Budget Resolutions and Economic Situation — House of Commons, 2015-07-08
Topic: Macroeconomics
Barry Strachan Gardiner (Labour, Centre-left): I start by welcoming the announcement about the living wage. I would feel a good deal happier about doing that if I had not noticed the guilty, sideways glance that the Chancellor gave immediately after he had made his announcement. It reminded me too much of Draco Malfoy. It set me thinking: what is the living wage in London at the moment? It is £9.15. The Chancellor said that it would be £9.35 by 2020. I thought, "Hang on. Is it really going to increase by only 20p in the next five years?" Then I realised what is really going on: one calls the thing by the same name, but changes what it is. We have been there before. We know very well that the practice exists. We remember the Chancellor’s colleague used it when we were given academies. Of course, those academies were not academies. What we called academies were those schools in difficulty, which were not doing well by the children that they were serving, and we put extra money into those schools and allowed them the freedom to try to do better. What the Conservatives called academies were excellent schools doing tremendously well, which were allowed to have that freedom and leave the system, taking with them money that was in the pot for those needing special educational assistance or free school meals. It is the opposite of rebadging: something different is called by the same name as something else. It does not fool people for long The Chancellor hit the wrong people, and he did so because of a genuine political problem that faces all modern Chancellors. Public demand for better services requires increased revenue, but international market competition for capital and labour drives down the ability of any country to raise either corporate or personal income tax. For any political leader, the issue of tax rates has become a straitjacket. The obvious answer has to be to raise revenue some other way. What is needed is a commodity that cannot be concealed or moved offshore. If it could help to establish a political narrative around fairness and equality, so much the better. Instead of hitting the working poor by removing working tax credits, perhaps the Chancellor should have considered taking a leaf out of the SNP’s book and taxing land, the possession of which is one of the defining indicators in our country of the divide between rich and poor, and between powerful and powerless Land is a very odd commodity. Take an unattractive piece of agricultural land worth about £5,000 an acre and give it planning permission. Suddenly one has an asset that is worth more than a hundred times that amount. An acre of development land can fetch between £500,000 and £l million. Of course, we all know that land is scarce on this crowded little island of ours—only we are wrong, and it is not. In fact, of the UK’s 60 million acres, only about 4 million are actually used to house our 61 million-strong population. It is true that about 15 million acres could not be used—not everybody wants to live on top of Cadair Idris—so we have to exclude the forests, lakes, rivers and mountains, but that still leaves 41 million acres of good land Most people are surprised to find out that the myth of the crowded little island is just that—a myth—but not as surprised as when they find out that the people who currently pay land tax, some £35 billion of council tax and stamp duty, are the 99.4% of us crowded on to the 4 million acres, while the 160,000 families who own the remaining 41 million acres receive from the public purse a subsidy of about £3.5 billion every year. That is about £83 an acre every year from us, their fellow citizens. Yet these fellow citizens are the very ones that my hon. Friend the Member for Eltham (Clive Efford) was talking about, who cannot afford to buy a home of their own because land is released slowly and selectively on to the market precisely to restrict supply and artificially inflate prices. The landowner benefits twice over. The current system subsidises a tiny elite, precisely encouraging them not to make their land available for housing until public demand has ramped up its price. Breaking that perverse cycle is a key way of resolving the problems of "generation rent"—the housing problems my hon. Friend was speaking about—but it is also a way of raising significant revenue A land valuation tax is a levy on the value of the land unimproved by buildings or other enhancements. The principle is simple: that because the value of the land has been created by its proximity to the infrastructure paid for by the community—the schools and hospitals, the roads and railway stations—that value should be captured by the community to be reinvested in public good, rather than appropriated for private profit. And if that sounds like a Labour policy, then so much the better!