Tag Archives: land-value-taxation

Cunning stunt? Buy a calculator

A few days late on this one, but I have been meaning to follow up on this article about Grant Shapp’s cunning stunt over the Christmas holidays:

“Our plan would build more houses than the Government. But the way to do it is not to do it in a centrally planned way. That has always failed.

“The way to do it is to incentivise communities to want to build houses. It works by saying, ‘build these houses and you get a new town centre or other services like a hospital or school.’ The existing community gets the gain, not just those people who move there.

“If people knew that council tax receipts were kept for five or 10 years if they took houses and therefore council tax was lower, they would often be in favour. This way you are building up an array of benefits from being a Yimby, not a Nimby.”

No-one is disputing that if communities had incentives to develop, all things being equal they probably would. But perhaps Mr Shapps ought to buy himself a calculator if he intends to make this incentive reliant on council tax receipts. Because while only a fraction (a quarter to be precise) of local authority revenue is raised from council tax, new developments will continue to have net costs associated with them, not net benefits.

If the Tory policy is for council tax to shoulder a bigger burden of local tax revenue, it’s news to me, and I’m sure it will be news to the millions of people who are unlikely to welcome a massive tax hike to the tune of thousands of pounds. And it must be news to Caroline Spelman and Eric Pickles who have spent the past two-plus years denouncing any attempt of government to even contemplate revaluation by coming up with scare stories about taxing “nice views“.

If Shapps truly wants his dream of creating incentives for new build to become a reality, he’s going to have to be a bit more radical than that. It won’t happen without a significant tax shift onto land values. That isn’t something that David Cameron, Gideon Osborne and the other members of the Tufty Club behind the New Model Tories are likely to contemplate, no matter how many times Grant sleeps in a cardboard box.

Shapps of course must know this; he’s seen how Osborne has been inflated to the point of being hailed the new messiah by the Right for suggesting (modest) cuts in wealth taxes after all, which makes his stunt seem all the more hollow. Almost as hollow, in fact, as this claim:

Mr Shapps points out that the real losers were the Lib Dems whose second place was a foretaste of the disarray that eventually claimed their leader.

W-O-W – this is amazing stuff coming from the man who claimed he had proof that the Lib Dems were running a “poster lottery” (which has subsequently earned Iain Dale the immortal nickname Pravdale) and whose hands appeared to be caught stuck in the YouTube cookie jar. Cunning stunts indeed. Without wanting to revisit old battles, let’s just make one thing clear: just as the Lib Dem’s victory in Dunfermline and West Fife in 2006 had nothing to do with our lack of a leader at the time, winning Ealing Southall would have done nothing to save Menzies Campbell’s job. He would still have quit this autumn. For Shapps to claim that one of the greatest Tory fuckups of 2007 was in fact a bold act of regicide on his part is immodest even by his standards.

It’s nice to see him begin his political rehabilitation however. It is clear he has learned nothing, which suggests that we will have a second chance to have some more fun at the expense of this legend in his own lunchtime before too long.

Is Nick Clegg about to ditch local income tax?

Discussing Clegg’s interview with David Mills of GMTV Sunday earlier, it occurred to us that the following quote has potentially enormous implications:

Nick Clegg: Er, yes, but I mean there are other ideas. For instance there are other ideas, I mean for instance I’ve also this week been floating ideas for how I think we should introduce a 10% tax on the non-domestic earnings of so-called ‘non-doms’. In that particular case that raises about £1 billion. I would like that to go to alleviate the burden of Council Tax on those in Band A and band B properties, those on the lower rung of the property ladder, if you like. But it’s just an example of where we can be creative in trying to find that extra money in order to fulfil that pledge, and I’m absolutely confident that we will under my leadership make that fixed pledge by the next general election.

Is this just idle blue skies thinking (which you surely must never do on a TV interview) or a hint that under Clegg the Local Income Tax policy is to be scrapped or at least adapted so that council tax will remain in the picture for the foreseeable future? Because you can’t alleviate the tax for low bands if you are going to scrap the tax altogether.

Is this an unintentional slip, revealing an agenda to move the party away from its existing LIT commitment? He was apparently quoted as saying nice things about site value rating earlier this week although I don’t have chapter and verse. Is a pattern emerging?

Speaking personally, such a shift would be fantastic: despite all the wobbles it could even win my vote (notwithstanding details, etc). Amongst many other party members though it would probably be about as popular as drinking a bucket of cold sick.

This isn’t an issue to be trifled with. If Clegg is thinking along these lines, mere hints will not be good enough. He would have to press it home. It would be a high risk strategy of exactly the kind that so many of us have been calling for him to adopt over the past few weeks.

Dare to do it Nick; you know you want to! 🙂

Will Stormont bite the LVT bullet?

An interesting article appears out of the blue:

Last night the Department of Finance and Personnel reiterated the answer they gave to Mr O’Loan when he asked what consideration the minister (Peter Robinson] was giving to the rating of agricultural land.

It said: “Under the current rating system agricultural land is not valued nor rated and there are no plans to do so.

“However as you are aware the current review of the new domestic rating system that was introduced by direct rule ministers in April 2007 is examining a wide range of options for change in the shorter and longer terms, which were included in terms of reference agreed by the Executive.

“Strand 2 of the review is addressing longer term issues including possible alternatives to the current arrangements and one such alternative is Land Value Taxation.

“I have commissioned the Ulster University to investigate the experience of other jurisdictions that have used Land Value Taxation.”

This is being presented as a scandalous attack on farmers, but Tony Vickers makes an excellent case in his recent book for the replacement of agricultural subsidies in favour of LVT.

Either way, it is interesting to see that Stormont is investigating LVT as a possible replacement of the rates – the Tory government in the 80s not having scrapped them in Northern Ireland along with everywhere else. Without being saddled with the mess that is a Council Tax that hasn’t been revalued in 17 years, it would be relatively painless to introduce there and the potential benefits would be immense. And if it could be shown to work there, it would be an easier sell for the rest of the UK.

This is all putting the cart before the horse of course – it remains to be seen if the mishmash coalition in Stormont is capable of pushing anything through. But it is certainly worth keeping an eye on.

Neo-Feudalism: back with a vengeance

Polly Toynbee mourned the death of social democracy in the Guardian yesterday which, based on her definition, is not something I will be shedding many tears over. He kneejerk reaction that what Brown should have done instead of raising the IHT threshold was to increase income tax on people with incomes above £100,000 was akin to arguing that instead of shooting himself in the foot he should have simply shot himself in the head. Not only would such a move have been massively unpopular, but it wouldn’t have made much economic sense either.

Fortunately, calmer voices were also to be found in the Grauniad, with Shelter’s Chief Executive Adam Sampson giving a much more lucid account about why wealth taxes are a good thing and the government so wholly wrong this week. In doing so, he breaks a major taboo, suggesting that our home owning economy might not be the unambiguous good that the cross-party consensus asserts.

The problem, which Sampson readily acknowledges, is that when you live in a society where 70% of the electorate are home-owners, making the national interest case for wealth taxes is a thankless task. Quite what a mountain we have to climb is summed up by Andy Beckett’s article on IHT which explores quite how unpopular the tax is and why. Beckett or more precisely Professor Stuart White, for that is who he is quoting, manages to both sum up the conundrum and miss the point with this sentence:

“What seems to have come through in Britain, post-Thatcher, is not so much a meritocracy as a feeling that what you get is what you’re entitled to.”

Michael Young, the man who coined the term meritocracy in 1958, became exasperated towards the end of his life at the way in which politicians came to adopt the term uncritically. His 2001 essay on this is even more relevant now than it was back then. The point is that exhorting meritocracy leads precisely to the view that people get what they deserve. The political establishment’s failure to challenge the idea that it is okay for the rich to get ever richer so long as you piously acknowledge the importance of “equality of opportunity” is precisely why the general public seem so resistant to wealth taxes. The fact that it could lead to, among other things, lower income taxes, increased social mobility and a more entrepreneurial culture falls on deaf ears.

The vested interests which ultimately defeated the 1909 People’s Budget sat in the House of Lords. Sadly, those same vested interests now dominate the electorate (although I suspect that over the longer term these mini-property empires will begin to aggregate as some manage to press home their inbuilt advantage better than others). For a substantial minority of the population that represents the death of hope: a life of no accumulation of assets, high income taxes and high user charges on services.

I see this as a profoundly depressing future; the very antithesis of progress whether you are coming at it from a liberal or a socialist perspective. Yet the Lib Dems can’t really give Gordon Brown too hard a time over it. While the rhetoric of our taxation policies is quite sound, almost everything we are committed to doing in our hypothetical first term of government is to compound the problem. In the long term, we’re committed to land value taxation; in the short term we’re committed to scrapping municipal property tax (making the eventual implementation of LVT much harder). In the long term, we’re committed to reforming IHT into an acquisitions tax, thus closing off a major loophole; in the short term we’re committed to raising the IHT threshold as well. Ming was careful at is conference speech to talk of transferring the burden of taxation from incomes and onto pollution – not resources. At a time when he desperately needs a USP, and the cause of progressive taxation needs a champion, he’s being advised to back away slowly from the sound of gunfire.

But perhaps I’m being too harsh on political parties. They are, after all, prisoners of an electoral system that gives enormous power to a handful of swing voters. All the time the parties are forced to chase the same small part of the electorate around like Pepe le Peu, the scope for making the case for broader policies will always be limited. Somehow we need to capture the public’s imagination outside the party political sphere. Anyone got any ideas?

Ming Campbell outed as Georgist secularist human being!

Odd last day of conference for me as I got to bookend Ming’s speech. I was in the fundraising video they showed at the start, having agreed to be a prop for Greg Stone to talk about the value of online advertising. In retrospect, it looked rather like a Children in Need appeal with a celebrity asking for money to support special needs kids. Not the most glorious start to my new sideline in whoring out my “celebrity” status for the good of the party (which I suspect has already come to an end).

At the other end of the speech, I was interviewed on News 24 for a quick reaction. My reaction then, as now, was one of faintly surprised praise. Ming was good in a number of different ways and his speech was the most rousing I’ve heard a Lib Dem leader give since 1999.

Kennedy certainly had his moments, but always struggled to fill a whole 45 minutes without sagging. Worse, I don’t think he was ever blessed with particularly awe-inspiring speeches – something which he cannot absolve himself of the blame for. This speech was more consistent than Kennedy at his best and while the delivery was little more than competent, the content was much stronger.

Two passages in particular leapt out for me. First of all, Ming declared himself a secularist:

Discrimination and intimidation have no place in a liberal society.

And on the matter of faith, let’s be clear.

A truly liberal society guarantees the freedom of all religions, but it accepts the tyranny of none.

People must be free to live without threat or fear.

To say the things, write the words and live the lives they choose.

Does that offend some people?

Yes, of course.

But the price of freedom is the risk of offence –

And, for me, that price is always worth paying.

I like to think even Laurence Boyce would be pleased to hear a Lib Dem party leader say that. He didn’t need to tackle this issue here; he chose to. That suggests a leader with strong liberal instincts. Can you imagine the Conservative or Labour leader saying the same over the next fortnight?

Secondly, he dealt with the interesting area of environmental rights:

And at the foundation of it all a Bill of Rights –

A Bill of Rights to reclaim the civil liberties stolen from us by this Labour government.

A Bill of Rights to anchor freedom of speech, freedom of conscience and freedom of association within our law.

And I am prepared to go further still.

Climate change is the greatest challenge facing the world today.

So I want a Bill of Rights that puts the protection of the environment at the very heart of Britain’s constitution:

We should guarantee the right of every citizen to clean water, pure air and unpolluted land.

I hope Ming appreciates the implications of what he has said here, because some of us will hold him to it. This passage effectively outs Ming as a Georgist. If everyone has an equal right to nature, then the privatisation of economic rent would be illegal. The BBC are missing the point when they suggest that it means that people would have a “right” to block new roads or airports. It could never be made to work that way (although environmental rights would of course have to be a consideration); what it would do is entitle people to a fair share of the wealth such projects create.

Frankly, this is radical stuff. We Georgists have contented ourselves to fighting for LVT in taxation policy working groups while the party leader effectively calls for the collection of economic rent to be hardwired into our constitution! Plaudits, Ming, plaudits. I look forward to these ideas being developed.

Finally, he finally realised that politics is personal:

Over the past few months I have travelled throughout this country.

I have had the privilege to meet – in private visits – some of the most extraordinary and courageous people:

People from all walks of life.

I met Jamal – a young musician who wants to go to university but is frustrated and angry at the prospect of being deep in debt.

I learned from him and his friends of the terrible waste of talent and the alienation of so many young people.

I met Anne, a 20 year old woman in prison for drug offences.

She’s had little formal education.

Yet she’s studying to take GCSEs and wants to enrol with the Open University.

I learned from her that if prisoners get proper education and training it will help them to find work on their release.

That’s the way to cut reoffending.

I met Jane – a 26 year old former addict, in a shelter for the homeless.

She has beaten her addiction.

She now hopes to get custody of her four young children.

I learned from her how important it is for the homeless to regain their self-respect and to feel that they are in control of their own lives.

I met Michael, a 29 year old British soldier who had suffered terrible injuries in a mortar attack in Iraq.

He was determined to get fit again and rejoin his unit.

I learned from him at first hand what our young men and women are going through in Iraq.

He told me he was lucky – two days before he was hit, one of his best friends had been killed by a single small piece of shrapnel.

That’s the price being paid for a war that should never have been.

These are inspiring people:

People with the spirit and determination to beat the odds.

But for every success there are too many stories of shattered dreams and frustrated ambitions.

There are too many forgotten people in Brown’s Britain.

What was interesting about this section in the speech is that it is here that Ming’s oratory came alive. Let’s be honest – he isn’t great at calling up great emotional swoops on demand. But in this section he came across as honest, sincere and respectful of these individuals’ dignity. The thing is, Ming is actually a good narrator. He tells stories well; he pitches policy poorly. Too many of his speeches and his predecessors’ have all been about relating official Rennard Approved(TM) policy bites. Not one of them has been as effective as these three simple human stories.

In my News 24 interview I said that Ming was the turtle to Cameron’s hare: he plods along but gets results while Dave falls apart before reaching the finishing line. Friends have since commented that they think this is a terrible analogy as it makes Ming look undynamic: personally I think it is time we started to concentrate on selling what he is rather than trying to pretend he’s something different. What was effective about this speech is that, broadly speaking, this is precisely what was done.

Next: let’s start selling the party on what it is rather than going around pretending it’s something different. One step at a time, I know.

Progress and Poverty

The above title is also the name of Henry George’s greatest work (which I strongly recommend everyone on the planet to read). I mention this because, while the Lib Dems broadly voted the right way during their poverty debate yesterday afternoon (certainly in rejecting the option to support differential age rates for minimum wage), I couldn’t help but feel there was an enormous Georgist hole in the paper.

Why? Because despite what we managed to do today, you can’t divorce taxation from issues relating to poverty. One point I didn’t make this morning was that one of the other poor decisions the party made on its tax proposals yesterday was the decision to effectively kick our “long term goal” of removing people on incomes of less than £10,000 from income tax into even longer grass. This has been sacrificed in favour of a crowd pleasing commitment to cut income tax by 4p in the pound (entirely neutralised by an income tax hike due to the introduction of LIT). Just as Labour does, we will continue to force people on minimum wage to pay income tax – not only is this unfair to the individual, but it adds inflationary pressure onto the minimum wage (since one of the considerations is not unreasonably whether you can afford to live on it) and thus discourages employers to recruit in this country.

I supported the amendment to introduce flexible working for all employees (not that I had a vote…) but again, this adds to the costs of labour. If such policies are to be successful we must somehow relieve the pressure on employers in other ways, and that brings us back once again to personal allowance.

On the other hand, so much of this paper was concerned – rightly – with housing. Yet the focus seemed to be on targets and empowering local authorities to tackle the issue themselves (there is, come to think of it, a slight oxymoron there). I remain sceptical of the rose-tinted view that all of this can be achieved by fiddling with planning law and introducing Community Land Auctions: we need a more fundamental shift in approach.

Of course, LVT would have both enabled us to take the bottom bracket out of taxation, create greater incentives to build housing and dampen speculative investment in property. It’s no accident that George’s book, which develops the argument for authorities to collect economic rent, has as a starting point the need to attack poverty. It just seems that we are attempting to tackle this area with one arm tied behind our collective back. Worse, by scrapping residential property taxation in the form of Council Tax, in many ways we make it worse.

The Federal Policy Committee really need to throw us a bone here. At the very least, so as to demonstrate that our commitment to LVT is more than just “jam tomorrow” they should commission a review about how we might facilitate its introduction. Tony Vickers’ book Location Matters vividly spells out what a government would need to do to introduce the tax and it would certainly take a while. But if we aren’t prepared to even think about it until the start of a second term, then what we’re really promising is to not introduce the tax until the start of a third term. It’s no wonder that Georgists feel as if they are being paid lip service and nothing else.

Will the Lib Dems finally get serious about taxation this morning?

Mark Braund is remarkably generous about the Lib Dems on Comment is Free this morning, saying that “what makes the Lib Dem position on tax most interesting is their apparent willingness to discuss the far more radical idea of land value taxation (LVT).”

The truth is, this debate will be happening in the face of the Policy Committee and many members of the Party’s front bench. Last year’s Tax Commission report promised jam tomorrow, promising to revisit this issue. This year’s “Reducing the Burden” report makes almost no reference.

The debate within the party over LVT is often portrayed as an either/or deal between it and local income tax. Actually it is rather more complicated than that. Regardless of LVT, replacing Council Tax with a tax based on incomes will mean that we have no residential property tax. At a time when house prices are at an all time high, removing the one tax which is discouraging speculative investment – however slightly – is simply irresponsible. The Council Tax – Local Income Tax switch will lead to an average property price increase of £15,000. Great news if you already own a home; a slap in the face if you don’t. Worse, many people struggling to get on the property ladder will see their tax bill rise, while people sitting on enormous unearned wealth in the form of a house which has increased its value tenfold and more since they bought it, will be taken out of taxation altogether.

Party leaders like to claim that, regardless of the economic disbenefits, the policy is enormously popular. One of my less political friends naively put that to the test during the 2005 General Election by forwarding the party’s tax switch calculator website onto all his friends. He was shocked to find that almost all of them duly reported back that there was no way they were going to vote Lib Dem as they would have to pay more tax. When the party publishes figures to “prove” that most people would be better off, they like to cite pensioners and single income households. If the economic reality forces you to live with your parents or in an HMO, you are simply screwed.

Council Tax is a dreadful tax, but replacing it with LIT would be worse. You couldn’t replace CT with Site Value Rating (the local version of LVT) instantly, but you could make it fairer – as the Lyons Committee suggests – and begin work on replacing it with a progressive land value tax. What’s more, you could still have local income tax simply by localising 4p of income tax – that would have the added benefit of increasing the amount of taxation that local authorities collect from around 75% of their revenue to 50%, which would reduce the inflationary pressure we currently have on CT.

Longer term, we need to consider the benefits of a nationwide system of LVT. As Tony Vickers explains in his new book Location Matters, this would not only dampen speculative investment in property and make many more houses and derelict sites available on the market, but it can be used to invest in big infrastructure projects such as Crossrail and even be used to replace the Barnett formula. Much work would need to be done to introduce a pure system of LVT, but it could be done over the course of two parliaments. The Lib Dems’ vague promises on LVT, as they stand, aren’t a promise to do anything at all.

Hopefully the debate this morning will go the right way and the Local Income Tax obsessives will be thwarted to at least some extent. But either way, the party’s policy committee really needs to start taking a serious look at this and evaluate policy on the basis of what is best for the country rather than the short term (and highly debateable) political gains of introducing such economically irresponsible policies.

Guardian labels Quaequam Blog “a Lib Dem gimmick”

Screen shot from Guardian Guide to the Conference seasonAccording to Patrick Wintour in his Guardian Guide to the Conference Season, this blog is the top tip for winning tomorrow’s Lib Dem Blogger of the Year Awards. Aw, shucks.

What’s more, this apparently makes me the Lib Dem equivalent of Arnold Schwartzenegger. Meet me on muscle beach, I have clearly some catching up to do.

Sadly, he then goes and spoils everything by suggesting that Land Value Taxation defeating local income tax is one of the things that “might go wrong” in conference this week. As any fule kno this is one of the things that could go right, so I won’t be making any space on my mantelpiece* just get.

*Not that I’m expecting it to be an actual, physical award. Or that I actually have a mantelpiece.

Tories (and Lib Dems) in a Pickle over Council Tax

Eric Pickles is getting his knickers in a twist about new government guidelines that suggest that “double glazing, central heating and fixed kitchen units” should all be taken into account when adjusting council tax on the basis that (gasp!) they might affect the value of the property.

The reason for this doesn’t really have much to do with the general evilness of the government. It has far more to do with the fact that, um, council tax is a tax which is at least supposed to be based on a property’s value. And who introduced this state of affairs? Why it would be Mr Pickles and his chums in the Conservative Party.

If the Tories are opposed to property taxes, they should propose scrapping them. To propose never revaluing property again is to say that people who live in houses which have, relatively speaking, devalued in recent years should subsidise the winners of the property market. If you don’t like the invasive nature of government inspections, then this is yet another reason for a land value tax – which isn’t based on things like your kitchen or your windows but on the land values which are externally calculated.

But of course they’d never advocate such a thing: it is hard-wired into their genes, as Lloyd George would be able to tell you. Sadly, the Lib Dems are similarly averse to taxing land values, preferring to tax labour instead, which is why Andrew Stunell here becomes a strange bedfellow with Pickles.

For some sanity, we must cross the Atlantic for a sensible editorial in the Philadelphia Inquirer:

Dutiful city taxpayers’ real grievance is with the high percentage of property-tax deadbeats, and with the city for not doing more to collect back taxes, which now amount to more than a half billion dollars, according to Hallwatch.org.

While this new wave of assessments should leave the city property tax system less out of whack, it isn’t the best fix.

The reform commission proposed the better ideas in 2003: A new citywide valuation at full market value (instead of the current, wildly confusing fractional system) and a gradual move to a two-tiered system of taxing land more aggressively than the buildings on it. This “land-value taxation” encourages smart growth while discouraging speculators and slumlords.

Brown Meme

Praguetory has tagged me with Matt Wardman’s Brown Meme. Unlike a lot of memes, this one seems to have the potential for an interesting debate, so here goes:

* 2 things Gordon Brown should be proud of.

– Helping to make Labour electable
– (Most of) Labour’s constitutional reform agenda in their first term of office – although none of it was as systematic or as well thought out as it needed to be.

* 2 things he should apologise for.

– Helping to make Labour electable (too cheap I know – this one doesn’t count)
– The tax credits fiasco
– The PFI fiasco
– The monstrous centralising target culture

* 2 things that he should do immediately when he becomes PM.

– Declare an intention to establish a fully elected second chamber – and follow through quickly.
– Restart the SFO’s Al-Yamamah arms deal investigation

* 2 things he should do while he is PM.

– Establish a Citizens’ Constitutional Convention
– Reform municipal taxation, decentralising local government revenue, scrapping council tax and introducing a system of site value rating as part of a package of measures of fiscal measures which local authorities could use to raise their own money.

I have to tag eight people, which will be Anthony Barnett, Stephen Tall, Tristan Mills, Duncan Hames, Jock Coats, the Millennium Elephant, Tom Papworth and Ming Campbell.