draft planning gain submission

Simon Fairlie chapter7 at tlio.org.uk
Mon Feb 19 17:04:37 GMT 2007

Thanks for the helpful response from many people to my previous e-mail.

Here is a draft response from Chapter 7. I would be very grateful for  
any comments on this. The three documents are pretty long and I could  
well have missed something.

You are welcome to paste any or all of this into your response,  
though watch out for changes in the next week. Responses to Paul  
Martin, planning.obligations at communities.gsi.gov.uk and  
julie.dufty at hmrc.gsi.gov.uk Deadline 28 February.

Simon Fairlie

We are grateful  for the opportunity to reply to the current  
consultation papers on Planning Gain, namely:
Changes to Planning Obligations (DCLG);http://www.communities.gov.uk/ 
Valuing Planning Gain (HMRC) http://www.hmrc.gov.uk/consultations/ 
Paying PGS (HMRC)http://www.hmrc.gov.uk/consultations/paying-pgs.pdf

Our response focuses on one particular aspect of the proposed  
legislation, though this is spread across all three consultation  
papers. Rather than deliver our submission in three separate  
responses, it seems more sensible to lay it out in one (fairly short)  
response covering all three documents simultaneously, so that the  
full depth of our concern can be appreciated.

The nub of our concern is highlighted in Question 1 of Chapter 8 of  
Paying PGS where it is stated that the forms of development exempted  
from Planning Gain Supplement (PGS)include small-scale home  
improvements, development carried out under the GPDO and possible  
other small-scale non-residential thresholds.

We submit that there are certain classes of residential development  
where it would be counterproductive and/or inequitable to impose a  
PGS; and that planning authorities, appeal inspectors or the  
Secretary of State should have the discretion to exempt a residential  
development from the charge where a case for exemption has been  
substantiated. Without the discretion to grant exemptions, the  PGS  
becomes a “blunt instrument” whose impact in some  circumstances  
could be counterproductive .

The following are some classes of developments where an exemption  
might be beneficial:

(1) Affordable housing. We appreciate that ( as stated in Question  
and Answers No 5 on page 33 of Valuing Planning Gain)  the PGS for  
affordable housing will be lower than the amount levied on market  
housing, because the Planning Value (PV) valuation will be reduced.  
However we question the value of raising any PGS on housing that is  
destined to be affordable, particularly that which is not delivered  
through developers contributions, but through a rural exception site  
scheme or a self-build scheme.  The provision of affordable housing  
is one of the main objectives of the overall planning gain programme,  
so what is the point of levying a tax on it?
Even without a levy, and where land has been acquired at less than  
market price,  it often remains difficult to provide housing at an  
affordable rate. Much of the housing now classed as affordable, is  
still beyond many people’s budgets. Some people find themselves  
excluded from any mainstream housing and resort to extra-legal  
housing, while in others it is paid for by the taxpayer through  
housing benefit. There seems little point in extracting a tax on  
affordable housing which will either serve to make it less  
affordable, or else have to be paid for through another form of  

(2) A similar issue relates to tied agricultural dwellings. These are  
conventionally assessed at 25 to 30 per cent less than market value,  
but even this is often far too high to be  paid off by someone  
working full time in the agriculture industry. For example, a  tiny   
1980s farmworker's bungalow near our office, formerly part of a  
county farm but without any tie, is currently being marketed  at  
£550,000 with 17 acres (it was sold last year by Somerset County  
Council by sealed tender with a guide price of £350,000, but is known  
to have gone for a good deal more than that.) With a 30 per cent  
discount  the same cottage with an agricultural tie would fetch  
£385,000. This is well in excess of what most farmers can afford  
through their agricultural enterprise — especially new entrants. To  
pay off 6.5 per cent on a loan of £385,000 would be £25,000 per year,  
whereas the rent charged by Somerset County Council for its farm was  
around £9,000 per year, and that was with 90 acres, not 17.

In other words tied agricultural dwellings command 70 to 75 per cent  
of market price, not because farmworker's can afford that much, but  
because of the hope value derived from the possibility of getting the  
agricultural tie removed — and a lot of buyers of agriculturally tied  
dwellings attempt to do just that. Farmers anxious to sell to  
somebody who is committed to farming the property would be advised to  
sell the dwelling not “at arm’s length” but at a reduced price. This,  
unfortunately, does not often happen, and many new entrants into  
farming,finding that they cannot possibly afford even a tied  
agricultural dwelling, buy a bareland plot and apply for a new  
agricultural dwelling, which they will be given if they meet the  
financial and functional tests in PPS7.

This is a deeply unsatisfactory state of affairs which needs to be  
addressed by measures which are outside the remit of this  
consultation. But it is important that PGS does not place a  
disproportionate burden on new entrants into farming, for that is the  
last thing that such people need. If hope value is not to be included  
in the Current Use Value of developments, equally it should not be  
included in the Planning Value. We submit that new agricultural  
dwellings should either be exempt from PGS, or else pay at a very low  
rate. If we are concerned to support farmers (and that of course is  
the purpose of agricultural ties)  PGS should be imposed only when  
the agricultural condition is removed and the dwelling acquires its  
full market value.

(3) In  residential developments where profits from planning gain are  
already being  channelled  into the provision of socially or  
environmentally beneficial infrastructure or activities, levying full  
PGS will be inequitable because in effect the tax will be being paid  

For example, in  the Lowland Crofting schemes in West Lothian,  
profits from increased land value went into planting large areas of  
the Central Scotland Forest —  this planting, secured by a Section 50  
agreement (Scottish Section 106), did not diminish the value of the  
houses, but it significantly increased their costs.

Similarly, there are a number of eco-developments, such as the  the  
Hockerton Housing Project in Newark and Sherwood, where much of the  
profit from planning gain has been funnelled into providing highly  
sustainable and zero carbon developments which cost more to build  
than conventional developments.

It would clearly be unjust and counterproductive to levy  PGS on any  
development which  already provided community benefits from the  
profits derived from planning gain. Indeed reduction of or exemption  
from PGS is an obvious financial incentive  to encourage developers  
to strive towards the zero-carbon houses which the government  
(bravely but optimistically) wishes to see across the board by 2016 —  
and a justifiable one too, because reductions in carbon emissions  
will help reduce the future expense of community infrastructure  
designed to address and mitigate the effects of climate change.

A similar dynamic may occur in connection with travel arrangements.  
Highly sustainable developments normally formulate travel plans which  
impose limits on car use, and provide infrastructure to support this  
in the form of car share clubs, collective deliveries, school runs  
etc. There are several examples of this approach already in the UK  
and there will no doubt be many more as responses to climate change  
become a priority: indeed in some years’ time we may  see larger car- 
free developments providing a public transport service which is made  
accessible to other members of the public in the neighbourhood.  
Again, there may be costs to the developer associated with developing  
car-free infrastructure, and at the same time the reduction in car  
trips would be reflected in reduced demand on the community  
infrastructure. These costs to the developer and benefits to society  
clearly need to be reflected in the level of PGS applied.

Question 8 of Changes to Planning Obligations asks ’Do you agree that  
measures to implement travel plans and demand management measures  
directly related to the environment of the development should remain  
within the scope of planning obligations.”
Indeed we do. The current draft PPS on Climate Change states:  
“Planning authorities should engage constructively and imaginatively  
with developers to encourage the delivery of sustainable buildings.  
They should be supportive of innovation.”(para 30).

  Imaginative and sustainable innovation, if it has to be maintained  
continuously as for example a car pool or a bus route does,  must be  
secured otherwise it is of little value.  In many cases it is hard to  
see what mechanisms could secure these benefits better than a  
planning obligation. Such innovations are unlikely to be provided by  
“the use of PGS as a revenue stream held by local authorities”  
however desirable this stream may be for dealing equitably with  
mainstream developers who “impose costs upon the transport network”  
instead of coming up with solutions (Changes to Planning Obligations,  
para 72). Imaginative, sustainable innovations tend to come in the  
first instance from small-scale developers rather than from large  
developers or  local authorities, because when the development is  
small the risks are  small. If the Climate Change PPS wants to  
encourage such innovation it needs to supply a suitable mechanism to  
secure them, and the obvious mechanism is a planning obligation.  
Statutory imposition of a blunt instrument such as PGS will only act  
as a deterrent.

We therefore submit that exemptions from PGS (or reductions)  should  
be allowed where profits from increased land values are ploughed into  
the provision of affordability or other social or environmental  
benefits for the wider community — provided that these benefits are  
secured by a condition or a Section 106 agreement. PGS would be  
payable on removal of the condition or legal agreement —  this would  
help to make these conditions and agreements more robust. And  
exemption would provide an incentive for developers to come up with  
more sustainable solutions.

Simon Fairlie
Hats: Chapter 7, The Land, The Scythe Shop

The Potato Store, Flaxdrayton Farm,
S. Petherton, Somerset TA 13 5LR

01460 249204
chapter7 at tlio.org.uk

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