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CIL – the antidote to green shoots?

February 24th, 2012

Successive governments have toyed with the idea of taxing profits made when securing planning permission. Indeed, betterment was a cornerstone of the early planning legislation.

A land tax has been tried by successive governments but abandoned for some reason or another – principally the concern that it would cause the property market to stop working and destroy the economy.

However, having done that successfully without CIL I guess the prudent Mr Brown had nothing to lose when he introduced this levy shortly before the public sent him packing.

Of course the option was always open to the new administration to pull back from this, but after inheriting a public debt of unprecedented scale, it was quite easy in political terms to convince a public increasingly cynical of all profit making enterprise that it should continue.

The fruits of that non-decision are now starting to show. This week we saw Redbridge introduce a charge of £70 per square metre for development in its Borough, equating to an eye-watering contribution of £317,730 for a residential development of 4,539 sq m. This is quite tame by recent standards however. The London Borough of Merton has proposed a rate of £385 per sq m for residential development and Wandsworth a rate of £575 per sq m. These are astonishing charges.

The way in which these rates are calculated is cloaked in mystery but the extension of a moist digit into the atmosphere represents at least 90% of the process, it would seem.

On the face of it, securing much needed public funds from developers seems like a good idea. However, at this point in the market anything that adds cost to development that is already hindered severely by the availability of finance and ever increasingly ridiculous demands for affordable housing and eco friendliness has but one outcome – that limited development that is happening at the moment will just not go ahead.

Coupled then with the ridiculous scenario that having committed (the landowner) to a significant CIL payment a developer may still need to pay for key infrastructure essential to the delivery of his or her development (Can you trust the local council to deliver a signalised junction adjoining your site in a timely manner when there is no Section 106 obligation requiring it to do so?) then you get a planning system that does the exact opposite of what it is intended to achieve. Development gets slowed, or stopped, at a time when what the economy really needs is for it to speed up.

A number of authorities have recognised the real burden that CIL is creating and have reduced their charges to reflect the economic climate. These are however the exception.

I am not for one moment claiming that we should drop CIL and revert to the lottery of Section 106 agreements. It is however time for the boffins in Whitehall and local authorities to apply joined up thinking in delivering a contributions protocol that supports the delivery of essential infrastructure but does not put the brakes on development at the time we need it most.