LVT: council tax and infrastructure

Quick links:

Stop press - check your Council Tax bill!

In January 2019 this man, Ken Griffin, paid £95 million (yes, £95,000,000) for a house close to Buckingham Palace.

Ken is American and runs something called "a hedge fund" - we have no idea what exciting products they manufacture or what socially useful services they provide - answers welcomed.

Now check your Council Tax bill - Ken pays £1,421 per year on his £95 million home - what do you pay on yours?

You may think this is fair - we don't. Under LVT Ken would be paying considerably more and making a fair contribution to the social good.

Are we "jealous"?

We are often told "you're just jealous of rich people" so let's knock that on the head right away.

We need creative and inventive people to build new businesses, to employ people, to provide the products and services we require as a society.

We believe people should be rewarded for their efforts - and we have no problem with that. We do have a problem when people do nothing to earn their wealth - "born with a silver spoon in the mouth" doesn't go down well with us.

Some of us (Labour Party members and socialists!) have invented things, set up businesses, employed people, exported products all over the world, made a very decent living and paid our taxes - with no fiddling and no avoiding. We have a strong sense of empathy, we have a strong sense of social responsibility but we understand that not everyone can be the same.

Where we get angry is when the system is bent in favour of those with wealth and those who have done nothing to earn it but who go out of their way to avoid their social responsibilities.

Council Tax: a grossly unfair tax

We are in favour of replacing Council Tax and Business Rates with Land Value Tax.

The disincentive of Business Rates

The current Business Rates system is a disincentive to startups and small businesses - even though no Business Rates are charged on premises with a rateable value (*) of under £12,000.

At £15,000 or above, full Business Rates are charged at almost 50% of the rateable value - a unit or office with a rateable value of £16,000 would pay £8,000 in Business Rates.

Not surprisingly, premises with a rateable value of under £15,000 are in demand - larger premises are frequently split into sub-units each with a rateable value of under £15,000. This "fiddling" is a direct consequence of the unfair system of Business Rates.

* "Rateable value" is nominally what the property could be rented for (per year).

These are the current Council Tax bands used in England.

How are values calculated?

At first thought someone might think:

"I've bought a new house for £385,000 so it must be in Band H."

This is not the case. Values are calculated by the Valuation Office Agency (VOA) based on house values in 1991. In the case of new builds the VOA looks at the features the house offers and then compares it with the Council Tax on similar houses in the area.

So, a new build house in postcode DE23 4AP costing £385,000 would be in Band D according to the VOA.

Here is a sample of Council Tax charges on different bands in different parts of the country - 2018 figures.

Examples of unfairness

This man owns a £5,000,000 mansion in in Crowley Street, Westminster.

His mansion is in Council Tax band H so he pays £1,421 in Council tax.

His "investment" company, Somerset Capital Management, transferred a number of its funds to Dublin to avoid problems with Brexit.

In South Derbyshire someone with a house in the same tax band, but currently worth a fraction of Jacob Rees-Mogg's mansion, would pay £3,445.

Is this fair?

Why this difference in charges?

Westminster certainly isn't more "efficient" than South Derbyshire - it is simply that the demands on local authority spending in South Derbyshire are larger than in Westminster.

Westminster is a compact authority with fewer problems to deal with than South Derbyshire which is a large, mainly rural, area coping with the legacy of the end of the coal mining industry.

Westminster also deliberately went out of its way to minimise its costs - witness the "homes for votes" scandal organised by Westminster's leader in 1996. In 2018 the Council still had some dodgy dealing.

Rupert Murdoch owns a multi-million pound mansion in Mayfair.

His mansion is in Council Tax band H so he pays £1,420 in Council tax while someone in South Derbyshire pays 242% more!

Is this fair?

As well as paying a low proportion of the value of his homes in Council Tax, Anthony Bamford inherited the JCB business built up by his father. He lost a court case with the European Union and became a leading Brexiteer. He lives at Daylesford House near Stow-on-the-Wold.

How would LVT make things fairer?

We don't think it's fair that the rich should pay a much lower proportion of their wealth than those with less. The rich have always used the argument:

"Well, if the average person living on a housing estate pulled their socks up, put in some effort and worked hard, they could be as rich as me with my country pile (inherited from my dad), private jet and yacht parked in the Med!"

This is usually following by the trite and uncaring:

"The poor will always with us so get used to it and move on!"

This is silly, self-serving and shows a total lack of empathy and social responsibility.

Besides which, it isn't about "the poor" - it's about the rest of us, homeowners and tenants, who work hard to bring up our families and who are getting pretty fed up with the rich getting richer and us staying roughly in the same place.

"Fair shares for all" seems reasonable to us. After all, if we didn't do the work, we wouldn't be able to buy your products and services - and then where would you be on your yacht and private jet! Hrrumph!

Replacing all property taxes with a national LVT makes things fair, simple and impossible to avoid - even the rich can't bury their land in Monaco!

With LVT the Valuation Office Agency's job becomes simple because it only has to answer one question:

"What would someone pay on the open market for this piece of land, in this location, given the use to which it can be put?"

For example:

"What would someone pay on the open market for this 150 acres of land, in Lincolnshire, given it can be used for agricultural purposes?"

"What would someone pay on the open market for this 0.1 acres of land, in central London, given planning permission for a 7 bedroom mansion?"

Note: LVT is based on the value of the land, not the value of the bricks and mortar.

More examples of unfairness

James Dyson developed the world's most successful vacuum cleaner and has an excellent engineering record. We applaud his inventiveness and the fact that he built a business from scratch.

As well as paying a low proportion of the value of his homes in Council Tax, he is now the second largest landowner in England and pays no tax on that land - though he gets taxpayers' grants of £1,600,000 a year.

We are not sure if he benefitted from rollover tax relief but, if he did, it's just another way to avoid paying tax. Dyson lost a court case with the European Union, became a leading Brexiteer, moved his company headquarters to Singapore to get more tax relief and continues to live at Doddington Park in Gloucestershire.

Dyson' company, Westbourne Group, also benefitted from tens of millions in taxpayer incentives. Quite why these are necessary when Dyson already has billions, we have no idea.

Unlike many of the nouveau riche, James Dyson does have a decent taste in yachts - not for him the acres of fibre glass and helicopter pads on the "mine's bigger than yours" yachts so loved by the average oligarch.

As well as paying a low proportion of the value of their homes in Council Tax, David and Frederick, the Barclay brothers, own the Daily Telegraph and they so love the UK that they are resident in Monaco "for tax purposes" though they live in a custom-built castle on the island of Brecqhou in the Channel Islands.

As well as paying a low proportion of the value of his homes in Council Tax, Jonathan Harmsworth (great grandson of the infamous "Hurrah for the Blackshirts!" Harold Harmsworth, Viscount Rothermere) owns the Daily Mail but is "non-domiciled in the UK for tax purposes". Despite being "non-domiciled" he is actually "domiciled" in a country house called Ferne Park in Dorset.

Infrastructure - grossly unfair investment

In the 10 years from 2008 to 2018 Londoners benefitted from £708 per person per year spent on infrastucture.

Over the same period those in the North of England benefitted from £289 per person per year spent on infrastucture.

Londoners got 244% more spent on infrastructure than the North. (Source: The Guardian.)

Is this fair?

Every penny invested in infrastructure increases the value of land benefitting from that investment.

Every penny invested in Crossrail increases the value of land within reach of a a Crossrail station - simply because it is easier and quicker for people to get to work.

Public investment increases land values yet at the moment the public doesn't benefit from that increase - the only people who benefit are those who get a windfall gain in land value.

Land Value Tax reflects changes in land value. If the value of land increases because of public investment, the tax raised by LVT also increases - so we, the taxpaying public, see a fair return on our investment.