SITE VALUATION TAX

SITE VALUATION TAX

Ronald Lello

A founder of Sellindge and District Residents Association 

My father would never have believed it. I am now an old man but when I was young and my father, who was an old man, told me he could remember young boys coming to school hungry and without shoes. He could even remember boys laying hessian sacks onto piles of City of London horse manure to make a kind of bed so as to keep warm at night as they breathed in the ammonia fumes that would kill them. My father, when a young boy, lived in Redmans Row, (subsequently bombed out of existence), near London’s Whitechapel in a small house with a few square yards of soil at the rear called a garden and on which he and his siblings made mud pies: my father thought that such poverty would never return. His Grandfather had lived in middle class luxury on the Welsh English Border but he fell in love with one of the maids from the house and ran off with her, was cut out of the Will and fell on hard times in London’s East End.

“Never again will people put up with such suffering” my Father would say. Yet here we are again. Those former conditions appear to be returning. A significant number of children who go to school hungry and poorly clothed are facing exactly the same kind of poverty. It is hard to find a supermarket in East Kent that hasn’t had some good person outside collecting for the foodless, shoeless starving. Heavens above, we are supposed to be the fifth or sixth  richest nation on Earth!. Something has gone terribly wrong. Our economic legacy to our grandchildren is grim –‘not fit for purpose’ as they say.

I had just finished writing this when the government decided to publicise their proposals for Health and Social Care which raises issues central to what I want to communicate. Of course it all comes down to money and taxation! The Prime Minister has made certain undertakings both in the past and recently that appear to ‘put things right’ without it seems letting anyone know how much ‘putting things right’ will cost and who will be meeting the cost.  Virtually every source of taxation has been suggested and most have been rejected. Every source, except the source of money that I am writing about, has been inspected for plunder.

Now poverty in my view links up with all kinds of injustice. So in this piece I hope to show there is a direct link between the kind of poverty described above and our system of land ownership and tenure. There are all manner of statistics about who owns land and I would be very grateful if someone would offer help by doing some reliable research for us. For the time being I would say that research made available last year, showed that over 50 % of British land is owned by a mere 1% of the population! Elsewhere it has been suggested that less than 10% of the population owns 90% of the land. I hesitate a little over these statistics which may well be accurate, but I have no means of verifying them. I shall try and continue to identify reliably accurate data.  

These depressing statistics are confirmation that when it comes to enlightened and principled financial policies, all British political parties are clueless. To my mind they are all choosing policies that perpetuate poverty rather than removing it. It is time for a fresh approach. Soon in part 2 of this Contribution I will show the scandal of a few individuals, families or corporations luxuriating in the wealth that has been created  and produced by the whole population and how those who lead the so called working classes lead everyone into greater poverty. For the sake of the whole community we need to look closely at how wealth arises. Has the process anything to do with what we call, ‘right’, ‘left’, ‘centre or is it not time we moved away from these old loyalties and outdated classifications. 

However to understand and explain the much needed improvements to our system I have found it necessary to keep to simple principles to begin with – otherwise I fear we shall all get confused  or totally lost.  Once we all have the feel for the subject we can explore the complications in Part 2  at a later date 

We all know that the price of land varies. Out here in rural Kent one can pay a few thousand pounds per square acre for good agricultural land – even less for scrubland. But if someone in Shepway decides to allocate that scrubland to a housing project the price rises rapidly. The same land which is still growing grass and weeds is now worth let us say 20 times or maybe even 40 times as much. But hold on a  minute. If we travel to London say to the charming small churchyard at the back of St Brides in Fleet Street it might well sell for £70  million. Why pay £70 million for a smallish churchyard site in Fleet Street when we could buy an acre of scrubland for £7,000 in rural Kent? “Because I am worth it,” says the clay and the scrub, “Because I am worth it, people will pay it.” And they do.

But it is only worth it when the community is round and about it. If everyone in the City of London decided to ‘up sticks’ and move to or near to that acre of Kentish clay  the price of the London land would collapse – who would want it? Yet the price of Kent scrubland would rise spectacularly – everyone would want it. Remember I am writing about the dry surface of undeveloped and unimproved land. It is the whole community that creates land value – from those who work on a given site to those who support such work and are, in turn, supported by everything and everyone from transportation to the street newspaper seller – the whole conglomeration of goods and services that makes a large community thrive. The story of the London Jubilee Line referred to below is a graphic illustration of how it all works

In a thriving community, whoever owns the dry surface of land, potentially enjoys great wealth. Such land owning families, enterprises, and individuals can stay in bed all day long  while the whole community works creating  the wealth from which they benefit.  It is this huge fund of wealth that exists not just in central London but in any city – or should one say any ‘community’? It exists in any community where numbers of people live and work together. Vast amounts of money accrue to the private pockets of owners who have no need to do anything to improve the land or create wealth in any way what-so-ever. Yet this economic rent is money that should fund the community, or put  another way returned to the community while at the same time taxes like income tax, sales and VAT taxes and all the rest can be substantially cut and perhaps even removed altogether. 

A good friend, Emile Woolf (emilewoolfwrites.co.uk) an accountant  and economist who writes a successful and widely read blog and articles on economics for a variety of international magazines, has expressed the ideas with typical clarity that I have touched upon:

‘This is a tax on land values, based on the value of the land alone – not on buildings or other improvements. Under this system, development is encouraged because it has absolutely no effect on the amount of tax payable. 

It is stressed that the amount on which tax is assessed relates only to the unimproved value of the land: buildings and other structures on the land are simply ignored. There is thus a huge incentive to improve properties in order to realise their full rental potential and refurbishing or adding structures has no effect on the amount of tax payable each year. And being based on land it cannot be hidden, dodged or shifted. 

To highlight the importance of these features just consider, by way of contrast, what is happening closer to home, where hundreds of thousands of homes across the UK are unoccupied despite widespread concern over the housing shortage. Why on Earth would someone own a property and leave it vacant.    

Islington Council complains that a high percentage of its housing units have no registered voters living in them. The authority blames a phenomenon known as ‘buy to leave’ whereby investors, often from abroad, buy property and leave it empty, thus exacerbating the capital’s housing shortage. This is undoubtedly a significant factor behind the travesty of having over 200,000 homes in England empty for more than six months. Their owners don’t have to do anything – they just watch and wait. The shortage they have helped to create guarantees higher property values, providing them with a source of wealth they have done nothing to earn but which they can access if and whenever they choose.

London’s Jubilee Line cost £3.5 billion to construct yet added £13 billion to land values along its route. The £10 billion bonus went into the private hands that contributed nothing to the cost.  Even a modest land value tax would cure this aberration at a stroke. The tax would be met out of the surplus value created by the community.’

Site Value Contribution is not a new idea. In the early part of the 20th century in 1909, the system almost became law of the land but was blocked by  the land-owning House of Lords. (for further information Google ‘Lloyd George and Site Value Taxation.) Site Value Contribution had been enthusiastically supported by Campbell-Bannerman, Lloyd-George, Hugh Dalton, George Lansbury, Aneurin Bevan, Arthur Henderson, Winston Churchill, Colonel Josiah Wedgewood, Stanley Baldwin  and Ramsay Macdonald who, with Andrew Maclaren in 1931 once more began to formulate legislation. But again the fierce opposition of landed gentry and other vested interests guaranteed it would fail.The American economist Henry George was a great popular advocate. He wrote a best seller called, Progress and Poverty  first published in 1879 and it still sells widely today. But again while Henry George was very popular in the community, land owning vested interests made sure his ideas were politically neutralized. While it is true that that much support for Site Value Contributions was from the left during the late 19th  and early 20th   centuries it should be stressed that ‘Site Value’ is not a system of Land Nationalisation – very far from it. Land owning individuals are free to use the land as they wish being subject only to planning laws etc. So surely it is time now to obtain for the whole community the wealth that the whole community has created.

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