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.

ALTER understands the Party hierarchy’s and some MPs’ concerns about residential Land Value Taxation (LVT), accepting the need for considerable caution. We support Andrew Dixon’s approach; he co-founded the Lib Dem Business & Entrepreneurs Network and the FairerShare campaign.

Proportional Property Tax (PPT) has significant cross-party support. It is a step towards LVT. It would replace Council Tax, Stamp Duty Land Tax and the “bedroom tax”, falling on owners rather than occupiers. Real transaction data would continuously update property values for annual reassessments. It would be far less regressive across dwelling types and areas, lowering bills for three-quarters of council tax payers.

Our policy already shifts Business Rates onto land values through the Commercial Landowner Levy (CLL), thanks to Andrew Dixon. Yet FPC blocked a similar Council Tax reform motion the following year, 2019. Businesses don’t have a vote!

Reform of the 1961 Land Compensation Act has also been policy since the 2023 Housing & Planning debate. For greenfield sites in high-demand areas such as the south-east, it would greatly improve housing delivery, quality and infrastructure by using the huge value uplift extracted by landowners and developers. CIL is minuscule by comparison. The Levelling Up and Regeneration Act 2023 (LURA) has a relevant clause in it, meaning this only needs secondary legislation to allow Compulsory Purchase Orders (CPOs) for use of land for public purposes.

Lib Dems introduced the policy of “use it or lose it planning permission” in the same debate. Allowing councils to CPO at “only”, say, 300% of agricultural land value would boost social housing.

ALTER calls for a Just Growth Alliance to unite forces and strengthen Lib Dem Shadow Chancellor Daisy Cooper MP’s excellent spokesperson paper, published at Brighton during this year’s Conference. The same day’s Thriving Economy consultation left us unexcited. Too many Lib Dems still seem happy to spend without considering where the money comes from: tax hardly featured.

We can regain badly needed media attention by promoting Lib Dem existing growth-oriented tax policy. ALTER invites others, inside and outside the Party, to help tackle bad taxes and their deadweight burden. That is how our economy can thrive.

It should be a moral crusade. It can’t be called “right wing” because it is correcting a vast market failure, reducing the amount of tax that needs to be taken from the active economy by recovering it from inactive rent-seekers. Lets not pretend we can have a fair society – or a free one – while we take large chunks of earned income from working people and risk-takers’ profits while leaving the fruits of speculation untouched.

LVT has more than double the potential to improve GDP than rejoining the EU. Why wait?

* Dr Tony Vickers is a retired chartered surveyor who worked first for a national housing developer, then as a Military Geographer before entering Lib Dem politics in 1995. He is co-founder of ALTER and has served as a councillor in Berkshire for 20 out of the past 30 years while also lecturing in green economics at Kingston University until 2016. www.libdemsalter.org.uk