THE British Property Federation has lambasted government plans to introduce a new tax on windfall gains made on development land, saying that it would stifle regeneration.

The comments came after John Prescott, the Deputy Prime Minister, said in July that ministers were considering a new land tax, dubbed a “planning gain supplement”, which would be levied on the uplift in value of land once planning permission has been granted.

The tax would be used to fund new schools and hospitals.

The idea was first mooted by Kate Barker, a member of the Bank of England’s Monetary Policy Committee, in a study on housing supply. It is thought that the plan has the backing of Mr Prescott and Gordon Brown and could be revealed in the Pre-Budget Report.

The idea initially applied to residential development land, but it is thought the Government is considering including commercial development land.

Liz Peace, BPF chief executive, said she was “deeply alarmed” by the idea, saying that it could pose a danger to regeneration.

The BPF instead wants a planning tariff system that would give a price per square foot for commercial development or a price per unit for homes. Ms Peace said a tariff system would be more transparent and could replace the 106 agreements that currently fund community facilities.

The BPF said that a planning gain supplement would be difficult to collect, unlikely to raise a significant sum for infrastructure and would deter development.

A tax on development land would prove controversial. There have been four attempts since the Second World War, none of which have succeeded.

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