In the past week we have seen a flurry of headlines focusing on the financial decisions facing our councils.
For the first time in eight years the council tax freeze would appear to be under a sustained attack with one council, Moray, appearing to be seriously considering a council tax rise.
It would I think to be overstating it that a consensus is starting to emerge on this issue in Scotland, about the need for the Scottish Government’s current policy to change.
However, it is not just the opposition parties that are questioning the wisdom of continuing with the current policy, there are also those within the SNP expressing concern about the wisdom of the current policy.
Sandy Howat, SNP group leader on the city of Edinburgh Council has said that:-
A revenue cut of this scale would be very damaging for jobs and services within Scottish local government generally, and here in Edinburgh specifically – the harsh reality is that this will translate to real job cuts that hit real families, in real communities throughout our capital city.
Everyone will be hurt by this.
Campaigning on this issue is already being seen around the country but the more fundamental question is whether the Council Tax survives the next parliament.
In December the Commission on Local Tax Reform announced that the current system “must end”.
In its place the commission set out three options:-
- a replacement property tax, which would be based on the value of land and buildings;
- a land value tax, based on the the value of land only;
- and a local income tax which would raise revenue based on a householder’s taxable income.
Out of these three options a Land Value Tax (LVT) would appear to be gaining support on the political left.
The Green Party have produced a detailed report called ‘A Land Value Tax for Scotland – Fast, Efficient, Sustainable‘ the report concludes ‘Combined with pressure for just rewards, fairness and greater equality, the arguments for LVT suggest its time may at last have come’.
Labour Uncut in an article before last years general election entitled ‘If Labour wants to tackle inequality, it’s a land value tax, not the 50p rate that’s needed’ makes the case for LVT from a Labour perspective and ends by stating ‘So, whilst a LVT may be difficult to implement initially (some growing pains have been seen in Denmark, for example), there would be great potential for a One Nation Labour government to genuinely offer a fairer, and more equitable, tax system, which would finally see a proper shift in emphasis on revenue collection from income to wealth, incentivizing work, and, finally, beginning to narrow the inequality gap that has stained our society for far too long’.
Interestingly enough, both the Green Party report and the Labour Uncut quote Winston Churchill in support of the case for LVT:-
The landlord who happened to own a plot of land on the outskirts or at the centre of one of our great cities …. sits still and does nothing. Roads are made, streets are made, railway services are improved, electric light turns night into day, electric trams glide swiftly to and fro, water is brought from reservoirs a hundred miles off in the mountains – and all the while the landlord sits still… To not one of these improvements does the land monopolist as a land monopolist contribute, and yet by every one of them the value of his land is sensibly enhanced.
By way of contrast politically, Owen Jones in an article from May of last year said that ‘We should scrap council tax and stamp duty, replacing both with a land value tax collected by local authorities. As the economist Jonathan Portes points out, this would help dampen excessive price rises. Here is a more effective alternative to the mansion tax too’.
So, what is LVT?
Land Value Tax is a tax on the value of land, it does not take account of property or amenities on the land such as drainage. The tax is set as a percentage of the capital value of the land or the rental value.
What are the benefits of LVT?
Supporters of LVT point to a number of positive benefits that would be realised through the introduction of this tax, the main ones being:-
- Collection – It would be a difficult tax to avoid, land is a fixed and visible asset so that make it difficult to hide and therefore tax avoidance theoretically more problematic ;
- Control – Proposals for the introduction of LVT include that a local rate should be set. This would hand more control to local councils and help to redress the balance of power between local and central government decision making, an issue that has been hotly debated in recent weeks;
- Investment – There is also the potential for LVT to move investment away from land speculation to more productive investment. LVT is not collected on improvements to buildings so, it would encourage people to improve the land that they own.
The introduction of any new tax would not be without its problems.
A number of different groups would not view the introduction of LVT as a positive step.
Those that own property on valuable land and the question of agricultural land is a recurring theme in the debate.
In the run up to the elections in May the public will want to know more about where the parties stand on any replacement to the council tax.
Scottish Labour supporting a land value tax with the potential to be more progressive and redistributive than the council tax and the other alternatives would, in my view, be in a position to help shape that debate.
Over to you
What are your thoughts on a replacement for the council tax? Do you think that LVT is a viable option or do you favour a replacement property tax or a local income tax?
You can let me know what you think by clicking on the poll attached to this blog, by leaving a comment, or by contacting me at the following email address:-