House – Public Policy Design
Blog: Why the Community Infrastructure Levy should be at the top of every Local Authority’s to do list
Infrastructure matters. The CBI reported to a Treasury Select Committee that 70% of business leaders think the UK’s infrastructure is poor and 85% suggest it had an impact on their investment decisions, making it crucial for any local economy. Numerous studies also suggest infrastructure quality has a profound effect on our personal wellbeing and satisfaction with services (for example the BMA study on the impact of the environment on patient recovery). And that’s not to mention the impact infrastructure can have on the future of the planet through reduced waste and resource demand management.
The truth is that, as with any other western economy, the UK’s last significant period of infrastructure investment came more than 50 years ago in the aftermath of WWII. Since then the approach has been piecemeal at best and managed decline at worst (and not managed particularly effectively as maintenance budgets are ever further trimmed to focus only on the most immediate of problems).
The Local Government Association suggested the bill to address the UK’s Infrastructure needs is £50 billion a year for the next decade. However, capital investment from Central Government capital programmes is to be almost halved to £21 billion per annum by 2015. Area-based regeneration models based on cross-subsidy from private sales have also been thrown into disarray. This has been accompanied by ever tightening revenue budgets in council Development Directorates, Environmental Management and Planning departments, as schools and critical adult care services are prioritised. So if infrastructure is critical to our future and yet the public spending squeezes mean less funding, what are local authorities to do?
A little quick research suggests that over the next 15 years London Boroughs could raise £2-£2.5 billion of Community Infrastructure Levy from housing development alone. That’s in the region of £150m per year. That will go along way to meeting some of the capital’s needs to remain competitive and address man of the wellbeing issues its less well off residents face.
Unlike some other infrastructure funding mechanisms such as TIF (Tax Increment Finance) Community Infrastructure Levy isn’t just for high growth areas. Community Infrastructure Levy spreads the cost amongst the vast majority of developments (all those producing 100m2 or more additional floor space). That’s both fair and equitable, in that those who benefit financially from infrastructure share the burden of its cost. That means it is relevant to all of our cities and rural areas.
It’s not just the income from Community Infrastructure Levy that matters. The levy mechanism will simplify and reduce some of the uncertainty in the planning process, consequently reducing the need for negotiation. That will save staff costs (and legal fees) for developers and local authorities alike.
Whether in the spirit of Community Infrastructure Levy or not, the Levy can and will be used to influence development markets. The Levy fee will never have as significant an impact as factors such as sales price shocks, hikes in borrowing costs or material inflation, but it will impact around the margin of development viability. Consequently, Local Authorities need to manage Community Infrastructure level, not just as a tax, but also as a strategic place-making mechanism. In managing the Levy public service leaders will need to answer important questions: Is your area open for business? Are you committed to investing in infrastructure the place needs to thrive?
The development industry might reasonably question the Levy given that some Authorities have significant amounts of unspent s106 monies. In our experience it is often unspent not because it is not needed but because of a lack of clear, sufficiently resourced delivery mechanism. In our view the success of Community Infrastructure Levy relies on solid local infrastructure delivery programming. So it is excellent news that the Levy enables Local Authorities to use 5% of the monies raised for management costs. In our view this should be spend on strategic program management to deliver your infrastructure projects (as well as the financial administration and enforcement).
Community Infrastructure Levy is neither just another Tax nor something that should be left solely in the hands of an isolated planning department. Community Infrastructure Levy is a strategic policy move that should be on every corporate management team’s priority list.
The legislation is in place, so every day without CIL is potentially lost contribution towards much needed infrastructure in our villages, towns and city neighbourhoods.
…House is a partner in CILknowldge.com a new service of Local Authorities seeking to take a strategic approach to Community Infrastructure Levy.
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