IL Watch: Infrastructure Levy details in Levelling Up & Regeneration Bill 2022

Levelling Up and Regeneration Bill

 Today (11 May 2022) the government introduced the Levelling Up & Regeneration Bill 2022 to Parliament. The full text can be found here.

 

This is a lengthy bill with a number of significant impacts to the planning system, including emphasis on digital, street votes for proposed development, and compulsory letting of vacant high street properties.

 

This post focuses on the first proper details of the much-trailed Infrastructure Levy, initially proposed to replace Section 106 affordable housing and planning obligations in the Planning for the Future White Paper (now shelved).

 

The proposals clearly have a significant impact on all development proposals UK-wide, and this is the first concrete information giving us an indication of how the proposed Levy may play out.

 

We are still reviewing this information, but below are a few initial reactions on first reading of the Bill.

 

It should be noted these are provisional opinions, and the end legislative product is likely to be amended significantly before becoming law. Please do give us a call if you would like to discuss up to date implications of these proposals.

 

Infrastructure Levy: Revolution or Renegotiation?

Schedule 11 of the Bill is of most interest to anyone reviewing the actual bill.

 

The first thing that jumps out is reference to charging schedules.

 

What is clear throughout is that the process of investigation, evidence gathering, proposals, examination, feedback and adoption will follow much the same route as CIL Charging Schedules do. This has never been a quick process, and clearly CIL has not been adopted countrywide for various reasons, most notably viability.

 

So could some areas fail or refuse to adopt an IL charging schedule?  204M provides for a ‘due date’ whereby the Secretary of State may issue a date by which a local authority must issue a charging schedule. 204M(2) specifies this not be before 12 months after the SOS has issued a written notice of the requirement to publish a charging schedule. This section also provides for the SOS to arrange for a charging schedule to be delivered on the authority’s behalf if not completed. However,204G(4)(a) notes local authorities must have regard to viability – and clearly a levy will not be viable in every area – as evidenced by the uneven adoption of CIL.

 

We will have to hear more on the precise regulations before we can judge the approach, but our initial take is that IL will likely follow a very similar adoption process to CIL – inconsistent adoption across the country, at very different rates, likely concentrated in London, but taking a considerable amount of time to adopt (consider the Bill must be amended and gainRoyal Assent, the Regulations must be completed, and a due date period completed).There will be areas where it is not viable to adopt – as with CIL currently – and these areas appear likely to either continue under the current regime or will fail to secure contributions unless a national pooling approach is taken.

 

Exemptions, rates and thresholds

Exemptions and reductions are referenced, including for charities. Interestingly at 204G(8) thresholds in relation to either nil or reduced rates are referenced, and 204X gives the SOS power to alter IL rates or thresholds. This suggests, in tandem with recent discussion about exempting smaller developers from planning fees, that SMEs may be supported through a legally mandated exemption or reduction under a certain threshold. This is the intention of national guidance currently, but often not applied in local policy.

 

The fine print

The usual technicalities are included, such as payment allowed on account or by instalments; can be repaid if overpaid; and compensation procedures if errors occur. There is also a significant section in relation to enforcement, including interest, penalties, suspension/cancellation of planning permission, prohibiting development in liability is not assumed, and even criminal offence creation through avoidance, as well as restrictions of use/occupation and land charge provisions.

 

So what about viability now?

Firstly, we expect the current regime to continue for some time to come. Clearly there will be a legislating and then adoption period of several years as with the Environment Bill, during which these provisional details may be amended and the existing system will continue to be subject to viability assessment. We then expect some considerable work by councils and their agents to be required to put in place the new process before it can be adopted. And this all appears, on first reading, to except Greater London and Wales. As noted there are likely to be areas where it cannot viably be adopted – there are still significant questions around how this will ‘level up’ regional inequality. The government commentary on this point suggests a very much 'trial and error' approach over a number of years, indicating their awareness that this could go very wrong if not properly tested first.

 

Practical points

For practical implementation, there will be a right of appeal regarding method and questions of fact; local authorities will be required to publish information about costs of development in their areas; and strict procedures for valuation of development will be included in Regulations. Interestingly, to my knowledge, this is the first time that viability has been so explicitly enshrined in law, at 204G(4)(a). This is a further reinforcement of the ‘plan-led’ approach currently emphasised in PPG Viability, and we suspect viability will remain in the planning lexicon for some time to come, although it may evolve slightly.

 

Ultimately it appears the intention is to have a scenario where the Infrastructure Levy can be delivered as cash or onsite, much as in the current system but with more emphasis on the cash. The emphasis will move to initial valuations of GDV upon which liability can be assumed, but the actual amount will be based on final sales values.

There is also a duty in the legislation for local authorities to ensure that the IL matches or improves current delivery - but this seems like both a very hard thing to quantify and a very hard thing to enforce, particularly given delivery can comprise onsite delivery of various benefits, offsite delivery and cash. Given a lack of any practical information it suggests a political rather than practical inclusion.

 

Conclusion: groundhog day

Ultimately, this is very early days, but this certainly reminds us of the original development and legislation for CIL, and its associated challenges in both formation and later adoption. We will need to await further detail on the Regulations to better understand how the government hopes to improve on the current system, but currently we have concerns that this will actively reduce, rather than improve, affordable housing provision and planning obligations across the country.

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