“Planning” reports on line today that the CBI backs Vince Cable’s two stage auction system to replace the way planning permission is granted. “Under the system, a council would ask any local landowners to submit sealed-bid letters stating the price at which they would be willing to sell their land. This price would be binding and councils would be given the right to buy that land for a set period. In the second stage, the council would choose which land offered they would like to see developed, would grant that land planning permission, and auction it to developers. The system would allow local authorities to capture almost all of the increase in land value created by allowing development.”

Now this rings a bell. Here is the Wikipedia summary of the system originally introduced by the Town and Country Planning Act 1947:

“The Act provided that all development values were vested in the state… . Any land would be purchased by a developer at its existing-use value; after permission to develop was granted, the developer would be assessed a "development charge" based on the difference between the initial price and the final value of the land.”

The development charge was set at 100%. The result was that the market for land dried up and the 1951 Conservative government abolished the development charge.

Will the latest proposal be different? First, the state keeps the uplift from granting planning permission. Developers profit comes from the investment of bricks and mortar and risk, not the grant of permission. In practice I doubt the value in the Councils’ hands will go up by the whole of the uplift from granting permission, because land value is related inextricably to what you can make from it. The developer will only pay the capitalised income (rented property) or a proportion of the gain he is going to make (property for sale at a capital sum).

Will landowners actually put up their land? In difficult economic times you can see they might, but in this reverse auction, are they not likely only to get only a depressed price? They might still sell.

Councils will have to factor in the risk of not getting permission. But assuming they do get it (wearing their separate planning hat) it looks attractive. What about judicial review risk? People are bound to attribute bad motive to the Council in its planning role.

What do others think?