Hammonds budget crime against humanity. Social problems which flowed from the actions of the malevolent aristocrats ejecting people from the common land are allowed to continue today.
Dodging the Magic Bullet - Fred Harrison on the Budget
Politicians with their backs to the wall have a favourite escape route. Philip Hammond invoked it by claiming that there was no “silver bullet” solution to Britain’s problems.
Such a policy does exist, but politicians make life easy for themselves by keeping it secret.
Days before he presented his Budget speech on November 22, Hammond dampened expectations about solving the housing crisis by insisting that there was “no silver bullet” remedy. http://www.telegraph.co.uk/news/2017/11/15/philip-hammond-wipes-60bn-debt-government-books-bid-build-affordable/ )
And when he addressed the problem of unaffordable housing in his budget speech, he insisted that “There is no single magic bullet”. The core issue, instead, was this: “If we don’t increase supply of land for new homes, more money will inflate prices, and make matters worse”.
But his brew of palliative measures will do little to alleviate the crisis; including the one facing young adults who are prevented from starting their families because they cannot afford the homes they need.
The Office for Budget Responsibility summarised the net effect of Hammond’s catalogue of housing initiatives. They would give a further upward twist to prices, with little impact on the numbers of people who could get on “the housing ladder”.
So the Chancellor needed a scapegoat. He blamed the last Labour government for the recession that supposedly undermined the small and medium-sized house building companies. This was what is now called “fake news”. Those SME housebuilders are victims, along with the rest of the UK’s SME enterprises, of a financial system concentrated in the City of London.
Big banks are only interested in lending mega-bucks to major corporations. Contrast this with the mittelstand sector, which is the backbone of Germany’s successful economy. Small firms get all the finance they need from the many local and regional banks which lend to invest in technologies that produce the goods demanded by global customers.
Britain, by contrast, is lumbered with a few large housebuilders who “land bank” their sites. This is pure land speculation, as they wait for values to rise before they build the homes which families need. Hammond’s strategy - “Solving this challenge will require money, planning reform and intervention” - is managerialism gone mad, when what is needed is radical reform of the financial system.
“Over the next five years we will commit a total of at least £44 billion of capital funding, loans and guarantees to support our housing market.” This promise from the chancellor tells us that it is Business-as-Usual in the housing and land markets. Good for the Big Builders. And futile for young people who are driven to distraction by government-sponsored financial incentives that are calculated to undermine their aspirations, to say nothing of low-income families marooned on the social margins.
What about those land banks hoarded by building companies? The chancellor is apparently bemused. Could there be an ulterior motive for not acting on the planning permissions (270,000 of them, apparently) which have been granted?
Hardly! In a previous life, the chancellor co-founded a commercial building company (of which he remains the main beneficiary). According to The Times (in a report published on the day of the budget speech - https://www.thetimes.co.uk/article/budget-2017-philip-hammond-s-firm-left-plot-undeveloped-for-7-years-kz8kpqkcj ) - that company has squatted on a building site for seven years without erecting a single dwelling.
And so Hammond has resorted to another of the favourite devices of politicians: kicking an awkward issue into the long grass. He promised to set up a Review. “And if it finds that vitally needed land is being withheld from the market for commercial, rather than technical, reasons, we will intervene to change the incentives to ensure such land is brought forward for development.”
There is a “magic bullet”
Because Philip Hammond insists that there is no “silver bullet” - he told Parliament that housing is “a complex challenge. There is no single magic bullet” - his palliatives condemn Britain to a further period of suppressed economic activity. According to the Institute for Fiscal Studies, the depression of the past 10 years could be dragged out through another decade.
But there is a silver bullet with the clout to emancipate people to solve the complex problems that beset society. It takes the form of a restructured tax system. Put simply, instead of raising revenue from people’s earned incomes (income tax is a penalty on work), government could fund its obligations out of the rents created by investment in infrastructure and public services.
When governments fund transport systems, schools and hospitals, a new stream of value comes into existence. Economists call it “economic rent”. Because it is publicly created, that value is owned by the public - isn’t it?
Instead of irresponsibly allowing that value to cascade onto a privileged section of society (those who own the locations serviced by the infrastructure) it should be collected. If that happened, income taxes could be reduced or abolished. Many beneficial effects would follow.
Construction of houses would begin immediately on vacant land. Builders would be liable for the “land value tax” (which I prefer to call the Annual Ground Rent).
More people would be employed, as the cost of hiring them was reduced. This would curb unemployment and poverty, and instigate the renewal of communities.
By restructuring the tax regime, people would be empowered to solve the many socially-significant crises that beset the UK. Those social problems flowed from the actions of the malevolent aristocrats who ejected people from the commons, starting in the 16th century. People were then forced to pay a ransom - rent - if they wished to return to work on the land.
By privatising the nation’s rents, and taking control of parliament, the aristocracy (and, later, the gentry) monopolised power over the legislative process. That enabled them to protect their ill-gotten gains. The landlords’ parliament had to replace the state’s lost rental revenue by creating an anti-social tax regime. Parliament has sustained that financial regime for 400 years. On Budget Day, Philip Hammond made sure that he did not challenge that crime against humanity.
* Fred Harrison is Director of the Land Research Trust.
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