Mark Edgerley, associate director for Boyer in Colchester, has concerns about the proposed Infrastructure Levy as well as local authority funding in general.
Last September’s news that Birmingham City Council had issued a Section 114 notice sent out a message that resonated far beyond the West Midlands: that local authority financing was in serious trouble.
Birmingham’s finances revealed a projected gap of £87 million between income and expenditure for the 2024/25 financial year. Birmingham can no longer service its significant debt and clearly the businesses that it created to generate income had both failed to do so and contributed to its financial downfall.
Sadly this is not uncommon. In November the County Councils Network’s survey found that 10 per cent of senior local authority staff are not confident that they can balance their budget in 2023. The figure increased to 40 per cent in 2024 and 60 per cent in 2025 – despite councils planning to make over £2 billion worth of ‘challenging’ savings and service cuts over the three-year period.
Furthermore, the Chartered Institute of Housing warned that 44 per cent are reducing housing programmes, while a quarter had already done so.
The Government hopes to address the financial constraints through a new Infrastructure Levy to replace both the Community Infrastructure Levy (CIL) and Section 106 payments.
The rationale is ‘ensuring local communities can take back control’. This includes borrowing and budgeting powers: a new ‘Right to Require’ to strengthen local government’s powers in negotiation increased requirements for financial support from developers. With much of the levy payable on completion rather than throughout development, it would also give local authorities additional borrowing powers.
But will this benefit local authorities, which are almost universally under-resourced and whose circumstances have sometimes been worsened through poor commercial decisions? Would enabling local authorities to borrow against future receipts lead to more Section 114s?
Under Section 106 and CIL, funding may not be used by local authorities to fund in a commercially and speculative manner. While this limits the opportunity for creative investments, it also reduces risk and ring-fences funds for community infrastructure and provision of housing and services associated with the new development. The downside of increased ‘flexibility’ is that more mistakes could be made in public expenditure.
Financial decision-making by locally elected politicians are invariably compromised by politicians, understandably, being motivated by achieving and electoral support within a specific political cycle – short-term successes, rather than the longer-term approach that strategic investment requires.
Rather than councils taking on an increasing responsibility for commercial and investment decisions directly, while having increased responsibilities for budget allocation I propose greater collaboration with the private sector.
Previously public/private partnerships have created successful housing and regeneration bodies, and private sector has provided various resources – from helping with nutrient neutrality to working on a Local Plan. In these arrangements, both parties can play to their strengths and the council can dedicate time to decision that only they can make – such as budgeting.
Like many in the development sector, I have reservations about the Infrastructure Levy. If it is implemented I would suggest that the greater flexibility that it bestows on the public sector is supported by greater flexibility in public/private partnerships.
© Eastern Echo (powered by ukpropertyforums.com).
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