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78 Any good reason why not? – Letter to the Prime Minister
I sent the following letter to David Cameron on 3rd December. I don’t know whether it reached him personally. I hope that it does.
3 December 2011
Rt.Hon David Cameron MP
House of Commons
Westminster
LONDON
Dear Prime Minister
I believe that there is an answer to the present financial crisis, and the best analogy I can give you is that of a blood transfusion, here “good” money replacing “bad” or non-existent money, with the “money donor” regenerating what he has given.
I detail this in the paper that I enclose.
Yours sincerely,
Alan Share
Enc.
cc. Rt. Hon. George Osborne MP
Rt. Hon. Nick Clegg MP
Danny Alexander MP
Nick Boles MP
A Financial “blood transfusion”
(amended 28 December 2011)
(Postscript added 23/25 February 2012)
This article will explain how it is totally possible to create “good” money to replace bad or non-existent money quickly, effectively and almost painlessly.
Are we really stony broke?
Clearly the banks are impoverished having speculated in valueless derivatives and over-priced sovereign debt. And now they cannot fulfill their one basic function – lending money – without substantial reserves of capital, which they do not have. And China won’t act as a fairy godmother. Why should it?
National coffers are empty too, having bailed them out.
But does that really mean that UK plc or the Eurozone equivalent is “broke”?
We are clearly not Papua New Guinea. Look around. There is a vast amount of accumulated wealth. The world is the substantially the same world as it was fifteen years ago. The only thing that is different, very different, the digits on a computer screen.
Recently the Times argued that it would be better to tax wealth in order to reduce tax on corporate and personal earnings. It could have another even more important benefit. It could help to refill empty coffers.
The problem of course is how? given that what you cannot easily value, you cannot easily tax. And wealth owners would not take kindly to the suggestion.
Read on.
I need you to use your imagination. When you stand on Tower Bridge I invite you to see the layers of £50 bank notes of varying thicknesses between the buildings you can see all around and the land they are built on. Trillions of £s of them. Trillions of £s more in every European and American city. 1% of them would be trillions of £s.
But how do you get at them? It shouldn’t be impossible.
The Philosopher’s Stone to turn base metals into gold has proved elusive, but I am asking you consider how to turn God’s good earth into digits on a computer screen.
The answer is to tax commercial land values. I know that this may be an anathema to a Conservative led Coalition Government, but desperate circumstances need desperate remedies. And the saving grace of the Conservative is that he will always be prepared to give up his garters to save his gaiters. The same cannot be said for some on the Left.
Getting confidence back into capitalism and getting a sense of fairness into it require something more than just tinkering and hoping that boom will follow bust because it always has. This is almost as stupid as thinking that there will be no more boom and bust.
So let’s think the “impossible” and make it possible.
If you tax the value of the land with the charge on its users, they will have to find the money to pay the tax. The banks can print it for them and lend it to them. In this instance it will not be “funny money”. There will be collateral for the loan, the land. None better. Immeasurably better than valueless mortgage backed securities that it would effectively replace.
It is not for me to calculate the rate of tax, whether it should be an annual tax or a one-off levy, how much money it should generate or the terms of the loan but, on the analogy of Calouste Gulbenkian, a 5% levy on all commercial land valued over £x an acre to exclude, and thereby benefit small shop keepers, feels about right.
I can suggest that, playing a long game, the terms of the loan in relation to the repayment of capital and the payment of interest can safely from a bank’s point of view be generous. There need be no immediate financial burden at all. Its introduction could be as painless as buying a suite of furniture with four years interest free credit with nothing to pay for a year.
Meanwhile the Banks would have their capital reserves and the national exchequer would have its money, and quickly.
When the Government receives this new money it can use it to reduce the tax on corporate and personal taxation and re-energise capitalism. By the time the landowners are called upon to repay capital or interest, their land will have appreciated in value and the users will be paying less in other taxes and so will contribute.
Furthermore re-capitalising the Banks with a stake in UK’s wealth will force the Banks to play the long game as they do in Germany, and combat short-termism that is the curse of the City and the UK generally.
Also the banks would be well positioned to discourage ill-deserved bonuses – much better positioned than shareholders to do this – poacher turned gamekeeper, why not? Long time ago I used to fear my annual visit to my bank manager.
Altogether this will make capitalism a healthier place to be in.
That is why I give you the analogy of a blood transfusion.
A short time ago the Conservative MP Nick Boles urged this tax in The Financial Times, pointing out that this was not just an old idea going back to Henry George but one now adopted in parts of the world.
This produced a response suggesting that the idea was “bonkers”. Land values were plummeting. How could you base a tax policy on that situation?
I have two answers to that. Employment is plummeting. Does this invalidate Income Tax? But, more importantly, if values are plummeting this is actually an argument for the tax, if it re-energises the capitalist system and helps land values to appreciate.
The other criticism leveled against Nick Boles was that if agricultural land and residential land were excluded, you were left with only 15% of land to tax. I’d happily swop that 15% for the other 85%. It’s a bit silly to say you shouldn’t fish for salmon simply because there are no halibut there.
The one argument you cannot level against it is its impracticability. It is already levied in New South Wales, Singapore, Estonia, Taiwan, and Hong Kong and will shortly be levied in the Republic of Ireland.
Apart from freeing up Capitalism to everyone’s benefit including the landowners themselves, there are four other arguments in favour of it that have some merit.
First it is fair, and fairness is significantly absent at this time. If fairness (not equality) is the guiding spirit in taxation policy – and I believe it badly needs to be – this is where some of the tax burden should reside. It is also fairer and more broadly based than the proposed TOBIN tax.
Secondly, if you owe it you cannot avoid it or escape it. You cannot move it to the Channel Islands or the Cayman Islands.
Thirdly, it encourages people to make best use of the land they own or sell it to someone else who will.
Lastly if it encourages those whose operations could be just as easily undertaken elsewhere in the UK out of London, they will move there, and this will help to rebalance the country. That must be a good thing.
In short, the great merit of this policy is not just that it validates printing money but it gives the State money to fund its social responsibilities that can make it less necessary to tax corporate and personal earnings, giving a new sense of purpose to capitalist enterprise.
Remember one simple thing – a magician can always pull a rabbit from the hat as long as he knows how.
And the rabbit?
Capitalism that works again and delivers and, furthermore, Capitalism without guilt.
PS Ros Altman, Director General Saga Group, in a letter published in the Times on 21 February 2012 provides another powerful reason by criticising the current method of “printing money”, known as Quantative Easing. She pointed out that this distorted the government bond market, and with annuity and drawdown incomes falling and pension liabilties and deficits raising, companies are diverting resources into pension funds rather than growing their own businesses. She goes on to say that it increases Banks’ trading profits and commissions at the taxpayes’ expense. She concludes “The sooner we wake up to the inadequacies of QE the better.”
What I have suggested above would work entirely in the opposite direction. Think about it.
And if you need more authoritative persuasion read Samuel Brittan, Financial Times, 24 February 2012 “It is time to tax England’s green and pleasant land” even though I’m not myself thinking of the green and pleasant stuff.
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