H. LVT would raise too much revenue

• The government will introduce LVT on top, without reducing existing taxes (skip to article)
• The government will keep increasing the tax rate (skip to article)
• People will never know how much tax they will have to pay next year (skip to article)
• At least with income tax, if your income falls, then your tax bill falls (skip to article)
• At least with income tax, there is a Laffer Curve which sets an upper limit to tax collection (skip to article)

These arguments are the equal and opposite of the arguments covered in I. LVT would not raise enough revenue. Surely they can't both be correct?

And of course, the Home-Owner-Ists like to confuse the issue by saying things like "LVT would not raise enough revenue, so the government would keep increasing the tax rate" and then "The rate would be so high that we would go past the top of the Laffer Curve and so receipts would fall again", thus safely hedging their bets without realising that they have just completely contradicted themselves and betrayed their lack of understanding of the Laffer Curve.

1. "The government will introduce LVT on top, without reducing existing taxes"

Given how unpopular LVT is with the brainwashed majority, this is highly unlikely.

As long as Labour are in the pockets of bankers and the Tories in the pockets of landowners, LVT seems a highly unlikely proposition (they won't even go as far as a Council Tax revaluation); and if they did come to their senses, then politically at least, they would know that LVT could only ever be introduced as a replacement tax.

If and when enough people vote for smaller parties who have full-on LVT front and centre in their manifestos, the two big parties who take turns running the government will only dare introduce LVT very incrementally, in the same way as it took Thatcher and Blair/Brown twenty years to completely reverse the old 20th century system when it was government policy was to keep prices and rents down.

If the government decided to continue with wasteful spending and corresponding deficits, it is better for the Baby Boomers to pay a less harmful tax now than simply to dump an even larger burden on future workers, entrepreneurs and investors. Even if they reined back spending to sensible levels and reduced the annual deficit to nil, there is still a massive accrued public sector debt; if they introduced 100% LVT it would still take ten years or so to pay it off, and then after ten years we can have another debate about which taxes to cut.

2. "The government will keep increasing the tax rate"

The politics is the easy bit:

Nobody said that when LVT is introduced we will suspend democracy. There'll always be plenty of political parties who will try and buy some easy votes by promising to freeze or reduce LVT. It's a question of whether they have a credible programme for reducing spending or increasing other taxes to match. And yes, politicians love increasing taxes, but this is particularly difficult with an in-your-face tax like LVT. So that's a good thing, not a bad thing.

And let's not forget about geese, feathers, hissing and all that. A couple of years ago they hiked VAT from 17.5% to 20%, which they said would raise another £13 billion a year and nobody batted an eyelid. Just imagine the outcry if they'd decided to raise that £13 billion a year by increasing Council Tax by 50%!

The economics is the fun bit:

i. The better known Laffer Curve is the one that says if you increase income tax rates beyond a certain point then total revenues start to fall again. So the revenue-maximising total income tax/NIC/VAT rate is probably somewhere between 50% and 60% (we are currently pretty close to the revenue maximising tax rate) and not 100%. Hopefully most are familiar with this:



The main reason that revenues start to fall again once the overall rate is more than 60% is because enterprise is choked off. If you add an extra line to the chart, the upper line shows by how much the total size of the economy shrinks at higher tax rates.



These losses (the area above the red line) are referred to as the deadweight losses of taxes. So yes, the UK government is maximising tax revenues by having an overall rate of 50% - 60% on the productive economy (income tax + NIC + VAT), but the price we pay is having an economy that is 15% - 20% smaller than it could be.

ii. LVT has no deadweight costs, if anything it stimulates the economy. So the optimum tax rate for LVT is somewhere near 100%. It's probably better to pitch it at 90% to go on the safe side, but if the rate does creep over 100% occasionally, well so what? All that means is that it doesn't just tax the rental value of the location but some of the rental value of the buildings and improvements as well, and it is still less bad taxing static rental income than mobile labour and investments.

iii. If the rate does go measurably over 100% in some areas then the first thing that we would notice is that new construction would stop (the same as punitive Section 106 agreements or Development Land Tax); but this is what the NIMBY majority want, isn't it, so that is not an unalloyed bad. The tax would still be collected from existing buildings (and it would still act to encourage the most efficient use of existing buildings).

iv. For sure, buildings still have to be maintained and improved, but it is better having a Poll Tax on the buildings themselves whatever condition they are in than to levy a tax on the cost/value of improvements. The tax rate would have to be very high indeed (100% of the site premium and let's say 75% of the bricks and mortar rental value) before people started abandoning buildings.

v. And if the tax rate does go significantly over 100% of the site premium, then that is simply not LVT any more, that is a "Property Tax" like Business Rates, which is a quite different animal and to which proper LVTers are opposed anyway.

vi. So it's not an argument against LVT, it's an argument for replacing Business Rates with LVT. Or we could equally argue "Income tax is a bad tax because the government could increase the rate past the top of the Laffer Curve or increase it to beyond 100%" in some cases, the government does. That's not an argument against income tax, that's an argument against colossally stupid governments.

3. "People will never know how much tax they will have to pay next year"

Life is full of uncertainties. LVT merely puts everybody in the same position as tenants or mortgage borrowers who don't know what their rent or interest rate will be next year.

i. During the transitional phase, you would know that you will pay £x less in income tax next year and £y more in LVT; you'd easily be able to predict the changes by comparing x% of your earned income with y% of the site rental value of where you live. If you have a low earned income relative to the site rental value, then you know that your overall tax bill will increase every year, but this is predictable years in advance and you have plenty of time to take evasive action (like "getting on your bike"). And for a majority, the tax bill will be falling slightly year-on-year!

ii. If we ever get as far as a full-on LVT system, then if your LVT bill this year was £z, then next year it will be £z plus or minus a bit. Rental values are very stable and only change by a few per cent each year, in line with wages.

Here's a chart showing ONS figures for nominal wages and nominal rents from 2005 to 2017:

iii. So this is no bigger burden than expecting somebody who takes out a mortgage at 4% interest to be prepared for the fact that it might be 6% interest in ten years' time (i.e. a fifty per cent increase in monthly repayments). As it happens, people tend to worry more about upside than downside risks, so all in all, this will keep house prices low and stable, even if the feared "tax bombshell" never explodes.

iv. Common sense says that increases would be capped at (say) 5% a year, enabling people to budget years in advance, even in a "worst case" scenario. And we know from experience that the government can get away with making higher earners take a hit of several thousand pounds from one year to the next (increase in tax rate from 40% to 50% or withdrawal of Child Benefit) without them taking to the streets.

v. The only time when rental values jump noticeably is when e.g. a new railways line and stations are opened, but these projects are announced years or even decades in advance, giving plenty of time for evasive action. So people who aren't interested in taking the train will have left by the time it opens, and people who need or want to use the train service will move to the area and happily pay the higher rent/tax. Thus we get far more efficient use not just of the physical land and buildings but of the railway as well.

vi. What's not to like?

4. "At least with income tax, if your income falls, then your tax bill falls"

Fair point, even though it contradicts the previous supposed argument. What the Homeys want is a tax bill that doesn't go up in the good times, but does go down in the bad times. You can't have it both. As ever, they refuse to accept that there is an inherent contradiction.

In terms of "ability to pay", income tax beats LVT in the short term, but in the medium term LVT catches up again and overtakes it in the long run. A price well worth paying in exchange for lower dead weight costs; lower collection and compliance costs; and better social cohesion.

And the politicians are always coming up with new ways of subsidising the "savings culture" (an excuse for bungs for the financial services sector), none of which seem to work, so how about trying the "stick" as well as the "carrot"? Everybody will make sure that they have some rainy day money just in case.

5. "At least with income tax, there is a Laffer Curve which sets an upper limit to tax collection"

i. Yes, the Laffer Curve (see point 2 above) sets an upper limit to income tax (which is why they have several layers of it, VAT, NIC, corporation tax, income tax and so on) but the only way to find out what the revenue maximising rate is is to get there and thereby hugely damage the economy. Many politicians and campaigners on the left of the spectrum deny that it even exists.

ii. We're currently at an average marginal rate of over 50% and the dead weight costs of that are, on a rough and ready basis approx. 15% - 20% of the potential size of the economy (the tax rate cubed).

iii. Here's a stripped down version of HM Revenue & Customs' spreadsheet which they used as the basis for this report. The only variable you can change is "taxable income elasticity" (which HMRC correctly assume is the most important unknown). A low figure means people don't care too much how much tax they pay; a high figure means people will avoid or evade high taxes. This then tells you the revenue-maximising tax rate and the dead weight costs, i.e. the fall in GDP:


iv. LVT has no deadweight costs (and in fact, tends to stimulate economic activity); it only has deadweight costs if the tax is more than 100% of the site premium and thus acts like a tax on the income from buildings and improvements, but even then, as explained, the dead weight costs are negligibly small.

I. LVT would not raise enough revenue

• LVT will never raise enough money to pay for all government spending (skip to article)
• LVT will never raise enough revenue to replace all taxes (skip to article)
• Why focus on one narrow asset class? Taxes should be broad-based (skip to article)

The collapsing revenue theories:
• Everybody will cram into the smallest houses, so not much tax will be collected (skip to article)


• Rich people will avoid the tax by trading down or moving abroad (skip to article)
• The best way to tax rich people is higher rate income tax or taxes on luxuries (skip to article)

These arguments are the equal and opposite of the arguments covered in H. LVT would [allow the government to] raise too much revenue. Surely they can't both be correct?

The claim that "Everybody will cram into the smallest houses, so not much tax will be collected" also sits uneasily with the claim that Landlords will pass on all the tax to their tenants. Again, the two arguments cancel out. Broadly speaking, we would expect gross rents to increase by the amount of the reduction in the tax on earnings. Thus illustrating that a £ for £ shift from taxing earnings to taxing the rental value of land is perfectly feasible and plausible.

1. "LVT will never raise enough money to pay for all government spending"

In which the current tax system is failing miserably as well. And that's not because the government isn't collecting enough in tax; it is because since 2008 or so, the UK government has been throwing everything it can at propping up the banking sector, the landowners and house prices - Buy to Let and all its predecessors under the Labour government, quantitative easing etc. (According to official HM Treasury figures, about 40% of UK government spending goes on corporate subsidies in one form or another.)

The OBR's chart for tax revenues v spending since 1948 is from here.



The deficit periods (blue line above yellow line) tend to follow house price boom/busts (early 1970s, 1990 and 2008), i.e. if we could keep house prices low and stable (via LVT or any other means), there would be no booms, no busts and hardly any deficit periods. If spending had been kept at 2004-05 levels (which were hardly lean years) in real terms, then this year, the public finances would have been in a break-even position.

2. "LVT will never raise enough revenue to replace all taxes"

In the short term, no, but so what?

The simple fact is that the total site-only rental value or site premiums of UK residential land is currently about £200 billion a year, with another £50 billion for commercial land and buildings (the rental value of farmland is negligible compared to these). Explanation and calculations here.

Taxed at 100%, that would raise £250 billion.

For a start, we could use £90 billion of that to replace existing taxes on land and buildings (council tax, business rates, SDTL, Inheritance Tax, capital gains tax, the ATED charge etc) net of subsidies (housing benefit for private landlords, farmland subsidies etc).

This leaves £160 billion which we could use to reduce the most damaging taxes, i.e. VAT and National Insurance, which are forecast to raise £250 billion in 2017-18 (ignoring Employer's NIC on public sector wages and VAT on petrol/diesel) by two-thirds. So VAT would be 7%, Employee's NIC 4% and Employer's NIC 4.6%.

That must be worth considering, must it not?

That might be the end of the matter, but when the associated economic growth kicks in…

a. revenues from the remaining taxes on earnings and profits (income tax and corporation tax) will soar, meaning that VAT and NIC can be phased out, and

b. rental values will increase, meaning that LVT revenues will increase, meaning that we can then make inroads into reducing the basic rate of income tax etc.

We know for a fact that rents are a function of people's net disposable incomes after tax, so if taxes on income are reduced, rental values (and hence the tax base for LVT) will go up, probably £ for £.

We can illustrate this quite simply by comparing the square metre cost of apartments in Nice and Monte Carlo, two towns on the south coast of France which are very similar in most respects. The only big difference is that Nice is in France with very high rates of income tax and Monte Carlo is a little tax haven with very low rates of income tax.

So the average selling price of an apartment in Nice (City Centre) is €4,500/sq metre and the average selling price in Monte Carlo is nearly ten times as much, €39,000 per square metre. That extra €3 million you would pay for an apartment in Nice is merely the amount which very high earners are prepared to pay in exchange for not having to pay high taxes on their incomes if they lived elsewhere in Europe.

2b. "Why focus on one narrow asset class? Taxes should be broad-based."

a) For LVT purposes, land is not an "asset" let alone an "asset class" or a "capital asset". The tax is levied on the annual rental value of land/locations", i.e. the sum total of wealth which flows from the whole productive sector to landowners, homeowners, banks, landlords, land speculators etc. So the source of LVT is very broad-based indeed.

b) Clearly, it would be silly to try and raise a disproportionate amount of tax from any one "asset class" (cash, buildings, jewellery, works of art, plant and machinery or share prices); from any one particular kind of land use (residential, commercial or agricultural/extractive); or from any one particular kind of economic activity (manufacturing or services or any sub-division thereof).

c) The worst taxes are things like VAT, a flat percent of turnover of non-favoured productive industries which allow high-margin industries to thrive but condemn low-margin ones to oblivion, and the more "targeted" a tax is, the more distortions it causes (the same goes for "targeted" tax breaks and subsidies). So "broad based" is clearly good - it's just that the Homeys don't like it when they are included in that "broad base", despite the fact that owner-occupiers create two-thirds of tall wealth, pay two-thirds of all the taxes and occupy two-thirds of all the land - regardless of how the tax system is designed.

d) Land rents are derived from all the activities of the productive sector, and are that part of any industry's income which is not necessary to sustain that industry, they are pure surplus (or the price a retailer pays for having a monopoly position on the High Street). So the least-bad tax on farming is a tax on that extra income (revenue minus costs and the value of the farmer's own labour) which would otherwise go into rent or higher land prices (on average, about £20 per acre). And the least-bad tax on retail is that element of profits which would go into rents. Manufacturing businesses are happy do make do with marginal and out-of-town sites (they need more physical space but central locations are not so important - they need access to stuff like motorway junctions and railway sidings which make places a no-no for residential use) so the tax collected from manufacturing would be minimal. Etc etc.

e) And we all have to live somewhere. The least-bad tax on earned income is a tax on that element of people's income which is paid as rent or mortgage repayments (which for an average household is the excess of income over the cost of the "basic minimum" standard of living and for higher earning households is "conspicuous consumption"), but unlike income tax (where you get nothing in return for paying it), the LVT is taken out of/included in the rent and when you pay LVT/rent, you get something in return (somewhere to live).

f) In urban areas (which is where 95% of land rents arise), these land uses are are all intermingled. It could be retail or services at pavement level with offices on the first floor and flats up above, with a car repair workshop in the alley behind. The rental value is fairly constant, it does not matter what that shop sells or what services are provided, it does not matter whether the offices are used by a financial adviser, physiotherapist or fortune teller. And it does not matter how the residents above earn their living or whether the car repair workshop specialises in second cars or tuning brand new Maseratis.

g) All of these uses compete. If people want to buy mobile phones instead of CDs, then the CD shop shuts down and is replaced with a mobile phone shop (or the canny CD retailer starts selling mobile phones on the side). The flats will be occupied by the people who work in the most profitable local industries, they might lose their job in the CD shop and be taken on by the mobile phone shop. Etcetera.

h) Occupiers who have to pay rent will always be the people who are best able to capitalise on the opportunities offered by that location or who can earn most by working within commuting distance of that location. So making people pay rent is not in itself a bad thing (price allocation is the best kind of allocation); where it goes wrong is allowing a privileged class to collect those rents rather than pooling them for the common good.

So as we see, land is not a narrow "asset class" and land rents themselves are a very broad-based and inherently stable stream of revenue/flow of wealth, which can be taxed with impunity.

NB, a slightly different version of this article is at the LVTC site.

3. "Everybody will cram into the smallest houses, so not much tax will be collected"

a) No they won't, because for most people there is little incentive to downsizing.

Here is the table for the site premiums for semi-detached houses in the first nine deciles (the top decile goes off the scale; the top one per cent of homes, mainly in certain small enclaves in London cost £100,000s a year to rent and £millions to buy):

How many people in the ninth decile would really want to trade down to the eighth, merely to save £2,000 a year? How many in the eighth decile would want to trade down to the seventh in order to save £1,000 a year?

No more than would be willing and able to trade up, providing house prices adjusted down accordingly, and by definition they would. And by definition, those people in the ninth decile could already be saving themselves £2,000 a year if they sold their homes worth currently £260,000-plus and bought a house in the eighth decile costing £210,000-plus, because that would knock £2,000 off their mortgage payments (or rent).

4. "Rich people will avoid the tax by trading down or moving abroad "

a) People who spout this do not understand how rich people behave. The argument is about as plausible as saying "If private schools start charging £10,000 or £20,000 per pupil per year, then the top 7% who currently send their children to private school will send them to free state schools instead."

b) Clearly, high earners won't move abroad, because as the French 75% income tax experiment demonstrated, what high income people are most sensitive to is income tax rates; with a flat income tax of 20%/40% and houses which have fallen in price to compensate them for any LVT thereon, they'd all be flocking to our shores.

Some even argue that even though UK income tax rates would be low, UK high earners would earn their money in the UK and then live abroad to avoid the LVT. Well, that makes them resident and thus liable to pay income tax somewhere else, so they would lose on the income tax side and gain nothing on the LVT side, because if instead of buying a cheap UK home with LVT on it, they would have to buy a more expensive home elsewhere with lower LVT on it, so best case they break even on the 'housing costs' side.

That part is easily dealt with.

c) And what do people like talking about? They'd love to talk about how much they earn, but for some reason that is taboo, but it is perfectly acceptable to complain bitterly about how much tax you pay (from which the astute listener can work backwards and work out what the complainant earns). So people use conspicuous consumption ("spending money you don't have on things you don't need to impress people you don't like") to drop hints as to how much they earn. And people also just love showing off about how much their house is worth.

So think about it - it would be the winning card at keeping-up-with-the-Joneses poker at dinner parties: high earners can "complain" about the amount of LVT they have to pay, thus subtly signalling that they've got shed loads of money; that their house is worth a lot; and giving them the satisfaction of whining about how greedy the government is and/or the opportunity to show how generous they are in paying so much into the system for schools and hospitals.

d) Yes, there will be a lot of down-sizing, up-sizing and right-sizing generally in the first couple of years, but by and large, people will be swapping places, there is no reason to assume an overall downward shift.

That leaves us with the people who live in the top decile. Where are they going to go? We know that there are enough people happy to pay rents of from £15,000 up to £100,000s a year, you only have to look on Rightmove or Zoopla. And there are others prepared to commit millions to buying a house, this is conspicuous consumption at its best. How many of them would really want to lose face with their peers by admitting that they can't afford it?

e) Just to fill in the gaps, let us now return to our Poor Widows In Mansions. According to arch-Home-Owner-Ists the Centre for Policy Studies, only 15% of high value London homes have been owned by the same person for more than twenty years, so the actual number of Poor Widows is no more than 10,000 or 20,000. Perhaps LVT would give them the nudge to cash in and sell up and buy a smaller flat closer to their no doubt equally poor offspring who will have bee priced out of the prime central London market decades ago?

And for every Poor Widow who moves out, there will be at least one high earner, oligarch, oil sheikh, foreign kleptocrat or French tax exile willing to move in and pay the tax out of petty cash.

Win-win!

5. "The best way to tax rich people is higher rate income tax or taxes on luxuries"

Opponents of LVT are missing the point. LVT is not about getting more tax from wealthy people or higher earners, it is about collecting tax from land values instead of earnings and output. There are plenty of high earners who will end up paying less tax after an LVT shift!

Even if that were the aim, 40% income tax is near the top of the Laffer curve and taxing land values is far better; at the very top end, increases in income tax rates depress rental values and hence LVT receipts anyway.

And here the argument goes full circle. Not only are "luxuries" difficult to define but any tax thereon is ultimately a tax on the people who provide them. A film star or a celebrity footballer wedding or birthday party "costing" £150,000 may superficially seem like wild extravagance and hence a luxury, but that £150,000 ends up in the pockets of all the dozens of caterers, waitresses, flower arrangers, taxi drivers, marquee builders, decorators, pole dancers etc; exactly the people who buy the cinema tickets and season tickets in the first place.

But if a film star lives in a £5 million house with an annual site-only rental value of £150,000, how much of that money will the caterers, waitresses etc ever see? Not a penny. And that house is a surely a luxury just as much as the wedding or birthday party. So why not get that £150,000 into their pockets via the tax/welfare system and make the wedding or birthday party tax-free?

J. There would be too much new construction

These arguments are tricky, because a majority of people in the UK are NIMBYs (or at least, NIMBYs are far more vocal than those who are happy for other people to have new homes). They argue that they are doing it because they care about nature, local history or the catch-all 'pressure on local services'. But underlying it is the selfish interest in keeping house prices as high as possible, so they oppose LVT and new construction with equal venom - you are fighting on two fronts. Even if you could explain the underlying economic logic which tells us that LVT will take away the motive for building on The Hallowed Green Belt and allowing town centres to rot away, they would still oppose it.

Four typical arguments are as follows:

• All public parks/school playing fields will be sold off for development (skip to article)
• Owners of open spaces will [be forced to] build on them (skip to article)
• The Green Belt will be bulldozed/concreted over (skip to article)

• What about churches and listed buildings? (skip to article)

See also: Greedy developers will get planning permission for my land, forcing me to pay more.

The Home-Owner-Ists are of course perfectly capable of proposing equal and opposite arguments. In the next breath they will claim that with LVT there would not be enough new construction and they will round things off by saying that LVT would force people to live where they don't want to i.e. that with LVT, they would be too much new construction where it isn't wanted or needed and not enough where it is (or something like that, it is never clear what they mean).

Proponents of LVT do not have any sort of collective view on whether planning laws should be made stricter or more liberal. By and large, it is easier to assume that the power of local councils to decide what gets built where would remain in place. Quite simply, LVT works just as well, conceptually or administratively, whether planning laws are very restrictive or very liberal.

We are agnostic on the whole planning issue for the simple reason that with LVT, there would be far less need for new construction. Instead, more incremental steps would be taken to make best use of what we've already got - loft extensions, refurbishment, conversions, small scale developments, infill projects, replacing derelict buildings, building on vacant/under-used urban sites etc. Most importantly, some widows in large family homes would downsize so that young families can upsize. In 2011, the Intergenerational Foundation calculated that there were 25 million unoccupied bedrooms in the UK, i.e. about ten million homes' worth of bedrooms. All of this is great news for small, local builders and craftsmen, and will go down like a cup of cold sick with national land bankers like Taylor Wimpey, Redrow, Barratts et al.

Furthermore, with LVT in place, planning decisions would go with the grain of what people actually want anyway.

1. "All public parks/school playing fields will be sold off for development"

No they won't. Because LVT aligns the interests of the local council (who receive a share of the money) and the people who live there.

a) A few facts: most of us live in very developed areas, it's the natural sweep of history for people to become ever more urbanised, but it's still nice to live somewhere not too far from a playground, park, open woodland, a river or canal with a footpath and cycle path etc.

b) So it is obvious that the rental value of homes which are near such amenities, or even better, overlook them is higher. Here's a bit of first hand research on the premium which people will pay for an apartment with a better view.

c) From the Yorkshire Post:

Houses close to public parks or open spaces now cost up to £21,000 more, revealing a “green premium”. A survey by finance company ING Direct found that the price difference was higher in cities with less public space as it becomes scarce because of pressure on town halls to sell off land.

Rents are currently capitalised at 3%, so what that means is, the rental value of a house close to a park is £630 a year higher than otherwise.

d) OK, so let's imagine a nice little commuter village with five hundred houses all within five minutes walking distance of a nice big six-acre public park with all the bells and whistles. A bit like this:
So the council is currently collecting 500 houses x £6,000 in LVT = £3,000,000.

e) Notwithstanding that the park is the prime selling feature of that village and there would be riots if the council ever even mentioned selling it to developers, how many homes could you fit into that park? Probably around sixty. So now the local council can collect LVT from 560 homes. But the rental value of those 560 homes would not be £6,000 any more, it would be 15% less = £5,100. Times that by 560 and the council only gets £2,856,000. So the council has no incentive to sell off the park.

f) Now, we also now that under current rules, a developer could make a huge windfall capital gain (at everybody else's expense) by building 60 homes on that park, all he has to do is hand over some brown envelopes to the right councillors. With LVT in place, there is no potential big windfall gain, because the selling price of the finished houses is depressed by the LVT. Even if the developer were given the park for free, there wouldn't be much of a windfall capital gain when he miraculously is given planning permission.

g) The same applies to school playing fields. A lot of schools use the number of playing fields they have as a selling point. That makes the school more attractive to parents; if a school is in demand, they can filter their intake; that pushes the school up the league tables etc etc; and all that pushes up the rental values of homes within the catchment area. So just like with parks, the incentive to sell off playing fields is greatly reduced.

2. "Owners of open spaces will [be forced to] build on them"

Nonsense.

For the simple reason that there are very few privately owned open spaces (i.e. public parks), and those that exist are usually owned by trusts set up by Victorian philanthropists and the like and are subject to restrictive covenants. They are effectively public parks as in the previous example. The LVT on such parks would be more or less nil as they cost more to maintain than they generate in direct income.

There are also derelict and vacant sites, usually behind fences and of no value to the public whatsoever. If anything they are a burden (rats, vagrants, fly tipping etc). Like the Battersea power station site for three decades. The owner can afford to leave them derelict because there is no financial disincentive (exempt from Business Rates and Council Tax). If the potential selling price is expected to increase faster than the equivalent return on other investments, the owner has every incentive to leave it vacant as long as possible. The Battersea site was bought for £70 million in 1993 and sold for £400 million in 2006 (the next purchaser went bust, of course). Eleven years later, the project is still not completed.

How land should be used has to be haggled out between owner of the site, the local council and the local electorate. The best uses for derelict sites are some combination of:

a) Clear the buildings and rubble, decontaminate, plant some trees etc and make it into a genuine public open space, enhancing the rental value of surrounding homes, and

b) Grant planning permission for an appropriate development, assess the LVT accordingly and start collecting the tax. If the owner runs up any sort of arrears, he loses his title and the site is sold of to somebody who does want to make something of it.

3. "The Green Belt will be bulldozed/concreted over"

No it won't.

a) Whatever happens, remember that only 3.5% of the UK by surface areas is homes and gardens, and considerably more than half of that is gardens, which have the far more bio-diversity than most farms.

b) The observation that so-called home builders make most of their money from the planning gains uplift applies to greenfield sites as much as it does to the park in the example above. With LVT in place, there would be less incentive to continually expand towns outwards and allow the centre to rot (see Battersea example above). Which is exactly what absence of LVT encourages - you can only bank the massive planning gain uplift once, and if you acquire something a bit run down in a city centre, there's every incentive to just sit back and do nothing.

And there's a trade-off:

c) Here's that little commuter village in its wider context:
If you really had to plonk down another 60 houses, there's plenty of space to the north and east (where the land is flattest before it slopes away again, down to the river below). So whether the town planner is motivated by concern for his fellow men or just wants to maximise LVT receipts for the council, that is where they would go.

To the extent that this has any negative impact on the rental value of the existing homes (and I'm not admitting it would), it would only be a fraction of the impact of building on the park. Nobody around there really values those fields, it's nice to know they are there is all. I grew up there and was very conscious of the park in the middle, but the fields were just something you saw out of the bus window, and there was one at the end of my road which was very steep and ideal for sledging.

4. "What about churches and listed buildings?"

Yawn.

a) LVT is based on the rental value of each plot, assuming optimum permitted use. So if it's a church, it's a church and would be valued as such, and not as if it could be used to build a ten-storey office block. What is the rental value of a church? It's however much money you can make from it in excess of the vicar's salary and repair costs compared with the amount of money you can make from a comparable church in the least favourable location. In either case, teh value is so low as to be barely worth measuring and the site-only values of a church and the LVT bills will be next to nothing. There is no need for a special exemption for religious buildings.

b) The same argument applies to the church as to the park. The church is a lovely old one dating back to the 12th century (as opposed to the squat Victorian Methodist church in the north-east corner of the park). Perhaps that church actually adds to the rental value of the houses in the village - some of its character magically rubs off on them. So there is no way that the council would ever grant permission to knock it down, even if it never collected a penny in LVT from it.

For example, if planning permission were granted to build new houses overlooking the church and the churchyard, there'd be a premium LVT to be collected from those flats because they are more or less guaranteed that the lovely view from their windows will never change.

c) The same goes for listed buildings; if what the owner can do with them is restricted, then the rental value and the price, and hence the LVT bill, is reduced to what a tenant or purchaser is willing to pay. That said, there are probably far too many listed buildings of no special historical or architectural significance, but this, like planning law, is a different topic to LVT.

K. There would be not enough new construction

Having argued that There would be too much new construction, Home-Owner-Ists are prefectly capable of changing tack completely and claiming, again on the basis of no evidence whatsoever, that with LVT, there would be less new construction and that buildings would fall into disrepair.

• It's like the Window Tax - a disincentive to improvements (skip to article)
• People will wreck or abandon buildings to avoid the tax (Business Rates) (skip to article)
• It will impede transactions (like Stamp Duty Land Tax, capital gains tax) (skip to article)
• Land taxes just don't work (Land Development Tax, s106 Agreements) (skip to article)
• What if a developer has paid out under a s106 Agreement? (skip to article)
• Owners will have no spare cash to pay for improvements (skip to article)
• Construction companies will either go out of business or pass on the tax as higher selling prices (skip to article)

The most important point here is that actual developers/builders would pay a lot less in LVT than they currently do in land- or planning-related taxes!
Here's an overview of all the taxes which are currently triggered by development:
Landowner – sells land, foregoes agricultural land subsidies on the area sold and pays Capital Gains Tax or corporation tax on the unearned capital gain.
Developer – buys land and pays Stamp Duty Land Tax
Developer – pays planning fees, Community Infrastructure Levy, s106 contributions and incurs costs of planning obligations.
Developer – claims VAT refunds as new housing is zero-rated for VAT, a kind of subsidy.
Developer – sells some “affordable housing” units at a low profit margin to a Registered Provider such as a Housing Association (this can be seen as a tax of nearly 100% on that fraction of the potential development profit) and sells the rest to owner-occupiers and private investors for a profit. The developer’s profit has two elements – the unearned increase in the value of the land since it was first acquired and the earned element (return for risk and effort) - and the total profit is subject to normal corporation tax.
Owner-occupiers and private investors – pay Stamp Duty Land Tax when they buy the finished homes.

All these land- and planning-related taxes would be scrapped and rolled into LVT as part of the initial shift. The average total currently taxes paid (less VAT rebates) is tens of thousands of pounds per new home (depending on where in the country it is). Even if LVT became payable as soon as planning is granted, the average would be about £7,000 per home per year. It seems sensible to give developers/builders an exemption for the first year or two after planning is granted, so developers/builders might end paying nothing at all.

As pointed out in the previous section (J. There would be too much new construction) "... with LVT, there would be far less need for new construction. Instead, more incremental steps would be taken to make best use of what we've already got - loft extensions, refurbishment, conversions, small scale developments, infill projects, replacing derelict buildings, building on vacant/under-used urban sites etc. Most importantly, some widows in large family homes would downsize so that young families can upsize. In 2011, the Intergenerational Foundation calculated that there were 25 million unoccupied bedrooms in the UK, i.e. about ten million homes' worth of bedrooms. All of this is great news for small, local builders and craftsmen, and will go down like a cup of cold sick with national land bankers like Taylor Wimpey, Redrow, Barratts et al."

When challenged on such contradictions, most Homeys will usually just ignore you, but the more inventive will do DoubleThink and say "Aha, you think you're so clever you LVTers, you think that it will increase the amount of development [which is not correct and is a secondary issue], but you are wrong, this is the wrong way to go about it, and actually if you want more development you should reduce taxes on land owners."

Which again throws up the contradiction that the Homeys want less new development as well as lower taxes on land. So why are they calling for the latter (which they do want) if they really believed it would lead to the former (which they don't want)? The only way to square this is to assume that they know perfectly well that lower taxes on land and subsidies thereto reduce the amount of new development, which is a win-win as far as they are concerned. Not that they'd ever admit it.

The fact is, by and large, LVT encourages incremental improvements and is neutral on new construction. Planning laws (or absences thereof) will still be the main factor.

The easiest way to explain why all these assumptions are wrong is to see LVT as a kind of 100% interest-only, non-repayable loan from the government to buy land, secured on the land and buildings only with no recourse to the borrower himself if there is negative equity. Once you grasp that, all the other objections melt away.

1. The six taxes mentioned - Window Tax, Business Rates, SDLT, CGT, Community Infrastructure Levy and s106 agreements - are not LVT, so their impact is quite different

a) The Window Tax was a tax on windows, so clearly, the number of windows went down. It did not change the amount of land available or the value thereof.

b) Derelict buildings are exempt from Business Rates, so if you have no plans to rent out or improve your buildings, you are inventivised to let them fall derelict, often with a helping hand. If there were no such exemption, there would be no such incentive, and if the Rates were calculated on the rental value of the site alone (and not the buildings as well) there would be less disincentive to maintain and improve buildings.

c) SDLT and Capital Gains Tax are transaction taxes, they depress the number of transactions. Planning fees, the Community Infrastructure Levy and s165 agreements are taxes on (new) construction, so depress the amount of new construction.

d) All these taxes would be the among the first to be replaced by LVT, which tends to encourage optimum use of sites, be that actually using the existing building, selling it to somebody else or building on it.

1b. "What if a developer has paid out under a s106 Agreement?"

See Wiki for a brief explanation of s106 Town & Country Planning Act 1990.

If in doubt, apply common sense. If a developer has paid cash or paid for specified expenditure not directly related to works on the site itself, that is to all intents and purposes a prepayment of LVT. If the developer of a site has incurred such expenditure in the past and still owns the site, then the value would be amortised over (say) thirty years from the year of payment, and the developer/owner of the site gets a credit/deduction of 1/30 of the amount for the remainder of the thirty years.

For example, it is 2017 and a developer paid £300,000 (planning fees, SDLT, CIl and so on) in 20073, that gives an annual credit/deduction of £10,000 for the years 2003 to 2033. The first ten years have been used up and so for the next twenty years, the developer gets a £10,000 credit/deduction.

2. "Owners will have no spare cash to pay for improvements"

Nonsense on at least four levels:

a) If you are buying a building and it is in disrepair, you get the discount when you buy it which compensates you for the cost and hassle of doing it up once you've bought it.

b) If you buy the building with an mortgage, that is no disincentive to keeping it in good condition. LVT is like an interest-only, non-redeemable, non-recourse mortgage, so is no disincentive to keeping it in good condition.

c) The cost of maintenance and improvements includes a large element of VAT (and income tax, unless you do cash in hand) and those costs have to be paid out of your net earned income. If your net earned income is higher, VAT is gone and the tax which your builders have to include in the price to leave them with enough to live on is lower, then the overall affordability of maintenance and improvements improves dramatically. In real terms, the number of hours of paid work you need to do to earn the money pay for any particular job will fall by at least a third.

d) By and large, people would rather live in a home in good condition. If you over-occupy, so that your earned income isn't enough to pay for the LVT (or interest on the interest-only loan) and the improvements, then you are in the wrong house. You can just trade down to somewhere you can afford, and somebody else willing and able to pay the tax will buy it from you. That's quite different to current rules, where people hang on to houses which are becoming increasingly dilapidated because there is no obvious holding cost.

3. " Construction companies will either go out of business or pass on the tax as higher selling prices"
Caroline Lucas was harangued by somebody from the Home Builders Federation (or similar) on the radio, who claimed that Land Value Tax would make building new homes unviable.

She didn't actually rebut this with the obvious point, so here it is:

From designingbuildings.co.uk:

Residual valuation is the process of valuing land with development potential.

The sum of money available for the purchase of land can be calculated from the value of the completed development minus the costs of development (including profit).

The complexity lies in the calculation of inflation, finance terms, interest and cash flow against a programme time frame.

Please note - it is quite clear that the developer's costs do not push the selling price of the finished building up, that is fixed; the developer's costs push the purchase price of the land down!

Here's a real life example:

OVer ten years ago, I advised a company which was selling an acre of semi-derelict land in north London, they were unsure how much they'd get for it. Somebody from a larger homebuilder told me - blurted out in a meeting, really - that when they were buying land in that area, they'd pay up to £50,000 for each flat that they could build on it (it would be double that now).

In round figures, each flat could be rented out for £7,000 a year, less costs = £6,000; they could be sold for £120,000; the pure build costs per flat were £50,000; and the developer expected a profit/contingency per flat of £20,000.

That leaves £50,000 which the landowner gets under the "residual valuation" method. The developer has to finance that purchase somehow, so he ends up paying £3,000 or £4,000 a year in interest to his own financiers (bank, bond holders etc) for the duration of the build
---------------------------------
Now, what if the developer knows that for the duration of the build, he is going to have to pay full-on LVT for each flat/equivalent of £4,000 (net rent £6,000 less bricks and mortar allowance of 4% x £50,000)?

1. Let us assume that the shift to LVT pushes down the selling price of the flat to £80,000.

2. The builder will simply stick that into his calculations, deduct the £50,000 build costs, the £20,000 profit margin/contingency (the tax due on these elements would be much lower, so the £50,000 and required £20,000 would be lower, but by an unknown amount) and the £4,000 LVT he would have to pay (assuming project takes a year to complete) and offers (say) £6,000 per plot.

3. The developer's profits are entirely unaffected. And as it happens, the £4,000 LVT he has to pay is a straight swap for the £3,000 or £4,000 interest he would have had to pay to finance the purchase of the land under current rules.

4. The landowner has to accept the offer of £6,000 per flat; his alternative is paying [£4,000 x number of flats] each year for the privilege of owning a derelict site. In theory, there might be a flood of landowners literally giving away their brownfield sites.

5. Clearly, there will be marginal situations where the theoretical land value dips below zero (the finished selling price might be lower than £80,000 or the project might take much longer); so even if the developer is given the land for free, his profit margin of £20,000 will be so eroded that it's not worth the hassle.

6. In that case, if the council wants the development to go ahead, it can simply waive the LVT for the duration of the build, or for the next one or two years (or whatever), pushing our developer back into the black. That will just be part of the usual negotiations and haggling between the developer and the planning department/local council (the LVT exemption is like a Section 106 payment, but in the other direction).

L. LVT would make people live where they don't want to

• If you increase the tax on inner city/urban/suburban/rural land, that will force land owners to over-develop
• If you increase the tax on urban etc land, that will price people out and force them away (skip to article covering both points)
• Poor Widows will be forced to move away from their family and friends (skip to article)
• Millions of households will be uprooted and the country will descend into chaos (skip to article
• Greedy developers will get planning permission for my land, forcing me to pay more (skip to article)
• The disappearing homes conundrum (skip to article)

There are infinite variations to these arguments of course. It's traditional to say "If farmers had to pay LVT, they would be forced to abandon/sell off all their fields to [greedy] developers and the countryside would be concreted over" (clearly this is not true, it all depends on how high you set the rate and whether you grant planning permission).

The argument has also been advanced that if the tax on inner city land is very high (and it would be), then land owners would be "forced" to build sky-high skyscrapers to try and collect enough rent to cover the tax, so we would all end up living in a giant tower block. Does that not contradict the first argument?

1. "If you increase the tax on inner city/urban/suburban/rural land, that will force land owners to over-develop" and "If you increase the tax on urban etc. land, that will price people out and force them away"

a) The arguments are starting at the wrong end. It is markets, i.e. tenants, owners and potential owners who decide what rental values in different areas are, taking all factors into account. And LVT is based on market rents. A tax not based on market rents is not LVT.

b) So if people are living somewhere paying rent (and in economic terms, an owner-occupier is paying rent, he's just paying it to himself) then clearly the rent is not high enough to drive them away; the LVT does not increase the rent and so LVT cannot possibly drive people away en masse any more than rents do (although clearly it will tend to speed up the process whereby lower income people live in some areas and higher income people in others).

c) We have established that LVT would have little impact on the amount of new construction, it would neither increase nor reduce it to any significant degree, and planning and zoning laws will always trump LVT/market forces.

d) LVT will only have an impact on sites which are chronically underdeveloped compared to neighbouring sites, so derelict and vacant sites will be brought back into use, and if that means building a new building, so be it. As long as a site is developed to something approaching its optimum permitted use then the owner thereof will be making a nice little profit. There is no pressure on him to do anything except keep his building well maintained.

e) So there's no question of either of these nightmare scenarios happening.

f) As we established in an earlier footnote, in any typical town, there is a close relationship between site rental values and build density. They are highest in the centre and fall, the further away from the centre you go. Therefore, the actual site rental value per home as you move outwards changes relatively little; for the same amount of money, you can live in a small flat in the centre; a small terraced house in the inner suburbs or a semi-detached in the outer suburbs.

g) So the LVT for most homes in any particular town would also be surprisingly similar. Of course, there are big houses in inner suburbs, which would be very expensive, and small flat in the outer suburbs which would be very cheap; and of course there are "nice" and "grotty" areas and so on, that's a separate issue. So if the LVT per home is fairly similar, it wouldn't really change people's decisions on where to live very much. The same old trade off between convenience/no garden and less convenience/big back garden remains the same.

2. "Poor Widows will be forced to move away from their family and friends"

Of course it's always the Poor Widows, isn't it?

Fact is they wouldn't be forced to move, they can choose to defer and roll up the tax to be repaid on death, even if house prices were to halve, we'd still be collecting 60% plus of the tax. So they only move if they decide that they want to pass on more of the value of their homes to their children rather than consuming that value themselves. To what extent the Poor Widows' heirs put pressure on them to trade down remains to be seen.

Further, cases where the only home they will be able to find within their budget is far away from family and friends would only apply in a small minority of cases in the short or medium term:

- if both they and their "family and friends" live in low tax areas, it doesn't apply. There'd no pressure to trade down and nowhere to trade down to.

- if they live in a low tax area and their adult children live in a high tax area, then LVT wouldn't make any difference.

- if they live in a high tax area and their adult children live in a low tax area, not a problem. They win on both sides of the equation.

- if both they and their adult children live in a high tax area, then the Poor Widow can either move into a smaller home, cutting her tax bill in half, and/or she can ask her high earner adult children (who would be saving most tax under a flat income tax system) to pay her tax for her (which is much the same as allowing her to defer and roll up the tax).

In the long term, the whole issue would melt away:

Planning for LVT payments during retirement would just be part of normal retirement planning and people would get used to the fact that "their home is their pension" in a literal sense; it is the asset which is used to fund LVT expenditure during retirement.

And with a more balanced and stable economy (i.e. not one fuelled by credit bubbles, land speculation and over-consumption) and low and stable house prices, far fewer children would move away from their parents. There are two main reasons why this has happened:
- if the parents live in an area where house prices have rocketed (London, south east and south west) then children can't afford to live anywhere near their parents;
- if the parents live in an area where house prices are low, this is mainly because of the lack of job opportunities, so their children move elsewhere where they can find a job.
These factors would be greatly reduced by an LVT/flat income tax system.

3. "Millions of households will be uprooted and the country will descend into chaos"

Having made three unrealistic assumptions on the basis of no information whatsoever, the extreme view is that there will be some sort of destructive internal migration, a game of musical chairs where millions end up on the wrong chair or on the floor.

Yes, there will be some households who end up down-sizing and an equal number who end up up-sizing, which adds up to a general "right-sizing" which must be a good thing, it's like a man with size nine feet and a pair of size ten shoes swapping shoes with a man with size ten feet and size nine shoes, but never mind, the real question is, how many such households will there be?

The answer is "not that many". The Joseph Rowntree Foundation did some research and came up with the following table, showing the correlation between households by income and households by Council Tax band, which we can use as a rough and ready proxy for value of home and hence likely Domestic Rates bill:

Assuming two adults (and hence two personal allowances) per household...

* eighty-one per cent of households, those above the horizontal black line, will be paying less in Domestic Rates than they did in Council Tax, as well as paying less in income tax. Nothing to worry about there.

* ten per cent of households, those in the top right-hand corner, will be paying less in Domestic Rates than they did in Council Tax and saving thousands or tens of thousands of pounds in income tax. Absolutely nothing to worry about there.

* nine per cent of households, those in the bottom right-hand quadrant, will be saving thousands or tens of thousands in income tax and paying thousands or tens of thousands more in Domestic Rates, most of them will end up better off and only a very few will be forced into penury, so not much to worry about there either.

* the whole debate seems to be focused on the ten per cent of households in the bottom right-hand corner, who will be paying more in Domestic Rates but not saving much in income tax. We can sub-divide these relatively few households into the following groups:
- a third of them are pensioners, who can go for the deferment/roll-up/pay on death option.
- some of them will break even anyway (income tax saving = Domestic Rates bill)
- some will be able to take evasive action, like getting a better paid job, taking in a lodger, having their adult children live with them for longer etc.
- some will be living in a house which is far too large for them, so they can halve their Domestic Rates bill by moving to a smaller home in the same area.
- some are unemployed and claiming Housing + Council Tax Benefit. I'm all in favour of a welfare system that pays for the basic essentials, but I don't see any rationale for paying "private" landlords to house people in swanky areas, they can shape up or ship out.

So realistically, how many people will be "cruelly forced to down-size"? Maybe three or four per cent of all households?

And how many households will be chomping at the bit and ready and able to up-size? A third of those in the top right-hand corner, perhaps? So that's three or four per cent of households ready to trade up.

For sure, three or four per cent of all households is a million households, which sounds like a lot but that is normal annual turnover in the UK housing market, a million households move home every year anyway, the two categories largely overlap, so the net extra number of movements is barely a blip in the overall scheme of things.

Or are we really going to allow the vested interests to impose a tax system using three or four per cent of households as a human shield to impose a heinous and wicked tax system on the eighty per cent "above the line"?

4. "Greedy developers will get planning permission for my land, forcing me to pay more"

Developers are always "greedy", that's one of the rules.

It is a quirk of English planning law that you can apply for planning permission for somebody else's land, and one of the basic rules of LVT is that the tax is based on the site premium of the land assuming optimum permitted use, so in theory, this could happen and the Home-Owner-Ists fall over themselves to use this as a killer argument.

Funnily enough, I have only ever seen this as a hypothetical case. I have never actually heard of it happening to anybody, that they wake up to find a fat envelope on the door mat, full of blueprints and terms and conditions from the planning department explaining what the new building could be.

It would of course be a simple matter to restrict LVT up-ratings to cases where the owner himself has applied for more generous planning, but in reality, how often do developers apply for planning on somebody else's land without their knowledge or permission, and would it really be more common with LVT?

It could only happen in two basic scenarios:

SCENARIO 1: There is a smallish bungalow on a single very large plot (which has a correspondingly low-ish tax bill, assuming this was the optimum permitted use so far), which is crying out to be replaced with a few houses or a small block of flats. In which case, why is this so terrible? For sure, one bungalow owner has the inconvenience of moving, but a few families get to live somewhere convenient, and the construction people get to make some money and create new wealth (buildings).

And how many such plots are there? Even if the developer gets the planning permission, the owner of the bungalow can still hold out for a ransom price for his bungalow, and he would (by definition) end up with plenty enough money to buy a different bungalow on a maybe slightly smaller plot, with a lower tax bill and a bit of spare cash for his time and trouble.

If you own a semi-detached house or a terraced house, you are pretty much insured against this happening. A developer can only squeeze out extra income if the existing house is in the top fifth of all houses by value and if it can be replaced at least three flats - and that's in an LVT-free world. We can safely assume that the council will increase the LVT bill accordingly if the development goes ahead; so the council can either turn down the planning application anyway, or it could nod it through but then (whether accidentally or on purpose) make it economically unviable by proposing "too much" additional LVT. In which case the planning application is withdrawn and no harm done.

Try for yourself with the ZohoSheet:


SCENARIO 2: A developer is trying to buy up two or more adjoining plots in order to build something bigger. This is an absolute nightmare position for a developer to be in, as each individual plot owner can hold him to ransom and bump up their prices accordingly so that they bank the planning gain uplift and not the developer.

So let's assume the planning department grants the developer permission to build a new shopping parade and car park covering ten existing plots. By how much does the rental value of any of those plots increase? By not one penny; the rental value of one-tenth of a shopping parade is precisely £nil. So the optimum permitted use, being to leave it as housing, is not changed and the tax would not change.

Furthermore, even if each owner were charged to tax on one-tenth of the rental value of a shopping parade, who's to say that this is significantly higher than the rental value of one single house? It probably will be more, but only twenty or thirty per cent more. If the gain were larger than that, somebody else would have already built a shopping parade somewhere else in the vicinity.

Unlike the Homeys, I've actually looked into this. The car park at the top of my road is about twice as big as a normal residential plot, and the total income they get from parking charges is about the same as they'd get if they built two houses on it instead. If they were earning significantly less, then they'd build two houses on it. And if could earn more from a car park than from housing, then some of the newer houses would never have been built, there'd be another car park instead.

Taking an extreme case, Heathrow airport:

How much does Heathrow earn for BAA? Not quite clear, but it made £110 million in the three months to September 2012 = £440 million a year, with far higher political risks than housing.

The airport covers 4.7 square miles = 3,100 acres, at a density of 10 homes/acre (low by London standards) = 31,000 homes, which you could reasonably rent out for £15,000 each a year = total income £465 million. Or BAA could flog off the land for easily £1 million/acre, they'd get £3.1 billion for it (minus the cost of digging up the tarmac. They can convert the passenger terminals to a shopping centre or something). And that is a stress and hassle free type existence, far simpler than running an airport with 70,000 employees and 70 million passengers and 400,000 aircraft movements etc.

Have you never noticed that when new airports are built, they are built out of town? This is not just a safety thing, it is a land cost thing. Airports make less money per square yard of land than suburban housing, so they are built where the only alternative use is farmland, where the rental value of the land is negligible. Suffice to say, even if the local council went totally mad and granted planning for an airport to replace tens of thousands of houses, the LVT bill would not go up.

And don't forget that planning permission usually expires after three years (another man made law which could easily be changed). If the current owners and the developer haven't sorted things out within three years, the whole topic has died a death.

5. "The disappearing homes conundrum"

This cracked logic comes from the vested interests, and is cheerfully perpetrated by the UK government.

It goes like this: young people need homes; homes are expensive and they can't afford to buy, but they can afford to rent. Therefore they need landlords. So we have to encourage landlords (via tax breaks and subsidies) to invest in housing so that there are more homes for the priced-out young people to rent. If we had LVT (the opposite of a subsidy), then being a landlord will be less profitable, so there will be fewer homes to rent. Worse than that, some homeowners won't be able to afford the tax, so they will have to sell up and rent as well; so there will be more potential tenants chasing fewer homes and this will push up rents.

So with fewer landlords, fewer homeowner and more tenants, homes will simply cease to exist and disappear from the system.

The reality is this: young people need homes; homes are expensive because of all the subsidies to land ownership; so banks demand higher deposits, which only people who have already made nice capital gains on housing they already own can afford. It is physically impossible to "invest" in land, the land is just there. If we spent less money on buying land and more on buildings homes, we could afford to build more homes. If people can afford to rent, they are paying off the landlord's mortgage, so actually they can more than afford to buy. Even with LVT, being a landlord will still be profitable, the absolute cash profit net of tax and without subsidies will go down but the percentage return on capital is fixed, so prices will fall. If prices fall, then young people will be able to afford deposits again and will be able to buy.

There will be the same number of people and the number of homes, or even more homes. If landlords decide to sell up, then they will sell to sitting tenants. If these tenants could afford to pay the income tax to pay for the subsidies and then pay the rent to cover the mortgage repayments on the inflated mortgage, they can easily afford the lower mortgage repayments and the tax on the land will be less than the reduction in tax on their income anyway (they win on both sides). And a homeowner can cease to be a homeowner by selling up and becoming a tenant, but he will either sell to a landlord or to another owner-occupier. The number of homes can't possibly go down, and even if not a single new home is built, the tax will encourage people to bring derelict and empty homes back into use.

M. LVT is anti-free market

• The government will effectively own all the land and thus own everything (skip to article)
• Land use and land ownership are best left to the free markets (skip to article)
• Landowners compete with each other and there is a free market in land (skip to article)
• Landowners are doing us a favour by keeping some land out of use and/or deciding how it should be used (skip to article)

1. "The government will effectively own all the land and thus own and control everything"

Nonsense on several levels:

a) Society as a whole via the government, already imposes massive restrictions on what can be built where and how the finished buildings can be used.

It is particularly hypocritical when land owners say in one breath that they don't like having restrictions imposed on what they do, and in the next breath to say that other people shouldn't be allowed to do what they want (NIMBYs).

It is a separate topic whether planning laws are too strict or not strict enough, let's assume that they are "about right" but whatever your view, it is clear that there is no free market (i.e. non-governmental) solution to balancing the competing interests of neighbouring landowners or of charging for external costs. So planning is only given if there is some vague kind of democratic majority in favour of it - the problem is that there are different constituencies.

For example, the whole town benefits from having a sewage works, but only a small number of landowners bear the burden (the occasional smells when wind and weather are unfavourable). Should we shut down the sewage works for the marginal benefit of the minority if this causes a far greater loss to the whole town?

b) By collecting LVT, the government acts as a kind of landlord collecting ground rents. That does not mean that they have to decide what goes on any more than a private landlord tells his tenants what kind of job they have to do or what kind of business to run. Landlords are quite happy if they can collect the maximum rent and are indifferent as to how their tenants make a living.

c) How is LVT worse than income tax?

If it were true that LVT is "nationalisation of land" (it's not of course, it is nationalisation of the rental value of land), then income tax etc. is the nationalisation of labour, enterprise and capital.

Only it's not, is it?

Even if the overall average tax rate on earned income is 40%, then it must be pretty clear that the government does infinitely better by allowing everybody to decide how to earn their living five days a week and then taking 40% of the cash income (to spend on policemen, teachers, nurses) than it would by allowing everybody to work for themselves tax-free for three days a week and then for two days a week to be forced to report for compulsory service as a policeman, teacher or nurse.

d) There must be plenty of people who rent their homes from the council or a housing association, send their children to state schools, only use the NHS and work in a business which rents its premises from some arm of the government (council, Crown Estates etc). Such people survive perfectly well without being the freeholder of any land whatsoever. Surely it is better to reduce their income tax bill rather than their rent bill?

2. "Land use and land ownership are best left to the free markets"

Nonsense on several levels:

a) Land is not and never can be a free market - it is a monopoly or a cartel (see below).

b) It is of course vitally important that people have the right to exclusive possession of certain bits of land, for agriculture, for living on and for their places of business.

This does not mean that people can't be expected to pay for this, and indeed tenants and people with mortgages are paying for this. But ultimately, what underpins anybody's right to exclusive possession? It is the whole of society which underpins it by mutually respecting each others rights, and by paying taxes towards the police and courts system to protect this right against burglars and trespassers.

Tenants and people with mortgages are paying full market value for exclusive possession, but not landowners in their capacity as landowners. The majority of landowners, i.e. the working population with one main residence, are actually paying more in income tax etc than they would have to pay in LVT, but there is little relationship between the amount of income tax etc. they have to pay and the benefits they get qua landowner.

So the fact that some people have to pay full whack for something actually provided by the whole of society; and others pay nothing or are collecting full whack is surely a massive market distortion?

c) I trust you are familiar with the concept of "ransom value". The developer of a larger scale project has to buy materials and hire labour, all of this is done at market prices. No supplier or worker can demand more than the market price, because the developer will just go elsewhere.

But if that same developer needs to buy up more than one plot of land ("site assembly"), then the owner of each individual plot, however small, can demand a huge premium, the "ransom value", because each one knows that without their plot, the whole larger project cannot go ahead.

Conversely, the value of the plot in isolation might be very low or negligible. Is this not a massive distortion of the free markets?

d) And isn't all land value ultimately "ransom value"? Everybody has to live somewhere and all businesses have to be carried out somewhere (just like everybody needs air to breathe); they can negotiate freely with all other counter parties, and where one type of business looks particularly profitable, there will be new entrants. But once all locations are owned, there is a complete monopoly in place, and no new ones can be created. As the saying goes: "If you owned all the money in the world and I owned all the land, how much would I charge you for the first night's rent?"

3. "Landowners compete with each other and there is a free market in land"

a) Landowners pretend that land is a free market by pointing out that everybody can buy land, provided he offers a high enough price, and that a million homes change hands every year. That proves absolutely nothing. Imagine a business (let's say, a water company in a country without price regulations). Clearly, it will try and charge the profit-maximising price (which would be several times as much as what water companies in the UK are currently allowed to charge), and will make super-profits which bear no relation to its costs.

And let's further imagine that this is a publicly listed company, whose shares can be freely bought and sold on the Stock Exchange. Does the fact that anybody can buy some of a restricted number of shares in the monopoly mean that the company does not have a monopoly, or that all its shareholders taken together do not have a monopoly? Of course not. Owning land is not like purifying and selling water, it is like owning share in that company. There are only so many shares in total and hence a limited number of co-owners of a fixed cake monopoly.

b) In day-to-day terms of pricing (rents or selling prices), landowners can do something which otherwise only monopolists (or a cartel) can do, which is called first degree price discrimination. What this means is that people who are willing and able to pay the most get charged a much higher price than those willing or able to pay least. So in pre-NHS days, the village doctor would charge the grand lady in the mansion house £10 for a treatment and a worker in a cottage 10 shillings for the same treatment. As long as the medicine etc needed cost 9 shillings or less, the doctor is making a good enough profit from the worker and a super-profit from the grand lady.

c) This is because by and large, most households only rent or buy one house at a time. Each household has a different budget and different tastes. And there is only a limited number of broadly suitable houses available to rent or buy in the area they want to live, and there will be an equal number of potential tenants or buyers chasing those houses.

d) So the nicest house will go to the highest bidder, and he drops out of the market. The second nicest house goes to the highest bidder from those remaining, and so on. Each house can only be sold or rented to one person, and each time, it goes to the highest bidder.

e) This is just like the monopolist doctor maximising his income by charging either £10 or 10 shillings depending on who his patient is. The grand lady and the worker cannot game the system by him paying for two treatments and selling one to her for 15 shillings. The household who bids the highest amount for a house cannot game the system by sub-letting or selling-on to an even higher bidder (because there simply isn't one). And, like the doctor who pays the same for the medicine regardless of how much he charges for the treatment, the cost of the landowner of providing a house in an expensive area is much the same as the cost of providing a house in an expensive area. Everything over and above that actual cost (a few thousand pounds a year, if truth be told) is pure monopoly income.

f) And so we conclude that when prices are set, it would't make any difference whether all the houses which are on the market at any one time belong to lots of different people or whether they all belong to the same person. For example, when a home builder builds an entire new estate with hundreds of homes, can he sell them all for a higher price simply because he owns them all? No of course not, because the first wave of purchasers aren't prepared to pay more for them than what they reasonably be able to sell them for 'second hand' (when there will be diffuse ownership, but only a few on the market at any one time).

The price setting mechanism for each home is thus a separate, discreet one-off transaction which has little impact on the others (apart from setting general guide prices). In fact in some respects, it might lead to a less-bad outcome if they all did belong the same person, but that's a different topic. So all landowners act as a monopoly or a cartel. Which is yet another indication that land is far from being a free market.

4. "Landowners are doing us a favour by keeping some land out of use and/or deciding how it should be used"

This is a fairly insane theory put about mainly by Faux Libertarians, the argument goes thusly:

- Land owners are bestowed with some particular gift of foresight which enables them to tell exactly how land should be used; by putting the land to that use, they are adding value to society (despite they are clearly keeping most of it for themselves) and if any of their corresponding rental income is taxed away, then this will lead to sub-optimal decisions or take away the motive for developing at all.

(Nonsense - yes of course, in some situations, it can require a fair amount of judgement, skill and 'vision' to see through a particular big project, but this work will be done by employees or sub-contractors (architects etc) of a land owning corporation, who have no proprietary interest in the land whatsoever. The real owners of the land - the company's shareholders - are not, and do not need to be, bestowed with any vision or foresight. In terms of incentives, why reward the shareholders with 90% of the gains and give the employees 10%? Would it not lead to the same outcome if the employees and sub-contractors just get their 10%?)

- Conversely, there is some marginal or sub-marginal land which should be left undeveloped or used as farm land. If this is taxed, it will "force" our long-suffering landowners (bestowed with all that foresight and vision, of course) to over-develop to try and get enough money to pay the tax.

These arguments are nonsense and cancel each other out anyway.

a) Most land which is worth developing is already developed, and to the extent that land is developed, LVT encourages owners to put the land and buildings to their optimal use, i.e. to keep the buildings in good repair and get some tenants in or sell it to an owner-occupier.

b) It is the users of land (ordinary people and businesses) who decide what optimal use is, which is easily determined by looking at market rents and prices. So if premises on a busy and noisy high street can be rented to a residential tenant for £500 a month but a business user is happy to pay £800 a month to use them as an office or shop, then the business user wins. All the landlord has to do is rent the premises to the highest bidder.

c) With undeveloped land, nine times out of ten, the best use is simply to do whatever the neighbours are doing. If its a vacant plot in a residential area, build housing, if it's a vacant plot on an industrial estate, build an industrial unit, if it's farm land in the middle of nowhere, rent or sell it to a farmer. The owner can cast the net wider; if there are no shops for miles around in a residential area, the best use might be to build a shop, but the developer can hedge his bets by building a building which could be used for retail or residential, or retail on the ground floor and residential above.

d) And the tax rate on marginal land, which to all intents and purposes is the 80% of the UK by surface area which is forestry, farmland, marshes, flood plains etc will be very low (between £0 and £20 per acre per year at most) to take account of the fact that the income from the most profitable use (forestry, farmland, doing nothing) is also very low or nil.

Even if a farmer in the middle of nowhere could get permission to build a few houses, then he would be stupid to build them as the rental value would be very low (no mains water, electricity, no broadband, miles from jobs and schools etc). The most profitable use for those fields is quite simply farming, with or without a tax.

N. Valuations are impossible

• Valuations are impossible, subjective, can’t be decided by government (skip to article)
• The Army Of Surveyors (skip to article)
• Endless appeals, would cost more to collect that it raises (skip to article)
• What about leaseholds and freeholds? (skip to article)
• What about unregistered land? (skip to article)
• What about social housing? (skip to article)
• Not all flats in a block are worth the same (skip to article)
• What about protected tenancies? (skip to article)

Let us get this clear from the off. The tax is not based on absolute selling prices from time to time, it is based on the "annual site premium" of any site,(although relative selling prices prior to the tax being introduced are a good enough proxy for rental values to get the ball rolling) which is quite simply the difference between:
- The total annual rental value of any plot of land and buildings on it (or permission to build on it), and
- The rental value of very similar land and buildings in the cheapest area (provided that those buildings can actually be rented out at all).

We already have perfectly good records for commercial land and buildings, which are used for assessing rateable values for Business Rates, so we need not concern ourselves further with those.

Residential land and buildings are even easier than commercial. I have explained how it would all work on a separate page (it's surprisingly easy to do).

1. "Valuations are impossible, subjective, can’t be decided by government."

a) No they're not, they are very easy to establish for 99% of homes.

b) The site premium is not "decided" by the government, all the Valuation Office Agency does is observe what market rents are and allocates homes to bands accordingly. They are perfectly capable of doing this for Business Rates, and the Council Tax banding exercise went without too much of a hitch, as did the fairly recent full revaluations in Wales and Northern Ireland.

c) It's like saying "If we had income tax, then the government would be able to decide what your taxable income is." Ignoring silly tax breaks, by and large it is you, operating within the constraints of supply and demand, who decides what your taxable income is; the government then levies a tax on that resulting figure.

The problem with the existing system is that:
- first the government decides whether a business is VAT-able or not; if it is, the government takes an arbitrary percentage of your gross profits in VAT;
- when salaries are paid out, and the government takes arbitrary percentages in income tax and National Insurance;
- of what's left the government takes an arbitrary amount in corporation tax;
- when a company pays dividends then some shareholders have to pay an abitrary amount in higher rate income tax.
- and the government might then give individuals an arbitrary amount of money back for transferring money into favoured schemes (pensions) or take away a further arbitrary amount of money in benefits withdrawal.

At each stage, there is a pseudo-scientific statutory method of working out a precise arbitrary percentage of a large number of precise but ultimately arbitrarily chosen large amount. The actual effective tax rate can thus be anything between negative and over one hundred per cent, with an average marginal rate of about fifty per cent.

It is far better to have a single layer of tax levied at a high rate on a reasonably accurately assessed lower amount, i.e. LVT, ultimately, LVT is far less arbitrary.

d) Values are not "subjective" either any more than the price which any supplier charges is "subjective". An airline doesn't know or care exactly why any particular passenger on any particular flight decided to fly where he did and when he did. The airline just charges the highest price it thinks it can get away with and still have a fairly full flight. If enough people are willing to pay it, then that is the market value of that service.

e) Most people will be perfectly willing and able to pay the LVT, and by simply paying it, that sends a signal that the tax was not "too high". And yes, of course there will be some home owners who decide that they'd rather trade down and save some money, but there will be plenty of others who'd like to trade up. The selling price of homes will adjust to whatever the parties think is a fair net payment for swapping places.

f) Once the tax is in place, the selling price of houses will be the new correct market price taking the tax into account. Similarly, the tax will always be the correct amount of tax, taking the selling price of houses into account.

2. "The Army Of Surveyors"

Compare and contrast: if the government wants to find out how much you earn, it has to employ people to do a lot of snooping, they have to see your payslips, employment contract, bank statements etc. Even with the force of the law on their side, people can still cheat. Most don't, because they can't be doing with the hassle of an investigation, but they would if they could. And these calculations have to be done from scratch every month, every quarter and every year. Last year's turnover, wage bill, income or profits are only a very rough guide to this year's.

In contrast, how difficult is it to establish the site premium of any home? Very easy indeed. Once all homes are valued and banded, then it is an easy matter to observe how rents and selling prices develop and index homes in different areas up or down accordingly, every year is an incremental exercise only.

There is also absolutely no need for internal inspections, that goes against the whole point of the tax!

The site premium depends on where a plot is, what sort of planning permission it has and how big it is, plus or minus a few external factors (like being next to a mobile phone mast), that's all. And HM Land Registry, the Valuation Office Agency and local planning departments already hold 99% of this information.

The point is that if the average total rent for generic 3-bed semi-detached houses in Area Such-and-such is £10,000 a year and the total rent for similar generic 3-bed semis in the cheapest zero baseline area is £4,000 a year, then the site premium in Area Such-and-such is £6,000.

All generic 3-bed semi detached houses would be allocated to Council Tax Band D the tax on Band D homes in the zero baseline area would be close to £nil (by definition) and the tax on Band D homes in Area Such-and-such would be £6,000 a year (or a percentage thereof) and no back chat. The tax is the same for a semi which is in tip-top condition with brand new kitchen and conservatory as it is for one in the same area with no central heating and an outside toilet.

3. "There will be endless appeals, the tax will cost more to collect that it raises."

Again, nope.

In the real world, the UK has Business Rates, which is a lot like LVT but the valuations are more complicated because they take the bricks and mortar into account and Council Tax, which puts homes into Bands..

The system proposed here is to adapt and adopt the Council Tax system, so all similar homes are in the same Band, and all homes in a Band in an area have the same tax bill. A lot of people might appeal against the initial Banding if they can show that their home/plot has the same or a lower site premium than homes/plots in a lower band, in which case some homes/plots will be moved down a band (and others up a band).

Once homes/plots have been allocated to Bands, there is little need for homes to be shifted between Bands. The LVT due for all Bands in each area will be indexed up or down for changes in local average rents.

As to the cost, even die-hard Home-Owner-Ist Eric Pickles admitted that a full Council Tax rebanding would cost a mere £10 per home. His other claims in the linked article are quite simply ouright lies:

He also says a revaluation would cost around £260 million, see ‘snoopers’ going into homes to revalue them, and take three years to implement fully

and we have the experience of the original Council Tax valuations/Banding and the more recent revaluations in Wales and Northern Ireland to prove it.

In detail:

The work of the VOA encompasses:

* compiling and maintaining lists of rateable values of the 1.7 million non-domestic properties in England, and the 100,000 in Wales, to support the collection of around £25 billion in business rates; [that's an average Business Rates bill of £14,000]

* compiling and maintaining the lists of council tax bandings of some 23 million domestic properties in England and 1.3 million in Wales, to support the collection of around £26 billion in council tax;

According to page 66 of their Annual Report 2011-12, they have just under 3,000 employees keeping all those valuations up to date.

Under proper LVT, valuations for commercial land and buildings would be a lot simpler but valuations of residential would have to be a bit more sophisticated because there would be more bands (at least twenty or thirty), broadly speaking the workload wouldn't change much (it can all be computerised, everything can be indexed up from year to year, and so on).

The VOA's total running costs including salaries, IT and so on are about £200 million a year, i.e. 0.4% of tax collected; and only about two or three per cent of Business Rates and Council Tax go uncollected. That's not absolutely brilliant, but far, far better than for any other taxes (collection costs approx. 1% and evaded and unpaid taxes about 10%).

The Valuations Tribunal deals with appeals against Business Rates and Council Tax valuations. There were 180,000 appeals against Business Rates valuations in 2011-12 (that's one-in-ten valuations, but three-quarters were agreed within the year) and 2,040 appeals against Council Tax bandings (that's one-in-twelve thousand bandings), see page 7 of their Annual Report 2011-12. The Tribunal employs about 80 people.

4. "What about leaseholds and freeholds?"

The connoisseur then advances this argument, which means that they have ignored Rule One, that the tax is on the annual site premium or ground rent.

With blocks of flats, we often find that there is a freehold and several layers of leaseholds before we get to the real leasehold, the one that gives exclusive possession in exchange for the next ... years in exchange for payment of ground rent to the next leaseholder up, who pays ground rent to the leaseholder above him all the way up to the freeholder, who just collects.

The rental value and hence site premium of the leasehold flats (level 1) is easily established, and if they have to pay £100 ground rent each to their immediate superior leaseholder (level 2), then the level 1 LVT assessments are knocked down by £100.

The leaseholder at level 2 thus has [number of flats] x £100 ground rent = income and pays [random amount] to the leaseholder at level 3. If the level 2 leaseholder receives more than he gets, the net income is what is liable to tax (at up to 100%). If a leaseholder decides it's not worth the hassle of collecting it, merely to pay most or all of it over in LVT, then he is free to waive it, and the LVT assessments on the flats go up by £100 a year each.

5. "What about unregistered land?"

The notion that we can't have LVT because there is so much unregistered land is another myth.

a) It's not the land which is unregistered as such, it's the owner who hasn't bothered to register himself. Either way, this does not stop the land being assessed to tax just like any other land; the valuations and banding are quite independent of who owns it and whether he or somebody else occupies it - we manage to assess Council Tax and Business Rates on 'unregistered land' without too much of a hitch.

b) Even if it were true (which it isn't), this is an irrelevant consideration, or else they could have opposed the introduction of the national income tax two centuries ago on the basis that there was no official register of how much people earn. Working out who owns (earns) what is part and parcel of any system of taxation of rental values (or incomes).

c) It is quite true that back in 2005, HM Land Registry's Strategic Plan (which I can no longer track down online) said that half of land by area was as yet unregistered, but that they hoped to have full registration by 2012.

As it happens...

d) By 2012, HM Land Registry had completed registration of over eighty per cent of land, and if they keep going at this rate, they will have full registration in four or five years.

e) On an administrative level, this was pretty irrelevant, as the unregistered land was largely agricultural land, the total rental value of which is about £2 billion a year, as against the rental value of residential and commercial land which is over £230 billion a year (and which would be much higher than that if earned income, output and profits were not taxed).

f) All this residential and commercial land is already registered for Council Tax or Business Rates purposes, even if it is not registered at HM Land Registry. So we can run Council Tax and Business Rates perfectly well, even though the owners of some bits of land are not registered with HM Land Registry, so we can run LVT without every owner being registered. HM Land Registry also runs a separate registry for mortgages secured on unregistered land.

g) Even if valuable urban land is not even registered for Council Tax or Business Rates (how, exactly?), then it is still physically there and shows up as a blank on HM Land Registry's computerised maps. So what "unregistered" means is that HM Land Registry don't officially know who the owner is.

In which case, the LVT bill gets sent to the occupants (just like with Business Rates and Council Tax). If they are the owners, they pay it. If they are tenants, it's their choice whether to pay or not, or to tip off the council as to who their landlord is. If the tax doesn't get paid, despite demands being issued, i.e. if the plot is unoccupied, then under general English law, the land can be obtained under a court order and sold to cover the debts, and under English land law (different in Scotland, I believe), if the owner doesn't come forward for twelve years, the title lapses and he loses ownership anyway.

h) There is a rough and ready parallel register for agricultural land called the Rural Land Register:

All land must be registered on the RLR in order to be eligible for payments under the Single Payment Scheme (SPS), the Environmental Stewardship Scheme (ES) or the English Woodland Grant Scheme (EWGS)."

i) So to the extent that we wanted to go to the hassle of collecting a billion or two from agricultural land (as long as they pay the full tax on the areas used for buildings, that is quite enough, actually), we can base it on what the RLR says. The subsidies used to be based on how good the land was, so the payments for owning arable land was much higher than for marginal land used for forestry. It'll be very interesting to see how many landowners start trying to explain that their prime arable land of ten years ago is now so degraded that it can only be used for forestry or for grouse shooting, for which the rental value is £5 or £10 per acre per year.

6. "What about social housing?"

a) This requires no special rules whatsoever, as rents in social housing (local council or Housing Association), like all rents by definition, include a payment for the bricks and mortar value and a payment for the site premium. Any rents received in excess of the bricks and mortar cost is to all intents and purposes LVT. It seems to be bureaucratic madness for local councils/Housing Associations to collect two quite separate sums of money from tenants, the rent itself and the council tax (each with their own earmarked means-tested benefits) instead of the council/Housing Association just collecting a single, all-inclusive figure.

b) Whether there should be an obligation on local councils to provide affordable housing and how high the rents should be are separate topics.

c) One thing is clear though, it is another layer bureaucratic madness for social housing providers to demand average rents of £83 per week and for another part of the government, the Department for Work and Pensions to then pay up to two-thirds of the rent via Housing Benefit. Figures from the DCLG English Housing Survey 2011-12. It would make more sense just to set the headline rents at however much the tenants are willing and able to pay (which can be netted off with a tenant household's personal allowance/Citizen's Income entitlement). If that's only £30 a week per home in some areas and £250 a week in others, then so be it.

d) Remember that the LVT proposed here is a national tax, just like Business Rates. Councils would be allowed to keep a certain percentage of what they collect locally (approx. twenty per cent) and the rest would be pooled nationally. So there are two separate cash movements: from tenant to social housing provider, and from the social housing provider to the national pool. The simplest approach would be for social housing providers to have to pay 80% of the notional full amount of LVT relating to their housing into the national pool (i.e. the full amount less the 20% which can be retained locally) and to leave them to maximise receipts from tenants as far as possible. By and large, any excess of rents collected over and above the bricks and mortar cost will be the "site premium", which in lower-income areas or on less desirable estate will be very low or zero.

e) While the whole aim of the tax system proposed here is to move away from taxation of incomes; and the aim of the welfare reforms proposed here is to move away from income- or asset-based means testing, it has to be accepted that there are people with low or irregular incomes for whom social housing is the only realistic option. In such cases, it would make sense to set rents at a certain percentage of earned income, so that people automatically pay more when they are earning and less when they are not.

f) In most cases, an additional "income tax" on social tenants of up to about 25% of earned income (collected via PAYE) would mean that the total rents actually collected from social housing (headline rents minus Housing Benefit) are about the same as they are now (but with a lot less adminstrative faff). This might lead to a greater demand for social housing and longer waiting lists in some areas, in which case social housing provider has to make the same decision as any other supplier: either increase the supply or increase the rents (or the percentage of earned income to be paid in rent).

7. "Not all flats in a block are worth the same"

This is quite true.

a) But to the outside world, it makes no difference who of the various people going through the same front door lives on the top floor and who lives in the basement. While some are getting slightly more benefits than others from the building itself, by and large, they are all getting the same benefits from the location, i.e. they all have the same work or leisure opportunities, they all have the same access to transport links and so on.

b) If a block consists of 1, 2 and 3-bedrooom flats, then the LVT could be apportioned according to the relative interior area of each flat.

c) Ultimately, it is up to the owners of the various flats to sort out between themselves. One possibility would be a self-assessment/auction process: each owner writes down how much rent he would be prepared to pay to occupy each flat (sight unseen). If the highest offer for your flat is more than you are willing to pay, then you and he swap places and the LVT to be paid is adjusted up and down accordingly.

8. "What about protected tenancies?"

a) For an explanation of what protected tenancies are, see Shelter. Basically, tenants who moved in before 1989 and had the right sort of rental agreement are still paying whatever rent they were originally paying, which in today's money is to all intents and purposes nothing. So the selling price of a home with a sitting protected tenant is usually only about half of a vacant home (all depending on how old the tenant is and what the chances are of another household member having the right of succession). And such home are usually in a miserable state of repair.

b) Rough justice says that the LVT has to be paid by the tenant, as he is getting the benefit of the location (and the landlord certainly isn't), but then again most such tenants are relatively old, so we are back into the Poor Widow Bogey. It appears that there are only 100,000 of these tenancies left, so it's hardly a big issue is it?