green taxes

Neither a borrower nor a lender be...

Jock — Fri, 10 Oct 2008 07:53:06 +0000

We've seen much over recent weeks about how awful the City has been. How banks have made rash dodgy loans. Short sellers, overpaid executives and whatever else...

But I'll let you into a little secret: for every loan there is both a lender, perhaps a dodgy spiv with too high a bonus to be sure, but just as importantly there has also to be a borrower.

We have seen a little po-faced political bemoaning of the culture of consumer debt, but this unsecured credit - spending money - does not appear to be the primary debt that has caused this collapse. With few exceptions, when the banks talk about the sub-prime loans lying like a half-dead half-back at the base of a maul, they are talking about mortgages. Are not these borrowers to be condemned in equal proportion? Did the bankers force them to borrow? Are not they just as greedy, in their own way, as the bankers making themselves rich on those borrowers' seeming insatiable demands for more money? Maybe these are the real "sub-prime loons" that are really responsible for bringing our economies near to systemic collapse?

Of course it would be electoral suicide to lay so much blame on the ordinary "Joe Sixpack, the hockey mom". And indeed it would be quite wrong to do so. For most of those mortgage borrowers, perhaps especially what has become known, horribly disparagingly, as the "sub-prime" borrowers, were being completely rational. Rational, that is, in an utterly irrational system. And the results of that rational behaviour are now serving to highlight just how irrational the system is.

Indeed, it is so utterly irrational a system that those borrowers we might want instinctively accuse of being the least rational - those whose chances of paying off the large loans were the smallest - are in fact the most rational. Because in that mad upward spiral of house prices, those still left renting would be the worst hit. The urgency of getting out of renting and fixing your future housing costs at today's rates is all the more pressing.

Because here's the second little secret for tonight: we all rent.

This may seem counter-intuitive in a world where 70% of folk "own" their home and most of the rest want to. If you are, or can recall when you were, on the point of making the transition from renting to buying the first time, this will be easier to understand. One of the factors in your decision to stop renting and to buy instead will have been whether the mortgage payments, as compared with your current rent payments, are reasonable value, over the length of time you expect to be needing to use that property.

Of course there are many other factors as well. Some in favour of ownership, such as being able to improve, redecorate or even trash the property, and having the prospect of capital growth. Some in favour of renting, such as not being responsible for all the maintenance, or not being stuck with a mill stone if you can't sell it when you need to move. And of course the supreme benefits: a. you don't need to charge yourself rent - after all you are paying for it anyway and b. if you get to the end of your payments okay, you get it rent free for as long as you like and still get to sell the rights to it hopefully at a tidy profit.

But as tradable assets, our properties are valued on the basis of the yield it could achieve to an investment buyer now, and their view of how that is going to change over the time they expect to hold the investment. And when we buy a home, what we are actually buying is the right to collect the rent on that property for several years ahead at a "fixed" price today that we think will benefit us. Few owner occupier buyers will probably think about it that clinically. They might instead look at local comparisons to assess what they ought to be willing to pay. But so long as there is a rental market, and since there are some disbenefits to ownership as noted above it is likely that there will always remain a rental market, the money-value to the market is going to be based on its current and future rental potential and the overall yield over the time an investor would expect to hold that property investment.

So, what rising house prices indicate is that investors believe that there are going to be higher returns in terms of future rent potential. And if you are still a tenant, higher returns to the landlord mean higher costs to you. So if it is economic to freeze the rent payments at or near today's levels for the foreseeable future, you definitely want to do so. This becomes a bubble because the effect of future expectations compounds itself. Throw in relatively cheap loans and people can afford more in the present to secure those expected future gains.

Okay, now having, I hope, got you thinking in terms of "rent" I want to get you thinking about the different components of this "rent".

Take two identical, some might call them identikit, homes. Two same model "Barratt boxes". Only one is in Kensington & Chelsea, the other in Blaenau Gwent. I choose them because they are the highest and the lowest respectively local authorities by "land value" in England and Wales. Three bedroom, 100 sq m and with a rebuild cost of £1500 per sq m. On the face of it, they ought to cost about the same to buy, somewhere around £150,000, but of course they don't, do they.

If you managed to find the same little plot in K&C as in Blaenau on which to place your "Barratt box" you'd probably find that in Blaenau it would cost next to nothing - probably a couple of thousand pound per plot, for the trouble of clearing it! But in K&C it would cost several million and probably wouldn't be worth your while putting that Barratt box on it! In fact, in the recent purchase of Chelsea Barracks by the Candy brothers, which was reported as £959m for 12.8 acres, your average tenth of an acre plot would set you back a cool £7.3 million.

In fact, the Chelsea Barracks site is a good one to look at, since it will not involve criticizing the "poor widow" for not developing her prime land, but the government! What did the government, the Ministry of Defence do to make that barracks land so valuable? It certainly wasn't its former use as a barracks! It's not because it was a barracks that makes it an in demand site. But because of all the economic and social activity that goes on around the site. In fact, once upon a time, as a barracks, no doubt the site would have attracted the usual motley collection of military hangers on - whore-houses, bars and so on - it may even have depressed local land values initially, but certainly for the past few decades holding it out of its more productive use has meant other local prices have been pushed higher than they would be if all that land had been used productively.

In fact, the proportion of the "rent" due to the value of the building, the same sort of building as in Blaenau, is a tiny fraction of the overall rent. The rest is due to the location. The popularity of a location which is made up of dozens of factors, but centres around the fact that there are hundreds, thousands, of people who could beneficially make use of that location to be nearer work, social and other opportunities created by the surrounding community.

Now, here's the easy part to remember. What Land Value Taxers want to see, from David Ricardo, Adam Smith, J S Mill, Henry George to Lloyd-George, Churchill, Asquith and many others to the present day, is that the portion of the rent a property yields due to its location, and not the building on it, should be collected by the community and redistributed amongst the community instead of privatised by the highest bidder (or in some cases still the person with the most brutal land grabbing ancestor!), shored up by cheap bank loans. It is rent due to its monopoly as a good location that many people could make use of rather than any effort of the landowner.

In an LVT based tax system, when you "buy" your home, you'd be buying the right to collect the rent for the building alone. This is something you as an owner can affect, through your diligence or negligence in maintaining it or in building something of higher density on the same site. In the language that a typical home buyer will understand better, we want you to pay the £150,000 for the Barratt box to Barratt or the previous occupier, but you pay the remainder, the rent caused by its location, in annually assessed chunks, to the state instead of paying taxes on the earnings from your economically productive labour.

You can already, I hope, see the advantages. This bubble we have lived through over the past decade, the angst of people priced out of the market stressing about if they ever will get out of renting, the ballooning of borrowing that now threatens the very system that created it, will be things of the past. For as long as you can justify paying the location rent given the benefits that particular location gives you nobody can shift you. If that rent rises it is a sign that more and more people are being excluded from land that they might make more productive use of than you. Why should you be able to exclude them for as long as you like and then also reap a massive profit from having cost so many others much money "avoiding" your plot?

Instead of that home in Kensington & Chelsea costing you £7.35 million up front, it'll cost you £150,000 or so up front, which you can borrow to pay for if you need to, and a hefty annual location rent bill instead of both the remaining £7.2 m mortgage it would have cost you to buy the location up front and your income and other taxes on productive labour. Your disposable income is likely to be maybe 30% higher just for losing those income taxes. You can save in a wider range of productive assets for your future than just the monopolistic endeavour of owning a popular, or up and coming location. You may even choose to save so you can continue to pay the location rent when you stop earning for whatever reason - though most would probably find it just as good to save for an income in retirement and to downsize or move so that someone else can have the benefit of the local school you no longer use, the local rail station you no longer commute from and whatever other factors have made your location a popular one and for the proximity of which you would continue to pay even after you have stopped using them.

In the lingo, this is called creating "free land". Returning it to common ownership and paying as you go to occupy the bit that most suits you at any particular time of your life.

Even apart from the source of government revenue this would provide (though some of us would prefer to see the rent collected and simply doled out to all citizens in that community as a community dividend, a basic universal non-withdrawable income in place of most cash benefits) it fundamentally shifts the burden away from working and producing and onto inefficient use of scarce resources.

It is essential in an environmentally responsible regime, because it makes the choice of whether to live close and not pollute by commuting or to live far and spend a fortune in travel costs, more available to more people.

And it is essential in a liberal regime, as it gives people a choice in the "taxes" they pay - the tax savvy will soon work out that if they can spot an up and coming area that still meets their needs early they will pay less tax and watch the services there get better as others catch on, until it reaches some kind of equilibrium again. And it stop people making monopoly profits out of excluding others from what we all need access to - a location to base ourselves at.

This would be so much more than just a "tax switch" though - it would so fundamentally change the fairness, equit, economic justice for millions of people who, knowingly or not, are trapped in a system that takes money from them to line the pockets of landowners, the ranks of whom are getting ever more distant for many people all the time. read more »

The Greenpeace Defense

Jock — Sat, 13 Sep 2008 12:08:43 +0000

Yes, I'm still meant to be on internet silence, but Linux and various bits of software have me stumped for a while until I get some help from the mailing lists, so I thought I'd cast my mind over the implications of the court case this week that resulted in a jury deciding that it was okay to commit a crime in order to prevent what the perpetrators believed would be a greater harm in the future. The case in point was that they had committed (and admitted) criminal damage by climbing a chimney at a Kent power station with the intent of scrawling graffiti on it in protest at its pollution record and plans to expand the facility, which, their oh so clever advocate declared would cause more and more widespread damage to people and property through the global warming it would contribute to.

Now, some of the more unthinking environmentalists might see this as a great victory. A court recognized that global warming was such an imminent threat to life and property that it was justifiable to commit brazen thuggery leading to criminal damage on anything that allegedly contributed to that global warming. Yay!?

Nay! I have two problems with this.

First is the acceptance, apparently by both judge and jury (and so, you may think, all "reasonable people"), not just that anthropogenic climate change is a fact but also such a grave threat that it justifies individuals taking the law into their own hands. To my mind this is still a matter in the political arena. Not only are there still, and perhaps growing, voices of dissent on the very premise of the debate; that mankind is responsible for such a change that it is a threat to the planet's very future. But also about what to do about it and when. A power station after all merely supplies a demand. Is the power generator guilty or the consumer making those demands? It is more dangerous to disrupt existing dwindling supplies before we have worked out how to replace them with cleaner affordable technologies? If the threat from global warming is real, so presumably is the threat of harm through disrupted power supplies.

Second is how this operates as a precedent in other, possibly more serious cases - although I heard someone saying that this decision will not be treated as forming a precedent, I'm not clear how that can be prevented. It is okay to murder an abortionist in order to stop the immediate harm to others he or she will cause? That threat, after all, is far more immediate and traceable to an individual than the effects of a single coal power station amongst all the coal fired power stations and other "climate vandals". We're starting to get not only into the realms of Philip K Dick's pre-crime but vigilante prevention of what individuals claim may be a pre-crime. This is hardly the basis for the rule of law.

Oh, you can say that no court is going to acquit a murderer because they thought they were preventing a bigger crime, but actually we already do. The "reasonable force" defense can be used to justify a death in the process of preventing an immediate threat to others' life. This decision seems to extend the boundaries of "immediate threat" let alone accurate identification of the person causing that immediate threat. One could, and many do, fight abortion on the basis that the most immediate threat t future generations of humanity is eradicating them before they are born. If we're going to adopt a principle (and I do) that we have a responsibility of stewardship not to harm future generations' survival on the planet then it would be legitimate for others to argue more forcefully that we have a responsibility to see those future generations actually survive as far as birth!

Anyway, two odd sounding sources provide what I believe are better alternative "precedents" to work from. First, there is a Catholic maxim that it is not legitimate to cause one moral bad, or an act that could foreseeably lead to morally bad consequences in order to prevent another, even near certain, specific bad. It is used mostly about abortion again. It is used to argue that it is not even permissible to abort a new life in order to prevent the death of the mother - often in the circumstances of an ectopic pregnancy for example.

Of course the world's aggressors, including the US and UK, routinely ignore this. They argue that foreseeable "collateral damage" is permissable to remove a dictator, for example. It is not. Terrorising and killing the people of Bagdad in "Shock and Awe", even as "collateral", was morally repugnant, notwithstanding our general agreement that the regime they were trying to punish or remove was also morally repugnant. The results of ignoring of this basic principle are there for us all to see - there can be little doubt now that more people in Iraq have suffered for longer under the oversight of the western occupying forces than it is likely would have happened at the hands of the previous repugnant regime. At least there could have been alternatives that held less potential for further suffering.

But on the environment, the libertarians' respect for the rule of law provides a better alternative to various bearded crusties climbing a chimney and committing vigilante criminal damage. Locke's proviso can be used, for example, to tackle pollution. If you, a power generator or anyone else - a pig farm even, pollute the atmosphere we both have to share, we have the right to legal remedy. Just as much as if you came along and started digging a hole in my prize rose border. Indeed this ought to work better than any political "solution". Protectionism is a political strategy, and even Green politicians will forcibly protect their favourite, in this case, power generation mechanism against legitimate complaint of harm. If planning permission were truly privatised, those affected most would almost certainly do better out of it than they will once the government has removed most of their rights in order to force their political idea of strategic energy infrastructure through.

Yes, we all need power, but left to ourselves we would probably not choose to have a nuclear reactor at the bottom of our garden. But, as they say, everyone has their price. If, collectively, my neighbourhood decided that the compensation on offer was enough when weighed against the costs of electricity or the convenience of not having a long transmission route or any potential danger they'd accept that nuclear reactor. If nobody accepts any price for nuclear, they have to weigh that decision against the potential alternatives. If nobody wants a giant power station, then we perhaps have to accept that we will have to help our neighbours fund micro-generation. read more »

BAA: Wrong Monopoly

Jock — Wed, 20 Aug 2008 19:30:01 +0000

The Competition Commission has suggested, perhaps commanded (I no longer know what sort of power the CC has given that most competition issues are meant to be dealt with on a Europe-wide basis) that BAA ought to sell some of its airports, and in particular two of the three main London ones. I am uneasy about this for two main reasons...

First off I am deeply suspicious about the timing of the Competition Commission's investigation which seemed to be a (possibly coincidental) reaction to those foreigners (Ferrovial) taking over a British company which had owned those airports for a significant time. If there was a problem with monopoly, surely it should have been taken into account when BAA was first privatised.

And second it is a big step to try and force someone to divest themselves of their own property, especially when it's not as if they are "absentee landlords" but working, and presumably working quite successfully (other than the debt burden) the property.

But there is another problem. The monopoly is not really about the airports themselves - and indeed making them compete directly by being owned by separate owners wanting to maximise their income from each individual airport is likely I would have thought to result in heavier use of all of them, increasing the discomfort for the folk who have to live as neighbours of these smelly, filthy, noisy facilities.

It is exacerbated by the fact that what they really control is access to the airlanes that supply those airports. Airlanes that are, in the economic sense, "land" - part of "unimproved" natural resources with finite space - and in this case also time - (though of course safety technologies can increase the capacity a little) for all the potential users. This is part of the commons, and Ferrovial/BAA and the longer established airlines profit directly from the monopolistic enclosure of those airlanes.

Like the Electromagnetic Spectrum they are part of the "commons" and should be leased at their full economic rent from the state for our collective benefit. They are most commonly called "landing slots" and are worth a huge amount of money - Deloittes reckons that peak day time slots at Heathrow are worth up to £30 million per pair in summer, and there are 9,562 (4,781 pairs - one to land and one to take off on) per week in high season, with an overall limit of 480,000 per year at the moment.

The slot situation is currently, by common consent, pretty chaotic. The government has capped the amount BAA can charge and capped the amount by which it can increase the charge, but 97% of all slots at Heathrow for example are not open to effective competition as they are sold at this capped cost to airlines who have been there the longest, so called "grandfather rights". Heathrow is the only airport in Europe at which there is a significant amount of secondary trading in a "grey" market which is where the £30 million per pair arises. All this profit, the economic rent, goes to the airlines and Deloittes goes on to calculate that BA's slot portfolio may be worth up to £2bn if it were included in its balance sheet as an asset compared with its market capitalisation of around £2.7bn!

The CAA should be auctioning airspace rights to all airports at whatever the market will pay, whilst airports themselves should be responsible for charging the airlines for the use of the "improvements" - the terminal access, ground facilities and so on.

This would force traffic that doesn't actually need to use these massively oversubscribed London airports out to existing regional airports first, often reducing travel times - why travel from Lancaster to London to get a plane if the destination you want is available more cheaply from Manchester - as well as bringing increased economic activity to the areas around those regional airports - airports are a huge draw for international businesses. And unless the overall capacity of slots convenient for travelers' points of origin and destination is actually more than required, would generate a goodly sum for the government in a more market efficient way than say fuel taxes.

I hope we will be having a debate at South Central regional conference on Heathrow's third runway proposals. I believe the rigorous eradicating of this money for nothing monopoly on the part of the airports and airlines through nationwide slot auctions would actually obviate the need for the extra imposition this third runway would cause on teh surrounding areas without affecting overall the competitiveness of Heathrow for flights that really need to use it. read more »

Let the train take the strain...not!

Jock — Fri, 06 Jun 2008 13:54:53 +0000

A friend, and former council colleague then defector, some of you will know who I mean but I won't name him, got the news early this week that his mother, in Glasgow, had been taken into hospital having been lain at home for the best part of a month not feeling well but doing little about it. Anyway, without going into too many details said friend is not really working full time at the moment and not claiming benefit - because of the irregular work he does for the local TA and ACF. THis is about enough to keep him in bed and board but without anything left over for "shocks" like having to travel to Glasgow from Oxford in a hurry.

Last night I booked him a train ticket for next Wednesday after his next ACF session, paid for with my debit card, and to be collected at Oxford station. At that far off it was £95 return. But this morning he got a call to say she might not last the weekend so we had to try and make some rearrangements for today. So first, trying to cancel the original ticket I found it wasn't possible online because it was an overnight service and had a reservation automatically applied. The cancellation has cost me a tenner as well. Then looking for a new ticket for today we concluded the only deal was to take a standard single, which was itself £85 (because he did not know precisely now when he was going to come back and so an open return was going to be pretty expensive.

Still, again, since I was the one booking it, I had to accompany him to the station to collect the ticket so that I could insert my debit card. And we had to wait for two hours to be able to collect it after the booking was made. So, getting to the station too early to be out before the time limit on the short stay car park I had to park in the long stay. The fee is £4.50 if you use something called "RingGo" and £6.00 if you only have cash. The process of paying via RingGo was quite stressfulm even for a techie like me, requiring some code off the platform (so I was lucky the man let me, the non-passenger, onto the platform to get the code which changes every hour. The instructions on how to pay seemed only to be back at the car park so having collected that code number I had to return to find out how to do it and then go through a most complicated automated system which has now, with no specific authority from me, got my mobile number linked to my car registration number. There was nobody at the car park checking, and no ticket either for the car window or the exit from the car park, so I presume it is monitored by ANPR.

So, it seems that if you are not very well off, don't have a credit or debit card, and need to travel quite quickly, you must be faced with a ticket that would be about 50% higher than even the extortionate "supasava" online and 50% extra on the car park. And this is supposed to be encouraging use of public transport? What a joke!

He texted me after about ten minutes on the train to say that it was like sardines in a tin.

And all that for ninety quid and it would take eight hours if everything went smoothly. I know all about the fixed, annual costs of driving, like my tax and so on, and actually I don't do much mileage a year anyway, so driving up there would have been cheaper at the point of use (I would have got there on two tanks at the most and with two of us in the car that would have been less than half the train price) and helped me justify my annual fixed costs in any case. And when I went looking for a plane ticket for him yesteray I gave up because I could not find a single ticket under £93.

Bonkers. Bonkers and discriminatory. Oh, and why on earth do two type of first class ticket vary by as much as £200 quid for the same (single!) journey - one was £250 or something and another £450. Just what is that about? read more »

Low tax Tories? Don't make me laugh!

Jock — Mon, 08 Oct 2007 02:51:40 +0000

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.

Tories to bite the hand that feeds them?

Jock — Tue, 11 Sep 2007 15:05:50 +0000

UPDATE: I see that Dave's already poo-pooed this idea in a Q&A session with Telegraph readers . Is there going to be anything left of this report that will actually make it to party policy by the time it's released on Thursday?

In more of the drip, drip, drip of revelations from the Gummer-Goldsmith "Quality of Life" report the Telegraph today reports that the Tories are to end out-of-town free parking:

Tories to end out-of-town free parking
By Graeme Wilson, Political Correspondent

Shoppers using out-of-town supermarkets would be forced to pay car parking charges under new Conservative proposals to defend the traditional British high street.

Under the plans, councils would be given the power to demand that big supermarkets and other stores on the outskirts of towns charge their customers for parking.

Seeing blue over Tory plans
on out-of-town retail?
Originally uploaded by Alastair Montgomery

The proposals - which are contained in the party's quality of life policy review that will be published on Thursday - are likely to face a backlash from shoppers, who have grown accustomed to free parking at the out-of-town supermarkets and shopping complexes. The 800-page report tries to deflect the inevitable criticism by stressing that the parking charges would be no greater than the amount people would pay in the nearest town centre.

All well and good. Liberal Democrats should note that our own tax proposals already do this in effect. By substituting Site Value Rating (LVT by another name) for the National Non-Domestic Rate (Business Rates by another name) the land occupied by these car parks would become subject to a tax on their land value along with the stores.

This would end the huge benefit out of town stores have over their town centre competitors without the micro-management of the Tory plans to implement a similar thing by imposing parking charges. It would be difficult for them to pass on SVR to customers of their in-town stores because they are competing with in-town neighbours who would not have this added burden and would not have an increase in costs - indeed heir taxes may in fact fall by a little once out-of-town store car parks were also paying tax.

Of course everyone's allowed to change their mind, Keynes style, when the facts change, but looking back to 1997, I seem to remember that it was a Labour manifesto policy to stop the growth of out-of-0town retail (another one they signally failed to achieve of course) which had grown like topsy under the Tory government with their powerful retail backers such as Peter MacLaurin at Tesco, James Gulliver's Argyll Group, Archie Norman's ASDA and so on. Even some of Zac's own fortune is connected with out-of-town retail, when his old man sold Argyll Brands to James Gulliver whose Safeway went on to be an early adopter of the model. read more »

Come on Dave, get Gideon to tell us which taxes you'll cut...

Jock — Mon, 10 Sep 2007 10:31:57 +0000

ConservativeHome highlights a speech at the LSE in which (despite what I assume to be an error in the first sentence) Cameron today says that whilst they will want to increase environmental behaviour modifying taxes, they will want to use this to cut taxes elsewhere.

Of course they already know that the Lib Dems have specific and costed taxation proposals that use green taxes to cut four pence off the basic rate of income tax and take many low income earners out of income tax completely. We also have a long standing commitment to replace the Council Tax (though of course you know I don't agree personally with our replacement Local Income Tax) which deals nicely with what turns out to be the most hated tax in today's annual Tax Payers Alliance survey, again highlighted yesterday by ConservativeHome. And our "Green Mortgage" proposals will help households deal with their most worrying expense - their fuel bills.

So Cameron, what are you and Osborne going to cook up to beat that? And when? You can't go on just blathering and blustering indefinitely with vague and vacuous platitudes to your CH readership. You're certainly not ready for government if you can't even tell us what you're going to do on taxes.

Speaking at the LSE David Cameron has crushed any idea that the balance of green tax measures under a Conservative government will be cuts to encourage good environmental behaviour rather than tax rises to discourage 'brown behaviours':

"By using green taxes as extra stealth taxes, Gordon Brown has given them a bad name.  I’m determined that the Conservative approach will be different. With my Government, any new green taxes will be replacement taxes, not new stealth taxes.

In a few days, our Quality of Life Policy Group will publish its report. It will contain many recommendations on tackling climate change, at home and abroad, including recommendations on green taxes.  As with all the reports in our Policy Review, we will study its proposals carefully.

But let me be clear.  We will raise green taxes, and use the proceeds to reduce taxes elsewhere.That is the right direction for the environment and it’s the right direction for our economy. It is the best way to deliver the green growth that must be our aim." read more »

Tories, "green taxes" and the "poor"

Jock — Sun, 09 Sep 2007 21:23:08 +0000

Over at ConservativeHome they're spinning the line that "Green Taxes" such as those that might be recommended by the Gummer-Goldssmith review might hit the poorest hardest:

Green action mustn't punish the poor. Green taxation - like the congestion charge and VAT on domestic flights - can fall most heavily on the poorest.

Zac Goldsmith: Green taxes
must not appear to be the rich
telling the poor what
they cannot have!

According to our figures I think they need to look either at who would be most affected, or who they are calling the poorest. It would of course not surprise any of us to find that they don't really count the really poorest as poor, just the "lower middle classes" from whom they want some votes. But, if they do mean the lowest rungs of the British wealth ladder, then according to the line that Chris Huhne, Green Lib Dems and other have been pushing it is not in fact these people who would be most affected.

33% of households do not have access to a car. Most of these are the least well off households. If money from the congestion charge puts more into public transport these people gain. Similarly I very much doubt that the very poorest, if they travel terribly far at all, travel by air, internally or overseas. These are the "National Express" customers if anything. It would cost me more in time, money and effort to get to a cheap flight airport before flying as it would be to get a coach service to my destination. And on overseas flights, it is the well off and moderately well off who can afford to take multiple breaks a year. The European city weekend break several times a year is not the stuff of the Housing Benefit claimant (unless he's also an MEP I suppose).

However, they are right about one thing, yet fail to address it. Green taxes will hurt the poor the most if the poor are always driven to living on "marginal land". For it is they who, as well as having to keep up their housing costs, will have to commute because housing prices near where they work or socialize are unaffordable to them. Only Land Value Tax, as I wrote in one of my first ever blog posts, can change that and give people a real choice as to whether to live closer to work or commute with the attendant higher travel costs that green taxation will bring.

The Tories therefore, like all the other main parties including the Lib Dems, signally fail to address the biggest environmental tax issue of all - the taxation of location values.

Landing slots, air taxes and BAA monopoly

Jock — Tue, 28 Aug 2007 13:38:34 +0000

ConservativeHome today covers the latest vapourware announcement in the Tories' slow progress towards finding a policy. This time it's the "Green Tories" (who, you would have thought, might have given up when their tree was repainted - presumably with lead based paint to boot - the other week) and their ideas for Green taxes.

Now of course, many of the tax proposals would have been easy to lift from our Tax Commission work a whole year ago, but I guess what with imitation and flattery and so on we ought to be pleased. But there's a couple of opportunities hinted at in it that I think they, and we, have both missed a trick on...

The list of proposals on air travel issues according to the Evening Standard/Daily Mail includes:

"A moratorium on all airport expansion, including Heathrow, Gatwick and Stansted;

The imposition of VAT on fuel for domestic flights;

A "single flight tax" to shift tax burden from passengers to airlines;

Domestic flight slots to be handed to long-haul trips instead."

The Mail also suggests that the BAA London airports 'monopoly' will be broken up and 4x4 cars will face higher duties.

It looks like a lot of "tinkering" legislation might be on the way, interfering by government diktat in the market. When actually what's happening is that the market is already skewed and not operating efficiently compared with other forms of transport.

You don't need to put a moratorium on airport expansion, you just need to make sure that all the externalities of airport use are properly compensated for. Airports are vast spaces with huge footfall. Their current land value in enormous. LVT on existing airports and any land converted to airport use would concentrate minds. That would also effectively break the "BAA monopoly"

You don't need to create some confiscatory mechanism to rip domestic slots away from domestic flights and "hand them" to international long haul flights - a form of protectionism of course; air space is ours. Technology can, as it has done over the years, mean that aircraft can use airspace and landing slots more efficiently, but it is essentially finite - as people looking up and the sky over London will realise. LVT can apply to landing slots/airspace use. It would be conducted usually by auctioning slots with the proceeds going to the public purse. It would become less efficient for airlines to pay for slots for domestic flights compared with the overall costs of other forms of domestic transport.

Airports are huge magnets for economic activity. Most of the high-tech industry to the west of London out as far as Oxford is, one way or the other, there because of Heathrow. These businesses do not compete against, say, Devon & Cornwall, but against Silicon Valley or the Rhine Valley areas of Germany so they need good international connections. Auctioning landing slots would encourage airlines to think about where they want to land in the UK and bring into use spare capacity at other, regional airports. This could have a massive potential effect of encouraging those businesses that need international connections to release valuable land in the "Western Arc" around Heathrow and move their economic productivity to, I don't know, near Teeside airport, or Humberside or wherever the landing slot auctions made most feasible for the airlines.

I thought the Tories liked to position themselves as a party of minimal interference. These policies seems to show that protectionism is alive and well and that they do not have a grasp of perfectly natural mechanisms that would encourage the results they want to see without low level market manipulation by governments.

Tax: Who said this?

Jock — Thu, 31 Aug 2006 00:07:00 +0000

"We should move some of the burden of taxation away from income and capital, and towards taxes on environmentally damaging behaviour. Instead of a tax system that penalises hard work and enterprise, we need to move towards more effective and fair taxes on pollution."

The pre-amble to the Lib Dem Tax Commission paper? Chris Huhne introducing the "Green Switch"? The LIb Dem mini-manifesto 1998?

No?

Apparently, according to Zac Goldsmith in Thursday's Guardian, it will be George Osborne in a speech in Japan tomorrow.

Apparently he will also talk about Land Value Tax:

George Osborne, the shadow chancellor, speaking in Japan today, will describe environmental pollution as a market failure. "It is a classic case of what economists call an externality. Because the pollution is external to the market, polluting can make life easier, while the true cost is paid not by the polluter, but by everyone else." Given what we can expect if even the most conservative climate change predictions are accurate, failure to correct this market failure is not an option.