Javid backs tax to take half of land value uplift from planning permission for the public purse

Chancellor of the Exchequer Sajid Javid has backed changes to the tax system that would equally divide uplifts in the value of land generated by planning permission between landowners and the public purse.

Chancellor and former communtiies secretary Sajid Javid. Image by House of Commons Library
Chancellor and former communtiies secretary Sajid Javid. Image by House of Commons Library

Former communities secretary Javid was blocked by former prime minister Theresa May in his attempts to reform the land value capture system, he has told the author of a new book.

Javid, now chancellor of the exchequer, told author Liam Halligan that he included proposals to update the 1961 Land Compensation Act in the 2017 Housing White Paper.

However, he told Halligan that he was "frustrated" when May removed the policies from the final published version. 

In Halligan’s forthcoming book, Home Truths, Javid said that his proposals would have returned to a system of "existing use" prices for land sales, splitting planning uplift between sellers of the land and local authorities.

He said: "When I was secretary of state, we worked on a fifty–fifty split of the valuation between local government and landowners,"

"This would be an efficient and morally justifiable tax," he said.

"The state is expected to create the infrastructure around new housing, and that needs to be paid for – so fifty–fifty makes sense."

Javid voiced disappointment about the May’s decision to remove the policy from the white paper.

He said: "She just didn’t get the impact of this housing crisis on ordinary families, ordinary working men and women – so the white paper was gutted, all the strong ideas removed."

Also interviewed for the book, Tony Pidgley, chairman of housebuilder Berkeley Homes, said that the UK land market is in "dire need" of reform.

He told Halligan: "The local community, the whole of society should capture that value – it’s about decency."

And he said that he would not oppose the wider use of compulsory purchase orders to ensure land is bought and sold at reasonable values.

He said: "We are in the building business – and that’s where we should be competing, not in trading land.

"As long as there is room to make a decent margin on housebuilding, bring it on."

Also quoted in the book, former housing minister Nick Boles blamed the planning system for producing an inadequate number of homes at low quality.

He said that large housebuilders are "sheltered by the planning system from competition by new entrants’, he says, so they "fail to innovate or invest in new, more efficient ways of building houses".

However, Halligan also trains his fire on volume housebuilders, citing the fact that up to 40 per cent of housing planning permissions are currently unused.

He said: "This reflects a concerted ploy by an increasingly concentrated UK housebuilding industry. Large developers sit on usable plots in a rising market, accruing wealth as such plots become more valuable – while ordinary workers save desperately, as prices rise, in a bid to be able eventually to afford a home."

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