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Transparency of financial benefits in planning

The Housing and Planning Bill (Clause 140) proposes to make public, through committee reports, the financial benefits of certain development proposals – as we have commented on before.  The report will need to list the benefits whether it is material to the LPA decision or not, and note the LPA’s position on the benefit, these include local finance considerations (as defined by the TCPA 1990 section 70 (inserted by the Localism Act 2011)).  CIL payments are included within this description whoever may be the beneficiary, i.e. the LPA as collecting authority for its own levy, or for the Mayor of London.

Piles-of-pounds1The Government’s technical consultation on implementation of the planning changes (issued on 18 February 2016, and invites representations by 15 April 2016) sets out that council tax and business rate revenue could also be included within the description ‘other financial benefits’, to be prescribed through regulations.  This will require the LPA to liaise with those relevant departments of its Council to ascertain estimates of the likely tax/ rates that will be generated by a development, and whether that is a material consideration to the decision to be made on the application.  This could prove difficult where the scheme is in outline and the full details of a development are not yet known, in particular where flexible uses are proposed.  New Homes Bonus benefits will also be required to be reported, again further liaison will be required to obtain the appropriate information, the level of funding and determine whether that funding is material.

Most committee reports already include a section on the benefits of a scheme, this would usually include an estimate of any levy charge payable (whether mayoral or its own), as well as section 106 agreement benefits – where a recommendation to grant permission will be subject to the planning agreement being entered into on the basis of the recommendation/ resolution of the committee.  The Planning Practice Guidance already encourages authorities to report financial benefits such as New Homes Bonus and CIL, regardless of whether there is no legal basis for treating them as material to planning decisions. Care is needed to do so without creating a ground for legal challenge that would otherwise have not existed.

The solar industry for example has, for a long time, offered community benefits, either in the form of works in kind (i.e. providing panels on a public building) or financial payments (usually for the benefit of projects promoted either in relation to reduction of energy consumption, or more commonly any projects promoted for the benefit of the community).  These offers are usually made to parish/ town councils.  However, there are a number of instances where payments have been offered, and made, to local schools or other unelected community groups.  The proposals in the technical consultation are likely to require these types of benefits to be included in committee reports and judged on whether they are material.  These arrangements are usually finalised outside of the planning system, by private deed.  This transparency could have opposing impacts – with the relationship between contributions and proposals being tested for materiality, opening routes for criticism and challenge.

Shale gale keeps blowing

David Cameron has confirmed that the Government is ‘going all out for shale’, on a site visit in the Gainsborough Trough area of Lincolnshire, in which the BBC has announced that Total is investing around £12 million as the first oil major to commit to UK fracking.

Business Rates Boost

The Prime Minster has also confirmed that the Business Rates Retention scheme in force since April 2013 (which enables authorities to retain 50% of the uplift in business rates from development they authorise) will apply to shale projects at a full 100% rate.  The policy would implement one of the recommendations from the influential May 2013 Institute of Directors report on the economic benefits from shale development in the UK and barriers to delivering it.

shaleThe IoD report envisaged a potential £3.7bn investment in UK shale and the Government is now looking to use the Business Rates regime to channel some of this locally to overcome public resistance to fracking.

The benefits for a 12-well site could be worth up to £1.7 million to the local authority responsible for collecting rates – 140% of East Lindsey District Council’s  total Environment budget or 100% of its 2013-14 budget cuts

Critics will point to the reported cost of policing Cuadrilla’s Balcombe operations last summer and uncertainties about how (and when) rates valuations will take place.

Community Benefits Still in Doubt

The missing link in the community benefits remains the lack of a clear mechanism for getting these resources down to the level where they will deliver tangible benefits and persuade local people that development can bring worthwhile investment – see our blogs on Community Interest Companies (CICs). Business Rates Retention will not benefit the (County) Minerals Planning Authorities who will determine fracking applications.  The clouding of roles feared by some is therefore unlikely to arise in practice but the money will not be a ‘Local Finance Consideration‘ for planning approval purposes unless the local authority commits itself to spending the retained rates on something with a clear planning relationship to the fracking project.

Where decision-making is co-ordinated in this way, there are some real benefits to weigh in the planning balance. It would be possible for the Government to structure the Business Rates Retention amendments so that the extra 50% (or a part of it) must be passed to a CIC or Neighbourhood Planning body (i.e. a Parish Council or Neighbourhood Forum).

Community Funds

The UK Onshore Operators’ Group has now launched its proposals for securing community benefits, which will rely on the national charitable trust UK Community Foundations to deliver £100,000 for local benefits where planning consent is granted and exploratory drilling starts.  Local priorities will be set following consultation and a local panel will be appointed to decide how the funds are spent.  It is good to see the model for local benefits being worked up, but it remains to be seen how the 1% of profits promised by the UKOOG and Government will be calculated and paid and whether the use of a national charity structure will give the level of flexibility that CICs could offer, in using community benefits to go beyond mitigation projects to wider not-for-profit and social enterprise roles.