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Praguetory — Sun, 29 Oct 2006 22:15:22 +0000

Well done, Jock. Thought-provoking as usual. LVT 4 on my site is in the offing - thanks again for this excellent and timely contribution.

Spell it out for us please, Caroline.

Jock — Sun, 29 Oct 2006 14:27:00 +0000

A couple of weeks ago there was a justified story from the Tories about how inspectors were going to peer into every house to check whether it had double glazing or gaudy wallpaper to add to the council tax valuation. I blogged flippantly about that one.

Now today there are lots of media (e.g. Telegraph: "Council tax to soar 300% for homes in nice areas" and BBC: "Council tax 'to be crime based'") who have picked up on another Tory criticism of what appears to be going on in Northern Ireland. That the government have invested in sophisticated computer systems to include all sorts of neighbourhood factors - like crime rates, good schools and so on - in "council tax" revaluations.

Now, a few months ago we had the Bow Group produce ideas for the Tories' Tax Commission that included a more progressive property tax which, whilst still based on the full value of both land/location and buildings and other improvements, was clearly a step towards proper Land Value Tax/Site Value Rating. But since then, I've managed to fathom out very little of what exactly it is that the Tories would do with local government tax-raising. Maybe someone could enlighten me.

Because today's criticism, as Tim Worstall points out, hits out at attempts to make the valuation of site values more accurate. If you don't want to value peoples' buildings (and I don't) then if you want any kind of property tax, you'll want to be valuing their location and land value. A non-intrusive process. In some circles it's called "landvaluescaping". There is considerable evidence that you can quite accurately revalue sites based on changes in the neighbourhood, and in particular in the services provided that affect that neighbourhood.

So, for example, you can predict quite accurately what will happen to land values (and therefore house prices) if a new school in built, , or a bypass added, or a train service doubled. And the sort of neighbourhood profiling these systems being criticised today do are essential in that, both to provide reference points and to model new inputs. As a side issue of course they can be used to shift resources to places where existing inputs don't seem to be having the desired effect of quality of life.

So, all this system does is help value sites. That's what the ratings system did, but without computers it was extremely slow to update and got out of kilter with actual values. So what do the Tories actually want to do with Council Tax?

I thought the example quoted, of a chap in Belfast complaining that his house, which he bought for £50k in 1983 would only be worth £300k now because he had done no work to it whatever and he was worried that because his neighbours had spent thousands improving theirs it was worth £550k, was quite interesting:

Michael Kelly, 64, has been left perplexed, struggling to comprehend the estimate he received for his 2007-8 rates.

ÒIÕm currently paying just over £1,000, but in 2007-8 my bill is going to go up to nearly £4,000,Ó said Mr Kelly. ÒI get by on a civil service pension of £100 a week Ð how am I supposed to afford it?Ó

The only explanation he can think of relates to the computer and its failure to appreciate the difference between him and his former neighbour in Myrtlefield Park, Belfast. Mr Kelly, a retired civil servant, bought his Victorian semi back in 1983 for less than £50,000.

But his next-door neighbour spent thousands of pounds on a new roof, kitchen, bathroom and plumbing system, selling the house last year for £550,000.

Mr Kelly is now less than delighted, because he thinks the sale allowed the computer-assisted officials to value every house on the street at more than half a million pounds.

ÒI would be lucky to get £300,000 for my house,Ó he said. ÒItÕs in the same state it was in 1983. Now, because of this crazy system, I may have to sell up and leave. It is a disgrace.Ó

Just where, sir, do you think your extra £250k of value came from, if you didn't lift a finger in 23 years to improve your home? Answer: the very social, public and commercial inputs that this sort of software is meant to track. Why should you benefit from those inputs to such a huge extent without it being reflected in what you pay to be located there?

Jock's Place - Spell it out for us please, Caroline. - Comments

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Spell it out for us please, Caroline.