Infrastructure levy for Scotland: discussion paper

This paper is to support discussion on options for an Infrastructure Levy for Scotland, to help fund infrastructure that supports wider growth.

7 Core criteria for an Infrastructure Levy for Scotland

Having considered the research and evidence summarised in section 3, we propose some core criteria for the ILS.

We recognise that an infrastructure levy will not raise all the funding needed for infrastructure related to development in an area; in fact it may raise a relatively small amount. Research in 2017 suggested that it might raise £75m per year, compared with the sum of £200m for infrastructure agreed through planning obligations in 2019/20. However, we believe a levy can still make a helpful contribution, specifically to support the provision of infrastructure required as a result of cumulative development or to facilitate planned growth in an area.

In light of the research on “The value, incidence and impact of developer contributions in Scotland”, we propose that the ILS should operate alongside s75 planning obligations and other forms of developer contributions rather than replacing them. Developer contributions should continue to be used to deliver infrastructure which is required to mitigate the impacts of an individual development, and affordable housing. The levy will contribute to wider infrastructure needs that cannot readily be funded through planning obligations, including regional projects. The levy will not replace national investment in major infrastructure projects or planned local authority investment, but will augment the funds available.

Many of the issues raised in the following sections require a balance to be struck between different options. Taking account of the previous work undertaken, in designing the Levy we want to ensure as far as possible that it is:

  • Simple for planning authorities to implement – we are conscious of the resourcing pressures on planning authorities;
  • Predictable and straightforward for developers to calculate – the intention is that the Levy should be reflected in land prices, and this can only be the case if developers are able to estimate the charge in advance;
  • Set in a way that takes account of viability, considering other demands and costs on a development;
  • Fair and proportional in how contributions are required from developments of different sizes and types, including allowing flexibility and exemptions where appropriate;
  • Complementary to existing mechanisms – serving a distinct purpose from s75 planning obligations; funding infrastructure for which such obligations are less suitable or where it is appropriate to gather contributions across a wider area; avoiding double-dipping.

These aims also align with the principles for tax policy making set out in the Framework for Tax published by the Scottish Government in 2021, of:

  • Proportionality
  • Efficiency
  • Certainty
  • Convenience
  • Engagement, and
  • Effectiveness

We are conscious that the Scottish Government is also considering the creation of a Scottish Building Safety Levy, following agreement from the UK Government to devolve the necessary powers to the Scottish Parliament. This means there are an increasing number of demands on residual land values, which could impact on the viability of some developments. The setting of the ILS will need to take account of this.

We also recognise that particular provision may need to be made in relation to development within National Parks, to ensure that levy setting, collection and expenditure is co-ordinated and agreed between the relevant local authorities and the National Park Authority, taking account of the Park’s Local Development Plan.



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