Land Value Taxation is not a new concept – it was conceived over a century ago, and boasts support from Prime Ministers and politicians across the spectrum. Land Value Tax has previously been passed into UK law in 1931. It was revoked following a change in Government and differences in opinion at the time over how best to address the problems of the Great Depression.
This section provides an overview of the political history of LVT in history, with particular focus on the Acts and Bills of Parliament from 1931 and 1939. Links available from this page also provide key summaries of the 1931 and 1939 legislation.
The fact that a Land Value Taxation Bill has already been voted for by Parliament, and has previously been made into an Act of Parliament, demonstrates how much Civil Service and Political effort has already been invested into this idea. Many of the LVT implementation issues prevalent at the time have already been considered and addressed. The historic legislation stands as the perfect starting point – and is obviously essential reading – for all those serious about drafting a Land Value Tax Bill that can be introduced into Parliament today.
The Land Value Taxation Acts of the 1930s
The first land value taxation act was passed into law by the second labour government in 1931. This government was elected in 1929 with Ramsey MacDonald as prime minister and Philip Snowden as Chancellor of the Exchequer. These were difficult economic times. The Wall Street Crash occurred just weeks after the election.
The Land Value Tax legislation was incorporated into the 1931 Budget (thanks to the Parliament Act of 1911, which prevented Finance Bills from being blocked by the House of Lords). Rather than having a separate bill, the Land Value Tax legislation formed part of the Finance Act of that year. As is often the case with budget legislation, the 1931 Finance Bill was compiled in some haste – and had to be steered through the political manoeuvring of the time without being mauled too greatly.
The essence of the bill was that there would be a levy of 1d in the £ on the capital value of land paid annually. The tax base was the rating list. The tax would be paid by the occupier who, if he was a tenant, could then deduct it from his rent so it fell on the landowner. There was a threshold value which meant that agricultural land and also owner-occupied working class housing was exempt. There were a number of other specific exemptions such as graveyards.
The Bill became law on July 31st 1931 – but the following day the “May Committee” published its report which anticipated a grave financial crisis was about to unfold. The labour government collapsed and was replaced by a National Government. A general election followed shortly afterwards and a Conservative Government came into power. The new Chancellor was Neville Chamberlain, a bitter opponent of LVT. The valuation of land was quickly discontinued and the project suspended. It remained in limbo for two years after which time the original legislation was repealed.
In 1934 the labour party won control of London County Council (LCC). Herbert Morrison was a leading figure and demands were made to levy rates on a site value basis. In 1936 the LCC petitioned the Government unsuccessfully.
By 1939 Herbert Morrison was an MP. He used his privilege to bring a motion under the ten minute rule for a bill to establish site value rating. Herbert’s 1939 Parliamentary Bill was based on the 1931 Finance Act. The work was much tidier and included further consideration of implementation issues. He changed the basis of the tax from capital to rental value – with the rate set at 2s in the £, which is 10%. It was payable by the occupier but tenants could then subtract the amount from their rent so the tax fell ultimately on the owner. Unfortunately, with new representation in the Commons, the Bill was heavily defeated.
Post War Land Legislation
Following the Second World War political interest in taxing land values waned. It was replaced by an attempt just to capture the increase in the value of land due to development.
The current property taxes in the UK are the Business Rates and the Council Tax. The legal basis for these goes back to the sixteenth century and has been slowly evolved over several centuries.
Property taxes were put on a modern footing by the General Rate Act of 1967. This was a local tax for both domestic and non-domestic property based on rental values.
Through the General Finance Act of 1988, domestic rates were replaced by the highly unpopular Community Charge or Poll Tax. This was short-lived and was soon changed to the Council Tax which was a compromise hybrid of the poll tax and earlier domestic rate. Non-domestic rates were replaced by the modern Business rates.
Legal basis for UK Land Taxes
Traditionally the basis of UK property taxes has been the occupancy of a hereditament. Interestingly these concepts have not been defined in law but their interpretation has been established by case law over a long period of time. [A simple interpretation of Hereditament would be any kind of property that can be inherited.]
The legal basis for a land value taxation would be the owner of a unit of land. The legal basis of ownership of land was greatly simplified and clarified in the Law of Property Act 1925. Unfortunately the definition of land in law established in the same act does not distinguish the land itself from the buildings, fixtures trees, etc. that are on it.
Original Documentation – and Summaries of the 1930s Legislation
The following links provide excellent overall summaries of the legislation, with clarification notes and links to the original Acts and Bills.
1931 Finance Act
1939 London Rating (Site Value) Bill