“I decree today that life is simply taking and not giving…”

I apologise to Morrissey for stealing his lyrics for purposes as uncool as an article on planning reform, and the infrastructure levy to boot. But I was in need of a pun and, being a Smiths fan, I felt compelled.

The Government issued their consultation Levelling-up and Regeneration Bill – reforms to national planning policy just before Christmas. See it here.

It’s full of things to be chewing on in the next month or two and there will be plenty of summaries on the web – none better (or quicker) than Simon’s, here.

The consultation doesn’t really say much about the proposed new infrastructure levy (IL), for good reason because that will be subject to a future consultation and is to be brought in – as CIL was in its time – by a set of regulations under the Planning Acts.  These things take time.

However, now planning reform is well and truly back on the agenda, I thought it would be worth blowing the dust off the IL and reminding ourselves of what we know so far and see where we might be headed.

First, a reminder of the basics.

Part 4 and Schedule 11 of the LURB introduce the IL in England. CIL will be abolished in England, but not in London (where Mayoral CIL will continue).  CIL will also continue in Wales.

IL doesn’t come into force immediately though – as I mentioned there will be a consultation on draft regulations, and then those regulations will need to be brought in. They will be politically very contentious – but let’s not get ahead of ourselves.

When the LURB was first published, one of the things much commented on was that IL is not going to be the “streamlined, low-level tariff” originally trailed in the Government’s White Paper – no, it is going to be even more complex than CIL.  I’ll say that again – even more complex than CIL.  Oh mother, I can feel the soil falling over my head.

In lots of ways, particularly its administrative nuts and bolts, IL is likely to be boringly like CIL. But the LURB introduces three big changes.  So what difference does it make?

• The first big change is that IL will be compulsory.  LPAs will not be given any discretion as to whether they introduce it, or not, in their areas.  They will be obliged to introduce it.  So very unlike CIL, where it’s left to each LPA whether to introduce it or not.  This seemingly subtle difference shouldn’t be underestimated – together with the next big change, it represents a very radical change in how affordable housing will be secured in developments.
• The next big change is that IL is intended to be used to fund affordable housing as well as infrastructure.  Again, very different to CIL which can only be used to fund infrastructure. No details of how this might work in practice are known, particularly what this means for development plan policies that require a (site specific viability-tested) amount of affordable housing to be provided. All we know at this point is that section 106s are proposed to be scaled back to cover just on-site mitigation measures on most sites (though it will be possible to use section 106s more comprehensively on the largest sites).

• The third big change is that IL is proposed to be charged on a proportion of gross development value. This is a massive difference to CIL, which is calculated by reference to floor area.  It raises a whole host of issues some of which I touch on below.

The Government reckons that the money raised from IL will be at “many multiples” of current CIL take and that the amount of affordable housing delivered on sites will not be any less than now.  They also expect IL rates to be lower than CIL rates, which leaves me scratching my head I must admit.  But is it really so strange?  I’m sure they have it all worked out. Their calculation might be that by making it compulsory, all those authorities who haven’t yet adopted CIL will be forced into world of levy.

The plan is to introduce IL through a “test and learn” approach, meaning that it will be rolled out nationally over several years, allowing for monitoring and evaluation, so as to design the most effective possible system.  Someone in the Ministry has clearly learned the lessons from CIL.  But obviously that means that the IL system – in its final form – will not be in place across the country for years to come.
This of course assumes no change of Government in the foreseeable future. But what if we get a change of government?

Something can be learned, I think, from the proceedings at LURB’s committee stage.  IL was discussed over the 6-8 September sessions.  Labour’s shadow housing minister Matthew Pennycook led for Labour, Tim Farron for the Lib Dems, opposite relevant Government ministers. Their proposed amendments in committee regarding the IL (supported by the Lib Dems) centred around the three big changes I mentioned above.

One concern for the opposition was around the mandatory nature of IL. The primary concern was that the sheer complexity of IL may make it onerously complicated to operate in practice. Section 106 is, argued the opposition, a more flexible and practical means of securing affordable housing. They are surely right about that, though section 106s can take time to complete.

Another opposition concern was that IL would be too inflexible a mechanism to levy as much public gain from development. Unviable sites in the places that are most in need of levelling up would be rendered unviable by an IL rate set for an area rather than based on the viability of each particular development. In their efforts to avoid setting blanket rates for their whole area, they might resort to creating a smorgasbord of IL rates to try and take account of viability on a finer grain.  Still, this would not be as flexible as section 106. By the same token, on sites that are more viable there would be no opportunity to capture a share of super-profit, as can be achieved currently with s106 review mechanisms. The opposition were concerned the IL will lead to less infrastructure and less affordable housing while putting development on marginal sites at risk.

A big opposition concern was that IL is to be calculated on development value rather than floorspace. There were several aspects to this. One was that this would bring viability issues into every planning decision, whatever the nature of the scheme in question, and ascertaining development value can be a subjective and uncertain exercise. Another was that IL payments might be made only at the end of the development process rather than at the beginning. Especially in the case of phased development, this would break the link between a development and the planning gain for the community that it generates.  Residents will not be able to understand the public gain inherent in development and will lose confidence in the system.

None of the opposition’s amendments that went to a vote made it through, and others were withdrawn to be debated in due course.  Matters rested with the observation from the opposition that no workable system for funding both infrastructure and affordable housing had yet been devised, and that it seemed unlikely that IL was going to be it.

Where does that leave us?  I suspect it will be quite some time before we see any consultation on draft IL regulations from the present government.  I might be wrong about that of course. But to come up with a workable IL system of the kind the Government envisage will take a massive amount of brain power.  And if there is a change of government, I doubt there will be the political will to introduce IL at all.

You’ve got everything now.  I will be back when there is more to report…

“So drink, drink, drink and be IL tonight.”