Treasury and ODPM at odds over infrastructure funding

In conflict: Brown and Prescott appear to be on collision course

Two government departments are at loggerheads over how to pay for the infrastructure required to support new housebuilding.

The Treasury and the ODPM have left the industry in confusion after a junior minister in Prescott's department encouraged growth area councils to draw up their own roof tax. This has sparked fresh concerns about whether the government favours a roof tax or the planning gain supplement championed by Gordon Brown in December's pre-Budget report.

At a recent meeting of the East of England regional planning panel, junior ODPM minister Baroness Andrews welcomed proposals by councils to draw up their own version of the Milton Keynes infrastructure tariff. Councils including Chelmsford in Essex are coming forward with plans that are, in effect, standard section 106 payments to provide upfront resources for infrastructure.

The Treasury insists that such tariffs can only be interim measures pending the introduction in 2008 of the planning gain supplement - which has led to questions over whether it is worthwhile establishing them.

The Treasury's consultation period on proposals for the planning gain supplement finished at the end of the month and the department is thought still to favour the idea. However, the ODPM, which handles most of the regeneration agenda, is less enthusiastic, as reported in Building (2 December 2005).

The supplement, which would tax the rise in land value after a site had won planning permission, appeals to the Treasury because it increases general taxation. But the ODPM wants money raised to be ploughed into regeneration schemes in the same area.

Planning consultant Roger Humber said: "This could be an indication of a lack of belief that the PGS will come in. There are tensions between the ODPM and the Treasury."

Bill Brisbane, managing partner of regeneration consultant Roger Tym and Partners, said councils ought to press ahead with tariffs.

He said: "The growth areas have to have mechanisms in place. They cannot wait until 2008/09 for the PGS."

Planning minister Yvette Cooper failed to offer reassurances that the sums raised through the planning gain supplement would be returned to the local level at a meeting with senior industry figures this week.