Government drops PGS in favour of “Planning Charge”

Published: 14th December 2007

After a period of nearly two years the Government has decided to replace its original proposals (first published in December 2005) for a new land tax involving a Planning Gain Supplement ("PGS") in favour of a new "statutory planning charge".

In the Chancellor's Report and in a statement by Yvette Cooper, the Minister for Housing, on 9 October 2007 it was announced that the Government would not proceed with PGS, but instead would legislate in the forthcoming Planning Reform Bill for a new statutory planning charge to enable councils to benefit from planning gain to support new infrastructure and housing. The idea is that Regional and Local policies will identify the infrastructure, such as transport, hospitals, schools and community spaces needed to support new housing development. This will then be paid for by a new planning charge or tariff imposed on new developments, similar to that already used by Milton Keynes (known locally as "the roof tax"). In 2005 Milton Keynes Council adopted a policy of standard tariffs calculated on the basis of the number of housing units, or the floor area of commercial developments. Current tariffs are £18,500 per dwelling and £67 per square metre of commercial floorspace.

The Government has indicated that this new charge would be in addition to the provision of affordable housing and other site specific issues currently dealt with by Section 106 Obligations. The detailed legislation is yet to be introduced, but it looks as though apart from a fairly low de minimis threshold, all new housing and commercial development above that threshold will be subject to the charge.

It is not known whether this charge will be set nationally, or at Regional or local level, but if the "tariff" is published in advance at least developers will know up front what they should expect. Again, it is not known whether the charge will be levied when the Planning Permission is granted, or as was proposed with PGS, when the development commences. Nor is it known whether the charge would be collected through an extension of Section 106 Obligations, or whether this would be collected separately as a tax by each Local Planning Authority.

Further details will appear in this newsletter as and when they are published.