February seems to have been a month for fascinating planning cases. 

First, we had Mr Armstrong's one man mission to clarify the scope of s.73 TCPA; then we had the Court of Appeal's decision over the Bridge to Nowhere; and finally we have Mr Justice Holgate's decision in The University Hospitals of Leicester NHS Trust, R (On the Application Of) v Harborough District Council [2023] EWHC 263 (Admin).

The case is notable for two reasons. Firstly, it features everyone's favourite Planorak, Zack Simons, who acted for the County Council alongside Isabella Buono. 

Secondly, it addresses an increasingly common question: Is it lawful for s.106 contributions to be used to fund the provision of NHS services?

This 'services' point is important. This was not an instance of an NHS Trust asking for funds for the provision of infrastructure - such as the expansion of a GP's Surgery. 

Instead, the University Hospitals of Leicester NHS Trust had asked Harborough District Council to secure a s.106 contribution of about £914,000 from an urban extension project in Lutterworth, which had been allocated in the recently adopted local plan. The allocation included the onsite provision of a doctors surgery within a new local centre.

The contribution was requested to fund the delivery of health care services by the Trust to mitigate the "the harmful effects of additional demands upon its services from that proportion of the people moving to the site who would be new to the Trust's area".

After a lot of discussion and investigation, which is explored in great detail in the judgment, the Council refused the request and granted planning permission on the basis of a s.106 Agreement that did not include the contribution requested. The Trust judicially reviewed the decision and lost.

The judgment is a fascinating read for anyone with even the vaguest interest in how the NHS is funded, however, if that is not you, the gist of the argument was as follows:

  • The Trust basically alleged that a 'funding gap' existed during the first year that new residents moved into the Trust's area. As it took a while for the NHS funding to catch up with the change in demographics. It was reasonable to request s.106 contributions to mitigate the impact on services of this funding gap; and HDC acted unlawfully in refusing that request;
  • HDC argued that the Trust had not actually established that a funding gap existed so as to justify a contribution in the first place.

The claim was brought on four grounds, and the Trust lost on all of them - primarily because of the fact that HDC was not only entitled to investigate whether the funding gap actually existed, but legally required to do so - to ensure that the obligation was reg. 122 compliant.

The most interesting section of the judgment, however, is not directly related to the grounds at all.

In paragraphs 139 to 151 of the judgment, Holgate considers the 'wider issues' raised by the challenge. In particular, whether it can ever be lawful to use s.106 contributions to fund NHS services. 

I strongly recommend reading this part of the Judgment in full. 

Holgate stops short of saying that it can never be lawful to use s.106 funds in this way, but does cast significant doubt over the prospect. Stating:

"140. In any event, the justification advanced by the Trust for a s.106 contribution needs to be seen in the context of the statutory framework for the provision of secondary health care services. The contribution would relate to people who are new to the Trust’s area. But those people are entitled to such services wherever they may live in the country. They would be so entitled if the development were to be refused planning permission and so they did not move to the Trust’s area. The relevant CCG for the area in which they live would remain under a statutory duty to arrange for the provision of the same treatment as would otherwise be provided by the Trust. The obligation to provide, and financial responsibility for, those services lies with the NHS. The context is far removed from the analogy of a typical s.106 obligation given by Mr Cairnes KC, namely where a developer is required to mitigate a reduction in the performance of a local highway network that would be caused by a new development. There, the highway authority is not under a statutory duty to fund improvements to the network, let alone to provide for highway facilities made necessary by a specific development.

141. The question therefore arises how could an applicant for planning permission for a new development be required lawfully by a system of land use planning control to contribute to the funding of treatment within the NHS? It is well established that planning permission cannot be bought and sold, for example, by making a payment for community purposes unrelated to the development authorised. Furthermore, planning legislation does not confer any general power to raise revenue for public purposes (see e.g. Attorney General v Wilts United Dairies Limited (1921) 37 TLR 884; (1922) 38 TLR 781; McCarthy & Ston(Developments) Limited v Richmond London Borough Council [1992] 2 AC 48).

142. Ordinarily a resident of the development at East Lutterworth who had moved to the Trust’s area would previously have been the responsibility of a CCG elsewhere in the country. So it has not been suggested that the development would increase the burden on the NHS in England as a whole. The attempt by the Trust to obtain a financial contribution under s.106 therefore depends upon their demonstrating a localised harm. The only harm they seek to rely upon concerns the provision by the Trust of services commissioned by the CCGs. On the Trust’s own case, that has to depend upon them showing a funding gap in relation to treatments for residents new to the area during their first year. The Trust accepts that there is no justification for any payment relating to other “first year” residents who are simply moving home within the Trust’s area, or to any resident after their first year at East Lutterworth. The extent to which funding is available to the Trust for the services it provides to the CCGs is the only possible justification for drawing these distinctions. Whether a funding gap genuinely exists was critical to the Trust’s request for a financial contribution under s.106."


"What if a funding gap could be demonstrated for a particular NHS trust? 

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. 

148. Where a housing development is carried out, some of the new residents may be entitled to social welfare benefits, which, like the need for secondary healthcare, arises irrespective of where that person lives. Of course, no one would suggest that the developer should make a contribution to funding those benefits. 

149. The funding of treatment in NHS hospitals would appear to be different in two respects. First, in an area of net in-migration any increase in the need for treatment and staff will be experienced in the relevant local area, not nationally. Second, because the patients would receive treatment even if they had not moved home, a local funding gap would only arise if funding for the relevant NHS trust did not adequately reflect a projected increase in population and/or the national funding system did not adequately provide for a timely redistribution of resources. Population projections will involve some areas of out-migration as well as areas of net in-migration. It is therefore significant that CCG funding across the country takes into account ONS population projections. Accordingly, in the distribution of national funds there may be increases or decreases in funding for individual CCGs by reference to size of population. 

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"

In short, for now at least, it looks as if the answer to the question "Can you use s.106 contributions to fund NHS services?' will, in the vast majority of cases, be 'No'.