chapter  7
22 Pages

DEVELOPMENT, INFRASTRUCTURE AND LAND TAXATION

The government’s growth agenda announced in Sustainable Communities (ODPM, 2003a) and reinforced through the Housing Green Paper (DCLG, 2007b) sought to deliver a step-change in housing and employment provision to 2020. Linked to this proposed growth were the thorny issues of infrastructure costs and development land tax, which resurfaced as they had so often done throughout the postwar history of planning. Attempts to capture some of the uplift in land value that results from planning permission has been a chronic theme of UK planning, and whenever it has been attempted it has largely ended in failure. New Labour’s attempt was no different. The Housing Green Paper in 2007 reiterated Labour’s commitment to increase house building to 240,000 units per annum by 2016, translating into 3 million new homes by 2020 (DCLG, 2007b). Such development would not be evenly spread but concentrated in the four ‘growth areas’ and twenty-nine ‘growth points’, the former involving 200,000 additional homes above previously planned levels by 2016 (ibid.: 24). With the impact of the credit crunch and recession on housing development from 2008, such targets became, at best, optimistic. However, the need to finance the infrastructure for such growth was a significant concern, particularly as the main existing mechanism for linking development to infrastructure – planning obligations secured through Section 106 of the Town and Country Planning Act 1990 – were widely criticised for being slow, costly and inefficient. Labour’s initial solution was to propose in 2005 a form of development land tax named the Planning Gain Supplement (PGS) (HM Treasury, 2005a). PGS emerged as a recommendation from the Barker report, which argued for some form of flat-rate tax on the uplift in land values resulting from the securing of planning permission (Barker, 2004). PGS would tax this uplift and recycle a proportion of the money back to local areas to help pay for necessary development-related infrastructure. Existing Section 106 arrangements would be scaled back to focus

solely upon site-related infrastructure, development mitigation and affordable housing provision. The government argued that PGS would be more transparent and certain than the existing system: ‘The Government believes it is fair in principle for the wider community to share in the wealth created by planning decisions in their area, given the sizeable uplift in land value that planning decisions often confer’ (HM Treasury, 2005b: paragraph 1.10). Tariff-based approaches, as an alternative to PGS, were rejected because they were: ‘potentially limited in their scope, since they are most suited to addressing local concerns and may not easily deliver the investment required to support significant housing growth’ (ibid.: paragraph 1.16).