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
No, I don’t know the taxpayer can pay – people are in enough trouble as it is. With council tax, at least the increases are currently quite low, whereas with a LVT they could see bills continue to rise without any corresponding rise in their ability to pay them.
Newsbot9
Only because of the lack of sufficient supply. With sufficient supply, speculation would be far less profitable. And a truism that the the private sector won’t build enough houses – they haven’t since Thatcher abolished council house building, after all.
Creating a LVT escalator….is not in the interest of the poor.
JohnLVT
Only 7.5% of the UK land mass is settled – Kate Barker report. The UK is rather empty. The planning laws wedge us all in urban pockets. Irrespective of land availability, there will always be speculation in urban areas where land is valuable because of demand. In the value of land continues to rise because the gains were not taxed, speculators could just sit on the land and waiting for the uptake in value.
Land Valuation Tax prevents harmful speculation, keep land prices low and stable and homes affordable. Property (land) booms and bust are eliminated.
JohnLVT
“There are no ‘good taxes’ and no ‘bad taxes’, merely taxes.”.
But LVT is not a tax. It is reclaiming community created wealth. If the land you own drops in value so does the LVT – automatically scalable.
JohnLVT
You totally misunderstand LVT. They would not pay Income, Sales, Council taxes. They keep their earnings. You only tax on the “value” of the land.