The multiples fear even heftier local authority penalties will be slapped on their development plans as a result of impending legislation. Liz Hamson reports

The question is: how much? The draft bill gives few details, but given that Section 106 agreements apply to just 2% of all planning applications, yet make up an estimated 5-10% of development costs, and the tariff could be applied across the board, it is not difficult to see why anxiety is high.

As far as the supposed choice between the two goes, experts point out that applicants will not be able to negotiate a Section 106 agreement that is lower than the fixed charge. Willcox says: “Effectively there wouldn’t be a choice. Everyone would apply the tariff as a starting point. The government needs to provide guidance.”

Many question whether local authorities have the resources to implement two charges. Edgeley says: “The first thing the government has to address is the shortage of planning officers. If there are extra charges and planning tariffs, money should be put behind them to make them work.”

Emma Glenn, associate partner at Drivers Jonas, adds. “Is the problem one of Section 106 being onerous or that local authorities lack the expertise to negotiate the section and therefore cause delays?”

Another concern is the scope of the tariff. It will catch far more retailers than are currently obliged to pay Section 106

agreements. Willcox adds: “The tariff might cover a wider scope of applications, including applications for smaller schemes. It could be more of a catch-all.”

But if it is introduced, could it really jeopardise future schemes? The industry verdict is a unanimous yes. The BRC spokeswoman says: “There is no doubt that an onerous tariff regime is going to make the difference between whether an investment is viable or not.” It also fails to take into account the regeneration benefits a development can bring, or the costs of cleaning up a site, she says. Jones warns: “If you burden people with so many requests, whether policy, financial or third party, a developer will say enough is enough.”

Money doesn’t always talk. When Tesco submitted a planning application to replace a 20,000 sq ft town centre store in Hanley, Stoke-on-Trent, with a larger store of 120,000 sq ft on the other side of town, it sweetened the offer with the promise of £6m for a distribution road that would not only give access to the site, but also free up a huge tranche of industrial wasteland for much needed housing.
The scheme had ‘ticked all the boxes’, said Tesco property communications manager Shaun Edgeley. Stoke-on-Trent Council agreed it had satisfied its planning obligation under its Section 106 agreement.
Yet last week, the application was called in by the secretary of state.
Publicly, Tesco shrugged its shoulders. But privately, even those resigned to the capricious nature of the planning regime and the authorities’ increasing willingness to call the power of the multiples into question admitted bewilderment. And alarm, because the planning process is set to become even more complex and costly.
This summer, the government is expected to introduce a radical planning tariff - or optional fixed charge - alongside the Section 106 agreement in the Planning and Compulsory Purchase Act.
Ostensibly, planning applicants will be able to choose between the fixed charge, as laid down in a council’s local development framework, currently known as the Local Plan, or the site-specific Section 106 agreement. But concerns are mounting that regardless of which they go for, they could end up stumping up both.
Sue Willcox, head of town planning at Sainsbury, says: “The tariff is set at Local Plan level and covers a fixed set of improvements, but the fear is that local interest groups will wonder what else they can get and that there will be a tendency by the local authorities to extract further gains.”
A spokeswoman for the British Retail Consortium adds: “In theory, there is a choice. But the tariff would be a blanket charge, a blunt instrument that would set the base line and raise development costs substantially.”
So far there has been precious little, despite the fact that the government is also undertaking a review of Section 106 and working up new guidance on town centre planning, PPS6.
It could also cover improvements not directly related to their schemes, warns Glenn. “The government has backtracked and said that it won’t remove the necessity test, but the original proposals do not make any reference to the test. That means the developer could be asked to make a contribution that does not necessarily directly benefit their scheme. It is effectively another tax on land and could be seen as buying a planning permission.”
Many would argue that they are already paying for planning permissions.Under the current regime, financial contributions made under Section 106 are supposed to be necessary to enable development and reasonable in scale. But the definition has been interpreted more loosely following a number of ministerial statements and high profile court decisions, prompting criticism that some authorities are asking for everything, from “bike stands to road improvements”, as Ross Jones, national planning consultant at GL Hearn puts it
It all adds up, says Tesco’s Edgeley: “Part of the reason planning obligations are more onerous is that the types of site we’re dealing with are more difficult. But our view is that the regime is getting tougher and that government intervention is increasing. We’re getting to the point where, if the council is looking at a large obligation, the cost could make the scheme unviable.”
Increasingly onerous demands for affordable housing are adding to the burden. One multiple is understood to have been asked not only to include a substantial element of affordable housing in its scheme but to pay the local authority £7,000 a unit for the privilege of doing so, a demand described by one surveyor as “not unusual”.
The problem is particularly acute in London. In January the Greater London Authority issued guidance stipulating that any supermarket redevelopment in London should include a residential element, of which up to 50% should be social housing.
The BRC has joined forces with the British Property Federation to lobby for the tariff to be dropped. It is no surprise that the supermarkets have added their voices to the growing chorus of dissent. Claire Healey, property communications officer at Asda, says: “We believe that Section 106 agreements should remain reasonable and relevant to the development. We don’t support the tariff.”
Ominously, the situation looks set to become more complicated. As well as a raft of new planning guidance notes, the government is also reviewing Section 106 with a view to introducing a pro-forma agreement and outsourcing the process.
All the multiples are asking for from the new planning regime is certainty, says Edgeley.“We want some clarification. When it comes to regeneration,is it or isn’t it what the government wants?”
The worst case scenario, adds Willcox, is “a complex system that is under-resourced.”
Meanwhile Tesco is considering whether it can justify the hundreds of thousands of pounds it would cost to fight its corner over Hanley. In the final analysis, whether the Act does simplify the planning process or not, the financial burden on supermarkets is unlikely to lessen, says Peter Dines, partner at Gerald Eve: “People see supermarkets and a lot of profit being made. Set this against local authorities with financial problems and you have to ask: will a local authority negotiate a £3m payment from Tesco, say, or put 1% on the council tax?”
Sometimes money is the only thing that really talks.