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.
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86 Responses to “A land value tax should be at the heart of London’s economic recovery”
Newsbot9
Talking about how you give nothing for tax again, except to fund your lavish lifestyle? Next!
Mark Wadsworth
Hear, hear, agreed etc. Keep up the good work.
Mark Wadsworth
If land value tax were implemented properly and in full, there wouldn’t be any capital gains anyway and assets for inheritance tax would be lower (negligible land values, few houses have bricks and mortar worth more than #325,000).
Ideally, LVT would replace most existing taxes, starting with council tax, SDLT, CGT, IHT and the TV licence fee. So don’t bother to use stupid taxes like that as an argument against very good taxes like LVT.
Mark Wadsworth
Taxes on goods which are produced and consumed are shared somehow between producer and consumer. So your example with tax on food is completely irrelevant and shows you do not understand about economic or tax. Or even natural justice.
Taxes on government-protected monopolies (like land ownership) are borne in their entirety by the beneficiary of the monopoly right and have no negative impact on prices paid by “consumers” (the tax comes off the price)
Mark Wadsworth
“It only benefits people who use the railway. ”
Well you are either lying or stupid. Fact is, good transport links boost land values, so you benefit even if you don’t use the railway. Plus, it is easier for other people to come and visit you, it is good for the local economy etc, so of course you benefit.