Achieving local support for major projects is a challenge. Financial commitments under Section 106 TCPA 1990 are little help in securing support – where they are a ‘reason for approval’, they cannot not go beyond what is necessary to make the scheme acceptable. As such, they are rarely a benefit on their own. Designing in benefits, then securing them by condition or S106, is an easier win.
But controversial schemes often need more to persuade local communities that they will share in benefits as well as impacts. The Government is committed to the idea that ‘host’ communities should share in the benefits of major development to capture their support and this is being applied in several sectors:
- Nuclear: the Business Rate Retention (BRR) allows local authorities to retain some or all of the business rates arising from new development, with special arrangements for new nuclear power stations involving up to £1,000 per generated MW over 40 years.
- Renewables: the renewableUK Community Benefit Protocol proposes £1,000 per MW of installed capacity, or equivalent benefits-in-kind, to be provided directly to host communities.
- Fracking: The UK Onshore Operators Group proposes £100,000 per fracked site and a 1% share of revenues if drilling succeeds.
- Airports: it has been suggested that a community trust should be given part ownership of, and a share in the profits from, any third runway at Heathrow.
Finding the right vehicle
The easiest way to deal with these incentives would be a hypothecated tax collected locally and payable to eligible local bodies. For the time being, though, developers must structure their own deals. Finding representative bodies to receive funds and implement good works is often difficult. Dealing separately with numerous individuals is impracticable and unrepresentative. Existing groups may also be unsatisfactory proxies for the community as a whole (or their legal form may be such that they are not ideal recipients − even as trustees − of significant financial benefits) although this has worked successfully with regular payments being made by the operators of the London Eye being routed to the South Bank Employers Group.
We have addressed the scope for Community Interest Companies to do the job in our detailed e-bulletin. CICs provide independent corporate governance, distinct both from individual residents and the authorities, and an “asset lock” and “community interest test” guaranteeing that resources are applied as intended. By using a CIC in their operating arrangements, developers of contentious, revenue-generating infrastructure can make a credible argument outside the planning process about positive impacts. They can also enhance their corporate social responsibility profile, whilst moving beyond debates with local authorities on benefits. The use of CICs for wind farm projects such as Fullabrook in Devon and Swinford in Leicestershire confirms their usefulness as an efficient and accountable channel for community benefit. At Fullabrook, Devon Wind Power transferred £1 million to the CIC, and pays £100,000 each year that the wind farm generates power.
If the approach is developed on these major schemes then it may provide a better model for other development, moving the focus from addressing impacts at the start of the development process to finding ways to ensure that new development continues to contribute to the place in which it sits over the longer term.