Developers would contribute to infrastructure costs by paying the tax on the increase caused in land values when planning permission is given (LGC, 8 December).
Speaking last week at a House of Commons' communities & local government committee, Treasury financial secretary John Healey said: 'If PGS provides a revenue stream for councils there is the capacity to use that as part of prudential borrowing to raise capital.'
A Local Government Association spokesman said: 'PGS could finance the costs of prudential borrowing, which does not get revenue support. It is good he [Mr Healey] has recognised that.'
Mr Healey said there would be a further consultation over the level of the tax, which the government has said would be 'modest'.
It is expected to be launched in 2008 with a 20% tax rate.
He said: 'We see it as a local measure to ensure local areas benefit and have the resources required for infrastructure when there is growth.'
Housing and planning minister Yvette Cooper said councils might be free to use the money as they chose.
She said: 'It could be ringfenced for [infrastructure] capital projects or it could be up to a local authority to decide how spend it because they are the democratically accountable body.'