Coalition calls for speedy resolution to land tax uncertainty

A group of leading organisations representing British business, property and planning called on Gordon Brown to clarify the Government’s position on the proposed Planning Gain Supplement (PGS). The PGS proposes to tax the rise in land values created when planning permission is granted. Failure to provide certainty is threatening investment in the infrastructure needed to create truly sustainable communities. The coalition is calling on Government to provide certainty as a matter of urgency.

The Royal Town Planning Institute (RTPI), the British Property Federation (BPF) and the British Retail Consortium (BRC) all agree that the PGS tax proposals made in late 2006 are unworkable. Government is currently thinking about the way forward, but the lack of a clear direction is causing uncertainty and raising the prospect of significant social, economic and environmental harm.

Money is needed to build infrastructure to support sustainable communities and housing growth. At present, most funds come from the ‘planning gain’ system, which the PGS tax would largely replace. Infrastructure takes a long time to plan and, without certainty about the planning and funding process, it is likely that much-needed infrastructure will not be properly planned and may be delayed or not built at all.

Rynd Smith, Head of Policy and Practice at the RTPI said: “Uncertainty in infrastructure planning now could lead to real harm in three or four years time. New housing is in danger of missing out on the full range of services that it needs, creating the sink estates of the future. Failure to include public transport will result in environmental damage as commuters continue to go by car. New construction without adequate infrastructure is unsustainable, but this could be the future if we don’t set a clear direction soon.”

Faraz Baber, Director of Regeneration and Development at the BPF said,
“From the very beginning, the BPF has urged the Government to consider alternative solutions to the proposed PGS tax, in particular, some form of standardised tariff system or an improved version of the current Section 106 system. Both these forms of planning gain would ensure support from all parties involved in the development process; crucially they would also provide the certainty that developers require in order to undertake large scale regeneration schemes.”

Kevin Hawkins, Director-General at the BRC said: “The PGS will discourage development in the areas where it is most needed. An increasing level of retail development is now taking place on brownfield sites and in areas in desperate need of regeneration. Imposing a blanket tax on these sites will only make marginal areas less attractive.

“The current system is far from perfect, but at least it guarantees direct and timely benefit to the community in which a development is taking place. There is no such guarantee under the PGS, where much revenue will be allocated bureaucratically, at arms length from local communities and projects.

"If the Chancellor is really interested in promoting development where it is most needed and ensuring local communities receive the benefits he will reject the PGS in its current form.”

The RTPI, BPF and BRC recognise that we have a duty to make constructive proposals to government about how to develop better infrastructure planning and funding processes. RTPI and BPF have provided alternatives that focus on a development tariff of the sort currently used in Milton Keynes. However, the development of alternative practice is also being held up by the lack of clear direction on the government’s proposals.