The Land Value Cap offers the chance of more affordable infrastructure
One of the main reasons I decided stand to be the first directly elected Mayor for Cambridgeshire and Peterborough was my determination to find solutions to tackle the significant disparities in wealth and opportunities that exist across the Combined Authority area.
Cambridge University is a remarkable institution and the associated “silicon fen” has the potential to propel Cambridgeshire and Peterborough into becoming one of the most economically dynamic regions of the UK. However, it’s also clear to me that the whole of the region will only achieve its true potential if all the different communities pull together as one.
Current projections forecast that Greater Cambridge will be one of the country’s great engines for job creation over the next decade, with the potential to create over 40,000 new jobs. However, one of the threats to the concept of Greater Cambridge that may prevent it from achieving its true potential is its overheated property market. Whereas in the north of the Combined Authority area a three-bedroom house would cost you approximately £160,000, in Cambridge City it would cost you closer to £600,000. Not only are the lower-paid workers who are needed to fulfil vital roles in the Greater Cambridge economy shut out, but even some of the highly skilled and more affluent workers that the University and the science park need to attract are struggling to find affordable places to live in the city.
Unfortunately, due to underinvestment in transport infrastructure over many decades, commuting into Greater Cambridge from the north, particularly Fenland, is rarely an option. It also means that relocating from Cambridge to the north of the Combined Authority area is impossible for those currently struggling with the cost of living in Cambridge. Unless this is addressed, the Greater Cambridge bubble is in danger of bursting. A solution is needed to ensure that Greater Cambridge can continue to attract the best talent and that the whole of Cambridgeshire and Peterborough can benefit from the 40,000 new jobs expected to be created over the next decade.
Nothing less than a revolution in the provision of transport infrastructure across the region is required to ensure these issues are resolved. I made clear during my campaign that part of this revolution includes an extension of the M11 near Cambridge to the Peterborough area in order to join the A47. Such an extension would mean journey times from the north of the Combined Authority area into Cambridge would fall from over an hour to approximately 30 minutes. This would open up the booming Greater Cambridge labour market to those across Cambridgeshire and Peterborough. It would also make the northern parts of Cambridgeshire far more attractive to inward investment. The extension of the M11 to the A47 would likely have a total cost in the billions. However, in my view, if we are bold and imaginative in our thinking, such a price tag need not be prohibitive.
I believe we need to consider a Land Value Cap in order to fund this project. Currently, developers and landowners are the biggest winners from state-funded infrastructure improvements. The Government is very unlikely to recoup the initial cost of the project, though it will of course benefit from increased tax revenues in the long-run. Land Value Capture is a mechanism that has the potential, if designed in the right way, to unlock major infrastructure schemes of significant public benefit that otherwise would have a prohibitively high price tag.
Almost all the land adjacent to the site of the potential M11 extension is currently agricultural land of limited value. If the extension of the M11 were to be completed, the value of the land adjacent to the extension would be greatly enhanced. The reason for this would be that the land along this new corridor would be suitable for significant housing development. In all likelihood, in such circumstances the value of the land in question would go up by 40, 50, or even 60 times.
A Land Value Cap would involve placing a cap on the extent to which land adjacent to a significant infrastructure project (the M11 extension) could go up in value. For example, the increase could be limited to ten times the original value. The landowner would still benefit financially from the effect of a major development that would not have taken place without the introduction of a Land Value Cap. The purchaser of the land in question, probably a housebuilder, would be able to secure the land at a far lower price than would have been the case without the cap. On purchasing the land, the housebuilder would sign an agreement, agreeing to pay a charge (say £30,000 per house, payable on the sale of the house) to the organisation funding the road construction project which made the housing development possible. This would have the potential of making the project (in this case the M11 extension) a viable proposition.
The Cambridgeshire and Peterborough Combined Authority does not have the legal authority to introduce a Land Value Cap, so parliamentary legislation would be required.Government action would bring about a large increase in land values and enable house builders to build in areas not previously available. The Government would therefore be justified in using part of this increased value to fund the road scheme which enables landowners and developers to make significant financial gains.
Connecting Cambridgeshire and Peterborough from North to South is not just about sustaining the Cambridge phenomenon and meeting potential labour shortages. At its heart is a moral mission to combat inequalities relating to the significant disparity in socio-economic opportunities across the area that I represent. Such disparities in wealth and opportunities will only be achieved through bold and imaginative thinking in order to bring about a dramatic improvement in our transport infrastructure. As the directly elected Mayor, I’m determined to play my part.