Government to rethink planning gain supplement

Developers and housebuilders have welcomed the government's decision to rethink the planning gain supplement after the policy was panned at a parliamentary inquiry.

John Healey, the financial secretary to the Treasury, last week conceded there would be a fresh consultation on the levy, which is aimed at capturing a proportion of the value added to land when it is receives planning permission.

Presenting evidence to the select committee, Healey said there could be a fresh consultation document before the government publishes legislation to introduce the tax. He said: "My view is that we would have to, and want to, ensure that there is further consultation. I think it would be an essential part of any decision we might take to pursue a PGS."

Roger Madelin, chief executive of developer Argent, welcomed the chance to remodel the legislation. He said: "I absolutely welcome a new consultation. I think there's a realisation that one size can't fit all. There are local solutions, such as the roof tax proposals in Milton Keynes, that can work out better than the current plans."

Stuart Robinson, head of planning at real estate agent CB Richard Ellis, also welcomed the rethink.

He said: "We've seen unanimity of views that PGS is not the way forward. Central government already takes 98% or so of our taxes, and section 106 agreements or planning tariffs are one way to give local authorities power to spend that money."

Nigel Smith, chairman of the RICS regeneration panel, added: "The PGS had some rough edges that clearly needed sorting. The department is trying to find a way to make it work."

Healey's admission follows reports that officials within the Department of Community and Local Government are concerned that the Treasury-inspired proposals will stymie housing growth.

The hearing coincided with the publication of a government study on the section 106 system.

The report, which was carried out by academics at Sheffield Hallam University for the DCLG, said 40% of large residential developments paid section 106 contributions.

The estimated value of affordable housing delivered through planning gain agreements was £600m, about half the £1.2bn figure agreed between councils and developers.

On schemes of all types, there was a £750m shortfall between the sums agreed and the value of contributions delivered.

The report also showed widespread discrepancies between the sums levied, with authorities in London and the South-east winning almost double that of councils in the north of England.

Housing and planning minister Yvette Cooper said the findings reinforced the need for reform.