Select Committee on Transport, Local Government and the Regions Memoranda

Memorandum by Land Value Taxation Campaign (ERF 07)


Q1  The effectiveness, usage and coverage of the five new, EU approved, land and property regeneration schemes—Direct Development, the Speculative and Non-speculative Gap Funding Schemes, Community Regeneration and Environmental Regeneration;

  In so far as such schemes are effective, they will result in the enhancement of land values (a) from the resultant increased prosperity and environmental improvement and (b) the availability of any grants and subsidies, which, as intended, make the selected locations more desirable. Thus, such schemes transfer public resources to private landowners. The Campaign believes that this is inefficient and cannot be supported on grounds of social justice and equity, or even sensible disbursement of public funds.

Q2  Any barriers to regeneration caused by the current framework;

  Urban decay and the failure of urban areas to regenerate spontaneously is largely a consequence of the present tax system. Positive obstacles are value added tax, income tax and taxes which add to transport costs, all of which increase the costs of the construction and repair of buildings. These bear with particular severity at marginal locations: cities in the north and west generally, and in pockets in cities in the rest of the country, for example, South-East London.

  Further obstacles are the operation of the business rate and Council Tax. Under the business rate, when a building is improved or redeveloped, the property is reassessed at a higher value and becomes subject to a higher tax; in effect, the development is penalised with a fine! The problem is compounded by the interaction between the business rate and the Council Tax, because a property attracts a lower tax burden if in residential use. This distorts the property market and has led to a loss of premises suitable for small businesses, as these have been converted to residential use. Thus, mixed-use areas, which are a key element in the urban renaissance, are gradually becoming primarily residential, losing their vibrancy and genuinely urban character as they are transformed into dormitories.

  A major distortion, is the absence of any tax on the site value of land; thus, the only holding cost of unused land is revenue foregone, and when owners have expectations of higher values in the future, they are willing to give up present income and allow land to stand vacant, under-used and under-developed in the interim. Thus regeneration is deferred, often for decades. If any government were to set out with the deliberate aim of provoking urban decay, if would introduce a tax system much like the one we have in Britain today.

  Further trouble arises from delays ceased by the planning system. The planning authorities frequently have expectations of developments which the developers are unwilling to satisfy, leading to protracted negotiations, again, sometimes lasting for decades; the Campaign would argue that such delays are, in part, due to the absence of a land value taxation system which would automatically claw back development value as public revenue.

  The absence of a land value tax also provides no encouragement to pubic bodies to provide infrastructure improvements, where such improvements could often turn round depressed areas. Under a land value tax régime, the enhanced land value due to the development is automatically reflected in the tax base and hence brings about an increase in public revenue.

Q3  The consequence of the urban renaissance in terms of outputs, outcomes and value for money

  Grants and subsidies generally are not a satisfactory means of achieving urban renaissance. The first step must be to remove those obstacles which inhibit spontaneous urban regeneration, of which the most important are the present tax system and the absence of land value taxation. It is inefficient and cumbersome to attempt to take money out of an area through the tax system, and then return it via a costly bureaucratic process in the form of grants and subsidies.

Q4  The need for a new European Regeneration Framework

  The Campaign suggests that existing taxes on labour, goods, services and capital should be phased out and replaced by a tax on the rental value of land. In this way:

    (a)  areas of urban decay, where land values are low, would, in effect become tax havens and regenerate spontaneously.

    (b)  Land would not be held out of use speculatively, and under-used land and buildings would be brought into optimum use.


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 per cent of the rental value of land[2], 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.


  2.1  LVT, provided that it was levied at a sufficiently high rate and accompanied by corresponding abatement of existing taxes, would promote spontaneous urban regeneration with little need for further public intervention, other than the provision of additional infrastructure where this was inadequate.

  2.2  An important reason for this is that the tax would in effect, create tax havens where they were most needed, thus removing an important disincentive to urban renewal.

  2.3  By imposing a cost on land holding, LVT would encourage land owners to develop derelict inner-city areas themselves, or to pass them onto somebody else who would do so. Thus LVT in itself provides a fiscal spur to the efficient working of the land market and the most productive use of undeveloped or underdeveloped inner-city land.

  2.4  The current system of local government finance, based on the UBR and the Council Tax, penalises high quality development and rewards withholding and under-use. Land as such has no "carrying charge" and is the ideal subject for speculation, being non-reproducible, non-transportable and therefore "price inelastic". The present fiscal régime encourages mis-use of valuable land, making it artificially scarce and dear. This forces developers who decide to develop to seek to recoup their outlay on site acquisition by building upwards or, in the case of housing, cramming in as many dwellings as possible with tiny rooms in minuscule plots in order to maximise the number of habitable rooms. The tendency today is thus, perversely, to have over-development side by side with underdevelopment. LVT, properly implemented, promotes rational development.

  2.5  LVT would provide an equitable means of paying for infrastructure and other enhancements to the public realm since it would automatically capture external (ie non-farebox and non-revenue) benefits, as such enhancements, if they were of perceptible advantage, would lead to increases in the tax base.

  2.6  To promote urban renaissance with a minimum of public intervention, 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.


  3.1  Land which has advantages over sites at the margin, commands Rent in proportion to its relative advantage vis-a"-vis all other land. Land Rent scoops this difference, leaving the return to capital (considerations of time and risk apart) and to labour (experience and special skills apart) more or less the same everywhere within a nation or community. Because marginal land only just remunerates Labour and Capital, and leaves no surplus to go as Rent, attempts to levy conventional taxes at the margin have the effect of tipping economic activities at such locations into unprofitability. Potential wealth creation is stopped. At the economic margin, at the periphery, current taxes are destroying jobs. This is a principal reasons why London and the South-East region act as a magnet for population and business, at the expense of the North, Scotland, Wales, the West and Northern Ireland.

  3.2  This is not just a matter affecting the edge of the wilderness, however. In practice, each occupation has its own effective margin; the point on the way out of town where shops give way to houses is one such margin. Marginal activities, in town as in the country, can be put out of business by taxation just as easily as those struggling at the literal margin of production. Thus we find depressed areas even within Greater London, usually where the local environment is unattractive, the infrastructure is poor and access difficult.

  3.3  Thus, an important reason why urban renewal policies have become necessary is to counteract the effects of conventional taxes at the margin and make wealth creation possible. A complex system of grants and subsidies has spawned, directing taxpayers' money into selected projects and areas. This is hit-and-miss, open to abuse, and expensive to administer. It creates a "dependency culture".

  3.4  To recapitulate: conventional taxes cripple. At the true economic margin, where no Rent of Land is paid, the price at which goods are sold goes to reward only labour and capital. Where land has no economic value, any tax assessment based on land value must be nil, and hence no land value tax is payable. The margin thus becomes a tax haven and in the absence of any other taxes, production immediately becomes viable. This can, however, happen only if government is funded solely by collection of the Rental Value of Land. We accept that such a change cannot be made overnight, but a progressive switch from conventional taxation is a pre-requisite if the present "north-south" imbalance is to be redressed. Given a switch from conventional taxes to land value taxation, urban renewal would take place spontaneously.

  3.5  Thus change from existing taxes to LVT would promote urban renewal by reducing the overall burden of tax on people who are at present penalised by their location. In effect, LVT creates tax havens exactly where they are most needed. Sites at present sub-marginal would be brought into economic use. This would promote urban renaissance and at the same time, enormously reduce the demand for land for all purposes—commerce, industry, housing, roads, etc—in the most congested parts of the country.


  4.1  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 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.

  4.2  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.

  4.3  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 garden, 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.


  5.1  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.

  The URL is

  5.2  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. The URL is

  5.3  Following a comprehensive study of local taxation, commissioned in 1986 by Brisbane City Council and chaired by Sir Gordon Chalk, KBE, LID, 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. The URL is

  5.4  The interrelationship between land value taxation and planning was discussed in a submission to the Royal Town Planning Institute. The document may be downloaded.

  The URL is

2   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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Prepared 25 February 2002