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4 Findings from Case Studies

Overview

4.1 The approach of the case studies was to complete a detailed disaggregated cost assessment exercise to understand the basis and accuracy of the current LFR 7 returns and the extent to which these reflected the full costs of the service. The exercise was also designed to collect additional costs incurred across the authority where these differed from those costs recorded on LFR 7 returns - referred to as a "bottom up" assessment of costs. Although most planning authorities at the seminars were keen that LFR7s should be improved, it was also to enable us to develop recommendations on how the LFR7 return might be improved and as well as to consider whether there are any better options for collecting the information.

4.2 Case studies were chosen to be representative, but especially to reflect the variations in cost recovery evident from LFR 7 returns.

Case study approach in more detail

4.3 Papers were dispatched to authorities in advance of visits to ensure relevant information was to hand at the visit and follow ups after the visits where information was still outstanding. The advance papers included overall briefing, a short local authority pro forma to gather some headline information and a copy of the forms which we completed at the visit. These latter forms were in two sets, one for a 'top down' estimate of costs (breaking down the current LFR7 return into its component parts) and the other a 'bottom up' estimate of other relevant costs (working through the component cost areas in turn and estimating the corresponding costs) whether or not these were incurred in the planning service or not. Copies of all these forms are appended. There was also a supplementary sheet giving the 'definition' of planning that should be used in completing the forms (particularly in constructing the 'bottom up' estimates).

4.4 Authorities were asked to read through all the materials prior to the visit, and begin to compile the necessary information. Typically we were working with planners. It was not expected that all of this information would be available, or disaggregated in the way that we were asking for it; indeed part of the visit was to identify and discuss such issues, and to try and help authorities come up with an estimate on the most robust possible basis.

4.5 The information collected by the pro forma in advance of interviews all related to the 2006/07 financial year and included basic data as follows.

• Total authority staff ( FTEs) - this should be the complete staffing complement for all sections of the authority.
• Total authority expenditure (gross outturn) - this was the complete expenditure by the authority, before allowance for income is made, i.e. the sum of gross expenditure across all services as presented in the audited 2006/07 income and expenditure account.
• Planning applications received - the total number of valid applications received and registered on the same basis as the planning statistics supplied to the Scottish Government for 'The current statement of planning applications determined'.
• Total application fee income - the total monies received that corresponds to the applications included within the 'planning applications received' section.
• Other activity measures such as data on enforcement and pre application discussions.

4.6 The forms which we aimed to complete during our case study visit. included a number of pieces of data, summarised below.

• A breakdown of the LFR7 employee costs between salaries paid to employees, salary on costs (i.e. NI and superannuation) and other remaining employee costs such as agency staff, relocation or severance payments, interview, training and advertising costs.
• A summary of staff within the planning service and their salaries.
• Proportion of staff times by salary band spent on various task areas across the planning service provided as a percentage of overall work time.

4.7 This last split of task areas included the following.

• The proportion of time which does not relate to the planning service ('non planning work').
• The proportion of time which does not relate to development management.
• The proportion of time which relates to development management but not to fee earning applications
• The proportion of time which relates to enforcement of fee earning applications.
• The proportion of time which relates to pre application advice for fee earning applications
• The proportion of time which relates to other non fee activities for fee earning applications.
• The proportion of time which relates to fee related activities on fee earning applications.
  

4.8 The form also sought proportions of other employee costs, non employee costs and costs incurred in other departments that could be allocated to these categories. Non employee costs are overheads and include accommodation, consumables and IT etc. Inputs to planning from other services include transport planners, environmental health staff, typists, filing/administration, one stop shop staff (or similar customer service staff) as committee support costs.

General results of case studies in relation to cost recovery

4.9 Comparison of the top down and bottom up results on cost recovery from case studies provides an indication of the range of costs included in LFR7 returns. This is because top down approaches largely represent an LFR7 approach, focusing on costs incurred within the planning service, whereas bottom up approaches include costs incurred in other departments.

4.10 The proportion of cost recovery in the seven case study authorities (labelled A-G) is shown graphically in Figure 3.1 below. As Figure 3.1 shows in five authorities the top down method reveals higher levels of cost recovery than the bottom up one, although in two authorities the values are the same. Lower cost recovery occurs in the bottom up method because costs are higher.

4.11 The existence of higher costs from the bottom up method largely confirms the expectations of attendees at the first seminar that costs would be higher using a bottom up method, whereas LFR7 returns relate mostly to costs incurred within planning departments, largely to keep things administratively tidy.

Figure 3.1: Cost recovery in case study authorities by method of cost estimate

4.12 The breakdown of costs incurred in handling an average application in each of the case study authorities is shown in Figure 3.2. This is in terms of direct staff salary costs, the overheads typically incurred within the planning department and recorded on LFR7 returns and the additional overheads identified through the more comprehensive bottom up method costing exercise which may include costs from other departments in the authority. As is apparent each is largely authority-specific reflecting both accounting and departmental organisation as well as the overall adequacy of resources. For example in Authority D most of the relevant staff are in the planning department, whereas in authority B or G some are in the wider organisation and costs are reflected in additional overheads.

4.13 As noted above the case studies included authorities with different cost profiles, including some which on the basis of LFR7 data seemed to be experiencing low levels of cost recovery and those which on the basis of figures supplied were making a surplus. In practice, as may be observed from figure 3.1, the inclusion of additional costs reduces the divergences from 100% cost recovery but does not result in any overall uniformity across authorities in terms of percentage cost recovery - there are still some authorities that appear to be making a surplus. This is thought to reflect a number of factors:

• basic differences in costs between authorities, which in term reflects contextual, scale and efficiency considerations;
• basic differences in accounting practice; and
• the adequacy of current resources.

4.14 Variations in overall costs per application per authority are also much greater than variations in average fee, the latter being in a relatively narrow range in comparisons to costs (shown in Figure 3.3). This suggests quite significant differences in the level of resources devoted to applications and thus costs incurred. Authorities C and E seem to have particularly low costs in Figure 3.2 below.

4.15 Overall while the bottom up method has clearly captured some additional costs in some authorities, we are still not entirely convinced that all costs have been captured, despite some strenuous efforts. The issue is that authorities and their accounting systems and departmental structures are not set up to provide the necessary full cost information, even for relatively basic variables such as salary costs.

Figure 3.2: Breakdown of costs of handing applications: salary costs, top down overheads and additional bottom up overheads based on Scottish Survey data

4.16 Figure 3.3 expresses costs recovery in terms of average cost recovery per application. Thus it compares average fees paid per application with the average costs of processing, the main purpose being to see if the profile of applications affects cost recovery. Overall it shows a similar pattern of costs recovery to Figure 3.1, with significant variations in their average costs of processing. In practice, most of the differences in average fee relate to the proportion of householder applications in the overall profile - specifically urban authorities tend to have a larger proportion of householder cases.

Figure 3.3: Average total costs (bottom up and top down) and average fees per application by authority

4.17 Alongside accounting and resource-level differences some of the effect of may reflect the size of the specific planning departments and the ability to achieve lower unit costs in larger departments, often referred to as economies of scale. As is evident from Figure 3.4 the total costs of fee related development management vary significantly across our case study authorities. Authority D for example is one the smaller authorities and has some of the highest costs per application. However, overall examining both our case study and LFR7 return data it is very difficult to find any clear relationship between costs as provided on returns and any particular local authority characteristics. The overall conclusion is that each authority faces a unique set of contextual, resource and accounting conditions.

Figure 3.4: Costs of fee-related development management by authority

4.18 In making LFR7 returns one of the more challenging issues is the spilt of costs between fee and non fee development management activities. This is the case because individual officers typically work on fee and non fee activities and authorities do not currently have time recording systems that are capable of measuring these differences and most rely on officer estimates. To examine this issue as part of the case study exercise, authorities were asked to give this breakdown and to show the costs of other development management activities. The results are summarised in Figure 3.5 showing the overall percentage breakdown of costs by authority by activity.

4.19 The data and our discussions with authorities suggest that it is the priority given by authorities to discretionary activities that drives the overall balance of fee and non fee-related activities rather than the number and profile of applications which are driven by demand. Local context and sensitivities also play a role in determining the extent of resources devoted to issues like enforcement as well as for non fee applications which comprise largely listed buildings and conservation area consents.

4.20 However, the general impression is that despite a lack of formalised time recording systems, authorities do have a reasonable understanding of the breakdown of costs across their activities. This is also confirmed by the findings which appear logical and to a large extent predictable when account is taken of the local context.

Figure 3.5: Breakdown of development management costs by activity and authority

Results of discussions on case study findings at the second seminar

4.21 Overall authorities at the second seminar were not surprised by the findings from the case studies and could not add much additional data to the findings. A number of interesting opinions were however expressed

• There was a general acceptance that the authority-wide cost figures looked reasonable and no one offered any reasons as to why they might not be representative.
• Some LAs have looked at average fee per application when considering what the impact of changes to permitted development rights might be. Some were surprised at the overall variation, thinking that would have been more. One authority had calculated that householder applications account for 1/3 of their workload, but only 9% of planning application fee income.
• There was general agreement that there were problems in the identification and recording of costs and it was judged that a perfect method of cost recording within current accounting arrangements was elusive. Although a Best Value Code of Practice was introduced by CIPFA in 2000 to promote a common accounting framework, it was agreed by finance officers that there is currently no consistency across local authorities, either in terms of recording or identifying what activities or overheads are included within development management. In this respect, 32 different development management practices do not lend themselves to a single fee methodology.
• The perception was that LFR7 was also a poor indicator of costs for a number of other reasons. These included the lag time in its completion (1 year) and its dissociation from anything relating to the performance or quality of the service provided. Some authorities suggested that best basis would be a 'more intelligent' format based on the bottom-up approach used for the case studies. However, it was questioned just how consistent would data from different LAs be, even after undertaking the case study methodology.
• Some noted that there was room to make LFR7 better - but they suggested that there would need to be a working party of planners and finance officers to make sure that there were better and consistent criteria and most importantly that the purpose of the returns were understood. This would need to ensure both the relevance of the data collected and that the integrity of the LFR returns series was maintained.
• It was also noted that If other sections of the authority beyond the planning service, such as transport or legal, have their costs used in calculating the cost recovery levels (as with the bottom-up approach) then when the new fees are announced alongside the reason for their change, there is a danger that those sections may try to seek some of the increase for their budgets at review time. It may be that a service level agreement is required to ensure that services related to planning charge each other at an appropriate rate/amount.

4.22 Overall in the light of an increasing emphasis on improving performance there was considerable concern that costs as currently incurred did not represent the true costs of a properly resourced system which could deliver expectations of improvement. This was because the current system was widely regarded as under resourced. Discussion also explored whether there were alternative ways of estimating costs that could reflect these concerns.

4.23 In particular some authorities would prefer a "benchmark" approach where costs were estimated independently on the basis of standard measures of resources (such as the increasingly standard measure that 1 officer should be expected to be process no more than 150 cases per annum) and that such measures might be based on existing good practice. The latter perhaps drawing on English experience where Planning Delivery Grant had helped deliver additional resources. However, a number of potential limitations of this standardised approach were highlighted including:

• relevance to all local authorities, e.g. urban vs. rural and those dealing with lots of major applications;
• the use of approximations/ estimations as a basis of identifying bench marks (i.e. 'guestimates' being translated into practice standards); and
• the removal of the discretionary element of dealing with applications.

4.24 To address the issue of variation between local authorities, it was suggested that benchmarking could be used to calculate standard fees, whilst adjustments for local context could be covered by grants from Scottish Government.

4.25 It was also suggested by a minority of authorities that a better basis for calculating planning fees might be as a percentage of total development cost, as is used by building standards. However, it was acknowledged that the building standards process is much simpler than planning, which, in some respects is a much more qualitative process. It was also acknowledged that an understanding of both costs together with potential development values would be required in order to set appropriate scaled charges - and this would be very complex to administer.

4.26 In relation to current variations, it was discussed whether applicants expect to pay the same fee across the country. Some thought that developers do expect development to be more costly in some parts of the country. This might be a basis for locally set fees. However, willingness to pay and benefit to the applicant must be balanced carefully against the potential for planning blight. It may also be difficult to identify any defining area characteristics that might make an application in one area more expensive. For example, whilst Edinburgh is a World Heritage site, some thought that this would not necessarily incur any extra cost to those applications within National Scenic Areas elsewhere in the country.

4.27 It was also considered interesting to compare the relatively low cost of planning applications and associated man hours worked within the local authority (sometimes spanning years) with agents fees. It was pointed out that developers might actually save money if they were to pay a little more to local authorities in return for a better service (and corresponding reduced need for agent involvement).

4.28 The advantages of time recording as a useful tool in recording and calculating costs was discussed. Authorities were agreed that there would have to be some clear outcomes/ benefits before they would be willing to implement such systems. It was also emphasised that time recording only captures what is being done, and not whether the service being provided is adequate, sufficiently resourced or meeting expectations. Central overheads would also not be picked up by time recording. However, it was acknowledged that the possibility must not be ruled out too early, particularly in light of forthcoming changes to the planning system.

4.29 Some discussion also inevitably focused on the extent to which existing fees recovered costs.

• A number of attendees felt that having more 'larger' applications within the profile of all applications was possibly more distorting on an authorities ability to recover the costs of determination.
• Generally it was thought that it was the costs of major applications that were not reflected in current fee levels. This was because the only economies of scale occur in relation to basic administrative processes This meant that for these larger applications the extra fee was lost and that smaller applicants were subsidising larger ones, a wholly regressive approach. Post-decision there is often proportionally more work to be done in terms of legal agreements, conditions and compliance and this is all non-fee work.
• The start and end point for applications in terms of fee calculation and performance monitoring should change - the new Planning Act introduced statutory obligations upon authorities (such as pre-application consultation work) that is outside the timescale.
• It was suggested that consideration ought to be given to include certain work elements within the fee where they are applicable, i.e. in the case of applications accompanied by an Environmental Statement or a Transport Impact Assessment. These applications often have the lowest level of cost recovery, but a very large time spent on them. Also, they need not necessarily be large applications, i.e. a single large wind turbine has a small site area, but requires an ES.
• It was also suggested that was necessary to consider the applicants perspective, since they are being faced with a very large fee (potentially) in addition to the other large costs associated with making the planning application. Such examples needing consideration included community groups (single wind turbines) and marine fish farms (large areas of relatively low-value use).

4.30 There was also a need to distinguish between statutory and non-statutory work within the same area so as to make sure that the agreed amount or type of work can be included within the scope of the fee. For example, pre-application consultation is now a statutory responsibility, but 'ordinary' pre-application advice whilst good practice, is not a statutory requirement. The former should definitely be included within the fee, whilst the later is more debateable. However, the alternative side to this is that this is in many ways a very artificial distinction. In practice, the two work areas blend together and it is difficult to say where one stops and the other begins. It is all part of the system and machinery for determining applications.

Key Findings

• Each local authority faces a unique set of contextual, resource and accounting conditions: it very difficult to find any clear relationship between costs as provided on returns and any particular local authority characteristics.
• Variations in overall costs per application per authority are much greater than variations in average fee, the latter being in a relatively narrow range in comparison to costs. This suggests significant differences in the level of resources devoted to applications and thus costs incurred.
• The average cost of processing applications varies significantly between local authorities and is dependent on the proportion of householder applications in the overall profile - urban authorities tend to have a larger proportion of householder cases.

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