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It’s curious, how the ‘limbo’ period between Christmas and the New Year affects us.

Some of us lose track of time in a web of winter celebrations; others start thinking about serious issues that are still facing their world.

I have a friend who is clearly in the latter camp. He recently posted the following on Facebook:

“I have developed what I think is a boring but sane plan that while probably politically dynamite – the big losers would be the Duke of Westminster, the Royal Family, the Church of Latter Day Saints, the Church of England and Oxbridge colleges – would actually work.

“If you know your economics you will instantly see I’m proposing a tax on land; not on the buildings, businesses, or development of said land – just on the value of the area in that location (I just listed the biggest landowners).

“Henry George suggested this in the 19th century, but it makes far more sense today.

“We get rid of Council Tax and business rates; large out of town retailers with acres of tarmac will now pay more than a corner shop, but both will pay less than now and nothing if they don’t own the land.

“Phase it in over 5 years, setting the tax at 1.1% of land value (just the land not the things built on it) annually.

“That replaces council tax and business rates entirely, opens up incentives to use land in valuable urban centres and reduces taxation on business and the poorest.

“Farmers will be no worse off as their land is used productively; that dictates the land value.

“People who speculate on planning permission and produce nothing will lose; but those who build will gain.

“You have to zero rate commons, parks, civic open space.

“You need enforced building regulations.

“What it will do though is tax the 7.1 trillion pounds sitting in land values, and relieve the burden on the poor by lowering rents by encouraging development and expanding housing supply.

“You’ll need guard rails, careful implementation and vested interests will hate it, but it would result in a construction boom and a fairer society within twenty years, and it’s hard to argue against it on economic grounds.

“A land tax may be the most progressive option for the UK, far more liable to work than punitive wealth taxes. Why? You can’t hide land, can you?

“It is an incredibly hard tax to evade, and if you sell up to working farms or developers, well you’ve just done what was intended.

“Land Value Tax is my modest proposal to make [the UK] a better place.”

I checked it out, and guess what?

This idea is serious, coherent, and economically orthodox — but politically explosive and administratively harder than it looks.

As a diagnosis of what is wrong with the UK economy, it is very strong. As a treatment, it is one of the few proposals that actually lines up incentives properly rather than fighting symptoms.

Longer answer:

My friend is describing a Land Value Tax (LVT) in the Henry George tradition, and most mainstream economists who have seriously engaged with it end up conceding three big points in its favour:

First, the economic logic is unusually clean. Land is fixed in supply. You cannot move it offshore, hide it in trusts in the Cayman Islands, or stop producing it in response to the tax.

That means an LVT creates almost no deadweight loss. Unlike taxes on labour, consumption or capital, it does not discourage productive activity.

In textbook terms, it is about as close to a “free lunch” as taxation ever gets.

Second, it targets unearned economic rent rather than productive effort.

UK land values largely reflect planning permission, infrastructure, proximity to jobs and services, and historic privilege — not the effort of the current owner.

Taxing that value recaptures socially created wealth for public use, rather than punishing work, enterprise or investment.

That is why Henry George appealed to liberals, socialists and classical economists.

Third, it directly addresses the UK’s central economic dysfunction: land hoarding and underdevelopment.

The UK does not have a productivity problem so much as a location problem; we concentrate economic activity into a few overheated areas while allowing vast quantities of valuable land to be underused.

An LVT flips the incentive structure: holding land idle becomes expensive, while farming, building, selling or developing becomes rational. That is exactly what the UK economy needs.

Unlike taxes on labour or consumption, a land value tax cannot be passed on in higher rents in the long run, because the supply of land is fixed. The tax is absorbed into land prices instead.

Replacing Council Tax and business rates is also a major strength.

Council Tax is regressive and frozen in a 1991 property valuation time warp; business rates actively punish investment in premises and equipment.

An LVT would remove both distortions in one stroke.

While Council Tax is legally paid by occupants rather than owners, its incidence still largely falls on land values over time. One of the strongest arguments for LVT is that it makes the real payer visible and aligns legal liability with economic reality.

My friend is right that out-of-town retailers sitting on acres of tarmac are currently subsidised relative to dense urban use, and that corner shops are penalised for occupying valuable locations without owning the land beneath them.

The point about farmers is broadly correct too.

Agricultural land has relatively low location value because its permitted use is narrow and its economic yield modest.

A properly designed LVT would not crush productive farming — though transitional reliefs would almost certainly be needed for cash-poor landholders.

And implementation would, of course, differ in Scotland, Wales and Northern Ireland, where land law, planning regimes and local taxation differ.

Where this becomes more fragile is not economics, but politics and implementation.

Valuation is the first obstacle. While land can be valued separately from buildings — it is done in other countries — doing so nationwide, accurately and credibly would be a massive administrative undertaking.

It is solvable, but it would require a level of state capacity and political patience the UK has not shown for decades.

The UK already performs mass valuations for business rates, inheritance tax, compulsory purchase and planning gain. The obstacle is less technical feasibility than political willingness to fund and trust a competent public valuation system.

Transition effects are the second problem. A tax of 1.1 per cent on land value would capitalise immediately into lower land prices. That is economically desirable, but it creates visible losers: asset-rich, cash-poor households; institutions with historic endowments; and anyone who bought recently at inflated prices.

Even if rents fall in the long run, the short-term distributional shock would be fierce.

This leads to the third issue: vested interests. My friend lists them accurately: the aristocracy, Oxbridge colleges, the Church of England, large institutional landlords, and much of the political class itself sit on vast land wealth.

Unlike income tax or VAT, this tax hits people who are powerful, organised, and very good at blocking reform. The UK political system is structurally biased towards landowners — not accidentally, but historically.

There is also a deeper reason for this resistance: at present, the state inflates land values through planning decisions and infrastructure investment, then allows the uplift to be privately captured. A land value tax would reverse that logic, giving the public a direct stake in value creation — and removing the incentive to manufacture scarcity.

Finally, the claim that it is “hard to argue against on economic grounds” is mostly true, but critics do exist.

Some argue that land value is already partially taxed through Stamp Duty and Council Tax (though badly). Others worry about volatility in land values during downturns.

These are not fatal objections, but they are not frivolous either.

Fears that it would “crash the housing market” usually conflate land prices with housing utility. What would fall is speculative land value, not the usefulness of homes themselves — which is precisely the intended effect.

So is it any good?

As a piece of economic reasoning: yes — very good.

As a way of realigning incentives, boosting housing supply, reducing inequality and shifting taxation away from work: arguably the best single reform available.

As a politically achievable policy in the UK without a major realignment of power: extremely unlikely in the short term.

That tension — between economic sanity and political impossibility — is exactly why Land Value Tax keeps resurfacing every generation, and exactly why it keeps being ignored.

My friend’s suggestion is begging to be taken up – but this is unlikely to happen because the system has been broken – by the people who run it

And there is no political will – at all – to fix it.

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