Prescott proposes Green Belt tax to fund city housing

A tax on greenfield development is under consideration, the Deputy Prime Minister, John Prescott, has disclosed. But, says Nicholas Schoon, Environment Correspondent, he has chosen not to stop the development of a swathe of Newcastle's Green Belt.

House building and refurbishment in Britain's rundown cities could have an extra pounds 250m a year pumped into it. The money would be raised by a tax on building homes on greenfield sites outside cities, towns and villages, says the Civic Trust, a leading regeneration pressure group.

Next week, the trust's director, Michael Gwilliam, will present his proposal when he meets ministers at the Department of the Environment, Transport and the Regions.

John Prescott, the department's secretary of state, has told The Independent he is looking at how taxation could discourage greenfield development and shift more private sector housebuilding inside towns and cities.

The Civic Trust proposes that the tax would be paid by a development company whenever the local council granted it planning permission for building houses on an open, green site.

The tax would be imposed on the difference between the value of the land as farmland and its much higher value with planning permission for housing. But the regional average for these two values would be used, rather than the actual values for the site in question.

The Civic Trust said the tax should be set at a maximum of 17.5 per cent - the same as VAT - and like VAT be collected by Customs and Excise. But the money would be given to the new Regional Development Authorities which the Government is setting up. These would have to spend it on subsidising housing projects - both private and public sector - which regenerate towns and cities from within.

The trust accepts that housebuilding on the countryside around urban areas is bound to continue. The demand is so great that the cities could never absorb all of the growth.

But the tax ought to slow it down, by making greenfield sites - and therefore the houses eventually built on them - more expensive. At the same time, the subsidies available from its revenue ought to make the often more costly and difficult option of building homes on derelict or underused land within towns and cities more attractive.

It calculates that with a 10 per cent rate the tax would raise pounds 250m a year, equivalent to the entire budget of the Government's leading regeneration body, English Partnerships, and one quarter of what the Department of the Environment, Transport and the Regions now spends on regeneration.

Meanwhile, England is set to lose another 500 hectares of Green Belt land following Mr Prescott's decision last week not to intervene to stop one of the biggest ever erasures of Green Belt, west of Stevenage in Hertfordshire.

And tomorrow, the final version of Newcastle City Council's latest Unitary Development Plan - a strategic blueprint for the city - comes into force. It sanctions the building of more than 2,000 homes and industry on Green Belt land north of the city.

Green Belts were created in order to stop cities sprawling and merging with other settlements. Conservation groups had appealed to Mr Prescott to use his powers to intervene, but he declined.