Tag Archives: lvt

Why aren’t landlords “in this together” as well?

The government’s response to its defeat in the Lords last night over benefit caps has been notable for its lack of substance. Iain Duncan Smith has taken two lines: that the policy is enormously popular, and that Bishops and left-leaning peers ought to be as concerned by the people paying for the benefits as they are of the people who receive them.

The popularity argument is, well, true. But it is a pretty hollow one. It is hardly surprising that public attitudes have hardened following years of rightwing propaganda emanating from what passes for the British press and, given the small amounts of money involved, this is rather a bread and circuses argument. Throw a couple more Christians to the lions to keep the plebs happy.

They are on stronger ground when they argue that peers ought to consider the needs of hardworking taxpayers more. But this looks like crocodile tears from the Conservatives who appear only willing to raise regressive taxes like VAT, are pressing to cut the upper rate of income tax and won’t even consider the introduction of wealth taxes. The fact that Vince Cable’s Mansion Tax is considered radical within the cabinet, which would only be levied on properties worth over £2 million, shows you how far we need to go to make the case for a fundamental shift from income to wealth taxation.

Fundamentally, this cap saves very little (and may even cost money), applies only to especially large families and undermines the concept of a universal child benefit. It is ironic that Iain Duncan Smith, the great proponent of symbolic taxes designed to encourage marriage is attempting to force through a benefit change which would give the poorest a major financial incentive to break up their families. It is a complete distraction from the real debate which is needed about benefits reform.

One thing that appears to be getting lost in this debate about the benefits bill is how much money is being wasted not to help the poor but to subsidise the privileged. I touched on the way the welfare state subisidises large companies who refuse to pay decent wages – thus ramping up the tax credit bill – last week. When it comes to housing benefit, too few politicians seem prepared to question why we are shelling out so much money which goes straight into the pockets of private landlords and only propose to tackle this issue by forcing people into worse accommodation.

This blind spot isn’t limited to the coalition; after all the housing benefit explosion continued unabated throughout the Labour years. The only justification for it appears to be that policies designed to tackle this problem at the landlord end of the telescope might harm property prices. And property prices help drive the economy.

There is some truth to this: no-one doubts that a collapse in property prices would damage growth. But it does rather bring all this talk of “ethical capitalism” into perspective. Because who is actually benefiting from this racket? Not taxpayers, who have to pay inflated housing benefit bills. Not the poor on welfare, who don’t see a penny from this spending. Not hard working people struggling (and mostly failing) to get onto the first rung of the property ladder. The beneficiaries are, once again, the very people who have managed to insulate themselves from every other aspect of the economic downturn.

If the introduction of land value taxation – which would discourage the speculative ramping up of rents – is not to be contemplated, then the very least we should be considering is the return of rent controls. The introduction of such a policy would mean many more winners than losers. The only real barriers to doing so is dogma about distorting the housing market (which one could argue has already failed chronicly) and fear about how the financial sector might react in its customary intimidatory way.

Instead, we seem hellbent on driving through policies designed to stigmatise the poor and provide everyone with less security. Until politicians on all sides are prepared to take on this beggar-thy-neighbour form of rentier capitalism, I won’t be getting too excited by this ‘new ethics’.

Why we need Land Value Taxation (part 893)

Another reason for LVT can be found in the Guardian today:

Property tax leaves cities ‘looking like broken teeth’
· Government adviser attacks Darling policy
· Empty buildings torn down to avoid payment

I won’t bore you endlessly with the details, suffice to say that LVT is charged on the land itself, irrespective of what is currently built on it. So, you couldn’t avoid it by demolishing buildings, yet it would still function as a means of encouraging land owners to fully develop their properties. If Swindon BC are willing to find half a million pounds just to bulldoze over a perfectly functional industrial estate, you can bet that with LVT they would find a tenant to cover their bills in no time.

Clegg and localism: early thoughts

I’ve just trawled through Nick Clegg’s speech on localism to the LGA today. A few thoughts:

1. He lets the Tories off too easily (unintentionally I’m sure). He is of course perfectly right to give them a hard time for refusing to even contemplate devolving spending, but the truth is it’s far, far worse than that. To quote Gideon Osborne’s interview in Prospect this month:

But surely this devolution process just means the health and education services are captured once more by the professionals? Not at all, says Osborne. “Accountability will come through payment by results.” This, he says, is a superior approach to the Labour model of targets. “Targets mean you have a big monolithic service and the secretary of state decides how you achieve something—how much time you spend on a task and how many times you do it. This is a different approach, where you say to a private company that is, say, running a prison: we will pay you according to reoffending rates. So we will choose the objective, but they will decide how to achieve it.”

Replacing targets with “payment by results” is an oxymoron. What he means is that he wants to replace the government’s present system of targets by a new system of targets. The fundamental problem with targets – that it creates an incentive to game the system – will remain. Contrast this with Clegg’s definition of the role of central government:

The central state has a vital role – of course.

It must intervene to allocate money on a fair basis, to guarantee equality of access in our schools and hospitals, and to oversee core standards and entitlements.

But once those building blocks are in place, the state must back off.

This is genuine localism. Osborne’s prescription is for more, but different, centralisation. If he and his colleagues are going to insist on uttering such drivel, we have a duty to point and laugh.

2. There is still an LVT-shaped hole in Lib Dem policy. Clegg’s redefinition of local income tax in this speech is actually quite encouraging, in that it is clear that his real enthusiasm is not for replacing council tax with LIT but replacing national income tax with local income tax. I share his enthusiasm.

His problem is that he is extremely unclear about how inverse the current 3:1 national:local tax raising ratio without creating a system that would reward rich areas while penalising poor ones. Indeed he only mentions this dilemma once:

The government needs some leeway to make up the differences between needier and wealthier councils with a grant that varies between areas.

… and doesn’t even allude to the fact that localising business rates will actually make this even more pronounced.

The question is how do you create a clear, transparent way of squaring this circle. The solution, in principle at least, is obvious: create a national tax on wealth and redistribute it on a per capita basis. That means a national system of Land Value Taxation. The alternative is lots of complex formulas which can be manipulated by the government of the day. You couldn’t redistribute a national income tax in this way equitably because, as we all know, a lot of the richest in society don’t actually pay a penny.

You couldn’t introduce a fully fledged LVT system in a single term of office, but we could at least talk about it. As I said before, it is curious that we are so shy about doing this while at the same time so enthusiastic about rolling out a system of national road pricing over a 10 year period.

Land Value Tax – Towards a Fairer Society

A guest article by Dr Carole Tongue and Dr Dinos Kyrou, of the Professional Land Reform Group.

“All taxation is theft”. The quote from political activist Lester Neil Smith (also a writer of science fiction), has been used by the right wing and those who oppose distribution of wealth for decades. Ironically, those who support Land Value Tax may think that L.N. Smith was correct – to a certain degree. Continue reading Land Value Tax – Towards a Fairer Society