CIL Review – can we fix it?

Part 1 of our CIL Review blog highlighted the Government’s appetite for retaining and reinforcing the Community Infrastructure Levy.  Our suggested reforms for this year are:

1. Simplify regulation: The CIL Regulations are the product of a set of amendment instruments for each year since 2010, plus the changes made by the Localism Act.  These reforms – delivering phased charging, abatement, flexibility on offsets for existing floorspace and other improvements – have been welcome.  The resulting system is now mired in horrible complexity though.  The Review should explore how much regulation could be simplified or simply discarded.
2. Simplify phasing: The introduction of phased charging in 2014 is a great tool for managing CIL liability. The process for defining and amending CIL phases should be significantly easier for investors though.  Breaking the link between planning phase and CIL phases is necessary to end what has become a time consuming exercise.  Likewise, the effect of S96A changes on phasing should be made absolutely clear to avoid CIL-bearing schemes being forced to use time consuming planning processes to achieve changes that are material to CIL but immaterial to planning.
3. Delivery: Uncertainty over the way that CIL expenditure will be focussed on planned growth is unhelpful.  The Review will have to consider the balance between the discretionary use of CIL, against the need to avoid it being drained away from investment in new infrastructure to support Local Plans. A slightly more prescriptive framework for some of the really big ticket items used to justify CIL setting would be sensible.
4. CIL Agreements: CIL breaks down for the largest schemes and is a drain on the system and general source of bafflement.  The Review will need to grapple with how much flexibility can be created for genuinely ‘Strategic Sites’. It is possible to contractualise CIL payments for major schemes so that much of the current regulatory fog is cleared, as long as:
   1. it is compatible with value capture, so that the overarching CIL burden itself cannot be reduced by the use of agreements;
   2. it is compatible with procurement law, which will mean that the point at which CIL liability arises will need careful thought, the powers to enforce under Part 9 of the regulations are applied and instalments continue to apply;
   3. the valuation assumptions for ‘works in kind’ are less dysfunctional.
5. Pooling + Double Dipping: The law is regarded as confusing but could easily be left as it is, but furnished with proper guidance about how the R123 restrictions should be used to focus debate on the whether there is a real justification for planning obligations. The R123 list and R123(2) pooling restrictions should be recognised as a diversion, and binned.
6. Look afresh at Affordable Housing investment. The Localism Act changes are widely seen as having successfully removed affordable housing from the realms of CIL ‘infrastructure’.  The merits of that political choice should be revisited – recycling a limited amount of CIL into innovative affordable tenures would make sense and address the viability debates that dominate housing.
7. Create freedom: Allow authorities to forward fund infrastructure and repay debt from CIL. The rate at which they may do so is currently set at 0%, despite their access to preferential borrowing rates. Authorities with a Local Plan less than 3 years old should be empowered to do so, as long as the CIL repays only new infrastructure.
8. Reduce choice: The Localism Act 2011 amendments to the Planning Act 2008 allowed CIL to be spent on existing, as well as new, infrastructure. That undermines the purpose and legitimacy of CIL. Take it back, or at least only allow it for authorities with a recent plan that meets needs in full without the need for future green belt reviews.
9. Charge Setting: The Examination process is mercifully short and focussed. It is too rarely burdened with substantive objections. There is little that needs to change, other than the level of engagement with the process. The scope for abuse of differential rates and the application of residential charging rates to so-called ‘ancillary’ spaces should be reigned back in or made absolutely clear at the charge setting stage.
10. Exemptions, distractions and diversions: There are too many developments that do not pay CIL and too much CIL is diverted away from local authorities who need it to provide the infrastructure to support development.  Good development should be supported by infrastructure, and that needs funding.  Let’s cut back on those who do not have to pay and let’s make sure the entirety of the money raised is available for new capital expenditure.