Treasury explores alternatives to planning gain supplement after pressure from all directions

The Treasury is exploring alternatives to the planning gain supplement (PGS) in response to intense political and industry pressure.

Building has learned that John Healey, the economics secretary, who was tipped for promotion in Gordon Brown’s first reshuffle as prime minister this week, has been canvassing colleagues about alternatives to it.

Doubts about the levy were fuelled by a recent report by the Smith Institute, run by Brown’s close adviser Wilf Stevenson. The paper called for local councils to be allowed to set their own tariffs, rather than having the PGS imposed on them. This would involve developers paying amounts based on the number of homes they plan to build.

Michael Gove, the Conservative planning spokesperson, voiced his party’s opposition to the levy. He said: “We’d abolish the PGS – absolutely. It is insufficiently local and creates a risk of benefit that accrues from a development not being spent there.”

An industry coalition issued a call for the government to rethink the PGS this week.

The British Property Federation (BPF), the Royal Town Planning Institute and British Retail Consortium published a statement warning that uncertainty over the introduction of the PGS, which has already been delayed, is threatening investment in infrastructure.

A paper published by the BPF said local tariffs, like the Milton Keynes “roof tax”, will generate more cash than the central government’s PGS. It added that tariffs in Aylesbury, Chelmsford, Milton Keynes and north Northamptonshire had already generated nearly £1bn for infrastructure investment.

It said: “The threat of the PGS is one of the major blockages in agreeing new tariff schemes.”

Faraz Baber, the BPF’s regeneration and development director, urged the government to use this week’s change of Treasury personnel to make a U-turn on the PGS.