A proposal for a Universal Basic Income funded by a land value tax/annual ground rent

Dr Angela Donkin of the Institute of Health Equity wrote in the first of nine blogs published by Taxpayers Against Poverty on health equality;

"Income can impact on health in different ways. Income impacts on health directly, for instance, because of insufficient money to heat your home or buy a healthy balanced diet. Cold homes increase rates of respiratory disease, cardiovascular disease, excess winter deaths and mental illness. Inadequate diets increase the risk of malnutrition, obesity, diabetes and cardiovascular disease.   Low income, and particularly debt or insufficient income also impact on health indirectly through increased stress, depression and anxiety, and sub-optimal coping behaviours, such as increased rates of smoking and drinking."

The following case is not the tip of an iceberg - it is the iceberg. 

In January 2014, John Smith (not his real name) was sanctioned by the Tottenham Job Centre for three months for attending an interview about his progress in seeking work on the wrong day. Mr Smith has a long history of anxiety and depression. Immediately after the sanction, he was referred by the NHS psychological services for 12 50-minute sessions of therapy. His housing and council-tax benefits were stopped as a result of the sanction. That created rent and council-tax arrears, which piled up while he had no income. Repayment of these debts was then enforced by Haringey Council when the Job Centre finally reinstated his Jobseekers’ Allowance (JSA) of £73.10 a week. He was subsequently threatened with eviction for rent arrears and prison for council-tax arrears.

In quick succession, he then received a letter from Haringey Council giving notice of its intention to demolish the block of council flats in which he lived, and was visited by the bailiffs in pursuit of an unpaid TV licence.

John Smith had never been fined before for any offence. The first he heard about his alleged misdemeanour was when the bailiffs knocked on his front door at 7.30am demanding £445 to cover a TV license, the court and bailiffs fees. His TV set is only used for games and DVDs and he does not therefore require a licence. He has no TV package or broadband account. Two representatives from the Authority had inspected his flat and verified this. ​He called me at 8am the same morning. I informed Marston, the bailiffs, about Mr Smith’s circumstances and they agreed to suspend the action. Acting on his behalf as a McKenzie Friend, I asked Highbury Corner Magistrates to remit the £135 fine and quash the bailiffs’ £310 fees, which they did.  

John Smith was then forced by the Job Centre to take up employment on a zero-hours contract and was moved on to the new Universal Credit (UC) benefit to support his income. Ironically, that served only to create more debt problems, when the Department for Work and Pensions paid just £0.01 into his bank account to last a full month in which the employer did not employ him at all. As he said, “It’s just one thing on top of another.”

 At one point, he considered throwing himself off the balcony of his fifth-floor council flat. CAB, Zacchaeus 2000 Trust, the GPs, Hospitals and mental health professionals can confirm that this case is not the tip of an iceberg - it is the iceberg, 

COUNCIL TAX

The government cut the central funding for council-tax benefit by 10% in 2013. 289 out of 326 local authorities in England then local councils made the poorest cover the shortfall by taxing the working-age benefits that have been shredded by national government by £18bn since 2010. (See observation of Supreme Court in 2014 at the end of paragraph 29) The local authorities did not ask the better-off to pay anything towards the shortfall. 3.5 million people were sued for council-tax arrears in the magistrates courts by councils in England in 2016. It will be worse this year, because working-age benefits are to be cut by another £12bn by 2020. And there’s the rub.

BENEFIT INCOMES TOO LOW FOR HEALTHY BABIES AND FOR HEALTHY LIVING

£73.10 a week is too low to tax with savage enforcement by councils, courts and bailiffs. £73.10 a week is incapable of providing ​a healthy diet and other necessities at any time, in particular for a woman before and during the development of the brain of a child in her womb. It has been losing value since 1979. ​ It is the cornerstone of the benefit system; all other unemployment benefits are added to it. It equals £317 a month under the newly introduced Universal Credit scheme. According to the ONS it is paid to more than 3.9 million people in the UK. In 2015 there was an unprecedented rise in the death rate  and in the infant deaths of poor mothers.  See graph published by the British Medical JournalGraph. 

SANCTIONS

In 2008, Tim Harford of the Financial Times reported Organisation for Economic Co-operation and Development research that showed that member governments spend an average of 0.75% of gross domestic product on unemployment benefits. In 2006, France spent nearly twice this and Germany almost three times as much, while the United States spent a third of the average and the United Kingdom just a quarter. Germany spent more than 10 times as much as the United Kingdom relative to GDP.  In 2010, the UK government continued and dramatically extended that pattern by shredding the spending on unemployment incomes in the UK.

Universal Basic Income (UBI)

The moral hazard of unemployed people sitting at home watching day-time television rather than looking for work, when they are given by the state a minimum income with no conditionality strings attached, is considered by some to be the moral “knock-down” argument against UBI's introduction. They ignore

1. T​he immorality of assuming every unemployed person in the UK is a crook who will steal from the state and then impose on the overwhelmingly large and innocent majority the most demanding active labour-market policy in Europe.
2. S​imultaneously government is complicit with the immorality
   1. of income parked tax-free offshore
   2. unlimited, unearned, un-taxed increases in private wealth accumulating as the value of UK land has soared since 1979. .  

The strongest moral argument in favour of the Universal Basic Income (UBI) is in the damage done to mental and physical health by the total inadequacy of the current lowest statutory minimum income, JSA or UC, and the inevitable debts that it creates. 

To be a successful economy, the UK must have a healthy workforce. The Universal Basic Income (UBI) is the way to do that. It should be based on the same Joseph Rowntree Foundation research as that used by the employers' Living Wage Foundation to determine the level of the Real Living Wage. Even then, the chaotic UK housing market drives a coach and horses through its best intentions by forcing people to use for rent the income needed for food, fuel other necessities, and healthy living. 

Dr Angela Donkin’s statement, with which this proposal​ begins, is a robust summary of the evidence in reports on health equality made by Black in 1980, Acheson in 1999, Wanless in 2002, the Government Office for Science in 2008 and Marmot in 2010. The moral imperative that every citizen has an adequate income for healthy living and an affordable home from cradle to grave is supported on scientific, humanitarian and economic grounds.

​Land Value Tax/Annual Ground Rent

The British economy is begging for a land value tax which could fund the Universal Basic Income and a lot else besides.The mistake made by the Blair/Brown government was to leave the UK housing market to run as free as the Thatcher government had required (See Z2K 2005 memorandum to the Prime Minister by the late Professor Peter Ambrose). The Cameron/May governments continue with that toxic Thatcher legacy. To pay for a UBI, some of the vast unearned tax-free wealth that has accumulated as the price of land has soared will need to be shared for the common good. And the City of London’s activities in parking its clients’ income tax-free in overseas tax havens will have to be stopped. 

The case for Land Value Tax (LVT), otherwise known as Annual Ground Rent (AGR), begins with the publication of dead-weight losses calculated at £500bn every year by Fred Harrison of the Land Research Trust. See Debt Death & Deadweight edited by Fred Harrison.  

1. The failure of the Treasury to measure or publish the dead-weight losses leaves the public in the dark about the high costs of the present income-tax regime. 
2. LVT/AGR is a secure, progressive source of revenue.  
3.  A small percentage tax/rent on the value of all land could gradually replace inefficient and regressive taxes such as council tax, business rates and stamp duty.  
4. It is paid by the landlord not the tenant. 
5. ​It relieves low-income tenants of the council tax and its draconian enforcement. 
6. Exemptions can be arranged for high-asset low-income households.  
7. LVT/AGR has been found to bring empty homes and unused land into use in Harrisburg, Pennsylvania and other US cities. It works in Denmark, Australia and Hong Kong,   
8. It would encourage the four big UK builders to release their bank of 600,000 plots of unused land.  
9. LVT/AGR enables landowners to contribute to the common good from the unearned increase in the value of their land due to the market, thereby relieving both landless tenants and themselves of the need for disproportionately high taxes on income.  
10. Land cannot be transferred tax-free via the internet to an overseas bank, so taxing it in the UK might even recover a little of the trillions shipped out to tax havens by the City of London

A land-value tax conference at the Royal Institute of Chartered Surveyors in September 2015 concluded that “the technical issues often quoted as providing reasons not to switch to assessing land rather than property, namely valuation methodology and data, are capable of solution within the UK context”. 

Rev Paul Nicolson is the founder of Taxpayers Against Poverty; http://taxpayersagainstpoverty.org.uk/