The question was raised on one of the Heyford Park forums about who benefits financially from a large scale development, what the impact would be of stopping to address environmental concerns, and what options there would be for corruption under these circumstances.
Obviously, I don’t want to address this in specific terms, but I thought a ‘hypothetical’ scenario might be helpful…
A ‘master developer’ acquires a site from the MoD that is almost certain to have significant environmental issues to be addressed before it can be be considered almost risk-free from these. (If it didn’t, then the MoD would sell it at its full market value.) They submit an outline planning application for development of the site in which they say that they will stop work if anything untoward emerges but they do not do any transparent, independent, verifiable testing to determine the risks. They are given permission (despite many objections and a refusal and appeal). They sell off plots to large scale builders who then quickly build on the land and sell the houses. 1500 homes so far, another 6000 in the pipeline. An issue does arise, but instead of stopping anything the building work continues and neither the council nor the relevant agencies (such as the environment agency) do anything to stop the process. Who might benefit financially from this situation?
Business as usual
In a hypothetical case such as this, several parties can benefit financially, while others bear most of the long-term risk. The key point is that financial benefit and legal responsibility are not always aligned.
The original landowner, in this case the MoD, benefits by disposing of a site that may carry substantial remediation liabilities. If the sale price reflects only part of the contamination risk, it transfers much of the future uncertainty to the purchaser. Rather like buying a car “sold as seen” on eBay, but on a much larger scale.
The master developer benefits as it acquires the land at a price that reflects uncertainty, obtains planning permission before the full extent of contamination becomes clear, and then sells serviced parcels to housebuilders at a much higher value. Planning permission often creates a substantial uplift in land value. If the developer can sell the plots before extensive remediation becomes necessary, it may reduce its own financial exposure, although this depends on the contractual arrangements and any continuing legal liabilities.
The volume housebuilders may benefit by constructing and selling homes rapidly, particularly if no regulator requires construction to stop. Cash flow from completed sales can be considerable. Whether they remain liable for later environmental problems depends on environmental law, planning conditions, contractual warranties, and any knowledge they had of the risks.
Mortgage lenders receive interest income on the properties they finance. They generally rely on the planning system, regulatory oversight, and professional reports (often a survey of the building itself; not the wider development) rather than conducting their own environmental investigations.
Estate agents, solicitors, surveyors, and conveyancers benefit from the large number of property transactions, although they also owe professional duties to clients which they may be insured against.
Local authorities receive financial benefits through planning fees, council tax from occupied homes, and infrastructure contributions such as those secured through planning obligations. These income streams shouldn’t influence regulatory decisions, and there is no basis for assuming that they do. Nevertheless, they are real financial consequences of development and political pressures on council ‘tolerance’.
The government will receive increased tax revenue through VAT on many associated goods and services, corporation tax, income tax from construction employment, and Stamp Duty Land Tax from property sales.
Those who may carry much of the financial risk include the eventual homeowners, who could face reduced property values (leading to negative equity), increased insurance costs, mortgage difficulties (and consequent credit rating impact), and the impact of future remediation works (cost, inconvenience, and stress) if contamination proves significant. Public bodies may also incur future costs if remediation becomes necessary and the responsible parties cannot be made to pay.
Planning permission does not remove obligations under environmental legislation, and environmental regulators retain powers that are separate from the planning system. Likewise, a failure to investigate contamination adequately at the planning stage does not necessarily mean that legal duties have been breached, although it may raise important questions about whether those duties were discharged appropriately.
From an economic perspective, the strongest incentive in such a scenario is the difference between the value of contaminated land before planning permission and the value of development land afterwards. That uplift can amount to many millions of pounds. If the costs of identifying or remediating contamination are delayed, transferred, or ultimately borne by others, those who realise that uplift can receive substantial financial gains while carrying only part of the long-term risk.
Those who find opportunity
A subsequent question arose about the opportunities for corruption in such a hypothetical scenario.
In a case of this kind, any corruption would most likely occur where private profit depends upon a public decision, inspection or failure to act. Even in our hypothetical case, this does not mean that corruption has occurred. Weak regulation, poor judgement, lack of staff, political pressure and institutional reluctance to admit error can all produce much the same outcome without bribery or crime.
The first area to examine though would be the planning process before permission was granted. Planning permission can create an immense rise in land value. This gives developers a strong financial reason to influence councillors, planning officers or advisers. The main risks include undeclared meetings, gifts or hospitality, political donations, personal or business links, selective access to decision-makers, and conflicts of interest. Transparency International UK found that major planning decisions face risks from hidden lobbying, conflicts of interest and the movement of staff between councils and developers. Its study identified 32 councillors in key planning roles who also worked for developers, though this did not itself prove corrupt conduct.
A second risk point lies in the wording and discharge of planning conditions. Permission may depend on later soil tests, water tests, remediation plans or approval from council officers. A vague condition, a weak investigation, or the acceptance of a poor report can save large sums. Particular scrutiny should fall on any decision to discharge a condition despite gaps in evidence, and on any shift from “work must stop” to “work may continue while inquiries proceed”.
The third and perhaps most important area is environmental enforcement after contamination becomes known. At this stage, stopping construction could threaten land sales, house sales, loan agreements, contractual deadlines and company profits. Corruption could take the form of pressure on officials not to issue a stop notice, not to classify land as contaminated, not to publish results, or not to require full remediation. Yet inertia is probably a more common issue: each body assumes that another body holds responsibility, while officers fear litigation, compensation claims or political blame; thus nothing happens.
The fourth risk lies among consultants and technical experts. Developers often commission their own environmental reports. The client pays the consultant, controls the scope of work and may choose whether to commission further tests. Most consultants act with care, but the structure creates a risk of “client capture”. Warning signs include narrow sampling, unexplained gaps, tests conducted in unsuitable places or seasons, changing risk criteria, and conclusions that appear stronger than the data support.
The fifth area concerns land and corporate transactions. Complex subsidiary firms, special-purpose companies, indemnities and rapid plot sales may divide responsibility so that each party gains value while liability becomes harder to trace much later. Such arrangements might serve lawful commercial aims (if tax evasion is lawful), but they can also conceal who knew what, who accepted the risk, and where the profits went.
At this stage, then, the question is: who had the power to interrupt the process, who had a financial or institutional reason not to do so, what information did they possess, and what explanation did they record for allowing work to continue?
A sound inquiry would examine declared interests, political donations, meetings, correspondence, consultancy instructions, planning-condition records, environmental test data, land-sale contracts and the chronology of regulatory decisions. A pattern of silence or weak action warrants investigation, but it does not alone prove corruption.
