Agenda item

The Board gave consideration to a report of the Assistant Director of Finance which was in response to a motion entitled “Land Value Taxation” which had been referred to the Overview and Scrutiny Board by Full Council on 28^th March 2018.

The report explained the history of Land Value Taxation (LVT) and its bases in economic theory along with the advantages and disadvantages associated with this form of taxation.  The motion had suggested that LVT could replace taxation levied through Council tax and business rates.  The report also considered the implications for tax administration at local authority level and highlighted issues for the Local Government Finance System which may arise on transition from current forms of local taxation to LVT.

The history, advantages and disadvantages of LVT were outlined.  Liability for paying LVT rested with the landowner (landlord or freeholder) rather than the tenant.  If LVT replaced Council Tax and Business Rates, many aspects of the billing and collection arrangements currently in place would have to be changed.  As well as significant changes for bill payers, switching to an LVT based system carried significant implications for the financing of local authority activities. The local government finance system would need to be rebalanced to ensure more funds were distributed from London to the regions and would highlight the major disparity in land values between London and the South East and the rest of the country.

Members were informed of present funding arrangements from Council Tax, Business Rates and Central Government. Members were informed that a Fair Funding Review was being undertaken which was looking at distribution of funding to Local Authorities. The Authority would need to look at the outcome which would include retention of 75% business rates and understand the impact on Oldham. Members were asked that the outcome of current reviews be investigated and the LVT not be supported at this time. Members were advised that there would be winners and losers moving to Land Value Taxation and that transition time would be required. It was noted that it had been 20 years since the last significant change.

Members sought clarification on the letters that were requested to be sent and were advised that when motions were referred to the Overview and Scrutiny Board, no other actions were taken that were outlined in the motion until the board has determined a response.

Members asked about who would be responsible for tax for properties liable under ground rent. Members were advised that it was the land owner who was liable for tax which shifted liability. This would be a radical shake up as to the way land and property was taxed. There was a crisis in funding Local Authorities at the moment. The Fair Funding Review was being undertaken but had not yet been completed. There would be a need to understand what the outcomes and if the funding would be fairer.

Members asked if it would be possible for Oldham to introduce Land Value Taxation on its own. Members were informed that this would need a Central Government analysis and also legislation to address how Local Government was financed. Without detailed modelling and understanding what it would mean, it was difficult to support. Members were informed that the current method of funding finished in March 2020. Business Rates retention would come in from April 2020 with a funding review at the same time scheduled from April 2020. A national committee was addressing this with a system to get the right level of service for the population.

Member’s highlighted Sir Oliver Letwin’s letter and the issues outlined on the impact of housing supply and the impact of Government policy on those activities.

Members suggested a joint workshop with PVFM to discuss the motion more fully before sending correspondence to Ministers or MPs.

RESOLVED that:

1.    The report on the Land Value Taxation and the information provided at the meeting be noted.

2.    A joint workshop be convened with the Performance and Value for Money Select Committee to discuss the implications of the motion.