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:
— Telecommunications equipment.
— 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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