Recent Progress on Land Value Taxation within the UK Government & Liberal Democrat Party

The UK's Coalition Government, formed in May 2010, consists of the centre-right Conservative Party and the Liberal Democrats, who are generally regarded as 'centrist'. Conservatives outnumber Lib Dems about 5 to 1 in Parliament, however Lib Dems claim that 75% of their manifesto is in the Coalition Agreement, which is the programme for government until 2015.

The Liberal Democrat manifesto included a significant measure of LVT: the reform of the national non-domestic rating system (NNDR), which is assigned entirely to local government, onto a site value base. This was to be carried out in a single Parliament - however it was not a policy that found its way into the Coalition Agreement.

The tax policies of the Lib Dems were last reviewed in 2005-7 by a Tax Commission. The Party has a campaign group dedicated to LVT: Action on Land Taxation & Economic Reform (ALTER). It was formed in 1997, when the previous Labour Government came to power. The then Chair of ALTER, Tony Vickers, was promised a place on the Tax Commission by the Party Leader at that time and was joined by several leading figures who are trained economists and known supporters of LVT, including ALTER's Honorary President Chris Huhne MP and the then Treasury Spokesman Dr Vince Cable MP.

Dr Cable was the main author of the Tax Commission's first policy paper in 2006: Fairer Simpler Greener. This included an excellent analysis of why economic rent is a good source of public revenue and indicated that the Party would reaffirm support, in principle, for LVT - which it did at its Conference that autumn. However the detailed policy proposals on local and property taxes were not set out until the second paper was published in 2007: Reducing the Burden. This included a section, written by Vickers, that set out how to move towards full LVT.

In more detail, the reform of NNDR was proposed - and voted through without difficulty. LVT for residential land was approved "for the longer term". However the Lib Dems had been campaigning for a Local Income Tax (LIT) to replace the pseudo-property tax known as Council Tax, since at least 1993 and the Party was not ready to abandon that policy, which affects all residential property and is the only significant source of local government revenue that councils in Britain have any influence over. It did however water down the LIT policy in its 2010 election manifesto, promising only to invite local councils to carry out pilots.

In the Coalition Government, there were initially three Lib Dem Cabinet members who remain honorary ALTER office holders: Huhne was Secretary of State for Energy & Climate Change; Cable Secretary of State for Business, Innovation & Skills (BIS); and the Deputy Prime Minister and Party Leader, Nick Clegg. Earlier this year, Huhne was replaced by another ALTER Vice President: Edward Davey. In a Government re-shuffle in September 2012, a Conservative who had gone on public record a year earlier as a supporter of LVT (Nick Boles MP) was appointed Minister for Planning in the Department for Communities and Local Government.

In June 2012, the Lib Dems began another review of their tax policy. Four ALTER members are on the 21-member Tax Policy Working Group, including Vickers. The remit of the includes "an examination of the taxation of wealth (including land)". In September, three papers covering other policy areas (Inequality, Housing, Economic Growth) included statements that acknowledge the significance of LVT: all were passed by Conference overwhelmingly.

It can therefore be said that, half way through the UK's first fixed-term Parliament and first Coalition Government in peacetime for 80 years, at least one governing party is committed in principle to LVT and in a position to exercise significant influence on public officials at national level. However the Lib Dems have suffered a major fall in popularity among its more left-leaning core voting base, through being in a right-leaning Government at a time when tough decisions have to be made to deal with the global economic crisis. The key Departments of State (HM Treasury and Communities & Local Government) are controlled by Conservatives with no known support for LVT.

Certain polices of the Coalition Government, whilst not true forms of LVT, should achieve increased revenue from economic rent. The Chancellor (aka Finance Secretary) has endorsed Community Land Auctions, which would in theory collect significant amounts of land value uplift and were adopted as Lib Dem policy in 2006. A pilot of part of the Land Auction approach to zoning land for housing is taking place. Tax Increment Financing is also being introduced, albeit very cautiously and with strict controls from the centre. The financing of flood protection schemes is now largely carried out on the principle 'beneficiary pays', with crude calculation of the value uplift effect on specific commercial properties as a basis for voluntary contributions: the success or failure of appeals for beneficiaries to pay towards the cost can decide whether or not a scheme proceeds.

Since the Coalition Government was formed, ALTER has seen a significant growth in membership, especially from new, younger members of the Lib Dems. The inter-generational wealth transfer effects of taxing land value (and of not taxing it) are increasingly recognised by the Party hierarchy. Leading figures in the Party are more eager to be associated with ALTER & LVT and to speak out on the subject. The Party's Ministers in the Coalition indicate that a growing minority of their Conservative colleagues are also (privately) showing positive interest in the merits of LVT as a possible instrument of economic growth. Whilst it is seen by Lib Dems as a key 'differentiator' between the two Coalition parties for the 2015 election, it could also help expose divisions within the Conservatives between a neo-liberal 'rentier' faction and a more libertarian-inclined free enterprise faction.

A draft tax policy paper will be the subject of a consultation session at the Lib Dem Conference in March 2013 and will then be finalised during the summer and debated at the Autumn Conference in Glasgow in September. ALTER has branded its proposals as "Lo-Tax" (lowering national taxation through taxing high-value locations). It is too early to say whether the Party will adopt Lo-Tax, let alone make it a key manifesto policy.