Democracy Café focused on taxing land and the problem of inequality
The Democracy Café concentrated on two topics at its last meeting: whether we should tax land and the problem of inequality. Both engendered a lively discussion and many interesting points were made.
Land has been taxed in the past but it has not been so in recent decades. The problem is that land is key to so much else in our society that it invites the question, can it continue to be ignored as a source of income for the Treasury? Labour is proposing to introduce a Land Value Tax to replace the Community Charge. Studies on the growing inequality in our society shows that the gap between the richest and the poorest is getting ever wider although there has been some leveling off in the upper deciles immediately below the top 1 or 2%. More and more of the tax burden is falling on the poorest in our society. Yet one of the greatest forms of wealth, land, is – to all intents and purposes – untaxed.
It was noted straightaway that collecting it would be quite difficult as there is no complete register of who owns what in the UK. There was need therefore for a new ‘Doomsday Book’ to establish this. Attempts to do this in the past have been frustrated because the Lords consists of a number of people who er … own land. Quite what is owned by Europe’s largest landowner the Duke of Buccleuch for example, is uncertain. It was also suggested that evasion was possible but in practice, since land is immovable and it would be possible to know who owns what, evasion should not be a big problem. It pointed to the need for transparency of ownership.
Would it have an effect on land prices? After all, if there was a tax on land would owners simply pass on the tax to any buyer of land? This might happen to an extent but since there was only so much money in the economy to buy land, then higher prices would result in fewer sales. It was likely that the tax would fall mostly on the landowner. The discussion moved on to the developers and house builders. Would they not be deterred and reduce the number of housing units built? This is difficult to answer since some of the major players buy considerably more land than they intend to build on immediately and there were concerns that they were engaged in land-hoarding. There was a big imbalance between land with planning permission and homes built. The claim is that developers do this to boost the value of their land banks, a claim they deny. A tax would have the effect of limiting this practice as it would represent a cost to developers.
The discussion moved onto the wider issue of housing. The policy of right to buy – originally a proposal by the Labour Party but keenly adopted by the Conservatives to become one of their flagship policies – had the effect of depriving local authorities of the ability to build affordable homes or homes to rent i.e. ‘council houses’. The rules meant monies were returned to the Treasury and were not used to build replacements for those sold. This was done for political reasons. The quality and size of homes diminished with the abandonment of Parker-Norris standards.
The discussion did not venture far into the question of differing values for different uses. So an acre of grazing land for example was worth maybe a thousand times less than an acre of land with planning for housing. How could the community benefit from this uplift? A large chunk of the price of a house was the value of the land it sat on. Maybe it is a discussion for another time.
How would you value land? This might be necessary if its rate of tax was related to its use. It was pointed out that there were methods for valuing land already, RICS produce guidance in the Red Book (mistakenly referred to as blue in the meeting) . One interesting phrase was ‘a garden tax’ and that referred to how would ordinary people react if their little plot was to pay a tax? Opponents would like as not use this phrase in their arguments against it. Someone also questioned the effect on someone living in an expensive area with a large plot of ground suddenly being asked to pay a new tax. Overall, a land tax would not alter the total take, it would just shift the burden from income tax towards a tax on wealth.
The second subject was the question of inequality which did in fact follow on from the first. Mark noted that a degree of inequality was in fact a good thing since it can act as an incentive and a spur to entrepreneurialism.
The first question was what do we mean by … ? are we talking about inequality of wealth or the inequality of opportunity? Pure equality will always be impossible: the differences between people, innate or otherwise, and societal differences, together with pure chance, will always mean that some people will always do better than others.
A powerful argument was put forward for the role of education. In this regard, why are not the opportunities made available by the education system today not taken up more by people? It seems that many are too apathetic to take advantage of what was available it was argued. There just seemed to be a lack of aspiration. Also, it seemed that society offered one deal for the educated and a different deal for all the others.
In trying to define inequality, Dickie suggested three aspects: 1. equality of interest, 2. equality of opportunity and 3. equality of outcomes. We did not take this up unfortunately so perhaps another time …
Two aspects to the education system generated a great deal of discussion: the role of class and the role of competition. The class system in regard to the British education system is well known. Research has shown that a child’s future is largely mapped out from around the age of 7 by reference to their class, parental considerations and the school he or she goes to. The preponderance of public school education people in the key professions and the media is well documented. The Russell group of universities have gone to great lengths to try and even the chances of candidates getting in from non-public schools with only modest success. The enormous difference between intake to Oxbridge from one public school – Winchester – and other schools was noted. [A similar point is made in this link]
While people recognise the need for plumbers and electricians, they are not so keen for their children to become such, preferring them to enter a profession, to become accountants or lawyers. This lack of ‘parity of esteem‘ has dogged the education system for well over a century. Someone noted the preponderance of classicists over scientists among our prime ministers with only two of them – Mrs Thatcher and Harold Wilson – representing the latter (wasn’t Wilson an economist though?).
A second theme was competition. Competition means there are winners and losers. What happens to the losers? Do they end up not doing as well? Becoming a ‘winner’ often depends on parental power or money – being able to move to the right catchment area for example. Committed parents are likely to do better for their offspring with tutoring, books, meaningful holidays and so forth. Since the ability of a child has nothing to do with the bank balance of the parent, it meant bias was inherent in the system. The loss of Sure Start centres was noted: these were set up to address the problems of early years children. If we had an education system which was equal and all pupils went to a good school, these differences would not be apparent. The public (that is private) school system would have to be abolished however. Some parents like the competitive system so long, one assumes, their children are able to profit from it. It was linked to the belief that the poor were to blame for their own misfortunes. We are aspirational and truly care for our child’s welfare so we deserve for them to do well: they, the others (the poorest) aren’t. Is there something in this belief?
Reflecting on the debate as a whole, someone said ‘we are an angry society today’.