Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Written Evidence


Memorandum by London First (PGS 05)

  1.  London First is a business lobby group established in 1992 to improve and promote London. London First lobbies for the infrastructure needed by the capital to retain its a world city status, to stimulate growth and facilitate regeneration. An effective planning system is an essential part of this to facilitate the development needed to accommodate economic and population growth in a sustainable way.

  2.  London First welcomes the Government's recognition in the Planning Gain Supplement (PGS) consultation document that crucial infrastructure investment should be funded by taxation. Infrastructure investment is critical to support and stimulate growth. London needs considerable investment in a range of infrastructure, including transport, to support forecast population and economic growth. Most critical among this is Crossrail which is urgently needed to support London's world city functions in central London and facilitate regeneration in the east. We welcome the inter-departmental review as part of the Comprehensive Spending Review assessing what infrastructure is needed to support growth.

  3.  London First does not support the proposal for PGS as we do not believe that it will aid more and better development, speed up planning decisions or improve the quantum or certainty of infrastructure funding. We also consider that whilst Kate Barker's proposal was predicated on, and could work for, greenfield urban extensions, PGS would not work for mixed use schemes on brownfield sites in a city like London.

  4. London first has responded in full to the consultation on PGS [appendix one]. Our response is summarised as follows:

    —  Land value uplifts are already captured through the existing taxation regime.

    —  It is more appropriate for the occupiers of developments to pay for the infrastructure they use rather than seeking to fund it through the development process which represents a low tax base.

    —  PGS represents an inefficient tax which would be expensive to administer. Although the purpose is to tax land value uplifts, it is charged to the developer and assumes that the cost will be passed on to the landowner.

    —  PGS is predicated on very specific examples of residential development on greenfield sites previously used for agriculture where a large increase in land value is generated and easily identifiable. It does not work for mixed use developments on brownfield sites in areas such as London. It should therefore be limited to greenfield cases.

    —  The rationale for and structure of PGS relates to residential development which is one class of development. Government policy promotes mixed use development. Other types of development such as commercial in London are critical to the capital's competitiveness and nation's economic well-being. The effects and impacts in these cases have not been considered.

    —  The proposal requires developers to pay the tax before any value is realised at the same time that they have to invest considerably in the development process.

    —  It is not apparent how infrastructure needed to support development and ensure it is sustainable, such as education and health facilities, will be delivered in a certain and timely manner. Any delay in delivery could undermine the Government's objectives of creating sustainable communities by increasing the strain on existing infrastructure such as schools and the transport system.

    —  In practice Section 106 is unlikely to be scaled back meaning that developers will be expected to pay considerably more. Negotiations are also unlikely to be quicker.

    —  The cost of PGS and Section 106 is likely to make many marginal developments unviable and will therefore serve to undermine the Government's objectives of increasing housing supply and encouraging regeneration. It will also lead to an increase in refurbishment rather then redevelopment, reducing investment in the built environment, undermining London's competitiveness and reducing productivity.

COMMITTEE INQUIRY QUESTIONS

Factors which should be taken into account in determining the rate of the supplement and the level at which it should be set

  5.  The rate of PGS should reflect the following:

    —  The need to increase housing supply and therefore encourage more development: the Mayor is currently proposing to increase London's annual housing target by 36% to seek to meet the needs of population growth and the unmet backlog of demand. Policy should therefore be seeking to encourage rather than discourage further development. Increasing the taxation on the production of a good is unlikely to increase its supply.

    —  Planning policy which encourages mixed use brownfield regeneration which is more complex and costly than greenfield residential development.

    —  The need to encourage investment in the built environment to improve the environment as well as improve productivity.

  6.  If PGS was to be introduced under the rationale of taxing development to fund the infrastructure needed to support that development, those developments that do not create demands on existing infrastructure or require new infrastructure should be not be required to pay PGS.

  7.  The application of PGS to minor development is likely to deter development and act as a disincentive to invest in the existing built stock. In London where the quality of the commercial stock is critical to attract internationally mobile corporates and the quality of the public realm and other developments such as retail is crucial to tourism, this could have a significant adverse economic effect.

  8.  If PGS were to be introduced, a minimum threshold should be set to exclude development not creating demands on infrastructure and to ensure that development is still encouraged.

  9.  The following should therefore be excluded from PGS:

    —  Advertisements.

    —  Signage.

    —  Telecommunications equipment.

    —  Change of use.

    —  Temporary uses where planning permission is required.

    —  External improvements such as to cladding/design/public realm.

    —  Internal works where planning permission is required.

    —  Where the increase in net gross floorsapce is less than a specified %.

    —  Variations of conditions such as hours of operation where a new planning permission is issued.

    —  Infrastructure development such as landscape works, roads, rail-linked development, waste, energy.

    —  Development undertaken by or for public bodies.

How the supplement should reflect subsequent uses such as social housing

  10.  We consider that the likely impact of PGS will be negative on social housing supply. The supply of social housing is in most cases dependent on the provision of market housing, as it is secured through the planning process. If development becomes unviable because of the imposition of additional taxation in the form of PGS this will reduce both the supply of market and social housing, exacerbating existing shortages.

How the revenue from the supplement should be distributed and appropriate uses

  11.  If PGS were to be introduced the revenue should be collected regionally and distributed to strategic infrastructure necessary to support and promote growth as well as to address local impacts of development. National collection with intra and inter-regional redistribution would be bureaucratic adding large and unnecessarily administration costs. PGS could only ever contribute to broader Government infrastructure investment and would not be able to replace it.

  12.  At a time when Government policy is to increase development and community involvement in the planning process, it is critical that communities see direct benefits from development, beyond the development itself. The Section 106 process has been effective at visibly demonstrating community benefits. Without this, opposition to development is likely to increase.

  13.  If communities are uncertain when crucial infrastructure will be delivered to support new development such as schools, healthcare or transport investment, concern over strain on local infrastructure will increase opposition to development. The Section 106 process clearly ties provision of new infrastructure (physically and through funding) to the development process. It is unclear how PGS will ensure timely and certain delivery of key infrastructure, an essential prerequisite to sustainable development.

Whether and, if so, how the planning gain supplement should be used to encourage development of brownfield sites

  14.  The rate of PGS should at the very least be substantially reduced for brownfield sites. More appropriately they should be exempt. This would reflect planning policy in promoting brownfield development as well as the increased cost and complexity of such developments.

  15.  The cost of assessing the liability of a brownfield scheme is likely to be higher because of the inherent complexity of development.

The potential impact of the supplement on s106 arrangements negotiated through the planning system

  16.  We do not believe that Section 106 negotiations will be quicker as a result of PGS or in practice will be "scaled back." The Section 106 process has improved considerably over the past couple of years including earlier and better co-ordinated negotiations. Whilst practice could be improved further, we remain of the view that negotiated agreements reflecting the nature of the development and its impacts create better agreements and better development. The Government might consider that targets for Planning Delivery Grant be linked to the conclusion of Section 106 Agreements as this marks the point at which the planning consent is implementable, rather than as at present the point of resolution to grant.

  17.  Under the proposed new regime disputes are likely to centre on what is appropriately covered in the "development site" approach as well as how matters raised in the Transport and Environmental Assessments are addressed.

  18.  Negotiated planning obligations create better development and better Section 106 Agreements which are reflect individual site circumstances. Where Section 106 Agreements can significantly delay development it is frequently because the local authority does not support the principle of development and uses the process as another mechanism for frustration and delay.

  19.  How infrastructure necessary for the development, but funded through PGS, will be delivered in a timely and certain manner is a critical issue. This is particularly important for matters raised in Transport and Environmental Impact Assessments and where addressing them is a condition of planning permission. If a condition links infrastructure provision to phasing failure to provide, for example additional school facilities would stall development.

  20.  Section 106 agreements may include two-way obligations such as to require the local authority to provide crucial infrastructure such as school places. How this would be achieved from PGS funding requires explanation.

  21.  Timely provision of new education or health infrastructure will be critical for a new residential development to be sustainable and for its occupants, a key Government objective. It will also be critical in allaying concerns of existing residents who may oppose development if they are concerned about local school and health provision. To be sustainable and viable any PGS proposal must address this.

  22.  Major new developments may include new schools, health centres or transport facilities. How this will be addressed under scaled back Section 106 and through new funding arrangements from PGS is unclear.





 
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