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John Prescott is at loggerheads with chancellor Gordon Brown over plans to abolish stamp duty for developments on d...
John Prescott is at loggerheads with chancellor Gordon Brown over plans to abolish stamp duty for developments on derelict urban land, reported The Sunday Times (p2). The deputy prime minister, who has already been thwarted by Mr Brown in his attempts to get VAT regulations for brownfield sites changed, is now worried that his dream of an urban renaissance could be endangered by the chancellor's opposition.

In March, Mr Prescott committed the government to building 60% of new housing on brownfield sites by 2008, but without treasury support his goal looks doomed. DETR ministers made their pledge believing their proposals would be backed by the chancellor in his last Budget. There was widespread speculation that Mr Brown would agree to impose VAT on all new house-building. This would have created a level playing field for urban developers. At present, no VAT is levied on new building on greenfield sites, although the full 17.5% rate is applied to the

refurbishment of old properties. The VAT plan, proposed by Lord Rogers's urban task force, was designed to reduce building in the countryside and encourage it in cities. However, Mr Brown discarded the idea after lobbying from construction companies and set up a consultation on another recommendation by Rogers: the introduction of stamp duty relief for buyers of derelict properties for restoration on brownfield sites.

Mr Prescott welcomed the new proposal and entered a series of meetings with the chancellor that have been going on since March. Insiders claim that Mr Brown knows he must give some ground but is unwilling to give enough to make the stamp duty idea viable. A senior treasury source confirmed there was a 'high level' of disagreement on how far

any concession should go. Mr Brown is thought to be happy to abolish stamp duty for developers buying property to renovate but is unwilling to extend the exemption to the first sale after renovation or to new homes built on derelict sites. The treasury is not thought to like the idea of 'urban priority' areas or other incentives.

Last week, Mr Prescott increased the regeneration budget for poor areas by 20%, to£1.2bn, but Keith House, chairman of the Local Government Association's planning executive, said: 'Without straightforward fiscal incentives developers are not going to be attracted'.

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