Since the ABC seems so keen on raising taxes, here’s another he might like to consider – a land value tax (LVT) on all real estate holdings – agriculture, forestry, prime London residential etc.
Currently we have numerous taxes on income – we also have taxes on consumption – but we have little in the way of taxes on wealth that has been hoarded for generations by families and institutions since the Norman conquest. (Yes we have IHT – but the really big estates have lots of clever ways of avoiding it.)
Just 6000 families (0.2% of the population) still own about 70% of the land in the UK. By anyone’s definition that is a monopoly – and we all know that monopolies are bad for economies.
It also means that despite years of apparent progress we still live in a semi-feudal system. A system supported by huge taxpayer-funded subsidies from the CAP. Although we can’t abolish the CAP (which benefits the COE as one of our largest landowners) we can at least tax the beneficiaries and redress the balance.
The COE has is also opposed to planning reform that might encourage urban sprawl – a land value tax would encourage more businesses to build up rather than out.
LVT would encourage building firms to build faster so reducing their land banks and making housing more affordable (another laudable aim of the COE). It should also encourage some people and institutions to sell land to those who can make more productive use of it, so perhaps encouraging small start-up farmers and market gardeners (transactions are an important part of a vibrant economy).
Arable land has increased in value by some 135% over the last 10 years (with prime now worth over £7,000 an acre) and nearly all that increase benefits the owners. Surely the COE can’t think that is right?
So Father Williams, how about coming out in favour of a say a £50/acre land tax – payable by everyone including church, state, corporations and royalty (I suspect the POW will veto this idea but that simply highlights another problem with our constitution).
LVT would raise a minimum of £6,000,000 from the COE alone (and that’s just for it’s rural land holdings). There are 60m acres in the UK – so LVT should raise £3,000,000,000 a year. I am sure the government would spend these receipts wisely.
Spot on and sensible. An old and great idea that’s been rumbling on behind the political scenes for many many years. Sadly it’s very unlikely it will ever happen, particularly with our ruling classes being part of the “born to rule” percentage who own land who won’t let go of their money as it may ultimately end up democratising society and removing the power their class holds. Be great if it could actually happen though.
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Thank you Nick – wish one of the main parties would adopt this (if the argument were well put it could be a vote winner). Not a fan of big govt or high taxes but modest levels of both are necessary for the efficient running of a modern democracy and to provide for some equitable redistribution of wealth.
I have belatedly read your post on land value tax. The one point which occurs to me is you are assuming that the fact that land is owned by a few necessarily prevents others from utilising it in some way. I do not see that as the case – the English tenanted sector works very well because of the ability to gain access to land which is privately owned. Such access is, if anything limited by the inevitable lack of available credit (and not just since the start of the current credit crunch) combined with the low financial yield available for farming. I realise that your £50 per acre was merely a suggestion, but you should be ware that this figure is in itself a significant proportion of the income attainable from such farming activities. It is not solved by a redistribution of land – perhaps only by an increases in food prices, then more confident lending, then more efficient production. As for CAP reform, this is the desire of many, but I must say I fear the food market volatility that it would engender as well as the business uncertainty.
Thank you for taking the time to comment. While I agree that tenanted sector works OK for some I wouldn’t say it worked well for all – for a start, as you point out, there is a lack of credit for investment by tenant farmers and that’s because there is always some uncertainty over the length of tenure (particularly if the landowner changes). Monopolies are bad for all industries – the same is undoubtedly true of farming – and of land use in general (the dominance of tithed cottages prevents development in many rural communities). Redistribution would help (particularly if it went hand in hand with a fall in land value) since it would allow more people to experiment with small holdings – the first step on the way to full farming for many.
Finally I think the fear of food market volatility is grossly exaggerated by those who gain most from the CAP. The CAP distorts investment and it distorts pricing signals, which are essential for an efficient market. The answer to food volatility is more global free-trade, with the removal of tariffs, better development of second and third world market (bringing farmland in Ukraine up to UK standards could pretty much solve the problems of global grain shortages), and more sophisticated storage and transportation (according to The Economist, about a third of our our food goes to waste before it reaches the processors).
Thank you once again for joining in – much appreciated.
Interesting point on the CAP. I have altered my views in recent years – from signing up wholeheartedly to the CAP is bad market intervention view, to increasingly one of free trade with some stabilising intervention. Whilst acknowledging that I am by nature a libertarian, the cycles which affect food production are often too extreme. We are increasingly seeing sovereign interfence on the grain market – Russia being the major player in this – and when this happens global markets really do enter a roller coaster ride. This has helped to fuel the current market fluctuations. Such fluctuations make investment decisions very difficult and highly cyclic themselves as well as exacerbating food inflation. Support however unpalateable does allow some business foresight.
On the subject of tenancies, I agree it does not work for all (although there are many succesfull businesses for whom it is a staple). I have tried to create agreements which give a starter for new entrants over the years, but the realtively low output – limited credit – economies of scale combinations puts pay to most of them.
I suppose the fundemental issue is that land values and outputs are pretty unconnected in real terms. Land is seen as a safe haven for capital – they don’t make it any more etc. it is very difficult to justify holding on income alone – even though yields of 1% no longer seem so out of kilter with other classes in such a poor economic climate .
Finally, the one-third food waste is an absolute horror. Although I belive that some statisticians have pointed out that throwing away used teabags is not really food waste (although not composting them is!)..
Glad to hear you are a libertarian by nature – it seems to most logical starting point (as the doctor says, first do no harm). Agree market fluctuations make long term planning difficult – but that’s the same for any industry. I still think that bringing more farm land up to western production levels (without increasing overall acreage) would go a long way to delivering that stability.
As you say, may people hold property for capital protection. And they pay little in the way of tax on it (despite imposing a cost on society). Increasingly, the big buyers and sellers of land use offshore companies to protect their identity – and to avoid transfer taxes (such as stamp duty and inheritance tax) – since the land remains the property of the company – only the shareholders change (often fancy trust arrangements to further protect family wealth).
Finally – that one-third food waste is before we get to the tea-bag stage – it’s the amount that rots or gets eaten by vermin in fields or while being shipped to factories. (The amount we throw out is small by comparison – though much more should be composted.)
Interesting to see the following two articles out today 24 Feb 2012 – both supporting Land Tax:
If you agree, you might want to sign this petition: http://epetitions.direct.gov.uk/petitions/3662
Have just come across this article by @martinwolf_ @ft http://www.ft.com/cms/s/0/8f06df9e-8ac1-11df-8e17-00144feab49a.html?siteedition=uk#axzz2tCbuUTjc – published in July 2010.