Labour’s land reform proposals are putting the cart before the horse

Private property sign © Getty Images

I’ve been meaning to have a quick flick through Labour’s Land for the Many report for a few days. I’ve finally skimmed it (it’s important because a lot of its proposals could well end up in the Labour manifesto) and find that there is much in it to agree with.

We don’t like talking about land ownership in the UK and we tax it (or not) in ways that don’t make much sense. I see no reason, as the report suggests, why land ownership shouldn’t be public and absolutely no reason why there shouldn’t also be a full open register of planning permissions available to all too. The fact that developers sit on so many permissions without starting development in the UK is maddening. So that’s fine.

It also makes sense to have a go at discouraging the property-mad population of the UK to start thinking of land and housing as utilities rather than speculative assets. So I’m fine with most of the tax reform proposals.

Should stamp duty be phased out for those buying primary homes? Sure. Stamp duty is a stunningly awful tax.

Should capital gains tax be levied at a fairly high rate on second homes? Sure. We have a very progressive tax system in the UK so this fits just fine into that.

Should inheritance tax be abolished and replaced with a gift tax levied on the recipient at their marginal rate of income tax. I can say pretty clearly that I think that’s a good idea. After all I suggested it myself here in 2016.

Should business rates be replaced with a land value tax based on the rental value of local commercial land? Most definitely so.

Regular readers will know that I am mad for the idea of a standalone Land Value Tax. I wrote about it at length here in 2013. Should we take a good look at the plethora of tax exemptions given to land owners and in particular owners of woodland and forestry? Indeed we should. I’m not even particularly against the introduction of Scottish style right to roam in the rest of the UK.

There are, of course, bits I’m not mad for: Community Right to Buy, Compulsory Sale Orders; a right for public bodies to force the purchase of land at prices that suit them rather than at market prices; open-ended tenancies; extending planning law to farming and forestry decisions; and so on.

It hasn’t been entirely true for a long time that freeholder ownership of land gives the holder absolute freedom over the use of that land in perpetuity. But if the report were to be adopted in its entirety we would not be able to pretend that it was even the tiniest bit true.

Still, my main issue with the report is not really any of the things in the report. It is that should any of it be adopted – I’m talking about the tax proposals in particular – they will be an addition to rather than a replacement of current regulation.

Take the idea that council tax should be replaced with a progressive property tax based on the value of the property. That doesn’t sound awful. Along with the abolition of stamp duty it would encourage the efficient use of the property in question and prompt downsizing where possible (it might also encourage the division of large houses into tens of tiny slums of course but I’m trying to be positive here). But would it replace the UK’s already very progressive rates of income tax? The same goes for the LVT on commercial properties. Would it replace corporation tax or simply add to it?

I think we all know the answers here. And that’s the problem. The adoption of anything in the report – useful as it is – won’t simplify or improve anything. It will just add another layer of tax and bureaucracy on top of an already unmanageable system.

What I would really like to hear from Labour – and for that matter from every single candidate for our vacant prime ministerial job this week – is just how much tax they reckon should be collected in the UK as a percentage of GDP. 35%? 40%? 45%? 60%? How big should the state be? How much should it do? Where does the expansion of the responsibilities of the state end?

Seems to be that we are better off answering those questions before we start adding new layers of taxation (however helpful those taxes might be in the absence of other taxes). Cart before horse, perhaps.