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Money troubles: Another NHS infrastructure funding case reaches the High Court

Next week, the High Court will hear its second judicial review challenge to a planning permission brought by an NHS Trust in under a year. 

Almost exactly five months after Mr Justice Holgate gave judgment in The University Hospitals of Leicester NHS Trust, R (On the Application Of) v Harborough District Council, the Royal Courts of Justice will hear another, strikingly similar, case.

According to reports in Planning Resource, on 18 and 19 July, the Courts will hear a challenge brought by Worcestershire Acute Hospitals NHS Trust against Malvern Hills District Council's decision to grant planning permission for a major urban extension in South Worcestershire.

The facts of the claim appear to be remarkably similar to those of the Harborough case.  An NHS Acute Trust is seeking large financial contributions (£1.8 million) from a developer via a s.106 Agreement to fund the provision of services to new residents in the first year of their occupying a scheme. The Local Planning Authority refuses the request and subsequently finds itself defending a judicial review challenge brought by the NHS.

The Council's rationale for excluding the contribution can be read in full in the relevant committee report*. In summary however:

  • Despite numerous discussions with the Trust, the Council had still not been able to establish that the funding gap actually existed, and harboured doubts about whether the requested contribution would be Reg.122 compliant; but
  • In any event, the viability case supporting the development had established that it was not sufficiently viable to support all of the infrastructure requests that had been sought. Granting the request would require  reopening the extensive viability negotiations, which had now concluded.
  • The proposed s.106 Agreement included an obligation to provide (if required) a serviced plot for new a GP Surgery and a significant financial contribution to the expansion of existing GP practices serving the development; and 
  • Having considered all of the circumstances, the Council thought it more appropriate to prioritise funding highways, education and the provision of affordable housing over meeting the Trust's request.

Given the striking similarities between the cases, and the decision that Mr Justice Holgate reached only five months ago, it seems fairly safe to assume that the Trust will be facing an uphill battle on this one. Particularly when you recall the following paragraphs of the Harborough Decision:

 "147. But what if in a future case a NHS trust could demonstrate that it would suffer a funding gap in relation to its treatment of new residents of a development during the first year of occupation? On one level it would be a matter for the judgment of the local planning authority as to whether the three tests in reg.122(2) of the CIL Regulations 2010 are satisfied and whether it would be appropriate to require a financial contribution to be made, after taking into account other requirements and any impact on the viability of the scheme. But all that assumes that there is no legal (or other) objection to a contribution of the kind sought in the present case. The argument in this case does not enable the court to decide that issue as a legal question. This judgment should not be read as deciding that there would be no legal objection. 


150. It seems to me that two points follow. First, even if it could be shown in a particular area that there is a funding gap to deal with “new” residents, HDC was entitled to raise the possibility that this is a systemic problem in the way national funding is distributed. Although the Trust criticised HDC for taking it upon themselves to raise this point, it strikes me as being a perceptive contribution to a proper understanding of the issue. If there really is a systemic problem, this may raise the question in other cases whether it is appropriate to require individual development sites across the country to make s.106 contributions to address that problem. However, for the purposes of dealing with the present challenge, HDC’s decision rested on the Trust’s failure to show that there was a funding gap in this case, not any systemic issue. 

151. Second, whether there is a lack of funding for a Trust to cope with the effects of a substantial new development is likely to depend not on those effects in isolation, but on wider issues raised by the population projections used as one of the inputs to determine funding for CCGs. The interesting arguments from counsel in this case suggest that these issues merit further consideration as a matter of policy outside the courts and even outside the planning appeal system"

Regardless of the outcome,  however, this second judgment will certainly be a fascinating read.

The cases also raise very important questions over the role that developer contributions should play in funding the needs of their residents. 

It is generally accepted that new developments should contribute to the costs of the new infrastructure required to support them. It is also an important, and long-standing, principle that developers should not be able to 'buy' their planning permissions.

The need to balance these competing interests is what led the Government to introduce Reg. 122(2) of the CIL Regulations, which states that:

"A planning obligation may only constitute a reason for granting planning permission for the development if the obligation is—

(a) necessary to make the development acceptable in planning terms;

(b) directly related to the development; and

(c) fairly and reasonably related in scale and kind to the development."

As Mr Justice Holgate noted in the Harborough case, whether any particular obligation meets these tests is often a matter of planning judgment for a local planning authority. In this instance, the council was not convinced that they were met.

It is also noteworthy that Malvern Hills District Council is a CIL Charging Authority. The Trust was not able to bid for CIL funding as NHS services do not meet the statutory definition of Infrastructure on which CIL can be spent (set out in s.216(2) Planning Act 2008), although medical facilities do fall within it.

Schedule 12 of the Levelling-Up & Regeneration Bill, which introduces the proposed new Infrastructure Levy, also excludes NHS services from its definition of infrastructure. Although, again, medical facilities are included. 

As such, it seems reasonably clear that the Government does not consider the provision of NHS services to constitute infrastructure. Particularly not infrastructure of a type that is suitable to be funded or subsidised by new developments through either CIL or its proposed replacement.

Despite this legal framework, we are now in a position where not only have two NHS Hospital Trusts actually sued their local planning authorities over failing to support requests for s.106 contributions; but one now appears to be claiming that the request should be prioritised over funding for affordable housing or education.

Unfortunately, these types of arguments over how local planning authorities should prioritise spending developer contributions, and what it is appropriate to spend them on, are becoming more frequent. 

I have previously written about the difficulties some County Councils are having accessing CIL funds. These issues are appear to be largely system driven - they seem to be a side affect of how the Community Infrastructure Levy has been designed.

The disputes with the NHS, however, are not caused by this same glitch in the system. Instead, they go straight to the questions of:

  • Where is the line between public sector services/ public infrastructure that it is appropriate for developments to subsidise, and those that should be entirely funded by other means; and
  • How an LPA should exercise its judgment over prioritising these requests - particularly on schemes with viability issues. What trade-offs are they entitled to make?

Hopefully a second high court judgment will bring additional clarity to these, admittedly tricky and sensitive, issues. Otherwise, given the well documented pressures on public services at present, I get the feeling that these two cases may just be the tip of a depressingly large iceberg.

*dated 3 November 2021, which can be accessed here 

A hospital trust is taking three local authorities to the High Court over a claim that following the granting of permission for a 2,200-home scheme it should have received £1.8 million in planning gain contributions for healthcare services that instead went towards affordable housing.

The case will focus on NHS concerns that increased healthcare costs are being ignored by planners considering large housing applications.

Worcestershire Acute Hospitals NHS Trust argues that developer contributions towards healthcare service provision should have been insisted upon.”