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Development Delivery and Viability
Development Delivery and Viability
Development Delivery and Viability
30 December 2010
The Scottish Government, 2010
Contents
Ministerial Foreword 1
Executive Summary 2
Introduction 2
Background 2
Rationale 3
Methodology 3
Key Findings 3
Planning Solutions 3
Funding and Finance 4
Improving Delivery 4
Recommendations 4
Conclusion 7
Development Delivery Research 8
Background 9
Methodology 9
Funding constraints 10
Occupier interest 12
Why invigorate the sector? 13
The planning culture check 13
The planning system 14
Other finance and public policy innovations 22
Summary 24
Recommendations 24
Annex A – Summary of Economic Recovery Summit 27
Annex B – Summary of Planning and Economic Development Workshop 29
Annex C – Methodology - Details of Engagement 31
Annex D – A step by step approach to interrogate masterplans/ 32
business plans
Glossary of Terms 33
Ministerial Foreword
The Scottish Government has a central, overarching purpose of
creating a more successful country, through increasing
sustainable economic growth. This overarching purpose has
become even more important as the problems in the wider global
economy pose major challenges for Scotland. This highlights
the need to develop new opportunities to build on Scotland’s
natural assets and deliver growth.
The development sector has been hit particularly hard by the
downturn, with the number of new residential build, starts and
completions, down to their lowest level in decades and
commercial property values, which underpin much of the
financing of property and businesses in general, have collapsed by over 40% since late 2007.
In the Economic Recovery Plan the Scottish Government recognised the importance that the
construction sector has on the economy in relation to Gross Domestic Product and growth.
The Government has investigated ways in which to support the development industry in these
challenging times. Research was undertaken into the issues affecting development and
infrastructure. This report sets out the findings of that research and the action that the
Government has taken, which includes, investigating the potential of development charges,
ensuring planning facilitates delivery of development, and identifying where appropriate
action could be taken to unlock stalled sites. The Government has also launched the
£50million JESSICA fund which will support regeneration, the National Housing Trust which
will deliver 1000 affordable homes for rent across Scotland, and has confirmed the Tax
Increment Finance (TIF) approach for the Edinburgh Waterfront.
The Government has also taken action to ensure that Scotland has an effective, efficient
planning system which delivers the right development in the right location. A programme of
work to modernise the planning system began in 2007 and significant improvements have
been made. However, changes to legislation alone cannot deliver the improvements that are
needed, which is why the Government launched Delivering Planning Reform in October
2008, to ensure this results in lasting culture change.
Lasting change will only be achieved through everyone in the public and private sector
working together and maximising the resources, skills and innovation available to create the
conditions in which Scotland’s economy can flourish.
John Swinney MSP
Cabinet Secretary for Finance and Sustainable Growth
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Executive Summary
1. Introduction
1.1 The development industry is a major contributor to the Scottish economy. The
construction of housing, business and commercial space creates employment in
design, engineering and construction and the buildings which result are occupied by
enterprises and activities, which are vital for our economy to flourish.
1.2 The Scottish Government is committed to increasing sustainable economic growth by
harnessing Scotland’s economic potential. The Government’s Economic Strategy is
focussed on stimulating lasting improvements in its long-term economic performance.
The Government launched its Economic Recovery Plan in March 2010 which set out
the action it was taking to bring about recovery and growth. Planning was highlighted
as a key driver of growth.
1.3 The global downturn has had a detrimental impact on the development sector, housing
completions are at their lowest level since 1981 and the number of new starts is at an
even lower level and commercial property values, which underpin much of the
financing of property and businesses in general, have collapsed by over 40% since late
20071. The Scottish Building Federation estimates that over 30,000 jobs have been
lost since 2008. In this climate the Government can play an important role by
promoting a culture of working together and a planning system which can enable the
right development in the right place, supporting sustainable economic growth.
1.4 The Government has been driving forward a programme of work to support this
ambition. Part of this work included seconding professionals from GVA to undertake
a nationwide audit of development activity to establish the issues facilitating and
impeding development, enabling appropriate action to be identified.
1.1 Background
1.1.1 In April 2009 the Cabinet Secretary for Finance and Sustainable Economic Growth
met with public and private sector interests to discuss the impact of the global
downturn on the development sector. A follow up seminar was held in August 2009,
to identify solutions. It brought together all key actors involved in planning, financing
and delivering development.
1.1.2 The Scottish Government set up the Development and Infrastructure Partners’ Group
to take forward proposals arising from the August seminar. This group consists of:
Heads of Planning Scotland (HOPS), Society of Local Authority Chief Executives
(SOLACE), Convention of Scottish Local Authorities (COSLA), Homes for Scotland
(HfS), Scottish Property Federation (SPF), and relevant Scottish Government
representatives, including Transport Scotland. Other key private sector practitioners
have attended on an invitation basis.
1 Figures provided by Scottish Property Federation and Jones Lang La Salle
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1.2 Rationale
1.2.1 The first objective was to establish the underlying issues blocking and stalling
development in Scotland. Two sector professionals were seconded from GVA to
gather evidence on the factors which can assist or impede development. This work
was overseen by the Development and Infrastructure Partners’ Group.
1.2.2 This evidence gathering added to the intelligence GVA had provided to
the Government in August 2009, with its summary guide to development
viability which set out the key steps to proving the viability of a scheme. (The
published document “A Guide on Development Viability” can be found at
http://www.scotland.gov.uk/Topics/Built-Environment/planning/modernising/cc/DViability)
1.3 Methodology
1.3.1 Between November 2009 and March 2010, GVA carried out a series of face-to-face
and telephone interviews. GVA consulted over 50 key contacts involved in property
development and planning in both the public and private sectors.
1.3.2 Additional subject specific sessions were also held and expertise was drawn on from
across the UK. The research was peer reviewed by the Development and Infrastructure
Partners’ Group, with regular checkpoint meetings held with HfS and SPF. GVA
reported their findings to the Cabinet Secretary for Finance and Sustainable Growth in
July 2010.
2. KEY FINDINGS - DEVELOPMENT DELIVERY RESEARCH
The main findings from the research are summarised below:
2.1 Planning Solutions
2.1.1 The research emphasises the potential for smoother processing of Section 75
agreements (the most common planning mechanism by which developers contribute to
infrastructure), and notes the publication of “Circular 1/2010: Planning Agreements”
has gone some way to assist. The revised circular advocates new methods of early
engagement and the use of staged or deferred payments. The research recognises the
potential to develop the staged/deferred payments approach further and advocates
further work on exploring how this may work. A further area for consideration is
whether there is a need to provide a national infrastructure investment plan setting out
the committed funding for key infrastructure projects, with this informing strategic and
local development plans.
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2.2 Funding and Finance
2.2.1 One of the key constraints highlighted by the research relates to the availability of
funding and finance. Specifically, the traditional model of developers’ front funding
infrastructure through debt finance is currently struggling to function. There appears
to be consensus among developers and funders alike that this business model is
unlikely to be employed to anything like the extent it was in the short/medium term.
Given this context, the research concludes that there is support for any source of
funding which can support upfront infrastructure – whether that is through joint
ventures, TIF (Tax Increment Finance) or other forms of finance. Likewise, an
approach to assist developers’ cash flow is advocated, for example through a “pay
back as you sell” method of infrastructure provision, as opposed to upfront funding
2.3 Improving Delivery
2.3.1 The research noted the progress that has been made in modernising the planning
system and recognises the next stage of this is strengthening development delivery. A
climate of limited financial resources will necessitate a much sharper focus on place
selection for investment. The research highlights the need to enable planners and
other professionals to have the skills to determine development viability. The research
highlights one of the tools to do this may be the “Guide to Development Viability”
which sets out the five key inputs which can be used to test the viability of a scheme.
Strengthening how infrastructure need is planned is also featured in the research. The
FIRS (Future Infrastructure for Required Services) approach in Aberdeenshire is noted
as an example of good practice. The research concludes that further work should be
undertaken to explore the potential for brokerage or the provision of a central
infrastructure team which could assist in partnership working and could focus on
delivery by joining masterplans with business plans in order to deliver good outcomes.
3. RESEARCH RECOMMENDATIONS AND GOVERNMENT ACTION
3.1 The ten research recommendations from GVA are set out below along with action the
Government is taking to address these:
(1) Promoting Economic Growth
The Government should emphasise planning’s role in stimulating property and development,
and the resultant benefits of economic growth.
Action:
Planning’s role as a driver to economic recovery and growth is made explicit in the Economic
Recovery Plan http://www.scotland.gov.uk/Publications/2010/03/03084300/8 .
Action is being taken to give this greater emphasis:
• A Planning and Economic Recovery Summit was held in July 2010 (Annex A)
• The Government co-hosted a working session with the Scottish Property Federation
(SPF) focussed on planning and economic development (Annex B)
• A follow up joint Government/COSLA working session is scheduled for 2011
• A further Planning and Economic Recovery Summit will be held in Summer 2011
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(2) Investing in Skills
The Government could consider continued coaching of local authority staff on development
economics/development viability skills to help ensure developments are delivered.
Action: Work has already been undertaken on this issue as part of “Delivering Planning
Reform” http://www.scotland.gov.uk/Publications/2008/11/05100742/0. This has included
delivery of a range of skills and training events through the Scottish Government’s Planning
Development Programme2 including development economics and viability. Consideration is
being given to continue support for this skills requirement in 2011.
(3) Assisting with Development Finance
The traditional business model of upfront funding for development through bank borrowing
is experiencing considerable difficulties and seems unlikely to return. Therefore, future
sources of funding will need to be found. There may be a role for Government in attracting
equity investors.
Action:
• A number of funding sources are now on stream (outlined in recommendation 4)
• The Government will continue to work with COSLA and local authorities to share
innovative approaches to development finance. For example, work is progressing in
Fife Council to investigate potential financial models, to deliver the infrastructure
required for developments.
• The Government is progressing discussions with the private sector to explore
opportunities for investment.
• Also, Scottish Futures Trust are taking forward a new revenue financed investment
worth up to £2.5 billion, to be delivered through the Non-Profit Distributing (NPD)
model which will support Health, Education and Transport and will take forward the
recommendations of the Independent Budget Review.
(4) Rolling Infrastructure Fund
A funding stream which could provide loans to developers, to enable the front funding of
essential infrastructure, would assist in delivering results on the ground. Such an investment
from Government would be repaid as development plots are sold, and could attract co-
investment from the private sector.
Action: The Government has taken steps to assist with the financing of developments with
the introduction of a number of funding initiatives:
• Tax Increment Finance (TIF) has now been given the go ahead to fund
infrastructure to unlock development at Edinburgh Waterfront;
• the £50m JESSICA (Joint European Support for Sustainable Investment in City Areas)
fund now established;
• the National Housing Trust (NHT) initiative, the first phase of which is expected to
deliver 1000 new affordable homes for rent across Scotland with plans for further
expansion.
2 PDP funding has been delivered by the Local Government Improvement Service to public sector planning staff
over the last four years to support implementation of the Planning Etc (Scotland) Act 2006.
(5) Planning Agreements
Greater simplicity and clarity would assist Section 75 planning agreements. This might
include providing more certainty over infrastructure costing and options to enable payments
to be phased in order to assist with developers’ cash flow.
ACTION:
• Advice on planning agreements was updated in “Circular 1/2010:
Planning Agreements” issued in January 2010 http://www.scotland.gov.uk/
Publications/2010/01/27103054/6.
• A good practice seminar on planning agreements was held in April 2010 to share
expertise.
• Research work on development charges commenced in November 2010 to explore the
potential of a “phased” or “tariff” style approach to infrastructure provision.
(6) National Infrastructure Investment Plan
An Infrastructure Plan could be published and reviewed annually to provide greater certainty
on Government investment.
Action:
• The second National Planning Framework (NPF), published in June 2009, sets out a
strategy for Scotland’s long-term development, including clear priorities for the
improvement of national infrastructure. While the NPF is not a spending document, it
is an input to spending decisions, not all of which are for Government. Progress in
implementing the Framework is reported annually to Parliament and monitored
through an Action Programme and a Monitoring Report which are available at:
http://www.scotland.gov.uk/Topics/Built-Environment/planning/National-Planning-
Policy/npf/.
• The NPF is complemented by the Strategic Transport Projects Review (STPR) which
sets out recommendations on a portfolio of land-based strategic transport interventions
and indentifies the most appropriate strategic investments in Scotland’s national
transport network from 2012.
(7) Better place selection
Best practice guidance would assist in improving place selection, ensuring that areas selected
for development or redevelopment have the potential to be developed.
Action:
• Further consideration is being given on how to support improved place selection,
including ensuring places are well connected and provide the basis for delivering
sustainable design.
• The Government will continue to work with local authorities, Scottish Agencies and
the private sector to take appropriate action, where this is possible, to unlock sites
stalled due to specific infrastructure needs.
• The Government is considering approaches to mainstream workshop-style working
across Scotland, a process that has the ability to test sites and masterplan approaches
through a design-led methodology informed by a wide range of stakeholders and
pressures.
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(8) Central Infrastructure Team
A central team could be formed to assist others with improving selection of places to develop.
The team could: Play a role co-ordinating activity; Assist others in assessing the viability of
potential sites; and ensure the right development occurs in the right place, with good
economic outcomes.
Action: The Government is exploring the potential of a “development brokerage” service as
outlined in the Economic Recovery Plan. The Scottish Government is working closely with
colleagues from COSLA, and across public and private sectors to ensure that any potential
brokerage service adds value, and can deliver good outcomes for Scotland.
(9) Masterplanning
Further work could be undertaken on developing a methodology to ensure masterplans and
business plans are developed in tandem. This type of development appraisal would assist in
identifying viability issues early on, thus reducing the potential for sites stalling.
Action:
• Initial work progressing this has been undertaken as part of the Scottish Sustainable
Communities Initiative (SSCI) and.
• The Scottish Government is also investigating the potential of an “Infrastructure
Workshop” and the possibility of running a pilot session, which will capitalise on the
core principles and successes of the recent Design Charrettes.
(10) Planning Delivering Developments
“Development delivery” should be considered as a third line of planning modernisation in
Scotland.
Action: Work is underway to emphasise this as part of Delivering Planning Reform to
complement the reforms made to development planning and development management,
particularly in relation to Action Programmes required as part of development plans.
4. CONCLUSION
4.1 The research has found that the global downturn has left lasting challenges for the
public and private sector, particularly the availability of finance. In a climate of
restricted public and private sector finance, the need to work together better and to
work innovatively becomes more important than ever. The work the Government has
undertaken to modernise the planning system, to make it more effective and efficient,
is starting to make a difference. However, there is more to do, and local authorities,
Scottish agencies and the private sector also have an important part to play to ensure
lasting change.
4.2 The research has also identified that there are no straightforward solutions. In a
climate of fewer resources there is a need to work collaboratively to maximise impact.
The Development and Infrastructure Partners’ Group is a good example of public and
private sectors working together and this must continue to make progress to ensure
that the planning system promotes an “open for business” approach and delivers the
right development in the right place.
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Development Delivery Research
Carried out by GVA on behalf of theScottish Government
November 2009 – August 2010
The views expressed in this report are those of the researcher and do not necessarily represent those of the Scottish Government orScottish Ministers.
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1. BACKGROUND
1.1 Two professional staff from GVA were seconded to the Scottish Government’s
Directorate for the Built Environment, from November 2009 to August 2010 inclusive
to carry out an audit of issues affecting development and infrastructure across
Scotland.
1.2 Because of the effect of the market downturn on planning, development and property
activity throughout Scotland, GVA held some discussions on key issues with senior
officials of Scottish Government’s Directorate for the Built Environment from mid
2008. In early 2009, a short seminar was held with various clients and other contacts
from the development, banking, funding and property market. John Swinney, MSP,
Cabinet Secretary for Finance and Sustainable Growth attended the seminar, along
with the Chief Planner and various other senior officials from the Scottish
Government.
1.3 This was a productive session and it was agreed that further meetings should be set up
between Scottish Government (SG), Scottish Property Federation (SPF), Homes for
Scotland (HfS), Convention of Scottish Local Authorities (COSLA) and other key
groups to discuss the issues facing the development industry and the problems with
obtaining development funding, cashflow and the delivery of development.
1.4 Whilst the stakeholder meetings were instigated, some further advice was procured by
Scottish Government from GVA on development viability assessments in summer
2009. This guidance has been used in briefing Scottish Government and other local
authority officials, particularly in the planning functions of Government, to explain the
background to development viability.
1.5 By the end of 2009 it was apparent that many contacts in the property industry were
keen to engage with Government to discuss issues they had encountered in delivering
developments. There was widespread concern that the true impact of the credit crunch
and the funding crisis in the financial market had not yet been fully appreciated by key
decision makers in public authorities and agencies.
1.6 GVA provided the facility of one to two days a week from a director and associate3,
from its Edinburgh and Glasgow offices respectively. Both were qualified town
planners and active in commercial development solutions and planning consultancy
throughout Scotland, across numerous public and private sector client cases.
2. METHODOLOGY
2.1 The GVA secondees were briefed by the Deputy Director, Directorate for the Built
Environment who leads on planning modernisation and investigating key aspects of
development and infrastructure. The brief was to use the private sector contacts of
GVA and to undertake as much face to face contact as possible throughout an
information gathering period of November 2009 to March 2010. GVA engaged
various different forms of approach to engage with the property sector.
3 Director: Richard Slipper, BA (Hons) MRTPI
Associate Director: Alasdair Morrison, MA (Hons) Dip TP MRTPI
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2.2 The methodology conducted is detailed at Annex C :
2.3 As well as individual developers, local authorities and Government
agencies/departments, the meetings included most of the key umbrella organisations in
Scotland who deal with property and development related matters. This included
Scottish Property Federation (SPF), Homes for Scotland (HfS), Scottish Builders
Federation (SBF), COSLA, Scottish Enterprise (SE), and the Scottish Futures Trust
(SFT).
2.4 The next 6 sections set out the main issues identified and some suggested solutions.
3. FUNDING CONSTRAINTS
3.1 Private Sector Funding
3.1.1 As the secondment progressed, the mood of respondents shifted from a severe concern
about bank lending and private sector sources of funding, to concerns about the
availability of public sector funds, as the effects of economic recession are felt on both
sides of the public and private sectors.
3.1.2 Frequent comment from most respondents was to highlight the severe restrictions on
the property and development sector, particularly in relation to bank debt lending on
property. Consultees pointed to the large urban ventures that had effectively closed
down development from 2007/8. The global recession was generally blamed by
consultees for the cessation of bank funding and the subsequent restrictions on the
more ambitious and higher risk urban schemes.
3.1.3 To compound this loan finance teams in banks are preoccupied with the distress and
difficulties on land assets around Scotland where there is continued bank exposure.
This presents a double dilemma in terms of future funding. Most banks are likely to
be engaged for some time on the problems associated with previous lending on
property ventures.
3.1.4 In addition, many landowners have the expectation of a fixed price (which was agreed
pre-recession) for large urban schemes. Most respondents we engaged with have
made it clear that schemes will remain stalled until there is movement on the base
price, or on the demand for built units and take up of space.
3.1.5 Some easement and price adjustment/rebasing of land value might be in evidence,
where landowners are able to accept a lower price, or developers are able to
renegotiate, but this cannot be assumed across all sites.
3.1.6 It is a general belief in the commercial property market, including banks and
institutions, that from 2010 onwards, commercial banks may only re-enter the fray of
finance or funding for less speculative proposals.
3.1.7 Although there are a few examples of mixed use developers enjoying upfront bank
debt to pay for upfront infrastructure, many consultees believe this will never return
from banking based sources of funding.
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3.2 New Emergent Forms of Funding
3.2.1 There are some early signs of longer term institutional investors looking for a return to
commercial property investment in order to keep their spread of investments across the
board. However, longer term investors are still unlikely to have an appetite to invest
in widespread residential development as they tend to work to a narrow band of safe
investments across prime located commercial developments (retail/office space/etc).
3.2.2 There are opportunities in Scotland to engage with the longer institutional investors.
They are represented on the likes of the Scottish Property Federation (SPF) and it is a
good time to investigate whether there are forms of de-risking, Government support or
other covenants that might be brought in, which might attract more investment from
the institutional sources.
3.2.3 Longer term sources of larger equity funding may be available from US, Middle East
or other European countries. This is an opportunity to explore all sources of new
private sector equity, however, this may require profit sharing, covenanting schemes to
secure public sector support and a greater understanding, particularly in the public
sector, of internal rates of return.
3.2.4 In our discussions with Scottish Futures Trust (SFT), it is clear that expert
practitioners are fully engaged within SFT to try and explore as many of these new
forms of funding as possible.
3.3 Reversion to Public Sector Funding
3.3.1 Although it is noted that, following Spending Review announcements, public sector
sources of funding will be restricted from 31 March 2011, many of the participants in
our secondment research have pointed to Prudential Borrowing, (under reasonable
Chartered Institute of Public Finance and Accountancy (CIPFA) guidelines), as a key
source in the current recession. Many local authorities are quite open to the prospect
of Prudential Borrowing, but some remain shy to explore this source of funding for
infrastructure to support their development plans, without further guidelines.
3.3.2 As we understand the guidelines at present, local authorities seeking to utilise this
source of funding are expected to demonstrate revenue savings or a projected revenue
income as a result of the proposed spend, with this normally being presented through a
full option appraisal. We return to the issue of revenue incomes from development
later in this report.
3.3.3 Perhaps the mixed response to utilising this source of funding is due to different
political and executive leadership within different authorities and the need to
investigate all the possible sources of both private and public sector funding before
resorting to Prudential Borrowing.
3.3.4 It might be a helpful approach for the likes of the Scottish Government, Scottish
Enterprise, Scottish Futures Trust and other agencies to be engaged alongside local
authorities to try and find ways of investing longer term monies from public sources.
Perhaps a typology of potential investment options can be better defined; from general
state aid, to more innovative levels of money loaned in upfront, for payback later.
3.3.5 There has been much discussion in our meetings about a possible national
infrastructure fund, facilitated by the Scottish Government, which might operate on
the basis of lending with repayment made as properties are sold/leased, with the
money being reinvested on a rolling programme.
3.3.6 This concludes our overview of findings on the funding sector. Clearly, our
secondment has been resourced by town planning professionals, rather than funding
and finance experts. It is therefore strongly advised that the financial skills of the
Scottish Futures Trust (SFT), Scottish Enterprise (SE), the banking and institutional
funding sector and other experts within the Scottish Property Federation (SPF), Homes
for Scotland (HfS) and others should be consulted on this critical area.
4. OCCUPIER INTEREST
4.1 Linked to the previous section on upfront funding is the critical balance for the
property and development sector of selling or letting the property once it is completed.
4.2 In our development viability advice to the public sector, “A Guide to Development
Viability” GVA is advising that all property ventures normally require the critical
“five P’s” to be tested:
1. The property to be secured;
2. The likelihood of a purchaser buying the final end product being duly examined
and the prospect of occupier take up being identified;
3. The basic balance of the first two factors should lead to a reasonable prospect of
end-out profit;
4. A risk assessment on the first three stages will critically depend upon: Planning
policy; Development plan; and an eventual planning consent to convert the
proposal into reality;
5. Lastly, the critical step of project delivery , with a final cross check on viability
and an ability to enter a site which is consented and “build ready”.
4.3 All of the above key factors tend to hinge on the end-test of demand for the built space
being created as part of the property development venture. Public policy which affects
the built environment should be geared towards a careful appraisal of occupier
interest. Perhaps too often, there are initiatives for planning, regeneration and new
development, which have not properly assessed the market interests across the
different housing, retail, office, leisure and other sectors, in order to properly gauge
the likely take up of space on a land purchase or property leasing basis.
4.4 Demand remains one of the most severe concerns across all of the property contacts
made during our secondment.
4.5 “A Guide to Development Viability” can be read in full at:
http://www.scotland.gov.uk/Topics/Built-Environment/planning/modernising/cc/Viability.
Since mid 2009 the circumstances on debt finance, cash flow and property values have
all fluctuated, however, the principles detailed in this guide are still relevant.
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5. WHY INVIGORATE THE SECTOR?
5.1 A useful question which has provided an element of challenge function to this research
work is: why should Government policy or other initiatives support the property and
development sector?
5.2 Most of the respondents made it clear that a national ambition to encourage economic
growth may be realised by public policy supporting and welcoming new forms of
development. This will create an “open for business” culture and reputation which
should attract inward investment to Scotland.
5.3 Therefore, the presence of well selected sites, in good prime locations which are de-
risked from planning and other uncertainties is a good signal to property market
funding interests and, most critically, to occupier interests.
5.4 The availability of consented and equipped built space, on serviced sites, in good
locations, is a first signal to any potential occupier that a particular location is ready
for development.
5.5 Reasons for supporting public investment in new infrastructure in Scotland includes
targeted spending being able to deliver significant economic benefits.
5.6 There is no doubt at all that the various funding sources, development companies,
occupier business and others consulted throughout our secondment wish to see a clear
and simplified planning system, with an ability to deliver development and be ready
for economic recovery.
6. THE PLANNING CULTURE CHECK
6.1 Since October 2008 the Scottish Government has undertaken a programme of work to
reform Scotland’s planning system. The focus of this work has been on radical
changes to simplify and make proportionate development planning and development
management procedures. Generally these changes have been welcomed by both public
and private sectors.
6.2 There are however, some concerns remaining amongst some key players, that in some
of their discussions with particular local authorities, there appears to be a complacency
that the market boom will soon return and developers and planners will default to old
patterns of behaviour, with a possible threat of entrenched positions and slow progress.
By this, it is implied that sufficient profit will soon return to the system, which will
allow ambitious planning contributions to be requested by authorities, enabling
infrastructure requirements to be fulfilled once again, through the negotiation and
delivery of Section 75 (and other relevant) agreements.
6.3 This is by no means widespread across all local authorities, but there is a view among
consultees that some areas seem to be content with the level of growth experienced
during the recent boom and that perhaps a recessionary period is a time for
conservation in terms of new development, pending another upturn.
6.4 Across many other local authorities, there is a much more growth-ambitious attitude
and an urgency to tackle the problems of the economic downturn and the need to
address regeneration.
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6.5 The Planning Reform agenda is delivering results, there is notable enthusiasm from
the private sector to engage with champions, leaders and efficient managers who are
prepared to take on many new skills, in order to realise projects through to delivery.
6.6 This new enthusiasm has given rise to a popular support for the notion of
“development delivery”, perhaps as a third arm of planning reform in addition to
development planning and development management.
6.7 Notwithstanding the enthusiasm noted above, there is still a realism that funding is
extremely tight, development viability can frequently be doubtful and the selection of
prime place for carefully chosen projects continues to be a difficult task. In this
connection, it is hoped that some of the recommendations for the planning system to
modernise in the direction of development delivery can be taken forward.
7. THE PLANNING SYSTEM
7.1 How the Planning System Can Assist
7.1.1 The above primary headings on our findings cover:
• funding;
• occupier interest;
• invigorating the property sector; and
• a culture check on planning.
7.1.2 Related to all of these issues are some more focused and specific devices which
planning could exploit with more efficiency, greater skill and increased vigour, in
order to modernise planning towards the key goal of development delivery.
7.1.3 It has been suggested by consultees, throughout this research project, that some form
of best practice guidance might be issued by the Scottish Government, which can
support:
• the importance of the skills required to deliver developments;
• the methodologies and techniques used to properly assess the viability of different
urban developments and the critical steps towards implementation.
7.1.4 The headings below are not intended to follow any particular logical sequence but
cover a number of key planning-related issues which have been raised in the
discussion groups, meetings and feedback from the secondment. The sections below
are worded in the form of GVA recommendations for best practice but they closely
reflect the ideas, proposals and phrases used by those who have contributed to the
secondment.
7.2 Development Viability
7.2.1 The most significant response from discussions with those engaged in development in
both the private sector and public sector is the need to share more understanding of
development viability in planning discussions, particularly for major urban schemes.
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7.2.2 GVA provided the Scottish Government with a summary guide to development
viability in August 2009. This guide focuses on the key steps to proving the viability
of a scheme; in particular the critical relationship between the gross development
value and the base price payable for land.
7.2.3 The guide highlights the 5 key inputs of:
• property secured
• purchasers interested
• profit proven
• planning risk assessed
• project delivered.
7.2.4 The development appraisal shows how the total value out of any development
(realised when occupiers buy up all the built space) should exceed the cumulative sum
of the profit, all the financing costs, professional fees, the site development costs and
the “residual” price payable for the land.
7.2.5 It is recommended that various methods are employed to communicate these basic
models of development appraisal and viability through the planning system. The
Local Government Improvement Service has run seminars and training on these
techniques.
7.3 Development Delivery
7.3.1 The result of an increased awareness and practice of development viability is to ensure
the various practitioners in planning and development (in all sectors) are focussed on
development delivery.
7.3.2 Many of the respondents and stakeholders believe that the planning system could
benefit from a fresh approach which is focussed on the delivery of allocated,
masterplanned and consented schemes.
7.3.3 This type of “place-proving” and testing could enhance the role of the planner in the
decision making process and could enable more developments to be consented and
brought into the ‘build-ready’ and site-start phases. The planning profession offers
good skills to bring to this challenge, including an approach which can complement
the technical skills necessary to ensure the delivery of development. In the longer
term this approach may help to audit the stock of “effective” sites for development
plan reviews and help to sift the prime development opportunities, which could then
be prioritised above less and non-effective options.
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7.4 Skills
7.4.1 The essential professional skills in development delivery, to complement planning
include:
• Development surveyors – development appraisal, Royal Institute of Chartered
Surveyors (RICS) valuation methods and funding sources;
• Market agency surveyors – reports on occupier interests;
• Costs/Quantity Surveyors – for detail cost plans for infrastructure etc;
• Funding and legal experts – to assist on special purpose vehicles/partnerships/joint
ventures etc;
• Project managers;
• Site engineers/civil engineers/transport planners;
• Environmental/remediation experts.
7.5 Methodologies
7.5.1 Many different approaches to development appraisal can be adopted and development
surveyors have proven techniques linked to land valuation, cash flow, market take up
rates, rental and pricing models. Some of these have been discussed in the
Development Viability Report.
7.5.2 As part of the secondment GVA had an opportunity to observe the Aberdeenshire
Council-led panel which meets to discuss Future Infrastructure Requirements for
Services (FIRS).
7.5.3 The FIRS approach undertakes a step by step process of due diligence across a range
of development planning and development viability issues. It parallel-tracks an
assessment of the urban capacity of a place with the development economics of
delivering the requirements for site services. The principal behind the FIRS
methodology is “no shocks” to any party in development planning and in site-proving
for development.
7.5.4 The secondment also included a valuable opportunity to share some active consulting
time with the Raploch Urban Regeneration Company board members to re-assess their
masterplan and business plan in the context of some key issues arising from market
downturn etc.
7.5.5 GVA discussed their inputs with the Raploch Urban Regeneration Company Chief
Executive and fed back their findings to the SSCI team and this included a
recommended step by step approach to interrogate masterplans/business plans for
larger urban area schemes which have been affected by the market downturn.
7.6 National Infrastructure Plan/Programme
7..6.1 A frequent suggestion was made for more clarity at national level on committed
funding for key national or major regional projects. It was suggested that a National
Infrastructure Programme could sit alongside the National Planning Framework (NPF)
and this could be annually updated and worked into a regional approach across the city
regions and into Strategic Development Plans (SDPs) and Local Development Plans
(LDPs).
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7.6.2 The Scottish Government's Scottish Infrastructure Investment Plan (2008) outlines the
higher cost capital project commitments or proposals (which are in excess of £5
million) over a period of approximately 10 years.
7.6.3 Given existing and future public sector budget constraints it is likely to become
essential that these projects are prioritised and their source budgets detailed. Only by
doing this can the existing aspirations for infrastructure expenditure across Scotland
(which is one of the drivers for the land allocated in local development plans) be fully
scrutinised by private sector investors.
7.6.4 This in turn could then inform the Strategic Development Plan (SDP) and Local
Development Plan (LDP) allocations and planning at a regional and local level, and tie
in with the published capital programmes of local authorities and their public sector
partners.
7.6.5 This approach would have the advantage of providing a clearer indication of
infrastructure projects which had funding agreed and in place, with timescales for
delivery made explicit.
7.6.6 We would recommend this as one of the early stage targets for the Scottish
Government to consider following publication of this report.
7.7 Action Programmes
7.7.1 A natural progression from the above is to work in the details of committed funding
down to the new Action Programmes for the new Strategic Development Plans (SDPs)
and Local Development Plans (LDPs).
7.7.2 Action Programmes could consider a grading and phasing of development sites as
follows:
1. committed sites – consented and readied for development with no residual risk
on delivery;
2. sites committed by planning but doubtful by funding – with contingencies
defined for de-risking the sites;
3. other sites – will be those which still require support from the planning system
and details of how they will be brought to delivery. This is likely to be a mix of
sites which are still subject to consents but could be assisted by bringing forward a
framework, brief or masterplan which solves the planning challenges in tandem
with the funding and delivery challenges
7.7.3 We would recommend that local authorities carry out the above exercise as a matter of
urgency with the public and private sector organisations in their area and allocate
resources accordingly across their organisation, to prioritise the delivery of those sites
belonging to the first category. This would include the development planning and
development management functions of local government.
7.8 Infrastructure Funds
7.8.1 Our research revealed that there is support for any sources of funding which can
support up front infrastructure. This is primarily an area more related to
funding/finance than to planning.
7.8.2 From the point of view of the planning system, it will be important to advocate more
active engagement by public authorities in sourcing funding, with perhaps planning
authorities becoming more engaged as a participatory ‘businesses’ in delivering
funded development. This could be through the use of prudential borrowing facilities,
or through the use of covenants offered by the public sector in the longer term delivery
of developments.
7.8.3 The planning system could increase its awareness of up front funding of infrastructure.
This could then help to inform decisions on land allocations, masterplans, phasing’s
and delivery plans including allowing for a “pay as you sell” approach from individual
investors/developers. The requirement for this type of approach has been endorsed by
most of the stakeholders in our consultation. It presents a more meaningful basis for
future Section 75 Agreements and a framework for “plot tariffing” and measured
development charges.
7.8.4 Like the private sector, it is likely that financial prudence and risk reduction will be
key drivers to any public sector sources of infrastructure funding forthcoming in the
short to medium term. Some advocate a ‘rolling’ loan fund (i.e. conditional funding
up front, which is dependent upon profit sharing down stream, with repayment of
loans being reinvested in further schemes on a rolling basis.)
7.9 Scotland’s “Development Prospectus”
7.9.1 Linked to the above funding issue and led by many of the more positive ideas about
continued modernisation in Scotland’s planning system, it was suggested by
consultees that the Chief Planner, with Scottish Enterprise and perhaps the Scottish
Futures Trust (SFT) could explore a regular calendar of visits to possible sources of
funding.
7.9.2 There is a case to promote the Scottish planning system as one which is ahead on its
modernisation as it is simpler and more readily engaged by the development industry.
It is possible to capitalise on this and consider the added value a “broker role” could
provide to Scotland.
7.9.3 “Brokerage” was mentioned by the range of stakeholders interviewed. It is apparent
that greater clarity is required on establishing a shared understanding of this term. The
notion of planners in both the public and private sector increasing their role as brokers
has been explored during the secondment.
7.9.4 The idea of senior representatives of central and local government planning teams
engaging more closely with the development industry, sometimes on a site-focussed
basis was supported by many stakeholders as a positive culture change.
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7.9.5 The Government undertook to investigate the potential of a ‘brokerage service’ as a
commitment in its Economic Recovery Plan. A broker could potentially play a role in
identifying the main urban sites in Scotland which are readied for development and
could also promote the larger, approved development plan allocations, Scottish
Sustainable Communities Initiative (SSCI) candidate sites, Urban Regeneration
Company (URCs) areas, to a wider audience of prospective investors.
7.9.6 In its simplest form, this could be executed by means of bi-monthly meetings with the
development funds present in Scotland and also the possibility of a quarterly visit to
the larger London based funds, investors, developers and other brokers to explore how
the Scottish planning system might help to de-risk up front funding. This could be in
conjunction with the Chief Planner, Scottish Enterprise (SE) and Scottish
Development International (SDI).
7.9.7 It is recommend that further work on a “Brokerage Service” includes:
• Providing clarity on whether the primary approach will be on allocated sites,
identified by the property industry as prime, which might be distressed or blocked
from implementation;
• Employing the methodologies and other skills and ideas noted above;
• Exploring whether brokerage can help out earlier in the planning pipeline, for
example, at the “call for sites stage” in LDPs;
• Looking at an expansion of this role to a more fully resourced support team.
7.10 Plot Tariffing/Section 75 Agreements
7.10.1 Previous approaches to Section 75 agreement negotiations have been widely criticised
in the discussions we have carried out as part of this research. Criticisms specifically
relate to stand-offs and delays for costings, tolerance testing and legal drafting. The
publication of “Circular 1/2010: Planning Agreements” has assisted in clarifying the
“fair and reasonable” tests for Section 75 Agreements. The revised circular also
advocates new methods of early engagement and set development charges.
7.10.2 An efficient approach to planning infrastructure is also well rehearsed in the
Aberdeenshire Future Infrastructure Requirements for Services model (FIRS) and by
many other planning authorities which are more active in urban expansion sites.
Various “tariff” type approaches have also been explored, and the key principles
examined as part of the evidence gathering of our work. These include, examples
from England prior to the proposed Community Infrastructure Levy (CIL) being
brought into use.
7.10.3 It is recommended that further work be undertaken on:
• Obtaining clarification on funding for overall infrastructure commitments for
defined areas;
• Precise costing calculations on standardised unit amounts of infrastructure (eg a
road cost is £X per linear metre, a sewage works £X per volume handled, a school
rated at £X per sq metre, etc) – Scottish Futures Trust (SFT) and others have
suggested this type of benchmarking is the most sensible way forward for
infrastructure planning and design;
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• Establishing close links between the development plan’s allocated sites and urban
expansions and a business model for the front funding and repayment of
investment, with payments being made as each plot is sold;
• Assessing methods of payment by future unknown beneficiaries;
• Recommending methods of combining the above into a best practice for defining
“measured development charges” which are fairly and reasonably related by site;
• Assessing whether the tolerance for development charging is too weighty for the
private sector land economics to bear the burden of costs – and if so, identifying
where there might have to be assistance with gap funding.
7.11 Central Infrastructure Team
7.11.1 A more ambitious plan for the “brokerage” concept would be to establish a “central
infrastructure team”, in central Government. This team would have the benefit of
harnessing all the skills, methodologies and approaches and centralise the best
practice. But it would also act at a national and local level, for instance holding
meaningful panel hearings into difficult sites and cases of frustrated delivery.
7.11.2 The secondment raised many examples of good practice and the methods employed by
the likes of the FIRS panel and also by ATLAS (Advisory Team for Large
Applications) and other exemplars south of the border have been impressive. We have
also learned from our own workshop approach with the Raploch Urban Regeneration
Company exercise and we believe that the skills of the development viability analyst
could be introduced in this way (example of methodology used at Annex D).
7.11.3 Most respondents suggested that a central infrastructure team would work to best
effect if its role regularly reported to a Government Minister-led team, which had
access to funds or had the ability to realign public sector budgets where necessary.
The team could focus on where serious efforts are being made to prove the case for
development and for development assistance. Most private sector interests believe
that this would add some vigour to public/private partnerships precipitating closer
collaborative working on clear masterplans and business plans, to deliver effective
solutions.
7.12 Prime Place Selection
7.12.1 There is much debate about where resources for new development and infrastructure
should be focussed. The development industry has a clear view on prime siting and
this normally gravitates to places located with strong connections to existing people
movement, where new places and public realms will succeed, and where occupier
take-up of built space will be more prolific. This is not an exacting method of place
selection and the skill of the successful investor/developer is to have the vision to see
such places emerge from some intelligent approaches to movement, spaces and
buildings which can establish a successful new pitch.
7.12.2 There is a priority to focus where the risks of moving people into new space are
lessened and this has a direct link back to occupier demand. This focus can be diluted
in times of economic boom, where activity is ‘over-heating’ the over-prime areas. But
in a downturn this principle is the first priority for all investors. All the respondents
we spoke with have urged that any new policy initiatives should recognise the central
importance of prime site selection. Economic recovery will be most effectively served
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by identifying the prime places and secondary places which can be developed, with
resultant benefits felt downstream.
7.12.3 The challenge is to try to align this kind of prime site sustainability in financial return
and risk terms with prime locations for sustainable development in terms of the built
environment.
7.12.4 New policy approaches by planning authorities and their public sector partners need to
align with this definition of “prime” at a local level, which will see resource attributed
to ensuring the success of development delivery in these locations and the local
economic benefits that will undoubtedly accrue.
7.13 Consenting and Readying Sites
7.13.1 Most of the focus on the above issues is linked to the more ambitious approach
towards the re-capture of debt funding to drive development and to try and stimulate
economic growth and promote occupier take up of built space. The feedback
discussions have highlighted the lack of larger scale developers who are prepared to
speculate on the larger sites with long term visions.
7.13.2 A simple approach to de-risk sites is to work harder at the consenting and readying of
sites. During a market upturn there are many speculative proposals for new
development sites which take the planning application process up to the full design
detail stage for full consenting, herefore presenting the site as “build ready”.
7.13.3 These speculators drive the system, by implementing the allocated sites, testing
policies for added sites and, sometimes, challenging the system to deliver new kinds of
sites and developments.
7.13.4 In the market recess, this activity is stalling and it is our assessment that the key
players are therefore likely to eschew the outlay on readying a site until the uncertainty
passes on other parts of their business view.
7.13.5 The planning system, development function, enterprise network and others in the
public sector can work with private sector interests to look at ways of advancing more
work on consenting and readying sites for development. The “entry-ready” sites in
prime places will be the first to attract take up and the economic recovery will run first
to the de-risked and readied sites. It is our view that these sites should be identified by
local authorities for willing investors.
7.13.5 This might be a more low-exposure funding outlay for the likes of infrastructure funds
and it could work with some new urgency on, for example:
• Distressed sites which are blocked by a Section 75 agreement proviso which has
become unrealistic;
• Could local authorities re-test their own tolerances and quality aspirations, to
redefine their specifications for hard and soft infrastructure;
• Development briefs and masterplans can promote a site to a more certain level in
the decision process;
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• Major applications are now incurring an advance 12 week period for consultation.
This delay could be dealt with by advancing an outline scheme for a permission in
principle and pre-consenting the main elements of a site;
• Revising and reviewing existing land use allocations to reflect market realities in
terms of delivery.
7.13.6 These advance consenting moves could all be considered by planning authorities
themselves and others in the Scottish Enterprise network and perhaps Scottish
Government could deploy central teams.
7.14 Market Sectors for Priority Actions
7.14.1 Another topic is the ability of local authorities to monitor and engage with market
sectors. Liaison with private sector interests is now becoming more strongly
established under the leadership of the Chief Planner but there could be further efforts
to monitor and report on different property market sectors which might be more
resilient to recession and capable of delivering development.
7.14.2 Recent months have seen a focus on reviving the housing markets with the publication
of “Fresh Thinking, New Ideas”4 from Scottish Government. There are some signs of
private sector housebuilding returning and there are hopes that the social rented and
shared equity formats will assist this residential sector.
7.14.3 From our ongoing private practice we are aware that efforts are being targeted at
onshore supply chain development issues for the offshore renewable energy industry
and initiatives such as the National Renewables Infrastructure Plan and Fund (NRIP)
& (NRIF) are welcomed by investors and developers in this field. The NRIP and
similar policy initiatives are taken as meaningful signs of Scotland being open for
business and ready to implement. Similar sectoral initiatives could help other areas of
the development market.
8. OTHER FINANCE AND PUBLIC POLICY INNOVATIONS
8.1 Public Policy
8.1.1 Though the main emphasis of the recommendations to Scottish Government are in the
realm of town planning legislation guidance and best practice, it should be noted that
the research, discussions and findings throughout the secondment have highlighted
numerous other themes, ideas and possible innovations which can complement the
planning system. However, these are primarily in other areas of public policy,
particularly relating to finance and funding issues.
8.1.2 There are skills, experience and professional practitioners in the financial, legal,
housing, project delivery and other sectors, which might help to implement some of
the ideas below. However, we do wish to record some of the complementary themes
which are relevant to development delivery.
4 http://www.scotland.gov.uk/Publications/2010/06/25144849/0
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8.2 Partnerships
8.2.1 As well as the traditional forms of joint venture partnerships, particularly between a
private sector venture with a public sector undertaking/covenant to support a scheme,
there are various other forms of emergent partnerships. Local authorities are
increasingly offering the certainty or covenant of a local property or other fixed asset
in an Asset-Backed Vehicle.
8.2.2 Critically, the public sector market is keen to communicate with public sector policy
makers on innovations such as Asset-Backed Vehicles. They have the ability to
identify upfront funding for a longer term return, based upon steady, stable income
flows. We have spoken to leading legal practices in Scotland, funding sources and
brokers who have put together infrastructure funds in the past. All of these sources are
keen to point out the importance of backing a joint venture partnership with the
certainty which the public sector can bring, in terms of longevity of commitment, the
presence of an asset, and ideally the take up of built space over time. Balanced against
this, is the ability of the private sector to bring various funding sources and a cashflow
to help the development proposition work over the medium to longer term.
8.3 Tariffing – Various Forms
8.3.1 Most of the recommendations on tariffing of development plots are set out in the
previous section. However, it is important to note that the location of development
sites by a measured amount of funding to contribute to larger scale infrastructure can
involve significant innovations in funding sources and financing models. In particular,
the FIRS model in Aberdeenshire has been examined in detail and this is being
extolled across various different forums in Scotland.
8.3.2 Critically, it appears that the more successful plot-tariffing model hinges on the
availability of upfront funding, for a pay-back later on a “pay as you sell basis”.
8.4 Tax Increment Financing
8.4.1 A Tax Increment Financing (TIF) model has been gathering pace, whilst the
secondment was underway. American TIF models have been explained in detail by
commercial advisors, lawyers and others who are active in Scotland on possible
pathfinder cases. It appears that the ability to capture non-domestic rates over the
longer term to pay back an initial upfront infrastructure cost is a device which can be
implemented with relative ease in Scotland. Therefore, some exploratory cases are
underway at Buchanan Galleries in Glasgow, Waterfront Edinburgh and at
Ravenscraig with other potential locations under consideration.
8.5 Infrastructure Loan Fund
8.5.1 The earlier section in this report on funding highlighted the widespread concerns on
the absence of the more traditional bank-sourced debt financing for development. As
a result, many in the property sector are suggesting that there has to be some refreshed
thinking across the board of both the private and public sector, in particular, to
investigate how national infrastructure funds might be made available for larger
projects.
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8.5.2 One particular suggestion is that a rolling or revolving infrastructure fund might be set
up on a lending basis, with funds sourced on favourable rates upfront from public
sector sources and a critical site selection and candidate-testing undertaken to assess
appropriate cases for investment of capital. This capital might be sourced through
public sector devices and loaned in on the basis of a “pay as you sell” approach.
9. SUMMARY
9.1 This concludes the findings and recommendations in relation to the secondment work
undertaken for Scottish Government through late 2009 to mid 2010.
9.2 There is no doubt that, along with the rest of the UK, Scotland finds itself in a
lengthening period of recession in the commercial and residential/mixed use property
market. There are severe concerns throughout all the different umbrella organisations
across the private sector industry in Scotland and there is a continued call for public
policy innovations, proposals and new approaches which can help to deliver
development on the ground, in well selected prime locations which will contribute to
sustainable development and economic growth. Ultimately, there is an interesting
challenge to try and twin the definition of sustainable development and sustainable
economic growth.
9.3 Various proposals have been presented in this summary report and it is hoped that this
will be helpful to the Scottish Government in formulating a way forward.
10. RECOMMENDATIONS
10.1 Promoting Economic Growth
The Government should emphasise planning’s role in stimulating property and
development, and the resultant benefits of economic growth.
10.2 Investing in Skills
The Government could consider continued coaching of local authority staff on
development economics/development viability skills to help ensure developments are
delivered.
10.3 Assisting with Development Finance
The traditional business model of upfront funding for development through bank
borrowing is experiencing considerable difficulties and seems unlikely to return and
therefore, future sources of funding will need to be found. There may be a role for
Government in attracting equity investors.
10.4 Rolling Infrastructure Fund
A funding stream which could provide loans to developers, to enable the front funding
of essential infrastructure, would assist in delivering results on the ground. Such an
investment from Government would be repaid as development plots are sold, and
could attract co-investment from the private sector.
10.5 Planning Agreements
Greater simplicity and clarity would assist Section 75 planning agreements. This
might include providing more certainty over infrastructure costing and options to
enable payments to be phased in order to assist with developers’ cash flow.
10.6 National Infrastructure Investment Plan
An Infrastructure Plan could be published and reviewed annually to provide greater
certainty on Government investment.
10.7 Better place selection
Best practice guidance would assist in improving place selection. Ensuring that areas
selected for development or redevelopment have the potential to be developed.
10.8 Central Infrastructure Team
A central team could be formed to assist others with improving selection of places to
develop. The team could: Play a role co-ordinating activity; Assist others in assessing
the viability of potential sites; and ensure the right development occurs in the right
place, with good economic outcomes.
10.9 Masterplanning
Further work could be undertaken on developing a methodology to ensure masterplans
and business plans are developed in tandem. This type of development appraisal
would assist in identifying viability issues early on, thus reducing the potential for
sites stalling.
10.10 Planning Delivering Developments
“Development delivery” should be considered as a third line of planning
modernisation in Scotland.
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BACKGROUND AND INFORMATION SOURCES
ANNEX A – Summary of Economic Recovery Summit
ANNEX B – Summary of Planning and Economic Development workshop
ANNEX C – Methodology - Details of Engagement
ANNEX D – A Step by step approach to interrogate masterplans/business plans
GLOSSARY OF TERMS
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ANNEX A
PLANNING AND ECONOMIC RECOVERY SUMMIT, 15 JUNE 2010
Focus of Event
The Scottish Government’s Economic Recovery Plan, published in March 2010, identified
planning as a key contributor to accelerating the economic recovery in Scotland. A
commitment in the plan was to hold a Planning and Economic Recovery Summit focusing on
the priority areas where we need to direct our collective efforts to bring about greater
improvements to stimulate economic growth, and provide an opportunity to discuss the long
term agenda for planning and how we can further drive performance to deliver results.
This was the first meeting of its kind, bringing together representatives from government,
business, agencies and local authorities to focus on the importance of aligning efforts to
accelerate the economic recovery.
Discussion points
The summit then discussed the following key points:
• Recognising the key link between planning and economic recovery and that
planning reform had made significant inroads in terms of culture but that there was
still work to be done to realise the potential contribution of planning.
• The new financial context means different development types, scale and pace and
a different ability to fund large scale, up-front infrastructure. This will be the norm for
many years to come and improved co-ordination of all involved will be required to
tackle such challenges, including looking at priorities for Scotland in terms of
competiveness and new methods of funding.
• The need to work together is more important than ever and collaborative
approaches to problem solving can be successful involving all parts of authorities,
agencies, developers and importantly the local community. It was stressed that both
local authorities and developers want to see development happen and that it was
important to understand and tackle blockages where these occur to allow this to
happen.
• The importance and challenges of resourcing planning effectively particularly as
the economy emerges from recession, including ensuring planning schools are able to
produce a supply of new graduates with the right skills.
• By the nature of the service people will on occasion have complaints about
planning decisions. There was a recognition this is sometimes inevitable as hard
decisions often have to be made but it is not acceptable where complaints relate to
poor processes holding up decisions.
Summing up and next steps
The discussion was then concluded by highlighting that there had been good progress but that
further sustained effort was required from all involved in planning and development to ensure
planning fully contributes to economic recovery and sustainable growth. The four key points
which will be taken forward by Scottish Government and public and private sector partners.
• Further work should be undertaken in relation to Section 75 agreements ,
strengthening their effectiveness to help facilitate development in the new economic
context.
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• The importance of moving to a collaborative approach to planning rather
than a series of sequential stages. He was supportive of the changes that agencies had
made to their engagement on planning issues and he also indicated that with fewer
applications there was an opportunity to get things right with all parties fully engaged.
• The importance of the link between resources, fees and performance .
Previous ideas that unless you spend more money it won’t get better have changed.
Do more for less has to be the new approach.
• Culture change remains a fundamental issue with all having a role in achieving
this and ensuring planning is fundamentally linked to economic development, in
particular he highlighted a role for new planners coming through the planning schools
bringing new energy to the service.
Finally it was agreed that there would be a further event in 12 months to review
progress and achievements.
Note: This summary paper has been prepared by the Scottish Government and does not
necessarily represent the views of individual attendees at the Summit.
Organisations Represented
COSLA
Society of Local Authority Chief Executives
Heads of Planning Scotland
Scottish Enterprise
GVA
Scottish Environment Protection Agency
Scottish Natural Heritage
Scottish Council for Development & Industry
Homes for Scotland
Scottish Water
Institute of Directors
Scottish Local Authority Economic
Development Group
Confederation of British Industry Scotland
Scottish Property Federation
Highlands and Islands Enterprise
Scottish Government’s Regulatory Review
Group
Scottish Building Federation
Scottish Retail Consortium
Scottish Government
Historic Scotland
Transport Scotland
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ANNEX B
SCOTTISH GOVERNMENT AND SCOTTISH PROPERTY FEDERATION
BREAKFAST MEETING
Date: 1st October 2010
Chaired by: Deputy Director, Directorate for the Built Environment,
Scottish Government
The purpose of the meeting was to examine key actions that could be taken to ensure planning
plays a full role in economic recovery. The meeting built on the discussions held at the
Planning and Economic Recovery Summit in June 2010 with John Swinney MSP, Cabinet
Secretary for Finance and Sustainable Growth and Stewart Stevenson MSP, Minister for
Transport, Infrastructure and Climate Change
SUMMARY OF DISCUSSION
The meeting then discussed the following key points:
• How to give greater emphasis to the importance of economic development in the
planning system, including the need to ensure that the message that Scotland is “open
for business” is communicated effectively at all levels. There were a range of views
as to the benefits of a statutory basis for economic development.
• The good practice that already exists across Scotland and in particular the
approaches taken by Glasgow who actively meet with developers/investors to discuss
what opportunities exist in Glasgow; Scottish Borders who have dedicated business
officers and Local Economic Development Forums. The pre-application system of
Highland Council was also discussed as a positive approach
• The meeting recognised that small businesses will be key to the economic
recovery and will increasingly make up a large percentage of applications and that
there should be consideration as to how the planning system can support small
businesses.
• Ensuring planners were skilled in economic development . There was also
discussion around how the SG can assist, in addition to the work that has been carried
out on the skills agenda in relation to planning reform, working on aspects such as
development economics and viability.
• The processing of applications . The meeting discussed the need to be more
proportionate in the information which is submitted and requested during the planning
process. It was suggested that it could be beneficial for developers to share reports
especially when they cover the same area and there was sometimes a need for better
co-ordination between agencies and local authorities. It was suggested that it would
be beneficial for developers to have a single point of contact throughout the planning
process to ensure consistency of approach.
• There was a discussion on what actions the private sector could take to contribute to a
more efficient and effective process. There was a discussion about the quality of
applications that are submitted and the need to ensure that all the information that
is required to validate an application is submitted and in some cases applications
which have little chance of success, for instance they do not accord with the
development plan, are not submitted. The new system for development plans will
• Infrastructure is still a key issue. The group recognised that funding to provide
infrastructure that is essential for developments to proceed is difficult to obtain and
there is a need to continue to investigate new funding mechanisms. It was also
suggested that standards would need to be re-assessed. However, the needs and
expectations of communities are key and there was a question whether lower standards
would be accepted by them, particularly as they may be resistant to development
generally.
SUMMING UP
The discussion was concluded by reflecting on the key areas to be taken forward by both
public and private sector partners.
• Maintain progress and momentum on the work that is being taken forward by the
Development and Infrastructure Partners’ Group.
• Scottish Government to discuss with public sector colleagues the merits of a Statutory
Duty for Economic Development. Regardless of this ensure Economic Development
is given prominence in any publications.
• Scottish Government to publish their response to the Development Audit work carried
out by GVA and publish the work they produced on Development Delivery/Viability.
• Scottish Government to explore whether there is potential to offer additional training
on development viability and development finance to Planners (with possible
involvement of SPF members) and a session for/on small businesses about
development management including permitted development rights
• The Scottish Property Federation and local authorities to explore opportunities of
working together to improve the quality of applications which are submitted.
• COSLA to convene a further session with attendees and others involved in planning
process to discuss the issues raised further and in terms of practical solution. This
event would be programmed for early 2011.
Note: This summary paper has been prepared by the Scottish Government and does not
necessarily represent the views of individual attendees.
Organisations Represented
Scottish Property Federation
COSLA
Heads of Planning
Glasgow City council
Scottish Enterprise
Federation of Small Businesses
Confederation of Business and Industry
Society of Local Authority Economic Development Group
Scottish Government
30
31
ANNEX C
METHODOLOGY - DETAILS OF ENGAGEMENT
Consultation
1. Nov 2009 – March 2010 – Face to face meetings with more than 40 individuals or
organisations involved in property, development and planning in both the private and
public sectors. Telephone interviews, email and correspondence contact with key players
in the market.
Reporting
2. November, December 2009 and May 2010 – Checkpoint meetings with representatives of
Scottish Property Federation and Homes for Scotland to conduct professional peer review
3. December 2009, March, May and June 2010 – Scottish Government Development and
Infrastructure Partners’ Group meetings chaired by the Deputy Director, Directorate for
the Built Environment.
Gathering Good Practice
4. November 2009 – attendance at the panel group meeting of the Aberdeenshire Future
Infrastructure Requirements for Services (FIRS) team.
Workshops
5. March 2010 Developer Agreements Good Practice Workshop, held in Stirling, on the
details of “Circular 1/2010: Planning Agreements” and the key factors affecting
developer contributions and Section 75 Agreements.
6. May 2010 – case comparison workshop on methods of development finance with English
case studies being presented and discussed with Scottish practitioners.
7. May 2010 – workshop with Scottish and English practitioners to share best practice in
development and infrastructure delivery.
Strategic Events
8. January 2010 – attendance at the 5 Administrations Meeting with national heads of
planning from the UK and Ireland.
9. January 2010 – meeting with experts on finance and funding within the Scottish
Government.
10. May 2010 – meeting with the SSCI team.
11. May 2010 – presentation to an SSCI learning event at Raploch Urban Regeneration
Company.
12. June 2010 – the Planning and Economic Recovery Summit – presentation to John
Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth and Stewart
Stevenson MSP, then Minister for Transport, Infrastructure and Climate Change.
13. July 2010 – Report back to the Cabinet Secretary for Finance and Sustainable Growth.
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ANNEX D
STEP BY STEP APPROACH TO INTERROGATE MASTERPLANS/
BUSINESS PLANS
33
GLOSSARY OF TERMS
Section 75 – planning agreements made under Section 75 of the Town and Country
Planning (Scotland) Act 1997 are the most common planning mechanism by which
developers contribute to infrastructure
Prudential Borrowing – Lending obtained from the Public Works Loan Board which is
secured against future revenue income.
Tax Increment Finance (TIF) – Is a means of funding investment in infrastructure.
TIF uses future additional public sector revenue gains from taxes to finance borrowing.
National Housing Trust (NHT) – The National Housing Trust initiative is a joint
partnership scheme between the local authority, developers, the Scottish Futures Trust and the
Scottish Government which will stimulate the development of newly-built houses, with
council loans for the scheme underwritten by the Scottish Government.
JESSICA (Joint European Support for Sustainable Investment in City
Areas) – A new £50 million fund to support urban regeneration in Scotland. The JESSICA
fund brings together Scottish Government resources with funding from the European
Commission's European Regional Development Fund (ERDF) to support regeneration and
economic development in Scotland's most deprived urban areas.
ATLAS (Advisory Team for Large Applications – A team which guides
stakeholders through the town planning process (England and Wales) in relation to large,
complex or strategic development projects.
Asset Backed Vehicles – Proposal where the local authority contributes land as well as
capital funding into a joint venture with a developer who makes up the funding shortfall.
Profit from any sale or rent is then shared between local authority and developer.
Scottish Sustainable Communities Initiative – Government programme launched
in 2008 to address the needs of those on lower incomes and help to create sustainable, mixed
communities across the country.
Design Charrette – A 'Charrette' is an interactive and intensive multi-disciplinary event
that engages local people with experts to develop designs for their community. It is a hands-
on approach where ideas are translated into plans and drawings. Charrettes involve a series of
interactive design workshops held over a number of days where the public, local design
professionals and project consultants work together on developing a detailed masterplan for a
site.
National Planning Framework (NPF) – The NPF guides Scotland's spatial
development to 2030, setting out strategic development priorities to support the Scottish
Government's central purpose - promoting sustainable economic growth.
Strategic Development Plans (SDP) – The 4 largest city regions in Scotland
(Edinburgh, Dundee, Glasgow and Aberdeen), are required to produce Strategic Development
Plans which addresses land use issues that cross local authority boundaries or involve
strategic infrastructure.
34
Local Development Plans (LDP) – Development plans guide the future use of land
and the appearance of cities, towns and rural areas. They indicate where development,
including regeneration, should happen and where it should not.
Strategic Transport Projects Review (STPR) – STPR sets the Scottish
Government's 29 transport investment priorities for the next 20 years, identifying those
recommendations that most effectively contribute towards the Government's purpose of
increasing sustainable economic growth.
Future Infrastructure for Required Services (FIRS) – The FIRS approach is
founded on the principle of early dialogue with the development industry. For major planning
applications the applicants are encouraged to hold informal early discussions with as many
consultees as possible at one meeting to inform the development industry of the infrastructure
requirements and how they will be funded.
National Renewables Infrastructure Plan (NRIP) – The plan supports the
development of a globally competitive offshore renewables industry based in Scotland. The
plan outlines the investment required to deliver Scotland's ambition to become a premier
location for the manufacturing and deployment of wind turbine and marine energy devices.
National Renewables Infrastructure Fund (NRIF) – The National Renewables
Infrastructure Fund (N-RIF) has been established to support the development of port and
near-port manufacturing locations for offshore wind turbines and related developments
including test and demonstration activity, with the overall aim of stimulating an offshore wind
supply chain in Scotland and will follow the clear approach set out in National Renewables
Infrastructure Plan (NRIP).
Economic Recovery Plan (ERP) – The ERP sets the Scottish Government’s priorities
to accelerate the economic recovery in Scotland and increase sustainable economic growth.
This includes development of a low carbon economy, supporting internationalisation, further
improvements to the planning system, managing labour market pressures, a renewed focus on
commercialisation, and improved access to finance.
Community Infrastructure Levy (CIL) – It allows local authorities in England and
Wales to raise funds from developers undertaking new building projects in their area. The
money can be used to fund a wide range of infrastructure that is needed as a result of
development. This includes transport schemes, flood defences, schools, hospitals and other
health and social care facilities, parks, green spaces and leisure centres.
Homes for Scotland (HfS) – HfS represents the country’s private home building
industry
Scottish Property Federation (SPF) – SPF is a membership organisation devoted to
representing the interests of all those involved in commercial property ownership and investment in Scotland.
Scottish Building Federation (SBF) – SBF is the lead voice of the Scottish
construction industry,
35
Scottish Futures Trust (SFT) – SFT is the independent company responsible for
improving value for money in public infrastructure investment projects such as schools,
transport, health and regeneration.
Scottish Enterprise (SE) – SE is Scotland's main economic, enterprise, innovation and
investment agency which helps ambitious and innovative businesses grow and become more
successful. They also work with public and private sector partners to develop the business
environment in Scotland.
Scottish Development International (SDI) – SDI offers help and advice to
companies looking for the ideal investment location for their business and provides a range of
services for businesses thinking about entering the overseas market.
© Crown copyright 2010
ISBN 978-0-7559-9898-2 (web only)
APS Group ScotlandDPPAS11066 (12/10)
w w w . s c o t l a n d . g o v . u k36
