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”
JohnLVT
LVT encourages maximum use of land which in itself encourages energy efficiency. A block of flats per unit uses far less energy than a detached house. Far less fuel is used in transport as well. LVT and eco are bedfellows.
LVT DOES NOT throw million out of their homes. Quite the opposite. It actually encourages homes to be built. Take to ex Mayor Reed of Harrisburg.
LVT is a revolutionary solution. It is used all over the world and proven., It is what we used before the Income Tax swindle was pushed onto us.
” Far more minor changes such as rent caps and a tax on empty brownfield land and empty property will achieve my aims in housing while council housing is built far more easily.”
That is fiddling the system as we go along – fire-fighting. LVT encourages maximum use of land and home building. Council homes need not be an issue and the private sector will fill the gap. All homes will be affordable – even owner/occupied. Housing shortages will be a thing of the past.
As Harrisburg’s mayor stated, who implement LVT, that LVT protects greenspaces. Planning laws will also protect green gardens, etc.
Your understanding of LVT is near zero,. Get to understand it. It is not difficult. Then the light bulb will light up in your head.
JohnLVT
Why would lawyers be involved in LVT? They were not involved in countries and cities that have implemented it. It is simple the levy is on the “value” of the land which is easy to assess. Queensland has it all on-line.
There ARE bad taxes. Taxes that penalize production (income tax) and trade (VAT) are bad taxes. LVT is not a tax despite it name. Many do not like the title. It should titled Community Reclaim Charge, or the likes of. It is reclaiming commonly created wealth to pay for common services.
LVT is not based at all on the buildings at all (or the technical term “improvements”). It is based on the value of the “land only”. In the USA they split “property tax” taxes into two: building and land values. Then roll into one and charge. LVT aims to eliminate a charge on buildings (that is like taxing your washing machine) and up the charge on land values to make it a fair charge. Then it cam be done nationally and eliminate income and sales taxes.
JohnLVT
“2. You want a LVT which the landlord pays, and the tenant pays for.”
No the tenant does not pay he LVT, only the landowner.
“3. You are saying that the landlord will eat the price of the LVT”
He will. He also pays no Income or Sales tax either.
“He can’t. He literally can’t afford to. He will pass it on, at a 1:1 value.”
Under full LVT the landlord pays no Income or Sales taxes. He can’t pass LVT on to the tenant as that implies he was charging under the market rate before LVT, which they do not. If he attempts to pass it on market forces come into play and people will move to another cheaper place to live, then he has to keep the rent as it was. LVT will move housing more over to the private owner/occupier sector.
JohnLVT
What your warped analysis gave was quite the opposite what happened in Harrisburg.
You are guessing. The points I gave came from the mayor of Harrisburg out of real world experience.
Stop making things up.
JohnLVT
“Yes, it can make it at the expense of the poor. Woo!”
Look at this by economist Fred Harrison. He says the opposite of you.
http://www.youtube.com/watch?v=6ZkfmY1PMng
It is best you attempt to understand LVT – all you are doing is making yourself look foolish.