The party has just published a comprehensive blueprint for replacing the broken business rates system.
Ground-breaking research was led by Andrew Dixon, founder of the Lib Dem Business and Entrepreneurs Network (LDBEN), in response to mounting concerns about the negative impact of business rates on struggling high street businesses and the wider economy.
The report – “Taxing Land, Not Investment” – calls for the abolition of business rates and its replacement with a tax on land values, the Commercial Landowner Levy (CLL). The levy would remove buildings and machinery from calculations and tax only the land value of commercial sites, boosting investment and cutting taxes for businesses in nine out of ten English local authorities.
Andrew Dixon said,
By only taxing land and not the productive capital above it, this reform would remove a major disincentive to investment, boosting productivity and contributing to a necessary revival in UK industry. While separate action is needed to ensure online retailers pay their fair share of corporation tax, our proposals would offer a lifeline to struggling high streets.
I am delighted to support this initiative which I believe would boost business and enterprise across the UK, and I am grateful to members of the Liberal Democrats Business & Entrepreneurs Network for their valuable contributions to this important research.
Key recommendations of the report include:
- Business rates should be abolished and replaced by a Commercial Landowner Levy based on the value of commercial land only
- The levy should be paid by owners rather than tenants
- Non-residential stamp duty should be scrapped to improve the efficiency of the commercial property market
- Commercial land should be taxed regardless of whether the buildings above it are occupied; the tax should also apply to unused and derelict commercial land
The report also finds that:
- The CLL would mean lower taxes for businesses in 92% of English local authorities. In places like Oldham, Blackburn, West Bromwich, Barrow, Middlesbrough, average taxes would be cut by over 25%, and in some cases by as much as 46%
- The manufacturing and technology sectors would be the most significant beneficiaries of the CLL, receiving tax cuts of over 20%. Retailers in struggling areas would also receive a boost.
- The CLL would represent a tax cut initially, but is likely to be at least revenue-neutral in the long-term. Redistribution between local authorities would be adjusted to ensure no change in local funding.
- By taxing landowners rather than businesses, half a million SMEs would be spared the bureaucratic burden of property taxation. With far fewer plots of land than individual businesses, the CLL would save councils both time and money
Liberal Democrat leader Vince Cable said:
Business rates were a badly designed policy to begin with and have become an unacceptable drag on our economy. They are a tax on productive investment at a time of chronically weak productivity growth, and a burden on high streets struggling to adapt to the rise of online retail.
Many of the areas around the country that voted for Brexit feel they have been left behind. In place of policies the Brexiters offer only rhetoric. Great swathes of the country demand better, and this policy offers change to the manufacturing industry and the small towns passed over by economic growth.
Chris Richards, Head of Business Environment Policy at EEF, the manufacturers’ organisation said:
This report is a strong addition to the debate on the future of business rates and property taxation, which despite many reviews is not an issue that has gone away.
Manufacturing as a sector with high capital intensity is perversely affected by business rates, as investments in productivity boosting plant and machinery are included in tax calculations – for some manufacturers making significant investments this is enough to put them off making that investment in the UK.
Innovative solutions will be needed to remove this challenge while ensuring stability from a future tax regime, and today’s report is an important contribution to finding a solution.
Philip Salter, Founder and Director of The Entrepreneur’s Network, said:
Business rates are a tax on investment, adding to Britain’s productivity woes. Introducing a Commercial Landowner Levy would remove a key disincentive to investment and reduce administration costs for thousands of business owners. This is exactly the sort of policy entrepreneurs need to thrive.
Liberal Democrat members will have the opportunity to debate and vote on the proposals at Conference in Brighton next month. The full report can be found here.
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21 Comments
I like this but I’m wondering why we’re calling a tax on the value of land a ‘commercial landowner levy’…
The motion is proposing an average 11% increase in property taxes on businesses in london, much higher in some areas.
Wonder whether this will help us in the GLA and mayoral election in 2020
Nick, my guess would be that the name Commercial Landowner Levy was chosen because we don’t want it to be automatically passed on to the business owner (as opposed to the land owner) through the wording of lease agreements. Also what you call something is very important, as we now know because we can’t get people to believe that something called Tuition Fees are really a sort of Graduate Tax – Honest guv.
Simon, I presume it depends how many votes the commercial landowners have but more importantly how good they are at scaring people in London.
Could this imply an empty property, say a pub, could have multiple small industrial or single units in one building? Equally craft orientated projects individuals or community run sharing the cost whilst producing their products. They could produce their product whilst linked to one ‘next door’ (next cubicle say )which when linked together adds added value and cuts the cost of a product and therefore produces more at alower price.
These are proposals to tackle one of the key areas of “Broken Britain”. Another key area , Housing, is also being debated on the Monday.
Where is our attempt to draw attention to these debate? Nowhere
Do they figure in Latest News on our Web Site? No
Where are the Press Releases, copied to all Local Parties? Nowhere
Are we generating debate before Conference? No
Instead the public sees a one issue party, Exit from Brexit, consumed with proposals to allow non members to vote for a leader who is not an MP. (Desperate stuff from a desperate party)
I have said it before, and I will say it again, this party needs to take an urgent grip of its media management if it is to move forward.
Land is too difficult and expensive to value and tax. If we have to increase taxes then we should focus on things like corporation and income tax. Most agree we have to increase taxes so I probably go for corporation tax and reform the system too so multinational PLCs can’t game the system.
Sounds lovely.
Regarding online retailers, I don’t see what’s wrong with just taxing the land they occupy rather than doing that + a bunch of specific taxes for them. The only thing businesses should be paying for (in my eyes at least) is the land they occupy. They don’t need to be taxed on anything else.
@ David Beckett “I have said it before, and I will say it again, this party needs to take an urgent grip of its media management if it is to move forward.” True to a point, David, but media management is only the outward manifestation of a pretty hollow inside.
Example ? Excellent informed article on poverty on LDV by Tahir, followed by – two exceptions – a series of comments riffing off about anything else but poverty ………..
Meanwhile in my constituency (second, 25%, 2005 ; fourth, 3%, 2018) , in the last year my local foodbank fed 4,493 people (36% under 16) with 45,000 kg of donated food – of whom 61% were adversely affected by welfare changes supported by this party when in office and 20% due to low income.
Time to wake up and smell the lack of coffee !!
Also not sure how land is going to be valued, hopefully not through some large bureaucracy that will take a huge bite out of the taxes raised. But employer NI is missing from this reform, companies that employ people are taxed more heavily than robot factories, surely just as important as getting rid of business rates.
Small companies often get exemption from business rates, if the owner of land is being taxed does that mean that rents will have to rise to cover the tax, which would make rates-exempt small businesses worse off.
Good foreword from Vince Cable.
“Land value taxation is an idea whose time has come… it has been endorsed by
organisations from across the political spectrum, most notably the Institute for Fiscal Studies, the Institute for Public Policy Research, the Adam Smith Institute and most recently, the Economist.
I myself have long been interested in the potential of land value taxation, which is why I agreed to chair the All-Party Parliamentary Group on Land Value Capture set up last
year to develop innovative proposals in this area.
The case for a land value tax is perhaps strongest when it comes to commercial property. Business rates, a badly designed policy to begin with, have become an
unacceptable drag on our economy… business rates are a tax on productive investment at a time of chronically weak productivity growth and a burden on high streets
struggling to adapt to the rise of online retail.
Introducing a tax on commercial land, or what the report calls the “Commercial Landowner Levy”, would progress many of my priorities as Liberal Democrat Leader. Because of the highly unequal way land value is distributed in Britain, it would significantly reduce business taxes in the poorest parts of country, helping bring about the regional rebalancing that is so badly needed. And by only taxing land and not the productive capital above it, it would remove a major disincentive to investment, boosting productivity and accelerating the UK’s industrial revival.
I am very grateful for all the research that has gone into producing this report. It will greatly aid my party’s efforts to campaign for the replacement of business rates with
a land value tax. But if this aspiration is to become a reality, support will have to come from across the political spectrum, something this work will be crucial in achieving.”
“The levy should be paid by owners rather than tenants”
Where do the bright sparks who think this stuff up imagine the “owners” will get the money from to pay the levy?
Favourable press coverage on the initiative from the FT, Daily Mail and the Sun https://www.thesun.co.uk/news/7114129/calls-for-business-rates-swapped-land-value-tax/
The Daily Mail has announced a campaign for business rate reform http://www.dailymail.co.uk/news/article-6077041/Business-rates-axed-ease-burden-high-street-shops-urges-Vince-Cable.html
About time.
Remember 1906, the election and the Liberal Party election marching song, “The Land belongs to the people”. Are yes I remember it well!!!
Meanwhile the electoral scene tonight is Sevenoaks. On the face of it, little for us, but will there be a surprise?
Innocent Bystander 30th Aug ’18 – 3:44pm:
“The levy should be paid by owners rather than tenants”
Where do the bright sparks who think this stuff up imagine the “owners” will get the money from to pay the levy?
From tenants. Which means the owners of vacant premises are incentivised to keep reducing the rent until they get one.
I can see how this would encourage landowners to make productive use of land, rather than leaving it empty and banking on future appreciation of it’s value, but it obviously will ultimately be paid by tenants because rents will rise to cover it. How else could the landowner generate the cash flow to pay it?
However, what happens to commercial or residential property that is half way through a 99 year lease, with rents based on market rates 50 years ago that are peppercorn by today’s standards? Do you base the tax on land values from 50 years ago too? If not, you will bankrupt some landowners.
Nick,
the motion excludes residential property from business rates and maintains the current system of exemptions for agricultural land and charities.
The report notes “Business rates are paid and administered by the occupier, even if many small businesses in a community rent from a single major property company.
The Commercial Landowner Levy would be paid by the owner not the tenant, sparing over half a million SMEs the bureaucratic burden of property taxation. 61% of small to medium sized businesses in England with premises – and even greater proportions in retail and manufacturing – would no longer have to worry about property tax, although most rents would need adjusting to reflect this tax shift from tenants to landlords.” Section 3 of the report – Simplifying the Tax System – goes into greater detail on moving tax from occupiers to owners.
ALTER https://libdemsalter.org.uk/en/ will hold a lunchtime fringe on Sunday, 16th September at the Brighton Metropole where the authors of the report will be answering questions and the motion will be considered by conference on Monday.
I think the elephant in the room here is local government finance… Any change like this needs to be part of a comprehensive package..
The Liberal Party adopted the taxation of land values as its policy in 1889. I am used to it taking a long time for Liberal policies to be adopted but 129 years, and counting, seems excessive. It has been vividly obvious for years that taxing land not buildings is a key component both in resolving the problem of the availablilty of land for housing and for providing substantial additional revenue to local authorities, but the party has singularly failed to promote this longstanding, popular and effective policy.
In reality there are no increases in house values, but only in land values – bricks and mortar do not increase in value. The increase in house prices goes way beyond general inflation and produces an unearned windfall for house owners. (I refrain from mentioning the corrupt vote winning gift of selling council houses at a huge discount with resale at a profit within a couple of years which provides a windfall basically to the next generation. 40% of the council houses sold are now privately rented.)
The party always seems determined not to push manifestly popular policies. The mantra on this, and other policies, should be, “Why vote for the parties that get it wrong when you can vote for the party thatgets it right?”
As Michael Meadowcroft says the party seems to be ‘frit’ on pushing popular policies which therefore do not attract votes. It is if they grandees wish to be ruled b ythe 2 other parties and doff the hat to them. Not a forward thinking thing to do to progress. Equally we seem to act at a snails pace and therefore loose the race to the other parties. When we agree to policies we should put a focus leaflet out NATIONALLY,rapidly, for the voters to comment on for us to see if we are on the right track.
Perhaps this is a policy that’s time has come.