Developer contributions is a collective term mainly used to refer to the Community Infrastructure Levy (CIL) and Planning Obligations (commonly referred to as ‘Section 106’ or ‘S106’ obligations after Section 106 of the Planning Act. These are planning tools that can be used to secure financial and non-financial contributions including for sports and leisure facilities, or other works, to provide infrastructure to support development and mitigate the impact of development.
Through the Levelling Up and Regeneration Bill, the Government intends to fully replace CIL and partially replace the S106 system, with a new Infrastructure Levy, which will be the primary mechanism for securing developer contributions. Section 106 agreements will be retained for ‘larger’ sites. The reforms are seeking to remove negotiation of developer contributions from the S106 system, by introducing a non-negotiable, fixed rate. The way these funds are allocated for spend will therefore be an important consideration for councils and putting in place governance arrangements now to help determine infrastructure needs over time and priorities for delivery is strongly recommended to help prepare for this.
What it is
S106 obligations are negotiated between the council and developer to mitigate the impact of a development or to secure local plan policy requirements as part of the development. They are ‘secured’ through planning agreements entered into under section 106 of the Town and Country Planning Act 1990 by a person with an interest in the land and the local planning authority; or through a unilateral undertaking. They are secured as part of the planning permission and as such are legally binding on implementation of the approved development.
How it works
The detail of the S106 is developed as part of the planning process with the objective to address any impact created by the proposed development. The impact may be from increase demand created by the development or for example to mitigate for where a facility may be lost or negatively impacted. The obligations should reflect adopted planning policy and are negotiated on a case-by-case basis.
The S106 agreement is registered as a charge on the public register and potentially HM Land Registry.
An example being where housing developments will create additional demand on existing sport and leisure stock. Subject to the relevant planning policy being in place a S106 obligation might secure improvements to a leisure facility through in-kind works, provision of land or a financial contribution. Where appropriately used planning obligations can contribute a significant financial contribution to delivering a councils facility strategy including by helping secure other sources of funding and finance.
The Government’s permitted development rights policy exempts certain schemes from S106, such as those that are converting from office to residential properties.
Community Infrastructure Levy (CIL)
What it is
Since 2010, authorities in England and Wales have also been empowered to establish a Community Infrastructure Levy (CIL) to help pay for infrastructure, other than affordable housing, to support development. This charge on the development can operate alongside S106. Combined authorities with planning powers can charge a strategic infrastructure tariff in addition to a local CIL. The Mayor of London can also charge a CIL for strategic transport projects.
Local planning authorities set, charge and administer CIL in line with CIL regulations. CIL is a fixed, non-negotiable, charge on most development of 100 square metres or more, or a new dwelling of any size. Payment becomes due from commencement of the development. Exemptions from CIL can be sought in respect of charitable development, affordable housing, self-build housing, residential annexes and residential extensions.
How it works
CIL and S106 are similar in that they are tools to address the impacts of development. But S106 is designed to mitigate the specific impacts of that individual development while CIL is a tool to deal with the cumulative impacts of development on infrastructure. CIL is specifically designed to enable the pooling of contributions from development.
A council, if they wish to apply CILs, following consultation, needs to decide and publish a charging schedule that outlines the charges for types of development.
The money received from CILs can be used for infrastructure which should be publicly identified by the council in their Infrastructure Funding Statements, along with its cost and other funding available.
CILs create a more certain, consistent and transparent method of applying charges for developments. The developers understand with greater certainty the obligation costs they will face, rather than negotiate on a case-by-case basis.
It also provides greater flexibility for councils in how they spend the money received from the development.
Further information on CILs can be found in the government’s guidance.
Central Bedfordshire Council (CBC): Spatial modelling to ensure appropriate future provision via S106 and other capital expenditureCBC had recognised that planned population growth coming from their allocated housing delivery requirement of 20,000 homes would create pressure on the existing sport and recreation infrastructure. They needed to understand how to increase provision to meet the increasing demand.
An evidence-based process using Sport England’s Facilities Planning Model (FPM) was applied to identify the best approach to addressing the changing facility needs. It led to the redevelopment of an existing leisure centre and the creation of a new centre.
CBC secured over £36 million for the two projects including developer contributions, council investment and other borrowing plus £3 million in funding from Sport England.
Investing in modern, high quality leisure facilities ensured CBC, through its third-party operator, would create a sustainable business model that would grow usage and income across the estate. The planning modelling informed the optimum mix of the modernisation of existing stock and the provision of new.
In 2021 Sport England updated the FPM modelling which reinforced the evidence in CBC’s Facility Strategy, helping it to move forward with other priority recommendations in their facility strategy.
View Central Bedfordshire's full case study
Social impact bonds
What it is
Social Impact Bonds (SIBs) are outcome focused contracts that use private funding from social investors to cover the upfront capital required for a provider to set up and deliver a service. They are a payment by result contract with performance measured and valued in terms of defined outcomes rather than purely the delivery. SIBs create partnerships between the public, private and voluntary sectors to help solve entrenched social problems which, due to their intersecting nature, have been consistently challenging to address through conventional approaches to public service commissioning.
In 2016 the Department of Digital, Culture, Media and Sport (DCMS) launched the Life Chances Fund. The £80 million programme’s purpose was to encourage councils to use SIBs. The fund’s six key themes: drug and alcohol dependency, children’s services, early years, young people, older people’s services and healthy lives are all areas that sport and leisure can deliver impact. In 2020 the fund supported the first sports based SIB involving 20 councils.
Whilst SIBs are not a ‘cure all’ for sustaining sport and leisure services, it does demonstrate how sport and leisure can deliver on wider policy objectives and how it can be funded to do so.
How it works
A key principle of a SIB is the inclusion of a social investor taking financial risk with the re-payment on their investment reliant upon the successful delivery of agreed outcomes. The social investment can be from a range of sources such as philanthropic, charities, social investment institutions, investment banks or from individuals. In the UK they are often from dedicated social investment institutions such as Big Issue Invest.
A SIB can also secure other sources of funding from national commissioners as outcome payers. For SIBs involving councils an outcome payer has often been the Life Chances Fund. A SIB would need to align social outcomes with a potential outcome payer, so the payment by results is for outcomes they need.
Additionally, it provides a funding mechanism for local sport Voluntary and Community Services (VCS) providers to deliver council’s wider policy objectives. They are often paid on a payment by results basis.
For a SIB to be successful a participating council needs to be able to identify participants with an existing cost implication that can be substituted. For example a young person may be involved with the youth service team due to involvement in the justice system. The cost for participation in the SIB should replace the current cost associated with the youth service team. The objective being to secure better outcomes from the equivalent cost.
Baseline data is required from councils about the outcomes they are seeking and to supply data to evaluate performance. Programme design is key to their success, along with having local providers with the expertise to deliver.
What are the benefits?
A key benefit is the council will pay on results for example against the agreed outcomes being delivered, offering the council financial protection for poor delivery by the provider.
Other benefits will be:
To establish a SIB, you need to be very clear about the social value that accrues from providing public leisure services. This will have knock-on value for other funding bids that you may make, and which will require the same strong evidence base.
Since the Social Value Act 2013 councils and other public sector organisations need to consider how contracts they commission provide wider non-financial outcomes via social value procurement. SIBs can have a similar effect in encouraging local providers to enhance their social outcomes.
What are the disadvantages?
Key learning points
The need for a council to understand the social outcomes required and how much these outcomes are worth to them is central to a SIB. If these are understood there is potential both to secure social investment for sport and leisure provision and for a SIB to successfully deliver wider policy objectives.
Embedding both social outcomes and their value can be important inputs for securing funding for sport and leisure, with the money targeted in delivering for example public health, education, youth services provision.