In last week’s Sunday Herald there was an eye-raising story regarding Alex Salmond slapping down John Mason for suggesting that the SNP should hold a policy of raising the top rate of income tax above 50%. To me the story illuminated Salmond’s fears that the public may mistakenly view an independent Scotland as a place where wealth is choked off to fund welfare and the public sector. One of the First Minister’s objective is quite plainly, and quite understandably, to not scare too many horses before Scots troop out to vote in the independence referendum, whenever it may be.
So tax rises from the SNP are out for political purposes, tax rises from the Conservatives are out for ideological reasons and tax rises from Labour are out because they are powerless to implement them.
For many of us who are not too fussed about the referendum and keen to make sure Scotland’s, and the UK’s, Warren Buffett’s and Liliane Bettencourt’s pay their fair share of tax, who are we to look to?
Well, the Lib Dems seemingly and good news in today’s Sunday Times comes with the front page story that “Lib Dems want a land tax on rich”. This may be something of a policy grab from the Green party’s LVT but it shows that, within the Government, a focus on wealth distribution does exist in some quarters.
It is admittedly disappointing that Nick Clegg may have to give the Tories a cut in inheritance tax to get the deal through but the proposal appears to be that levies would be fixed at 0.5% of the capital value of the land, determined by the independent Valuation Office Agency. It seems to be a workable, deliverable policy that would be difficult to avoid. As Vince Cable says: “land tax is the one thing you can’t take off to Monaco”.
Anyway, a headline, progressive policy that differentiates the Lib Dems from the Tories would be welcome and is certainly long overdue.
Talk is cheap and the deficit is expensive but hopefully, somewhere between the two, a political party can rise through the political reticence to raise taxes and extract more from those with the deepest pockets. Right now, it seems it’s the Lib Dems who are best placed to deliver.
#1 by James on August 28, 2011 - 1:27 pm
I love the idea that the Lib Dems will get anything progressive out of working with the Tories. That ship sailed some time ago.
#2 by Douglas McLellan on August 28, 2011 - 11:04 pm
Mmm. Scrap ID cards, Scrap Compulsory Redundancy Age, Raise Tax Threshold for lowest earners (SGP proposed raising taxes for lowest earners), Banking Levy, Move International Aid budget to UN target, judicial enquiry into UK role in torture & rendition, increased capital gains tax for higher earners, restored link between state pension & earnings.
Just a few.
#3 by Random Lurking Scotsman on August 28, 2011 - 2:09 pm
I feel quite sorry for the Lib Dems. They genuinely thought they were joining a moderate, sensible government with real influence, but they’ve just been relegated into propping up a nasty old-style Tory administration and can’t leave for fear of the inevitable political oblivion that awaits them.
It’s a shame in a lot of ways as there are quite a few genuinely good Lib Dem politicians, but ministerial limbs can have a strange effect on most men.
#4 by Steve on August 28, 2011 - 2:28 pm
Totally agree with James about the Lib Dems. Progressive, ha!
I recently blogged on why we should legislate for a LIT now, not as a replacement for council tax, but as a replacement for the 10p tax powers due to be devolved to Scotland under the Scotland Bill.
But we could extend my proposals to include Land Value Tax too.
The basic idea is twofold:
1 – We’re better off with a Local Income tax that we can vary as we see fit – we can choose the tax free element, we can set different basic and higher rates. Much better than the Scotland Bill powers which will restrict us to the UK tax free “personal allowance” and requires that any change to basic rate must also apply to higher rate and vice versa.
2. – Following on from discussion with James on twitter, the LIT plus LVT bill would be enabling, it would be putting in place powers now, that could be used after future elections by future Scottish Governments or councils with a mandate to implement (hopefully progressive) changes.
My argument is that we should remember the SVR fiasco, where we couldn’t have used the 3p tax powers even if we’d wanted too. The SNP is all about more powers for Scotland. Legislating now to enable a LIT or LVT to be implemented is a way of increasing the powers we have over taxation, regardless of whether they are actually used or not in the next few years.
#5 by Tom Cresswell on August 28, 2011 - 4:14 pm
I was actually quite interested by this so I actually went out to buy the ST (normally I only get it on Saturdays & Wednesdays), but before I read this story I ended up getting infuriated that the Centre for Economics and Business Research have released another of their tediously fanatical and fantasy reports that inevitably follow the theme of “PUBLIC SPENDING IS ALWAYS TERRIBLE AND TOO HIGH AND IF WE REDUCED IT THEN EVERY PROBLEM IN THE WORLD WOULD BE SOLVED!!!”. (Apparently in 20 years Scotland will be a third world country, which is obvious because (as those of you who watched the third Scottish election debate this year) Scotland *indisputably* has the third highest dependency on the public sector after only Iraq & Cuba…).
But this does genuinely interest me since it was the Land Value Tax was basically the reason why I voted Green at the last election since, even though they probably wouldn’t be in a position to introduce it, it’s a good idea which hopefully if there were more green MSPs in parliament making a noise about it then it might be taken up by Labour or the SNP, as like those above, I doubt the Lib Dems will be able to introduce it…
#6 by Angus McLellan on August 28, 2011 - 5:07 pm
What was the point of John Mason’s comment? He has even less idea of how the books may look years from now than George Osborne does. And that’s very little idea indeed. Attention always seems to be focussed on Income Tax and Corporation Tax, these accounted for less than 40% of UK goverment revenue in 2009-10 and nearer 35% of GERS-estimated Scottish revenues.
If you want money, think about why Willie Sutton robbed banks. The easy money lies in reducing the scope of exemption, zero- and reduced-rating for VAT. And unlike Income Tax, fiddling with VAT leaves no inconvenient trail of reminders like pay slips, tax returns and P60s. It disappears into the inflationary background noise.
If you want to tax the historic ill-gotten gains of the great and the good, Income Tax is the wrong tool. And the UK already has what are, by international standards, high rates of Inheritance Tax anyway. Although for all the money it raises – an estimated £150 million in Scotland – Inheritance Tax might as well be abolished. Do you think the Duke of Buccleugh doesn’t have everything organised to ensure the bill comes to next to nothing?
The only significant types of tax that seem to have been abolished entirely are poll taxes and land taxes. That should tell us something. Poll taxes are understandable – hard to collect and never, ever popular – but land taxes? How hard are those to collect? So perhaps the Greens have it right for once. A Land Value Tax may well be the way to go. When you find the likes of the Institute for Fiscal Studies and bloggers at the Adam Smith Institute agreeing with the Greens on this point there must be something to it. The little Irish trial suggests that it isn’t any harder to implement than rating or council tax valuations are and were. The machinery is already in place, unlike LIT, so why delay? If the SNP are looking for something big to do in the next five years, apart from the referendum and managing cuts, why not replace Council Tax and Business Rates with LVT?
Perhaps you should write to Boris suggesting the same thing Jeff? He’s more likely to deliver for you than Cable, Clegg & co. After all, he’s got his reputation and his future to worry about. The LibDems are long past that stage.
#7 by Barbarian on August 28, 2011 - 5:09 pm
There are two parties I will never, ever trust.
The Lib Dems for starters, since they are opportunitists who will do anything for power.
The other is the Green Party. Their message seems to be taxing the hell out of everyone for everything.
As to 50% tax rises, there is little point, since it simply deters investment and does not raise sufficient capital anyway.
But why does the solution always seem to be tax? Perhaps a bit of efficiency in parliament might help, starting with a reduction in those ridiculous expenses, switiching the lights off at night, and using fewer ministerial cars.
Land tax is scary, since no doubt someone would find way to tax ordinary homeowners as well.
#8 by James on August 28, 2011 - 10:30 pm
So you trust Labour’s “efficiency savings, no cuts, no tax rises, magically maintained public services” and the SNP’s “tax cuts, magic money from the bridge, and magically maintained public services” lines?
#9 by Douglas McLellan on August 28, 2011 - 11:10 pm
I think that whilst you have distilled the SGP tax policies to a fine point you are being a bit harsh on them as it is clear that the tax/spend message of the SNP & Labour dont add up. At least the Greens appeared to.
I do share your concerns about LVT on ordinary homeowners. Nothing I have seen regarding LVT proposals seems to take into account how much people earn and their ability to pay this tax.
#10 by Angus McLellan on August 29, 2011 - 1:24 am
You’re missing something here. Andy Burnham was in favour of LVT as he explained in the Guardian. The website for the Labour Land Campaign is here.
It is not a panacea and as always there would be losers. But there is a huge, unequally distributed stock of wealth in land which has been largely untaxed for 150 years. There’s no reason why that should continue. There was a functional land tax in the United Kingdom for over a century. And if it could be made to work in 1707, it can work now.
As Wikipedia will confirm, LVT is presently used in the real world. So it’s not an impractical plan to resurrect a long-dead idea. It’s a viable alternative, or complement, to other taxes.
#11 by Andra on August 28, 2011 - 5:35 pm
I’ve got an open mind on land tax. A 0.5% p.a. tax is equivalent to compulsory seizing of c5% to 10% of land value. So one day a person owns 100% of the financial value of a piece of land, and the next day the government seizes 5-10% and forces the “owner” to pay rent (tax) to the government in perpetuity.
However, I can’t think of any difference between that and the government seizing 30% of a person’s income through income tax and NIC. To get a fair mix, it’s probably right to operate various taxes.
Land is just one type of asset, others being houses, factories, car, shares, intellectual property, etc. Why should land be taxed on a per value basis but other assets are not? One difference with land is that it is limited in quantity and the “owners” of land are only carers of the land for the next generation (and for the nation and the nation’s next generation).
A question, is it fair to seize 5/10% of the value of the 2011 owners of land? It may not adversely affect the landed gentry who have owned the land for generations and will continue to do so. But what if someone bought land last year with a 95% mortgage – they will now have 5% negative equity (due to the market value dropping by the 10% that the government has seized), due to a single government decision.
One advantage of this tax is that I don’t think it can be evaded by moving domicile; reducing the market value of land might actually make it easier to invest in land in Scotland; the tax may actually incentivise the profitable (for the current generation) use of land, thus reducing the incidence of derelict land – thus boosting the economy.
Of course, interested parties would complain, but then everybody complains about tax so that should not be a concern. It would certainly be fairer to tax land a little every year, rather than tax it once per generation through inheritance tax (and even then only were avoidance is not being practised).
#12 by Gryff on August 29, 2011 - 10:20 am
Pedantically, on your first point, I believe the crown owns all the land in a common law state, so far from appropriating a portion of the land, LVT or similar just end a thousand year rent holiday.
Your point on mortgages is more concerning, a prime advantage of LVT would be a fall in house prices, as they cease to be tax free assets, and thus become less desirable as investments and also as property hoarders with limited income put estate onto the market. But I don’t know if there is a way of compensating those who loose out on this. I assume any such tax would be levied on a five year or so escalator, with plenty of warning, but nonetheless some normal house buyers are likely to suffer a little.
#13 by Ben Achie on August 28, 2011 - 6:24 pm
There is a major issue about the efficacy of much of public spending in the UK. Anyone who has had many dealings with the public sector in Scotland, whether it be the NHS or local government, will know that is has a high incidence of complacent and often arrogant senior managers, who appear vastly overpaid (probably by a margin of about 50%).
It is no coincidence that inflationary deals such as McCrone for teachers, or the huge jump in pay for GPs and consultants, 8/10 years ago managed to filter their way through to senior managers’ pay. There has been little management accountability or effective performance monitoring, and fantastic pension and early departure deals of a kind that most private sector managers (and there are far proportionally far fewer of them) can only dream of.
What has this go to do with LVT? Lots, on the basis that those advocating new taxes must accept that all is not well with public sector performance, and that both its delivery mechanisms and policy formulation procedures need to be radically shaken up. Nicola Sturgeon has done well with the NHS, for example, in forcing better performance out of it, but is its current structure with a superabundance of boards, but lack of effective local accountability, really sustainable?
It is a cause of frustration and disillusionment for many of the people that I meet that those advocating radicalism in one sector always seem blind to the faults of the other, and land ownership patterns in Scotland are still mediaeval, with those owning significant amounts of land enjoying remarkable privilege, paid for by the rest of us. Likewise with senior public sector management. It’s the “squeezed middle” along with the most vulnerable that are really losing out.
The Lib-Dems will never get anywhere with this with their Tory partners, and almost certainly face annihilation at the next Westminster election. Labour might get round to it, but that’ll take them a decade at least, and the Greens just don’t have the clout in these straightened times. So that leaves the SNP to wake up to the benefits of considering LVT, I guess, unless the Scots Tories under Ruth Davidson really do some radical thinking………..(but would the membership they have left ever wear it?).
Why is there so much institutionalised inertia in Scotland?
#14 by mav on August 28, 2011 - 9:25 pm
If I’ve read the article right, they are proposing replacing council tax with it, and then fixing it at 0.5% of the value. Its that last bit I find really annoying. It should be down to councils how much to raise. Otherwise areas with high land values would be swimming in cash, and areas with lower land values would be broke.
#15 by Steve on August 28, 2011 - 10:58 pm
mav, sorry to be a tedious tax geek, but that wouldn’t happen. As with council tax at the moment different councils would raise different proportions of their budget through LVT.
So at the moment, somewhere like Edinburgh raises 25% of the money they spend from council tax but more rural councils up north only raise around 10% or even less.
Most of the money councils get comes direct from the Scottish Government, which works out how much a council would raise if they set an average level of council tax (or LVT if we had that) and then sets the grant they give councils accordingly. That way areas with low local tax takes aren’t forced to set really high local taxes just to break even compared to other areas.
#16 by Steve on August 28, 2011 - 11:07 pm
Agree LVT should be local though, by the way. The SG could set the grant they give to councils assuming a 5% rate, and then councils could raise more or less by varying their local LVT above or below the 5% rate.
#17 by mav on August 28, 2011 - 11:54 pm
interesting – much of your first reply I guessed but didn’t know. But glad you agree it should and could be local. I’m unsure about whether land based taxes are a good idea, (certainly any new taxes should be be matched by tax cuts elsewhere) but I’ve always believed that all elected bodies need a direct link to the pockets of the electorate so that the thinking is not ‘how do we spend the money?’, but ‘do we need to spend the money?’. A blanket rate, imposed from the top, is not the way forward.
#18 by Barbarian on August 29, 2011 - 12:43 am
Why not do what they did with the Armed Forces when Council Tax was brought in – make the bill the same wherever you live. A fixed rate would possible make it easier and cheaper to collect, and could be arranged centrally, with the Scottish Government providing the councils with their revenue.
Note to John: I don’t agree with Labour’s ideas, considering they caused many of the problems in the first place. But I do not trust the Lib Dems or the Greens, and am unlikely to do so.
#19 by CassiusClaymore on August 29, 2011 - 9:55 am
Jeff – “organised robbery of land ownership” – are you a communist now?
LVT is interesting, but watch out for unintended consequences – if you tax land ownership, you incentivise development i.e. a land owner will say – “well, I’m paying tax on this so I need to try to make it work for me”. That’s fine if you want to encourage building/economic activity, but to my mind the results might not please folk with a green outlook.
For starters, it will lead to a huge wave of garden-grabbing, as councils grant planning permissions they would not have previously granted, in order to optimise land values and thus their LVT tax take.
Anyway, there’s no chance of it happening. Osborne just ignores Cable (quite correctly IMO).
CC
#20 by Jeff on August 29, 2011 - 10:04 am
No, not a Commnist CC. I know that title is a bit red, probably too red, but i’ve always liked the quote ‘property is organised robbery’ in a romanticized kind of way so I pilfered it.
How families ended up owning land is something well worth scrutinising but I would never get too Robert Mugabe about it. We are where we are, a simple land tax is sufficient to rebalance things the other way.
I’m afraid I agree that this is a headline that’ll probably disappear into the ether….
#21 by Steve on August 29, 2011 - 10:23 am
@CC LVT is good for greens as it incentivises efficient land use, encouraging the development of brown field sites, clearing up the mess left behind from previous occupants, as opposed to what happens now with developers looking to build on the green belt because that’s easier and cheaper for them.
#22 by CassiusClaymore on August 29, 2011 - 10:28 am
Jeff
As someone whose distant ancestors were cleared from their land, I’m always tempted to get a bit commie on the landed gentry too. But I think the right to roam and the community right to buy deals with these ancient injustices to some extent at least.
But I would nationalise Balmoral, just for fun.
CC
#23 by CassiusClaymore on August 29, 2011 - 11:07 am
Steve
It will certainly incentivise brown field development – but it will encourage developments on presently undeveloped green sites too. And squeezed Councils will play ball, making planning permission easier to obtain in order to increase their tax revenues.
I just don’t think that from a green perspective, this has been properly thought through.
CC
#24 by Andra on August 29, 2011 - 4:04 pm
A problem with a property tax being levied by Local Councils, and making up a significant proportion of their income is that a small proportion of people would pay while the majority of voters would not be affected by the rate – and thus would be tempted to vote for higher rates.
I suggest that this tax should make a contribution to central coffers as part of a range of general taxation and that the level should be set centrally – either UK or Scotland level.
Some other solutions needs to be found, if council tax needs replaced.