I’ve just spent some time updating an LVT playlist on YouTube that I created some time ago. It features some great LVT explainers, documentaries and interviews with advocates like Fred Harrison, Fred Foldvary and Frank De Jong.
In the midst of a housing crisis caused by the disastrous policies enacted by successive governments over the past 30 years or so, politicians are scrambling around for solutions. There have been repeated calls to rip up the green belts surrounding our towns and cities in order to find new land for housing construction. This pressure would be significantly eased if we made better use of our existing urban areas.
A fresh approach is needed to tackle the housing crisis, while also preserving our green spaces. At the heart of this approach should be a land value tax.
The introduction of a land value tax (LVT), an annual levy paid by property owners based on the value of their land, has long been Green Party policy. It featured in the Green Guarantee for the 2017 general election, as well as in the manifestos of several other parties. It could form part of a wider green tax shift focusing on the use of natural resources, for example a carbon tax, with the revenue being used to replace other taxes and/or fund a universal basic income.
MEP and Green party speaker on the economy and finance Molly Scott Cato discusses the benefits of LVT in the documentary ‘The Taxing Question of Land’
Shifting the focus of taxation onto land would have several benefits. Firstly, it would improve the allocation of existing housing. It would lessen the appeal of snapping up properties in desirable locations as speculative investments to leave empty. Those people living in larger houses than they need would be incentivised – but not forced – to downsize, making it easier for young families to find suitable, affordable housing.
Secondly, LVT makes it costly to hold onto valuable land for speculative purposes, putting an end to land banking. It would ensure that land in city centres is put to good use and not left vacant or under-developed: LVT would encourage developers to either build on the land that they hold or sell it on to someone else who will.
Best way to stop land banking would be a land value tax. Geeky, perhaps, but true 🙂 #Budget2017
“As land in the city centre has the largest monetary liability, the landowner will want to maximise the return on investment in order to pay it. The denser the building that sits on the land, the larger the revenue generated to pay for the same levy value.”
This would stop urban areas from spreading further out into the countryside, destroying wildlife and lengthening people’s commutes to work. The housing crisis isn’t just about building more houses; we need homes where people’s jobs are located. We need to make commutes more walkable and cyclable, helping us to reduce our reliance on cars and give us cleaner air.
Reducing urban sprawl in this way would also lessen the demand to build on productive farmland, which pushes farmers towards less productive locations.
Inflated land prices caused by speculation push out genuine farmers. “Young newcomers to farming are prevented from buying land unless they have access to money from elsewhere”, writes farmer and LVT advocate Duncan Pickard. “The rising price of farmland is attractive to non-farmers who have money to invest. They are not concerned with the land’s productive capacity – they are hoping for increases in its price.”
Taxing farm land, instead of throwing subsidies at it, would encourage efficient use of the most productive locations. Land at the fringes – which is only profitable because of subsidies – could be allowed to return to nature.
For conservationist Peter Smith, founder and director of the Wildwood Trust, LVT is crucial to his ambition of rewilding the British countryside. “Land Value Tax is a rocket to put up the backsides of landowners & developers to make the most of what we have, in doing so we put all our human effort into building better housing on the land already developed, we will make farming and recreation ‘land efficient’ and thus create the space to rewild Britain and at the same [time] have great housing & jobs aplenty”, he says.
By improving the efficiency of urban land use and reducing the incentives for speculation, sub-marginal land would become cheaper, making it easier for local authorities or nature trusts like Peter’s to purchase land for conservation.
Farmer Duncan Pickard and conservationist Peter Smith explain the impact of our current tax system on the environment in ‘The Killing Fields’
A Fairer, Greener Britain
Confronted with a housing crisis, inefficient land use and climate change, we face a choice: do we stick with the tired, broken status quo that has brought us to this point or do we go in a new direction with bold, progressive ideas such as a land value tax?
We can build the houses we need, reduce air pollution and also return land to nature and wildlife. The time has come to put a land value tax on the agenda to end the housing crisis and build a fairer, greener Britain.
When the Labour Party included a paragraph in its manifesto for the UK’s 2017 election stating that it would “initiate a review into reforming council tax and business rates and consider new options such as a land value tax”, the mere suggestion of a land value tax (LVT) was unsurprisingly derided by Conservatives and the right-wing press as “Marxist” ideology. Of course, this is nonsense, as Chris Game explained in his article “Land Value (or Garden) Tax – more Adam Smith than Marx”.
Some of my fellow LVT advocates have suggested to me that one of our most important tasks is to convince people on the right of the benefits of land value taxation – no easy task given the way the idea is frequently attacked and distorted by the right-wing press and conservative politicians.
However, there are several politicians, economists, journalists and think tanks on the conservative and libertarian right who have supported the idea. I thought it might be handy to put together a collection of articles, along with extracts, and videos supporting LVT from a right-wing perspective that can be shown to sceptics on the right, as well as perhaps to give us an insight into the arguments that may be useful in furthering our cause.
I’ve focused on people on the right who happen to be LVT supporters here, rather than LVT supporters who happen to be right-wing. I’ve also chosen to stick to more modern times, rather than go back to the days of Adam Smith (although Smith’s views are included in the article on Geo-libertarianism). A couple of the sources do not exactly provide ringing endorsements for full taxation of all land, but do at least accept some aspects of LVT. If anyone spots something that I’ve missed then please let me know. Links to all sources provided.
“Because Business Rates are levied on a property’s value not just the land beneath it, they act as a punishing disincentive to investment.
The worst affected businesses are manufacturers. Tata Steel’s rates bill rose by £400,000 a year when it rebuilt the blast furnace at Port Talbot. No wonder British Steel is struggling. Despite what the likes of Jeremy Corbyn and Nigel Farage say, the answer isn’t nationalisation of these industries. It’s modernising the tax system so they don’t get punished when they invest.
I would replace business rates with a tax on commercial land, paid by the landlords and levied only on the land value itself, so that no business is worse off if they invest and landlords do not have an incentive to keep commercial properties vacant.”
“In current circumstances, one of the most pernicious taxes is national insurance as it punishes employers for taking on new people and, because we have a fairly free market in labour, reduces people’s take-home pay just as surely, though a little more indirectly, than income tax. But if we want to cut this tax on jobs and wages, we need an alternative source of revenue that is reasonably easy to collect and which is less damaging in its effects on people’s incentives to invest, expand and hire new people…
[A land value tax] would deter speculative land banks and would encourage property owners to develop brownfield sites and put rundown areas of inner cities back to good use. Over the longer term, it would lower the price of development land and help us get off that quintessentially British rollercoaster of house price booms and busts…
Using the proceeds of a targeted Land Value Tax to cut the national insurance tax on jobs might give the British economy the crucial leg-up it needs.”
“What puzzles me is why, if he really wants a radically energised planning system and is prepared to have a huge fight to get one, Mr Brown has not gone for the much bolder option – a tax on the value of the site itself. This tax would take the form of an annual charge on the value of a site, levied according to its status in the local plan, whether or not it was developed. Its advocates claim that it would bring idle land into the best use for it, leading to an increase in supply and a decline in price.
Rather than capturing planning gain on one site at one moment, a land value tax would also recover value from neighbouring sites that had benefited from the development. Local authorities would collect more tax by the mere act of designating (or zoning) suitable land for industrial or residential development, thereby increasing its value even if no development took place. Landowners would have no incentive to hold sites back from development. Councils, by contrast, would have an incentive actively to pursue re-zoning.”
“One of these policies could be the replacement of council tax and stamp duty land tax (SDLT) with a new and simpler land value tax (LVT) on the unimproved value of all UK land. As derelict land in close proximity to urban infrastructure such as roads and railways is more valuable than Greenfield land with little nearby infrastructure, the redevelopment of poorly-utilised inner city land by its owners over new Greenfield sites would be encouraged by the LVT.
Consequently, the LVT would significantly assist in the prevention of undesired urban sprawl and the preservation of rural settings; making its introduction an effective replacement to green belts.
The elimination of SDLT would help to stimulate the UK property market; something that will need to occur if we are to encourage more housing development in the UK. Another added bonus is that the LVT would be very difficult to evade. This is because British land cannot be physically moved beyond the jurisdiction of UK tax authorities.”
“Yet, far from being an outrageous Bolshevik idea, the case for a land tax is one of the oldest and least disputed propositions in economic thought…
The basic point is that the supply of land, with rare exceptions such as reclamation in the Netherlands, is fixed. But because of its scarcity owners can command an income over and above the normal return to the enterprises placed upon it.”
David Cowan (Conservative activist, Tory Reform Group)
“The introduction of a LVT ought to be viewed as the most legitimate way to raise new revenue.
For too long, landowners and speculators have been able to reap sizeable economic outputs from rising land values, though contributing little economic input. One example being how the construction of the Jubilee line sent surrounding land values shooting up to £10 billion, to the benefit of landowners, while taxpayers still had to foot the bill….
Properties of all shapes and sizes are already overtaxed by the likes of council tax, business rates, stamp duty land tax, planning charges, and landfill tax. If these taxes were to remain then LVT would be burdening people with further unwelcome costs.
Instead, LVT should replace those property taxes – either entirely or at the very least mostly…
The LVT would not harm enterprise. It would boost productivity, discourage urban sprawl, could replace the plethora of punitive property taxes, and would be relatively simple to administer and collect.”
“Reforming the taxing of property will also improve affordability. Stamp duty, council tax and business rates should be replaced with a Land Value Tax with regularly updated valuations. This will stop stamp duty discouraging downsizing.”
“The ASI wants business rates to be stopped from taxing capital. Its reasoning is as follows: business rates tax property values, so they effectively tax both the land a property is built on, and what sits on top of the land (bricks, mortar, machinery).
“Taxing land values is a relatively good way of raising revenue, because it does not discourage production. But taxing property discourages construction, improvements and investments in new machinery,” it says.”
“5. Replace Business Rates and Council Tax with a simple Land Value Tax
While there is always a lot of noise whenever business rates change, it is often forgotten that it isn’t businesses who bear the cost of business rates, but landowners. Over time, most of any cut in business rates will be offset by a proportionate rise in rents – meaning that it’s predominantly landlords who benefit from cuts and lose out from rises, not businesses. It would be better if we were to merge council tax and business rates into a simple tax on land values. It would remove the distortion caused by changing purpose between using land for residential or commercial purposes, and ensure that business investment is not discouraged.”
“Tax unimproved land values, not transactions. Stamp duty land tax destroys huge amounts of economic value and prevents allocative efficiency—it should be abolished. Council tax and business rates disincentivise improvement and bias buildings toward certain uses—they should be first merged, and then levied only on unimproved values.”
“If and when they do revalue business rates, there’s a disincentive to anybody who is a business or is a land owner to improve the property that they’re on, and we don’t want that. What we want is them to only be paying the value of the land, and to try and get as much as possible from that land, by building as much on that property or the most profitable thing they possibly can. We’d get that with a land value tax, we don’t really get that really from business rates.”
“A good rule of thumb is that if you tax something, you get less of it, which is why taxes on capital are such a bad idea. But since there’s a fixed supply of land, taxing the value of land doesn’t get you less of anything. Nice one.”
“It’s a bit silly to call this a ‘garden tax’, since council tax valuations already include gardens. Unless the Tories are proposing to exempt gardens when we calculate how much a property is worth, they too favour a ‘garden tax’.”
“One reason to like this tax – as Milton Friedman pointed out – is that it’s the least distortionary tax there is. No one is making land anymore, so we’re not going to reduce the supply of it by taxing it. That is true of everything else – tax apple consumption and people eat fewer apples, tax incomes and some work less, tax profits and people set up fewer businesses. But land is in fixed supply, so we’re not getting less as a result of gaining our necessary tax revenue from it…
It’s also right that everyone should pay it. Yea even those horny handed sons of the soil, the farmers. Land that’s on top of some Dale is worth spit and so would pay near nothing, someone using Surrey to grow turnips probably should be encouraged to make better use of it.
For, yes, having to pay tax on the value of the land does indeed mean that people will have to allocate the land to a use which will producing a decent return on that value. This is why the OECD has insisted that “repeated taxation on property”, by which they mean the LVT, makes the economy more efficient, unlike all other taxes.”
“As Henry George pointed out to us all the art of land value taxation is to tax the unimproved value of said land. Another way to say the same thing is that we’re trying to tax the value that society adds to the land, not what the owner has added themselves. Land in the centre of London has a higher value than much land elsewhere just because it is surrounded by London. It seems reasonable enough that some of that value created by London should be taxed to pay for London.”
“That is, business rates are a crude proxy for a land value tax and as a crude proxy they’re not quite good enough. What we want instead is a proper land value tax, one that taxes the undeveloped value of that specific plot of land, that value being determined by all the other development that has taken place around it. What is actually developed upon that plot should not be taxed in the slightest. In that manner the retailer, the occupier, will not be bearing any of the cost of the rates, the developer will not be yet the landlord of the land itself will be carrying the full burden.”
“For a reasonable analysis of how zoning (or in the UK, planning permission) works is that those who currently own houses in desirable, low population areas, vote to get the zoning policies which keep those areas low population at no financial cost to themselves. The point of land value taxation being to insist that they carry that cost of excluding others from building houses in such desirable areas.”
“Business rates are not perfect as they rely upon the rentable value of the building, not the land it is upon. But they are the closest we’ve got to a good tax, a land value tax…
If you happen to be trading in a property hot spot (and, indeed, your brilliant business may have contributed to the success of that place, as in Southwold and Port Isaac, areas with notably good independent shops that will be hit by rate hikes), or big brands have arrived and now surround your enterprise, then your valuation goes up and you find yourself catapulted out of the small business relief zone.
Yes, that’s the point. There’s a limited supply of land in those hot spots, taxing that land is the least distortionary tax that we have. It’s a good tax. And note what is being taxed – that the other people around that property are adding value to it.
But the revaluation works for the online retail giants. According to CVS analysis, the nine Amazon distribution centres in England and Wales will be able to knock £148,000 off their property tax liabilities this year (despite annual sales in excess of £6bn). Similarly, fashion retailer Boohoo gets 13% knocked off the bill for its distribution centre in Burnley; so it goes on.
Quite so, this is what we want to happen. There’s a limited demand for chi chi shopfronts in Burnley and there’s lots of land. Thus we tax the use of low value land more lightly than the use of high value land.”
“However, we also know that different taxes have different deadweight costs… We even know a rough order of ranking of those deadweight costs. Transactions taxes have vast deadweight costs: at least one official report on the financial transactions tax (the report from the EU itself) tells us that that tax would make the whole economy so much smaller that it would actually lose tax revenue by being levied. Lower than that are wealth taxes (a once off wealth tax that no one knows is coming does not, but a regular one does), then capital and corporation taxes, then income taxes, then with still lower deadweight costs consumption taxes (like a VAT or sales tax) and then finally, at the bottom, we find that repeated taxes on non-movable property can even have positive deadweights. And that last can also be called a land value tax.”
“For the Institute of Economic Affairs (IEA), this is the solution: Property taxation should be completely overhauled, with the long-term aim of abolishing council tax, business rates and stamp duty, and replacing them with a Land Value Tax on commercial land and a tax on imputed rent for residential property.”
“If properly constituted, a tax on location value may cause disproportionately little economic damage, because land cannot be hidden or taken overseas to avoid the tax and owners cannot respond to the tax by producing less value in its location”
“The move away from existing property taxes and towards a land value tax and a tax on the imputed rent from owner-occupied housing (or a housing consumption tax) would create a tax system much more conducive to growth. Existing taxes on business property would be abolished and homeowners would no longer suffer stamp duty when they moved to take a more productive job. The tax on imputed rent would end the bias against rented property that exists in the UK tax system and a land value tax is well understood by economists to be one of the least growth-inhibiting taxes available.”
“The tax has attracted many proponents because it is as close as possible to an ideal tax – it is efficient (does not alter economic activity), equitable (the richer tend to have more land than the poor) and has revenue raising potential (the tax is difficult to avoid or evade). It also recognises land as a precious finite resource. More importantly, if implemented properly it can potentially seed economic growth, lead to greater productivity and even energise house building (as well as helping stabilise the cycle in land prices).”
“Now imagine local authorities had to finance all of their expenditure from their own tax revenue, and imagine a large chunk of that revenue came from, say, a local Land Value Tax (LVT). They would then have a strong incentive to grant planning permission more liberally, because this would be an easy way to broaden their tax base. That is the way to solve the housing crisis – not subsidising developers, and not subsidising homeownership.”
“Sensible tax changes would strengthen incentives to permit development by giving local authorities ‘skin in the game’. This could be achieved by, for example, replacing council tax, stamp duty, business rates and (property-related) capital gains taxes with a local Land Value Tax (LVT). Local authorities would retain 100 per cent of LVT revenue. This would encourage tax competition for residents, and it would allow local authorities to capture a part of the ‘planning gain’ (the increase in land value when planning permission is granted).”
“The UK’s system of property taxation is extremely complex, distortionary, arbitrary and inefficient. For a start, there are simply too many property-related taxes: Council Tax, Business Rates, Stamp Duty, and insofar as they relate to property wealth, Capital Gains Tax and Inheritance Tax. They should all be rolled into one, in a revenue-neutral way.
More importantly, they all tax a package. They (clumsily) tax the value of land, but they also tax improvements to that land, buildings, and the activity that takes place on it. Only the unimproved value of the land should be taxed, because this is the part of the package that a landowner cannot influence, which means that taxing it does not change their behaviour. Whether they leave their land derelict, or put it to the best possible use – their tax bill would be the same…
This would radically improve incentives. It would lead to a more efficient use of land, more and better housing development, a more efficient use of the existing housing stock, more business investment, and greater accountability in local politics. What’s not to like?”
“The economic principles of a land value tax have been advocated for centuries, from the writings of Adam Smith and Milton Freedman to the Mirrlees Review. In its purest form, an LVT is a tax on the value of the underlying land, independently of any specific improvements such as the value of any property built on it. Crucially, the owner must pay even if the land is currently unused. Unlike most taxes, then, an LVT actually encourages economic activity.”
“As the stock of land is fixed and housing is in short supply, continued growth in land value is not surprising, said Julian Jessop, chief economist at the Institute of Economic Affairs, a free-market think tank…
“The longer that this goes on, the stronger the case for introducing a land value tax to make sure that this scarce resource is used efficiently and fairly,” Jessop said.”
“The standard rebuttal to such proposals is the fact that Britain’s property taxes are already higher than anywhere else in the developed world. But that isn’t necessarily a problem: there is a strong philosophical case for taxing assets instead of work. Economically speaking, wealth taxes tend to do the least damage to growth. Property taxes also have the practical advantage of being nigh-on impossible to avoid.
The problem, in fact, isn’t that we tax property. It’s how we do so, which at present is both costly and unfair.
Indeed, it they were truly ambitious, the government might be tempted to overhaul the whole system and introduce a land value tax, which is a levy on the value of the underlying land and is paid by the landowner whether or not the land is being used. This is that rare thing: a tax that encourages rather than discourages economic activity, by making landowners pay for property that sits idle.”
“For all sorts of reasons, our green and pleasant land has become a “safe-haven” for investors the world over. The planning system can be loosened, but with so much international money chasing our acres, one has to ask what it would take to soak up the enormous pool of current and future demand.
This is why the ConservativeHome manifesto makes the case that other, more radical, measures will be required to render homeownership more affordable.
In the meantime, we need to charge investors a lot more for the privilege of burying their money in British soil. It’s not as if investing in land is going to make any more of it, so let’s whack-up the relevant taxes and use proceeds to reduce the burden on genuine, job-creating enterprise.”
“Likewise, the question of the private ownership of land is not one of whether private persons can possess or control or even trade claims on the use of land. The question is whether I can truly own land the way that I can truly own a spear.
I say: No. But what I mean by that is quite narrow, as with the airspace. You can own buildings – because buildings are created with labour and other non-land property… But you cannot (normally?) own the space (the “land”) in which the buildings and the soil sit because, as with the airspace, no property or labour has contributed to its creation…
In a previous piece, I argued against wealth taxes. But the reasoning of this post suggests that land taxes are not wealth taxes, for land cannot be part of a private citizen’s property. The land is owned (if by anyone) by the Crown. So the Crown might legitimately charge a fee for its use. I do not think such a charge should even be described as a “tax”. It is more like a usage fee.”
“In theory, the cost of paying the tax wouldn’t be passed on to tenants, but it would capture the “‘undeserved’ gains landowners make on the investment of others, such as the government improving nearby transport links.”
One could also argue that it would be an excellent way of discouraging the excesses of the British property market.”
“Meanwhile, the Chancellor should announce a comprehensive review of land taxation. Rents extracted from the productive economy by property speculators and land monopolists are a drag on growth not a contributor to it. They should be taxed accordingly.”
“There’s a sense in which all taxes are antagonistic to free enterprise – and yet we need taxes… So the question is, which are the least bad taxes? In my opinion the least bad tax is the property tax on the unimproved value of land, the Henry George argument from many, many years ago.”
“What kind of taxation is least harmful?….My own preference is for a single tax on land, with landholders doing their own valuation; you’d state the price at which you’d be willing to sell your land, and pay taxes on that amount. Anyone (including the tax collector) who wanted to buy it at that price could do so. This is simple, fair, and minimizes government snooping into our lives and business.”
Peter Thiel (entrepreneur and lifelong member of the Republican Party)
“Yes, I think George is a really interesting thinker. The idea that we should tax land heavily (and perhaps not tax anything else at all) is very interesting, since many of the bad monopolies in our society involve the unholy coalition of urban slumlords and pseudo-environmentalists”.
“Libertarians want to eliminate taxes, but until that can happen, taxes should at least be guided by rational principles and make a distinction between helpful and harmful behaviors. This may sound like the “no victim, no crime” principle applied to tax policy, but the philosopher Henry George arrived at the same conclusion…
Northeast Illinois’s high property taxes present a great opportunity for local Libertarians to propose sensible tax reform to solve the problems of high taxes that are stifling economic growth. The split-rate tax is a promising alternative to the burdensome tax schemes enforced across the majority of the country.
“Conservatives must support taxation on the value of land to modernise the UK economy. If they do not, it will become even more difficult to tackle issues like land banking and the housing shortage, while its implementation could allow for scrapping outdated taxes such as corporation tax and help to bring about a surge in productivity and growth.”
“English Common Law is based on natural relations within society, and not arbitrary decrees and statutes, and so it can be seen that the right to assess landed property for a land-related payment is merely a recognition in our law that land ownership cannot be absolute, that land anywhere in the world existed before any human society was formed, that the land that we live on forms a common social resource, and so it not genuinely “ownable” by anyone in any country, society or time period…
The original land grants made to Norman nobles could only be made in the context of English Common Law, which provided for exactions to be made by the Crown. It is clear that a common social resource—the land—a resource that naturally exists, is not the product of investment or the application of human skill and is generally not something that more can be produced of—has become monopolised by a few…
It is right therefore that the state attempt to extract as large a proportion as possible of the economic rent derived from possession of land, minerals, forestry and fishery resources, and the electromagnetic spectrum, and land taxation should be seen in this light. Given the fact that land is a common social resource, it is doubtful whether the word “taxation” is correctly applied to a land levy. What we are talking about here is not taxation of income or profits or the restriction of economic activity, but a levy that is based on the fact that no original ownership of the common resources ever existed.”
“The term “geo-libertarianism” was coined by economist Fred E. Foldvary. The “geo” in “geo-libertarian” stands for Georgist. Georgism is the economic belief that people should keep what they work for, but the benefits of land ownership should belong to the community as a whole. Thus, they support a land value tax (or LVT for short). Straight away, you probably see that this view is at odds with the common libertarian idea of property being an extension of the individual. Georgism stresses the idea of community, and libertarianism stresses individualism. However, these views don’t necessarily to contradict each other if the community exists to protect the rights of the individual…
One of the first Americans to identify as a libertarian was also a Georgist. His name was Albert Jay Nock. Milton Friedman also referred to the land value tax as the “least bad tax.” David Nolan (the founder of the Libertarian Party and the creator of the Nolan chart) claimed that a single tax on land was the “least harmful” kind of taxation.”
“The moral argument starts from the same place as John Locke’s famous discussion of property, with the claim that each individual is the sole rightful owner of his body and labor. Because George accepted Locke’s idea of self-ownership, he argued that most forms of taxation are unjust – essentially a form of theft. If you own your labor, and you choose to sell your labor to somebody else, no third party – including government – can legitimately demand that you give them a portion of the income you’ve received. To do so would be, in effect, to steal your labor.
But natural resources are not the product of anyone’s labor. They simply exist, on their own, as a free gift of nature. And because nobody created them, nobody has any better claim on the raw value of those resources than anybody else…
Natural resources, George thought, belong to humanity as a whole, and not to any particular person. A tax on the unimproved value of those resources is therefore one way in which humanity as a whole can reclaim what has been unjustly monopolized by a few, and do so moreover without violating individuals’ self-ownership.”
William F. Buckley Jr (conservative author and commentator)
Unsurprisingly, there is no mention of LVT in the Conservative manifesto.
However, there is a commitment to “work with private and public sector house builders to capture the increase in land value created when they build to reinvest in local infrastructure, essential services and further housing, making it both easier and more certain that public sector landowners, and communities themselves, benefit from the increase in land value from urban regeneration and development.”
“A Labour government will give local government extra funding next year. We will initiate a review into reforming council tax and business rates and consider new options such as a land value tax, to ensure local government has sustainable funding for the long term.”
“Reviewing the Business Rates system, prioritising reforms that recognise the development of the digital economy, lessening the burden on smaller businesses, and ensuring high streets remain competitive. We will also consider the implementation of Land Value Taxation.”
“Action on empty homes to bring them back into use and a trial of a Land Value Tax to encourage the use of vacant land and reduce speculation.”
“We would scrap the council tax, and allow local authorities to use new options, such as a tourist tax and land value tax, to ensure local government has sustainable funding for the long term.”
Scottish Green Party
“Tackling wealth inequality will be a priority. We will introduce a wealth tax on the wealthiest 1%, continue support for a Land Value Tax and introduce laws to limit the size of CEO pay relative to the lowest-paid workers in the company.”
Plaid Cymru, UKIP, Scottish Conservatives, SNP, Scottish Lib Dems
Since the UK voted to leave the EU in June, the Tory leadership has been determined to make it clear to the rest of the world that Brexit Britain will remain “open for business”.
A recent report published by the Institute of Economic Affairs (IEA) has suggested numerous tax and government spending reforms intended to achieve just that. The authors encourage Chancellor Philip Hammond to take a sledgehammer to the UK’s tax system to stimulate economic growth, in what has been dubbed a “bonfire of taxes” by the Telegraph.
A key part of their solution is to replace several taxes with a new land value tax, described in the report as “well understood by economists to be one of the least growth-inhibiting taxes available”.
The idea of a land value tax – or LVT- has a long history, with figures from the 18th to early 19th century such as Thomas Paine, Adam Smith and David Ricardo supporting its implementation. It is closely associated with American journalist and economist Henry George, who believed that a tax on land could act as a “single tax” and replace all other taxes. LVT was also described by 20th century economist Milton Friedman as “the least bad tax”.
American journalist and economist Henry George who believed a land value tax should replace all other taxes.
In the UK, a land value tax was proposed in 1909 by then Chancellor of the Exchequer David Lloyd George and his ally Winston Churchill. The reform was included in their People’s Budget but was ultimately rejected by the land owners who filled the House of Lords.
More recently, LVT has been supported by the Green Party and Labour’s Shadow Chancellor John McDonnell.
Numerous arguments are made in favour of LVT. Firstly, increases in the value of land are largely a result of the economic activity of other people. It is possible for land owners to receive unearned income simply by speculating on increases in the value of land without making any improvements themselves. Furthermore, by taxing land, governments can recoup some of the money that they invest in infrastructure and utilities, rather than allowing the resulting increase in land values to merely provide a windfall for land owners.
Winston Churchill makes the case for land value taxation in 1909.
Secondly, the tax would encourage owners to develop valuable land rather than leaving it unused. In particular, sites in inner city areas would be used more efficiently, leading to a reduction in urban sprawl.
Unlike corporation and income tax, LVT would be virtually impossible to avoid. Advocates also claim that it would stabilise the economy, curbing the boom-bust cycle.
Lastly, switching to a land value tax means the burden of taxation can be shifted away from productive enterprise, and taxes that fall mostly on the poor can potentially be reduced or even abolished.
In the UK, three taxes that are usually considered prime candidates for replacement with LVT are:
Council tax – In the above-mentioned report published by the IEA, council tax is derided as “Confused, outdated and unpopular”.
The regressive nature of council tax has been criticised by journalist George Monbiot: “Why should council tax banding ensure that the owners of cheap houses are charged at a far greater relative rate than the owners of expensive houses? Why should Rinat Akhmetov pay less council tax for his £136m flat in London than the owners of a £200,000 house in Blackburn?”
Furthermore, MSP and LVT advocate, Andy Wightman of the Scottish Green Party has noted that 83% of households in England would immediately be made better off by a revenue-neutral shift from council tax to a land value tax.
Business rates – The IEA has previously criticised business rates in a blog post arguing for LVT: “Ideally, as argued here, they [the government] should at minimum consider scrapping business rates and replacing them with LVT. Business rates have long been criticised by many businesses because of their complexity and discouragement of investment and growth.”
Another problem is that business rates are reduced or zero for charities, agriculture and unused or underdeveloped land, which, according to the IFS, “provides a clear and perverse incentive to use land inefficiently”.
Stamp duty -It has been claimed that stamp duty, a tax on property purchases, has “a strong claim to be Britain’s worst tax”.
Jonathan Isaby, Chief Executive of the TaxPayers’ Alliance says that “Stamp Duty is unfair, unjust and must be reformed. It stops ordinary families moving up the property ladder, discourages the elderly from downsizing, and worst of all is a barrier to young people looking for their first home”.
However, abolishing these taxes could be just a first step. As mentioned above, a land value tax could also be used to shift the burden of taxation away from workers and businesses, thus encouraging enterprise and entrepreneurship. Taxing land rather than income would help the government to achieve its aim of “making work pay”.
A shift to a land value tax would encourage economic growth as it would result in lower “deadweight losses” than other forms of taxation. Economist and land value tax advocate Fred Harrison estimates that these deadweight losses amount to around £500 billion every year: “How does this happen? Taxes such as those on corporate profits, consumption and most of the rest of the fiscal tools imposed on the people of Britain result in negative forms of behaviour. The cumulative effect of all those distortions can be summed in one statistic: £500bn. That is the additional annual wealth and welfare which the people of Britain would produce if they were not burdened by Treadmill Taxes… That is because the incentives to work, save and invest would favour higher productivity in the way people went about their daily lives.“
Although, strictly speaking, they don’t have a land value tax, Singapore and Hong Kong are good examples of places where land rents have been captured for public revenue. In Singapore and Hong Kong most land is owned by the government, which leases it out to businesses and private individuals.
According to economist Neville Bennett, Hong Kong raises approximately 38% of its revenue from land leases. This has enabled the city state to keep its taxes on businesses and income relatively low. Income tax is very low in Hong Kong, with a top marginal rate of just 17%. Corporation tax there is 4% lower than in the UK (16% vs 20%).
Land value taxes have been implemented in a couple of European countries. One of these is Estonia. In part thanks to its use of LVT, Estonia is considered to have the most competitive tax system in the OECD.
Denmark also has a land value tax in place, and like Hong Kong and Singapore, it has been among the top six countries in the ease of doing business index every year since 2008. Impressively, Singapore topped the rankings every year between 2007 and 2016.
Ease of Doing Business index 2015-17. Source: Wikipedia (link)
Although numerous other factors contribute to the ease of doing business in a particular country, basing their tax systems on capturing land rents clearly hasn’t had a negative impact on those countries in this respect.
In addition to regularly featuring among the easiest places to do business, these places also perform significantly better than the UK in terms of budget surpluses/deficits.
By contrast, the UK has only achieved a budget surplus eight times in the past six decades, and not once in recent years, despite the austerity measures implemented by the coalition and subsequent Conservative government.
If the government wants to ensure that Brexit Britain is truly open for business, it would be well-advised to consider the examples of Hong Kong, Singapore, Denmark and Estonia and take a serious look at the idea of land value taxation.
Since I began following the discussion about basic income a couple of years ago, I’ve seen a number of people arguing that a job guarantee is a better solution to alleviate poverty. Briefly, a job guarantee is where the government acts as “employer of last resort”, providing jobs when the private sector is unable to. I’ve read several articles about the concept, but have always had a few reservations about it and felt that some of the criticisms of basic income made by its supporters have been somewhat unfair.
For example, in August Pavlina Tcherneva, a prominent supporter of the job guarantee, made an appearance on RT’s Boom Bust programme (see video below). One of her main criticisms of basic income is that it doesn’t do enough to stabilise the business cycle. “The basic income doesn’t have this counter-cyclical stabilisation function” she says. “It is supposed to be provided at all times irrespective of the macro-economic conditions. Every fiscal policy has a counter-cyclical feature except the basic income guarantee”.
So far, this doesn’t seem to have been an issue with the Alaskan dividend – the nearest example to a basic income that we have – which has been providing every Alaskan with an annual, unconditional cash payment since 1982. Funding a basic income like this by means of a sovereign wealth fund is the method preferred by Guy Standing, co-founder of the Basic Income Earth Network. He has refuted the “business cycle” argument, saying that basic income payments made in this way can be increased and decreased depending on the state of the economy with an independent body making judgements on the amount being paid out.
However, if –unlike the Alaskan dividend – a basic income is used to replace existing elements of the welfare state, in particular unemployment benefits and tax credits, then Tcherneva’s criticism may be a legitimate concern.
Many basic income models already have a counter-cyclical feature built into them though. This usually involves an integration of the benefits and tax systems. For instance, several proposals for a basic income in the UK include the abolishment of the personal tax allowance. This means that, unlike now, all income would be liable for taxation. As soon as someone’s income rises they would begin to pay back more of their basic income through income tax. Additional marginal tax rates can be implemented to ensure that more of the basic income is clawed back from higher earners.
In this way, a counter cyclical feature is ensured: when the economy is doing well more people will be paying back their basic income, and when it’s not doing so well people will rely more on the basic income, just as they do with welfare now. Alternatively, a land value tax could be introduced to recoup some of the money from wealthy individuals. It is often argued that a land value tax would stabilise the economic cycle of boom and bust.
Clawing back the basic income in one of these ways also tackles another common criticism of basic income, namely that it isn’t targeted enough to people on low incomes. If the basic income is recouped from the rich, more money would be available to raise the level of the basic income and ensure that people on low incomes are better off.
I’m not against the idea of a job guarantee in combination with a basic income though. “Providing a financial incentive to seek work may not be enough, if job-hunting is difficult and expensive” writes basic income advocate Frances Coppola in Forbes. “People may need help looking for jobs, and in some areas may need the government to guarantee a job… The combination of job guarantee scheme with basic income should ensure that anyone who wants to work can do so.”
If there is work to be done that won’t be taken care of by the market then why not have the government employ people in certain areas of the economy? If we look at the United States for example, there is clearly a need to deal with the country’s crumbling infrastructure. A jobs programme to fix this, like the one proposed by Bernie Sanders in his presidential campaign, would be a good idea.
L. Randall Wray, a professor of Economics at the University of Missouri–Kansas City and colleague of Pavlina Tcherneva, provides a list of other possible jobs that could be guaranteed by the government, such as companion for senior citizens, the bed-ridden, mentally or physically disabled, public school classroom assistant, neighbourhood clean-up worker, library assistant, environmental safety monitor, etc. These would be useful jobs that wouldn’t necessarily be filled by the private sector so I see no problem with a job guarantee providing this work.
A worthy goal that advocates of both the job guarantee and basic income have in common is the aim of redefining what is meant by “work”, allowing people to choose to do useful work that is not usually considered “productive”. However, if a government were to implement a job guarantee with the objective of simply achieving full employment, no matter what sort of jobs are being done, then I probably wouldn’t be in favour of it. This would continue the fetishizing of jobs and lead to more people being employed in what David Graeber describes as “bullshit jobs”. The main issue is see really is whether there is enough useful work to do for the government to guarantee everyone a job.
There is also plenty of work, such as care work, already being done that isn’t always remunerated and wouldn’t necessarily make sense being part of a job guarantee programme. According to Emily Holzhausen, Director of Policy at Carers UK, 1.4 million people in the UK each provide over 50 hours of unpaid care per week. A basic income seems like the simpler way to recognise this unpaid contribution and make it easier for people to take on and possibly share the responsibility of care work without involving state bureaucracy. If there are important jobs that need to be done within a community, does the government really need to get involved to provide formal jobs? We could instead just provide a basic income and let people decide what work needs to be done on their own.
An issue that I have with implementing a job guarantee without a basic income is that it would do nothing for people who are already employed but whose incomes fluctuate; the self-employed, freelancers working in the gig economy or workers on part-time/zero-hour contracts, for example.
In particular with the potential for giant leaps forward in terms of automation and artificial intelligence, it seems clear that we’re moving further towards an economy that creates fewer and fewer steady full-time jobs, and increasingly promotes flexible labour markets. Without a basic income we will forever be resisting this. It would surely be better to embrace new, more flexible ways of working, while also ensuring improved financial stability for workers in the form of a basic income.
Furthermore, a job guarantee doesn’t eliminate the disincentives to work caused by high marginal tax rates at the lower end of the income scale. As Scott Santens explains in a recent article, welfare effectively punishes people for working because it is withdrawn, whereas a basic income would help to remove the “benefits trap” and make sure that work always pays.
Related to this is the final criticism of basic income that I want address: the idea that basic income simply pays people to stay at home. Mariana Mazzucato (who I thought was a supporter of basic income) recently tweeted an article by L. Randall Wray to present this argument.
Excellent piece by Wray on why Job Guarantee scheme as Employer of Last Resort makes more sense than Basic Income. https://t.co/YUywFJBqQg
In the article, Wray talks about a job guarantee programme called Plan Jefes y Jefas, – or Jefes – that was introduced in Argentina following an economic crisis there in 2001-02. The scheme created around 2 million new jobs for poor heads of households.
According to Wray, at one point three quarters of the participants were female. However, when the economy recovered and the men in the families began to find work again in the private sector, the government decided to draw down the Jefes programme and place the women back on regular welfare. When the women were asked “would you prefer to receive the benefit of the Jefes program but stay at home,” they all said that they would prefer to go out to work.
It seems odd to me that Mazzucato would see this as an argument against basic income. Surely it is rather an argument against welfare in its current form? I think this idea of basic income paying people – in particular women – to stay at home is a really unfair representation of basic income. Pilots have shown that a basic income can help people to work. For example, following a basic income trial in India, Guy Standing notes that people actually worked more, not less. One example he gives is of a disabled woman who was able to buy a sewing machine and become a seamstress. If – as job guarantee advocates seem to agree – people instinctively want to work, why would a basic income stop women from going out and participating in the community or finding a job? Unlike conventional welfare, a basic income would give them every incentive to do so.
I think this discussion about these ideas is really interesting and I intend to keep an open mind about a job guarantee. Like France Coppola, I think a job guarantee could be done alongside a basic income and I see no reason why we can’t try both.
See also Scott Santens discussing basic income and job guarantee with Iain Dooley of the Australian Employment Party:
This week it was revealed that the troubled families scheme, launched by David Cameron in 2012, has had “no discernible impact” on employment, truancy and adult and child offending. The scheme was initiated following the 2011 riots with the aim of “turning around” troubled families. However, an unpublished Whitehall report suggests that it has badly failed in its mission. The scheme has so far targeted 120,000 families around the country at a cost of £400 million, with a further £900 million due to be spent on another 400,000 families by 2020, meaning around £2500 will have been spent per family.
This money could instead have been spent on trialling basic income, and likely with better outcomes. The total cost of £1.3 billion would have easily funded a reasonably large-scale basic income pilot. For the same amount, 156,250 individuals could be given an unconditional weekly payment of £80 for two whole years. And if the pilot was designed to temporarily scrap job seekers allowance and perhaps reduce in-work benefits in the trial area, the pilot could even cost less than this or be widened in scale.
Shadow chancellor John McDonnell has already shown an interest in a universal basic income, and I believe a pilot is the sort of idea that the Labour Party should be looking at for the next general election, whenever is and whoever their leader may be. The party could use a pilot to test what impact a basic income would have on things like employment, mental and physical health, school performance, crime, entrepreneurship and private debt.
Some ardent supporters of basic income might say “oh but we’ve had successful pilots around the world already, let’s just get on with it and implement basic income for real”. However, it could be political suicide for the Labour Party to commit to a basic income before the public has had a real chance to acquaint themselves with the idea and be convinced. I would worry that the British public would reject basic income – just like the Swiss did in June – if they don’t have the opportunity to see it in action first. As Jeremy Corbyn has said, a basic income would be “a major, major change in social policy”. A pilot could provide us with further evidence that basic income really is the way forward and move us a step closer to its implementation.
So why not find a town or region with a higher than average unemployment rate in, say, the north of England, and try giving all working-age individuals a no-strings-attached £80 a week for a couple of years and see what happens? After all, it can’t go worse than the failed troubled families scheme.
In a Reddit AMA session a couple of years ago, co-founder of the Basic Income Earth Network (BIEN) Professor Guy Standing stated that the “best way to fund a basic income is through establishment of sovereign capital funds”, otherwise known as sovereign wealth funds (SWF).
These funds are typically used by countries with great oil wealth in order to preserve some of this wealth for future generations when the oil eventually runs out. The funds are invested around the world to grow them over time. Norway’s SWF – currently worth around $847 billion (£647.6 bn) – is the largest in the world.
The SWF that people with an interest in basic income are most likely to be familiar with is the Alaskan Permanent Fund. Since 1977, the state of Alaska has been putting at least 25% of its oil revenue into the fund. The money is then invested, and the profits generated are distributed equally to every resident of Alaska in the form of an annual dividend. Last year’s dividend, at $2072, was the largest paid out so far.
The Alaskan dividend system has been a great success, enabling citizens to save and reduce their levels of debt, while helping the state to reduce inequality and poverty. Although it is obviously not a full basic income (i.e. enough to live on), it is the closest we have to an example of a basic income in the sense that it is a regular, unconditional payment made to all citizens.
Unfortunately, the UK squandered a great opportunity to set up a similar SWF in the 1980s using revenue from North Sea oil. Instead, as Stewart Lansley explains in an LSE blog post, “the proceeds were used to cut taxes and boost consumption – now widely recognised as a huge historic policy error”.
Writing in the Guardian, Guy Standing says that the UK must not make this mistake again by allowing a few elites to benefit from fracking rather than the many. Despite his opposition to fracking “for environmental and safety reasons”, he argues that “if fracking is to go ahead… then the people of this country should be the primary beneficiaries and decision-makers, not a plutocracy and a few multinational corporations.” Standing proposes the establishment of a “democratically governed national fracking fund”, created by renting areas of drilling to companies through public tender. The proceeds would then be “invested in ecological and socially desirable investments”, with dividends paid out in a similar way to the Alaskan Permanent Fund.
There are several other possible ways to create an SWF. One would be to reverse the trend of privatising publically-held assets. In the afore-mentioned blog post, Stewart Lansley outlines how and why this should be done:
“In the last year alone, over £30bn of publicly owned assets from Eurostar to RBS have been sold. Next in line are to be the Land Registry and the remaining shares in Lloyds Bank previously bailed out with taxpayers’ money.
The government claims that such sales help pay down the deficit, but it makes little sense to use long term capital assets to finance a temporary revenue gap. Sales offer a one-off windfall – the family silver can’t be sold again. This will mean the permanent loss of collectively owned public assets, many highly profitable, built up over many decades, and the end of a stream of income delivered over time. In recent years, for example, the land registry has achieved annual surpluses of up to £100m, thus delivering regular dividends to the government…
Imagine the shape of the British economy today if, instead of the £200bn worth of successive sell-offs since the mid-1980s, public assets had then been pooled into a protected public ownership fund. With the revenue paid back into the fund – and only an agreed proportion of it spent – it would have grown to represent a significant part of the economy, providing a powerful balance to the entrenchment of private capital.”
In a paper that would later be published as a chapter in his book “Exporting the Alaska Model: Adapting the Permanent Fund Dividend for Reform around the World (Exploring the Basic Income Guarantee)”, researcher Gary Flomehoft explores numerous revenue streams that could be used to establish SWFs or provide straight-up dividends. He shows that the Alaska model can be applied even in states and countries without vast reserves of oil, explaining that “SWFs can be based on other valuable resources such as copper (Chile), diamonds (Botswana), or even phosphates (Kiribati)”. Furthermore, he argues that even a resource-poor state like Vermont in the U.S. could harness its common assets to provide dividends of at least $1,972 to its citizens:
“One might get the mistaken impression that only oil or resource-rich states can afford such a fund and dividend. Every state or country has substantial untapped revenue available because many natural resources and social common assets have been given away by government to private businesses. Businesses then sell them back to the public capturing not only the value they add with their effort, but also the scarcity value or economic rent of the assets given to them by public authorities.”
In his paper, Flomenhoft looks at various revenue streams such as land value and a carbon tax, licenses for logging, hunting and fishing, as well as fees for companies extracting groundwater and minerals or using publically funded resources such as the broadcast spectrum or the Internet (see also Peter Barnes’ excellent website dividendsforall.net). There’s no reason why these ideas couldn’t be looked into in the UK too.
Other options not explored in Flomenhoft’s paper include using Thomas Piketty’s idea of a wealth tax to establish an SWF, as suggested here by blogger Matt Bruenig, or Robert Reich’s proposal of sharing out profits from patents and trademarks.
In conclusion, we are certainly not short of common assets that can be rented out to the benefit of all citizens rather than a few individuals. By applying the Alaska model to the UK, we too could preserve the value of limited resources for future generations, while also reducing inequality and poverty today.
It’s interesting how British politics often finds itself reflected in the U.S.: from the emergence of the populist, right-wing politics of Farage and Trump to the virtually simultaneous rise of left-wingers Jeremy Corbyn and Bernie Sanders who have both amassed a large and passionate following but are unwanted by their respective parties.
Observing British and American politics, an issue that I think is becoming increasingly important on both sides of the pond and urgently needs far more attention than it is getting is electoral reform.
The problems with the UK’s first-past-the-post (FPTP) electoral system were blatantly clear after the 2015 general election. FPTP enabled the Conservatives to form a majority government with just 36.9% of the national vote. A combined total of around 5 million people votes for UKIP and the Green Party yielded just a single MP for each party, while the SNP needed only 25,972 votes per elected MP. Furthermore, an MP in Northern Ireland managed to win his seat with a record low share of the vote of just 24.5%.
There is another big reason why reform is urgently needed now: the Labour Party is tearing itself apart at the seams but cannot afford to split under FPTP. While the various wings of the party are involved in bitter fighting, the party’s standing in the polls is disastrous, and the lack of a united front would hand an easy victory to the Conservatives in a general election.
It seems doubtful that the party will be able to unite with members and the PLP pulling in different directions. Labour rebels are already planning to create a separate party if Corbyn wins the leadership contest, as is expected. However, without electoral reform such a split would be a disaster for all involved. If Labour were worried about the Greens splitting the left vote before the 2015 election, imagine what would happen to a freshly carved up Labour Party. The two newly formed parties would be obliterated in a general election, allowing the Tories to rule indefinitely at a time when the country desperately needs an effective opposition, something even David Cameron acknowledged during his final outing at PMQs.
Under a proportional system, Labour would be able to split and start taking the fight to the Tories. As Josiah Mortimer explains in his article “Let’s Face It: Labour Wouldn’t Be in This Mess If We Had PR” in the Huffington Post, switching to a proportional system would have several benefits for the various factions that currently make up the Labour Party:
“The simple fact is, under a PR system, none of this would need to happen: the ‘coup’ plots and the constant tug-of-wars, the unpredictable see-sawing one way or another. A centrist/social democratic party could elect who they wanted, while a new left-wing party could emerge. They could work alongside each other, and be perfectly content with their leaders. The quality of leadership might also go up on both sides, with less of a ‘fortress mentality’ that comes from trying to hold on to the reigns for as long as possible in the face of a possible unseating from another faction… Leadership contests would no longer be the same skewed, bitter ideological struggles – there would be broad agreement on ideological positioning.”
Some Labour MPs, such as Clive Lewis and Jonathon Reynolds, have argued in favour of PR. However, it seems unlikely that Labour leader Jeremy Corbyn will join them in supporting full PR. When asked about PR in an interview with Owen Jones, he gave the following answer:
“The caveat for everything to do with electoral reform, as far as I’m concerned, is maintaining the constituency link. Where you go away from constituency link of a member of parliament to a constituency then I think you end up with a more remote form of politics. Beyond that, top up lists, Additional Member System or, perhaps better, a democratically elected upper chamber, which would be proportionally represented, are ways forward on this.”
The Additional Member System (AMS) that Corbyn mentions has been suggested as way to have a more proportional system, while retaining the constituency link. It is already used for the Scottish Parliament, Welsh Assembly and London Assembly and is also used for general elections in Ireland in combination with a Single Transferable Vote system.
“Many MPs who are opposed to PR claim that it would inevitably damage the link between them and their constituents, whose interests they represent. In reality, there are a number of systems of PR that keep or even improve this link. The Additional Member System (AMS) maintains the present principle of one-MP-to-one-constituency, while using top-up lists to ensure that the share of seats a party wins matches the share of the vote the people give them.”
One problem I can see with implementing this system though is that it would require either a large increase in the number of MPs – something that I cannot imagine the British public wanting – or a redrawing of constituency boundaries to make them much bigger, thus halving the number of local MPs. In any case, ways to make the electoral system more proportional ought to be discussed further in the UK.
Meanwhile, in the U.S., the attempt to carry Bernie Sanders to victory in the Democratic primaries has failed, and progressives are looking around for alternatives, with many considering Green Party candidate Jill Stein.
However, if they vote with their conscience and refuse to fall in line behind the “lesser of two evils”, they risk forever being held responsible for handing the White House to the Republicans, much like Ralph Nader is routinely blamed for costing Al Gore the presidency in 2000. The threat of splitting the vote has effectively left Americans having to choose between the two most unpopular and least trusted presidential candidates in history.
There is clearly an appetite for alternative voices, with interest growing in the Green Party and the Libertarian Party, but under the current system these parties will struggle to even achieve the 15% required to take part in the debates, let alone produce a winning candidate.
The only candidate who seems to be addressing these issues at all is Jill Stein. In a recent interview with the Intercept she said the following:
“[T]he two-party system is the worst-case scenario. In my view, the worst horror of all is a political system that tells us we have to choose between two lethal options, and that’s what we have to fight and we shouldn’t be manipulated into thinking it’s one or the other of these villains out there, one or the other evil.
There’s a readily available solution right now: ranked-choice voting, which would take the fear out of voting and would ensure that people can vote for their values as their first choice, and their pragmatic choice, whatever that is, as their number two. That would actually enable us to move forward in a good way and bring our values back to democracy.”
If we really care about democracy we should looking at alternative solutions like PR and ranked-choice voting to enable a wider range of opinions, rather than narrowing down the debate. Moreover, a more proportional system would finally enable the dysfunctional parties that force together unhappy bedfellows like Sanders and Clinton and Corbyn and Blair to break apart and put everybody out their misery. We need to end our “lesser-of-two-evil”-thinking and finally start making our representatives actually representative of what we want. Changing the way we vote for our politicians is the only way we can make this happen.
This is the second part of Professor Guy Standing’s talk at the “Of Money and Men” conference in Prague on 12th May. In this part he focuses on basic income. You can read the first part of the talk here.
“I’ve been working and lobbying for basic income since 1985. And we set up in 1986, a group of economists, philosophers – many have gone on to fame and glory, if not richness – an organisation we called BIEN. I came up with the name because it’s French and it’s nice; Basic Income European Network. But when hundreds and thousands of people started to join from around the world, we decided to change the name at our Barcelona congress in 2004. And we became BIEN, but the “E” became “Earth”. And since then, for various reasons, basic income has suddenly become mainstream. Basic income is seen by mainstream economists of high reputation now. Those same economists, 10, 15 years ago, would have written, saying it was a stupid idea. Today they understand that if we do not address the major crisis of inequality and insecurity – they go together but they’re different – we are at risk of going to a dystopia of neo-fascist authoritarianism. It’s no light-hearted matter.
And also there are philosophical reasons. I’ve just come from speaking at a big conference in Zurich because, as you may know, on June 5th there’s going to be a national referendum on whether a basic income should be introduced as a constitutional amendment in Switzerland; commit the Swiss government to move towards a basic income. What was interesting about a number of other speakers who were there; they included two plutocrats from Silicon Valley, a former US secretary of labour, a venture capitalist from New York and sundry other prominent economists and philosophers. I don’t think we’ll win the referendum, but it’s now up there in the mainstream.
And, I want to emphasise several points. First, the standard argument against basic income is that it’s unaffordable. Yet, every country spends six or seven percent on subsidies, which distort markets, which go predominantly to the corporations and to affluent groups. A basic income would cost much less than that.
Second, we spend a huge amount – we, governments – on means-tested, behaviour tested, costly welfare systems that act as a deterrent to labour. Because if you have means-testing you have poverty traps. So in those countries, I’ve just come from Denmark, there the calculations are that the poverty trap is, you have a marginal tax rate, if you go from low benefits into the sort of low-wage jobs that that the precariat can get, of 86%! That means you only get an extra 14% by going into a low-wage job of the type that’s available. In Germany it’s 85%. In Britain it’s a wonderful 80%. Can you imagine what would happen if the salariat had marginal tax rates of 80% or more? They would be – PAH! – creating havoc! Creating wonderful speeches. But the precariat has to face them. We need to overcome the poverty trap. The only way to do that is to move to a basic income as a floor.
But I want to advocate the basic income for a philosophical reason. It’s a matter of social justice. All the aspects that are instrumental, they’re important, but Thomas Paine and a very fine thinker in the early 20th century, G.D.H. Cole, put their finger on it. The way I put it is this; the wealth and income of any of us is far more to do with the efforts and achievements of our ancestors than anything you or I do ourselves. But we don’t know whose ancestors created our wealth; yours? Mine? His? So, in a sense you can see a basic income as a modest amount given to everybody as a right, as being a social dividend paid from the collective wealth.
I came to this idea when I was asked to talk in Middlesbrough, an industrial town in the north east of England, and I mention it in my book. Middlesbrough was a village in the 1820s. Then they discovered iron. And within 15 years Middlesbrough became the centre of the industrial revolution, the centre of industrial capitalism. So if you go to San Francisco, the Golden Gate Bridge was built with iron ore from Middlesbrough. If you go to Sydney Harbour, the bridge was built with iron from Middlesbrough. Today if you do to Middlesbrough you see poverty; you the precariat; you see people hanging around in the streets – no future. But you see the toffs down in the south of England who got the wealth produced by Middlesbrough. And they’re back in government; they went to Eton and Oxford, and so on. And you say that is fundamentally unfair. The wealth was created by the ancestors of those people. So for me that is the main justification.
But a basic income would also give security to people. It would also enable people to have a greater sense of control of their time. To be able to make choices about work, reproductive work. I want to spend more time caring for my elderly mother and not just doing a job pouring the tea for a boss. Are you telling me that pouring tea for a boss is more valuable than doing the caring?
It also gives us a sense of encouraging work and encouraging leisure. The only condition, which I think could be justifiable for giving, attaching to a basic income is a moral one. I say that, in fact, to encourage democracy, which is very weak at the moment, we should do what Pericles did in 450 BC, which is, he said, for participating in the life of the polis, as citizens, I – the state – will give you a basic income. He did that. He didn’t make it conditional; he gave it as a reward. And I say that anybody when they start receiving their basic income should sign a statement morally committing to voting in elections and to going to one political meeting a year.
I want to end by just mentioning this is the year of the pilots, the experiments. Some years ago I was involved in the first basic income pilots in Africa, designing it, carrying it out. Saw fantastic results. And then I got an opportunity to do three pilots, experiments, in India. When we were designing it and raising the money to do it, Sonia Gandhi let us know that she thought we were wasting a lot of money and that everybody would be lazy and drink alcohol and smoke cigarettes. I thought we were going to be blocked from doing it. But we did it. We provided over 6000 people in nine communities with a guaranteed basic income. Every man, every woman, every child; the child’s paid through the mother. For 18 months and then four more, they each had that basic income. No conditions; they could do what they liked. And we monitored it through what everybody calls a randomised control trial, comparing it with other communities where nobody got a basic income. And the results, which we published in a book, – I’ve got a few copies if anybody is interested – were remarkable. Sonia Gandhi asked us back to her house. Two cabinet ministers came out in favour once they saw the results.
First, the welfare effects. People who have a basic income improve their nutrition, particularly the children, improve their health, improve their schooling, school performance, sanitation.
Second, contrary to what people say, people worked more. And laboured more; but more work.
Income in those communities, discounting the basic income, went up. And the income inequality went down, and there was greater economic dynamism.
The third aspect was that equity improved, because people, like the disabled, this woman who we pictured and is on the front of the cover, she’s disabled, she has no legs. But people like her, when they had their basic income and her family and friends contributed part of their basic income, she was able to buy the means of production and become a seamstress, making the clothes in her village.
But the thing that really excited me, and we emphasised it, – and if anyone’s interested, I’ve written some articles on this – is the finding that the emancipatory value of the basic income is greater than the money value. Because people who have that basic income have security and they can make choices and decisions. So people managed to save and get out of bonded labour. People managed to find ways of cooperating with their neighbours and building their community.
But I’ll end with a story. I went to one village where we were doing a basic income, and when we started it we had to get everybody with a card, because they had to have their picture card so we knew who to give the basic income to until they had bank accounts. And in one village all the young women wore veils. And they didn’t want their picture taken. We said “alright, then go into a hut” and have their picture taken unseen.
When I went back to that village about six, seven months afterwards when the program had been going, I said to an Indian colleague of mine, working on the project, I said “have you noticed the change in this village?” He said “no”. “Yeah, yeah, yeah, when we came here all the women were wearing veils and now none of them are”. He said “yes”. So we called the young women, some of the young women across, and they wouldn’t, you know, young women, don’t like talking to strangers. But eventually one of them said “I’ll tell you why. Before, we had to do what the elders told us to do. Now we have a little of our own money we can make decisions ourselves.” Thank you very much.”