Election 2019. Debt-free public funding: broadband, water, energy. Public debt mountains not needed....

The Labour party has said it will bring utility companies into public ownership:
         We will bring rail, mail, water and energy into public ownership to end the great privatisation  rip-off and save you money on your fares and bills. We will deliver full-fibre broadband free to everybody in every home in our country...
See: Labour Manifesto p7 . Subsequent reported statements say that they will issue government bonds to do so - that is: borrow money and pay interest on the new debt.  

Lord Vallance of Tummel (ex-BT Chair) writes in The Times 19 Nov 2019 that the reason BT was privatised was to access sufficient capital for technological transition to digital. He states that telecoms ranked lower than the NHS, police, defence etc. in the annual  spending round and says there is no reason to believe that these priorities would change if BT came back to public ownership. He clearly does not realise what a government of a sovereign state with its own independent currency can do, to provide tax-free, debt-free funds.  Free money can be issued for non-inflationary productive investment such as developing broadband, railways, etc. No borrowing from banks is needed at all, Lord Vallance. No queues. No begging bowls. Just careful management of how the money is handled. 

As Prof Richard Werner wrote back in 2010, specifically on broadband investment:
Government Money
        One principle in monetary economics is that money creation used for productive purposes is not  inflationary. It is therefore possible to finance the Broadband Initiative with the creation of government money, without anyone incurring any costs or debts, and without any interest burden. From an economics perspective this is indeed the most efficient way to fund such productive government expenditure  

George Osborne, Chancellor of the Exchequer, concurred with that same view through a Treasury briefing document in 2013 (see para: 3.34), that money creation can be carried out to finance fiscal deficits, thus:

      ' It is theoretically possible for monetary authorities to finance fiscal deficits through the creation of money. This would allow governments to increase spending or reduce  taxation without raising corresponding finance from the private sector.'  

All the main parties are into spending much more government money than in the austerity days. But none of them mention money creation as a tool for financing public needs. Instead there are scare stories about public debt mountains and more tax. But if pension funds had their utility assets bought up through debt-free funding (no debt mountain-building) they could invest the cash in productive industry and commerce - Hey! there's a new capitalist idea for financial wizards to think on. A resurgence of new and newly capitalised businesses to fund our pensions? 

To prevent a property market boom through the cash released from re-nationalisations, the Labour idea of land value tax on commercial property would be a wise move. (Labour Manifesto p50).     

Posted by Charles Bazlinton. Author: The Free Lunch - Fairness with Freedom   

Cut income tax / vat / etc this way

Link to this short video from the Welsh Parliament to see Mark Drakeford MP clearly explain land value taxation as an alternative to other taxes. 


Example: In London the Jubilee Line extension raised land values around the station by £10bn. A small land tax would have paid for the scheme. It would also have compensated the owners of land/property where values may have been blighted by the scheme - their land value tax would have automatically dropped. 
Read The Free Lunch- Fairness with Freedom which has a section on the benefits of dropping income tax and such, and bringing in land value tax. 

Landowners vote for land tax to build railway

In Virginia US there is a missing section of railway between Dulles Airport and Washington DC. The problem is how to raise $330m funding for the 23 mile railway and three new stations. The actual route is sorted as it will fit in the central reservation of the motorway link to the airport (US speak: 'median strip of the Dulles Access road'). On 10th October this year the group planning for the link, WARD (Western Alliance for Rail to Dulles) achieved nearly 60% of the votes from commercial and industrial landowners (51% are needed to make the scheme run). Homeowners are exempted from paying. With a few more hurdles to go, the project is hoped to be confirmed by the end of 2009. It is Phase 2 of the Dulles Metrorail Project. Phase 1 is under construction - opening in 2013. When both parts are complete a huge area of north Virginia will be much more accessible from Washington DC.

Why on earth would landowners vote for a new tax? It starts at 5 cents per $100 land valuation and climbs to 20 cents in 2013 (0.05% to 0.20%). The urban corridor is home to a population of over 577,000 which is expected to grow by another 350,000 in 20 years and jobs are expected to rise from about 500,000 to 750,000. The landowners see the area achieving a fuller development potential with this rapid transit rail system particularly helping employees locally and others accessing to and from the wider region. Derek Kravitz writes in the Washington Post article (see below) quoting US Rep. Gerald E Connolly: 'this was a decision that was out of self-interest for the future'. The theme is that land values will rise as the railway will make the area more attractive to businesses, so existing landowners are willing donors of their taxes. A sprat to catch a mackerel.

Other sources of funding will help this scheme too, but the bulk is from the land tax. See the WARD website
or look at this Washington Post article

Land value tax is not only the natural source for infrastructure funding but could very well be a fair replacement for other taxes. We tax hard work and creativity through income tax and VAT. But the general prosperity that results from the same hard work and creativity, over the years automatically feeds through to rising land values. Landowners generally are exempted tax on their gains. How fair is that?
Buy and read The Free Lunch - Fairness with Freedom for more on this.

Funding new railways

Ben Webster in The Times (12th October 2006) reports that developers are proposing to open a closed railway line between Oxford and Cambridge (UK). They are trying to strike a deal with planners: The £100m needed would be paid for by a new 'roof tax' on new homes near the opened line. Even with the extra cost the homes would be attractive because of the new railway.

Fred Harrison in Wheels of Fortune (2006. Institute of Economic Affairs) writes that London's Metropolitan Railway was funded in a similar way in the early 1900's. The land values near the route doubled as soon as a proposal was made and doubled again when it opened (p.157). The developers of the railway bought land near their proposed route and were left with good profits from selling land for housebuilding and for paying for the railway. In the modern case above, let us suppose that a developer has plots of agricultural land totalling 100 hectares bought at £5000 /ha along the 75 mile route between Oxford and Cambridge. With planning permission for housing the land value would be £3,500,000 / ha. For an investment of £0.5m the gross profit would be £350m. Deduct the land and railway costs (£100.5m) and the net profit is £249.5m. Every £1 invested multiplies to £499! For up-to-date land prices see the official property market figures on : www.voa.gov.uk .

The term 'roof tax' is misleading, as what is proposed is actually 'land value tax'. Fred Harrison has written several books on the topic including Power in the Land (1983); Boom and Bust: House prices, banking and The Depression of 2010 (2005). His latest is available at www.shepheard-walwyn.co.uk Ricardo's Law - House prices and the great tax clawback scam. Subtitle: Why Tony Blair's Project failed.

The Free Lunch shows that that many factors trigger land price rises and house price gains.
Anyone thinking about investment in property needs to read it, see: www.the-free-lunch.com .