Great Britain

American Journal of Economics and Sociology, The, Dec, 2000 by Owen Connellan, Nathaniel Lichfield

III

Betterment and Compensation in the Planning Acts

A. Town and Country Planning Act 1947

Although within the last hundred years the principle of betterment was reflected in the Town Planning Acts of 1909-1932, it did not really come into its own until after World War II. Based on the principles of the Uthwatt Report but not on its precise precepts, the post-war Labour Government's Act of 1947 nationalized development rights and introduced compensation betterment provisions which were quite different from that in the pre-war Town Planning Acts of 1909-1932. Beyond minor exceptions, no development was allowed without the permission of the local planning authority. If permission were refused, no compensation would be paid, except in a limited range of special cases. If permission were granted, any resulting increase in land value was to be subject to a development charge. [18] The land owner had the right to continue the existing use of land so that any interference by the State would attract compensation. [19]

Betterment could be claimed as a development charge so far as the value of land was enhanced by the grant of permission. [20] In other words, it was conceived as "any increase in the value of land (including the buildings thereon) arising from central or local government action, whether positive, for example by the execution of public works or improvements, or negative, for example by the imposition of restrictions on other land." [21] The development charge was assessed on the development value, and on one hundred percent of the increase in value due to the permission to develop. Thus there was no incentive to develop, since all profit on development was theoretically taken away. [22]

Under the 1947 Act, loss of development value due to the nationalization of development rights (which was calculated to be the difference between the unrestricted value and the existing use value) attracted compensation. This was based on admitted claims to an ex gratia fund of [pound]300 millions, plus one-seventh for the accrued interest on the amount of the claim. When all claims had been received and examined, the previously set [pound]300 millions would be divided between them according to the respective proportion of their value of July 1st 1948, and paid together with interest. In the event the total of all claims amounted up to [pound]380 millions, very close to the preliminary estimate. [23]

The Town and Country Planning Act of 1947 thus brought about a major change. Whereas in the 1909-1932 Acts the landowner had his development rights granted to him in the local planning scheme, after 1947 the landowner had no rights, minutiae apart, until they were granted to him by the planning permit, except in the case of reinstatement of established buildings. [24]

The 1947 Act did not work as expected. Land was being widely offered, and still worse, bought, at prices including the full development value, even though developers were to pay a development charge amounting to one hundred per cent of the increase in the value of land resulting from development. [25] This was largely due to the severe restrictions imposed on building, because of resource limitations. Building licenses were scarce, and developers able to obtain them were willing to pay a high price for land upon which to build. [26] Purchasers other than developers often found themselves forced to pay more for land than its existing use value, which in logic was all they should have been ready to pay. [27]