Lord Bruce-Lockhart (Con), chairman of the Local Government Association, described the Treasury's announcement on the planning gain supplement in the pre-Budget report as 'disappointing'.
He called for all revenues raised through the levy, designed to capture increases in the value of land granted planning permission, to be retained by the area from which they were raised.
'Under the proposals, almost a third of the proceeds from local communities would be redistributed and spent by 'the regions',' he said.
But Dr Phyllis Starkey (Lab), chair of the communities and local government select committee, welcomed the proposals and said some regional funding was essential for major infrastructure projects.
'There will always be developments where the infrastructure projects needed aren't actually in the locality of the development,' she said.
'Motorways, for example, are not actually in the area where a development takes place but will be absolutely crucial to it. '
The Treasury said the tax would not be introduced before 2009.
Preparing for the planning gain supplement, 6 February 2007, LGCconferences@emap.com