Land Value Tax: For The Many, Not The Few
17 May 2017
“We will initiate a review into reforming Council Tax and Business Rates and consider new options such as a land value tax”
It is seriously good news that the Labour Party is at last considering replacing two of the worst taxes on the books with a fairer, more progressive and economically efficient land value tax (page 86 of yesterday’s Manifesto).
Council Tax is hugely regressive with an effective rate of 30-40% (of annual rental value) in the cheapest areas compared with just 3-4% in the most expensive, e.g. the owner of a £200 million mansion in Westminster currently pays £100 less Council Tax than the tenant of a £345 per month flat in Weymouth!
After wages and rent, Business Rates are often the biggest expense for many companies, particularly SMEs, and they are deeply resented by such as John Cridland, Director-General of the Confederation of British Industry, as “outmoded, clunky and regressive“.
A Land Value Tax (LVT) is an annual levy on a site based on its value which will be conditioned by its location and optimum permitted use. This form of taxation that ignores any developments made on land has many advantages over property taxes like Council Tax and Business Rates: it encourages rather than discourages investment to improve property (e.g. to enhance housing stock or increase productivity); it will bring unexploited and under-exploited high-value land into productive use for residential or commercial purposes; it will particularly favour the development of low-value land bringing jobs, housing and economic activity to the places that need them most; and perhaps most crucially, it is paid by the landowner, the sector that reaps most of the benefit from local amenities and services (public transport systems, hospitals, schools, sewerage, rubbish collection, …) in the form of higher rents and property values. With LVT, those who can most afford to pay – pay the most; and those who benefit most from public sector investment contribute most towards it in fair, proportionate measure. This is in contrast to the current situation in which, when the Council regenerates a run-down neighbourhood, tenants and regular homeowners are hit with the double whammy of a hike in rent and/or higher taxes. Two things that both look like taxes except one of them goes entirely into private pockets.
The Labour Party should be congratulated for considering LVT to replace the local taxes on buildings and business equipment. For a democratic socialist party operating in a mixed economy, it would seem to be a natural policy as LVT is the fairest, most economically neutral tax (far superior to any of our current taxes on work, production, investment, enterprise and trade). As for the Conservatives, is it because their most important constituency is the wealthy (and specifically, big landowners) that they cannot even talk about what the most distinguished economists from across the political spectrum recognise as the only form of taxation that does not distort market forces?
LVT is the very embodiment of governance For The Many, Not The Few and might even presage a brave example of Strong, Stable Leadership. The Labour Land Campaign welcomes Jeremy Corbyn’s recognition that “Wealth should belong to the majority and not the tiny minority… The British people know that they are the true wealth creators, held back by a system rigged for the wealth extractors.”
 Institute of Economic Affairs: https://iea.org.uk/publications/research/wheels-of-fortune
Adam Smith Institute: https://www.adamsmith.org/policy
Institute of Fiscal Studies: https://www.ifs.org.uk/publications/mirrleesreview/
Corbyn looking at a very good idea – replacing Business Rates with a Land Value Tax
27 April 2017
Addressing the Federation of Small Businesses last week, Jeremy Corbyn talked about replacing Business Rates with a Land Value Tax: “I’m interested in the idea… We are looking at it“.
After wages and rent, Business Rates are the biggest expense for many companies—particularly SMEs—by whom they are perceived as unfair (in that business is expected to bear a disproportionate part of the burden of paying for local services compared with residents): a typical opinion is that of John Cridland, Director-General of the CBI: Business Rates are “outmoded, clunky and regressive“.
A Land Value Tax (LVT) is an annual levy on a site based on its value which will be conditioned by its location and optimum permitted use. This form of taxation that ignores any improvements made to land has many advantages over property taxes like Business Rates: it encourages rather than discourages investment to improve commercial property (e.g. to increase productivity); it will bring unexploited and under-exploited high-value land into productive use; it will particularly favour the development of low-value land bringing jobs and economic activity to the places that need them most; and perhaps most crucially, it is paid by the landowner, the party that reaps most of the benefit from local amenities and services (public transport systems, hospitals, schools, sewerage, rubbish collection, …) in the form of higher rents. With LVT, those who can most afford to pay, pay the most and those who benefit most from public sector investment contribute most towards it in fair, proportionate measure. This is in contrast to the current situation in which, when the Council regenerates the run-down high street, local shops are hit with the double whammy of a hike in rent as well as higher Business Rates. Two things that both look like taxes except one of them goes into private pockets.
So, if LVT is so clearly superior to the current Business Rates system, why has it not been embraced by a “business-friendly” government that has been told about the advantages of such a switch by institutions as revered as the Institute of Fiscal Studies and the Institute for Economic Affairs? Because the Conservative Party has a far more loyal, longstanding constituency to placate, namely the small but disproportionately powerful minority who own most of our green and pleasant land and who would be the only ones to lose out with a switch to LVT. Corbyn put it well this week: “wealth that should belong to the majority and not the tiny minority… The British people know that they are the true wealth creators, held back by a system rigged for the wealth extractors.”
For the Labour Party, LVT would seem to be natural policy: strategically because it is the fairest tax; tactically, for a party that is often painted as economically irresponsible, because it is the only form of taxation that does not distort market forces; and practically because the Conservative Party cannot even talk about it.
Most citizens would benefit from the replacement of almost any of our current taxes on production, work, trade, enterprise and investment with a tax that is progressive, economically efficient, easy to collect and impossible to dodge. And Business Rates are a great place to start. There is even a cogent case that rental properties—effectively commercial land exploited to generate income like any other business—ought to be subject to LVT.
Labour Land Campaign Secretary Carol Wilcox says, “If politicians, the media and economists could only recognise how land value arises and who currently receives unearned income from it, part of it could then be collected through a reformed tax system, reducing economically counter-productive (literally!) taxes whilst increasing investment in our under-funded public services”
Philip Hammond’s Ides of March
16 March 2017
With Tory backbenchers’ knives out after the budget, Philip Hammond’s climbdown highlights how complicated and unfair the UK tax system is. The issue of whether or not to increase National Insurance Contributions for self-employed workers points up how our tax system is overly complex, inefficient, avoidable for some and unfair for many; it penalises work, trade and entrepreneurship whilst rewarding those who enjoy unearned income.
The system is so fundamentally broken that the time for minor tweaks is long gone: it is not just the National Insurance scheme that needs reviewing but the whole system. That would provide an opportunity to realise that shifting taxes off work and production and on to the unearned incomes received by landowners through no effort of their own will not only be fair but will benefit the economy and encourage—rather than deter—investment in existing and new businesses. Because land values and taxes are inversely related, a shift to an annual Land Value Tax will make homes and business premises really affordable and will recycle the land wealth that accrues from public and private investments to provide a sustainable source of funding to maintain and develop our public services that are in such dire need of it.
Anthony Molloy, Chair of the Labour Land Campaign which argues for fair taxes, says “Let’s hope this current spat over raising National Insurance Contributions for self-employed workers—together with the negative impact on some businesses of belated Business Rates revaluations—makes MPs think about how hideously complicated and unfair our tax system is and how it could be reformed to address some of the most pressing problems in the British economy. An annual Land Value Tax fits the bill: it cannot be avoided or evaded; it will encourage work and entrepreneurial investment, thereby enhancing productivity; it will solve the unaffordable housing crisis; and it will level off inter-regional inequalities, notably the North-South economic divide.“
London leading the way to fixing a broken system
27 January 2017
With today’s publication of the London Finance Commission’s (LFC) report entitled “Devolution: a Capital Idea” on top of Mayor of London Sadiq Khan’s positive response earlier in the week to the Greater London Authority (GLA) Planning Committee’s report “Tax Trial: a Land Value Tax (LVT) for London”, there is welcome evidence that at last an important political centre has a leadership that is thinking seriously and radically how to repair a patently broken, unfair and economically inefficient taxation system. Both reports recommend investigating ways to capture the uplift in land values that accrues from public sector infrastructure investment and currently goes entirely into private landowners’ pockets; judiciously harvesting some of this unearned wealth back into the public purse could create a self-sustaining virtuous cycle of locally increasing land value driving further investment in a community at the same time as perennially raising the quality of life of all the community’s citizens. More concretely, both reports further recommend setting up a trial of “the operation of a land value tax pilot on undeveloped land”. If the trial proved successful, it could be rolled out across the capital on all land, then across the country and then across the world! It would not be the first time that London has led the way.
While a local LVT has only a fraction of the benefits of a national one (notably with respect to the kind of dire inter-regional disparities and inequities that characterise the United Kingdom), the LFC report emphasises the synergy to be gained from Mayors in cities all over the country working together on obtaining real devolution, i.e. genuine power over fiscal policy, especially when negotiating with a government that is stronger on rhetoric about devolving power to the regions than it is on seriously tackling inequality in all its forms.
Moreover, the LFC report does not address the key question of whether this land tax proposal would be an add-on or a replacement tax. Rather than being a tax in the classic sense, LVT can be fairly characterised as a “payment for benefits received”; the benefits being driven by the whole community and the payment being received by the minority that owns most of the land. Thus, in addition to being fair in that those who are most able to pay will be paying the most and those who benefit most from public-sector investment will be contributing most towards it in fair and proportionate measure, LVT is economically neutral and does not distort market forces. While the introduction of LVT would have significant direct corollary benefits like solving the housing crisis in our major cities by bringing undeveloped and underexploited land into optimum use, its core virtue is that it can be used to replace other pernicious taxes on work, trade, investment, enterprise and productivity (Rule Number One of Taxation: The More You Tax It, The Less of It Will Get Done). In addition to being fair, progressive and economically efficient, LVT is impossible to dodge (you cannot put your Mayfair flat in the Cayman Islands); no other form of taxation combines all these virtues.
Dave Wetzel, President of the Labour Land Campaign who was the first Vice-Chair of Transport for London until 2008, says, “Whilst welcoming the Commission’s interest in an annual Land Value Tax, they need to understand that it is not just development sites that benefit from new and existing infrastructure but all land within the catchment area that derives unearned benefit and this is what LVT is designed to recover.”
 Whereas the GLA report explicitly recommends replacing the three basic property taxes, i.e. Council Tax, Business Rates and Stamp Duty Land Tax
Only half of families own their own home – how do the other half live?
28 December 2016
We now know for certain that the comfortable assumption that 64 per cent of UK citizens own their own home is a myth (1). Comforting because, although homeownership has been in decline since 2005, it still seemed to confirm that two thirds of households were achieving their dream and were not dependent on the precarities of the rental sector.
A decent home is a basic human right and the sixth richest country in the world should have no difficulty in achieving this for everyone here. The Labour Land Campaign has for over 30 years sought to show how homes can become affordable for all whether to buy or rent. Our policy is based on the fact that:
- House prices in desirable areas are substantially land value, which is created by the whole community through its economic activities and the locally provided public, and private, goods and services, including vital infrastructure paid for by general taxation.
- If the land value was shared by all those who create it the price of a home would be no higher than the building cost – even less if not new – just like second-hand cars.
The Labour Land Campaign calls for Council Tax to be abolished and replaced by Land Value Tax, which is paid by the owner, not the tenant.
At the moment the owner of a £200 million mansion pays £100 less Council Tax than the tenant of a £345 per month flat in Weymouth!
Labour Land Campaign Vice Chair, Heather Wetzel, writes: “My paper ‘Welfare for the Rich – who really receives the biggest subsidies in the UK?’ (2) shows how landlords have benefited inordinately from the increasing value of land. For many years I have sought to prove that homeownership in the UK has been overestimated and that many more people are dependent on the exploitative private rental market to maintain a roof over their heads. I am grateful to Lindsay Judge and Adam Corlett for researching this important subject.”
Council Tax: a sticking plaster to staunch the social care haemorrhage
13 December 2016
The failure of the government to address the worsening crisis in social care in the Autumn statement attracted criticism from across the political spectrum with projections suggesting that 40% of current social care places could become non-viable in the medium term. Now, the belated response to the hue and cry is a proposal to increase social care funding by further increasing Council Tax. Of all our economically inefficient, unfair taxes, Council Tax—a hybrid property/poll tax—is deliberately and by Tory design one of the most regressive: a tenant in a flat almost anywhere in the country pays more than the owner of a similar flat in Westminster. Mark Wadsworth, Research Officer of the Labour Land Campaign (LLC) has shown that “across the country, Council Tax is hugely regressive with an effective rate of 30% or 40% [of annual rental value] in the cheapest areas compared with 3% or 4% in the most expensive”. It is a profoundly divisive idea to try to cure a fundamental, national problem like the expanding need for social care provision by raising the already unfair Council Tax. In addition to consolidating well-characterised inequality between the proportions of disposable income paid in tax by the poorest and the richest households within any given area and across the country, concrete figures from the King’s Fund think tank show how this measure would further specifically exacerbate inequality in access to care services between prosperous areas with relatively low pensioner needs and deprived areas with high pensioner needs.
LLC President Dave Wetzel says “While all of our current taxes are either unfair, economically counter-productive, easy to avoid or all of the above, Council Tax takes the biscuit when it comes to making those who can least afford it pay the most. The history of the Council Tax is a prime example of how tax policy in Britain has been mismanaged: from its hasty introduction in 1991 to plug the gap left by popular rejection of the Community Charge, through the inexorably worsening geographical and social unfairness of this tax as a result of failure to revalue the base in England ever since. And the mismanagement now goes on with yet another sticking plaster, this one to cover up central government’s abdication of its responsibility to adequately fund social care spending, passing the buck to local authorities that have already seen their own funding cut by 40% since 2010.”
The Labour Land Campaign advocates replacing current taxes on work, production, trade, investment and enterprise with economically neutral taxation on land value and therefore wealth and unearned income. When Britain gets a government that is more interested in establishing a fair, efficient taxation system than it is in consolidating the position of a narrow constituency of disproportionately powerful vested interests, getting rid of Council Tax may be a good place to start.
 King’s Fund Report: “How serious are the pressures in social care?” [www.kingsfund.org.uk/projects/verdict/how-serious-are-pressures-social-care]
Failure “… to build an economy that works for everyone” (Philip Hammond, 23 November 2016, 12h32)
24 November 2016
In his Autumn Statement, the Chancellor talked about “tackling the three major weaknesses in our economy, namely: the productivity gap; the housing challenge; and the damaging imbalance in economic growth and prosperity across our country”. He went on to announce a series of sticking plaster measures that leave in place a corrupt tax system that: is anathema to productivity; has led to a sustained drop in house-building (especially of affordable housing) over more than fifty years; and favours rich over poor as well as the more prosperous parts of the country over the most deprived.
Taxing work (Income Tax, National Insurance Contributions), trade (Value Added Tax), private sector investment (Business Rates) and enterprise (Corporation Tax) makes goods and services more expensive and less competitive, and thereby reduces productivity; the housing crisis has been driven by the existence of strong incentives for landowners to restrict supply to a minimum and thereby guarantee rising prices for their scarce asset; regressive taxes (Council Tax, VAT) disproportionately fall on the less well-off, and taxes penalising private-sector, yield-bearing investment that are indiscriminately levied on prosperous and deprived areas alike (Business Rates) reinforce geographical inequality. These taxes account for some 85% of Treasury revenue.
Anthony Molloy, Chair of the tax-reform pressure group Labour Land Campaign, says “Until we tax the right things the poorest will continue to subsidise the richest. We need a reformed tax system that is fair, transparent and cannot be evaded.” He explained that, as our economy has grown over generations, so owners of land have demanded more and more unearned income from those using their asset for production, services and homes. He continues “land wealth largely accrues from public services paid for by all taxpayers with no input from land owners. By reducing negative taxes that compromise trade and investment, and replacing them with an annual Land Value Tax (LVT) that collects the economic rent of land which properly belongs to all, we will see: enhanced competitiveness and thus productivity; an end to land speculation, the development of idle and under-used land, and resolution of the housing crisis; and a fairer system in which not only is more of the tax burden borne by those who can afford it most but also one that encourages regeneration of the most deprived parts of the country, instead of holding it back.“
Rather than helping the intended beneficiaries, many of the measures announced today such as subsidies for builders, transport infrastructure and Business Rates will immediately capitalise into land value, thereby further the enriching the wealthy and exacerbating the problem at the root of the housing crisis which is over-priced land; history shows that all government grants and subsidies inexorably find their way into the pockets of land owners.
If Philip Hammond were serious about making the economy work for everyone, the underlying causes of low productivity, the housing crisis and growing inequality would have been ‘tackled’ in this year’s Autumn Statement. But then, his party has powerful vested interests to keep happy (the wealthy and specifically landowners) and, according to his declaration of interests in 2016, “I am a beneficiary of a trust which owns a controlling interest in Castlemead Ltd., a company engaged in construction, house building and property development.”
How would Land Value Based Fiscal Reform contribute towards good, secure, affordable housing?
1 November 2016
Abstract for the “Commons Rent for The Common Good” Conference from Peter Smith
In the face of a deep and ever worsening housing crisis there is widespread frustration at the failure to increase the rate of house building to address the imbalance of supply and demand. A large part of the problem is that the profits of the development industry are intrinsically linked to inflated land values which are boosted by artificial scarcity. It is not in the interests of developers to flood the market with new builds as this would have a price-suppressing effect and hit their bottom line.
At present it is all too common for land owners to sit on development sites and demand an unrealistically high price from others who want to bring them forward, or otherwise demand that local authorities lift the obligation to build sub-market-rate, affordable homes in order to make schemes more profitable. The viability discussion, a circular argument over the relationship between site value and planning obligations, can be typified as a stand-off between the developer and the planning authority with the latter commonly lowering its affordable housing requirement in the hope that this will result in stalled sites being taken forward.
Land value based fiscal reform would strike at the root of the problem by fundamentally shifting the balance in favour of productive land use, rewarding the industrious and penalising the speculator. It would do this by introducing a modest annual cost on the land owner regardless of whether land is used productively or not. In return, one-off costs that developers currently face such as Community Infrastructure Levy and Stamp Duty Land Tax on development land could be eliminated in a revenue neutral way. These existing taxes are not paid by those holding land idle but are only levied once the decision is made to sell or develop the site. The revenue neutral fiscal shift could be extended further to eliminate other taxes on house building companies and construction workers including VAT, corporation tax, income tax and national insurance. Reducing these harmful taxes would lower the cost of development.
The net result would be a saving for those who proceed quickly with development and mounting costs for those who do not. The reform would prove to be an effective antidote to unproductive land banking and speculative behaviour which drives up the cost of land. Stalled sites together with underused and derelict land in both the public and private sectors would be unlocked and the build-out of development schemes would be accelerated. The surge of available land would have the effect of lowering its price, enabling new developers, including smaller house builders, self-builders and housing associations to join established volume house builders in providing a plentiful supply of affordable housing as well as creating additional jobs in the construction industry.
The fiscal shift would also result in a more efficient use of the existing housing stock. Bringing empty homes back into use would be rewarded and an incentive would be created for existing households to downsize where possible. Not only would this mean a greater number of larger homes coming onto the market but it would also reduce the requirement for greenfield land to facilitate urban expansion.
Thousands of hectares of land would be freed up and millions of new homes would be delivered across the country. Housing supply would increase to meet demand causing a fall in house prices as well as lower rents. At the same time the fiscal shift would mean higher after-tax incomes and greater spending power for the majority of people which would make homes more affordable to the population at large. Furthermore, the end to scarcity that increased supply would bring would result in better quality housing and a more equal relationship between landlords and tenants, reducing the insecurity of tenure and poor conditions currently experienced by many in the private rented sector. In essence, land value based fiscal reform would tackle the monopolisation of land which lies at the heart of our current housing crisis.
Submission to the London Finance Commission
18 October 2016
- Our taxes have been introduced over many centuries and in a haphazard way. Taxes were originally levied on land values but over the centuries our Parliament of land owners has shifted taxation on to trade, production and wages. The London Finance Commission gives a real opportunity for Londoners to consider what is currently taxed, what the benefits and disbenefits are and to explore an innovative, more efficient and fairer tax system (as highlighted in this year’s Greater London Authority Planning Committee’s Report for the incoming Mayor, “Tax Trial. A Land Value Tax for London?” February 2016 [https://www.london.gov.uk/sites/default/files/final-draft-lvt-report_2.pdf]).
- The Labour Land Campaign (LLC) is a broad left research and campaigning organisation and argues that current local, regional and national taxes are inefficient, distort behaviour and are often avoided or evaded. Consequently, they tend to damage the economy, discourage good investment, penalise work, and skew the economy in such a way that it actually creates unfair advantage to rich individuals, global corporations and those who claim ownership of land and other natural resources. Local taxes should empower local communities by providing a sustainable income sufficient to maintain and develop local services that meet individual and community needs. We argue that this can best be achieved by replacing all current local taxes including Council Tax and Business Rates with an annual Land Value Tax on all land – urban and rural. We also argue that London’s economy would be stronger, fairer and more secure if all taxes were to be replaced totally or in part by an annual Land Value Tax. We consider that taxes on other natural resource rents, particularly oil, the radio spectrum and airport landing slots, should also be collected.
- Council Tax is not fair because people in lower value homes pay proportionately more than those in higher value homes.
- Business Rates fall most heavily on owners of well maintained, well insulated and architecturally attractive buildings and are avoided by those who leave their buildings empty or leave development sites idle – in some cases for decades.
- Stamp Duty Land Tax (SDLT) is not efficient or fair as it only collects a small proportion of property value at the time of sale hence properties that change hands regularly pay much more than properties in static ownership. SDLT actually discourages positive trading in properties, discourages the better use of properties, destroys value for both buyers and sellers, and so discourages the optimum beneficial economic use of land.
- Income Tax is regularly avoided or evaded and can deter people from enhancing their income because this means they pay more tax or a higher rate of tax.
- Value Added Tax (VAT), local sales taxes, and Employers’ National Insurance Contributions (NICs) are not only an unnecessary cost for both employers and consumers but damage the economy through deadweight losses. VAT can easily be avoided or evaded by reducing production, reducing trading hours, employing fewer workers, selling fewer goods or services and operating in the cash economy; and above and beyond lost revenue, the convoluted VAT credit and refund mechanism is massively exploited by the unscrupulous to actually steal from the Treasury.
- NICs are easily avoided by employers shifting groups of employees to being “self-employed” thus removing the social protections that were their original prime purpose.
- Corporation tax can be avoided particularly by global enterprises using the tax advantages of one country, transfer pricing and setting up subsidiary companies – an option not open to local businesses (however well run).
- Land speculation is encouraged by the present tax system which leads to higher land prices for homes and business premises. Although it is the biggest speculators who reap the really immense rewards, the average UK worker—who will have earned something like a million pounds over his or her career—who was lucky enough to have been able to buy property early on will have seen a comparable increase in their “wealth” by doing absolutely nothing at all.
- LLC will gladly provide evidence and information to support these arguments if required.
2. Do you believe that the current arrangements for sub-national (that is, the mayor and the boroughs) taxation and the responsibility for service provision as it affects London is fit for purpose
- LLC argues that local democracy has been seriously eroded over recent years and therefore does not allow the London Mayor or individual London Boroughs to launch new initiatives that were once the pride of local government, or to offer a better level of locally run public services that actually meet individual needs. Instead, because of financial constraints, essential services are now provided by private companies concerned with making profits at the expense of workers’ wages, decent pensions and high-quality provision.
- In devolving responsibility for taxation and service provision to the Mayor and Boroughs, there also needs to be the power to reform Business Rates and Council Tax, both of which are inefficient and discriminate in favour of land speculators (UK and overseas based), land hoarders and owners of expensive homes as well as discriminating against tenants (commercial and residential) and other non-property owners, including the growing number of adults who are forced to live with family because they cannot afford to rent or buy in Greater London.
- An example of how the Mayor could finance public services through a radical reform of local taxes is seen in the building of Crossrail being part funded through a supplementary Business Rate which was at the initiative of TfL in meetings with the Treasury in order to obtain Government support for the project. By using just the uplift in land values (reflected in the property assessment for Business Rates) on only the larger business properties in London, over £4bn is being raised without objections from said businesses or the last Conservative Mayor. Although suggested by TfL working for Ken Livingstone, former Labour Mayor, the Supplementary Business Rate was generally supported by business and not only did Boris Johnson continue with the funding but the current Conservative Government has extended this source of land value funding to directly elected Mayors across the country. If only a proportion of existing as well as past and future increased land value is collected through a shift to an annual Land Value Tax on all land by the London Mayor and London Boroughs, not only would there be a sustainable source of funding for new transport infrastructure but for all local public services including Social care for all that need it and really affordable homes including new Council-owned homes for rent.
3. Do you believe that London’s government (the mayor and the boroughs) should take responsibility for a wider range of taxation and public expenditure?
- But it would be a missed opportunity if the harmful existing taxes on London’s workers and businesses were not reduced or replaced by LVT which would help tackle the London housing crisis, reduce poverty and lift up the most deprived parts of the capital.
- London could be a trailblazer in levying progressive and Green taxes that stimulate the economy using the many underused skills and talents of people living here; rid London of land speculation, land hoarding and empty/underused buildings; increase renewable energy and have all new buildings built to a high eco-friendly standard.
- Local public services are in desperate need of sustainable funding particularly all aspects of social services, youth work and social housing and in supporting schools to provide greater support for those students with learning and physical disabilities and reduce class sizes and more personal development to enable all students to become responsible citizens.
- More powers for the Mayor and Boroughs to implement a progressive tax system together with more policy control will help bring about a fair and sustainable economy benefitting all of those who live and work in Greater London. London’s progressive Congestion Charge is cited by governments the world over as an example of how to reduce congestion and pollution in a city. It was introduced by a committed and courageous Mayor and brought immediate positive results despite opposition by the London media, motoring organisations and other opponents. The former rating system allowed local authorities to provide good, wide-ranging and involved community and business organisations in decision-making.
4. If London were to take greater regional/local responsibility for taxation and public spending, which taxes and services do you think would be most appropriately devolved and why?
- LLC believes that almost all current taxes are inefficient, unfair, easily avoided/evaded and distort the economy. London needs to be able to shift to a progressive form of taxation so that the underlying and rising land values that currently go to land owners will instead, be captured and recycled to maintain and develop public services. If London were able to levy a charge on the annual rental value of land through an annual Land Value Tax on all land with at least Business Rates and Council Tax being abolished, this would provide a sustainable income for providing quality services to meet local needs. Local businesses and communities would be encouraged to become more involved as elected Members determine and provide the type of services needed locally.
- There is a precedent for London Government asking for new powers to fund its services. In 1938 the then Leader of the London County Council (LCC), Herbert Morrison MP, presented a Private Member’s Bill to Parliament which would have allowed the LCC to shift the rating system on buildings to Site Value Rating (the local designation for Land Value Tax).
5. Does the UK’s referendum decision to leave the EU affect arguments for the transfer of power from Westminster/Whitehall to London’s government?
- Leaving the EU allows the Mayor and Boroughs to argue how distortive and unfair the EU-imposed Value Added Tax is and how Common Agricultural Policy subsidies capitalise into land value thereby exclusively benefitting land owners rather than achieving their intended purpose. LLC would support greater local democracy whether or not the UK is in the EU.
6. Would greater devolution of powers to the mayor and the London boroughs make it more or less likely that public resources were effectively and efficiently used?
- Local decision-making should encourage local business and community involvement in policy making and that would lead to greater understanding and scrutiny by all. Centralised decision-making over recent years that isolated those using and needing local public services has helped create apathy among many voters and anger when they become personally affecteded. An annual Land Value Tax would solve the problem of the growing number of young adults who cannot afford to rent or buy in the London area and the revenue would ensure that the land value—that they too help generate—will benefit everyone rather than just land owners and land speculators.
Reclaiming the terrain of economic efficiency for the left
11 September 2016
Motion submitted for debate at the Labour Party Conference
- Neoliberal doctrine has driven economic policy in developed countries and has been forced upon many developing economies leading to a drop in living standards for all but the very wealthiest throughout most of the world.
- The claimed purpose of these policies is NOT to consolidate the dominant position of either developed countries and transnational corporations or the wealthiest individuals and companies. They just happen to do both these things!
- A cornerstone of neoliberal doctrine is the trickle-down argument that: the market knows best; taxes on labour, enterprise and sales distort market forces; reducing taxation will free up the market and lead to increased prosperity for all.
- Because taxes and land values are inversely related, all tax reductions eventually end up capitalised in land values, a distortion of the market that disproportionately hurts the poor who do not own property. Only one form of taxation is perfectly economically neutral: land value taxation (LVT).
- LVT is a levy on the value of land (conditioned by its proximity to jobs and services, its fertility, etc.), irrespective of any buildings or improvements on it.
- Big land owners and their political parties abhor LVT—what Milton Friedman called “the least bad form of taxation”—because they constitute the small minority of citizens who would lose out by its introduction.
Conference believes that Labour should replace taxes that have perverse market-distorting effects with economically efficient LVT.
Homes for Londoners: land value and taxation
29 August 2016
Some 100 days after an election dubbed a referendum on housing, our new Mayor of London has established the Homes for Londoners board. If Boris Johnson did not hide it, this board would do well to read this year’s report by the GLA Planning Committee on how to address the housing crisis in the capital. In addition to a very pithy exposition of the virtues, challenges and history of Land Value Taxation (LVT), he will find the conclusion that, “The time has come to test it out. The conditions are right”. He will also find therein concrete recommendations that, as soon as the new Mayor takes office, he should cost replacing Council Tax, Business Rates and Stamp Duty with a LVT, and set up a trial in a specific area of London with a view to subsequent roll-out across the capital.
Last week the Mayor announced that he would try to force the release of tracts of urban waste land owned by Transport for London (TfL) coupled with a commitment to the construction of housing for regular Londoners. The very frank response from Tory transport spokesman Keith Prince AM was, “Selling TfL’s land with a massive 50 per cent affordable housing requirement ensures it will be sold for well under market value”. Well, yes, that’s the point: speculative market values are killing London by driving out the young and strangling the diversity and vibrancy that make our capital so great. If only Londoners could also get their hands on all the undeveloped land in their city which is being banked by private companies and which accounts for the majority of those bleak, off-putting, Trespassers Will be Prosecuted plots one sees everywhere.
Some may find it puzzling that there is so much undeveloped land in areas one would have thought eminently desirable—and profitable—like Greenwich and Southwark (and, if truth be told, anywhere in Greater London at all). The problem is that, as long as the price of land rises at the rate it has been in the last twenty years in London, a landowner can make more money doing nothing than by developing his asset for productive use. The solution is to tax land. LVT would stop dead the kind of speculation that leaves so much of London’s most precious natural resource fenced off, sad-looking and of no use to anyone. While rising land prices are due to inflation of the property market by the banks, rising land values are largely the result of public sector investment (not only homes for ordinary people but also schools, hospitals, sewerage systems, policemen, tube trains, etc.) so revenue from a land value tax could also drive a virtuous cycle in which public sector investment, as well as enhancing Londoners’ quality of life, further drives up land values and thereby increases revenue for the public purse … for further investment …
Landowners not only tend to be richer than tenants but they–along with the banks–are also the main beneficiaries of rising land values which is why Anthony Molloy, Chair of the Labour Land Campaign, says, “Taxing land would therefore not only ensure that those who are most able to pay will pay the most but also that those who benefit the most from public sector investment contribute most towards it, in fair measure.”
Sadiq Khan was elected on a mandate to solve London’s most critical challenge, its housing crisis. A good departure point would be the GLA Planning Committee Report.
 “Tax trial. A Land Value Tax for London”, 22 February 2016 [https://www.london.gov.uk/sites/default/files/final-draft-lvt-report.pdf]
Letter to the Guardian by Dave Wetzel, President of the Labour Land Campaign, in response to an article entitled “What’s needed to tackle Britain’s homelessness scandal”
21 August 2016
The letter from Labour MPs and others on the need to address homelessness misses one crucial policy: we cannot build new homes without access to land. Before the government and others begin to build more homes they will need to acquire land, and in the face of this increase in demand, landowners will naturally increase the price of land, meaning the cost of these new homes will escalate. The answer is to remember that land is not a manufactured good but a free gift of nature. Housing policy needs to acknowledge that land speculation (the hoarding of land out of use) is the underlying cause of the high cost of homes. An annual land value tax would kill land speculation in its tracks and provide government with the funds to build more homes.
The housing crisis is not about bricks and mortar … it’s about land: tax it
2 August 2016
“House prices have become detached from people’s earnings” Matthew Whittaker, chief economist at the Resolution Foundation
The Resolution Foundation’s well-timed and eye-opening analysis illustrates the extent to which property prices have risen disproportionately to wages since the early 2000s. Even Theresa May, in her coronation speech, drew attention to the “injustice [that], if you’re young, you’ll find it harder than ever before to own your own home”. Outside the pages of the Daily Mail, the zeitgeist has shifted towards a recognition that high property prices are incompatible with a balanced, fair economy.
But it is important to recognise that the component that has gone through the roof is not bricks and mortar, it is land. Bricks and mortar depreciate so if the same house costs more than it did twenty years ago, it is because the land that it is on has gone up in value. The reasons for this are many and various but the solution is clear: tax the value of land to capture this unearned capital gain.
A land value tax is levied on the part of the value of a property that stems from the size, planning permissions and location of its land, irrespective of the value of buildings and other improvements on it. Land value may be most of the property price (Mayfair) or very little of it (Port Talbot).
Land value taxation would solve the housing crisis in our major cities by:
- bringing property prices down (both because future taxes will have be taken into account in the selling price and because vast swathes of underexploited land will be forced on to the market);
- removing the incentive to leave useful land undeveloped;
- encouraging landowners, landlords and home-owners to improve their asset to ensure that it is put to its optimal use and generates as much income or joy as it can;
- driving the regeneration of deprived areas where land value is currently low.
This is in contrast to the perverse effects of our current property tax system: if a home-owner improves his property to improve quality of life, he will have to pay higher Council Tax; if a businesswoman invests in her premises to enhance productivity, she will have to pay higher business rates.
Taxing land has many other virtues: it is fair and progressive; it is easy and cheap to collect; it is impossible to dodge; and most importantly, it is economically efficient, meaning that it does not distort market forces. Anthony Molloy of the Labour Land Campaign says, “if a land value tax were to replace any of our current perverse taxes that penalise work, business, investment and trade, the market would be freer to do what markets do best”. Surely an argument that ought to appeal to the woman who has stepped into Margaret Thatcher’s shoes.
Unfortunately, she, like her predecessor, is going to have to sacrifice the economic efficiency that her Party has laid claim to for the last thirty years in order to appease the tiny minority of vested interests—notable among them the banks, big building companies, property developers, speculators and, of course, the big landowners—who represent the core constituency of the Tory political machine—and who fund it.
Land value taxation: giving the lie to One-Nation Tories
14 July 2016
“The government I lead will be not driven by the interests of the privileged few”
Theresa May gave the now-traditional, One-Nation Tory, “Party-of-the-Workers” nod to the unwashed on her coronation yesterday. Presumably it was not written by Steve Hilton or Stewart Pearson but their spirit was in it: the spirit of spin devoid of ideology in cynical denial of their party’s dedication and indebtdedness to the powerful and wealthy vested interests that have been controlling fiscal policy for centuries in Britain since the days of Rotten Boroughs and Corn Laws.
More recently, the Tory Party has enthusiastically embraced the neoliberal agenda: shrink government, liberalise trade and deregulate to make production more profitable and boost growth. An End Of History argument that has proven bizarrely seductive to voters despite the corollary effects of such policies being a drop in living standards for all but the most wealthy and the creation of a dangerously alienated underclass.
The claimed virtue of market fundamentalism is to optimise economic efficiency and create wealth that will trickle down throughout all strata of society. In no way are these policies expressly designed either to further the narrow interests of the Tory Party’s traditional core constituency who fund them, namely the wealthy and, in particular, the land-owning class: they just happen to do this!
A key element in the neoliberal agenda is to reduce taxes to enhance economic efficiency: the underlying economic principle is that taxation reduces profitability and therefore cuts out potentially viable producers thereby inhibiting economic activity and preventing growth. While this is true of all of our current taxes, it is not true of land value tax which, being taken from economic rent (producer surplus), does not distort market forces. The cornerstone of market fundamentalism is that the market knows best and any distortion of market forces will have perverse effects. So, if economic efficiency is the guiding principle of the Conservative Party, why do they not advocate the only form of taxation that is not economically inefficient—land value taxation—what their guru Milton Friedman called “the least bad form of taxation”?
Claiming back the terrain
30 June 2016
Since the 1970’s, economic efficiency has been a terrain claimed by the right: shrink government, liberalise trade and abolish regulations to make production more profitable and boost growth. An argument that has proven seductive to voters in democratic countries despite the corollary effects of such policies being a drop in living standards for all but the most wealthy and the creation of a dangerously alienated underclass. Right-wing political parties have won power with this message across the world, transforming the most powerful economies to create a uniformly neoliberal globe from Europe through the Americas to China; the so-called End of History. And, at least until the financial crash of 2008 indicated that the End of History had perhaps not arrived just yet, few opposition parties in these countries dared to question the foundations and validity of the neoliberal doctrine, even when they were in power, preferring to revisit old domestic battles between workers and bosses or resort to the age-old, ever-reliable strategy of blaming foreigners and immigrants.
The claim is that the purpose of market fundamentalism is to optimise economic efficiency and create wealth that will trickle down throughout all strata of all societies. In no way are these policies expressly designed either to further the narrow interests of the developed countries that impose them or consolidate the position of the wealthy who constitute the traditional core constituency—and also fund—the political parties that promote them; they just happen to do both these things!
A key element in the neoliberal agenda is to reduce taxes to enhance economic efficiency; as implemented according to the Washington Consensus, the focus has been on tariffs, taxes on income (especially higher incomes) and taxes on business. The underlying economic principle is that taxation reduces profitability and therefore cuts out potentially viable producers thereby inhibiting economic activity and preventing growth. While this is true of tariffs, income tax and corporation tax—or any other of our current taxes—it is not true of land value tax which, being taken from economic rent (producer surplus), does not distort market forces. The cornerstone of market fundamentalism is that the market knows best and any distortion of market forces will have perverse effects. So, if economic efficiency is their guiding principle, why do those on the right not advocate the only form of taxation that is not economically inefficient; what their guru Milton Friedman called “the least bad form of taxation”? You know the answer: fiscal policy the world over has been managed by the wealthy minority—in particular the land-owning class—to consolidate their own advantage.
So when it comes to communicating about land value taxation to counter the predictable arguments of the tiny, overweeningly powerful minority of individuals and institutions who would be the only ones to lose out, an important message will be that, far from being single-mindedly committed to economic efficiency, those in the corridors of power today are as beholden to the same narrow, vested interests at the expense of good governance as they ever were in the days of Rotten Boroughs and Corn Laws.
Working and sitting at home: the problem with unearned income
10 June 2016
One of the great fallacies of life is that working is more lucrative than doing nothing, a fallacy that is perpetuated particularly vigorously by the Conservative Party. (NB: Who said this? “The Conservative Party speaks of the profit from land as if it were the fruits of thrift and industry and a pleasing example for the poor to imitate”).
While it is true that most people earn their money by working, what is not true is that most money is earned through work; unearned income outweighs earned income. Canadian mathematician Jens Von Bergmann has just published an illuminating comparison of employment income (the kind that is taxed in Income Tax) in the City of Vancouver and unearned income accruing from rising land value (the kind of wealth that is not taxed at all in Britain, Canada or hardly anywhere else). Between property tax assessment years 2015 and 2016, the value of owner-occupied single-family homes rose by $25 billion while employment earnings in the same period amounted to $19 billion. Average hourly after-tax earnings were calculated at $26 from regular work compared with $126 from sitting at home (or more accurately, from sitting on your land, if you have any). Any similar assessment is impossible in Britain where the last property tax assessment was a quarter of a century ago.
Earned income is generally perceived as more “worthy” than unearned income (welfare benefits, rental income, profits from speculation, etc.) but it is as important to realise that siphoning money out of the real productive side of the economy into the sterile asset-based side is bad for the economy as a whole. A great part of this siphoning off can be seen in rising land values and, in consequence, property prices and rents. And this is particularly relevant in the year in which total housing wealth owned by UK landlords overtook that held by mortgaged owner-occupiers.
There are a number of reasons why our betters have chosen to tax—and thereby disincentivise—work, investment, trade and development rather than unearned income. To single out just two: our fiscal system was historically drawn up by landowners; and we, the baby-boomers, have done everything we can to enrich ourselves at the expense of our children.
Anthony Molloy, Chair of the Labour Land Campaign says, “Our flawed tax system is not fit for purpose and a major shift in taxation off wages and production and on to land value and other natural resource wealth would provide a sound foundation for an economy that will encourage positive and sustainable production”.
 Winston Churchill in Liberalism & the Social Problem, 1909
 Jens von Bergmann: Work vs Twiddling Thumbs [http://doodles.mountainmath.ca/blog/2016/01/24/work-vs-twiddling-thumbs/]
 out of the $45 billion by which land values increased overall, the $20 billion differential mainly accruing to landlords, large landowners, property companies, speculative building firms, … rentiers.
 Judith Evans: Landlord housing wealth eclipses owner-occupiers with mortgages [https://next.ft.com/content/1dc30d76-baf4-11e5-bf7e-8a339b6f2164]
Save the British steel industry by dipping into workers’ pensions or replace pernicious Business Rates with a neutral and efficient Land Value Tax?
30 May 2016
The Business Secretary’s latest wheeze to save some vestige of a British steel industry is a grab from the pension pots of 50,000 as yet unretired workers to plug an estimated funding deficit of £485 million in the fund. This desperate attempt to make the Port Talbot business more attractive to buyers at the expense of workers is not only illegal under present legislation, it also goes against the principle that pension benefits, once granted, cannot be taken away.
Many of the challenges facing the steel industry are specific to that industry but one anomaly in particular is a challenge for almost every business in the country, namely high Business Rates. These are a kind of property tax payable on the value of the land plus everything immobile on that land; in the case of Port Talbot, this comes to about £10 million per annum. Without denigrating the town of Port Talbot, the value of the land on which the steel plant is installed is probably close to zero; the £10 million will almost all be for the plant and machinery. Carol Wilcox of the Labour Land Campaign says “You couldn’t make it up! If a company invests in its premises to enhance productivity or improve working conditions, it will have to pay even higher business rates.” This goes against the first fundamental principle of taxation, that of neutrality meaning any tax ought to “contribute to efficiency by ensuring that optimal allocation of the means of production is achieved”
And while this applies particularly egregiously to manufacturing industry with serious plant, the same goes for almost every business in the country. In refusing to address the counter-productive—literally—impact of Business Rates, Sajid Javid is ignoring advice from experts in the field, notably that of the Institute of Fiscal Studies (the work of which is “the independent gold standard” according to David Cameron talking about something else altogether this week): their Mirrlees Report which has been on desks at the Department of Business, Innovation and Skills since 2010 makes an unequivocal recommendation: “abolish the current system of business rates and replace it with a system of land value taxation, thereby replacing one of the more distortionary taxes in the current system with a neutral and efficient tax.” According to the Confederation of British Industry, “Business Rates have become a barrier to entrepreneurship, investment and productivity growth for businesses of all sizes and need urgent reform”, but they do not even bother proposing the IFS solution of replacing them with a Land Value Tax because “it’s not what the Treasury wants to hear”. Pointing up the fact that, far from single-minded dedication to economic efficiency, the Tory Party is as beholden to the landowning class as it was in the days of Rotten Boroughs and Corn Laws.
 OECD 2014: Addressing the Tax Challenges of the Digital Economy – Chapter 2. Fundamental Principles of Taxation [http://www.oecd-ilibrary.org/docserver/download/2314251ec005.pdf?expires=1464354260&id=id&accname=guest&checksum=33DE0B389D976749F0CA03099D7BA855]
Our NHS and land
25 May 2016
The NHS overspent by nearly £2.5 billion last year and this is unlikely to improve with the planned “move to market-based rental charging” on properties belonging to NHS Property Services, a Limited Company set up in 2013 to manage the former Primary Care Trust estate consisting of property valued at around £3 billion. It is currently 100% owned by the Secretary of State but looks suspiciously ripe for sale. The sell-off of publicly owned property—while nothing new—is a triple whammy for this government: firstly, they collect much-needed cash to plug the austerity-driven shortfall in government revenue; secondly they shrink the state that they abhor by selling off its most precious assets; and last but not least, they are paying back the profiteers and rent-seekers who fund their political machine.
The story of privatisation of public services is largely a story of the transfer of precious income-generating assets—notably property and land—to the private sector, often based abroad and all too often in tax havens.
Anthony Molloy, Chair of the Labour Land Campaign said “The day that a Government recognises that public services generate land value and that taxes and land values are inversely related, most of the population will be able to benefit from a shift away from economically perverse taxes on production and wages and on to an economically efficient tax on land value.”
Research carried out by the Labour Land Campaign shows how our skewed tax system disadvantages businesses and workers whilst rewarding land speculators, land hoarders and big land owners. Anthony Molloy explained that “as our economy grows, so owners of land demand a huge chunk of that growth through rents and capitalised land prices. Soaring land prices have left those on low and middle incomes unable to own or rent a home in an area of their choice, and distorted rents are squeezing the viability of many potentially useful businesses.”
Rather than penalising work, investment, productive economic activity and enterprise, government should begin to shift the burden of taxation onto unearned income by introducing an annual Land Value Tax to provide revenue to pay for public services like the NHS which are what generate land value in the first place. A virtuous cycle instead of the vicious cycle created by our current taxation system.
 HMRC currently leases back the offices it sold to Mapeley Steps (a Bermuda-based company) in 2001!
Tax havens – one of many reasons for taxing the quintessential on-shore asset
5 April 2016
The documents leaked from Mossack Fonseca provide indisputable proof that the UK’s tax system is not fit for purpose and there needs to be a fundamental shift in what is being taxed to prevent the rich and powerful from avoiding paying taxes.
Dave Wetzel, President of the Labour Land Campaign says, “This leak only confirms what we already knew about the UK tax regime: those who are most able to pay avoid paying whilst workers and small businesses are left to fund public services.”
One reason why the Labour Land Campaign (LLC) has campaigned for years for land value taxation is because land is the quintessential “on-shore” asset and a tax on it is therefore unavoidable. Dave Wetzel went on, “It is ironic that so much of the wealth squirrelled away off-shore actually derives from the increased land values that are generated by public services paid for by UK taxpayers. And yet our tax system helps the richest and the unscrupulous avoid contributing to the cost of these public services that they are the very ones to benefit the most from.”
More fundamentally, taxing the unearned incomes land owners siphon out of the real economy will make it possible to eliminate all the dead weight losses associated with our current economically inefficient taxes which variously inhibit work, business, enterprise, trade and investment. Changing what is taxed will make our fiscal system fairer and more economically efficient to the benefit of society as a whole and to the profit of the vast majority of its citizens.
More bunce for the backers
17 March 2016
The Chancellor has plunged new depths of economic illiteracy in this Budget with his changes to Business Rates.
The new threshold for small business rate relief will increase from £6,000 to £15,000. Business rates will also be linked to CPI, the official measure of inflation, which has historically been lower than the RPI rate to which rates are currently linked.
As always when property taxes are reduced, it will do precisely nothing for business beyond their next rent review: their rents will then be increased with the landlord absorbing the benefit of the tax cut. One would think that, in the face of all the evidence, the Chancellor would have learned this by now unless the real constituency that he is serving is the economic rent-seeking vested interests that fund his political machine (landowners, big builders, speculators and the banks).
The changes to Business Rates will mean less revenue for local authorities, already in dire straits. To compound the effect, Osborne will give powers to privileged Greater London to keep all the high Business Rates raised there for themselves and not share them with the rest of the country. Given that infrastructure investment will continue to be concentrated in London yet is largely funded from general taxation, this is outrageously unfair as well as economically inefficient.
One of reasons why the Chancellor has been tinkering with rate relief is that the valuations on which Business Rates are based are more than seven years out of date and many small businesses are suffering, especially where commercial property values have fallen, i.e. everywhere outside the South East.
Carol Wilcox of the Labour Land Campaign says, “What the Chancellor should be doing is preparing to abolish Business Rates and replace them with an annual Land Value Tax (LVT) by initiating valuations. It is cheaper and easier to value just the land element rather than individual buildings – and even industrial machinery. It’s crazy to tax the working capital of a business on which it creates its profits.”
“And here’s the best bit. All beneficial investment in infrastructure increases local land values. Once regular valuations are established (annual revaluation being easy with modern technology), a LVT will foster a virtuous economic circle of infrastructure investment leading to increased land values leading to increased LVT revenues leading to increased infrastructure investment.”
This is in contrast to the current vicious circle of returns on taxpayer-funded investment being siphoned off out of the real, productive economy into private hands via the sterile, asset-based economy, depriving the Treasury of the resources it could invest to improve society.
WHAT we tax, a front line in the war between left and right
The economic case for land value taxation
7 March 2016
In the war between left and right, one of the main ideological fronts is always taxation. In the trenches on the left, relatively high taxes with big government for a fair, equitable society which nurtures its most vulnerable; across the bleak strip of ravaged mud, low taxes, small government and rewarding hard work and enterprise to maximise economic efficiency. That’s the ideology but closer scrutiny of actual policy suggests that:
- The right—far from being single-mindedly committed to economic efficiency—is as beholden today to the same narrow, vested interests at the expense of good governance as it ever was in the days of Rotten Boroughs and the Corn Laws, first and foremost among these vested interests landowners and other monopolistic rentiers who collect unearned income.
- The fact that the left has never felt strong enough in power to launch a root and branch attack on the central question of taxation points up the power and influence that said vested interests have had in the past and still have now.
Because one of the central questions in taxation is what you tax. While battles about how much you tax and how you spend the revenue may be important, this article is not about that: it is about economic efficiency.
In this country (like almost everywhere else) fiscal policy is mainly based on taxing work (Income Tax and National Insurance Contributions), trade (Value Added Tax) and business (Corporation Tax and Business Rates): these five taxes on labour, sales, production, enterprise and investment account for over three-quarters of all Treasury revenue. Rule Number One in taxation is that the more you tax it, the less of it will get done. That’s why smoking and drinking are taxed so heavily. If Income Tax plus National Insurance amounted to 100%, not many people would go out to work; if they were at 40%, more might (one hopes so because that is where they are). VAT and Corporation Tax as well as taxes on labour drive up the prices of goods and services, thereby lowering competitiveness and killing jobs. In other words, taxation distorts markets. But there is one form of taxation that does not: land value taxation (LVT).
LVT is an annual levy on the unimproved value of land, ignoring any buildings or amenities added to it by the landowner’s industry and investment, past and present. Land value is a function of the area of a parcel of land, its location (proximity to amenities) and its actual or potential permitted use (essentially local planning regulations). The value—as opposed to its price—of the ultimate fixed-supply asset of land is driven exclusively by market forces and, unlike the value of elastic factors like labour and capital, is unaffected by taxation.
- The rationale for LVT is a recognition that the land of a nation – even when privately owned – is a common good in which every citizen has a stake.
- The elegance of LVT is that any rise in land value as well as all rent is unearned income, the level of which is mainly conditioned by local public sector investment—roads, transport, schools, hospitals, teachers, nurses and doctors, sewerage systems, etc.—so taxing it means that those who benefit most from rising land value contribute most towards what drives said rise, in a fair and proportionate measure. Because wealth correlates so tightly with land ownership, those who are most able to pay will be paying the most. And because land ownership is so highly concentrated in Britain, taxing the most fortunate in society more heavily would mean that the less fortunate could be spared. In fact, rather than being a tax, LVT could be seen as more like recovering a payment for benefits received—a share of the unearned income landowners get from their assets without having had to do anything at all. If the Duke of Westminster enhances the value of one of his properties by building an Olympic swimming pool in the garden, it might seem different from the increase in the property’s value because Westminster Council built an Olympic swimming pool down the road but without LVT, it comes to the same. In just two years around the opening of the Jubilee Line extension in London, land values within 500 meters of the 11 new stations went up by about £13.5 billion, a 200% annual return to private landowners on a public-sector investment of £3.5 billion. If such profit from public sector investment were harvested for more public sector investment instead of going into private pockets, a virtuous cycle could be established in which state spending drives ongoing rises in land value (as it has always done) which are in turn harvested to fund more public sector investment and further improve the quality of life of citizens. This is in contrast to the current vicious cycle of returns on taxpayer-funded investment being siphoned off out of the real, productive economy into private hands via the sterile, asset-based economy, depriving the Treasury of the resources it could invest to improve society.
- And the practical beauty is that LVT is easy to collect and administer (at least compared with taxes like Council Tax and Business Rates that demand the valuation of millions of unique properties), and impossible to dodge (you cannot hide your mansion or shooting estate in the Cayman Islands).
Corollary benefits are many and various. LVT will remove incentives that encourage land banking and speculation, thereby encouraging the productive exploitation of currently under-developed land (brownfield sites) to mitigate the housing crisis. It will encourage the regeneration of disadvantaged areas where land values are lowest, bringing jobs and economic activity to those parts of the country where they are most lacking. Moreover, LVT will encourage the optimisation of land use across the board so that landowners obtain as much income from their precious resource as they can.
But the most important corollary benefits by far will be those that result from getting rid of worse taxes with perverse economic consequences because LVT would be a replacement tax, not an add-on. You could choose to substitute LVT for taxes on labour: this would have positive economic benefits on competitiveness and the balance of trade. Replacing taxes on sales would similarly enhance productivity and competitiveness at the same time as getting rid of VAT, surely one of the most grotesquely regressive taxes ever dreamed up by Man. Abolishing property taxes like Council Tax and Business Rates would remove the disincentive to improve current stock leading to better housing and working conditions. Broadly speaking, in any arena in which advantage would accrue from making land use more efficient or labour and investment more lucrative, LVT will bring about corollary benefits.
So if LVT is obviously so much better than all our current taxes … ?
You know the answer: historically fiscal policy was drawn up by landowners who were the only ones entitled to vote or sit in Parliament and this has not changed as much as we might think in the one hundred years since property restrictions on suffrage were finally removed in the wake of the First World War (the vicious Housing and Planning Bill was recently passed by a House of Commons in which fully 30% of the Members—as opposed to just 2% in the population as a whole—declare receiving rental income; there are more landlords in the House of Commons than there are women!). So would our Prime Minister who is all about organising the fiscal system to reward hard work agree with Winston Churchill that, “The Conservative Party … speaks of the profits of the land monopolist as if they were the fruits of thrift and industry and a pleasing example for the poorer classes to imitate … All goes back to the land, and the land owner is able to absorb to himself a share of almost every public and every private benefit …”. In March, will George Osborne be bringing in LVT, what his idol’s economic guru Milton Friedman called “the least bad form of taxation”? Of course not, because the constituency to which the Conservative Party is beholden is the wealthy and in particular the land-owning class. In the case of obviously decent guys like DC and GO, simple ignorance of the whole rich pageant of modern British life and a constrained world view as a result of limited experience may have lead them to actually believe that their policies encourage entrepreneurship and economic growth. A more jaundiced eye undertaking an analysis of actual policies might see that, far from any ideological commitment, their priority is to cater to certain vested interests—of which they are not only members and to which they naturally owe allegiance but which also fund their political machine—to the detriment of most of the citizens of the country that they rule. And, dear reader, you decide whether that includes you and what side you are on.
The core constituency of the left that is denied unearned income represents the majority of the population so the battle lines can be redrawn with LVT at centre stage—the big gun of economic efficiency solidly implanted on the left after years of accusations of economic irresponsibility in government (not entirely without justification). Of course, the right’s Big Media Bertha will be wheeled out to strike fear into regular homeowners and turn them into foot soldiers for the forces of reaction with an important human shield in the asset-rich, cash-poor “Widow in the Mansion”. But if LVT is formulated in such a way as to ensure that the vast majority of citizens (including said regular home owners) end up paying less tax and no specific population other than the tiny one of the wealthy rentier loses out—and we manage to communicate effectively—we may be able to take back some of the ground we have lost in recent years and perhaps even force into retreat the tiny (1%?) but armed-to-the-teeth elite that has so long called the shots.
The strategic reason why LVT is a natural policy for any socialist, democratic party operating in a mixed liberal system is because it is fairer and more economically efficient than all others form of taxation. The tactical reason why, for a political party that does not have to appease a powerful, internal vested interest, it is sensible to advocate a form of taxation that is patently better in every way than the current system is that the opposition will never be able to do it.
Let battle commence …
The Efficient and Fair Tax Budget 2016
1 March 2016
The UK’s skewed tax system is inefficient; wasteful, complex and unfair to wage earners; costly for businesses and self-employed people to administer; and it discourages worthwhile investments whilst rewarding those in receipt of unearned incomes, particularly those who claim ownership of our land and other natural resources. Even worse, taxes are avoided and evaded by multinational corporations and the richest families and institutions. These tax avoiders and evaders leave those who do pay their fair share of taxes to pick up the bills for maintaining and developing our public services.
The Chancellor needs to simplify the tax system by changing WHAT is taxed in his 2016 Budget, shifting taxes off buildings, work and worthwhile production and on to natural resource wealth that goes to the owners of land and other natural resources, that is – shift taxes off earned incomes on to unearned incomes.
Because land and other natural resource wealth is held in the hands of a few, the UK’s economy suffers from an historic wrong leaving more and more adults unable to afford to rent or buy a home in the area of their choice, and medium and smaller businesses unable to afford the high rents demanded by rapacious landlords. Financial grants and subsidies intended to benefit individuals, farmers and businesses end up being capitalised into land value thus benefitting only the landowner.
The Chancellor’s 2016 Budget should ensure that all taxes:
- Are transparent and straightforward to administer for HMRC as well as for the individuals and businesses that pay them so that everyone can be sure that everyone is paying their fair share of tax;
- Are fair, ensuring that people on lower incomes are not paying a higher proportion of their income in taxes than is paid by the richest individuals and businesses;
- Are unavoidable and unevadable by individuals or businesses including international multinational corporations;
- Are designed to encourage business and enterprise and correct our corrupted economy;
- Return to the public purse the natural resource wealth that is generated from public investments paid for by taxpayers.
The Chancellor’s 2016 Budget therefore must set out a programme that will change what is taxed. Shifting taxes off earned incomes and onto natural resource wealth will make our tax system fair and preclude distortion of our economy by tax evaders. This shift would address the problems of the North/South divide, reduce the Rich/Poor gap and go some way to reversing the wholesale transfer of wealth from the young to the old that the baby-boomer generation has manipulated. Owners of our natural resources will be encouraged to use them sparingly and efficiently thereby benefitting our environment and at the same time, they will return some of their unearned proceeds accruing from public and private investments which they currently receive as windfall income.
Such changes are fundamental and far-reaching, so our Key Objectives for the 2016 Budget are to:
- Introduce an annual Land Value Tax (LVT) on the annual rental value of all land with each site valued according to its permitted use and with a built-in equaliser to ensure that the burden of taxation on individuals and businesses in currently low value areas is reasonably lightened by taxing those lucky enough to own high-value land. This will encourage development on urban brownfield sites and thus help protect urban green spaces, our countryside and the green belts around many of our towns and cities.
- Abolish all property taxes. Taxing buildings discourages physical improvements and allows the owners of empty buildings and brownfield sites to enjoy the financial benefit of rising land values created by public services and investments whilst making no contribution towards either the public purse or social well-being.
- Reduce Value Added Tax to a minimal level to mitigate the negative effects this distortive tax has on production and consumption, enabling businesses in low investment areas to flourish unhampered by negative taxes.
- Simplify and reduce levels of Income Tax, National Insurance Contributions and Corporation Tax to correct the ‘drag anchor’ effect these taxes have on employment and business, especially in areas with the highest unemployment rates and lowest incomes where land values are low. Shifting taxation from the real economy to the asset-based economy will also enhance productivity and competitiveness, both areas in which the UK performs poorly on the international stage.
- Apply a similar annual tax on the economic value of all other natural resources including oil, coal, minerals and ores, landing slots at airports, airwaves and the Internet, wind and solar energy, fishing in our seas … and on all other natural resources to ensure their sparing and efficient use.
If the government is serious about making the UK’s tax system fair and unavoidable as well as tackling climate change, they have to have the courage to rise to the challenge of implementing a just, efficient tax system.
“A Land Value Tax for London?” The answer is Yes!
22 February 2016
The Labour Land Campaign congratulates the Greater London Authority (GLA) Planning Committee for its bold and imaginative report [https://www.london.gov.uk/sites/default/files/final-draft-lvt-report.pdf] “Tax trial. A Land Value Tax for London?” and in particular for its courage in raising the question of how to repair a broken, unfair, economically inefficient tax system, a question that for murky reasons is rarely brought up in such a serious way in the corridors of power.
In recognition of London’s urgent need to encourage house building and find new ways of funding infrastructure development, London Assembly Member Tom Copley and the GLA Planning Committee were commissioned to prepare a report for the incoming Mayor on the case for and against a Land Value Tax (LVT) for London. This report signed off by the Committee’s three Labour and two Conservative members is published today and its conclusions are clear: “… the current system of property taxation does not deliver … LVT appears to offer an opportunity to secure the land and fund the level of growth required”.
In their review of the case for a LVT, the Committee emphasises how it would stimulate development of the vast tracts of land in the capital that are currently under-utilised as well as providing a better, more efficient way of funding the kind of public-sector investment that improves the daily lives of Londoners and makes the capital such an attractive place to live and work in. Less emphasis is put on the broader long-term economic benefits of getting rid of an unfair tax system with deeply perverse consequences for both households and business, and replacing it with a more progressive, simpler LVT. Anthony Molloy, Chair of the Labour Land Campaign, says that the reasons for this are understandable, “The report focuses on housing, a crisis situation that the incoming Mayor of London will be faced with the day he takes office. But our tax system as a whole is pernicious and it is high time to shift taxation off work, productivity, trade, enterprise and investment and onto unearned income, notably economic rent of land.” LVT is fairer, easier to administer, more difficult to dodge and more economically efficient than current taxes: “The least bad form of taxation,” according to Milton Friedman.
In their review of the case against LVT, the authors point up political obstacles, notably how it will be resisted by those who currently hold all the power (landlords and big landowners). They also address some practical challenges, notably difficulties stemming from failure to revalue the Council Tax base since 1991 and the uncertain question of whether or not the Mayor would need new powers to implement a LVT.
But their conclusions are clear: they recommend that, as soon as the new Mayor takes office, he should cost replacing Council Tax, Business Rates and Stamp Duty with a LVT, and set up a trial in a specific area of London with a view to subsequent roll-out across the capital.
An incisive report and a brave one. As an article on LVT in the Economist put it last year, “politically tricky problems are ten-a-penny. Few offer the people who solve them a trillion-dollar reward”
Plus ça change
12 February 2016
The Housing and Planning Bill has now been sent to the House of Lords after having been passed by the House of Commons late last year to general dismay at its clearly expressed double intention of shrinking the social housing sector at the same time as easing the path for big developers by privatising the planning process.
Some 196 Members of Parliament receive income from rental property: this corresponds to a proportion of 30% compared with one of just 2% in the population as a whole. Among the Conservatives, 129 out of 330 (39%) are landlords. The majority in favour of the Bill was 93.
One is inevitably reminded of the People’s Budget in 1909, the first budget in British history with the expressed intent of redistributing wealth more equitably in the British population. It raised higher-rate Income Tax but its more far-reaching proposal to tax land value was dropped under pressure from a House of Lords dominated by landowning Tories.
Recusal is a principle applied in all corridors of power from the Courts through Board Rooms to Local Government: if an individual in a position of authority has an interest such that his/her impartiality vis-à-vis a certain issue might reasonably be questioned, he/she abstains from deliberating or voting on said issue. Judges, company directors, local councillors and even tax inspectors (sometimes) all routinely obey this essential aspect of good governance. But not apparently the members of our ultimate organ of governance, the Houses of Parliament. And until they do, Britain’s housing policy will continue to be determined by landlords.
 Meaning at least £10,000 per annum, the threshold for declaration; the actual amount they receive is not published in the MPs’ Register of Interests but this group includes major landowners like Richard Benyon MP who receives at least £120,000 per annum in housing benefit alone at the same time as making swingeing attacks on the “something for nothing culture”.
The latest Tory housing policy gives yet more backhanders to developers
7 January 2016
The Labour Land Campaign says the latest announcement by David Cameron to build more homes is at the expense of taxpayers and provides yet another a gift to property developers.
The way to bring brownfield housing sites along with idle development sites and empty homes into full use is through an annual Land Value Tax on all land valued at its optimum permitted use. Dave Wetzel, President of the Labour Land Campaign says “It’s a pity that David Cameron doesn’t understand the current Zoopla TV ad where house-searcher Amy ecstatically caresses a house close to amazing transport links, a top-rated school and is in an area of Telegraph readers. Unlike David Cameron, Amy knows the type of location she wants and recognises that the owners will price the house accordingly. In addition, history shows us that subsidies to house buyers, property developers and land owners through grants and other measures merely puts the price of land up making homes even less affordable to buy or rent. With his latest policy to give landowners £1.2bn to build on brownfield sites David Cameron is giving yet more of taxpayers’ money to property developers and landowners. This is not only immoral but does not even make economic sense.”
He went on to say “that as David Cameron and many of his supporters are landowners and private landlords he is looking to favour them instead of the people he is purporting to support – first-time buyers”.
Research carried out by Labour Land Campaign shows that the fundamental answer to making homes affordable can only be successful when land wealth is shared by those who create it; it is public and private investments in the production and delivery of worthwhile goods and services that generates land value and we all pay for that as taxpayers, consumers and investors.
Dave Wetzel went on to explain “Land value is a free gift of nature to all of us. Owners of land do not generate one penny’s worth of land wealth, they merely take as their unearned incomes the wealth we all create as taxpayers and consumers when we pay for maintaining and developing public and private services and investments which inflate location values. We need a fundamental shift in taxation to discourage land hoarding and to bring idle development sites and empty buildings back into use. Taxes should be removed from wages, goods and services and levied on land values.”
The Labour Land Campaign believes that by taxing land value, land will be used more efficiently and will provide a sustainable source of income to maintain and develop local and national public services instead of it rewarding owners of land for doing nothing.
Response to the Report by the Scottish Commission on Local Tax Reform
15 December 2015
“We believe that a system of land value tax is promising, but that, while the work done for the Commission has been of unprecedented scale, gaining a full understanding of its impact would require further analysis.”
This is the lukewarm conclusion arrived at by the Commission which undertook a broad-based review of possible ways of reforming the broken and unfair Council Tax system [http://localtaxcommission.scot/download-our-final-report/]. With a remit of assessing alternative ways of funding local government in the light of the taxation principles of “equity and fairness, administrative and economic efficiency, and autonomy and accountability”, the Commission reviewed some 175 written submissions from diverse sources (including the Labour Land Campaign and individual members), commissioned research from Scottish University departments and heard oral evidence from experts on taxation (including LLC). The three options ultimately considered in the report are taxes on income, property and land value.
Despite their often-mentioned dedication to “evidence-based” conclusions, their conclusion that land value taxation is unfeasible in the short term flies in the face of much of the evidence submitted which included concrete, costed implementation proposals with stipulated time frames of the order of two years as well as line-by-line refutations of many of the issues singled out as challenges [http://localtaxcommission.scot/submissions/].
Reading between the lines of the report with its repeated references to the simple idea of land value taxation being “complex”, it seems that the existence of different proposals as to how a land value tax might be levied may have confused the members of the Commission; as if there were only one way of levying a local income tax or a property tax.
The misconception that “a tax on land is a new and potentially complex concept” is a challenge for LVT-ers and we need to address how to meet it when given a well-organised, democratic and right-thinking opportunity like the Scottish Commission on Local Tax Reform.
 Happily, Commission member Jackie Baillie Labour MSP dissented from another of the Commission’s conclusions that “income is a fairer basis on which to levy tax”
George Osborne comes out for land value taxation! (Only joking)
25 November 2015
On Wednesday, George Osborne proposed the establishment of a Shale Wealth Fund. Details here as elsewhere in the Statement were thin on the ground but presumably this means setting up a system whereby some of the wealth extracted from a natural resource is to be taxed for return to the community rather than it all going into private pockets. This involves recognising that citizens have a stake in a nation’s natural resources, whoever owns the land under which said natural resources happen to lie.
Will this Chancellor extend this recognition to land in general (the ultimate fixed-supply natural resource) which has seen its value rise so steeply in recent years that a whole generation is now excluded from the hope of ever owning their own homes?
Shifting taxation away from the real economy—labour, production, enterprise and investment—and onto asset-based wealth would go a long way to solving our low productivity and disastrous balance of payments, the two problems identified by Osborne on Wednesday as the “as-yet-unsolved” ones. But it just will not happen under the Tories whose core constituency is the asset-rich and more specifically the land-owning class. Do not expect progressive policies from George Osborne unless they are conceived accidentally as a way of sidestepping an unexpectedly vigorous public backlash against a business venture that may prove to be environmentally devastating but will definitely be highly lucrative for some.
John McDonnell, Shadow Chancellor of the Exchequer
and member of the Labour Land Campaign
September 14th, 2015
The Labour Land Campaign (LLC) is excited to see one of its longstanding members in one of the most influential positions in British politics. LLC is a cross-party voluntary group working for land reform, notably the replacement of economically inefficient taxes on labour, trade, enterprise and investment by a land value tax, the “least bad form of taxation”*.
No surprise the gainsayers today.
The Daily Mail: “New Shadow Chancellor who wanted to kill Margaret Thatcher to push through plans for taxes on middle-class families”
The Mail’s non-dom owner Viscount Rothermere may well be afraid of impossible-to-dodge taxes on the vast swathes of Wiltshire and elsewhere that he patriotically owns through companies registered in the British Virgin Islands and other tax havens. Unlike other forms of taxation, a land value tax cannot be avoided—you cannot put Wiltshire in the Cayman Islands and if it is registered there (as so much of this green and pleasant land is), you still know where to go to collect the tax due.
The Daily Telegraph: “John McDonnell, the man who wanted to assassinate Margaret Thatcher”. (This seems to be the best line they have.)
The Barclay Brothers, owners of the Daily Telegraph, are residents of Monaco for tax purposes but they famously rule Brecqhou—the Channel Island that they own—through bullying, intimidation and litigation.
These gainsayers are right: they personally have every reason to be afraid of the introduction of a form of taxation that targets wealth rather than production and enterprise. In contrast, “middle-class families” can look forward to it. If LVT is introduced to replace or reduce taxes that are either unfair (Council Tax) and/or economically inefficient (Income Tax, Business Rates) and/or easy-to-dodge by those with access to skyscrapers full of accountants and lawyers (VAT, Corporation Tax), most households will end up paying less. By definition and simple mathematics, “middle-class families” will be paying less because LVT is a tax on wealth and wealth is highly concentrated in Britain: those who are most able to pay will pay the most. Furthermore, land value is essentially driven by public sector investment (local hospitals, schools, trains and buses, sewerage systems—access to public services and amenities in general) so LVT will also mean that those who benefit the most from such investment (through the rise in the value of their land), contribute most towards it, in a fair, proportionate measure. A vast improvement over the present, unfair fiscal system.
The truth is that the vast majority of citizens of this country can welcome the possibility of a Chancellor of the Exchequer who seeks a fiscal system that encourages work, investment and enterprise in place of the one that has been constructed over the centuries to favour a small elite. The fiscal system in Britain (and almost everywhere else) has been drawn up by wealthy landowners.
But don’t expect to hear this truth from the likes of Lord Rothermere or the Barclay Brothers. Be ready for plenty more hysteria to come, especially when the issue of reform of the broken British tax system actually arises. So when the criticism comes, take a close look at the critic. And think about who will win and who will lose as a result of the introduction of a land value tax.
Footnotes: *Milton Friedman
TORY BUDGET MEANS EVEN MORE WELFARE FOR THE RICH
July 6th, 2015
In its budget, the Tory Government is taking away essential welfare payments from those on the lowest incomes and upping rents of some living in Council-owned homes—whilst giving more subsidies to the better off.
This bleak budget does however contain some nuggets of social conscience. Apart from promises on the Living Wage, there is the cut to income tax relief on the interest paid on mortgages for buy-to-let properties. It may only be a cut and the plan may be to phase it out gradually and that may only start in 2017 but … This egregious form of welfare for the rich has driven speculation, skewed the housing market and priced normal first-time buyers off the property ladder. All that for a loss of Treasury revenue amounting to £6.3 billion in the financial year 2012-13, i.e. over 1% of all actual revenue; enough, for instance, to pay one thousand times over the contentious £650 million taken off the BBC by obliging them to bear the license fee break for over-75 year-olds.
By lifting homes worth up to £1 million out of inheritance tax, George Osborne is giving yet another tax handout to the better-off. A large part of the value of an expensive home is its location value that arises because of its closeness to infrastructures and public services. Roads, public transport, utilities, schools, health care services and so on are paid for by all taxpayers and it is these—together with private services—that gives land its value.
According to Dave Wetzel, President of the Labour Land Campaign (LLC), “this Tory Government is hell-bent on increasing the economic divide between the haves and the have-nots. Everyone is a taxpayer at some level and our public services generate land value that owners of properties receive through no effort on their part. Yet it is the owners of the highest-priced homes that will get the biggest hand-out from this budget at the expense of those dependent on benefits in order to survive. Tenants (both social and private) are another group of people who are punished in this budget as house (i.e. land) prices rise: tenants contribute to land value but get an increase in their rent whereas land owners, land speculators and land hoarders see their land value rise.”
The Labour Land Campaign calls for a fundamental shift in taxes away from wages and production and on to the unearned incomes that the owners of our land and natural resources get purely because of popular demand to live near employment opportunities, good transport, pleasant places and good public or private infrastructure and services.
Wetzel says “this government is determined to give even more subsidies to owners of land as they do when they give housing benefit to private landlords – who include Richard Benyon Conservative MP – to the tune of £9 billion a year. Land is a natural resource and if, instead of rewarding those who leave buildings empty and developable sites idle, government collected a part of land value to pay for our public services, negative taxes that penalise work and productivity—literally counter-productive taxes—could be cut and we would have a fairer economy, higher wages, fewer unemployed and affordable homes to rent or buy.”
For more details contact our Press Officer at firstname.lastname@example.org, or
HELP TO BUY WON’T HELP
October 12th, 2013
In his Financial Times article (10 October 2013, “Buyers beware of Britain’s absurd property trap”) Martin Wolf exposes the real reason for the Government’s Help to Buy Scheme – to stimulate land speculation in the UK and give land owners even more unearned income as the next property bubble grows and grows at the expense of the economy. Land values are created by our collective demand for public and private services and production; it is our taxes, our investments and our consumption that create land value. Because we have monopoly ownership of land in the UK (70% of land is owned by less than 1% of the population) we have monopoly ownership of land wealth. The poorest taxpaying commercial and residential tenants are subsidising the richest land owners.
Carol Wilcox, Secretary of the Labour Land Campaign, says “The mythical housing ladder is unattainable to a growing number of households and the UK’s tax system sustains this economic injustice and actually encourages land speculation. This is now so hideous that blocks of apartments are being built in London that have already been sold to overseas speculators before completion. We don’t need a government that fuels land price rises through subsidies which make homes even more unaffordable to a growing number to buy or rent. We need a courageous and imaginative government that tackles our tax system by shifting taxes off earned incomes and on to unearned incomes that the owners of our land and other natural resources take as theirs. By taxing the annual rental value of all land at its optimum permitted use value, the government will capture wealth that the whole of society creates to be reinvested in our public services.”
For more details contact Steven Clarke at email@example.com, phone number 07817 906299 or
THE TORIES IGNORE THE SUBSIDIES THE POOREST GIVE TO THE RICHEST
April 8th, 2013
When Iain Duncan Smith and his government try to justify their malicious benefit cuts to the poorest families in receipt of them, they chose to ignore the huge subsidies those same tenants together with other non-property owners give to freeholders and land owners. Taxes paid by all of us fund public services most of which ultimately increase land value and provide hidden financial benefit to owners of land. No tenants (residential and commercial) or other non-property owners get any of this increase in land value they have equally created. Indeed, as land values rise, tenants will normally find their rent increases.
Empty buildings and idle sites, kept out of use by land speculators, blight our communities.
It is not unusual to see these sites kept out of use for decades as their owners wait for more investment in local public transport, roads, schools, health care, street-cleaning and so on to get even more unearned income from their land holdings. Yet these owners are not only denying society the affordable homes, jobs, business premises, goods and services that are needed but take the land value that we all create.
Those taking the hidden subsidies of increased land value ought to concern themselves with the need for a fair tax system that not only encourages good investment but one which cannot be easily avoided or evaded as current tax system allows. A shift in taxation off wages and trade and on to the unearned income land owners receive will address the unfairness our society places on all tenants and other non-property owners.
Who is getting the biggest subsidy – a hard working Council tenant or the land owning Duke of Westminster whose family, for generations, has received fortunes from land value that was created by us as workers, tax payers, investors and consumers?
For more details contact Steven Clarke at firstname.lastname@example.org, phone number 07817 906299 or
A BALANCED BUDGET FOR A FLAT-LINING ECONOMY?
March 21st, 2013
A balanced budget for a flat-lining economy? This does not sound like a recipe for growth.
However, George Osborne expects to start the engine by the magic trick of underwriting some mortgages for some prospective first-time buyers. Presumably there are lots of young couples with secure employment whose present rented accommodation is so affordable that they have been able to save a substantial deposit plus enough to cover stamp duty land tax and moving expenses. (The stamp duty relief in this budget was for share transactions, not homes.)
This will supposedly stimulate developers, sitting on land banks with planning consent for several hundred thousand homes, to get building, which will boost employment in the sector; which will increase tax receipts and reduce benefits.
Or will it? Perhaps, instead, developers will just wait for a real recovery before starting the process, when land values start to rise again and they can sell their houses in boom-time. In that case any stimulus to housing credit will merely increase house prices or, more likely help to maintain nominal house prices, the market having just experienced the mother of all house price bubbles.
The Labour Land Campaign agrees with the Chancellor that house building could provide the key to recovery, but we would suggest a few less carrots and a big stick.
What developers need to persuade them to unblock the stagnant market is an annual land value tax charged at the rental value of the land assessed according to its location with respect to local facilities and current permissions. The only reason to own land should be to use it and that is what would happen. The landowners would be forced to either get building or sell it to those who will do so.
But the Labour Land Campaign says, why stop there? If a land value tax were levied on all land for which there is a potential market, assessed in the same way and on a regular basis, not only would more houses be built but the Treasury would be in receipt of a huge and increasing revenue stream with which to fund public services and infrastructure renewal.
To quote from the Economist Growth Manifesto : “One reason why companies sit on development land is because they do not pay taxes until the offices and warehouses are built. It would be much better to tax the land value: that would make hoarding expensive and force owners to sell to someone who can use the site. Once in use, the site value and the tax would rise—creating a virtuous circle, as the revenues pay for better infrastructure, making land more valuable.”
It should be noted that a land value tax could replace all existing property taxes, including Council Tax, Business Rates and Stamp Duty Land Tax plus income tax on the average wage.
1. ‘A growth manifesto: A little faster, George?’, The Economist, March 9th 2013
ARE HOUSEBUILDERS CONTRAVENING THE TRADE DESCRIPTIONS ACT?
February 28th, 2013
Amid the continuing economic gloom, what with credit rating downgrades hot on the heels of yet another negative quarterly growth figure, it’s nice to know someone is doing well.
Two of Britain’s largest housebuilders have reported excellent results for 2012 . Persimmons’ pre-tax profits rose by 52% on selling prices up by 6%. Meanwhile, rival Bovis Homes saw increases of 69% and 5% respectively. So, the housebuilding trade must be going briskly, right?
Wrong. In fact, new housing starts in the last year dropped below 100,000 for only the second time in over 30 years – coming in at 98,290, a drop of 11% on the previous year .
So what’s going on? If coffee sales were at an all time low, would you expect to see Starbucks and Nestlé booming? If we all cut back on our weekly food shopping, would we be bullish on Tesco and Sainsbury’s shares? Of course not! So why should housebuilders be doing so well out of so little housebuilding? It’s because these companies, by calling themselves housebuilders, are stretching the Trades Description Act.
With housing supply near enough fixed, prices rise with ever increasing demand. And since homes are mostly bought on credit, rising demand reflects loose monetary policy – both low interest rates and the government’s funding for lending scheme. These companies can pocket these rising prices – without effort – because they are sitting on land; and as the land market is so rigged by landowners, new entrants can’t come in and undercut the existing house builders with cheaper homes, as should happen in a competitive market.
Should this worry us, the fact that these companies are making so much money when they are manifestly not doing what they are supposed to do? Yes, because broadly it is wrong for people to prosper without effort or providing useful goods and services. When you can prosper from owning rather than earning, you are rent-seeking. It is both unfair on those who have no choice but to earn their way in the world, and inefficient, as otherwise productive people are diverted into sterile speculation.
Land speculation may be good for landowners’ profits, but, in particular, this is bad for those for whom the dream of home ownership is slipping out of reach, for those whose rents eat up an ever increasing portion of their wages that could be spent on other things, those desperate for any accommodation or those forced to live with parents or friends. It is also a missed opportunity for the economy. After the last great prolonged economic downturn in the 1920s and 30s, economic recovery in Britain was accompanied by a housebuilding boom in the mid to late 30s . Completions ran over 350,000 a year at the end of the decade, leaving the suburban semi-detached houses that still remain a valued and key feature of our built environment.
We could have similar housebuilding now. We certainly need more affordable homes, for which there is a huge pent up demand. Building them would put many to work and spending money. Unemployed youngsters could be trained up in plumbing, carpentry and construction, gaining valuable skills that would last them for life.
Government needs to provide the right incentives for housebuilders to build. Rather than sitting on land banks, waiting speculatively for land prices to rise, companies such as Persimmons and Bovis Homes could release them providing many years housing supply. If an annual Land Value Tax were implemented, sitting on empty homes or idle land which already has planning permission would become costly.
Appropriate land, with planning permissions, would be freed up to build new communities and further excursions into our valued green belts and countryside would become unnecessary as empty homes and brownfield sites in towns and cities are brought back into use. Governments could take advantage of record low interest rates to upgrade and invest in new infrastructure such as the road, rail, social housing, schools, hospitals and public parks which would make these new communities great places to live. And for those worried about this extra borrowing, the increased land values created by this investment would repay the initial cost – the revenues eventually being used to reduce burdensome taxes on wages and enterprise.
The vicious cycle we’ve been living through would be turned into a virtuous cycle. Economic growth could return, and a legacy of great new homes and a fair tax system would be left to us. It’s a legacy we need to start building.
For more details contact Steven Clarke at email@example.com, phone number 07817906299 or visit
 ‘UK funding scheme boosts housebuilders’, Gill Plimmer, Financial Times, February 5th 2013.
 ‘Housing starts drop to post-recession low’, Kate Allen, Financial Times, February 21st 2013.
 ‘Metroboom: Lessons from Britain’s recovery in the 1930s’, George Trefgarne, Centre for Policy Studies, March 2012
A MANSION TAX IS FAIRER THAN INCOME TAX
February 18th 2013
Ed Miliband is right to look at shifting tax off incomes and on to unearned income by paying for the reintroduction of a 10p tax rate through a fairer property tax on high value homes. A home has two elements that make up its value – the building and the land it is located on. The land value is created by the whole of society not by any property owner and it is unfair that as land values rise because of public and private investments – paid for by us all as tax payers and as consumers – it is only owners of land that receive a financial windfall whereas tenants and other non property owners get nothing.
The Labour Land Campaign (www.labourland.org) reminds people that the “asset rich, income poor widow“ being trundled out by some objecting to Ed Miliband’s proposal applies only to a very small group of people, and there are ways of getting around the problem, such as letting them roll up the tax payments until they dispose of the property. “Asset rich income poor” people have to pay for their gas, electricity, council tax etc today, why should those who can afford to upkeep a £2million or more property be subsidised by those who live in modest homes, a large proportion of whom are tenants or living with family
Heather Wetzel, Chair of the Labour Land Campaign, says “Ed Miliband could do even better by reforming all property taxes and abolish business rates and council tax and replace them with an annual Land Value Tax being applied to all land according to its optimum permitted use. Such a tax would result in those homes, commercial buildings and idle development sites being used to provide more affordable homes and business premises instead of being held out of use by land speculators.
Land investors do not invest in anything; they actually speculate that land values will increase providing them with an unearned income that has been created by the whole of society. When tax payers from across the UK paid for the London Underground’s Jubilee line extension, it has been estimated that the extension cost £3.5 billion to build and land values rose by over £13 billion around the new stations because of the economic benefit the extension brought to those areas. Tax payers paid but land owners received a huge windfall that should have been collected and reinvested in public services throughout the country.”
If the London to Birmingham/Manchester and Leeds high speed railway (HS2) were funded in the same way then many local rail improvements including CrossRail
2 (Hackney to Chelsea) could be sustainably funded.
For more details contact Steven Clarke at firstname.lastname@example.org, phone number 07817 906299 or visit www.labourland.org
YOU ARE INVITED TO ATTEND THE AFFORDABLE HOUSING CONFERENCE
October 8th, 2012
The Labour Land Campaign is pleased to announce that it is hosting an Affordable Housing Supply Conference on Wednesday, 14 th November at the Directory of Social Change, 24 Stephenson Way, London, NW1 2DP.
The conference will bring together senior researchers, housing executives, planners and campaigners from across the political spectrum to ask ‘Is there a permanent solution to the permanent housing crisis?’
It is widely recognised that Britain is not providing the affordable homes it needs. Rents are high and rising. Home ownership is out of reach for many younger people. The public sector no longer provides large numbers of council homes, but taxpayers foot the bill for housing benefits and loan guarantees.
The private sector does not respond to high house prices with extra supply. What is to be done?
The conference will look at:
- Housing Policy.
Learning lessons from the past, what is the appropriate mix of tenures, and how can they be supported? What is the impact of housing policy on the wider economy? Who will be the winners and losers in terms of housing costs and benefits? What would a housing policy for a well working economy and society look like?
- The Availability of Land.How we use land and public spaces is determined by how they are owned and managed. What role does the land market play in the supply of affordable homes? Why has the private sector failed to respond to demand? What should be the role of the state here?
- Finance.What role has finance played in the housing market, and what role should it play in the future? How are we to pay to build new homes? What are the options for fiscal policy?
We will discuss the underlying problems to our housing crisis, assess the approach of the present government and examine and share solutions. Speakers include Duncan Bowie, Jacky Peacock, Eileen Short, Stephen Hill, Bob Colenutt and Gordon Nardell, QC.
This conference is a must for those working in Communities and Local Government related areas including Housing, Social Cohesion, Planning and Finance. Students and members of the public with a strong interest in the built environment, land and community development issues are also welcome.
For more details contact Steven Clarke at email@example.com, phone number 07817906299 or visit
October 5th, 2012
Ed Miliband has won plaudits for his bravura notes-free speech at the Labour Conference. He should be heartened; David Cameron won the Conservative leadership largely on the back of a similarly-delivered speech at the Tory Conference in 2005. The British public, living under the continued “omnishambles” of his Government, may be beginning to wonder if we should demand greater qualifications from our leaders than the ability to memorise a speech.
Joking aside, the speech has increase Ed Miliband’s standing with his party, the press and the country. He landed blows on the Government, whilst painting a pleasant picture of a Labour Britain. There is much to applaud in Labour’s policy announcements. Strengthening vocational education. Making banks work for their customers, not bankers. Preventing the increasing marketisation of the NHS. Extending transparency in public sector contracts with the private sector. Pushing for a Living Wage.
One policy particularly caught the attention of Labour Land Campaign – when Ed Balls called for the income received from the auction of the 4G mobile phone spectrum to build 100,000 new homes. It doesn’t sound earth-shattering, but the economic principle behind it is very close to our hearts.
The spectrum used for mobile phones is a limited natural resource which people cannot create. The economic value of “owning” the spectrum is so high because it is a scarce resource. Mobile companies would grow rich not because of their efforts or the quality of their service, but because they own something they didn’t make and which someone else can’t have. This surplus value is economic rent, and this rent can be taken by the Government without reducing the incentives for companies to provide useful services.
The same logic applies to land. Land is a gift of nature, which people cannot create. Ownership of land confers unearned economic rent from ownership of a scarce resource. This economic rent can be collected by Government as an annual Land Value Tax, without in anyway reducing the incentive to provide land for the homes, shops, factories and offices we need. This money can then reduce other taxes, such as on wages, in such a way to make our tax system more progressive and efficient.
Mr. Balls plans on spending the money from the auction of the spectrum on building new houses. We undoubtedly need to increase the supply of affordable homes. The Labour Land Campaign believes that a Land Value Tax is a vital part of achieving this, both by encouraging more efficient use of the housing stock and by increasing the availability of appropriate, affordable land for development. But recognising there are many viewpoints and policies that can help, we are hosting an Affordable Housing Supply Conference, ‘A Permanent Solution to the Permanent Housing Crisis?’, from 9am on Wednesday 14 th November at the Directory of Social Change, 24 Stephenson Way, London, NW1 2DP.
For more details contact Steven Clarke at firstname.lastname@example.org, phone number 07817906299 or visit
LIBERAL DEMOCRATS SHOULD PUSH FOR LAND VALUE TAXATION
September 28th, 2012
Plastered on the podium at this week’s Autumn Liberal Democrat conference was the slogan ‘Fairer tax in tough times’. Oh, that our political masters would take it to heart!
The Liberal Democrats offered a radical tax plan at the last election – increasing the income tax threshold while plugging the lost revenues with capital gains tax increases, a mansion tax and a reduction in tax reliefs for the wealthy. It was a sensible plan, taking the tax burden off ordinary working families and onto beneficiaries of unearned windfalls.
Some of these changes have now been partly implemented. But the overall effect is marred by some of the Tory tax policies. If they had a tax slogan it would be Matthew 13:12: ‘ For whosoever hath, to him shall be given, and he shall have more abundance: but whosoever hath not, from him shall be taken away even that he hath.’ The VAT increase cancels out any gain from the personal allowance increase, putting up bills for low paid workers. The cut in the top rate of tax is a giveaway for very high earners.
At least the conference has reopened the debate on wealth taxes – specifically the mansion tax. A mansion tax has something to be said for it. It might curb housing booms and busts which so harm economic stability and create huge unearned inequalities which cascade through the generations. It might shield the pain of austerity from poorer households.
It also has its disadvantages. It would not raise significant revenue. The £2 million threshold might buy you a mansion in some parts of the country, but only a terraced house in London. The most damning critique, however, is that it would be a diversion from implementing the most sensible tax change of all, a switch to a Land Value Tax.
A Land Value Tax is not a tax on wealth per se; it is a collection of economic rent. As the earliest economists knew, it does not discourage productive economic activity. It will not cause people to work or save less. In as far as it replaces other taxes and discourages speculative land hoarding, it will actually increase economic activity. It promotes efficient use of land – forestalling the planning free-for-all that the Coalition wished to allow, but the rank-and-file Liberal Democrat delegates have bravely stood against this week.
It is not a confiscation of something that has been rightfully earned, as a site’s value is created by surrounding community, not the site’s owner. It is merely returning to the community that which was confiscated from it.
The Liberal Democrats already support changing the tax base of business rates onto undeveloped site values. Nick Clegg and Vince Cable are both Vice-Presidents of the campaign group Lib Dem Action for Land Taxation and Economic Reform, which pushes for Land Value Taxation. Why do they not have the courage of their convictions, and tells us what they really believe while they are in a position of influence?
Labour Land Secretary Carol Wilcox says, “The Liberal Democrats are in dire straits. Nick Clegg may go down in history as a man who sacrificed himself and his Party to other men’s principles.”
“He should recall the great reforming pre-WW1 Liberal Party, when David Lloyd-George and a young Winston Churchill stormed the country, calling for the unearned rents of land monopolists to be used for the creation of the Welfare State. A modern Land Value Tax would protect the Welfare State and create the fair tax system to lead Britain to prosperity”
LAND VALUE TAXATION IS THE BEST PLAN FOR GETTING THE HOMES WE NEED
David Cameron completed his first reshuffle of the Government this week, but so far shows no sign of reshuffling his failing policies.
The UK’s economic performance is still dire. The Government’s chances of meeting its fiscal targets and getting re-elected will be imperilled unless there is sustained recovery in growth and employment.
The Government knows this, which is why we will continue to hear of a flurry of initiatives and speeches about restoring growth. Today we heard the latest of these – a relaxation of planning laws to boost construction of homes and business premises, and ease improvements to existing properties.
While the aim of more housing is laudable, the policies will fail to have a big impact. The economy’s short-term problem is lack of aggregate demand. People are not spending enough to buy what our economy is capable of producing. This means that, for all the supply-side tinkering with planning rules, people will not rush out to buy new extensions or new houses at any great scale in the next couple of years.
The Government should directly invest in a house building programme and improvements to infrastructure. It can currently borrow at next-to-nothing and could put many people to work, paying taxes and spending money.
In the longer term, supply-side reform is needed, but these reforms do not tackle Britain’s long-running inability to provide the homes it needs. A sensible approach would be replacing existing property taxes with a tax on the site value, a Land Value Tax, which would be collected by local Councils.
For site owners, they would have the incentive to develop sites that have planning permission in order to pay the charge. The Local Government Association released figures showing a backlog of 400,000 prospective homes which have planning permission but have not yet been built. Under Land Value Taxation, these sites would be incurring a tax bill and so the developers would ensure those homes were built in order to pay it. Similarly, empty homes would also be running up a bill, and so it would be better they were used to house people in order to pay it. Land would be used efficiently, so there would be no need for rushed, developments and ugly urban sprawl.
Labour Land Campaign Secretary Carol Wilcox comments “The Government’s plans will not work. It has a few marginal benefits for property owners, but will not get the houses we need built. A few carrots will not be enough to break the cartel of land speculators holding back development; sticks are needed as well. The relaxation of the affordable homes targets are merely a gift to the profits of developers and the unearned income of land owners.”
She continues “A Land Value Tax is needed to provide the right incentives for land owners and developers to provide the homes needed for people to live in and the jobs our ailing economy needs.”
Notes to editors
1. This is an amended version of the Press Release ‘Land Value Taxation Is The Best Plan For Planning’.
2. For more details contact Steven Clarke at email@example.com, phone number 07817906299 or
A TALE OF TWO EXPORTS – RENT AND THE REST
August 10, 2012
Two pieces of recent economic data highlight why Britain’s economy is both sluggish and unfair.
UK exports fell 4.6% between May and June, with a drastic 8.4% drop in exports of goods over the same period. As imports fell by only 0.7%, the trade deficit rose to its highest ever level at £4.3bn. 
Meanwhile it was revealed that foreign investors own 23% of the UK’s property market. This is an increase of 106% over 8 years. [ 2]
Investors buy property in the hope that its value will increase rapidly – which it has done for many years. However, it is not the value of building that has increased, they depreciate over time like any man-made object. It is the value of the land the buildings sit upon that has increased.
This land value is created by the community. One site is more valuable than another because of its proximity to better public services, more productive industry, better transport links etc – not due to the merits of the site-owner or the improvements upon the site. A field in the middle of London is vastly more valuable than an identical one in rural Cornwall, say, and its owner potentially far richer if the field is developed; precisely because it is surrounded by a large, internationally connected Capital city of millions, not because of the greater sagacity and industry of London landlords relative to their Cornish counterparts. Land value then is that most social of assets – created by generations of communities in an area. This value accrues as land rent to the landlord under current arrangements and it is this rent that has attracted foreign property investors. Exporting land rent is a great British success story.
Perversely this high rent makes it very difficult for those businesses that could be exporting goods and services. Land is a primary factor of production and is a large cost to many consumers and productive enterprises making our exports uncompetitive.
It does not need to be this way. This rent could be collected as land value taxation and used to fund Government expenses. We could then reduce or replace the heavy taxes on wages, buildings, capital goods and trade such as Income Tax, Council Tax, Business Rates and VAT. This would immediately make British companies very competitive internationally. It would also end the speculative hoarding of land, keeping it un- or under-used in the hope of gaining an unearned increment in its value. Land, rather than sitting idle, would become cheaply available for homes and factories, allowing the productive sector of our economy to grow.
Dave Wetzel, Labour Land Campaign Chair, says “Our economy is set up to benefit the skimming off of rent by wealthy elites; money that is created by the whole of society and should belong to the whole of society. Meanwhile those that produce the goods and services that would allow us to earn our way in the world pay high rents and taxes on productive behaviour.”
He continues “Land value taxation should be introduced as the primary revenue for Government, allowing other taxes to be reduced or abolished. British consumers and producers would benefit extraordinarily as we reward those who make, not those that take.”
Notes to editors
3. For more details contact Steven Clarke at firstname.lastname@example.org, phone number 07817 906299 or
July 18, 2012
The Coalition Government’s announcement of £9.4bn of investment in railways in England and Wales is a welcome move. It will create jobs and growth, and benefit passengers and local businesses. It will also have an immediate effect on the value of the land in the surrounding area, benefitting land owners.
Government investment in public transport and other public services always increases the value of land in the areas they serve. This windfall is unearned by the land owner, who gains it, and could instead be used as a return to the taxpayer’s investment.
Eleanor Firman, Chair of the Labour Land Campaign says “This is yet another example of how our taxes pay for public services and then land owners get an increase in the value of their land with no effort on their part. Taxpayers are subsidising large land owners”
She continues “The Labour Land Campaign calls for a shift in taxes off of labour, buildings and trade and on to land value that is created by the whole of society, not land owners. Why should land owners get the unearned income they receive from land value that is created by the rest of us ? Why should we as consumers , taxpayers and producers subsidise land owners ?”
A recent example of this effect was seen in the London Underground Jubilee Line extension, which cost taxpayers £3.5 billion. It was estimated at the time that as a result of the extension, land values in the vicinity of just two of the stations, Canary Wharf and Southwark, increased by £2.8 billion; and over the whole extension by some £13 billion. Taxpayers could have been handsomely repaid for their investment – instead private land owners who contributed nothing to the project found themselves substantially richer.
By levying a tax on the annual rental income of all land, empty buildings and those sites that currently remain idle or underused will be brought into their permitted use – providing homes, business premises and leisure facilities. As the economic benefits flow from public investment ( such as the £9.4bn thegovernment has just announced for our national railways ) , so the levy would recoup the uplift generated by the new investment. This unearned land income should then be used to maintain and develop our public services; whether it is in transport, health care, education, social care, roads or leisure provision.
Eleanor continues “The whole of society pays for our public services as taxpayers and consumers – but land owners get a handout at no cost to themselves. Why should taxpayers and rail travellers subsidise the likes of the Duke of Westminster?”
July 16, 2012
In a wide-ranging speech this week, Tory MP Nick Boles discussed the future of public spending priorities. Despite starting from the wrong premise – that spending cuts are needed – Boles makes the case that spending should be focussed on areas which measurably increase productivity and competitiveness. Of course, little of this was reported. What did make the headlines was his suggestion that we means-test benefits for the elderly.
In today’s political environment, a politician would as soon advocate the killing of the first-born as upset pensioners – after all, they are numerous and are more likely to vote. However it is reasonable to raise the issue of fairness between the generations. Unemployment among 16 to 24 year olds is around 20%, compared with about 8% for the population as a whole (1). Much of the Coalitions’ policies have hit the young – cutting EMA, the child trust fund and housing benefits for under-25s, raising top-up fees, means-testing child benefit etc.
Whereas David Cameron has so far ruled out any cuts to pensioners’ benefits.
Consider also that personal wealth is very unevenly distributed between old and young. In 2009, out of a total of £6.7tn, £0.9tn or personal wealth was held by the under-45s, £3.5tn by 45-65 year old ‘baby-boomers’ and the remaining £2.3tn by over-65s ( 2). This disparity has grown over time. In the decade after 1995, the median personal wealth of the under-45s collapsed by over two-thirds while that of the ‘baby boomers’ tripled ( 3).
But the problem with this sort of analysis is that the deep divisions in our society are not between old and young but between the haves and have-nots.
The main division is between those that ‘have’ land, including homeowners and those that ‘have-not’. Man neither creates land nor alone can he give it value. Land values are generated by society as a whole. The value of land will increase as roads are built, public services created and improved, private enterprise flourishes. It belongs to the community as a whole, the young as well as the old, renter and owner, rich and poor. However, that value is currently appropriated by the land owner.
And those owners have seen the value of land soar many times over in the last decade as a result of policy decisions – loose credit, low house building, low property taxes – nothing to do with the character, prudence or industry of the owner.
Although not the only beneficiaries – the ‘haves’ come in all ages – the baby boomers have done very well from the process. They were able to buy property when it was much more affordable with higher wages as a share of national income. Higher inflation then eroded their mortgage debts and subsequently their wealth increased through a housing bubble. A narrow age cohort has been very lucky in its timing.
What are the solutions to these inequalities? Nick Boles already knows one of them. He has advocated a Land Value Tax. Such a tax would heal many of the deepest divisions in our society – between regions, homeowners and renters, old and young and ultimately haves and have-nots.
It would ensure that socially created wealth is socialised. It would allow for increase public investment – which is the real solution to our economic problems. It could reduce or replace other taxes, such as Income Tax and the Council Tax. It could help pay for a National Care Service, the final plank of the cradle-to-grave welfare state.
Do pensioners have anything to fear from a Land Value Tax? No. They would not have to pay if they could not afford it; merely roll up their payments until their property changes hands. And let’s not forget that they do not look merely to their own self-interest. They would know that their children and grandchildren and great grandchildren lived in a society where they could succeed on their own efforts, without the game of life being rigged by those lucky enough to be born to the right parents, in the right decade and the right area.
Labour Land Campaign Chair, Eleanor Firman says “We welcome cross party support for Land Value Taxation and were pleased to hear of Nick Boles’ support in the past. We hope he will join the existing Labour and Lib-Dem MPs supporting Caroline Lucas bill calling for research into its implementation which receives its second reading on 9th November.”
Notes to editors:
(3) A. Benito, J. Thompson, M. Waldron, G. Young, and F. Zampoli, ‘The Role of Household Debt and Balance Sheets in the Monetary Transmission Mechanism’, Bank of England Quarterly Bulletin, Spring 2007, figures from Chart 3. Pension wealth (which would tend to further increase this disparity) has been excluded.
(4) For more details contact Steven Clarke at email@example.com or phone 07817 906299.
WHO REALLY GETS THE MOST INCOME FROM “SOMETHING FOR NOTHING” CULTURE?
29 June 2012
The Labour Land Campaign says that instead of attacking the most vulnerable in our society, people on benefits, David Cameron should attack the biggest beneficiaries of the “something for nothing” culture – land owners.
Land values, especially those with buildings in the centre of towns and cities, arise from public and private investment in infrastructure, businesses, services etc. Public and private investments – paid for by all of us as consumers and taxpayers –enable land owners to receive an unearned increase in the value of their land. Tenants (private and commercial) of course get to pay higher rents as a result of increased land values.
The Labour Land Campaign calls on David Cameron to examine the real damage this does to our economy and to change our tax system away from wages and production and on to land wealth through an annual Land Value Tax on all land.
Then, as our economy grows, so the increase in land value will be returned to the public purse to pay for maintaining and improving our public services instead of going to property speculators as unearned income.
The results of this change in taxation would be many, including an incentive to develop all unused and underused sites with planning permission and bring empty homes and unused buildings back into use thus providing homes, business premises and leisure facilities. This would increase employment and therefore reduce Government expenditure on welfare benefits. Instead of properties (i.e. land) having inflated prices, homes would become more affordable whether for buying or for rent.
An annual Land Value Tax cannot be avoided or evaded and therefore the rich would have to pay their fair share of this unearned wealth that is created by the whole of society and not through any effort on the land owner’s part.
Eleanor Firman, Chair of the Labour Land Campaign, says “The real beneficiaries and perpetrators of a “something for nothing culture” have actually been with us for generations since common land that supported many livelihoods was first stolen and then enclosed. Today, we treat houses as assets not homes, and all kinds of businesses (not just landlords) speculate in property for capital gain financed by the taxpayer, or use sale and leaseback to cut their tax bill. The result is lower tax revenues and higher welfare expenditure. We should be cutting the vastly excessive tax benefits to landowners and landlords – not the meagre welfare payments to those on low incomes who have no control over inflated rents.”
For more details contact Steven Clarke at firstname.lastname@example.org or phone 07817 906299.
18 June 2012
The €100bn bailout of the Spanish banks and the Greek elections are the latest, but no means last, episodes in the seemingly interminable eurozone crisis.
The dominant narrative of the crisis is that of profligate Peripheral European governments who have overspent, running up large debts and deficits. The solution, they are told, is fierce austerity measures to atone for their past sins and so placate the gods of fiscal rectitude who, they hope, will reward them with a return to economic normalcy.
This narrative is a myth. The real problems of the eurozone were sown with the creation of the single currency. It is to do with converging interest rates, trade imbalances, credit flows into the periphery which puffed up housing bubbles, bloated banks which have now blown up, taking economies and Sovereigns with them. The problem is that land prices and debt have been mutually ratchetting each other up – building up of imbalances in wages, prices and competitiveness across the Continent. Imbalances which now need to be unwound in a rigid currency union that doesn’t allow for symmetrical, palatable adjustment between core and periphery, debtor and creditor.
If this is the problem, what are the solutions? Clearly there is no silver bullet. Several interlocking solutions need to be put in place, including but not restricted to: higher inflation, recapitalisation, reform and regulation of banks, debt mutualisation, debt forgiveness, fiscal transfers, fiscal stimulus, perhaps even a move to greater fiscal and banking union. Such things are often suggested by intelligent commentators, but what are they missing?
What is needed is land value taxation. The trigger for the crisis, both in peripheral Europe and the US, was housing bubbles, which are largely land price bubbles. If the land price were to be socialised by being collected by the State for public revenue, speculative debt-fuelled housing bubbles would not get so inflated.
Labour Land Campaign Chair Eleanor Firman says, “In many ways fiscal union is the best way forward, but it would not prevent a repeat of the current crisis. If the eurozone fiscal union shifted taxes from labour to land this would allow land values to be captured for public benefit not by the banks and speculators. This revenue could help resolve the tax gap and stimulate jobs, consumption and sustainable – not volatile, debt-fuelled – growth.”
The tax would provide much needed revenues for cash-strapped governments to provide employment and training opportunities for the unemployed, to protect public services and to improve the long-run fiscal position of their countries.
It would allow for taxes on labour, which is abundant relative to jobs, to be reduced. This would ease the process of getting people into jobs, the most urgent task for all governments.
It would make a public infrastructure-building program more palatable as the infrastructure would raise land values, raising tax revenues.
Thinking more radically, if Europe does move to fiscal union, what should be the European tax? What better than a land value tax – it would fall most heavily on the most prosperous areas of the Continent, making it progressive, it falls on economic rent not returns to production, making it efficient. It should be adopted.
For more details contact Steven Clarke at email@example.com or phone 07817 906299.