Why we need a residential Landowners’ Levy

There are two motions for debate at Brighton that I particularly welcome, as founder member of ALTER and campaigner on Land Value Taxation (LVT) for 20+ years. There’s the one on Commercial Landowners Levy (F26), which is based on an excellent paper by four esteemed experts in our Party. Then there’s F34 “Promoting a Fairer Distribution of Wealth”.

Having read both motions, I was unhappy that F34 failed to match the combination of thorough research and analysis in F26 and also falls short on radical policy proposals to address the main cause of wealth inequality: the so-called Land Question. As a member of the last two tax working parties charged with preparing our policies on taxation, I had thought that our commitment to implement LVT on both commercial and residential property was settled.

In the most recent tax policy paper “Fairer Taxes”, approved by Conference in 2013, it was agreed that “we will … launch a consultation to determine how to implement LVT”. This was also in the 2015 manifesto.

The manifesto for the 2017 snap election did not include this commitment. However given the unavoidable lack of time in which to consult before publishing that manifesto and its inevitable focus on BREXIT-related policy, ALTER wasn’t concerned. 

When I queried with the author of the paper “Giving everyone a stake”, upon which F34 is based, “Why the retreat on LVT?”, one reason I was given was that “our most recent manifesto only mentioned LVT in relation to commercial property, not residential”. 

Policy is made by Conference, not Manifesto, isn’t it? 

Every other proposal in F34 is explained (in the paper) with a “Who would this impact?” – but not the property tax reforms. Yet in its sponsor’s (i.e. our Party Leader’s) own words, in the 2006 tax policy paper “Fairer Simpler Greener”, “property tax taxes the most important form of personal wealth” (3.2.2).

The value of land overall constitutes more than half the total assets of the UK: £5.4tr. Of this, £4.1tr is under homes, not offices or factories! Almost ¾ of domestic ‘property’ wealth is actually land values, not ‘bricks and mortar’: the latter depreciates over time; land values increase without owners lifting a finger.  If we aren’t tackling the cause of inequality in land ownership / wealth, we are failing in the most important area that the motion is dealing with – and failing in the supporting paper to admit that this impacts mostly on the young and asset-poor.

Moreover in 2007, when we committed to scrapping council tax and replacing it with a local income tax, we specifically dismissed adding higher bands to council tax as “a half-hearted reform” and agreed that “such a cautious approach is not justified”. What has changed, other than the fact land values have soared even more and resulted in even greater injustice?!

We have not reviewed local taxes since then. We should not be changing our policy on council tax without as thorough a consultation, research and analysis as has been carried out to develop our policy of replacing business rates. 

FPC has a full review of policies on Wealth Inequality scheduled for 2019, called “Fair Share for All”. So please support ALTER’s amendment to F34 which merely seeks to maintain existing policy until this review has been done.

* Dr Tony Vickers is Vice Chair of ALTER (Action on Land Taxation and Economic Reform) and Chair of West Berkshire & Newbury Liberal Democrats. His doctorate was in land value mapping and he was a researcher and lecturer on ‘green taxes’ at Kingston University School of Surveying and Planning for ten years until 2015.

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20 Comments

  • J.G.Harston 2nd Sep '18 - 11:10am

    If I have no income how do I pay the tax on the value of the land I own? Slice off the end of the kitchen and sell it? Strip out some of the piping and sell it? And then next year, how do I pay next year’s tax? I’ve already stipped out the piping and demolished the kitchen, what do I strip out next?

  • Lorenzo Cherin 2nd Sep '18 - 1:04pm

    The article does not explain policy in any way at all. Are we currently as a party committed to local income tax or LVT, it cannot be one or other , but wait, can it?????

    As the contributor herein says, what of the poor in a rural area with a little bit of land? Defer it, get in real trouble, lose the land, this is going to be difficult and the LVT proponents, like the immigration issue, Brexit, are relentless in their inability to consider not eveyone is as obsessed.

    I am more worried about police numbers, crime…..

  • Willam Fowler 2nd Sep '18 - 1:55pm

    Replacing council tax with an inheritance tax levy (with no exceptions for trusts or companies structured to avoid it) would be a vote winner. Or just add the council tax revenue on to the new land tax for commercial land, even more popular.

    On domestic property a beautiful house on a small plot will fetch much more than a grotty house on a large plot, two plots of the same size but one located next to pedestrian access lane will differ significantly in value… do you value a house on an elevated plot with steep stairs to access it the same as a similar sized plot on the level? Or plots the same size but one with no parking… or one next to a busy road????? By the time you have equipped the country with the huge bureaucracy needed to value the land you will have eaten up all the revenue it is going to generate.

    Is anyone aware that the serious rich buys farms so that they can pass it on without paying inheritance tax BTW?

    A sales tax on house sales, when the money is not rolled over into another property, would be a fair way to tax unearned wealth (although how much of it isn’t already taxed is a moot point because you have to take into account the total cost of the mortgage, renovation costs AND then divide that figure by 0.7 to represent the income tax and NI already paid on the salary received). Second homes and BLT are a different matter and should be taxed heavily enough to provoke sales, putting more property on the market.

  • Innocent Bystander 2nd Sep '18 - 2:38pm

    Personally I think LVT is being touted as a magic bullet which will unleash a cornucopia of benefits. It will be a horror show to calculate.
    It’s just a tax and the LibDems love taxes. It looks like it will hit businesses and houses in the south east very hard.
    But in fairness the points about the ability to pay are a bit spurious. Council Tax doesn’t recognise ability to pay now.

  • As Benjamin says above, any change to the tax system involves winners and losers. Since the intent is to reduce inequality, the expectation must be that the rich lose and the poor win.

    But you need cash flow to pay taxes if they are not being levied when an asset changed hands for money.

    The problem will be the segment of society that owns valuable land, but has a relatively low income. Some of these won’t look like the filthy rich that some love to hate, any many will be elderly. It will make for bad press when they get turfed out of their homes to pay their tax arrears.

  • Laurence Cox 2nd Sep '18 - 5:48pm

    Our opponents will be quick to brand LVT as a “London Values Tax” because it is the people who live in London and some expensive areas in the South-East who will be paying almost all of it. It is hardly surprising that it is members of our Party who live in country areas where land values are low who are pushing this. In 2015 London taxpayers were paying £34 billion more in taxes annually than was spent in London and people like Tony Vickers need to understand that if you cannot sell taxation changes to Londoners, you will never get them through Parliament.

  • Magnamundian 2nd Sep '18 - 9:57pm

    All this hand-wringing about elderly and poor people and how will they pay…

    They already pay council tax, for which LVT is a drop in replacement.

    Given the vast swathes of land currently untaxed (including so many empty properties, especially commercial properties) if LVT ends up higher than council tax you’ve set the rate too high.

    Meanwhile the country is slowly sold acre by acre to foreign investors who only care about making a profit as the land value goes up for zero investment by them.

  • William Fowler 3rd Sep '18 - 7:31am

    So it is a simple tax to administer except in the details of the actual land value… but there are going to be two elements to it, a national tax and a local tax (all collected by HMRC)… but the income poor may actually be better off if the difference between their tax allowance and income is negative:

    “Tax allowances (earned income and HA) would be transferable. Although the administration of earned income tax and LVT would be merged, the two taxes are separate. If the individual’s income is less than the HA, then LVT liablity will be reduced by the difference. However apart from this allowance, LVT is a ‘flat tax’, charged as fixed percentage of land value, quite unlike income tax. For such administration to work, LVT must be a national tax.”

  • Tony Harris 3rd Sep '18 - 10:07am

    In my view LVT represents an excellent opportunity to replacement business rates; a system which is clearly broken. However, it’s not clear whether the same applies for residential property. I would suggest that we see if we can get LVT implemented to replace business rates first and then look at residential if (and only if) it works effectively in the business rates context. If appropriate, the lessons learned from business can be applied to residential. In the interim I suggest we increase the number of council tax bands. The current system is severely broken and favours those with multi-million pound properties.

  • William Fowler 3rd Sep '18 - 10:45am

    An interesting modification to council tax would be to relate it to household income, so those below a certain threshold would avoid it and those with two people working and earning loadsa money would pay yet more. It too could be collected by HMRC rather than councils or a declaration of income (along with tax number so it could be checked) could be made to the council.

  • Laurence Cox 3rd Sep '18 - 12:33pm

    @Joseph Bourke

    I wouldn’t have much difficulty in using LVT as a replacement for Council Tax with rates set locally to raise the same amount as Council Tax; the particular problem with the latter is that it is half based on the value of houses and half based on the Poll Tax (which is why people living alone get a 25% discount). The problem I have with LVT is ALTER wanting to make it a national tax and that means that anyone living in London will be massively subsidising people living in the country.

    Tom Copley’s proposal in was specifically to tax undeveloped or underdeveloped land to encourage its development for housing. He wasn’t proposing a generic tax on housing. While there is a justification for taxing price rises in housing arising from infrastructure developments like Crossrail, where I live in London all of the infrastructure development was done in the 1930s when the estates were built (and the Underground Stations preceded the estates) so all those infrastructure costs were ‘baked in’ to the price I paid for the property.

  • Peter Hirst 3rd Sep '18 - 2:55pm

    I feel that to sell LVT to the electorate, we could start with the slightly less contentious area, i.e. non-residential land though I accept this could mean we don’t get the full sleight. I don’t know whether half the cake is better than none, regardless of whether the full cake is on offer.

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