The industry launched a campaign three years ago to persuade the government to junk plans for a planning gain supplement and, lo and behold, it succeeded. Now we need to learn the lessons
Although Alistair Darling did not directly mention the planning gain supplement (PGS) in either his pre-Budget report or his Comprehensive Spending Review speech, the chancellor used the occasion to announce a decision that will affect all sections of the construction and property industry. Not only has the government cancelled plans for the unpopular supplement, but it has accepted the recommendations of an all-industry group, led by Sir Stuart Lipton, to introduce a tariff system.
The reference to the supplement is buried in the documents issued alongside the pre-Budget report, and it takes the form of a reference to Kate Barker’s 2004 Review of Housing Supply. It was this document that first proposed the introduction of the PGS, the purpose of which was defined as a “levy on development to raise additional resources to invest in the infrastructure needed to support housing growth”. The proposal was to tax the increase in the value of land generated by the grant of planning permission, and it was essentially a rehash of the ineffective development land tax of the seventies, and earlier.
The report goes on to say: “Following extensive consultation, the prime minister indicated in July 2007 that the government would be prepared to defer legislation to introduce PGS if a better way could be found to ensure that local communities received more of the benefits from planning gain, to invest in necessary infrastructure and transport … Following discussions with key stakeholders, the government will legislate … to empower local planning authorities in England to apply new planning charges to new development, alongside negotiated contributions for site-specific matters … Legislation implementing PGS will therefore not be introduced in the next session.”
In other words, what is being introduced is a system of locally negotiated tariffs, not dissimilar to existing section 106 contributions, to finance local infrastructure.
So what happened to persuade government to do such a U-turn? Governments do not usually pull back on tax proposals, nor do they normally allow industry groups to tell them what they will or won’t pay.
What this short passage in the pre-Budget report conceals is the story of the exemplary way in which the property industry got its act together
What this short passage in the pre-Budget report conceals is the story of the exemplary way in which the property industry got its act together: first, to persuade the government to delay introducing the PGS; then to work up a viable alternative; and finally to convince the government that the alternative would, if implemented, have the support of the major players in the industry. It’s a lesson that other groups and bodies would do well to heed.
Working with the British Council for Offices, the British Property Federation and organisations such as the House Builders Federation, Lipton masterminded this three-year campaign. He eventually gained support across the property industry for a tariff-based approach. The success of this campaign shows how working together to develop a coherent case and working with rather than against the government machine can win the day.
Can we find similar examples of the construction industry collectively seizing an issue, working on it together, and persuading government how to reform for the benefit of all? In short, no. The nearest the industry has got to this model was in response to Sir Michael Latham’s 1994 report Constructing the Team, which set the agenda for the Construction Act. But here the action was prompted and led by government, with the industry grudgingly co-operating. Since then we have had a series of examples of partisan lobbying on narrow issues that do nothing for the industry as a whole: for instance, subcontractors taking on the contractors over payment reforms, contractors taking on the government on the cost of PFI bidding, consultants taking on the clients (again) over joint and several liability and the industry laying the blame for its failings on health and safety on clients.
The construction industry seems capable of unanimity only in identifying its ills! Can the sectors not take heart from our success over PGS, and resolve to co-operate more closely in the future on finding solutions?
Ann Minogue is a partner in solicitor Linklaters