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Publication - Research and analysis

Introduction of an Infrastructure Charging Mechanism in Scotland: research project

Published
20 November 2017
Topic
Communities and third sector
ISBN
9781788514040

This research focuses on the options for an infrastructure charging mechanism.

View supporting documents Supporting documents

Annex B. High Level Options

Table B‑1 High Level Options: Geography

Principle Priority High Level Options
Geography
Local Authority Option Regional Authority Option Combined Authorities Option With National Charging Option
Fairness Address cumulative impacts of development Could address localised issues but may lack the resources and vision to address wider geographical challenges. Ability to identify required infrastructure but potential conflict with constituent authorities. May be managed through SDPA. Ability to meet local and regional needs as a partnership: ability to identify common infrastructure challenges Low level charge may address more strategic development issues, but redistributive nature might mean that charge has a more limited impact on local and regional infrastructure needs.
Assess market variations on a wider geographical scale Potentially limited ability to coordinate actions to address market variations. Ability to address wider market variations, though may not reflect market areas. Less political accountability. Potential to address complex market areas based on combination of local authority areas. Potential that it does not address market areas. May address market variations on a much wider geographical scale but may also impact viability.
Ensure examination and scrutiny Could be tied to a local authority’s LDP process. Potential for conflict with local authorities. However, SDPs could serve as a vehicle for developing the scheme. Greater opportunity, depending on structure of partnership, to allow infrastructure providers and other stakeholders to participate in process. Development and setting of tax would take place at the national level, potentially limiting the impact of local stakeholder involvement.
Monitor implementation and collection Potential limitation and conflicts in local authority monitoring. Regional authority may lack political accountability Political accountability recognised through membership to board; potential third party members offers some independence Potentially complex task in monitoring and analysing contributions and use of funds.
Apportioned according to need, responding to supply and demand Local authorities may provide an adequate scale in terms of need but may not be coterminous with market areas and therefore may not reflect market need/demand. Boundaries may not reflect market areas Market areas within combined authorities need to be established. Better understanding of areas of need within local authorities and potential for agreement amongst partners Not necessarily based on local or regional need.
Transparency Clear legislation to avoid conflict with S75 Existing processes in place which would potentially ease transition Combination with LPAs would require a regional policy document detailing items
Demonstrable link between development and required charge More localised, but limited ability to exact charges from developments for strategic infrastructure impacted by and encouraging development. Less understanding of local needs—potential to misrepresent areas of growth due to arbitrary boundaries. Combination of local authorities may agree infrastructure needs and appropriate distribution of funds. ‘Tax’ breaks link between development and what is being funded.
Guidelines delineated in policy Could be issued as Supplementary Guidance. Requires political authority to delineate policy—may be based on SDP or other regional policies. Policies regarding Scotland-wide tariffs for strategic infrastructure may be issued at the national level.
Full stakeholder involvement in charge-setting process Potential for inclusion at plan-making stage. Wider geographies will mean greater participation of stakeholders in detailing required infrastructure. Potential for more complex charge-setting process. Development and setting of tax would take place at the national level, potentially limiting the impact of local stakeholder involvement.
Clear procedures for redress Legislation may provide for appropriate mechanism.
Certainty Based on clear evidence (need, supply, demand, anticipated growth) Local authorities may provide an adequate scale in terms of need but may not be coterminous with market areas and therefore may not reflect market need/demand. Boundaries may not reflect market areas or may incorporate incompatible market areas. Market areas within combined authorities need to be established. Better understanding of areas of need within local authorities and potential for agreement amongst partners. Not necessarily based on local or regional need.
Clarity about what infrastructure is required and where a charge will be spent. Potential to provide infrastructure in action programmes. Variability in detail. Regional authority may lack ‘buy in’ from local authorities. Group of local authorities can debate and evidence infrastructure required on a larger market area and agree apportionment. Potential to be tied to capital investment plans (Infrastructure Investment Plan), NPF.

Charges should be used to encourage sustainable economic growth Charges can be tied to action programmes and a spatial strategy within a local authority but may not meet wider geographical objectives. Infrastructure charging funds may be applied to support sustainable growth within regional boundaries, but this may not reflect market areas. As above, and this can be employed to deliver development in growth areas within the combined local authority area. May deliver nationally important infrastructure with the aim of supporting policy objectives.
Clarity over intersection with broader funding packages May be tied to existing programmes within local authorities (e.g. TIF). Unclear how a regional authority would access alternative funding. Best practice shared amongst local authorities; may be based on established City Deal regions and delivery structure. Potential for risk share between Local Authorities? Additional to capital budget and associated funding/financing.

Administrative boundaries should not be arbitrary Local Authority boundaries may not be best suited to capture greater market areas Regional boundaries may reflect functional market areas but are likely to be based on political or historic boundaries which may not be reflective. Boundaries may reflect ‘growth areas’ (not necessarily based on constituent LPA boundaries) and thus reflect functional housing market areas. Would be redistributive tax and would not depend on an administrative boundary.
No redistribution out with a market area or region N/A
Exemptions should be driven by encouraging viability Dependent on Administration and required infrastructure.
Efficiency Clear process of collection Dependent on Administration.
Robust details of infrastructure delivery Could follow development plan process. Limitation in ability to plan and deliver infrastructure—potential to repurpose SDPs to support this. Limitation in ability of partnership to ‘plan’ for infrastructure. Would be tied to national infrastructure programme.
Broader funding package established at outset Would supplement existing funding sources (e.g. TIFs, prudential borrowing through PWLB). Potential limitation in borrowing power of a regional body. Lack of legitimacy in planning and delivery? Partnership or area based on City Deals can establish best practice and serve as a basis for identifying additional funding streams. Additional to capital budget and associated funding/financing.
Should not consume local authority resources Potential for constrained resources amongst planning authorities. Potential to administer large geographical areas, though unclear how this would be resourced. Broader partnership and ability to share resources and best practice. Would be tied to national infrastructure programme.
Avoid lengthy negotiations in payments N/A

Avoid a ‘land tax’ on a site-by-site basis		 N/A

Table B‑2 High Level Options: Mechanisms

Principle Priority
High Level Options
Mechanisms
Per Unit of Development Option Charges based on Extent of LVU Option Charges based on Quantum of Development Option Charge based on final value of development Option
Fairness Address cumulative impacts of development May not address needs and may result in imbalances of unit/development types, resulting in unsustainable development. Limit to apply to wider range of developments due to complexity and limit of uplift value. Would adequately identify ‘volume’ of development in terms of floor space. Could be categorised according to use. Complexity might impact the delivery of funds and development.
Assess market variations on a wider geographical scale As above, per unit of development charges may result in imbalances in limiting the ability to reflect ‘floor space’ and volume of development. Potential to reflect market variation but may produce sub-standard development. Charges on floor space may be set to reflect market variations. Potential to reflect market variation but onerous.
Ensure examination and scrutiny Dependent on governance and administration.
Monitor implementation and collection Simple to administer and understand. Potential for straightforward monitoring. Potential to be overly complex and difficult to monitor. Straightforward dissemination but more difficult in administration due to potential for change in floor space, identifying exemptions, etc. Potential to be overly complex and difficult to monitor as it is difficult to know when a final sale takes place and whether the transaction was at open market value.
Apportioned according to need, responding to supply and demand May unfairly prioritise one development type over another and therefore misrepresent the appropriate contribution required to meet a broader infrastructure needs. Will reflect uplifted values, but this may not accurately represent what infrastructure is needed, what is already provided. May unfairly prioritise one development type over another and therefore misrepresent the appropriate contribution required to meet a broader infrastructure needs. Will reflect uplifted values, but this may not accurately represent what infrastructure is needed, what is already provided.
Transparency
Clear legislation to avoid conflict with S75 N/A
Demonstrable link between development and required charge Dependent on administration and geography.
Guidelines delineated in policy May be set out in policy. More difficult to justify and set out in policy given shift in interest rates, land values, etc. More guidance required regarding negotiation process. May be set out in policy. More difficult to justify and set out in policy given shift in interest rates, land values, etc. More guidance required regarding negotiation process.
Clear guidance to prevent overlap between charging mechanisms Dependent on administration and geography.
Full stakeholder involvement in chargesetting process Dependent on governance and geography.
Principle Priority High Level Options
Mechanisms
Per Unit of Development Option Charges based on Extent of LVU Option Charges based on Quantum of Development Option Charge based on final value of development Option
Clear procedures for redress N/A
Certainty Based on clear evidence (need, supply, demand, anticipated growth) Mechanisms equally dependent on evidence, though land value uplift mechanism will require frequent reassessment.
Clarity about what infrastructure is required and where a charge will be spent Dependent on governance and administration.
Charges should be used to encourage sustainable economic growth Variable charges may help direct development in most appropriate areas. As noted, potential imbalances depending on the sensitivity of the charging set. Potential to reflect market variation but may produce sub-standard development. Variable charges may help direct development in most appropriate areas. Charges may not accurately reflect sales values and may be difficult to justify.
Clarity over intersection with broader funding packages N/A
Administrative boundaries should not be arbitrary N/A
No redistribution out with a market area or region N/A
Exemptions should be driven by encouraging viability Identified in policy.
Efficiency Clear process of collection In all cases would be payable at some point in development process, though may vary depending on system of administration (e.g. whether funds are payable to consenting authority).
Robust details of infrastructure delivery N/A
Broader funding package established at outset N/A
Should not consume local authority resources Relatively straightforward process of implementation and collection. Potential to be administratively complex and resource intensive.
Avoid lengthy negotiations in payments Less complex as based on standardised rates. Subject to negotiation and complex. Could be subject to negotiation where there are changes to applications. Subject to negotiation and complex.
Avoid a ‘land tax’ on a site-by-site basis. Specific to development but based on standardised rates. Complex and site-specific. Specific to development but based on standardised rates. Complex and site-specific.

Table B‑3 High Level Options: Use and Purpose of Fund

Principle Priority High Level Options
Fund Purpose
Itemised Option Pooled Option Maintenance Option Capital Costs Option

Fairness		 Address cumulative impacts of development Can provide evidenced and transparent infrastructure items to meet demands of anticipated growth. Can provide flexibility in meeting potential infrastructure requirements. Could meet longer term impacts and administration. Focusses on meeting infrastructure need rather than maintenance.
Assess market variations on a wider geographical scale Less flexibility in meeting market changes in the short term? Pooled funds may be distributed according to projects as needed over a wider geographical area. Less concerned with addressing market variations. May better address infrastructure delivery on a wider scale.
Ensure examination and scrutiny Potential to be interrogated at plan stage, for example, as part of an action programme. Less clarity regarding allocation of funds and required infrastructure. May be equally subject to scrutiny at examination or similar review.
Monitor implementation and collection Easier to monitor progress against implementation and Less clarity and not as easy to monitor. Collection may be straightforward, but use of funds by local authorities less straightforward. Simplicity Dependent on manner of collection.
Apportioned according to need, responding to supply and demand Can be established in an infrastructure investment plan and delivered accordingly. Pooled resources may anticipate need on a wider geographical scale and delivery infrastructure not otherwise deliverable based on contributions from local developments. Less based on need in regard to growth but on use of asset. Contribution to capital costs reflective of need to support infrastructure delivery where required.

Transparency		 Clear legislation to avoid conflict with S75 Matter for national legislation.
Demonstrable link between development and required charge Dependent on mechanism employed. Itemised option easier to demonstrate direct link? Pooled option could be more difficult to do this, however, a wider benefit may be determinable?

Guidelines delineated in policy More straightforwardly identifies what infrastructure is to be delivered and by what means. May be tied to an action programme.
More flexibility, though requires additional policy to guide its operation.

Less straightforward to implement in policy as it is unclear when funds will be required for maintenance.		 Relatively straightforward to delineate in plans and policies, depending on mechanism, governance and administration.
Clear guidance to prevent overlap between charging mechanisms
Full stakeholder involvement in charge-setting process and identifying infrastructure Dependent on geography and governance.
Clear procedures for redress Each method would require a system for redress set out within the administrative process.

Certainty		 Based on clear evidence (need, supply, demand, anticipated growth) Both methods would require evidence to support allocation of funds in addition to charge applied. Dependent on type of asset, though maintenance could be based on expected use and an agreed 10 or 20-year plan. Potential to be well-evidenced based on anticipated use. Capital costs included in action programmes would be costed and based on anticipated need for infrastructure
Clarity about what infrastructure is required and where a charge will be spent More straightforwardly identifies what infrastructure is to be delivered and by what means. Dependent on geography and governance (i.e. if there is a spatial plan or infrastructure plan).
Charges should be used to encourage sustainable economic growth Can aid in delivering a spatial plan and addressing development constraints in a measurable fashion. Potential to apply funds on a wider geographic scale and respond to changing circumstances. Does not necessarily respond to priorities for economic growth. Responds more appropriately to growth.
Clarity over intersection with broader funding packages Dependent on geography and governance. Dependent on geography and governance.
Administrative boundaries should not be arbitrary Dependent on geography selected.
No redistribution out with a market area or region
Exemptions should be driven by encouraging viability Matter to be delineated in policy. N/A N/A

Efficiency		 Clear process of collection Dependent on mechanism employed. Dependent on mechanism employed. Potential issue in terms of access to funds by infrastructure providers. Dependent on mechanisms employed.
Robust and evidenced details of infrastructure delivery More clarity with regard to what is required in terms of funding and when it is expected to be delivered. Potential for evidenced and robust delivery plan—dependent on the mechanism and geography. Dependent on mechanism and governance.
Broader funding package established at outset Both would require additional funding and financing sources to deliver infrastructure. Dependent on mechanism and governance.
Should not consume local authority resources More complex in identifying infrastructure up front, but potentially less resource intensive in project delivery. Potentially complex in administering and therefore resource intensive. Dependent on system of administration.
Avoid lengthy negotiations in payments Dependent on mechanism.
Avoid a ‘land tax’ on a site-by-site basis Dependent on mechanism.

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