A fairer system for planning gain?

One of the main issues which embitters many a planning dispute is who pockets the large windfall gains from the conversion of cheap land to dear land with building permission?

There are three models on offer or regularly debated. The first is that the developer or land owner should claim the gain , because it is their land or their activity which is leading to improved value and the new homes.

The second is that the community should seek a substantial portion of the gain. This currently happens on larger developments through Section 106 agreements. A developer negotiates with a planning authority, offering to give the Council money for public facilities, or offering to build public facilities as part of the plans. The developer may offer roads, flood schemes, leisure facilities or whatever the Council thinks the community wants.

The third is that the wider nation should pocket the gain, through moving to a system of land nationalisation, where everyone just rents their property from the state and the state collects all the rents and therefore benefits from new construction. Effectively land values are abolished as no-one is allowed to be a freeholder apart from the state. Various Labour figures are pressing for a variant or starting point for this, proposing for example that the state should levy a tax on all properties adjacent to new infrastructure improvements in cities, on the grounds they are benefitting from this state investment and their property values have gone up as a result.

I am not keen on any of these three versions. The first leaves many people feeling it is unfair that large landowners can make huge sums out of the artificial scarcity created by planning permissions. A true free market system would leave the land owner free to profit, but it would also allow any landowner the right to build as they wished, creating much more competition and lower prices for buildings than a planned system does. Our current system allows enterprising people to make money out of rationing.

The second leaves many feeling the relationship between Council and big developers is too cosy, as the Council will make a profit out of the development if it allows it to go ahead more or less as the developer wishes. Quite often the 106 money or infrastructure contribution is spent in ways that do not help the home owners who feel they are disadvantaged by the new development. It is, for example, a final insult to the houseowner objecting to new homes on the greenfields next to his house, if the development goes ahead and the Council places a noisy play area adjacent to his house, paid for out of the Section 106 money.

The third if done in full is so radical that no-one has satisfactorily explained how you could get to it from where we are today, even if you wanted to. Partial implementation is just another kind of tax on those unlucky enough to live near “improvements”.

It seesm to me the large profits thrown up by scarce planning permissions should be shared with those most immediately affected by the development. The way to make people feel a new development near them is fair would be to give them a share of the winnings by way of compensation. They would then be able to decide for themselves whether to accept it gracefully or to spend the money on the costs of moving if they really cannot stand the change in their local environment.

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45 Comments

  1. Stuart Fairney
    Posted August 17, 2010 at 8:09 am | Permalink

    "This currently happens on larger developments through Section 106 agreements"

    In fact it happens on most all developments. A disgraceful local council is after £52,000 from me for a scheme of only three houses. Quite how this development would 'disadvantage' the local people is unclear to me, perhaps you could explain?

    Clearly if large profits can be made from scarce planning consents, let's make 'em less scarce.

    The relationship between councils and myself can in now way whatsoever be described as cosy.

    You are living in the 1980's when you talk of greenfield development. I haven't done one of these in more than a decade.

    With respect JR this is your least informed blog article.

  2. Mark Wadsworth
    Posted August 17, 2010 at 8:46 am | Permalink

    "The third is that the wider nation should pocket the gain, through moving to a system of land nationalisation, where everyone just rents their property from the state…."

    I take it you are referring to Land Value Tax here, which any proper economist will tell you (backed up with real life examples) is the least bad tax. I am perfectly happy to explain how we could use this to reduce or replace most other taxes.

    It's also a bit harsh referring to a tax on unearned gains (land ownership) as nationalisation, without applying the same logic to VAT, income tax etc on earned income – why do you not describe this as 'nationalisation of industry' or even 'slavery'?

    • Scary Biscuits
      Posted August 17, 2010 at 11:19 am | Permalink

      Mark, the gains on property are often not unearned. They are usually the result of a great deal of work and risk capital.

      As for your 'proper economists', would any of those be the 365 who wrote to Mrs Thatcher criticising her economic policy or the ones at the Bank of England who are consistently (and very conveniently for politicians delighting in tax and spend) overestimated growth and underestimated inflation? Are they working at universities in a cartel protected by the state? I'd trust an amature over them any day.

      • Mark Wadsworth
        Posted August 17, 2010 at 2:29 pm | Permalink

        Can you quantify "often"? I was a hobby BTL investor on the side and most of the capital gains I made were entirely unearned, windfall gains, taxed at very low rates (or at nil when I sold my own house). I earned more doing this than from my well-paid day job, which required a lot of training and hard work etc, and is taxed at very high rates.

        I take it that in your book, Adam Smith, David Ricardo, Milton Friedman aren't proper economists then?

      • Lola
        Posted August 17, 2010 at 6:42 pm | Permalink

        You are confusing the gain on property with the gain on land values.

        • Scary Biscuits
          Posted August 18, 2010 at 2:02 pm | Permalink

          Exactly, Lola. Over the past 500 years of so property prices have been flat in real terms. That is, the real value of an acre of land is relatively constant, as you'd expect. Taxing the proceeds of what was really a bubble, blown by the government, would be fair for the people who deliberately rode the bubble but not for everybody else. Using tax to correct a government induced artifact might work but it would be more sensible to address the root of the problem, which was negative real interest rates. These transfered wealth – and trained people like Mark -from investments in wealth creating industry to unproductive bricks and motar. When property returns to its long term prices, as it always has, these loans still have to be paid back and that is why we are now in trouble.

          The best solution would be to put a firewall around high street, utility banking so businesses can continue to operate. Then RBS, Lloyds and the rest can be allowed to sink or swim on their own. Most will probably sink, causing a wave of defaults that will mainly harm the rich and those who have been riding the bubble. Once that is over, capital and people will once again be available to invest in industry.

  3. Alfred T Mahan
    Posted August 17, 2010 at 9:18 am | Permalink

    I think this is an innovative approach to a thorny problem. However it still involve states intervention and it doesn’t solve the pressing problem of the delays and idiocies of the planning process.

    One slight amendment might be to say that there is a presumption that a development cannot be refused if a certain proportion of neighbours approve it. It would be no business of the law whether or not that approval was bought, so a developer could deal with neighbours to ensure approval by buying them off.

    This might work best if there are different definitions of “neighbour” depending on, perhaps, the height, size, or noise of the proposed development. Thus for instance a loft conversion in a city might only require the approval of 60% of neighbours within 25 metres of the boundary, while a wind farm, which would affect the area for miles around, would need approval of 70% within five miles – there is scope for local variation as there is no need for the rules to be exactly the same across the country.

    Of course you would need safeguards but such a system would (a) speed up planning approval; (b) make the process fairer by removal of arbitrary bureaucracy; and (c) might develop a sense of local community as people worked out for themselves what the “going rate” was for permission. As a bonus, good neighbours would find it easier to muster support than bad ones.

  4. Bill
    Posted August 17, 2010 at 9:48 am | Permalink

    Could keep first option, best in my view, and apply a punitive tax on the super profit made. Similar to the tax planned on passing an annuity on.

    Tax paid to central not local government.

  5. waramess
    Posted August 17, 2010 at 10:41 am | Permalink

    The planning system as it relates to housing in this country is a nonsense and adds the sum zero to our quality of life. The examples of its failure are all around us and too numerous to list. It is yet another socialist system that has gone badly wrong but from which we are too timid to escape.

    Did you ever hear Maggie wonder how we would keep the lights on after the electricity privatisation?

    We should disband the entire planning system.

    If we wish to ensure the aesthetic quality of our buildings we should have a minimalist authority to oversee that, and just that. Otherwise we should trust the markets and watch as the price of housing declines and the supply expands.

    Green belt will be built on but, in the main, not intensively and cities will continue to expand but, in the main not as intensively and we will rid ourselves of yet another layer of beaurocracy.

    Maybe we need a few less hand wringers and bed wetters in government and a few more visionaries

  6. Lola
    Posted August 17, 2010 at 10:44 am | Permalink

    Seconded to Mr Wadsworth. LVT is not land nationalisation, it is a tax based on the value. If the developer increases the value, by obtaining planning permission, but doesn't proceed to build he still pays LVT on the value. This is not land nationalisation.

    • Mark Wadsworth
      Posted August 17, 2010 at 2:20 pm | Permalink

      L, thanks.

  7. Rob H
    Posted August 17, 2010 at 10:53 am | Permalink

    JR – On a related note you can add protected species regulations to planning gain instead of the rediculous regulations in place today.

    The protected species list contains some very common species and current policy often leads to lots of monitoring and or translocation leading to, at best, mitigation of the adverse ecological impacts of a development.

    Many species of bat (all are protected) do not need this protection. Provision of additional habitat (bat lofts/boxes/hibernacula) as planning gain would lead to enhancement not just mitigation.

    The same applies to Great Crested Newts, protected for thier status across the whole of Europe but very, very common in the UK. A couple of years ago a much needed road building scheme was delayed by months with additional costs on top of the time at £350,000 for the sake of 24 newts. The end result was mitigation and no enhanced habitat (but lots of survey work for ecological contractors who lobby for the legislation). If the road building scheme has just built 10 ponds at £2,500 each then this could have lead to over 1000 extra newts at a fraction of the cost and without the delays that impact on the rest of the economy.

  8. Epigenes
    Posted August 17, 2010 at 11:08 am | Permalink

    Mr Redwood, I disagree with Stuart Fairney. You have a comprehensive knowledge of planning issues.

    A house was built outside my front window, in the garden of my neighbour, after John Prescott scrapped PPG3 and stated that any development that increased housing density towards 39 dwellings per hectare should be permitted. Density in Maidenhead, where I lived for 20 years, was 6 per hectare.

    Gone were the [PPG3] provisos that any development,"…should enhance the area and be in keeping with the street scene". Blocks of flats in areas of detached houses were now allowed.

    Under PPG3 I defeated the developer many times (about 12) and twice he was refused by inspectors from the DoE. After Prescott 94 letters of objection from local residents to the developer's proposal were ignored and he was able to proceed.

    You are right about the cosy relationship between the LA and developers. The Maidenhead planning boss and his minions gave no support to local residents throughout the 7 years of repeated applications – sometimes there were three applications running simultaneously – detached house, 3 terraced houses, block of flats.

    The initial fee for the developer's application was nominal and repeat applications free. Fighting him cost me several thousand pounds. RBWM planning officers even advised him on any non – compliance issues and did his work for him at the expense of residents. This should be stopped. Repeat fees should be high enough to discourage repeat applications that are vexatious. This is how most developers get consent, by repeated, virtually identical applications. They grind down the resolve of residents.

    I would advocate a return to PPG3 which forces LAs to consider the objections of residents, protects them from the diktat of government ministers and stipulates that development must improve the area. I also am in favour of those affected by development receiving compensation and not LAs. This already happens to those with covenants, as some of my neighbours had. They are compensated through the courts.

    I wrote to Mrs May on this issue and she raised the matter in the House but Prescott was able to make new rules without them being debated.

    (Names a developer and says he was told he would lose by the developer-ed)

    • Stuart Fairney
      Posted August 17, 2010 at 3:45 pm | Permalink

      With respect to the points I noted, which is incorrect?

      Planning fees are not nominal, my scheme of three units cost me about six grand all in all with application fees and information requirements.

      I would also add that whilst I am no fan of Prescott or PPG3, this remark

      "any development that increased housing density towards 39 dwellings per hectare should be permitted"

      is such an over-simplification of reality as to be meaningless.

    • Lola
      Posted August 17, 2010 at 6:47 pm | Permalink

      Hmm. Why should you decide what goes on on someone else's property? Suppose your tax burden was reduced considerably to compensate you for the loss of amenity? Or, perhaps the 'community' should be able to say what its members can and cannot do with their property. In other words someone else always tells you waht you can and cannot do.

      Look, I sympathise with you. I wouldn't like it if someone built on the fields around me. I am as nimbyist as the rest of us, but there's more to this planning thing than meets the eye.

    • waramess
      Posted August 18, 2010 at 11:06 am | Permalink

      The fact that someone was building outside your window was a direct consequence of the planning rules that encourage people to continue building whilst failing to increase the amount of land available for building on.

      There is a natural desire of people to exert ever increasing control over planning issues when quite the opposite would achieve what they want.

      What do you think the chances would be of someone building outside your window if they were free to build where they pleased and what do you think might be the chances of a block of flats or a factory being built outside your window?

      And before the handwringers point to the risk of farming land disappearing they should give the matter pause for thought.

  9. A.Sedgwick
    Posted August 17, 2010 at 11:08 am | Permalink

    Many sensible comments have already been written.

    On the day a Government department recognises the blindingly obvious on wheel clampers another blindingly obvious issue is to make trespass a criminal and not civil offence and make everyone including so called travellers subject to planning laws.

  10. CDR
    Posted August 17, 2010 at 11:10 am | Permalink

    I believe the idea of Land value Tax was to replace every other form of taxation, with no exceptions. Making it an additional tax on top of what we already pay would be too painful.

    LVT doesn't explain how those of us who have paid outright for our homes (i.e no mortgage) would suddenly be obliged to "rent" our own homes from the State (who presumably would have moved in and confiscated all privately-owned property, without any compensation for the thousands of hard-earned pounds forked out for a 25 year mortgage).
    I can understand why people like the theory of LVT (and yes I have looked at the websites) but the idea of the State grabbing and owning all property is socialism.

    • Mark Wadsworth
      Posted August 17, 2010 at 2:26 pm | Permalink

      1. Yes of course the idea is to replace other taxes! For a start, we could replace all property or wealth-related taxes, like Council Tax, Stamp Duty, Inheritance Tax, Capital Gains Tax, TV licence fee, Insurance Premium Tax etc with a flat tax on residential properties of about 1 per cent.

      In Northern Ireland, they replaced their old Domestic Rates with an 0.78% annual property value tax (but they still have all the other taxes) in 2005-06 and nothing terrible happened.

      Why not go to 1% and get rid of all the other taxes on the list, and then we'll busk it from there?

    • Mark Wadsworth
      Posted August 17, 2010 at 2:27 pm | Permalink

      2. The idea that is retrospectively unfair to swtich from VAT, income tax etc to LVT is a non-argument. Just imagine we had always had LVT instead of income tax, VAT etc. Instead of having paid off your mortgage out of post-income tax money, you'd have paid it off out of post-LVT money, and you'd have ended up in much the same position. And your future income tax, VAT bill is replaced with a future LVT bill.

      Of course there would have to be deferment or exemptions for pensioners, or simply pay them a higher state pension (we'd have to have this even if we had always had LVT). What's not to like?

    • Lola
      Posted August 17, 2010 at 6:52 pm | Permalink

      LVT is not land nationalisation. And since you wouldn't pay loads of other taxes you would be no worse off, most likely even better off, on a cashflow view.

      I have done more than most to develop my property. It was a total wreck when I bought it. But the real value lies in the plot, not the property. I would be very happy to pay LVT if I didn't have to pay Council Tax, VAT, CGT, IHT etc etc. If it was also possible to slash income tax to a flat tax rate of say 20% together with a threshold of say £15,000 I would be ecstatic. I could then get the Banks, the government and other investors to back my real wealth creating business, rather than play Monopoly with each other and our money.

      • Mark
        Posted August 18, 2010 at 10:15 am | Permalink

        The great difficulty I have with LVT is the setting of fair values for the tax. Some rough with the smooth can be tolerated when the amount of tax at stake is small (I remember feeling aggrieved at the banding of my property in 1992, but I knew it would be difficult to persuade the valuer that it should have been at the top of the band below, rather than the bottom of the bad above). It's like Morton's Fork.

        • Mark Wadsworth
          Posted August 18, 2010 at 10:54 pm | Permalink

          Mark, let's compare this with income tax/VAT/Corporation tax/means testing. Some people have marginal tax rates at close to 100% (benefit claimants), for an average earner it's between 40% and 50% (including National Insurance and VAT) and for a high income person running a VAT-able business, the effective overall rate is close to 70%.

          So £1 earned by one person might be taxed at anything between 0% (if below personal allowance or interest on an ISA account) and 70% – 100%. Is there any underlying logic to this? Nope. Does it damage the economy hugely? Yep. Is it unfair or stupid or incredibly complicated to assess and collect? Yep.

          So of course, having a 1% tax on averaged out property values (or even better, 2% at site only land values excl. bricks and mortar) is a bit rough and ready, but probably far more simpler and accurate than the hodge podge of taxation of incomes, and certainly far more accurate or fairer or simpler to assess and collect than Council Tax, Business Rates, SDLT, IHT, CGT, TV licence, Insurance Premium Tax and so on.

          And like I'm saying, let's start off with a 2% on land values (to replace council tax etc) and then cut other taxes a bit and make it 3% and so on and keep shifting from one to the other every year. Provided no buildings sell for less than their rebuild cost, the rate is not excessive and no harm done to the economy.

    • Derek
      Posted August 17, 2010 at 9:50 pm | Permalink

      And Council Tax doesn't explain how those of us who have paid outright for our homes (i.e no mortgage) are currently obliged to "rent" our own homes from the State. Yet we have, we are and we do.

      At least when the switch is made from Council Tax to LVT we will only be paying tax on the plot of land on which our homes stand, rather than on the home and the land as we presently are.

      Apparently we already live in the sort of socialist country where the State has grabbed and owns all the land, so I'm not sure why you think replacing the "rent" (aka Council Tax) with Land Value Tax would make things worse.

      • CDR
        Posted August 18, 2010 at 10:23 am | Permalink

        No-one knows whether LVT would be "worse" than council tax because I suspect few people actually know what their bare plot of land is worth. At the moment, house-price banding gives the indication for council taxes, so people have some idea of where they stand, even if the system isn't exactly a fair one (on which most are agreed). But trying to value a bare plot of land for taxation purposes is something many can't get their heads around, including me…and I still feel it's open to abuse. I just feel that a lot more detailed explaining is needed, coupled with actual calculations, to convince people that (a) the scheme has merits and (b) that they won't be net losers, financially.

        • Mark Wadsworth
          Posted August 18, 2010 at 10:59 pm | Permalink

          I have done an infinite number of calculations and explanations, it is all blindingly simple. HM Land Reg has all the info it needs on plot sizes and selling prices, this can all be fed into the computer, bingo.

          With any such shift, of course there will be winners and losers (on an individual by individual basis) but society and the economy as a whole will be vastly better off at the end of it.

          It's like poor old Iain Duncan Smith trying to simplify benefits – of course there will be winners and losers (or else there would be no point) but lower income people, as a whole, will end up better off (and the taxpayer, society in general and the economy will be enormously better off).

    • Henry Law
      Posted September 8, 2010 at 10:52 pm | Permalink

      The massive compensation from a switch to LVT is through not having to pay other taxes. Even income tax is ultimately reflected in higher costs of everything in the shops, together with a hugely higher welfare bill as it is a major component of the poverty trap which makes it more worth while to stay at home on a meagre benefit rather than go out to work.

      A further benefit is that the present lack of LVT is widening the gap between haves and havenots that Britain is becoming a place that frankly is not worth living in (I don't) when there are others where this is nowhere near as acute an issue.

  11. Scary Biscuits
    Posted August 17, 2010 at 11:12 am | Permalink

    106 money is legalised corruption. If often means that a developer can build whatever he likes as long as he bungs money in the direction of the councillors' pet projects.

    I also reject option 3 simply because it is communisim.

    The solution is to abolish 106 money as it is just a watered down version of option 3 and gives the impression of councillors being too close to developers (which they often are). Also if 106 is abolished, then the developer keeping all the gains – option 1 – actually becomes more palatable. Councillors have no pecunary interest in allowing a damaging development to go ahead and are instead motivated to listen to their voters and to create a town that actually works. This would make them less likely to pass monstrosities and less likely that developers' profits would be resented.

    The prerequisite for abolishing 106 though is that councils need to be allowed to keep all their busines rates. This theft forces councils, particularly Conservative ones, to turn to development as the only way they can afford infrastructure improvements, often making terrible compromises with the designs as a result. Looked at like this 106 money is just another stealth tax.

  12. Rory
    Posted August 17, 2010 at 11:53 am | Permalink

    106 agreements.
    ‘The developer may offer roads, flood schemes, leisure facilities or whatever the Council thinks the community wants.’

    The above is not correct.
    From Circular ODPM 05/2005

    A planning obligation must be:
    (i) relevant to planning;
    (ii) necessary to make the proposed development acceptable in planning terms;
    (iii) directly related to the proposed development;
    (iv) fairly and reasonably related in scale and kind to the proposed development; and
    (v) reasonable in all other respects.

    Item (iii) means that the Local Authority can only seek contributions for works where the necessity for those works is generated by the subject development.

    'It seems to me the large profits thrown up by scarce planning permissions should be shared with those most immediately affected by the development.'

    This might go down well in leafy Wokingham but I don’t believe it is practical. Something like 60% of residential development takes place on Brownfield sites. Who will pay whom when a smelly chemical factory is replaced by a residential development, thereby raising the value of neighbouring properties.

    Reply: You have stated the rules – my piece points out how these can be applied and used, and often are.

  13. Norman
    Posted August 17, 2010 at 12:47 pm | Permalink

    I never realised planning was so difficult. If a farmer owns a field next to an existing housing development I thought it was just a case of 'let's put 30 houses there', do a bit of liasing with sewers, etc. and voila.

    Surely we need to increase the supply of housing, and therefore developable land? Scrap most of the rules hindering progress and let the private sector get on with it.

  14. StevenL
    Posted August 17, 2010 at 1:13 pm | Permalink

    "A true free market system would leave the land owner free to profit, but it would also allow any landowner the right to build as they wished"

    No, in a free market system residental planning permission would exist in a standardised unit which would be tradeable. Whether the state auctioned it or handed it out to citizens as a dividend would be the only issue. NIMBY rights would be non-existent.

    In your idea of a 'free market' (existing large landowners-ed) ( some of whom ed inherited their land from tyrannical dictators who would make Saddam look like a Mary Poppins) would pocket all the windfall.

    Your idea of handing the windfall from the granting of planning permission to homeowners in the form of cheques is IMO the worst idea you've ever expressed on this website. It's so bad that if I lived in your constiteuncy I'd vote for the candidate most likely to beat you.

  15. Martin Cole
    Posted August 17, 2010 at 1:20 pm | Permalink

    Planning issues? The moment of decision for you to make a greater mark on the world has arrived, Mr Redwood!

    Following today's resignation of Lord Pearson as UKIP leader, your political courage is about to be tested to the limits and thereafter your strategic guile can, I believe, change this nation for the better for all time! Gather as many colleagues from Westminster and Strasbourg as you are able, leave this increasingly federalist Coalition Government, apply for UKIP membership and the leadership, pledge a by-election in Wokingham, with yourself as a UKIP candidate and the nation will finally have the chance to be confronted with deciding between independence or further subjugation.

    Reply: It's this kind of fantasy land politics which makes it so difficult to marshall the Eurosceptic majority. The course you recommend would be a good way to get me out of Parliament, replaced by a less Eurosceptic Coalition supporting Conservative candidate. Mr Farage for UKIP came third in Buckingham, behind a Europhile Independent.

  16. grahams
    Posted August 17, 2010 at 1:46 pm | Permalink

    We are mixing up different things again. Planning gains should be shared locally only when one person’s gain causes a loss of amenity to others. This can be achieved by local votes on big, controversial developments, where the developer would have to compensate locals, one way or another, to win the vote. Planning gains can be shared generally by the simple, fair and non-punitive method of imposing VAT on new construction. The VAT would inevitably come out of the value of land and would not raise prises. Of course, imposing VAT would be a disaster (and would raise costs) if it were applied suddenly. It would need to be announced at least 5 years in advance to allow developers, whether of homes or supermarkets, to work through their existing land banks. The tax would then affect only the price of new land purchases and development permits. The end buyer/user of the development would not then pay. But can politicians look 5 years ahead?

  17. forthurst
    Posted August 17, 2010 at 3:51 pm | Permalink

    Whatever method of planning is adopted, without restricting the number of people who are entitled to live in this country, we will inevitably reach the same destination: the total destruction of England's green and pleasant land. There are many parts which are already neither green nor pleasant and which no Englishman concerned for his personal safety would care to venture.

    Keep re-arranging the deckchairs. That's what our government is for.

  18. Mark
    Posted August 17, 2010 at 5:24 pm | Permalink

    Surely the approach is suggested by RH Coase? Negotiated settlement between the parties might not all be monetary compensation. Communities negotiating with developers will have their own priorities, and might for example demand that the developer provides adequate parking, or restricts building height, or erects a fence etc. – but the choice is theirs, not dictated by Prescott Powers.

    A much more difficult issue is sorting out where development should take place in the light of available jobs, shops etc., and how to tackle needed infrastructure. Part of this relates to overall need – largely determined by immigration policy, which is the big variable in population projections. If there is to be significant population growth there does need to be some strategic foresight in catering for it. If population will be well controlled, then we can concentrate on how best to replace housing that isn't economic to maintain due to age or the creation of adverse social environments. That will likely entail reducing housing density, and some building on other sites.

  19. APL
    Posted August 17, 2010 at 5:45 pm | Permalink

    No one seems to be discussing the alternative.

    Given our population demographic trend, the only reason we need extra housing is to accomodate our high levels of immigration.

    Why doesn't the government move toward a balanced immigration policy? The same number of immigrants are allowed in as people leave in a given year

  20. Alan Wheatley
    Posted August 17, 2010 at 6:54 pm | Permalink

    This Supply side analysis needs to be balanced with a look at the demand side.

    We have a growing population and the predictions are that it is going to go much higher. The land mass is fixed. There is no spare land for housing in the sense that all the land is being used for something. So to build more house you have to change the use, so often there is an amenity loss as a consequence.

    It seems to me totally unreasonable to assume that the population be allowed to continue to grow without the population being allowed a proper debate as to whether this is what they want. There are plenty of voices who say population growth is not what they want, but I cannot recall a political response from the main parties addressing the issue.

    Reducing the demand will reduce planning gain as less demand will lead to lower prices.

  21. Lola
    Posted August 17, 2010 at 6:54 pm | Permalink

    …some of whom ed inherited their land from tyrannical dictators… Let's go and start a fight with them!!!!!

  22. Alan Wheatley
    Posted August 17, 2010 at 7:15 pm | Permalink

    PLANNING ISSUES NOT CONSIDERED AS PLANNING

    It seems "infrastructure" is not a planning consideration. This is daft.

    A dwelling going from owner-occupier to holiday let is not subject to planning consideration as it is not deemed not to be a change of use. This is daft.

  23. DBC Reed
    Posted August 18, 2010 at 12:34 am | Permalink

    Mark Wadsworth and Lola have already pointed out that nobody is proposing land nationalisation ( I am a Leftie and regret to say I have never come across a perpetuator of this venerable tradition. )
    If you wish the planning gain to be enjoyed by locals (not the entire nation) then you support local land value tax.(Arguments rage among land value taxers ,who are more numerous than you might think , growing in number and found across the political spectrum.) The disadvantage of local LVT is that areas with cheap property don't raise much: national land taxers argue that the profits of land deals in posh neighbourhoods should help poorer areas.

    • lola
      Posted August 18, 2010 at 9:41 am | Permalink

      DBCR Y'see, there you go again telling stories. You are no more lefty than me, But I am way right of Labour. It's just that like you I am also way left of the Tories!

  24. Stephen W
    Posted August 18, 2010 at 1:31 am | Permalink

    I'm all for a land value tax. Use it to partially (or entirely) replace the council tax and rates. Encourages development of brownfield sites, instead of whoever owns them just sitting on them, depresses house prices, ensures those people who benefit from nearby improvements contribute for the benefit, and is nearly impossible to avoid or evade.

    Sounds great. especially compared to some of the ridiculous complicated taxes and benefits we labour under at the moment.

    • DBC Reed
      Posted August 18, 2010 at 12:27 pm | Permalink

      Another advantage of LVT is that new infrastructure pays for itself .Local or national government builds a new road or Tube station; the land all around goes up in price; LVT reclaims the money which pays for the scheme (and some over if the Jubilee Line is anything to go by).
      Opponents of LVT fondly believe that ife if somebody else's actions put up the value of their property ,they should get to keep the windfall.The same kind of people go cross eyed with righteous anger if anybody else is subsidised by
      others.Also the possibility of sudden rises in alnd value is the prime cause of many building sites being kept off the market and not put to use.

  25. Andrew
    Posted August 19, 2010 at 2:15 am | Permalink

    A "personalised 106" is certainly an interesting (and of course free market )idea, although it would almost certainly require a change of primary legislation. It would also increase the affluence of already relatively affluent areas. The issue of the funding of additionally required infrastructure covered currently by the present 106 arrangements would be exacerbated. In a sense the current 106 is a hypothecated tax. If it is abloished or its outputs "privatised " then necessary infrastructure, etc will have to be funded anyway, more conventionally., …..i.e. general taxation !

    Why not retain the 106, but place a far higher onus on Local Councillors to consult affected residents , moreover and involve them actively and properly in deciding how the 106 is used ?

  26. Chris
    Posted August 19, 2010 at 1:06 pm | Permalink

    Regarding LVT, surely any tax on the ownership of an asset as opposed to a transaction is going to be harder to implement and seen as less fair than a tax on a transaction. Ignoring pensioners, what happens to people who suffer a reduction in earned income, would they be exempt from a proportion of the tax as with council tax benefit, in which case we'll need to extend the bureaucracy to cover everyone, not just those claiming benefit.

    Alot of valuable but currently unproductive land is held by bodies such as the Church of England – are they going to be taxed on that or do we have to develop exemptions?

    Finally I assume current property taxes such as council tax, business rates and stamp duty include a measure of land value tax in their valuation of property, based on a quick calculation in http://www.ifs.org.uk/bns/bn09.pdf these three taxes constituted 10% of the UK government revenue in 2008-2009, whereas the OECD average for 2006 (the latest I can find at http://www.oecd.org/dataoecd/48/27/41498733.pdf) is 6%.

    Even if this went up a bit in the boom it is still likely that property tax is in line with the rest of the OECD or higher and that didn't prevent an increase in property prices so not sure how a LVT taxes would prevent another increase?

    Wouldn't it make more sense to raise consumption taxes so that reductions in income are compensated for automatically by reduced spending and so that saving is more attractive?

One Trackback

  • By greg on September 14, 2010 at 2:00 am

    greg…

    excellent info, keep it coming…

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    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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