A land value tax would prompt property firms to action
Land that is earning would cover the land value tax and prevent house builders allowing land to sit idly on their books.
Treasury minister David Gauke is against conducting a study to examine the costs of implementing a land tax.
Dotted across the country is industrial land with nothing on it. Derelict or simply vacant, there is an empty space where once machines hummed.
Making use of land that has potential for housebuilding or a return to its former industrial purpose should be a priority for any government.
Yet at the moment landowners can sit happily on their inert patch of ground without any penalty.
It's the reason why all the big house builders can boast three or more years of land with planning permission and allow it to sit idly on their books.
Property companies, which rank second only to financial services firms in the list of Tory donors, are keen on incentives before they push ahead with building plans.
Tax breaks are a favourite. But in an age of austerity tax breaks are ruled out. So the government prefers ripping up planning rules as the next best incentive to get spades in the ground.
Experts have lined up to say that riding roughshod over local concerns is not the way to spur construction. And with plenty of planning permission under their belts, the big firms don't see it as an incentive. Bovis Homes went public with that view at the time of their six-month results.
Talk to them privately and they say the real reason is a lack of mortgage finance or commercial loans to back the construction of new homes.
This is where a land value tax becomes a sufficient stick to beat property firms into action. If the land is earning, then it will cover the tax and more, if there is nothing happening, the tax is a burden.
Caroline Lucas, the Green MP for Brighton wants the Treasury to conduct a feasibility study to examine the costs and administrative difficulty of implementing a land tax.
Treasury minister David Gauke says no. Bizarrely, he argues that among many reasons against one is that "an LVT would increase the tax on less productive sites, at a time when market conditions are making it difficult to bring land into more productive uses".
This is the same minister who will walk through the Aye lobby to vote in favour of a bill that rips up current planning laws in the name of bringing less productive sites into use.
Lucas is concerned that business rates and council tax are already flawed. Council tax is skewed towards the poorest, with a whole series of tax bands at the bottom end of the scale and none at the top end. A mansion tax goes a little way to addressing the imbalance, but is clumsy and easily avoided.
All governments have sidestepped a revaluation of council tax since its inception in 1993. The coalition has just delayed business rate revaluation beyond next year while it pushes through the planning changes.
So we shouldn't be surprised at the resistance from the Treasury towards a new tax, even if it rewards activity against inactivity.
Gauke is cautious when bold action is required. He has against him all the major thinktanks, which promote LVT as a cure-all for capitalism's ills. The OECD is in favour, the IMF is in favour. The Institute for Fiscal Studies is in favour. A report for the Treasury on tax reform, the Mirrlees report, said it couldn't see any fundamental problems, and that the benefits of the reform would justify significant adjustment costs, and therefore that "the case for a thorough official effort to design a workable system seems to us to be overwhelming".
An LVT would be an annual tax on land based on its market price. This doesn't move very much and with a tax in place would move even less. There is no speculation in land in the same way there is in property. Residential land could be excluded, but probably should be counted because it would provide sufficient revenues to allow cuts to income taxes.
On a broad level, one reason the west is in decline relates to its reliance on property wealth, much of it inactive and unproductive, to provide us with a high standard of living. What is clear after yet another property bubble has burst is that we all need to rely less on wealth for our standard of living and pension and more on our labours. The tax system should reward work (for those who can) and punish those who just sit on land and don't do anything with it.
The GMB union said the other day that local councils should be given the power to compulsory purchase the 173,276 holiday homes that are occupied for only a few weeks a year.
"A holiday home that is only used for a few weeks a year is very different to a holiday home that is occupied for most of the year in terms of its economic benefits to any locality," says the GMB.
But these powers are unnecessary if an LVT applies to the land. Your main home is worth owning because it is the base from which you earn a living, but a second home is, well, the tip of a large iceberg of unproductive land that should have a tax applied to it.
The losers will be commercial property developers who do little with their land. Any government that extended an LVT to cover residential housing would make the tax neutral when combined with cuts in other taxes. Even the losers, older people in bigger homes, can be exempted or enjoy transitional arrangements that delay tax payments until they move or die.
The Treasury needs to back a feasibility study. There is no reason to block the Lucas bill.