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Battersea's £35m excess levy payments revealed

Battersea Power Station Development Company lobbied central government to change the Community Infrastructure Levy after racking up £35m in extra costs, Construction News can reveal. 

Documents released to CN by Wandsworth Council under the Freedom of Information Act reveal that the developer’s former chief executive Rob Tincknell wrote to the Department for Communities and Local Government (DCLG) in March 2017 complaining about the charge.

Writing to DCLG director of planning Simon Gallagher in a letter dated 3 March 2017, Mr Tincknell described the CIL regulations as “frankly not fit for purpose” and suggested Battersea had been “double-charged” after the developer racked up millions in extra costs.

The DCLG was renamed the Ministry for Housing, Communities and Local Government in January 2018.

In his letter, Mr Tincknell said the firm had spent £35m on “erroneous CIL payments” since the project was awarded planning permission.

The payment liabilities were uncovered by Wandsworth Council’s planning team.

The vast Battersea project is split into seven phases, with amendments to each of the phases submitted under section 73 of the Planning Act, 1990. Each time an s73 application is made, a CIL commitment is calculated.

In the letter, Mr Tincknell stated that changes made via an s73 amendment application were originally proposed as the best way to manage the scheme’s exposure to CIL costs.

However, he said an s73 application to swap office space allocated in phase three with residential space in phase four had resulted in its liability increasing by £14m, as office space is allocated at a lower CIL rate, but previous CIL commitment for the residential element had already been calculated and could not be redeemed.

Mr Tincknell said that, although a “work-around” was found to alleviate this “flaw” by subtracting costs from the project’s £211m section 106 commitment, “we are still in the position of a double-charge being levied to the tune of several million pounds”.

He wrote that the project’s Malaysian backers had “rescued Battersea Power Station from failure and decay”, but were hampered by what he described as “poorly drafted legislation” which meant the developer could not count any negative CIL liabilities in its costs.

His letter continued: “An initial estimate is that the shareholders have spent up to £500,000 on merely administering CIL, a cost which has only become apparent after the site purchase.

“All parties involved in trying to resolve these issues (Wandsworth, lawyers, Counsel) have acknowledged that, whilst it was clearly not the intention, the wording nonetheless is clear that negative liabilities cannot be accounted for and indexation is not like-for-like in the Reg 128A comparison exercise.

“That is, that the wording is wrong, but it’s the law. This cannot be right.”

Mr Tincknell suggested this “flaw” would affect all developments using s73 applications and present “a serious obstacle to the government and City Hall reaching its housing targets”. He went on to offer assistance to the government in changing the regulations.

He noted: “This flaw only gets worse as time passes and further section 73s are made – a current day estimate is that our most recent permission adds £35m of erroneous CIL to the project.

“This flaw was discovered by Wandsworth officers during drafting of the balancing solution and so further mechanisms were introduced into the s106 to net the erroneous indexation off the £211.6m s106 contributions.

“There are now an additional eight pages of mostly algebra in the s106 to try to overcome these two flaws in the CIL regulations. However, this error affects all section 73 permissions, and most will have no ability to offset this additional indexation.”

Mr Tincknell went on to say: “I would therefore ask DCLG to address these issues as a matter of urgency and issue guidance and/or corrections to the regulations, it is imperative and need not be contingent on the wider CIL review.

“My team now have invaluable experience in applying the regulations on a large complex development and would be happy to assist in any way they can.”

It is not known if the DCLG’s Mr Gallagher responded to Battersea’s complaint.

However, in a separate letter to Wandsworth Council, Battersea outlined its frustration with the entire CIL process, which had seen only one of the seven parts of the project’s CIL levy commitment validated.

In the letter developer stated that it had “been working collectively for more than three years and have so far only achieved the validate the CIL liability of one masterplan permission (which is now potentially being questioned)”.

In added: “This means that there is an estimated liability of upwards of £55m on which we have no certainty and cannot currently budget for with any certainty.”

The developer blamed Wandsworth Council’s validation process for the costs of administering the CIL.

However, the project’s head of planning added: “I would hasten to add that the note is not intended as any criticism of officers; we work very closely and collaboratively in order to find solutions for our project within the law.

“There are two main problems being the sheer complexity of CIL on a complex development and the Council’s strict validation process.”

Battersea Power Station Development Company declined to comment. Wandsworth Council has been contacted for comment. The Ministry for Housing, Communities and Local Government has been contacted for comment. 

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