Comparing LVT with other taxes
Apologies - this page is a little long because it covers:
Reforming Council Tax
Reforming Council Tax by revaluing is pointless - it would change the banding within a Local Authority (LA) but it would do nothing to change the unfairness between LAs. A mansion in Westminster would still pay less that a three bedroom family home in Gateshead because the demand on LA services in Westminster is far less than in Gateshead
Council Tax provides only about 37% of Local Authority (LA) funding, 10% comes from the half of the Business Rates they collect on behalf of the treasury and 53% is at the discretion of government through grants. LAs don’t control their own revenue - we deal with this in a separate article.
The current unfairness is obvious: a dilapidated cottage in South Derbyshire on band D pays £2,005 while a band D house in Westminster pays £973. A £95 million mansion in Westminster on the top band pays £1,946.
Property values for Council Tax are based on their equivalent values in 1991with the top band, band H, being properties valued at over £320,000. In 2024, in Derbyshire, this would equate to a value of about £1,500,000.
Why there is no point in revaluation
The Valuation Office Agency, responsible for putting homes into Council Tax bands, already takes into consideration the increase in value since 1991. A house valued at £500,000 in 2024 would have been worth £112,000 in 1991 so it would go into band E.
Revaluation of the Council Tax bands sounds like a good idea but won’t make any difference because Council Tax revenue is used exclusively by the LA that collects it. Rich Westminster will still need to collect far less than other LAs because it has far fewer calls on its services than rural areas or areas with large amounts of social deprivation.
Revaluation will change the balance of contributions within an LA, but it won’t solve the problem of the differences between LAs.
Underfunded LAs are best placed to deliver local service yet almost everything they have to do is determined by national legislation and most of their funding already comes from national government, The refusal of government to provide adequate funding (down 40% since 2010) explains why we have problems with everything from social care to planning to potholes.
The only solution is to scrap Council Tax, fund LAs from central government and use LVT to bring in the equivalent. This would be much fairer, and much cheaper to implement, than Council Tax.
LVC: Land Value Capture
Land Value Capture (LVC) attempts to provide social benefits as part of the increase in land value that goes with development. For example, a new development of 600 homes may require a new medical centre, a new nursery and primary school, an extension to an existing secondary school and a proportion of “affordable” homes.
Since the end of WWII Labour and Conservative governments have tried a variety of ways to do this - the current ones are called Section 106 obligations (S106) and the Community Infrastructure Levy (CIL). Both involve negotiations between developers and Local Authorities (LAs) before final planning permission is granted. With S106 developers commit to building certain things (and almost always try to wriggle out of those commitments during the course of development), while with CIL they pay a levy to the LA which can decide what it wants to do with the money.
Sometimes these methods work, sometimes they don’t. A whole legal industry has grown up to advise developers on how to avoid or minimise their commitments under S106 and CIL. National developers have very deep pockets, they can afford expensive lawyers and they have experience gained across the country. LAs have seen their planning departments decimated over the last few decades and they simply don’t have the staff or the expertise to win long battles with developers. Each LA is fighting on its own against developers who may have fought the same battle many times before.
In 2025 the Labour government is trying again to reform or change Land Value Capture.
This is pointless. It doesn’t work. It approaches the problem from the wrong direction. It involves fighting developers whose only interests are the corporate bottom line and the salaries of their directors.
It is time to stop flogging a dead horse and look at alternatives - and LVT is that alternative. LVT immediately captures all changes in the value of land and it prevents land banking because developers will be paying increasing LVT at each stage from an agricultural field to the final sale of homes.
The increased revenue generated by LVT can be returned to LAs who can determine what new infrastructure is required and get on with building it. It also takes away one of the major factors holding back the start of developments - the arguments between developers and LAs - it smoothes the process of develoment for both sides.
LVT: Land Value Tax
LVT proposes replacing all property taxes, including Council Tax and business rates, with a flat rate tax on the open market value or all land with no exceptions.
The LVT rate would be set when the total value of land, and the total requirements of LAs, are known. The Valuation Office Agency (VOA) would handle valuation - as it does now.
LVT would be implemented over ten years to allow people and the market to adjust so there would be no sudden changes.
Those who cannot afford the increase over Council Tax will have the option to defer payment of the balance until the property is sold or transferred.
LVT would be collected nationally and the revenue provided to LAs to cover the full cost of local services.
LVT is paid by freeholders, not by tenants.
LVT applies to all land in the UK and to all land held outside the UK by UK citizens and those resident in the UK for tax purposes - with suitable protection to prevent double taxation.
LVT allows LAs to add supplements if they wish – for example, to second homes or airbnbs.
PPT: Proportional Property Tax
PPT is described on the Fairershare web site.
PPT proposes replacing Council Tax with a 0.48% tax on the market value of all property.
PPT proposes a cap of £1,200 so no property would be paying more than £1,200 above what is currently being paid in Council Tax. It suggest that the cap is lifted when the property is sold or transferred so the full percentage is then applied.
PPT applies only to property currently subject to Council Tax – it does not apply to land or to property subject to business rates.
PPT would be collected nationally and the revenue provided to LAs to cover the full cost of local services.
PPT is paid by freeholders, not by tenants.
PPT allows LAs to add supplements if they wish – for example, to second homes or airbnbs.
LVT v PPT: summary
Both LVT and PPT are paid by freeholders and they are designed to provide LAs with all the funds they need to provide local services. Both allow LAs to add supplements if they wish.
We believe that LVT is a better long term tax than PPT because:
It taxes the value of all land in the country - with no exceptions. PPT doesn't.
It taxes the value of land that has not been taxed for 1,000 years. PPT doesn't.
It taxes the value of land which is unlikely to be sold or transferred - some parts of England have not changed hands since 1066! The PPT cap would remain in place forever.
It taxes the value of land held outside the UK by UK citizens, residents and trust beneficiaries. PPT doesn't.
It makes it clear that "this land is our land". PPT doesn't.
It answers the question: "who owns England?" PPT doesn't.
It provides funding for all LA services. PPT doesn't.
It replaces all property taxes. PPT doesn't.
It discourages land banking by capturing land value changes at each stage of development. PPT doesn't.
It is phased in over 10 years to allow people and the market to get used to it.
PPT uses a transitional cap (£1,200) which leaves high value houses in London still paying less than top value houses in Gateshead.
Green Land Value Tax (GLVT)
The Green Party manifesto for 2024 stated (page 21):
"Greens will champion a fair system for taxing landowners. Our long-term policy aim is a Land Value Tax so that those with the most valuable and largest land holdings would contribute the most."
So far, so good - we are singing from the same hymn sheet!
However, elsewhere (not in the manifesto) we see:
"The green LVT - effectively a split-rate property tax - would consist of a charge on the land plus a charge on the building minus a discount depending on its energy usage."
and elsewhere:
"a charge on the land plus a charge on the house minus a discount related to efficiency of the building's energy usage."
These two statements are not the same. One is based on energy usage, the other on the efficiency of energy usage.
Adding confusion
We are concerned that both statements confuse one type of tax with another.
Most taxes are designed to fund the services we share - general taxation.
Some taxes are designed to change the way we behave - "sin taxes" such as tobacco and gambling taxes.
GLVT requires the valuation of land - which is an excellent first step.
However, it then confuses things by extending a tax based solely on land value with a tax based on buildings and land value. It is, in effect, a property tax.
It then adds more confusion with a threat to punish those whose homes are difficult to insulate to the standard required to get the maximum discount. What about those with very old homes? What about listed buildings or those in conservation areas where it is difficult to get consent for energy saving measures? This opens the door to objections and exceptions - tax avoidance advisors will laugh all the way to the bank.
It also implies some level of bureaucracy to assess and record (in the land register?) the energy efficiency, or energy usage, of homes. The EPC scheme comes into action when a home is sold but does not cover homes not sold since 2007. Presumably it would be compulsory for home owners to obtain an EPC before getting any discount. This provides a significant job creation scheme (gravy train) for those who assess energy efficiency.
Neither statement made its way into the manifesto - so there is hope that things will be kept simple!
There is a better way
The Green Party wants to reduce carbon emissions by ensuring that homes are insulated to the highest standard. That's fine, but it can be done with a carrot instead of a stick by providing positive incentives from general taxation for people to insulate their homes.
Why destroy a simple and elegant tax like LVT just for the sake of a single agenda?
Wealth Tax
One party proposed 1% on all assets over £10 million and 2% on all assets over £1 billion.
We have covered this is a separate article on wealth taxes.
They have failed everywhere they have been tried.
Wealth taxes are complicated, easy to avoid and almost impossible to enforce.
A simpler way
In the end, it might be better to politely ask the wealthy to pay a percentage of their assets voluntarily and shame those who don't. That costs nothing to administer and would be equally ineffective.
Politicians and wealth
Many (most?) politicians go weak at the knees when faced with those having wealth - in some cases, they are happy to receive "donations" and freebies from them!
MPs and ministers are well paid and have generous expenses - why do they need “donations”?
Many (most?) MPs have never been in business, never competed in the market, never faced the pressures of employing people and never lain awake at night worrying about how to pay the wages. This sometimes makes them very naive when it comes to understanding the motives of some (not all) business people, financial people and wealthy people - that explains why so many politicians go on about "removing red tape" and "deregulation".
They fail to understand that without rules and regulation, many people, particularly in the financial sector whose primary motivation is greed, will get away with as much as they can.
Wealthy people have deep pockets - many (most?) of them will use every trick in the book to get away with avoiding tax and their track record is very good at doing so! It is naive to think otherwise.
Some politicians, such as Tony Blair, go on to become extremely wealthy after leaving parliament.
The video below covers the problem of politicians and wealthy people. If you prefer to read the transcript (which is quicker than watching the video), please click here.
Units of land measurement
The traditional unit of land area in the UK (and the USA) is the acre: 4840 square yards (one chain by one furlong).
The international unit of land area is the hectare: 10,000 square metres. One hectare is 2.47 acres.
The UK is currently confused, some people use acres, some use hectares - just as we sometimes measure the internal area of houses in square feet and sometimes in square metres. Either way is better than simply counting the number of bedrooms - which tells you nothing!
The diagram below shows acres and hectares along with the size of the Wembley football pitch for reference.
