When it comes to panaceas I am usually a sceptic. Thus I doubt whether the introduction of LVT

would of itself cause land prices to fall, certainly in any general sense. We have an analogy in mortgage tax relief. In retrospect we can see that if mortgage tax relief ever had any impact on land prices it was pretty negligible, although it was held by some at the time to have an inflationary impact. Without it inflation has happened anyway.

Land price inflation is due to three causes; speculative money flows; the availability of cheap long term credit (in other words the presence of an excessive supply of money in an inelastic market) and thirdly availability of land and housing supply.

With regards to the second of these factors the simpler, more direct and more effective way of reigning in land price inflation would be through the application of credit controls on mortgages, certainly in the short to medium term. This would cut the excess money supply thus reigning in speculation also. The average gearing ratio of house prices to average family income is currently around 5:1. We would all benefit from a long term credit control policy aimed at restoring that to, at the most, 3:1. Such a policy would sit alongside the use of public credit to finance affordable housing as I outlined in my article. With regards to mobility local taxes already differ, sometimes widely, from district to district.

In my view the principle impact of LVT would be to bring derelict and under utilised brown land into use by penalising owners. In fact that could be done within the present system by restoring the business tax to local control and giving councils the discretion to levy business rates and council tax at penal rates. That this does not happen is a matter of government policy. As another, somewhat similar matter of government policy, it was only recently that second home exemptions were lifted.

The central problem with LVT is the regressive nature of all systems of land taxation whether rates, council tax, site value rating or LVT. In effect Martin Childs acknowledges this towards the end of his piece.

The existing council tax system could be adapted. If the business rate were restored to local control and unified with the council tax base and if councils were given full discretion to levy at discriminatory rates on poor and wasteful land use the net effect would be all but indistinguishable from LVT. The only remaining anomaly would be that council tax and rates penalise development ... the more extensions you put on your house or factory the more in costs. Other than that the only difference would be a technical difference in the calculation of the tax base.

But we are left with the regressive nature of land tax. This must be addressed by a system of rebates (again decided locally, firstly because rates will differ between localities and secondly because local control should be maximised as a point of principle). I believe it is possible to merge local income taxation and land taxation and that some work in this direction might be profitable.

Thus I believe that the main impact of either LVT or a modified council tax system would be in improving the efficiency of land use rather than in an across-the-board effect on land prices. With that in mind I see no reason why LVT could not be piloted. Indeed such are the variations in land use patterns from district to district that differences in tax regime are necessary and inevitable. For example the tax regime in an inner city borough with large areas of dereliction might be very different from that in a district where there are large areas of highland, woodland or marshland. Again that is land with little or no productive value but for very different reasons.

- Frank Taylor