The Scottish Government

Planning Green Paper
Delivering a Fundamental ChangeODPM (December 2001)

Paras. 5.28 & 5.64-5.65
Green Paper confirms that Sec 106 agreements are subject to criticism for being complex, difficult to agree and delay the planning process; not sufficiently open to public scrutiny

Green Paper confirmed that a separate consultation paper would be published. However ODPM indicated that it was the intention to change the law to require obligations to be entered in the planning register (already best practice).

Reforming Planning Obligations : A Consultation PaperODPM (December 2001)

• Objective to promote sustainable development with particular reference to affordable housing
• Local Authorities to set standardised tariffs through plan making process as a starting point for negotiations (law as interpreted by the Courts)
• Standardised terms and monitoring and accounting arrangements to be prepared by Councils
• Local Development Frameworks to detail how the tariffs have been defined and the disbursement of receipts with wide discretion available (also use of SPGs and Action Plans)
• Single obligation to be negotiated around a tariff
• Flexibility necessary to avoid making development uneconomic on difficult sites and dissuading sustainable proposals.
• Pooling arrangements to be legislated for

Promotes sustainable development
Allows a more certain basis for delivering affordable housing
To achieve a wider range of objectives than set out in Circular 1/97
More Transparent (details available on public register; monitoring and accounting procedures)
Quicker (Use of standardised contractual terms/model clauses; dispute resolution to be introduced; agreed timetables for conclusion)
Equitable ( especially in the delivery of affordable housing in a range of circumstances)

Existing system criticised for being inconsistent, unfair and lacking in transparency; negotiations are protracted; high legal costs result; lack of accountability
Criticism of mechanism by Nolan Committee which recommended strict adherence to the "necessity test" in Circular 1/97
Mismatch between present Government policy and the legislation as interpreted by the Courts.
Many Councils already had been adopted obligations SPGs
3 further options tested in the consultation paper :

• Strict application of the necessity test
• Full flexibility for
• Councils to negotiate within the law
  Impact fees.

Thirteenth Report of the Select Committee on Transport, Local Government and the Regions (2002)

• Evidence was taken from a range of bodies who criticised the green paper proposals on the following basis :

- complexity in setting tariff
- fears that grants may be reduced if income from tariffs increased
- private sector being asked to pay for local benefits not connected to developments
- Councils approving inappropriate developments to secure benefits
- Tariff payments not maximising private sector contributions if set too low and deterring developers if too high
- developers being asked to contribute two forms of planning obligations (infrastructure costs and the tariff)
- differing views on how the income from tariffs should be used;
- tariffs being an inequitable tax helping those areas with high land values.

The Committee found that the Government's proposals :
a) would replace one form of complexity with another
b) involve enormous effort to establish the basis for tariffs at the forward planning stage
c) will affect the Government's grant to LAs
d) are un necessary following the Government's other proposals to improve the practical operation of the planning system (Para 108 of report) with the more radical option of tariffs being considered following a 5 year period of monitoring improvements in speed and transparency in the system.
e)lacked the further work necessary to demonstrate that funding affordable housing by tariff rather than by the current system of negotiation will clearly produce significantly more affordable housing.
f) need much more development before they can be judged to be workable

Ministerial Statement Sustainable Communities-Delivering through Planning (18 July 2002)

Announcement made that although there would be changes to the Section 106 obligations system to make it more transparent and simple there would be no legislation to introduce a tariff but new guidance would be issued.

ODPM published 3 statements which set out the Government's proposals for change following the consultation on the Green Paper.

Planning and Compulsory Purchase Bill (as it left the house of Commons December 2003)
See below for current status

Sections 46-48
Although provisions equivalent to Section 106 were retained, provision was made that a developer may opt to make the contribution by paying a fixed sum (scale etc. to be set out in LDPs )or he may opt to go down the negotiated agreement route.
Details to be given by Regulation.

Provisions introduced at the House of Commons Report Stage.

Contributing to Sustainable Communities - A new Approach to Planning Obligations Consultation Paper ODPM November 2003

Legislation would provide for a new optional planning charge
Circular 1/97 to be replaced and best practice guidance to be introduced.
The new policy would allow obligations to pay for a range of impacts including local transport initiatives, education, health services, open spaces, affordable housing etc. (Direct and indirect)
Development Plans to set out

• when sought
• factors influencing scale of contributions and formulae
• details of any commuted sums towards maintenance costs
• exclusions
• allocation of contributions

Debate through the statutory development planning process
Voluntary pooling between two or more authorities possible
Mechanisms for securing ongoing contributions possible.
Payment of a charge will be a material consideration ie. agreement to pay should not make an otherwise unacceptable development acceptable.
Charges would vary across differend land uses and would be set to mitigate likely impacts of new developments.
Would relate only to sites identified in the development plan although unilateral undertakings equivalent to the appropriate charge possible for other sites
Pooling arrangements possible.

Optional charge arrangements balances flexibility with speed and certainty.
Objectives of sustainable development and enhancement of quality assisted
Greater openness, accountability etc.
Contributions to direct and indirect impacts would bring policy into line with case law.
House prices and commercial leases would not be significantly affected
Assumes costs passed back to landowners.
Reduced risk and uncertainty means quicker and cheaper for developers to arrange finance.
Payment flexibility better for developers
Cost certainty would lead to quicker and easier negotiations
Faster negotiations would allow better use of resources by LAs.
Greater certainty for Councils by effective use of development planning to secure obligations.
Increased financial certainty for developers
Administrative simplicity for Councils
Improved arrangements for costing developments , assessing and funding infrastructure
Greater accountability and transparency will lead to greater confidence in the system by local communities.

Implies the possibility of a totally open arrangement for the distribution of funds.in pursuit of development plan objectives and not strictly related to the impacts of individual developments.
Non financial issues would still require to be resolved in a conventional planning obligation arrangement.
Use of obligations would increase
Increased costs for developer
Increase in up front costs for Councils
Greater predictability for local communities
Better funding of local services through pooling arrangements
Danger that excessive contributions would deflect essential development from a locality
Danger that Councils will not set charges accurately (dynamic nature of development; changing circumstances) running risk of budgetary mismatches.
Developers fear that this will lead to a second and subsequent attempts to negotiate obligations over and above the originally agreed rates.
Housebuilders & RICS have grave concerns

• perceived as a development tax
• necessity test removed

Development of brownfield sites will be compromised as process of defining charges will get bogged down in development planning.
Developers see danger that scales will be set artificially high meaning developers will wish to negotiate leading to delays etc.
Unhelpful to expect developers to pay charges up front.

Terminology changed to avoid use of word "tariff"
Reconciliation of policy and case law
Charge less flexible than a negotiated obligation
Estimated that in 2001 the average size of a planning obligation across 45 LAs surveyed was £148,730 (N. England) and £753,830(S. England). Some exceed £1 million.
Valuation skills gap for Councils
Increased speed seems to be behind the change in approach.
Consultation exercise seen as rushed and poorly thought through
Very mixed reaction to the Government's proposals

Contributing to Sustainable Communities - A new Approach to Planning Obligations
Statement by ODPM 30 January 2004

Summary of Consultation Responses

• Consultees agreed that the difficulties with the existing system (delay, lack of transparency, lack of certainty and predictability) need to be addressed
• Consultees agreed that the objective should be to mitigate the impacts of development
• Businesses wished obligations to relate as firmly as possible to specific development proposals and that the reforms should not be seen as a pretext for extracting development value or for transferring extra burdens from the taxpayer to the applicant. Removal of the strict application of the "necessity test" was heavily criticised by developers and business community.
• LAs argued that the wider interpretation of Circular 1/97 (viz. the removal of the strict application of the "necessity test" was helpful in that it allowed the addressing of wider and less direct impacts of the development than the present policy allowed.
• Strong support for including obligations policies in plans but concern at the possible level of detail and how these would be tested in inquiry.
• The principle of the charge was more widely accepted than had been the tariff with consultees pressing for further detail as to how it might work in practice.
• Local authorities rather than central government should set the charges.
• Wide variety of views on the basis on which charges should be set and concerns about Councils' ability to devise scales which adequately covered the full impacts of developments.
• Most consultees thought that it was critical that the charge amount should have a relationship to the size or scale of the development rather than eg. a flat rate fee per permission.(More research needed on methodology).

Affordable Housing : Generally accepted practice in England to secure affordable housing through developer contributions. Consultation paper suggests optional charge in cash which might have implications for securing land and the objectives of sustainable development.

• Most consultees thought that charges should also be applied to sites not identified in locoa plans.
• General agreement that spending of cash contributions was accountable and effectively managed. This issue linked to the issue of who actually provides the pre requisite contributions in kind viz. essential infrastructure in a pre planned way. Relates to the issue of phasing and the ringfencing of contributions.
• Developers considered the optional charge plus negotiation model gave them a valued mechanism for challenging non robust charging regimes.
• Danger that charges become a ceiling rather than an "average" to give LAs a firmer hand in negotiations where developer opts out. Developers fear that this would make renegotiation of a supplementary charge easier if this eventuality was not legislated for.
• Simplicity of calculation v inflexibility to suit local circumstances
• Flexibility offered by cash contributions v application of funds for purposes not explicitly related to the impacts of the development involved.
• Ongoing contributions generally supported . Trusts suggested as a means of managing capitalised contributions to revenue expenditure.
• General support for standardising the approach to concluding agreements in interests of speed and efficiency
• General support for mediation
• Implementation arrangements should dovetail with programming of the provisions of the Bill in general and with the introduction of Local Development Frameworks.

Government's Reaction to Consultation Responses

• Response more mixed and moderate than response to the previous consultation paper.
• Changes to planning obligations policy viewed as complementary to forthcoming draft PPS1 which will indicate that developments which are not sustainable should not proceed.
• Judgements about the viability of developments will be the starting point for negotiations with flexibility for Councils in certain circumstances to decide that local or central government taxation should bear the full costs of the impact of development.
• The Government is to put in place safeguards "to ensure that the charge is not used as an excuse to extract more benefit from applicants than is necessary to secure the good planning of its area and mitigate the impacts of development"
• Therefore charges levied should be reasonable, relevant and proportionate.
• The "necessity test" not being adequately adhered to by Councils. Therefore the Government is to consider further the alignment of policy with case law.

Progress with the Bill in Parliament

• Brought to The House of Lords from the House of Commons 10 December 2003
• House of Lords Committee stage 2-5 February.
• Several amendments were tabled by their Lordships were tabled, debated and subsequently withdrawn following statements by Lord Rooker on behalf of the Government :

1. Should be no raising of the quantum of contribution after p.p. granted during the lifetime of a permission
2. Max. to be no more than would have been payable under a Sec 106 Agreement
3. Removal of a clause which allows regulations to prescribe the timing etc. of the preparation of a "document" outlining the scale etc. of contributions
4. Additional provision relating to the time periods for enforcement of the terms of the contribution i.e. any other stage before the development is occupied or completed.
5. To include repayment provisions, with interest payable.
6. Introduction of right of appeal against a proposal to modify a planning contribution.

Unease that the optional charge arrangements were being progressed in the |Bill in the absence of further work to demonstrate there potential impact. Lord Rooker gave an assurance that the Planning Minister would be asked to undertake further assessment prior to the Report stage.*

In early March the Planning Minister, in particular response to criticism in the Lords by Lord Brest, Chief executive of the Joseph Rowntree Foundation, announced the setting up of a stakeholder group to advise on the reforms. The Group is expected to take six months to report.

• House of Lords Report stage 16 March