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American Journal of Economics and Sociology, The, Dec, 2000 by Owen Connellan, Nathaniel Lichfield
OWEN CONNELLAN [*]
NATHANIEL LICHFIELD [**]
THREE STRANDS MAY be discerned in the history of land-value taxation in Great Britain: land tax gathering for public revenue purposes, development value capture for the benefit of the community, and recoupment of infrastructure costs. This chapter describes the three in sequence.
Of these three strands, only the last is currently in place in Britain under circumstances of private ownership. However, although to do much more than mention it would carry us too far afield, there has also grown up a method of development value capture with which Britain has had great experience since World War II--namely, capture as a consequence of prior public acquisition of land for development and subsequent renting or leasing, by which increasing land values flow to the public purse. Under this approach there has been a huge program that includes, for example, the redevelopment of bomb-damaged and obsolete areas after the war; [1] the building of some thirty new towns, starting in 1946; [2] the redevelopment/regeneration of obsolete areas by Government-appointed Development Corporations; [3] and also value capture from the nationalization of natural resources, as in coal [4] and oil/gas. [5]
In the first three of these examples, significant land value rises were captured by the legislation fixing levels of compensation for the purchase which did not reflect the expected potential rise from the development envisaged. In the latter two, the principles were different; however, both, of course, involve remuneration to the public for both the right to extract the resource, and for the quantity extracted. In relation to coal, nationalization of the underground deposits, with compensation paid to the owners, was initiated in the 1930s, so enabling the National Coal Board to grant licenses for the use of the nationalized rights subject to obtaining a planning permission. As to open cast mining, which was begun during the war, the same system applies but no compensation was paid to the landowners. For oil/gas, the government assumed ownership of both on-shore and off-shore deposits. It was thus able to grant licenses to explore, and then, when appropriate, to operate, and to garner income from them in th e form of royalties. The principles of the latter two are currently being applied in relation to licenses for the spectrum of radio waves. These are the subject of open auction bidding by intending licensees to run the next generation of mobile 'phones.
I
History of Land-Value Taxation in Britain
AN UNDERLYING PRECEPT of the administration of the Roman Empire, which included what is now Britain, was a codified system of property jurisprudence, at the heart of which the control, transfer and ownership of rights over land were clearly evident. The Romans also recognized land as a target for measurement and assessment by surveyors for taxation on a quinquennial basis, [6] which would have been a normal part of their imperial taxation during the four centuries of their occupation in the first millennium. Subsequently land continued to have a fiscal role.
After the collapse of the Roman Empire, the outstanding feature of Europe was the feudal system. Thenceforward until the late Middle Ages, land paid virtually all the costs of government in England and indeed throughout most of Europe. [7]
It was with the disintegration of the feudal system that land increasingly became treated as "absolute private property free from obligation, [leading to] increasing dependence of government upon other sources of revenue." [8]
From Britain's past, Wilks [9] summarized what little fleetingly remains of land taxation by confirming that there were very minor residual taxes still existing based on the value of bare land. These were known as Danegeld, land tax, and Queen Anne's Bounty. His view was that for all practical purposes these may be forgotten, being the residue of a system that was in force seven hundred or more years ago. And indeed, vacant land in Britain became entirely tax free in 1923. [10]
Despite this, the basic arguments for a return to land taxation were extensively promoted by classical political economists in the nineteenth century (for example, David Ricardo and John Stuart Mill). In Britain, in the latter part of that century, Henry George fueled the debate when he visited Britain five times, three on extended speaking tours. [11] His impact was considerable amongst progressive thinkers. Testimonials by such eminent Fabians as Bernard Shaw, Sidney and Beatrice Webb, and H. G. Wells explicitly credit George with being the most potent single instrument in the conversion of both individuals and the working class itself to trade unionism and socialism, [12] even though he viewed trade unions as having but limited value, and advocated socializing only natural monopolies.
The influence of George's ideas in Britain has endured. While no economist accepted his total framework, and most rejected much of it, his stress upon the idea of a tax on land values persisted in the minds of some 20th century economists, and even his all-out notion that it should be the single tax still has adherents. Consequently over the past century there have been many attempts at legislative action in Britain to promote land-value taxation as a source of government revenues; these are tabulated in the appendix to this chapter. This shows that there was considerable activity, right up to the beginning of the Second World War, by expert bodies, members of Parliament and municipal authorities to persuade Parliament to allow local governments to levy rates on land values. None succeeded. And there were also attempts by Central Government to introduce land value duties as taxation for national and local purposes but only two succeeded in becoming Acts of Parliament: The (Lloyd-George) Finance Act of 1909-1 0 from the Liberals, and the (Snowden) Finance Act of 1931 from the Labour Party. Although enacted, these measures were abandoned before they could be fully implemented. [13]
