Would LVT disrupt financial services?

Yes. It would transform them. It is not the least of the beneficial effects of LVT.

The issue arose recently in some correspondence.

“Land Value Taxation is potentially extremely disruptive, not only in the real economy, but also to the financial economy of banks, shares, pensions and insurance.

Only if introduction were to take place to a foolishly short timescale and without warning. Most loans run for about 7 years in practice and the newest are 15 year terms. A switch from Council Tax and UBR to LVT and a gradual switch thereafter from other taxes to LVT would allow ample time for adjustment.

Banks rely on land value as collateral from property buyers when creating new credit money in the economy.

Yes that is why we keep having these financial disasters. It needs to stop. Moneylending on the security of land as collateral is not true banking, it is pawnbroking. Given that large deposits are now being required for property purchase, it is the case that a much smaller proportion of land value is now being accepted as security for loans.

The repayments to the bank reflect the economic rent of the land received by house buyers and commercial mortgagees. Collecting the economic rent of land for public purposes will eliminate over 70% of banks’ business. Land owners cannot pay LVT to the government and continue to pledge their economic rent to the banks too.

Actually they can continue to pay if existing taxes are gradually withdrawn. As existing taxes are taken off, land value rises. This establishes a benign cycle.

The banks (and financial services and accounting) will be radically transformed and “downsized” by LVT.

Could this be the best ever argument for LVT?

Banks should do no more than provide facilities for cash handling, deposits, payment transfers and business credit. All the rest adds nothing whatsoever to wealth and is parasitic on the economy, just as poor transport is a drain on the economy. Talent, some of the brightest and best in the country, is tied down in unproductive activity yet well rewarded for it. They would be more use if they were sent out to sweep the streets – though they would inevitably find something more suited to their undoubted talents.