Willie Rennie calls for Land Value Tax “to shape society and economy in fair and just way”

It was the Greens’ opposition day debate in the Scottish Parliament. They chose to hold it on local government finance.

It was a worthy subject, but they were a little muted. Their Andy Wightman made a speech which pretty much said “The Council Tax is bad. Let’s replace it with something.”

Don’t get me wrong, this was fine as far as it went. It was certainly a million miles better than the Tories and SNP who voted together to keep the Council Tax that the latter had once railed against.

If you are one of those liberals whose hearts beat a little faster at the mention of Land Value Taxation, you might want to sit down and have some smelling salts handy. Scottish Liberal Democrat leader Willie Rennie espoused that old liberal idea from the dawn of time, saying that it would change the way our society and economy works in a fair and just way. Here’s his speech in full:

We have heard from Murdo Fraser and James Kelly that the SNP has been on a journey with the council tax. There was a time when it would take every opportunity to condemn it. Alex Salmond called it unfair and insisted that he would scrap it, but he did not. Nicola Sturgeon said—quite strongly—that she “hated” it. She went on to criticise any suggestion that it should be tinkered with, but then she did that.

Now SNP members seem to be the staunchest defenders of the council tax. When they secured the support of the Greens and the Labour Party for their arbitrary increases to the council tax, I argued that those would not be the first steps towards further reforms but the last steps. We have heard from the minister this afternoon that we will have to get a consensus across the Parliament from the other parties before he will even consider taking our proposals forward. Rather than being with us on developing a consensus, he is going to be a bystander, and his long-grass amendment confirms that.

I commend the Greens for trying again after they were convinced to back the Government last time. Andy Wightman used to make the case that the Government’s previous set of council tax changes violated international law, which was not an argument that I heard him make this afternoon. He cited article 4, article 9 and article 9(3) of the European Charter of Local Self-Government, and he made a convincing case that the Government’s council tax proposals were illegal, before he voted for those same proposals. I wish the Greens well in changing the Government’s mind this time. They seem to be pretty determined not to vote for the budget unless there are changes, and we will be with them on that. We favour the ending of the council tax, as it is unfair.

A land value tax is our alternative, as it would levy a charge based on the real economic value of the land, rather than just on the property on that land. It would be reflective of how well that land was serviced and what value it could deliver for the benefit of wider society. There is a strong set of lobbyists and enthusiasts who believe that a land value tax could be the best way not just of raising the revenue but of shaping the way our society and economy works in a fair and just way.

If we are to deliver change, it must be change that enhances local democracy. I was disappointed with the minister’s earlier comments in favour of capping, because that undermines local democracy. The new local government tax must be a truly local tax that is set locally. That means leaving it to local authorities to set the rate that is right for them, and it must be a step towards allowing councils to raise the majority of the money that we spend. That is our proposal as we enter into this debate in a genuine and optimistic way.

* Caron Lindsay is Editor of Liberal Democrat Voice and blogs at Caron's Musings

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  • Scotland, as it has done so since the days of Adam Smith, is leading the way once again in new thinking.
    The Scottish Liberal Democrat 2016 manifesto, titled ‘Be the best again’ focuses on the relative decline of Scottish public institutions such as education and policing. The manifesto urges a return of focus to these policy areas, especially education and tax policy, and away from constitutional issues such as independence.
    The Liberal Democrats (in common with the Scottish Greens) supporting a land value tax. The party wants the charge, which would tax land value, to replace council tax.
    Andy Wightman MSP has long been an advocate of Land Value Tax. In his blog http://www.andywightman.com/ he notes “It is an odd state of affairs that it is easier to find out the ownership of land in 1915 than it is in 2018. The Finance Act of 1910 (Lloyd George’s famous People’s Budget”) proposed an increment levy on the increase in value of land. To establish a base-line of values, surveyors mapped out in intricate detail, the ownership, occupation, value and use of virtually all of Great Britain and Ireland, covering 99.7% of the land area of Scotland.”
    ALTER https://libdemsalter.org.uk/en/ will be running a stand at the Scottish conference next month. Members going to Aviemore can meet Tom Inglis there and get briefings on how land value tax can, as Wilie Rennie says, “shape society and the
    economy in a fair way.”
    Despite the Prime Ministers jibe at Jeremy Corbyn on last week’s PM questions, there is a lot of work being done behind the scenes by all the main parties and think tanks on these issues.
    The IPPR has done detailed work on the issue of council tax reform https://www.thesun.co.uk/money/5872457/council-tax-costs-the-poorest-families-six-times-more-than-the-rich/ as has the resolution foundation. With council tax about to increase by 6% next month, the Party needs to be on the front foot on this issue.

  • Interestingly I know of a few people in Scottish LDs who are amongst the most vocal against LVT because of its potential impact on communities that have borrowed to take over land through the community land ownership schemes. And that, as a result, the SLD leadership has been more vocal in repeating the LIT policy until recently? So this is good news, but the implication from the article is that Andy Wightman was not proposing an alternatives, rather just complaining about the current system and we were coming up with a novel alternative, when Andy’s very reason for wanting to be an MSP in the first place was to promote LVT, his first love 🙂

  • It’s difficult to know where the Liberal Democrats stand on local government finance and Council tax. In the 1997, 2001 and 2005 General Elections the policy was to support a local income tax – although I remember Charlie K. getting into a confuse trying to explain it after wee Donald had allegedly kept him awake all night. Then in August 2008, The Guardian reported,

    “Liberal Democrats are planning to soften their support for a local income tax to replace the council tax, a key policy for at least three elections. Instead they are expected to propose reforms to adapt the council tax. Vince Cable, the Liberal Democrat treasury spokesman, is backing the shift in stance. He believes the party should not look to introduce, or press any coalition partners to introduce, a local income tax for at least one parliament.”

    I’m glad Joe has paid tribute to Andy Wightman instead of (by implication) belittling him. Andy is an extremely capable politician with an impeccable academic background. He established a cross party group (including Catriona Bhatia) to enquire into local government finance in 2015. He also wrote what I consider to be a masterpiece in an analysis of the Highland Clearances : ‘The Poor Had No Lawyers : Who Owns Scotland and How They Got it’.

    Lib Dems have no monopoly of wisdom and we would do well to cooperate with the Greens in Holyrood.

  • William Fowler 29th Mar '18 - 11:27am

    Any tax not based on personal income or company revenue is going to be unfair, if you want to get at wealth an inheritance tax levy and sales tax on property/land/leases would surely do it.

    Council tax makes up a small part of the council’s income and if you are going to replace govn money with local taxes then does this mean a massive increase in taxes for the home owner or is all the burden going to be on companies with business rates replaced by LDV. Neither of which will have a very nice outcome.

    As Liberals, who believe in freedom of the individual, surely putting a huge burden on home owners, making them slave away at work forever or go on benefits to avoid it, would not produce much liberty?

    Local income tax is already available in Wales and Scotland in the sense that they can tweak the rates, probably more to comes as devolution progresses.

  • Caron Lindsay Caron Lindsay 29th Mar '18 - 12:22pm

    @jock coats Andy Wightman may well support LVT, but the Greens didn’t push it yesterday in the debate.

  • @William Fowler

    A land value tax is pretty much the perfect tax – it doesn’t create market distortion and by nature it’s a progressive tax as the wealthiest of society own a lot of land. It’s the best of all wealth taxes and considering I’m a bit of a georgist, I would like to have this tax eventually replace the majority of labour and capital taxes (scrap personal/corporate income taxes in favour of a higher LVT) but the best way to ease it into the tax system is to replace council tax and business rates with it.

    Have a look at this chart which shows the gigantic gap in property wealth between the bottom 10% and the top 10%:

    And then have a look at this chart which shows the gigantic gap in property wealth within the top 10% itself:

    A flat land value tax is still more progressive than a progressive income tax.

  • “the Greens didn’t push it in yesterday’s debate “. I’m afraid that misses the point . That’s not what it was about.

    What the Greens did was absolutely sensible. Mike Rumbles got it, “Does Patrick Harvie agree that if the Scottish Government were to set a date years in advance for the abolition of the council tax, that would concentrate minds and we would achieve something?”

    Patrick Harvey : “Absolutely. We seek an implementation group—if the Government wants to call it something else, that is fine—that needs to crack on with the job and make progress. That would begin the prospect of legislation in this parliamentary term. We have suggested a five-year transition period to any new system, so we are talking about a long-term argument. However, progress will not be made on a long-term argument unless the first steps are taken”.

    ‘My gang right or wrong’, doesn’t butter many parsnips for small minority parties.

  • William Fowler 29th Mar '18 - 2:25pm

    “Have a look at this chart which shows the gigantic gap in property wealth between the bottom 10% and the top 10%:”

    But what about all the people in the middle? Fair enough if you want to give me a rebate for all the income tax and NI that I have paid on the money used to buy my house and then tax me on some assumption of wealth. Actually, just had a thought if you want to get really fair why not have a variable income tax rate based on family assumed land wealth so council house tenants would pay say 5 percent and multiple property owners would pay 60 percent? You would make some accountants seriously rich finding ways around that one.

  • @William – I’d love to have the tax back on all the rent I’ve paid over the years and still ended up with nothing but *rising* costs as land monopoly makes for those who paid all their rent to the banksters up front. Do you think the latter should be able to eat their cake and have it, while the former end up just paying more for their cake as a result?

    @Tony – Interesting. I’d come up with an idea that a national rent collection should be distributed as a CD equally and then elected bodies at other levels precept into that CD. Putting the people really in control of what their local authorities get to spend 🙂

  • @William Fowler

    The problem with council tax is that it’s a property tax and all property taxes are inferior to land taxes. A property tax discourages people from upgrading their property as if they do that their taxes will increase. A land value tax is a tax on the unimproved value of the land, and that means it would tax the land value of a property as if there’d be no property on that piece of land at all. This allows people to upgrade their property without worrying about their land value tax going up.

    Another benefit of an LVT is that it ends speculative land holding (this is a major issue and has a big impact on properties being built) if the LVT is high enough – in most countries it isn’t. People sit on empty pieces of land until the value of the land goes high enough to make it worthwhile to sell and an LVT would stop this as for all that time they’d be sitting and doing nothing with that land, they’ll be continuously taxed on it, forcing them to sell as quickly as possible or to turn that bit of land into productive land.

  • John Marriott 29th Mar '18 - 4:51pm

    LVT v LIT v CT? How about a bit of all three? And while we’re at it, what about a bit of UBR (Uniform Business Rates?) as well?

  • Laurence Cox 29th Mar '18 - 5:38pm

    @Tony Vickers
    If you make LVT a nationally set tax rather than a locally set tax, then LVT will come to stand for London Values Tax and our opponents will slaughter us for it. Do you remember the “Death Tax” when Labour came up with their proposal to tax estates to pay for personal care, or the “Dementia Tax” when the Tories came up with similar proposals? LVT can work in a local area where there isn’t too much variation in land prices per acre, but in my opinion it would be easier just to add a few more bands to Council Tax and make the amounts paid per band proportional or progressive rather than regressive as they are now.

    There are, currently, 73 Parliamentary constituencies in London and no Party has ever won a majority without winning a significant proportion of them.

    You don’t pay extra Council Tax if you improve your property. See https://www.gov.uk/guidance/council-tax-band-changes You are thinking of the old Rates.

  • John Marriott,

    Duncan Brack in his recent Federal Policy Commttee report writes:
    “He [Vince Cable] updated us on three separate pieces of work under way on aspects of tax policy: on business tax, on the prospects for land value tax, and on options for a wealth tax. He hopes to be able to publish short ‘spokesperson’s papers’ on all of these and submit motions on them to the Brighton conference, though that depends on sufficient progress being made before the motions deadline in late June. We discussed how the proposal for a wealth tax could form part of a wider set of proposals on issues of income and wealth inequality, and/or whether its revenue should be hypothecated to funding something like education and training.”
    We can expect to see consultation/motion papers forthcoming this Autumn on Site value rating for business rates, corporation tax and potentially wealth taxation as well as cross-party reports on Land Value Capture with a focus on local government finance and housing development.

  • Laurence,

    the IPPR report on council tax reform is focused on London https://www.ippr.org/research/publications/a-poor-tax-council-tax-in-london
    They write:

    “Council tax is considered by many to be in the ‘too difficult to touch’ box when it comes to reform. Haunted by memories of the community charge, better known as the poll tax, which is widely perceived to have contributed to the fall of Margaret Thatcher, the majority of national politicians daren’t even speak of reform, let alone propose any change, for fear of the political consequences.

    But leaving council tax unreformed is becoming ever more unsustainable. Local authorities across the country are increasingly cash strapped as a consequence of government cuts to their core grant funding and limits on their ability to raise funds through council tax and other sources. Moreover, the direction of public policy is towards greater devolution and allowing local politicians, accountable to their local electorates, to have a greater say – not just about what services should be prioritised, but how the funds for them should be raised.

    Perhaps most significantly, however, is just how unfair the current system has become. Our research, focused on London, but with wider relevance for the whole system across England, demonstrates how council tax has become increasingly regressive with regard to property values – the cheaper your property, the more you are likely to pay as a proportion of your property value.”

  • Shelter in research conducted with the Centre for Progressive Policy has come out strongly in favour of Land reform to tackle the housing crisis arguing that councils must gain right to buy land cheaply for affordable homes https://www.ft.com/content/a3c94308-80dd-11e7-94e2-c5b903247afd

    The research estimates that “£87bn could be ploughed into housebuilding and other infrastructure by local authorities during this parliament if they could take full advantage of land value capture. This sum could be enough to ensure that Britain deals with its housing shortfall, but it is contingent on reform of a little known piece of legislation passed more than 50 years ago. Currently, when local authorities buy land — for example for regeneration projects — they must pay prices that take into account potential planning permissions and infrastructure developments, rather than just the value of the land at its current use. This means councils therefore usually pay inflated prices. The 1961 Land Compensation Act should be amended to enable local authorities to buy land at current use value, according to the Centre for Progressive Capitalism and the Adam Smith Institute. This would put councils in a position of being able to subsequently grant planning permission for housing on the purchased land, and then sell it on at higher prices. They could also enter into joint ventures with developers to build housing on the land, and then sell the homes. Either way, the local authorities could reap the benefit of the uplift to land prices, and use this to fund affordable housing.”

  • Any change of tax system would involve a tricky period of transition, but surely one of the benefits of LVT is that it would help to stabilise the land and property market?

    IMO, to make the introduction of LVT workable across wider areas with wide differences in land value, then instead of saying that person A with land in London worth £500k pays five times the amount of person B with land in Yorkshire worth £100k. You’d have the person in Yorkshire with land worth £100k paying five times the amount of the other person in Yorkshire with land worth £20k, while the person in London with land worth £500k paying twice as much as the other person in London with land worth £250k. Except you’d probably need to do that comparison for each Local Authority area.

    Ways and means of mitigating the fall-out from sudden changes in tax paid need to be considered, and whether that means during the transition period council’s get 10% of their income from LVT in year one, 20% in year two, and so on, or there are specific rebates given to those in particular circumstances, it is doable, and will give the housing/land market time to adjust.

  • Fiona,

    I think most people that have studied the issue of LVT implementation would concur with your assessment.

    Martin Adams in Land: A new paradigm for a thriving world makes some salient points:
    “One of the main reasons our current economic system doesn’t work for everyone is because the revenue flow from the commons—which include all gifts of nature—has been privatized…This privatization of the revenue flow from nature is one of the root causes of economic recessions, ecological destruction, as well as social and cultural decline.

    All of nature is community wealth, including—and especially—land. People give value to land through the goods and services they provide to their communities. For example, because people offer more goods and services in the city than in the countryside, urban land tends to be much more expensive than rural land. As communities become more attractive to live in, some property owners—but mostly the financial institutions that finance them—then extract this value by making money from real estate (buildings, like cars, decrease in value over time, but land increases in value the more prosperous a community becomes), and this extraction is one of the root causes of wealth inequality, ecological destruction, and even economic recessions.

    … whenever people use land, they need to reimburse their local communities for their exclusive use of it…In most nations around the world, the value of land has already been privatized: If communities were to suddenly impose land contributions upon existing property owners, property owners would end up having to pay twice for their ownership of land—first to the previous landowner (from whom they bought land), and a second time to their local communities.

    In order to transition from a land ownership model to a land stewardship model, therefore, local governments and community land trusts would either have to financially compensate existing property owners for the land value portion of the properties in question or offer a transition plan that would allow new property owners to acquire exclusive use of the land without obtaining ownership of the land itself. “

  • Laurence Cox 30th Mar '18 - 1:54pm

    The big problem is that in some parts of London (Westminster, for example) so many of the properties are in Band H that the Council Tax is essentially a Poll Tax. The other issue with Council Tax in general is that because it was a replacement for the Poll Tax, it retains certain features of it. The 25% reduction for a single person living in a house comes from the Council Tax being notionally 50% a flat tax and 50% a tax based on house value.

    To reform Council Tax we must eliminate the flat tax aspect of it and, like Fiona, I can see that we would need transition measures to ensure that no-one’s bill rose too rapidly. More seriously, I think that any method of funding local government must move towards it raising most of its money locally in the majority of areas, with government subsidies being concentrated on the poorest areas rather than the present system where most of a council’s money comes from the government. Only in this way can we begin to restore democratic accountability to local government.

  • Laurence,

    you cite Westminster as an example. It is important to look at the facts.

    In January 2018, the End Child Poverty coalition published figures which reveal that:
    Westminster is 6th in the top 25 local authorities with highest levels of child poverty across the UK with 41.29% of children in poverty in 2017 (after housing costs)
    Westminster North is 15th in the 25 parliamentary constituencies with highest levels of child poverty across the UK with 44.41% of children in poverty in 2017 (after housing costs)
    The inequality between wards in Westminster in striking
    • 14% of Westminster neighbourhoods are in severe deprivation which is defined as being in the top 10% of deprived neighbourhoods in the country.
    • 52% of all out of work benefit claimants in Westminster live in the most deprived 25% of areas compared to less than 5% of residents in the best 25%. Westminster is the second most polarised borough in London in terms of out of work benefits claimants, second only to Chelsea and Kensington.
    • 30% of housing in Westminster is overcrowded as defined by the government, which is the third highest in the country,.
    • 80% of Westminster’s neighbourhoods are in the worst 10% for housing in England.
    • 25% of all rough sleepers in England are in Westminster.

    Council tax is a highly regressive levy. Reform of the tax should be focused on alleviating the burden on those least able to bear it. The majority of local government finance for most local authorities is coming from business rate equalisation grants and council tax. In Richmond upon Thames council tax provides 76% of the council budget. In Westminster it is just 25%.

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