Richard Short is the Deputy Director of Conservative Workers and Trade Unionists, and was Parliamentary Candidate for Warrington North in 2015.
At face value, it looks like a stereotype tax: left-wing Labour will tax rich landowners to fund spending for the workers. Jeremy Corbyn’s loyal supporters see his Garden Tax as a levy on the very rich with huge property empires and vast expanses of land.
But, like most of his manifesto pledges, there is a sting in the tail – and one which will wound the many, not the few. The Labour manifesto gives no detail on how their proposed new land value tax tax would work. None the less, it is clear that it would be a tax on land, not property (replacing some local taxes, Labour say, and therefore not adding to local taxation as a whole).
It’s thus evident that Corbyn cannot not possibly have thought it through – and that the result would be dire for the ordinary workers, pensioners and vulnerable people who don’t own the land their house is built on. New build properties are increasingly being sold as leasehold so, on one take, the owners of these properties would not be subject to the Garden Tax.
Many owners of older properties, too, will be leaseholders. A friend of mine has a typical suburban family three bed semi on leasehold on a 999 year lease. The annual ground rent for this property was set in the 1930s at £7 3/ 6d (£7.17 p.a. in decimal), and has never been claimed by the landowner.
But the land will be owned by someone – even if it is the descendents of the original purchasers. There is a real danger that unwitting owners of land, who maybe of modest means themselves, will be traced and presented with a tax bill completely out of the blue. This, in turn, will prompt the newly discovered landowner to charge ground rent to cover their new tax liability, beginning with demanding six years of back rent the current law allows them to do and then, of course, increase it to a market level.
To avoid this, a Labour Government would have to extend their proposed rent controls to ground rent – but doing this would of course reduce tax take, which would then have to be found elsewhere. The losers would be the home owners of a modest family three bed semi, and landowners who hadn’t previously realised they actually owned land. They could, of course sell the land, but they would thus also be selling a tax liability.
Freehold property owners woud be immediately liable for the Garden Tax as they own the land. While about half of owner occupiers are freeholders, almost all those who bought their council houses, and still live in the properties concerned, are be freeholders. Owners of former council houses will therefore be subject to the Garden Tax and, as I know from experience, some council houses have large gardens.
Absent landlords are far from unique and, while some may be easy to trace, this will not universally be the case and Labour’s plan would thus, inevitably, lead to a shortfall in tax take. This would pile the pressure on those landowners who can be traced, including the owners of former council houses, to try to ensure that filled the gap.
All in all, to Labour policy chiefs the target group for paying the Garden Tax are rich landowners, who they perceive to have pockets deep enough to pay with relative impunity. If this was the case, it would fulfil their principle of wealth redistribution from the rich to the not so rich. But this is not the case. The tax would clearly hit the ordinary workers hardest – as most Labour policies do. They may start by meaning well. But they end in a tangle of unintended consequences, which throttle those without the means to overcome it.