What are the Liberal Democrats proposing?

Monday, 05 September 2011 12:33

The LibDems’ proposal for some sort of land value tax has attracted a little bit of coverage recently, but it is not clear exactly what is proposed. The root of the trouble seems to be that Liberal Democrats (and politicians generally) and press reporters and commentators have only a shallow understanding of LVT. It is not helpful that not all LVT supporters seem to have real depth of understanding either. The resultant lack of confidence results in hesitancy, insecurity, and the unwillingness to fight hard enough (or at all) against doctrinal perversions, compromises, concessions, and exemptions.

If advocates of LVT do not stand up for the policy, they betray mistrust in it, sow doubts about it, and make it harder to convince potential supporters that it is worth dedicating themselves to the fight too. Compromise is not something to be advocated or accepted lightly, but to be accepted only if forced upon one (and then only in the most compelling of circumstances). We hasten to add that this does not mean that one has to conduct oneself unpleasantly or aggressively in debate: one's tone should be measured, but the message should have nothing of the craven about it.

There are two routes to LVT. The obvious one (followed by Lloyd George and Snowden) is to introduce it nationally from the start. The other is the gradualist approach via local government. Personally I have come wholly to reject the latter. Of course we use opportunities raised by others (the Burt inquiry, the Lyons inquiry, Kate Barker's report which ended in the never-implemented planning gain supplement, and the Northern Ireland consultations) but we do not wish to put forward a case for a local LVT, given the mess that is local government finance.

This would be slow, tiresome, frustrating, and ultimately ill-fated. At best, it would leave LVT as a little local tax riddled with holes, and could simply end in its being cast aside as vested interest and incomprehension wear it away. There is nothing radical enough or financially rewarding enough in site value rating to stir the blood in Everyman and carry the LVT case forward from General Election to General Election, nothing to keep the denizens of the parliamentary benches focused and away from mischievous ventures in other directions.

Land Tax a misnomer

A land value tax is not to be described as just a land tax; it is a tax on land value. This, incidentally, was the fundamental flaw in the Lloyd George legislation - a sad betrayal of all the years of campaigning which had been for genuine LVT).

Neither is LVT is a tax on the person, but a rent to be paid in return for the exclusive use of a plot of land. Within the law, it does not matter how the land is used, how much capital is applied to it, or how many people work or live on the site. Society as a whole is entitled to the aggregate value of all land in the Kingdom. 

In fact, as we know, LVT is a mis-nomer, which we are prepared to accept at this juncture, even as we point out that what we want is in fact to collect (as nearly as is practicable) 100% of the annual rental value of the land. This is not taxation, but land-rent capture. LVT, in other words, is a national land-rent charge.

There are a few further points to be made. The ad hominem approach to LVT advocacy is not useful. Attacks on individual persons are distasteful, unfair, and misplaced. A reasonable observer would, I suspect, consider the Duke of Westminster, for instance, a good landlord and a very satisfactory manager of his properties. Even if this were not so, he is doing nothing illegal, nothing that the humblest suburban freeholder in Leafy Green is not doing, nothing that Parliament has forbidden him to do. In any case, the Westminster properties are held within a corporate structure. It is not His Grace whom we should target, but the institution of the private ownership of land which allows private appropriation of the rent of land. Land is not a people question! We must get away from thinking of the land-rent charge as a charge on the person!  

The most informative of the newspaper articles, in the "Daily Express", made some interesting points which are worth noting:

"Nick Clegg is...in favour of shifting the tax system to extract more from those benefiting from unearned income."

"The Lib Dems may seek a deal by proposing the extra revenues could be used to cut inheritance tax or raise the income tax threshold."

Vince Cable said "Government is going to look at this at some point because the traditional tax base is more and more difficult to apply. Income tax for high earners is becoming difficult to enforce. The traditional tax bases have been eroded and land tax is the one thing you can't take off to Monaco... There are modest changes you could introduce. You could replace business rates with a tax based on the value of the site; then, instead of council tax, you could have a property tax based on the underlying value of the land calculated on an annual basis". 

"Lib Dem supporters of the proposal suggest that land tax could be fixed at around 0.5 per cent of the capital value of the land... Householders which pay the lowest bands of council tax are likely to be exempt...Mr Cable said: 'There would be an allowance based on income - a homestead allowance'."

"Facing the Future, a document by Mr Clegg's aide, Norman Lamb and other senior Lib Dems, states: "We need to further develop our thinking, looking at wealth taxes, land taxes, green taxation, and localisation of revenue raising'.

The mansion tax gets a mention as does tinkering with VAT on home improvements and scrapping stamp duty for lower earners.

This reveals the confusion reigning within the senior hierarchy of the Liberal Democrats. It does, perhaps, reveal Dr Cable in a somewhat better light. It also shows what LVT campaigners are up against. With friends like these, what need have we of enemies?

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