One particularly spurious argument against taxing location values is that a lot of land is not registered, and it is quite true that back in 2005, HM Land Registry's Strategic Plan (which I can no longer track down online) said that half of land by area was as yet unregistered, but that they hoped to have full registration by 2012.
This is all pretty irrelevant, or else they could have opposed the introduction of the national income tax two centuries ago on the basis that there was no official register of how much people earn. Working out who owns (earns) what is part and parcel of any system of taxation of rental values (or incomes).
As it happens...
1. HM Land Registry have now completed registration of over eighty per cent of land by now, and if they keep going at this rate, they will have full registration in four or five years.
2. On an administrative level, this was pretty irrelevant, as the unregistered land was largely agricultural land, the total rental value of which is about £2 billion a year, as against the rental value of residential and commercial land which is over £200 billion a year (and would be much higher than that if earned income, output and profits were not taxed).
3. All this residential and commercial land is already registered for Council Tax or Business Rates purposes, even if it is not registered at HM Land Registry.
4. There is a parallel register for agricultural land called the Rural Land Register:
All land must be registered on the RLR in order to be eligible for payments under the Single Payment Scheme (SPS), the Environmental Stewardship Scheme (ES) or the English Woodland Grant Scheme (EWGS)."
5. So to the extent that we wanted to go to the hassle of collecting a billion or two from agricultural land (as long as they pay the full tax on the areas used for buildings, that is quite enough, actually), we can base it on what the RLR says. The subsidies used to be based on how good the land was, so the payments for owning arable land was much higher than for marginal land used for forestry. It'll be very interesting to see how many landowners start trying to explain that their prime arable land of ten years ago is now so degraded that it can only be used for forestry or for grouse shooting, for which the rental value is £5 or £10 per acre per year.
Male Talkers
3 hours ago
8 comments:
I'm afraid you are mistaken about the Rural Land Register. The RLR has nothing to do with land ownership, merely the recording of who is farming (not owning) a particular piece of land, in order to be able to claim agricultural subsidies on it. Tenant farmers will have the land they rent assigned to them on the RLR, not the actual owner. Equally the RLR is effectively a list of field numbers, not a comprehensive account of all the land in a a particular locality. Woodland, scrub, unfarmable areas, rivers, ditches etc are all not necessarily included. The RLR can in no way be compared to the Land Registry.
S, no, it's not directly comparable, but it gives us a good steer and as a matter of fact, it does include maps.
I'm sure if a demand or enquiry is sent to a tenant farmer, he won't find it too difficult to tick the box saying "I am a tenant, please re-direct this demand to Lord X"
As to "Woodland, scrub, unfarmable areas, rivers, ditches etc are all not necessarily included" so what? Those areas have a rental value of more or less nothing, so let's ignore them.
Yes, having a river running through your farm is a big bonus, but it increases the rental value of your farmland, so there is no need to tax the river separately.
Completely off topic (well not off LVT topic I suppose) I was thinking about why house prices have inflated massively in the last 40-50 years, whereas for the previous 50-60 years growth was considerably more measured, if at all.
Its often argued here that economic growth is captured mainly (or increasingly) by increased property prices and thus rent seeking activities. But UK GDP rose from c.£2b/year in 1900 to c. £50bn in 1970 (25 fold increase) and further to c.£1.4tn in 2010 (28 fold increase). So the two periods are broadly comparable. Why therefore was period 2 so prone to massive growth in property prices, whereas period 1 was not? Surely if growth in GDP was increasingly captured by rent seeking, the same sort of increase would occur in both periods?
The answer as far as I can see comes from the fact that post 1970 UK broad monetary growth has outstripped house prices by a large margin. The best figure I can find is that from 1963 to 2011, M4 monetary growth averaged 10.6%. A rise of 12500%. Nominal GDP rose in the same period by an average of 8.7%, or 5400%(Link: http://critical-reaction.co.uk/3008/15-12-2011-it-s-not-all-black). In the same period (actually 1960 to 2010) house prices went up from an average of about £2.5K to about £162K (link: http://www.guardian.co.uk/money/2010/jan/20/house-prices-britain-property), a rise of 6500%.
So my recipe for preventing continued massive house price inflation would be to stop printing money, full stop. When holding cash for 40-50 years (the length most people live in their own home) maintains the value of your savings as well as owning a house for the same period, then people will no longer regard buying property as the one way bet it has been for the last 40 years.
Basically when the State stops stealing people's savings via inflation, houses will revert to being machines for living in, not investments, and not before. You often say that old people who bought their houses years ago for peanuts have been given a a free windfall. Indeed they have. But they have also seen the value of their savings virtually wiped out. Retire on a pension that was equal to average earnings 30 years ago, and you'd be in need of benefits nowadays just to survive.
House prices haven't actually gone anywhere in the last 40 years, its just that the currency we value them in has been massively debased.
S, I've explained all that before.
A usual Homey excuse is that "The wicked government will insist on printing money and causing inflation, therefore I must buy land to protect myself against inflation".
Truth of the matter is that Home-Owner-Ism is the direct cause of (or reason for) inflation. The whole idea is to inflate away debts and hence the value of cash savings and transfer wealth to land owners and bankers.
And you are just talking about selling prices, which are a secondary issue. The rental values are much more fundamental and it is rental values which would be taxed by LVT.
I think you'll find that landowners were getting something for nothing in the early 1900s as well, and before that. I believe guys like Ricardo, Smith, George etc. caught on to it even when there was gold and silver standards.
"The whole idea is to inflate away debts"
Indeed it is, but not specifically the private debts of people with mortgages, but the debts the government runs up borrowing money to pay for all the stuff people vote for (benefits/NHS/pensions etc). Governments love a bit of inflation. 3% average over the life of a 30 year gilt reduces the value of the capital borrowed by more than half. Inflation is a transfer of money from savers (the prudent) to the profligate (the feckless who rely on State handouts). Its only because inflation has the coincidental effect of raising hard asset prices as well that people have cottoned on to this little State trick, and now realise the only way to keep the State's mitts off your life's savings is to buy something they can't replicate at the touch of a button.
And thus you reach the current impasse - the State wants inflation to cover the fact it cannot really pay for all the services the population demand, and the population (at least the property owning bits) don't mind a bit of inflation because they own one of the few assets that keeps up with it, and often outstrips it because of the bandwagon effect.
The solution is to stop inflating the money supply, cash will become a much more sensible way to save, businesses that generate cash will be commensurately more valuable (hence enhancing investment returns), and houses will revert to being the money pits they always were before the State decided the best way forward was to bribe the electorate with the savings of the prudent via inflation.
S, the other half of the trick is to for the government to keep interest rates low. This inflates property prices, speeds up the transfer of money from savers to borrowers makes land a more attractive investment and encourages people into debt. Then, all you need is a change in popular thinking from "debt is bad" to "debt is good" and the whole damn thing is so self-reinforcing that an elected government can get away with it forever, well, until the next crash, that is or, possibly, even beyond it, if the experience of Ireland is anything to go by.
Kj, land ownership has always been something for nothing.
S; "Inflation is a transfer of money from savers (the prudent) to the profligate (the feckless who rely on State handouts)."
That's the Home-Owner-Ist justification after the event. If truth be told, the value of the net transfers to "the feckless" are insignificant, they are just used as an easy target and justification for e.g. inflation to keep the wealth transfer to landowners going.
So a more accurate summary is: "Home-Owner-Ism is a transfer of money from savers (the productive economy) to the top of the pyramid (the landowners and bankers who rely on State handouts)."
In any event, LVT would put a stop to inflation at a stroke.
B, ta for back up.
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