Planning tax slammed as hindering infrastructure projects

Government planning proposals have come under attack from industry groups, who slam them as unrealistic and a hinderance to PPP and PFI projects.

The Government’s proposals to introduce a ‘planning-gain supplement’ (PGS) may not achieve the aims set out in last year’s consultation paper, concludes independent research undertaken by property consultancy Knight Frank with the backing of industry groups including the British Property Federation (BPF), the Confederation of British Industry (CBI) and the Royal Institution of Chartered Surveyors (RICS).

BPF chief executive Liz Peace said: “[The research] identifies that PGS will be complex to implement, could cause prolonged delays in the development process and, for large developments, will raise less than current section 106 payments.”

PGS is a levy designed to capture part of the uplift in land value as a result of planning permission being granted for a development. It aims to help fund new local infrastructure while simultaneously preserving the incentive to develop land.

The research investigates the potential returns of implementing PGS at rates of 10 per cent, 20 per cent and 30 per cent of the uplift in land value, as a result of planning permission being granted. It looks at 18 case studies, covering residential, mixed-use and commercial developments.

It concludes that PGS, which the Government has pledged will not be implemented before 2008, may not deliver the levels of funding sought for new local infrastructure to support housing growth, potentially rendering some smaller developments unviable.

The research also finds that large-scale developments are likely to contribute significantly less planning gain value than under the current system.

Denton Wilde Sapte’s head of planning Stephen Ashworth said: “The earlier experiments with betterment levies and the development land tax provided helpful guides but are now easily criticised as historic. The situation was short on real evidence, but thankfully the BPF, CBI and HBF have started to fill the void left by the lack of Government analysis supporting PGS.”