Labour's Flawed Land Acts -- 1947-1976
Vic H. Blundell
[Published by the Economic and Social Science
177 Vauxhall Bridge Road London; August 1993]
Since 1945, many attempts have been made by both Labour and
Conservative governments to pass legislation which would have direct
or indirect bearing on land economics. Most of that legislation, from
Labour's Town and Country Planning Act of 1947 down to the
Conservative introduction of the Community Charge in the late 1980s,
produced very important side-effects which were obviously not
expected. These side-effects arose through a failure properly to
appreciate certain fundamental economic principles, including the very
meaning of the word "land".
Land reformers of various kinds have long contended that the adverse
effects of the land tenure system prevailing in England and Wales, and
also (with some important variations) in Scotland, lead directly and
indirectly to a wide range of social and economic problems. Among
these are high costs of housing, homelessness, unemployment, high
taxation and recurrent industrial depressions. The present publication
is primarily concerned with those particular aspects of the "land
question", although some reference will be made to other aspects
In the early part of the 20th Century, agitation for land reform
became a major political issue. In 1903, the Conservatives enacted
some important land legislation relating to Ireland, whose effects,
good and bad, are visible in both the north and the south to this day.
A few years later, their Liberal successors attempted to assess land
values in Scotland as a preliminary to taxation, but were frustrated
by the House of Lords. The land taxing clauses of Lloyd George's 1909
Budget inaugurated one of the most intense periods of political
controversy in modern history. There was continuing interest in land
reform in the inter-war years: substantial legal reforms achieved by
the Conservative government in 1925; the derating of agricultural land
in 1929; the effort of the Labour Government in 1931 to assess and tax
land values; and the unsuccessful London Rating (Site Value) Bill of
We are here concerned with legislative measures which have been made,
or attempted, since 1945. It will not consider all legislation which
has some bearing on land - that would be an almost impossible task -
but only the legislation which was primarily intended to secure for
the community some of those land values which were created by the
community, but in practice were captured by private individuals. It is
the view of the author that in many - perhaps most - of these cases
Parliament was motivated by creditable principles, but that the
effects actually produced were widely different from those intended,
and sometimes the very reverse, through a misunderstanding of the
underlying economics. If Britain is to undergo a further spate of land
legislation in the future, it is important that the strengths and
weaknesses of past measures should be clearly understood, in order
that avoidable errors should not be repeated.
The word "land" will be used repeatedly. The term is here
usually employed in its economic sense, to cover all natural
resources. In actual pieces of legislation, however, the word is used
in its legal sense, which includes buildings and other developments
set upon land. These two usages of the same word must perforce be
followed, but it is important that the reader should appreciate the
The Town and Country Planning Act, 1947
....i. The background
In the first half of the 20th Century, both the Labour and Liberal
Parties were more or less formally committed to land value taxation. A
considerable number of Conservatives, including Winston Churchill,
showed much sympathy with the idea as well. When the Labour Party came
to power in 1945, it was eagerly expected by many of its supporters,
and by land reformers generally, that land value taxation would be
The Town and Country Planning Act which was passed in 1947 is famous
for a number of its provisions. It greatly strengthened the control of
local authorities over planning and land use. These elements of the
Act are important, but they lie rather outside the present study. The
provisions which are most relevant here are those which concerned "betterment"
The Act brought together the recommendations of the Scott, Barlow and
Uthwatt Reports, which drew attention to the high cost to local
authorities and government corporations of acquiring land for
development. These Reports noted that, as soon as development was
mooted, a "cloud" of value descended on the designated area,
and up went the price of land. This "cloud" of land
speculation followed the planners around the country.
If planning decisions by public authorities gave rise to increased
land values, it was argued, then the "betterment" of land
value should pass to the community, and not to the landowners. Hence a
"betterment" charge should be levied. All increases in land
values which were not related to planning permission, however, were to
be excluded from this charge. The architects of the Act claimed that
it would end land speculation, force land into use, and ensure that
increased land values arising from the release of land for development
accrued to the community.
.... ii. Provisions of the Act
The basic provisions of the Act which are relevant here were as
a. The right to develop land became a state monopoly, and
permission to develop, or change the use of, land had to be bought
from the newly-created Central Land Board. The definition of "development"
was therefore not confined to construction on vacant sites and the
re-development of existing buildings. It also included the change of
use of buildings from one business to another.
b. When "development", within the special meaning of the
Act, required planning permission, it attracted a Development
Charge. The Act, however, laid down twenty-two classes of
undertakings or occupations which were to be considered as of a
A change of use within a class was not deemed to involve "development",
and was therefore exempt from Development Charge. But a change of
use from one class to another required planning permission and, if
granted, attracted a Development Charge. As an example, shops as
such were not a single class of use. The class into which a shop was
placed depended on what it sold. A person could not change from
selling sweets to selling meat, or vice versa, without planning
permission -- which, if granted, made him liable to a Development
c. The method of calculating the amount of Development Charge
payable was to take the assumed selling value of a property if it
was confined to its present use - "existing use value", as
this was called - and deduct this from the value of the property
with permission for its development potential to be realised. The
difference between the two values was taxed at 100 per cent.
d. A sum of £300 millions was made available as compensation
to land owners who could claim hardship because their land was ripe
for development, but the Central Land Board had refused them the
right to develop.
The Act was passed in August 1947, and the planning sections took
effect shortly afterwards. The rest of the Act, which included the
Development Charge (s.61) came into effect in July 1948.
.... iii. Weaknesses of the Act
Although the Act was clearly an attempt to capture land values for
the people, it had many practical defects. Anomalies and absurdities
abounded, and even before the legislation came into operation many
people in the professions concerned with development and use of land
and buildings were alarmed at the complexity of rules, regulations and
Orders. Mr Silkin, Minister of Town and Country Planning, admitted in
a debate in the Commons (26 May 1948) to having second -or even third
- thoughts on this "highly intricate matter". So complex was
the Act that civil servants were sent round the country to address
meetings on the workings of the Act for the benefit of those in local
government and the professions who had to interpret, advise on, or
administer the regulations.
But there were other defects of a more fundamental character. In the
first place, the development charge which was intended to deprive the
landowner of communally-created increases in land values fell only
when the land was developed or redeveloped. Increases in land values
arising from other causes remained with the landowners. In practice
the vast majority of land value increases was of this kind, and these
were therefore lost to the community.
In the second place, development was discouraged, since there was
more profit to be made by improving property up to the limit of a
change or use than improving or building beyond that level, when it
would attract a Development Charge. The same applied to empty sites,
which were used as car parks or for similar purposes. Idle land as
such attracted no charge, and so site owners were encouraged to keep
it idle, in the hope that - with a change of government - the
financial provisions of the Act would be repealed.
A third weakness was that the Development Charge applied to the
developed site as a "property", and not to the land itself.
The greater the development the greater the charge, irrespective of
the value of the land as a separate factor. This weakness seems to
have derived from a fundamental misunderstanding of the nature of land
values. These are determined not by the actual use to which a piece of
land is put, but by its potential use in the mind of a prospective
purchaser. People will often pay a great deal of money for a piece of
land which is more or less derelict, because they think that they can
use it in a way which will bring them profit.
Finally, landowners who had been refused the right to develop their
land - whether or not they were entitled to a share in the £300
millions compensation - were disposed to withhold it from sale, in the
speculative hope that it would increase in value without, of course,
attracting the Development Charge. Thus land speculation, so far from
being ended, was actually encouraged.
.... iv. Operation of the Act
As the Act came to be applied, a chorus of criticism and condemnation
arose. Some, but by no means all, of this criticism was politically
inspired. The Act was simply not working as the legislators had
intended. There were examples from all over the country of frustration
resulting from extortionate Development Charges, inconsistent rulings
and valuations, absurd decisions, and differing interpretations of the
The Press reported numerous examples of the effects which the
regulations were having on would-be developers, on those whose use
changed from one class to another, and on those who innocently thought
that they did not come within the scope of the regulations. One
typical example was of a factory owner who was discouraged by the
Development Charge from building on land that adjoined his factory.
Instead, he erected two goal posts on the land, for his workers to
play football. This was deemed a development, and charges were imposed
on the goal posts. Another was of a man who bought his disused air
raid shelter from the local Council. He was refused permission to use
it as a tool shed unless he paid a Development Charge.
Many owners of small building plots who had previously bought them to
build a house, faced a Development Charge which doubled the price they
had paid for the land - the existing use value of which was deemed by
the Central Land Board to be purely nominal. Valuers had no firm
criteria for arriving at development values. They depended on the
estimated value of the completed buildings, less the "existing
use" - a vague and indeterminate concept. Many valuers had to
back-track on their estimates when challenged on appeal.
Valuations under the Act were subjective and often perverse because
of the underlying fallacy that the value of a plot is determined by
what it is used for, or what is put upon it. Thus, two plots of land
which on the market would fetch the same price had, by this reasoning,
different values when used for different purposes.
At the root of these various defects was the fact that "land"
was considered in its legal meaning, which included buildings and
other improvements, and not in its economic sense, as natural
resources alone. Thus the Development Charge was aptly named: it was a
tax on development and use of land, not on the land itself.
But what of the claims that the Act would cheapen land, make it more
readily available, and end speculation? Many landowners refused to
part with their land, even under threats of compulsory purchase. They
sat tight, awaiting new legislation, or a change of government. They
had nothing to lose. Compensation for loss of development rights was
indeterminate and they were not interested in parting with land at
present-use value. Estate Agents reported that the supply of building
land for sale had declined, and that when land was available its price
was usually well above current-use value.
.... v. Partial repeal of the Act
A Conservative government took office in 1951, and in December 1952
the financial provisions of the Town and Country Planning Act were
repealed. This ended the Development Charge, and also the obligation
of the Government to distribute compensation to landowners.
Another provision of the Town and Country Planning Act, which has not
been discussed above, had given public authorities the power to
acquire land compulsorarily in certain circumstances.
This was no new principle in English law, and had many precedents in
- for example - the Canal and Railway Acts. In some cases, land had
been acquired under the Town and Country Planning Act 1947 at less
than its market value. This state of affairs was also altered by
Conservative legislation. A new Town and Country Planning Act was
passed in 1959, which entitled the landowner whose land was
compulsorarily acquired to receive the market value, including any
increases in market value arising from development plans.
The Land Commission
.... i. Principles
In 1964 the Labour Party returned to power, and in 1966 it received
an increased majority. This gave it the opportunity to legislate once
again for the recovery of betterment values, and to extend the powers
of compulsory purchase of land.
There was no attempt to restore in their original form those clauses
of the Town and Country Planning Act 1947 which the Conservatives had
repealed, but an important new measure, the Land Commission Act, was
passed in 1967. Its aims were said to be "to secure that the
right land is available at the right time for the implementation of
national, regional and local plans", and "to secure that a
substantial part of the development value created by the community is
returned to the community and that the burden of the cost of land for
essential purposes is reduced.
.... ii. The Land Commission Act, 1967
To achieve these objectives, several legislative changes were made.
The Act was long and complicated, but the following is a summary of
its principal provisions.
1. A Land Commission was set up, and given wide powers
to acquire land in advance of requirements, so that it could be
available "at the right time". The Commission also
received powers to manage land, and to sell or lease land at full
market value - or, if need be, on concessionary terms (Part II of
2. A Betterment Levy was imposed at a uniform rate - initially 40%
of the development value - when land was sold, leased or realised by
development. It was intended to increase this proportion later by
stages. Liability for the Betterment Levy was subject to certain
allowances, exceptions and exemptions. The money was collected by
the Land Commission and paid into the Exchequer (Part III of the
3. A new form of land tenure, Crown Freehold, was created, which
was qualified by covenants reserving to the Commission future
increases in values arising from development or redevelopment. Where
a concessionary Crown Freehold was sold for housing, a covenant
prevented the house owner from selling at a profit representing the
difference between the market value and the concessionary value of
As with the Development Charge under the 1947 Act, liability for the
Betterment Levy awaited action by the landowner. In this case it was
the sale or lease of land, or the carrying out of "material
development" -- a term defined in Section 99(2) of the Act.
The added value which the owners expected to gain by developing,
selling or leasing their "land" was termed the "net
development value". This value was arrived at by deducting a
complicated "basic value" (essentially, the current use
value) from the market value. When this calculation revealed a
realisable value, a "chargeable act" or event arose. "Chargeable
acts" included the sale, lease or development of land;
compensation for revocation of planning and other permission; grant or
relief of an easement; and certain other "chargeable acts"
designated by Ministerial Regulations.
.... iii. Operation of the Act
A landowner became liable for "chargeable acts" after the
first "appointed day", 6 April 1967. Thus there was a rush
to start work before the deadline. This often entailed digging holes
or trenches, or laying foundations, as token evidence that development
had started before the appointed day.
There followed uncertainty in the land market, which was reflected in
the reluctance of landowners to part with their land. They might wait
for a change in government and the abolition of the Betterment Levy.
For owners of developable land, waiting was often no problem. Land,
they observed, always increases in value in the long run. They had
nothing to lose. Instead of more building land becoming available for
development, there was less. The decline in supply tended to raise the
price of what land was available. It was reasoned that since in many
cases the retention of 60 percent of development value was not
sufficient to make their land available, they would be still less
likely to do so when the levy increased as planned.
Thus the objects of the Act were not being realised. Land was less,
rather than more, readily available, and the proceeds of the levy fell
far below that expected. Instead of the £80 millions expected in
a full year, only £15 millions were raised in 1968-69 and in the
following year only £31 millions.
Sir Henry Wells, Chairman of the Land Commission, came under fire,
particularly from builders, who complained that land was not
forthcoming as promised. According to the property correspondent of
the Observer, 1 December 1968, Sir Henry had threatened to resign
because of unfair criticism. "
I am tired of being nagged by
builders. I am trying to help," he said, and blamed the planning
authorities for not releasing more land.
During the life of the Labour Government of 1964-70, criticism of the
Land Commission continued. It was labelled unjust, wasteful, and too
complex to understand properly - even by professional advisors. And
the Betterment Levy was self-defeating, in that realisation of its
objects depended largely on action by landowners - whose interests
were often better served by taking no action at all.
.... iv. Repeal
The Land Commission and the Betterment Levy were eventually abolished
by the Conservatives after they came to power in 1970. Subsequently a
land hoarding tax, aimed at penalising people who had obtained
planning permission for their land but had not proceeded with the
development, was proposed, but came to nothing. Then in 1973 came the
collapse of property prices, and many land speculators burned their
fingers and were in serious straits.
The Community Land Act 1975 and the Development Land Tax Act 1976
.... i. The two Acts
Labour's third post-war attempt to regulate, control and manage land
development and to collect development value for the community, took
the form of two linked but separate measures.
The first was the Community Land Act 1975, which had objects along
the same lines as its predecessors: "to enable the community to
control the development of land in accordance with its needs and
priorities". The second was the Development Land Tax Act 1976,
whose objects were the same as those of the Development Charge and the
Betterment Levy: "to restore to the community the increase in
value of land arising from its efforts".
.... ii. The Community Land Act
This Act, which came into effect on 6 April 1976, was considered by
many to be a half-way house to land nationalisation. Local authorities
were given the power to acquire land for public ownership, by
agreement or by compulsory purchase. The Secretary of State was
empowered to dispense with a public enquiry as preliminary to a
compulsory purchase order. Local authorities, having acquired land,
had the responsibility of seeing that it was developed, either by
themselves or by others.
The price to be paid was the market price, less any Development Land
Tax (see below) payable by the owner. Thus the basis was current use
value, which would exclude any "hope value" of the land
being later developed for other purposes. The power of local
authorities to acquire land became mandatory when a Duty Order was
made by the Minister. The cost of buying land, including costs of
administration and interest payments, etc., would be financed
initially by borrowing, and would be repaid from the proceeds of
disposals. Ultimately, purchases would be paid for directly by the
proceeds of disposals.
Land for commercial and industrial development was to be made
available on ground leases, of normally not more than 99 years. Land
for residential purposes was to be disposed of either freehold, or by
way of a building licence granted to the builder. Eventually the
freehold would be conveyed to the house owner.
.... iii. The Development Land Tax
The Act which introduced this tax came into effect in August 1976.
Unlike the other Act, this was based on proposals for taxation of
development gains which had first been made by the previous
The tax was to be administered by the Inland Revenue authorities, and
operated in conjunction with Capital Gains Tax. It was charged on the
realisation of development value. This could occur either by disposal
of an interest or by "deemed disposal" on the carrying out
of development. The tax was 80 per cent of the gains realised, except
for allowances for low gains. It was intended that the rate should
eventually be raised to 100 per cent.
The net development value to be taxed was the proceeds of disposal,
less the highest of three basic values - a convoluted formula which
roughly equated with current use value. There were exceptions,
exemptions, allowances, conditions and special cases - all set out in
94 pages of explanatory notes containing examples, calculations and
expositions to guide those who either had to deal with the Act or to
.... iv. Criticisms of the two Acts
Conferences organised by professional bodies to explain and interpret
the two Acts, and to conjecture how they would work, were held in
several towns. Speakers and audiences alike were highly critical,
revealing the uncertainty and frustration engendered by this land
legislation. Most of the criticism was levelled at the Community Land
Act. The Conservatives promised to repeal it; but they were willing to
go along with the Development Land Tax if it was nearer 60 per cent
instead of 80 to 100 per cent.
.... v. Fate of the two Acts
The Community Land Act ran into difficulties after the Government's
spending cuts of December 1976 reduced the borrowing capacity of local
authorities by £70 millions. This severely restricted their
acquisition of land, as there were no other funds available for the
purpose. Meanwhile, pressure for repeal continued. A typical comment
came from the President of the Incorporated Society of Valuers and
Auctioneers: "Any suggestion that the Act should be retained and
amended because the threat of repeal causes a greater level of
uncertainty, should be opposed. A bad Act is a bad Act. A house of
cards is no sounder because it has mosaic tiles on it." (Estates
Gazette, 2 April 1977).
When the Conservatives came to power in 1979, they soon repealed the
Community Land Act and reduced the Development Land Tax to 60 per
cent. The Development Land Tax was eventually repealed in the Finance
Post-war Governments, particularly Labour Governments, have
repeatedly legislated with the object of making more land available
for use, bringing down land prices, curbing speculative profits
arising from the implementation of regional and national plans,
enabling local authorities to acquire land cheaply and collecting for
the community those land values which were created by the community. A
great many people whose politics were not Labour have sympathised
strongly with these objects.
Yet legislators who have attempted to deal with such problems have
been unwilling to look beyond expedients like betterment levies,
bureaucratic control of land use, and semi- nationalisation. Although
the Acts were eventually abolished by political action, this was
nothing more than the coup de grace to legislation which was
manifestly not achieving the objects for which it was originally
The Acts failed for a variety of reasons.
In the first place, they were complex pieces of
legislation, and the more complex a law is the more likely it will
be riddled with anomalies and unintended side-effects.
In the second place, there has been real confusion about what the
word "land" means in different contexts, and people who
sought to produce an effect on land in one sense of the word often
in practice produced a completely different effect.
Thirdly, the legislators have been preoccupied with the speculative
profits made by dealers and developers. This has led them to
concentrate on capturing some of the gains which arise at the point of
development and sale, or when planning permission is granted. Yet the
value of land at any time does not differ in any essential from
subsequent increases in land value. The value is merely the aggregate
of increases which have accumulated since the time when land had no
market value, and should not be treated differently from more recent
increases. All that a betterment levy or similar expedient does is to
tap the pool of land value at a point in time and to draw off a
little; but in general it keeps the status quo.
Fourthly, there was no attempt to harness the self-interest of
landowners. Instead of inviting cooperation, the Acts provoked
resistance or inertia.
Fifthly, the effect of the post-war land legislation on all three
occasions (1947, 1965, 1976) was to deter development and the better
use of land, to encourage land hoarding by owners and to produce an
artificial scarcity of sites.
An effective and satisfactory way of achieving the essential objects
which the three post-war Labour Governments all seem to have had in
mind would have been to levy a tax on all land values - vacant land
included, and regardless of its state of development. The value of
different sites of land vary enormously according to a variety of
factors which (unlike the value of improvements) have nothing to do
with the activities of the landowner or his predecessors in title.
These factors include fertility, the presence of minerals, ease of
communications, proximity of towns, and the kinds of use permitted by
planning and other environmental legislation. These factors would all
be taken into account in assessing the tax.
A full exposition of the theory and practice of land-value taxation
may be found elsewhere - but, briefly, its virtues are as follows.
- It treats all landowners alike.
- It takes cognisance of increases or decreases in land values at
- It is a natural and buoyant source of revenue.
- It is payable irrespective of the actual state of development,
and acts as an incentive for owners of idle land for which
development is lawfully permitted (e.g. in decayed inner cities)
to develop it or put it on the market.
- The tax cannot be avoided or evaded.
- Land would be cheaper to buy and dearer to hold. As more land
was made available, its price would fall, and therefore houses,
etc., would be cheaper to buy.
The success of any measure of land reform will depend not so much
upon what it sets out to accomplish, but on how strictly it conforms
to the principles and logic of land economics.