How Rogers plans to save cities

LUCRATIVE tax advantages to lure people back from country towns and villages to the inner cities will be unveiled on Tuesday by Lord Richard Rogers, the world-renowned architect entrusted by Labour to mastermind an "urban renaissance".

A report by the Government's Urban Task Force, which he heads, will recommend a range of financial incentives to halt the exodus from the city in the biggest drive to regenerate urban communities since the Blitz.

The task force says that property developers should be given tax breaks for converting old properties and penalised for building over the countryside.

It recommends that the Government reduce VAT on conversions - which currently stands at 17.5 per cent - in order to encourage developers to recycle existing buildings. Tax should also be levied on building new properties, currently exempt from VAT, the report suggests, in order to create a level playing field.

Although the report reveals that parts of some British cities - such as west London - are now among the richest in Europe, it identifies poverty as a major problem in urban areas generally. The Government should do more to encourage mixed areas of housing, rather than allowing cities to degenerate into ghettos of rich and poor, it says.

The task force proposes turning inner cities and run down suburbs into "tax havens" with a new lower band of council tax in order to encourage people to return. And it says that property owners who leave inner-city buildings empty should have to pay their council tax in full, not at the current reduced rate.

Lord Rogers' report also sets out measures which would discourage building in rural areas. One idea is that developers should be forced to pay into a special community fund if they build on greenfield sites. This would be criticised as effectively a "greenfield" tax - although the money would be allocated to the local area rather than being transferred to central Treasury funds. The task force also urges the Government to charge people to drive and park in cities in order to reduce congestion, as part of its proposals for improving the environment.

The existing tax system - particularly the inequality in VAT rates for new buildings and conversions - acts as an incentive on people to build over the countryside rather than convert properties in cities, it concludes. "It tilts in the wrong direction by penalising people who are recycling and encouraging greenfield development," one insider said. "We need to level it up."

The proposal to harmonise VAT will be welcomed by ministers at the Department for the Environment, Transport and the Regions, who have privately expressed concern about the anomalies in the tax regime for developers. But it will be fiercely resisted by the powerful building lobby which argues that it would increase house prices across the board.

The Treasury is already examining the financial implications of Lord Rogers' recommendations. Gordon Brown, the Chancellor, has always resisted the VAT proposal, arguing that it would cost too much. But insiders say Treasury ministers are now warming to the idea as a way of proving their green credentials.

They have been told by the Empty Homes Agency, the Government's own organisation for improving efficiency in social housing, that the change would be relatively cheap because the cost of reducing VAT on conversions would be compensated for by the increase in new building tax.

The task force has also come up with a series of proposals for improving the lives of people who live in cities. It advocates a system of urban caretakers, paid for by the state, who would be responsible for looking after particular streets. They would be in charge of improving everything from security to community spirit.

Planning departments will also be told to become more proactive in designing their towns and cities. Lord Rogers believes that the lives of urban dwellers, both aesthetic and practical, could be dramatically improved if more thought was given to how buildings fit together.

Tony Burton, vice-chairman of the Council for the Protection of Rural England who is a member of the task force, urged the Government to accept its recommendations. "They are central to the achievement of the Government's wider objectives for protecting the countryside, tackling social exclusion and promoting economic competitiveness," he said.