We keep being told that we lack the funds to do anything ambitious with our country’s future. Boris Johnson failed to deliver on ‘levelling up’. Rishi Sunak cancelled HS2. And now the Labour frontbenches tow the same line.
Both parties insist that the other are irresponsible with taxpayer money, while demonstrated no competency of their own. Nor do Reform’s proposals for over £100 billion in tax cuts seem to add up. And with the deficit ballooning out of control, it is thus hard to imagine the alleviation of this quite frankly dire situation regarding the public finances anytime soon.
One proposal, courtesy of the left, is a property tax. This would be a large enough revenue stream for the government to pursue vital investment in infrastructure, public services, and the green transition, though not without consequence. Taxing homeowners would be a courageous stance to take for a government already so unpopular with the British public, and a property tax could be the very deterrent for investors this Labour government is so keen to avoid. It seems, therefore, that we can do any two of public investment, creating business friendly conditions, and balancing the books. But not all three at the same time. If only there were another way. A different means of taxation with many of the same advantages of a property tax, but without as much baggage.
An answer to our present dilemma can be found in a long-gone liberal economist’s vision for a more just society. That man was Henry George, and his remedy was a system predicated on taxing the unimproved value of the land, understood as economic rent. Observing that economic growth in 19th Century America did not necessarily equate to a better standard of living for all, he identified land monopolisation as the cause of this injustice. Following in a long liberal tradition from John Locke to Adam Smith, Henry George argued that a land value tax (LVT) would be the fairest and most efficient means of taxation. Only taxing the unimproved value of the land, LVT does not punish the productive use of land in the same way property tax does. In turn, George supported the creation of a citizens’ dividend – a form of universal basic income – to ensure an egalitarian distribution of the wealth attached to land and natural resources. This position is now known as Georgism, after Henry George himself, or geoism, literally meaning landism.
Of what utility is the economic theory of this late American to 21st Century Britain? A surprising amount, actually. These ideas have enjoyed a revival in part thanks to the work of left-libertarians like Hillel Steiner, and for good reason. An LVT stands above other means of taxation as fair and comprehensive without being anti-business. It is my firm personal conviction that no one is entitled to monopolise and collect a rent from anything they themselves have not produced. Natural wealth, including the land, fits this designation. We may occupy the land; that much is necessary for society to function. But to deprive that land, to which no one has a stronger claim to own than any other by virtue of its natural origin, from others requires some kind of compensation. As those with more land would pay more, the tax has a progressive effect and does not unduly burden those in society who are least able to pay. This only seems fair in a society where just 25,000 landowners own half of the country. In addition, an LVT would render tax avoidance virtually impossible; taxes based on land ownership cannot be evaded in the same way some corporations shift their profits to subsidiaries in tax havens. This forces companies to pay their fair share towards the country they profit from operating within, bolstering the public finances.
On the pro-business side, an LVT only applying to the unimproved value of the land makes it far less distortionary than other property taxes. Any earnings above the land tax rate would be left untouched, giving plenty of room for profit. This could be an attractive proposal for businesses, especially if the revenue from an LVT allowed for a reduction in other taxes like corporation tax or VAT. This would also encourage the more efficient usage of land. As land is one of the most valuable assets in the UK, a subset of wealthy landowners have been able to make a fortune merely by sitting on land they know will appreciate in value without doing anything in the public interest. All the while first-time buyers suffer from a lack of affordable housing. In a society where only 35% of 25–34-year-olds were homeowners in 2017 and getting onto the property ladder seems like a pipe dream for young people, this is unforgivable. The indirect impacts of an LVT – plus overdue changes to planning permission – could help make homeownership a realistic prospect for young people and regain the trust of this demographic.
You do not need to take it from me; a number of economists over the years have voiced their support for a tax like LVT. Nobel-winning economist Joseph Stiglitz, for instance, has called for a tax on natural resources at a rate as close to 100% as possible. He argues that land value increases account for rising inequalities in a way economic approaches which emphasise labour and capital, and therefore our answers should entail the application of Henry Georgean principles. William Vickrey, another Nobel laureate, argued in favour of land value taxation over other approaches which also tax real estate improvements. Most economists emphasise the less distortionary nature of LVT compared to other taxes, but a few go as far as arguing that an LVT has an actively positive influence. Austrian economist Fred Foldvary suggests not only the abolition of the distortions from other taxes, but also that the ‘carrying cost’ an LVT would attribute to land has a positive effect on productivity. No wonder staunch free marketeer Milton Friedman dubbed LVT the ‘least bad tax’. Even Karl Marx, noted critic of attempting to achieve justice by mitigating capitalism, could not dispute the merits of the tax and argued that proletarian states should implement it. Bringing economists of all persuasions together, LVT clearly has broad enough support to be deemed viable.
An LVT could help resolve our budgetary woes while also creating incentives for the productive use of land. But how would it actually work in practice? Taxing the land is not just abstract theory; many jurisdictions have followed Henry George’s example to great effect. Some countries like Singapore have an LVT-inspired system at the national level. Others – like Australia – have it at the state level, with the precise implementation varying between jurisdictions. In New South Wales, the tax has a threshold of AU$1,075,000 and has exemptions for homes and primary production. Land value is calculated via an assessment into the characteristics of the land, such as its size, location, and shape, which is usually conducted at a mass scale rather than for each individual property. Vacant land is taxed at the same rate as land in use, incentivising landowners to do something economically viable or sell to someone else who will.
As for the benefits of policies associated with natural wealth egalitarianism inspired by the citizen’s dividend, look no further than Alaska’s Permanent Fund Dividend. This scheme means all Alaskans directly benefit from the state’s deposits of oil and other natural resources. Payouts vary, but hardly go unappreciated by residents. In 2024, the payout was $1,702 per head. While the UK lacks the sheer extent of Alaska’s natural wealth, perhaps we could implement a similar system in a vein closer to Henry George’s original notion of a citizen’s dividend. In an economy like ours where the cost of living is an increasingly pertinent issue, dividend payments like these could make all the difference for struggling families. Perhaps an additional dividend could be paid to parents for each of their children to alleviate the costs associated with childcare. With a bit of political imagination, the possibilities for how such a policy could improve quality of life are almost endless.
Land tax proposals have also percolated into the history of the British Isles. Prime Ministers from each of the major parties have at some point advocated for LVT. The Liberal government of Herbert Asquith sought an LVT to fund the People’s Budget of 1909. A few decades later, Labour under Ramsay MacDonald attempted to implement a land tax in 1931, only for the proposals to be reversed by the Conservative-dominated national coalition. Even former Liberal MP turned Conservative Prime Minister Sir Winston Churchill was an outspoken critic of land monopolisation and the unearned wealth thereof, citing Henry George’s proposals as the remedy. By appealing to this tripartisan history of land tax reform in each of our major political parties, the creation of a more just Britain where access to economic opportunities is equal for all can finally be realised.
That being said, the Liberal Democrats could benefit from the consideration of an LVT in particular. In so doing, the party would connect itself with the liberal governments of old, and such a policy would sit well with other policies such as a national social care service. In addition, it would also help to set the party apart from an increasingly claustrophobic British party system. Despite dissatisfaction with the traditional party system, much of the media’s attention has been on ReformUK. Maybe this would not be the case if the Liberal Democrats committed to such a transformative policy as this. One only needs to look back at the politics of the Roman Republic to see how energising debates around land reform can be. Opening this debate today would grant the LibDems control of the narrative, allowing us to steer away from the jingoism and xenophobia of Reform. In addition, Henry George spent the first half of his magnum opus Progress and Poverty criticising the very kind of Malthusian hyperfixation on population size which seems to underpin contemporary debates around immigration. If we want to take the wind out of Farage’s sails, adopting a Georgist platform may very well be the way to do it.
The merits of an LVT have clearly stood the test of time. All it would take to improve our public finances is a government with the ambition and will to do so.
“There is danger in reckless change, but greater danger in blind conservatism.” – Henry George