APPENDIX 1
VISUALISING LANDVALUESCAPE: DEVELOPING THE
CONCEPT FOR BRITAIN
Evidence from an ongoing research project by
the author that relates to this submission to the House of Commons
ODPM Committee Enquiry on Local Revenue:
I.
Most experts in relevant fields expect UK to be
"value mapped" by 2015. A Policy
Delphi (virtual committee) of 29 people43 has been convened for
the study. They participate in complete anonymity and without
meeting face-to-face and can therefore neither influence (nor
be influenced by) each others" individual prejudices. Four
types of expert are included: property valuers; spatial analysts;
geo-data policy specialists; and land/tax policy specialists.
There are also several types of "stakeholders" in the
development of value mapping such as: data and software suppliers;
urban planners; investors and underwriters; environmental campaigners;
business executives; property agents. The Delphi research technique
involves three or four iterations of a questionnaire, exposing
ideas on the way a complex policy area may develop and seeking
views which are then fed back to the group with new information
gleaned by the researcher (Vickers 2004b). This was the mean of
21 answers in Round One to the question: "When do you expect
Britain to have been value mapped?"
II.
e-government projects involving GIS greatly exceed
their initial business aims, where they
receive strong multi-sector leadership. Examples are the Ordnance
Survey digitising programme of the 1980s, the National Land Information
Service (NLIS) for on-line conveyancing, and the National Land
& Property Gazetteer (NLPG).
III.
Joint working between Government departments
and agencies on such projects has been greatly hampered by lack
of clarity on pricing, licensing and liability policies and by
Treasury's insistence, until recently, that data exchanges are
"traded" between public sector bodies—even though
the data themselves are fully paid-for at point of collection
and cannot be "used up". The EU Public Sector Information
(PSI) Directive will force limited changes on the UK.
IV.
The Valuebill project
pilot, which has its national launch in London on 8 June 2004
and uses Value Maps, has enabled the 10 participating local authorities
to achieve 100% data matching of NLPG property addresses—crucial
to at least 85% of local and central government functions,
let alone uses by business and citizens—as a by-product
of "finding" some of the 3% of "missing"
payers of CT and NDR. The target for Valuebill is to cut the erosion
of local government finance, estimated at £825 million
per year, by just 25% within six years (Newham London Borough
2004). 44
V.
The Acacia Project, aiming
to achieve a UK national land management system comparable with
that of every other EU and OECD country, 45 has had no funding
from Government and looks set to be abandoned, just as Valuebill
appears to provide a clear business case for it—even ignoring
probable benefits outside the public sector (IDeA 2002).VI.
Modern property tax systems elsewhere cost far less than the UK's46
and produce land values as a by-product, so that even if a country
doesn't adopt LVT it can make beneficial use of Value Maps. 47
VII.
ODPM's House Price Index,
published quarterly since 1968, went monthly in September 2003
(ODPM 2004). This is a direct result of advances in electronic
data transfer. It is now easier for mortgage lenders, who supply
the data, to transmit 100% rather than the 5% originally requested.
This much larger sample (about 70% of all domestic property sales)
also includes full postcode and other information about the property
and transaction. Statistical analysis can be much more sophisticated
and its results are extremely useful to a wide range of people
in all sectors. Although ODPM has no plans at present to produce
detailed Value Maps, other researchers are looking at this and
maps of quarterly trends at local authority level have been produced
experimentally from this and Land Registry data. It is possible
therefore to derive CT bands or domestic LVT assessments direct
from this Index.
VIII.
We spend far more maintaining property tax lists
between Revaluations than on doing the Revaluations.
The 1990 business rate revaluation cost £130 million, yet
the cost to VOA (ie local government's share of the ODPM budget)
over five years of artificially correcting property assessments
to the 1989 "antecedent date" for changes in the list
between 1989 and 1995, plus contesting appeals against assessments,
plus adjusting the rate paid by others because of the "leakage"
resulting from lost appeals, amounted to about £800 million
(VOA 2000)! That takes no account to the costs to taxpayers of
employing professionals to contest their side of appeals, or of
paying more than they should through "transitional arrangements"
to smooth out the changes when a Revaluation occurs! Whilst this
is very good income for rating experts (qualified lawyers and
surveyors, as well as less reputable "appeal chasers"),
would it perhaps have been cheaper—and more equitable—for
the nation as a whole, to move to a "rolling revaluation"?
The tax rolls could be "frozen" every year at the time
councils set their rate. Most independent experts think this is
feasible and desirable with a modern valuation system—the
kind that also produces land values as a by-product. But Government
takes its advice from people with a vested interest in the status
quo.
Endnotes
1 When LVT is set by a local authority for its own
use, in this country it is termed Site Value Rating (SVR). Other
countries that have forms of LVT use different names for it and
supporters of LVT never cease to look for names that avoid the
impression it refers to "rolling acres"! The value of
rural land is insignificant compared to that in towns and cities,
except where there is pressure to develop at the urban fringe
in areas of expanding population.
2 LVT is usually based on the capital value, not
the rental value, of land. Some jurisdictions apply a formula
to convert capital to rental value before applying the tax. This
author does not regard the debate on whether to use rental or
capital value as important at this stage: the choice mainly depends
on the nature of the property market and professional practice
of valuers who do the work.
3 LVT is never seen by its supporters as a source
of additional revenue for governments. It would replace
other sources of public revenue and by stimulating economic activity
would probably allow a significant reduction in taxation overall,
mainly through reductions in benefits and subsidies paid for by
taxes. It would be up to the Government which introduced it to
decide which other taxes to reduce as it did so: there are many
practical and political considerations to be taken account of,
some of which are covered later.
4 Many existing taxes and charges include an element
of LVT. Even council tax, because it is levied annually and includes
land value, has some LVT features. Parking meters, congestion
charging, bridge tolls and the business rate are somewhat closer
to LVT: they all take account of the relative economic values
of locations. The revenue from licensing access to the broadcast
spectrum above the UK is a form of LVT!
5 Speaking at a Symposium on 13 May 2004 at the Town
& Country Planning Association (TCPA), Ms Barker claimed it
was not her but the Treasury who had given her proposal the name
Planning Gain Supplement. At the time of writing, no report of
this event has been seen but a note has been circulated privately
by a TCPA member and local councillor who was there, as was this
author (Powell 2004).
6 The "increment" can be negative, eg to
land next to a new motorway but far from access to it. LVT provides
a means of compensating those whose land values decrease, as well
as of financing the infrastructure investment from those whose
land values increase.
7 It is not clear how PGS, as opposed to the earlier
one-off land taxes such as Betterment Levy, would operate. Planning
permission can be awarded to anyone who seeks it and can be opposed
by the owner of land. Would the owner have to pay a tax for development
that he opposed?
8 One-off charges on transactions in property could
continue alongside LVT for some time, even after "full"
implementation. The time between acquisition of an option to purchase
and realisation of full development value through sale of the
finished properties is often far longer than the time suggested
here (7-10 years) for introduction of LVT. Therefore considerable
"unearned increment" will be "in the pipeline"
and available for capture by local authorities through Planning
Gain—or by Treasury through CGT. Eventually however these
other land taxes should be phased out. Connellan (2004) Chapter
12 and pages 124-125.
9 The International Union for LVT and Free Trade
www.interunion.org.uk founded in 1926 became a UN-recognised NGO
in 1999. It is based in London although most of its work is developed
via sister organisations in North America. In the US, Philadelphia
(the fifth largest American city) has just decided to introduce
LVT in 2005 (Schaffer 2004).
10 The Scottish Office Land Reform Policy Group (LRPG),
mainly in the context of rural policy, called for "a comprehensive
economic evaluation of the possible impact of moving in the longer
term to an LVT basis" in its final report (Scottish Office
1999), having earlier listed more benefits for LVT than for any
other of the 64 policy instruments it looked at (Scottish Office
1998). Different political, legal and technical factors apply
in Scotland and will not be pursued further in this paper, except
to point out that the Scottish Green Party appears not to have
been harmed in its 2003 Parliamentary campaign by featuring LVT
among its top five priorities: it went from one to seven MSPs.
The Greens are currently drafting a Bill to be debated in the
Scottish Parliament, with some support from MSPs in all parties
except Conservatives, that promotes LVT as the main source of
revenue for Scottish unitary authorities (Scottish Green Party
2004). The constitutional settlement for Scotland allows this
to be implemented without reference to London. However although
rural land makes up about 87% of Britain's total land area, it
represents only about 5% of the total land value, so the burden
of LVT would overwhelmingly fall on urban areas (Pickard 2004).
11 In the KPMG report for the UTF, LVT was rated
as high as any of the fiscal measures studied (KPMG 1999).
12 This "mixed model" or "split-rate"
property tax has been introduced into over twenty cities in Pennsylvania
(PA) since 1975 (Hartzok 1997) and is due to be introduced to
Philadelphia—the fifth largest city in the US—in 2005.
Two cities in Virginia have also petitioned successfully since
2001 to be allowed to move towards LVT in this way. North American
property taxes are normally based on a split valuation, with separate
assessments of the land and building elements. The author led
a multi-disciplinary British study tour of five PA split-rate
cities in 2001 (Vickers 2002a).
13 FoE was one of the first organisations to join
The Progressive Forum (PF) that year: PF was created on the initiative
of the Henry George Foundation of Great Britain (HGF) to bring
together those interested in applying "resource rents"
to public revenue. A launch event and subsequent study of the
attitudes of political parties, lobby groups and think-tanks towards
"tax shifting" (off jobs and onto resource usage) was
published by PF at a seminar hosted by FoE in London in January
2002 (Oshitani 2002).
14 Muellbauer's paper for HM Treasury states: "One
possibility worth serious exploration is a land value tax not
on occupied residential property but on all other sites. Property
tax reform for homes could then be phased in gradually."
15 See note 1.
16 It is not clear whether voters would understand
that responsibility for schools, police, home care (etc) had transferred
away from local councils and councillors to some Whitehall Department
or unelected regional QUANGO: fifteen years after transferring
housing stock to a housing association, West Berkshire Council
voters still blame councillors for problems with housing!
17 Disposable income, after taking account of housing
costs, varies regionally far less than gross pay. Increasingly
those paying a mortgage live in a very different economy to those
who have no mortgage debt. Local authority staff confined to national
pay-bargaining are increasingly hard to retain or recruit in areas
of high land values, as they trade up—and out—as soon
as they can afford to, to increase their disposable income and
quality of life.
18 Except that differences in housing costs, a reflection
of land value differences, increase labour-related costs for councils.
19 This is particularly the case with smaller service-oriented
businesses, which cannot balance the higher costs of branches
in high-tax local authority areas against lower costs in other
parts of the country: there is very limited flexibility in regional
location of hairdressers, care homes, estate agents and take-away
food shops. Their higher costs are either passed on to the rest
of the local economy or they are replaced by identikit national
chains.
20 Research in the US shows that for every 1% tax
shift off buildings onto land, there is a 16% increase in construction
activity. Construction is known as one of the motors of any economy.
Economic growth automatically increases the general tax base (Plassman
& Tideman 1999) .
21 A 10-minute video Smart BIDs for Britain was
produced to show prospective BID stakeholders in focus groups
during the author's third and final David C Lincoln Fellowship
in LVT (Vickers 2003).
22 Although maintaining tax rolls and billing for
council tax and NDR would continue, no planning for full periodic
revaluations (next due in 2016 and 2008) would occur until after
LVT pilots had been reviewed. The transition from UBR/CT to LVT
would involve parallel running of billing systems but only one
type of valuation from the date of a national decision on LVT:
Valuation Office Agency (VOA) resources would switch immediately:
see Valuebill Project below.
23 This is quite a different scenario to that of
the Poll Tax, where London imposed its "solution" first,
untried, on Scotland, having already decided on implementation
throughout Britain.
24 The Local Government Act 2003 gave BIDs a single
statutory source of revenue: a supplement to UBR. This was despite
a strong campaign, involving some surprising allies, to allow
property owners to be tied into BIDs" funding and governance.
Campaigners prepared legislative amendments and procedures that
could easily be resurrected to allow use of LVT instead of (or
in addition to) to current BID levy.
25 Local Government Act 2003 Part IV. Government
has promised to review BID funding in 2006.
26 The London Olympic 2012 bid needs to secure a
means of funding Crossrail if it is to succeed.
27 Research being undertaken on behalf of ODPM, TfL
and RICS has shown that, although it is possible to isolate the
core areas influenced by a single transport project, the multitude
of other factors influencing property values all the time gives
the wider area "fuzziness" of definition (RICS 2004).
28 A conference on the potential of LVT to finance
transport infrastructure projects is being held in London on 6
July 2004.
29 At the very time the Thatcher Government was imposing
Community Charge on Britain, Brisbane commissioned a study to
review its tax system (Brisbane City Council 1989). LVT, which
it already used, was concluded to be the most equitable system
available, on the basis the beneficiaries of the City's expenditure
payed in proportion to benefits received.
30 Findings (Vickers 2003) include:
— A national (England & Wales)
land valuation could cost no more than the existing periodic valuations
for property taxes, over the valuation cycle.
— LVT could be phased in, as a full
replacement to local property taxes nation-wide, while the 2003
(non-domestic) and 2006 (council tax) valuations and taxes based
on them are phased out, over less than 10 years starting with
trials as part of the pilot BIDs in several cities. The changeover
could be cost-neutral in administration terms.
— Business managers overwhelmingly
prefer Smart Tax to Business Rates, which they do not understand,
and are particularly eager to see it being piloted in BIDs, where
they do not believe a voluntary system of owner payments can work.
— The Valuation Office Agency's replacement
IT system should not be specified until further research has been
carried out relating to the need for a parcel-based national land
management system and fundamental reform of property taxes.
31 See www.thewaterfront.co.uk/pdfs/current-conferences/oxford.pdf
32 See www.landvaluescape.org/archives/000003.html
for more detailed information on this project and links to other
research.
33 This is irrespective of any move towards LVT,
although the likely conclusion of the study is that Value Maps
and LVT will help each other's case: whether LVT justifies Value
Maps more than Value Maps justify LVT is a moot point. It is noteworthy
that far more countries use Value Maps than have LVT, although
almost all countries that have LVT use Value Maps.
34 A more complete list of Questions and Answers
on LVT is provided in Questions Around the Smart Tax, an on-line
publication of PF now hosted by the HGF website at www.progressiveforum.info/taxbook/
(Vickers 2000b).
35 Both measures could be adopted to ameliorate the
hardship of CT as well. It is no accident that LVT supporters
usually favour a Citizens Income as well (Robertson 1998).
36 Taiwan, Singapore and some US cities have such
"homestead" allowances, in recognition that everyone
has a basic human right to a place to live (Tsai 2001). It would
be far cheaper to administer than CT benefit, as there would be
no need for a means test. The level at which the allowance was
set could be such that people living in the most cramped of dwellings
paid nothing. Identifying entitlement to the allowance could be
achieved by linking each billing authority's property and electoral
registers: once both lists were continuously updated, calculation
of the net tax liability of each property on the date councils
need to set their budgets would be very simple.
37 For pensioners living in larger properties where
a tax-free allowance still left a large LVT bill, a deferment
option would remove any accusation that LVT was causing genuine
hardship: those suffering would be the heirs of the deceased!
Where it is used, it seems not to be taken up excessively.
38 Certainly residential property as "investment"
would be hit, leading to greater owner-occupation and lower rents
under LVT—especially if LVT living-space allowance was only
granted to owner-occupiers. LVT liability is to the owner not
the occupier. Owners can only pass on as much of the tax as the
market can bear: if their tenants leave they retain the full tax
liability. The LVT bill could, at least to begin with, be served
on the occupier (if there is one), until ownership is known. See
Connellan (2004, 128) Annexe 4 for explanation of a method of
apportioning liability between the "hierarchy" of "beneficial
owners".
39 Some supporters of LVT suggest it should first
be applied only to the increment in value above that on a "base
date" of the first land valuation. However this would greatly
reduce both the initial economic effects and the overall initial
tax base of the reform: if LVT was to be an extra tax, it would
be justified, but as a substitute for other property taxes it
is not. A gradual shift off building value and onto land value,
as in Pennsylvania's "split-rate cities", using the
whole value, is recommended here too.
40 The basic valuation of a piece of land takes account
of its potential to provide wealth and an income stream to its
owner. For example, a piece of city centre land designated for
public worship alone has a very low value, so the Church will
pay little LVT as long as it continues to use that site for that
purpose. But should a church organisation be allowed, as in the
US, to own very valuable sites that it leases to commercial companies
or to wealthy individuals at market rents tax-exempt?
41 A prototype Tax Effect Demonstrator (TED) was
developed for the Liverpool LVT trial (Vickers 2003) and is being
further developed for the Oxfordshire study, where most land parcels
are residential.
42 Adrian Sanders MP (Liberal Democrat, Torbay) in
an interview for the magazine Land & Liberty given January
2002.
43 LVT campaigners were excluded from the Delphi
Group.
44 Councils have been paying heavily for an inefficient
property tax system controlled by Treasury via the Inland Revenue
who "own" the data and have hitherto refused to let
it be used more widely—even for publicly funded research
projects. Councils have also had insufficient money from Government
to complete their LLPGs, with many achieving less than the 90%
matching of incompatible address list necessary for viability
of NLPG.
45 The European Land Information System (EULIS) takes
for granted that land values are part of such systems. The EC's
INSPIRE initiative (Infrastructure for Spatial Information on
the Environment), arising from the Water Directive, will require
member states to be able to identify ownership, use, occupier
and value of all property by 2010, if accepted by Heads of Government
and EP. Otherwise how can claims relating to pollution and land
use be settled? The UK is the only state with no comprehensive
record of land ownership—let alone land values—at
present.
46 For example, Denmark adopted computer-aided mass
assessment (CAMA) twenty years ago. Initially the authorities
then got rid of 4-5 valuers but then decided to re-engage most
of them, so that revaluations could be done every two years instead
of every five. This improved equity and collection rates. VOA
says CAMA is inappropriate in this country but hasn't justified
the claim: Northern Ireland is adopting CAMA for domestic rating
in 2007. Denmark's property taxes cost £1.50 per property
per year; England's £9.
47 Lucas County, Ohio, has possibly the most advanced
Value Maps in the world, used free of charge by residents and
businesses who can find everything they need to know about the
nature and value of every piece of land and property. It doesn't
use LVT but if their system is "down" their switchboard
is jammed by property agents who cannot do business (Ward et al
2002).
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