Whitehall hints that Brown may impose levy on increase in land value triggered by planning permission
Chancellor Gordon Brown is considering imposing a land tax on housebuilders in next week's Budget, according to senior Treasury sources.

This comes as the government prepares to pioneer the use of easier-to-handle "design codes" in its planning bill to speed up housebuilding (see right).

The tax, to be levied on the increase in land values triggered by a grant of planning permission, is expected to be used to fund key worker housing and infrastructure in the northern and southern sustainable communities growth areas.

Building revealed plans for the tax, which would replace section 106 deals, in September 2003. Firms gave the idea a mixed reception.

Alan Cherry, chairman of Countryside Properties, said then that previous taxes had been impractical.

This tax would have a damaging effect on plans to increase housing

Unnamed housebuilder

However, one housebuilder said this week that an uplift tax would be "disastrous". He said: "This tax would have a damaging effect on plans to increase housing."

There have been three previous attempts to introduce a land tax since the war. The last was under Labour in 1976, when it was levied at 80% of the uplift value of the land, later reduced to 40% by the Conservatives, before being scrapped in 1984.

One housing expert noted that land taxes were costly and bureaucratic and had the effect of discouraging landowners from releasing sites on to the market. He said it would also be difficult to determine the "base rate" for the tax, particularly on former industrial brownfield sites.

  • Treasury sources also suggest that Brown may use the Budget to signal his intention to open talks with the construction industry on other issues, such as PFI, sustainability and skills shortages. There were hints of the chancellor's growing interest in construction in the 2003 Budget, when he first unveiled plans to issue permits to overseas workers.