Would you mind HS2 so much if it meant you never had to pay tax again?

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.

  • Greg

    Part of the coalition is interested – particularly Vince Cable – however many/most of the Conservative Party seem to think that it would be unfair for pensioners – surely pensioners could pay their LVT upon death from their estate instead of Inheritance Tax? The Green Party has a Land Value Tax in it’s manifesto, Labour and Lib Dems have indicated support in previous manifestos (I believe). But really there should be cross party support for this tax as a replacement of many other less fair taxes – as it’s one of the few taxes that does not ‘interfere’ with and distort the market.

    • John

      This was called the “old widow bogey” by Winston Churchill. It is not a problem as you noted.

      The Liberal proposal of introduction of LVT caused ructions on the House of Lords in 1909. The biggest shake up of that chamber since Blair threw a lot of them out. It has been on Liberal and Labour manifestoes, but each time Tory opposition prevented it getting through.

  • Salient Point

    The same principle applies to new housing. As things stand, a few people make an enormous profit when their land goes up in value from £6,000 an acre to £600,000 an acre (if not more). On the other side, many people suffer a decline in the value of their property, or at least some degradation in their environment.

    The gain made by the land owner could be partly used to compensate losers. Indeed, this was the conclusion of a report produced by Kate Barker, one-time member of the Monetary Policy Committee. When the then opposition raised the idea with developers, they rejected rejected it (of course). Given that the Tory Party receives substantial funding from that source, the idea got no further.

  • Jaycee86

    Never mind LVT etc. There simply isn’t a case for the project. Let’s not kid ourselves over the cost either. I can’t think of a Government project that hasn’t ended up costing many times the original estimate. What use is HS2 to anyone living along the route, as they won’t be able to use it, even if they will be able to afford it. (Everyone is being extremely coy about what fares might be in 15 years’ time.)
    Every statement has been about how quickly we’ll be able to get from Birmingham/Leeds/Manchester to London; so much for bringing business to the Midlands and the North.
    Now, Mr Cameron appears to holding out a begging bowl to China, to help fund the damned thing. I’m fully expecting some day to find someone from China/India/Saudi on my doorstep, telling me he owns my house.

    • John

      Mr Jaycee86 you clearly do not understand the benefits of LVT. It is easy and cheap to collect as you cannot take land off-shore. Land’s location is known to the inch. You cannot avoid paying. Raise the level of LVT and income and sales taxes can be abolished along with many other stealth taxes.

      LVT reclaims community created wealth to pay for community services, leaving private wealth in private hands.

      The article was about compensating those who are disadvantaged and advantaged by public infrastructure schemes. LVT does it automatically, by having a levy on the land’s “value”.

      LVT is used to great success in many parts of the world.

      • Salient Point

        “LVT is used to great success in many parts of the world.”

        Could you give some examples, please, particularly including a case in which it is the only tax (which is what it’s proponents want).

        Unless you are starting a tax system from scratch, there is an obvious problem. Someone could have paid income tax all their life, and invested the balance in property. This would obviously be unfair.

        • Salient Point

          Correction to my reply: it’s should of course be its (not that I imagine many people care).

  • 4caster

    I have supported Site Value Rating (SVR) for over 50 years, on the grounds that it should replace Council Tax, Business Rates, and especially Stamp Duty (which is a massive impediment to mobility of labour).
    The logic behind SVR, or LVT as you now call it, is that infrastructure such as smooth roads, footpaths, street lighting, mains water, sewerage, electricity, mains gas, telephone and now fast broadband reach a property through no expense of the property owner, but as a windfall from the development of adjacent land.
    But your comment about a village bypass turns that argument on its head. In that instance, ever-increasing traffic over a period of decades has reduced the amenity of living there. The bypass will merely return the village to the “status quo ante”. Logically, land tax should have gradually been falling in recognition of the traffic disturbance, and if no reduction has ever been granted, there is no case for increasing tax when the disturbance ends.

  • Tyler Durden

    You mean a bribe?