PRACTICAL POLITICS No.167
- From: nobiesse3@xxxxxxxxxxxx
- Date: Mon, 18 Aug 2008 19:23:04 +0000
PRACTICAL POLITICS July 2008 Issue No.167
11 YEARS ON
The following piece is reproduced from our Issue No.71 (June 1997).
"Last month's General Election changed the Government, but little else.
In the forthcoming budget we are promised a windfall tax to benefit the
youthful unemployed. Let us be clear that this creates no jobs. The tax
money coming from privatised utilities would not have been left down the
sides of company sofas. It would have been spent by the companies
themselves or distributed to their shareholders or placed in banks to be
reissued as loans. One way or another, the wealth the windfall tax
represents would have made its way in to the general economy and
without a commission charge to sustain government bureaucracy. So, some
work is to be lost in order that the money may go on training unemployed
youths. Put like that, it is no big deal.
This windfall tax is justified by no principle except that the
government is sure it needs money and has seen where there is some. As
for job training, there is no coherent policy. Government has itself
erected formidable barriers to employment. Businesses must first buy
employees off their welfare benefits and then make it worth their while
to accept work. It is take-home pay that matters here. Yet work and jobs
are routinely subjected to discouragement by taxation. Even the
eminently employable are left on the scrap heap.
A windfall is a fruit that drops from a tree in a wind. As Newton
demonstrated, it drops according to a natural law of physics. Would
government legislate to repeal the law of gravity or to have plant stems
grow downwards and the roots upwards? Only in economics, it seems, are
natural laws persistently flouted. There can be no surprise that
deprivation exists amidst plenty and social disorders constantly
threaten.
There is a natural, logical, self-consistent, principled way of
conducting our affairs. This publication is dedicated to showing that
public collection of the location value of land, with corresponding
relief of taxes on production, on goods, on services, on trade, on
spending, and on saving, would (inter alia) expand employment
opportunities, reward effort and enterprise, and reduce dependence on
state welfare."
"POVERTY" IN THE CONTEMPORARY POLITICAL LEXICON
Presumably because eliminating poverty has been proving too difficult
for the political classes, the word is now being reparcelled and paraded
as "child poverty" or "fuel poverty" and the like. This is to trivialise
the problem, which is, quite simply, that, although some people
doubtless are poor but apparently unwilling to help themselves, others
really are poor (no "if", "but", "child" or "fuel" about it) and really
are entrapped and in need of rescue and help. However, further
government intervention such as in the energy markets (as some are
urging) will, given the number of those markets and the diversity of the
participants within them, inevitably produce unintended and harmful
consequences. Have we forgotten the government raid on the pension
funds, the fallout from which will last for years? Dealing with poverty
requires vision but, once the solution is grasped, action can follow
quickly and results will flow fast. Markets can not and do not
deliver fully or fairly if policy is conducted as if there were no
distinction between Land and Capital: the two differ both in kind and in
their economic rôle.
THE FORTUNES OF TWO FOOTBALL CLUB OWNERS
"Paul Davidson, the entrepreneur known as The Plumber, has agreed to buy
the Spanish football club Real Mallorca for an undisclosed sum, thought
to be well in excess of £50m" (Jonathan Russell, "Daily Telegraph",
22nd. July). "Mr Davidson...admitted...he knew almost nothing about
football" but "The club, which finished seventh last year in Spain's
premier league, owns large tracts of land in and around Palma, including
its old stadium and current training ground."
Meanwhile, back in England, Mohamed Fayed, whose claims to fame include
ownership of Fulham F.C., has struck oil. Through one off his companies,
Bocardo, based in Liechtenstein, Mr Fayed brought an action for trespass
against Star Energy, "a British-based onshore oil producer...and was
awarded a share in the proceeds of three wells that produce oil 800ft
below his land" on his estate at Oxted, Surrey (John Bingham, "Daily
Telegraph", 25th. July). Star had drilled the wells from its own site,
"passing diagonally under Mr Fayed's land to extract oil and gas." The
award was for a "nine per cent share in the £7million that
the...oilfield has yielded since 2000 and the same proportion of all
future income". The yield has now slowed to 2,000 barrels a month no
fortune, but still useful pocket money. As matters stand, the award was
correct, but this means that the principles of ethics and economics were
inevitably ignored (and will remain so until the law is changed). The
value of the oil under the ground is public; only the additional value
once it has been brought to the surface is legitimately private. The
value of the land (of which minerals at and below the surface are a
part) is all rightly public, and should be collected to replace existing
taxes.
THE WAY WE DRIFT NOW
(i) A RICS survey has noted that recent steep increases in the cost of
fuel and animal feed have "rendered many smaller marginal farms
unprofitable" (David Litterick, "Daily Telegraph", 28th. July), but
still manages to observe that now is "one of the best economic climates
for farmers in many years". As always, it is the owner of agricultural
land (provided, as it now appears, that it is not marginal land!) who is
the ultimate beneficiary, not the tenant, not the prospective new
entrant, and definitely not the farm labourer. "Arable land rose in
value by 32pc to £14,453 per hectare in the first half of this year,
while pasture land increased by 16pc to an average £11,477 per hectare"
[1 hectare = 2.471 acres].
(ii) "Until house prices find a floor, the credit system and the wider
economy will continue to flounder. It may just be better to get there
sooner rather than later" (David Wighton, "The Times", 4th. July). Of
course it is primarily the price of housing land, not that of the actual
house structure, that is falling. Land speculation is the root cause of
the problem, and land prices must be shorn of their huge speculative
element and return to reality before the battered economy can start to
recover. Sadly, experience indicates that lessons will not be learned,
and the sorry cycle will be set in motion again.
(iii) "Alarmingly, as the economy has slowed, growth in income and
corporation tax revenues has stalled and value-added receipts are
shrinking fast. Spending beyond its means...the government has pushed up
net debt as a percentage of gross domestic product to 38 per cent...At
the same time, the Treasury is reassessing its fiscal framework that
is, the internal rules on spending and taxation. The cynical minded
think this simply means that the government is desperate to borrow more
now that times are tougher, without having to resort to raising taxes"
(Lex column, "Financial Times", 19th. July). "Increased borrowing today
means higher taxes tomorrow." Well, it might do, and perhaps it should
do, because borrowing on the money market implies both paying interest
and subsequently redeeming the loan. Governments, however, have a
history of avoiding that pain, by, sooner or later, simply printing and
spending into circulation quantities of unbacked paper currency pure,
naked inflation (as described in our Issue No.157).
Monetary inflation reduces the purchasing power of all currency
previously in circulation. It transfers value from the citizenry to
Government. In upsetting the balance between goods and money in the
economy, it acts just like a tax, and a bad, indiscriminate tax into the
bargain.
Yes, they really do tax money too!
BOOM TOWN
The next boom town will be Tirana, capital of Albania: attractions
include no SDLT, no CGT, no IHT, and the arrival of international
corporations to take advantage of its central location as a distribution
hub in the Mediterranean (full-page advertisement, "Sunday Express",
8th. June).
PROSPECTS AND PERSPECTIVE
There is rising awareness of the determining importance of the factor,
Land, in the workings of the economy. This now goes beyond merely
recalling that Land is not man-made but is the free gift of Mother
Nature, and noticing how political, economic, and social decisions are
reflected in land values. Instead, it is becoming increasingly clear
that Land Value is called into being by, is sustained by, and will
depend in future on, the collective actions of the whole community as
expressed in the demand for living, working, and recreational space.
This awareness is spreading from the business and professional classes
to commentators, journalists, and other observers. It is now percolating
through to the political classes, the political parties, the
think-tanks, and academics. This will take time, and effort, because
contemporary preference is to reshake the same old kaleidoscope, change
the terminology, select a new logo, and hope that failure does not
repeat itself until after the next set of elections. In our way, we are
sorry for those who think they are not going to fail next time: but our
deeper regard is for the poor apolitical British public, whose only
recourse seems to be to ridicule its masters or just to ignore them.
It can, of course, lead to loss of social cohesion and to a
dysfunctional society.
RIGHTS AND PROMISES
"All property ought to be the reward of industry; all industry ought to
be secure of its full reward; the exorbitant right of the landholders
subverts both these maxims of good policy" (William Ogilvie of
Pittensear, "Birthright In Land", 1782). Our contemporary politicians do
not literally promise us the earth, but in fact the Earth is about the
only thing they should be promising! It is, after all, ours, and we
should like to have it back.
Found at: http://www.landvaluetax.org/downloads/
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