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”
JohLVT
“More tax. Solves every known ill.”
LVT is known as the Single Tax. Only ONE tax. A tax on the values of land. Geonomics has LVT as its core. Geonomics charges for use of all commonly owned land and resources.
BTW, we used a form of LVT before Income Tax, which was a temporary tax to fund the Napoleonic wars. The landowners decided to push taxes onto the poor and away from them, so got it to stay. Since then we have had financial turmoil in boom-busts and world-wide crashes.
Carol Wilcox
Ask yourself what capital gain you could expect on a second-hand car. Why should a house be any different? Houses are nothing like other ‘assets’ – they are consumables.
Carol Wilcox
The problem with the land market is that it is all externalities.
Newsbot9
A true LVT isn’t the same as a tax raised on property near developments, which is what the article is talking about.
For a true LVT, there are loads of questions…
1. How do you plan on handling the equivalent of council tax benefits, when landlords are paying it and hence passing it on to tenants, rather than paying it direct to the council?
2. How will you handle flats above shops?
3. How will you handle agricultural land so as not to inflate food prices?
Etc.
Loads of questions, all needing answers…
Newsbot9
Because land is unlimited. Oh, wait…