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Developer Ballymore has established itself as a major urban regeneration player and is now pursuing a number of schemes in the Thames Gateway. Like all developers it negotiates with local authorities on the level of Section 106 planning gain it should provide, a significant element of which has emerged, in recent times, as a contribution towards the provision of healthcare.

In one recent scheme the expected level of healthcare contribution was significantly higher than historic rates and covered both capital and revenue expenditure. Ballymore is prepared to pay its share of the cost of providing community facilities but wanted an independent review of the justification for the increased level of healthcare contribution. It commissioned URS' economics and development group to analyse how the level of contribution is established, to question the assumptions made and give a view on whether the contribution should be less.

In the past developers would negotiate with local authorities on the level of planning gain and contributions to social facilities including health and education. These were generally negotiated using rules of thumb and tended not to be particularly scientific. The resulting agreement would provide funds for additional primary care and educational facilities.

The trigger for taking a more considered approach came three years ago with the then ODPM's Sustainable Communities Plan covering the Thames Gateway. Because of the scale of development envisaged across the Gateway, comprising the creation of whole new communities, it became apparent there was a need for substantial developer contributions and that these should be calculated on a more scientific, equitable basis.

The NHS, in an attempt to create certainty and clear guidance for developers on the level of contribution expected, created the Healthy Urban Development Unit (HUDU) in 2004. This was founded on the basis that early engagement in the planning process would enable the NHS to respond positively and proactively to the demands that London employment and housing growth will place on local health services.

In light of the London Plan's housing growth target of 30,000 homes per year between 2001-2016 and its commitment to enhancing sustainable development, HUDU aims to use the planning gain process to ensure that adequate facilities and funds are in place to meet the health needs of the incoming population (see box below).

HUDU has developed the "HUDU model" to provide NHS primary care trusts and local authorities with a tool that gauges the likely health needs of the incoming population. The model is based on a formula that multiplies the expected increase in population by the cost to service the expected health needs of this new population.

The main issues that URS identified with the model, in its present form, include:

• The inclusion of revenue funding in the planning obligation appears unreasonable; the model provides for developers to contribute up to three years' revenue funding for healthcare facilities because the NHS Plan is updated only every three years. The contribution would therefore cover any shortfall before the next NHS Plan comes into effect.
• In the specific context of the Thames Gateway, NHS funding to primary care trusts already appears to allow for population growth and includes funds to cover the revenue costs of the incoming population. Therefore, it is unclear why developers in the Thames Gateway are being asked to make this contribution and it may be seen as double-counting.
• The use of national average per capita treatment costs is likely to over-estimate the costs of developments like Ballymore's schemes in London Docklands where a high proportion of homes are expected to be occupied by people with lower than average NHS health needs. Also, it is generally accepted that people in more affluent areas use private healthcare for a significant proportion of their health needs and so demand could be discounted to some degree.
• A significant proportion of the social housing residents in the scheme are expected to be moving from within the borough and are likely to be already using the area's healthcare facilities.

These issues are very significant for Ballymore and other developers because the healthcare infrastructure required - including primary care, hospitals, mental health, etc - is considerable and is ramping up the likely developer contribution, amounting, in many cases, to millions of pounds.

HUDU has generally been positive in listening to suggested modifications to its model and it is hoped that future negotiations will lead to a more reasonable and fair assessment of health-related planning gain. If this is not possible, then it may be that these issues will need to be tested at appeal on a test-case planning application.