The Joy of Local Tax – and the mysteries of the missing Levy… Richard Chisnall investigates

 

Community Infrastructure Levy. Sounds boring, right? It’s a tax or levy on development intended to support the necessary infrastructure the development needs: zebra crossings, schools, doctor’s surgeries and more. Call it a “Section 106 agreement on steroids”. It’s been implemented by all other Somerset councils: Taunton Deane, Sedgemoor, South Somerset, North Somerset, B&NES, but remarkably, not by Mendip. While local authority budgets and services are being cut, it seems rather strange that a cash-strapped council chooses to forego a ready source of funding.

I’ll be the first to admit that local authority finance issues don’t exactly make my eyes light up, but delve a little deeper into these issues and you’ll soon come across what one writer has termed “planning’s guilty secret”. But first, some background.

We’re experiencing the second-worst housing crisis in living memory. The first was created by air raids during the Second World War which destroyed large swathes of our inner cities. The hardship that caused is difficult to comprehend, but after World War II, the UK had a housing boom like no other and the problem was solved. Houses were built (mainly) by local authorities in hitherto unseen numbers, helped along by the Town and Country Planning Act of 1947. Here’s where the fun bit starts.

In the arcane and sometimes impenetrable world of planning law, there’s something called “planning gain“. This refers to the increase in the value of a plot of land resulting from planning permission being granted on it. It’s staggering: the value increases at least 100-fold and often 200-fold. You can buy an acre of agricultural land for, say, £10k and its value jumps to between £1m and £2m – without a single brick being laid.

The 1947 act taxed this unearned income at 100% – but with a mechanism whereby local authorities could claim it back. The rate of taxation varied in later years, to 40% and 50%, but was eventually dropped completely in 1985 under the then Conservative government. This continued until the Planning Act of 2008, where the Community Infrastructure Levy (CIL) was created in order to improve and provide things like roads, doctors surgeries, schools, zebra crossings and the like. This was expanded upon in the Localism Act of 2011.

The key point to understand is that it’s up to the individual local authority – in this case, a district council – to implement the CIL, and our own Mendip District Council (MDC) has, unlike all the other Somerset councils, chosen to say no to this source of funding. The reason given is – anecdotally – that the levy will deter business development: if this is the case, why has Mendip not experienced a surge in businesses moving here instead of to neighbouring areas?

This is what MDC says via the Local Plan:

There are no CIL charges on development in Mendip. Financial contributions are sought via a legal (s106) agreement where required in line with national guidance and Local Plan policies.  Proposals to commission viability work to assess the introduction of CIL were agreed by Cabinet in September 2016. Any decision to proceed with a draft charging schedule will not be made until later in 2018.

I’m loath to get into the numbers involved, as the calculations are complex and beyond this author’s capacity, but the baseline figures of Planning Gain in the Mendip area since 2010 are not less than £200m – and the amounts available via a CIL would be substantial.

If you’ve got this far, I’m guessing you’re wondering why Mendip has chosen this route? Well, so am I. Here in Frome we’ve got a large area in the centre of town which is finally being developed. This will, no doubt, add pressure to the stretched resources in the town centre and new infrastructure will be necessary. That’s what the CIL is for, after all.

Viewed from a pragmatic point of view, I find it inexplicable that MDC lets this money slip through their fingers – or, rather, our fingers. Planning law is often arcane but the amounts of money involved are substantial. A cynic would suspect that this might influence the thinking of the present MDC leadership and the 32 Conservative councillors that make up the majority. I am certain are just as appalled as you are by the thought of unearned income going untaxed into the pockets of wealthy developers, while the poorest have to live with savage cuts to the services they depend upon.

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