Community Infrastructure Levy No1 - Effects of the Localism Act 2011 (Update No 1 19 November 2011)

Although community infrastructure levy (CIL) was introduced by the previous Labour government in the Planning Act 2008 and regulatory secondary legislation, it is now just finding its feet. There was a spell when I thought the Coalition government would drop CIL but they finally picked it up and are now running fast.

Changes were made by the Coalition but it was originally significantly the same as intended. In effect CIL is a new kind of tax which will probably entirely replace various "tariffs" and almost completely section 106 Agreements and, possibly, like agreements under housing and transport legislation. The Localism Act 2011 may have introduced changes which may cause local problems.

Firstly though it has been pleasing to see some order come about in this (mine)field of taxation - the so-called tariffs have been bludgeoning in in a manner reminiscent of the days of of the Sheriff of Nottingham.   What now seems a hundred years' ago, I came to the view that Section 106 Agreements were a system of unbridled "taxation" without recourse to the basic principles of taxation: tariffs seemed more appropriate but were similarly unbridled in the green and pleasant land!

Although determined locally, CIL is formulated within a national tax structure provided by the 2008 Act (as amended) and subsequent regulations. It might be thought of as a "bricks-and-mortar" tax. In this respect it is not a "development value tax" also variously known or guised as "development charge", "betterment levy", "development land tax" or "development gains tax", etc. All of these national taxes required insights into the development value of the land at some time. Each was an impost  and differently imposed on the difference between a parcel of land's open market value and the existing/current use value to give development value.

Destination of CIL Proceeds
It remains to be seen how local aggregations of CIL will be allocated to the needs for local infrastructure. It may be noted that very little of each of the proceeds (tax-take) of the development value taxes had a transparent local destination: they ended up in the national piggy bank! Similarly, I understand that very little of the aggregation of proceeds ("tax-take") of Section 106 Agreements was or is actually spent on infrastructure: they ended/end up in local authority piggy banks!

What will happen to CIL? We do know that under the 2011 Act a portion will end up in the neighbourhoods' pockets (say, parish council (?), town council (?), etc) but will it be spent on infrastructure? What happens to the rest? Will it be spent on infrastructure?  Also, in this context, the Localism Act 2011 begs the question:  "What is neighbourhood?"

Finally, the Localism Act 2011 (15 November 2011) may "spoil" CIL. For about two years local planners have been beavering away at collecting information on prospective new infrastructure - types, programmes, costs, etc - and basing their charging schedules on these pointers.

However, the 2011 Act provides that the proceeds will go:

1. to the kinds of infrastructure itemised in the Planning Act 2008; 
2. to the neighbourhoods for the kinds of things the locals want - about which the planners may not have collected much if any information; and,
3. a range of costs associated with old infrastructure costs, eg maintenance, operations, etc - again this may not have been foreseen in each planner's crystal ball when devising the charging authority's rates of CIL.

These extra "burdens" (2 and 3) may throw the CIL-take to the point where the extra costs on top of the  original list of infrastructures upon the CIL rates are based is such as to so severe that not all expectations will be achieved in some areas where say, the neighbourhoods are demanding.