Budget 2025: A missed opportunity for land value tax

On the 2025 budget announced by the Chancellor today, Dr Di Nola said:

“The budget outlined today by Chancellor Reeves raises total tax revenues to around 38 per cent of GDP by the end of the Parliament, with the largest single measure being the continued freeze in income-tax thresholds until 2030–31, expected to raise roughly £8–9 billion per year. These are meaningful adjustments, but in my view, the priority for any Chancellor should be long-term reforms that strengthen sustainable growth while remaining mindful of their distributional effects. Policies that boost investment, improve labour-market performance, and lift the economy’s long-run productive capacity matter far more than incremental tweaks to the tax code.

“One promising avenue is a land value tax. Unlike conventional property taxes, a land value tax is levied only on the value of land itself and not on the buildings or improvements made on it. This means it does not discourage construction or redevelopment; on the contrary, it creates strong incentives to build housing and use land more efficiently. Because the supply of land is fixed, taxing its value is also economically efficient - it minimises distortions, raises revenue in a neutral way, and tends to be progressive, since land ownership is highly concentrated. Reforms of this kind are politically challenging, but they are central to tackling the UK’s persistent structural problems. Today’s budget represents a missed opportunity to advance them.”