Sunday, 8 February 2015

First rule of Land Value Tax club...

... don't talk about Land Value Tax unless you know about land values.

The LVT campaign linked to an article in The Guardian about Business Rates. By far and away, the single largest BR bill is on Heathrow airport, if you add together the airport, the maintenance area and Terminal 5 (ignore cargo terminal), it's £150 million a year. The next biggest is Sellafield, at £32 million.

(The LVTC article appeared to suggest that Heathrow was overtaxed. Sellafield might or might not be; in terms of 'alternative use of the land they are occupying', they are wildly overtaxed, but what they are paying for is 'the right to run a nuclear power station' which as we know is worth ££billions. Even if the right is only worth £1 billion, then £32 million a year BR looks about right

UPDATE: LVTC blog has now amended the article to clarify their stance, excellent.)

Returning to Heathrow, their BR bill is tuppence ha'penny, frankly.

What Heathrow airport is paying for is not so much the site itself (all 3,000 acres of it!) but the privilege of using London's airspace and quick transport links into London.

Acording to Heathrow's website, there are about 480,000 aircraft movements a year (one landing plus one take-off).

Check: one every forty seconds, 14.5 hours a day, 363 days a year = 473,000. Looks about right. There are different figures for the number of passengers, so let's take the mid-point 65 million.

[Update: Curtis adds, rather curtly: Where do you get "14.5 hours a day, 363 days a year"? Heathrow is open 365 days a year and planes are in action from 0430-2330 every day.

Answer: I was doing a rough check to see whether 480,000 aircraft movements looked plausible, and it does. Maybe it's 1 plane every 47 seconds x 17 hours a day x 365 days a year. This is what is referred to as 'missing the wood for trees'.]

Divide our BR bill of £150 million by 480,000 movements = £ 313 per aeroplane landing and taking off, or about £2 per passenger. Seems pretty good value to me.
There's far more to it than just BR of course.

The biggie is actually Air Passenger Duty. Let's assume that Heathrow airport generates half of all APD in the UK (it might be two-thirds, who knows?), that's £1,600 million a year. Ten times as much as their BR bill.

Heathrow is running at capacity, so whatever taxes they pay, they are clearly not so high as to depress demand/output.

APD is a tax on transactions (the worst kind of tax); a flat per 'plane tax would be far better; but best of all is to scrap APD and hike Heathrow's BR bill to £1,750 million all-in. That's £3,300 per aircraft movement or £25 per passenger (return trip).

Relieved of the faffy and inefficient APD, airlines will be able to increase ticket prices accordingy, and the regulator would then allow Heathrow to increase its landing charges from £20 to £45 per passenger.

(Clearly, it makes more sense for Heathrow to charge per aircraft movement than per passenger. All things being equal they want fewer aircraft movements (expensive and risky) and more passengers (very lucrative, they spend money at the airport), but there you go.)


Ben Jamin' said...

If the Government was smart it would a) announce it was scrapping UBR b) then sell off all State owned buildings in London at an inflated price c) introduce a LVT d) pats on backs/knighthoods all round.

Curtis said...

Where do you get "14.5 hours a day, 363 days a year"?

Heathrow is open 365 days a year and planes are in action from 0430-2330 every day.

Jim said...

Sellafield are not paying for the right to run a nuclear power station. They never have done. Windscale (which is a seperate island nuclear licenced site, used to, but even Windscale are not doing that, they have not done so since 2003 when Calder Hall was closed down.

Jim said...

I guess that shows the need for an LVT to be locally set. The cost of the Nuclear site licence, is of course being upheld by the taxpayer, as its the NDA who hold the contract rights, so pay the bills. We quickly see that its not actually sellafield that "benefits" from the use of the land, in fact its sellafield which adds to the value of the surrounding residential areas of west cumbria. I guess to tax sellafield very heavily on LVT would be lot like Hiking the price of the road tax on every one of the nations fire engines in terms of tax take.

Mark Wadsworth said...

BJ, or more likely a) and b) without c).

C, it was just a check, your figures might be more accurate.

J, I don't care what they think they are paying for. Fact is, if you get planning permission to build a nuke on a greenfield site, that ups the value of the site by several billion. That's just a fact.

Now, if it were a state-owned nuke, there's no real need to tax it, as the state gets the benefit either way, the LVT logic applies mainly to privately owned ones.

The fact that there are wider benefits to the surrounding community (jobs) is completely irrelevant. It's called 'agglomeration' and that is what drives land values.

Jim said...

Mark, it is a state earned Nuke, the NDA own it.

Jim said...

That was kind of my point

Mark Wadsworth said...

J, well I thought they'd privatised it. If not, no harm done, as the state cannot pay tax to itself - although there can be distribution between local councils and central government and back.

And there are plenty of things on that list which are government owned. LVT is also a good way of reining in spending by government bodies - your budget is £X, and if you want to occupy lavish buildings, we will claw back £Y.

Jim said...

It is and has been an NDA asset for years, Sellafield is not a powerstation, its a nuclear clean up site, looking after the legacy waste of nuclear builds. It remained an NDA asset when the running of it was contracted to NMP, but thats not working well, so now its under reform back to an NDA owned and managed system.

Sellafield is a rather unique place, but as you say, no harm done, just better to be corrected on errors than not.