Archived decisions
APPENDIX 2
That the Cabinet approved the following general principles and detailed responses to the specific questions posed in the consultation document as the basis for the County Council's response:
1 General principles:
(a) The Council believes that the likely revenue effect to the Exchequer can be more simply dealt with by reviewing the Capital Gains Tax regime, which works effectively at present. This could support increased spending on infrastructure of local importance. In addition, the Council believes infrastructure requirements at the county level would be delivered more effectively through a locally collected and administered tariff system along the lines of the Milton Keynes approach;
(b) considers that, if a Planning-gain supplement is introduced, the funding should be 100% reallocated locally to provide local infrastructure and other local needs currently provided through planning obligations, since the additional revenue will be insufficient to meet the overall shortfall;
(c) considers that, if a Planning-gain Supplement is introduced, local authorities should be exempt from paying it where they are developing land for operational purposes or to re-invest in infrastructure;
(d) considers that the Government should explain why affordable housing would continue to be provided through Section 106 Agreements; and what impact this would have on funding for other major infrastructure, such as transport, which would come from Planning-gain Supplement; and
(e) believes that the Government should commit to publishing an annual statement setting out the value of Planning-gain Supplement collected and Planning-gain Supplement funded investment by region and by county/unitary area; and
(f) regrets the lack of detail in the consultation document which prevents a full understanding of the Government's proposals and thus precludes the County Council from making a comprehensive response and calls on the Government to publish more detailed proposals to enable more focused comments through a further consultation.
2 Detailed responses to the specific questions posed in the consultation document.
Q 2.1 What further clarifications to the definitions of planning value and current use value (as described in Box 2.2) would be helpful to provide further certainty to developers?
Planning value and current use value are not as clear cut as is implied in the consultation document. Planning value does not arise solely at the point at which planning permission is granted, but may relate to the allocation of land in a development plan. Indeed, this may be a gradual process with land increasing in value in stages throughout the development plan, and subsequently development control, processes. Even if full planning permission has been granted, new or revised applications may be submitted for a site, or reserved matters may need to be approved, resulting in further changes in the value of the land.
Definitions of planning value and current use value should be expanded to exclude variations in land value generated by the development plans process or hope value. Where full planning permission is granted more than once on the same site, planning value should be based on the planning approval which is actually implemented.
Q 2.2 How can the self-assessment of PGS valuations and liability be made as easy to comply with as possible?
There is a danger that self-assessment will encourage overstatement of Current Use Value and understatement of Planning Value or that the costs of development are over-estimated in order to minimise PGS liability.
The self-assessment of PGS valuations and liability can be made as easy to comply with as possible by providing simple and clear proposals and processes with little room for any ambiguity about who needs to do what and by when. Lists of un-enhanced land values should be maintained which could form the basis of the assessment. An efficient arbitration process should be introduced to handle disagreements and help prevent abuse of the self-assessment process.
Q 2.3 What information on the condition of land at the granting of full planning permission should be made available to the chargeable person?
Local Planning Authorities should be required to make available relevant information where appropriate.
The information should include details of the actual use at the relevant date, details of extant planning consents, relevant planning policies and any "unusual" planning circumstances or exceptional development costs (for example where land is known to be contaminated) which would affect uplift value.
Q 3.1 Should payment of PGS occur at the commencement of development or another point in the development process?
The most practical trigger for payment of PGS would be at commencement of development. This would, however, cause difficulties where infrastructure needs to be provided up-front before the development is occupied, for example road improvements and, since commencement of development is driven by the developer, it would make it difficult for infrastructure providers to plan properly. Where large sites are concerned it may be more appropriate for PGS to be paid in tranches relating to stages of the development, although these would need to be index-linked.
PGS should be paid on the commencement of development although there should be sufficient flexibility to allow advance payments to finance infrastructure that is required up-front. Consideration should be given to allowing staged payments where appropriate, for example in relation to large development sites. In effect, a similar approach to the current system in this regard.
Q 3.2 Should the Development Start Notice be submitted to the local authority or HMRC?
If HMRC is the body responsible for collecting PGS monies, it needs to be informed of the commencement of development as soon as possible. There would, however, be merit in the local authorities undertaking this in view of their local knowledge and the importance to them of information relating to the implementation and monitoring of development proposals. Whichever body actually receives the Development Start Notice, a system should be put in place whereby the other body is either sent a copy of the Notice or is otherwise informed at an early stage that development has commenced.
Q 3.3 How should the proposed approach to compliance be made to fit with larger, phased developments?
On larger developments it would be unreasonable to expect developers to pay the whole PGS at the start of the development process; this could prevent land from coming forward and might lead to developers applying for planning permission and developing large sites in a piecemeal fashion, at the expense of sound planning.
With larger, phased developments PGS should be payable in tranches. It should be assessed at the start of development, but the system should allow for the amount of PGS to be amended in the event that revised planning applications are submitted and approved.
Q 4.1 To encourage regeneration, should a lower rate of PGS be applied to brownfield land? What might be the drawbacks?
This is difficult to answer without a clearer definition of brownfield land. Encouragement should be given to the redevelopment of previously developed land; however where the condition of the land (for example contamination) increases the costs of development, this would normally be reflected in its value, so it would be unnecessary to apply a lower rate of PGS. If brownfield land includes easily developed sites such as garden land, a lower rate should not apply as it would place such land under greater pressure for development, leading to the increased loss of important open areas and higher-density development offering less potential for wildlife habitats. The infrastructure costs associated with developing brownfield land are not necessarily less than those for greenfield sites, and indeed could be more. If a lower rate of PGS was applied, this could result in insufficient funds being available for infrastructure provision.
It is unnecessary to apply a lower rate of PGS to brownfield land as higher development costs should be reflected in land values. A lower rate of PGS could result in insufficient funds being available for essential infrastructure. If variable rates of PGS were to be introduced, a clear definition of different types of brownfield land would be required in order to prevent abuse and to discourage the over-development of infill sites and garden land.
Q 4.2 How should a PGS threshold for small-scale development be set? What factors should be considered?
There should not be a threshold for small-scale development, as all new development has implications for infrastructure and it could result in a significant lack of infrastructure investment in areas characterised by small-scale development such as many rural areas. However, there is a need for a broader class of developments which should be exempt from paying PGS, such as extensions to commercial and industrial premises to allow for business expansion. Development by public authorities for operational purposes should also be exempt from paying PGS as it is for precisely this type of development that PGS is collected in the first place. This should include sales of land for housing to release higher land values for investment e.g. in a new school on land nearby.
Q 5.1 Does the development-site environment approach proposed here represent an effective and transparent means of reducing the scope of planning obligations?
The development-site environment approach could create problems in respect of essential off-site infrastructure development and mitigation measures. Local transport infrastructure such as road and junction improvements, traffic management measures, cycleways, footpaths and bus services would fall outside the scope of planning obligations and it could be difficult to secure their provision at an early enough stage in the development process. For example, a superstore development which required off-site highway works could no longer be required to sign a legal agreement for such provision. The County Council would be dependent on the local planning authority imposing a condition prohibiting completion of the development prior to provision of the works. Off-site mitigation and other measures (eg waste management) do not seem to fall within the scope of either the proposed PGS or the retained planning obligations system despite the fact that these matters are an increasingly important element of sustainable development.
At present these works are sometimes undertaken directly by the developer rather than dealt with by payment of a contribution. The current proposals do not appear to allow for the provision of land rather than a financial contribution to enable the provision of essential facilities, such as community halls, schools and health centres. On large sites these may be provided within the development site, but on occasions they are provided off-site by means of land swap or purchase.
The development-site approach does not make adequate provision for the provision of critical off-site infrastructure or mitigation measures, which are essential in order to render the development proposal acceptable and sustainable, neither does it provide adequate scope for off-site provision of facilities in order to maximise site values (eg. off- site green space).
Q 5.2 How should infrastructure no longer funded through planning obligations be provided, including through the use of PGS revenues?
Whether a tariff based approach or PGS is pursued, it will be essential for each area to have an infrastructure delivery plan which clearly identifies what must be delivered by whom, and the funding arrangements/ expectations. Early work by Roger Tym for the South East County Leaders has given clear indications of potential levels of developer funding and the scale and relative significance (eg between transport and affordable housing) of funding required to deliver adequate infrastructure to support sustainable development and communities in the South East. This would suggest that all uplift value would be required to meet these needs rather than the modest rate suggested for PGS. Where infrastructure is funded through the use of PGS it is essential that the appropriate payment is received quickly from the collecting body in order to ensure timely provision.
Q 6.1 How should PGS revenues be recycled to the local level for local priorities?
It is essential that "local" is defined, especially in two-tier local government areas. PGS revenues should be recycled to the local level for local priorities by way of grants in direct proportion to revenues raised. Ideally, 100% of PGS raised should go to the local authority areas where the development takes place, with an appropriate proportion going to other local infrastructure providers such as health authorities. In more prosperous regions where land values are higher, so too are other costs such as building costs and salaries and therefore PGS income should not be re-distributed from areas of high land value to areas of low value. The South East, which is the area facing significant growth and development pressure already makes a significant net contribution of taxes to the Treasury, to extend this through PGS re-distribution would not be equitable or acceptable, and would run contrary to the Government's aim of making development more acceptable and sustainable by ensuring adequate funding for infrastructure.
Local Development Frameworks (LDFs) and Local Transport Plans (LTPs) should form the basis for the allocation of PGS, in that they are the vehicles by which land is allocated for development and are the most appropriate means for identifying associated infrastructure requirements.
Q 6.2 How should PGS revenues be used to fund strategic infrastructure at the regional level?
Regional Spatial Strategies (RSS) and LDFs should form the basis for identifying infrastructure needs and associated funding at the regional level. PGS income, however, should not be used directly to fund infrastructure at more than the local or sub-regional level, until it has been demonstrated that local needs have been addressed. This could help achieve delivery as it would reduce the complexity of funding streams. If a surplus did exist, a corresponding proportion of the PGS grant raised locally could be assigned to the regional level to combine with national funding sources.
Q 6.3 How can local and regional stakeholders, including business, help determine the strategic infrastructure priorities most necessary to unlock housing development?
Local and regional stakeholders, including businesses, can help determine the strategic infrastructure priorities within a locality most necessary to unlock housing development by active participation in and contribution to the developments plans process, i.e. RSS, LDFs and also LTPs. It is via these mechanisms that the proposals for and details of housing growth are identified and thus related funding from PGS should be directed to the appropriate local authorities based upon the outcome and development proposals of these democratic planning tools and processes, upon which planning approvals and development will ultimately be based. To add another layer of consultation and further bureaucratic processes on top of these would be unacceptable.
Local and regional stakeholders should help determine the strategic priorities most necessary to unlock housing development by means of the public consultation processes embedded in the development plans process.