Scottish Government

CHAPTER SIX - PRACTICE REVIEW

6.1 As part of Stage 1 of the study, authorities were asked to provide information on a range of policy and practice issues. In total 32 out of the 34 authorities returned the questionnaire and the findings are summarised in table 6.1. The full questionnaire is at Appendix 1. The responses suggest that most authorities are developing planning policies for developer contributions (between development plans and SPG), that fixed formulae for contributions are still at an early stage, that there is recognition of the need to audit deficiencies at a corporate level in authorities but that the need for dedicated staff is far from universally recognised as yet.

Table 6.1: Summary of Main Findings from Stage 1 Questionnaire

Notes to table
(Source: Analysis of the Stage 1 returns from the 32 Authorities who returned the questionnaire.)

Stage 2 Assessment

6.2 A case study approach has been designed to gather details to inform the process of valuing developer contributions, to provide an insight into the policies, practices and procedures of different authorities, and how these policies affect their success levels in securing developer contributions. Seven Authorities have supplied copies of some of the legal agreements they have recorded over the last three years which have been analysed to provide further insight into the breakdown of contributions (see Appendix 3 - detailed case studies).

6.3 Across Scotland, the negotiating processes and capabilities of authorities varies widely, and is mainly influenced by the tools that the authority has available to it. Some authorities have a very sophisticated system with a team of dedicated officers backed up with development plan policy and supplementary guidance. Others rely on a policy framework and supplementary guides, while some authorities have neither and negotiate on a case by case basis.

6.4 Development trends are also an important factor, with areas such as the Lothians experiencing huge pressure for growth, whilst the likes of Shetland and Orkney fight to reverse population decline. Data supplied from the Local Authorities annual returns to the Scottish Government have been analysed to assess trends in the number of planning application approvals by development type over the three year study period.

Key trends

6.5 The findings of the case study analysis have been used alongside the data supplied at Stage 1 to establish a Scotland-wide picture of the emerging trends in the variation and value of developer contributions.

6.6 Over the last three years the key trends are:

• The number of planning applications approved has decreased over the three year period (see paragraph 4.3).
• The number of planning approvals linked with legal agreements and number of developer contributions has risen over the study period.
• Dramatic increase in the use of s69 agreements.
• The scope and frequency of agreements is broadening to reflect new policies introduced by authorities. Further innovative policies are emerging such as West Lothian Council's road and education SPG, Glasgow City Council's Fastlink contribution scheme, and the Highland Council's A96 developer protocol.
• Six authorities now employ dedicated developer contribution officers with 2 more currently reviewing the position. Authorities with dedicated staff secured almost 5 times as many contributions as those without and £0.5m per authority more in the total value of monetary contributions received.
• A number of authorities have developed formula based policies to secure direct financial contributions. These are discussed in more detail in paragraphs 6.31 to 6.39. Over the three year study period they secured almost £3 million per authority in direct contributions more than the authorities with no "standard charging".
• 77% of all developer contributions are direct financial contributions. The proportion of in-kind contributions has remained steady across the three year period.
• Post 2007 the number and value of contributions is expected to rise as more authorities develop new policies and supplementary guidance with respect to developer contributions. In addition, an anticipated slow rise in development activity with more large scale developments, in some parts of Scotland should result in more agreements being concluded to secure developer contribution.
• Geographical influences with the three island councils reporting no developer contributions over the last three years for example.

Declining permissions / Increasing contributions

6.7 Chapter 4 of this report demonstrates that over the three year study period the total number of planning applications determined has declined. The number of planning permissions for larger applications likely to impact on infrastructure and linked with a contribution has also declined. Therefore it could be expected that the number of legal agreements concluded would decline over the period. However, the number of agreements to secure contributions has increased significantly over the period, and subsequently the value of contributions secured has also risen. The most significant factor influencing this outcome is the development of new policies by planning authorities seeking to capture contributions from developers towards essential infrastructure.

6.8 The detailed case studies for West Lothian and the Scottish Borders provide evidence of the link between the introduction of specific developer contribution polices and the subsequent and corresponding increase in the number and values of such contribution secured.

The use of s69 Agreements and Upfront payments

6.9 The most noticeable trend in the study is the increase in the use of s69 of the Local Government (Scotland) Act 1973 to secure developer contributions. In 2004/2005, there were 29 s69 agreements concluded. Of those 18 were by Glasgow City Council. There were 6 other authorities using s69 in 2004/05 (Dumfries and Galloway, East Dunbartonshire, Midlothian, Moray, North Lanarkshire and Scottish Borders). In 2005/06 a total of 135 s69 agreements were concluded, with 47 by Glasgow City Council and 53 by the Scottish Borders. By 2006/07 there were 184 s69 agreements, with 106 by Scottish Borders. A total of 11 authorities were using s69 as a means of securing contributions by the end of the study period.

6.10 The overwhelming majority of s69 agreements were concluded by Glasgow City Council and Scottish Borders (77%). The increase in frequency of the use of these agreements is also linked to the introduction of new policies. In the case of the Scottish Borders, new policies were introduced to secure contributions towards affordable housing provision and towards the construction of the Waverley railway line. In Glasgow the majority of contributions are towards recreation.

6.11 In addition to the volume of s69 agreements attributed to Glasgow and the Scottish Borders, it is evident that the number of authorities using s69 agreements has also risen steadily.

6.12 Those authorities are generally using s69 agreements to secure direct up front financial contributions. The questionnaire responses from some of the authorities using section indicates that the s69 process is seen as being quicker and enables the authority to issue a decision notice more quickly, and will therefore be used for financial contributions wherever possible providing the developer agrees. s75 is generally used where payments need to be phased.

Contributions without agreement

6.13 Circular 4/1998 states that as a general proposition no payment of money or other consideration can be required when granting a permission or any other kind of consent required by a statute, except where there is specific statutory authority. Conditions requiring, for instance, the cession of land for road improvements or for open space, or requiring the developer to contribute money towards the provision of facilities not directly related to the proposed development, should accordingly not be attached as conditions to planning permissions.

6.14 However, paragraph 82 of Circular 4/1998 does not rule that conditions requiring a financial consideration are always ultra vires. The acceptability of such a condition is dependent on the particular circumstances of the development for which the planning authority intends to grant planning permission and whether, in particular, the proposed conditions satisfy the criteria in paragraph 12. In their spreadsheet returns most authorities have stated that they would prefer to use an agreement to ensure that the requirement is binding on successors in title, and therefore more enforceable as planning conditions can be challenged by appeal.

6.15 There is not enough evidence to establish whether this is a national occurrence, and further research has not been carried out as this study is only concerned with the number and value of legal agreements used over the last three years.

The Changing Scope of Contributions as a Result of Improved Policies and SPG

6.16 Over the study period the types of contribution received did not change a great deal, there were no additions to the 9 main typologies, and all were evident to varying degrees throughout the three years. However, there was a very noticeable increase in the frequency they were being secured, and an increase in the number of authorities securing a greater range of contributions.

6.17 The major factor behind the increase in the number of contributions is the introduction of comprehensive policies in development plans and the publication of supplementary planning guides. Planning authorities are becoming much more adept at securing developer contributions, and this is clearly demonstrated within the case studies.

6.18 Case studies for Midlothian, West Lothian and the Scottish Borders (see Appendix 2) all demonstrate the changing scope of planning agreements on the back of new comprehensive policies or guidance. As a result of their new policies, these authorities secured more agreements with contributions covering a wider range, and subsequently securing more financial contributions. In all of those cases there is a clear link demonstrating how the scope and frequency of the types of contributions increased following the introduction of specific new policies.

6.19 This approach contrasts significantly with other authorities that do not have a strong policy framework with regard to developer contributions. For example, authorities with no supplementary planning guidance tend to negotiate on an ad-hoc basis, and therefore there are no real trends emerging. Generally it is evident that the contributions secured by legal agreements by the authorities with no SPGs, or weaker policies, does not match the scale of development in their administrative area, although it is recognised that major developments do not always generate a requirement for additional infrastructure or developer contributions.

6.20 At present, 5 of the 32 authorities that returned the study questionnaire have no developer contribution policies within adopted local plans. However, 2 of those authorities are planning to implement new policies in forthcoming local plans and structure plans. Three of the authorities are also planning to introduce supplementary guidance that would leave just two authorities with no statutory policies or supplementary guidance on developer contributions.

6.21 There are currently some very innovative policies in the pipeline. Within the study period West Lothian Council introduced a policy requiring developers to make a contribution towards the funding of a new post created to monitor Travel Plans. The Council's policy requires Travel Plans as part of major trip generating proposals, and in order to ensure they are being implemented properly has created the post of Travel Co-ordinator, funded by developer contributions. Other authorities are known to be watching the success of this policy closely with a view to adopting similar policies.

6.22 Highland Council has recently approved (March 2007) supplementary planning guidance on developer contributions for the A96 Corridor. This is an innovative and hugely significant Developer Contributions Protocol which is a delivery mechanism that will be used to deliver a significant amount of infrastructure over the course of the next 30 years. This work is being finalised at present. The Council has also set up specific agreements for the Inverness Southern Distributor road and the provision of a link road in Dingwall.

6.23 The Council is also hoping to enter into agreements with landowners/ developers in advance of planning applications in the new draft local plan for the Fort William area to make sure that the procurement of development can take place within a reasonable timeframe rather than have sites lying zoned in local plans for many years without development happening. At present, this is at an early stage.

6.24 A key trend that will heavily influence the value of developer contributions in coming years is the inclusion in forthcoming development plans in Midlothian, East Lothian, Stirling and Perth and Kinross of major new housing developments including new settlements or extension to existing settlements of 1,000+ houses.

6.25 In the last two years there have been major developments in North Lanarkshire (2005) and East Dunbartonshire (2006) securing developer contributions of £12.5m and £26.35m respectively.

6.26 One of the major new settlement proposals likely to come to a conclusion before 2010 is at Shawfair, in Midlothian. Negotiations are continuing on the s75 Agreement related to the Shawfair new settlement in Midlothian. It is anticipated that this agreement will be concluded within the next 3 years and that it could secure direct contributions of £49m, with developers also expected to provide roads infrastructure, service land for supermarket, a site for a medical facility and remediated and serviced land for 800 affordable houses in-kind. With similar sized developments in other forthcoming local plans (Oudenarde new settlement in Perth and Kinross, Blindwells new settlement in East Lothian for example, plus major long-term expansions promoted to Cupar, Dunfermline and Kirkcaldy in Finalised Fife Structure Plan) it seems likely that this trend will continue in the period to 2010 and beyond. It is also considered that the first phases of major development at Winchburgh, West Lothian, will begin before 2010. Like Shawfair, the developers will be required to provide infrastructure including roads, a new junction with the M9, schools, shopping and medical facilities. However, as a result of the progress of new local plans in Perth and Kinross, Fife and East Lothian, it is considered unlikely that any contributions will be delivered in respect of the major expansions proposed within those areas before 2010.

Dedicated Staff

6.27 There are now 6 authorities (Aberdeen, Aberdeenshire, East Ayrshire, Edinburgh, Glasgow and Scottish Borders) in Scotland that have dedicated staff whose roles are linked with developer contributions. The roles vary across different authorities but include responsibilities for negotiation and policy formulation.

6.28 The authorities with dedicated staff negotiate planning agreements more frequently and secure more types of contributions and a higher average total of direct contributions than those with no dedicated staff. Over the three year study period, the 6 authorities with dedicated staff secured an average of around 80 agreements each, with a total of almost 123 contributions on average worth £4.927m per authority.

6.29 The authorities with no dedicated staff secured an average of 16 agreements per authority over the three years, with 26 contributions worth an average £4.36m per authority. This figure includes the agreement worth £26.35m in East Dunbartonshire and £12.5m in North Lanarkshire. Without those two agreements, the average per authority drops to around £2.42m.

6.30 Agreements by authorities with dedicated officers are also generally more comprehensive. The 6 Authorities with Developer Contribution Officers accounted for 735 of the total of 1263 contributions (58%). However, Edinburgh City has only recently appointed its dedicated officer. Furthermore, the authorities with dedicated staff include 3 of the 5 authorities with the most development activity throughout the study period. Consequently, the apparent link between having a contributions officer and an increase in contributions needs to be viewed with some caution.

Impact of Formula based policies

6.31 A number of authorities have introduced a "standard charge" or have formula based policies in respect of developer contributions. For example, Edinburgh, Dundee, the Scottish Borders and West Lothian calculate education contributions on a set price per unit basis. These policies are linked to the construction costs of the educational infrastructure required and apply to housing developments within the catchment area.

6.32 Glasgow and Stirling have policies to secure contributions towards recreational open space, facilities and future maintenance based on the size of houses approved. For example, in Stirling there is a standard charge of £550 per 2 bedroom dwelling unit and £800 per 3-4 bedroom dwelling unit, with the policy applied to all new housing developments of more than 10 units.

6.33 There are in some cases big differences between the monetary figures used in formula based policies, although there are also differences in the way they are applied by different authorities. Taking education contributions for example, a significant difference is evident in the practice of Dundee City and West Lothian Councils.

6.34 In Dundee City in 2004/05 a figure of £3500 was charged per residential unit as a contribution towards new educational facilities within the catchment of the development. The figure is established by the Education Department and is index linked, and the charge had increased to £3678 per unit by the end of the study period. Education contributions were linked to large developments of more than 80 units. However, there is no Supplementary Planning Guidance to advise developers of these requirements, it is only at pre-application stage that the need for a contribution is established.

6.35 West Lothian Council has produced a range of SPG's with four alone concerned with education contributions.

• High School - establishes developer contributions for new or improved denominational high schools at £1767 per house and £1015 per flat.
• Armadale Academy - Contributions for the replacement Armadale Academy set at £1653 per house and £620 per flat.
• Primary School - Contributions assessed by Education Dept depending on impact of individual development.
• School commissioning costs - provides a framework for contributions necessary to deliver a turn key project and make the school building/campus operational.

6.36 West Lothian's approach is applied to smaller scale developments than those in Dundee, which could explain the lower cost per unit. It should also be noted that some of these policies, and in particular policy regarding school commissioning costs, were heavily criticised by housebuilders concerned that the policy went beyond the parameters of Circular 12/96.

6.37 Twelve authorities reported the use of formula based policies, although the data given by one of those authorities is not detailed enough to include. The 11 authorities that provided suitable information on contributions received negotiated a total of 899 separate contributions. The value of the total direct financial contributions those authorities secured is £62.67m, which is 72% of the total value of all direct contributions over the study period. Authorities using formula based policies secured an average direct contribution of £5.7m per authority over the study period.

6.38 Nine authorities that do not use formula based policies returned information on financial contributions agreed over the study period. The nine authorities secured a total of 312 separate contributions from 162 planning agreements. The average value of direct financial contributions secured per authority is £2.664m, around £3m less per authority than those authorities that do use formula based policies.

6.39 This outcome reflects the position in England, with the ODPM report on Valuing Planning Obligations also establishing the same link between the Authorities using a "standard charging" mechanism.

Best Practice

6.40 In terms of practice, it is apparent that the authorities that have specific posts dedicated to dealing with developer contribution issues have more sophisticated procedures in place. Aberdeenshire was the first to create such a post and now shares a team of three officers also working with Aberdeen City Council. There are now 5 other authorities with at least one dedicated officer, and two others known to be seriously considering creating such a post.

6.41 Generally the dedicated officers are involved from policy formulation, through negotiations to monitoring the contributions received. A clear policy framework, including Supplementary Planning Guidance, is an essential part of good practice.

6.42 An essential part of the policy formulation is an identification of infrastructure or service deficiencies through an audit process. This enables the Authority to establish where there are infrastructure deficiencies and therefore can seek to secure developer contributions towards the upgrading of these facilities where appropriate.

6.43 Supplementary Planning Guidance is becoming more common as an accompaniment to the statutory development plan. This includes site development briefs as well as Supplementary Guidance documents on individual subjects such as affordable housing or open space provisions. This is illustrated by the following examples.

6.48 Formula based policies are currently used by around one third of Scottish planning authorities. The use of such policies ensures that a consistent contribution is being sought. It is therefore easier for developers to calculate what will be required and factor this in to site acquisition costs. Furthermore, in general, authorities that use such policies secure far more from contributions than those that do not.

6.49 The case studies have established that the authorities with advanced practices and procedures are securing contributions more frequently, and securing more direct contributions per annum than their counterparts with very basic procedures. There is considerable scope for these planning authorities to secure more contributions than they currently achieve.

6.50 Good practice goes beyond the initial stages of negotiating and securing the agreement. It is important also that a strong monitoring system is in place to keep a track on all contributions received whether in-kind or direct. This exercise gave an insight into how well contributions are monitored. Authorities with dedicated officers in place, such as Aberdeenshire, Scottish Borders, East Ayrshire, Glasgow and Stirling, were among the first to respond to the information gathering exercise and were generally able to provide sufficient detail on contributions secured. Dundee has no dedicated team but has begun to compile a database of all legal agreements which enabled them to provide a rapid and fulsome response. However, for those authorities with no such mechanisms in place the data gathering process has been far more difficult.

6.51 The recent Audit Commission Routemap report (Audit Commission, 2006) highlighted Newcastle City as a good example of an effective monitoring programme. One of the positive outcomes from Newcastle's experience is that effective monitoring of existing obligations as a good place to start a programme of improvements for future planning obligation processes.

6.52 Edinburgh has recently created a new post with a remit mainly concerned with negotiating and monitoring planning agreements. It is vitally important that the contributions are monitored to ensure that they are used for their intended purposes, and therefore do not have to be returned. In most cases, Council Finance departments administer the financial contributions within allocated accounts, and there have been few reported cases of contributions being returned.

6.53 An important factor in the establishment of good monitoring procedures is the formation of a central database of agreements and contributions. From our experience in compiling the data necessary for this report it seems that few authorities were able to provide the required information which suggests that the monitoring procedures are generally not well developed across Scotland. In order to improve the efficiency and effectiveness of contributions, it is considered that a sound monitoring system is an essential starting point.

Scottish and English Guidance and Advice

6.54 The most recent National Guidance in Scotland on the use of legal agreements was published in 1996. Circular 12/96 refers to s50 of the Town and Country Planning (Scotland) Act 1972, subsequently superseded by s75 of the 1997 Act. In their questionnaire responses many authorities have expressed their concern at the lack of up to date guidance and advice.

6.55 As explained in chapter 2, the Planning Etc. (Scotland) Act 2006 introduces the framework for changes to s75 that are not yet in force but will bring it closer to the provisions of s106 of the Town and Country Planning Act 1990, as amended by the Planning and Compensation Act 1991. English guidance is more up to date and a review of it is important in terms of informing a review of Circular 12/96 and ultimately providing new guidance in Scotland when the new s75 comes into force.

6.56 In England the latest guidance was published in a 2005 Circular as a revision of guidance last published in 1996 ( ODPM, 2005). It clarifies the basis on which planning obligations should be assessed for their acceptability in policy terms and gives further guidance on the process of securing obligations. It stresses that while the Secretary of State sets out the policy tests for planning obligations, the question of whether or not an obligation is valid and material in a particular case is ultimately a matter for the Courts. On a number of occasions, the Courts have held that planning obligations that go beyond the policy tests nevertheless meet the statutory requirements of the 1990 Act and are therefore still valid and material.

6.57 The Circular sets out some of the reforms to the planning obligations system proposed in the consultation paper Contributing to sustainable communities: a new approach to planning obligations, published 2003. The changes in the Circular concern only the negotiation of planning obligations and did not introduce an optional planning charge as was proposed in the Government's November 2003 consultation paper.

6.58 Annex B of the Circular provides detailed guidance on the use of direct and in-kind contributions, and the acceptability of maintenance charging and pooling resources from smaller developments which cumulatively have an impact on infrastructure. The importance of a clear audit trail between the contribution made and the infrastructure provided is clearly stressed. The Circular encourages clear policies within Development Plans:

"in order to allow developers to predict as accurately as possible the likely contributions they will be asked to make through planning obligations and therefore anticipate the financial implications for development projects."

Furthermore, the Circular advises that more detailed policies applying the principles set out in the Development Plan ought to be included in Supplementary Guidelines.

6.59 One of the key messages of the Circular is the need to make the s106 process faster and more transparent. One of the methods the Circular highlights is the use of formula based policies or standard charging.

"Formulae and standard charges are quantitative indications of the level of contribution likely to be sought by a local planning authority, through a planning obligation, towards the provision of infrastructure that is necessitated by a new development. Local authorities are encouraged to employ formulae and standard charges where appropriate, as part of their framework for negotiating and securing planning obligations. These can help speed up negotiations, and ensure predictability, by indicating the likely size and type of some contributions in advance. They can also promote transparency by making indicative figures public and assist in accountability in the spending of monies." ( ODPM, 2005, para b53 - page 15)

6.60 The case study research has recognised the impact of standard charging or formula based policies, with those authorities using such methods securing on average around £2m more a great deal more in terms of the value of contributions received than their counterparts with no such policy.

6.61 Standards charges or formulas should reflect the impact of the development. The main purpose is not to apply a blanket charge, but to give a greater degree of certainty to developers and increase the speed of negotiations. Guidance on the use of standard charging was published in November 2004 ( ODPM, 2004).

6.62 The use of standard heads of terms or a model agreement is also encouraged. In July 2006 the Department for Communities and Local Government published "Planning Obligations: Practice Guide" to provide best practice guidance in respect of Circular 05/05. Included within the Practice Guide is a model Planning Agreement, which Authorities are encouraged to use in order to speed up the planning agreement process.

6.63 The best practice guide provides further guidance on the key points made in Circular 05/05, providing advice on where it is appropriate to use in-kind or direct contributions, the importance of the development plan and the use of SPG, as well as further guidance on standard charging and speeding up the system.

6.64 The importance of monitoring agreements is also stressed, and commends the use of dedicated officers in this respect:

"Some LPAs have found it beneficial to manage the implementation of obligations through the use of dedicated s106 officers. A specialist s106 officer is able to focus all his/her attention on the implementation of obligations and more able to develop, maintain and be proficient with obligations monitoring systems. A specialised s106 officer who has the responsibility for all types of obligation across the LPA and other public bodies is often more able to ensure that obligations policies are applied and enforced consistently across all developments." ( ODPM, 2005, page 66 para 10.4)

6.65 Notwithstanding the lack of reference in the current guidance to planning charges (paragraph 6.57), the situation in England is set to change with the publication of the Planning Bill in November 2007 with provisions for a Community Infrastructure Levy.

6.66 The Audit Commission produced further best practice advice in August 2006 - "Routemap to improved Planning Obligations" (Audit Commission, 2006). This describes the steps that Councils need to take to improve their approach to s106 and addresses common weaknesses.

6.67 The s106 routemap sets out the key points to consider before establishing the 6 building blocks to improved performance. First of all, the Council has to consider if it has sufficient supporting information such as needs assessments, development impact assessments and capital expenditure programmes for example. It is also important for the authority to consider if it has the necessary technical capacity including specialist skills, detailed policy and SPG, and sufficient monitoring programmes.

6.68 The six building blocks required to improve the process are:

1. Design a clear policy
2. Test the likely impact of the policy package on development viability
3. Design a systematic process with planning obligations considered early in the process
4. Be clear about when and how communities should be involved
5. Improve transparency by publishing the policy and outcomes of the process
6. Monitor the outcomes and manage the risks

6.69 The document includes a flowchart outlining how the negotiation process should be taken through to conclusion. The outcome of following the process should be:

• Easy to work out contributions required from development
• Policy applied consistently to all developments across the area
• S106 resolved within the 8-13 week timescale
• Contribution to legitimate community projects
• Audit trail between development and s106 capital projects

Conclusion

6.70 Some of the Scottish authorities, mainly those with dedicated officers, have developed a sound s75 process. Others are setting up Benchmarking Groups to share best practice advice amongst other things. However, many other authorities have not developed their procedures and are being held back from doing so by a lack of up to date guidance and best practice advice. Until such advice is published these authorities will not be able to develop more advanced procedures and are ultimately unlikely to improve their planning agreement performance.

6.71 The research has established that some authorities are implementing a wide range of policies, either through development plans or SPG, that are capturing significant values through developer contributions. The most significant values are linked to the use of formula based policies, and those policies are considered to be the most effective means of capturing developer contributions. The practices of local authorities will be a major determining factor in the value of developer contributions in the future. With the use of SPG and formula based policies seemingly likely to increase, it is anticipated that the value of developer contributions will continue to rise

6.72 Improvements to policy and practice have clearly contributed to the increasing number and levels of developer contributions over the study period and this coincides with evidence of greater convergence of the planning system with public sector investment programmes. There is reason to believe therefore that the trends will continue and these provide an important part of the basis for projections in the next chapter.