Why Community Infrastructure Levy is important to the NHS

VernonHertbertCol2By Vernon Herbert, HUDU

Developer contributions have been a significant means of funding and ensuring new healthcare infrastructure is provided to support growth in London. In recent years, typically around £9m pa has been secured in cash contributions from developers as well as important contributions in kind – eg the provision of accommodation for new health facilities within a new development.

One of the key changes currently taking place in the planning system is the phased introduction of Community Infrastructure Levy (CIL for short). This will radically change the process whereby developer contributions towards new health infrastructure in support of growth are negotiated.

In brief, the process will change from an up-front negotiation on a site by site basis around the planning application and approval process to one where, once CIL is implemented, the NHS will need to make the case for investment, and release of appropriate funds, to the relevant local planning authority. CCGs will obviously have a key role to play in this process as representatives of the NHS locally but other parts of the NHS also have a role to play.

HUDU is actively monitoring the introduction of CIL across London, and is liaising with CCGs and other health organisations as appropriate. The HUDU model is a key tool that CCGs and other health organisations can use to help with the new system. Developed originally for use with the S106 system, the model has recently been revised and updated to better support the new process and HUDU will be rolling out the new model over the next few months.

Background to CIL

CIL implementation is now proceeding apace in London, and it is important that health organisations – and particularly CCGs because of their local overview of services in their area – understand and plan for the changes that will result from CIL being adopted by Boroughs.

As at 1 October, 6 Boroughs have already adopted and implemented CIL, and there are only a handful of Boroughs left who have yet to formally commence the process of introducing it.

The main features of the new system are:-

  • Adoption of a CIL Charging Schedule by the relevant charging authority – mainly the local Borough, but also the Mayor and the London Legacy Development Corporation
  • The statutory steps that need to be followed prior to adopting the Charging Schedule
  • Post implementation processes for collecting CIL monies, prioritising spend and agreeing the release of funds for specific purposes.

Most importantly of all, once CIL is adopted (or by 1 April 2014 at the latest), it will generally no longer be possible to negotiate new S106 developer contributions for health related and other community infrastructure.

CIL Charging Schedules

CIL is potentially a charge on all new development resulting in a net increase in floorspace or residential units. Exactly what is charged and where is a matter of discretion for the relevant charging authority – subject to complying with the relevant legislation. Charges might therefore vary according to land use type eg retail, residential, scale of development and/or location within an area eg a higher charge in a growth area or town centre.

It is for the relevant charging authority to set out its proposals for any CIL charges in a (draft) Charging Schedule and consult on them. The Schedule may be subject to an Examination in Public prior to its being formally adopted – see below.

One essential difference with S106 is that the charge no longer specifically attaches to particular infrastructure requirements, rather community infrastructure needs are assessed in broad terms, along with possible sources of funding, and the gap in funding identified (CIL is not intended to replace other sources of funding mainstream infrastructure provision and renewal). Charging authorities are then required to justify that the charges proposed will not undermine the viability of development in the area affected. There is, therefore, no direct link between the charge set and a particular health infrastructure funding requirement as there is with S106 developer contributions. Rather the case needs to be made for new infrastructure and for the subsequent release of funds to the local authority.

On a separate note, HUDU has successfully argued that publicly provided healthcare floorspace should not attract a charge, and most London Boroughs have followed this approach to date.

Statutory Process

The statutory process for introducing CIL involves the local charging authority first publishing a Preliminary Draft Charging Schedule for consultation. The charging schedule must be informed by “appropriate available evidence” and have undergone a broad test of viability. In particular, charging authorities need to be able to show why they consider that the proposed levy rate(s) set(s) an appropriate balance between the need to fund infrastructure, and the potential implications for the economic viability of development across their area. There is also a presumption that charges should be prepared in the context of, and support, an up to date Local Plan.

The starting point for most authorities introducing CIL is therefore the preparation of an up to date Community Infrastructure Plan or needs assessment, the identification of funding sources and any funding gap, and the undertaking of a viability assessment to test alternative levels and ways of charging without undermining development viability.

It is important that health infrastructure needs for the area are therefore identified at this earliest point. Where no up to date health infrastructure plan(s) exist, the HUDU model can be (and usually is) used to provide a broad estimate of requirements resulting from planned growth. A key issue here is that the local authority/local plan usually takes at least a 10 year view of infrastructure needs and requirements (and sometimes a 15 or 20 year view). It is difficult for many health organisations therefore to do anything other than provide a broad indication of need.

Once the relevant authority has consulted on its Preliminary Draft Charging Schedule, it must take into consideration any comments received and publish and submit to the Secretary of State a Draft Charging Schedule. The Draft Charging Schedule may then be subject to an Examination in Public prior to its being final adopted and implemented.

Overall, the process can take at least a year.

Post Implementation of CIL

The first authorities to implement CIL at Borough level were Redbridge (from 1 Jan 2012) and Wandsworth (from 1 Nov 2012). Subsequent implementations have been from 1 April 2013 or later (Croydon, Barnet, Brent and Harrow).

Early signs are that CIL is leading to an increase in the overall amount of funding raised from developers. Whilst this is to be expected, given that CIL potentially applies much more widely to developments than S106 did, from an NHS perspective, it must also be recognised that there is potentially more competition for the available funding; and, that the prioritisation and allocation of funding is a matter for the charging authority.

HUDU has been actively working with Redbridge and Wandsworth and the relevant NHS organisations to establish mechanisms whereby health infrastructure requirements can be better identified and prioritised over the shorter term and will be issuing more general guidance in due course. In the meantime, the NHS will need to gear up to make the case for why CIL funds should be released for new health infrastructure against potentially growing and competing demands for social infrastructure generally.

For a fuller description of CIL, please click here

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