UPDATE 9 April 2011
Actually, the error I identify below (over-estimate of LVT revenue by £123 million) doesn’t look like an error on further examination. The land values in my original report were from January 2009 (the Valuation Office) and thus that is why the NDR figures are from 2009 also. Land values will have risen since then, probably by a little more than the Council Tax revenue has done (which means if there is a discrepancy it’s probably in the opposite direction – i.e. that LVT would raise a little more extra revenue than the 2009 calculations), but we cannot forecast use figures using different base years. Obviously the precise difference between the two will vary ahead of LVT being introduced, as one taxes properties and the other taxes land. The figures published in the SGP proposals are thus robust.
Today, the Scottish Green Party (SGP) published its proposals for a Land Value Tax to raise finance in the next Scottish Parliament. A thoughtful commentater (Steve @3pSteve on twitter) has questioned the figures used. His criticisms are published here. Specifically, he argues that the £1,039 million that the SGP claims will be raised is incorrect and should instead be a mere £150 million. He levels two particular allegations.
The first is that the SGP has underestimated current local tax revenues from Council Tax and Non-domestic Rates (NDR) by £274 million. This is because the SGP proposals do not include income from Council Tax Benefit (CTB) and that the wrong figure has been used for current NDR.
He is correct that the CTB is not included in the figures for current income. This is a benefit paid by the UK government and will continue to be paid under LVT. So, one either excludes it from the current income and future LVT or one includes it. The SGP proposals exclude it (if they were to include it then forecast LVT income would rise to £5,027 million)
On the question of NDR, the figure Steve cites is a mid-year estimate for 2010-11. The SGP paper uses a figure of £1.9 billion which is from 2008-09. The figure for 2009-10 figure is £2,015 million.
So, at most, the SGP proposals over-estimate current income by £115 million.
The second criticism is that the LVT revenue estimates are over-stated by £615 million. This is based on the assertion that the second table in the SGP proposals has current CT at £2,568 million and that this is £659 million more than is actually raised by CT (£1,909 million).
However (and this is made clear in the footnote to the table), the £2,568 million excludes CT discounts such as empty property relief and single person discounts. In other words, this is the TOTAL sum that would be raised by CT were it to be applied in full to all properties. It is wrong therefore to make the assumption that this is a flawed methodology which, if applied to the forecast LVT yield would reduce it by £615 million as Steve claims. The forecast thus remains at £4,839 million.
The conclusion of all of this is that the SGP proposals may overestimate revenue by £123 million (£4,839 million minus £3,923 million current revenue). This should be seen against the background of, imperfect valuation data but also substantial flexibility in the exact level at which to set the rate of LVT. Thus it appears perfectly reasonable to plan for a £ 1,039 million extra revenue.