Memorandum by the Land Value Taxation
Campaign (HIS 38)
A. REPLIES TO
THE QUESTIONS
The Campaign wishes to respond to just one of
the questions: What fiscal and legislative changes should be made?
1.1 The Campaign would wish to see a shift
from existing taxes to Land Value Taxation (LVT) for numerous
important political economic and social reasons. In this overall
picture, a relatively minor benefit is that it would give crucial
support to policies for the protection of historic buildings and
creation and enhancement of public spaces. LVT would both assist
conservation positively and allow the removal of existing taxes
that actively work against the preservation of our historic buildings
and environments.
1.2 The present tax system is highly detrimental
to building conservation and repair. All taxes on such work ultimately
have to be paid by the owner of the building, including VAT and
taxes paid in the first instance by the builder, including income
tax and employees' and employers' National Insurance contributions,
and vehicle fuel duty. These taxes comprise about 45% of the cost
of the works. The problem is aggravated because a substantial
proportion of the tax is charged on labour inputs, and work on
old buildings is by its nature labour-intensive.
1.3 The situation with regard to VAT and
listed buildings is perverse, in that new work is exempt but repairs
are subject to the tax. This does not encourage owners to protect
historic features of old buildings—on the contrary, it is
an incentive to destroy.
1.4 LVT would actively promote conservation,
both in urban and in rural areas. This may be seen by considering
how LVT would operate in relation to Conservation Areas. Local
planning authorities have a statutory duty to identify and designate
as Conservation Areas those locations which it is considered should
be preserved and enhanced. Within Conservation Areas, consent
is required for demolition, and planning applications for new
development are submitted to specialist advisory committees.
1.5 Unfortunately, legislation has had only
limited success in preventing the destruction of historic areas,
and the erection of harmful developments. In some cases, owners
of listed buildings have neglected them to the point where demolition
has become the only option, and have then exerted pressure on
local authorities for consent to redevelop and intensify the use
of their sites. In other circumstances, pressures for relaxing
conservation provisions have built up because land values were
approaching a peak in the boom-slump cycle.
1.6 LVT would increase the protection given
to designated historic buildings and areas, and trees protected
by preservation orders, because it would reduce the pressure for
development within them. Valuations would reflect the advantages
and restrictions of such designation, and because the tax would
be payable regardless of whether the building was in use or not,
the neglect of listed buildings mentioned in the previous paragraph
would become uneconomic.
1.7 A system of LVT would therefore automatically
compensate for any economic disadvantages from having to protect
particular buildings, trees, or wildlife habitats, or sites of
archaeological importance; with LVT at a sufficiently high rate,
owners would have no incentive to overturn the protected status
of their land.
B. FURTHER EXPLANATORY
COMMENTS
1. AIMS OF
THE LAND
VALUE TAXATION
CAMPAIGN
1.1 The Land Value Taxation Campaign is
a non-party organisation which was established with the aim of
securing legislation which would fundamentally change the basis
of public revenue in the United Kingdom. It proposes that existing
taxes on wages, goods and services should be progressively replaced
with a property tax on the rental value of all land. This is referred
to as land value taxation (LVT). The policy advocated by the Campaign
would ultimately secure 100% of the rental value of land[44]for
the Exchequer, but it is recognised that, as with any radical
change in the tax system, a transition period would be desirable.
The Campaign therefore accepts that the introduction of LVT would
be phased in a series of deliberate steps.
1.2 Although the Campaign was established
to promote the case for a national land value tax, we would point
out that, as is the case with all forms of property tax, LVT is
suitable for all tiers of government and could be readily adapted
to any multi-tiered structure including devolved bodies in Scotland,
Northern Ireland, Wales, London, and any future English regional
assemblies, as well as existing local authorities.
2. SUMMARY
2.1 Existing taxes act as a deterrent to
the repair of old buildings.
2.2 By imposing a cost on land holding,
LVT would encourage owners of historic buildings to keep them
in optimum use, or to pass them on to somebody else who would
do so.
2.3 But because land value tax assessments
would automatically reflect restrictions on the use of land resulting
from designation of the land itself or structures upon it, a system
of LVT would therefore automatically compensate for any economic
disadvantages from having to protect particular buildings, trees,
or wildlife habitats, or sites of archaeological importance; with
LVT at a sufficiently high rate, owners would have no incentive
to overturn the protected status of their land.
2.4 To promote policies designed to protect
historic buildings and enhance urban spaces, the Campaign therefore
urges that all land in the United Kingdom should be valued frequently
and accurately, in accordance with its optimum use within the
current planning regulations, and made subject to an ad valorem
land value tax, with existing taxes being phased out as quickly
as practicable.
3. THE COMPENSATION/BETTERMENT
MECHANISM INHERENT
IN LVT
3.1 Under a system of LVT, the valuation
would be based on the full rental value of the site, at its optimum
permitted use. Thus, increases in land value (betterment) arising
from planning decisions such as the creation and enhancement of
urban spaces would automatically be collected as a revenue stream,
along with existing land values and betterment arising from all
the other causes which influence land values.
3.2 Furthermore, the system would contain
a built-in compensation mechanism. Where the value of land was
depressed by—for instance—planning blight, traffic
noise, or the presence of listed buildings or other restrictions
on its use, this would naturally be reflected in the valuation,
and the landowner would be relieved accordingly.
3.3 Thus, LVT is a payment for benefits
actually received, and falls only upon values which can be enjoyed
or realised. If planning restrictions prevented more intensive
or rent-enhancing use, eg, requiring preservation of a building
or other structure, or limiting a piece of land to use as a golf
course, or for agricultural purposes, the land value would be
assessed accordingly. The introduction of LVT would not conflict
with the existing system of planning controls; on the contrary,
it would greatly reinforce the planning process by removing, or
at least reducing, the financial incentive for overturning restrictions
on development contained in existing statutory plans, such as
listing and Conservation Area designation.
4. FOR FURTHER
INFORMATION
4.1 The London Rating (Site Values) Bill
of 1938-1939 is an example of model LVT legislation. This would
obviously have to be updated and adapted to suit present circumstances
and to conform to the law in Scotland and Northern Ireland. Copies
are available or may be downloaded.
4.2 The URL is http://www.landvaluetax.org.uk/1939bill.htm
4.3 Proposals for a transition from existing
local taxes to a land-value based system are set out in the Campaign's
publication "Options for Property Tax Reform. Copies
are available or may be downloaded.
4.4 The URL is http://www.landvaluetax.org.uk/lvtprpsl.htm
4.5 Following a comprehensive study of local
taxation, commissioned in 1986 by Brisbane City Council and chaired
by Sir Gordon Chalk, KBE, LlD, formerly deputy premier of Queensland,
a report was published in 1989 in which the committee strongly
recommended that the city keep its existing system, based on site
values. This is essentially the stance advocated by the Land Value
Taxation Campaign. A copy of the summary of the Chalk Committee's
two-volume report is available on request or may also be downloaded;
http://www.landvaluetax.org.uk/brisbane.htm
4.6 The interrelationship between land value
taxation and planning was discussed in a submission to the Royal
Town Planning Institute.
4.7 The document may be downloaded; http://www.landvaluetax.org.uk/planning.htm
5. APPENDIX
The Royal Infirmary Edinburgh: A Case History
"Although the Royal Infirmary sits in the
very centre of the capital, and covers 25 acres in a prime area
for redevelopment, the site, which could be worth £50 million,
is unlikely to be sold for more than £10 million" (George
Hume, The Herald, 14 January). "The factor acutely
depressing the value of the site . . . is a battery of A and B
category listings by Historic Scotland on buildings covering almost
the entire hospital. Demolition is out of the question".
The main block was completed in 1879, but there have been numerous
later additions. In the circumstances, refurbishment is the order
of the day, for whatever uses can best be made of the different
parts.
If LVT were fully operating, the listed site
would yield, say, £0.5 million per year. The cleared site
would bring in £2.5 million. The brutal question facing politicians,
planners, and public would be whether preserving the Royal Infirmary
buildings is worth foregoing £2 million per year. Looked
at the other way round, with LVT fully operating and site rental
revenue replacing presently levied taxes, the occupier of Edinburgh's
Royal Infirmary location would be assessed on the assumption of
optimum permitted use. If the present structures have to be preserved,
he would pay £2 million per year less than if he had a free
hand. This is compensation for following public policy. He would
receive no rebate if he were to allow a building to fall into
disrepair—still less if he were to vandalise it so as to
render it unusable! Thus he would have every incentive to preserve
the property in top order and maximise his income from it, which
is presumably what Historic Scotland wishes.
Henry Law
Land Value Taxation Campaign
44 The term land is used here not in its legal sense
but is given its meaning as defined in political economy, ie "that
part of the material world other than human beings and the products
of their labour". Back
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