Labour and the land


By D. J. Webb.

Note: the Libertarian Alliance does not endorse candidates or parties in the general election. This article is offered for discussion and should not be construed to constitute advice as to how to vote.

A brief note.

While immigration and multi-culturalism are my main issues at election time, the London attacks have just underlined that Theresa May has no intention of devising a proper response to terror. She wants more refugees to come in, refuses to deport the 23,000 known jihadis, and favours continued mass immigration.

I’ve decided not to give her my support. I’m toying with voting Labour for the first time in my life owing to their support for the libertarian land value tax.

UKIP might have got my vote, but Paul Nuttall has genuflected once too often before the multi-cultural altar. True, so has Labour, but the only reason to vote UKIP is as a protest, and if they don’t embody support for an English England, where is the protest?

A land value tax, or LVT, is not based on snooping round conservatories, but on the raw site location value. A empty plot next to a plot with a house on have the same LVT. It’s not about the building; it’s the site location. In London, a house can cost over £1m, but the rebuild value can be £150,000. To simply subtract the rebuild cost from the property value to get the land value is not exactly right, but I use this as an approximation and derive a land value of £850,000. Most of the value is simply because the land value in London is so high. I would impose a 1% tax on the site location value. In this example: 1% of £850,000 would be £8,500.

If Crossrail is built near the house (with public funds raised by taxes on income) and the property value rises to £2m then the LVT would be 1% of £1,850,000, i.e. £18,500 a year. The point is to capture the socially created rise in land values (a monopoly windfall created by public spending) for social use. J S Mill supported the LVT as the chief means of taxation. Taxes on land are much fairer than taxes on labour or capital: libertarians oppose taxes on labour and capital.

The LVT would crash property prices — that is its advantage — but would also restrain price increases. E.g. if Crossrail is built near the house causing the LVT to rise sharply, then maybe it would deter purchases, and the property value would rise only to £1,500,000, raising the LVT to £13,500. Or more likely, a proper LVT would halve property values all over the UK, so that the £1m house went down to £500,000 with an LVT of £3,500 a year, with the Crossrail project increasing the property value to £750,000, raising the LVT to £6,000.

Let no one pretend this is unfair. Freeholders benefit from the wealth effect of land appreciation that they have not contributed towards. They capitalise public spending in their property values. This has all sorts of ramifications: you can’t expect a senior civil servant to work for £100,000 because he would be unable to buy a house in London. NHS trust executives demand £700,000 a year for the same reason. Reduce property costs and the state will be able to reduce high-end civil service salaries commensurately.

Most of the cost of care homes for the elderly is also in the land value, in the form of rents paid by the care homes. We need to bring these rents down if we are to afford elderly residential care. Social policy has become too much of a one-way ticket to wealth for freeholders. England is crying out for an LVT.

As I said before, subtracting the rebuild price from the property value ignores many factors. In the north there are many older terraced houses that would certainly cost more to rebuild than the current property value. This partly reflects the fact that the houses are 100+ years old. You can find houses for £30,000 or less in the north, but they are decrepit old houses, and I doubt you could rebuild them for £30,000. This suggests their LVT would be zero. But a more exact way of working it out would be a cadastral land value approach. Ignore the building entirely and work out what a bare plot that size would cost in that area. Council surveyors would not need to visit each plot: every house down the street would be assumed to have the same land value per square foot of empty land and all they would need to know is the size of the plot. To make things even simpler, you could assume the same land value in each borough as an average.

E.g. Southwark in London could work out average land values per square foot of undeveloped bare land and apply that to all properties in the borough without trying to work out differential values per street. Huddersfield could work out its own average land value per square foot. So could Reading, etc. It would make it very simple to calculate the LVT — no appeals would be accepted. In every borough the average land value per square foot of empty plot (with planning permission) would be worked out every year, and the LVT adjusted accordingly.

In the town I live in a 500,000 sq ft plot of land with outline planning permission for 130 homes has gone up for sale, with a guide price of £2m. This equates to £15,385 per home. Of course there are homes of varying sizes planned there, but my LVT proposal would give them an annual LVT (to replace council tax, inheritance tax and stamp duty) averaging £154 a year (probably well under £100 for terraced homes and around £300 a year for detached homes). If the £1m plot for sale in North Hinksey village outside Oxford with planning permission for three large detached houses fetches the asking price the land value would be £333,333 per home, with an LVT of £3,333 a year.

Note that I stated the LVT replaces the council tax. Council tax is chargeable – gasp! – to tenants, who don’t benefit one iota from the socially created uplift in land values. It is the landlords who would be responsible for the LVT. The LVT replaces inheritance tax – no one should pay inheritance tax on income or investments (labour and capital). Buying a house is not an investment. Just holding an empty plot empty is not an investment. The LVT replaces stamp duty – stamp duty deters transactions, but the LVT encourages transactions by deterring wasteful use of prime land. Those living in London on £2m plots who can’t afford £18,500 LVT a year can’t afford to live there, full stop. We should stop subsidising the land scroungers. I would call the LVT the Alfa payment: the anti-land fraud assessment payment.

Labour’s own proposals are not well thought-out. They propose a tax of 3% of the value of the land, and propose to work that out by assuming that the value of the land accounts for 55% of a home’s value. Clearly this ignores the fact that buildings of varying value exist, and you can’t assume that 55% of a home’s value is in the land. In northern towns like mine, where I showed above a terraced house would have a land value of under £10,000, this means of calculating the LVT would see terraced houses of £40,000-50,000 charged an LVT on a fake figure well above the real land value. In London the land value would account for much more than 55% of the property value. Maybe Corbyn doesn’t want to be faced with a large bill for any London properties he owns. Labour’s proposal equates to a tax of 1.65% of property value regardless of the land value. I would urge them to forget snooping round conservatories and concentrate on the land only: the building value is the result of personal investment, the land value isn’t. Nevertheless, to the extent that they would crash the housing market, Labour’s proposals have to be welcomed.

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10 comments

  • “……but the only reason to vote UKIP is as a protest,……”
    I would disagree. Then only reason to vote for any political party is because you support their policies. Your philosophy perpetuates the rule of the two-party system. They are safe and they know it.

    • Self fulfilling prophecy

    • You are correct, Hugo, no-one who claims to care about the future of this country should support any of the Lib-Lab-Con. We are where we are precisely because of them – all of them. I watched the BBC election debate the other night, and Paul Nuttall was the only one there to talk of Islamic extremism.The reaction of the other politicians, not to mention the usual carefully-selected BBC audience, should have informed anyone with their eyes and ears open just how we’ve got to our current state. This was particularly true of the pair of idiots from Plaid Cymru and the SNP, and just what they were doing there anyway I can’t quite work out. Can I vote for either party in England next Thursday? I think not, so what were they doing on a national General Election platform? Vote UKIP, I say, their work is far from finished on getting us out of the clutches of the EU.

      • Actually there is a case for voting Labour on the basis that it is very likely they will make things worse, and that being the case, why not give them the rope they need to hang themselves?

        • They’d more likely hang us in the process. Blair and Brown had plenty of rope, 13 years of it, made things much worse, and now they seem to be doing rather better than the rest of us.

          • On the other hand, would nationalism and other conservative and reactionary philosophies (including the sort of libertarianism prevalent on this forum) have gained the same impetus without a lengthy spell of Labour government? I doubt it. I think one of the strategic mistakes the liberal-left have made is to pursue their objectives in an accelerated way. The Blair government went too far with immigration, for instance, and the result was electoral success for the BNP: the first-ever politically-successful nationalist political party in Britain.

  • An LVT sounds like a good idea to me, but here I’ll play Devil’s advocate. There are a couple of points that do make me nervous about it. By advocating an LVT, you really are putting your money where you mouth is. We are talking here about people’s homes, to which they often become emotionally attached, and people need a roof over their heads. The practical problem with an LVT is that the tax does not waiver even if the taxpayer is not earning any income. This means in practice that a taxpayer might lose their home or have a mortgage placed on their property in order to meet their tax debt. Or, best case scenario, the tax authority might agree to place a lien on the relevant property and defer payment. These measures seem harsh to me and could put people in a precarious position. I think a libertarian society should be concerned with helping people preserve their land, not creating a society of insecure debtors and tenants.

    The author is basing some of his argument on the idea that an LVT would remedy the housing market by bringing down prices drastically. This appears to be in a belief that house prices are linked to income, which seems intuitively correct, but we could argue that house prices are also linked to credit availability and mortgage providers might come up with solutions to capitalise LVT payments over a term of years, giving the homeowner additional security. That might obviate the planned beneficial impact on prices.

    Also, even if some householders found themselves priced out of the more expensive property markets due to an excessive LVT assessment, this might not remedy the problem of house price speculation. Those priced out might gentrify the cheaper LVT areas, pushing up prices in those to a level that is tolerable for the movers but not for locals on lower-incomes; meanwhile, those who can afford it might still be willing to pay high prices for attractive property, regardless of the tax imposition (not least taking into account the savings that will be made due to the abolition of the taxes that LVT replaces).

  • “May is too sane and pro-freedom on immigration, I may vote Labour” is certainly a novel approach. I’d have expected libertarians to instead oppose her for her grandstanding on the attacks as a reason for increased Internet censorship.

  • Knappster, opposition to immigration is the only important policy in fact. The Muslim community in Britain is 5% of the whole, but at least 50% were born abroad and the age profile is much younger than the average. We desperately need an outflow of Muslims, and one in the millions. This is the only important thing. This is the real divide. I’ve now decided to sit out the election once again, as I normally do.

    • I just heard on the news that they are erecting ‘concrete and steel’ barriers on London Bridge and Westminster Bridge to prevent cars mounting the pavement in the future. One has to wonder at the mentality of those whose responsibility it is to deal with this terror threat. I suppose they think that if they are seen to be ‘doing something’, we will all be placated and reassured. Idiots.
      It occurs to me that there may be something in the mentality of the Muslim terrorists akin to those inadequates who phone the fire brigade with false alarms. It gives them a sense of power. By the mere act of driving a car onto the pavement, they can make make themselves famous and cause the entire government to run around like headless chickens.
      If I were a terrorist looking for my next target, what better than the queues of people lining up to vote on Thursday?
      Surely it’s time to bring back internment of suspects? A ‘three-sided prison’ if you like; they will be free to leave the country, but if they choose to stay, it must be under lock and key, and preferably fed on pork sausages, so no Paradise or 72 virgins for them.
      Or revoke the driving licences of Muslims perhaps? If they don’t like it, let them demonstrate that they are on our side, not that of the Jihadis. If ninety nine out of every hundred Muslims are wonderful peace-loving people, that still leaves 25,000 in our midst who are not.
      Time to stop laying teddy bears and balloons in the streets and start fighting back.

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