Miliband seeks to allay fears over planning gain tax

Communities minister David Miliband has attempted to reassure the industry that the planning gain supplement is workable, despite growing opposition that now includes former construction minister Nick Raynsford.

Miliband pledged this week that all of the funds raised by the supplement would be spent on infrastructure within the region in which it was raised.

In a speech at the Local Government Association's sustainable communities conference in Birmingham, he said: "The majority will be spent at the local level; the rest will be spent at the sub-regional level."

The wording of the Treasury's consultation paper on the supplement, published before Christmas, had sparked speculation that central government would keep a share of the revenues raised.

The news came as it emerged that former housing minister Nick Raynsford led a delegation last week to current planning minister Yvette Cooper to voice concerns at the PGS. The delegation, consisting of Greenwich council and developers Quintain and Lend Lease, is the first sign that MPs and the property industry are uniting against the proposals.

Raynsford, who was responsible for housing and planning as well as construction during Labour's first two terms, said he feared the supplement would not work as intended because it would slow brownfield development.

He said: "My concern is the PGS is a blunt instrument, which may work on greenfield but is going to cause problems in brownfield areas."

Raynsford predicted that the supplement would reduce investment in regeneration. Any uplift in value resulting from planning permission would take years to recoup because of the inherent difficulties of remediating brownfield sites, he said.

The PGS is going to cause serious problems in brownfield areas

Nick Raynsford MP

He added: "The PGS may work in areas where there is some windfall generated as a result of planning consent from a greenfield site, but we are now talking about an environment where more than 65% of development is on brownfield."

Raynsford, whose claims for a Cabinet post were championed by his former boss John Prescott during last year's post-election reshuffle, said it was right to secure a cut of developers' profit to help pay for infrastructure. However, he added that recent changes to the planning gain rules, making it easier for councils to levy tariffs to pay for infrastructure, should be given time to bed down.

At the conference, Miliband's pledges failed to reassure David Hill, chief executive of Ashford council, which is one of the government's South-east growth areas. He urged the minister to "knock on the head" the planning gain supplement as a way of funding vital infrastructure.

Hill told the LGA conference: "The PGS is more than likely to produce less funds overall for infrastructure than conventional section 106 and redirect a proportion of it elsewhere away from where the resources are needed."

Miliband responded: "It would be unwise to knock something on the head that is going to deliver greater investment into infrastructure."

But the minister added that although most revenues from the supplement would remain in the local authority where they were raised, infrastructure items such as sewage needed to be delivered across a wider area.

Gideon Amos, Town and Country Planning Association chief executive said in his speech at the conference, that the Treasury was working to look at how to make sure locally raised funds were used locally.