The state and local government
Hence, as Jerry Jones stresses, Marx ‘did emphasise that production for human consumption depended as much on nature…as on labour power…’
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Hence, as Jerry Jones stresses, Marx ‘did emphasise that production for human consumption depended as much on nature…as on labour power…’79 Wetzel for eight years was also the Greater London Authority’s first Vice-Chair of Transport for London and Chair of London Buses and TfL's Safety, Health and Environment Committee. He was introduced to the philosophy of Henry George by his father, Fred Wetzel, who was an active member of the Commonwealth Land Party in the 1930s. In 1982, when Wetzel was Chair of the former Greater London Council’s Transport Committee, the Law Lords ruled against the decision to slash 32 per cent off the fares paid by the capital's commuters; and London Transport was forced to raise fares. In January 1983, however, the High Court decided that a new plan to cut fares by 25 per cent was acceptable, because it was a ‘totally different exercise from the arbitrary decision in 1981 to introduce Fairs Fares.’ So London Transport was able to cut fares with the aid of a £350 million subsidy from the GLC. Some of this money came from the general taxpayer. But, at the time, Wetzel recognised that, unless the subsidy was raised through the property tax, the cut in transport costs would ultimately be capitalised into higher land values. Some property owners – those who travelled in their own cars, for example – objected to this strategy. And they were particularly aggrieved by the fact that 15 per cent of the users of London's transport system did not live in the capital. They would therefore escape an increase in the property tax, and in effect be subsidised by London property owners. Wetzel also recognised this, and said at the time: ‘A land value tax is the fairest solution because it would hit industrial properties more than residential properties. Employers bring people into town, and they should pay for their employees' transportation’.80 Wetzel’s view was vigorously opposed by the Confederation of British Industry, which then and now – as shown above – was campaigning to compel the government to reduce the burden of the property tax on employers. On the centre-left, the New Statesmen launched a campaign for LVT in September 2004.81 In 2006 Compass – ‘the democratic left pressure group’ – proposed LVT ‘to reduce housing market booms and busts, and to help fund infrastructure such as low carbon transport.’82 In their Chapter on ‘Housing and land reform’ Compass argue that unearned capital gains made by the owners of property are a natural site for taxation, especially given the increasing difficulty in taxing globally mobile capital. Locational benefits are land value gains, whereas improvements owners make to the actual building are reasonably theirs to keep. We should therefore shift the basis of property taxes off building value and onto land value, and off occupation and onto ownership.83 In the longer term the aim should be to replace all property taxes (Council Tax, Business Rates, Stamp Duty) with a full annual land value tax levied on all owners of landed property, based on the unimproved value of the site (i.e. ignoring buildings etc) but based upon the optimum rather than the actual use of the site.84 This would mean that land owners would be given an incentive to develop their land as productively as possible….A land value tax would achieve many of the policy aims proposed here including stabilising the housing market, redistributing wealth inequalities, reducing tenure distinctions, reducing land speculation, promoting efficient use of land, reducing regional imbalances, rewarding improvements to buildings, ensuring development and regeneration benefits to local communities and funding public infrastructure.85 Compass also propose increasing ‘progressive taxation through a combined top income tax/National Insurance rate of 50 per cent, on incomes of £100,000 or more per year’86; and a tax on all the components of individual/household wealth (as was proposed but never implemented in the 1970s in the UK) – such taxes are used successfully in other countries such as France and Switzerland, and indeed, prior to the 1997 election, the Labour Party considered proposals for an annual tax of 1-2 per cent or more on personal wealth above £100,000 (or family wealth above £200,000).87 Moreover, as Toby Lloyd – in his April 2009 Compass report – argues: Social justice demands that the gains in land value be shared more equitably with the community than at present….the most effective fiscal policy means of achieving this would be to replace the unpopular and regressive council tax and the system of business rates with an annual land value tax (LVT). All land would face an annual charge for the benefits received as a consequence of being a landowner on the basis of the unimproved site value of the land, which would be revalued for tax purposes annually.88 This could be structured so that it eventually provided a similar level of overall public revenue to council tax and business rates (currently £25.6 billion and £19.6 billion respectively). LVT, as Lloyd also emphasises, is not a tax on property values: since, if ‘people improve or develop their home then the benefits would still accrue to them’.89 By using tax thresholds, the tax burden on lower and middle income groups can be further reduced and we should follow the example of Denmark and allow pensioners to postpone some or all of their charge until their home is sold. The percentage tax rate would be set locally by the council within a range determined nationally by central government. This would ensure local discretion in tax raising and help reinvigorate local government. The main winners would be those who rent, pensioners and those who live in a local authority area with relatively low property values and relatively high council tax. The losers would be those with relatively low council tax and relatively high property values, and those with second homes or investment property portfolios. LVT could also play a major role in the financing of infrastructure, especially public transport, so that over time it would be the beneficiaries of the investment who would pay. For example, the Crossrail project - a rail-link between Maidenhead, Heathrow Airport and central London, through to Shenfield, east of London, and Abbey Wood in south-east London - could have been financed by borrowing on the basis of the additional revenue from LVT that would be collected due to the higher value of the land in the vicinity of Crossrail, after completion of the project.90 The London Underground Jubilee Line extension, which cost taxpayers £3.5 billion, could have been financed in this way. It has been estimated that as a result of the extension, land values in the vicinity of just two of the stations, Canary Wharf and Southwark, increased by £2.8 billion, and over the whole extension by some £13 billion. That is had LVT already been established, the public as a whole would have been the beneficiaries from the higher land values created, instead of the private landowners in those areas, who had contributed nothing to the project. Similarly, where development reduced house values the owners would be automatically compensated by lower taxes. Because it is levied on the value of the land, not the buildings on it, LVT would incentivise owners to improve their property, as any such increase in value would increase their home’s value but not their tax bill. By taxing all land, including vacant business property, it would encourage owners to bring such assets into use, improving the land supply and creating jobs.91 LVT would also promote new capital investment rather than sterile land speculation as it would encourage a shift of private investment from land speculation (which creates no extra land but only higher land prices) to productive enterprises. Inner city areas would be opened up and regenerated. LVT could not be avoided. Unlike income – where tax avoidance experts are in great demand and the ‘shadow economy’ flourishes to evade taxes – land cannot be hidden or concealed. While it could initially just replace council tax and business rates, moving to LVT could begin to shift the entire tax base from work and production to wealth and resource consumption. In future years it could be increased to allow reductions in income tax, especially for lower wage workers. By removing the main speculative driver of house price growth, LVT would reduce and stabilise property prices, making both renting and owning homes cheaper for everyone, reducing the economic gulf between different tenures and placing the entire economy on a more robust and equitable footing. Hence, as Lloyd concludes: A tax on land and unearned windfall profits would be the basis to get back to the socialisation of risk and reward. In a globalised economy we are putting impossible demands on individuals. We cannot cope alone. We must share the risks and rewards. We can do this by earning enough in real and deferred wages to replace our dependence on rising house prices – which we cannot guarantee and which have all kinds of other damaging economic and social impacts….Taxing unearned land value increases is not just necessary but desirable and feasible.92 Lloyd also quotes from Jerry Jones’s pamphlet, which is referred to in detail in the next section, showing that land revaluation using map-based data is far simpler than the revaluation of individual homes, reduces property market volatility, encourages more sustainable investment in existing town centres and boosts local economies.93 The leftwing MP John McDonnell, as part of his platform for the Labour Party leadership in 2007, advocated the replacement of Council Tax and business rates with a Land Value Tax. McDonnell – in Another World is Possible: A Manifesto for 21st century socialism – proposed ‘redistributing wealth from rich to poor by progressive taxation so that corporations pay their fair share and the wealthiest with the greatest disposable incomes pay a larger share than the poorest’ plus replacement of the ‘Council Tax and business rates with a fairer Land Value Tax as a progressive alternative.’94 The Green Party’s 2005 General Election Manifesto stated that: In the UK, nearly 70 per cent of the land is owned by just 0.6 per cent of the population. Our current systems of land use taxation do nothing to redress this situation. The Greens will therefore introduce pilot Land Value Tax (LVT) schemes based on the rental value of land. Tax will be levied, as in some US cities, on the owners of the land. LVT will be set by local authorities as part of local taxation and will eventually replace Council Tax and Uniform Business Rate.95 And the ‘Land Value Tax’ section of the Green Party’s Manifesto for a Sustainable Society updated in Spring 2009 states that: A system of Land Value Taxation (LVT) will be introduced to replace the Council Tax and the National Non-Domestic Business Rates. LVT rates will be set at a local level, and will be based on the annual rental value of the land. Rates will vary according to the permitted use of the land, as determined by planning consents which have been granted. Agricultural land will be taxed at a low rate so that intensive farming is not encouraged or basic food prices forced to rise. There will be no reduction of or exemption from LVT for buildings which are left vacant or which have been allowed to fall into a state of disrepair. In this way, the policy will encourage full use of existing properties and discourage the practice of people speculating on the price of sites whilst keeping the properties empty or derelict.96 The Green Party General Election Manifesto 2010 proposed to: • Introduce the new higher rate of income tax at 50 per centy for incomes above £100,000, raising £2.3bn pa. • Abolish the upper limit for National Insurance contributions, raising £9.1bn in 2010. • Help lower earners by raising the lower National Insurance limit to the personal allowance rate (which is £6,475 a year, or £124.52 a week), costing £3.9bn. • Help lower earners by reintroducing the 10 per cent tax band and the 22p basic rate, costing £14.9bn. • Increase the main rate of Corporation Tax from 28 per cent back to 30 per cent and reduce the small firms rate back to 20 per cent, altogether raising £1.4bn. • Raise the Capital Gains Tax rate from 18 per cent to the recipient’s highest income tax rate (that is 22 per cent, 40 per cent or 50 per cent), raising £1bn. • Reform inheritance tax, so that the level of taxation depends on the wealth of the recipient rather than that of the deceased, raising £3bn by 2013. This will encourage people to distribute their property widely. • Crack down on tax havens and other methods of tax evasion and avoidance, raising £10bn in 2010 rising to £13bn by 2013. In particular press for a transparent international accounting standard that requires companies to report on a country-by-country basis so that their profits can be located and taxed. • Reform Council Tax by making people in more expensive houses pay more and those in smaller ones less, adding an additional band at the top for the biggest houses, raising £1.7bn. In the long run we favour moving to a system of Land Value Tax, where the level of taxation depends on the rental value of the land concerned.97 Following the Tax Commission and two debates in Party Conferences (2006 and 2007), according to the Liberal Democrat Action for Land Taxation and Economic Reform’s Manifesto, the Liberal Democrat’s policy on LVT is as follows: business rates to be reformed onto a site-value-only basis (Site Value Rating) and largely re-localised, within one Parliament; site value rating to be levied on second homes and development permitted housing land, until residential occupation; and LVT more generally – including on domestic property – “longer term”. They also have ‘an aspiration’ to raise the income tax threshold to the level of national minimum wage (NMW) and have just committed to raising it to £10,000. Among their wider policy aspirations are increased supply of affordable housing, sustainable land use and massive investment in transport and other public infrastructure – all currently unfunded.98 Meanwhile, the Liberal Democrats’ 2010 Election Manifesto proposed introducing ‘a Mansion Tax at a rate of one per cent on properties worth over £2 million, paid on the value of the property above that level’.99 In December 2008 twelve think-tanks, charities and political pressure groups – Labour Land Campaign, Liberal Democrat Action for Land Taxation and Economic Reform, Social Liberalist Party, Systemic Fiscal Reform Group, School of Economic Science, Land is Free, Henry George Foundation, Land Value Taxation Campaign, Professional Land Reform Group, Christian Council for Monetary Justice, Global Justice Movement and the 1909 Group – formed a new cross-party group called the Coalition for Economic Justice (CEJ) to campaign for the introduction of LVT.100 CEJ held a LVT seminar at the House of Commons on 24 March 2009. The publicity for the seminar pointed out that: The American embassy in Grosvenor Square was recently sold for £500 million. As the price agreed was on the assumption that the building would be demolished, the entire price reflected the site value alone. The intrinsic value of the 2-acre site is negligible – as agricultural land it would fetch no more than £10,000. All this site value therefore arises from external, community-derived factors, such as, the density of population at the heart of the nation’s capital and London’s unrivalled communication and infrastructure network. It is wrong that the site owner should reap this benefit; it arises from the community and is paid for through taxes. It should be returned to the community.101 CEJ also emphasise that: In most property transactions the site value element is not disclosed but is highly significant. It is the site value, not the perishable bricks and mortar, which is the driving force behind property prices, pushing them up to ever higher and unsustainable levels. These inflated property prices and the ballooning credit that supports them eventually implode with, as now, catastrophic consequences for the economy. An unsustainable property boom and its subsequent collapse has been at the heart of virtually every economic crisis since the Second World War. With site values taxed, property would lose its speculative appeal and housing would once again become affordable. The mountain of credit thus released would be used to finance business and trade.102 The panel of speakers included Samuel Brittan (Financial Times) who pending the full introduction of LVT advocated auctioning of planning permissions; Fred Harrison (Land Research Trust and author in 2005 of Boom Bust: House Prices, Banking and the Depression of 2010); Ashley Seager (The Guardian); Molly Scott Cato (Green Party Economics speaker); David Triggs (Henry George Foundation); and Ian Mclean (Professor of Politics at the University of Oxford).103 Mclean was a member of the independent expert group set up by the Calman Commission on Scottish Devolution whose Final Report was published in June 2009.104 Table 13.1: Glasgow City Council land value tax pilot study
[a] Using a residential ‘flatted’ land value rate (£355 per square meter). Source: Glasgow City Council, 2009, Appendix 3, p. 43 Glasgow – Scotland’s biggest city – wants to replace the unpopular local Council Tax with a tax based on land values. The radical proposal was agreed by Glasgow City Council on 25 June 2009; and, according to David Maddox: The idea could become the blueprint for Scotland's future local taxation….Councillors from all parties except the SNP backed the idea to create a fairer property tax based on up-to-date values. The proposal would draw in elements of the land value tax put forward by the Greens, who played an important role on the city council's group.105 The decision was made following the publication of a Council report by its Local Taxation Working Group. The report looks at alternative systems for raising local revenue, and assesses options using the criteria of fairness, efficiency, predictability and local democratic accountability. Scorecards gave land value taxation equal top ranking, with fifteen points out of twenty. The tax was seen to fall down on questions of predictability and local accountability. Councillors accepted the report’s recommendation of a ‘long term move to a local property tax/land value tax hybrid tax’ and that the Council should ‘start planning for replacement of council tax with a local property tax, incorporating powers to introduce gradually land value tax elements’.106 The report also states that simple (that is, non-hybrid) LVT should itself ‘not be discounted as an option for local taxation reform: it potentially holds many benefits and addresses many existing concerns with the council tax. Whilst there are a number of concerns with LVT, these often arise from the ambiguous and unfamiliar nature of the tax, coupled with the absence of UK empirical evidence and practical understanding.’107 While the report’s view is that ‘none of the concerns identified with LVT are deemed insurmountable’, it warns that ‘LVT may be difficult to explain to taxpayers so there would have to be effective public liaison and education to ensure support’.108 The authors also believe ‘the treatment of agricultural land would have to be considered’.109 The report concludes that: ‘A series of detailed national pilot studies, with potential localised targeted LVT on derelict land, would be a sensible way forward’, and that: ‘The Glasgow pilot commissioned by the working group has been a valuable exercise in identifying indicative issues for Glasgow and has helped progress the LVT debate.110 The report publishes for the first time the findings of that pilot. The study looked at the likely effects of the tax options on the city’s East Centre ward. With an assumption of revenue neutrality, the pilot found low-value homes would have their tax bills slashed under the LVT proposal (see Table 13.1). Looking at non-domestic tax-payers, the pilot report concludes there would be little change in the amount of local tax bills for industrial and retail property. But noting that derelict and vacant land is currently not subject to local taxation, the study estimated that ‘total possible LVT revenue on...derelict and vacant land’ within the subject ward would be £669,539.111 This would constitute a new stream of funding for local government – possible additional revenue for the whole city of perhaps £14 million. At present Scotland’s local authorities do not have the prerogative to determine their own tax base. Maddox reports, however, that the Council is ‘advocating Scotland’s councils be given the powers to develop taxes which suit their local needs and raise a larger proportion of their own budgets.’112 And the Council will now make representations to the Scottish Parliament on all the above matters. The Co-operative Party’s Annual Conference in September 2009 adopted LVT; and the section on Land Reform in the their Manifesto for the forthcoming general election states that the Government should use taxation to change incentives within the property market, ensuring that it incentivises the productive use of land rather than expected capital gains in an upward market. The Government should replace council tax and national non-domestic rates with a land value tax….This is likely to not only improve economic stability but also stimulate investment in more productive elements of the UK economy over the medium to long term.113 The PCS – following a resolution agreed by its 2007 Annual Conference – in October 2009 published An Alternative Vision for the Land Registry, which includes a contribution by PCS member Heather Wetzel who argues for LVT and is an officer of the Labour Land Campaign.114 The union’s Assistant General Secretary Chris Baugh in his Introduction states that LVT is ‘an important element of any serious reform of land registration.’115 And Professor Roger Seifert and Mike Ironside – the main contributors – argue that LVT would help shift the costs and risks of holding land and using it (or not using it). It might also help encourage more social use of land as hoarding would be less viable, and it could deal with the issue that high rises in property values not associated with the owners’ improvement activities go untaxed and therefore differentially benefit those owners with the highest valued properties.116 They also point out that: When prices are falling across the board, however, that element of the tax based on higher valuations becomes redundant and could discourage recovery. In addition that marginal land not in use is unlikely to be put to social use in a recession whatever the tax disincentives to bring it onto the market. Nonetheless a land tax along the lines suggested by the Labour Land Campaign has a place in the array of policy tools for the future, but only when linked with compulsory registration (as Heather Wetzel argues P.L.) and with state directed control of land use.117 Therefore PCS, although the RMT nationally and some trades union councils (Croydon, for example) are already affiliated to the Labour Land Campaign, is the most recent major British trade union to support the principle of LVT – though it is not yet policy.118 Stephen Spratt et al – in their 2007 report for the New Economics Foundation (NEF) titled The Great Transition – argue that: First, while income tax for most people would be abolished with the minimum threshold set at the median wage, income inequality would be kept within reasonable bounds through the levying of an income tax that rises progressively thereafter. Second, asset inequality at the individual level would be primarily addressed through the inheritance-tax-funded Citizens’ Endowment described in the Great Redistribution, but would then be held in check through a progressive capital gains tax, complemented with a national land value tax to create a regional inequality reducing mechanism: if some areas grew more prosperous than others, this would be reflected in higher land values, generating higher tax revenues. Land in less prosperous areas, in contrast, would have lower values and so attract lower tax rates, providing incentives for investment and economic regeneration. Third, while the tax measures targeting asset inequality would also be positive from general economic stability through their dampening effect on speculation in financial and property markets, this would be complemented with transaction taxes levied at a low rate on all financial transactions – including on international currency transaction through the introduction of a Tobin tax. Such taxes would discourage short-term speculation and high-frequency trading but not long-term investment, as the impact of the tax would be negligible in any longer-term investment, but would become progressively larger as the number of transactions rose.119 They also argue that, as LVT ‘is a method of raising public revenue by means of an annual tax on the rental value of land’, which ‘unlike goods and services…has no cost of production and the supply of land is inelastic, hence a tax should not have distortive effects on the economy or prices’ and that its implementation would reduce the volatility of the housing market and make homes more affordable.120 In addition: The provision of national level public goods could then be funded through the proceeds from the land value tax, facilitating the development and maintenance of a national sustainable energy network to provide back up for local energy production, based on larger-scale facilities, such as offshore wind-farms, for example. Similarly, national transport networks of high-speed rail links integrated into regional and local rail systems and the national road network and could be part-funded and maintained in a similar way.121 Annual land value taxation plus There is therefore now a broad alliance of support across the political spectrum for LVT – despite the pragmatism of Lyons other stakeholders have called for the replacement of business rates with tax on land values…land value taxes have some clear theoretical advantages. Nevertheless, given that business rates already have some of the attributes of a land value tax, strong arguments would be needed to support a wholesale change. A consideration against the principles of a land value tax can help to suggest areas for reform and suggests that reform, rather than replacement, is the most pragmatic approach.122 Conversely, the Marxist economist Jerry Jones of the Labour Land Campaign in his pamphlet Land Value … for Public Benefit – the most effective current detailed statement of the socialist position – demonstrates that ‘the actual mechanics of introducing LVT (to replace the ‘council tax, stamp duty land tax, and the system of national non-domestic rates’) is relatively simple.’123 For example, a detailed study in the Vale of White Horse District in Oxfordshire from 2004-5 concluded that: (a)Valuations based on the undeveloped value of the land present no special problems to a professional valuer. (b)The lack of definition of agricultural land at the present time would need addressing if agricultural land is to be included. (c)The increasing availability of well-developed GIS systems and other IT developments have the potential to make all property tax administration and land use planning easier and cheaper. (d)The initial valuations would be no more expensive than, for instance, the planned revaluation of Council Tax. Thereafter the system would be simpler and cheaper to maintain than those based on developed values. (e) Further consideration needs to be given to the choice of basis for valuation, i.e. capital or annual rental values. (f)The shift in tax liability between different categories of property would probably need a period of phasing in. (g)Further study on the effect on levels of domestic tax if the high value business sites in central Oxford were included in a countywide LVT would be welcome.124 LVT has a number of advantages, not least that it is a fair tax, since it allows society to reclaim the rising value of land created by the economic activity of society as a whole instead of going to the owners of land who contribute nothing to its rising value. Furthermore, it is fair because, in effect, people are charged according to the space that they occupy and its value. Since wealthier people tend to occupy more land, LVT also doubles as a wealth tax. In addition, it would lead to the more efficient use of land, and eliminate the scourge of derelict sites and homes standing empty. That is because the tax would be payable whether or not the land is being utilised according to its permitted use, which would act as a powerful stimulus for landowners to develop the land to its maximum potential (in line with prevailing planning regulations). It would also prevent the escalation of land prices, the main element in property bubbles, thus making homes more affordable, and leaving more money available for investment, which would provide more jobs, thus helping to promote economic development.125 One of the objections often raised against introducing LVT is that it would penalise people living in areas where the value of their properties had increased sharply over the years (due to rising land values), but whose incomes had not grown proportionately, or perhaps had gone into decline if they had become pensioners or unemployed, or had been widowed. However, this could be mitigated by giving people the option to defer (or roll over) the payment of LVT, either wholly or in part, until the property was sold or transferred to heirs. This would enable people to carry on living in their properties at no extra cost, and, if they so chose, to pay less tax than they do now. However, it is only fair that the tax plus interest should be paid eventually, because the value of the land that they occupy would have been created by the activities of the community as a whole, and not by themselves. Meanwhile, local authorities could obtain the revenue that they otherwise would have received from low-cost loans, using as collateral the stream of income that they would eventually receive. Furthermore, it should be pointed out that LVT is levied on landowners (including home owners who own their freehold), and not on tenants who currently get no benefit from rising land values. (It is true that over time landlords might try to pass on the extra cost of LVT, but as with the amount of rent they can charge, this will depend on the supply and demand situation for rented property.)126 Of course, before LVT could be introduced, it would be necessary to value all land, including that which is still unregistered (mainly that owned by the rich). As explained by Jerry Jones, contrary to popular belief, valuing land is actually more straightforward and more accurate than valuing buildings, since land is more uniform and its value depends almost entirely on location, and extensive use can be made of geographical information systems and computer aided mass assessment techniques.127 Another important advantage of LVT is that once the system was up and running, by raising the rate of tax, it could be extended over time to cover the direct grants currently coming from central government. On the one hand, this would allow local authorities to become more independent financially, thus enhancing local democracy. On the other hand, it would allow central government to reduce or eliminate income tax for the lower paid. At the same time, it would realise more of the economic benefits of LVT. Whatever the system of financing local government, a major issue that would need to be addressed if the bulk of funding for local government came from local sources, is that it would tend to perpetuate the considerable inequalities that currently exist among different localities. In particular, there are huge variations in the costs of services that different local authorities have to provide – related to such things as the age structure of populations and the number of people on low incomes in the different localities – and therefore variations in the amount of revenue that they need to collect. A way out of this would be for central government to pool a certain proportion of the revenue raised by local authorities, and then redistribute it back partly on a per capita basis, and partly according to assessed needs. In effect, this is roughly the system now. Thus, the revenue from the national non-domestic rates is pooled centrally and redistributed on a per capita basis, while the various central government support grants, which make up around half of local authority revenue, are distributed more or less on the basis of need. Only the council tax element, together with the fees charged for various local services, is decided by local government, and even that is governed to some extent by rules set by central government.
Jones concludes that: LVT is unlikely to provide enough revenue to finance all the needs of a modern state – especially if governments become more actively involved in pre-empting market failures and economic downturns, which it is becoming increasingly obvious is needed now that the prevailing neo-liberal economic policies are running into the sand.129 And he proposes to: 1. Abolish the council tax, stamp duty land tax, and the system of national non-domestic rates and replace with a system of land value tax. 2. Phase out income tax at the standard rate, and gradually raise the rate of land value tax to compensate. 3. Retain an income tax or surtax for very high earners. 4. Continue to fund recurrent expenditure on pensions and healthcare through employee and employer contributions, but paid into a National Pension Fund and National Health Fund, respectively, managed by statutory authorities under democratic control, independent of the government of the day. 5. Retain the corporation tax or a profits tax beyond a certain threshold, eventually, raising the rate of tax in steps to 50 per cent (once governments have been persuaded to abandon the prevailing neo-liberal economic policies). 6. Abolish value added tax and excise duties, and replace with a simple sales tax extended to all products, but at varying rates according to the product, which, in addition to raising revenue, would be geared to achieving various other policy objectives.130 David Grove – a Marxist critic of Jones who does not refer to his pamphlet – argues that Jones discusses ‘taxation of land “values” without reference to the prospect of social ownership’ and ignores ‘a vital issue in the advance to socialism.’131 However, in the former Soviet Union, as Jones notes in his pamphlet where all land was state owned and treated as a free good (as was capital)…there were many instances of land being used inappropriately or inefficiently. In particular it was common practice for enterprises…almost entirely state owned…to hold land vacant indefinitely in case they might need it later. This meant that the rest of society lost out from making the best use of what was often valuable land in a prime location for more beneficial purposes. This also distorted investment decisions, which meant that capital was not necessarily invested in productive activities that made the best use of the land that was available.132 Meanwhile, ‘in countries such as Britain, where the private ownership of land is thoroughly entrenched’ as Jones asks would nationalisation, in which all private titles to land were abolished and land declared public property, be the most effective course for reclaiming land values for public benefit? Is it even necessary?133 Moreover: If a political party included in its manifesto land nationalisation without compensation, one needs little imagination to picture the propaganda war that would ensue – paid for by the wealthy 0.5 per cent of the population who own most of Britain’s land….homeowners could easily be persuaded that the government was about to steal the land they had bought in good faith along with their homes, even though the state ownership of land would make no difference at all to their right to the land.134 Georgists argue that all existing taxation should be replaced by LVT. Conversely, for Marxists LVT has to be combined with progressive taxation of income and wealth. The Labour Land Campaign, the Labour Representation Committee, Compass, the Co-operative Party, Glasgow’s Labour Council, the Greens and the PCS (in principle) now all support LVT – plus various combinations of progressive taxation of income and wealth – instead of the regressive council tax and national non-domestic rates. The Christian Council for Monetary Justice and Global Justice Movement and Liberal Democrat Action for Land Taxation and Economic Reform(ALTER) also, as shown above, support LVT. The council tax, stamp duty land tax and national non-domestic rates should therefore be abolished and replaced by a system of LVT plus more progressive taxation of other wealth and income. For in Britain – where 0.3 per cent of the population own 69 per cent of the land worth an estimated £5 trillion – a 0.5 per cent levy, as Philippe Legrain points out, could raise £25 billion a year. Only freeholders and landlords would pay LVT with the owner of a large estate paying a higher rate than someone who owns a small suburban semi.135 Last year, the council tax also brought in £25 billion – one quarter of the cost of local budgets. Almost all of the rest came from central government grants and national taxes whose proceeds are earmarked for local authorities. A two per cent levy could therefore raise £100 billion. Chapter Fourteen Towards a new basis for ‘local democracy’ and the defeat of big business control The Marxist dialectical methodology (see Chapter 1) used in this study shows:
This Chapter therefore summarises the policy proposals made in this study; and discusses various possible strategies to win the battle to reinstate national and local democracy in Britain. Summary of policy proposals 1. Repeal of the Local Government Act 2000 to allow all councils to introduce the enhanced committee system and restore the right of all councillors to make policy The Local Government Act 2000 deprived backbench councillors of the right to make policy, and concentrated the decision-making process in the hands of leaders/cabinets or directly-elected US-style mayors (see Chapter 6). The first priority, therefore, would be to repeal this Act and bring in the enhanced committee system to restore the right of all councillors to make policy.138 2. Abolition of US-style directly and indirectly-elected local government mayors Following from this, it is proposed that the system of US-style directly and indirectly-elected mayors be abolished. As discussed in Chapter 7, they concentrate too much power in one person, and create too many opportunities for corruption, patronage and cronyism. Furthermore, all communities should have the immediate right to replace their existing US-style mayor or abolish their US-style mayoral system, and not have to wait, as in Doncaster, until 2013 to do so. The power of the Secretary of State for Local Communities to impose mayoral referendums should also be repealed. In addition, the Local Government Act 2007 would have to be repealed, since this obliges all but the smallest local authorities to adopt either the directly US-style mayor elected mayor, or leader and cabinet executive arrangements in which leaders have virtually the same powers as US-style directly-elected mayors. For the same reason, New Labour’s White Paper Communities in control: real people, real power, published in July 2008, which is primarily concerned with making the US-style directly-elected mayor system more attractive to local government politicians and easier to introduce, must be rejected. Since, if implemented, it would reduce the threshold for a petition to trigger a mayoral referendum, and it would allow mayors to chair the Local Strategic Partnership, which would enable local capitalists to become involved in decision-making without standing for election. Similarly, for the above reasons, New Labour’s 2010 Manifesto pledge to give residents in new city-region authorities ‘the opportunity to trigger a referendum for directly electing a Mayor, with London style powers’139 and the coalition government’s agreement to hold compulsory mayoral referendum in the 12 largest English cities140 are both rejected. So is the forthcoming Police Reform and Social Responsibility Bill, which will introduce ‘[d]irectly elected individuals to hold the police to account’141; and open the way for political groups, such as the fascist BNP, to hijack local oversight of the police. 3. Smaller councils, more councillors Following a number of reorganisations of local government, England, Wales and Scotland now have fewer and larger ‘local’ authorities than any other Western advanced capitalist country (see Chapters 5 and 6). It is therefore proposed that the structure of local government be reorganised to eliminate this ‘democratic deficit’ so that the number of councils and councillors cover a smaller area and represent a smaller population, thus bringing Britain more into line with other advanced capitalist countries. 4. All councillors to receive the average backbench annual allowance The replacement of the traditional committee system with the systems of leader-cabinet or US-style directly-elected mayors has created a brigade of full-time career politicians. This has removed ordinary working class people from this layer of local democracy. Currently, as noted in Chapter 7, the average annual allowance for directly-elected US-style executive mayor is over seven times that of the average backbench councillor’s allowance. To encourage representative democracy, therefore, it is proposed that all councillors should receive simply the average backbench councillor’s annual allowance, which in 2008 was £6,099. 5. The Single Transferable Voting system for all elections Next, it is proposed that the voting system be changed. First, the first-past-the-post system to elect councillors not only fails to reflect fairly the votes cast, but also discourages participation in local democracy. The single transferable vote (STV) system, used for the first time the 2007 local government elections in Scotland, is preferable, and would enhance local democracy. Second, the Supplementary Vote system currently used in mayoral elections, in which voters record their first and second choice, should be abolished. For, as discussed in Chapter 7, a large number of voters may be denied any say in the second round, sometimes exceeding in number the eventual majority of the winning candidate. As long as the mayoral system continues to exist, therefore, the Supplementary Vote system should at least be replaced by a second or ‘runoff’ election in cases where the top candidate fails to obtain more than 50 per cent of the vote, so that all voters have a chance to cast their votes with the knowledge of which candidates are left after the first ballot. However, the fairest and most consistent solution would be to use the single transferable vote system (STV) for all elections: mayoral (until the system is abolished), local, Westminster, Europe, devolved bodies and the Greater London Authority. 6. Direct provision by councils of locally administered services Another issue is that, currently, local government is only one of many agencies providing local services, and elected councillors today are directly responsible for providing fewer and fewer services. Most public spending is now controlled by the unelected ‘quango state’ with local councillors responsible for only five per cent of the total public spending in their areas (see Chapter 6). This ‘democratic deficit’ of ‘local governance’ must therefore be totally reversed, so that public services are once again provided directly by democratically elected local authorities instead of through locally administered privatised services. Local councillors would be responsible for public services, and would be accountable to their communities. In addition, where this is in accordance with the wishes and needs of their electors, local authorities should be able to expand their functions to run many things now owned and controlled by the private sector, such as local industry, some types of retail and wholesale distribution, and a much broader range of cultural facilities. 7. The ending of all forms of marketisation, privatisation and profiteering in central and local government A third of local government services are already marketised and privatised. As noted in Chapter 9, the Julius Report suggested that the time was ripe for a ‘significant expansion’. Full ‘maturity’ for Julius is when public services have ‘been completely outsourced’. However, there is no evidence to support the claims of the dominant neoliberal wings of the three main parties and Julius that the marketisation and privatisation of public services is value for money, either for taxpayers or for the users of services. On the contrary, the Private Finance Initiative and Public Private Partnerships are wasting billions of pounds of public funds boosting the profits of private contractors who are downgrading services, and at the same time slashing pay and conditions for public sector workers. Therefore all forms of marketisation, privatisation and profiteering in central and local government should be ended. 8. Abolition of the council tax, stamp duty land tax and national non-domestic rates to be replaced by a system of annual land value tax plus progressive taxation of income and wealth The council tax, stamp duty land tax and national non-domestic rates, as proposed in Chapter 13, should be abolished and replaced by a system of annual land value tax, which alone could raise up to £100 billion a year. The Con-Dem coalition government's cuts in public services, pensions and benefits – if the other wealth and income of the super-rich and big business monopoly profits were also taxed, the Trident replacement cancelled and the troops withdrawn from Afghanistan – would not then be necessary. All forms of marketisation, privatisation and profiteering could then be ended in local and central government. 9. Short-term deposits by councils in publicly owned banks Following the Icelandic banks collapse saga short-term deposits by councils should only be in the Treasury backed Debt Management Agency Deposit Account Facility until all banks are publicly owned (see Chapter 8). 10. Ending the City of London Corporation The anomaly of the City of London retaining the non-residential business vote, which was actually extended in 2002, is a travesty of democracy that should be resolved by abolishing the City of London Corporation and reconstituting it as the 33rd London borough (see Chapter 6). The above proposals contrast sharply with the timidity of those in the Local Government Association Labour Group’s manifesto Putting fairness first (PFF), which states that: ‘By the time we won in 1997 Labour was in an unprecedently strong position in local government, with record numbers of councillors and record numbers of councils enjoying Labour control’.142 However, PFF fails to acknowledge that the situation (see Chapter 11) is now completely reversed due to New Labour’s neoliberal policies. The latter omission, moreover, is compounded by PFF’s failure to discuss privatisation and uncritical support for the Total Place ‘more for less’ strategy: In the 2009 budget, the Government announced the Total Place initiative, with the principal aim of forging links between public services and identifying where public money can be spent both more effectively and strategically. Initial audits across the thirteen pilot areas suggest that billions of pounds could potentially be saved by the more effective pooling of resources….If Total Place succeeds, then we will be well placed to radically recast local public services, offering joined-up delivery whilst cutting red tape and doing away with unnecessary duplication, with councillors acting as the lynch-pin in any local authority area.143 For example, in September 2009, London Councils appointed PricewaterhouseCoopers to ‘help develop thinking on Total Place at a pan-London level’: who concluded that London’s annual total public expenditure of £73.6 billion could be cut by as much as 15 per cent – or some £11 billion per year using the Total Place approach.144 And the Management Consultancies Association – mainly by ‘[r]educing the average cost of employment...through outsourcing and/or off-shoring’ and greater collaboration between local public bodies – estimated that £25 billion in new efficiency savings could be made after the 2010 general election.145 Total Place is also enthusiastically supported by Nick Sharman – who is a New Local Government Network (NLGN) Board member and Managing Director for Local Government at Amey who are one of the private contractors that fund the Network (see appendices 1 and 3) – because it provides the Yüklə 5,87 Mb. 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