Letter: My Further Answers to Section 106 Payment Concerns

Published on: 21 May, 2022
Updated on: 24 May, 2022

From: George Potter

Chair of GBC’s Corporate Standards and Governance Committee and borough councillor for Burpham

In response to: Concern About Section 106 Money is Misplaced and Alarmist

In response to my letter about Section 106 contributions, Dragon reader S Callanan asked a number of very good questions which I would like to respond to. To deal with each point in turn, my answers are as follows:

1) “Just £270,000” [unspent Section 106 contributions] may not be a large amount in terms of S106 money, but we live in a borough which is closing public toilets because we can’t afford to keep them open.

The reason a few, low-usage public toilets have closed is because of the ongoing annual running costs of keeping them open. S106 money, however, consists of one-off payments for specific, designated pieces of infrastructure. Even if the unspent S106 money wasn’t ring-fenced for specific purposes, it is not legally possible, or practically sustainable, to use one-off capital funds to pay for ongoing annual expenditure.

The only way to keep the closed public toilets open would have been to either make cuts elsewhere to other, more-essential public services, or to find new sources of income, which is rather difficult given that central government is limiting borough councils to below-inflation council tax rises at the same time as cutting funding for local government.

2) How “historic” are the CCTV schemes upon which the bulk of the £270,000 at risk of return is to be spent? What are the technical obstacles preventing installation?

Full details can be found by watching the webcast of, and reading the papers on, the Corporate Governance & Standards committee meeting of April 21 but there are three key CCTV schemes, worth a total of around £86,000 in unspent and at-risk S106 contributions; these schemes date back to 2006, 2011 and 2014 respectively.

My understanding of the problem is that in most of these cases: the planning permissions ring-fence the money for very specific locations, that police guidance on the use of CCTV contradicts what was envisaged by the planning permission, and that finding suitable physical locations and electricity supplies to install the CCTV is challenging because most of the suitable locations are private property.

Separately to CCTV, there is also a very large sum of £63,000 outstanding for “environmental policy and design” relating to the 2008 Boxgrove Gardens development, £16,700 outstanding for the same purpose from the The Quarry development of 2010, as well as £50,000 outstanding from the 2013 development “The Croft” in Ash for drainage studies and works. There is additionally £20,000 for “community works” from the 2013 Parsons Way development in Tongham, as well as £25,000 for “community infrastructure” in Walnut Tree close dating back to 2014.

All of the above are under the control of GBC and are notionally at-risk of having to be refunded if the developer asks for the money back, and what all of them have in common is that they date back to planning permissions from 2014 or earlier.

In recent years planners have been very careful with the wording of S106 contributions in order to avoid unrealistic deadlines, and to allow more flexibility with how the money can be spent, but prior to 2015 the wording created far more hostages to fortune when it came to the council’s ability to spend the money it received.

3) Of the £11.75 million unspent S106 money held by GBC and Surrey County Council, how much is held by GBC and how much of that figure is not on track to be spent on time?

£4.3 million of unspent money is held by GBC and £7.5 million is held by SCC and others (but of this figure only a vanishingly small proportion is held by the ‘others’ which the police and health bodies).

GBC has adopted a red, amber, green, blue system for ranking the contributions, with red meaning “at risk of refund”, amber meaning “180 days until at risk of refund”, green meaning “not at risk”, and blue meaning “cannot expire”.

Of the £4.3 million held by GBC just £270,000 (or 6 per cent) is rated red, and, according to the report seen by the CG & S Committee, zero unspent money is rated amber.

4) Could we have two or three helpful examples (of partial contributions which are waiting for a larger piece of infrastructure to come forwards) with figures, please?

Example 1: Part of Woodbridge Business Park from 2007. £125,220 has already been spent on various road and environmental improvements in the area. But there is £7,292 unspent and at risk of refund. This amount is not enough to pay for any specific piece of work (such as a new roundabout, or new pedestrian crossing, or pavement upgrade) so this money is having to wait for a suitable project to come along which it can be used as a contribution.

There is also a separate unspent amount of £337 which is leftover from the Woodbridge Hill street environment improvement project (which came in at £67,738) but this money does not have any deadline for being spent.

Example 2: The Croft in Ash from 2013. £55,933 has already been spent on play equipment for The Briars, but there is £50,157 unspent for drainage studies and works which is at risk of refund. £50,157 is a large amount of money, but is still not enough to pay for designing and implementing comprehensive drainage works to tackle the flooding issues in the overall local area.

5) Are these unspent S106 contributions [waiting to be spent in individual wards] in the “hundreds of thousands” of pounds included in, or additional to, the sums mentioned earlier?

These are included in the sums mentioned earlier. The appendix to the report received by the Corporate Governance & Standards committee lists all outstanding S106 contributions for every single ward. There is a total, across the entire borough, of £3.7 million which is planned to be spent but is not yet spent, and £430k which is unspent without any plan on how to spend it.

Surrey County Council, however, is still holding on to £7.2 million of S106 contributions which are unspent without any plan on how to spend them.

6) Wouldn’t it be easier (and more transparent and accountable) for GBC to publish an annual digest of S106 money so everyone could see what was coming in and going out, what it was being spent on and how much is left? If the sum left was broken down into years of origin we’d know how long the CCTV money remaining, for example, had been waiting to be used.

Yes, it would, which is why this is exactly what GBC is doing. A rolling update on S106 contributions will be included in the quarterly finance reports to the Corporate Governance & Standards committee, and there will also be an annual S106 report to the committee which will include all moneys received and spent in the previous year, as well as a ward-by-ward breakdown of unspent contributions. All of these documents are put into the public domain on the council’s website ahead of committee meetings.

At our last meeting committee members also suggested that the report should include a separate summary section of how much red, amber, green and blue money there was, as well as more detail on what the specific requirements were for spending each unspent contribution. I expect that these changes will be made in the next version of the report which we see.

I seem to recall that in 2019/20 GBC had to give back to the government just under £2,000,000 in right to buy receipts plus just under £400,000 in interest and that this was because the money hadn’t been spent in the time allowed. I don’t know if the same thing happened in 2020/21 but presumably, Cllr Potter does.

Yes it did. And, astonishingly, this was without a single councillor being aware that the money was being handed back. In response to this GBC commissioned an independent report to investigate what had gone wrong, and made a major overhaul of how right-to-buy receipts are handled in order to prevent this from ever happening again.

As part of this overhaul, the quarterly financial reports to Corporate Governance & Standards include a section dedicated to reporting on right-to-buy receipts and whether or not they are on track to be spent before the deadline.

As far as I’m aware, and as a result of these changes, no right-to-buy receipts had to be handed back in 2020/21, and there are no right-to-buy receipts at risk of being handed back as there is now a pipeline of projects in place to ensure that the money is guaranteed to be spent in time.

It was off the back of the right-to-buy receipts fiasco that councillors asked for the Corporate Governance & Standards committee to receive the same level of regular detailed reporting around S106 contributions, which is precisely why we received our first report on the matter on April 21.

Since I have just been re-elected as chair of the committee, I can reassure S Callanan, and any other interested members of the public, that the committee will continue to keep a close eye on S106 reporting throughout the upcoming municipal year. No councillor wants money allocated for their ward to be left unspent in a bank account, so we all have a vested interest in ensuring the money is properly spent.

Each time reports on S106 contributions come before the committee we will be making suggestions and constructive criticisms which will result improved iterations of the report, until we can all be satisfied that the reports are thorough, accurate and contain all the information that is needed for proper accountability and transparency.

If any member of the public is concerned about what they see in the reports or has any questions, I would invite them to come along to one of our committee meetings where S106 is on the agenda to watch the debate and discussion for themselves. And if any member of the public wishes to submit questions in advance of their attendance at a committee meeting then we will make sure that we are able to have those questions answered in detail at the meeting.

Responses to Letter: My Further Answers to Section 106 Payment Concerns

John Ferns Reply

May 24, 2022 at 9:23 pm

A detailed and comprehensive answer, but one that will still need validating and quickly, as the vultures will be gathering at the door.

Two things of concern stand out in Cllr Potter’s reply.

First, he says “Surrey County Council, however, is still holding on to £7.2 million of S106 contributions which are unspent without any plan on how to spend them.”

In no way does this let GBC off the hook as, under the doctrine of privity of contract, the s106 agreement is between GBC & the landowner, and where there is a risk of default in fulfilment of the terms of agreement, it is not SCC that will be in the firing line but GBC, as a number of local authorities have already found out to their cost.

Independent Building Warranties Insurance Brokers Granite says: Councils Sitting on Millions in Unspent Cil & S106. Note the paragraph where it says, “The sums involved could be much higher. Local authorities are required by law to publish Infrastructure Funding Statements (IFS) by the end of 2020. But, one in five failed to do so, and of those that did, a third provided incomplete information.”

And the Leicester Mercury reports: “Developers given back nearly £900k because it wasn’t spent…“.

The second matter of concern is Cllr Potter’s extraordinary statement about the right-to-buy fiasco. He says: “Astonishingly, this was without a single councillor being aware that the money was being handed back.”

As I pointed out in my earlier letter, GBC is establishing a track record of failing to dot the i’s and cross the t’s; so I would dispute Cllr Potter’s assertion that Sue Wyeth-Price’s findings were, “misplaced, somewhat alarmist, and severely mistaken on several points”. On the contrary, she has done a valuable public service and deserved a more gracious response.
George Potter Reply

May 24, 2022 at 9:24 pm

To respond to Mr Ferns’ further points:

Once S106 money is handed over to SCC it is up to them to spend it. GBC has no legal control over, or say in, how SCC spends the money. If SCC doesn’t spend the money and the developer asks for it back then it is SCC’s responsibility to hand the money back.

GBC is quite clearly publishing full accountings of the S106 money it has received, and is clearly managing to get it spent on time (only 6 per cent of the amount controlled by GBC is at risk of being refunded and all of it dates back to before 2015) so I’m not sure how the articles mentioned are relevant to GBC?

In relation to the right-to-buy receipt, I’m not sure why my statement is particularly extraordinary given that the entire fiasco, and the independent investigation into what went wrong, were all extensively covered by the local media.

There have clearly been a few notable cases where GBC’s governance has not been up to scratch over the past few years, but I would argue that the current council, elected in May 2019, has been spending the past three years gradually, and thoroughly, putting the house in order; and the committee which I chair has had a central role in that process.

I will also add that everything in my reply to S Callanan can be validated by the simple expedient of reading the papers published on the council’s website. I do not have any special insider knowledge here, I just read the published papers for the committee I chair, and I am (obviously) present during the discussions at the committee meetings, recordings of which can be watched by anyone on the council’s website.

My frustration, and concern with Sue Wyeth-Price’s “findings” is that they were inaccurate in many places, had already been discussed and considered at the committee meeting (meaning it should have been obvious that things were not as portrayed by Ms Wyeth-Price) and that her letter to The Dragon was incredibly alarmist and made claims which were simply nor borne out by the facts. And that is, to my mind, incredibly unhelpful and gets in the way of actually informing communities and the public about what is happening with S106 contributions in their communities.

George Potter is the chair of the Corporate Governance and Standards Committee and a Lib Dem borough councillor for Burpham.
S Callanan Reply

May 24, 2022 at 9:28 pm

Cllr Potter misunderstands me. I wasn’t suggesting S106 funds be used to keep public toilets open. I was trying to make the point that when large S106 sums are under review, £270,000 is relatively small. But when viewed in terms of how that sum could be spent on the provision of public toilets, say, it’s a lot of money.

Thinking about this again I doubt that money is the issue. As we know, if a S106 contribution is not used within a certain period, the developer can ask for it to be refunded. Clearly that’s not the case here since GBC still has the money but has failed to do anything useful with it.

Cllr Potter tells us there is £86,000 tied up in three CCTV schemes, the earliest of which dates back to 2006. He then passes on a rich and varied list of excuses provided to him and described as “technical obstacles preventing installation”.

In a nutshell the S106 elements of the planning permissions tie the money to very specific geographical areas but planners seem to have done this without knowing exactly where the CCTV equipment would be installed, whether there was any right to put it there and whether it could readily be connected to the electricity to power it. And they don’t seem to have checked the police guidance on the matter so the permissions don’t conform to that guidance. If I’m not right I’ll happily be corrected but, in any event, couldn’t problems such as these have been resolved by now?

On the right to buy receipts Cllr Potter is rightly concerned that sums were handed back to government in 2019/20 and 2020/21 without “a single councillor being aware that the money was being handed back”.

This is what makes me think that money isn’t the issue, at least in the S106 case: things went wrong and people don’t seem to have sorted it out. Maybe there was also an element of hoping the problem would go away.

It’s more serious in the right to buy case because GBC doesn’t have the money any more and the council wasn’t even told there was a problem. But GBC has commissioned a report into what went on which will, I hope, include who knew what was happening, who made the key decisions and when they were made.
- George Potter Reply
  
  May 27, 2022 at 2:19 pm
  
  I’m very sorry for misunderstanding what S Callanan was saying. £270,000 is indeed a very large sum of money in relation to public services.
  
  In terms of the CCTV schemes, it is indeed a very big problem that these S106 contributions were secured without there being any practical way to spend them. The result is that the community is being shortchanged since that money could, and should, have been spent on other infrastructure instead had the S106 agreement been better written.
  
  However, all of these agreements causing the problems date back to 2014 at the absolute latest, and many of them date back to the 00s. But there’s not much which can be done about that many years after the mistakes were originally made, other than focusing on finding ways to spend the money. Given that the same problem hasn’t occurred again since 2014 it’s quite clear that GBC has already, years ago, made changes to prevent the same mistakes being repeated. I have to ask, what more could the current council staff be reasonably expected to do?
  
  I’m not going to sit here and claim that there is no work left to do on S106. The entire point of my committee is to constantly scrutinise and constantly push for governance improvements. That’s what we’ve done with right-to-buy, meaning we now have robust processes and controls and scrutiny in place to ensure all right-to-buy receipts are spread properly, and we’re now starting on doing the same thing with S106 contributions.
  
  My point is not that everything is perfect, but rather that the system of governance is now functioning correctly to hone on an identified problem and strengthen the structures and transparency around it to make sure that the problem can’t possibly occur again.
  
  George Potter is a Lib Dem borough councillor for Burpham and chair of GBC’s Corporate Governance and Standards Committee
Dave Middleton Reply

May 24, 2022 at 9:29 pm

Cllr Potter says: “Example 1: Part of Woodbridge Business Park from 2007. £125,220 has already been spent on various road and environmental improvements in the area. But there is £7,292 unspent and at risk of refund. This amount is not enough to pay for any specific piece of work (such as a new roundabout, or new pedestrian crossing, or pavement upgrade) so this money is having to wait for a suitable project to come along which it can be used as a contribution.”

As a suggestion, perhaps some of this money could be used to clear and perhaps improve the riverside footpath along the east bank of the River Wey from the A25 Woodbridge Road, at the business park to Faraday Road, created as part of the planning consent for the Woodbridge Business Park.

Since it was created, this path has been allowed to become overgrown and pretty much impassable. It is not the responsibility of the Wey Navigation to maintain this and the owners of the business park, Travis Perkins Ltd, who appear to still own the land, seem unwilling to maintain it.

The Section 106 agreement to planning application 07/P/00797 at Guildford Borough Council refers.
Ben Paton Reply

May 24, 2022 at 9:30 pm

A classic case of institutional corruption.

GBC assesses the s106 sum. GBC grants planning permission. Nominally GBC oversees the development. GBC collects the money. GBC then gives the money to a third party – in this case SCC.

By virtue of giving the money to the third party GBC leaves the room and washes its hands of all further responsibility. In this manner, by virtue of the structure of the “system”, GBC is responsible for everything except the key element that in some cases was the factor that determined whether or not it gave planning permission.

It is a structure that by its design absolves the government agencies from taking an integrated, holistic, honest view of the whole thing.
And when a member of the public notices that huge sums of money are being returned to developers they are told: “Oh but it is all published.”

So it is not just institutional corruption. It is transparent institutional corruption. No individuals can be held to account.

And this is all okay? This is “good” government?

“Nothing to see here?”

And the whistleblower is branded “alarmist”!

Staggering hypocrisy.
- George Potter Reply
  
  May 27, 2022 at 11:35 am
  
  Reading the above by Mr Paton I can only conclude he has no idea what the words “institutional corruption” and “whistleblower” mean.
  
  It is not “institutional corruption”, for instance, to hand S106 money for highway improvements to the highways authority. It is, in fact, following the law with regard to the different roles of GBC as the planning authority and SCC as the highways authority.
  
  Nor is it whistleblowing to (inaccurately, even if well-intentioned) write a letter about information which is already publicly available. Whistleblowers reveal information which is secret, whereas the S106 information is freely available on the council’s website.
  
  George Potter is a Lib Dem borough and county councillor.
  - Ben Paton Reply
    
    May 29, 2022 at 7:17 am
    
    Mr Potter is the most argumentative man in politics in Guildford by a mile. And given certain Conservatives that’s saying something.
    
    He is unable to imagine that institutions may be badly designed, that laws are misconceived or ill-framed, or that any action that he may be associated with may be anything other than commendably virtuous.
Dave Middleton Reply

May 31, 2022 at 10:56 am

Rather than simply arguing with Mr Paton, might Cllr Potter like to respond to my, hopefully constructive, suggestion above regards the riverside path on Travis Perkins’ land and perhaps do something about it?