Launch of All Party Parliamentary Group on Land Value Capture

In July of this year ALTER floated the idea of a Progressive Alliance round Land Value Taxation and put out a call for the formation of an All Party Parliamentary Group on Land Value Tax in advance of our fringe at Bournemouth on this theme.

In a pre-budget speech in the City of London this week, Sir Vince Cable laid out Liberal Democrat proposals for tax reform including investigating the feasibility of Land Value Taxation (LVT).

He said;

Authoritative analysis of the British tax system, notably the Mirrlees Report, makes it clear that the taxation of land is the most economically efficient and rational form of taxation, the least open to evasion and avoidance and the most relevant to contemporary needs such as better utilisation of land for housing. The Lib Dems are committed as a first step to replacing business rates with site value taxation.

Sir Vince will Chair the inaugural meeting of the All Party Parliamentary Group (APPG) on Land Value Capture to be launched at Westminster next month, supported by Sir Edward Davey MP who has been active in investigating cartel-like practices and leasehold abuses in retirement homes

The 2017 Conservative manifesto included a commitment to registering all UK land and reforming land value capture as a means of funding local infrastructure. Richard Bacon MP (Conservative), who steered the Self-Build and Custom Housebuilding Bill through Parliament in 2015 will serve as Vice-Chair of the APPG. The South Norfolk MP has called for a revolution in people building their own homes as a means of fixing the broken housing system. According to Mr. Bacon, serviced plots can be sold for £55,000 (or rented out by local authorities) and a house built for between £80,000 and £160,000 dramatically reducing the costs that new households currently face.

Caroline Lucas MP (Green) who presented a private members bill in 2012 calling on the government to undertake a feasibility study into the introduction of LVT will also serve as a vice-chair.

Labour’s 2017 manifesto promised to “…review council tax and business rates and consider … land value tax, to ensure local government has sustainable funding for the long term.” Ruth Cadbury MP, who has served as part of Labour’s shadow housing team will represent the Labour party position on the groups governing committee.

The SNP conference passed a resolution in March this year backing LVT as a mainstay of Scotland’s land reform program,

ALTER is a member of the Coalition for Economic Justice. The CEJ comprises political groups, pressure groups and charities who came together in 2008 in response to the economic crisis of that year and who have continued to work together for the establishment of justice in economic affairs. The cross-party group proposes the introduction of LVT and will furnish secretariat services to the new APPG on Land Value Capture.

ALTER members interested in attending the launch of the APPG next month, can register on the ALTER website.

* Joe Bourke is an accountant and university lecturer, Chair of ALTER, Chair of Hounslow Liberal Democrats and PPC for the Brentford and Isleworth constituency.

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36 Comments

  • Fair points, Benjamin and I think as an initial or transitional phase the extension of council tax bands to encompass a wider range of high value propeties (instead of a mansion tax) would be a pragmatic policy proposal.

    However, there remains the issue of equity with Council tax which, in its present form, is a quite regressive form of taxation that increasingly falls on tenants and not Landlords.

    Splitting the council tax between an LVT paid by Landlords/owners and a property services charge paid by tenants/occupiers for rubbish collection and the like (in the same way that councils assess business rates and waste disposal charges separately) may be an appropriate way of addressing this inequity in the system.

  • David Cooper 13th Nov '17 - 5:29pm

    Benjamin,
    Council tax can’t be reformed “simply” since it is inherently regressive. Council tax increases much faster than price, penalizing residents of low value properties. Basically it is a flat rate tax per household + a modest component proportional to property value, but capped at the top end. Try to fix that!

  • Geoff,

    economic rents derived from Land are just one (albeit the largest one) source of unearned income as this article describes https://reconstructingeconomics.com/2015/01/12/tax-economic-rent-not-productive-activity-the-conversation/

    The concept of economic rent can be generalised as an unearned income and need not apply to physical land. The classical political economy of Adam Smith, David Ricardo, and Henry George belong to the late eighteenth and nineteenth centuries. It focussed particularly on land in the physical sense due to the structure of the economy, about which they wrote. Nevertheless the concept of economic rent still holds true, as the economy continues to function on the basis of property and rights, the concept of land can be broadened to include such things as radio spectrums (including commercial broadband access), mortgage lending and public underwriting/guarantees of banks that allow them to create money and so forth. This research paper from Michael Hudson is a more academic analysis of the economic issues http://michael-hudson.com/2016/08/finance-is-not-the-economy/

  • David Cooper 13th Nov '17 - 7:03pm

    Geoff Crocker
    You are wrong. If land is so unnecessary for hi-tech companies, then why are land prices in Silicon Valley skyrocketing? Your statement is at total variance with actual facts.

  • Little Jackie Paper 13th Nov '17 - 9:29pm

    This seems to me to be an important but understated point – ‘However, there remains the issue of equity with Council tax which, in its present form, is a quite regressive form of taxation.’

    However I do perhaps think we need to be careful here. It was far from clear to me for instance that raising the income tax threshold was wholly progressive, yet that was rather popular. Ending the 10p tax rate was progressive and that didn’t go down well. The Coalition’s changes to child benefit were massively progressive, yet a lot if people weren’t all that keen.

    Progressive/regressive can be a red-herring in these discussions, which is at heart why this tax hasn’t changed for the best part of 30 years. Just because something is progressive doesn’t mean it will fly politically. I’m just rather surprised we’ve not had someone trot out the normal trope about how house price wealth isn’t real wealth yet.

  • nigel hunter 13th Nov '17 - 9:33pm

    With LVT does this mean the Council can own the land and allow. or build themselves modular housing that is cheaper to build and therefore be incorporated into the declining rural housing landscape ONLY for those living in rural areas to buy or rent. This can then counteract the decline in rural areas brought about by the rise in rent to buy 2nd homes

  • Geoff,

    Fortunately the big players haven’t yet found a way to cool large acres of server farms in outer space. Until then, these companies will continue to buy far more land than anyone else.

  • Geoff,

    I think you are right to cite the complexities around defining economic rents. This is relatively straightforward where an active rental market exists as with real estate but more complex when it comes to intellectual property. Monopoly and competition law can be challenging. However, after a long career dealing with the complexities of the US and UK tax codes and the intricacies of International Taxation, I can’t imagine any tax legislation more complex than what we have now.
    Unearned income for these purposes has to be differentiated between dividend and interest income earned from productive investments and income where the source of profits is rent-seeking activities such as land rents and intellectual property rights that extend beyond the time when costs of production (including costs of capital) have been recovered.
    Hunter’s article focuses on the economic issues and consequences of a rentier based economy and addresses various aspects of the modern economy that many libdemvoice contributors have expressed concern with.
    It is sometimes said that your PC desktop is the most valuable real estate in the modern economy. The business that dominate the provision of your operating system, word processing and spreadsheet applications (Microsoft), memory chips (Intel), search engines (Google) and social media applications (facebook) are the new monopolists. Our tax and competition law needs to be updated to reflect the realities of a 21st Century economy that siphons off surplus value in monopoly profits from land, mortgage lending, money creation and increasingly intellectual property rights.

  • Geoff,

    This idea of taxing large companies purely to extract as much money from them as possible lays the foundation for regressive and poorly thought-out tax policies. We shouldn’t be looking at how much money a company makes and look at it with £s in our eyes, fantasizing how much money we could make from them. They aren’t doing anything illegal by making tons of money and they treat their employees with respect, to target them purely because of the profit they’re making goes against liberal thought. The liberal solution to this would be to decrease the barrier to entry and make it far easier for companies to compete in that space. We’d have to make an argument for scrapping certain patents which allow these companies to exist as monopolies.

    I don’t think it’d be wise to bring out policies which would discourage innovation, something which companies like Microsoft and Google are at the forefront of. They’re making massive strides in technology and actively reinvest their money into R&D. We shouldn’t penalise them for this, we should try to encourage competition instead.

  • Nigel Hunter,

    I think that is the kind of outcome we should be aiming for.

    Vince Cable had advocated ” using the Government’s balance sheet to finance large scale housebuilding by a government agency operating on the Development Agency model, used in different ways in the Docklands and Liverpool and for the New Towns.
    The Communities Secretary has partially backed a plan originally put forward by Respublica for a £100bn programme over ten years, to build homes for sale or rent.
    Such a programme could be complemented by greater freedom for councils to borrow to build, and by assisting smaller private builders by boosting the small builders’ credit scheme operated by the British Business Bank.”
    Richard Bacon, the MP for South Norfolk, is promoting the idea of build ready plots with infrastructure, utilities and foundations in place for self-build or modular homes.
    Putting these two concepts together, where homeowners with established ties to the area (not 2nd homes) paid a modest ground rent/LVT on the site and took out a personal mortgage for a modular or self-build home, could quickly ramp-up home provision in both rural areas and towns alike.

  • Phil Boothroyd 14th Nov '17 - 9:21am

    Oh man, this could so easily turn into a tech dominated discussion… as a software developer and tech person myself – I have far less of a problem with Microsoft than I do Google (although a lot of that is about personal preference rather than ideological opposition) – and Amazon are more of a mixed bag (no issue with their tech arm per se, but lots with the humanitarian side of their physical operations). But I will steer as clear of that as I can…

    The big question for me though is will the Tories get on board? It would be somewhat ironic if the one party that would love us to have a US style economy are opposed to a significant land/property valuation tax – something that makes up a significant proportion of tax paid in the US…

  • Philip Knowles 14th Nov '17 - 11:04am

    One of the issues of the current Council Tax system is that is one size fits all. Band C is the same value throughout the UK which means that low value areas struggle with there not being enough higher band properties and in high value areas no lower bands.
    A better system would be to base Band C on the mean value of the properties in the area and then base the other bands around that with Band D 10% higher and Band B 10% lower etc.

  • Phil Boothroyd,

    this is not about the tech industry. They have come under scruting becuase of their International tax planning arrangements and extensive use of low tax jurisdictions. Land Value Tax is primarily focused around the collection of rents from natural resources for the public benefit. This may include public land that is used to run telephone and broadband fibreglass cable through as well as other infrastructure like the radio spectrum that is used to deliver mobile phone services; airport landing slots, Yacht marinas; pigiuvian taxes on air and water pollution, implicit public guarantees that underwrite mortgage lending etc.

    We need to keep our focus on what Henry George called ‘the problem’ – the persistence of poverty among plenty in an age of exponential technological progress. The APPG is focused on land capture as the housing crisis is the immediate concern As Daniel Bentley argues http://civitas.org.uk/publications/the-land-question/ :

    “The barrier to fixing the housing crisis lies …in the trade in land.
    …development land is being traded at values that too often require a slow drip-feed of desperately-needed new homes, or prevent affordable housing commitments from being honoured in full. Together with the under-utilisation of sites that could be used for new housing, these are the consequences of allowing monopolistic landowners to extract too high a price from new developments.

    As the classical economists knew, the increase in the value of land owing to its location is the product of the labour and the investment of the community, not the individual landowner…Only by reforming the land market, and rewiring incentives for landowners, can we hope to build the homes we need in the places we need them.”

    As for the Tories, see this from James Palmer, Mayot of Cambridgeshire and Peterborough https://www.conservativehome.com/platform/2017/07/james-palmer-the-land-value-cap-offers-the-chance-of-more-affordable-infrastructure.html
    or Nick Boles 2012 MacMillan lecture http://toryreformgroup.tumblr.com/post/16769897465/nik-darlington-nick-boles-macmillan-speech-national-miss

  • Benjamin Weenen,

    ALTER is a member of the Coalition for Economic Justice http://www.c4ej.com/ as is Mark Wadsworth, himself a strong advocate of LVT.

    Member organisations of the CEJ are not all ‘majoring’ on LVT, although all support it and understand it.. Some are more interested in banking reform, other on poverty alleviation and reform of the benefits system. “Economic Justice” is the connecting thread and relations between those who come from different political backgrounds are very cordial.

    Libdems can input to the CEJ through ALTER. To join ALTER with full voting rights, you first need to be a member of the UK Liberal Democrat Party (or Northern Ireland Alliance Party). However anyone who sympathises with liberal democracy as defined in the Lib Dem Party Preamble to its Constitution may pay a subscription.
    Subscriptions and donations go towards funding literature, exhibition stands and fringe meetings at Federal, some regional and now Scottish conferences. ALTER also gives some financial and other support to non-party political organisations campaigning for LVT.
    By joining you allow ALTER to increase its efforts to promote LVT and broaden its arguments for Economic reform. ALTER has for many years had stands and fringe meetings at the federal conference, but it is important that we take this to the Scottish, Welsh and regional conferences.
    Scotland is particularly important as there is considerable cross-party support for LVT North of the Border and ALTER aims to increase its activities and membership there. The Scottish Act could be an enormous opportunity for radical reform of the system as it allows the possibilities of cutting income tax up to 10%, the abolition of Stamp Duty and the introduction of any new tax without the need of Westminster legislation.
    If you support Land Value Taxation, please join ALTER now to help promote the merits of LVT within the Liberal Democrats and beyond to the media and the wider electorate.

    Libdem members can join ALTER as subscribing or non-subscribing members at https://libdemsalter.org.uk/en/page/join-alter

  • Geoff Crocker
    As far as I can see your argument against LVT is that there are other things that may be also useful to tax (either as low deadweight revenue sources, or changing the incentives in the economy). This doesn’t look like a problem with LVT but a problem with opting for LVT as the only tax in society. I know some of the LVT advocates are way too optimistic about it but as part of a balance of tax sources it is better to have than not.

    The valuations on certain tech companies that you are very concerned about look a bit too bubble like for me and may need to make a significant correction at some point in the future, other issues are due to lack of competition for certain monopolistic businesses. There may be solutions involving tax (I’m not convinced) to those problems or there may be solutions involving other public policy instruments (unfortunately best deployed using via the EU which we are about to loose).

    The focus on “unearned income” is a red herring here, IP and some competitive advantages (only some mind you) is not “unearned” they are often the result of people and businesses taking risks and making investments of various natures.

  • JoeB

    “this is not about the tech industry. They have come under scruting becuase of their International tax planning arrangements and extensive use of low tax jurisdictions”

    And some of the debate about international tax arrangements would be helped if the US didn’t have some of their sillier rules around tax. Also once interest rates start to climb, some of the cash pool issues may also start to resolve themselves too.

  • PSI,

    on IP there is a good article here https://promarket.org/intellectual-property-laws-wolves-sheeps-clothing/ from the ProMarket blog that is dedicated to discussing how competition tends to be subverted by special interests. They conclude “The copyright and patent laws we have today … look more like intellectual monopoly than intellectual property. They do not simply give people their rightful due; on the contrary, they lavish special privileges on copyright and patent holders to the detriment of everyone else. Therefore, it is entirely appropriate to strip IP protection of its sheep’s clothing and to see it for the wolf it is, a major source of economic stagnation and a tool for unjust enrichment.”

    I take your point abour US tax rules and the expected impact of higher interest rates.

    As regards LVT as part of a balance of tax sources – Ed Millibands new podcast has been discussing LVT https://podtail.com/podcast/reasons-to-be-cheerful-with-ed-miliband-and-geoff-/episode-8-land-tax-the-ax-land-value-tax-plus-obam/. It starts from 14 minutes in and interviews a couple of economists. Singapore is cited as a possible model of a successful land tax based economy, with 90% home-ownership and a top income tax rate of 7%.

  • Nigel Hunter,

    you ask – if the counil can own the land? The summary to Daniel Bentley’s book http://civitas.org.uk/content/files/thelandquestion.pdf includes the following:

    “The key to this lies in reform of the Land Compensation Act of 1961, which enshrines in law the right of landowners – in the case of compulsory purchase by the state – to be reimbursed not only for the value of their site in its current use but for any prospective use to which it might be put in the future. Their entitlement to this ‘hope value’ means public authorities are powerless to enforce development priorities that are in the interests of the community. This was not always the case: the new towns that were initiated before the 1961 Act, and much of the local-authority output of the late 1940s and 1950s, was underpinned by a landvalues policy that meant landowners were compensated at values reflecting the existing use of the site. This meant land for new homes could be acquired at or close to its much lower agricultural or industrial use values. It also doused speculation and prevented the withholding of land.
    Revising the 1961 Act, so that assessments of market value do not incorporate prospective planning permissions, would reframe incentives in the land market by enabling public authorities to acquire development sites at prices closer to its existing use value. This would have a cascade of benefits for housebuilding. By taking away from landowners their entitlement to speculative values, it would remove the incentive to hold out for aspirational prices. This would enable developers to gethold of land at prices that are compatible with planning obligations, the provision of more affordable homes and quicker build rates. It would also make it much easier and much cheaper to embark on a new generation of council housebuilding and/or a new programme of new towns and garden villages.
    This raises important questions about property ownership and the balance between the rights of the private landowner and the rights of the wider community. It calls for a reconsideration of attitudes to land ownership and of what landowners’ rights should, and should not, encompass. Specifically, it requires policymakers to accept what the classical economists argued but which is largely forgotten today: that increases in locational land values are an ‘unearned increment’, generated not by the owner of the land but by the labour and the investments of the community.”

  • JoeB

    I’m not claiming the current arrangements are perfect or don’t need significan reform but I don’t see tax as the tool for reform.

    The extensions of various copyrights in recent years was clearly bonkers. It was not as if the music IP extention was due to some shortage of teenagers singing in to hair brushes dreaming of stardom.

    But the use of tax as a solution is simply suggesting we should allow the monopolists who have found ways to exploit the system to continue to behave in this anti-competitive way so long as they pay their protection duties on it. This in turn creates incentives for governments not to fix bad IP laws as to do so would cut revenue that they would have to find elsewhere.

    Where IP laws are flawed the solution is to amend them not to ask for our cut.

  • JoeB

    “Singapore is cited as a possible model of a successful land tax based economy, with 90% home-ownership and a top income tax rate of 7%.”

    I can’t really listen right now but I would be sceptical of a model that cites Singapore as a competitor for the UK just due to the significant differences.

    I’m a supporter of LVT but I think over promising it’s benefits will not help it. It would be important to help improve the system but it is one part of the puzzle which will see some form of significant revenue raising from other sources.

    What I think is important is to have some answers about what else may help get it on the books. Matthew Huntbach on a thread a few years ago had some intetesting observations.

  • “Singapore as a competitor”
    Sorry thatvshould have said comparator.

  • PSI,

    Singapore is not a direct comparator and it has its faults. 80% of the population there live in subsidised apartments built by the government, most of them as owner-occupiers. Singapore’s Housing and Development Board (HDB), the successor of the city planning agency created by British colonial governors is the foundation of the states economic and social policy. The government has since the 1960’s acquired much of the land and now controls around 90% of the territory. New built properties are sold every year to 1st time buyers (with a means tested discount) on 99 year leases. Singapore has virtually no homeless problem and accommodation is more affordable than London. Property tax is imposed on owners of properties based on the expected rental values of the properties.

    Alter does not propose state ownership of private property, but rather an LVT to fund public infrastructure and services that benefit all owners of land. The LVT would replace existing taxes on property such as council tax, business rates and SDLT and allow for an element of redistribution to tenants that is not then recaptured as economic rents by landlords.

    LVT is a market intervention that contrats with the nationalisation and rent control programs of socialism and the Laissez Faire of Conservatives.

    As regards economic rents derived by IP intensive industries like entertainment and software giants, it may be that more effective regulation is part of the answer. However in a world of trans-national global giants, equally averse to both regulation and taxation this is easier said than done. Collecting ground rents for the use of communicatiions infrastructure on public land and airspace within a nation’s own territory may provide for a more effective approach to the problem of taxing monopoly profits.

  • Maybe the question that needs to be asked is can a man or woman live without access to land. Of course not. Where else would or could they possibly live – space – ocean? With this in mind the lvt needs to be structured to return a dividend equally to everyone so that the lvt on the average parcel of land is equal to the land dividend received. This ensures equal access and ownership of the earth by all. The beauty of an lvt is that it can be automatically managed by free market activity.

  • William Fowler 15th Nov '17 - 8:25am

    Recent governments have opted out of revaluing residential property for council tax bands because they know people will start leaping up and down if they are expected to pay yet more money for ever declining local services (fixed costs eats up a large chunk of the income) so trying to steal yet more money via notional land rent values or whatever is political suicide.

    Roughly, income tax raises 250b and corporation tax 60b… that tells you all you need to know and the solution is a turnover tax on companies, phasing out of employer NI, business rates and council tax as that turnover tax replaces them… if you tell voters that their council tax is going to go down whilst you are clobbering thieving energy companies and money lenders with highish turnover tax guess what happens – you win elections!

  • JoeB

    Another point back on to the implementation, when you suggest extending council tax and (what appears to be a transition to an LVT) would it not be better to actually develop a phase out of council tax over an extended period with the same period of a phase in of LVT. In order to allow the land market to correct it is better to have a clear model that is gradually coming in so valuations can be based upon this rather than having to access how and when the council tax will transition over. As any LVT will need to have a long introduction to give the aging in big homes time to plan along with not causing big price impacts on those with mortgages (avoiding valuation jumps to impact on LTV figures feeding through to people’s individual rates). The dropping off if the council tax could fall to the point where it will become the “property service charge” that you identify as something required even in a LVT world.

  • JoeB

    Another point that was raised on an old thread on this was the issue of an “allowance” in the way we have an income tax allowance. As if it belonged to every person it would give a benefit to those with children (who would qualify) to give some relief while they had that additional expense. And would also start to signal to parents the need to move as the allowance would be dropping (and therefore tax rising) as the utilisation of the rooms in the family home became empty. The incentive of this along with the abolition of stamp duty should act as an incentive for more movement and better utilisation of property.

  • William Fowler

    “Recent governments have opted out of revaluing residential property for council tax bands because they know people will start leaping up and down if they are expected to pay yet more money […]
    the solution is a turnover tax on companies, […] guess what happens – you win elections!”

    Government enforced price rises and skewing the economy in favour of high margin businesses is the magic formula to winning elections?

    I’m not convinced.

  • William Fowler,

    it is an important point. Most economists cite LVT as the ideal tax from an equity and efficiency perspective, but acknowledge the political difficulties associated with the perception of tax on property – that for many people is their main investment and store of wealth. It is important that taxes like council tax are reduced to a level of a property services tax for rubbish collection and the like for homeowners. Higher value investment property and 2nd homes however could see significant rises in levies.

    We already have a form of turnover tax with VAT and there are many problems with a broad-base turnover tax. I think restriction of tax deductions for corporate interest (as Vince Cable has hinted at in his recent speech) and intra-group patent charges and management fees etc., might be a better approach.

  • PSI,

    I think the phase-out approach to council tax has considerable merit for the reasons you suggest. Equally having a form of ‘homestead allowance’ based on the Local Housing Allowance for the number of bedrooms that a site has planning for could exclude most owner occupiers from the land tax element altogether; leaving the bulk of the tax to be collected from investment properties, second homes, properties with high rental values and commercial property.

  • Nick Boles (former planning minister) on BBC today from 15:44 http://www.bbc.co.uk/news/av/10318089/bbc-news-channel echoing atguments made by Daniel Bentley for reform of the Land Compensation Act of 1961 to allow local councils to acquire land for housing at affordable prices.

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