Letter: Price of Green Belt

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Sir: A Green Belt tax would not, as you report ("Prescott proposes Green Belt tax", 20 January), make houses built on the Green Belt more expensive.

The price of a house is determined by what someone will pay for it. Many of the costs in its production, such as bricks and wages, are relatively fixed. What the land is worth depends on the price the finished house will fetch, not the other way around.

A Green Belt tax is a windfall tax. Windfall profits accrue to those who sell land for development, the value of which is created by largely external factors. Many governments since the First World War have attempted to tax these windfall profits, but only very small sums have ever been collected. Landowners are often in a position to take a long-term view, and most simply wait for a government of a different hue to remove the tax. The only result is bottlenecks in the supply of development land, further aggravating the problems of the housing market.

This government has shown some determination over windfall taxes, so perhaps they will be able to devise a solution.