Post on 22-Oct-2014
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Addressing The Deficit without Increasing Taxes or Reducing Services
Dave Wetzel FCILT
President, Labour Land CampaignChair, The Professional Land Reform Group
General Secretary:The International Union for Land Value Tax
Former Vice Chair, Transport for LondonFormer Leader London Borough of Hounslow
Former Transport Committee Chair, Greater London Council
GlobalNet21 Webinar 15 November 2011
Addressing The Deficit without Increasing Taxes or Reducing Services
Dave Wetzel FCILT
President, Labour Land CampaignChair, The Professional Land Reform Group
General Secretary:The International Union for Land Value Tax
Former Vice Chair, Transport for LondonFormer Leader London Borough of Hounslow
Former Transport Committee Chair, Greater London Council
GlobalNet21 Webinar 15 November 2011
The UK is in Debt
The UK has a deficit -Because the UK’s
annual expenditure is higher than our
annual income
But let’s put the total debt into proportion
UK Debt as percentage of GDP1945 to 2010
UK DEBT 1945Was 3.2 times more than 2010
UK Debt2010
And remember in 1945 the UK had to:
• repair or rebuild bomb damaged homes, docks, bridges, roads, business premises, roads, railways etc.
• find jobs for demobilised servicemen and women.
• and shift industry from producing armaments to selling manufactured goods to a war-ravaged world economy.
Not only did they achieve this but the 1945-51 Govt also managed to create full employment (for the first time after a major war), establish the welfare state, introduce decent pensions and unemployment benefits, improved education, and create The NHS!
Suppose the UK found a new rich oil field in the Midlands?
Like oil-rich Middle East countries we could not only pay-off our debts
But also IMPROVE public services and CUT those taxes that damageour economy
Taxes like vat which increases prices and income taxes which reduce workers’
spending power
But the UK is unlikely to find new natural resources
But we could make better use of an existing resource
Our LAND
But what could that be?
To produce wealth we require three factors:
1. Labour (all mental and physical human effort in the production process)
2. Capital (Man-made wealth used to produce more wealth e.g. Tools, equipment, machinery, business buildings, parts etc.)
3. Land (all the free gifts of our universe such as dry land, oceans, fish in the sea, natural resources oil, coal, gas, ores, space, the electro-magnetic spectrum etc.)
What is the return to these three factors?:
1. The return to Labour is WAGES (salary, bonuses, peace-work
etc.)
2. The return to Capital is INTEREST (interest rates, profits, dividends,
etc.)
3. The return to Land is RENT (economic rent as opposed to rent for hire cars, buildings, equipment etc.)
Who deserves to receive these returns?
1. WAGES? surely belong to those who create wealth by working
2. INTEREST?surely belongs to those who save and invest
3. RENT?the rent for hire cars, buildings, equipment, domestic appliances etc. must surely belong to those who made
these items or who fairly transferred their ownership –
But Who deserves the economic rent of NATURE?
Who deserves the RENT of LAND?
RICARDO’S THEORY OF RENT
As agreed by
Adam Smith
Henry George
Karl Marx
William Vickrey
and others
4 x fields
Imagine Four Fields
of equal size
4 x fields
These sites could be used for factories…
4 x fields
Offices or hotels…
4 x fields
Shops…
4 x fields
Or housing…
We’ll use agriculture for this example
4 fields of equal size and equal access.
The only difference is the fertility
resulting from Mother Nature
Land
Labour £100k
What do we need to produce wealth in these fields?
Capital £90k
Profit £10k
Breakeven£200 k p.a
Land
Labour £100kper annum
Capital £90kper annum
Profit £10k
Income
£10k £1m
Labour £100k
Capital £90k
RENTProfit £10k
Breakeven£200 k p.a
£210k
£1.2m
Income
£10k £50k £400k £1m
Labour £100k
Capital £90kProfit £10k
£210k
£250k
£1.2m
£600k
Rent
GDP
But not a good model of the economy
What’s missing?
Income
£10k £50k £400k £1m
Doesn’t include Government expenditure
Breakeven now: £260k
Tax£60k
Labour £100k
Capital £90kProfit £10k
£210k
£250k
£1.2m
£600k
Breakeven£200 k p.a
Rent
Income
£10k £50k £400k £1m
Breakeven now: £260k
Tax£60k
Labour £100k
Capital £90kProfit £10k
£210k
£250k
£1.2m
£600k
Rent
Income
£10k £50k £400k £1m
Breakeven now: £260k
Tax£60k
Labour £100k
Capital £90kProfit £10k
£210k
£250k
£1.2m
£600k
Rent
GDP
Income
£1m
Labour £100k
Capital £90kProfit £10k
£1.2m
Rent
What is the freehold price?
10 - 20 years rent
Income
£10k £50k £400k £1m
Labour £100k
Capital £90kProfit £10k
£210k
£250k
£1.2m
£600k
x 10 yrs x 10 yrs x 10 yrs x 10 yrsFreehold =
£100k £500k £4m £10m
Rent
Income
£10k
Labour £100k
Capital £90kProfit £10k
£210k
x 10 yrs
LVT50%
Freehold =£100k
Rent
Income
£10k
Labour £100k
Capital £90kProfit £10k
£210k
x 10 yrs
LVT50%
Freehold =£100k
RentLandowner £5k
Land Value Tax £5k
Income
£50k
Labour £100k
Capital £90kProfit £10k
£250k
x 10 yrs
LVT50%
Freehold =£500k
RentLand Value Tax £25k
Landowner £25k
Income
£400k
Labour £100k
Capital £90kProfit £10k
£600k
x 10 yrs
LVT50%
Freehold =£4m
RentLand Value Tax £200k
Landowner £200k
Income£1m
Labour £100k
Capital £90kProfit £10k
£1.2m
LVT50%
Freehold =
Rent Land Value Tax £500k
Landowner £500k
x 10 yrs
£10m
Income
Labour £100k
Capital £90kProfit £10k
£210k
£250k
£1.2m
£600kLVT50%
Freehold =
Rent £5k £200k £500k£5k £25k
£25k
£200k
£500k
x 10 yrs
£100k
x 10 yrs
£500k
x 10 yrs
£4m
x 10 yrs
£10m
£50k £250k £2m £5m
Income
Labour £100k
Capital £90kProfit £10k
£210k
£1.2m
£600kLVT50%
Freehold =
Rent £5k £200k £500k£5k £25k
£25k
£200k
£500k
x 10 yrs
£100k
x 10 yrs
£500k
x 10 yrs
£4m
x 10 yrs
£10m
£50k £250k £2m £5m
£250k
Income
Labour £100k
Capital £90kProfit £10k
£250k
£1.2m
£600k
Freehold =
Rent £5k £200k £500k£5k £25k
£25k
£200k
£500k
x 10 yrs
£100k
x 10 yrs
£500k
x 10 yrs
£4m
x 10 yrs
£10m
£50k £250k £2m £5m
£210k
LVT50%
GDP
LVT HELPS AVOID URBAN SPRAWL
SPRAWLIf land is used efficiently in towns and cities with no
empty or underused buildings or sites -
Then the needs of investors and residents are met without being forced onto less advantageous marginal land which incurs extra cost and inconvenience.
The disruption to the countryside is saved, urban environments become more efficient and journey times are reduced for transporting goods and for individuals commuting.
Energy is saved – i.e. we help to address climate change.
Why collect land rent?• Land is a natural resource
• Land values are created by whole communities
• Landowners do not create land values
• Expenditure on public services usually leads to an increase in land values
• The planning process often provides landowners with huge windfalls
• Taxes on labour and capital act as a drag anchor on the economy
• LVT is a fair way of paying for public services
• LVT encourages new capital investment
• LVT promotes the use of empty sites
• LVT helps prevent urban sprawl
• LVT cannot be avoided - unlike other taxes
• LVT is easy to assess and collect
• LVT would provide automatic compensation
• LVT facilitates lower interest rates
• LVT evens out the property cycle
Land Value Tax is one way to collect land rent
Thankyou For
listeningDave Wetzel