Community Infrastructure Levy (England and Wales) · Community Infrastructure Levy. (CIL) became the Labour Government’s preferred way of obtaining finance from developers for infrastructure.

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BRIEFING PAPER

Number 03890, 19 December 2019

Community Infrastructure Levy (England and Wales)

By Gabrielle Garton Grimwood

Contents: 1. History of the CIL 2010 – 2014 2. More recent reviews and

consultations 3. In more detail: using the CIL

and section 106 funding for the same piece of infrastructure

4. Adopting the CIL 5. The CIL in London 6. The CIL in Wales

2 Community Infrastructure Levy (England and Wales)

Contents Summary 3

1. History of the CIL 2010 – 2014 6 1.1 Labour Government policy 6 1.2 Coalition Government policy 7 1.3 Current policy 7 1.4 The CIL as an incentive for house building 9 1.5 Value of the CIL 10 1.6 Some initial questions about the CIL 10

Can commercial development be exempted from the CIL? 10 Can the CIL discriminate against superstores? 11 Councils’ concerns over the CIL 11

1.7 Changes to the CIL in 2014 11

2. More recent reviews and consultations 13 2.1 2015 Review of the CIL 13 2.2 Consultation in March 2018 15 2.3 Technical consultation in December 2018 18

3. In more detail: using the CIL and section 106 funding for the same piece of infrastructure 19

4. Adopting the CIL 22

5. The CIL in London 23 5.1 Introduction of charging schedule in 2012: MCIL1 23 5.2 Second iteration in 2019: MCIL2 23

6. The CIL in Wales 25

Contributing Authors: Cassie Barton, Social and General Statistics, section 1.5

3 Commons Library Briefing, 19 December 2019

Summary History of the Community Infrastructure Levy 2010 - 2014 A system of charging for infrastructure associated with development has long been in place through section 106 agreements - sometimes known as “planning obligations” or “planning gain” . This system stems from agreements made under section 106 of the Town and Country Planning Act 1990, as amended. They are agreements made by negotiation between the developer and the local planning authority (LPA) to meet concerns that an LPA may have about meeting the cost of providing new infrastructure or about the impact on the local area. These agreements can require that, for example, the developer must provide, or pay for, a certain number of affordable homes in order to be given planning permission to build a development of market value homes. Section 106 agreements are legally binding and may be either in cash or kind.

The Community Infrastructure Levy (CIL) became the Labour Government’s preferred way of obtaining finance from developers for infrastructure. It was brought into force on 6 April 2010 by the Community Infrastructure Levy Regulations 2010, made under section 206 of the Planning Act 2008. The idea was that local authorities could choose the rate for the levy in their area, set at a rate per square metre. Variations were to be allowed between different areas within the planning authority, as well as by different intended use for development. It was envisaged that it would create a more transparent system, whereby developer contributions could be calculated upfront.

The Regulations empowered local authorities to impose a levy but did not compel them to do so. Local authorities can still use section 106 planning obligations, which remain an option, although the 2010 Regulations did introduce restrictions on their use.

The CIL as an incentive for house building In January 2013, the then Government announced that in areas where there was a neighbourhood development plan in place, the neighbourhood would be able to receive 25% of the revenues from the CIL arising from the development that they had chosen to accept. The money would be paid directly to parish and town councils and could be used for community projects such as re-roofing a village hall, refurbishing a municipal pool or taking over a community pub. Neighbourhoods without a neighbourhood development plan but where the CIL was still charged would receive a capped share of 15% of the levy revenue arising from development in their area. The Government made clear that the aim of this was to incentivise house building.

This incentive came into force on 25 April 2013, through the Community Infrastructure Levy (Amendment) Regulations 2013.

Changes to the CIL in 2014 In April 2013, the Government published a consultation on further CIL reforms. The consultation proposed (amongst other things) to give relief from paying the CIL to homes built or commissioned by individuals, families or groups of individuals for their own use and that would be owner-occupied. The aim was to make it cheaper for people to self-build their own homes.

The Government responded to the consultation in October 2013. It confirmed that it would proceed with the majority of the proposals, including the proposed exemption from the levy for self-build homes.

4 Community Infrastructure Levy (England and Wales)

The Community Infrastructure Levy (Amendment) Regulations 2014 brought all of these changes into force as of 24 February 2014.

More recent reviews and consultations 2015 Review of the CIL

In November 2015, the Government commissioned a review of the CIL.

The independent review group submitted its report to Ministers in October 2016. The report called for a new approach to developer contributions and recommended a twin track approach - combining a low level local infrastructure tariff (LIT) and Section 106 - describing this as “the best of both worlds”.

The Autumn Budget 2017 document set out how the Government wished to proceed in amending the CIL and section 106, subject to a further consultation. In the document’s section on the Cambridge – Milton Keynes – Oxford corridor (for example), the Government said that it would encourage authorities to make use of existing powers and to consider introducing a strategic infrastructure tariff, to sit alongside the CIL.

Consultation in March 2018

In March 2018, the Ministry of Housing, Communities and Local Government (MHCLG) launched a consultation on supporting housing delivery through developer contributions. This consultation document set out the perceived shortcomings of the current system and listed the Government’s five objectives for reform:

• reducing complexity and increasing certainty

• supporting swifter development

• increasing market responsiveness

• improving transparency and increasing accountability and

• allowing local authorities to introduce a Strategic Infrastructure Tariff to help fund or mitigate strategic infrastructure.

One area where change was proposed was setting the rate for CIL, where the consultation set out to overcome issues around setting CIL rates based on the type and scale of the proposed development and differences in the uplift in land values on granting planning permission. It therefore proposed that rates should be based on the existing use of land. The consultation also raised the possibility in the longer term of determining developer contributions nationally and making them non-negotiable.

MHCLG’s response to the consultation was published in October 2018.

Technical consultation in December 2018

Most recently, a technical consultation on draft regulations to reform developer contributions ran from December 2018 to January 2019. In it, the May Government set out its proposals around reducing complexity and increasing certainty, increasing market responsiveness (through indexation of CIL rates), improving transparency and increasing accountability, delivering starter homes and other technical clarifications.

The summary of responses to this consultation and the Government’s view of the way forward was published in June 2019.

The regulations enacting the changes are the Community Infrastructure Levy (Amendment) (England) (No. 2) Regulations 2019.

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Adopting the CIL Local planning authorities must publish details of any draft charging schedule and agreed charging schedule for the CIL on their website.

A study commissioned by MHCLG estimated that developer contributions through CIL were worth £945 million in 2016/17.

The CIL in London The London boroughs and the Mayor of London all have powers as CIL charging authorities.

The levy in Greater London (MCIL1, since superseded) applied to developments consented on or after 1 April 2012, and was collected by London boroughs once development commenced. The Mayor designated that the CIL would be used to raise £300 million towards the delivery of Crossrail. Listing the infrastructure projects or types of infrastructure that the Mayor intended to fund in whole or in part by CIL also allowed the continued use of planning obligations (section 106 agreements) for other projects or types of infrastructure.

The second iteration of the Mayoral CIL (MCIL2) came into force on 1 April 2019, superseding MCIL1. MCIL2 will be used to fund Crossrail 1 (the Elizabeth Line) and Crossrail 2. The Mayor of London/London Assembly website explains the difference between MCIL1 and MCIL2.

Separate to the Mayoral CIL, each London borough is also entitled to set its own CIL charging schedule to gather funds to pay for new infrastructure within that borough. Although this will be an additional charge for development, boroughs must show that they have considered the Mayoral CIL when setting their own charge.

This note sets out all these issues in more detail. It applies to England and Wales only.

• For information about planning systems around the UK, see the Commons Library briefing Comparison of the planning systems in the four UK countries: 2016 update

• For more information on section 106 agreements, see the Commons Library briefing Planning obligations (section 106 agreements)

• Other Commons Library briefings on various matters to do with planning are available on the topic page for housing and planning

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1. History of the CIL 2010 – 2014

1.1 Labour Government policy A system of charging for infrastructure associated with development has long been in place through section 106 agreements, sometimes known as “planning obligations” or “planning gain”, which stem from agreements made under section 106 of the Town and Country Planning Act 1990 (TCPA), as amended. They are agreements made between the developer and the local planning authority (LPA) to meet concerns that an LPA may have about meeting the cost of providing new infrastructure or about the impact on the local area. These agreements can require that, for example, the developer must provide, or pay for, a certain number of affordable homes in order to be given planning permission to build a development of market value homes. Section 106 agreements are legally binding and may be either in cash or kind.

In March 2004, the Barker report (the report on housing supply by Kate Barker, commissioned by the then Chancellor and the Deputy Prime Minister) recommended the introduction of an explicit tax on development gains, instead of extending section 106 agreements in that direction.1 The resulting proposed tax – Planning-gain supplement (PGS) - was to be levied on the increase in land value resulting from the grant of planning permission. After consultation, the Labour Government introduced the Planning-gain Supplement (Preparation) Act 2007 to enable up to £50million to be spent in preparation for PGS, should the Government decide to go ahead.2 Further consultation followed but the proposal did not gain support. In the Pre-Budget Report of 9 October 2007, the then Chancellor announced the replacement of PGS by a planning charge.3 A Written Ministerial Statement on 9 October 2007 explained the idea of a planning charge in more detail.4

What is now called the Community Infrastructure Levy (CIL) became the Labour Government’s preferred way of obtaining finance from developers for infrastructure. It was brought into force on 6 April 2010 by the Community Infrastructure Levy Regulations 2010, made under section 206 of the Planning Act 2008.5 The idea was that local authorities could choose the rate for the levy in their area, rather than one central rate as for PGS. The levy rates could be set per square metre, rather than depending upon the increase in the value of land as for PGS. Variations were to be allowed between different areas within the planning authority, as well as by different intended use for development.

1 Kate Barker, Delivering stability; securing our future housing needs, March 2004 2 For background information on the Bill that became the Act, see the Commons

Library briefings Planning-gain Supplement (Preparations) Bill (RP 07/04, 10 January 2007) and Planning-gain Supplement (Preparations) Bill; Committee Stage Report (RP 07/13, 14 February 2007).

3 HM Treasury, Pre-Budget Report 2007 Chapter 6 4 HC Deb 9 October 2007 cc25-7WS 5 SI 2010/948

For more information on section 106, see the Commons Library briefing Planning obligations (section 106 agreements) (CBP 07200, 6 September 2019)

7 Commons Library Briefing, 19 December 2019

The Regulations empowered local authorities to impose a levy but did not compel them to do so. Local authorities could still use section 106 planning obligations, which remain an option, but the 2010 Regulations did introduce restrictions on the use of section 106 planning obligations.

1.2 Coalition Government policy After the 2010 General Election, on 18 November 2010, the then Department for Communities and Local Government (DCLG) announced it would retain the CIL, but amend it to give more of the benefits of development to the local neighbourhood and more control to local councils.6 Changes to the scheme were made by the Community Infrastructure Levy (Amendment) Regulations 20117 and the Community Infrastructure Levy (Amendment) Regulations 2012.8

1.3 Current policy In summary, the CIL now is a levy that local authorities in England and Wales can choose to charge on new developments in their area. It is basically a charge on new buildings and extensions to help pay for supporting infrastructure. In areas where a CIL is in force, land owners and developers must pay the levy to the local council. The money raised from the CIL can be used to support development by funding infrastructure that the council, local community and neighbourhoods want, like new or safer road schemes, park improvements or a new health centre.

Before the CIL can be introduced, a draft charging schedule based on evidence demonstrating economic viability and the potential effects of the proposed levy rate (or rates) on the economic viability of development across their area must be produced. This must be subject to public consultation and is then subject to examination by an independent examiner, normally a planning inspector. Once it has passed these stages it must then be approved by a resolution of the full council of the charging authority.9

The charges are set by the local authority, based on the size and type of the new development. The local authority can set different rates for different geographical zones in their area and for different intended uses of development. This is a local decision based on economic viability and the infrastructure needed. There is no requirement for a local authority to charge the CIL if it does not want to – it can be set at a zero rate. CIL charges are based on formulae which relate to the size and character of the development paying it. The charge applies to the

6 DCLG, News story: Communities to share in the advantages of development, 18

November 2010 7 SI 2011/987 8 SI 2012/2975. More detail about these changes is set out on pages 23-25 of the

DCLG guidance, Community Infrastructure Levy, April 2013 (since withdrawn). More recent guidance is given in the Planning Practice Guidance on the CIL (MHCLG, 12 June 2014, updated 1 September 2019).

9 MHCLG, Guidance: Community Infrastructure Levy, 12 June 2014, updated 1 September 2019

8 Community Infrastructure Levy (England and Wales)

net increase in gross internal floor area after allowing for any demolition, and is payable on most developments over 100 square metres or where a new dwelling is created, as the Planning Practice Guidance (PPG) on the CIL issued by the Ministry of Housing, Communities and Local Government (MHCLG) explains:

What is the Community Infrastructure Levy? The Community Infrastructure Levy (the ‘levy’) is a charge which can be levied by local authorities on new development in their area. It is an important tool for local authorities to use to help them deliver the infrastructure needed to support development in their area.

The levy only applies in areas where a local authority has consulted on, and approved, a charging schedule which sets out its levy rates and has published the schedule on its website.

Most new development which creates net additional floor space of 100 square metres or more, or creates a new dwelling, is potentially liable for the levy.

Some developments may be eligible for relief or exemption from the levy. This includes residential annexes and extensions, and houses and flats which are built by ‘self-builders’. There are strict criteria that must be met, and procedures that must be followed, to obtain the relief or exemption. This is explained in more detail below – see ‘What kind of development does not pay the levy?’ and the relevant links provided therein.

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Revision date: 01 09 201910

The PPG also lists the structures which are not buildings and so not liable to pay the levy, and the exemptions or reliefs which may be available:

What kind of development does not pay the levy? The following do not pay the levy:

• development of less than 100 square metres, unless this consists of one or more dwelling and does not meet the self-build criteria below, in which case the levy is payable (see regulation 42 on minor development exemptions);

• buildings into which people do not normally go (regulation 6(2));

• buildings into which people go only intermittently for the purpose of inspecting or maintaining fixed plant or machinery (regulation 6(2));

• structures which are not buildings, such as pylons and wind turbines;

• specified types of development which local authorities have decided should be subject to a ‘zero’ rate and specified as such in their charging schedules.

10 MHCLG, Guidance: Community Infrastructure Levy, 12 June 2014, updated 1

September 2019Planning Practice Guidance on the CIL (MHCLG, 12 June 2014, updated 1 September 2019).

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The following can be subject to an exemption or relief where the relevant criteria are met, and the correct process is followed:

• residential annexes and extensions where an exemption has been applied for and obtained;

• ‘self-build’ houses and flats, which are built by ‘self-builders’ where an exemption has been applied for and obtained;

• social housing that meets the relief criteria set out in regulation 49 or 49A (as amended by the 2014 Regulations) and where an exemption has been applied for and obtained;

• charitable development that meets the relief criteria set out in regulations 43 to 48 and where an exemption has been applied for and obtained.

Where an exemption or relief has been obtained for residential annexes, self-build housing, charitable development or social housing, it is important to note that a commencement notice must be submitted prior to the development commencing. If a commencement notice is not submitted in time, the charging authority must impose a surcharge equal to 20% of the notional chargeable amount, capped at £2,500. The charging authority only has discretion to waive the surcharge if it is less than any reasonable administrative costs which it would incur in relation to collecting it. See regulation 83 as amended by the 2019 Regulations.

Where the levy liability is calculated to be less than £50, the chargeable amount is deemed to be zero, so no levy is due.

Mezzanine floors, inserted into an existing building, are not liable for the levy unless they form part of a wider planning permission that seeks to provide other works as well.

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1.4 The CIL as an incentive for house building

In January 2013, DCLG announced that in areas where there was a neighbourhood development plan in place, the neighbourhood would be able to receive 25% of the revenues from the CIL arising from the development that they had chosen to accept. The money would be paid directly to parish and town councils and could be used for community projects such as (DCLG suggested) re-roofing a village hall, refurbishing a municipal pool or taking over a community pub. Neighbourhoods without a neighbourhood development plan but where the CIL is still charged would receive a capped share of 15% of the levy revenue arising from development in their area.12

The Government made clear that the aim of this was to incentivise house building:

11 MHCLG, Guidance: Community Infrastructure Levy, 12 June 2014, updated 1

September 2019 12 DCLG, Communities to receive cash boost for choosing development, 10 January

2013

For more information, see the Commons Library briefing on Neighbourhood Planning (SN 05838, 12 October 2018) and the My Community Rights website.

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Instead of hectoring people and forcing development on communities, the government believes that we need to persuade communities that development is in everyone’s interest. Incentives are key to getting the homes built that we both need for today and for future generations.

It is vital this country increases the number of homes it builds to meet the needs of its increasing population. The failure of previous administrations to build enough homes, latterly despite the credit boom, led to a severe housing shortage that has been made worse by the rapid increase in the number of households. The number of people living alone has rocketed, and immigration has led to an influx of 1.7 million people into England in the last decade.13

This incentive came into force in England on 25 April 2013, through the Community Infrastructure Levy (Amendment) Regulations 2013.14 An article in the specialist publication Planning reported concerns that giving communities a proportion of the CIL would threaten council spending on infrastructure.15

There is no equivalent provision in Wales, where few local planning authorities have introduced the CIL.

1.5 Value of the CIL A study commissioned by MHCLG estimated the overall value of CIL contributions in 2016/17. Data was collected via a survey of LPAs; responses to the survey were used to estimate a national total. The study’s authors estimated that developer contributions through CIL were worth £945 million in 2016/17, and added that “the circumstances under which CIL provided the largest financial contribution were largely confined to Greater London and the South East of England”.16

The survey also asked LPAs about trends in CIL charges. 81% of CIL-charging LPAs agreed that the number and value of CIL charges in 2016/17 was greater than the previous two years.17

1.6 Some initial questions about the CIL In its early days, questions arose about the scope and usage of the CIL.

Can commercial development be exempted from the CIL? The first council in England to begin charging the CIL – Newark and Sherwood District Council – wrote to DCLG complaining that some other councils proposed to charge the CIL only on housing. They

13 DCLG, Communities to receive cash boost for choosing development, 10 January

2013 14 SI 2013/982 15 “Fears over levy plan threat to infrastructure”, Planning, 25 January 2013

[Subscription – Members and their staff may obtain copies of this and other articles from the Commons Library on 020 7219 3666]

16 Lord et al. (2018), The incidence, value and delivery of planning obligations and Community Infrastructure Levy in England in 2016-17: pages 37-38

17 As above: page 47

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obtained a QC’s opinion that such schemes would be liable to challenge through judicial review and also to complaints to the European Commission over state aid. However, Shropshire Council’s CIL scheme, which only charged CIL on housing, was backed by an examiner from the Planning Inspectorate.18

Can the CIL discriminate against superstores? The Borough of Poole prepared a draft charging schedule, setting out its proposed CIL rates. It outlined a charge of £200 per square metre for superstores with more than 3,000 square metres of floorspace and proposed that all other retail developments should be exempt from the levy. An article in Planning magazine reported that, following representation from Sainsbury’s, the Council later decided to change its position:

But in its representation to the examination, Sainsbury’s objected to this approach.(...) In a statement this week, the council revealed that it had accepted Sainsbury’s position that there should be no differentiation within a particular type of use and that the same CIL rate must apply across all retail development. (...) Sainsbury’s representation said that, while the CIL regulations allow charging authorities to set differential rates for different geographical zones or for different uses of development. They do not permit differential rates within the same intended use of development.19

Councils’ concerns over the CIL In June 2012, the Royal Institution of Chartered Surveyors published a study showing that, although councils broadly welcomed the introduction of the CIL, much uncertainty remained as to how it would work:

Many councils are drawing up levy charges, with CIL already in operation in five local authorities. However, the report highlights councils’ concerns over how to develop the evidence base needed to justify their charges, how to determine appropriate charging levels, how to use section 106 alongside the CIL and how to collect the levy.

Another key concern is around the levy’s impact on the economic viability of development, it says. The survey also found that 62% of the councils surveyed plan to introduce a CIL within the next three years and are looking to the Government’s CIL frontrunners for guidance on how to develop rates.20

1.7 Changes to the CIL in 2014 In April 2013, the Government published a consultation on further CIL reforms.21 The consultation proposed to give relief from paying the CIL to homes built or commissioned by individuals, families or groups of individuals for their own use and that would be owner-occupied. The aim was to make it cheaper for people to self-build their own homes.

18 “Levy pioneer: councils’ CIL plans could be challenged”, Planning, 9 March 2012 19 “Council forced to drop levy on superstores”, Planning, 29 June 2012 20 “Study highlights fears over development levy”, Planning, 29 June 2012 21 DCLG, Consultation on Community Infrastructure Levy further reforms, April 2013

12 Community Infrastructure Levy (England and Wales)

The Government responded to the consultation in October 2013. It confirmed that it would proceed with the majority of the proposals as set out in the consultation document, including the proposed exemption from the levy for self-build homes. In the Government’s response it made clear that it also intended to make some changes which differed from the proposals in the consultation. These were:

• Extending the vacancy test to cover buildings that have been in use for a continuous period of six months in the last three years. Where there is no change of use, they will also be exempt from the levy, other than where there is an increase in floorspace, or where the building has been abandoned. This will help to facilitate empty buildings being brought back into use.

• Extending the proposal to allow credit where the levy has already been paid and the proposed development is changed. We now propose to apply this to any incomplete building on a site where the levy has already been paid.

• Exempting highway agreements relating to the trunk road network drawn up by the Highways Agency, Transport for London or Welsh Ministers from proposals to restrict the use of highway agreements by reference to the Regulation 123 list.

• Not extending the consultation period on the draft charging schedule from four to six weeks.

• Continuing to enable authorities to determine at their own discretion how to consult on any amendments to their Regulation 123 lists.

• Not replicating in the levy regulations, in relation to “in kind” payments, the EU procurement limits applied in other regulations.

• Exempting residential extensions and annexes from the levy.22

The Community Infrastructure Levy (Amendment) Regulations 2014 brought all of these changes into force as of 24 February 2014.23 This followed scrutiny in Parliament of the regulations by the First Delegated Legislation Committee on 10 February 2014.24

22 DCLG, Community Infrastructure Levy: Consultation on further Regulatory Reforms:

Government Response, October 2013: page 5 23 SI 2014/385 24 First Delegated Legislation Committee, Draft Community Infrastructure Levy

(Amendment) Regulations 2014, 10 February 2014

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2. More recent reviews and consultations

2.1 2015 Review of the CIL In November 2015, the Cameron Government commissioned a review of the CIL.25

The independent review group submitted its report to Ministers in October 2016. The report called for a new approach to developer contributions and in its general observations set out where and how the CIL had (in the independent review group’s view) not fulfilled its original intentions:

4.1.3 CIL has not provided the universal and therefore ‘fair for all’ approach to developer contributions that was originally envisaged. For various reasons, many of them sound and usually to do with development viability, a number of local authorities, many of them in the north of England, have decided not to introduce a CIL and this has resulted in a patchwork of CIL and non-CIL authorities across the country and a continuing, more extensive reliance on Section 106 than originally envisaged. That means many smaller developments which could afford to pay something towards infrastructure are getting away without making any contribution.

4.1.4 Whilst CIL was never intended to provide all the funds necessary for local infrastructure, the amount raised has been much less than anticipated and has undoubtedly been undermined by the ongoing introduction of exemptions. This has resulted in a situation where the remaining pool of chargeable development carries an unfair burden. Setting CIL at a ‘lowest common denominator’ level has also sometimes meant that larger developments that could make some larger contribution towards the infrastructure burden do not do so.

4.1.5 Where CIL has been introduced, it has not necessarily worked well for larger sites with complex site specific mitigation requirements. It has effectively transferred the burden and risk of providing infrastructure from developers to local authorities who are not well placed to deliver. The cumulative nature of the collection of CIL has meant that necessary infrastructure is not provided up front when it is needed to support the earlier stages of development. Local authorities are not always able to effect such provision themselves and are prevented from borrowing against future CIL receipts to do so. At the same time developers are prevented from stepping in and providing the infrastructure themselves. Where developers are continuing to make the traditional Section 106 payments, in both CIL and non-CIL authorities, difficulty is caused by the pooling restriction for those large items of infrastructure that need to be funded by more than five different planning obligations.26

25 DCLG, Consultation outcome: Community infrastructure levy review: questionnaire 26 A new approach to developer contributions: a report by the CIL review team,

October 2016: page 20

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In examining the options (and picking up some of the points raised in the general observations), the independent review group therefore considered the arguments for doing nothing, abolishing the CIL, minor or more substantial reform. The independent review group recommended a twin track approach - combining a low level local infrastructure tariff (LIT) and Section 106 - describing this as “the best of both worlds”:

4.3.1 We propose a twin track system of a new low level tariff, combined with Section 106 for larger sites, that captures the best of both worlds, optimises the contributions from those smaller sites which may not otherwise be contributing in a Section 106 system and also ensures the more substantial infrastructure needs of larger developments are met in a timely manner by those best placed to do so.

(…)

4.3.6 Given that CIL has not, and never will, shoulder the entire infrastructure provision burden directly or secure its provision in a timely manner, we recommend that the LIT should be explicitly set at a level which does not attempt to achieve this. The LIT does not need to be set in a manner which involves establishing a precise relationship between the quantum of infrastructure need and the amount of LIT that is charged and thus substantially simplifies the charge-setting process.

We recommend that the Government should replace the Community Infrastructure Levy with a hybrid system of a broad and low level Local Infrastructure Tariff (LIT) and Section 106 for larger developments.

4.3.7 Given the changing nature of the local government geography and the emergence of Combined Authorities, we believe there is a good case for making the necessary legislative and regulatory provision to enable CAs to collect a ‘Mayoral’ type CIL as a contribution to major pieces of infrastructure. This would not be obligatory and indeed would only be relevant where there was a requirement for such large infrastructure. We refer to this subsequently as the Strategic Infrastructure Tariff (SIT).

We recommend that Combined Authorities should be enabled to set up an additional Mayoral type Strategic Infrastructure Tariff (SIT)

4.3.8 We believe these recommendations, which are expanded in the following chapter, will provide a fairer, faster and simpler system for ensuring that all development, both small and large, makes some contribution to cumulatively required infrastructure, whilst at the same time recognising the needs of larger more complex sites. Overall, we believe this approach is likely to raise more money for infrastructure in aggregate by optimising LIT and Section 106s. Moreover, by allowing for the timely delivery of infrastructure to support larger schemes it will unblock major development, thus supporting the Government’s growth agenda and at the same time dealing more effectively with the very issues that make development unpopular.27

27 A new approach to developer contributions: a report by the CIL review team,

October 2016: page 25

15 Commons Library Briefing, 19 December 2019

A Government response to the review was not published but, in the 2017 Housing white paper, the May Government said that it would make an announcement in the Autumn Budget.28 The housing white paper also raised the question of capturing uplifts in land value.

On developer contributions and land value uplift, the Autumn Budget 2017 document set out how the Government wished to proceed in amending the CIL and section 106, subject to a further consultation. It intended (it said) to:

• In certain circumstances remove the restriction on section 106 pooling towards a single piece of infrastructure where the local authority has adopted the CIL

• Speed up the process of setting and revising the CIL, to make it easier to respond to changes to the market

• Allow local authorities to set rates better reflecting the uplift in land values between a proposed and existing use

• Change indexation of CIL rates to house price inflation rather than build costs and

• Give Combined Authorities and planning joint committees with statutory plan-making functions the option to levy a Strategic Infrastructure Tariff (SIT) in future, in the same way that the London Mayoral CIL was providing funding towards Crossrail. 29

In the budget document’s section on the Cambridge – Milton Keynes – Oxford corridor, the Government again said that it would encourage authorities to make use of existing powers and to consider introducing a Strategic Infrastructure Tariff (SIT), to sit alongside the CIL.30

The SIT was again mentioned in a debate on land value capture in December 2018, when the then Housing Secretary, James Brokenshire, was asked whether the power to establish a strategic infrastructure fund might be extended to smaller authorities. In reply, he said that combined authorities with strategic planning powers would be able to introduce such a charge, while other authorities could use their CIL pooling powers.31

2.2 Consultation in March 2018 In March 2018, MHCLG launched a consultation on supporting housing delivery through developer contributions.32 This consultation set out the perceived shortcomings of the current system. The issues (according to MHCLG) were:

• The partial take-up of CIL has resulted in a complex patchwork of authorities charging and not charging CIL. Where CIL is charged, it is complex for local authorities to

28 DCLG, Fixing our broken housing market, February 2017: page 40 29 HM Treasury, Autumn Budget 2017, HC 587: pages 61-2 30 HM Treasury, Autumn Budget 2017, HC 587: page 55 31 HC Deb 10 December 2018 c3 32 MHCLG, Supporting housing delivery through developer contributions: Reforming

developer contributions to affordable housing and infrastructure, March 2018

In the Autumn Budget 2017, the Government proposed the introduction of a strategic infrastructure tariff, to sit alongside the CIL.

16 Community Infrastructure Levy (England and Wales)

establish and revise rates. These can often be set at a lowest common denominator level;

• Development is delayed by negotiations for section 106 planning obligations, which can be sought alongside CIL contributions;

• Developers can seek to reduce previously agreed section 106 planning obligations on the grounds that they will make the development unviable. This renegotiation reduces accountability to local communities;

• CIL is not responsive to changes in market conditions;

• There is a lack of transparency in both CIL and section 106 planning obligations – people do not know where or when the money is spent; and

• Developer contributions do not enable infrastructure that supports cross boundary planning.33

The consultation document listed the Government’s five objectives for reform:

• reducing complexity and increasing certainty

• supporting swifter development

• increasing market responsiveness

• improving transparency and increasing accountability and

• allowing local authorities to introduce a SIT to help fund or mitigate strategic infrastructure.34

One area of proposed change was the restriction on pooling section 106 planning obligations which, to create some flexibility, would be lifted in certain circumstances.35 Another area where change was proposed was setting the rate for CIL, where the consultation set out to overcome issues around setting CIL rates based on the type and scale of the proposed development and differences in the uplift in land values on granting planning permission. It therefore proposed that rates should be based on the existing use of land:

69.Allow CIL charging schedules to be set based on the existing use of land. This will allow local authorities to better capture an amount which better represents the infrastructure needs and the value generated through planning permissions. Local authorities will continue to have the ability to set CIL at a low or zero rate to support regeneration.36

The consultation also raised the possibility in the longer term of determining developer contributions nationally and making them non-negotiable.37

33 MHCLG, Supporting housing delivery through developer contributions: Reforming

developer contributions to affordable housing and infrastructure, March 2018: p 14 34 As above: page 15 35 As above: page 21 36 As above: page 20 37 As above: page 10

Chapter 13 of the Commons Library briefing What next for planning in England? The National Planning Policy Framework discusses developer contributions (CBP 8260, 7 June 2019)

For more information on section 106, see the Commons Library briefing Planning obligations (section 106 agreements) (CBP 07200, 6 September 2019)

17 Commons Library Briefing, 19 December 2019

An article in the specialist publication Planning outlined various planning professionals’ views of the proposals, particularly those on pooling. The professionals also commented on setting the CIL rate, where (some suggested) the proposals, if enacted, might lead to far lower contributions.38 It was reported in June 2018 that the Home Builder Federation was arguing that the proposed changes amounted to a land tax in disguise:

Responding to the Government's consultation on the new draft National Planning Policy Framework, the HBF compares the proposals to Harold Wilson's "betterment tax", under which landowners paid a 40 per cent levy to contribute to local public services, including housing.

(…)

The industry body predicts that the plans would lead to "a land shortage, a lack of development and subsequent inflation in both land value and property prices, exacerbating rather than solving the current housing crisis."39

MHCLG’s response to the consultation was published in October 2018. In that response, MHCLG said (amongst other things) that

• Following the revision of the National Planning Policy Framework (NPPF) and published guidance on viability, MHCLG would issue more guidance, to support local authorities in adopting and revising CIL charging schedules.40

• Charging authorities would continue to be required to consult on draft charging schedules, but two separate rounds of consultation would not always be required.41

• In the light of comments received, the Government would not go ahead with the proposed creation of a two month grace period for submission of a commencement notice in relation to exempted development, but would instead make changes to the penalties associated with failure to submit a commencement notice before development starts.42

• Starter homes would be exempted from the CIL.43

• The Government would not be legislating to take forward the proposal to allow local authorities to set differential CIL rates based on existing use of land, but would support local authorities in using existing flexibilities within the CIL regulations to set differential rates.44

38 “Changes to developer contributions: the sector reacts”, Planning, 8 March 2018 39 “'Land tax in disguise' will worsen housing crisis, construction industry warns”,

Telegraph, 2 June 2018 40 MHCLG, Government response to supporting housing delivery through developer

contributions, October 2018: page 5 41 As above: page 6 42 As above: page 11 43 As above 44 As above: page 14

18 Community Infrastructure Levy (England and Wales)

• Varying views had been expressed in the consultation about how to index CIL rates to house prices and there would be further consultation on draft amendment regulations.45

• To reinforce the changes made to the NPPF and the guidance on viability, the Government would require developer contributions made through the CIL or section 106 agreements to be reported in a statutory Infrastructure Funding Statement.46

• In the light of comments received, the Government had modified its proposal in relation to a SIT, so that Combined Authorities with strategic planning powers could take forward a SIT and groups of charging authorities would be encouraged to use existing pooling powers more effectively, to deliver strategic infrastructure.47

2.3 Technical consultation in December 2018 Most recently, a technical consultation on draft regulations to reform developer contributions as outlined above ran from December 2018 to January 2019.48 In it, the May Government set out its proposals around reducing complexity and increasing certainty, increasing market responsiveness (through indexation of CIL rates), improving transparency and increasing accountability, delivering starter homes and other technical clarifications.

The summary of responses to this consultation and the Government’s view of the way forward was published in June 2019. Here the Government said:

6. The Government introduced new regulations to deliver these reforms in June 2019. The regulations will be debated in the House of Commons under the affirmative resolution procedure.49

The regulations are the Community Infrastructure Levy (Amendment) (England) (No. 2) Regulations 2019.50 The Parliament beta website gives a timeline for the procedural activity relating to the regulations, which were approved by the House of Commons on 2 July and came into effect on 1 September 2019.51

45 As above: page 16 46 MHCLG, Government response to supporting housing delivery through developer

contributions, October 2018: page 19 47 As above: page 22 48 MHCLG, Reforming developer contributions: Technical consultation on draft

regulations, December 2018 49 MHCLG, Government response to reforming developer contributions, June 2019 50 SI 2019/1103 51 For comment on the regulations, see “Eight things you need to know about the new

2019 CIL regulations”, Planning, 6 June 2019 and “Community Infrastructure Levy - September 2019 will bring further changes”, TLT, 6 June 2019.

19 Commons Library Briefing, 19 December 2019

3. In more detail: using the CIL and section 106 funding for the same piece of infrastructure

It was a longstanding principle of the CIL and section 106 agreements that they could not both be used to fund the same piece of infrastructure, as the March 2018 consultation document pointed out:

81.Regulation 123 of the CIL regulations enables local authorities to publish lists of infrastructure they intend to fund through CIL. This regulation also prohibits the use of section 106 planning obligations to provide contributions to fund infrastructure on this list.52

The consultation document argued that there was a “considerable amount of confusion and variation” around Regulation 123 lists, which in many cases (it said) did not serve a useful purpose. It therefore proposed to remove regulatory requirements for Regulation 123 lists and to amend the CIL Regulations to require the publication of Infrastructure Funding Statements, that would “explain how the spending of any forecasted income from both CIL and section 106 planning obligations over the next five years will be prioritised and to monitor funds received and their use”.53 In the response to the consultation, MHCLG confirmed that the restrictions relating to regulation 123 lists would be removed. Concerns expressed in the consultation about “double dipping” would be addressed (MHCLG said) by the new reporting standards set out in the Infrastructure Funding Statement.54

The technical consultation on draft regulations to reform developer contributions in December 2018 similarly said that the new regulations would enable local planning authorities to use both the CIL and section 106 agreements for the same piece of infrastructure, thus boosting flexibility:

16. The regulations will allow local authorities to use both the Levy and section 106 planning obligations to fund the same item of infrastructure. Together with other reforms set out in this consultation, such as removing restrictions in regulation 123 of the Community Infrastructure Regulations 2010 (see paragraphs 48-53 below), this will give charging authorities greater flexibility for funding infrastructure. This will enable authorities to approve development that may otherwise have been refused. The Government will consider how guidance can be used to incentivise uptake and ensure that planning obligations are used effectively. In order to incentivise continued use of the Levy the

52 MHCLG, Supporting housing delivery through developer contributions: Reforming

developer contributions to affordable housing and infrastructure, March 2018: pages 22-3. Regulation 123 of the CIL Regulations 2010 (SI 2010/948) limits the use of planning obligations. The charging authority’s list of individual projects that it proposes to fund from the CIL is commonly known as a ‘Regulation 123 list’.

53 As above: page 23 54 MHCLG, Government response to supporting housing delivery through developer

contributions, October 2018: page 19

20 Community Infrastructure Levy (England and Wales)

Government proposes to require that, should authorities consider stopping charging the Levy, they should consult on doing so. The consultation would set out the expected impacts of ceasing to charge the Levy on funding infrastructure and how the authority intended to replace any lost funding. These proposals do not apply to the Mayor of London.55

The summary of responses to the December 2018 consultation confirmed that the Regulations would allow authorities to use both sources to pay for the same piece of infrastructure; although some respondents had expressed concerns about this, the Government considered that it would bring benefits in speed and flexibility:

68. The Regulations will allow authorities to use funds from both the Levy and planning obligations to pay for the same piece of infrastructure, regardless of how many planning obligations have already contributed towards it. The Government acknowledges the comments made about the use of the Levy and section 106 planning obligations in this way. The Government considers that this will enable more flexible and faster infrastructure and housing delivery. The introduction of infrastructure funding statements will increase transparency to ensure that it is clear how the Levy and planning obligations have been spent. The Government considers that these reforms to increase transparency provide a more appropriate mechanism for considering how the Levy and planning obligations are used together than the regulatory restrictions which were found to create barriers to development. Guidance will also be provided on this issue.56

The PPG on planning obligations now explains how funding from different routes (section 106 agreements and the CIL) may be pooled to fund the same infrastructure, saying that “plan makers should consider the combined total impact of such requests so they do not undermine the deliverability of the plan”:

How do planning obligations relate to other contributions? Developers may be asked to provide contributions for infrastructure in several ways.

Local authorities should consider whether otherwise unacceptable development could be made acceptable through the use of conditions or planning obligations. Developers will have to comply with any conditions attached to their planning permission. Conditions should be kept to a minimum and only imposed where they are necessary, relevant, enforceable, precise and reasonable.

Planning obligations, in the form of section 106 agreements and section 278 agreements, should only be used where it is not possible to address unacceptable impacts through a planning condition.

Developers may also contribute towards infrastructure by way of the Community Infrastructure Levy which is a fixed charge levied on new development to fund infrastructure.

Where the Community Infrastructure Levy is in place for an area, charging authorities should work proactively with developers to ensure they are clear about the authorities’ infrastructure needs.

55 MHCLG, Reforming developer contributions: Technical consultation on draft

regulations, December 2018 56 MHCLG, Government response to reforming developer contributions, June 2019

21 Commons Library Briefing, 19 December 2019

Authorities can choose to pool funding from different routes to fund the same infrastructure provided that authorities set out in infrastructure funding statements which infrastructure they expect to fund through the levy.

Plan makers should consider the combined total impact of such requests so they do not undermine the deliverability of the plan.

See related policy: National Planning Policy Framework paragraph 34 and paragraph 54

Paragraph: 003 Reference ID: 23b-003-20190901

Revision date: 01 09 2019 See previous version57

57 MHCLG, Guidance: Planning obligations, 19 May 2016, updated 1 September 2019

22 Community Infrastructure Levy (England and Wales)

4. Adopting the CIL As noted earlier, it is for local authorities to decide whether to adopt the CIL (and at what rate) in their area.

In a memorandum in October 2013, the coalition Cameron Government set out rates of adoption and expected adoption of the CIL. The document also provided a list of CIL charging authorities whose charging schedules had come into effect, as at 1 October 2013.58

More recently, as part of its “CIL watch”, Planning magazine - observing that more than 200 local authorities in England and Wales have published CIL plans for consultation - has published an updated table of local authorities’ CIL status59 with interactive maps of CIL status and residential charges.60

Local planning authorities must publish details of any draft charging schedule and agreed charging schedule for the CIL on their website.61

58 DCLG, Memorandum – Post Legislative Scrutiny Planning Act 2008, Cm 8716,

October 2013 59 “CIL watch: who’s charging what?”, Planning, 2 October 2019 60 Community Infrastructure Levy maps, Planning, 2 October 2019 61 MHCLG: Guidance: Community Infrastructure Levy: paragraphs 001 and 044,

revised 1 September 2019

23 Commons Library Briefing, 19 December 2019

5. The CIL in London The London boroughs and the Mayor of London all have powers as CIL charging authorities.

Separate to the Mayoral CIL, each London borough is entitled to set its own CIL charging schedule to gather funds to pay for new infrastructure within that borough. Although this is separate to the Mayoral CIL, and will be an additional charge for development, boroughs must show that they have considered the Mayoral CIL when setting their own charge.

5.1 Introduction of charging schedule in 2012: MCIL1

On 29 February 2012, the Mayor of London agreed a CIL charging schedule. The levy (MCIL1, now superseded) was to apply to developments consented on or after 1 April 2012, and was to be collected by London boroughs once development commenced. The Mayor specifically designated that the CIL would be used to raise £300 million towards the delivery of Crossrail. Listing the infrastructure projects or types of infrastructure that the Mayor intended to fund in whole or in part by CIL also allowed the continued use of planning obligations (section 106 agreements) for other projects or types of infrastructure. MCIL1 was charged on most developments in London at the following rates:

Zone 1 boroughs - £50 per square metre

Camden, City of London, City of Westminster, Hammersmith and Fulham, Islington, Kensington and Chelsea, Richmond-upon-Thames, Wandsworth

Zone 2 boroughs - £35 per square metre

Barnet, Brent, Bromley, Ealing, Greenwich, Hackney, Haringey, Harrow, Hillingdon, Hounslow, Kingston upon Thames, Lambeth, Lewisham, Merton, Redbridge, Southwark, Tower Hamlets

Zone 3 boroughs - £20 per square metre

Barking and Dagenham, Bexley, Croydon, Enfield, Havering, Newham, Sutton, Waltham Forest62

5.2 Second iteration in 2019: MCIL2 The second iteration of the Mayoral CIL (MCIL2) came into force on 1 April 2019, superseding MCIL1. MCIL2 will be used to fund Crossrail 1 (the Elizabeth Line) and Crossrail 2.

The Mayor of London/London Assembly website explains the differences between MCIL1 and MCIL2:

MCIL1 set a standard charge for all development across London and in March 2016 the GLA published the Crossrail Funding SPG

62 Mayor of London/London Assembly website, Mayoral Community Infrastructure Levy

[undated, accessed 20 September 2019]

More information is available on the Mayoral Community Infrastructure Levy webpage on the Mayor of London/London Assembly website.

24 Community Infrastructure Levy (England and Wales)

which explained how MCIL1 and S.106 Crossrail charges work together.

The SPG can be found here:

Crossrail Funding [Supplementary Planning Guidance] updated March 2016

In contrast, MCIL2 sets a general charge for all development across London as well as specific charges for office, retail and hotel development in Central London and the Isle of Dogs.63

The new charging schedule for all development in London (except for office, retail and hotel use in Central London and the Isle of Dogs, and except for health and education in all of Greater London, for which other rates apply) is:

Band 1 boroughs - £80 per square metre

Camden, City of London, City of Westminster, Hammersmith & Fulham, Islington, Kensington & Chelsea, Richmond-upon-Thames, Wandsworth

Band 2 boroughs and mayoral development corporations - £60 per square metre

Barnet, Brent, Bromley, Ealing, Enfield, Hackney, Haringey, Harrow, Hillingdon, Hounslow, Kingston upon Thames, Lambeth, Lewisham, Merton, Redbridge, Southwark, Tower Hamlets, Waltham Forest, London Legacy Development Corporation (LLDC), Old Oak & Park Royal Development Corporation (OPDC)

Band 3 boroughs - £25 per square metre

Barking & Dagenham, Bexley, Croydon, Greenwich, Havering, Newham, Sutton64

63 Mayor of London/London Assembly website, Mayoral Community Infrastructure Levy

[undated, accessed 20 September 2019] 64 Mayor of London, Community Infrastructure Levy 2 Charging Schedule Takes effect

1 April 2019, January 2019

25 Commons Library Briefing, 19 December 2019

6. The CIL in Wales The National Assembly for Wales research service’s briefing The Planning Series: 12 Community Infrastructure Levy sets out to answer some of the most frequent questions about the CIL in Wales.65 As it points out, so far only a small number of local planning authorities in Wales have introduced the levy and, even where it is introduced, it can only be used to support the development of infrastructure previously identified in an authority’s Local Development Plan.

Planning magazine’s table shows the following authorities in Wales as having adopted or made some moves towards adopting the CIL:

Source: “CIL watch: who’s charging what?”, Planning, 2 October 2019

65 National Assembly for Wales research service, The Planning Series: 12 Community

Infrastructure Levy , April 2019

Local authority CIL status Date

Caerphilly Adopted 10/06/2014

Cardiff Draft Charging Schedule Published

08/09/2016

Carmarthenshire Preliminary Draft Charging Schedule Published

07/09/2016

Conwy Preliminary Draft Charging Schedule Published

14/12/2015

Merthyr Tydfil Adopted 23/04/2014

Monmouthshire Draft Charging Schedule Published

24/03/2016

Newport Examination Report Published

03/08/2016

Rhondda Cynon Taf Adopted 10/12/2014

Torfaen Draft Charging Schedule Published

11/12/2017 

For more information about the planning system in Wales, see the Commons Library briefing Comparison of the planning systems in the four UK countries: 2016 update (CBP 7459, 20 January 2016)

BRIEFING PAPER Number 03890 19 December 2019

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