Homeowners devastated by bombshell planning taxes that left some facing possible imprisonment should have their charges covered by the “colossal” interest the council collected from the charges, a councillor has said.

It came as a motion criticising Waverley Borough Council’s handling of the Community Infrastructure Levy was passed by 22 votes to 20 at its June 30 full meeting – although some said many of the actions called for were already available.

The Community Infrastructure Levy is supposed to support the building of schools, green spaces and health facilities needed to meet growing developments.

It is aimed at large-scale builders and exemptions exist for those who build their own homes or smaller extensions – so long as they are applied for in advance of work starting.

A grey area, where amendments made after work began, caught out many in Waverley with homeowners slapped with huge bills in the tens of thousands of pounds.

Last week the Government confirmed councils could give back charges through its general fund if householders, who should have been exempt, fell foul of the complex bureaucracy.

The motion expressed the council’s grave disappointment over the executive’s failure to find a working resolution to the long-running problem and called on it to publish a progress reports on independent investigations into the behaviour and practices of Waverley Borough Council’s planning department, and on its discretionary review.

Senior councillors had already said the report is expected by the end of July and will be ready for scrutiny soon after.

The council now also now formally calls on the Overview and Scrutiny Committee to consider establishing a task and finish group to review how CIL matters were handled – although this was power that already existed.

The motion called for the executive to consider proposed legislative reform in light of the Housing Minister who had written to all leaders and chief executives of Community Infrastructure Levy charging authorities in England.

Councillor Peter Martin (Conservative: Godalming Holloway), said: “We have an outstanding and unspent level of CIL sitting on our balance sheet in excess of £31m. And the interest gathered in just the month of May on that £31, amounted to nearly £116,000 just in one month.

“The unspent CIL in generated about £1.4m a year of interest that goes straight into the general fund so I would have no difficulty at all in explaining to a resident that it would be perfectly reasonable to use some of that money to put right the injustices that we have seen thus far.”

He added that the council is on track for an underspend of £4.6m this year from its general fund.

“That’s the equivalent to 36 per cent of council tax – much of which was transferred into reserves so it netted out to £2.9m – still equal to 23 per cent of council tax.

“Colossal sums of money were saved last year and it seems to me that similar colossal sums of money will be saved during the course of this year. It would be good for the executive to consider ways of returning much of that money to residents.”

Leader of the council, Cllr Paul Follows said delays had been regrettable and, regardless of whether the motion passed, would be something they would address.

On the motion, he said: “All of the superstructure that you are trying to build into the process has been fundamentally unnecessary and that it would be unfair to pay out of the general fund before homeowners had explored suing those who had given them bad advice.

“To do an ex-gratia payment we would still need to have significant and proper justification to do so.”

He added: “If you are in a position where you are to incur a CIL liability as a homeowner you will have either not employed advice, or you’ve employed improper advice.”

“The third option is when the council has made an error and that is of course the easiest way for us to refund and to redress it, which is what we have tried to do.”