Property and land, taxation and the economy after the Barker Review

John Muellbauer

A critical review of the role of property and land taxation in relation to the wider economy.

In March 2004, Kate Barker published her review of housing supply, prepared for Chancellor Gordon Brown. Her recommendations included a radical reform of the planning system and for new development taxes.

Separate reports for the Chancellor have also examined the operation of the mortgage market and the impact of fiscal instruments on the housing market. In this report, John Muellbauer re-examines property and land taxation in a wide economic perspective. He considers UK property tax reform given four broad economic criteria:

  • macro-economic stability;
  • resource allocation; symptoms of misallocation include the under-provision of housing highlighted by the Barker Reviews, serious urban deprivation and regional underutilisation of resources, and pressure on resources in high demand areas;
  • the reduction of inequality between individuals and between generations;
  • caring for the environment, particularly in the context of the expected relaxation of planning controls.

The author explains the role of housing and land markets in exacerbating macro-economic instability, resource misallocation and inequality, and why reform of the current tax regime could improve matters. He argues that taking this more holistic view of the economic issues – rather than looking at elements in isolation – may suggest different policy solutions from those set out in the Barker Review and the July 2004 Balance of Funding Review, which examined local tax and funding reforms. Available in electronic format only.