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
1. This isn’t part of any serious proposal I’ve seen. You are talking about a chimera, not actuality, which is a replacement for council tax. You harp on abouy earned income, when earned income is both falling sharply (and has been stagnant since the 1970’s), and by using “household”, you encourage the complete destruction of the nuclear family and create far, FAR more demand for housing (hence pushing rents up even further out the grasp as the poor, as middle class families “break up” into nearby houses)
2. Right, so basically with the LVT values for a shop versus a house, anyone living above them is going to be evicted. Wonderful, a serious reduction in housing.
3. So basically, you’re willing to accept a huge rise in food prices. The values I have seen proposed for farmland would cause, cause a 50-60% rise.
Your “reason” is based on the concept that landlords will take a loss.
Newsbot9
Uh-huh. No, I’ll stick with scientific papers and economic studies, not ramblings on youtube. I’ll also look at the published proposals and their consequences, not waste time on videos.
Unless, of course, you’re proposing to PAY me for doing your research on why they’re worthless for you.
Newsbot9
“Put a conservatory on your house and you pay more Council Tax”
Generally not, that requires a revalidation.
LVT encourages high-density housing, yes, and does nothing to encourage for example energy efficiency, which I would make part of rent caps or at least allow an offset against council tax for highly efficient buildings.
“If people are in financial hardship LVT has exemptions. ”
NONE of the published proposals I’ve seen has these worth spit. In fact, only one softens council tax’s provisions for late payers, even!
Painless? Inly if you call the proposals which will throw millions out of their houses “painless” under the old Nobel ideology that the poor don’t really feel pain.
It’s a revoloutionary soloution which I require solid answers to ALL me questions, in a published proposal, before I can support it. Far more minor changes such as rent caps and a tax on empty brownfield land and empty property will achieve my aims in housing while council housing is built far more easily.
Do bear in mind that LVT also means you’ll never see a garden again, outside the very rich.
Newsbot9
Exactly. And the Green party proposal for LVT has the holes I mention and many more..it’s not a policy which you could seriously implement without a lot of people becoming homeless very quickly, and food prices soaring.
Which is why I want to see a proposal which doesn’t do that before I’ll support it. I’m not going to wait for one, I’ll keep advocating the procedures which I’m confident won’t cause that and will achieve my major economic objectives (more housing, and few evictions in the time being, not to mention putting a lot of money back in the hands of the poorest!)
Newsbot9
1. Right now, the tenant pays council tax to the council. He pays rent to the landlord.
2. You want a LVT which the landlord pays, and the tenant pays for.
3. You are saying that the landlord will eat the price of the LVT
He can’t. He literally can’t afford to. He will pass it on, at a 1:1 value.