Examiner questions Havant Borough Council's CIL retail rates

In a letter to the Council (2-Pages / 11KB PDF) the Inspector said he had a number of queries relating to the differential retail rates proposed in the Council's Draft CIL Charging Schedule. “This is yet more proof that proposing differential CIL rates based on the size of development is a high-risk strategy for local authorities," said Marcus Bate, a planning and CIL expert at Pinsent Masons, the law firm behind Out-Law. 

Havant Borough Council proposed to charge differential rates for retail development in its Draft Charging Schedule, which would vary depending on a development's size and location. It proposed a nil rate levy for all retail development in the town centre. 

For retail development located on the "Edge/out of centre" area that is over 280 square metres, the Charging Schedule proposed a levy of £84 per sq m and for "out of centre" retail development that is less than 280 sq m, it proposed a levy of £42 per sq m. 

The first issue the Inspector raised was that, despite the Council proposing differential CIL rates for different parts of the area there was no map in the schedule indicating where different rates would apply. 

"Under Regulation 12(2)(c) where a charging authority sets differential rates the changing schedule is required to provide a map that identifies the location and boundaries of the zones. The submitted schedule does not include this," the Inspector said. 

The Inspector said it is not clear what the CIL would be for an "edge of centre" retail development of less than 280 sq m, a category of development which does not appear to be covered by Schedule, the Inspector said. 

"The Inspector’s request for Havant to produce further ‘fine grain’ evidence to justify the threshold separating ‘small’ and ‘large’ retail uses is entirely consistent with Government guidance and recent experience at CIL examinations," said Bate. 

"Similarly, the reminder about the importance of complying with State Aid rules picks up on a recurring theme appearing in Government guidance, but as yet not properly tested at examination.  At best, Havant will face delays in implementing CIL.  At worst, it may be unable to justify a particular threshold and would have to apply a single flat rate for all sizes of retail development.”

The Inspector also questioned Havant Borough Council's justification for proposing 280 sq m as the threshold at which retail development were judged to be large or small.

"Such a distinction must be justified by a comparative assessment of the economic viability of the different categories within the different zones, bearing in mind the need to be State aid compliant," he said in the letter. "Does the Council have the fine grain of evidence that would support the use of the proposed threshold in this way?" 

The Economic Viability Assessment states that the Council "might wish to consider CIL on retail development of around £80 per sqm on retail park development, with consideration given to a discounted rate for smaller out of centre retail, and a zero rate on high street retail”. 

Havant's use of different terminology for the proposed retail charging zones, without definition, could cause confusion, the Inspector said. 

"The Inspector assumes that the Council has equated “retail park development” with “out of centre” and “high street retail” with “town centre”," his letter said.  "On the face of it these could be considered to be different things. Could the Council explain in more detail or point to the economic viability justification for the discounted rate and also the choice of this particular threshold?"

It was noted that Havant Borough Council had received a "relatively small" number of representations, but requested an "early response" to the matters he raised. 

A final view on how the examination should proceed is expected following the consultation period on the Council's "statement of modifications", which ends on 3 August. 

“The wider issue about the legality of this type of differential CIL rate will not go away and the Inspector’s comments will merely add heat to that debate," said Bate.  

"The Inspector’s letter suggests that any CIL distinction between different sizes of development must be justified by a comparative assessment of economic viability of the different categories of development. However, the CIL Regulations clearly and unambiguously state that differential CIL rates can only be imposed for different zones or different intended uses of development.  So the question left hanging is how ‘large’ retail can lawfully be treated as a different use to ‘small’ retail when the underlying land use is the same.”