Our brief address to the House of Commons

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On Friday, Caroline Lucas, Green Party MP for Brighton Pavilion, will have the opportunity to present the case for LVT in her Private Member’s Bill, which would “Require the Secretary of State to commission a programme of research into the merits of replacing the Council Tax and Non-domestic rates in England with an annual levy on the unimproved value of all land, including transitional arrangements; to report to Parliament within 12 months of completion of the research; and for connected purposes.”

She will have just a few minutes to present the case. What might one of us say, given the opportunity?

"I beg to move, That the Bill be now read a Second time.

"I would like to begin by thanking the Clerks for their assistance in drafting the Bill.

"This debate takes place against the background of the loss of Britain’s triple-A credit rating, which is itself a result of the failure of government policies to pull the country out of the recession which began in 2008. From a longer-term perspective, however, the performance of the UK economy since the end of World War 2 can be characterised as a 15 year period of reconstruction followed by a continuous succession of crises, punctuated by three short credit-fuelled land price booms, each of which ended catastrophically, in 1974, 1992 and 2008.

"The same period also saw the de-industrialisation of the northern half of the country and the development of an intractable problem of regional economic imbalance. This miserable history suggests that there is something fundamentally wrong with the policies that have been followed according to the broad political consensus. We should also note in passing that similar problems have to a greater or lesser extent affected countries as diverse as the US, Japan and Sweden.

"It would, however, be wrong to regard the present economic difficulties as a “world problem”. They have largely passed-by countries such as Hong Kong, Taiwan and Singapore, which have been able to achieve consistent long-term economic development. I would suggest that it is not a coincidence that these administrations have operated with low taxes on individuals and companies, and instead, derive much of their revenues from the rent of land. In doing so, they have prevented a major cause of the persistence of the present and previous slumps in the UK – which is that land prices and rents are sticky-downwards. The forest of TO LET boards in Britain’s high streets and industrial estates tells us that rents are not falling to market-clearing levels, as free-market theory would lead us to expect. However, by putting a cost on holding land vacant, a land value tax promotes the efficient functioning of the land market, which essential to a healthy economy.

"I would suggest that a major cause of the long-term problems with Britain's economy is the tax system, both negatively, in that it leads to a deadweight loss, variously estimated at between 12% and 30% of GDP (the lower end figure is bad enough), and positively, in that the absence of a direct tax on the annual rental value of land means that unproductive rent-seeking is better rewarded than genuine wealth creation. This has distorted the whole economy. I would also remind my colleagues of the growing difficulties with the tax system itself– ever-increasing complexity, collection and compliance costs, avoidance, and evasion. HMRC is now resorting to name-and-shame tactics in an effort to people to pay. We should note that a tax on the annual rental value of land...
  1. has no deadweight cost;
  2. cannot be avoided or evaded, as land cannot be hidden or removed to a tax haven, and;
  3. creates 'tax havens' precisely where they are most needed. This is because land values are lowest in areas of locational disadvantage which therefore stand to gain if LVT replaces existing taxes. We can expect the resulting financial incentive to be as least as effective as bureaucratic interventions.
"Finally, I draw the attention of my honourable colleagues to the wording of the Bill, which refers to the conducting of 'research needed to provide Parliament with a report on how a scheme of local taxation, based on land values, could serve as a replacement for Council Tax and the National Non-Domestic Rates in England.'

"The terms of reference here are necessarily wide. As a result of this research, it may be concluded that the taxes should be levied at a standard national rate and paid into a 'pot' to be distributed to local authorities, which they would be given a degree of discretion to spend as they wished. There are indeed good grounds for the view that no system of local taxation is viable due to the skew of resources and people; the same problems would arise regardless of whether taxes were levied locally on incomes, property, sales, development values, congestion or anything else one cares to think of.

This Bill provides the opportunity for the country to take the first step towards breaking out of a crippling and seemingly intractable economic situation in which there appear to be no options left. I commend it to the House."
 

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