Jenny Jones AM, leader of the Green Party on the London Assembly, argues the case for a land value tax to be at the heart of London’s economic recovery.
By Jenny Jones AM, leader of the Green Party on the London Assembly
Fairer, smarter taxes are needed for London to recover from the double-dip recession. Therefore I fully support the Mayor of London’s move to have another look at them with his London Finance Commission.
Earlier this week I asked its chair, Professor Tony Travers, whether he will look at putting a tax on rising land values as one way to promote useful economic activity in a more fair way.
You can watch our exchange below:
Land value taxation can get complicated to explain, but could potentially keep down house prices, finance major transport infrastructure projects and switch more of the burden of taxation onto unearned wealth.
The basic idea is very easily explained with an example.
The £15 billion Crossrail project is expected to benefit many businesses in London, so they were required to contribute to the cost. A Business Rate Supplement has been levied on businesses with a rateable value greater than £50,000, raising £4.1bn towards the cost.
But building this new railway line will also benefit land owners along its route, estimated at a minimum to be a £5.5bn windfall gain by property consultants GVA. Their land becomes more valuable when the line is built without their lifting a finger but, unlike businesses paying rates, these landowners get their windfall gain tax-free.
The Jubilee line extension to Stratford is an even more stark example. The £3.5bn cost to the public purse was dwarfed by the estimated £10bn plus in windfall gains to land owners in the area.
A land value tax would enable the Mayor and government to reinvest a proportion of these windfall gains into new infrastructure, ensuring everyone who benefits pays their fair share.
The Metropolitan Line was built in the 1930s using a similar principle. The company who built the line bought up land along its length for housing, and used the uplift in land values to pay for the line.
London desperately needs investment in its transport, energy and waste infrastructure. Fairness also demands we do something about these huge, unearned private gains to already-wealthy individuals and companies resulting from public investment.
There are many other strong economic arguments for land value taxation – putting a dampener on the housing market by making it a less attractive option for investors; giving developers with land banks and other owners of brownfield sites a strong incentive to develop; and possibly using the revenue to reduce business rates are just three that were raised in the debate with Professor Travers by myself and other London Assembly Members.
Land value taxation could reshape London’s economy to promote useful economic activity, generate revenue for investment and fairly distribute the benefits. It’s popular with economists of all colours and stripes, and was endorsed by the Institute for Fiscal Studies’ Mirlees Review.
So it’s a shame Travers thinks the proposal is unlikely to make it into the London Finance Commission’s final recommendations. While he “definitely won’t not look at it”, he suggested it wouldn’t get buy-in from all political parties and so would be a non-starter. I hope this week’s debate will have helped convince more Assembly Members it’s a viable option and I urge them to raise it with their parties.
86 Responses to “A land value tax should be at the heart of London’s economic recovery”
Newsbot9
You’re trying to extrapolate between a region’s LVT and a country’s. You can move out of a region, but not so easily a country.
1, It induces the highest return use of land. This is not the same as “best”. For example, housing for the poor is very low return.
2. Correct, so what housing WILL be built will be either tower blocks or for the rich
5. Er, how? They will vanish, rather, since they are completely unproductive in returns. This also applies to social facilities which don’t generate income.
6. By driving many of the poor out of the area, yes. This is also how you get 7, 8 and 9.
Moreover, the area has debts of $1.5 billion, and tax will need to rise sharply.
You want to create a situation where the poor have nowhere to run!
Mark Wadsworth
Aha, I see where you are coming from now – you don’t know what you are talking about and are prepared to tell any lie to prove your point, such as suggesting that LVT would make family life impossible. If anything, LVT would encourage people to share, because they can then share the tax bill – unlike current rules (single person discount for council tax and vacant property discounts) which encourage people to live on their own or to leave houses empty.
And you are totally inconsistent – can you please state, once and for all whether you think that LVT will push up rents and hence REDUCE demand for housing, or whether LVT will “create far FAR more demand for housing”. As a matter of fact, neither extreme is true, but it is easier arguing with somebody if they at least don’t keep changing their mind every five minutes!
Toodle pip, read your own comments, you are making an idiot of yourself.
JohnLVT
“Uh-huh. No, I’ll stick with scientific papers and economic studies, ”
Scientific? Economics is NOT a science. We can give you lots of papers if you like. Look up Profs Michael Hudson, Mason Gaffney, etc.
I doubt you looked at the vids on Youtube. Worthless for me? I never made them. Good aren’t they?
What don’t you understand?. Maybe we can help you.
JohnLVT
Your knowledge of this topic is near zero. Yet you think you had figured matters out.
All you are doing is supporting freeloading landowners.
Mark Wadsworth
As to food prices, you are wrong, wrong, wrong. Do tenant farmers charge higher prices for their food than owner-occupier farmers? No, because rents cannot be passed on, rents are calculated by market forces as food prices minus actual cost of production. The food price is fixed, costs are fixed, the balance is rent.
Alternatively – can you explain why it makes any big difference whether a farmer pays £20,000 a year in income tax or £20,000 a year in Land Value Tax? Why would the latter lead to higher food prices than the former.
FYI, average rent for farmland is between £50 and £100 per acre per year, so LVT on farmland, by definition would be between £40 and £80 per acre per year. It is a mystery to me which “values you have seen proposed for farmland” as neither JohnLVT nor I have mentioned any figures at all.
Perhaps you were hallucinating again?