Friday 24 February 2012

Should Have The Land Of Britain As A Perquisite

Behind the FT's paywall, no less a figure than Sir Samuel Brittan, old Thatcher guru turned trenchant critic of austerity, writes:

The case for a land tax is one of the oldest and least disputed propositions in economic thought. The underlying theory was developed at the beginning of the 19th century by the highly respectable David Ricardo. Many chancellors have said that they would jump at a tax that had no disincentive effects on work or enterprise but had a strong redistributive element. The problem was that the amount of preliminary work required would take more than one parliament and any credit for the measure would redound to their successors.

And:

A land tax is one of those subjects - basic income is another - which divides commentators into a great majority who never mention it, and a minority who talk of nothing else. The result is to give supporters a cranky appearance, while the eyes of chancellors of either main party glaze over if you as much as mention the subject.

The basic point is that the supply of land, with rare exceptions such as reclamation in the Netherlands, is fixed. But because of its scarcity owners can command an income over and above the normal return to the enterprises placed upon it. Gross UK trading profits of non-financial and non-oil corporations are running at over £200bn per year or about 20 per cent of gross domestic output. Some part of this - we do not know how much - is not true profit but the return on land. There is one way in which the supply of usable land can increase. That is when land, previously off limits, is newly released by local authorities for development. The consequent increase in value, say some land tax campaigners, is created by "the community", which is entitled to a share of the increment. But to argue in this way is to sell the case short. The case for a land tax is valid even for land which always was available for development or which remains in agricultural use.

There must be a tax on the productive value of land per acre, other than that occupied by the homes of the less well off, perhaps making possible the abolition of stamp duty, and in any event establishing and enforcing the principle that no one should own land other than in order to make use of it; this was proposed by Andy Burnham when he was a candidate for Leader of the Labour Party. There must also be a statutory requirement of planning permission for change of use if it is proposed to turn a primary dwelling into a secondary dwelling, a working family home into a weekend or holiday home.

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