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What are the prospects for LVT in Britain?

The past few months have seen a flurry of activity which has probably helped to bring LVT more public attention more than for several decades. Notably, it was espoused by one of the candidates for the Labour leadership and there were three articles in the Guardian.

The first two articles were vague to the point that it was unclear what was being proposed. The third of the articles, by Mark Braund, was more explicit. All three unleashed a torrent of objections which all those who are advocates of LVT would be well advised to scrutinise. These objections fall into three main categories, and they come from both ends of political spectrum.

The first are based on a misunderstanding of what LVT is and what its effects would be. Some of them seem to come from people who would stand to gain the most from this reform. Other objections come from those who would lose from the changes. Some of the comments verge on the ludicrous: that the countryside would be covered with tower blocks, historic cities would be flattened and wildlife exterminated, and that wealthy landowners would leave the country, take all their wealth with them and leave us all impoverished.

A residue of objections are genuine. This is the old question of the poor widow in the property on a site which has become valuable. This is really a matter of adapting pensions policy so as not to cause hardship, but against that it has to be asked whether it is desirable to encourage OAPs to sit on valuable sites, thereby preventing other people from using them. A further genuine difficulty is that that of the home purchaser with a large mortgage. In our view, in this situation it is the lender who is the beneficial owner of the land ie the one who is receiving the rental income stream, since “interest” on that part of the loan that represents the land value is in reality economic rent of land. That is of course not something that the banks would like to admit were LVT to become a serious policy option.

From the campaigners’ perspective, the most important thing is to be clear in our own minds what the policy involves and what are its implications and effects. It is better to stay silent rather than raise the subject. In order to argue the case for LVT it is absolutely necessary to understand and be able to explain Ricardo’s Law of Rent and how it works out in practice, since this accounts for the entire origin of land value as a consequence of the presence and activities of the community.

Any article that tries to advocate LVT should somehow put this idea across at the outset, which is not easy, though we have tried here, and that is an idea that could be used. It is also necessary to be clear that LVT is not a tax on land prices, nor a tax on increases in land price. Something needs to be said about how pensioners would be treated and the “tower blocks in the countryside” argument must be countered.

So what are the prospects for LVT? In my view, they are slim. No politicians will or even can answer the objections that arise from poor understanding of LVT and its implications. The Conservatives are unlikely to adopt policies that appear to threaten the interests of their supporters, even though LVT would turn estate agency into a sustainable business free from the uncertainties of boom-bust cycles. The LibDems are in the throes of an upheaval. Labour seems likely to continue to water down its underlying but defective socialist principles in a display of muddled thinking.