If the claims of David Cameron and Nick Clegg are to be taken at face value, here in the UK we now live under a radical transforming government unprecedented in its progressive ambition. Of course, there is nothing in the coalition agreement to justify the hyperbole, but there may be a glimmer of hope. For the first time since long before the last coalition was dissolved in 1945, the cabinet now boasts three members who are on record as supporting the principle of land value taxation (LVT), a radical and potentially transforming policy if ever there was one.
If you visit the website of Lib-Dems ALTER (Action for Land Taxation and Economic Reform), you will discover Chris Huhne is its president, and Nick Clegg and Vince Cable are both vice-presidents. Huhne and Cable have a long record of speaking out for LVT: In his 1990 book Real World Economics, Huhne wrote, “the morality of taxing gains in land value seems very clear”. And in his forward to Tony Vickers 2007 book, Location Matters, he says “Neither the property market or the tax system are fit for purpose in the modern age without a carefully constructed land value tax.”
For his part, Cable, in his foreword to ALTER’s 2009 book, The Case for a new People’s Budget reminded us that LVT is already part of Lib-Dem taxation policy. Their manifesto included a commitment to replace business rates with a system based on site values. Cable goes on to say “this is only a first step towards a wider system for taxing land value.”
Last year, Cable used the underlying case for LVT as the basis for his Mansion Tax, although it was left to Clive Anderson on Question Time to make the case for full LVT and explain to Cable the shortcomings of his plan.
Does this commitment on the part of senior Lib-Dems improve the prospects of LVT making it onto the statute books any time soon? Notwithstanding the inevitable retreat to safe territory for debate during the election campaign, LVT has been making impressive inroads of late, most recently in this Guardian article by Philippe Legrain.
And while there is no evidence of even closet support from senior Tories, there are eloquent advocates for LVT among the grassroots of both governing parties, and also within the Labour Party, UKIP, and the Green Party, for which it remains a key policy aspiration.
But the challenge is not just political: before the benefits of LVT are accepted by politicians and the wider electorate, it has to find more vocal support among economists. While respected journalists like Martin Wolf and Samuel Brittan are already on side, it’s going to take a major figure from academia – a Joseph Stiglitz, for example – to launch LVT into the mainstream. But even that isn’t beyond the realms of possibility. In this 2002 interview, Stiglitz said:
“The question is: Would it be better if we had more taxation of land and natural resource, and more revenue from natural resource management, and I would include atmosphere and spectrum. And less tax on income and savings. And I would say, ‘Yeah.’ And I think many economists would agree with that.”
This idea of a tax shift, away from income and savings (and profits and trade) and onto land and natural resources is the best way to sell LVT. With the issue of how best to reconcile public revenue and government expenditure coming into ever sharper focus, advocates now have an opportunity to direct the debate: LVT is not just another tax; indeed it should only be implemented as an alternative to existing ways of raising public revenue. But neither is it just an alternative way of funding the proper functions of the state. It would also help address the wealth gap by redistributing access to economic opportunities, rather that simply redistributing wealth from rich to poor.
As Nick Clegg wrote before the election: “we face a once-in-a-generation opportunity for lasting fairness and fundamental reform.” Whether this holds true in a new era of coalition government must be doubtful. But let’s hope Clegg and his Lib-Dem cabinet colleagues don’t forget their principled roots, and use the opportunity of power, however limited, to force LVT onto the agenda.
This article was originally published on The Future Now