Law change confirms that NHB and CIL can be considered in planning applications, says expert

Out-Law Analysis | 23 Jan 2012 | 9:48 am | 2 min. read

OPINION: Councils should publish clear spending plans for New Homes Bonus ("NHB") and Community Infrastructure Levy ("CIL"). This would allow them to consider the benefits of NHB and CIL money generated by developments when deciding on planning applications, following a change in the law this month.

NHB and CIL are relatively new Government schemes that are designed to provide incentives for development in local areas and to support the delivery of the Government's localism and growth agendas.

Under NHB, the Government provides additional funding to Councils by matching extra Council tax generated when a new house is built in the Council's area. Under CIL, Councils are able to set an additional charge on development to fund infrastructure needed to support local development.

Not all Councils have published  clear plans about how and where money secured from NHB will be spent. Similarly, many Councils proposing to use CIL have kept their published spending lists very high-level, making it hard to know precisely what infrastructure will be funded by CIL in each area.

This has the advantage of giving Councils more flexibility. But the down-side in legal terms is that - as well as creating uncertainty - it prevents Councils from being able to give credit to developments for generating NHB and CIL payments when they determine planning applications for new development.

The Town and Country Planning Act (section 70) provides that Councils must have regard to the development plan and "material considerations" when dealing with planning applications. The law was changed - or technically it was simply clarified - on 15 January through amendments made by the Localism Act. Now, Councils must also have regard to "any local finance considerations, so far as material to the application."

NHB and CIL both clearly qualify as 'local finance considerations'. The key question is whether they are "material" to specific planning applications.

The Government has not published formal guidance on what "material" means in this context, but the Department for Communities and Local Government's summary of responses to a consultation on NHB gives an indication of Government thinking.

It said that "in some cases [NHB] could lawfully be taken into account as a material consideration where there is a direct connection between the intended use of the Bonus and the proposed development". The House of Lords debate on the legal change also noted that, to be material, a consideration "must relate to the planning merits of the development in question."

This means that the NHB or CIL money will be 'material' to the planning application when it is reinvested in the local areas in which the developments generating the money are to be located, or when it is used for specific projects or infrastructure items which are likely to affect the operation or impacts of those developments.

Councils. then, can and should take NHB and CIL positively into account when deciding whether to grant planning permission. In all other cases, though, where NHB and CIL spending plans are less clear, Councils should not take NHB or CIL into account when determining planning applications, otherwise their decisions will be vulnerable to legal challenge.

Councils who want NHB and CIL to incentivise and support new development should produce and publish clear spending plans for NHB and CIL. Such a move would also enable developers to openly talk about the financial benefits of their developments without fear of prejudicing planning decisions. Developers should consider very carefully whether, and when, their planning statements and environmental statements should be identifying anticipated NHB and CIL revenue generated by their schemes.

Marcus Bate is an expert in planning law at Pinsent Masons, the law firm behind