A slightly clearer view on build levy

Tamar Wilner, Regeneration & Renewal, 15 August 2008

Government officials indulged in a spot of window washing last week. On the subject of the Community Infrastructure Levy - the proposed tax on new development - a few panes have been made clearer. But many more remain opaque.

One thing we now know, courtesy of government guidance published last week, is who will have the power to collect the Community Infrastructure Levy (Cil), assuming it clears parliamentary hurdles and becomes law. In England, the power will be limited to district, metropolitan and unitary authorities, the London boroughs, the London mayor and East Anglia's Broads Authority. England's shire county councils will be denied the power. In Wales, the power will go to county councils and county borough councils. National Park Authorities will also wield the power in both nations.

Nigel Smith, chair of the regeneration panel at the Royal Institution of Chartered Surveyors, says he's disappointed that English counties and regions are excluded. He notes: "They can ask unitaries to levy on their behalf, but if (the unitaries) don't want to, they can say: 'Get lost'."

The guidance does envisage that sub-regional infrastructure will be a key beneficiary of the levy, and proposes that councils fund those projects by pooling Cil contributions. It adds that regional development agencies could provide up-front infrastructure funding and be reimbursed by council Cil money. Stuart Robinson, executive director of UK planning at property consultancy CB Richard Ellis, says that one new element is the document's assertion that regional spatial strategies are likely to identify infrastructure requirements, which will be met through local plans. But he says: "We have yet to understand the exact mechanism that will fund sub-regional infrastructure."

Another clarified point is the levy's purpose. According to the guidance, Cil should be used to fund infrastructure required to support development envisaged in an area's development plan, not to remedy existing infrastructure deficiencies. Graham Nickson, policy and projects manager at campaign body the Town and Country Planning Association, welcomes that declaration. But he says the Government must do more to show that Cil will raise extra cash, rather than act as a substitute for current funding. "Cil (shouldn't) provide 80 or 100 per cent (of infrastructure costs) - it must be ten or 15 per cent," he says.

But many other facets of the levy remain unresolved. The document says that councils, when drawing up their Cil rates, may consider how much they expect the granting of planning permission to drive up land values. But developers think this would make the tax complex to calculate and may encourage housebuilders to sit on land, hoping that Cil is repealed by a future government. The uplift issue was a key reason why developers booed Cil's predecessor, the Planning Gain Supplement, off the Government's agenda. But the guidance says the Government will continue discussing with the sector using other measures, such as developer profits or rental returns, as a basis for calculating the levy.

Other issues to be clarified include whether Cil charged on developers that build their own infrastructure will be reimbursed as they have paid for their own infrastructure; whether Cil can be used to fund "soft" infrastructure such as community development officers to help residents settle into new neighbourhoods; and how section 106 planning gain deals will be restricted once Cil begins. "There's still a wealth of uncertainty," Robinson says. But not much time - the Government would like Cil to kick in as early as next spring.

- The Community Infrastructure Levy is available here