The Fabian Society organised a policy Dragon's Den earlier today. I suggested scrapping the 50p rate of tax to pay for a land tax.
The Fabian Society organised a policy Dragon’s Den earlier today under the title ‘Change or No Change: What do we ditch from New Labour‘. Since all the other speakers had argued for change, I suggested “No change with a purpose”.
My argument – which was somewhat cobbled together due to stepping in at the last minute – was that the Labour party should retain the post-1992 orthodoxy on tax by scrapping the 50p rate. But that it should do so only in order to introduce a land tax.
The inequalities in wealth in the UK far outstrip inequalities in income. As the Political Climate blog points out, “recent data from the ONS show that the top 10% of households own more wealth than the rest put together”. Meanwhile, land – which is to save the least hard to move – is concentrated in an even more extraordinary way: 0.3 per cent of Britain’s population owns 69 per cent of its land. As economist Philippe Legrain argued in an article of Prospect, a land tax is the “only efficient and fair way to bring Britain’s finances back into line”.
My back of the envelope calculation (open I’m sure to challenge) suggests that you could raise £10 billion in tax revenue from an average levy of around £400 per hectare (2.5 acres). The rate would, of course, have to be graduated in order to tax urban land at a higher level than farm land.
In return, the Government could afford to cut the 50p rate and take a penny off the base rate of income tax with billions left over for deficit reduction or public spending. The Treasury estimated that the 50p rate would bring in around £2 billion but the IFS expressed concern last year that it could encourage tax avoidance. In any case, the 50p rate will do little to address income inequality. A focus on a living wage at the bottom and financial sector remuneration at the top are a far better means.
The three panelists – pollster Deborah Mattinson, journalist David Aaronovitch, and Tottenham MP David Lammy – supported the idea but, as Mattinson said, “the devil’s in the detail”. To test the popularity, she asked how a middle-income family with a combined income of £40,000 and a house in Surrey would fare. With a chance to do some proper number crunching, I can report that they would gain £270 from the income tax reduction but lose £160 on an acre of land – a net gain of £110.
There are clearly lots of details that would need fleshing out and this is very much a ‘starter for 10’. But it must make sense to consider a shift from taxing income to taxing unearned income. In the words of David Lammy: “it’s an idea whose time has come”.
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85 Responses to “Scrap 50p to introduce a land tax”
John77
What’s wrong with a 60p top rate (apart from admitting that Geoffrey Howe got it right)?
Also, please do some homework – the ENTIRE POPULATION owns LESS than 69% of land by value – your old college owns quite a lot, the MoD, National Trust, local authorities (and the housing associations to which they have transferred housing estates), schools, British Rail’s various successor bodies, the Forestry Commission (4% of the total land area if you want to look at area instead of value), institutional investors in farmland (lesser but still massive in area terms), water companies, port authorities, property companies (not so much in area but much larger value), charities, sports clubs …. Even if you treat the Crown Estates, the Royal Park and the Duchy of Lancaster as personal belongings of the Queen although she doesn’t get a penny from them, your claim is insupportable.
Forlornehope
Anything remotely like £400 would destroy farming. If you exclude farm land or significanctly reduce the tax rate then the numbers don’t look anything like as skewed and the potential tax revenue defaults to taxing owner occupied housing. As you so correctly write, the devil is indeed in the detail. More effort required on this one.
Sunder Katwala
this was @wdjstraw o his ditch 50p rate and adopt Land Tax to @thefabians this lunchtime … @LeftFootFwd http://bit.ly/dznd8n
Andy Wightman
RT @leftfootfwd: Scrap 50p to introduce a land tax – @wdjstraw 's Dragon's Den policy idea for @thefabians http://bit.ly/dznd8n
James Graham
RT @wdjstraw: @jamesgraham Here's the argument. Would welcome your thoughts http://bit.ly/dznd8n