Considered in Grand Committee
That the Grand Committee do report to the House that it has considered the Town and Country Planning (Fees for Applications, Deemed Applications, Requests and Site Visits) (England) Regulations 2012.
Relevant document: 7th Report from the Joint Committee on Statutory Instruments
My Lords, the regulations laid before the House on 17 July 2012 consolidate 12 statutory instruments dating back to 1989 and introduce new levels of planning application fees. The draft regulations have been approved in the other place and, if approved by this House, they will come into effect in the week commencing 19 November.
As noble Lords will know, the planning service is funded from local government grant and from council tax; in addition, the planning application service is also funded by fees for planning applications. The Government’s policy is that, in aggregate across England, the income generated by planning application fees should, as far as possible, cover the estimated total costs incurred by local planning authorities in determining those fee-paying applications. The principle underlying the planning fee regime is that would-be developers and applicants, rather than the council tax payer, should meet the majority of the costs incurred by local planning authorities in determining planning applications.
Planning application fees were last increased in 2008, overall by 23%. The fee increase in 2008 aimed to provide for local authorities to move closer to a position of cost recovery in determining planning applications. Since 2008, there has been a significant fall in the number of planning applications, from 649,000 in 2007-08 to 483,000 in 2010-11. Over the same period, the number of major applications has fallen by 18%. The overall decline is partly as a consequence of the extension of permitted development rights but is also due to the credit crunch under the last Administration.
In 2009, Arup undertook research to consider the effects of the 2008 fee increase and the impact of the decline in planning applications. The research, which was published in 2010, showed that fee income was approximately 10% lower than the cost of the service, based on an average cost of £619 per application and an average fee income of £563. This shortfall is because application fees have remained constant since they were last amended in 2008 while inflation has increased.
In early 2011, we consulted on proposals for planning application fees, which included an option to decentralise fee setting to local authorities. We have also worked closely with the Local Government Group, which undertook a comprehensive benchmark exercise with over 200 authorities to assess the real-time costs of processing different types of planning applications.
Sitting suspended for a Division in the House.
My Lords, I remind noble Lords that I was talking about working with the Local Government Group, which undertook a comprehensive benchmark exercise with more than 200 authorities. The results of the benchmark showed that there were potential reductions in some fee categories, but significant increases in others, including for the householder category for which, on average across England, the fee would be more than doubled. It also concluded that the overall increase needed to achieve cost recovery was closer to 26%. That would account for the 10% which Arup identified as the shortfall and inflation since 2008.
The effects of decentralisation are complex and we have had to balance the need to ensure that local authorities have the necessary resources to deliver an effective planning service alongside the effects on applicants and developers, who are key to delivering economic growth. Therefore, on balance, we have decided to continue to set fees centrally for planning applications. In time, decentralisation should be part of a package of measures to make council planning departments more responsive to the needs of business and local residents. The benchmark work has been undertaken by the Planning Advisory Service arm of the Local Government Group, and the Government fund completely the Planning Advisory Service. Please let me assure you that we will continue to support and work with the Planning Advisory Service to develop further the benchmarking work and to understand the costs at the local level. We therefore propose to uprate planning application fees by 15% in line with inflation between 2008 and 2012. This uplift in planning fees will provide additional resources to local authorities of some £32 million per annum.
In addition to the much needed consolidation of the regulations, we have also introduced some new fees as a result of changes to primary legislation. These include fees for applications for urgent Crown development, where the application is made directly to the Secretary of State, and for an application for a certificate of appropriate alternative development. An amendment has also been made to allow for fees in respect of deemed applications—applications as a result of the local authority taking enforcement action—to be paid in full to the local planning authority rather than half to the local planning authority and half to the Secretary of State. This does not change in any way the fee to be paid, but it does mean that the local authority will benefit from receiving the whole fee.
The draft regulations before you are intended to keep planning application fees at a modest level for developers and householders, compared to overall project costs, while providing local authorities with the necessary resources to turn round planning applications efficiently and effectively and while protecting applicants from any significant increase. I commend these regulations to the House.
My Lords, I start by thanking the noble Baroness, Lady Hanham, for the introduction of the regulations. The Minister will be aware that these were not hotly contested in the other place and that they will not be by us on these Benches. They have our support and we are not seeking to give the Minister any trouble—not very much trouble, anyway. The approximate 15% increase is said to reflect inflation since the last uprating in 2008. Can the Minister let us know what measure of inflation has been used for this purpose?
My colleague in another place asked a question relating to the removal of permitted development rights under Article 4 directions relating to HMOs and whether fees would be applied to planning applications relating to HMOs. Has the department yet had the chance to produce an answer on that? We note the reluctance of Government to go down the path of decentralisation of fee setting, although I think the door is not completely closed on that matter.
The question of resources is a matter of importance and it seemed to be tacitly accepted that the increase in fees would not bridge the current deficit. There are always difficult questions in this area. I remember talking to planning officers in Luton about what goes into the cost base when one is looking at costs and fees. There was some shenanigans around central administration charges and all that. The Minister in the other place was rather broad-brush in suggesting that the new homes bonus could deliver lots of money to help support a range of things, including planning. Clearly, for some it may, but for others it will not, particularly if it is constructed on net rather than gross additions to stock. There will not be a bonanza for already tightly developed areas where new build comes, in large measure, from demolition of old. Surely it must be important for central government that local authorities have access to quality planning capacity, if local authorities are to be leading the charge for growth.
Will the Minister say more about what assessment the department has made of the capacity of planning departments up and down the country in the current environment? Will he say when it is proposed to look at fees again and whether there is merit in having more regular changes, rather than larger step increases? It seems to me to be fairer to those who are developing along the way, but I reiterate that we have no problem with these regulations and are happy to support them.
My Lords, I, too, thank my noble friend for what she said and for the change that has been made. I declare an interest as leader of a planning authority. I agree with what the noble Lord, Lord McKenzie, has just said—that it would be desirable, in principle, if changes could be made more regularly, rather than in a stepped arrangement. I think I heard my noble friend say, and I find in the papers, that she recognises the need to go back and examine, at some point, the case for decentralisation. I very much welcome that. In the nature of things the balance of planning applications, the nature of business between one authority and another, will be different. Some will have very large numbers of large construction projects, others will rely mainly on householder projects; but given that the principle that the Government sets down, that it should be possible to recover costs, is accepted, I hope that, over time, we can also move towards decentralisation. I am sure that local authorities would welcome that and work with it.
I note that it is said that there is a need for restraint; that councils should not respond to current reductions in central government grant funding simply by increasing fees to raise lost grant revenue. That is a nice obeisance to Treasury doctrine, but of course the principle is that within the planning framework, planning costs should be met by planning fees, plus whatever grant is available. I hope that that principle is accepted. We are obviously not allowed to charge a commercial rate for part of a function, whereas everybody else who is involved in a planning process is. That is by their nature, whether it is the lawyers indulging in some judicial review or the builders charging a commercial rate, so councils in time should be allowed to do so. With that rider, I welcome the commitment to look again at decentralisation. I thank very much my noble friend for her announcement and give it my warm support.
My Lords, that makes a change from the previous debate, for which I may be extremely thankful. I thank the noble Lord, Lord McKenzie, for his support for these measures, although I appreciate that there was some qualification from both the noble Lord and my noble friend Lord True because of the fact that the 15% does not totally meet the inflation rise. The noble Lord asked what measure of inflation it is. It is CPI. The noble Lord and my noble friend Lord True also asked about passing the planning fee question to local authorities. There has not been a decision on that at the moment. It was part of the consultation, as I said, and it has not been thrown out. In answer to the question from my noble friend, work is continuing with the Local Government Association to look at that and at reviewing fees more regularly.
Another question which the noble Lord, Lord McKenzie, asked was on Article 4 directions and HMOs. I have three pages here—the noble Lord may not want all of that but I am happy to send them to him. The changes made in October 2010 mean that a change in use of a family dwelling to a small HMO is permitted development. Where there are local concerns about concentrations of HMOs, on the other side, authorities can make Article 4 directions to restrict the national permissions after consultation with the local community. We do not believe that councils with substantial HMO problems have been slow in applying for Article 4 directions as a consequence of not being able to charge a planning application fee to determine them. I think that covers the question that the noble Lord asked. He is looking as if the answer is sort of yes. If there is anything further on that, I will of course let him know.
The question of capacity is something that varies from local authority to local authority. I think what was meant by capacity is the number of planning officers available to deal with applications. To some extent, that will be governed by the amount of work that local authorities have. In somewhere like London, there may need to be more than there are. The gap in a local authority’s budget, if there still is one, will have to be borne by that local authority, certainly for the time being, but we do not expect those gaps to be very large. I think that that answers some of the noble Lord’s questions. There were only five on these regulations instead of the 40 on the previous matter. I am very nervous about the noble Lord, Lord McKenzie, because he normally produces whole strings of questions which are usually quite difficult to get a grip on, but I think I have answered him today. I am grateful for the responses from the noble Lord and from my noble friend Lord True.