| SPOTLIGHT |
Rohini Vekaria analyses recent developments in relation to community contributions, in particular in relation to education and healthcare.
Test for financial contributions
When promoting urban development and infrastructure projects, community involvement is crucial for shaping the spaces we live in. Section 106 agreements can play an important role by securing community benefits, helping to foster a harmonious relationship between developments and the communities they affect. A planning obligation should meet the test under Regulation 122 of The Community Infrastructure Levy Regulations 2010 (as amended), which states that a planning obligation may only constitute a reason for granting planning permission where the obligation is:
a) necessary to make the development acceptable in planning terms;
b) directly related to the development; and
c) fairly and reasonably related in scale and kind to the development.
Local Planning Authorities have the ability to provide community infrastructure such as schools, health and recreational spaces either through expending CIL receipts (Community Infrastructure Levy) or secured via section 106 obligations (subject to the above requirements being met).
Challenges can arise with obligations. Balancing the interests of developers, communities, and local authorities can be complex. The negotiation of agreements requires careful consideration to ensure fairness, legality and feasibility. With increasing constraints on development viability there has been much debate on whether community contributions should be sought from a developer as part of a section 106 agreement, or funded via other means.
Education contributions
The Department for Education recently published updated guidance on securing developer contributions for education facilities.
The guidance sets out how education contributions should be calculated through pupil yield factors (new guidance on estimating pupil yield from housing development was also published at the same time) and encourages the use of developer contributions but on the basis it complies with CIL Regulation 122(2). Regardless, the guidance steers towards the government’s intention to share the financial burden of additional education infrastructure requirements generated by new housing developments, with developers who propose residential development. This is in despite of government funding and development programmes being available for education providers, which are based on forecast shortfalls in school capacity.
The new guidance on pupil yield was published to ‘help local authorities develop and apply long-term evidence of pupil yield from housing developments, to inform local plans and planning decisions, and justify developer contributions towards education’.
CIL is also another mechanism available which is intended to help support the financial burden of providing infrastructure and can be used to fund education facilities. The guidance affirms that securing a developer contribution through a section 106 allows the funding to be ring-fenced to education facilities and is therefore guaranteed (unlike the allocation of CIL funding).
The guidance also makes it clear that existence of other capital funding does not negate housing developers’ responsibility to mitigate the impact of their development on education.
Healthcare contributions
In two recent cases the Courts have determined that if healthcare authorities request developer contributions towards healthcare provision, the healthcare authorities must provide justification towards the need for the contribution and how the contribution has been calculated.
In R (University Hospitals of Leicester NHS Trusts) v Harborough District Council, the court considered if there was a funding gap for the Trust, which would lead to the Trust being unable to cope with the added capacity arising from the proposed mixed used development. To establish if there was a funding gap, the Court looked at how the National Health Service is funded and drew the following points regarding the framework of the National Health Service:
Clinical commissioning groups (CCG) have a duty to arrange for the provision of a range of health services to such extent as it considers necessary to meet the reasonable requirements for those persons registered with GPs or otherwise “usually residing in the area” of the CCG.
NHS England is responsible for allotting funding each financial year to each CCG towards meeting the expenditure of that group “attributable to the performance by it of its functions in that year.”
An NHS Trust is obliged to ensure that its revenue is not less than sufficient, taking one financial year with another, to meet its revenue outgoings.
The Technical Guidance for the allotment of funds by NHS England to CCGs allows for some population growth within a financial year. The Court found that the Council had tried to seek to understand from the Trust how population growth is considered in their funding arrangements. However, the Trust failed to explain to the Council why the annual negotiations for funding for the next financial year did not, or could not, take into account population growth (arising from the development) during that year, given that CCG funding has a baked in element for future population growth.
The Trust did not explain how much population growth was allowed for in the funding provided to the CCGs and then to the Trust, which would directly and obviously be relevant to whether there was a funding shortfall at all, and if so, how much.
Ultimately, the Court found that though the Trust continued to assert that there was a funding gap, they failed to demonstrate that there was. The case established that without evidence of a funding gap being created because of a new development in the area (due to population growth), the requirement to pay a contribution through an obligation towards healthcare, if imposed, would render a planning permission unlawful.
In R (Worcestershire Acute Hospitals NHS Trust) v Malvern Hills DC and Ors [2023] EWHC 1995 (Admin), Worcestershire Acute Hospitals NHS Trust sought a contribution of £1.8m to cover the costs of increased demand that the development would place on the Trust’s services. The Local Planning Authority refused this request as it would affect the viability of the development and if accepted it would be at the cost of other infrastructure and affordable housing, which was already reduced due to viability. The Council were also of the view that it was necessary for the Trust to demonstrate how the size of any “first year” funding gap takes into account the funding which is available under the NHS scheme for population growth. The planning officers were not satisfied with the information provided by the Trust and noted that that there should be no funding gap if services were paid for in accordance with the National Tariff rates[1] (or payment by results). As a result, the Council was not persuaded that the Trust’s request fully met CIL Regulation 122(2). The Court agreed.
Both cases set out what funding is available to the National Health Service, confirming that funding is set out annually, and is based on the previous year’s costs with an allowance for population growth. Unless a funding gap can be demonstrated, and linked to additional capacity a new development will generate, it will be difficult to justify a contribution. The recent Court of Appeal cases, and to a certain extent the guidance on education contributions, provide some comfort to developers when significant community contributions are requested for a development, as they set an important reminder that all planning obligations sought must meet the test set out in Regulation 122 of the Community Infrastructure Levy Regulations 2010.
Rohini Vekaria is an Associate at Dentons. This article first appeared in the firm’s Planning Law Blog.
[1] The national tariff was a set of prices and rules used by providers of NHS care and commissioners to deliver the most efficient, cost effective care to patients. The NHS Payment Scheme has replaced the national tariff from 1 April 2023.
