New tax on housebuilders

THE Government is planning a new stealth tax on the housing market by massively jacking up the cost of submitting planning applications. The proposals could see up to a fivefold increase in the cost of putting plans through.

Under proposals from the Office of the Deputy Prime Minister, John Prescott, housebuilders face huge rises in the cost of applying for planning permissions. Developers currently have to pay up to £11,000 for housing schemes but this could now rise to £50,000 for each one.

Housebuilders say the figure will amount to a big charge on smaller schemes and this will have to be passed on to homebuyers, adding yet more cost on to people who are already struggling to get on to the property ladder.

Pierre Williams, spokesman for the House Builders Federation, says the new £50,000 charge will be a small extra cost in the context of large housing developments. But for smaller plots it amounts to a big charge. On smaller developments of up to 10 units, such a large charge could make schemes unviable, he commented.

In an official response to the ODPM's proposals, the House Builders Federation criticised the rationale behind the new charges, arguing that although they are supposedly being levied to get local authorities to become more efficient, the reality was that there was 'no incentive' for them to do so.

'All local planning authorities have a monopoly on processing planning applications within their administrative boundary. There is no market competition and thus there is no incentive for authorities to keep costs low or to introduce efficiency measures that would reduce the resource required to process applications,' the Federation declared.

The department issued the consultation just before Christmas and could put up charges within months. It insists that its aim is to raise more money for local authorities to make their systems more efficient. But housebuilders say that could just add more cost to the process.

The Royal Institution of Chartered Surveyors added its concerns. Spokesman Andrew Smith said there was a clear need for greater funding to improve efficiency in the planning system at the local level.

'The process needs to be speeded up, there needs to be more certainty, more skills, more qualified staff. If the increase in the levy helps this, we wouldn't oppose it. But we would be concerned that the increase in funding should be tied to the benefits it's supposed to be creating. If it dow this, it benefits everyone, including the builders.'

The proposed new charges come as John Prescott is pushing ahead with major redevelopment schemes to the east of London that will result in tens of thousands of new homes. If the latest proposals are put into force, it could result in big windfalls for local authorities responsible for processing these planning applications.

Homeowners already face other hefty charges when they sell their property, following big rises in Stamp Duty. The Conservatives have vowed to reform Stamp Duty amid growing anger about the impact of the tax, the bands for which have not changed despite booming house prices.

Unveiling his proposals last month, Shadow Chancellor Oliver Letwin described the current framework for Stamp Duty as 'unfair'. He added: 'Stamp duty is a classic Labour stealth tax. Since coming to power they have failed to raise the threshold of £60,000, despite massive increases in house prices. As a result the amount of money raised from stamp duty on residential property since 1997 has risen from £675m to £3.8bn.'