In The Times‘ Christmas review of books about money, Oliver Kamm writes:
The Times recommends Aftershock: “The crash of 2007-09 did not turn into a reprise of the 1930s mainly because policymakers had learnt from the mistakes of that era. They rescued the banks, slashed interest rates, and injected money into the economy to support demand. Philippe Legrain, in Aftershock: Reshaping the World Economy After the Crisis (Little, Brown, £12.99), lucidly discusses the policies that have (so far) prevented disaster and the route back to prosperity. Legrain knows his subject and is a commendably clear exponent of economic concepts. He argues, in my view incontrovertibly, that openness to trade and immigration has big welfare benefits.
Filling the gaping hole in the Government’s finances is, in George Osborne’s words, the “great national challenge of our generation”. Unwise spending cuts and tax rises could sap economic growth; unfair ones provoke political unrest; inaction a market panic.
Faced with a national crisis, who better to turn to for advice than Winston Churchill? A century ago, the great man — who, like the present coalition, was both Liberal and Conservative — advocated introducing a land tax as part of a bold package of fiscal reforms. In his emergency Budget on June 22, the Chancellor should set up a commission to consider how best to implement that recommendation.
Taxing land values would be a fair way to help to plug the budget gap while stabilising — and even boosting — the economy. Land is routinely valued each year as property changes hands. With all the land in Britain worth perhaps £5 trillion, a 0.5 per cent levy could raise £25 billion a year — as much as a five-point rise in income tax.
Neither tenants nor leaseholders would pay a penny; only freeholders and landlords would, with the owner of a large estate paying a higher rate than someone who owns a small suburban semi. The proceeds could be used to cut the deficit and national insurance, creating jobs, boosting take-home pay and stimulating growth. Over time, the aim would be to shift the tax burden off hard-working families and on to idle landlords — as in Hong Kong, where revenues from land taxes keep income tax low, there is no VAT or capital gains tax, and enterprise flourishes.
When the Government taxes successful effort, people strive less — some work less, others don’t bother setting up a business, a few relocate overseas — and since hiring is more expensive, fewer jobs are created. But taxing land wouldn’t crimp economic activity, as Adam Smith explained in The Wealth of Nations. It wouldn’t reduce the supply of land, which can’t be spirited away to a tax haven. And it wouldn’t push up rents, which depend on what tenants are prepared to pay rather than landlords’ expenses.
A land tax would actually encourage development. Since it would be payable irrespective of how land is used, it would stimulate the regeneration of derelict sites — such as Battersea power station, where David Cameron launched his election campaign and which has lain idle since 1982. Infrastructure investment that raises surrounding land values, such as Crossrail or a high-speed rail network, would pay for itself and thus escape short-sighted budget cuts. And unlike property taxes, people who do up their homes would not be penalised.
Taxing land values could also limit property bubbles — and the inevitable busts — without discouraging mobility (unlike stamp duty) or business investment (unlike interest rate rises). Relaxing planning restrictions, as Policy Exchange, the Prime Minister’s favourite think-tank, has suggested, would help too. The notion that we can all get rich by swapping more or less the same stock of houses at ever more inflated prices is a dangerous delusion. Property speculation diverts funds from productive investment in promising companies — and when the bubble bursts, the economy plunges into recession, home-owners are stranded with huge debts and banks laid low by bad loans seek bailouts from taxpayers. Isn’t it time we learnt from our mistakes?
Above all, a land tax would be fair. Land in Britain is parcelled out more unequally than in Brazil: 0.3 per cent of the population owns 69 per cent of the land. The country’s biggest private landowner, the Duke of Buccleuch, owns 277,000 acres, not because of his talent or industry, but because his ancestors seized vast swaths of Scotland.
These “land monopolists” — as Churchill dubbed them — get richer not through their own efforts, but that of others. The Duke of Westminster owns 300 acres of what was once fields and is now London’s priciest real estate — Mayfair and Belgravia. And because so many people have established thriving businesses in the capital, that inheritance is now worth billions of pounds. Surely it would be better to tax that windfall gain, rather than the employees and entrepreneurs who generate it?
For sure, farmers and big landowners would kick up a mighty fuss. But since the typical family of four shells out £750 a year to farmers in higher taxes and food prices because of the Common Agricultural Policy, which also inflates land prices, it’s only fair to claw some of that back. And while landowners would point to the impact on a poor granny in a big house — a bogus argument that Churchill called the “poor widow bogey” — she wouldn’t be forced out of her home; her tax bill could be deferred, or she could even be exempted.
Since nearly all of us earn most of our lifetime income from work rather than from rent, taxing land instead of labour would make most people better off. So the question for the coalition Government boils down to this: do you want to help a big society of enterprising people working hard to get ahead — or a tiny hereditary elite creaming off the rewards of others’ efforts?
Filling the gaping hole in the Government’s finances is, in George Osborne’s words, the “great national challenge of our generation”. Unwise spending cuts and tax rises could sap economic growth; unfair ones provoke political unrest; inaction a market panic.
Faced with a national crisis, who better to turn to for advice than Winston Churchill? A century ago, the great man — who, like the present coalition, was both Liberal and Conservative — advocated introducing a land tax as part of a bold package of fiscal reforms. In his emergency Budget on June 22, the Chancellor should set up a commission to consider how best to implement that recommendation.
Taxing land values would be a fair way to help to plug the budget gap while stabilising — and even boosting — the economy. Land is routinely valued each year as property changes hands. With all the land in Britain worth perhaps £5 trillion, a 0.5 per cent levy could raise £25 billion a year — as much as a five-point rise in income tax.
Neither tenants nor leaseholders would pay a penny; only freeholders and landlords would, with the owner of a large estate paying a higher rate than someone who owns a small suburban semi. The proceeds could be used to cut the deficit and national insurance, creating jobs, boosting take-home pay and stimulating growth. Over time, the aim would be to shift the tax burden off hard-working families and on to idle landlords — as in Hong Kong, where revenues from land taxes keep income tax low, there is no VAT or capital gains tax, and enterprise flourishes.
When the Government taxes successful effort, people strive less — some work less, others don’t bother setting up a business, a few relocate overseas — and since hiring is more expensive, fewer jobs are created. But taxing land wouldn’t crimp economic activity, as Adam Smith explained in The Wealth of Nations. It wouldn’t reduce the supply of land, which can’t be spirited away to a tax haven. And it wouldn’t push up rents, which depend on what tenants are prepared to pay rather than landlords’ expenses.
A land tax would actually encourage development. Since it would be payable irrespective of how land is used, it would stimulate the regeneration of derelict sites — such as Battersea power station, where David Cameron launched his election campaign and which has lain idle since 1982. Infrastructure investment that raises surrounding land values, such as Crossrail or a high-speed rail network, would pay for itself and thus escape short-sighted budget cuts. And unlike property taxes, people who do up their homes would not be penalised.
Taxing land values could also limit property bubbles — and the inevitable busts — without discouraging mobility (unlike stamp duty) or business investment (unlike interest rate rises). Relaxing planning restrictions, as Policy Exchange, the Prime Minister’s favourite think-tank, has suggested, would help too. The notion that we can all get rich by swapping more or less the same stock of houses at ever more inflated prices is a dangerous delusion. Property speculation diverts funds from productive investment in promising companies — and when the bubble bursts, the economy plunges into recession, home-owners are stranded with huge debts and banks laid low by bad loans seek bailouts from taxpayers. Isn’t it time we learnt from our mistakes?
Above all, a land tax would be fair. Land in Britain is parcelled out more unequally than in Brazil: 0.3 per cent of the population owns 69 per cent of the land. The country’s biggest private landowner, the Duke of Buccleuch, owns 277,000 acres, not because of his talent or industry, but because his ancestors seized vast swaths of Scotland.
These “land monopolists” — as Churchill dubbed them — get richer not through their own efforts, but that of others. The Duke of Westminster owns 300 acres of what was once fields and is now London’s priciest real estate — Mayfair and Belgravia. And because so many people have established thriving businesses in the capital, that inheritance is now worth billions of pounds. Surely it would be better to tax that windfall gain, rather than the employees and entrepreneurs who generate it?
For sure, farmers and big landowners would kick up a mighty fuss. But since the typical family of four shells out £750 a year to farmers in higher taxes and food prices because of the Common Agricultural Policy, which also inflates land prices, it’s only fair to claw some of that back. And while landowners would point to the impact on a poor granny in a big house — a bogus argument that Churchill called the “poor widow bogey” — she wouldn’t be forced out of her home; her tax bill could be deferred, or she could even be exempted.
Since nearly all of us earn most of our lifetime income from work rather than from rent, taxing land instead of labour would make most people better off. So the question for the coalition Government boils down to this: do you want to help a big society of enterprising people working hard to get ahead — or a tiny hereditary elite creaming off the rewards of others’ efforts?
The Times asked a number of people, including me, whether Britain is full.
The country's supposed overpopulation is now the argument of choice for opponents of immigration, many of whose real objection to having more foreigners around is cultural.
After all, Manhattan, Paris and Kensington & Chelsea are the most densely populated areas of the US, France and the UK respectively, yet they are hardly hellholes.
When John Reid became Home Secretary, he promised to get a grip on
Britain’s shambolic immigration system. But less than six months later,
he is already making an even bigger mess of it.
As Churchill might have said, the World Trade Organisation is the worst way of governing the world economy, except for all the others. That is what the seething globaphobic masses and padded ministerial suits who conspired to wreck the WTO’s recent meeting in Cancún may soon find out. With prospects for freeing world trade — the engine of global economic growth over the past 50 years — in tatters for now, the consequences could be devastating. Indeed, finance ministers who are in Dubai for the World Bank/IMF meeting have already been expressing regret for the Cancún debacle.