A Tax on Tories?

Clive Stevens, author and former Green Bristol City Councillor, outlines the numerous benefits that a Land Value Tax could bring to the UK.

An assorted series of houses

Photo by Toa Heftiba on Unsplash

Clive Stevens

Did you know that Land Value Tax (LVT) was part of a package of policy changes voted through at our Conference in 2019? A good decision by Greens; it is part of the answer to many of today’s pressing problems: lack of affordable housing, housing in general, gentrification, and other unsustainable trends. Plus, it removes some unfair taxes too.

What is LVT?

Unsurprisingly, LVT is a tax on the value of land; of about one to two per cent per year. Not on the house or building; just the land. It is paid by the landowners and should not be passed on to tenants. It would simplify taxes by replacing Council Tax, Business Rates and land Stamp Duty. 

A tower block
There’s land at the base of this tower, of very high value.

LVT has a rich pedigree and is already used in many countries including Denmark. In the UK it was recommended by no less than Adam Smith himself. It almost made it into law via the 1910 People’s Budget. It did become law in the Labour Parliament of 1931 only to be repealed by the Conservative Government a few months later. 

It is so wonderful that you’d think nobody would be against it. The Tories most definitely are, and even some Greens had questions. 

I will answer Green concerns shortly, but, firstly, a couple of examples:

Why LVT is fair

In 2006, I became a ‘victim’ of unfair enrichment: The state paid millions for a new school near my home, its price went up 15 per cent, estate agents said the school increased the land value. I didn’t do anything for that enrichment. Rents went up, renters called that unfair, so did the homeowners just outside the catchment area. 

Over time Land Value Tax would have captured much of the uplift paying back the cost to the state. It’s the same with roads, railways, even bus routes.

Why is LVT green? 

A different example: big builders have land-banks, two or three years’ worth, usually with planning permission already. It rests undeveloped waiting for a profitable time to build and sell the homes. A tax on land would force them to either build quicker, sell the land to someone who will, or re-designate it e.g. for a park. The latter would reduce the land’s value and so reduce their tax. 

LVT efficiently drives the process of using land for its designated purpose. And where land is scarce, like in a city surrounded by Green Belt, LVT is important for a fairer, more sustainable future.

A city garden
A Community garden, designated as such, the land is of very low monetary value.

The benefits are clear: gardens, parks and community facilities, properly designated with good planning enforcement would have next to no value and so owners would pay little tax. 

The Conservatives attacked the Green Party dubbing this a “garden tax” – they would, being the party of landowners. Land properly designated as a garden would not incur extra tax. But, if you get planning permission to build a house for sale, the land value rockets and so does the tax. 

LVT is a solution for cities. A 2016 Danish study saw it stabilising or even reducing land prices. It makes it more affordable for the state to build much needed cheaper properties and reduces the pressures of gentrification.

But what about rural areas? 

The Green Party’s Agriculture Group raised some very good questions which tested our working group (I was in the group, we worked on this for three years before the 2019 Conference). 

Over 67 per cent of England’s land is agricultural, yet that amounts to just five per cent of land value. Nationally, 89 per cent of value is residential land, including cities, which is where most LVT would be raised. 

But a farmer with, say, 100 hectares (a hectare is 100m x 100m) of land would save on Council Tax, but face an LVT bill of some £20,000 a year; a big dent in the fragile rural economy. This is resolvable by including LVT as the stick in a package of subsidies to transition farms to sustainable land management practices; an area for further work.

Back to cities

Let’s close with a key worker, a carer, a tenant living in a block of 100 flats. The carer would not pay Council Tax and their landlord gets a bill for £100,000 LVT which they try to pass on to the tenants. Without caps they might succeed, in the short term; after a decade or more with faster completions on land designated for development and other land assigned for parks or affordable housing, the balance of supply and demand changes. The landlord can’t pass on the tax because of more supply and less competing demand from property speculators.

Best to be safe, phase it in with a cap; the result: our carer pays no Council Tax; with more to spend in the local economy, perhaps on better quality food, starts off a virtuous circle. 

Land Value Tax is most wondrous. You can’t offshore land, it’s very difficult to dodge. It is also the policy of the Lib Dems (partly) and many in Labour, so it might not be so far off.

Greens leading the way.