Thursday, 15 January 2015

Reader's Letter Of The Day

From the FT:

Sir,

With reference to your editorial on the dysfunctional housing market, I would agree with the “Too much help for homeowners” but not with “too little for builders”.

With the abolition of the domestic rating system, owner-occupiers of more expensive homes have seen their property tax burden decrease by a significant amount... Some further relief was given to them when 2.5% was added to the VAT rate, to pay for a reduction in the equally regressive Council Tax.

All these savings in tax have fed into house prices, so that landlords, property speculators and mortgage lenders have scooped the income whilst those comfortably on the property ladder have seen their wealth and their ability to borrow massively increase. The rest are not so lucky.

The demise of the domestic rating system had a lot to do with the lack of regular revaluation, so perhaps the Council Tax is about due for replacement now.

So far as builders are concerned, as Shaun Spiers points out, there is plenty of land with planning permission that is not being developed. What builders need is sticks, not carrots.

Property tax reform is the necessary first step to fixing the housing crisis. Land Value Taxation would kill house price inflation permanently and it could be introduced gently by replacing Council Tax on main dwellings on a revenue neutral basis for each local authority.*

LVT on all other land, whether developed or not, (replacing Business Rates) would provide the incentive to build. The Community Infrastructure Levy and Section 106 Agreements do the opposite and should be abolished.

Carol Wilcox, Secretary, Labour Land Campaign


* I hotly disagree on the maths, any new tax should be at a flat national ad valorem rate, same as SDLT, or else it would continue to be inefficient and regressive, but hey.

13 comments:

Ben Jamin' said...

"Property tax reform is the necessary first step to fixing the housing crisis. Land Value Taxation would kill house price inflation permanently and it could be introduced gently by replacing Council Tax on main dwellings on a revenue neutral basis for each local authority."

It's the redistributive effects of LVT in lowering taxes on output that makes housing more affordable for hard working families:)

Lowering/stabilizing of HP's and the removal of market distortions are really just the cherry on top.


Random said...

This is Labour we are talking about. Do you think they support progressive taxation?

Lola said...

Your note. She's a lefty. They cannot help themselves. They are all latent central planners.

Mark Wadsworth said...

BJ, agreed that reducing house prices is a beneficial side effect and not the main event.

R, the LLC are primarily (but not solely) Labour Party members but they are not otherwise affiliated.

The LLC manifest is a bit of a jumble and it is not actually clear (not even to me as a member) what it is they want, apart from LVT.

L, I know Carol and I like her. But yes she is a lefty.

DBC Reed said...

Mark is being coy: he has been a member of LLC, on and off, since his UKIP days. I have been a member for longer but he is considerably more influential than I. The group tries to present a range of different forms of LVT on the premise that LVT is compatible with all political systems and can improve the economic policies of all of them. One of the LVT implementation schemes exempts houses, as Nick Boles of the Conservative Party would do.( I think the latter is ludicrous myself but the theory is any LVT scheme ,even Tory- voter friendly, is better than none at all.)

Bayard said...

"One of the LVT implementation schemes exempts houses,"

Wouldn't that be, effectively, business rates?

DBC Reed said...

@B As far as I can make out ( I disagree with the proposal myself) the idea is that houses would continue to incur Council Tax. (Another alternative proposal- which is highlighted in the FT letter by Carol-is that Council Tax on houses would be replaced by LVT on a revenue neutral basis, the aim being to suggest a range of LVT possibilities for possible adoption by very different parties , groups and groupuscules).

Mark Wadsworth said...

DBC, I'm not being coy, I said I was a member.

DBC Reed said...

MW Not how important a member you didn't.

Mark Wadsworth said...

DBC, I wouldn't say 'important'. I just help them with their numbers, the same as I help lots of other people with their numbers.

DBC Reed said...

MW You've gone coy again. They/we absolutely rely on you for numbers
which are not some incidental.
I'm afraid you've been outed as someone who happily consorts with anybody who takes LVT seriously!

Bayard said...

DBCR, groupuscules, great neologism!

DBC Reed said...

@B It's in French dictionaries and some American.