Replacing business rates with a land value tax

“If the Government is serious about supporting businesses of all sizes, promoting growth and reducing costs for consumers, it must urgently address our outdated and unfair business rates system.” [Alex Baldock, CEO Currys]

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There’s been a lot of noise in the press about the government’s moves on business rates as announced in the Autumn Statement – with all sorts of differing analysis. Many in the tourist trade note that business rate relief has been extended for hospitality and business in general see that small business rates have been frozen – and yet the UK’s biggest companies are excluded from the business rates freeze. 

And so, Currys boss slams the ‘unjustifable’ business rates increase as the Chancellor shuns reform:

Chancellor Jeremy Hunt has failed to offer reform to the business rates system despite mounting pressure from retailers in what Currys chief Alex Baldock termed a “deeply disappointing” decision. Baldock said that in failing to address “the unfairness of our business rates system”, Hunt had “missed an opportunity to support retailers at a time of economic uncertainty… If the Government is serious about supporting businesses of all sizes, promoting growth and reducing costs for consumers, it must urgently address our outdated and unfair business rates system.”

There have been regular calls to reform the business rates system – including ‘lessening the burden of the unfair business rates system‘ (2018), creating ‘a level playing field for ALL in order for our High Streets to survive‘ (2020) and government actually promising then delaying a ‘fundamental review’ of business rates (2021).

Last month, the TaxPayers’ Alliance produced several Options for business rates reform – but perhaps something more radical should be considered. 

The Welsh government is currently looking at replacing council tax and non-domestic rates with a ‘land tax’. This is indeed radical, with the introduction this week in the Senedd of a new law which could change business rates and council tax:

Rebecca Evans told the Senedd that the bill would address many of the limitations of local taxation systems in Wales. The finance minister said the bill will establish a five-yearly cycle of revaluations for council tax which is still based on property values from 2003… Peredur Owen Griffiths called for council tax and business rates to eventually be replaced by a land value tax (LVT) – a more progressive tax that would fall on land owners. The South Wales East MS highlighted research by Bangor University into the feasibility of introducing such a tax. The Plaid Cymru politician said LVT would bring revenue to Wales from land owned by the Crown Estate rather than see it “syphoned away” to the UK Treasury.

These pages have looked at the feasibility of a land value tax. A possible ‘solution to our housing problems‘ could be to fundamentally reassess land value – and that an actual infrastructure or land value tax might work better in the long run.

This has been considered across the political spectrum: with the Institute of Fiscal Studies looking at business rates and land value taxation, the New Economics Foundation suggesting funding local government with a land value tax and the Labour Land Campaign looking to replace business rates with a Land Value Tax:

Land value is created by the whole community. The Labour Land Campaign is a voluntary group working within the labour movement for a switch away from taxes on economically productive activities like work, trade, enterprise and investment, and onto unearned land wealth. A tax on the value of land, irrespective of any improvements made by its owners (such as buildings) is fair, easy to administer and more economically efficient than taxes on productive activity. All land should be valued and taxed according to its assessed value. As well as making it possible to reduce or abolish unfair, economically inefficient taxes, this will help repair the broken UK land market – characterised by speculation and underuse – that has deprived many citizens of secure, decent accommodation, for the benefit of a small-but-powerful, wealthy minority.

All of which would very likely be highly unpopular in these parts – as not only are there high land values in the Sid Valley, but many residents are of course retired and ‘not productive’! And yet there are also ‘economically productive activities like work, trade, enterprise and investment‘ happening even in these parts – and with the business rates and council tax systems seen by more and more as ‘broken’, we will have to see how things develop across the Bristol Channel in Wales…

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