A strategy for implementing LVT

The first priority would be to complete the registration of all land in Britain.
Second, all land would have to be valued using the techniques already available.
The Labour Land Campaign proposes that, in the first instance, LVT would replace the much-discredited Council Tax and the system of National Non-Domestic Rates for businesses, and also the Stamp Duty Land Tax.
After that, the next step, logically, would be for LVT to be extended to gradually replace central government grants going to local authorities (including the revenue support grant, the dedicated schools grant, and other specific and special grants), which, currently, on average, account for nearly half the revenue of local authorities – the amount varying according to needs and the population structure of the localities under the jurisdiction of local authorities. This would be a first step towards substituting LVT for Income Tax – which, in effect, is what funds central government grants going to local authorities.
It is envisaged that there would still be the need for an ‘equalisation mechanism’ to take account of inequalities between different local areas, and their different needs. This could be achieved by a certain proportion of LVT collected by local authorities – perhaps half or more – being pooled at central government level, and then redistributed more or less on a per capita basis, which is how the system of National Non-Domestic Rates operates now.
As LVT was extended beyond local level, other taxes would be reduced pro rata as the rate of LVT was increased, so that LVT would be seen genuinely as a replacement tax, and not an additional tax burden.
The Labour Land Campaign accepts that the introduction of LVT and its substitution for other taxes would be a gradual process, and that, in the short run – as with any change of legislation – it would involve winners and losers. Therefore, there would need to be a number of transitional arrangements. A major concern is the extent to which LVT would penalise those living in areas where the value of their properties had increased sharply over the years (due to rising land values), while their incomes had not grown proportionately, or perhaps had gone into decline if they had become pensioners or unemployed, or had been widowed. This could also apply to established businesses. However, this problem could be mitigated in a number of ways.

First, people – and also businesses – could simply choose to increase the occupation of the premises, for example, by taking in lodgers or sub-letting, or they could move to smaller properties or to areas where land values were lower. This, indeed, is one of the long-term benefits of LVT – it encourages the more efficient use of the land that is available.

Second, for residential properties, pensioners and others with low incomes could be allowed to defer the payment of LVT (either wholly or in part) until the property was sold or transferred. This would enable people to carry on living in their properties at no extra cost, and, if they so chose, to pay less tax than they do now. However, it is only fair that the tax plus interest should be paid eventually, because the increased value of their properties (that is the land on which they stand) would have been created by the activities of the community as a whole, and not by those who happen to occupy the particular site. Meanwhile, local authorities could obtain the revenue that they otherwise would have received from low cost loans, using as collateral the stream of income that they would eventually receive.
Third, a ‘Homestead Allowance’, similar to the Personal Allowance on Income Tax, could be introduced for main residences, which would act as a threshold before LVT was levied, thus helping to ease the tax burden of people on low incomes. In addition, for people on very low incomes, it could be arranged that they received benefits similar to the Council Tax Benefit.

Meanwhile, in the case of businesses, there may be instances when the local community might, for one reason or another, want to preserve the productive activities of certain businesses in the neighbourhood, for good social reasons. As now, this could be handled simply through the planning system, which could limit the way in which the land was used. This would reduce land values in these particular cases, and therefore the liability for LVT. Similarly, parks and open spaces, including school sports fields, would be exempted from LVT because planning regulations would, in effect, reduce their land value to zero.

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