CIL Infrastructure Funding Statements – Clarifying the Opaque

New planning guidance was published by the Government on Sunday 1 September regarding the Community Infrastructure Levy (CIL) in light of recent amendments made to the CIL Regulations. One of the key changes made is the revocation of Regulation 123 (see here for our recent blog on this), which provided that a development could not be required to pay a planning contribution in relation to infrastructure where CIL had been identified as responsible for funding its delivery, and restricted the pooling of funds towards specific pieces of infrastructure. In connection with this amendment, which allows authorities to choose to use funding from different sources towards the same infrastructure, a new requirement has been inserted into the CIL Regulations requiring charging authorities to publish an “infrastructure funding statement”.

The infrastructure funding statements are required to set out the infrastructure projects or types of infrastructure that the authority intends to fund, either wholly or partly, by the levy or planning obligations, though this will not dictate how funds must be spent and in turn collected. These statements will become increasingly important for developers who wish to understand what the appropriate level of planning obligations payable in relation to a development is, and in particular the types of planning obligations that should properly be payable in relation to that development based on what is outlined in the statement and what should properly be funded by the CIL it pays. Importantly, it is possible for an infrastructure funding statement to identify that an item of infrastructure may be funded by both CIL and by planning obligations.

The infrastructure funding statements are non-binding and thus will likely result in a lot of negotiation regarding the types of planning obligations that should be payable before a developer can fully understand the quantum of the applicable planning obligations/CIL. This will make assessing the viability of a development, and in particular determining the land value for a site following updates to viability guidance and approach over the last 18 months more strictly requiring land values to be calculated taking planning obligations/CIL into account, even more difficult.

However, the immediate problem would appear to be that the first infrastructure funding statements are not required to be published until 31 December 2020, so until then what the split should be between planning obligations/CIL will be opaque, with Regulation 122 likely to be increasingly relied upon (by all parties) to determine when a planning obligation is appropriate. Further, whilst an authority “must” publish an infrastructure funding statement, there is no penalty included in the CIL Regulations for not doing so.

The potential positive impact of the changes is that it will allow a developer and the authority more freedom to confirm the infrastructure to be funded by the overall contribution to be made in connection with the development, and give authorities more freedom to direct funds to immediate infrastructure needs to unlock sites and provide a greater certainty of delivery. However, taking into account one of the main complaints regarding CIL was the lack of delivery of infrastructure using CIL monies, which is likely as a result of issues beyond the effect of the now revoked Regulation 123, it’s very much a “watch this space” to see if those potential positives can be realised.

Author: Martyn Jarvis, senior associate, planning, London

Martyn Jarvis
Martyn Jarvis
Senior associate, planning and environment, London
+44 20 7466 2680
Matthew White
Matthew White
Partner and head of UK planning practice, London
+44 20 7466 2461

CIL reform: What the dickens!

“Large amounts don’t grow on trees.
You’ve got to pick-a-pocket or two.”

On 1 September 2019, the CIL Regulations will be amended – yet again. Among the various technical changes is the removal of Regulation 123, which currently prevents local planning authorities using more than five section 106 obligations to fund a single infrastructure project. This is widely referred to as the “pooling restriction”.

This change has two significant implications for developers:

  • First, there will no longer be any restriction on local planning authorities asking for section 106 contributions towards infrastructure that is also being funded by CIL. This practice, known as “double dipping” means that developers could end up paying twice towards the same infrastructure.
  • Secondly, local planning authorities will no longer be restricted to spending CIL receipts on infrastructure that is specified in their Regulation 123 lists. Instead, an annual infrastructure funding statement will be published which sets out the infrastructure projects which the charging authority intends will be, or may be, wholly or partly funded by CIL; and which reports on CIL and planning obligations received and spent over the previous year.

How has this happened?

The pooling restriction was certainly a problem. In 2016, the City of London Law Society Planning and Environmental Law Committee was among the organisations that gave evidence to the government’s independent CIL Review Panel saying that the pooling restriction had become a barrier to the delivery of infrastructure, particularly in relation to strategic sites in multiple ownerships and involving multiple applications. The Committee recommended allowing applicants for major developments to opt out of the CIL regime in favour of negotiating a bespoke infrastructure agreement under existing section 106 arrangements instead.

Unfortunately, the changes to the Regulations only deal with one side of the equation. By removing Regulation 123, infrastructure can be funded by section 106 contributions once again. But by failing to allow major developments to opt out of CIL, the door has been opened to double dipping.

The government’s summary of responses to its technical consultation on the proposed reforms revealed that three private sector organisations expressed concerns about double dipping and four local authorities called for guidance to clarify the position on this issue. The government acknowledged the comments made about the use of CIL and section 106 planning obligations in this way and said that guidance will be provided on this issue. No new guidance has been issued yet, however.

My understanding of MHCLG’s view is that CIL receipts will never be enough to fund all of the infrastructure needed in an area, so it is legitimate to collect section 106 contributions in addition to CIL. But that view ignores the whole foundation on which CIL was originally established: to fund specific items of infrastructure identified by the local authority, with charging rates set according to their anticipated cost after independent examination.

The government considers that these reforms will increase transparency. But by removing Regulation 123 lists and allowing double dipping, the link between CIL rates and the cost of defined infrastructure projects has been broken. Consequently, from 1 September CIL will become a very complex land value capture mechanism masquerading as an infrastructure funding tariff.

Author: Matthew White, partner and head of UK planning practice, London

For further information please contact:

Matthew White
Matthew White
Partner and head of UK planning practice, London
+44 20 7466 2461