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”
Evan Price
When someone has the money in hand, you can see where the payment is coming from.
Where you are simply taxing the percieved or assessed value of an asset, I agree that the problem is that you cannot see where the payment is coming from or whether it is affordable.
Evan Price
But that cannot be what Jenny Jones is proposing. To do that she would need to be in Government nationally not a member of the London Assembly.
She wants to see this tax in addition to all the other taxes, but possibly to replace Council tax.
Evan Price
Entertainingly, classic cars are classed as a wasting asset – wine is another – so there is no CGT on them.
The only reason that you don’t pay CGT on your principle primary residence, is because there is a specific exemption from paying the CGT on the sale of that residence.
Houses are not ‘consumables’ at all. While a commercial building has a commercial ‘life’ and is accounted for in the accounts of the owner, a residential building is not accounted for in that way.
Newsbot9
Again, you’re talking about a proposal nobody has seriously made. Moreover, correct, the Landlord will have no choice but to charge the LVT+his profit margin, which will mean effectively passing on the value formerly in those taxes to tenants.
As poorer tenants can’t pay that, the landlords will have to evict them (British law basically requires that for sales), and sell to wealthy people – who will generally offer them only tied to jobs. This is a reversion to the 1700’s.
1. So can a tax on empty property and brownfield sites, without chasing millions out of their property.
2. So does council tax.
2 the second. So homeowners will know when they’re being evicted. Great!
3. Wow, so you’ve made people pack into Grandmother’s home, delaying the issues for a few years and slaughtering tax revenue.
4. “Capturing” it from the poor, right. You will have the poor bitterly fighting infrastructure projects.
5. Yes, it can make it at the expense of the poor. Woo!
You are trying to make an argument which fails Economics 101.
Evan Price
Divorcing the value of the land from the development of it would be very interesting and entertaining for many lawyers … who would get an enormous amount of work from such a divorce.
I repeat – there are no ‘good’ taxes and no ‘bad’ taxes – I will expand – there are merely taxes that are efficient and achieve a particular purpose and ones that don’t.
From memory, many places where an LVT exists it is charged as a rent often based on a rateable or other such value. Rates, of couse, are assessed on the property and its characteristics rather than on the underlying percieved value of the land.