Development Taxes and Levies: TCPA - Cambridge University, Discussion Paper Launch at RICS

The Town and Country Planning Association and the University of Cambridge launched their Discussion Paper on Development Taxes and Levies on the 8^th July at RICS. Chaired by Liz Peace, CBE former CEO of the British Property Federation and current RICS Senior Independent Governor, a full house included diverse interests in land development, planning, law, academia and taxation from the public and private sectors.

Development taxes and levies: lessons from the past, ideas for the future - Town and Country Planning Association

The right to develop land was nationalised under the planning system set up in 1947. Measures to capture windfall gains resulting from planning have been a persistent political challenge ever since. This is also a technically challenging area of professional practice where RICS has produced three separate pieces of mandatory advice to enable members to apply evolving government policy.

The discussion paper is based on research conducted by Miles Gibson at the University of Cambridge.  As one of the architects of the Community Infrastructure Levy 2010 (CIL) he is well placed to reflect on the performance of our current system. Rigorous research often gets hidden away, never reaching the people who need to understand its findings. In a sector frequently informed more by polemic than hard information, this collaboration and dissemination is a really important role the TCPA is carrying out.  It helps us understand better how and why policy measures are introduced and repealed.  

Long on policy, short on evidence

It is impressive how thin the evidence base was for introducing previous levy regimes. It is also equally impressive how little evidence there was to justify repealing them; so much for rational evaluation then in interrogating the problem to be solved and choosing the appropriate options to achieve the aims.

Which takes us to the politics of development levies and the taxing of windfall gains in development land. This issue has always exposed the ideological split between the two main political parties of the day.  Are development land values community generated or are they a return on risk … or some combination of both? How is the uplift in value to be shared?

The paper advocates some key principles …

1.    Both CIL and Section 106 have a reason to exist, but they are not playing to their strengths.

RICS engaged closely with the development of the previous government’s proposed Infrastructure Levy. It is instructive to see how policy makers seem to be searching for a single, uniform, universal regime capable of being applied across all areas. It soon became apparent that given the fragmented nature of infrastructure providers; the range of socio economic conditions to be met; and the difference between small and large scale development, such uniformity would prove elusive.

So the rationale for retaining S106 agreements for large and complex sites became un-contestable. The paper recognises that, so we can now make the S106 component of the regime fully perform at negotiating and delivering its planning obligations on time.

There is another rationale. It is that with a non-negotiable, fixed mandatory CIL providing the core contributions, having a negotiable S106 regime gives the potential to flex in response to site specifics and cyclical market conditions.

2.    Reform should be as much about increasing the number and type of developments exposed to value capture as about attempting to secure more value from these developments which are already exposed. While windfall gains can in theory be taxed at high rates without distorting incentives a successful system should not ask for so much value that the incentive to develop is removed.

The first part of the statement refers to a number of development types, scales and locations of development which could be brought within CIL. There may still be potential to expand the value base along these lines. Where new development of all types and uses clearly relies on the provision of local infrastructure to function in principle they should be brought within the development levy regime.

The second part refers to a technically challenging area which has presented difficulties in the current system i.e. not to seek to capture so much value that the incentive to develop or bring land forward is removed. But there is no discoverable evidence of what this figure is. Equally there is only anecdotal evidence about what level of premium will deter land owners from releasing land onto the market. This area would benefit from further policy development to provide greater certainty and to link to discoverable metrics that don’t give rise to challenges.

…. and some Recommendations

• Allow CIL to be spent on affordable housing

This kind of proposal was explored in the design of the Infrastructure Levy which was conceived as a single pot of money without differentiating between infrastructure and affordable housing. Ultimately it was rejected because of concern the infrastructure demand would squeeze out the affordable housing.

• Allow CIL to be borrowed against

This seems like a reasonable approach to ensuring infrastructure is delivered in a timely way. But borrowing against future receipts of CIL was considered high risk in the design of the Infrastructure Levy and was seen as transferring risk from the private sector to the public sector. Given the precarious nature of local finances this will continue to be difficult.

• Allow a wider range of authorities to charge CIL

To some extent it would seem that the issue is answered by the recognition in the paper that the state can only capture windfall gains where these gains exist – which means that infrastructure requirements of much development in low value locations will have to be met in another way. 

Caveat about micro-levies

The development sector has long been concerned about the cumulative affect of planning obligations on development viability. RICS guidance seeks to explicitly account for these. The discussion paper refers to the increase in what it describes as ‘micro-levies’. These are having an impact on what is deliverable through CIL or S106 as they compete for a limited resource before viability is compromised.

Planning needs plans

The paper refers to the stand-alone nature of the CIL regime as being one of the reasons for its durability. Given the absence of up to date plans and accompanying evidence bases the need for an self-contained process is entirely understandable. But so much of what is advocated in this paper would be easier to achieve if our plan led system had up to date plans.

[This is an edited version of the author’s invited response at the launch event]

09.07.25