The Planning Gain Supplement (PGS), was first conceived by Kate Barker in her Review of Housing Supply and would have involved taxing the uplift in the value of land following the grant of planning permission. In their response to the Barker Report the Government consulted on a proposal to introduce a Planning Gain Supplement. In July 2007 (after two years and two rounds of consultation) the Government published a Green Paper on Housing in which it set out four possible alternatives to PGS to be explored with 'stakeholders' and subsequently indicated that PGS would not be introduced if the property industry could agree on a better alternative which would be acceptable to the Government.

In November 2007, and after a long (and ultimately successful) campaign by a formidable alliance comprising the British Property Federation, the Home Builders Federation, London First and The Major Developers Group, the Government formally abandoned any aspirations to pursue PGS and instead, announced its intention to proceed with a proposal for a new statutory planning charge, loosely modelled on the planning tariff system operated in Milton Keynes. The main features of the statutory planning charge are proposed to be:

  • all residential and commercial development will be liable to pay the charge, subject to some de minimis thresholds;
  • The charge will be based on a costed assessment of the infrastructure requirements arising out of development contemplated by the Regional Spatial Strategy/ Local Development Framework, taking account of land values. The amount of the charge will be put forward by planning authorities in their regional and local development plan documents and tested in the usual way through the development plan process. It is likely that a significant burden of responsibility will fall on local planning authorities to put in place the necessary policy background to support the new charge; to determine (and cost) the relevant infrastructure; and to provide robust support, and justification, for all of this throughout the development plan process.

Negotiated Section 106 Agreements will continue to be required to deal with specific site requirements and to make provision for affordable housing. The new proposals will require primary legislation and are expected to be included in the Planning Reform Bill.