House of Commons Seminar on Land Value Taxation, 24th March 2009
Introduction
There was standing room only in committee room 5 at the House of Commons on Tuesday 24th March for this stimulating and lively session hosted by Vince Cable MP. There were interesting questions and valuable comments from the floor during the periods set aside for debate.
A strong majority supported the view that private appropriation of community-created site values has a negative effect on our economy, dooming every upswing to an ultimate collapse. To end this boom and bust cycle the CEJ claim it is vital that Government has a measure of control over the level of property prices. Land value taxation, it is agreed by many economists, would give it that control and would ensure a steady income for the exchequer, particularly when government finances are so restricted.
The CEJ will be pressing all the main political parties to develop the debate on the issue of land value taxation with the aim of having it stated in their next election manifestos. Now, during the recession, is the time for parliamentarians to take action on this vital issue.
Invitation - An All Party Group to debate Land Reform
The Coalition for Economic Justice (CEJ) is seeking to form an All Party Parliamentary Group (APPG) on Land Reform. The Coalition would like to invite all Peers and MPs to consider this proposal for debate and then to register their interest for the APPG by responding to the invitation at the end of this document.
The CEJ consists of a wide-ranging group of organisations across the political spectrum who have united with the aim of avoiding future economic crises. See below for a list of the organisations. We believe that the introduction of an annual Land Value Tax (LVT) to replace existing taxes on labour and enterprise is an essential measure which would rid us of the boom and bust cycles that have undermined the economy for well over a century. We recognise that it is only through parliamentarians that this change can be achieved. Hence this seminar, a summary of which is set out below.
Seminar Speaker Summaries
David Triggs, Executive Chair of the Henry George Foundation
David Triggs introduced the seminar by speaking of the principles underlying a shift in public revenue collection away from taxation on work and enterprise onto a charge based on land values and how this could act as a fiscal stimulus to the economy. He carefully concentrated his focus on location value, fiscal stimulus and said it was not a tax. In outlining the principles that underpin the Coalition’s concerns and proposals he suggested that the scope for fiscal stimulus was much greater than usually supposed and arose from how government raised public revenue rather than how it spent it.
He explained how corrupting, damaging and discouraging to producers of wealth the present system of taxation was and how it was unnecessary to the extent that an alternative was available. He said there was an obvious and transparent source of economic value which arose from the presence and actions of the community and its government that was separate from that created by individuals, firms and corporations.
He showed how this community created value showed itself in the value that people attach to location and, using an image familiar to everyone, a corner of the Monopoly Board showing Mayfair and The Old Kent Road, which marked the contrast in value that arises between sites. He explained how location value derives from the mere presence of people and the development of community funded public services including: security for persons and property, law and order, transport and communication facilities, markets, parks, schools, hospitals, etc. He explained how failure of government to collect this community-created rental value results in locations acquiring a capital value. This value, he said, must then accrue to owners irrespective of any productive activity whilst producers must then be taxed.
He pointed to another malign effect of this unnecessary capital value as the associated rise in forms of financial inter-mediation which, while they profoundly affect the distribution of wealth, do not assist in the production of wealth. Examples include debts arising from collateral based loans, speculation, and the creation of new (bad) money inspired by such ventures. He suggested that the present crisis illustrates this only too painfully.
Sir Samuel Brittan, Financial Times Economics Commentator and Author
The simple case for taxing land. The difficulty in stating the case for taxing land is that it is so simple; and simple things are often difficult to put across. There are indeed some who see land taxation as the basis of an entirely different economic order replacing market capitalism. Maybe. But it is also possible to see it as an improvement in the tax system of a normal capitalist mixed economy. Thus I do not believe that it will cure cancers, abolish war or even eliminate boom and bust. But it is still well worthwhile.
Most forms of direct taxation are inevitably a disincentive to enterprise and work. So are most forms of indirect taxation, although this is less obvious. The advantage of a land tax over other kinds of tax is that it is in principle based on pure space and need not be a disincentive to either capital or labour. If you are religious you can say it was given by God. In more secular terms land has a zero elasticity of supply. Indeed, it provides a positive incentive to use land wisely and not to hoard it. It is also one of these rare things: a redistributive measure with few adverse kickbacks. (Land ownership is far more concentrated than wage income or even capital ownership.)
Finally, let me make a very general point. It is one I make to supporters of other unconventional reforms I support such as basic income for all. This is that the reformers should not retire into a corner and talk to themselves, but should participate in general fiscal and economic debate. Of course they should submit their ideas to bodies like the Barker Review or the ongoing IFS Commission on the tax system. But I mean a little more than that which they are more or less doing already. They should examine proposals already in the air, like the Planning Gains Tax, and instead of simply underlining their shortcomings, consider how they might be improved and become a step to the final goal. A half a loaf can be better than no bread.
Molly Scott Cato, Economics Spokesperson, The Green Party
Molly Scott Cato made a case broadly in favour of LVT, which has been the party’s policy for some years. She based her case on the belief of indigenous peoples, also reflected in the writings of the Levellers. She went on to say that the Green Party think LVT is just, their thought being based in Gerrard Winstanley's words and how land is a common treasury. And the earth is the mother, nourishing all, so a green policy is incumbent on us all, within a bioregion, where the heart of our future economies must lie. Molly also made a case for LVT as an efficient way of assessing and sharing value that has been gained through planning change of use, for example, and should revert to the community rather than any individual who happens to be holding the parcel of land ‘when the music stops’. Also, she said that buildings derive from labour and the party do not wish to discourage building and use; but location integrity is significant for the well being of the whole community.
Some proposals mentioned included planning and economic management to encourage the development of organic food production and the reduction of food miles through local productivity. Unearned income is a poor incentive whereas LVT is of value to the whole community and LVT resolves some of the intergenerational issues. Of historical note from a bioregional economics perspective, land will be the source of resources to satisfy all our subsistence needs and a thorough land survey that would be a precursor to introducing a land tax would be valuable in assessing these resources. Molly stated that 1066 is a famous historical date as it marks the shift in the conception of land from subsistence value to financial value. Now, after almost a thousand years of feudal servitude, is the time to reverse that change and to conduct a new Domesday survey for the benefit of the whole nation rather than the few.
Iain McLean, Professor of Politics, Oxford University
Professor McLean spoke of how much was to be learned from the devolved countries where new responsibilities in self-governance were awakening them to the importance of Land, its location known and its use seen. Since land has no economic elasticity it is the best tax/revenue base, so there is serious engagement with developing policies that replace taxes on production and wages which are regressive. Council tax (still based on misleading 1991 valuations), business rates and stamp duty are all very bad partial land taxes and can be better expressed in Land Valuation collection.
There is recognition that revaluation now is painful due to wide margins of winners and losers and that there is always a bias against growth and development in localities; so there is a need for incentives to encourage this gradual process of overcoming nitty gritty issues in transition within a replacement process.
In Wales the Holtham Committee, which has not yet reported, may be sympathetic to recommending land as a tax base for the national Assembly. Recent revaluation showed the fuss that is made by the small minority who have unfavourable revaluations. In Scotland there is advocacy of taxing land values but the current parliament is moving in the opposite direction towards a local income tax. Northern Ireland has remained with the older rates system which is better than council tax.
Ashley Seagar, Economics Correspondent, The Guardian
Ashley Seagar provided practical examples, citing a local state school (built only seven years ago) with consistently good exam results. Whilst the Estate Agent’s attributed rise of £50k on nearby property prices may be a great gain for private owners, it offers no value to the tax payer. The school’s teachers cannot afford to buy in the area.
Ashley provided practical methods for calculating land value – including the very simple technique of subtracting the “approximate rebuild value” (found on most household insurance policies) from estate agent valuations. There are various methods for successfully implementing Land Value Tax.
Ashley said he believed that council tax and stamp duty should be abolished. He looked at the effect of Stamp Duty on a family with newborn twins (who will soon desire a bigger home). He asked whether it is sensible to charge a lump sum of £30k (when the family need it most) when it could be spread over the entire period they occupy the land. The lump sum only serves to make people reluctant to move and leads to the inefficient use of land.
Ashley closed with the assertion that national wealth does not rise with rising property prices. Rising property prices serve no useful economic purpose and are an obvious choice for taxation.
Fred Harrison, Executive Director, Land Research Trust
Fred Harrison made a brief introduction asking: when are the politicians and commentators going to act and speak out about the realities on the street? And he then went on to introduce his new Renegade Economist film "Taxed to Death" which claims that the government kills 50,000 people in the UK each year from causes that can be traced back to the way government taxes the nation. The Late Professor George Miller, a senior clinical scientist, apparently proved so scientifically. These are issues of life and death. We are structured to kill. This tragedy is not equally distributed and is much lower in the south east than the north east. The rates of this disease follow a "Ricardian pattern"; that is, they are tied to the economic rent in the location values of land and the rules that are rigged in favour of those who live in the south east, rather than how hard an individual works. The country is inflicted with a sinister economic apartheid.
Progressive taxation on higher incomes has not been effective for 60 years for two reasons: spending on infrastructure raises location values faster in the south east. And tax revenue is rigged so that more is raised from wages than location values delivering a bias which enriches people in the more valuable locations. This is why anti-social behaviour is concentrated in the poorest communities as they are under the most stress from finding jobs, homes, fair wages. Knife crime, binge drinking etc should not be a surprise. Politicians are unable to see this because their policies are not formed in the real world and are unrelated to life on the street. Life on the margin remains deadly, yet the welfare state for 60 years has been supposed to even out the distribution of wealth. It has failed because it penalises savers and workers and rewards those who buy land for the windfall gains. It is a perverse and unhealthy system and the effects can be seen from London to Glasgow.
Fred concluded following the film by making some welcome and strong statements that MP's fear what homeowners think. They cannot act when homeowners are complicit in the problem. Both government and the people have become morally bankrupt. The matter before them is as serious as the abolition of slavery. Regulation is a dangerous red herring. They must consider the mega trend where many major issues all affect each other. And finally a plug was made for his Renegade Economist web site.
James Black, Home Affairs Spokesperson, The Social Liberalist Party
James Black (a sixth-former) said LVT made common sense to the young and the opportunity should not be missed. Young people need this source of revenue. A change in property taxation is common sense to the young. From occupiers to owners, 90% cent would benefit.
Conclusion
The seminar was aimed at parliamentarians but very few indeed turned up. The CEJ has the objective of forming an All Party Parliamentary Group on Land Reform in order to develop debate on the issue. MPs and Peers are invited to telephone or email the contacts listed below or sign and send the form below to indicate their interest and agreement to be a member of such a group.
All speakers and attendees please write to your own MP requesting they consider this proposal seriously and join the APPG.
Member Organisations: CEJ
Labour Land Campaign (LLC)
Liberal Democrat Action for Land Taxation and Economic Reform (ALTER)
Social Liberalist Party (SLP)
Systemic Fiscal Reform Group (SFRG)
School of Economic Science (SES)
Land is Free (LF)
Henry George Foundation (HGF)
Land Value Taxation Campaign (LVTC)
Professional Land Reform Group (PLRG)
Christian Council for Monetary Justice (CCMJ)
Global Justice Movement (GJM)
The 1909 Group
Invitation to join the APPG on Land Reform
Please email or phone any of the following contacts:
John Lipetz, 02077945343, johnlipetz@hotmail.com
Robin Smith, 07786078836, robinsmith3@gmail.com
Tony Vickers, 07950202640, tonyvickers@phonecoop.coop
Dave Wetzel, 07715322926, davewetzel42@googlemail.com
OR reply using the following text for your request to join the APPG:
Dear CEJ,
Please accept this request to register my interest in joining the All Party Parliamentary Group on Land Reform.
PLACE ANY COMMENTS, SUGGESTIONS, REQUESTS YOU WISH TO MAKE HERE
SIGNED
MPs
Peers
YOUR PREFERRED CONTACT DETAILS
And send to CEJ, 20 Parliament Court, Parliament Hill, London, NW3 2TS
PRESS RELEASE London, 02 April 2009
For immediate release
Press Release: Report on House of Commons Seminar on Land Value Taxation
Organised by The Coalition for Economic Justice
Hosted by Vince Cable MP
Panel of Speakers:
Sir Sam Brittan, Financial Times
Fred Harrison*, Land Research Trust
Prof Iain McLean, Professor of Politics– Oxford University
Ashley Seager, The Guardian
Molly Scott Cato, Green Party Economics speaker
David Triggs, Henry George Foundation
* Author of Boom Bust: House Prices, Banking and the Depression of 2010.
There was standing room only in Committee Room 5 at the House of Commons on Tuesday evening for a lively and stimulating seminar hosted by Vince Cable. The Coalition for Economic Justice – a recently formed grouping of concerned organisations across and beyond the political spectrum– believes that the private appropriation of community-created site values is lethal in its effect on our economic arrangements, dooming every economic upswing to an ultimate collapse. To end this cycle of boom and bust it is vital that the Government has some control over the level of property prices. Land value taxation would give it that control.
The House of Commons seminar held last Tuesday was aimed at parliamentarians and policymakers. It examined the advantages of land value taxation, how it might be introduced and how transitional problems could be dealt with.
As Sir Sam Brittan saw it, the case for LVT was clear and simple. But perversely, people find this difficult to grasp; they expect complexity in taxes. Being a tax on unearned value increment, LVT was no disincentive to Labour or Capital. As a temporary expedient, pending the full introduction of LVT, he advocated the auctioning of planning permissions.
Ashley Seager of The Guardian cited instances where public expenditure had led to massive increases in property (i.e., land) prices. In one case, the building of a school had led to such a big increase in local property prices that teachers in the school could not afford to live in the area. As the land of this country is provided free of charge by nature, “rising property prices do not raise national wealth one single penny”. They serve no useful economic purpose and are an obvious target for taxation.
Professor Iain McLean explained how, as a member of the independent expert group set up by the Calman Commission, he was looking at LVT as a way of financing public services in Scotland and Wales. LVT would replace council tax, business rates and stamp duty.
From a Green perspective (Molly Scott Cato), land is a trust for the people, its life-giving properties to be preserved from one generation to the next. LVT, which aims to curb private profiteering from the nation’s patrimony, was seen as a valuable tool in this connection.
The groundwork for the panel discussions was set out by David Triggs in his opening address. “The challenge that confronts those interested in establishing a just and equitable division of the fruits of production lies essentially in recognising that land values impound that part of the value created which is attributable to factors external to the individual, e.g., the country’s infrastructure, the system of governance, law and order and the density of population. It is manifestly unfair to tax the individual on what he produces while those community-created values are provided tax-free to the benefit of the landowner. These land values, arising essentially from location, should be the primary source of taxation.”
Fred Harrison reinforced this message. He showed how failure to collect location value led to diminished opportunity and life expectancy at the marginal location.
James Black (a sixth-former) said LVT made common sense to the young and the opportunity should not be missed.
This seminar is the first step in a campaign to interest parliamentarians in the formation of an all party parliamentary group on Land Value Taxation.
END
For further information contact
John Lipetz, 020 7794 5343, johnlipetz@hotmail.com
Robin Smith, 07786 078836, robinsmith3@gmail.com
Dave Wetzel, 07715322926, davewetzel42@googlemail.com
Tony Vickers, 07950202640, tonyvickers@phonecoop.coop
www.c4ej.com
CEJ Member Organisations:
Labour Land Campaign (LLC)
Liberal Democrat Action for Land Taxation and Economic Reform (ALTER)
Social Liberalist Party (SLP)
Systemic Fiscal Reform Group (SFRG)
School of Economic Science (SES)
Land is Free (LF)
Henry George Foundation (HGF)
Land Value Taxation Campaign (LVTC)
Professional Land Reform Group (PLRG)
Christian Council for Monetary Justice (CCMJ)
Global Justice Movement (GJM)
The 1909 Group
PRESS RELEASE London, 16 March 2009
For immediate release
Press Release: House of Commons Seminar on Land Value Taxation, 5pm Tuesday 24th March 2009
Committee Room 5
Hosted by Vince Cable MP
Chaired by Nick Ross
Panel of Speakers:
David Triggs, Executive Chair of the Henry George Foundation
Iain McLean, Professor of Politics, University of Oxford
Ashley Seager, Economics correspondent, The Guardian
Samuel Brittan, Economics commentator, FT, author
Molly Scott Cato, Economics speaker for the Green Party
* Fred Harrison, Executive Director of the Land Research Trust and leading author
John Lipetz, CEJ Chair. To sum up the seminar
* Author of Boom Bust: House Prices, Banking and the Depression of 2010.
The Coalition for Economic Justice – a recently formed grouping of concerned organisations across the political spectrum– believes that the private appropriation of community-created site values is lethal in its effect on our economic arrangements, dooming every economic upswing to an ultimate collapse.
To end this cycle of boom and bust it is vital that the Government has some control over the level of property prices. Land value taxation would give it that control. The tax thus raised would not be additional Government revenue but would be matched by an equal and offsetting reduction in those taxes which bear directly on labour and enterprise, such as, income tax and corporation tax. This would give a much needed stimulus to economic activity while curbing the unjust and unearned enrichment from property speculation.
The seminar is aimed at parliamentarians and policymakers, with the objective of forming an All Party Parliamentary Group to consider how this situation may be rectified and a land value tax introduced.
BACKGROUND
The American embassy in Grosvenor Square was recently sold for £500 million. As the price agreed was on the assumption that the building would be demolished, the entire price reflected the site value alone. The intrinsic value of the 2-acre site is negligible – as agricultural land it would fetch no more than £10,000. All this site value therefore arises from external, community-derived factors, such as, the density of population at the heart of the nation’s capital and London’s unrivalled communication and infrastructure network. It is wrong that the site owner should reap this benefit; it arises from the community and is paid for through taxes. It should be returned to the community.
In most property transactions the site value element is not disclosed but is highly significant. It is the site value, not the perishable bricks and mortar, which is the driving force behind property prices, pushing them up to ever higher and unsustainable levels. These inflated property prices and the ballooning credit that supports them eventually implode with, as now, catastrophic consequences for the economy. An unsustainable property boom and its subsequent collapse has been at the heart of virtually every economic crisis since the Second World War.
With site values taxed, property would lose its speculative appeal and housing would once again become affordable. The mountain of credit thus released would be used to finance business and trade. The message from this shift in the tax burden from production on to property would be: wealth comes from work, not from sitting on a property.
For further information contact
John Lipetz, 020 7794 5343, johnlipetz@hotmail.com
Robin Smith, 07786 078836, robinsmith3@gmail.com
Dave Wetzel, 07715322926, davewetzel42@googlemail.com
Tony Vickers, 07950202640, tonyvickers@phonecoop.coop
www.c4ej.com
CEJ Member Organisations:
Labour Land Campaign (LLC)
Liberal Democrat Action for Land Taxation and Economic Reform (ALTER)
Social Liberalist Party (SLP)
Systemic Fiscal Reform Group (SFRG)
School of Economic Science (SES)
Land is Free (LF)
Henry George Foundation (HGF)
Land Value Taxation Campaign (LVTC)
Professional Land Reform Group (PLRG)
Christian Council for Monetary Justice (CCMJ)
Global Justice Movement (GJM)
The 1909 Group