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”
Roy Langston
LVT is automatically affordable, because it is no more than someone is WILLING to pay to use the site: just let them use it. Problem solved. It is also false to claim that LVT bills could “continue to rise without any corresponding rise in their ability to pay them.” LVT cannot exceed the land rent. Land rent is the economic advantage obtainable by using the land. If LVT increases, it is because the economic advantage to the land user has increased, and thus their ability to pay the increased rent — IF they are using the land productively, and not just sitting on it, hoarding it expectation of trousering millions for doing nothing.
Roy Langston
Your claims are false and dishonest. LVT is a REPLACEMENT for the revenue from stupid, unfair, and destructive taxes. The London Assembly has the power to reduce said taxes. It should do so forthwith, and replace them with LVT.
Roy Langston
Your claims are false. Food prices cannot soar, or even rise, as a result of LVT. That is a fact of economics that has been known for 200 years. Google, “Law of Rent” and start reading. Homelessness would be reduced to zero by LVT — though some people would not be able to afford to continue depriving the community of prime sites they are currently under-utilizing to the detriment of the city and the nation.
Roy Langston
It is false, absurd, and dishonest to claim that LVT would concentrate land ownership with a few. The current enormous concentration of UK land ownership with a few in the ABSENCE of LVT is proof enough of that.
“Loss-making land”? What would that be? Land’s average appreciation is currently far greater than its holding cost, even if you don’t collect the rent.
Roy Langston
Your claims continue to be false, absurd, and dishonest. Poor people don’t own land, and LVT cannot be shifted onto them. Economists do not agree on much, but they do agree on that. It is absurd to claim that people would have to live in very high density housing or slums. LVT is simply the same payment a private landowner would charge for the land. He just doesn’t get to trouser it. And that is your whole objection to LVT, in its bare essentials.