Local Government Association and CBI bury differences to oppose Treasury's planning gain supplement
Councils and businesses are preparing to mount a challenge to government plans for a planning gain supplement.
The Local Government Association, the CBI and the British Property Federation are drafting a letter to chancellor Gordon Brown warning him that the PGS will undermine efforts to increase housing provision.
The alliance between local government and the business lobby is significant given their differences over rates. However, it reflects a shared concern that revenues raised from the supplement, which would tax the rise in land value after a site had won planning permission, will not be used for local infrastructure provision but for national projects.
The BPF, in its submission, said: "The uncertainty that surrounds the PGS is already having an impact on the property market, with land owners holding back the supply of sites."
It also claimed that the document was "riddled with fundamental errors" over the way in which the commercial property market functions.
It said: "Of particular concern is the apparent lack of understanding of the risks and costs associated with the development process and a misinterpretation of the ways in which valuation is calculated in commercial development."
The BPF fears the introduction of the PGS will lead to a hiatus in the property market because developers will refurbish their buildings rather than redevelop them to avoid seeking planning permission.
The Home Builders Federation, in a highly critical response to the proposal, has also called for a "coalition of the willing" to resist it.
The HBF's conference on the Barker report, held last week, heard calls for supplement to be binned. John Stewart, the HBF's director of economic affairs, warned that although the government had promised to set PGS at a modest rate, there was no guarantee that it would remain so in the future.
But at the same conference, the report's author, Bank of England economist Kate Barker, criticised the infrastructure tariff being piloted in Milton Keynes, which many feel is in direct opposition to the PGS.
Barker argued that the "roof tax" could stifle housing provision in a market downturn.
She said that a tariff introduced when land prices were high would form such a large component of the overall sale that it would discourage land owners from bringing sites on to the market.