Allowing councils to pocket the taxes from the sale of new homes would ensure they are much more supportive of development
The government’s biggest planning failure over the past 11 years has been that it has touched on every area of planning, from design quality to speed of decision-making, without tackling the most important question: how do you create a climate in which development is favoured?
Well, now that a Tory government is looking ever more likely, it may be time to ask how the Conservatives plan to create this climate.
Developers seem convinced that the core tenet of Conservative housing policy – abandoning regional housing targets in favour of letting councils set their own – would cut housebuilding.
But during a visit to Sweden’s low-carbon developments in Stockholm and Malmö last week, Grant Shapps, the shadow housing minister, found that both the Conservative council in Stockholm and the Social Democratic one in Malmo wanted to build a large number of homes as quickly as possible. In fact, the Malmö scheme had to be restrained from sucking up all construction resources available in the region. What was the secret?
Sweden uses income tax as an incentive. Swedish local authorities keep the first 28p of every pound in income tax, which gives them a lot of cash to play with. Certainly, it is a lot more than British councils would have if the Conservatives went ahead with their proposal to allow them to keep the first 10 years of council tax raised from new homes.
The Tories now seem interested in allowing councils to bank a local sales tax to supplement this. One might wonder whether the Conservatives might extend such a sales tax to new-build homes. The right to pocket, say, £15,000 for every additional £300,000 three-bed semi sold in Northamptonshire would certainly focus the minds of councillors when they are debating whether to build 5,500 homes in Kettering East.
The right to pocket £15,000 for every £300,000 three-bed semi sold would focus the minds of councillors debating whether to build 5,500 homes
This system would also be a more transparent replacement for the ailing section 106 system, while staving off plans to bring the UK’s VAT exemption on new build into line with the rest of Europe.
The last Conservative government emasculated councils and rolled the state too far back. The result was that many large or complex planning applications had to be rescued by the likes of the Homes and Communities Agency’s advisory team for large applications, because local authorities have neither the skills nor the staff to cope.
If the Conservatives adopt a localist agenda, they will have to put some muscle back into local authorities. A skilled person in charge of planning and environment at a council, as can be found for example in Telford & Wrekin and South Hams councils, is more likely to have the ear of the members than someone taking control from London.
I would urge the new Tory line-up to adopt the Swedish model. There is no doubt that it would take several years to effect the changes to the tax system, during which time the necessary staff and doctrine could be put in place.
No doubt it would be a lot of work, but it could answer the question I posed at the beginning: how do you create a climate in which development is favoured? Tax receipts!
David Birkbeck is chief executive of Design for Homes