Vince Cable

A number of others have kindly blogged about the interesting discussion at the ALTER conference fringe event last Saturday night. From the point of view of being on the platform for the first time it was all the more interesting for me. I wanted to pick up on some of the issues that were raised, not so much by the audience, though many were very insightful questions and observations, but the issues raised by both Tony Vickers in his introduction and especially by Vince Cable in his speech.

First, Tony Vickers introduced the whole event by saying that ALTER wanted to spend some time focussing on the second half of our acronym, Economic Reform more generally, rather than Land Tax which we have fixated on thus far. I'm afraid I rather brushed that aside with my little speech about our book, which will now focus more on land than anything else.

I have always taken the view personally that there is indeed more to the essential economic reforms we need to see in an equitable economic system that will benefit the greatest number of ordinary people than just land. I look to the great individualist anarchists and mutualists of the late nineteenth and early twentieth centuries, the fore-runners of the libertarian movement, who all held that there were four great monopolistic systems we needed to eradicate to level the playing field for all - land, banking, intellectual property and the state itself, or most especially the tariffs they use in pursuit of protectionist policy. Indeed my journey to understanding the land problem began with reading books about the debt-money system.

Colleagues involved in the editorial team for the book, whose economics education is far superior to mine, however, are more convinced that the land monopoly underpins all of these others, and whilst I am yet to understand their arguments fully I do I think see roughly where they are coming from. Essentially their argument is that by creating "free land" the power of the worker is increased by enough to offset the coercive power of debt money, that the ability of governments to manipulate a tax system based on market set values of land to effect protectionist policies is reduced and intellectual property becomes much more a negotiable part of an inventor's portfolio rather than something easily "enclosed" by big business as a result of the relative increase of the power of labour versus capital. At least I think that's how it goes.

But anyway, the upshot of all this is that the book will be more about land than about any of the other areas I have been interested in and which Tony suggested we would be looking at in the future. Though no doubt the chapters on each area of policy will show how "free land" feeds through into greater empowerment of the individual and worker.

Second, (we weren't ganging up on Tony, I promise!) Vince again turned the discussion around onto land tax. He said, I think, that we had largely won the theoretical argument on land taxes - that the party acknowledged its potential importance. But that there was much work to be done he said to produce "SMART" (my corporate bingo word, not Vince's) policies that can actually be sold to people (ie voters) and implemented. And on that theme I want to post a few separate thoughts of my own in separate posts in the near future.

James Graham rejoined that actually we need to make the "moral case" for LVT, what I would call, and agree with, the TINA (there is no alternative) argument - though my powers of persuasion in the housing debate on that position were clearly not very good! I could put it a slightly different way - "can we afford not to". And that, I think, is also shaping up to be the real message of the "Liberal Alternative" book.

I will end this introduction to a series of posts on "can we afford not to" with a thought on what seems to be a trait in Liberal Democrat policy making. Do we need to have such detailed plans for exactly how we would proceed from day one of a Lib Dem administration, or should we focus more on getting the "big messages" across. It seems to me that the last time we had a big ideological shift in British government, in 1979, that the Tories had a clear "direction of travel" but were not obsessed with landing in Number 10 with a full set of detailed measures to implement that. They may have had behind the scenes, ready to wheel out when the time was right, but the message to the public in the election was of the broad direction of travel.

This is not something we are alone in. Nowadays every party seems to have to have these details all thrashed out in order to give them credibility amongst the electorate that they would be competent to run the country. But I'm not entirely sure that that is what the voter actually wants - perhaps they want the big ideas rather than the detailed minutiae. I suspect this minute detail is a symptom of our modern managerial one-upmanship and the absence of ideological politics. But surely as a party we actually want to return to ideological politics that we think voters will engage with and be excited by.

I don't think I would be accused of disloyalty if I said that we are not going to be the party of government after the next election! So we spend a lot of time selling detailed policies that we will not get to implement before circumstances, most likely, change again. We have had most success with our "big themes" - we are known for PR, for opposition to war in Iraq, and for the idea, expressed through our previous tax pledges (though I hate to admit it in oh so many ways - not least that it will give succour to the likes of Evan Harris!) that we want "fair" taxation. We can sell LVT as "fair taxation" without minute details as to how it would be implemented, perhaps at most a broad timescale for a tax shift, as the Tories did with reducing income taxes in 1979 - something that actually took them three terms to really implement as far as the average voter would feel in their pocket.

Our detailed policy making produces a couple of not always welcome effects - that we are hostages to fortune - what we promise in one election might one day come back to haunt us several elections later when we make it to Downing Street, and it saves other parties a deal of work thinking for themselves when we create policies that they like to nick. We can of course take some pride in others wanting to use our policies, but people soon forget where they originated, and we risk being forever a glorified "think tank" rather than a party with the big ideas that will win us power. LVT is such an idea. We should not be afraid to tout it without trying to explain to people exactly how it would be implemented except in broad outline until we are closer to being in a position to do so. That will not stop the likes of us in ALTER, however, trying to show the party internally how it might work, but in the end, the detail is what the Treasury is for when we have control of the Great Court!

One last post on this, not because I care, but because I report "news" in this instance...

It was to be expected I suppose that the events of the past few days would be mentioned in Vince Cable's talk at the Oxford East constituency dinner this evening, and he didn't disappoint.

So for all of those out that are talking of splits in the party and and bad feeling, his message was quite clear.

There are no splits. We are (except perhaps for me) the most united party on the whole issue of Europe. There were differences of opinion over tactics; whether abstaining was going back on a manifesto promise, or rather whether abstaining specifically on the treaty rather than the constitution was going back on such a promise. Some people took that position. Those who resigned the front bench before voting did so with good grace and no rancour towards Nick or anyone else.

He did seem to me to suggest, but I'm sure not say explicitly, that the regrets are over the events of the last couple of weeks as a whole. The profile that by implication Nick has given to this one issue. For me of course, I think that's just the new boy not quite realizing in time he was being set up by the Tory Euro-shambles to take the fall for their own irresponsibility on the issue. And perhaps a regret that Nick was backed into a position in which he felt it was right to make it a three line whip issue.

Cameron has not faced such a media backlash for his massive rebellion because although it was a front bench position to abstain from Bill Cash's amendment, he had not insisted on whipping it - but the rebellion was larger than ours and shows up the Tory incoherence on Europe.

The parliamentary party are only too aware that they have caused headlines for the wrong reasons and are apologetic for that. But todays newspapers...

So I figured I would restart blogging with some feedback on what turned out to be an excellent South Central Regional Liberal Democrats' conference on Saturday here at Oxford Brookes University. Given that I see the place every day my motivation to get there in time for nine-thirty speeches on a Saturday morning was not great, and I actually arrived a few minutes into the first keynote speech by Evan Harris.

Some in the party and elsewhere give Evan a hard time I hear, but I have a lot of time for him. I get the impression he works his proverbials off in his constituency and has a penchant for minority interests which suits me. But listening to him on Saturday and then later hearing Vince Cable they between them seem to epitomize what one might call the "old" Lib Dems - leftist, statist, more interventionist - and the "emerging" Lib Dems - more liberal in every sense.

Evan restated his support for the fifty pence tax rate and bemoaned the federal conference at which it was removed from party policy, Vince emphasized that the new tax policy, trying to focus, as Churchill said, on not just "how much have you got" but also on "how did you get it", was in fact the most redistributive set of tax policies on the table from any party.

Harris's main point, as I understand it, was that the fifty pence tax rate sent a signal, even if it did not in fact promise to raise terribly much, that we were prepared to take more from the highest earners if need be to lift the poorest out poverty. It is a simple message to be sure, and easier to communicate than the "new" idea that we should be more carefully targeting tax on externalities and unearned privilege, but not one that adds to the progressiveness of the overall tax system one iota.

But Evan is exactly the sort of person we want to attract to our book the ALTER executive are putting together to launch centenary celebrations of the 1909 People's Budget. We want to show him how rigourously applying what we have been calling the "liberal economic tradition" will in fact raise the lot of the poorest by increasing the returns to labour, by rooting out corporate welfare, and by allowing genuine competition to bring down the cost and increase the quality of all sorts of goods and services some take for granted are best delivered by the state. In short that there need be no dichotomy between "social" and "economic" liberalism.

Tory cartoonists seem to think so too:

ConservativeHome's Mr Bean posters:

There are more where that came from .

ConservativeHome on Sunday included this little piece of hubris. Now, it is true that, somewhat inexplicably to me, Gideon's announcement about raising the Inheritance Tax threshold, something that everyone seems to acknowledge affects just 6% of estates (about 30,000 families each year) currently, seems to have done them a lot of favours, positioning them in the public perception at least as a tax cutting party.

But it would be quite wrong on a number of levels to say that they are lowering taxes:

• First, they are simply shifting the burden. Sure, it is shifting from a few relatively wealthy households (with average house prices once again below £200k having a housing asset over £350k is still in the top quintile nationwide) who can and generally do vote to a very tiny number of households who generally can't and don't vote. But shifting, rather than cutting, it undeniably is.
• Second, even if it were not the "revenue neutral" shift (after all they have also promised to stick to Labour's spending plans so need the money from somewhere) it would amount to a tax cut of just 0.88% of the government tax take (that's central government by the way - i.e. excluding local taxes). If a party that has regularly claimed to be managerially superior and capable of saving government wastage cannot "lose" less than a measly one per cent of its revenue in efficiency savings, they're clearly not the competent financial managers they would have us believe!

It astonishes me that a measure that would be felt my fewer than 30,000 families per year can be spun as some major step forward in tax shifting, let alone tax cutting. Compared to the Lib Dem proposals - abolishing the Council Tax (the tax most respondents found unfair in recent polling by the Tax Payers' Alliance) would be immediately felt by virtually all households; reducing national Income Tax by four pence in the pound would be felt by every individual earning anything more than the personal allowance, the Tory changes to IHT and Stamp Duty on homes, are small fry - mere plankton in fact.

But both parties of course propose changes that are "revenue neutral". Nobody seems to be advocating real tax cuts. And maybe when the population wakes up to this fact they will see through the spin and reject those attempting to hood-wink them into believing they will somehow be much better off. On balance of course, the Lib Dem proposals would leave far more people better off, if they tread lightly on the resources of the planet, for most of our tax cuts are to be funded by increases in taxation for environmentally damaging behaviour and life-styles.

Vince Cable - the best prospective Chancellor by far?

So why is it not us that have made eleven percentage point gains in the polls? For I have to say, compared with either Gideon, Gordon, Balls or Darling I find Vince Cable the most palpably honest and certainly best briefed potential Chancellor of the Exchequer in mainstream politics right now. Might I suggest that it is a lack of clarity, especially about who gains and who loses under our proposals. This was most obviously apparent when Charles Kennedy famously fluffed his interview on Local Income Tax during the 2005 General Election campaign.

Our Green Taxes and local tax reform ideas have been criticized by others:

• as affecting the annual family holiday (wrong - they do however aim to penalize those very lucky tiny few who have the time, lack of domestic commitments and financial wherewithal to take weekend breaks abroad every month or two - where their flight costs pale into insignificance compared with hotel and entertainment costs)
• to hit the poorest households' motorists (wrong again - the 33% poorest households by and large still do not even have access to a private car and would in fact be likely to benefit from the resultant investment and better efficiency in public transport)
• or to greatly increase the income tax of those two young nurses of CK's fluffed interview (still wrong - the four pence in the pound reduction in national income tax is intended to more than cover the Local Income Tax and they won't be paying Council Tax on top).

So why can't we get that across to people? It's a far more compelling package than the Tories and their tax cuts for the rich - which is jam tomorrow for even those who might benefit and jam never for most of us.

Now, you would not expect me to comment on tax policy without mentioning my pet pair of elephants - Land Value Tax and Citizens' Income . I maintain that by adopting the "Single Tax" of Henry George - that is taxing the unimproved value of all land as a replacement for (most*) Income Tax, Capital Gains Tax, Inheritance Tax, Corporation Tax, and, if Europe were to agree, Value Added Taxes and returning most of even that Land Value Tax to the people to spend in the form of "an unconditional, non-withdrawable income payable to each individual as a right of citizenship" (the description used by the Citizens' Income Trust) would so transform our economy and environment that government expenditure could be reduced to just a fraction of the proportion of the national income it is today.

Couple this with monetary reform that would see a national credit authority, free of government and politicians' interference, creating just the right amount of new currency needed by the economy to account for each year's growth in the economy instead of privatised debt creation doing the same job with a lot less stability as recent weeks in the financial markets have shown, we would have virtually no need for taxation at all (except perhaps as a behaviour modifying mechanism)

Pie in the sky? Well, it may be. But surely that sort of promise is worth investigating at the highest level. We assume the way we currently operate - coercive taxation and state capitalism - is the only one possible. It is true that, as the joke goes, in order to get to that fiscal nirvana one would not start from where we are, but the potential attractions are so enormous that we ignore them at our peril. Land Value Tax has some heavy-weight supporters historically - Adam Smith, J S Mill, Winston Churchill, Lloyd George, Albert Einstein, George Bernard Shaw, Milton Friedman and others cannot all have been wrong, surely?

I stumbled across this group of bloggers the other day called the "Low Tax Coalition" .  I considered applying to join their number, but so far as I can see not one of them even dares to imagine the sort of low/no tax economy I set out above.

*I say "most" Income Taxes (and possibly CGT too) because I am becoming more convinced that some of these taxes on (some of) the highest earners may be necessary in the short to medium term to recoup the "embodied advantage" they have gained under the current less fair system. For an example of what I mean, look at the current Sainsbury take-over where the shareholders are about to crystalize property values worth up to around £10bn effectively valuing the grocery business at nothing despite its obvious earnings history and potential.

Last week Vince Cable seems to have unilaterally added to Lib Dem tax plans in response to repeated more-heat-than-lght stories in the media about private equity bosses and their tax treatment, "non-domiciles" and their property in the UK going untaxed and the continued cris de coeur of middle England against Inheritance Taxes on their homes. Later in the week it seems George Osborne joined in, on what must be pretty unfamiliar Tory territory.

And then yesterday there was a story on the BBC about how buy-to-let property owners are able to avoid up to £2bn in taxes by offsetting their mortgage interest against their rental income before tax.

This seems to me to be something of an unhealthy return to the politics of envy, where the only question the taxman asks is "how much have you got?" As I wrote last week at the 1909 Group website, our Liberal forebears wanted to change that attitude. They realised that "equity" in the tax system was not solely a question of how much someone has, but just as importantly of how they got that wealth. Whether it was through healthy economic processes, creating new wealth, or by exploiting such things as protectionist policies, negative externalities or land and other natural monopolies.

Take supermarkets as an example. Private Equity firms have been circling Sainsbury's recently. Though they may have been seen off by other investors such as Robert Tchenguiz, he himself, a noted property tycoon, said he was investing in a "property company with a retain business". Indeed, with a Stock Market capitalization of £8.7bn, estimates value their property estate at more like £10bn - more than the whole business! If someone were to take over Sainsbury's they would not be creating new wealth but releasing the embodied profit of land ownership.

Many new entrepreneurs are basically leveraging land values to make a killing, hiding behind diverse operating businesses. INTO University Partnerships is an international English Language teaching business, but the partnership deals it forges with universities all seem to revolve around land acquisition and becoming a successful and profitable landlord to the students it brings from all corners of the planet. Last year, the HBOS banking group attempted to become a major player in the UK house building industry, pipped by Barratts in a contested bid for what had been the fifth largest house builder - this last is a double whammy - not only do they get to build your home, and capture the land value profit for themselves, but they get to charge you for borrowing the money to pay them for that land!

As to "non-doms" why should only they be penalised for owning property in the UK? Why not a land tax that would fall on everyone regardless of domicile status and instead of income and other capital taxes, including the hated Inheritance Tax? The non-doms would not be able to avoid it - and neither, incidentally, would the company involved in the outsourcing of the HM Revenue & Customs property estate, Mapeley, who subsequently off-shored the ownership of the property to avoid any taxes on it.

Anyway, the point is there are ways of making a tax system which is fair and equitable, that is not complicated, and doesn't seek to fleece people just because they have made money, but on the basis of how they make that money, and where that wealth is accumulated by processes like land ownership, where the value is created not by themselves but by others' need for their monopoly locations, they will be taxed the most, automatically, and according to market valuations not intrusive tax assessors. Land Value Tax.

Technorati Tags: vince cable, lib dems, tories, land value tax, Henry George, property tax, george osborne

The Lib Dem newsfeed on Monday included this - Urgent need for review of banking system - Cable:

Urgent need for review of banking system - Cable
31 July 2006

Responding to the news that HSBC has posted pre-tax profits of £6.7bn, Liberal Democrat Shadow Chancellor, Vince Cable MP said:

"There is a serious question mark about the level of profits in the banking sector. In March 2000 the Cruickshank report provided a serious set of broad recommendations for action, yet the Government’s failure to act has meant that we are in the worst of all worlds.

"Piecemeal and ad-hoc investigations by the OFT are being relied upon too heavily while the level of charges and levels of service deteriorate.

"With soaring profits seemingly unrelated to the standard of customer service, whether it be overdraft charges or cheque clearing times, there will be increasing pressure for a windfall tax on banks.

"We do not believe that is the right way forward. There is now an urgent need for an overall review of the banking system, a Cruickshank II, whose recommendations must be more seriously investigated."

Now okay, I know he's on about profits from charges - that was what Cruickshank was all about wasn't it? But if we're serious about "reviewing the banking system" we're opening a great big catering sized can of worms. What about their effective monopoly of the creation of credit? About their protected profits from lending with not one, not two, but three forms of security - income, a charge and ultimately the protection of the central bank from their own mistakes.

Somehow I suspect that seignorage reform is not anywhere on Vince's radar. I hope we can change that! The two big monopolies that stifle truly free trade and give inequitable power to the few who can afford more than they need, of land and credit creation, are coming into play together.

Technorati Tags: lib dems, monetary reform