Scottish Government

RIGHTS OF APPEAL IN PLANNING: PARTIAL REGULATORY IMPACT ASSESSMENT

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1. Title of proposal

Consultation on rights of appeal in the planning system.

2. Purpose and intended effect of measure

(i) The objective

This Regulatory Impact Assessment accompanies a consultation paper which considers the issues and options around rights of appeal in the land use planning system. The consultation paper sets out a number of possible models but does not pre-judge first of all whether new rights of appeal should be introduced and, if they were, which model would be preferable. That will be for the Scottish Ministers to consider when they have assessed the response to the consultation.

This consultation and any action which results from it applies to Scotland only.

(ii) The background

The consultation recognises that this is a topical matter on which there are strongly held views. On one hand there is a perception in some quarters that there is an inequality in a planning system in which an applicant for planning permission has a right of appeal against refusal of that permission but a third party does not have a similar right of appeal. On the other hand some hold the view that the planning system already controls an individual's "right" to develop property, that the introduction of a third party right of appeal would further restrict that right and that it would furthermore have a detrimental effect on the Scottish economy.

While the consultation paper looks at possible new appeal rights and procedures, it also recognises that changes are not certain. It states clearly that maintaining the status quo remains a serious option.

3. Options

The consultation paper looks at the principle of whether new rights of appeal should be created in the circumstances specified in the Partnership Agreement:

• where the local authority involved has an interest;

• where the application is contrary to the local plan;
• when planning officers have recommended rejection; and
• where an Environmental Impact Assessment is needed.

The Scottish Ministers are approaching this consultation with an open mind. Following the consultation they will consider whether it is in the public interest to make any change to the current rights of appeal in the planning system.

The paper sets out models to deal in different ways with the concerns which have been expressed on both sides of the argument. The paper proposed various models, each with different kinds of costs and a number of variables or variations on the theme.

• Model 1 would retain the present system for applicant appeals and would introduce third party or objector appeals in the categories envisaged by the Partnership Agreement.
• Model 2 - in effect, the status quo - this model would not alter the rights of appeal but would proceed with the wider programme of modernisation of the planning system which is in hand. Elements of this programme are aimed at dealing with the underlying issues which prompt calls for a third party right of appeal.
• Model 3 puts the emphasis on further improvement in decision-making on planning applications. This model would provide for hearings in specified circumstances as an additional means of considering planning applications. It would also require planning authorities to notify the Scottish Ministers of all applications which depart from the development plan. At present such applications are notified only if the departure is significant. This would provide a further check in the system.
• Model 4 also considers extending the right of appeal to those who objected to the planning application, but in a more limited way than model 1, at the same time as limiting the right of appeal currently held by applicants. This would be in association with further related changes aimed at moderating resource demands.

If Ministers conclude that change should be made, the preferred model or any alternative would be worked up in detail.

Regulatory Impact Assessments are required to consider the risks associated with the options, the likelihood of their occurring and their effect if they were to occur. The risks are almost entirely related to the financial costs and to the potential barrier to development and these are covered in section 5 on "Costs". There is also a risk of dissatisfaction when people do not receive the results which they want from the appeal system, which is mentioned in the section on "Benefits".

4. Benefits

The benefits would be largely of a qualitative nature and cannot be expressed in financial terms without significant difficulties. It is possible that the prospect of third party appeal may lead to better quality applications and may create an incentive for more frequent revision of development plans. Such changes could benefit all users of the system. Each of the models proposed in the consultation offers additional benefits.

Models 2 and 3

Model 2 and 3 would provide benefits to all users of the planning system. Model 2 would deliver improvements which are the outcome of a number of consultations and, as such, reflect as best they can a consensus on the way forward. Model 3 offers additional reforms in the form of more thorough consideration of the planning applications which would come within its scope.

Models 1 and 4

Models 1 and 4 would offer the benefits which supporters of a third party right of appeal foresee in the form of the satisfaction to be gained by the third party from an increased right to participate in the planning system. It would remedy a situation which is perceived in some quarters as an inequality, ie the absence of appeal right for third parties. However, it would create an inequality in the eyes of others in that the planning system already controls development, the existing appeal arrangements were intended to protect applicants' rights and a third party right of appeal would further restrict people's "right" to develop their own property. Model 1 offers no benefits for applicants. Model 4, for resource reasons, proposes a restriction of applicants' current rights.

Any revised appeal system would, as at present, determine the outcome according to planning considerations, not according to the quantity of opposition to or support for a development. In some cases the planning authority's grant of planning permission would be overturned on appeal. Third parties might then consider that they had contributed to improving the outcome and avoiding inappropriate development, which could be regarded as being in the public interest.

In other cases the appeal would uphold the planning authority's grant of planning permission. Only time would tell whether third parties considered that they had benefited from further participation in the system when the outcome of the appeal did not alter the original grant of planning permission. The applicant would be in the same position in terms of planning permission but after greater cost and delay.

Third parties in this context are generally thought of as individuals, community groups or environmental organisations. However, in some circumstances they may be business competitors. Such competitors could derive an indirect benefit from curbing their competitors' business and thereby maintaining or enhancing their own position.

There would be direct financial benefits to legal practices and planning consultancies through new appeals business.

Regulatory Impact Assessments are required to consider whether the benefits would be gained by a different group from those who would bear the costs. This is almost certainly so.

• If hearings were introduced on a more widespread basis, in principle all parties should benefit from fuller consideration of the issues. The costs, however, would be borne by the taxpayer unless the planning application fees were increased correspondingly, in which case the costs would be borne by the applicant. It might be argued that it is reasonable for the public purse to pay for improvements in the system in the public interest.
• The benefits of a third party right of appeal would be gained by third party appellants. Third parties might be required to pay a fee to appeal. However a fee which would cover the costs of all parties would be prohibitive. In reality the other parties, ie applicants and planning authorities, are likely to bear their own costs for handling the appeal and any financial or opportunity costs of delay.

5. Costs

This partial Regulatory Impact Assessment does not attempt to cost the models in detail. Instead it indicates the features of the proposals which could entail costs for the parties concerned. Some enquiries made of representative organisations have confirmed the difficulty of being precise about costs, particularly at this stage before any clear course of action is decided upon and due to the variety of situations that could occur.

In this section we look first at the 4 models and note to whom the costs would fall. We then look at the various parties involved and consider how they would be affected by the models. All models would make additional demands of planning authorities. The introduction of a third party right of appeal would create an additional financial burden for any applicant whose application became the subject of a third party appeal.

Model 2

Model 2 envisages no additional hearings or rights of appeal. It envisages instead retaining the existing appeal rights, and continuing with the reforms currently planned. There would of course be some costs but, as these changes and their financial implications have already been agreed, they should be regarded for the purposes of this consultation as the "no cost" option. To avoid repetition the following discussion of the costs does not repeat the fact that model 2 creates no additional cost, but consultees should bear this in mind when commenting.

Model 3

Model 3 considers the introduction of a more systematic approach to hearings as part of the development control process. The main resource impact would be on planning authorities. Hearings would make only limited demands of applicants and third parties. It is not intended to add to the timetable for processing applications, although there may be instances where availability of parties had that effect. The impact of a mandatory hearings process on applicants is not considered in any further detail in this paper.

This model also considers the extension of notification requirements. This would mean an increase in notifications of around 650 cases a year with a consequential administrative cost for the Scottish Executive and costs associated with delay for applicants. If this model were pursued, the Executive would develop criteria for deciding whether to call cases in for determination by Ministers, in advance of which it is not possible to estimate how many additional applications would be affected.

Models 1 and 4

Regulatory Impact Assessments are often expected to assess the impact of changes which would affect particular types of business or would have an even and relatively predictable effect across a range of businesses. The proposals here could, however, affect any applicant for planning permission, whether householder, business or public works, not primarily because of the nature of the business or development but because an individual application happens to come within the scope of the Partnership Agreement categories.

The introduction of a third party right of appeal would have cost implications for applicants, appellants and taxpayers. There would be both direct costs - to make, process or defend an appeal - and indirect costs, such as loss of business or opportunity and delay to or loss of the generation of new jobs and public services.

The cost to the appellant will be the price of the appeal process. As with the developers affected, this will vary depending on the scale of the appeal. The cost to the appellant of the appeal process could have an impact on the volume of appeals submitted, as an appellant would weigh up possible cost against the potential benefit of a successful appeal.

Identifying the magnitude of costs would require some certainty about the extent to which third parties would make use of any available right of appeal. We have established that there are around 1,600 cases a year in the categories defined by the Partnership Agreement and in principle these could all be open to appeal. Some say that third parties would use any new right sparingly, while others foresee widespread contention and delay to a high proportion of applications. Many planning applications proceed without objection and there would therefore be no potential third party appellant. On the other hand some applications attract many objections and any of those objectors could be minded to submit an appeal.

The example of the existing third party right of appeal in the Republic of Ireland may give us some indication of possible level of use. It is not a guarantee as it is rooted in a different planning system and there may be cultural differences between Scotland and the Republic of Ireland in the readiness of individuals to undertake a third party right of appeal. In Ireland around 45% of appeals are submitted by third parties and they appeal against around 3% of approvals of planning permission. However, as the Partnership Agreement categories imply the more contentious cases on the whole, the rate of appeal is likely to be considerably higher. There is also a possibility that appeals by applicants could increase if they, in particular business applicants, perceive the planning system as becoming more adversarial.

Similarly we could not be guided with any accuracy by the proportion of applications which are currently the subject of objections. The level of objection could increase if it carried with it a right to appeal at a later stage. It is impossible to foresee whether there would be a rush of third party appeals at first in the enthusiasm of using a new right or a hesitancy to do so until others had tested the water. Whichever happened in the short term, the system would no doubt stabilise in due course.

Another effect which cannot be calculated without significant difficulty is the deterrent effect on business, including inward investment. Investors take a range of factors into account when deciding whether to do business in a particular country, for example construction costs, the tax regime and the quality of the workforce. The planning system is only one of those factors and the appeals system only a part of that one factor, but we need to consider the potential disincentive effect of even one factor when businesses can choose to invest elsewhere. Opponents of third party appeal believe that this is a real risk. The businesses concerned would manage their risk by opting to do business elsewhere. The impact of that decision would affect the economy in Scotland.

Cost to householder applicants

Models 1 and 4

While the Partnership Agreement categories for possible new rights of appeal are not aimed primarily at householder applications such as extensions to houses or the erection of a single dwelling, some could come within the scope of the categories. Whatever the outcome of the appeal, the householder would incur expense in taking part in an appeal to support his proposal, which might incur loss of earnings. If the appeal led to refusal of planning permission, the householder would additionally suffer loss of preparatory costs and the disappointment of not being able to fulfil aims. This loss is a calculated risk in any planning application, but the introduction of a third party right of appeal would increase the risk. While such costs could be significant to the person concerned, they are unlikely to happen with any frequency to any individual and are therefore not of great significance in terms of a Regulatory Impact Assessment.

Although criteria have not been proposed at present for an extension of the notification requirements under model 3, it is arguably less likely that it would affect householder applications than more substantial developments.

Costs to business

Model 3

This model would create some costs for business. Applications which were subject to a widened notification requirement would incur cost because of delay. For those applications which after consideration were cleared back to the planning authority to determine, current targets suggest an additional time of one month in 80% of cases and 2 months for the remainder. If they were called in, however, the time taken for further consideration varies from case to case, but in general it is likely to be around 12 months. Cases in this group are likely to incur additional costs for a public local inquiry.

Models 1 and 4

If a third party right of appeal were introduced, there would of course be an impact on developers. Businesses which apply for planning permission would incur costs in comparison with the present situation. Applicants have costs at present in relation to appeals. However, initiating an appeal is a calculated risk for the applicant and he stands to gain from the process. When taking part in an appeal initiated by a third party, an applicant incurs expense in the costs of the appeal itself as well as expense caused by delay to a business opportunity, but he also risks losing planning permission if an approval is overturned in the appeal.

The cost of an appeal in terms of management and legal costs varies from case to case. Figures quoted by business sources are in the order of 100,000 and upwards. While this cost does not necessarily apply to all appeals, it does provide an indicative figure. The costs are affected by choices made by appellants, and are outwith the control of the planning system. For example, the appeal system does not require any party to engage professional representation. Businesses often do so. The stakes are high and they consider that professional representation increases their prospect of success.

The Scottish Executive Inquiry Reporters Unit's (SEIRU's) current targets for processing appeals delegated to them by the Scottish Ministers are 20 weeks for cases determined by written submissions procedure and 38 weeks for cases determined by public local inquiry. In the approach outlined in model 4, stage 1 consideration should have the benefit of eliminating unsubstantiated appeals but at the cost of adding 3-4 months to the process. There would be some cost to applicants to represent their interests at Stage 1, but this should not necessarily be excessive. Those appeals which proceed to Stage 2 would be subject to the costs and delays associated with existing appeals, although efforts are being made to modernise the process. If one takes 12 months as a likely example of additional delay to conduct a major appeal by public local inquiry, the housebuilding industry estimates the additional costs to a housing development could range from around 5% to 13% depending on the size of the development. Costs increase if delay extends further but on a less than pro rata basis.

If the effect were mainly delay rather than a reduction in development, there would be a transitional effect on business while all concerned learned to calculate the risk of delay. If it became clear that there was a moderate amount of additional delay, business would factor it into their forward planning. This is not to suggest that such delay is unimportant or without cost.

If the delay added a significant proportion of time to the overall process, there must be a point at which projects cease to be viable. The level of risk does not relate solely to the additional delay, but would also be affected by the economic climate more generally. Most housing developments of any size are the subject of objections. By way of example, every 1% of housing developments refused implies a loss of investment of over 32 million, unless the industry is able to redeploy the investment in another project. House building is of course one of many aspects of the economy but the example is relevant as house building is the largest single type of development. The Barker Review of Housing Supply notes that, as well as the significance of housing supply for national economic well-being and individual welfare, housing supply is highly relevant to the issue of membership of Economic and Monetary Union.

For those developments which are refused on appeal there would be a cost to the business concerned in terms of the costs of taking the application as far as it did as well as opportunity costs which in most or all cases would be substantial. In cases where the appeal upholds the original grant of planning permission, it is slower and more costly for the applicant to progress from application to starting work on the site. In addition to the effect on the applicant there would be consequences for society such as a slowing down of housing supply to meet the increase in households and possible difficulties in providing facilities to implement the National Waste Plan. One of the aims of the consultation will be to establish whether consultees consider that this would be in the public interest.

Planning applications usually involve new construction. Any reduction in development would affect not only the business which sought the development, eg to provide a new location for a company, but also the construction industry, its suppliers and subcontractors.

Another uncertain factor is the consequential effect on the wider economy, in other words whether these additional costs are passed on to customers either as direct increases in product prices or whether restrictions on viability of businesses limit supply of goods and services with a consequential inflationary effect.

Costs to taxpayer

The extent of the cost to the taxpayer would depend on the many factors explored in the consultation paper, such as the potential to cut back on other aspects of the planning system to free up resources for the appeals process and the level of any fee payable for appeals. The consultation paper identified the potential need to recruit many more planners if available. Those costs could be further increased if competition to recruit planners had the effect of increasing their salary levels. It would remain to be seen whether an increased salary encouraged more recruits into the profession and in due course resolved the supply shortage. An increase in public funding to resource the planning service could have implications for the resourcing of other public services.

The taxpayer would pay for the additional public sector costs incurred by the Scottish Executive and planning authorities in the form of dealing with new appeal cases from third parties. The taxpayer would similarly benefit from any savings incurred by those bodies in the form of a reduction in appeals by applicants under model 4, a reduction in the proportion of cases dealt with by public local inquiry, fee income charge to third party appellants which would help to meet the costs of appeals.

Planning authorities

There could be some saving in time and effort if local plan inquiries are no longer used as routinely as at present, which is the subject of other consultations at present. This could free up some resources for appeal work. It would of course remain essential that development plans are clear and up-to-date.

Model 3

If a mandatory system of hearings were introduced, criteria would be evolved to ensure that the resource requirements were feasible. Each individual hearing is a relatively small input for a planning authority but overall could become a significant resource demand. Even if we assume no more than half an hour for a hearing, this implies around 24,000 hours (over 4,000 working days) a year if all applications were subject to a hearing. This, as well as the preparatory work, would have implications for applicants and objectors, but the main resource pressure would be on the planning authority in preparing and conducting the hearing as well as follow-up work in recording and assessing the proceedings.

There would be a small administrative cost for planning authorities in notifying additional applications to the Scottish Ministers. There would be no compensatory saving in those cases called in for determination by Ministers as the planning authority would already have gone through the full determination process and would have reached its conclusion.

Models 1 and 4

If models 1 or 4 were introduced, and we assume that the level of third party appeal would be 50% (given that the Partnership Agreement concentrates in general on the more contentious categories), these appeals would be roughly equivalent to the current number of appeals by applicants. Costs of handling appeals vary according to: the range and complexity of issues and the nature of technical expert evidence; the number of witnesses; the nature of legal representation (whether by advocate or specialist planning solicitor as opposed to a legal officer of the council); and the conduct of the inquiry if there is one. If these were simple written submissions cases, the additional cost could be as low as 250,000. However, there would remain a proportion of cases handled by hearing or public local inquiry even if these are used less readily than at present. Costs for conducting cases by public local inquiry are radically higher -and again these are affected by choices made by the individual council. Examples have been given of 3,000 for staff time, 10,000 for specialist legal representation and 60,000 for an individual major public local inquiry. In the face of resource pressures, there may be a case for reviewing the extent to which administrative staff could undertake work currently done by professional planners and for encouraging more planning authorities to use in-house lawyers.

Under model 4, we would assume the same level of third party appeal as under model 1. Applicants would, however, have a right of appeal in fewer cases than at present because they would be restricted to the Partnership Agreement categories, as explained in model 4. Applicants would be able to appeal against refusals related to these categories and against conditions which could in principle be applied to any application which is granted planning permission.

With clear development plans and committee reports, along with detailed decision notices on applications, there should not be a significant burden on the planning service at Stage 1 of the appeals process, particularly if there is efficient use of information and communications technology. There would however be an increase in administrative workload in notifying parties of appeals, copying papers etc.

While we do not yet know the likely number of appeals to be lodged or how many of those would proceed to Stage 2 of the process, it is possible that there would be no more appeals at Stage 2 than the current level of around 700 appeals by applicants a year. Having said that, we would expect a higher proportion to be contentious and therefore require more significant efforts and costs per case.

Other public bodies

Model 4

Sometimes public bodies, such as Scottish Natural Heritage and the Scottish Environment Protection Agency, are required to participate in the appeal process to represent their interests. Any increase in the number of appeals could have an impact on the workload and resources of public bodies. If the notification direction were revoked, public bodies may need to take on the role of third party appellants on a case by case basis to ensure that their interests are fully covered. There could be public pressure on SEPA and SNH to appeal cases as third parties where their views had not been followed and permission was still granted.

Involvement in the planning system would not be a new activity for these bodies, but their role and the resource implications could alter.

Scottish Executive

Model 3

This implies a very substantial increase in notified cases dealt with by the Executive. A minority of cases which are contrary to the development plan are notified under present arrangements. There would be an increase of around 650 on the current annual caseload of approximately 350. This would almost triple the number of notified applications considered. Although we have not proposed revised criteria for calling-in applications under this model, we would assume that it would be necessary to call in a greater proportion than at present. If as a guide we assume a tripling of the work done by the Scottish Executive's Planning Division on notifications and called-in applications, the cost would increase from 400,000 to around 1m a year. The implications for SEIRU could be relatively small in that these cases at present form a smaller part of their overall caseload. If larger numbers were called-in as the result of increased notification, the resource effects could be significant - particularly if these involved major developments.

Model 1

Model 1 would imply a doubling of planning casework by the Scottish Executive's Planning Division and the Scottish Executive Inquiry Reporters' Unit. Estimates suggest that a full year's additional cost would be 2.4 million for both the Scottish Executive Planning Division and for SEIRU, assuming a similar mix in complexity in the increased appeal volume. This is the Scottish Executive planning and SEIRU staff cost only and does not include legal or accommodation costs. Additional accommodation costs would be involved for SEIRU if a substantial new right of appeal were introduced. There would also be a need to decide whether the necessary additional reporters should be home or office-based, assuming that they could be recruited. If there was a delay in recruiting new staff the increased workload from new appeals would overload the present system and inevitably lead to significant delays over existing arrangements.

Model 4

Potentially the greatest impact of model 4 for the Executive would be for the Development Department in processing Stage 1 appeals, which would require extra staff (both planners and administrators), although this would be partly offset if the notification direction were revoked. Once again, it is not clear what impact there would be from the Stage 2 appeals, which would be dealt with by the Scottish Executive Inquiry Reporters Unit. While it is possible that SEIRU's case-load would reduce, those appeals which do go forward to Stage 2 would in many cases be at the more contentious and costly end of the spectrum involving public local inquiries.

This Assessment does not consider the costs to the Executive of producing legislation and guidance. The likelihood is that this would displace other objectives and would be only an opportunity cost, not a financial cost.

6. Consultation with small business

The proposals are not targeted at large or small businesses any more than they are targeted at householder development or public works. Small businesses, like any other applicant, would be affected by a third party right of appeal by virtue of proposing a development which happens to fall into one of the Partnership Agreement categories.

As the costs of supporting one's application at appeal do not relate to the size of the development, smaller developments risk being disproportionately affected by additional cost. The cost of an appeal is calculated to be about half of the additional cost of 13% caused by a 12 month delay to a housing development of 10 houses whereas it is under one tenth of the additional cost of around 5% to a development of 200 houses.

7. Competition assessment

If a third party right of appeal were introduced, it would be unlikely to create competition issues of the sort that disadvantage some companies in a sector but do not disadvantage others in the same sector. There may nevertheless be some competition issues of different kinds.

• Businesses whose planning applications tend to fall within the categories set out in the Partnership Agreement would have increased costs of handling appeals and may be less profitable than those who do not.
• Businesses could use a third party right of appeal to delay, or hope to overturn, their competitor's development.
• Additional costs of development in Scotland could make businesses here less able to compete with businesses elsewhere in the UK where there is no third party right of appeal.
• Scotland could be less able to compete with parts of the UK or other countries in attracting inward investment.

8. Enforcement and sanctions

A regulatory impact assessment is expected to consider how to ensure compliance with the measures. Compliance issues in this area are very different from compliance issues where, for example, Government requires more stringent emissions controls or the introduction of new statistical returns. At this stage we are not recommending a specific course of action. If additional appeal rights were introduced, however, it would be open to third parties to use their appeal right but they would be under no obligation to do so. Applicants would have no alternative but to participate if an appeal were mounted against a planning permission granted to them.

9. Monitoring and review

As at this stage the Executive is exploring the issues and options and not proposing a specific policy change, it would be premature to elaborate a review mechanism. If the Executive concluded that a policy change was necessary, an appropriate review arrangement would be introduced.

10. Consultation

(i) Within Government

The consultation paper has been the subject of consultation within the Scottish Executive. Government Departments who might have an interest as developers are invited to comment on it during the consultation period.

(ii) Public Consultation

The question of whether to introduce new rights of appeal in the planning system and, if so, how is now the subject of public consultation. The purpose of the consultation is to assess the pros and cons of changing the Executive's current policy on appeals in the planning system. The consultation period will run until 30 July.

11. Summary and recommendations

This paper indicates possible approaches and the type of costs which might arise. Model 2 is the "no cost" option in that it represents changes which have already been agreed and for which this consultation has no additional cost implications. Most of the discussion has therefore centred around models 1, 3 and 4 each of which entails additional cost. The nature of the benefits and costs differ from each other to such an extent that they cannot be compared directly. We encourage interested parties to submit their comments and any evidence on costs and benefits.

Scottish Executive
April 2004