August 3, 2020

It is a truth universally acknowledged that the Covid crisis has forced the Chancellor to spend — and borrow — a lot of money. But Rishi Sunak also has to work out how he’s going to raise revenues through the tax system — not as an alternative to borrowing, but so that the bond markets will continue lending to us at a non-ruinous interest rate. That’s because confidence in the ability of a nation to repay its debts depends on the robustness of its tax base. Unfortunately, the pandemic has played havoc with that too.

Some parts of the tax system, like business rates, were looking fragile even before the crisis. The effects of loading the tax burden on shops and restaurants, while allowing the online retailers to get off lightly, can be seen in towns and cities across the country. Lockdown means that the issue can no longer be dodged. We either go for wholesale reform or say goodbye to the high street.

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It’s been reported that the Treasury is working on plans for an online sales tax — something I argued for back in 2017. Even better, it looks like serious consideration is being given to a “capital values tax.” This would replace business rates and would be a tax on the value of land (plus the buildings built upon it). Furthermore, it would be payable by the owner not the tenant.

You may be thinking that sounds rather like a Land Value Tax (something else I’m rather keen on) and you’d be right. So if Rishi Sunak introduces it, we’d be facing a truly remarkable moment in British politics: the first step toward a seemingly impossible political philosophy — Tory Georgism.


Georgism is an economic theory named after Henry George (1839-1897) — an American economist and journalist. He lived through a time of unprecedented economic change — the transformation of the United States from agricultural backwater (and, in the southern states, slave society) into an industrial giant. He will have seen small settlements grow into mighty cities, walked in the shadow of the first skyscrapers and travelled on trans-continental railroads.

What he  also  witnessed, however, is landlords getting rich from the value created by all that development. Not that they had to lift a finger to make it happen — they just had to own property in the right places and rake in the rents. Putting that injustice right was his life’s work.

George was not a socialist. He supported free trade and free enterprise. People should keep the value they created, he believed. But by merely owning land, landlords don’t create value — they simply exploit their monopolies on the physical space that people need to live and work.

He saw all of this as a sickness at the heart of the capitalism, but one that had a cure: a tax system based on land values. The more a piece of land is worth, the more tax the owner would pay on it.

That way, value that would otherwise be extracted by private landlords would benefit the whole community — both by providing the state with revenue and by replacing taxes on income and consumption — i.e. useful activities that create supply and demand in the economy.

Taxing the value of land has further advantages. For a start, it disincentivises speculation and the use of land as a mere piggy bank. It also prompts land owners to make the most productive use of their land or sell it on to someone else who can. That’s why land value taxation has supporters on the Right as well as on the Left. Indeed the free market economist Milton Friedman called it the “least bad tax”. While a tax on income discourages work and a tax on dividends discourages investment, a tax on land does not discourage land. All of it will still be there no matter how hard you tax it. It’s one asset that can’t be moved to a tax haven.

But if land value taxation is such a good idea then why aren’t land value taxes more common? And to the extent that we have property-based taxes at all, why are they in the form of policies like the UK’s Council Tax and Uniform Business Rates — which are payable by the occupier not the owner and which are imperfectly linked to the actual land value?

Well, there are technical challenges to overcome — not least the accurate, ongoing valuation of land — but for Georgists the real answer is the ever-present influence of the “landed interest”. Landlords are just about the oldest and most influential of all lobby groups. Politicians who may not have the time for active business interests, often have ‘passive’ investments in property and are thus easily swayed against land value taxes. 

Moreover, British Georgists sometimes identify the landed interests specifically with Toryism. Over the centuries, it can be argued that the Tories — as the party of farming, the countryside and the “gentry” — have acted to protect these interests over those of the urban population and commerce. It’s not nearly so simple as that, of course — but nor is it completely untrue. Successive Tory — and, later, Conservative — governments have given landlords an easy ride.

However, this aspect of Toryism isn’t entirely about grubby self-interest. There’s a moral case for the dignity of ownership, especially home ownership. Why shouldn’t Britons be able to call a piece of this Blessed Plot their very own? Why shouldn’t their homes, and their possessions contained within, be theirs to keep — paid for out of taxed income, but then free from the depredations of the tax man?

Ownership rights are the foundation of liberty — and one only has to look at countries where people have no secure title to their land to see how important these rights are. While socialists would like to make us all tenants of the state, conservatives (and many liberals too) believe that what separates us from totalitarianism (self-reliance, family life, basic privacy) begins at home.

Unfortunately, though, the Tories have a record of over-extending this moral case to provide cover for the exploitative ownership of other people’s homes (and workplaces) and of land that has little to do with home life, but which is important to the common good. It is, for instance, truly astonishing that 20 years into the 21st century, we still don’t have a complete register of exactly who owns exactly what land.

Digital mapping technology means this is entirely feasible. We have the Land Registry of course, but the information that it provides is incomplete and expensive to access — and, as recently as 2016, the Tories under David Cameron and George Osborne were planning on privatising it! This may have been an Osbornite policy, but a less Georgist measure could hardly be imagined.

Thankfully, we’ve moved on from that low point. Indeed, if Rishi Sunak really is about to introduce land value taxation then that would be a jaw-dropping turnaround.


But given eveything I’ve said, isn’t Tory Georgism the ultimate contradiction in terms? One might as well announce a policy of violent pacifism or isolationist expansionism or universalist exceptionalism. It makes about as much sense as a square circle. 

But, then again, the world is full of oxymoronic ideologies. We’ve already got capitalist communism (China), authoritarian liberalism (the woke Left) and plutocratic populism (Trump). I realise those examples aren’t exactly encouraging, but Tory Georgism is the oxymoron we need right now.

Indeed, the Tories need Georgism and the Georgists need Toryism. 

The Government is in the tightest of financial spots. It has to rebuild the tax base, without raining down further blows on a traumatised economy. Hikes to income and consumption taxes would hurt the recovery — as would a further round of austerity. But a Georgist taxation policy would only hit non-productive activities that funnel wealth away from ordinary consumers into the pockets of the rich (who spend a lower proportion of their money than the rest of us). Both economically and politically, there is no better way to raise money right now.

Of course, that would require the Government to put in place a proper system for valuing land and identifying its owners — but then that’s what it needs to do anyway if it’s serious about solving the housing crisis — another vital part of any credible recovery plan. 

The reason why the Georgists need the Tories is simple: they haven’t had much success selling Georgism on their own. There are no mainstream Georgist political parties. After all, Britain’s landlord-friendly policies can’t be blamed on the Conservatives alone. We’ve had Labour governments too, but they didn’t bring transparency to land ownership or stop lucky farmers from winning the planning system lottery. 

If anyone can sell Georgism to a wary public, then it’s the Tories. The majority of the population are home owners and a lot of the rest hope to become home owners. They will resist land value taxation if they suspect it will be used to effectively confiscate their houses, slice-by-slice. A Land Value Tax will only be politically viable if tax-free thresholds are hardwired into the system to respect the right of home ownership — and also to protect small businesses that own their own premises. And, needless to say, the assets of charities and community organisation should also be sacrosanct. 

Above all, Georgists need protecting from the utopian tendencies of the Left. In the long-term, a thoroughly Georgist taxation policy may deliver a fairer, greener and more prosperous society. But getting from here to there won’t be easy. Implementation needs to happen step-by-step, taking care to obtain popular consent at every stage — as well as dealing with all the practical complexities.

So forget the fantasy politics. If we get Georgism at all it won’t be in a sudden burst of ideological purity. It will be through piecemeal, painful progress — one least bad option at a time.