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The LVTC blog, by Henry Law

The comments in the LVTC Blog are a personal view of our Hon. Secretary Henry Law and do not necessarily reflect the official policy of the Campaign.

This is a place for personal observations and comments on politics, economics, current affairs, on-going discussions on the potential for LVT to remedy some of the current ills, and the impact on Society of any of the above. 

Please read and enjoy, and feel free to respond to Henry if you have any thing you would like to add.


Britain's dysfunctional housing market but don't mention LVT

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There is something profoundly wrong with our housing system: demand and prices continue to rise yet supply does not, largely due to the development process. In this article, published today for the London School of Economics, Toby Lloyd argues that any serious attempt to address the housing crisis must include measures to change the land market, allowing those who want to build to buy land at a low cost.

It is a concise but penetrating analysis and the author comes up with a few proposals. LVT is not one of them. Since Toby Lloyd, director of Shelter, knows all about LVT, would it be paranoid to suggest that he might have been told not to mention it? There is something fishy about Shelter, which has never spoken for LVT even though the people there must by now be aware that LVT is an essential component of any solution.
 

Crap on stilts

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I was recently asked if crap on stilts is wealth? It may be, but only if someone wants it. Putting the crap on stilts is a work of  human labour, which is part of the qualification for falling into the category "wealth", but the product must still satisfy someone's desire. As crap is good fertiliser, this is the case, so yes, it probably is.

Crap was at one time the subject of a major industry. Sea-bird crap from Chile, known as guano is rich in nitrogen, phosphorus and potassium. It was widely used as a fertiliser in the late nineteenth century. As supplies seemed likely to run out, scientists searched for ways of producing artificial alternatives, and the result, in 1907, the German chemist Haber developed a process which used ammonia, a readily available inorganic chemical. This proved very handy as it made it easier to manufacture nitric acid, an essential raw material for explosives, just in time for the First World War. Potassium and phosphorus are, however, elements less easily replaced; phosphorus in the form of phosphate rock is not particularly common and with increasing consumption, there is concern about future shortages.

To return to the original question: crap in its natural state is not wealth until someone shifts their arse and starts to shovel it off the ground. It is wealth once it has been loaded onto trucks and is on its way to its final destination as fertiliser. If you own the land where the guano is sitting, you are wealthy because you can charge other people for shovelling the shit which is there and thus have a claim on the wealth they have produced through their work.

 

Pope Francis sloppy on economics

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Evangelii Gaudium, the Pope's first major publication, is an "exhortation" rather than an encyclical, so it does not carry the same weight. Which is just as well. The economic analysis is sloppy. It contains nothing of interest and offers no direction. Even Leo XIII's Rerum Novarum is better, for all its shortcomings. Why didn't the Pope go back to the previous body Catholic Social Teaching and build on what has been said there? Benedict created a fresh starting point with Caritas in Veritate. That needs to be developed. It seems unlikely that this will happen under the current regime. The present pontificate has not been characterised by intellectual rigour, which is surprising considering that the Pope is a Jesuit, an order with a tradition of academic solidity.
 

Royal Mail privatisation or property giveaway?

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Royal Mail had a large sorting office slap in the centre of Brighton. The building was put up in the 1930s and the work inside went on day and night. In the days when the mail went by rail, it was a good location, a couple of hundred yards from the station. But for those who lived nearby, it was a bad neighbour, since it generated a huge volume of traffic, often carelessly driven. In the late 1980s, it was modernised with new sorting equipment, but soon after, the sorting process was moved to a new centre at Gatwick. The building was then reduced to the status of a distribution centre and most of the property was virtually unused. A prime development site, it could have been sold and the operation moved to a shed in an industrial estate on the edge of town. But it languished, rising steadily in value until the latest crash. The same story can be told all over the country, but the potential for cashing in was always there. Now that Royal Mail has been privatised, the profit will no doubt be taken.

The public sector utilities have shown themselves to be as addicted to land hoarding as the house builders with their land banks. As with British Rail, what was being flogged off as part of Royal Mail was a massive property portfolio. This has been the subject of a study by law firm Clifford Chance. We now know that this particular item of family silver has been disposed of to the in-crowd in the City for a fraction of its real value. The taxpayer has been the loser yet again.
 

A thought for St Andrews' Day

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Saltire

The Campaign does not have a view on Scottish independence. One of the factors behind this movement must surely be the sense that wealth is being sucked out of Scotland into the centre of power and government, which means London. This is occurring through the tax system by government, and through the extraction of rental value by the financial system. The same problems are experienced in the peripheral locations of any country. Land value taxation addresses this because taxation is then directly related to geographical advantage, or lack of it.

There would be no point in Scotland, or Cornwall, or anywhere else, becoming independent if most if it is still owned by the same handful of people and companies and the financial flows continue unchanged. A little bit more of the flow will be towards Edinburgh rather than London, but it will make no difference in principle and most people in Scotland will gain nothing apart from a good feeling which will eventually turn to a sense of disappointment and betrayal.
 

How should we be campaigning?

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Most LVT campaigners are at some time tempted to believe that the reform we support is only just over the horizon. One more push, and we shall be there. The temptation seems to hit hardest at two points. The first is when we have “seen the cat”. Having spotted the elusive feline lurking in the branches, we find it difficult to appreciate that anyone else could miss seeing it. The other time the temptation kicks in is when we are getting on a bit and want to see a result for our efforts: LVT before we retire, or are kicking up the daisies.

This is to ignore two important facts. The first is that we are all rent-seekers. We all pick the best places in restaurants, theatres, on the beach, when travelling, pitching a tent for the night. Some of us are so successful at rent-seeking that we would rather not see the cat, and the mind being a wonderful thing, it makes sure that the cat is unseen. The second fact is that the most successful rent-seekers of all have been able to pass on the fruits of their success down the generations and have so much power and influence that they are able to stifle any serious discussion about cats. This is usually done by steering the discussion in another direction, or by gentle ridicule.

What does this mean in practice, in the British context? None of the main parties have LVT on the agenda. There was a little bit of interest in the higher ranks of the Liberal Democrats in the last years of the Labour government but this has long since evaporated. Unless events take a very unexpected turn, there is no prospect of LVT within the present decade and quite possibly beyond. Labour might have gained some electoral advantage from it, but the politicians are more concerned with power than principles and their attention is on the “swing” voters in critical constituencies, who are the very sort of people who might be influenced by media scaremongering if it was in the party’s manifesto.

Thus, in the absence of political will on the part of those who make the decisions, there is no point is devoting time and energy to working up detailed plans for the introduction of LVT and trying to predict how different groups might be affected. Circumstances will be different when the time for LVT approaches. We need to focus now on principles and strategy.

As a matter of practical convenience, any introduction of LVT would use the administrative mechanisms already in place for assessing and collecting recurring property taxes. Logically, and to avoid two different systems of property tax running side-by-side, these existing property taxes would be the first to go, and there would be little further change until the system had “bedded-in”. There is a particular difficulty within the present UK context because the residential property tax, the Council Tax, is a local tax, and for reasons discussed elsewhere on this web site (http://www.landvaluetax.org/frequently-asked-questions/lvt-national-or-local.html), we are firmly against the use of LVT as a local tax. This raises the questions of transition and the financing of local government, which are also discussed in the linked article.

After that crucial first step, there is an extensive range of options for the phasing out of other taxes. It cannot be assumed that the tax system will exist in anything like its present form into the indefinite future. As a matter of general principle, in the early stages of LVT, we would like to see a sharp cut in sales taxes. But there is also an urgent need to reduce taxes on work, in particular, by removing the low-paid from tax liabilities.

There is also a need to discredit existing tax systems by drawing attention to their stupidity, illogicality and running costs, the ease with which they are avoided and evaded, and to the economic damage they do. The ramifications here are considerable, especially when the “tax incidence” arguments are deployed, since it can be shown that amongst the harmful effects are less obvious problems such as regional imbalance and a chronic shortage of funds for infrastructure.

Discrediting the tax system and the economic arguments that are wheeled out to support it can be compared to pouring acid on a concrete bunker. It is not going to crumble to the ground straight away, but every little drop helps to weaken the structure and the concrete has its own inherent weaknesses. Since de-bunking is also an activity which can be enjoyable, we need to take a relaxed view whilst keeping going.
 

Humbug or ignorance?

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The British Chambers of Commerce (BCC) is urging George Osborne, in his Autumn Statement on December 5, to freeze business rates for the next two years. The business group wants the government to review and reform the business rates system by 2015, with a more “responsive and transparent” system enacted early in the next parliament.

Is this humbug or pure ignorance? The BCC could say exactly the same thing about rents, since the same objections apply. Why doesn't  BCC propose a rents freeze? Or at least an end to upwards-only rent revision clauses? The UBR could do with being tidied up, but any rates cut will be absorbed by the landlords at the first rent review. There is such a wealth of evidence to show that this is what happens, that one wonders how they think they can get away with coming up with suggestions like this?

 


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