Hypothecation – I’d never hear about this before but it maybe of interest connected to issues around Land Value Tax and Land Uplift Capture or whatever else we are calling ways of preventing land speculators from profiteering these days…
The concept of hypothecation, where revenues from specific taxes would be ringfenced for a particular expenditure purpose – and publicly communicated in this way – has traditionally been unpopular with many. This is because of the notable challenges, relating to complexity, transparency, and public perceptions, with which it is associated. However, there is growing interest in how hypothecation could help engage with tax policy and increase public trust in the system.
Many people who call for a change in the way land is taxed also have called for the new tax income to be ring-fenced for using on connected issues. E.g. a land value tax going towards buying land for self build homes or re-commoning or supporting entrant farmers etc.
This report documents the workshop on taxation which took place on September 17th 2017, hosted by the Land Justice Network policy and legislation group.
Over 30 people, including grass roots campaigners, academics and professionals, gathered at UCL to discuss the issues surrounding taxation and land reform. The workshop began by presenting the Land Justice Network and its aims: more equitable distribution of land, long-term stewardship, not short-term profit, increases in land value should be given to society, pro-active community planning and transparency. The aims of the workshop were then explained: given that landowners benefit greatly from owning land, how could we change the taxation system to ensure public benefit.
Duncan Bowie focused on housing as it is now the greatest source of wealth. He outlined the purposes of a taxation system before moving on to outline a number of taxation options to deal with issues such as ineffective use of land and capacity and capital gains from residential development. Some options include: changes to residential council tax banding, reforms to inheritance tax and reforms on levies to new developments. The key point is that we must examine tax options according to what our aims are and in this case the main aim is to ensure that housing policy are met.
Heather Wetzel from the Labour Land Group outlined the problems that arise from the fact that land is not the cornerstone of our taxation system. Though there are other taxes needed to meet other public objectives, a tax on land should be central to government policy. This is called the Land Value Tax. Rather than a series of taxes (as presented by Duncan) there would be one tax which would achieve many of our land reform objectives. This tax would not be based on production and would not hit the homeowner. She stressed, however, that in addition it is important to keep land in public hands.
David Mountain, a research student from UCL, presented his research findings on capturing land value in opportunity areas of London.
Q and A and group discussion
There was a wide-ranging discussion which showed the links between taxation and other land issues. A selection of points:
The planning system is related to land values. If a piece of land has been given planning permission for residential properties and many of the requirements that would benefit the public are waived (eg percentage of homes for social rent, number of stories) then the value of the land increases.
Relationship between land and finance. The ease of lending can increase the value of land.
Source of problem is making housing a market.
Need to take into consideration both urban and rural areas and also outside London. The situation is very different outside London.
Much concern about developers in general and how they are getting away with making huge profits at our expense.
There were also a number of concerns that focused on the taxation issues.
For the Land Value Tax, how do we know how to value the land?
For all tax options, what about your average homeowner who lives in their home but who is now worth more because of the rise in prices? Would they be penalised?
It is difficult to focus one tax changes or one tax change because there may be other consequences to consider.
Question of whether it is best to have several different task changes or one major one like the Land Value Tax.
Issue of whether it is best to approach the problems we gave identified through tax changes and capturing the land value or whether we should be ‘capturing the land’, in other words putting land into public ownership/trust/the commons.
General: Summing up?
Everyone is very concerned and passionate about issues around land. These issues affect us as a society but also as individuals.
People learnt something about land issues and the taxation options though some felt that there was a lot more to learn about how the different options might work in practice. There were people with different degrees of expertise and experience as well as different kinds of expertise and experience.
Most thought that we had been a little premature in focusing on tax options without thinking about what our aims are. Though the Land Justice Network has its Common Ground Statement it is not enough when trying to identify what tax system to introduce or even whether the problems can be address through the tax system. The issue of effective use of land, or how do we decide what the public and communities want from land and land reform needs to be included.
Need to find a way of making sure that the movement is led by people at the grass roots in campaigns and communities whilst at the same time gaining the support of all the excellent work done by researchers (who will also be in campaigns and communities in many instances!).
A Land Reform Bill may be a bit ambitious at this stage without looking more closely at what the aims are. Then there will need to be discussions about how broad or narrow the bill would be.
There was also concern expressed about how to mobilise people to support land reform.
The policy working group will consider how to facilitate a discussion on elaborating on the Common Ground statement. All people affiliated to the Land Justice Network can participate in this. You can affiliate by e-mailing firstname.lastname@example.org. Since the workshop, Just Space has volunteered to work on a summary document of various tax options and how they deal with the aim of capturing land value. There will be some workshop at the November 11th meeting in Leicester and the next London workshop will be on ownership. We will aim to combine both a discussion of aims as well as different strategies for achieving those aims.
Remember that there are other working groups on issues to do with outreach and education and actions.