PLANNING GAIN SUPPLEMENT PROPOSALS WOULD MEAN CENTRALISED TAX ON DEVELOPMENT
28/02/07 | 09:53
The BCC strongly opposes the introduction of a PGS and amongst the arguments that the BCC is making makes against the introduction of a PGS are:
- Running side by side with Section 106 Agreements the PGS will be another tax on business.
- Unlike Section 106 Agreements, under a PGS there is a lack of transparency in how money raised will be spent locally. We are concerned that the revenues will not be recycled to the particular development that contributed the PGS payment.
- The PGS is to be collected at the most sensitive time of a development, at its commencement. This has the potential to put off of the risk of development by many small businesses.
David Frost, Director General of the British Chambers of Commerce, said:
“These proposals are a tax on development with no guarantee that the money raised would be spent on local projects.
“Section 106 agreements, whilst not perfect, are at least transparent and developers can see the local benefit of what they hand over to Town Halls. The PGS is shaping up to be just another tax on business which will benefit no-one but the Treasury.”
ENDS
MEDIA CONTACT:NOTES TO EDITORS:The Planning Gain Supplement consultation ends tomorrow, Wednesday February 28th 2007. Although the BCC has chosen to answer questions only to the ‘Changes to Planning Obligations: A Planning Gain Supplement Consultation’ we have serious concerns that cover all three consultations. Noted below are the British Chambers of Commerce thoughts on the Planning Gain Supplement as a whole.
Planning Gain Consultation Documents:
- Valuing planning gain: a Planning-gain Supplement consultation
- Paying PGS: a Planning-gain Supplement technical consultation
- Changes to Planning Obligations: A Planning Gain Supplement Consultation
- Burden on business
The Planning Gain Supplement represents another burden on business. It is proposed to be a blanket, centrally-driven tax on business, which will fail to provide for the nuances of local economic geography.
The PGS will impact disproportionately on smaller businesses that will find contribution prohibitive, particularly at the commencement of a project, and may deter businesses from becoming involved in important development and regeneration projects. Calculation of PGS
The Development profession is recognised as carrying high risks and this should be recognised in the way the PGS is calculated. The Planning Gain supplement will be taken at a time when there is the most value on the land and we would like to see a claw back arrangement should the level of development and overall value of the completed development not be achieved.
The method of calculating planning gain has the potential to slow down the early stages of development as the increase in value from works (such as demolition, remediation, site clearance etc.) will be carried out before planning permission will be liable for PGS. Developers could potentially shy away from development as the increase in value from these works would form part of the PGS calculation.
Identifying the start and end points of the development for which PGS is to be charged would cause extensive problems. An area of land may be designated as greenfield, used for agricultural purposes, but then incorporated into a local authority’s development framework, at which point the value increases. If someone then applies for planning permission, is granted this, develops and sells, would they be responsible for the full PGS payment due to uplift in value.
Disincentive to developGrowth Areas rely heavily on the willingness and propensity of the private sector to invest and develop in local towns and cities in order to succeed. Business is aware that this means infrastructure contributions will need to be made to enable their developments to progress in a well-serviced, well-connected economic environment. This is currently achieved with varying degrees of success and pain, through Section 106 agreements; proposals to introduce a "one-size-fits-all" version to development contribution through Planning Gains Supplement offers no transparency or flexibility for local areas and will simply be viewed by business as an increase in the generic cost of development. Developers may be deterred from developing land, discouraging regeneration and significantly slowing its rate. There will be fewer homes built and those that are may be more expensive. A lack of affordable housing could have a significant affect on local economies by reducing the supply of labour, particularly in key skills.
Impact on Land Availability
Landowners would face increased costs in selling land. This may result in their being less inclined to sell land and decrease the supply of development land.
Distribution of Revenue
The Chambers believe there is insufficient information on how the revenue from PGS would be distributed. Business would need much greater transparency to ensure that monies raised via the PGS are spent on local infrastructure needs. We are very concerned that the revenue is spent locally and does not simply go to HM Treasury. The BCC would therefore urge the Government to ring-fence funding for infrastructure.
Clear safeguards and criteria based assessments need to be put in place to ensure PGS funds are invested in relevant public projects and not dropped into some general fund to support overall Council and Regional body expenditure.
Section 106 agreements, while imperfect, do at least make a direct link between developments and infrastructure needs. We agree that the effectiveness of Section 106 agreements are very much down to the efficiency and tenacity of individual councils but do not feel PGS is a viable alternative as it will not provide clear links of accountability.
Brownfield sites
If the PGS were introduced, businesses would favour a substantially lower rate for Brownfield land, or no rate charged at all as there are likely to be extensive site preparation costs such as decontamination and/or site clearance. These costs can mean development brings in little gain and in these circumstances PGS would certainly act as a disincentive to develop. With an exemption, or substantially reduced rate, there would be a higher pace of property development and land regeneration, with knock-on benefits for rateable values, employment and economic growth. The PGS may make development of Brownfield sites a less attractive option for developers with serious implications for the government's growth plans. Diversification
The PGS may affect businesses looking to develop their premises. With changing trends in agriculture and related industries, facilitating residential or commercial development on old farming land is a popular option. This is often a highly successful strategy for agricultural businesses to continuing trading, and indeed widens their activities, and has a positive impact on the rural economy. We would be concerned about any measures which deter businesses from considering developing and diversifying their business.
Scaling back Section 106 Agreements
The intention for ‘scaling back’ the existing system and providing a light touch for the new would follow our calls for less and better regulation. However, we are concerned that over time the PGS will create two parallel systems that will, whilst causing confusion, develop new systems and complexities that the PGS was intended to avoid.
Businesses are concerned that the continuation of Section 106 arrangements alongside PGS would increase the financial and regulatory burden on them whilst maintaining some of the uncertainty associated with Section 106.
Scottish Executive
It should be noted that the Scottish Executive responded to the UK Government’s 2006 Treasury/OPDM consultation on PGS, opposing the idea. The Executive’s view was that it could act as a disincentive to development, particularly in rural areas and in low land value areas in need of development.
The British Chambers of Commerce (BCC) is the National Voice of Local Business.
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