Resourcing public revenue

American Journal of Economics and Sociology, The, Nov, 2005

Nor, of course, would a betterment levy capture land value increases occurring incrementally over time as a result of population growth and community development. Accordingly, it would not provide funds to meet the converse circumstances and enable landowners to be compensated for gradual, non-specific worsenment occurring over time. And a betterment levy would not discourage landowners from withholding their land from use. Indeed, the prospect of a 100 percent levy might in some circumstances discourage landowners from using (or selling) their land for a more intensive permitted use.

Turning then to land nationalisation, the solution often argued by those who see freehold title as the root cause of land speculation and an insurmountable obstacle in the way of effective town planning. The nationalisation of all land and its subsequent disposal on a leasehold basis for specified purposes subject to an annual rental would certainly ensure that all increases in land value accrued to the community. Whether leasehold tenure would be a guarantee of effective planning is arguable. But the question need not be debated. Politically and economically the nationalisation of all land in Australia (with or without compensation) is simply not a realistic option.

In England, in pursuance of post-war reconstruction, the 1947 Town and Country Planning Act sought to capture land value increments for the community by nationalising all existing and future development rights attaching to privately-owned land. Compensation was estimated at 300 million pounds sterling. Problems with interpretation and administration, coupled with apprehension about the inflationary impact of such a large payment, delayed implementation of the Act, and the scheme was abandoned by the incoming (Conservative) government.

In Australia, a less ambitious proposal was recommended by the Commission of Inquiry into Land Tenures' First Report in 1973. The Commission avoided the problem of compensation by recommending only that future development rights be reserved to the Crown (by analogy with mineral and forestry rights). In other words, it sought to ensure the capture of 100 percent of the betterment attributable to future land use changes. In hindsight, this relatively simple proposition was regrettably overshadowed by a series of complex (and not directly related) recommendations proposing the establishment of public development corporations to control all urban development and re-development. Interest in the Commission's report lapsed after the change of government in 1975, but many passages remain a lucid and professionally competent overview of contemporary issues. (1)

Neither the 1947 Act nor the Land Tenures Report provided for "worsenment," and neither would have prevented the withholding of private land from development (although both envisaged active government intervention in the land market to promote planned re-development). And, while capturing betterment (through the sale of development rights) would have secured substantial funds to finance the provision of public infrastructure and community services, neither would have significantly altered the basis of public revenue raising.