Planning-Gain Supplement (Preparations) Act 2007

The Planning-gain Supplement (Preparations) Bill permits the expenditure for the preparation of the implementation of a tax, which targets the land value increase resulting from the granting of planning permission for development of a site.

The persons who may incur expenditure are listed as: The Commissioners for Her Majesty’s Revenue and Customs, the Secretary of State, and a Northern Ireland Department.

Treasury spokesman John Healey introduced the debate for the second reading of the Planning-Gain Supplement (Preparations) Bill in the Commons.

Responding to early questions regarding the consequences of a planning gain supplement on the supply of land, Healey stressed the “modest level” at which any planning gain supplement would be set.

In clarifying concerns raised by Mark Lancaster (Con, Milton Keynes North East) about the distribution of the funds from the supplement, Healey said:

“We have said that at least 70 per cent. of any revenue raised in a local authority area through a planning gain supplement would be recycled to that local authority area, and that the remainder would then be available to regions for developing the strategic infrastructure necessary to support developments".

Discussing the application of the supplements, though excluding small scale home improvements, Healey commented that small residential developments covered by s.106 agreements would be covered by the supplements.

Liberal Democrat shadow chancellor of the exchequer Vincent Cable asked about reports that the Treasury was considering a levy of 20 per cent. Healey responded that the government has not yet decided on the level.

Sir Patrick Cormack (Con, South Staffordshire) asked about the cost implications of setting up an IT system to handle the levy. Healey replied, saying that “the early estimate of the cost of designing and building the administrative and IT systems needed for PGS prior to its introduction is approximately £40 million”.

Shadow paymaster Mark Francois responded on behalf of the Conservative Party, emphasising the conservative party’s opposition to the Bill. Giving the reasoning behind this, Francois spoke about concerns that the money from the supplement would be topsliced by central government, lessening the impact on local communities. Francois also criticised the possibility of the supplement being administered at a regional level, and the impact the supplements would have on affordable housing.

Vince Cable criticised the lack of specific detail regarding the levy rate, due to the level of the levy being “fundamental” to the debate.

Cable commented that section 106 agreements and capital gains tax could be improved to “tax betterment”, instead of introducing the supplements.

Housing minister Yvette Cooper concluded the debate, commenting on the shortcomings of section 106 agreements:

“It is difficult to apply section 106 to small sites without creating burdens for local authorities or developers. We should recognise that the evidence shows that only 40 per cent. of major residential planning permissions included a section 106 agreement. That means that 60 per cent. of major housing developments had no section 106 agreement in place at all. For the smaller sites, 90 per cent. had no affordable housing or infrastructure contribution included. That is a problem.”

House of Commons

First reading: December 12 2006 [HC Bill 37]

Second reading: January 15 2007

Planning-Gain Supplement (Preparations) Bill Committee:

• 1st sitting: January 30 2007
• 2nd sitting: January 30 2007

Remaining stages: February 20 2007

House of Lords

First reading: February 21 2007 [HL Bill 43]

Second reading: March 5 2007

Third reading: March 19 2007

Royal Assent: March 20 2007