Should the government do more to encourage redevelopment?

The government has ambitious targets for house building, and aims to build 60 percent of these on brownfield land. When this target was set, it turned out that it was already being met which hardly acted as an incentive. So, by encouraging brownfield development during the downturn, could the government have a double success in rescuing the environmental and civil engineering industries, and also assisting in removing the legacy of brownfield sites in the UK?

According to the National Land Use Database for England & Wales, and the Scottish Vacant and Derelict Land Survey, there are in excess of 70,000 hectares of previously developed land in the UK which are currently undeveloped. This is equivalent to a block of land over 25km x 25km, a truly staggering quantity. Why are we continuing to build 40 percent of our domestic properties on greenfield sites, when this huge tranche of brownfield land is available? That 40 percent represent thousands of homes on greenfield land.

Most urban areas have a mixture of long-term derelict and vacant sites, and low quality end of life buildings, which are ripe for redevelopment. In addition to the downturn in the construction industry, there is a ready supply of development land that investors could be doing more with than they currently are. So what is the government doing to encourage such investment?

Financial assistance
Until last year, there were two main forms of government financial assistance available to developers operating within the UK: Landfill Tax Exemption and the Land Remediation Relief. The first of these allowed developers to avoid paying landfill tax for the disposal of soils from historically contaminated sites. When the exemption was removed, the tax sat at £38 per tonne, a considerable additional cost to developers.

Many in the environmental industry who were promoting alternative treatment technology for contaminated soil, were delighted with the removal of the exemption. Others were less enthusiastic as many historically contaminated sites contained some quantity of highly contaminated soil, which could not be treated by modern technologies.

Landfill was often the best option for these materials. Accordingly, the removal of the tax exemption has had a significant impact on the costs of many brownfield redevelopment projects. Currently the tax is sitting at £42 per tonne, which means that to dispose of 5,000 cubic metres of contaminated soil, the developer has to find £400,000 or more for the tax.

When the exemption was removed, the Treasury pledged that it would be a revenue neutral policy, as they intended to hand back to developers the money that was taken away, by its removal, in the form of increased Land Remediation Relief.

This has been the second main encouragement to brownfield developers put in place by the Treasury. It offers relief from corporation tax, providing a deduction of up to 150 percent for qualifying expenditure incurred by companies cleaning up contaminated land.

The Treasury consider that qualifying expenditure includes remedial works to land or buildings, where a substance is present that is causing or could cause harm or otherwise is likely to cause pollution in the groundwater, streams, rivers or coastal waters.

From April 1, 2009 Land Remediation Relief has been extended to cover land derelict since April 1,1998 and qualifying expenditure now also includes removing underground structures from previous sites occupations. The latter includes post-tensioned concrete, building foundations and machinery bases, other below ground reinforced concrete and buried redundant services. Finally, the Treasury have also included the removal of Japanese Knotweed.
While these new provisions might sound significant, the EIC’s Contaminated Land Working Group believes that this has only applied to a very small number of additional sites. Indeed our 140 member companies have only been able to come up with one additional site where Land Remediation Relief has been claimed thanks to the new provisions. The government’s claim that the removal of the landfill tax should be a revenue neutral concept does not appear to be the case.

Economic stimulus
The EIC considers that encouraging brownfield redevelopment would provide further stimulus to the economy. Giving grants for more housing may not be the best use of tax payer’s money, as planning can take years meaning that any investment might take a long time to end up being used on site. Consequently the house building industry does not benefit straight away.

The same is not true of investment in brownfield redevelopment. Planning permission is often not required and a remediation plan can be negotiated with the Local Authority. The relevant Waste Licensing Permits can be organised to allow onsite treatment or reuse. In this way, very substantial regeneration projects can be commenced quickly allowing civil engineering contractors to bolster their workload and create employment. A legacy of remediated sites will be created, ready for redevelopment when the property market finally improves. What better way to both stimulate the economy and improve the environment?

Creating a spread of decontaminated sites across the country will also mean that when the property market improves, brownfield sites will be more attractive to developers. Perhaps the government would be able to set a brownfield building target of 80 percent rather that the easily achieved 60 percent. New areas built on the larger brownfield sites could be named ‘browntowns’, perhaps preferable to ecotowns and a good legacy for our beleaguered prime minister.
Ideas for additional expenditure within Land Remediation Relief could include transport infrastructure, improvements to water supply and drainage, earthworks, archaeological legacy issues, habitat improvement or even for the landfilling of truly untreatable contaminated soils. Perhaps the government could even consider increasing the percentage of remediation relief claimable

There are other areas where the government could provide further help and advice that would simplify the process of brownfield remediation. The ongoing uncertainty surrounding Part IIA of the Environmental Protection Act and the government’s associated guidance, which includes the CLEA software is critical. Trivial levels of contamination are often remediated at vast cost, and other sites, where the Local Authority should be enforcing remediation, have been ignored as a result of this confusion. If the Government are serious about stimulating brownfield redevelopment and protecting the environment, then far more resources must be invested in this area.

To summarise, despite the government’s stated intention of encouraging brownfield redevelopment, we have a situation where the regulations and guidance are confusing and contradictory, the tax breaks to developers have been reduced rather than increased, and developers are finding it increasingly easy to gain planning permission for relatively low risk developments on greenfield sites. This is clearly illogical and the EIC will continue to lobby to reverse this situation and draw MPs’ and government ministers’ attentions to these serious issues. Perhaps the solution would be to put tax on greenfield site development, with all the money raised being spent on brownfield grants and incentives.

Contact information:
Alistair Kean is Environmental Director of IKM Consulting Ltd based in Grangemouth and is also Chair of the EIC’s
Contaminated Land Working Group
Alistair@ikmconsulting.co.uk, 01324 878822