Planning gain, perhaps unfairly, is often linked with slightly dodgy negotiations in smoke-filled rooms. This, however, would be a thing of the past if this new proportional system is adopted.
You, a builder, have secured an option on a nice little piece of building land. Congratulations! But it has cost more than you expected and now you are worried that your planning permission – if you get it – will cost you even more in planning gain.

What will the planners want? A new junction with the main road? A payment to a fund for providing and maintaining local parks and playing fields? A percentage of the houses built to e “affordable”? A new nature reserve? For many years now, planning gain of one sort or another has become commonplace in British planning practice, but it has always attracted a long list of criticisms:

  • Overlong negotiations cause delay

  • The system is unfair and capricious

  • Planning permissions are being bought and sold

  • Confidentiality of negotiations between the planners and developers is eroding confidence in the planning system

  • It is all about collecting money for general local authority spending – nothing more than taxation by another name.

Government policy on planning gain – which studiously goes by the legally correct term “obligations” usually made under section 106 of the 1990 Town and Country Planning Act – is to be found in a departmental circular issued in the last months of the former Conservative government.

This circular is not without its good points. It makes clear that planning obligations should be sought only where it is necessary to make an otherwise unacceptable proposal acceptable. This may be called the principle of necessity. Another sound principle is that of proportionality, which means that the obligations sought or offered must be in proportion to the development proposed.

Yet revision of the circular is now urgent, not least because many people consider it to be too negative. It outlines what should not be done, and then gives no good guidance as to what legitimately may be done. As a result, any good advice it has to offer is all too often disregarded.

One of the least happy features about this outdated policy is that planning gain has to be negotiated on a so-called voluntary basis, rather than by the use of what the old circular termed “rigid formulae”.

Perhaps this policy was designed to make sure that the gain secured was not so big as to kill off the development. Alternatively, it may have been intended to give local councils the flexibility to promote desirable development. Whatever the case, it involves negotiation in every case – and all the delay and arbitrariness this entails.

It is only fair that the payment should always have an obvious connection to the development, and be proportional to it

There is a better way, currently being considered by the Royal Town Planning Institute, and it is one that many planners and many in the building industry hope the government will soon adopt. It calls for a radical rejection of the old policy. Instead of so-called voluntary negotiation, it puts the cards on the table. It is called the tariff or scale approach, and more and more people are becoming interested in it.

The foundation of the scale approach is in the development plan that every local planning authority must prepare and keep up to date. Under these radical new proposals, the development plan – or quickly prepared supplementary planning guidance to fill gaps – would set out area-by-area requirements for the provision or renewal of infrastructure in new developments on brownfield and greenfield sites and all foreseeable environmental requirements.

All this will require a good deal of hard work in early liaison between planners, developers and infrastructure providers. But the sooner that infrastructure and environmental requirements can be firmly identified, the more likely it is that their cost will be put back into the value of the land itself, rather than taken from the development industry and its customers.

From this, the plan needs to go on to explain how its requirements relate to the developments that will pay for them. It is only fair that the payment made should always have an obvious connection to the development to be permitted, and be proportional to it.

The Americans, who in many of their states have rationalised the whole planning gain process as “impact fees”, refer to this principle as “rational nexus”. It is as important here as there, by whatever name we give it. So, for example, we could have a development plan saying that open space should be provided at a scale of half a hectare for every 100 houses built. It also might say that to open up a large brownfield area for new development, a new road is needed, as well as a range of other requirements.

The first requirement, about the scale of open space needed, can be simply read off the plan by anybody. But what about the new road? All right, the existing roads are so poor that it would be irresponsible to expect them to serve the new development. Yet building the new road would not only permit the development, it would also benefit other road users.

So perhaps it would not be right for the entire cost of the new road to fall on the development. Some of the cost should still be borne by the highway authority on behalf of road users in general. The development plan in our example would state just how the costs of the road will be shared out.

Finally, the charges need to be fairly apportioned between one development and another, according to the benefit received. But the scheme has to be a practical one, and schemes based on considerations such as additions to the value of the land have seldom proved satisfactory – they are rarely easy to calculate and may change as time goes by.

So, apportionment according to such considerations as area of land or number of houses is to be preferred.

The adoption of this new scale-based policy will reduce the number of occasions in which negotiation is needed, although, of course, it can never eliminate the need for negotiation in every case. But in its adoption, certainty and transparency could replace negotiation in most commonplace development situations.