2013/01/21 Minutes Economics Working Group
1. Joined by members of the Royal Court Theatre exploring protest for a play. Introductions.
2. Following CEJ meeting with Treasury officials – sent papers to them; one on implementation; Tax based on the land; Separating land from capital; rent due to the community which created the land value; replacement rather than an additional tax; other taxes are on production; better to tax that which doesn’t deter production. Political obstacles: 65% owner occupiers but social housing and private tenants would benefit; implementation could be both local and national; separate buildings from land – tax on land only; efforts to upgrade the buildings are not taxed; location value rises as a result of communal action and the benefits should be shared accordingly – ie. given back to the community. Could be passed on to tenants in inflated rents? Rents determined by market which should limit them; current rents are driven by mortgage lending – LVT should reverse the trend of rising rents; possibility of rent controls to limit abuses. Can’t avoid LVT through tax havens; 800,000 properties currently vacant in the UK, LVT would bring them back into use. North/South divide; urban v countryside; number of issues to be examined. A recent survey revealed only 1 in 8 know what LVT is. Incoming government would introduce a National Land Rent Bill to establish the concept, ownership recording and valuation of land would take a year; only have to establish the value of land not buildings which is more complicated – think of Council Tax valuation; Tax would be based on rental not capital value; National Non-Domestic Rates (NNDR) moved on to Site Value Rate (SVR) basis – national and local taxes; phasing out of other taxes as LVT rate increased; could be implemented quickly; Mirrless Report. Recommends NNDR to SVR;
3. Commons and land should be shared for the common good; land registry records are poor and incomplete and demands to have comprehensive land records would be a good start. LVT is additional cost on production leading to inflation and possible migration of production overseas? Henry George LVT tax expressly not on production – income and corporation tax – dead weight losses. Taxing annual rents (rather than capital) would act as a limit on production? Time related cost/return could lead to short term expediency giving rise to ecological concerns; relies on land ownership rights rather than careship (stewardship); measures needs to be transformative – ownership of land is usury. How would this impact rents and what is the community? Government? Planning law impact; tax on leaseholder or freeholder;
4. See banking paper for answer to Summary point 4) in the CEJ Implementation plan. Not a tax on production, property taxes are on the owner, not additional to existing taxes/instead of; easy tax to collect; income and corporation are more complex/costly to collect; needs a strong and sensible planning regime; optimal best use – ecology – got to protect the green belt; speculation on land will diminish diverting investment elsewhere; time value law of dynamics; tax may not be entropically neutral; raw material + energy = profit + pollution. Would encourage the best use of sites; would be transformative – 0.1% of people owning 50% of the land – politically significant to tax the rich; would be a wake up call for the Duke of Westminster Henry George wrote over 100 years ago and American – globalisation is a different challenge; agree with recovering land value for the community but is this the best way to achieve it; would need to be implemented global think of development in Africa for example. Chinese are in africa. Policy could be seen as anti-royalist which may dilute support; value of land is subjective or according to the market; need information on land ownership – database. Henry George: land should be in common ownership; need a full frontal assault on the current system; not trying to achieve goals by Blairite stealth; tax on productivity? 65% in occupation; 0.6% owns 70% of land; paper not stark/bold enough; Land tax/ownership reform is one part of the solution; people will may off their land into common ownership leading to alternative models eg. Cooperatives. Paper addressed to the Treasury – not a silver bullet – one of many things to be done – banking system reform; social housing; short term and long term measures required. Land ownership is the issue. It’s about winning the argument. Banks are significant stakeholders in the housing market through mortgages; would reduce intergenerational conflict – move towards equality; Spirit Level; first target for reduction/removal would be income tax and national insurance; replace taxes on production – eg. VAT hits the poorest hardest; UK need to be an example to the world; South America could be a potential target for LVT; global strategy; land is a gift from nature/god – capital is derived from land and labour. LVT is not elitist; Widely discussed at the recent Quilligan related economics conference on the commons – water and energy for the people rather than private gain – LVT is very much about returning land to the commons. Is the ambition to get to 100%? Some think yes others want to see how it develops. Other LVT advantages – encouraging lending to business – home loans will decline; reduce money creation by banks (mortgage loans); improve empty properties; discourages speculation on land; impossible to avoid; £400bn pa potential for public benefit ; if land values fall it’s reflected in tax unlike council tax; encourages best use of land; gradualist approach but needs to be national; cuts on income tax benefits employer; LVT is a paradigm shift but suggesting incremental implementation; if implemented land owners may want to sell, would the government buy? Poor widow – don’t pay until you re-mortgage, sell or die. LVT is condoning private ownership; should be part of the commons.
5. Vote on capturing land value for the common good: 10 in favour, 2 against with 1 abstention
Vote on LVT 7 in favour, 5 against with 1 abstention.