Land Value Taxation Campaign

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Taxi tax fiddles and other Swedish difficulties

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There was a news piece this morning (8 July) about the problem the Swedish tax authorities are having with getting the right amount of tax out of taxi drives. Yesterday there was a report of the crack-down by Skattverket on restaurants who fiddle their takings; a popular method has been by manipulating their cash registers. So far, over 100 restaurateurs have been convicted and 45 sent to prison.

Sweden enjoys high standards of public services, so much so that they can be taken as a benchmark for how such things ought to be. And though Sweden, unlike some other countries, no longer harbours the delusion of being a world power with the associated need to spend a fortune on military activities, the government still needs a lot of money. Around 55% of the Swedish economy is in the public sector, which suggests that in the UK, with its much greater concentration of population, the figure would have to be much higher than the present 45% or so to bring the public realm up to the standard that people aspire to. Though it must be remembered that a sizeable chunk of that 45% is spent on welfare - state charity, much of which would not be needed if there was the economic justice for which Land Value Taxation is a key prerequisite.
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UK economy - no silver lining

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The news on the UK economy gives no indication of any silver lining to the cloud. All is talk of recession, a house price crash, a falling exchange rate and inflation.

The falling exchange rate is more serious than usually acknowledged. A year ago, a Euro cost 71p, whereas now it is nearly 80p. But the Euro itself has also been losing purchasing power, and all these changes will feed through into higher prices for all imported goods. The only people to benefit are exporting companies who provide services with small inputs of imported products.
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Where is the UK housing market going?

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The news is still of falling house prices and expectations of more to come. Nationwide report a drop for every month of the last nine. An estimated 145,000 mortgage holders already owe more in mortgage payments than their houses are worth, according to research undertaken for the Daily Telegraph. Since the peak in October last year, the average house price has fallen from £186,044 to £172,415, with house prices now falling for eight consecutive months, according to Nationwide. But this is not good news for first time buyers because there are tight constraints on lending. Which is presumably a major cause of the drop in prices.

The volume of sales is said to be at an all-time low, with Halifax predicting a 45% drop in mortage approvals for 2008. This has caused problems for house builders: Taylor Wimpey suffered a 50% drop in share prices on 2 July. These difficulties are already having repercussions for the wider economy, as major expenditure on furniture, consumer durables and refurbishment tends to take place when houses change hands.

Higher energy prices are a further factor which is likely to lead to economic downturn. Again, this too is something which it would be easier to weather if LVT was in place. As things are, land values are "sticky downwards" - they do not respond to the reduced rental yields caused by the higher input prices, and instead, sites are liable to just go out of use, which is the usual observation during recession.

Almost nobody apart from LVT advocates is acknowledging that the house price slump is is really a drop in land prices, which makes it impossible to appreciate what is really going on, and, one might hope, to introduce policies - including LVT - which will get the UK out of its problems as quickly as it might, and to prevent a recurrence in the future. Only LVT will break the unhealthy and damaging link between the land market, the banking system and the general economy. But there is no need to be an LVT supporter to realise that the underlying theories provide a better model of the economy than those more generally accepted. Advocates such as Harrison, who predicted the 1991 crash long before it happened, have an excellent record of predicting how the economy will perform.
Read about Harrison's prection of the crash of 2010

There is a range of predictions being give about the eventual size of the fall. It depends on how the Bank of England decides to set interest rates in its attempt to control inflation. Lax control means that inflation will lead to a catch-up; a tight control will result in a larger drop. The key figure to look at is rentals. The primary value of property is its annual rental, since property purchase is in principle the purchase of an income stream. Multiply them by a figure between 4 and 6 gives the realistic range within which selling prices lie.

The spare capacity in the economy means that it would be a good time for the government to spend on infrastructure, if only there was a system of land value taxation in place, as the Campaign advocates. Without such a system, the infrastructure improvements are absorbed into land values and capitalised into land prices. The government gets little back for the money spent, which means that it has is little incentive to improve the UK infrastructure, which is a frequent comment of criticism by people from mainland Europe who have been to Britain.

The sharp drop in selling prices is a useful warning to LVT advocates who believe that it does not matter if assessments are based on annual rental values or selling prices. It is the latter that have been so dramatically affected. Domestic rental values have remained quite stable, in fact they have increased a little in some areas, though that would change if the general economy goes into recession, which is possible.
 

The return of de-roofing

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A article in today's (29 June ) Sunday Telegraph reports that growing evidence of the disastrous side effects of the removal of empty property rates relief on commercial buildings has led members of the Government to reveal privately they are already considering reintroducing the relief. The change in law, which Government estimated would yield an extra £1.4bn from the commercial property sector, has led to landlords demolishing buildings rather than pay the extra levy.

The article cites what is described as a well-placed source as saying that there are some people within Government that accept the situation is not as clear as the Treasury thought it would be. Ministers within both Treasury and Communities and Local Government have let it be known there may be scope for mediating or repealing the changes.

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Housing market will not boom until 2015

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The housing market will not boom again until 2015, according to Professor Stephen Nickell, Warden of Nuffield College, Oxford, in an article in the Daily Telegraph here One might ask why it is desirable that the housing market should boom at all. After all, only the oil producers are happy when the oil price booms, and when food prices boom, people may even get together and have riots. So what is different about house prices?
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