Losing the plot

For once, I find myself agreeing with John Prescott. For once, I find myself understanding John Prescott:

A lot of ruddy builders shout about planning, but find it more profitable to hold on to land in tremendous land banks. They are on to a damn good thing. They blame planning, but I wish they would tell us how much land they have got in the bank.

You needed to put £5,000 as a deposit 20 years ago and now it is about £35,000. If you look right across the country with prices in the last couple of years, it has now got to be impossible for people to buy.

Mr Prescott added: “What we are now finding is that people who could properly buy a home before are completely eliminated from that process. Where are they turning to? Local authority housing lists.

But what is Prezza’s solution? Planning Gain Supplement. The problem with this system was summarised by Andrew Duffield in a letter in the Times on Monday:

The proposed windfall tax on planning permissions (report, Dec 2) is fatally flawed and will deliver the exact reverse of the affordable housing the Chancellor seeks.
Postwar Labour governments have made several failed attempts to legislate in this area. The planning gain supplement proposed in Kate Barker?s report to the Bank of England?s Monetary Policy Commission on the UK housing supply crisis will no doubt suffer the same fate and exacerbate the problem of unaffordable homes.

Landowners take a much longer view than government cares to. Faced with such an impost, they will simply withhold the sale of development land. A shortage of suitable sites will ensue, and the price of land will rise. Housing will become less affordable.

As it happens, Mark Braund was in the Guardian this weekend to promote his new book. Both he and Andrew advocate land value taxation (and you will be unsurprised to know that I agree with them). Apart from anything else, even if you reject the more strident claims of Georgists, there is surely no argument that it has got to be better than PGS and Council Tax?

Vince Cable‘s response to the Government’s proposals thus leave a little to be desired:

“If a planning gain supplement is to be introduced it must be done at a local level. The Chancellor must not be allowed to simply use revenue from this tax to bolster Treasury coffers. The supplement must be set locally and collected locally to deliver improvements to local infrastructure.

“It is right in principle that the community should derive benefit where property developers see a large increase in the capital value of land, not as a result of their own efforts but due to the granting of planning permission.

“However the Treasury must be careful with how it frames the legislation the track record of similar schemes in the past is far from impressive. Legislation has previously had to be abandoned because it has been ill thought out.

“If the Chancellor gets the application wrong it could slowdown new house building and the development of much needed affordable housing. Consultation with the property industry on the structure of tax is vital to ensure compliance.”

In short, yes to PGS, but it has to be a nice Lib Dem PGS, not a nasty Gordon Brown PGS? What tosh! The problem with PGS is PGS, not implementation. Why is Vince being so cagey when the Lib Dems, at least in this limited area, are already signed up to site value rating (a localised version of LVT)?

This is the problem with Cable and Kennedy’s “Three Bears” strategy. Nothing too far to the left of Labour or to the right – just squarely in the middle, only nicer. The wheels are starting to come off and the Tax Commission hasn’t even written its report yet.


  1. James

    I´m not sure I agree with the final paragraph here. But the rest, yes!

    The problem with this “nice Lib Dem” response is that we always come out with something like this (And it appears only to ring a chord with our own membership. I don´t think this came into existence with the three bears approach.

  2. I’d agree with that, but that news item did suggest that there was a greater than ever concern about self-consciously keeping the party squarely in the centre.

  3. I suspect this is an area where the tax commission can come up with something with teeth. It’s a wishy-washy statement, yes, but i have no problem with it thus.

    The Duffield point is the crucial one. Landowners tend to operate as a cartel, and if they feel they’re going to be the victim of a windfall tax, they’ll simply keep hold of their land. An LVT model will take this out of their hands.

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