GLA put Land Value Tax on the political agenda with Old Oak in the spotlight

The greatest challenge facing the next Mayor will be achieving a step change in the level of house building in London. Last year we built fewer than half the number of homes the Mayor’s own estimate says is needed to solve the housing crisis over 20 years. Clearly, new and bold thinking is required. 

This report seeks to offer the next Mayor a potential solution, by examining the argument for and against introducing a Land Value Tax in London. Land Value Taxation provides incentives for bringing land into more productive use, and discourages keeping land empty or derelict. Thus, it would have serious potential to bring more land forward for development, including for
housing. There are examples from cities around the world that have brought in Land Value Taxation that suggest this would indeed happen. 

Our conclusion is that the next Mayor should fund an economic feasibility study and, subject to a positive conclusion, request the powers from the Government to trial a Land Value Tax in part of the city. 

The potential of introducing Land Value Taxation in this country has been discussed for more than a century, and has supporters from across the political spectrum. Economists like the fact that it is highly efficient, with minimal distorting effects on the market. Of course, we recognise that making such a radical change to how we tax land and property would not be without difficulty. 

This report looks at both sides of the argument, and offers the next Mayor a clear course of action to pursue.

  Proponents of LVT argue that by replacing council tax and business rates with LVT, not only would the public sector secure returns on its investment in infrastructure, the average tax payer would actually pay less. The tax base would be broader and owners of vacant or underused property would pay more than under the current system.

A single-issue non-party/all-party organisation based in the UK, we propose that the rental value of land should be collected and used as the principal source of public revenue, as a replacement for present taxes on wages, profits, goods and services. This policy is a prerequisite if chronic economic problems are to be eliminated.

How? Nearly every country in the world is affected by poverty and unemployment; widening divisions between rich and poor; boom-slump cycles; housing shortages; inadequate infrastructure; and damage to the environment. These economic ills persist, seemingly intractably, despite unprecedented developments in science and technology. All of them are ultimately related to the different economic behaviour of 'land' in contrast to man-made consumer and capital goods, whose supply can be, and normally is, varied and transported in response to demand.

Land is otherwise. No more can be made: each plot of land is unique and immovable. Its total supply is fixed. Consequently, the market in land behaves differently from the market in products. Land value comes from the natural and man-made advantages of location, which derive from the presence and activities of the community as a whole.

It follows that the value of land, its rent, is peculiarly suitable as the basic source of public revenue. This is not really taxation, but payment for the right to occupy land and enjoy the benefits of occupation; however, the policy is usually known as "Land Value Taxation" It operates as an annual charge on the rental value of land, assuming that each site was in its optimum permitted use. Since the idea cuts across all political divisions, the Campaign has no party political affiliations.