Planning Gain Supplement shelved

Housing Development Burgess Hill
Originally uploaded by seadipper.

The Guardian reported today that government's proposed Planning Gain Supplement would be shelved if a better alternative could be found.

This is after about four years of work by various appointed committees headed by highflyers like Kate Barker, who came up with the idea, and Sir Michael Lyons, who addressed the issue as part of his remit to reform local government finance.

The Land Value Taxation Campaign made submissions pointing out that the most appropriate and practicable way of collecting development value was through the form of Land Value Taxation advocated by the Campaign. When the proposals for the Planning Gain Supplement were announced, the Campaign, amongst many other groups, pointed out that similar legislation had been adopted and failed in Britain four times since 1945 and that precisely the same thing would happen again.

So it seems as if after all the work now done, at vast expense, the government has just backed off. At least that is some kind of victory for commonsense, but what a wasteful way to run the country, and the problem of finding an effective solution remains. One might remind Gordon Brown of the alternative of Land Value Taxation, but it is a safe bet that he will not take any notice.

Of course, the objectors are motivated solely by self-interest, but what is depressing is that those who recognise that the PGS is an attempt to deal with a genuine problem are unable to look at the issue in any depth and suggest a workable alternative.

Here is the text of the Guardian article, headed "Brown retreats over tax on property developers"

"Gordon Brown rowed back from a row with Britain's property developers today, postponing a move that would have seen a levy on the profits made by housebuilders.

The new prime minister announced the controversial "planning gain supplement" (PGS) - intended to be part of this autumn's Queen speech - would be shelved if a "better alternative" could be found.

The dry-sounding bill was intended to fund local infrastructure projects from the windfall profits often made by developers when planning permission is granted.

Instead, Mr Brown promised to consult over the summer on alternative measures, with the bill only being provisionally tabled this autumn. The House Builders' Federation, which represents Taylor-Wimpey and Barretts as well as 300 other homebuilders, welcomed the apparent U-turn. The Organisation's director of economic affairs, John Stewart, said: "We're pleased the prime minister is not charging ahead with something we don't think would have the benefits expected of it. "There are better alternatives to a property gain tax and we were concerned this wasn't a workable proposal. "Homebuilders want to see funding for new communities, but there are better alternatives - none of them perfect - and we would like to see a degree of flexibility."

The planning gain supplement had been intended to replace existing section 106 agreements between developers and local authorites, whereby builders agree to construct a road or playground or other amenity in return for planning permission.

The building industry complained the new tax could make developments less profitable leading to a stall in construction, and that 30% of any revenue would be used to fund regional projects, rather than local ones.

The PGS would have levied a "modest" tax on the uplift in value on land when it was granted planning permission. The original intention was to have the bill in the Queen's speech and on the statute book by 2009.

The British Property Federation, which represents commercial builders and investors, said they were "delighted" the "deeply flawed" PGS had been delayed.

Faraz Baber, director for planning and regeneration, said: "The PGS tax is not supported by the property industry and has received lacklustre support amongst a wide range of stakeholders."

The Royal Institute of Chartered Surveyors also welcomed the consultation, saying PGS was "not the most appropriate mechanism" for increasing the supply of housing.

The RICS, along with some other players in the industry, would rather see a straightforward fixed-price tariff, as has been piloted in Milton Keynes, rather than a percentage of the windfall gain.

However, there was consternation at the possible loss of the scheme from other sectors of the industry.The National Housing Federation, which represents not-for-profit housing associations, said: "We strongly support the planning gain supplement and urge the government to go ahead with it."