When you consider it, we all have an ideological mind-set of some sort, but unlike our elected leaders, we’re not in a position to impose it on the wider public; which is probably their good fortune – and ours! In the real world, as they say, we’ve had a Labour ideology for the past thirteen years, but with an election shortly, a more Conservative ideology may replace it. If so, how much will change, or perhaps, how much can change?
Over the years we’ve created a huge culture of dependency and welfare, no doubt with the best of intentions. The cost of mitigating poverty is enormous, yet this does not seem to cure the problem. Indeed experts tell us that the gap that separates the rich and poor is wider. And in the middle, the middle class is squeezed until the ‘pips squeak’. Huge amounts are spent on health and education, but equally huge problems remain. With this situation, can we say that government intervention works?
On the other hand, we can’t abandon the unfortunate in society to their fate! What is the answer? What should a new administration do? What can they do?
Our democratic system holds elections every five years, or thereabouts. Votes are canvassed with a view to capturing the support of the majority. This, one might say, satisfies the maxim of securing : ‘the greatest happiness for the greatest number’. In doing this politicians must avoid offending the self-interest of the majority which includes the property-owning middle class. Indeed any hint of this would be an instant weapon for the opposition’s armoury. So elections are something akin to a tax auction – using the tax system to sway the electorate, effectively bribing taxpayers with their own money. This has been going on for decades.
Radical reform, that is, tackling root causes is avoided, as it offends the self-interest of the greatest number, the providers of the votes. You might say that the electorate is the author of its own misfortune, or fortune, if you happen to be on the right side of the have/have-not divide.
Our laws allows the location value that attaches to land to be claimed privately. However location value is the creation of the community as a whole. No one would claim that the location value of the local high street, or say the City of London is the creation of an individual or even a corporate body. Yet this community created fund is claimed privately. This, of course, is perfectly legal. Also legal is the taxation of the earnings of enterprise. So the state taxes privately created earnings and leaves publicly created location value to be claimed privately. This seemingly illogical practice has held sway for centuries.
To own the publicly created location value of, say, a Threadneedle Street site, would be quite a nest egg. Indeed, tapping the community fund is lucrative. This, of course, is the general situation for those who own their property and its site location. Again, as already mentioned, it’s all perfectly legal. Clearly, those who own property in a desirable area are well placed. High street landlords extract large sums per month from their tenants. Charging for the building is quite reasonable, but this is often small compared with the location value of the site, which can be very considerable. What high street tenant doesn’t complain about the rent? For in most cases the landlord will take the most that he or she can get. So the ownership of real estate, that is capitalized location value, can command a substantial advantage, which is fine for the landlord, but not so good for the frequently struggling tenant, whether domestic or commercial. Here is the beginning of the have/have-not divide.
So, what is the answer? Well ‘dear reader’- if I may slip into Trollope mode! – this is where the baton passes to you! We may rage against the Left or castigate the Right and end up with a patched up model of the status quo. Here, nothing much will change, except that extremist versions of the hard Left and Right could do great damage. Or we could make a fresh start and investigate the communal fund that rises in a natural way within communities. Three questions may help this enquiry. What is location value? Who creates it? And to whom does it belong?
The logical conclusion that location value is created communally seems inescapable. For instance, no developer would build a NatWest Tower look-alike on a deserted mountain slope. Obviously, only a suitable surrounding community with complimentary infrastructure would make such a building viable. In such a community the infrastructure is, of course, provided by the community and is funded out of general taxation. The building itself, that is, the steel and concrete etc., is due to the enterprise of the developer and is therefore his property, but the value of the real-estate on which it stands is community created. The logical conclusion seems inescapable. That which is created by the developer belongs to the developer and the location value which is community created belongs to the community. What could be simpler? Yet informed opinion appears to disagree, as unending application complications are cited and the proposals are consequently dismissed as impractical. Manifestly the principle is simplicity itself. It is not the fault of the principle, but, rather, the system that we have evolved. It is anything but simple. Indeed, it is nightmarishly complicated; so, we shy away from real reform and tinker with minutia.
What then is the answer?
So far, we have not considered the political difficulties, and there are certainly difficulties! The very hint of a levy on location value would galvanize the vested interest. The reason and logic of the principle would have scant consideration when the voting public reacted to ‘they’re taxing your back garden!’ In our free society the democratic will is sovereign. To put it bluntly, we cannot ram the truth down people’s throats. So what is the answer?
The principle is simple, true and not a whim to be abandoned. But it can be nurtured and continually presented so that the idea becomes an accepted commerce in the mind of the community. This is our constant duty.