"Common ground" found over rezoned land windfall tax proposal

Thursday 20 April 2023

A new "charging mechanism" to recover some of the vast profits generated by the sale of rezoned land for development is to be created after States Members backed the bulk of a proposition from a Reform Deputy.

Deputy Kovacs said she was pleased politicians were able to find some "common ground" when considering her proposal, which called for some form of charge – such as a tax or levy – to be introduced to raise revenue for the States from any significant uplift in the value of land arising from when the land is rezoned or from when planning permission has been granted.

Pictured: Deputy Raluca Kovacs said she was pleased States members found some "common ground" when considering her proposals.

One example, which was referenced by the proposition, is Field J1109 in St John, which sold for £3.55 million after it was designated an affordable-homes site in the Bridging Island Plan.

This represented an approximate 50-fold increase in value, as prior to the rezoning the 6.71-vergée site – located next to the former Sion Chapel – was estimated to be worth around £70,000.

Deputy Kovacs’s proposition was altered slightly after she accepted an amendment from the Council of Ministers which removed references to "tax" on the basis that the new charge could take the form of "some other mechanism to extract value".

It also extended the date by which the necessary legislation would need to be brought forward for approval, from Deputy Kovacs’ target of 31 March 2024 to 31 March 2025 – although Deputy Kovacs stressed it could still be introduced earlier if possible.

Parts A and B of the proposition – covering the introduction of the "fair" charging mechanism within the designated timeframe – were passed in a single vote by 40 to one with two abstentions.

However, multiple members – including Environment Minister Jonathan Renouf and Treasury Minister Ian Gorst – did not support part C, which requested that the proposals should also be designed to capture uplifts in the value of land arising between the date of the debate of the proposition and the legislation coming into force.

Objections raised included concern that it could constitute a "retrospective" charge and might also incentivise developers to stall projects until they knew the full extent of the charging mechanism being introduced.

Part C was rejected by 31 votes to ten with two abstentions.

Pictured: Deputy Warr said it was important the new legislation did not "stifle development".

Housing Minister David Warr has also warned that the new legislation – due to be developed over the next two years – must not "stifle development" by setting too high a charge, as developers will still need to ensure projects are "viable".

Deputy Warr said: "I think what the Assembly recognised is what a delicate balance there is and that if they get it wrong it might stifle development. The devil is in the detail and we need to consider how this is done very carefully.

"The question now is how much should be recovered for public benefit.

"It’s important that projects are still viable," he continued.

Speaking following the debate, Deputy Kovacs said: "I was pleased we managed to get some common ground and can move forward with legislation and finally some action."

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