YVETTE COOPER'S STATEMENT ON PLANNING

My Rt Hon Friend the Chancellor of the Exchequer, in his Pre-Budget Report said that the Government intends to legislate in the forthcoming Planning Reform Bill for a new statutory planning charge to enable councils to capture greater levels of planning gain to support new infrastructure and housing. This investment will be in addition to Section 106 agreements, the £1.7bn targeted infrastructure investment to support growing areas from the Communities and Local Government Comprehensive Spending Review, and the additional mainstream support for infrastructure investment through programmes such as Crossrail. This statement sets out further details of the new statutory planning charge.

This Government believes that everyone deserves a decent home at an affordable price. Homes are the building blocks of our communities and are essential to ensure a sustainable future for the next generation. That is why the Housing Green Paper published in July 2007 set out ambitious plans for delivering three million new homes by 2020.   

For new homes and communities to be sustainable, we also need to invest in the infrastructure needed to support the people who live in them - transport, hospitals, schools and community spaces. Through the planning system local communities can secure a contribution to this infrastructure from developers, via section 106 agreements. But only a small proportion of all developments currently contribute to the costs of infrastructure in this way. The current system is also limited in the extent to which it is able to mitigate the cumulative impacts of development on infrastructure, and local authority use of these powers varies significantly. Therefore a new mechanism which properly addresses these concerns is required.

The Government also believes that it is right and fair that local communities should benefit more from the uplifts in land value arising from planning permission to finance the infrastructure needed to support housing growth. This is why, as part of our response to Kate Barker's review of Housing Supply, published in 2004, the Government accepted her recommendation in principle and consulted on proposals for a PGS. In the Housing Green Paper we also asked stakeholders to put forward alternative approaches for capturing more planning gain for consideration.

The Government welcomes the constructive and focused way in which stakeholders have engaged with this challenge since the Green Paper. This has included a clear recognition on the part of the development industry that it is right that they should contribute more to the costs of infrastructure needed to support housing delivery. Many in the industry - including the British Property Federation, the Home Builders Federation, London First and the Major Developers Group have supported proposals for planning charges, building on the current section 106 approach and the tariff models developed by Milton Keynes and other areas. The Local Government Association has also supported a similar approach.

Following these representations, and others, we have concluded that the best way at this stage to increase contributions towards infrastructure alongside greater house building is to take forward the Housing Green Paper option of a statutory planning charge.

Compared with the existing system, we believe our proposals will:
* Capture more planning gain to finance additional investment in local and strategic infrastructure, while preserving incentives to develop.
* Make the planning charge-setting process simpler and more certain. By giving a clear basis on which to set a planning charge to support the delivery of planned infrastructure.
* Provide a fairer means of securing contributions from developers for infrastructure. At present, infrastructure benefits for local communities are typically secured from major developments only.
* Encourage regions and local authorities to plan positively for housing and economic growth and for the infrastructure needed to deliver it, and, in the plan context, to decide priorities and detailed charging arrangements which reflect local and regional needs and circumstances.  

The Government's approach builds on the strengths of the current system and experience from areas where a form of charging is already being applied. We therefore propose to include provisions to introduce statutory planning charges in the forthcoming Planning Reform Bill, and we will not be introducing a Planning Gain Supplement Bill in the next Parliamentary Session. We will keep under close review the development and operation of statutory planning charges to make sure that they achieve our aims of increasing investment in infrastructure alongside supporting new development.

These provisions will empower local authorities to apply standard planning charges for all new development in their areas to support infrastructure delivery. The main features of the planning charge will be as follows:
* Subject to low de minimis thresholds, residential and commercial development will be liable to pay the planning charge.
* Where appropriate Local Authorities will be able to use planning charges to supplement a negotiated agreement. Negotiated agreements will still be necessary to secure affordable housing and to address costs related to the specific development site.
* Planning charges should be based on a costed assessment of the infrastructure requirements arising specifically out of the development contemplated by the development plan for the area (which comprises the regional spatial strategy and the local development framework), taking account of land values.
* Planning charges should include contributions towards the costs of infrastructure of sub-regional and regional importance identified in development plans.
* Planning charge policies in development plans will be tested through the development plan process, in consultation with developers, stakeholders and the community to ensure they support the viability of new development and levels of new housing required.

The level of support which both the development industry and the local government community have now offered for increasing resources through a planning charge approach is very welcome and provides an important basis on which to implement the proposals successfully. We will be in touch with the development industry and local government very shortly to discuss how we can best work with them and other stakeholders as we prepare the new legislation, and put new planning charges in place.
As with other policies, once the planning charge has been introduced the Government will carry out an evaluation to ensure that its objectives - a step change in infrastructure provision to deliver more homes in more sustainable communities, funded by a fair contribution from development - have been achieved.

BPF WELCOMES STAMP DUTY CUT

The British Property Federation has welcomed moves to scrap SDLT on the property transfers within a property investment partnership.

The BPF highlighted the significant adverse consequences arising from SDLT changes relating to interests in limited partnerships, (announced in the Finance Act 2007). The Pre-Budget Report stated that the legislation would be amended in the Finance Bill 2008, but applied retrospectively to address the industry's concerns.

The changes will be subject to consultation and will ensure that where there is a transfer of interest in a property within a property investment partnership, there will be no charge to SDLT.

Gareth Lewis, director for finance and investment, said: "This is encouraging news, particularly the fact that the changes will be applied retrospectively as the changes introduced in FA 2007 were having an immediate impact on commercial transactions which were clearly not the target of these anti-avoidance provisions. We look forward to working with ministers to ensure that the new rules achieve their desired objectives without unduly affecting commercial arrangements."

Chancellor proves he’s not the Darling of Small Business

The Forum of Private Business (FPB) has accused the Chancellor of the Exchequer of failing to address the issues of smaller businesses in his first Pre-Budget Report. Alistair Darling omitted any reduction in the tax burden for those companies who most need it. Campaigns Manager Matt Hardman highlighted the prospect of more taxes to come.

"The Chancellor has raised the prospect of Supplementary Business Rates as part of the funding for the Cross Rail project for London," he said. "This is the thin edge of the wedge, as the Government looks to make smaller businesses pay yet further."

Following the recommendations of the Lyons Inquiry and representations from stakeholders, the Government is publishing a White Paper setting out proposals to allow local authorities to invest in economic development and the improvement of infrastructure through a business rates supplement. Under the plans, which include consultations based on detailed proposals of specific projects, all properties worth £50,000 or above would be subject to the additional tax. A ballot of local businesses would be required where the supplement supported more than a third of the project’s cost.

"Our members already pay enough tax if the principle of a Supplementary Business Rate isn’t opposed where will it stop?" asked Mr Hardman, " In a year’s time when local authorities need more money will the threshold come down? We mustn’t open the door to more levies on smaller businesses."

In his report, Mr Darling handed big business a tax break by pledging to cut the higher rate of corporation tax by 2p to 28p in the pound – the lowest in the G7. However, the rate for smaller businesses remains at the level set by his predecessor, Gordon Brown, who last year, in his final budget as Chancellor, raised it from 19% to 22%.

The FPB believes that, as the UK’s 4.1 million smaller firms are the backbone of the economy, employing around half of the private sector’s working population, the Government has missed its chance to redress this imbalance.

"How much does big business have to be handed before smaller firms are given a slice of the pie?," asked Mr Hardman.

The Government also announced that its plans to simplify tax administration including self-assessment. The measures have been designed to reduce the administrative burden by up to £100 million, but the FPB believes the measures don’t go far enough

"Self assessment improvements, for example, will only apply to the smallest of businesses, employers are also in need of support." Said Mr Hardman.

PBR DECLARES REITS A 'MARKED SUCCESS'
REITA WELCOMES STATEMENT BUT URGES FURTHER ACTION NEEDED

Reita , (www.reita.org) the UK education and awareness campaign for REITs and property investment, has welcomed the comments made about REITs in the Pre-Budget Report (PBR), but urged that further action is needed.

Dave Butler , Reita programme coordinator, explains:

"Whilst welcoming the Government's declared support for REITs, we are rather disappointed at the decision not to move on the issues of Residential REITs and the REITs listing rules. Although the regime has certainly been successful in persuading 16 existing property companies to convert - indeed they now represent more than 70% of the market capitalisation of the Real Estate Sector - it has so far failed to promote new REITs. Only one, the Local Shopping REIT, has been launched successfully this year and 17 REITs do not yet make the dynamic market that we are all looking for."

Gareth Lewis , director of finance and investment at the BPF (a Reita member), added:

"The lack of residential REITs is a real issue and it is somewhat surprising that there has been no move here given that the development of the private residential sector was seen as a key objective of the REITs legislation. We are however pleased with the commitment to keep the regime under review and are looking for a positive response to the upcoming submissions by the Property Industry Alliance."

In the Pre-Budget Report, Darling announced that the UK Real Estate Investment Trusts (REITs) regime, launched in January 2007, had (sic) 'been a marked success'. Further adding: 'To date 16 companies have become UK-REITs with a total market capitalisation of around £30 billion. The Government has recently reviewed the viability of residential REITs and the REITs listing requirements – but has concluded that there is not at present a compelling case for change. However, the REITs regime will continue to be kept under review."

Reita now includes 11 of the biggest quoted property companies (some of which have already converted to REIT status and others that are likely to maintain their current structure), 11 of the leading fund managers, the London Stock Exchange, ten merchant banks and advisers, legal firm DLA Piper, the British Property Federation and the Investment Property Forum.

The reita.org portal provides expert knowledge, education and tools for professional financial advisers, other financial specialists and private investors, and represents the UK's first dedicated educational resource for information on REITs and quoted property investment.

FMB Condemns Business Rate Supplement in Pre-Budget Report

"The Chancellor's proposal to allow local authorities to set a business supplement rate is yet another tax to penalise existing successful hard working businesses", says Brian Berry, Director of External Affairs at the Federation of Master Builders (FMB) in response to the Government's Pre-Budget Report.

Berry continued, "It is entirely wrong that small businesses should be expected to fund the gap in the Government's spending plans, in effect paying for the 2% cut in Corporation Tax. Once again we are seeing the Government robbing Peter to pay Paul by giving a tax break for large businesses at the expense of smaller ones.

Previous attempts to allow local authorities to raise business taxes has always resulted in failure and been regretted later. We've been down this painful road before, why do we have to go down it again?"

Friends of the Earth’s Pre-Budget Report response

Alistair Darling’s first Pre-Budget Report did little to support Gordon Brown’s recent pledge to make Britain a world leader in tackling climate change, says Friends of the Earth.

In his speech to Labour’s annual conference last month], Brown said “I want Britain to lead in carbon-free vehicles, carbon-free homes and carbon-free industry.”  But Alistair Darling’s half-hearted tinkering in the Pre-Budget Report will do little to achieve this vision.

Friends of the Earth director, Tony Juniper said:

“This Pre-Budget Report falls well short of what is required to help tackle climate change. Last month Gordon Brown said that he wanted Britain to lead in developing a low-carbon economy. This was a golden opportunity for the Chancellor to produce a range of green incentives to encourage people to go green. But yet again the Government has not delivered.”

This year’s PBR comes almost a year after Nicholas Stern’s review of the economics of climate change. The report, which was commissioned by Gordon Brown, warned that unless urgent action is taken, global warming would have a devastating economic impact.

The PBR
• did contain a welcome move on reforming and raising Air Passenger Duty. But this is entirely inadequate to the task of tackling climate change
• raised the prospect of incentives for greener cars - but further action has been postponed until next year
• did nothing to help people cut emissions from their homes.

A detailed response to the PBR will be available soon at www.foe.co.uk

PROPERTY INDUSTRY GETS A BOOST AND A BOOT IN THE PRE-BUDGET REPORT SAYS GRANT THORNTON

Commenting on changes in the pre-budget report that will affect the property industry, Grant Thornton Head of Property and Construction, Clare Hartnell, says, “The move to a single rate of capital gain tax at 18% is great news for shareholders in property investment companies who previously were able to reach an effective rate of 24%, but bad news for their counterparts in property dealerships, whose rate increases by 8%, given that previously they could reach an effective rate of 10%.”

“Although this will not damage the market, it means that life just got more expensive for dealers and costs will most likely end up being passed on to the buyer.”

Following the Barker review, the government has also signalled its intent to reform the planning gains supplement.

Property tax director Marion Cane says, “Although there is nothing concrete in the pre-budget report, it would appear that the Government has ditched the universally unpopular proposal to introduce a planning gain supplement in favour of the preferred tariff-based system. Local planning authorities are to be given the power to levy planning charges on new developments to fund local and important regional infrastructure expenditure. This is good news for the property industry which has lobbied hard against the value based PGS in favour of the fixed, tariff-based approach.”

Cane says that a further announcement by the Housing Minister is expected to shed more light on the issue.

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