General Matters

Caroline Lucas Excerpts

Tuesday 17th July 2012 Commons Chamber

[Caroline Lucas (Brighton, Pavilion) (Green)]

I am grateful to have this opportunity to call on the Government urgently to investigate how a land value tax might be introduced to replace, first, business rates, and then council tax. I call for this because it would be more progressive and fair, it would help to prevent property speculation and it is a potential means of redistributing wealth. I am also encouraged by the fact that land value taxation has long been a key policy of one of the coalition Government partners. I hope that the robust reports on LVT from the likes of the Institute for Fiscal Studies, as well as debates such as this, might help to persuade the other partner.

As hon. Members know, LVT is a tax or levy on the value of land that takes account of any planning permission associated with it but not of any improvements made to the site such as buildings. For domestic property, for example, the house price includes both land and building values, but LVT would apply only to the land that the house stands on. LVT encourages efficient and sustainable use of land, as owners of derelict land or properties that they have deliberately allowed to become run down pay the same as those who take care of their properties. It therefore has the potential to bring more brownfield sites into use and to ease pressure on green belt. Building in towns and cities would become more efficient, urban sprawl could be reduced, and speculative land banking—for example, by big supermarkets—could be discouraged.

[Jonathan Lord]

The hon. Lady cites all sorts of terrible, egregious cases, but what about the widow who wants to carry on living in the family home but does not have much income or spare capital? Would she force her to move home because of these taxes?

[Caroline Lucas]

I thank the hon. Gentleman for his intervention, not least because it gives me the opportunity to reassure him that I certainly would not be asking that widow to leave her home. What I am asking the Government to do—I have drafted a private Member’s Bill to this effect—is to research how we would implement a land value tax. Among the provisions that we would need to consider is how to protect the widow in the case to which he alludes. For example, one could give her the option of continuing to pay council tax until she dies or moves house, and if she moved house one could think about how to introduce the land value taxation at that point. I assure him that I certainly do not envisage a scenario where this measure would force people to leave their homes. It would have to be brought in gradually. I stress that my private Member’s Bill asks the Government to research this and look into the modalities of introducing it, transition periods, and so on.

One of the great advantages of a land value tax is that it would be very hard to dodge, avoid or evade. It would encourage more efficient and sustainable use of land and avoid distorting business behaviour, as our current business rates do. Business rates are levied as a percentage of the estimated rental value of the property, and the effect of that is to skew economic activity away from property-intensive production and to create a perverse incentive not to use or properly develop brownfield land first. Crucially, an LVT could discourage boom and bust in property, giving incentives against disproportionate amounts of capital being tied up in property and unsustainable accumulation of debt.

Support for this idea comes from interesting quarters both historically and today. For example, in February this year, Samuel Brittan said in the Financial Times that

“the case for a land tax is one of the oldest and least disputed propositions in economic thought.”

He went on to explain:

“Many chancellors have said that they would jump at a tax that had no disincentive effects on work or enterprise but had a strong redistributive element.”

Samuel Brittan is in very good company. Winston Churchill, speaking in 1909, put the argument in favour of LVT rather eloquently:

“Roads are made, streets are made, services are improved, electric light turns night into day, water is brought from reservoirs a hundred miles off in the mountains—all the while the landlord sits still. Every one of those improvements is effected by the labour and cost of other people and the taxpayers. To not one of those improvements does the land monopolist, as a land monopolist, contribute, and yet by every one of them the value of his land is enhanced.”

In addition to that, last year we had the heavyweight report from the IFS that was commissioned from the Nobel prize winner, Sir James Mirlees; it is known as the Mirlees review. It clearly recommends that the Treasury take LVT seriously. It says:

“This is such a powerful idea, and one that has been so comprehensively ignored by governments, that the case for a thorough official effort to design a workable system seems to us to be overwhelming.”

In responding to the questions that I have put to the Government so far on LVT, they have always fallen back on the work done by Sir Michael Lyons in his 2007 inquiry into the role, function and funding of local government. There are many criticisms of the Lyons report and there have been dramatic economic changes since it was released, the most obvious of which is the 2008 crash, which make Lyons’ analysis of land value taxation out of date.

We need a study into the practicalities that looks at how we would bring in an LVT, who would be the winners and losers, and what transitional measures would be needed. The evidence suggests that such a measure would be broadly progressive. In other words, those who can afford it would pay the most and those who can least afford it would pay the least. I hope that the Government will use the response to this debate to reply positively to the broad cross section of people who are saying that this idea has potential. We now need research into how it would be implemented.

The practicalities of land valuation at the necessary level of disaggregation might seem daunting, but that does not mean that it is not possible. There is already a substantial apparatus designed specifically to record land and property values for business rates. Rating lists are compiled by the Valuation Office Agency, which in 2009-10 employed approximately 4,000 staff. New lists are compiled every five years. The infrastructure is therefore already there and could be used.

As I said, I have introduced a private Member’s Bill which, if we are lucky, will be discussed in November. It calls on the Treasury to do a serious piece of work that looks into how land value taxation might replace business rates and, subsequently, council tax, and that takes account of transitional arrangements as necessary. I hope that the Government will take that proposal seriously. The economic case is strong. If we took the wider view to see how such a transition could be made, I think we would find that such a tax would be sensible, efficient, effective and progressive.

[Several hon. Members]

rose—