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Ministers set to stagger introduction of Infrastructure Levy

Words: Huw Morris

The new Infrastructure Levy (IL) proposed by the government will be based on the final gross development value of a scheme and introduced in a staggered roll-out while retaining some role for section 106 agreements, under government planning reforms this week.

Amid scant details of the new tax, which will replace the Community Infrastructure Levy, government explanatory notes and a document accompanying the levelling up and regeneration bill say it will be introduced through a “test and learn” approach. 

Ministers will set different dates for local authorities to unveil levy charging schedules for “a staggered roll-out of IL, so that IL regulations can be informed by how IL works in practice”, with much of the detail to be set out in future regulations.

Section 106 agreements will be retained and used instead of the levy for the “largest” projects, although the government falls short of defining what these include. However, it adds that “infrastructure will be able to be provided in-kind and negotiated, but with the guarantee that the value of what is agreed will be no less than will be paid through the levy”.

Developers will be required to deliver infrastructure that is “integral to the operation and physical design of a site”, including flood-risk mitigation, under “narrowly targeted” section 106 agreements alongside the IL.

The proposals include a new non-negotiable “right to require” under which local authorities will “determine the portion of the levy they receive in-kind as on-site affordable homes”.

In a joint comment on the proposal, Irwin Mitchell’s planning partner Nicola Gooch and head of planning and environment Claire Petricca-Riding said the new regime’s success will depend “entirely on how it is implemented”, which means publishing the draft legislation. 

“However, it is a plan that is fraught with risk,” they stated. “The proposal would put the responsibility for delivering infrastructure – including affordable housing – squarely on the shoulders of local councils, which are not geared up nor ready to become large-scale infrastructure providers. 

“If the government is not careful, this move could also undermine a number of their more recent planning reforms – such as the introduction of First Homes and biodiversity net gain, both of which rely on section 106 agreements as their primary delivery mechanism.”

Ashurst partner and co-head of planning Claire Dutch noted the scant detail of the proposed IL so far. “For developers, this is a big one. We are told to expect a “locally set, non-negotiable levy” which sounds remarkably similar to the system we currently have.”

Shoosmiths planning partner David Mathias said that “while not without its flaws, the existing system allows for flexibility and certainty of delivery”, especially on non-financial planning obligations such as affordable housing delivery.

“The new locally set, non-negotiable levy must enable swift decision-making that offers flexibility and certainty if it is to succeed,” he added. “Local authorities and their planning departments must also be provided with the resources to manage the levy and ensure that obligations are delivered.”

Image credit | Simon Hark, Shutterstock