Why all progressives should support a land value tax

Through no effort of their own, landowners reap a £100bn annual windfall. Caroline Lucas's bill shows the way towards a moral capitalism.

Caroline Lucas, Brighton’s Green MP, has submitted a private member’s bill promoting a land value tax. After some delay, it should have its second reading on 1 March. Every progressive politician in Westminster should support this bill.

David Cameron considers it part of his job as Prime Minister to provide moral leadership. It’s worth recalling a few of his words: "we need to reconnect the principles of risk, hard work, and success with reward." According to him, markets are moral: "open markets and free enterprise can actually promote morality" because "they create a direct link between contribution and reward; between effort and outcome".

Connect effort with outcome, and markets will flourish, entrepreneurs will create jobs, work will get done and society will prosper. Woe betide those who cleave them apart. Karl Marx tried to separate effort and outcome with the words: "from each according to his abilities, to each according to his needs". When this was tried in the Soviet Union the powerful made sure their own needs were well catered for while the economy collapsed and the powerless starved in their millions.

Back home, Her Majesty’s Revenue and Customs is assiduous in disconnecting effort and reward. Every year, the people of Britain are rewarded with £600bn for their efforts at work. HMRC takes one quarter of this reward away as income tax: £150bn.

There is an alternative. Taxes on windfall gains arising through no effort are popular and just. The tax system should target windfalls, not work, whenever possible. This is the aim of the land value tax proposed by Lucas. It targets a £100bn annual windfall that at present is hardly taxed at all. The lion’s share of this goes to powerful and privileged freeloaders who fight tooth and nail to keep every penny. In doing so they harm the economy and, as we shall see, damage the environment.

Who are these freeloaders? Nobody has explained this better than Winston Churchill in a speech in 1909: "Roads are made, streets are made, railway services are improved, electric light turns night into day, electric trams glide swiftly to and fro, water is brought from reservoirs a hundred miles off in the mountains – and all the while the landlord sits still… To not one of these improvements does the land monopolist as a land monopolist contribute, and yet by every one of them the value of his land is sensibly enhanced."

Churchill knew that landowners cannot change the value of a plot of land. Its value depends only on location and size. Is it near a station? A park? Good schooling? All of these factors are determined by the community, not the landowner. The landowner can increase the value of the property, by building on it, or extending existing structures. But any increase in the value per square foot of the plot on which the buildings stand is a free ride, and any profit made from this is pure freeloading on the efforts of the community.

Landowners, including homeowners, are freeloaders on a gigantic scale. The total value of the housing stock in the UK was £1.3trn in 1990. With only inflation it would now be worth £2trn, but instead its current value is over £4trn. This £2trn increase above inflation has come through a rise in the value of land itself, not through new buildings; comparatively few houses have been built in the last two decades. Landowners have gained £100bn yearly on average from a rise in land values. As Churchill might have said, never in the field of human endeavour has so great a reward been given for so little effort.

Lucas wants to reclaim this windfall via a land value tax; a tax which is levied on the value of the plot of land, without taking into account any building on it. A vacant plot in a row of houses would be taxed the same as a similar built-on plot. Buildings are the result of effort and enterprise by the landowner who should be rewarded with their use or profit. The value of the plot is not the result of any effort on the part of the landowner and any increase is a windfall.

The Green MP realizes our current tax regime harms the environment. Throughout our towns and cities, vacant sites are left derelict. Developers sit on vast land banks, create an artificial housing shortage, and blame the planning system for resulting problems. The tax system encourages land hoarding. Keeping a property empty and unused makes excellent sense to speculators, since minimal tax is payable on an empty plot. They cover our green fields with concrete and create urban sprawl, whilebrownfield siteslie abandoned.

This is the strange politics of today’s Britain. The Conservatives profess to be the party of enterprise, but are actually beholden to entitled freeloaders; Cameron’s fine words are so much empty rhetoric. Vince Cable champions a mansion tax but is slapped down by his coalition partners. Labour half-heartedly copies Cable’s best policies. It is Caroline Lucas, our only Green MP, who shows the way towards a moral capitalism and an enterprising economy. All progressives should wish her bill well and rally around her bold initiative on 1 March.

David Cooper is secretary of Liberal Democrat ALTER (Action on Land ­Taxation and Economic Reform), a Liberal Democrat campaign group

The Royal Standard flys from the turrets of Balmoral Castle. Photograph: Getty Images.
Getty
Show Hide image

There's nothing Luddite about banning zero-hours contracts

The TUC general secretary responds to the Taylor Review. 

Unions have been criticised over the past week for our lukewarm response to the Taylor Review. According to the report’s author we were wrong to expect “quick fixes”, when “gradual change” is the order of the day. “Why aren’t you celebrating the new ‘flexibility’ the gig economy has unleashed?” others have complained.

Our response to these arguments is clear. Unions are not Luddites, and we recognise that the world of work is changing. But to understand these changes, we need to recognise that we’ve seen shifts in the balance of power in the workplace that go well beyond the replacement of a paper schedule with an app.

Years of attacks on trade unions have reduced workers’ bargaining power. This is key to understanding today’s world of work. Economic theory says that the near full employment rates should enable workers to ask for higher pay – but we’re still in the middle of the longest pay squeeze for 150 years.

And while fears of mass unemployment didn’t materialise after the economic crisis, we saw working people increasingly forced to accept jobs with less security, be it zero-hours contracts, agency work, or low-paid self-employment.

The key test for us is not whether new laws respond to new technology. It’s whether they harness it to make the world of work better, and give working people the confidence they need to negotiate better rights.

Don’t get me wrong. Matthew Taylor’s review is not without merit. We support his call for the abolishment of the Swedish Derogation – a loophole that has allowed employers to get away with paying agency workers less, even when they are doing the same job as their permanent colleagues.

Guaranteeing all workers the right to sick pay would make a real difference, as would asking employers to pay a higher rate for non-contracted hours. Payment for when shifts are cancelled at the last minute, as is now increasingly the case in the United States, was a key ask in our submission to the review.

But where the report falls short is not taking power seriously. 

The proposed new "dependent contractor status" carries real risks of downgrading people’s ability to receive a fair day’s pay for a fair day’s work. Here new technology isn’t creating new risks – it’s exacerbating old ones that we have fought to eradicate.

It’s no surprise that we are nervous about the return of "piece rates" or payment for tasks completed, rather than hours worked. Our experience of these has been in sectors like contract cleaning and hotels, where they’re used to set unreasonable targets, and drive down pay. Forgive us for being sceptical about Uber’s record of following the letter of the law.

Taylor’s proposals on zero-hours contracts also miss the point. Those on zero hours contracts – working in low paid sectors like hospitality, caring, and retail - are dependent on their boss for the hours they need to pay their bills. A "right to request" guaranteed hours from an exploitative boss is no right at all for many workers. Those in insecure jobs are in constant fear of having their hours cut if they speak up at work. Will the "right to request" really change this?

Tilting the balance of power back towards workers is what the trade union movement exists for. But it’s also vital to delivering the better productivity and growth Britain so sorely needs.

There is plenty of evidence from across the UK and the wider world that workplaces with good terms and conditions, pay and worker voice are more productive. That’s why the OECD (hardly a left-wing mouth piece) has called for a new debate about how collective bargaining can deliver more equality, more inclusion and better jobs all round.

We know as a union movement that we have to up our game. And part of that thinking must include how trade unions can take advantage of new technologies to organise workers.

We are ready for this challenge. Our role isn’t to stop changes in technology. It’s to make sure technology is used to make working people’s lives better, and to make sure any gains are fairly shared.

Frances O'Grady is the General Secretary of the TUC.