Alex Cunningham: “If the carrots don’t work then the sticks come out”

Labour's shadow housing minister discussed the land value tax and the party's plan for housing in government

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In a Labour Party conference fringe event on housing and sustainability, the shadow housing minister, Alex Cunningham, outlined Labour’s plans for its housing policy in government. In a session sponsored by Barratt, Cunningham heavily criticised developers for the practice of land banking, in which companies hold unused land for long periods of time without building on it, waiting for its value to increase in order to turn a greater profit upon resale. “We need to make use of land and not have developers sitting on land,” Cunningham said. Questioned about the potential use of a land value tax (LVT) to disincentivise land banking and capture revenue from land value uplift, Cunningham said “the LVT is something that needs to be considered...It’s better to do positive things than negative things, to use the land that we have rather than sitting on it before we apply taxes.” The shadow minister, appointed after his predecessor Melanie Onn quit the front bench to vote against a second referendum, did not rule out the LVT altogether. “We prefer the carrot rather than the stick,” he said, “but if the carrots don’t work then the sticks come out.”

Earlier in the year, a report commissioned by the party and written by George Monbiot, Land for the Many, recommended that a future Labour government replace business rates with an LVT “calculated on the basis of the rental value of local commercial land.” Many activists within the Labour Party, including the Labour Land Campaign, have long advocated the adoption of an LVT. Its supporters often refer to it as a ‘perfect tax’ – they note the difficulty of avoidance or evasion (land, unlike financial assets, is impossible to offshore). Supporters also point out that the LVT shifts sources of revenue away from productive economic activity such as work, trade and investment, and moves it towards unearned wealth, capturing some of the value created by public investment (such as transport infrastructure) that has hitherto benefited landowners.

Also speaking at the panel event, Fiona Fletcher, group director of development and sales at the large social housing association, L&Q, also commented on the potential of increasing government revenue by capturing land values. “By Sadiq Khan simply making the announcement that TfL would extend the Bakerloo line to the Old Kent Road, all the people owning housing and flats there were suddenly a lot richer,” she said. “They weren’t going to contribute anything to the public investment that was needed for the extension, but their property was suddenly a lot more valuable.”

Cunningham was keen to emphasise that the government would ensure land held by government departments and public bodies such as TfL and the NHS would be put to use, and that the party would end what Land for the Many describes as “the sell-off of public land to the highest bidder.” “A lot of land is held by local authorities, the NHS, the Ministry of Justice, all sorts of public bodies,” he said. “We’re going to get grants right, the funding right, and partnership between government, authorities, housing associations and everyone working in the industry.”

Sadiq Khan has given his backing to a trial of the land value tax in London. The Greater London Authority does not currently have the powers to conduct such a trial. The LVT proposed in Land for the Many was labelled a “garden tax” by detractors.