Land Value Tax versus urban sprawl
Adam Smith, writing in The Wealth of Nations (Book 5, Chapter 2), reasoned that, “Ground-rents are a still more proper subject of taxation than the rent of houses. A tax upon ground-rents would not raise the rents of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground.”
In modern speak, Smith was referring to the “Land Value Tax” (LVT for short). The name, however, is a misnomer as the Land Value Tax is not a “tax” at all. Rather, it’s a rent on the land that one uses. In this regard, paying LVT is not dissimilar to paying for a parking ticket. If John purchases a plot of land over which he demand autonomy and of which he demands the state’s protection, then he pays a rent back to the community. After all, if I ensnare a flat chunk of the universe with a picket fence and call it my own, I have taken land from the commons. Land that naturally belongs to everyone. Unearned capital that was given to us by nature. Therefore, it seems plausible that I owe a small debt of reimbursement to the community.
At this point, your neo-liberal alarm bells should be ringing. Claims that the land belongs to everyone have an eerily Marxist undertone, don’t they? Actually, Marx hated the idea, once referring to its progenitor, Henry George, as “utterly backward!”. In fact, the LVT has always marshalled its strongest defenders from free-market thinkers like Milton Friedman (who referred to the LVT as “the least bad tax”).
This modest solution packs a mighty punch. Even if you aren’t convinced that the LVT should replace all taxes (as its original proponents believed), an LVT of 3% (excluding homes and gardens) could raise over £33 billion. This money could be diverted from fiscal vanity projects to invest in green start-ups and conservation.
The tax also ensures a greener future by encouraging the use of brownfield land and land occupied by run-down construction sites. In so doing, the LVT sucks development away from the greenbelt. This, in turn, helps cut back on excessive urban sprawl. By treating the earth as though it belonged to everyone, we would be ushering in a revolutionary new perspective on land – with any luck, a greener one.
Amos Wollen is the winner of the under-18 category in our Young Writer on Liberty 2020 competition.
If only people would learn from other countries like Germany
This letter to The Guardian could be a spoof we suppose although we think, sadly, that it’s meant to be serious. Germany has, it appears, dealt with the coronavirus rather better than our own dear and pleasant land:
Martin Kettle is absolutely right in his comparison between Germany’s response to the Covid-19 pandemic and that of the UK (On different planets: how Germany tackled the pandemic, and Britain flailed, 24 June). But one big factor is the fact that Germany is not, as he writes, just “a bit more prosperous” than Britain. Its standard of living is much higher than ours and there is certainly less of a divide between the rich and poor than there is here. The much higher standards of hygiene in Germany and of health care have also been an important contributing factor to the country’s much lower Covid-19 infection and death rates.
That health care system is certainly less centralised than our own. Testing, for example, was carried out by some 400 labs all over the country instead of our system which seemed to have Public Health England (for England, of course) insisting that only they, the very priesthood, could possibly be competent to do anything. Not a competence they then went on to prove.
It’s also true that the German health care system as a whole is based upon insurance, not direct tax funding, with some 130 different insurance funds. Both the GPs and hospitals are near all in the private sector, not run by the government. All of which makes this such a lovely second point made in the letter:
Our government of Little Englanders and fanatical privateers will never admit that we could learn something from another nation, let alone from Germany. Angela Merkel has pursued a politics of consensus and moderation, whereas our Conservatives have consistently followed the discredited neoliberalism of the US and the chaotic response to this pandemic is a direct result.
Any such move to fund health care in Britain by insurance, or to free the hospitals from the National Health Service, would be decried as the imposition of that neoliberalism, wouldn’t it? Actually, even the modest moves already made are so described.
We agree that we should all learn from foreign countries because the experiments there might indeed be more successful than our home grown attempts. But we would suggest that consideration of what Johnny F has managed to get up to be informed by a modicum of knowledge concerning what Mr. J. Foreigner has been and is doing. For that would seem to be the correct manner of picking the useful information from those experiments in those foreign climes.
You know, that near no one else has the National Health Service being an indication that perhaps the National Health Service isn’t quite the way to do it? And if the absence of the NHS leads to better health care, as is the claim here, then perhaps it’s the NHS that we might want to reform in that neoliberal direction?
Green is great for business
On its departure from the EU, the UK is faced with the opportunity to improve its global competitiveness and its contribution to the fight against climate change. How will we do this? Through innovation, entrepreneurship and developing top companies to lead the way in environmental capitalism.
The process of ‘Creative Destruction’ pioneered by Joseph Schumpeter led to an enormous improvement in living standards across the world through competition. The engine of capitalism must keep running in the 21st century and remain focused on creating the platform for entrepreneurs to solve the challenges of the day.
We can see from the USA that countries with highly competitive markets, and loose regulatory frameworks continuously produce innovation beyond those of more restrictive ones. This is common knowledge, yet the impact that this innovation can have on the environment is still not fully appreciated by policy makers in the UK.
A key driver of environmental advancement comes from improvements in technology, allowing for companies such as Tesla and Beyond Meat to have the capital required to innovate. This technology combined with a freer business environment allows for domestic innovation to develop at the rate required to compete in the global economy.
To do this, a system of low corporation tax, entrepreneurial hubs and intellectual property law must be refined in order to attract the top talent to develop tomorrow’s technologies. In particular, special focus may be given to green sectors, such as increasing ease of patent application for biological development, or by developing innovation zones in green cities such as Bristol who already have a culture of innovation and sustainability. This will allow for refinement of innovation infrastructure and help create zones for entrepreneurs to work in the UK.
For the UK, this would lead to economic improvements from having more globally competitive firms, but also environmental improvements, due to the proliferation of technology first developed in the UK. We may be able to capitalise on this technology and achieve our environmental targets far quicker than others. Thus the UK should not only prioritise creating a competitive business landscape for economic reasons, but also for environmental reasons. Sustainable capitalism is possible after all.
Tim Edwards is the winner of the 18-21 category in our Young Writer on Liberty 2020 competition.
Would we miss the Ministry of Housing etc. if it left us?
How many men does it take to change a loo roll? Women believe the answer to be “zero” because it has never happened. If you got that right, how many people does it take to divide HM Treasury’s funding, once a year, between 354 local authorities and 89 police, fire and other local bodies? 4,067. In 2017/8 the Ministry of Housing, Communities and Local Government (MHCLG) had 2,021 HQ staff, a 25% increase in the year, with another 2,046 in its agencies and “designated bodies”. Staff costs were up 22% overall. Police and fire services are not part of MHCLG responsibilities.
MHCLG is Whitehall’s supreme example of Parkinson’s Law. The 2018/9 accounts list seven strategic objectives, the first five of which are matters for local government, for example: “We are taking steps to help people now to find the right home.” Well of course, if one wanted a new home in Newcastle, one would head for MHCLG’s palatial offices in Westminster. Grenfell Tower should have been sorted by now by the Kensington and Chelsea Borough Council but four days after the fire on the 14th June 2017, the MHCLG took over which probably explains why, three years later, so much is still unresolved. The sixth item is “providing assurance and stability to our sectors to help them to prepare for EU Exit”. Clearly local government could not survive Brexit without that. The last is ensuring MHCLG is “a great place to work”. Of course it is; spending other people’s money is fun.
“We have continued to build more homes year on year” (p.8). Nonsense, the MHCLG has not built a single home. “We helped councils in England to prepare for EU Exit by providing over £58 million of funding” (p.9). That reminds me of winning the London Marathon by sponsoring the runner who came first.
Annex A lists whimsical, or so they seem, gifts to charities totalling £16.5M. Almost all are matters for local authorities, parks for example, and quite a few are outside the remit of MHCLG. That is symptomatic of the general problem. In 2018/9, MHCLG spent (net) £38.3bn., £26.6bn. going to local councils, £20.7bn. being the main annual grants and the other £5.9bn. being divided into a dozen or so specific grants which must occupy far too much of the time of hard-pressed council financial officers making applications. A further £11.7bn. was spent on the department’s pet projects. If the funding all went to local councils as single annual grants, the money would have been better spent.
In 2018/9 the Planning Inspectorate had 650 staff (up 7%) at a cost of £54M gross or £38M after deducting the income from fees. The Inspectorate is mostly known for planning appeals; more than 40% of public inquiries and hearings reverse the local decisions. These appeals provide no fee income but form the majority of the net cost. The two main performance targets and outcomes for planning appeals in the year were (p.131):
To determine 80% of written representations in 14 weeks of the start date: 58.8%
To determine 80% of householder appeals in 8 weeks of the start date: 75.9%
A Policy Exchange report earlier this year argued that planning should be primarily a matter for local authorities with politicians setting the rules but thereafter butting out. Provided local planning officers follow those rules, there should be no further political involvement. The Planning Inspectorate would only verify that planning officers comply with their own local rules. Presumably there should also be some monitoring of their compliance with national policies. A senior councillor at one London borough told me that, for ideological reasons, the Greater London Authority did all it could to frustrate local developments that were acceptable in all other respects. If that is the case, it is a problem for Whitehall to sort out, not the Planning Inspectorate.
National infrastructure planning should be decided at national level but it is far from obvious why officials in Bristol, who may not even visit the site, should be entitled to override local communities and planners at all, never mind more than 40% of the time. In short, national infrastructure projects, which are few and far between, should be decided by ad hoc committees and local planning left to locals, as suggested above. This would save not just the £38M net cost of the Inspectorate but also the local costs of dealing with appeals.
“Ministers are preparing for a major overhaul of the planning system in England to speed up approvals for new developments as part of the government’s attempts to kick-start the economy hit hard by the coronavirus crisis.” Replacing the Inspectorate with democratically agreed local planning rules would help such liberalisation provided a small unit within the Cabinet Office checks the guidelines against national policies and removes arbitrary blockages.
The QEII Conference Centre in Westminster makes steady profits (£3.4M in 2018/9) and should be privatised. The Ebbsfleet Development Corporation has not published an annual report for two years but should anyway be the responsibility of one or both of the two local councils: Gravesend and Kent. Any of the other eight quangos linked to MHCLG, and worth preserving, could easily be found homes in other departments.
The department overall competes with local government in deciding how their money should be spent and cutting their funds, rather than strengthening, developing and promoting them as it should. Instead it spends each year devising new ways to spend our money. They presume that they know better than local government what the locals really need. Since local government is closer to the people who provide the money than the bureaucrats in SW1, it is much more likely that the reverse is the case. Luckily, the solution is simple: abolish MHCLG and assemble a small team in HM Treasury to divide the total amount up between the local authorities. Local authorities should submit their annual funding requests as formal plans and will quickly learn that those failing to follow national policies may find their grants diminished.
We don't believe these proffered numbers about food poisoning
Will Hutton tells us that food poisoning is vastly more prevalent in the US than UK- therefore we must not allow American food to grace our tables nor pass our lips. We are not sure we believe these figures. Partly simply because they’re just too convenient to Hutton’s political argument - more Europe, less US, always - and partly because we can’t quite understand why Hutton would suddenly become either reality based or correct.
But here is the claim:
One in six Americans fall ill every year from the food they eat (according to the US Centers for Disease Control and Prevention). In Britain, it is one in 28. This week, the negotiations over the shape of the final relationship between Britain and the EU resume in earnest, making the next three or four months among the most fateful of our lives. The grandstanding is over. And food quality, standards and security are going to become flashpoints.
This is also a claim that has been made by Jolyon Maugham so we know that it’s wrong, we just have to work out why.
Fortunately there’s a Fact Check out there on the point. The answer being that CDC and the FSA are measuring “illness” in different ways. That different definitions lead to different incidences should not surprise. We’ll get a different incidence of racism if we define it as enslaving someone for the colour of their skin or calling the Irish kid “Spud”.
There is an update to the FSA’s numbers using something much more like the CDC definition.
As well as identifying about half a million cases of food poisoning attributable to 13 specific pathogens researchers believe that 10 million incidents of infectious intestinal disease (IID) a year are not yet attributed to a specific pathogen.
The CDC numbers do indeed include the “we dunno what caused that” figures and we get to roughly the same result too, about one in six. Roughly, you understand.
It’s also possible to look at hospitalisation figures - presumably the thing we’re actually interested in anyway. CDC has 128,000 or so a year in the US, The FSA has about 20,000 in the UK. Control for the relative populations and we get 0.03% as the incidence for each country.
True, we’ve had to use only two digits after the point to get to that, it’s more like 0.039% in the US and 0.03% here but we’d submit that our fiddle of the figures is rather less than some others in this shouting match. We’ve also not corrected for those who can’t be bothered to wait for the NHS to note them and thus go home without treatment.
Reality is that food caused illness is about the same in both countries. As that’s not a politically useful answer that’s not the one being given. We have mentioned that we largely despise politics as a manner of understanding the world, have we?
Facebook and free markets
There is at least the beginning of an advertising boycott of Facebook as certain companies more attuned to current fashions complain about some of what Facebook allows to be posted upon the site.
Good, this is how it should be.
Facebook has said it will start to label potentially harmful posts that it leaves up because of their news value.
The more hands-on approach comes as the social media firm is under pressure to improve how it moderates the content on its platform, including posts by US President Donald Trump.
More than 90 advertisers have joined a boycott of the site.
Consumer goods giant Unilever on Friday added its name to the list, citing a "polarized election period" in the US.
The maker of Dove soap and Ben & Jerry's ice cream said it would halt Twitter, Facebook and Instagram advertising in the US "at least" through 2020.
"Continuing to advertise on these platforms at this time would not add value to people and society," it said. "We will revisit our current position if necessary."
Now, whether the folks at Unilever are doing right by their shareholders by doing this is another matter. But of course those shareholders that don’t want that done with their money can sell and invest elsewhere.
Facebook is, of course, one of those dual facing (no, not two faced) companies as analysed by Jean Tirole. They are trying to please both the users of the site and also the advertisers upon it - there is a balancing act here. So, how to judge the perfection of the balance reached?
Advertisers have the absolute right not to spend their money there. The impetus for not doing so presumably being that those they are advertising to will change their purchasing habits if they do or they don’t. Those who post to Facebook will equally decide to do so or not dependent upon the restrictions upon their doing so. The end state will be emergent from the interplay of those different processes.
That is, by leaving matters to those market processes we’ll end up with the correct balance. The conclusion therefore being that we can leave well alone and watch them get on with it - legal measures, regulation, are not required.
It’s worth noting what that end state will be too. The restrictions on the posting of “hate” material may or may not end up as being what we or you specifically would desire. But it will be the balance of what the couple of billion people who actually use Facebook do. Which is rather what the aim is, isn’t it? That people, by their individual behaviour, contribute to how the world ends up - you know, markets make good enough?
Can't we all be Keynesian about this?
Much to our surprise we find ourselves agreeing - if only on the one specific - with Larry Elliott at The Guardian:
In the long term, an economic rethink and reboot is needed. In the short run, the response has to be to protect as many jobs as possible. There are plenty of options: targeting the furlough at vulnerable sectors; allowing all companies to furlough part-time staff for longer; cutting employers’ national insurance contributions. Otherwise, the current euphoria will quickly fade in the grimmest of winters.
That specific being the cutting of employers’ national insurance. As Keynes himself said:
[Y]ou are able to show fluctuations in income of an order of magnitude which is significant in the context… So far as employees are concerned, reductions in contributions are more likely to lead to increased expenditure as compared with saving than a reduction in income tax would, and are free from the objection to a reduction in income tax that the wealthier classes would benefit disproportionately. At the same time, the reduction to employers, operating as a mitigation of the costs of production, will come in particularly helpfully in bad times. (July 1, 1942). Keynes, Collected Writings, vol. 27, p. 218.
It’s not necessary to buy the whole Keynes for this to make sense. Deficit financing or not there’s still value here. Employers’ national insurance is taxing people for employing staff. In the long term of course it is incident upon wages but in the short upon employers. The concern is that there is a wave of unemployment coming. If you tax something you get less of it. So, stop taxing employment if we wish to reduce the amount of employment we’re about to lose.
The worse anyone thinks this is going to get the more they should be arguing for employers’ NI to be reduced to zero for the duration.
Simple, logical, effective, no wonder it’s so rarely discussed as a political solution.
Carbon dividends are the answer
“People say economists don't agree on anything”, muses Dr. Erik Brynjolfsson, “but here's one thing we do agree on: carbon dividends”. Dr. Brynjolfsson’s statement came in response to a plan that was signed by more than 3,500 economists, the largest number of economists to endorse any policy of any kind in all of U.S. history. This included 27 Nobel Prize winners and all 4 living past federal reserve chairs (again, record breaking numbers.)
Plans of this ilk offer to implement a tax on carbon that gradually climbs up over time. The problem with many of these sorts of taxes is that they are often regressive, and aggressively so. Energy providers will let their consumers shoulder the burden, with higher prices needed to cover for their losses. This creates feelings of resentment, opening the door for populist demagogues to swoop in and “save the day”.
Never fear. This flaw is easily fixable. No one will feel the need to rally through the streets dressed as traffic wardens if the government were to give back to him or her the revenue amounted by the tax. People won’t complain about soaring higher energy bills if their pay check is soaring at a proportional rate.
How, then, should this money be handed out in a manner that bypasses the law of unintended consequences? A Universal Basic Income, perhaps. Or, better yet, a Milton Freidman-style Negative Income Tax (as I have advocated in past writing).
Carbon dividends aren’t magic bullets, but they may well be the free world’s best way to appease the likes of Greta Thunberg whilst not sacrificing the economic framework that, quite literally, gave her the vaccine-filled, polio-free childhood that the despicable globalist elite supposedly stole from her.
Amos Wollen is the winner of the under-18 category in our Young Writer on Liberty 2020 competition.
Perhaps the Committee on Climate Change could make up its mind?
The Committee on Climate Change has decided to favour us with its thoughts on how we do indeed deal with climate change. In the process they’ve illustrated why the Stern Review insisted we do not plan for this, rather, we set the market up with the correct incentives then see what emerges. Just as the one example we offer you this:
Energy networks must be strengthened for the net-zero energy transformation in order to support electrification of transport and heating. Government has the regulatory tools to bring forward private sector investment. New hydrogen and carbon capture and storage (CCS) infrastructure will provide a route to establishing new low-carbon British industries.
We have not elided anything from that quote. That is actually what they say. The problem with it being that in the third sentence they entirely contradict the first. For hydrogen - one of us has done substantial work on hydrogen to power cars - is an alternative to electrification. Hydrogen can be burnt, for example, producing both heat and cooking. It can also be used as the equivalent of a battery in storing power. It can be used to power transport as well, there are a number of different possible fuel cell technologies out there.
The Stern Review really did say that we should not be using planning to try to deal with this problem. Simply because planning ends up in foolishness like the above. Instead, set the incentives and leave the market to do the heavy lifting - as Hayek pointed out, that entire economy out there is the only calculating engine we’ve got capable of working at the required level of complexity.
What really irritates is the number of people who will use the Stern Review as proof that something must be done but then gaily go off to ignore what the Stern Review insists what must not be done.
How improving information can reduce environmental overconsumption
Pollution, emissions and climate change are externalities resulting largely from consumers’ overconsumption of a good at a given price level. The lack of private responsibility associated with these external effects leads many to believe the only way for consumption to fall is through heavy handed government intervention, detrimentally impacting individual liberty and freedom.
Yet with the rise of environmentally conscious consumers, it would appear that people are internalising the externalities created by overconsumption.
Rising awareness may come from an increase in media attention and discussion of environmental issues on the world stage such as the increase in articles on climate issues, concern from leaders at the UN and the popularity of Greta Thurnberg. This creates a narrative which can have tangible impacts on the real economy, as evidenced by work done by Robert Schiller.
How does this change in narrative link to consumer markets? Whilst the environment may in many cases be ownerless, the choices made by consumers on how to treat it are made with individual agency and carry personal responsibility. In the same way that those who litter are shunned, developing environmental consciousness may lead to ecological consumption becoming a ‘social act’ providing people with an intrinsic motivation to make ecologically sound choices.
This idea builds upon Conspicuous Consumption proposed by Thorstein Veblen where the motive for consumption is based on exerting economic power to gain social influence and respect. Despite differing motives, both theories provide an external pressure for consumers to consider environmental effects of their consumption.
So, with society, firms and the media already moving in this direction, what policy can ensure this environmental consumption is effective as well as ethical?
Currently the ecological impact of a good is often poorly communicated, with no clear indication of what goes into the production of a given good. Creating a simple metric of environmental impact of consumption (e.g. through total CO2 resulting from production) would signal ecological effects to consumers allowing for more informed consumption choices.
In a way, this policy borrows aspects of behavioural economics and creates an additional factor for consumers to consider, which from societal pressure, they are likely to take seriously.
Thus by pioneering this metric, the UK seeks to take a more rational perspective in this increasingly environmentally conscious world.
Tim Edwards is the winner of the 18-21 category in our Young Writer on Liberty 2020 competition.