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
Ah yes, gotta get those mansions built on the countryside. Go right on ignoring urban sprawl and general land usage.
House prices rise because of insufficient supply. Speculators sit on land because it’s rewarded by the current tax system, which is easy enough to fix without a LVT.
And like Brown eliminated Boom and Bust, right. No, what it does is price people off their property in the versions I’ve seen.
Newsbot9
The proposals I’ve seen would only replace council tax. Moreover, poor people would be faced with tax bills they couldn’t pay in your system, because they don’t pay income tax as things stand.
You’d have to live in VERY high density housing, aka slums, at best.
JohnLVT
The examples of land prices rising because of new infrastructure only highlights the need to implement LVT. The Greens want LVT all over London, not just near stations.
There would be no Council Tax to give it any benefits, LVT replaces all taxes. Flats above shops? Only the landowner pay LVT. not tenants. The landlord cannot pass on LVT as market forces come into play.
Only the “landowner” pays LVT. No other personal taxes. Pergovian taxes on alcohol, tobacco, etc will remain.
Newsbot9
You are making the economically illerate argument that landlords will pay a LVT from their profits, rather than passing it to tenants. No, tenants will pay the relevant taxes on the property, either directly or via the landlord. You are saying there will be no help for the poor.
Moreover, you are for instance evicting everyone who lives above a shop, because over doubling their rent in tax alone means it will be economically impossible to live there, unless you’re REALLY rich! (Moreover, unless you can rent that space as well? Oops, there goes your ability to own the property!)
And you are arguing a proposal which hasn’t been put forward by any serious organisation, in terms of replacing tax. The Greens propose only replacing council tax, for instance.
JohnLVT
Because LVT is a big twist to the psyche of the people, having a full instant implementation is seen as too much, so a part introduction is viewed as soft way in. I prefer a full head on implementation. LVT replacing Council is far more fair.
Council Tax takes the building (Capital) and the LAND into account. Put a conservatory on your house and you pay more Council Tax. This is as daft as taxing your dishwasher. It also discourages enterprise in the construction industry, so a negative bad tax. LVT taxes only the LAND, payable only by the landowner on the land’s “value”. Understand that. Those new to LVT can’t grasp that fully. LVT is geared to the “value” of the land.
People in Harrisburg and, Altoona in the USA, Singapore, Hong Kong, Taiwan, etc, have no problems paying land tax. In fact it makes them economic powerhouses and/or cleans up the cities of derelict buildings and vacant plots.
If people are in financial hardship LVT has exemptions.
Speculation in unique and life maintaining land is pretty well evil. Speculate on washing machines by all means, but not land. That should be discouraged by all means and the right, self controlling and painless means is LVT.