Charles Moore on Tories and Labour

What are the two main parties' core beliefs? Lord Moore in The Spectator  The Spectator 1 June 2024 asks for clarification about:

 '...current confusion in which Tories hint at approval of socialist principles and Labour of capitalist ones,...' 

What clear choices are there for the ordinary voters on polling day July 4th?

Maybe the only clear choice is about competence? The decline in skills in managing public affairs over the long Tory regime after 5 prime ministers in 14 years does not inspire 'More of the same please'. Is there a chance that a fresh lot would do a lot better? Here's hoping... As Moore implies they are really playing a similar song with only slight variations and they don't have  anything very new to envision us with. Are the Lib-Dems any different?

If we are really in a capitalist system does that explain the growing need for food banks? If it is socialist why are the food banks needed at all with taxes the highest for 70 years?   Has socialism failed too?  Why is it becoming more difficult to buy a house on an average salary? Why are housing rents ever increasing? OK, we are in a mixed system - part socialist part capitalist - but are there any alterative tweaks to think about?

There is a system change that would begin to sort the inefficient running of the economy which the food banks and shortfalls of the NHS show up - after all,  technological success is not an issue so the issue is fairness. A new way would focus on where taxes comes from, how welfare is handled and how citizenship should be fairly recognised.

Tax reform is need to source a large input to the public purse from Land Value Tax  instead of from income tax and other taxes. The property market mirrors the speculative aspect of capitalism and brings  untaxed gains to homeowners when they have done nothing to produce the added land value. What such free lunch do renters get like that? Separating the land value from the house value  (about a quarter or a third of the Rightmove or Zoopla price) shows the value that should be taxed on an annual basis. The amount would need to match the average income tax currently paid so that for the period of the tax reform  any income tax paid would be a rebate allowed  against the charge for land value.  

There is an added green and a housing benefit to land value taxation in that it would encourage the development of land. A house could be enlarged to build rent-producing rooms under the same land tax charge. With more homes built to cover land tax charges on vacant land with planning permission, houses would become more affordable.  The failure to build enough homes has been a feature over decades  - land value tax is an incentive to build more - whilst Help to Buy schemes merely inflate prices by adding new money into the existing housing stock. 

Welfare reform should be included in this LVT tax shift by instituting a regular unconditional Universal Basic Income (aka: Citizen's Income). This should eventually replace most of the welfare benefits which are clearly inadequate given the food banks and housing benefit needed. The individual fine tuning of welfare benefits now needed would be  reduced  bringing large admin savings. The UBI would not be conditional on work and it would be provided for citizens only. These changes would make fairness for people a new feature of our socio-economic system, reducing the centralising nature of the state and curbing capitalistic power.  

Banking reform could add to the UBI sources (see this Blog elsewhere). For other banking reforms and how banking works see:  Charles Bazlinton - YouTube  .

posted  by Charles Bazlinton  author: The Free Lunch - Fairness with Freedom The Free Lunch - Fairness with Freedom 

Merryn Somserset Webb favours land value tax

In a philosophical article in Saturday's FT (4 December 2021) Merryn Somerset Webb writes that she 'favours land value tax'  as she explores aspects of ownership and capitalism.  She refers to land wealth as communal wealth.  The article is about  how selfish we allow our society to be.

Owners of land are gaining as 'house prices' keep booming everywhere. People and firms are putting their wealth increasingly into property and prices are responding - upwards. Just take note that every building deteriorates so the gain is in the underlying land value. Lloyds Bank's new chief Charlie Nunn is hoping to quadruple 'the budget for its private home rental market'  (FT 6 December 2021) which is great for landlord rents and the bank gains the security of the underlying land value gain but not the renters. 

Value in land is largely dependent on location, which is about the ease with which work can be found nearby, such as rail links, good roads, business employment, etc. These things are nothing to do with the land owner's skill - but rather utility providers' provision of good services and such things as planning permission. The land owner can make a desirable valuable house which takes cost and ingenuity but the land value is quite outside their ability to make any individual difference to, land value is a gift from society, the community around. It's just that owners get the gain but renters don't.

This quite unfair situation has another facet for end of life social care. The current plans (see Kings Fund) are for there to be an £86,000 cap on care charges. The scare is that homes may need to be sold to pay for care at some point.  Will a home be safeguarded?      

A much fairer method of paying for care is to tax land value. Almost every piece of land with or without a house or building on it has  value and a small percentage tax charged every year would go to providing end of life care for all. Those with the higher priced property would pay more which would be proportional to the gain in value that society has created on their land.  In the setting of land value tax a allowance below which no land value tax would be payable would be set, so that many poorer homeowners would be land tax exempt. Renters who will never have any prospect of land value gain and thus no land tax, would gain the universal state-provided care but not be charged at any time. Home owners would be paying over some of their lifetime property gains for their later life care as they pay the tax. 

These ideas should be seen in the context of wider tax reforms where income tax paid would be allowable against a liability for land value tax. A gradual tax shift from tax on wealth gained through work onto community inspireded wealth would happen. 

Fairness comes through using community inspired wealth to pay for community needs.

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

Brexit is done. Get Fairness Started

The boring and brilliant 'Get Brexit Done' tag did it for the Tories with Brexit voters gifting the election to the Tories with an extraordinary 80 seat majority for Boris Johnson as Prime Minister. Labour's diligently crafted policies were ignored in the face of the big issue that triggered the winning votes.  Some long established Labour constituencies switched to the Tories. Is this a sea-change or a one-off blip? In five years time will Labour voters revert? Or will Labour fade away as a major party?  For the new Tory administration pressure must be on to do whatever will retain the old Labour seats in an election by 2024. 

Young people voted heavily for Labour in 2017, and also this time; with Remain not being a big enough issue for enough of them to abandon ship for the pro-EU Lib-Dems or Greens. Of these,  full-time students voted massively for Labour with x3 times as many as voted for Conservative. Their manifesto pledge to abolish tuition fees and bring back maintenance grants obviously did it for Labour. The Tories would be advised to do something similar and neutralise the appeal of Labour for students. After all there will be added students next time and some older Tory votes may just not be - both trends will endanger the Tories. How about a lifetime grant for education with created money as proposed by Prof Richard Werner? 

Home renters tended to vote Labour, and owners Conservative. This aligns with the age bias generally, with older people voting Tory. The disparity of home ownership between age groups continues to grow for all income groups. This despite the Conservative Help-to-Buy schemes which become Help-to-Bonuses for house developers . If a carefully designed land value tax scheme gradually replaced income tax, property prices would adjust and affordability of ownership return for the younger, lower earners, and even homeowners might see the fairness of getting their family on the housing ladder as they did for themselves decades ago See this blog Jan 30, 2018.  Does it matter that the home-owning dream is dying in the UK? Are Conservatives still the party of the home owning democracy?  Does this growing unfairness bother them?

The new government is being given advice about spending £billions on infrastructure in the midlands where their new ex-Labour voters live.  The lead time for these is many years and is not a particularly personal vote winner - so why not borrow a Labour proposal and pilot a Universal Basic Income scheme to tackle enduring poverty? What better and fairly quick way to capture and keep voters voting for you? Fairness, particularly for young, poor voters. Use UBI as a basis for Universal Credit reform. 

Incidentally, if spending £billions on infrastructure the Bank of England agrees that it is possible to create money for public spending interest-free and debt-free (no tax cost) and George Osborne (remember him?) agreed too but didn't bother, or dare, to use this monetary tool for the common good.     

And what about promoting local banks to supply credit where needed - locally? Labour were going to do so based on the Post Office network. Dr Plamen Ivanov, a leading proponent of economic benefit through local banks, argues the local case from a new study of the origin of the Bank of England. 

Is the Tory victory to be compared with Benjamin Disraeli stealing Gladstone's Liberal policy of extending the voting franchise in 1867? Not quite in the same way. Brexit as an issue will fade, bringing other election issues. If the Tories come up with 'borrowed,' policies Boris may do a full Disraeli, next time. But don't forget that in 1868 the Tories lost the next election even after 'Dishing the Whigs' having added new voters.             

Posted by Charles Bazlinton:  Author of The Free Lunch - Fairness with Freedom. Also: Promoter of Local Community Banks.  

Mansion Tax: all-party consensus?

A mansion tax may be likely within a couple of years with Labour and the Lib-Dems both wanting one. Today in The Times 'Mansion Tax 'could hit directors' ability to get loans' (Deidre Hipwell), Lord Adonis is reported as saying that the idea is unpopular with 'anybody who is well off ' and  James Sproule of the Institute of Directors says that company directors may find the collateral value in their property is cut. This would be a double whammy against SME businesses. What is needed is a way to introduce the tax fairly so that the ordinary homeowner, at least the asset rich / cash poor ones, who will be hit by an annual mansion tax of 1% on their £1m plus value home, can cope with paying.

An accepted principle of taxation is that it is an awful lot easier to work if the tax can be paid out of  an income stream, ideally one that brings the liability - which is why income tax and VAT are so easy to work. The problem is the value of a home doesn't produce cash until a sale. To stop the outcry at the difficulties of paying the new tax each year, why not let anyone who pays mansion tax on their usual residence to set it off against their income tax bill? Even many Conservative voters would probably tolerate mansion tax this way.

Ordinary home owners would see no income reduction - including company directors guaranteeing their loans against their residence. The housing market would be damped down making homes more affordable probably right down the range, even below the £1m threshold. But company-owned houses and second-home owners would be liable for the tax without relief, raising more for the exchequer, which is always a helpful thing when embarking on the messy business of reforming tax. It would also be a wise thing that business loan collateral in property is considered more realistically. To have to rely in every business cycle on a property speculation bubble to back funding for a (non-property development) business is a little mad when such loans should be made on the strength of the business case.
Posted by Charles Bazlinton. Author: The Free Lunch - Fairness with Freedom

Transforming Finance - 4 Mariana Mazzucato. The state as innovator

Prof Mazzucato exposes the myth that the private sector is the prime generator of innovation. It isn't, because the bill for the risks endured is too huge for the entrepreneurs to pay. The private sector did not create the internet - governments did. The same goes for GPS technology and touchscreens. Everything that makes a smartphone smart, rides on the back of taxpayer funded research and development. Yet the giant IT companies Google and Apple now manage to pay little tax. There is thus no payback by the venture capitalists who come in when the new technology had proved itself and was ready for mass markets. At the Transforming Finance in May in London Mazzucato gave probably the fastest speaking talk of the conference ( Her short presentation is here. ) but what she said we need is the 'real slow' telling about the state investment in technology now profitably reaped by  iPhone, green investment, etc. This can be read in her book which is now out : The Entrepreneurial State. Debunking Public vs Private Sector Myths

In the FT Martin Wolf (5 Aug 2013) rates her book very highly:
 'A brilliant exploration of new ides in business argues that government is behind the boldest risks and biggest breakthroughs'. 
Wolf says her view matters because the state is seen usually as an obstacle and is thus inhibited from taking entrepreneurial risks for the good of humanity and for prosperity. He says what has developed is acceptance of the state taking the risks and the private sector the rewards which makes the private sector parasitic.  

How to invest without increasing the deficit
But our government is hung up on reducing the deficit and, in refusing to spend for such innovation as Mazzucato implies we need, it is not doing the best for our future. Even if you accept that deficit spending is needed, Edmund Gray in a letter to The Times in March said that  Keynes showed that deficit spending is a remedy to restore demand in a recession because national economies are not like the budgets of individuals. Unfortunately Cameron and Osborne seem to think they are. Moreover in the FT on the same page as MartinWolf's review is a letter from Richard Wood which shows how to finance the deficit, if you must, with newly created money. But he doesn't say 'debt free money', which as Prof Richard Werner declares, governments can create 'debt free and interest free' to cover such productive, innovative investment that Mazzucato says that only government is capable of: see YouTube . So there is a way out of the crisis, without raising the deficit whilst recognising the unique role of the state as essential innovator.    

Homeowning - A Brilliant Wheeze

The democratic struggle moves towards respect for the rights of all. Reform follows when the rights of some are seen to blatantly burden others involving a denial of their rights. In the UK a new regulation is coming into force that will criminalise the squatting of someone else's home. Up until now it was usually a civil offence if someone moved in uninvited. Now it will go like this: You are out. Squatters are in. Police are in. Squatters are out (cops leading). You are in. Quickly.

Squatting usually happens after buildings have been left empty and the hard cases such as someone having a long hospital stay and finding squatters in when they get back home are quite rare. Besides there are apparently criminal remedies for such squatting already before this new law . 

Squatting is one symptom of our divided nation. We inordinately favour home owners to the detriment of the propertyless. See this YouTube video where Fred Harrison uses researches from his book  Richardo's Law, House Prices and The Great Tax Clawback Scam . He shows that the nest egg that accrues to many homeowners in the equity stake over a lifetime, effectively refunds a huge amount of income and other taxes that the homeowner has paid over the years. This, whilst being a brilliant wheeze for homeowners, blights the lives and social opportunities of renters and tenants. Poverty. A huge imbalance is perpetuated in our society through our failure to face up to this unfairness. We unfairly burden renters with the tax for the services we all use and unfairly allow a protected nest egg (i.e. tax refund) to homeowners. Horrendous for any democrat worthy of the name. We don't even have adequate rent controls - see this UK/Germany.   

Howard Davies, a one-time deputy governor of the Bank of  England in a article in the Financial Times A wealth tax may work once but don't make it a habit   advocates taxing all land values rather than the wealth taxes mentioned by Lib-Dem Nick Clegg. A levy on the location value of all land would address the land utilisation problem that is one root of the squatting problem. If you had a property that you were keeping empty but had to pay a levy on its land value every year you would soon let the building out and the rent payments would cover the new levy. Hey! With every landlord having to rethink about their empty properties, rents might drop so that even poor potential squatters could pay them.

Trouble is there are more homeowner-voters than renter-voters. Homeowners-voters must be given a promise of  a drop in income tax to match a new land value tax. It is called a tax shift. It will be the only way.

FT letter 12 Dec 2011: Debt-free public investment

In the Financial Times today:
A debt-free way of public investment

From Mr Charles Bazlinton.

Sir, Just over a year ago Martin Wolf wrote a column “The Fed is right to turn on the tap ” (Comment, November 9 2010) commenting on the likely effect of “quantitative easing”. He thought it would be “a leaky hose” and “have a modest economic effect” and he has been vindicated in the UK.

Despite the Bank of England having created money and massively bought up government debt with it, the hope that the cash received would somehow translate into new bank lending has not happened. Mr Wolf also stated: “The essence of the contemporary monetary system is creation of money, out of nothing, by private banks’ often foolish lending.”

So when is the penny going to drop with the coalition government so that a public agency is set up to direct newly-created money to productive, non-inflationary purposes? The creation of such money used for new infrastructure in particular could be issued debt-free and interest-free.

Why on the one hand do we ask private banks to provide loan funds, at interest, for public investment, but we do we not ask the government to direct some of the Bank of England’s new money, debt-free, directly into such investment?

Our current system benefits private banks, but burdens us with taxes. Surely we are missing two great opportunities: to make money creation democratically accountable and, when used for public investment, debt-free?

posted by Chares Bazlinton. 

Author: The Free Lunch- Fairness with Freedom available on Amazon

FT banking and Hong Kong land taxes

The Financial Times is making amends for poor coverage on Mervyn King's recent anti-banking stance.  Yesterday the leading editorial ( King helps the case for banking reform) gave supportive comments to what he has been saying for some time. Catch up. 

Today the FT has an article of interest to land taxers . Land tax being the source of much government funding in Hong Kong. Article: Hong Kong's land system that time forgot. (David Pilling). The tax system is so productive of funds that they are giving away about US$770 worth of cash to citizens. Huge fiscal reserves have built up. Seems though that the rich developers are doing very well but 'even middle-class families...[are] ..dependent on subsidised housing'. A problem is that some tax raised has to be spent on infrastructure and this limits the options to spread wealth.

Read The Free Lunch- Fairness with Freedom it covers Land Tax and banking reform 

posted by Charles Bazlinton

Don’t nationalise banks but...

...nationalise the money supply.

On BBC2 this week Geoffrey Robinson minister in the Blair government and long-term friend of UK Prime Minister Gordon Brown showed his shock at the enormous amount of money that the failed Royal Bank of Scotland has been lending as it crashed out of control towards the largest loss for any company to date. He seemed surprised. You would have thought that someone so close to the center of power would realize that it is the banks that make most of the money supply for a country as they create credit out of thin air and then speed off with it round the world as they do their business.

Asset bubbles in property, in commodity or stock markets are fed as this credit creation balloon inflates around the world. Banks increasingly egg each other on by making more and more money to catch every last million of profit before the whole thing bursts.

Top man Lord Myners, the Government’s City Minister, also seems strangely out-of-touch. He is reported in the London Times today as saying that bankers have 'no sense of society'. But we must not get angry with bankers as they seem to slam the doors to lending to ordinary firms desperate to borrow to keep their businesses going. They are only protecting their own banking businesses as bad loans turn worse in horrific amounts. The credit creation system is the problem - banks just do what they have to do, because the system compels them to do so. They have a legal right to create credit (that is: money) and use it with minimal supervision. So why would one bank hold back?

But this is a bizarre thing. No one is allowed to forge banknotes or coins, but banks, in creating credit, are doing just the same thing and we are all seeing the consequences. I suggest that Geoffrey Robinson and Lord Myners study the submission made to the House of Commons Select Committee on the Treasury, by James Robertson. Click on this link: (House of Commons -Robertson ). He says it is unnecessary to nationalise commercial banks if we nationalise the money supply. The Bank of England would create the money - all money - according to agreed rules, and give it to the Government to spend into circulation - just as it does with banknotes and coins. Ordinary banks could borrow from this supply of money and lend out to those who need it. However the monopolistic profits that they have made up to recent times, by being permitted to create their own money, would cease. As some of the new money would be used to replace that currently raised by government borrowing, taxpayers would save billions every year in interest. It is likely that asset prices would be less volatile. See also references to Prof Richard Werner on this blog.