Editorial

Citation

Plimmer, F. (2008), "Editorial", Property Management, Vol. 26 No. 1. https://doi.org/10.1108/pm.2008.11326aaa.001

Editorial

In October 2007 the UK Chancellor, in his Pre Budget Statement, announced the abandonment of the proposed Planning-gain Supplement (PGS). PGS flowed from the recommendations of the Barker Review (Barker, 2004) into the supply of housing and was the latest in a series of attempts to tax the betterment which occurs on the grant of planning permission. The theory was that such a levy would return some of the so-called windfall profits which planning permission bestows on landowners. Thus, developers would estimate the amount of PGS to which they would be liable and reduce their proposed purchase price for the land by that amount. So, the intention was that the landowner would have borne the burden on the tax, which, fixed at a “modest” rate, would not disrupt the supply of land onto the market at a time of urgent housing need, and the revenue would have been hypothecated for the provision of infrastructure to support the proposed housing development.

Some of us have been there before. Memories of the Community Land Act and Development Land Tax must have prompted many of the “responses” to the government’s consultation documents and, it seems, the government listened.

At the time of writing, the details of the proposed Statutory Planning Charge (SPC) are few. SPC is to operate alongside section 106 agreements (which will continue to fund affordable housing and other infrastructure which relates specifically to the development on which they were negotiated). The revenue from SPC will be hypothecated to fund infrastructure identified through the development process within the locality of the development taxed, so that there should be a clear link between developments within the local authority area and the infrastructure identified within the development plan. A share of this revenue will be used for regional projects, which will, of course, have a wider benefit. In this way, it seems, the most if not all of any future infrastructure will be funded by future developments and, by implication, the landowners involved.

There are a number of important issues not covered by the announcement – indeed, they were missing from the far more detailed PGS consultation documents. One is how these provisions will work in the devolved administrations.

It seems clear that if SPC is to be negotiated individually for each development it will not be a tax which is levied uniformly across the country (unlike PGS). The level of funding provided by developers will depend, instead, on the negotiating skills within local planning authorities and, given the perception of experience from section 106 agreements, the success in raising revenue is likely to be patchy across the country. This puts huge pressures on local planning authorities to develop or acquire appropriate skills in order to secure the maximum return for the community. It is also likely to raise concerns about equity of treatment and infrastructure provision across the country which, if not managed carefully, could damage a range of social, commercial and environmental interests.

There also seems to be an underlying “carrot and stick” approach to local planning authorities here. Identify prospective development sites and there will be funding for more infrastructure; with the converse situation being, if such sites are not identified, there will be no funding for infrastructure. NIMBYism will start to cost communities in terms of infrastructure provision, and perhaps rightly so.

But because SPC will be based on the need for infrastructure to support (apparently) only the latent development value identified within the local planning authorities approved documentation, does this mean that those areas which do not have much identified development land will not be funded for any new infrastructure? What about existing needs which have not yet been met – how are they to be funded?

Maybe as the details become clearer, many concerns will be shown to be groundless.

It is clear that the UK experience with betterment taxes has not been a happy one, but I wonder whether SPC will provide us with a better one. There is certainly a lot more at stake.

Frances Plimmer