The Treasury has come under increased pressure to rethink its support for a development tax after Housing Corporation chair Peter Dixon said that it could provoke a “land strike”.
The head of the government’s housing quango said: “I am not sure the land tax idea, advocated by Treasury economist Kate Barker, will work. It is a laudable idea, but it hasn’t worked in the past and I don’t see why it will work now. We may end up in the situation of having a land strike if it goes ahead.”
The Barker review recommended the introduction of a planning gain supplement (PGS) to tax rises in land values triggered by development proposals. The Treasury has promised to outline its plans this autumn.
Dixon said local authorities, which are likely to be asked to bring in the tax, need to be careful that land prices are not inflated by the pressure from the Inland Revenue, for tax revenue, and from the landowner, for greater profit. He said councils had to encourage “lower expectations on land pricing”.
Michael Chambers, policy director at the RICS, said that although his organisation supported the idea of a levy on windfall development profits, there were question marks over the point at which the levy ought to trigger.
He said developers were likely to snap up sites before the levy was introduced to avoid paying it and this could lead to a lengthy delay before it started to bite.