Europe stands on the brink of war and a huge amount of money must be raised for defence. The welfare state demands an ever-greater share of the national income. In response, a Left-wing government decides to impose a radical new property tax.
It might be assumed these events describe present-day Britain. However, they could just as well fit the political landscape more than 100 years ago, when David Lloyd George pushed through one of the most controversial levies in history.
What happened next should serve as a warning to Andy Burnham. The Prime Minister has long supported a “land value tax” (LVT) which would be based on asset wealth rather than income.
Mr Burnham, who cemented himself as the Labour leader last week after receiving the support of 349 MPs, has already voiced support for reforming property taxes.
During his Makerfield by-election campaign, he admitted to having “long been persuaded of the argument for a land value tax”, and previously referred to it as “aspirational socialism”.
But the idea is not new and has been tried before – with devastating consequences.
‘Horrible complexities’
The year was 1909 and the country had just elected the Liberal Party to Government with a landslide victory. Lloyd George, the Chancellor at the time, targeted the “unearned” wealth of landowners whose property had increased in value between buying and selling it.
In what would come to be known as the “People’s Budget”, the politician attempted to raise revenue for newly created old age pensions and additional Dreadnoughts to compete in the arms race with Germany.
Central to his plans was the Land Value Tax, a 20pc levy on the amount that a property increased in value when it sold compared with a baseline valuation (backdated to 1909).
There was also an annual tax worth about 0.4pc of a property’s value, then equivalent to a penny for every pound of value.
