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The LVTC blog, by Henry Law

The comments in the LVTC Blog are a personal view of our Hon. Secretary Henry Law and do not necessarily reflect the official policy of the Campaign.

This is a place for personal observations and comments on politics, economics, current affairs, on-going discussions on the potential for LVT to remedy some of the current ills, and the impact on Society of any of the above. 

Please read and enjoy, and feel free to respond to Henry if you have any thing you would like to add.


UK property tax pickle

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Between them, Chancellor George Osborne and Local Government minister Eric Pickles, have missed the opportunity to reform Britain’s property tax and made a mess of things instead. We reported previously that the government had decided to defer the UBR revaluation for two years, until 2017. The FT now reports that

Colliers International, the property agency – which has described the decision as a ‘scandal’ – has launched an e-petition on the Downing Street website calling for the 2015 revaluation to go ahead as planned.

“The firm’s own research suggests that rents have fallen steeply in many parts of the country since the last valuation in 2008, meaning that tenants are locked into overly high rates. The falls include 26 per cent in the Northeast, 20 per cent in the East Midlands, 21 per cent in Merseyside and 23 per cent in Yorkshire.

“By contrast rents in London’s West End have risen 26 per cent in the same period, meaning that shops in the most expensive part of the country will benefit from the delay in the revaluation.


The Chancellor, in the meantime, has decided against either a review of Council Tax bands or to go ahead with the LibDems proposal for a “Mansion Tax”. We would not argue with that. Cable’s proposal for the Mansion Tax was never a good idea and it was easily shot down on the grounds of practicality alone. It is unfortunate that the LibDems muddied the waters with the suggestion in the first place. Waters have been further muddied by the misrepresentation of land value tax as a wealth tax, which it absolutely is not.

As to the fairness or otherwise of delaying the UBR revaluation, the report of a 26% rise in rents in London’s West End gives the game away. The beneficiaries of delay are not the shops who rent the properties but their landlords. On the same line of reasoning, those who are losing out from a revaluation are not, on the whole, the shopkeepers, but the owners of provincial properties; either way, the effects of a change in property tax do not last beyond the first (upwards only) rent review.

Thus a revaluation would change the relative values to bring them in line with changes since the last one. But it makes little difference to most businesses, especially small ones. If rates are held down, they will be hit with a bigger rent rise when trading conditions pick up. Landlords win regardless, since theirs is an each-way bet. If the government was concerned about small businesses, they would have outlawed the onerous, unfair, and ubiquitous "upwards only" rent revision clause.

However, having deferred the UBR revaluation for two years, the way is now open for a comprehensive reform of Britain's property taxes, replacing them all with a national tax on land values. This would broaden the tax base by raising revenue from properties – vacant and poorly developed sites - which currently make little or no contribution. If most people paid about the same as now, the additional revenue raised would help to pay off government debt and then pave the way for substantial cuts in taxes on wealth creation. But does not seem as if it is not going to happen. If the Conservatives were really the party of business, a Conservative Chancellor to be giving top priority to cutting taxes on wealth and its creation.

Humbug

The behaviour of this one reveals humbug behind their rhetoric. But we seem to be in the Age of Humbug. It is humbug all the way across the board - I referred last week to the humbug that lies behind protestations about tax avoidance by people who refuse to talk about the one tax reform that would stop it dead in its tracks.
 

MPs grill tax avoidance rogues

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Representatives from the big trans-national tax avoiders - Google, Amazon and Starbucks, had a grilling by MPs yesterday. But the rogues missed a trick. These companies' obligations to the British government begin and end with the value of the infrastructure that they enjoy in the UK. That's it. This is fully reflected in the land value element of the rents they pay on the properties they occupy, plus the UBR the companies themselves actually pay. I doubt if they own much, if any, property in the UK, so we are talking about town centre shops, sheds on fringe industrial estates and perhaps little offices in a posh address in SW1, rented from investment companies and the odd duke. If the UK government wants the money to which it is rightfully due, it should collect it from the companies' landlords through a tax on the rental value of land. It is a pity that the company lackeys did not point this out very firmly.

When confronted by MPs with the charge that the tax avoidance was immoral but not illegal, they should have retorted that the British tax system, like most others, is based on the systematic theft of private property, combined with a failure to collect a value which is created and sustained by public action, largely at the expense of taxpayers, and to which the government has a perfectly legitimate claim. That really is immoral.

Next for the MPs' grilling should be Chancellor George Osborne and his predecessors, and Treasury civil servants. They should be asked why they have not put a robust tax system in place, one based on sound moral principles. Caroline Lucas could usefully take the opportunity to point this out to her colleagues, over coffee, between now and the time her LVT bill comes up for discussion early next year.

There is a verbatim report of the farcical exchange here in the FT.
 

Crossrail bonanza for landowners

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Crossrail could help create £5.5 billion in added value to residential and commercial real estate along its route between 2012 and 2021 according to new research for Crossrail by GVA, the UK’s largest independent commercial property consultant.

According to the Crossrail web site, "The report illustrates how Crossrail will have a marked impact on a number of central London and suburban locations along and around the Crossrail route where the new railway will help stimulate investment in commercial activities, retail and housing. The report findings unveil which areas these are, and what the scale of those changes is likely to be."
Read more...
 

Murphy misses point yet again

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Anti-tax avoidance campaigner Richard Murphy has got the American coffee chain Starbucks in his sights this time. But as usual he does not tell the whole story and nor does he draw the obvious conclusions - shift taxes onto fixed property. Why can't Murphy see this? Is he serious?
 

Strange times

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The times get stranger. I received an email yesterday from Vince Cable asking me to campaign for fairer taxes and to sign an on-line petition for his pet project, the Mansion Tax, now suggested for properties valued at £2 million or more. Cable claims it is impossible to avoid. I could think of a couple of ways off the top of my head. I am sure a lot of people could think of more if they put their minds to it. The odd things are that this idea was knocked down on practical grounds almost as soon as it was put forward, which must be getting on for two years ago, and that Cable knows about LVT - he is, after all, a patron of ALTER, the LibDem group which exists to promote LVT within the party.

Today there is an article in the Guardian, "How American and British workers can fight for a fairer economic system" referring to a campaign originating in the US, called Prosperity for All and again asking people to sign an on-line petition. The campaign web site explains that "The largest labor, community and advocacy groups in the country agree that prosperity economics is the best way to rebuild and restore America."
Read more...
 

Is the cycle turning?

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This article here discusses the US housing market and suggests that the upswing is just beginning there. Meanwhile, in the UK, housebuilding firm Bovis has doubled its interim dividend as profits jump and reports that it has taken advantage of the depressed land prices since 2008 to embark on an agressive round of land purchase. This seems to be all in accordance with the theory from which land value taxation emerges as a prerequisite for a solution to the cyclic problems that have been a feature of most economies for the past two centuries.
 

Unthinking concern

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Concern about economic injustice needs to be tempered with a sound understanding of the causes. If it is not, you get proposals for nonsensical ideas such as global wealth taxes, currently the subject of a petition under the umbrella of change.org.

How would a global wealth tax work? Who would get the revenue? How would wealth even be defined? Would it include, for example, jewellery in bedside tables, first edition books still in their original dust jackets, lying forgotten in boxes, or pedigree horses? How would this wealth be valued? How would the authorities make sure it was paid? Change.org ought to exercise better judgement about the causes they support and people with a social conscience should engage their brains before going public with stupid suggestions. One might also question the value of online petitions. How many of the signatures belong to fictitious characters?

 


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