A select committee report has welcomed the controversial levy but says additional infrastructure funding will be needed
A committee of MPs has told the government that it needs to do a lot more work to make its controversial development levy work.
The Department for Community and Local Government (DCLG) select committee’s report on the planning gain supplement (PGS), which was published today, supports the principle of the PGS but says it must be part of a wider package of measures to fund infrastructure.
The Treasury has proposed the PGS, which would be levied on top of existing planning gain agreements, to provide the additional infrastructure funding needed to help bring forward housing development.
The report says that the government should do an analysis to compare the costs and benefits of the proposed system and improving existing section 106 agreements
In particular, it says, ministers need to conduct extensive research to work out the rate at which the PGS should be set.
But the committee, which polices the work of the DCLG, rejects suggestions by ministers that local councils should borrow against anticipated PGS revenues to fund infrastructure provision. It says such a move would be "unnecessarily expensive option" and "entirely unattractive".
The report also warns the government must provide up-front gap funding to finance infrastructure provision before the PGS revenues start rolling in.
It said: "A substantial element of government forward funding to enable infrastructure to be provided in a timely manner is essential to the successful operation of PGS.
"We are adamant that the government should not proceed with PGS unless it has made provision to bridge the time difference between the need for expenditure and the receipt of PGS funding."
Committee chairman Phyllis Starkey said: "The committee has examined the issues that the PGS raises and proposed a series of refinements which we expect the government to consider, but we also found that more work needs to be done, by the government, on examining the strengths and weaknesses of the existing section 106 regime."