An Examination into the Effects of Land Value Taxation in the UK

The aim of this study is to update the valuation exercises which were undertaken in 1963 and 1973 in order to assess the practicability of introducing a Land Value Tax in the UK. The original studies were based on the town of Whitstable, in southeast England and were undertaken by Hector Mark Wilks whose reports have formed the basis of both the methodologies to be undertaken and the issues to be investigated. This study differs from the original studies in two major respects. The first is the fact that the current methodology investigates the use of modern technologies and thus the research has become something of a test of the valuation and the technological methodologies involved in this valuation exercise. The second difference is the aim to test the robustness of the current UK planning situation to establish the extent to which the planning system needs to be reformed in order to support a Land Value Tax, although the second year of the study will focus on this aspect.

The report begins with a brief background to the current level of debate about Land Value Taxation in the UK which provides a context for this study, although there is no attempt to argue the case for or against the introduction of Land Value Taxation in the UK. Also within Part 1, the original methodology is outlined as is the report structure.

Part 2 provides an historical background to the Whitstable Studies, beginning with the introduction of Danegeld in the 9th century and examining the 19th and 20th century reports to government regarding Land Value Taxation, all of which saw moral support but practical and political difficulties in its introduction. Indeed, it was as a result of a call for a “comprehensive test valuation” that the original Whitstable Studies were undertaken. A level of confusion between Land Value Taxation and Betterment taxation is demonstrated within these documents. In addition, the origins and development of planning in the UK and their impact on the original Whitstable Studies is explained.

Part 3 provides details of the original Whitstable Studies, the aims, resources, and methodology adopted, the sources of data, the outcomes and the difficulties encountered are all discussed. Three fundamental assumptions were made in undertaking these original Studies: the compulsory and comprehensive registration of land titles; all transactions in land would be published and available for public scrutiny; and that the definition of ‘value’ adopted for any system of Land Value Taxation should be accompanied by sufficient explanatory information to avoid lengthy judicial clarification. Wilks’ methodology, in so far as it is explained in his reports, is analysed as are the outcome of his valuations. These are discussed both in terms of property types and his overall aim of demonstrating the differences between the values of taxable property under the (then) orthodox system and his interpretation of Land Value Taxation.

Part 4 describes the methodology and the data issues involved in the update of the original Whitstable Studies. In addition, significant differences between circumstances now compared to when the original studies were undertaken are also highlighted. Details of the GIS database MasterMap® and the other electronic sources of data use are discussed, as are the problems associated with their use. Strategies for dealing with the paucity of publicly available transaction data are also considered.

Part 5 discusses the effects of town planning on land value, and the issue of highest and best use is considered, together with the interpretation of the legal requirements of town planning. These form the backdrop for the planning methodology for Whitstable.

Part 6 discusses the traditional methods of valuation for landed property in the UK, comprising the rental method, profits method and the contractor’s basis (all traditionally used to value for tax purposes) as well as the residual method of valuation (used to value land which is to be the subject of future development). These are previewed both in the context of their suitability for Land Value Taxation purposes and also for their reliability and robustness for assessing a land only tax base.

Part 7 concludes the report by identifying issues which remain to be resolved and by previewing the second year of this research.