No relief, no facilities

If universities aren't spared the local council levy on new development, their communities will suffer, warns John Cater

September 20, 2012

When the government introduced new planning regulations in the spring of last year, the message was clear. The aim was to put an end to the rag-bag of practices whereby local authorities might seek improvements to the local infrastructure and amenities as a condition of approval: for example, a new school building in return for the release of playing fields for a supermarket; or a new library and community centre in return for permission to build a block of flats. Local authorities reached such agreements in only 6 per cent of plans approved.

The catchily titled Community Infrastructure Levy (Amendment) Regulations 2011 (CIL) instead provide a formal structure to allow authorities to raise funds from developers undertaking new building projects. This money, in turn, will be used to fund a wide range of infrastructure projects such as new road schemes; road safety initiatives; flood defences; education, health and social care facilities; green spaces and leisure centres.

So far, so good. But, as ever, putting theory into practice is problematic.

First, a levy that is sustainable in a prosperous borough with enthusiastic developers and a buoyant property market will not be sustainable in a poor one desperate for infrastructure investment, with concomitant implications for the quality of service provision. Second, a levy set at a time of economic growth may well stifle investment in tougher times.

But, faced with cuts in direct public funding and a cap on rateable income, there is no doubt that most authorities will seek to use the levying powers granted to them. So what are the implications for the higher education sector?

Crucially, the Department for Communities and Local Government's guidance does not differentiate between types of developer or development. It states that "most buildings that people normally use will be liable to pay the levy" and it will "be charged in pounds per square metre on the net additional increase in floor space of any given development" at the planning permission stage.

Many universities have become used to paying so-called Section 106 monies on residential developments, usually levied on a fee-per-unit basis. This money is then ring-fenced for expenditure on improvements to, for example, local transport infrastructure. But the CIL is a tax on all development, and as universities are principal investors in new construction in many parts of the country, it is a tax on the sector.

Is it legitimate? On student residences, probably. But on the facilities that universities build and then open to their local communities - sports centres and playing fields; libraries, museums and galleries; arts centres; freely available halls and public lecture theatres - probably not. In many towns and cities, educational institutions are principal providers of leisure and recreational opportunities, and of sports and cultural facilities. None is seeking to make a profit, few will even cover their costs or see any return on the initial capital investment. For example, in my university, two-thirds of the 200,000 user visits to our sports facilities each year are from the community, we provide bookable space to more than 50 local groups, and they make up 80 per cent of our theatre and cinema audience.

So is there a way forward? The DCLG guidance does allow relief to be given in two specific instances: to charity landowners where the chargeable development will be used wholly, or mainly, for charitable purposes; and in "exceptional circumstances" to ensure that the levy does not prevent an otherwise desirable development. Regrettably, the latter exemption is limited to cases "where a specific scheme cannot afford to pay the levy", which offers little comfort.

Perhaps the answer is a nationally agreed exemption for education providers where a facility can offer a clearly defined public benefit. If not, the possibility awaits of long legal battles over charitable status, planning law, differential application and whether community-oriented facilities are part of the "educational purpose" of the university. As with the windows tax of centuries past - easy to assess, readily administered, fatally flawed - we need to be cautious that a CIL tax on university development does not achieve exactly the opposite of what was intended.

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