Point of payment

34. The PGS consultation document indicated that the Government intends that PGS liability would be established at the point at which full planning permission is granted but that payment would not become due until development had started.[68] The Government argue that "Requiring payment of PGS at the commencement of development would better address [the] cash flow problems […] that would arise if the payment of PGS was required earlier in the development process" and that "at the point development commences the developer and the landowner(s), if not now the same person, share an economic interest in the benefits deriving from development. Requiring payment of PGS when development commences therefore ensures that the chargeable person is most likely to be the active party implementing the planning permission".[69] None of our witnesses favoured requiring payment at the point at which full liability is established. We agree with the Government that to do so would be impractical.

Definition of commencement of start of works

35. If the commencement of development is to be the trigger for PGS payments, it is important that all concerned agree, precisely, what constitutes 'commencement of development'. The Government propose that the definition of commencement of development provided in the Town and Country Planning Act 1990, s54(4) should be used as the trigger for PGS payments.[70] Some witnesses questioned whether this definition of commencement of development was sufficiently unambiguous. English Partnerships, for instance, questioned whether remediation work or access improvement would count as start on site.[71] We recommend that the Government and stakeholders reach a mutually agreeable and robust definition of commencement of development prior to the introduction of PGS.

Deferred payments

36. The proposals require developers to make their PGS payment before they realise any value from their development and at a time when development work itself will require considerable investment. Several witnesses told us that, as a result, the cash flow implications of PGS were a major concern particularly if initial development comprised expensive demolition or decontamination works before construction could begin.[72] The HBF, for example, explained that

in cases where a large site is broken down into phases, each with a separate detailed planning permission before work commences, payment of PGS would be automatically phased. However, it is sometimes in the interests of developers to submit a single planning application for a large site, even though the site may be developed over many years. If so, the PGS liability would be very substantial […] coinciding with the usually substantial up-front on-site infrastructure payments required for a housing development […] PGS could influence the way in which sites were submitted for planning and developed.[73]

English Partnerships argued that "the payment should be phased; it should not all be up front at the point of starting on site […] it should be 25 per cent up front and 75 per cent upon completion so you can give an incentive through the operation of the system for the developers to come forward with sites".[74]

37. The PGS consultation document indicates that "the Government may want to consider allowing developers to pay their contributions in instalments over reasonable time periods so as to ensure that house builder cash flow pressures are sufficiently accounted for".[75] We recommend that the Government permit phased PGS payments particularly in relation to those large sites where development itself is phased.

38. Permitting deferred payments would, however, increase the time delay between development and the availability of PGS receipts to finance the infrastructure required to support those developments. We discuss the issues surrounding the timing of provision of infrastructure in detail below (see paras 51-7) but for the moment we note that one implication of a deferred payment scheme would be to increase the gap to be bridged by forward funding and therefore increase the size of the initial dowry required from Government.

Revenue collection

39. The benefits of central Government collecting PGS revenue and redistributing the funds raised to local authorities has been questioned but the majority of our witnesses favoured this arrangement. Because retention of a portion of PGS revenue by central Government for strategic infrastructure provision is a key element in the PGS proposals, we concur that it is appropriate for central Government to collect PGS payments.

69   Planning-gain supplement, paras 3.5-6 Back

70   The Town and Country Planning Act 1990 defines "material operation" as any work of construction in the course of erecting a building; the digging of a trench which is contain foundations, or part of foundations, for the construction of a building; the laying of any underground main or pipe to the foundations, or part of the foundations, of a building or to any such trench; any operation in the course of laying out or constructing a road or part of a road; or any change in the use of any land which constitutes material development. Back

71   Ev 30 Back

72   Ev 22, 105 Back

73   Ev 114-5. See also, for example, responses to the Government consultation from Lawrence Graham and The Grundon Group. Back

74   Q 153 Back

75   Planning-gain Supplement Consultation, para 1.6 (Box 1.1) Back