Small print in Jeremy Corbyn’s general election manifesto revealed that a Labour government will look into a new levy on “commercial landlords” that could hit businesses. The Tories warned the proposal could “clobber” the UK’s struggling high streets and town centres if Labour wins the December 12 general election. Tory analysis based on a blueprint for the tax drawn up by a think tank with close links to the Labour leadership showed the average bill for businesses could hit £38,130 a year under the proposal. Communities Secretary Robert Jenrick said: “A Conservative majority government will get Brexit done, and support local high streets by cutting their business rates.
“Corbyn’s Labour Party will hike up taxes on local firms across the country and wreck the economy. This is a new tax on high streets that will clobber struggling shops.”
The little-noticed policy in Labour’s general election manifesto said: “A Labour government will review the option of a land value tax on commercial landlords.”
Mr Corbyn and his shadow chancellor John McDonnell have long advocated such a levy to try to squeeze more tax revenue out of “unearned wealth”.
Last month the New Economics Foundation, a Left-wing think tank with close links to the shadow treasury team, argued that a tax on land values could raise up to £5billion a year.
The proposal would sweep away the current system of business rates based on a valuation of a commercial property and the land it stands on.
Instead, the levy would be based only on the value of the land.
A report on the proposal from the New Economics Foundation acknowledged measure would “particularly hit businesses in high land value areas (such as town centres)”. The think tank recommended an annual levy charged at between 2.8 and 3.6 percent of the value of the land a business stands on.
The Labour Land Campaign, a pressure group within the party, has called for a Land Value Tax “on commercial land at a rate of 3 percent of capital value” and floated the possibility of raising the levy to up to 5 percent in the long term.
Using land values figures from the independent Investment Property Forum, Tory researchers calculated that a high street shop outside London of the same size could pay £38,130 a year under the proposal.
London shops would pay more, as land values in London are even higher.
By contrast, the Tory election manifesto proposed increasing business rate relief for shops, pubs and retail premises to cut £5,000 a year from the tax bill of an average shop in England.
During his 2015 campaign for the Labour leadership, Mr Corbyn said: “I have been impressed by the work the Labour Land Campaign and others have done on making the case for Land Value Taxation, which can capture for local benefit some of the private gains generated by public investment, while promoting more efficient use of land.
(I would welcome input from Labour councillors on developing proposals of how LVT could replace the regressive system of Council Tax and the centrally-controlled Non-Domestic Rates.”
Mr McDonnell has advocated a land value tax for over a decade.
In 2007, his website said: “I’m advocating the replacement of Council Tax and business rates with a Land Value Tax. This is something long campaigned for by the Labour Land Campaign.
“A tax on land values will return some of this unearned wealth to the community.”
In 2012, his website proposed a “a radical alternative to austerity”.
Setting out his alternative economic plan, he wrote: “It simply requires the introduction of a limited range of redistributive measures which will raise the funds we need from those most able to pay and who have profited most out of the boom years. This redistribution can be achieved through a Land Value tax.”
In November 2019, the New Economics Foundation outlined how a land value tax could be used to increase business taxation by an additional £4.4 billion to £5.5 billion a year.
“A land value tax should be levied directly on landlords rather than occupiers.
“However, this cost could be passed on to occupiers in the long term,” a report from the think tank said.
It added: “Business renters may enjoy decreases in their bills as a result of not paying business rates up to the maximum levels as presented below, although in the long run, landlords will likely pass back a large proportion in bills in the form of increased rents.”
Labour’s shadow Treasury minister Jonathan Reynolds said: “This is more fake news from a Conservative Party which promises nothing to turn round our high streets over the next five years.
“Labour will not raise business rates. We will establish a new Business Development Agency to act as a one stop shop and champion small businesses across government departments, helping them access business advice, finance and large scale government contracts.”
