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Volume 464: debated on Tuesday 9 October 2007

Today my right hon. Friend the Chancellor of the Exchequer said in his pre-Budget report that the Government intend 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 £1.7 billion 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 believe 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 believe 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 welcome 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.