Planning matters: A tax aimed at benefiting local communities

July 31 2019
Planning matters: A tax aimed at benefiting local communities

Planning Matters column with Chris Gosling

AS the saying goes, the two things that are sure in life are death and taxes. I am going to concentrate on the latter in this month's article. Along with many planners on both sides of the fence, I would rather not have to. Many of those working in the public sector have had to become part-time tax collectors, although that opportunity is surely not what would have drawn them to the profession in the first place. The same can be said of those planners who have to explain the tax implications of development to their clients. The tax involved is the Community Infrastructure Levy, the mouthful also known as CIL. It has not been adopted nationwide, but for the councils that have started to collect it, their communities are starting to see the benefit, as reported in last month’s Fishponds Voice. The example covered in the Voice was the arts project promoted through the Eastville Neighbourhood Network, funded through CIL contributions, now coming on line.

There is a long, often acrimonious, politically-charged dimension to who should benefit from the grant of planning permission that goes back to the birth of Town and Country Planning in 1947. Over the years, the balance between the developer and the general public has changed according to who is in power. The current compromise between the two reflects that because the public can experience some disbenefit from development, they should be compensated for these effects. As an example, a new housing estate brings new children to the area. The local school will need new classrooms as a result. The State is obliged to educate these children and the developer agrees to fund part this because there is simple, demonstrable cause and effect. The planning department is the gatekeeper between the two parties.

The latest swing in this balance, CIL, changed the onus for payment from large housebuilders to all developers, big and small. To an extent this was fair as, for instance, increasing the size of your house tends to enhance its value, but it made collection of lots of smaller sums very unwieldy, while streamlining financial matters for the larger developers. The money raised goes into a ring-fenced pot to be spent locally, so a visible ‘public good’ can be shown to have come from the cumulative effects of all development in the local area.

Taxation is also often used as an incentive or disincentive to behave in certain ways and with the CIL, the self-build exemption relates to living in a house you have built for its first three years. If you move before the third anniversary, you become liable to pay CIL. Clearly this dis/incentive only becomes effective when the alternative to building for yourself is a hefty payment. The number of people who choose to do this is testament to the locally-set rate. This taxation sets up its own market, where local authorities want to attract development but risk losing it to neighbouring authorities who charge less for each square metre built.

This extra layer of complexity to the world of planning does result in tangible community benefits which have to be set against the inconvenience, complexity and general unpopularity on those forced to pay. It may feel like CIL is here to stay but at the very least it will evolve further before it is eventually replaced.