The Observer (3rd Dec) revealed a new initiative to tackle the housing crisis from the Tony Blair Institute for Global Change. Blair is proposing that council tax and business rates, which are currently based on the value of the site and any building or improvement on it, be replaced by a tax which relates solely to the value of the land under the buildings, arguing that it is a “fairer and more rational system of property taxation”.
At the same time, the Office for National Statistics has released figures revealing that land is Britain’s most valuable asset, having increased fivefold since 1995, provoking calls for the introduction of a land tax to curb soaring house prices driven by the rising land prices.
The land-value tax is usually seen as leftwing, reinforced when the Marxist John McDonnell pledged in Labour’s 2017 election manifesto to hold a review of the idea, but rightly understood it could provide a market solution to the housing crisis.
During his premiership, following a visit to Singapore, Blair returned to Britain espousing the idea of a “third way” to create an economy that worked for everyone, something Anthony Giddens, then Director of the London School of Economics had written about in his book The Third Way. This proved a disappointing mixture of left and right.
The argument for funding government from economic rent, which is what a land-value tax would collect, rests on an understanding of Ricardo’s Law, named after the classical economist who first explained its operation clearly. Unfortunately, mainstream economists largely ignore it, thus depriving policy-makers of a valuable tool in their endeavours to make the economy work for everyone.
It is to be hoped that Blair has realised the significance of the Law of Rent and how this could be a foundation for a genuine third way, one which holds out the possibility that, with government focused on collecting more of the economic rent, the burden of taxation could be reduced and possibly even eliminated so that government was funded entirely out of rent. This is what a “fairer and more rational system of property taxation” offers.
Several of the books in our Ethical Economics list explore the many ramifications of such an approach.
Further Reading: Progress and Poverty by Henry George Progress and Poverty by Henry George Public Revenue Without Taxation by Ronald Burgess In Progress and Poverty Henry George sought the ‘cause of industrial depressions and the increase of want with the increase of...read more
Further Reading: Rent Unmasked by Fred Harrison The Power in the Land by Fred Harrison Progress and Poverty by Henry George At a recent event, the Council of Georgist Organizations Conference, Anthony Werner and Fred Harrison were honoured for their contributions to...read more
This week marks the 10th anniversary of the event that triggered the 2007/8 crisis and the ensuing Great Recession. But it need not have happened. In November 1997 Fred Harrison, author of Boom Bust and The Power in the Land, wrote to Prime Minister Tony Blair and his Press Secretary, Alistair Campbell, to warn them about a ‘housing crisis that would end up in a depression’. No notice was taken. Chancellor of the Exchequer, Gordon Brown, even boasted in each of his Budget speeches, including April 2007, that “we will never return to the old boom and bust”.read more
This is the dilemma facing the British government – and many others – as they struggle to meet the rising costs of the welfare state while trying to eliminate the budget deficit. The options are either to increase taxation, never a popular move, or to increase borrowing. The cost of the former will fall on present taxpayers, the latter on future generations and the young of today who are being wooed by Jeremy Corbyn.read more
“You can become wealthy by creating wealth or by appropriating the wealth created by other people. When the appropriation of the wealth is illegal it is called theft or fraud. When it is legal economists call it rent-seeking”
John Kay, Financial Times 27th Dec 2009
“If a free society cannot help the many who are poor, they cannot save the few who are rich.”
John F Kennedy, Inaugural Speech, Jan 1961
“If science is defined by its ability to forecast the future, the failure of much of the economics profession to see the crisis coming should be a cause for great concern”
“Today we live in a world that is divided. A world in which we have made great progress and advances in science and technology. But it is also a world where millions of children die because they have no access to medicines… It is a world of great promise and hope. It is also a world of despair, disease and hunger”
Rent Unmasked explores the new economic paradigm that policy-makers need to solve global problems in the post-2008 era. With conventional economic theories discredited, the new model must equip governments with tools to re-stabilise societies in a dangerous world. Rent Unmasked explains why one paradigm only qualifies to serve this purpose: the dynamic model that reinstates time and space in economic theorising.
ISBN 9780856835117 | Price: £19.95