Town and Country Planning (Fees for Applications, Deemed Applications, Requests and Site Visits) (England) (Amendment) Regulations 2023
Baroness Swinburne
That the draft Regulations laid before the House on 20 July be approved.
Relevant document: 51st Report from the Secondary Legislation Scrutiny Committee
Baroness Swinburne (Con)
My Lords, these regulations were laid before the House on 20 July 2023. They amend the town and country planning regulations of 2012 and deliver on our commitment to increase planning application fees by 35% for major applications and 25% for all other applications. Significantly, they also introduce an annual inflation-related increase so that fees do not lose their value in the future. The measures in the regulations will provide much-needed additional income to local authorities, and we expect them to invest this additional income in their planning services to improve the speed and quality of their decision-making.
I will start by providing some context and background to these regulations. We last increased planning fees in January 2018. Over the last five years, the costs and demands on local planning authority budgets have increased. Currently, the income from planning fees does not cover the cost to local planning authorities of determining the applications. The cost of the planning application service is around £675 million annually, but, overall, there is a funding shortfall of approximately £225 million. The burden of this funding shortfall is currently borne by the general taxpayer.
It is therefore vital that we increase planning fees to reduce this funding shortfall and to create greater financial sustainability for local planning authorities. With our fee increase, local planning authorities will be able to use the additional income to procure more resources and therefore provide an improved service to applicants. This will benefit householders, businesses and developers, and ultimately all of us, as the economy grows and more homes are built.
We consulted on proposals for a fee increase in February this year. Respondents were generally supportive of our proposals, recognising the need to boost the funds available to local planning authorities, particularly if this leads to improvements in their planning performance.
I now turn to the detail of the regulations. First, they introduce a national fee increase of 35% for those major applications and 25% for all other applications. This means that householder applications will increase by 25%, from £206 to £258. The maximum fee for the largest and most complex applications will rise by 35%, from the current £300,000 to £405,000. The regulations also introduce an annual inflation-related increase in fees from 1 April 2025. The increase will be at the rate of the consumer price index from the previous September, capped to a maximum of 10%. This new measure will ensure that fees do not lose their value in future, and it has been widely supported by the sector.
In addition, the regulations remove the existing fee exemption, which allows applicants, in certain circumstances, to submit a second application without paying a fee. This is commonly known as the “free go”. By removing this exemption, local planning authorities will now be able to charge for repeat applications, which are a known demand on resources.
In order to encourage faster decision-making for non-major applications, these regulations also reduce the planning guarantee period for non-major applications from the current 26 weeks to 16 weeks. This means that, in most cases, if non-major applications are not determined after those 16 weeks and no extension has been agreed, the applicant would be entitled to a full refund of their planning application fee.
Finally, the regulations introduce a new prior approval fee of £120 for the permitted development right for development by the Crown on a closed defence site. This permitted development right was introduced through an amendment to the general permitted development order in December 2021 and requires that a fee be paid for prior approval applications by the Crown.
Overall, our estimate is that in the first year this fee increase will raise an additional £65 million for local planning authorities. However, these regulations do not require this fee income to be formally ring-fenced, as there is already a requirement, through primary legislation, for planning fees to be used for the function of determining planning applications.
We have been very clear that local planning authorities should use the income from planning fees to fund their planning service. This will allow them to build their capability and capacity and improve their performance. I recognise that some may consider that, during times of economic pressures for businesses and householders, we should not be increasing planning fees. However, in light of the clear funding shortfall that exists, it seems right that applicants should contribute more to the costs of local planning authorities in delivering their planning service.
An increase of 35% for major applications and 25% for all other applications represents a proportionate approach, which provides much-needed additional income for local planning authorities while not unfairly introducing disproportionately high fee increases for householders and small businesses, who may be more sensitive to charges than other groups. We estimate that in most cases the cost of the planning application is less than 1% of the overall development cost.
I understand that others may consider that the fee increase does not go far enough to address the shortfall that exists in local planning authorities and that local planning authorities should be able to set their own fees. As I have mentioned, the proposed fee level represents a proportionate approach that provides additional income for local planning authorities without introducing disproportionately high costs for applicants at a time when we want to support new housing and economic growth. To achieve a suitable balance, we are therefore providing £24 million of additional funding through our capacity and capability programme to provide direct support now and create upskilling opportunities for those already in the sector. The Government do not believe that enabling local authorities to set their own fees is the way to answer resourcing issues; nor do we believe that it would create an incentive to tackle inefficiencies.
Local planning authorities already have the power to set their own fees for additional planning services, including planning performance agreements for major developments. Having different fees between local authorities also creates uncertainty and unfairness for applicants and, if set too high, could risk unintended consequences by discouraging development coming forward. A national fee increase will, however, provide an immediate benefit to all local planning authorities and much-needed clarity and consistency for all applicants.
To summarise, these regulations will provide a boost to local planning authorities, generating additional income that will allow them to invest in their planning services and improve their performance. With a more sustainable financial income, they will, we hope, be able to budget with more confidence and build their capability and capacity.
Lord Lansley (Con)
My Lords, I shall speak briefly on the Motion to approve this regulation. I welcome it and support it. I remind the House of my registered interest as chair of the Cambridgeshire Development Forum. A number of people in the development community to whom I have spoken thoroughly endorse the view that local planning authorities are underresourced and that there is a need to secure additional resources for them. They welcome the fact that there is to be a significant increase in planning fees, but also that there is to be an annual indexation. I think that gives some certainty to developers, as well as confidence to local authorities.
My noble friend described the proposals very well and referred to some of the issues. I will pick up on three of those issues, and I would be grateful if she would either respond to them or perhaps even take some of them back to the department for further work.
First is the question of ring-fencing. In government, we have been resistant to the idea that local authorities should be too constrained in how they spend their money but, as my noble friend said, the provision of these fees to local authorities for development management purposes is in statute. However, since there is a significant gap, presently of £225 million, between the cost of planning services and the revenue from planning fees, there is a risk that, as planning fees and the resulting income are increased, local authorities may take the opportunity to reduce the subsidy they presently give to planning services. That is neither in our interests nor what this planning fee increase is intended to secure.
Baroness Pinnock (LD)
My Lords, I remind the House of my relevant interests as a councillor and a vice-president of the Local Government Association. I thank the noble Baroness, Lady Swinburne, for her detailed explanation of the content and purpose of the changes proposed to planning fees. She obviously thought that at least someone in the Chamber today would raise the fundamental concerns about full cost recovery; I will raise that issue because it is vital that it be considered.
There are two big issues of principle to raise, the first of which is why planning fees are set nationally for England. We have spent many months in this Chamber discussing levelling up, and part of that was a discussion about devolution to local areas of England. Surely, if we are serious about devolution, one aspect would be to devolve responsibility to set fees and charges for planning locally, as indeed it is, I think, for nearly every other fee and charge that a local authority can levy. The Government worry that varying fees will lead to inconsistencies across the country, but that is the very essence of devolution: that local fees are set according to the area in which they are made and the area a council represents. I suspect that there must be varying costs to planning applications—for instance, in London boroughs compared to some other parts of the country where costs are not as high.
My second major concern is the failure of these proposals to enable full cost recovery. The Government’s own assessment estimates that, currently, council tax payers are subsidising the planning service to the tune of £225 million a year. For me, it is totally unacceptable that council tax payers, who are often very hard pressed, are funding, for example, major developers who are making vast annual profits. The cost of a planning fee against the total cost of even a so-called minor development is very small as a proportion of the total, so surely full cost recovery must be not only fair but justified in not requiring council tax payers to subsidise developers. These regulations provide the opportunity to remedy that unacceptable situation, so perhaps the noble Baroness can think again about not enabling full cost recovery.
The noble Lord, Lord Lansley, said that he hopes that the increase in fees will not lead to a reduction in local authority subsidy for the planning service. I have to disagree with him, because I think the whole purpose of a rise in fees is to reduce the subsidy paid by council tax payers for the service. Otherwise, we should have full cost recovery, because many local authorities are on the verge of issuing Section 114 notices, which indicate that they have run out of sufficient money to run services as a whole in their areas.
Only today, I received an email on behalf of London Councils saying that it estimates that its councils will run short by £500 million in order to provide statutory services. Given that that is replicated across the country, it seems totally wrong for councils to take money from their budgets to subsidise planning development when they are making cuts to children’s services and adult social care. I urge the Minister to go back to the department and suggest that full cost recovery would be a better way forward.
On the details of the proposals, of course, given what I have just said, I welcome the increase in fees, which is better than nothing. However, the Government’s own estimate is that the proposal to increase fees by 35% for majors and 25% for all others will transfer £65 million of costs to planning applicants but will still leave a shortfall of £125 million of subsidy for local planning authorities. I could not reconcile the figures in the Explanatory Memorandum for the regulations, so perhaps the Minister can do that for me. There is a current shortfall of £225 million and a fee increase of £65 million, and yet apparently a resulting shortfall of £125 million. Those figures do not add up, so something must not have been provided in the Explanatory Memorandum.
Lord Lansley (Con)
Is it not to do with the removal of the “free go”, which I think is worth about £25 million in itself? However, the other changes, not just the fee changes, are the reason.
Baroness Pinnock (LD)
I thank the noble Lord; that probably is the explanation. However, it would be good to hear the Minister to confirm that.
The issue I still have is that if we do not have full cost recovery, local planning authorities will not be able to appoint all the planning officers that they need to provide an efficient and effective service. We know that the Local Government Association and other professional bodies have indicated that 58% of councils overall and 83% of county councils have trouble filling planning posts, and the RTPI reckons that one in 10 planning posts are currently not filled. Therefore, unless the fees are increased more than is proposed here, that challenge will remain, which will then lead to a less efficient and effective planning service. I hope the Minister will be able to respond to that, because it is at the heart of what is proposed today.
The other significant issue I have is with the way the planning guarantee works in practice. Of course, it is right to have a requirement to fulfil confirmation of planning applications in a timely way, but the starting point of a planning guarantee is that an application is “valid”. This can mean that the applicant has supplied the relevant information, but it does not mean that the content of the information is of the necessary standard. Herein lies the problem.
Lord Khan of Burnley (Lab)
My Lords, as stated, this instrument increases planning fees to address the funding shortfall in the planning application service. The new fees will increase by 35% for major applications and 25% for all other applications. The instrument also adds an annual inflation indexation of fees from 1 April 2025. We on these Benches have previously called for increases in planning fees, so we broadly support these measures. The Government have stated that these increases will not be enough to address the funding shortfall—as we have just heard—which local authorities must pay for from their other budgets.
It is vital that there is a clear plan of how local planning authorities can improve their planning services as a result of the increase in fees. Housebuilders of all sizes and in every part of the country are experiencing significant delays in the planning process, principally because of a lack of staff and resources at local planning authorities. The situation is particularly challenging for SME builders, as outlined in the recent Home Builders Federation survey. Of the respondents, 76% cited a lack of resources in local planning authorities as a major constraint. This is supported by the results of the 2022 Local Government Association workforce survey, which found that almost six in 10 councils—58%—struggle to recruit planning officers and 36% have problems retaining them. In 2009, approximately 85% of planning decisions were made within statutory time limits and without performance agreements, but by 2021 this figure had fallen to 49%. This trend is concerning.
The Government have allowed planning permissions to collapse to the lowest on record and, by the time of the next general election, new home completions are forecast to have dropped to as little as 160,000 per year. Meanwhile, two-thirds of local planning authorities do not have an up-to-date local plan, with this number set to fall even lower as councils pause plans due to the chaos. Without urgent action, we face a generation locked out of home ownership. Already since 2010 there are half a million fewer young home owners. Meanwhile, millions are stuck in expensive, poor-quality and insecure rented housing.
On these Benches, our vision is an immediate blitz of planning reform delivered in our first days and weeks in office to rescue the housing system from the chaos of the Government. We want to enhance local communities’ power and their voice over how housing is built to best service local people, while challenging those who question whether homes that people need should be built at all. We need to work with local authorities to quickly draw up and agree local plans that have stalled, recruiting hundreds of extra planners in a sprint to agree new plans, as announced by the shadow Chancellor. We will also strengthen requirements to approve new homes in areas that do not have an up-to-date plan and will intervene to approve new homes in poorly performing areas, including using call-in powers in the most extreme cases. The Government’s consultation received 495 responses. What steps has the department taken to ensure that these are representative opinions of the sector? The regulations mean that if there is deflation, the fee will not be adjusted. Does the Minister expect that there could be an exemption to this in extraordinary circumstances?
Can I press the Minister in relation to not ring-fencing budgets, a point mentioned by the noble Lord, Lord Lansley? The Local Government Association has highlighted that local planning authorities have
“borne the brunt of budget cuts since 2010”.
The noble Baroness, Lady Pinnock, mentioned Section 114 notices being issued by some authorities recently. The department states that the national planning fee rise
“will increase resources for local planning authorities to determine planning applications in good time”.
This increase in local planning resources is not guaranteed, however. Without ring-fencing the additional revenue, local authorities may spend it in other policy areas, a concern outlined by the British Property Federation. How will the Government monitor this and alleviate the concerns of utilising the increased fees in other statutory services, given the desperate funding situation of so many councils? Finally, the 2020 White Paper Planning for the Future promised a comprehensive resources and skills strategy for the planning sector, but the Government have no plan to increase performance and there has been no strategy.
There is a clear lack of government planning to support local authority planning. I look forward to the Minister’s response.
Baroness Swinburne (Con)
My Lords, I thank noble Lords for their thoughtful contributions. If they can bear with me, I have a lot of inserts and Box notes which I have been handed, so this may not sound like a closing speech. I will endeavour to answer the questions rather than to sound too eloquent.
I covered ring-fencing in my opening remarks, but I should be clear on why we are not saying that this additional income generated should be ring-fenced: it is because it is in primary legislation. There is a requirement for planning fees to be used by the local authorities to perform the function of determining planning applications. That is already in primary law so it is does not need to be restated here in a different format. As there is no surplus to planning fee income, logically there is no overspend that could be used to cross-subsidise other services. We therefore do not believe that this has to be ring-fenced.
However, I agree that, having made clear to all local planning authorities that they are expected to retain the income from planning fees for direct investment in their planning services, we should reiterate this expectation after the regulations are made. Indeed, I hope to have reassurance in writing from my department that we will monitor how these fees are generated and used.
I come to the issue of whether performance will be enhanced and how it will be monitored. In return for increasing planning fees, we expect local authorities to invest more in their planning services and deliver better performance. The fee increase provides the opportunity for authorities to consider how they might use that additional income to improve their performance and whether they are resourcing their planning application service adequately. We need to see them assessing this for themselves.
We are also developing a new framework that will measure that performance across a wider set of criteria to ensure that local authorities are delivering on all fronts, for all users of the system. That is really important. I am sure that the department and certainly the noble Baroness, Lady Scott, will welcome the involvement of the noble Lord, Lord Lansley, and his thoughts on how to develop service level agreements further.
A “free go” was mentioned by many noble Lords. We recognise that a free go has a significant resource impact for local planning authorities. Therefore, if applicants still want to arrange an extension, they can, but they cannot have a free go. I hope that has a positive impact on planning departments’ ability to resource planning efficiently.
I know that planning authorities setting their own fees is controversial. There are some who believe that they should be able to set their own fees, at an appropriate level. However, as I mentioned in my opening remarks, there is also a risk that fee variation between areas could dissuade home owners and small developers from undertaking development. It could introduce unpredictability at a time when we need developers to accelerate the number of homes they are building and to support economic growth. I am sure that that objective is supported across the House. A national fee increase ensures that all planning authorities can benefit, so we consider that to be the appropriate measure in the meantime.
Why do fees not cover the full cost of that planning application service to local planning authorities? It is fair to say that we want to proceed in a measured way. It is important that we provide additional resourcing to local authorities without disproportionately impacting businesses and householders. If we were to set full cost recovery now, we could see a substantial rise in some fees that could adversely impact potential developments. I reassure the noble Baroness, Lady Pinnock, and others who mentioned this that we intend to undertake a wider review of the actual cost of processing different types of applications, as the proposed planning reforms are implemented and the savings, particularly from digitisation, are realised. In future, we might see fees relate more directly to the cost of the service itself.
The noble Baroness, Lady Pinnock, is correct that there is a difference in the numbers that I mentioned in opening. Between the £225 million deficit and the £65 million new funding being raised, there is a difference of £160 million. As was mentioned by the noble Lord, Lord Lansley, there are measures that will make an impact on that, including the free go.
I also draw your Lordships’ attention to the fact that local planning authorities are, we believe, under- resourced, but there are ways in which we are addressing this. Staffing issues and efficiencies were mentioned. We have developed a comprehensive planning, capacity and capability programme, which provides the direct support that is needed now and upskilling opportunities for existing planners, while developing the future pipeline into the profession. As part of this, we have also launched a new £24 million planning skills delivery fund; this will directly support local authorities to help clear the backlogs of planning applications and to address skills gaps. We have also announced an additional £13.5 million to stand up a new super-squad of experts to support local planning authorities to assess specialist resources to accelerate the delivery of homes and development, starting with the activities in Cambridge with which the noble Lord, Lord Lansley, is familiar.
Baroness Pinnock (LD)
I thank the Minister very much for giving that detailed explanation. Is she willing to put it into a note for Members, so that we can see exactly how it will all add up?
Baroness Swinburne (Con)
Absolutely. I am sure that my team in the Box and back in their offices are monitoring this very closely to make sure that I am not saying anything I should not.
We monitor the financial health of all local authorities on a regular basis, using a wide range of data as well as extensive engagement with those local authorities. We stand ready to speak to any council that has concerns about its ability to manage its finances and the pressures that planning is putting on them.
In conclusion, I reiterate that we believe it is vital that we have a well-resourced, effective and efficient local planning service, and the House seems to agree with that. The measures in these regulations support this ambition by providing much-needed additional resources for local planning authorities. The Government are clear that the income from planning application fees should be used by local authorities to provide a high-performing planning service. This is essential to deliver the homes and economic growth that our country needs.