Like other “advanced economies”, we suffer “deadweight loss” from dysfunctional taxes. Why, when we could get up to 30% more economic growth from tax revenue by taxing wealth extractors, such as landowners, rather than wealth creators: workers and entrepreneurs?
Deadweight Burden is real and now under review by the Labour Government—a potential game changer for sustainable growth. HM Treasury’s Marginal Cost of Public Funds (MCPF) officially acknowledges that 30p in every pound allocated to government capital projects is “lost” through tax inefficiencies. Just 15 years ago, I was told Treasury estimated 20%. No wonder it’s under review.
Treasury does not spell out these “inefficiencies”, citing “sensitivities”. Academic studies suggest they include tackling evasion, collection and administration costs—often borne by businesses—and opportunities lost when taxes divert money from wages, investment and output. Economists also call them “welfare costs”, a benign-sounding term. Stamp Duty Land Tax (SDLT) is an egregious example: its admitted 12% deadweight loss reflects discouraged housing efficiency and labour mobility.
One tax is accepted as “welfare neutral”, with no Deadweight Burden: the Land Value Tax (LVT) on the annual rental value of land or other fixed natural capital. Land is used renewably, but access rights belong to landowners, who do not use it simply by owning it. The tax cannot be avoided or reduce productive land use; it encourages sites’ “highest and best use” within a planning system that largely sets land values.
Gradually shifting taxes off earned income and business profits would grow the economy. By one estimate, each pound shifted would generate £16 of economic growth.
Liberal Democrats have long supported this reform. Some is already Party policy, approved by Conference but rarely used in campaigning. ALTER (Action for Land Taxation & Economic Reform) has summarised the policy and proposed next steps.





