BPF blasts government over PGS

In a damning response to the consultation, the BPF has told the government that Gordon Brown’s proposals to raise a windfall tax on land which has just received planning permission could promote a culture of land-banking and lead to further increases in house prices.

Liz Peace, BPF chief executive, said: ‘The BPF has maintained all along that PGS is not just unworkable but that it would negatively affect the economy. Our opposition is not based upon a reluctance of the property industry to pay its fair share for the provision of infrastructure, simply that we do not see PGS as a viable solution, due to the numerous negative consequences outlined in today's response.

‘At a time where ministers are setting out numerous targets to improve the supply of housing and encourage sustainable development, it seems inconceivable that so much public money can be wasted consulting on a tax which successive Labour governments have tried and failed to introduce because of its impracticality.’

The BPF's highlighted key reasons why PGS will not work:

Brownfield development (previously developed sites)

While it may be easy to apply PGS when a greenfield site is sold for housing development (as originally suggested by Kate Barker), PGS will discourage re- development within existing property ownership.

Delivering infrastructure

PGS would be centrally collected and redistributed back to local and regional areas. This creates two problems. Firstly, the vital link between a developer and the community is eroded. Secondly, developers and communities will have no certainty that development-critical infrastructure, currently provided by developers, will be delivered on time. Planning permission could be appealed against if supporting infrastructure detailed in an application fails to materialise. This would lead to higher costs and further delays.

Paying for infrastructure

There is no empirical evidence to show that PGS would provide the revenue required to finance development-critical infrastructure. Developers could be forced to pay twice for infrastructure simply in order to make their development viable.

Delays over valuation

Delays arising from disputes over self-assessment of PGS liability will delay regeneration projects across the country. Extra financial burdens will be placed on developers. Valuing land is not a precise science; this is likely to result in protracted legal proceedings challenging PGS valuations.

Crude valuation mechanism

PGS is designed to capture a proportion of land value uplift that occurs at the grant of full planning permission. But for some types of development, this is not the sole catalyst for the creation of value. The nature of the market means that land value can increase even before planning permission has been sought.

However, due to the crude valuation mechanism which PGS will use, it is assumed that the value uplift in land is solely created by planning permission.