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Dave wetzel global net 21 webinar nov 15 2011 [3]
- 1. Addressing The Deficit without Increasing Taxes or Reducing Services Dave Wetzel FCILT President, Labour Land Campaign Chair, The Professional Land Reform Group General Secretary: The International Union for Land Value Tax Former Vice Chair, Transport for London Former Leader London Borough of Hounslow Former Transport Committee Chair, Greater London Council GlobalNet21 Webinar 15 November 2011
- 2. The UK is in Debt
- 3. The UK has a deficit - Because the UK’s annual expenditure is higher than our annual income
- 4. But let’s put the total debt into proportion
- 5. UK Debt as percentage of GDP 1945 to 2010
- 6. UK DEBT 1945 Was 3.2 times more than 2010 UK Debt 2010
- 7. 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!
- 8. Suppose the UK found a new rich oil field in the Midlands?
- 9. Like oil-rich Middle East countries we could not only pay-off our debts But also IMPROVE public services and CUT those taxes that damage our economy Taxes like vat which increases prices and income taxes which reduce workers’ spending power
- 10. But the UK is unlikely to find new natural resources But we could make better use of an existing resource But what could that be? Our LAND
- 11. 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.)
- 12. 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.)
- 13. 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?
- 14. RICARDO’S THEORY OF RENT As agreed by Adam Smith Henry George Karl Marx William Vickrey and others
- 15. Imagine Four Fields of equal size 4 x fields
- 16. These sites could be used for factories… 4 x fields
- 17. Offices or hotels… 4 x fields
- 19. Or housing… 4 x fields
- 20. 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
- 21. Profit £10k Capital £90k Labour £100k Land What do we need to produce wealth in these fields?
- 22. Breakeven £200 k p.a Profit £10k Capital £90k per annum Labour £100k per annum Land
- 23. Breakeven £1.2m £200 k p.a Income £210k RENT £10k £1m Profit £10k Capital £90k Labour £100k
- 24. GDP £1.2m £600k £250k Income £210k Rent £10k £50k £400k £1m Profit £10k Capital £90k Labour £100k
- 25. But not a good model of the economy What’s missing?
- 26. Breakeven £1.2m £200 k p.a Breakeven now: £260k £600k £250k Income £210k Rent £10k £50k £400k £1m Profit £10k Capital £90k Labour £100k Doesn’t include Government expenditure
- 27. £1.2m £600k Breakeven now: £260k £250k Income £210k Rent £10k £50k £400k £1m Profit £10k Capital £90k Labour £100k
- 28. GDP £1.2m £600k Breakeven now: £260k £250k Income £210k Rent £10k £50k £400k £1m Profit £10k Capital £90k Labour £100k
- 29. £1.2m Income Rent £1m Profit £10k Capital £90k Labour £100k What is the 10 - 20 freehold years price? rent
- 30. £1.2m £600k £250k Income £210k Rent £10k £50k £400k £1m Profit £10k Capital £90k Labour £100k x 10 yrs x 10 yrs x 10 yrs x 10 yrs Freehold = £100k £500k £4m £10m
- 31. Income £210k Rent £10k Profit £10k Capital £90k Labour £100k x 10 yrs Freehold = £100k
- 32. Income £210k Land Value Tax £5k Rent £10k Profit £10k Landowner £5k Capital £90k Labour £100k x 10 yrs Freehold = £100k
- 33. £250k Income Land Value Tax £25k Rent £50k Landowner £25k Profit £10k Capital £90k Labour £100k x 10 yrs Freehold = £500k
- 34. £600k Income Land Value Tax £200k Rent £400k Profit £10k Landowner £200k Capital £90k Labour £100k x 10 yrs Freehold = £4m
- 35. £1.2m Income Land Value Tax £500k £1m Rent Profit £10k Landowner £500k Capital £90k Labour £100k x 10 yrs Freehold = £10m
- 36. £1.2m £500k £600k £200k £250k Income £210k £25k Rent £5k £5k £25k £200k £500k Profit £10k Capital £90k Labour £100k x 10 yrs x 10 yrs x 10 yrs x 10 yrs Freehold = £100k £500k £4m £10m £50k £250k £2m £5m
- 37. £1.2m £500k £600k £200k £250k Income £210k £25k Rent £5k £5k £25k £200k £500k Profit £10k Capital £90k Labour £100k x 10 yrs x 10 yrs x 10 yrs x 10 yrs Freehold = £100k £500k £4m £10m £50k £250k £2m £5m
- 38. £1.2m GDP £500k £600k £200k £250k Income £210k £25k Rent £5k £5k £25k £200k £500k Profit £10k Capital £90k Labour £100k x 10 yrs x 10 yrs x 10 yrs x 10 yrs Freehold = £100k £500k £4m £10m £50k £250k £2m £5m
- 39. LVT HELPS AVOID URBAN SPRAWL If land is used efficiently in towns and cities with no empty or underused buildings or sites - SPRAWL 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.
- 40. 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
- 41. Land Value Tax is one way to collect land rent • 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