We’ve written here several times before about how useful a land/location value tax (LVT) might be. But when we talk about it, like most people, we tend to focus on the kind of land that should be hit up for more tax rather than that which should pay less or even be entirely exempt.
It is standard stuff to mention that if you build a bypass around a village, the price of houses in the village goes up. And if the taxpayer has put up the cash for the bypass, why should the owners of this tiny group of houses reap a windfall of tax-free cash? Makes no sense really.
But look at it the other way around. What of the people who can now see and hear the bypass where before they lived in peace? Some of them will have ended up with a little compensation. Most will have had none. Yet they will have suffered one way and another, so why shouldn’t they be compensated via the tax system – paying less tax on their now devalued land than those inside the village in their newly desirable homes?
Imagine if you were out there nimbying about HS2, or a nasty new wind farm going up in clear sight of your hill-top cottage, or perhaps the way that fracking was about to ruin your sense of rural idyll. Would you complain so hard if your compensation came in the form of zero council tax for ever?
Or if it meant a 70% reduction on a new LVT that had mostly replaced income tax? Or even if the new owners of the wind farm were obliged to write you an instant cheque for £250,000? I’m rather guessing you wouldn’t.
I’ve talked about this with a few readers over the last few years, so I was interested to see it pop up in The Independent last week – albeit without reference to an LVT.
The current compensation system for those living around new infrastructure projects, says Anthony Hilton, is “geared to paying out as little as possible”. That pretty much guarantees that people will oppose it, and do so for as long as possible – there is generally only downside for them if they do not. So why not reward them “properly”?
It might be expensive to do so, but if it meant there would be “much less to pay out on massive legal bills and all other costs of delay”, would it really end up hitting us all up for much more than it would under today’s system? Maybe not.
Interesting then, as Hilton also points out in his column, that tucked away in the Autumn Statement was a decision to “run a pilot project that will share some of the benefits of the development directly with the individual households adversely affected by it.”
There have been a good many hints since the last election that the coalition is unusually interested in the LVT. This is another one.