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Capturing funds for the NHS estate

Aahsan Rahman, department head of town planning at NHS Property Services (NHSPS), looks at an alternative and perhaps underutilised funding source for the NHS: the town planning system.

Developer contributions and the healthcare system

At a time when expectations of healthcare systems are rising, we face the central question: how should our healthcare be funded? The town planning system can be used to support improved patient care and help provide new health infrastructure where required. Developer contributions, obtained through the planning system, are an important element in meeting the cost of new or improved infrastructure as a result of new development in an area.

Contributions from development towards local infrastructure are collected primarily through two mechanisms: Section 106 (s106) planning obligations and the Community Infrastructure Levy (CIL). They are two different processes, but work in parallel. In 2016-17, an estimated £6bn was committed through s106 planning obligations and CIL. However, in 2016-17, only £146m was captured for ‘community uses’ (of which health forms just one part), whilst £241m was captured for education alone. These figures show that there is an opportunity for the healthcare system to increase its activity in this area, and more effectively capture contributions towards health infrastructure in a more consistent and coordinated manner.

How do developer contributions work?

S106 planning obligations are legal agreements made between local planning authorities (LPA) and developers. They are designed to address issues that new developments may place on local infrastructure. The agreement will vary depending on the nature of a development, but will typically address issues such as affordable housing, highways, education, and health.

S106 agreements are negotiated between developers and local authorities during the consideration of a planning application. They can take a number of forms, including contributions in kind (land/floor space/buildings) as well as financial contributions. In most cases, s106 funds need to be spent on a specified task or project and the money should be used within a specified deadline.

All section s106 agreements are subject to statutory tests to ensure they are necessary, proportionate, and directly related to the development. It is therefore important to ensure that requests from the healthcare system are robustly evidenced and justified.

As a result of the introduction of the CIL, there is currently a ‘pooling restriction’ on s106 planning obligations – which means that no more than five pooled contributions can be used towards any single piece of infrastructure. This, and other restrictions, need to be considered when developing a strategy for securing contributions in each area.

The CIL is a charge that LPAs can set on new developments in their area in order to help fund the infrastructure required to serve the development. If implemented, CIL is non-negotiable and charged at a pound per square metre rate, which varies based on the nature of the proposed development and its location. The money should be used to support development by funding infrastructure that the council, local community, and neighbourhoods have identified. CIL can be used to fund a wide range of infrastructure, including transport, flood defences, schools, hospitals, and other health and social care facilities.

CIL funding is collected by LPAs on all CIL liable developments where the council has established a CIL charging process. The CIL is a charge imposed on some new developments (most often housing) and is collected and pooled by the LPA. The LPA has discretion to spend the CIL funding on infrastructure according to the priorities that it identifies within its list of local infrastructure projects (known as a Regulation 123 list). CIL charges and items on a CIL list need to be justified by local evidence, which could include the identification of specific healthcare infrastructure needs resulting from planned growth, such as GP surgeries or hospitals. The list could also include contributions to wider infrastructure that could improve health or reduce health inequalities, such as green infrastructure or cycle paths.

It should be noted that CIL has not replaced s106 agreements, but that the introduction of CIL has resulted in a tightening up of the s106 tests. CIL has been developed to address the broader impacts of development. Currently, there should be no circumstances where a developer is paying CIL and s106 for the same piece of infrastructure in relation to the same development.

To summarise, these mechanisms provide an opportunity for the healthcare system to secure additional funding (or land/buildings) to support services as a result of planned housing growth. S106 planning obligations can only be used to mitigate against site-specific impacts, for example more people using local healthcare facilities. CIL on the other hand, when implemented, is intended to capture the cumulative impacts of development over an area.

So how can you capture these funds?

In order to be best positioned to capture funding, there is a need to understand how the healthcare system can interact with s106 and CIL procedures, and how support can be offered to existing practitioners. There are several areas where the NHS is currently involved in dealing with s106 and CIL matters, ranging from the receipt of funds or buildings through developer contributions, through to the payment of s106 and CIL on our own development projects.

The model pictured above identifies some of the actions that will be necessary to help establish a robust process which will help to maximise the ability of the NHS to successfully capture funding.

It is imperative that the NHS establishes robust and well-coordinated processes to negotiate and capture s106 and CIL funding from the town planning system. These will need to focus on both immediate opportunities and long-term strategic fund capture in growth areas across the country where there will be significant population increases linked to new housing. There will also be a need to actively engage with local planning authorities and to put forward a consistent NHS message when local planning authorities are establishing planning policies for an area.

In establishing these processes, it will also be important for the NHS to learn from external experiences of fund capture, particularly by infrastructure providers, and to also capitalise on the lessons learnt from instances where the NHS has already been successful.

The NHSPS town planning team is currently finalising a guidance note to help support NHS staff who are looking to capture s106 and CIL funds from the town planning system. Once this guidance note is circulated, the NHS will be one step closer to establishing more robust practices which can maximise the capture of much-needed s106 and CIL funds. This will help to support the delivery of much-needed NHS health infrastructure and services through funding from the town planning system.

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