Referring to my previous posting on the budget, and thanks to Lord Greaves, I now have the explanation for George Osborne’s pilot scheme. It could be said to be a Liberal Democrat idea, in that it was proposed by a LibDem member, Dr Tim Leunig of the London School of Economics. It was, however, rejected as policy by party conference.

According to Dr Leunig’s own blog, it works like this: “The council first asks all landowners to name the price at which they are willing to sell their land. By naming a price, the landowner gives the council the right to buy the land for 18 months at that price. The council then writes a development plan. As now, they will take into account the suitability of the land offered for development, but will also consider the price of the land, and the likely financial return to the council.

“It is rather like buying a car. You know your preferences, and can choose the most suitable car. But you might buy a different one if it is much cheaper. That possibility means whoever makes the best car for you has to offer you a good price. It is how well-functioning markets work.

“Having decided which land can be developed, the council auctions it to developers, keeping the difference between the price named by the original landowner, and that paid by the developer. There is no risk to the council – if no developer wants the land, there is no sale and the original landowner retains the land.”

   2 Comments