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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.


VAT cut boosted eating out

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It is unusual for economics experiments to be carried out, from which firm conclusions can be drawn. A recent one in Sweden involved the reduction of Value Added Tax for restaurants from 25% to 12% on 1 January 2012. Analysis of the results by the national statistical bureau SCB show that the monthly sales volumes for November 2012 were 7.2% higher than in November 2011. Café sales were up by 11.3%, and restaurants serving lunch and evening meals saw an increase of 10.2%. Adjusted for calendar differences and general price increases, the increase amounts to a 6.5% growth, against the general trend in the Swedish economy with a growth rate of just 1%.

Commenting on these figures, the local Metro newspaper reported that the number of employees in the restaurant sector had risen by 5,000 over the 12 month period. Interestingly, the tax cut had not led to immediate price cuts, though prices had stabilised. This suggests that restaurants had been able to charge the same prices as their customers were accustomed to paying but had been able to absorb rising costs due to inflation and other causes.

The EU commission has, unsurprisingly, questioned the effectiveness of the tax cuts in creating jobs but it takes no penetrating analysis to work out that tax cuts will eventually result in lower prices and that, consequently, more people will eat out in restaurants. Which these figures only go to confirm.

There will be knock-on effects too. Restaurants will become more profitable, and this will feed through into rents. In due course, some of this can be recaptured through the property tax. If the property tax was an LVT, at a substantial rate, most of the extra value would be recaptured as public revenue, demonstrating the general principle that since all taxes are at the expense of land rental value, a tax on the rental value of land could replace all existing taxes.
 

Banking the rotten heart of capitalism?

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Will Hutton writes in the Observer about banking scandals as lying at the rotten heart of capitalism. That was two years ago but other commentators keep on saying much the same thing. We disagree. The rotten heart of capitalism is the private appropriation of the rent of land, something which Hutton and most other commentators never talk about. Without it, the banking scandals could not happen.

The standard banking model is the creation of money at no cost, for land purchase. The banks use this created money to purchase land which is then leased back to the "borrowers" for the duration of the loan. The "interest" paid by the borrowers is, mostly, nothing other then rent of land.

It is a smoke-and-mirrors business which makes it hard to see what is going on. But if the preconditions are not removed, no amount of bank regulation will prevent repeat performances.

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The free market fallacy

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I came across this the other day.

"It is really very simple. Capital can be allocated by markets or by central planning committees. Despite the booms and busts, markets do it better. It may be that that the booms and busts are just inevitable."

 alt Why is there a refusal to recognise that there is more to it than this?
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New Swedish commuter train to boost land values

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alt

The new commuter train service between Göteborg, Sweden's second city, and Älvängen commenced last week. With new stations serving a suburban area which has previously had to rely on bus services, it will make commuting more attractive and open up new development opportunities. The scheme is part of a big infrastructure project which has involved the rebuilding of the route to Trollhättan, on the route to Oslo, as a high speed, double track main line.

Since the Swedish tax system includes a small element of land value taxation, some of the additional land value created by this investment will return to the community. But most of Sweden's taxes are raised through punitive levies on productive activity, resulting in a high level of unemployment especially within the 16 to 25 age group, and chronically short staffing in the shops and services where they could usefully be working. It could be so different if the punitive taxes were phased out and the land value tax was put on a proper rental basis. The regular revaluation would quickly sort things out, giving the government a more reliable source of revenue and reducing the cost of employment so that more people were working and less had to be paid out to keep the unemployed in welfare.
 

More welfare for landowners

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A nice little welfare handout for landowners was slipped almost unnoticed into the Chancellor's Autumn Statement last week. New developments will be exempt from empty property rates from next October: all newly built commercial property completed between 1 October 2013 and 30 September 2016 will be exempt from empty property rates for the first 18 months. This is described as "a victory for the property industry, which has campaigned for a change to empty rates for years."

Osborne praised the work of the working group of MPs, led by York Outer MP Julian Sturdy, in reviewing empty property rates. He said that empty rate relief for new development would "help the construction industry".

This is doubly strange.
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The Internet is changing

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The internet is subtly changing. The Financial Times, the Daily Telegraph and the Times are now behind paywalls and give limited free access. The Guardian adopted a different strategy with free access and a comments page called "Comment is Free" (CIF), paid for out of advertising. The quality of the articles is middling-to-poor, and they are mostly written by the Guardian's old warhorses. Their views are 100% predictable.

For several years, however this has provided a useful forum for discussion and the exchange of views. But the Guardian has just altered the format of its CIF website and introduced what is called "threading". Responses are gathered together instead of being in chronological order. This seems to be unpopular - an overall look at the number of comments suggests that there are less than half the number there were before.

In addition to making navigation difficult, the threading system has led to fragmentation of discussions to the point of meaninglessness. The comments have degenerated into one-liners.

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High speed rail - who will benefit?

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Pro-HS2 research group Greengauge 21 says it thinks the rest of the country will benefit more than London from the high-speed link.
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