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

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Hopes of an anti-Brexit party are illusory, but Remainers have a new plan to stay in the EU

Stopping Brexit may prove an impossible task. Remainers are looking to the "Article 49 strategy": reapplying for EU membership. 

The Remain campaign lost in the country, but it won by a landslide in parliament. On 23 June 2016, more than two-thirds of MPs voted for EU membership. Ever since the referendum, the possibility that parliament could thwart withdrawal, or at least soften it, has loomed.

Theresa May called an early general election in the hope of securing a majority large enough to neutralise revanchist Remainers. When she was denied a mandate, many proclaimed that “hard Brexit” had been defeated. Yet two months after the Conservatives’ electoral humbling, it appears, as May once remarked, that “nothing has changed”. The government remains committed not merely to leaving the EU but to leaving the single market and the customs union. Even a promise to mimic the arrangements of the customs union during a transition period is consistent with May’s pre-election Lancaster House speech.

EU supporters once drew consolation from the disunity of their opponents. While Leavers have united around several defining aims, however, the Remainers are split. Those who campaigned reluctantly for EU membership, such as May and Jeremy Corbyn, have become de facto Brexiteers. Others are demanding a “soft Brexit” – defined as continued single market membership – or at least a soft transition.

Still more propose a second referendum, perhaps championed by a new centrist party (“the Democrats” is the name suggested by James Chapman, an energetic former aide to George Osborne and the Brexit Secretary, David Davis). Others predict that an economic cataclysm will force the government to rethink.

Faced with this increasingly bewildering menu of options, the average voter still chooses Brexit as their main course. Though Leave’s referendum victory was narrow (52-48), its support base has since widened. Polling has consistently shown that around two-thirds of voters believe that the UK has a duty to leave the EU, regardless of their original preference.

A majority of Remain supporters, as a recent London School of Economics study confirmed, favour greater controls over EU immigration. The opposition of a significant number of Labour and Tory MPs to “soft Brexit” largely rests on this.

Remainers usually retort – as the Chancellor, Philip Hammond, put it – “No one voted to become poorer.” Polls show that, as well as immigration control, voters want to retain the economic benefits of EU membership. The problem is not merely that some politicians wish to have their cake and eat it, but that most of the public does, too.

For Remainers, the imperative now is to avoid an economic catastrophe. This begins by preventing a “cliff-edge” Brexit, under which the UK crashes out on 29 March 2019 without a deal. Though the Leave vote did not trigger a swift recession, a reversion to World Trade Organisation trading terms almost certainly would. Although David Davis publicly maintains that a new EU trade deal could swiftly be agreed, he is said to have privately forecast a time span of five years (the 2016 EU-Canada agreement took seven). A transition period of three years – concluded in time for the 2022 general election – would leave the UK with two further years in the wilderness without a deal.

A coalition of Labour MPs who dislike free movement and those who dislike free markets has prevented the party endorsing “soft Brexit”. Yet the Remainers in the party, backed by 80 per cent of grass-roots members, are encouraged by a recent shift in the leadership’s position. Although Corbyn, a Bennite Eurosceptic, vowed that the UK would leave the single market, the shadow Brexit secretary, Keir Starmer, and the shadow chancellor, John McDonnell, have refused to rule out continued membership.

A group of Remainers from all parties met in the Labour MP Chuka Umunna’s office before recess, and they are hopeful that parliament will force the government to commit to a meaningful transition period, including single market membership. But they have no intention of dissolving tribal loyalties and uniting under one banner. A year after George Osborne first pitched the idea of a new party to Labour MPs, it has gained little traction. “All it would do is weaken Labour,” the former cabinet minister Andrew Adonis, a past Social Democratic Party member, told me. “The only way we can defeat hard Brexit is to have a strong Labour Party.”

In this febrile era, few Remainers dismiss the possibility of a second referendum. Yet most are wary of running ahead of public opinion. “It would simply be too risky,” a senior Labour MP told me, citing one definition of insanity: doing the same thing and expecting a different result.

Thoughtful Remainers, however, are discussing an alternative strategy. Rather than staging a premature referendum in 2018-19, they advocate waiting until the UK has concluded a trade deal with the EU. At this point, voters would be offered a choice between the new agreement and re-entry under Article 49 of the Lisbon Treaty. By the mid-2020s, Remainers calculate, the risks of Brexit will be clearer and the original referendum will be history. The proviso is that the EU would have to allow the UK re-entry on its existing membership terms, rather than the standard ones (ending its opt-outs from the euro and the border-free Schengen Area). Some MPs suggest agreeing a ten-year “grace period” in which Britain can achieve this deal – a formidable challenge, but not an impossible one.

First, though, the Remainers must secure a soft transition. If the UK rips itself from the EU’s institutions in 2019, there will be no life raft back to safe territory. The initial aim is one of damage limitation. But like the Leavers before them, the wise Remainers are playing a long game.

George Eaton is political editor of the New Statesman.

This article first appeared in the 17 August 2017 issue of the New Statesman, Trump goes nuclear