Planning gain supplement scrapped

You are not alone! Many developers have been taking a keen interest in the proposal to introduce Planning Gain Supplement (PGS).

It relates to the increase in value that land gains when permission is granted for new development and the extra investment needed to build necessary road improvements and other infrastructure to support the development.

The PGS proposal meant developers or land owners would pay directly to the government a proportion of the uplift in the land’s value once developed.

Currently, there is no general tax on development, although developers are sometimes asked to contribute to specific local projects such as a road improvement or an extension to a school. It is often referred to as “planning gain”.

The general opinion was that the system worked well, with liabilities determined and spent locally.

The opposition to PGS was powerful and widespread. The major property and lobby groups said it would frustrate development at a time when the Prime Minister was trying to increase significantly the number of new homes being built.

It seems the government has listened because it has scrapped plans for PGS but sadly not before millions of pounds had already been spent on new computer systems.

Although PGS will not go ahead, we will still have some sort of local taxation system. Individual local authorities will set a local development tariff to claw back some of the profits from development.

This tariff system has been working successfully for some time in Milton Keynes, where it’s known as the ‘roof tax’. The government wants this scheme to operate nationwide.

Each local authority will have to work out its infrastructure needs on which it will base its local tariff, with a minimum threshold.

In the North East we have major infrastructure problems on the A19/A66 around Middlesbrough, Stockton and Darlington, and the A1 Western bypass in Gateshead.

Establishing who will contribute and by how much towards resolving these issues is not easy, especially when regional improvements benefit us all.

For example, should those behind developments in Sedgefield contribute towards a better infrastructure in the Tees Valley? Likewise, should home builders on the edge of Durham support improvements on Tyneside? 

The government has indicated that councils will set the tariff locally as part of the new Local Development Frameworks and developers are advised to watch progress on these carefully. We have direction moving forward, but there is still uncertainty ahead.