Guest Blog by Fred Harrison, Land Research Trust.
Scotland’s First Minister has created an awkward rod for her political back. Her attack on the Coalition Government’s “austerity” policies renders the SNP vulnerable to its enemies in Westminster. Speaking in London on Wednesday (video above, text here), Nicola Sturgeon trashed the UK Government’s policies on three counts. She condemned the economic policies pursued by David Cameron for failing to deliver long-term growth, increased productivity and fairness. Her own government in Holyrood will now be judged on those tests.
Fortunately for the SNP, the new powers on taxation that are being devolved to Scotland will enable her to undertake reforms that can shift Scotland in the direction of an alternative economic path. But this will require a major change to the way Scotland funds its public services. The taxes employed by the London government certainly fail the first test: long-term growth. Tax policies are rigged against people who earn their incomes by working and saving. The revenue system is biased to favour land as an investment asset. And the pages of history leave us in no doubt that those fiscal policies drive the boom/bust business cycle that terminates long-term growth.
The productivity test is an awkward one. How inefficient is the current tax regime? I will explore that issue at a public conference in Glasgow on 25th February. But there is no doubt that performance of the Scottish economy could be dramatically enhanced if the Sturgeon government decides to rebalance the tax regime. It will need to shift the emphasis away from Income Tax and onto a re-based property tax.
There is no ambiguity about the third test: fairness. At present, the tax regime discriminates against families that rent their homes, and favours the owners of residential property. So the SNP’s commitment to land reform will challenge Ms Sturgeon to find a way of shifting the structure of taxation so that people are treated as equals.
In her London speech, Ms Sturgeon pointed out that the austerity programme was being forcefully opposed throughout Europe. But she is now in a unique position. Unlike the newly elected Greek government, the SNP administration does not have to secure the permission of others to change course. It has the political mandate to launch the reforms that would shift Scotland onto the high productivity growth path. Those reforms would be fair to everyone willing to work by adding to the sum total of Scotland’s wealth and welfare.
Ironically, the SNP government’s enemies within Scotland will not invoke Nicola’s three tests. Already, the opponents of land reform are mobilising their ammunition to try and defend the status quo. The last thing they want is a shift in the direction of efficiency and fairness! The tax regime, after all, was created by those who sought privileged treatment, and to hell with the unfair impact on others. So it will be up to Nicola’s friends to hold her to account, by invoking the three tests to measure the performance of the SNP government.
‘There is no ambiguity about the third test: fairness. At present, the tax regime discriminates against families that rent their homes, and favours the owners of residential property’
As a semi-retired homeowner, I worry whenever I see this type of statement … I was in ‘Class 1’ employment (tax deducted by employer) for most of my working life and am now past retirement age – but now also self-employed owning (with my wife) our house … and I can’t see how I’m somehow being positively treated over someone who is in the same employment/retirement situation, but renting?
And there is to be a new ‘property tax’ put on landlords of rented domestic property – will that not be just passed on in higher rent to the renter?
The property tax – which ought to be based exclusively on the value of land beneath the buildings – should not fall just on landlords; but everyone; and no, the tax would not be passed on to the renter – if it had been possible to increase the rent, the landlord would already have done so.
The discrimination between owner and renter is evident, when you consider this: as property values rise, so do the rents of tenants. They are fully “taxed” by their landlords, who exact higher rents to reflect the rising value of the public services which they do not provide. Owner occupiers, however, merely accrue those rising values in the form of capital gains, which are not taxed.
Ian W: Fred has pointed out that the property tax should only be levied on the land part of the duality of property ( we often conflate the building and the land in our minds). The tenant enjoying the benefits of the location, will of course pay for his access, but that part of the overall rent due for the land part, will either go directly to the public purse or will be deducted from the landlord by the collecting authority. The landlord cannot gain from trying to pass on the land value gain as it will be taken from him by the collecting authority. On the other hand that part of the rent due to the landlord for the provision of the building and its facilities will accrue to the landlord free of tax.
Should the landlord upgrade the physical properties of the building, the land value rating due will not be increased and he may reasonably charge the tenant extra rent( tax free) for the provision of higher living standards. Their will be no rates or council tax charged on the building and contents.
not helped by the Alex Neil situation regarding the profit made on the sale of his taxpayer funded house, as per the Herald
To Ian W: you had a tax advantage throughout your time of ownership. Suppose your mortgage payments were £1000 per month and compare yourself to someone who rented a home for £1000 per month. Your mortgage payments went towards buying outright an asset that you will own with nothing (or very little) being paid to the government. Whereas the rental payments to the landlord will contribute to their taxable income. Therefore a renter (indirectly) pays more tax than an owner with the same housing costs.
Which is why we used to have Schedule A taxation on imputed rent until 1963.
but the two didn’t have the same costs .. the guy who chose to buy his house paid 1000 a month in mortgage, whilst his neighbour paid 500 in rent for the same property … the homeowner in effect paid his future rent ‘up front’ with the view of having no rent to pay in retirement .. . I’m just waiting for someone to tell me that ‘all property is theft’
You won’t have long Ian!
both wrong, property is just fine, the problem being that in terms of land tenure in Scotland , not enough people are involved. The collection of LVR as the basis of public revenue is only possible through collecting it from private owners/occupiers, as government cannot collect rent from itself. The collection of LVR makes land monopoly and land-hoarding less attractive and tenable and in itself. It will encourage an extensive as opposed to an intensive, property -owning democracy. It is thus both the Nemesis of land monopoly capitalism and communism simultaneously.
glad to disappoint you.
Why is the mortgage interest not taxable in the hands of the lender?
Clicking the Fred Harrison link above, I see a photo of someone who reminds me uncomfortably of the dictator of an East European country ranting at students days before the fall of the Berlin Wall.
We’re told Fred is the Research Director of the London-based “Land Research Trust”. Google that and you get a WordPress blog http://landresearchtrust.org/ Click the “About LRT” link and it’s in Latin!
Not very transparent. Or credible. In fact, it’s the Highland Titles of think tanks …
Neil: the LRT website is still in-the-making, which explains the Latin! But as for dictatorship – well, people are welcome to attend our conference in Glasgow next Wednesday, where they will be presented with the evidence on the issue of dictatorship. What it boils down to is an exceedingly uncomfortable message. Ours is an irresponsible society; and most of us have been co-opted into behaving irresponsibly. It will be difficult to come to terms with that reality, but there will be no substantive improvement to the quality of our lives, or to the fabric of our communities, unless we make the conscious choice to act responsibly. That is something that cannot be imposed by dictatorship: which is why I argue that we need to evolve our democracy on the principles of accountability and transparency. When it comes to the issue of land and rent, our culture conceals the evidence. So for the sake of democracy, we need reform. But, yes, I acknowledge that such a transformation will not be to the liking of some of us.
and what has this got to do with the substantive issues at hand?
? to Neil
Whether what is proposed has credibility.
well if it had no credibility, we would not have land hoarding by rich individuals/.corporations would we?
Andy, could you please explain about Schedule A Taxation,
Part of the income tax declaration pre-1963. You had to declare the imputed rent (the rent you could have achieved on the open market) of your property. This figure was included in the amount you were assessed for on your income tax bill.
In reality, it recognised that property owner-occupation contained a consumption of rent/ an ability to pay- and that it was unfair to tax people on their wages, but not on the rent that property owners were choosing to consume, rather than collect.
Thank you Thomas.
How did it come to be abolished?
To bring about a fair society and more environmental taxation system, you will need to tax on what you use its only fair (tragedyofthecomons) , poltax anone! its a fair system if you can vote you must pay tax.
er no, we could instead pay for what we hold and take and not on what we do and make. We may need public revenue, but that does not necessarily mean that we have to tax labour or man- made property. The key issue is to recover the societally created land rental values for the public purse instead of them going to help a terminal ‘monopolytoma’ engulf the body of society.
Sturgeon’s remarks on fairness are somewhat hypocritical given that her party’s attitude to council tax. It is the one tax which has been devolved and which the SNP have chosen to freeze, with the most benefits going to the property owners with the most expensive property. I had hoped that Sturgeon’s ascendancy would mean that this would change but I see that a Council Tax freeze is an SNP commitment and, disgracefully, Murphy has matched this.
Of course, allowing local council’s to pursue their own policies would mean less influence for the Politburo in Edinburgh.
If we make use of the new powers coming to Holyrood, we could dispense with Council Tax altogether. The key lies in the first sentence of Fred’s initial post.
and your fair % level of income tax would be?–and why would it be fair?
Why is it fair “to pay for what we hold” if you have worked 3 generations to get it,and gone without to get it?Which many families have done to get them where they are today?How is it “fair” for a family of 5 all working out of one house to pay council tax divided by 5 compared to a couple with 2/3/4 kids paying council tax divided by 2?Not sure how any one system will be fair,they all hurt somebody.Most families now are paying 50 to 65 % tax right now(that’s everything) and then get lots back through family tax credits etc.
It goes straight back to Fred’s first sentence in his initial post: only the value of the ground underneath the property not the bricks& mortar( house or factory) should be assessed for public revenue liability.
Land is not man-made, it is in fixed supply and cannot respond to normal supply and demand market forces. Neither God or the Big Bang had any production costs and neither issued any invoices. Land has absolutely and utterly no capital value whatsoever( what we call capital value is a human-constructed phantasm)_
The only value land has is a 100% societally generated desirability factor, given various terms such as Land Rental Value or Land Value Rating. Since this is 100% generated by society and not the owner/occupier, it’s 100% return to society is 100% fair, and since land cannot be transferred out of the country or hidden, it is also 100% unavoidable.
So by switching to the collection of LVR as the basis of public revenue, your house will NOT be taxed and should you upgrade your house, the improvement will not be taxed and the LVR will not be increased. Further all the wage earners in your house will not have income tax removed by the state at whatever arbitrary unfair level it sets this ‘official robbery of labour’. So, no income tax, no rates on the building, no corporation tax, no UBR, No escape for land-hoarding supermarket chains, Starbucks, or Amazon or those stashing billions in offshore accounts. God bless your house and all who reside there.
T. Fraser – what is really unfair is that through those 3 generations you have had your income depleted by income tax. Otherwise it would not have taken so long to get where you are. Your earned income is due purely to you and you should be entitled to keep it all. Land, on the other hand, is not man-made and has no production costs. Yet it has a value which is simply an indicator of the level of demand for a resource on which we all have an equal moral claim, and whose supply is fixed and finite. It is a publicly-generated value, distinct from the value of the man-made structures on it. Land values are the natural source of government revenue, as those who demand more would pay more for the exclusive rights that land ownership confers. Then we could start to dismantle the ramshackle tax system that you rightly find so infuriating. It would be far more transparent too – you cannot disguise land or hide it in a Swiss bank.
A number of points:-
1. What’s with this “tax isn’t fair” thing? I don’t consider it remotely unfair to pay a share of my income towards government expenditure. What would be unfair, IMO, is under LRV/LVR/LVT only one section of the population is paying tax (don’t say it Ron!!!), namely property owners, while the rest are getting off scot free.
2. How does the “societally created value” thing work in relation to an acre of Class 1/2 arable worth pushing £10k compared to an acre at the top of the Cairngorms worth buttons? The value of the former is not created by society but rather by its superior natural endowments.
3. Myth buster #1 – the supply of land is not fixed and finite. The supply is in practice controlled by the planning laws.
4. Myth buster #2 – you can’t hide land in Switzerland etc. from the current suite of taxes we have either.
This is almost laughable—no, I am actually laughing. So who is actually making new terra firma these days–is someone doing a homer that God is unaware of? That’s right, unless you have got access to Star Trek technology it is indeed impossible to a transfer a 50 acre plot of ground in London or a 50,000 acre Highland estate to Switzerland. Everyone registered as the official owner or occupier of a piece of land will pay LVR, including tenants. You are correct in identifying that class 1/2 arable land has more societally created value than the land at the top of the Cairngorms,, that’s why the former is worth thousands and the latter buttons—exactly the point. So you are happy to concede that the State can own any amount of your labour and creativity it deems fit? Poor chap, This post is not up to your usual level of intellectual acuity.
I’m going to ignore that.
Does anyone want to actually respond to my questions?
Why, all your points have been dealt with ?
Where does land get it’s value from?
Who or what is making new land?
Can you hide or transfer any part of the land of the British Isles in and to another country?
Does land have a capital value and what were the production costs of making it that justify it? Do you have any documentation recording the production costs of the entity or cause of its existence,, say an invoice?
Does mother nature place a different value on the top of the Cairngorms from that on a lowland field or does that value judgement come from human society?
What level of State expropriation of your time and labour would you consider apt and why?
Neil – your 4 points:
1) What share of your income do you consider fair for income tax? (Presumably 99% would be unfair, so the figure must be between 1% and 99%). What figure and why?
2) Do you agree that it is public, i.e. human, demand for the arable land that makes it so much more valuable to us, in economic terms, than the top of the Cairngorms? (if we were snow buntings or ptarmigan it would be the other way round perhaps!!).
3) Do you believe that planning authorities manufacture new land when they give consent for change of use?
4) You can’t hide land from anything. But do you believe that financial transactions are as difficult to hide?
1) I’d say the fair amount of income tax is whatever is sufficient to meet the government’s expenditure.
How do you respond to my point about the unfairness inherent in loading the burden of defraying government expenditure onto one section of society, namely property owners?
2) Yes and no and I get your snow bunting thing but let me put my point a different way: suppose you dug under a city centre location where the price of land is £bazillion per acre and found the subsoil was Class 2 arable worth £10,000/acre. I would accept that (bazillion minus 10k)/bazillion % of that price is “societally created” but why is the remaining % (£10k/ac) not due to its natural endowments? It would be still be worth £10k 100 miles from a city centre. Or is your point that the natural endowment % of value is in practice so small where it really counts (in towns) that it’s academic?
2A) Sorry to spring another question on you but everything I read about LRV/LVT presupposes the societally created increment derives from infrastructure provided by the tax payer. What about when it’s private companies? For e.g. a company establishes a new factory which provides new employment opportunities and house prices locally begin to rise as a result. Why – to be devil’s advocate – should the company not be entitled to a share of the rise as a return on its capital risked on building the factory?
3) No. For the record, I don’t believe planning authorities can magic up increases in the earth’s surface area or even reclaim land out the sea. But they control the supply of land that can be used for building just as surely as, for example, OPEC controls the supply of crude oil (of which there’s also a finite supply within the globe).
4) My point here is you could assess a piece of land for £X of Land Rental Value but if its owner is a trust in Guernsey whose trustees are companies in Bermuda whose directors are companies in BVI (etc. etc. etc.), then you’re going to be whistling for it unless you have the legal power to impose some kind of attachment on the land itself allowing HMRC to sell it. With “conventional taxes”, it’s the same. There’s no legal reason why HMRC couldn’t be given power to raise an estimated assessment to income tax, 10 year IHT charge, etc., give the offshore owner X months to prove it owes a different amount, failing which the land is attached and sold. The point is it’s about powers of enforcement, not the nature of the tax being collected.
Will be interested in your thoughts. Thanks again.
natural endowments are taken into account as they profoundly affect societal demand for land. A south facing sheltered aspect and naturally more fertile soil being an example, or a coastal estuary with sheltered natural harbours. None of these created by mankind nor with production costs, thence no capital value and having no perceived value until human societies came along–frequently establishing permanent settlements on sites like this.
We have repeatedly pointed out and I now re-iterate, both tenants of land and owners will be due for the site benefits accessed. If the owner has no tenants he will be due for the entirety of the LVR.
What if the factory you mention detracts from the attractiveness of the area, would you have them compensate the private house owners for loss of ‘property’ prices. Both the factory and the houses will be accruing, or depreciating a value not created individually and it will be adjusted accordingly in the next LVR assessment period.
Would a piece of farmland with equal productive potential in terms of the soil-vegetation complex have more or less delivery costs if it were 100 miles or 20 miles away from the main markets and /or 25 miles/500 yards away from a main trunk road?
after the hilarity you imparted to me last night, I would now like to thank you for the intense sense of Schadenfruede you have imbued in me due to the pointed and studious way you have ignored the generally similar response I made to that of John’s.
1) I don’t go along with your “Just pay up – the Chancellor knows best” ideology! But how should he distribute the burden between tax bands? Where does one band start and another finish, and what are the ideal respective rates and why?
Ron has answered your question about property owners – any occupier would be paying, but tenants would in effect be paying via the landlord who would thus be financially neutral vis a vis the land element.
2) “Optimum permitted use” is the basis for valuations – does that explain it?
2A) The company is taking advantage of the location – if it set up on the Cairngorm plateau instead it wouldn’t achieve much, nor would bothy prices rise! But overall public demand for goods is what drives industry, and that leads to demand for space. Development congregates incrementally over time – otherwise you’d have to attribute the wealth of Glasgow’s shipbuilding industry to the first shipyard and shower it with wealth (in your devil’s advocate bit)! Yes, let the company benefit from the return on its capital – stop crippling it with taxation.
3) Glad you agree that the supply of land is finite – taking it from one use and putting it to another doesn’t make any more.
4) Whatever enforcement procedures you choose, the existence of land is much more difficult to hide than financial transactions.
Just one point, John, about your error re “the unfairness inherent in loading the burden of defraying government expenditure onto one section of society, namely property owners”. The ONLY mechanism for funding public services that spreads the load on ALL beneficiaries is the one that bases its charges on rents. TODAY, tenants pay for their share of the services, through (a) taxes, and (b) the rents which take into account the availability of public services in the locations where they want to work/live. Alas, in the private sector, those rents go into private pockets of people who do not provide the services for which they are charging.
Under the proposed rent-based funding system, EVERYONE directly funds public services, through the rents they pay. Private landlords pass on the location-based rents which they receive from tenants to government. And private land owners pay their location rents to government. This is the ONLY democratic funding system that is both fair and efficient.
Fred – that’s what I meant when I said “tenants would in effect be paying via the landlord”.
Arable land was maintained and created on the Blackisle from about 1800 in many places when English families with money came up and ceated/improved large areas.Some of those farms are still in the same families.If this had not been done they would be rough grazing so they did have a production cost.Also they cost quite a lot to maintain so don’t have “no capital value”.Ever thought that the reclaimed land “created” the the road structure and towns so that it is the roads and public infrastructure that were created by the farms and given their value not the other way about.?
What you are talking about, human activity upon land, does have a capital value, and indeed all capital is created by the action of labour upon land. Under LVR there is no impost on improvements, but the land itself does not have a capital value and as Mark Twain said ‘invest in land young man, they ain’t making any more of it’
ever contemplated the impact of the A9 on the commercial potential of the House of Bruar?
As you say, the improvements need maintenance, or the land would eventually revert to rough grazing/scrub etc. The residual value of those improvements would of course be taken into account when you sell, but they would not count for LVR assessment. The intrinsic value of the Black Isle land is due to its location – the local climate/geology makes it suitable for arable farming and leads to a competitive demand, which is reflected in what people will pay for it. The same investment by yourself and your predecessors in an arable enterprise, say, on the Cairngorms plateau, would have yielded much less (if anything!) – hence the difference in value. The roads and other publicly funded infrastructure are crucial in determining land values, which would plummet in their absence. LVR distinguishes between the privately created improvements on one hand, and publicly created ones on the other, i.e. competition for location and publicly provided services and infrastructure.
Having said all this, bear in mind that the really huge land values are in the towns and cities where, acre for acre, they can be hundreds and thousands of times greater than those of agricultural land.
T Fraser, I think the LVR proponents accept that the creation of the arable on the Black Isle as you described is human capital (if that’s the right expression) and therefore that proportion of the land’s value is not assessable to LVT. I just struggle with the idea that the BI’s natural endowments (soil, aspect, elevation etc.) which led people to improve it are “societally created” when in fact they’re accidents of nature.
I also agree with you 100% that the A9 goes to the Black Isle because humans improved it, not the other way round. That’s a better example of the point I was trying to make about a new factory causing local house prices to rise. Yes, the House of Bruar only exists because of the A9 but it’s not always that way round as LVR proponents seem to assume.
Neil – maybe you hadn’t read my post immediately above. We aren’t saying the soil, aspect, elevation etc are societally created! It’s the demand that is societally created, and that results in a value.
yes the basic geographical features are not man made and they have no value until people settle and perceive advantages/ disadvantages pertinent to their society’s needs and desires thus creating LVR according to those desires. The original ‘A9’ was not put in to service agricultural communities, it was built by Wade and his successors for military purposes. There were no proper roads in the Highlands until the 18th century, but agri-pastoral activities and associated communities had existed for at least 4 or 5,ooo years. I live in a village that did not exist, per se, until the railway was built. The Roman roads were military roads serving forts and to this day substantial urban centres exist along their old routes where post-road settlements developed from the advantages provided by the infrastructure, driving increases in site values. If you look at a nightime satellite photo-map of Russia, you can see a linear succession of light blobs—towns that exist because of the Trans Siberian railway—with all the site value increases that caused.
Yes but the Wade road was only fit for military traffic so the Highland Roads & Bridges Commission effectively binned it and built (half at the expense of estate owners, be it noted!) a new A9 in the early 19th century suitable to the civillian commercial traffic being stimulated by agricultural improvement in places like the Black Isle. In this case the public (partly!) infrastructure followed the private investment, not the other way round.
Responding to John (February 17, 2015 at 11:41 am) which didn’t have a reply link under it:-
1A) What’s the ideal (or “fair”) rate of LVR? 100%? What if 100% exceeds the government’s spending requirements? What if it’s not enough?
1B) Perhaps I’ve misunderstood but I thought LVR had to be paid by landlords only and couldn’t be passed on to tenants?
2) See comment above re Black Isle. Still struggling with this although it might be academic in practice due to urban land being so exponentially more valuable than rural.
2A) Ref. new factory. Suppose Cairngorm plateau due to its temperature (or something) turns out to be optimal for some new technology. New tech company builds factory up there … etc. The public infrastructure then follows that private investment in. Total opposite from the case usually cited of taxpayer building new motorway, railway etc. and then touting round for companies to locate next to them.
3) Yes but planning can control the supply of more valuable land for e.g. housing, industrial use etc. Within the limits of the size of the globe, obviously, but that’s pretty big. Like the amount of oil in it. (I think this is sort of beside the point for LRV purps. I only raised it because “supply of land is finite” seems to be something you hear said a lot in LRV circles, although I’m not sure why!)
4) Just have to agree to disagree on this. You can easily devise a scheme to seize land (which indeed you cannot hide) to pay arrears of any tax, be it IT, VAT, UBR, IHT, LVT, CGT, CT, LRV, you name it. You don’t need to introduce a new tax (don’t say it Ron!!!!) just to increase yield.
Note – posted this without having seen Fred’s comment at 12.22pm. But I didn’t understand it so maybe you could do a worked example with some illustrative figures to show how it works out in practice.
1A: As I have been pointing out to you and others for several years, the LVR is 100% generated by society and its 100% return is 100% fair and since land, unlike money and bonds etc cannot be sent abroad, it will be 100% unavoidable Your salary/income is 100% generated by you and the fair rate of income tax would be 0%
But what happens if 100% is more than the gov’t needs? Or not enough – does it get set to 102% or whatever is enough?
The government’s “needs” are not fixed though- just like our own! A rich country can afford its government to provide healthcare, education, state pensions etc, where a poor country cannot.
As most people on this thread seem to agree, it is not “what the government needs” that is important, it is where it can fairly look for revenue.
Incidentally, if the government’s revenue was derived from rental value, then the government would be motivated to increase overall land rents- i.e. make the country richer/nicer overall. It would lead to a virtuous circle of the nations state of advancement and wealth.
1B: we have repeatedly and before Fred’s post above, pointed out that the rent the landlord receives from the tenant for the building/facilities therein will go to the landlord free of income tax, but that portion of the rent due for the societally created LVR of the ground the building stands on will go to the collecting authority for public revenue, either directly from the tenant or tenant to landlord and thence landlord to collecting authority. The landlord does not determine the LVR.
if it was a tax, I’d call it a tax, of course, but it isn’t a tax.
3: probably because no more land is being made on Earth ( well apart from interstellar dust, meteorites and asteroids landing)
1) 100%. If too much, plenty to spend it on – new infrastructure, hospitals etc. I’m sure you’ll think of something (round here fill some potholes!). If too little, resort to some of your favourite taxes! But seriously, you should come to the Scottish Land Revenue Group conference in Glasgow on 25th Feb. to hear much more on this.
But why don’t you answer my question about your preferred rates and bands of income tax?
1B) The tenant is, and would be, paying it as part of his rent. Under LVR the landlord would surrender that land element as public revenue. If he could then simply jack up the rent, why isn’t he doing that already – most landlords aren’t philanthropists and they will try to maximise returns without need for an excuse. They can only charge what the market will bear.
2) Not sure why you’re struggling with “optimum permitted use” if that’s what you mean.
2A) Society is creating the demand for the product, and society is paying for the infrastructure, without which the enterprise would presumably fail.
3) The supply is finite – zone it for one type of use and you lose it for the previous one.
4) We might be talking at cross purposes. I simply said land is harder to hide than financial transactions and asked you if you agree.
I do hope when LVT/LVR comes in we get the utilities to our farms that the towns get, namely roads , bin collection, sewage, water, gas, public transport links in easy reach and broadband. All of which I pay G band tax on our farm in Kilbirnie and at the moment get none of or am I still do without. note of caution these are utilities bar the roads that we can not for any money upgrade as the utility companies and north Ayrshire council refuse to allow us to have. why should we pay more tax when we are refused basic utility’s. Also if we get ill and cant work the farm as well do we still have to pay the tax .
if you have poor utility provision your farm will have a low or modest LVR setting.
no why should towns have better utilities and pay no LVR that is just not fair. They have a better utilities,like better broadband thus better job and social opportunities, why must they then pay lower or no tax under LVR.
towns will have a general higher LVR, don’t understand where you got that concern from. Even within towns, there will be differences from district to district. You will be paying no income tax, no council tax, no UBR and no corporation tax and you will not be paying any increase in LVR if you upgrade your house or farm buildings.
What happens to your farm if you are old or injured and cant pay your LVT TAX.?
You are euthanased and made in to glue.
Come on- what happens if you can’t afford your Waitrose grocery bill? You cut your coat according to your cloth and go to Aldi.
In respect of land taxation- you a) downsize/move to a property with lower LVT, b) defer until death in the case of old age- when it is paid from the estate, or c) get your inheritors to pay while you still live.
If you are ill/injured, surely you should allow the farm to be taken over by someone able bodied who can actually produce something from it anyway.
fine reply Thomas apart from calling it a tax.
Thomas, if you are within travel distance and have the time, I hope you will be able to attend the Scottish Land Revenue Group conference at the National Piping Centre in Glasgow on the 25th.
there will be no tax to pay as it is not a tax. As the ancient Gauls used to say ‘dead men bury their debts’. What happens to your farm just now if you are old and injured and can’t pay?
LVR offers many advantages, but it does not guarantee a free lunch, let alone immortality.
Trying to answer the point that it’s unfair that, under LVR, only one section of society will be paying for government expenditure by saying things like:-
“the rent the landlord receives from the tenant for the building/facilities therein will go to the landlord free of income tax, but that portion of the rent due for the societally created LVR of the ground the building stands on will go to the collecting authority for public revenue”
“The tenant is, and would be, paying [tax] as part of his rent. Under LVR the landlord would surrender that land element as public revenue.”
is mere sophistry: a fancy dancy way of distracting people’s attention from the fact you’re really saying “it’s not fair”.
*tenant pays rent + tax
*landlord pays tax
*tenant pays rent
*landlord pays LVR
Therefore tenants are not paying tax anymore and landlords are bearing the entire burden of financing state expenditure.
Your theories are only comprehensible if it’s admitted that landlords have had the locational value of their property expropriated. But you don’t have the courage to say that openly and plainly and instead try and distract attention by waffling on about tenants continuing to pay tax through their rent. It’s intellectually dishonest.
I can’t come to the SLRG conference, unfortunately. Will you be uploading videos of the talks to Youtube?
you forgot the bit about both the landlord and the tenant paying no tax and the tenant paying the LVR from the land he is occupying during his tenancy, therefor freeing the landlord from paying the LVR during this time, thus the tenant will be paying towards public expenditure. We have never been coy about saying that at present the societally created LVR is going into land monopoly interests who are ‘expropriating’ a publicly created value they do not merit. With LVR you keep what you create and pay for what you receive. I need no commentary on fancy dancy expression from a retired property lawyer.
“the bit about both the landlord and the tenant paying no tax and the tenant paying the LVR from the land he is occupying during his tenancy, therefor freeing the landlord from paying the LVR during this time, thus the tenant will be paying towards public expenditure”
Do you think people are taken in by that sort of thing Ron? The landlord is now paying LVR instead of tax and the tenant is not “paying” anything, he is merely acting as collecting agent and remitting to HMRC.
Make your case, Ron, don’t try to hide it. It shows you don’t have enough confidence in it.
the tenant is paying for both the LVR during his occupancy and for the facilities provided by the landlord .( who pays no tax on the latter) There is nothing to hide and nothing deceitful. The landlord can no longer of course pocket a value he did not create. I can see why the loss of that might be a bit irritating to those losing a’ public hand out’, but I openly admit to shedding no tears on that one.
HMRC will be getting it from the tenant. Otherwise if the landlord cannot attract a tenant, they will get it from the landlord anyway. Might be a good idea if the landlord had a tenant. Actually right now I pay Council Tax direct to the Council, but if my landlords flat was not occupied, they would be liable for it. Are you saying I have paid nothing during the last 11 years of my occupancy, My bank statements don’t say that.
Revenue would be from land rents which the landlord didn’t generate. That isn’t expropriation, unlike the confiscation of a portion of people’s earnings through income tax. You are yet to answer my earlier question on income tax, which was:
“But how should he [the Chancellor] distribute the burden between tax bands? Where does one band start and another finish, and what are the ideal respective rates and why?”
Landlords may not have generated land rents but there are an awful lot of really very ordinary people (I’m not talking about dukes, earls or non-doms) who are going to be rather surprised to be told they’re going to have to start renting what they thought they’d bought in good faith.
As for the distribution of tax bands, I accept there’s a difficult value judgement to be made there (if anyone’s really interested in my view, I’d probably extend the tax free allowances a bit and compensate with a few extra % on the higher rates) but it’s no more absurd than telling people the bad news is we’re confiscating your property but the good news is you won’t be paying tax anymore … oops! … sorry! actually you are because the proceeds of your former property isn’t enough (or alternatively, they’re too much but we’re going to keep it anyway and look for things to spend it on ).
they won’t be renting it, the deed title of ownership remains with them, all they will be doing is returning a value they did not create individually, to the society that it created it for them. On the other hand, that which they create for themselves, through labour and enterprise will be 100% theirs. They need never fill in a tax form again.
I think if income tax were to be introduced from scratch, people would be rather surprised to be told they’re going to have to start paying out a proportion of what they thought they’d earned in good faith. It only came in just over 200 years ago and we’ve just got inured to it!
LVR isn’t confiscation any more than Council Tax is. We might hate Council Tax but we don’t see it as property confiscation. Yet the assessment includes the value of the buildings (notionally anyway), which we or our predecessors in title did put there. We didn’t put the land there.
I doubt if we’ll see eye to eye on this and we could go round in circles for ever. Happy to draw a line under it if you are!
By the way, I don’t know of any plans to video the conference next week. But yesterday I went to a talk by Andy Wightman in Glasgow and I think they were filming it. So it might come up on his website in due course – well worth a look.
Thomas Hall.At the moment when I have been injured,so cant work,I pay no tax.But with LVT years of going without holidays/pension/wage(as many self employed do to survive/builda business) is all gone paying a new Land tax.But I get the idea that that does not count for much because those pushing this have nothing to loose and most voters live in towns and are just not interested.So mygrandfather managed to survive the trenches at 17 only for his grandchild to loose a small farm when sick or injured or old to pay a Land Tax.Cant think they came out of blackhouses/fought a war where many of his schoolmates were dead by 18 to see their descendents loose everything when he voted SNP all his life.
no land tax is envisaged. Any business you are running will not being paying income tax, UBR or corporation tax and you will pay no rates on the buildings or improvements. I live in a rural area and before retiring on the grounds of ill health I spent quite a time being self-employed, so ‘I’ve been there’
T Fraser- do you buy anything when you are injured/out of work? Clothes perhaps? Petrol for your car? Tax on these items does not go away when you are ill. Should a landlord stop asking for rent if their tenant falls ill?
If you hadn’t been taxed on your work the whole of your healthy life, then you would have plenty saved up to cover the bad times. It is this confiscation of people’s ability to save that is so wrong. The fact that you chose to pay all of your hard earned to a bank in mortgage interest, or to the previous landowner does not now give you the right to demand the continued taking of other people’s money with unjust taxation and seeing the publically generated rental value of your land’s location as exempt.
As the owner of valuable land- you are always able to pay- because you can always rent out the land to cover the costs. Can you imagine someone with no wages/other income living in a property with a potential rental income of £10,000 a month actually starving to death before they rented the property out? Of course not. Not saying you don’t get a few idiots living a cold and humble existence in their expensive property- where they would be much better off renting the place out and living somewhere a bit cheaper in significant more. But hey!
Collecting site premiums for public expenditure is just. The fact a few people *might* lose out in the transition in no way changes the fact that the change is the right thing to do. The change will stop centuries of injustice continuing, and will allow society to move forward on a morally solid position, in a way that has in-build positive feedback loops to drive further advancement.
Consider the poor widow back in the days when slavery was legal. She might have spent the total of hers and her war-veteran husband’s accrued savings on a slave to look after her in old age. Abolishing slavery will in effect write her death warrant- no savings, and no care. Clearly in the example, it is still correct to go ahead and abolish slavery!
Incidentally- your grandfather will not see you lose “everything he fought for” as he is dead. I bet the young tenant being stiffed for rents AND taxes on his hard work also has ancestors who fought/died for their country.
As a point of disclosure, I grew up in the country, and now live in a town within commuting distance of a city. I own my own house.
Thomas, I missed this very valuable addition to the debate, as I was en route to Glasgow for the SLRG meeting which went very well. Well said
Three more questions for proponents of LVR/LRV:-
i) Will payment be voluntary?
ii) To whom will it be paid?
iii) What will the recipient do with the money?
The volition of payment will similar to income tax etc, only no avoidance/evasion possible ( including nondoms) (
It will be paid to the same collecting authorities as income tax or council tax ( or their equivalents if local government reforms are enacted)
pay for public services and strategic government functions as at present, with priorities set through the normal electoral processes
So, compulsory payments to HMRC (or local authorities) to pay for public services.
Anyone else think that sounds awfully like a tax?
It is compulsory to pay for my rent and for the parking meter—are these taxes? BTW do you get tax-free Sangria where you are?
You’re clutching at straws now Ron. Your rent doesn’t go to defray public expenditure and using Council parking spaces isn’t compulsory. Even if you own a car. I don’t know about Sangria but if it is sold here, I expect it’s not tax free – what’s your point?
irrelevant, a payment is not a tax just because it’s a payment
are you suggesting voluntary payments to the public purse
“no land tax envisaged”,what is it then?In a poor farming year with loses do you still pay it?
it is the collection of a publicly created value, that is currently going into private hands. If you are in a situation, where you could not make a profit with no taxation on your income whatsoever ( despite agricultural subsidies and grants), why should you as a farmer get special dispensation, when other businesses might have to close down. Why do you think the world owes you a living just because you are a farmer?
Mr Fraser: you ask “In a poor farming year with loses do you still pay it?” The answer is to be found in your answer to this question: “In a poor farming year with losses do [tenant] farmers still have to pay rent to their landlords?” They are (a) paying for the use of the landlords capital improvements, and (b) for the social amenities access from that location, provided not by the landlord but by the community.
Where do you get that? “world owes you a living” from.Anybody/business making a loss/sick/injured would have to pay LVT when they have no income wheras now they would pay no income tax at least if they had no income.Nothing to do with being a farmer.By the way many farmers get no subsidy .So you are saying you will pay your LVT even when you have no money?That would cover a lot of rural type people/jobs a lot of the time.Most families with young children in rural areas live off family tax credits plus a job but with LVT if they are short or out of work for a while they still pay LVT .These people will not see your “owes you a living” comment as helping things when because of sickness,bad weather,Russian trade sanction etc etc they have little or no income and although they work rurally are not maybe farmers.Its not about farmers as you seem to think,it will affect everyone in rural areas.
no LVT is proposed, just the collection of societally created land rental value. Where do I get ‘that from’: the apparent attitude you displayed about’ poor me the old farmer’ Now you move the goal posts to a different part of the park. Have you seen any statements about the suspension of welfare benefits?, though these need a more humane revision than they have had so far. LVR will not get us out of living in the real world, it will just ensure that we have the full value of our labour and enterprise in engaging with it. You have to ask yourself a profound question: do I need this land or do I just want it? Nothing wrong with either, but you have to consider if you have the means to nourish the want, That means will be easier to obtain in a situation where you keep the full value of your labour and enterprise. No one is forcing you to own a farm. I live in a rural area, have been on JSA, have been in low paid jobs, have spent periods of being self-employed, so please,whatever animals you have on your farm, don’t patronise me from a hobby horse
John said above (February 18, 2015 at 10:02 am):-
“I think if income tax were to be introduced from scratch, people would be rather surprised to be told they’re going to have to start paying out a proportion of what they thought they’d earned in good faith.”
I agree but the point is that income tax is NOT being introduced from scratch. But you’re talking about abolishing it and introducing from scratch a new compulsory payment to HMRC to defray government expenditure with a different name and consisting of rent for what people think they already own. You can see how the initial euphoria about abolition of tax might wear off pretty quickly.
I’m going to accept John’s invitation in the same post to draw a line under this here but close with the observation that, whatever the merits or demerits of LVR/LRV/LVT, its cause is not well served by pretending it’s not a tax (roses by any other name and all that), pretending that tenants pay it (when all they’re doing is remitting the landlord’s payment) and trying to conceal that it involves expropriation of property.
If there are Youtube videos of the SLRG conference, then let me know and I shall certainly watch as it may be that the spoken word conveys the message more successfully than in writing here. Good luck with it!
they own the land, but the LVR is not theirs to keep.
I don’t follow any/most of the reasoning on here .So until I do I may ask what seem dum questions.If it is not clear what the Land value tax is/getting to me then I suspect other will not follow it either.I see going on these forums it is the norm to start being rude to people you don’t know or anything about who ask genuine questions.Is the SNP really going with this stuff?I guess those proposing it have nothing to fear but many others will.
FreD Harison,of course you would pay rent in a bad year,I rent so I should know.But you are saying you would pay you rent and the LVT .I am sure my landlord will still want his rent no matter what Land rental scheme you have.”Sociall amenieties access from the location” is my land tax? on land I rent,so basically like rates I guess?By the way do you rent?How do you feel about paying extra to rent your ground.It will be very difficult to make money anymore renting ground.
Misunderstandings all round I think. I for one had assumed you were the owner, in which case you would pay the LVR. You had assumed that as a tenant you would have to pay it. Both wrong! The owner would pay – it would be ridiculous for you to have to pay the rental value of the land twice – once to the landlord as part of the rent you pay for the farm, and again to the revenue authority.
there will be no rates, there will be no income tax, there will be no UBR, there will be no corporation tax, there will be no council tax.
There will be no land value tax, because land has no capital value to tax, as neither God or the Big Bang had any production costs and neither issued any invoices.
The only value land has, is it desirability by the rest of society. An acre of land in Blackhill will have much less value than an acre in Bearsden or Milngavie. If you rented an acre of land in Bearsden it would cost you more than the rent for an acre of land in Blackhill. We call that desirability factor land rental value, or the Land Value Rating ( LVR) That LVR is not created by the owner, but by all of us a society. It does not matter if the land is rural or urban.
The rent you would pay for to your landlord under LVR would either combine the agreed amount for the use of his facilities/property, which he will retain income tax free and the amount due purely for the LVR, which he will then have to pass on to the HMRC. Or as happens to me and others at present I pay the rent for my flat directly to my landlord and the Council Tax direct to the Council.
The LVR will not increase if you increase the profits from your work, the landlord cannot increase the LRV. The LRV will not increase if either you or the landlord upgrade the farmhouse or farm buildings or use the land more efficiently So you get to keep all that you create, tax free, and only pay for what you receive. It will be the same for all of us.
I am a farmer who owns his farm and also rents land for seasonal grazing. The rent we pay is fixed according to its capacity to leave a surplus after costs have been covered. If landowners try to charge more in rent than is available from income minus my costs, I have the option to quit the land and the landowner has to take the risk that no one else will rent the land. In Mr. Fraser’s case, responsibility for paying LVR will be the Landlord’s not the tenant’s. He may try to increase the rent but will be unable to do so if the tenant’s income minus costs does not allow it. No one will be expected to pay more LVR than the land can afford. Should Mr. Fraser be temporarily unable to work, safety net payments will be available from the surplus LVR as a result of the increased production of wealth following the freeing of labour from taxation. Existing taxes destroy their tax bases. This is the main reason why “austerity” does not lead to recovery from recessions. LVR improves its tax base because it encourages production of wealth which leads to increases in rental values. More people will afford to live in remote rural areas when they can keep all they earn following the removal of harmful taxes.
None of this is new, Hong kong had LVT since the year dot and no income tax, hence it was a raving success story.
I dont think farmers have anything to fear from lvt, wheras landlords do.
Yes Hector, the concept is not new, but the landlords have spragged it time and time again, the classic one in the UK, being the House of LANDlords, just before WW1. Part of the problem is caused by calling it land value tax, the last word being an outright pejorative concept -killer. It is not in fact a tax at all, for all the reasons we have argued above. Note how all the opponents of it, and Andrew Howard on the other thread, constantly refer to it as a tax, no matter how often it is called by its proper name. This is an attempt to put it down. It was a Scotsman who applied it in Hong Kong. Aye its application here could transform the lives of tenant farmers and indeed help them attain their own holdings.
The property owning elite are petrified of it, as they might actually have to work after LRV is collected.
Absolutely correct, Hector
I can see the case for LVR, but not for abolition of income tax – if we had no IT wouldn’t we become a haven for tax dodgers from elsewhere looking to establish domicile here, but not acquiring any substantial property that would be caught by our LVR?
no deal Robert, completely and utterly no deal with income tax, it has to go –END.
You’re not actually in a position to dictate (so far as I know) so you need to persuade people. I’m just looking for an explanation. Why should a banker retire from a lifetime of rent seeking to a bungalow in rural Argyll ( where land values are I think fairly low) and not be taxed on investment income? Or on income from part time consultancy or non executive directorships?
Why should he be taxed, why should J.K.Rowling be taxed on a $70 million dollar movie franchise on books she started writing on the dole in a bedsit? If we bring in LVR the banker would never have been in the rent seeking business in the first place. This is not about revenge and envy, it’s about a more secure and just socio-economic future for us all. I was speaking personally and their will be no deal from me on a compromise on income tax.
They are here already, whats to lose?
that’s a well made point Hector and it’s highly unlikely that these or any new ones coming in, that they as millionaires/billionaires, will be living in a room and kitchen in Govanhill, Blackhill or Saughton. In any case if they have made their money legally, it’s none of our business.
2 questions then for 1.Hector “the property owning elite are petrified of it..”Does that mean a retired railwayman in I nverness with a mortgage just paid off and only rates to pay would now have to pay LVT on his lifes work/achievement his house?He cant “downsize” its a small house.
2 Mr Pickard my 364 day rent have often no connection to “capacity to leave a surplus…” in a given year,you just take a chance,look at the loses on potatoes for example this year on rents of £200 to £400/acre.Over 10 years the rent may balance out sure.
as we have repeatedly pointed out, no charge will be levied on domestic houses, farm houses and farm buildings, nor on upgrades upon these. Only the land rental value would be collected up to the optimal permitted use of the land under planning law. So no rates on buildings and no income tax on labour.
ok …. now lets see if I’ve finally got it right …
I will no longer pay Council Tax on my house; nor income tax – instead I will pay a land rent for the land the house stands on? And, as I will not be paying income tax etc then the liklihood is that the land rent will have to be greater than the current Council Tax to compensate for that (and other ‘lost’ taxes). And in retirement the land rent will stay the same, but my income will be less.
And Starbucks will no longer be paying UBR, corporation tax etc but will pay a land rent instead (which, again, will be notably higher than current UBR to compensate for other ‘lost’ taxes). They will now also be ‘legally’ be avoiding no end of taxes that they were castigated for avoiding before the land rent came in. And the wee fruit and veg shop next door to Starbucks, being in the same street and having the same floor area will probably pay the same land rent as Starbucks (though the fruit and veg shop profits will be notably less)?
Have I got it right, or am I still missing something?
When I retired, my landlord did not reduce my rent and the local council did not reduce my council tax, so no difference in principle there, and in fact that one was a hybrid between a red herring and a strawman.
No doubt Fred Harrison, might address your questions directly, but I would draw your attention to his article on the SLRG website covering the principle of ATCOR: all taxes come out of rent ( eventually) Sadly under the present system it would appear that companies such as Amazon, Starbucks and some supermarket chains have not been paying their dues and of course in the 2013/14 period up to £70 billion was not paid into the national exchequer due to the type of activity mentioned over the HSBC scandal. So if we go back to the ultimate source of taxes, and just collect the rent, we accrue rather than lose. Best of luck to all companies making lots of money legally from either a small area of high LVR or a larger area of low LVR or anything in between.; may the make gazillions out of supplying the best quality product/service at the keenest prices—and tax free at that.
there will be a big difference Ron, if my new land rental is three times my current council tax to make-up for other lost taxes .. so I will have to rely on Andy’s ‘transition’ – which I hope will work!
Will have a read at Andy’s report and wait with baited breath to see the outcome of the Scottish government’s commission on replacing council tax
please note John Digney’s reply to Mr Fraser below.
have read Andy’s report and like it for a number of reasons including (but not exclusively) because:
1. He calls it a tax … I like that .. some seem determined to call it something other than a tax, as if that will make the taking of money more acceptable .. if I want to call it a hoover, don’t tell me I can’t call it that because it’s a Panasonic …
2. transition …
3. no TV licence 🙂
Starbucks and the wee fruit shops etc, next door to them/on the same street, are taking advantage of a high locational value for trade created by society. The apparent dubiety of Starbucks, paying taxes on the high trading value they are accruing, will be totally cleared up when full LVR collection is implemented. Same for everyone else on the same LVR.
No Nirvana, no free lunches, no guarantee of business success is being proffered. Every business has to do its SWOT analysis its business plan and its forward financial plan. At present this has to take into account the current range of imposts on trade ( some of which are being legally avoided or illegally evaded), If they get it right they succeed and if they don’t, they go out of business. So it will remain, the difference being there will be no imposts on profits after the LVR is paid. If their business plan is not robust enough to harness the potential of the locational value they will either go out of business or have to improve their business activities. It’s still capitalism, but just not land monopoly-capitalism. Starbucks and their like can play the game or just go and get stuffed, instead of stuffing us.
it is very unfortunate that the term Land Value Tax came into being in the first case and that it has persisted in its error for so long, It has cursed, frustrated and stymied the concept for over 100 years. It is certainly not a tax, but more of a fee, albeit an unavoidable one. More recently we have being trying to apply a more accurate term such as LVR or LRV and only the passage of time ( as per Hoover or Ski-doo have gone from specific to generic) will fix it in the public mind. It is not a tax and unlike taxes cannot lead to less of the item, or service being produced.
but Ron … can’t you see that, if you try to call government-collected money anything other than a ‘tax’, then people will think that you’re trying to hide something? To pull the wool over their eyes (to keep with the farming angle) … If you call it a (progressive) tax that will develop to become the ‘fair tax system’ that (almost) everyone can appreciate – don’t you think that that will be a better approach?
no, if it was a tax, I’d call it a tax. I think it was Confucius who said that the solution to problems begins by calling things by their proper names. We have not done so for a 100 years and the problem remains unresolved. Of course there are always those who might accuse us of duplicity in order to further the land- monopoly vested interests
hmmm … according to my OED, a ‘tax’ (noun) is ‘a contribution levied on person, property, business, or articles of commerce … for the support of the State’ … and I have absolutely no problem with that; and I don’t think many people do. I suspect that the reason it’s had its problems for 100 years is because of the vested interests already mentioned as having had the power to frustrate it all these years – I doubt very much that it was ‘the common man’ who managed to do-it-in because it was called a ‘tax’.
So – Confucius aside – don’t waste your energy on semantics?
and a bit later than Confucius – Benjamin Franklin told us that only death and taxes were certain … so if you take tax away … what then???
instead of being taxed to death, it will be death to taxes—no semantics involved.
a retired railwayman will not be paying rates as well as lrv. he is hardly landed elite.
exactly, but how many times can this man ignore : no rates on buildings , no council tax, no UBR, no corporation tax, no income tax?
I do not intend to become involved in this fascinating discussion but I want to make just one observation. Many of the difficulties in understanding the implications of LRV arise as a consequence of trying to determine the impact were it to be introduced essentially overnight to replace the existing system of public finance.
The problem with this is that, as in the case of the retired banker in Argyll, were LRV in place in its pure form (capturing 100% of economic rent) the retired banker would not in fact be so wealthy since banks today earn huge profits from rent seeking. Indeed, this was a major contributor to the financial crash which had its genesis in sub-prime lending on land in the USA.
So – the important thing to bear in mind that the introduction of LRV would involve a transition. Designing that transition is critical. Once the transition os completed, many of the issues being raised here melt away. That transition might, for example, involve (as it did in Northern Ireland with a new rating system) a scheme of phasing in for those standing to lose the most and a deferral scheme for those whose current cash flow was insufficient to meet the new rates levels.
That is all.
In this respect it wasn’t helpful that the SLRG’s press release announcing the conference next week said:
“The process [of rebalancing the tax system] would *begin* by zero-rating the Income Tax, scrapping the existing property taxes and replacing the revenue with a new charge on location rents.”(Emphasis added)
yes, a transition has a beginning.
1.the one LVT off tax looks like for a retired or out of work person a higher cost then just paying rates.
2Will not everyone end up in tiny houses to avoid tax and then put any money they have made into ?
they might live in a big house in an area of low LRV and relish the fact that’s there’s no land tax or indeed any other of the main taxes we suffer from just now. The house size and quality are irrelevant, only the publically created value of the land it stands on.
Please do have a look at Andy’s own report “A Land Value Tax for Scotland”. At the top of this page go to “Writings” then choose “Main Publications” from the drop-down menu. It’s the tenth item down on the list that comes up. Look in particular at Page 16 for a comparison with the Council Tax. The vast majority of properties (the lower value ones) would be better off.
hope he listens this time.
I have bothered to look at this now which I had no idea of,and their is your problem selling an idea to the public who will not bother researching this stuff.
One question,the farms now going to pay a large LVT in theory even though they only survive through subsidy it doesn’t help them that LVT drives down the price of land if they bought it at the old market price,or if the landlord is paying the new high LVT as he will want to pass it on?
he cannot pass it on for the reasons John and others have already explained. The farms will have no income tax, rates, council tax, no UBR and corporation tax to pay, so they keep all their profits.
If a farm cannot survive without a subsidy, the economic value of its land is zero without the subsidy. Zero-valued land would have zero liability for LVR. I hope that clarifies it a bit, but Duncan Pickard (who posted here yesterday) has written a book “The Lie of the Land” which explores the issue of farm subsidies in the context of the reform proposed on this blog.
We do indeed need to engage the public more, that’s why we are having a conference, been writing to the press, contributing to radio programmes, setting up websites, putting items on Youtube and of course contributing to blogs like this—-sometimes for many years.
Mr. Fraser, Please refer to my previous comment. Farmland is about 90% of the area of Scotland but has only about 10% of the total market value. 70% of the farmland is classified as rough grazing land which means that the total rental value of farmland is less than 10% of the total rental value of Scotland. Urban land will therefore contribute more than 90% of the LVR. Our farm is profitable even when subsidy income is deducted and I know of many more farmers who are in a similar position. Tenant farmers who receive subsidies pay most of that money in rent to their landlords.It is land owners who benefit most from subsidies which can be described as non means- tested income support for wealthy landowners. There are also many farmers who only survive through subsidy because they choose to. Why work if you can live comfortably without working? Slipper farmers are good (bad?) examples.
I agree with one of your observations and that is that it will be in urban Scotland that the debate over LVT is most focussed as that is where most of the value resides. Rural land has become a focus partly because little rural land has a property tax on it and also because a number of land reformers have latched onto LVT as a land reform tool.
Where I disagree is the suggestion that subsidies simply feed into landlords pockets. That is too simplistic. Clearly if you introduce support payments into a system it has distorting effects. On incomes (the intention), asset values and rents. However my view is that vast majority of farm tenants in Scotland – on 91 Act tenancies have not experienced any sea changes in rent as a result of subsidy changes. As far as I am aware the proportion of rent paid from net farm income is broadly consistent with figures going back a long way. In more recent times changes to subsidy have increased flexibility for the recipient and because of that farm profitability but this hasn’t impacted on rents. The current rent review mechanism has proved to a remarkable buffer against short term change in response to external stimuli.
Its also worth noting that the cost of occupation of a farm exists whether you rent it or own in. You pay the landlord or the bank. You may of course inherit one but it’s still the accounting norm to provide for an imputed rent to monitor farm performance.
Most of the subsidy since 1947 has ended up in landlords pockets.
Rents in pre war scotland were £1 per acre in scotland and they are now £50 plus for arable land , a rise of 5000%.
Grain prices have risen in the same period by a mere 1000%.
EU subsidies were meant to help farmers, but they are now the agent of tenants demise as landlords fill in the eviction notices ,quickly followed by filling in the subsidy forms.
That you think my observations are rubbish gives me some comfort. Is the rent of £1 you quote an average or for the equivalent arable land you then quote at £50?
You also ignore the huge drop in production costs over that time driven by farm scale which many farmers, owners and tenants have benefited from, technology etc. The rent has to be seen as a proportion of the surplus not in absolute terms given the huge changes in the past decades.
Your point about eviction notices is of course guff because a 1991 act tenant has a very secure position. What we have seen is landlords reaching voluntary agreements with tenants to buy out there interest in the lease. Setting aside any political concerns that may drive that step – why might that be? Its because the owner can make much, much more from farming the farm himself than from letting it. In other words the marginal difference between letting (which was always a lower return but lower risk) and farming yourself has widened dramatically particularly in arable areas. This points to the potential conclusion that rents have not kept up with the earning capacity of the farm and many owners have identified this. So my conclusion that the rent review mechansim we currently have, together with political intimidation, has surpressed rental growth below the level you might otherwise have seen.
Of course I imagine you’ve now choked on your coffee!
Another question for LRV/LVR proponents:-
Take the situation of Parliament Hall which is the subject of Andy’s two latest blogs. Imagine that a settlement is arrived at whereby title is restored to Edinburgh Council but it’s leased to the Scottish Courts Service for 175 years (statutory maximum period of lease) at an annual rent of £1.00 on the basis that the SCS pays for the maintainance of the building.
Imagine then that LRV/LVR is introduced. I expect PH must have a substantial locational value due to its central location. So who pays the LRV/LVR – the Council as owner or the SCS as tenant?
I thought you’d finished!
I haven’t read those blogs so am not au fait with this case, but so long as the public purse doesn’t lose out I wouldn’t really bother who pays. If they have come to some quirky arrangement about peppercorn rents, maintenance etc., they can come to another one over any LVR that is due as far as I am concerned. Normally the titleholder pays.
If I agree to do all house and garden maintenance on my neighbour’s property for the next 10 years so long as he pays my council tax – fair enough. One of us might come to regret it but so long as the money is duly paid, who cares?!
To be explicitly clear about your answer John:-
The Council as the owner are the party legally due to pay the LRV/LVR to the collecting agency. Having done so, they (Council) then have to turn round to the Scottish Courts Service as tenant and occupier and ask them to reimburse them (Council) for the LRV/LVR they’ve paid out.
Is that what you were saying? Could you answer that “yes” or “no” please. Thanks.
ever heard of a landlord who collected rent from himself?
If the council had already made a binding arrangement with SCS regarding the rent and maintenance, I would imagine they’d be stuck with it. Would they be so daft? Maybe!
Incidentally, I didn’t spot your post agreeing to wind up the previous thread, but you said LVR would be expropriation of property. Is Council Tax expropriation of property, as it partially includes land values? Is anyone challenging that?
And I think you didn’t spot the bit in my post that said “Could you answer that “yes” or “no” please.”
Just so there’s no misunderstanding, I’ll repeat the question:-
“[Is it the case that the] Council as the owner are the party legally due to pay the LRV/LVR to the collecting agency. Having done so, they (Council) then have to turn round to the Scottish Courts Service as tenant and occupier and ask them to reimburse them (Council) for the LRV/LVR they’ve paid out. [Let’s assume for the purposes of discussion there is nothing in the contract between EC and SCS about payment of LRV.]”
Could I ask you to answer that “yes” or “no”. If you want to add any extra comment to “yes” or “no”, type it on a separate line but please *don’t* just respond with another question or by saying the scenario is unlikely etc. etc. Thanks.
Since LVR is entirely created by society and not by the owner or occupier, then no expropriation happens when a publically created value is returned to the public. On the other hand income tax amounts to state expropriation of individual labour at an arbitrary rate set by the state.
In an LVR ‘world’ among the zero rated categories would be all publically owned land as it is an obvious nonsense for any collecting agency to collect from itself.
I don’t agree. Land owned by public authorities should be liable for LVR just the same as other owners. One of the benefits of LVR is that it stimulates behavioural responses (a levy on vacant land will encourage it to be brought into use). There is plenty vacant land owned by public authorities.
They should therefore not be immune. After all they currently pay NDR. City of Edinburgh Council offices at Waverley Court have a rateable value of £3,120,000. The Scottish Parliament has a rateable value of £7,775,000 – its NDR bill is one of its highest item of expenditure.
Andy, I take it that you are referring to my last paragraph. OK, I can see your point about public authorities in the none state sense, but in terms of state owned land, then what’s the point of the state invoicing itself?
mmm, perhaps council tenants on sink estates, should change their names to Lordavocates, and see if the council lets them off with the council tax and/or rent for the building.
Neil (no “reply” tab under yours)
Best if I decide my word allowance!
The titleholder pays, as we have said many times. That would be automatic unless the parties have come to some other arrangement between themselves.
Any thoughts on property expropriation regarding Council Tax?
yes, how could a Council expropriate an empty building owned by the Council or evict itself from its own building?
I thought that subsidies were paid to farmers so that they could produce food of a high standard .
I do not think that a subsidy should be used as an excuse to provide a higher rent to the landlord who does not work for it .
If you read Lord Gill’s observations in the Moonzie appeal he deals with the theory of how subsidy works it’s way through the rent system where a tenant is making a bid for a farm.
The subsidy is there for a number of reasons and food security has lessened as one of the justifications. Environment and social reasons probably now dominate. As I’ve explained elsewhere I’ve seen no evidence of rents directly reflecting changes in subsidy arrangements and rents, as I understand it, remain broadly in proportion to historical stats. So, as I said any subsidy will feed into the system in a number of ways but tenants are in not just a simple conduit for the subsidy to leave the EU and end up with landlords.
If your position was that subsidy should be excluded from any rent assessment – ala Moonzie part 1 – then the result probably would be dramatically falling rents. Yet the occupier would be even better off increasing the gap between let income and potential farmed income for the owner. This would place intolerable strain on the system as landlords understandably would wish to access the much better returns they could get from farming themselves.
The problem with the current debate about ag holdings is that pretty much no one considers what might make letting attarctive to an owner. In the current atmosphere of anti-landlordism that failure to see both sides of the arguement will result in one-sided legislation and further stagnation of the sector.
Moonzie part 1 was the correct position, and rents should have fallen dramatically.
even moonzie 1 was too high in that the land court included a potato let which was specifically excluded in the lease.
“Stagnation ” is obviously bad for your employers and other lairds, but is a boon to sitting tenants, the opposite of the “churn ” your fee-seeking chums clamour for.
The enhanced production since ww2 has been possible due to tenants investment in technologies and fertilisers, all of which cost a great deal, so it is only right that they should reap the benefit,, and not be rented on it.
This thread is supposed to be about LVT so we should perhaps defer the rerun of this discussion for the next agri topic.
Subsidy and rent are very relevant to LRV
I happen to think it highly unlikely we’ll get LVT in our lifetime perhaps not that relevant.
Andrew, I heard of landowners who were very keen to take their tenanted farms in hand a few years ago when the price of wheat approached £200 per ton but have decided to leave the tenants in place now that wheat is nearer to £120 per ton. Many of those who have bought farmland as an investment are wise to leave the risks and the work to their tenants. You are right to mention the importance of environment and social reasons dominating the justification for subsidies. Since its inception the CAP has been a social welfare policy disguised as an agricultural policy, initially to give income support to farmers on small farms in France. I describe subsidies in the UK as non means tested income support for wealthy landowners. Subsidies increase the market price of land and make it almost impossible for newcomers to start farming. Those of us who are owner occupiers and could farm profitably without subsidies are encouraged to invest in more land to further increase our subsidy income. 80% of the subsidy goes to 20% of the farmers.
I’m not doubting that agri subsidies distort behaviour and pricing but it’s complex and impacts in many ways. Perhaps the challange we should all be facing up to is farming for less subsidy. It’s a developed world issue so the UK can’t do that alone but it needs to be addressed. At present Europe has it’s head int he sand about the matter.
Oh , so it was a theory , was it ?.
I have heard of some theories that cause utter chaos .
What do you think of The Theory of Evolution Andrew ?.
Evolution definitely preferable to revolution.
Furthermore, subsidy is harvested by lairds through enhanced rents, and also through inflated land value. Subsidy accounts for 50% of the current value of farmland.
Regarding the discussion on the LRV liability for Parliament House. As you will see from Scottish Ministers’s title, Parliament House occupies less than 10% of the land area of the Courts complex. The current rateable value of the whole courts complex is £1,860,000. The current poundage is 48.2p for larger properties such as this which means that for the complex as a whole, the Scottish Courts Service is currently paying £896,520 per year in non-domestic rates. The liability for Parliament House will thus be less than £89,600 (let’s assume it is £80,000).
Were City of Edinburgh Council to regain title to PH and there was 100% LVR and the site value is indeed 48.2% of the total property value (the improvements are thus 51.8%), then CEC would be liable for a figure of around £80,000 per year. This would be recouped in rent that CEC would charge SCS and is an equivalent figure to what SCS is currently paying as the occupier in NDR. So, overall, nothing much changes.
It is worth noting that, in relation to non-domestic rating, occupiers are currently paying something close to 100% LVR. In situations where the site value is 48.2% of the total value, then that is equivalent to 100% LVR.
Thanks for clearing that up. I had got the impression somewhere that landlords would be prohibited from recharging LVR to their tenants but I must have been mistaken about that.
yes, that’s right Neil and tenant in occupancy is due the LRV and pays it out of his/her/their own money. Here’s a simpler example.
1: A landlord rents out a property where the rental value of the building is £600 per month and the LRV for the land it’s on is £400. The tenant pays monthly by direct debit and he gets a statement from the bank saying Mr W.E Serf, we confirm that £1000 has been deducted from your account on behalf of Mr.F.N Landlord for the rental of the property of Glengrovel House
The F.N. Landlord person keeps the £ 600 for the house totally free of income tax, but has to send the £400 to HMRC for the LRV due on the land. but since the tenant paid this, he has paid nothing and the tenant has paid it all out of his own income tax free income. The F.N. Landlord person is therefor not out a single penny.
2: Alternatively W.E Serf, the tenant, sends only the £600 to the landlord, but pays the £400 for the LRV directly to HMRC. The F.N. Landlord person again pays absolutely nothing.
So far, so easy -peasy for the F.N.Landlord, BUT if he cannot attract a tenant, he will lose £600 in house rent and be due, as the landowner, the £400 for the LRV.
And the lesson for all F.N Landlords is?
Thank you. Very clear. Of course the lesson is no empty properties if you can help it. But we know that already and if we have one have to pay CT.
If under LVT you had a property in poor repair you couldn’t afford economically to repair you could still apply for permission to demolish and return the land to a lower value use such as agriculture. Not likely to be a common scenario but I guess you could adjust your annual LVT liability by seeking a change of use. Or will “optimum use” be prescribed for us? If so by whom and on what basis?
there will be no LVT.
Thanks for appreciating the clarity of my example, no need for spread sheets, apart from muddying the waters. In the situation where there is no LVT, no council tax and no income tax, but only the collection of land rental values on land underneath buildings and not on buildings or upgrades on them, then if you turn that ruin into a 5 million pound luxury home, there would be no increase in LVR. So yiu would either make a great tax-free monthly rent on it, or you could sell it for £5 million tax free.
Yes the capacity to alter the LVR in accordance with optimal permitted use would be built in, so it could go up or down. There’s nothing revolutionary in change of use assessments, but hopefully it will carried a bit more sensitively than the infamous ‘2nd gear CT assessments.
You are ducking the issue again !.
There has never been a theory of revolution .
Maybe you heard some new entrant young farmers talking one night at THAT meeting about getting a farm on a big estate ?.
You are obviously willing to go along with Lord Gill’s observation of “a theory ” .
All I am asking is do you believe in the Theory of Evolution .?. Yes or No ?.
Yes, I’m a signed up aetheist so hardly likely to believe otherwise but I fail to see the relevance. As regards Lord Gill’s judgement we all have to “go along with it”. That’s the way the law works even when you don’t like it.
Is a theory not a guess ?.
The farmer received subsidies for the production of food .
It was not intended for the landlord . It was intended for the farmer who took the risk .
A theory is more informed than a guess and likely to rely of a given amount of evidence. To go back to the rent. What Lord Gill said was that it was up to the tenant how much of that subsidy – or more properly his income in total from the farm he wished to offer to the farm owner to have access to it. The same decision is made when deciding what to bid to buy land. How much can afford from the surplus I make. So you are correct that the subsidy is intended for the producer. It is then up to the producer how he spends it.
It’s worth noting that in open market lets (LDTs etc) prospective tenants have been willing to part with rather more than secure tenants are expected to do so.
That is not through choice, it is because of scarcity.
Once grain drops back to £80 ton and the new CAP is shown to be a disaster, tenants will be hard to find and landlords will be paying farmers to farm their land as was the case in 2000 to 2005.
Just to prove to myself I wasn’t going mad, I did a spreadsheet involving the following scenario: A house whose Council Tax is £200/mth is rented for £700/mth (split 50% locational rent and 50% “bricks and mortar” rent) by a tenant who pays £100/mth Income Tax. The landlord also pays £100/mth IT and £200/mth CT on his own house which he owns.
Once the transition to 100% LRV was complete, this shows that the tenant would be £300/mth better off and the landlord £50/mth worse off which is fine except writing all the figures out demonstrated to me conclusively that, under 100% LRV, tenants do not pay CPSDPEs (my new acronym for “Compulsory Payments to the State to Defray Public Expenditure”), only landlords do. (Note that, even if there were to be a sort of PAYE system for LRV whereby tenants retained the locational increment of their rent (in my scenario 50%/£350) and remitted it to HMRC, they are not in any true sense “paying” – in the sense of “being out of pocket as a result of” – LRV, they are merely acting as remitting agent.)
Whatever the merits and demerits of LVR, I have an uneasiness about this rather arbitrary distinction between payers and non-payers of CPSDPEs according to the accident of whether you happen to own property or not.
Something else is the syndrome Andy wrote about in his recent blog “Scottish Conservatives propose increased costs for home-buyers” (http://www.andywightman.com/archives/4003) whereby, if you reduce a tax, the money will get spent by the tax payer somewhere else. Thus, if our tenant is no longer paying £300/mth in tax (IT and CT), he can afford a rent increase of that amount whereby the landlord can recharge to him a fair chunk of the LRV (£350/mth). If that happens, the tenant ends up being no better or worse off but the landlord becomes £250/mth (>60%) better off. So there might be some unintended consequences.
I seem to recall an anecdote about how there was a toll bridge between a factory and the workers’ houses and when the tolls were lifted, the rents of the houses went up by the same amount. Did I get that wrong?
So the conclusion may be a whole heap of disruption and change to end up not far from where you started?
re: your penultimate paragraph – that tenant will also be able to afford a mortgage. Far better – get a house of you own and no more money down the drain.
On which property he will have to pay a mortgage and LVT. Of course no income tax in this utopia.
it’s the income tax in the current dystopia that’s the problem.
so if a £400 amount is accepted by HMRC after being cleared from the tenant’s bank account, the tenant has not paid anything?
Ron, not in the “being out pocket sense” if the £400 is exactly matched by £400 he’s not paying to someone else as a direct consequence.
You really must stop treating us like fools!
the fact remains the landlord is not paying the £400 for the LRV that isn’t his in the first place and the tenant is paying his due to society. No-one is being fooled by you.
so if I win on the lottery, the landlord should put up my rent?
Was my example not clear enough for you.( no spread sheet required)? If the tenant gets promoted and earns more tax free income, the landlord cannot put up the rent purely on that basis and the LVR won’t increase either.
You would think not in an ideal world but Andy’s “Scottish Conservatives propose increased costs for home-buyers” blog told us that cutting stamp duty causes people to pay more to house sellers. Therefore I’m raising the question why, on similar reasoning, if you cut (or abolish) other taxes, that should not cause people to pay more to house renters?
Sorry, I forgot to reply to John’s question ” Is Council Tax expropriation of property, as it partially includes land values?”.
Yes, of course in a sense it is because it’s an unrefusable demand for money based very crudely around property you own and its value. But LRV is precisely targetted to almost surgically cut out a sum of money equivalent to property you own. It’s thus a far more explicit expropriation than CT.
And no one that I can recall has answered my question about what the banks make of LVT and the billions of debt they have secured against property – including the underlying land value. Andy did at least say a transition would be needed but just how do you deleverage such a complex market without causing an unpleasant shock to our economy generally?
How do you remove a cancer without some trauma to the patient?
A bit cavalier isn’t it given we’d all suffer from economic disruption.
yes, the banksters behaved in a cavalier fashion and the QE horsemen of the apocalypse are in full gallop again.
You must know that the property market drives the boom and bust cycle with the disastrous consequences in very recent memory. It is the land that is the volatile element of property, not the bricks and mortar. Do you really want to leave things as they are and let it all happen again.. and again?
I meant to add – do you want to take the banks’ advice on this, given their track record?
the banks are intimately involved in the current dystopia
I’m not defending the banks just pointing out they have secured debt based on property – land and bricks and mortar. Like it or not disrupted banks would be an issue for us all.
Clearly I don’ think a boom and bust economic cycle is desirable but it wasn’t just property that went through such a cycle. Many assets / commodities did. And how can you be so sure that it was the land element only that boomed. Were purchasers making that distinction?
when oil was purported to be off the Ayrshire coast, ‘house prices’ in Ardrossan etc went up sharply, but then when the MOD stymied exploration because of Trident access, they went down very quickly. During that time the quality of the houses had not changed radically and similar houses 25 miles inland did not change in price. What had happened is that the desirability of the site ( land) had shown the volatility, not the bricks and mortar or commodities.
I don’t recall much change in the price of building materials when house prices soar and collapse. In fact structures decay with time unless maintained. What about buy-to-leave property investment in areas of high land value? You can let a building fall into total disrepair and still make a killing because the land value has rocketed. Land can’t respond to supply and demand in the same way as manufactured goods.
If we don’t change the system we shall forever be in thrall to the banks. And of course, as someone said above (too late to start looking!), there’ll be winners and losers. But far more winners.
There was a huge increase in cost inflation for building materials and labour during the property boom of the 2000’s. Materials of almost all types from steel to tarmac were under enormous pressure and skills and staff shortages meant contractor rates rose very rapidly so the rising cost of a home is not just due to land value but to the physical cost of building the land.
There will always be price rises as supply periodically strives to meet demand, but you surely don’t believe that was driving the boom! What about existing houses whose value also rocketed? No new materials needed there. In fact, as I said, structures undergo a slow process of decay from the word go. You can’t make more land, and even if you take it from one use to another, you can’t transport it to the areas where demand is highest. I would strongly recommend two books by Fred Harrison whose piece started this blog: “Boom Bust” and “Ricardo’s Law”.
I am going to sign off now – not because I want to run off with the ball having had the last word, but because I don’t think we’ll ever agree. I’ll sign off with Neil too, and he’s had the last word on our thread! Also, I’m out most of today and then until late this evening.
whit, they’ve secured debt on a fixed supply entity with no capital value—never!
So if the valuation is crude, then it isn’t explicit expropriation? How explicit an expropriation is income tax? Or is that crude enough to be OK?
All tax is of course “expropriation” to an extent John. But for the best possible reasons, though. But the best taxes, IMO, are the ones that are easiest to pay – most painless for the payer. I would have thought that that means the ones related to ability to pay – income, cash passing through your hands, – rather than a CPSDPE that seems to be surgically targetted at depriving you of the benefit of an asset that is not liquid.
As I have just posted to Andrew, above, I’m going to sign off now (for the 2nd time). We won’t agree on this, but it has been good banter!
the land rental value does not belong to the owner or tenant, it is publically created and its return is not expropriation. Taxation of labour is however expropriation of individual possession.
Ron you’re overlooking the fact that 99.99% of property owners think – with quite good reason – they DO own land rental value and that “returning” it (who to? the old lady I bought it from?) is a concept they simply won’t understand.
Instead of going to the Land Revenue Group conference next week, why don’t you walk down your street and talk to your neighbours?
I do talk to my neighbours and once it’s explained to them, they ‘get it’ pretty quickly. Mind you, some of them live in short assured private tenancies of 6 months in houses where fungus grows on the walls because of leaking rooves and they can’t ventilate the rooms affected, because the windows don’t open. They don’t often comment on sites like this, for fear of reprisals, but they are paying attention.
As you’re no doubt fearless and have the benefit, as I understand it, of a secure tenancy perhaps you’d like to reveal who those landlords are so they might have a right of reply.
Those landlords know full well about their own substandard houses.
ah, the old ‘real world’ argument. You mean the real world where heavier -than -air machines were not supposed to fly and QE creates debt out of thin air? The purpose of our organisation and its forthcoming conference is to start taking the concept into application. It has already been used in part at least in Hong Kong—flight of capital!?
I cannot do that against my neighbours wishes, much as I’d like to
Hmmm. So you get to give the impression of poor landlordism without any proof and without providing anyone with the right to contradict or respond. But then that’s all part of the strategy isn’t it?
it is not an impression and the local medical centre is well aware of it, as is the assessor evaluating the entitlement of one of the octogenarian tenants concerned, to social housing. The assessor almost had a fit of anger-induced apoplexy on hearing of the conditions. Litigation may be in prospect.
I shall look forward to hearing the case’s progression through the courts. Presumably the assessor was also cowed into not doing anything.
nonetheless they don’t own it, but they do own their own labour and talents, abilities and skills expropriated by the state via income tax. Unless they are very rich, it’s difficult to avoid or evade it.
Neil has started to touch on the key issue in LVT which is its political saleability. Working on the reasonable assumption that any political party wishing to introduce LVT also wishes to get elected I think we can assume they will have to construct a new system where the vbast majority of home owners and land users (by number) consider themselves to be better off. Unless I’m being thick that means the exchequer is thus worse off. Given the number of these homeowners and farmers etc are very substantial we can safety assume the loss to the exchequer of their income and capital taxes (they’re still WM so how does that work?) is pretty substantial. That means politically that attention for gathering the tax – ie placing the value (that’s an art not a science so open to all sorts of assumptions and manipulation) will fall on higher end locations in urban areas whether that be residential or commercial. So the questions that arise are:
1. Does this raise anywhere near the lost taxes from other sources – given the owners of those assets are also the majority payers of those other taxes?
2. Could the political proponents withstand the ferocious lobbying from those property interests and homeowners?
3. Would there be capital flight from Scotland across the border to England which seems much less inclined to this sort of caper?
Given that you don’t have a black sheet of paper to work with. Given the political emperative to actually get elected to deliver this and the potential financial risks and linkages to other integrated economies not doing this (rUK) it’s difficult to see how this can be a flier.
I talked to someone yesterday involved with reviewing this issue with the labour Party in the 80’s. After 4 yrs it was dispatched as unworkable to the bottom drawer.
Sorry, I should have added that in considering what the tax take under LVT needed to be a government would need to be cautious in it’s estimation of any economic dividend it forecast might arise becuase of LVT. If they followed your logic of huge unleashed economic gain, which then didn’t arise, they be stuffed.
so you have asked 99% of property owners or sample size?
Andrew: To start with here’s a quote from Fred Harrison’s blog in the other thread. I recommend reading the full piece to get it in context.
” So, it turns out that we CAN have our cake and it eat it. We can run a revenue neutral budget while expanding the aggregate income available to be shared between the private and public sectors. In Scotland that would result in more jobs while providing government to resources to help the vulnerable members of society”
In the UK we are currently down up to £70 billion in evaded/avoided taxes. Since ATCOR applies ( all taxes come out of rent), that’s a loss that will not accrue again.
There can be no land flight across the border and all capital is created from the action of labour upon land. We’ll have the land.
Yes, I can imagine Labour putting this in a bottom drawer as it is the antithesis of tax and spend, as no tax will be applied. Of course that was before the bankster-led land-monopoly capitalism crash of 2008
The repeated failure of our current system, the misery it caused and continues to cause, with greater austerity measures in prospect after May, puts us in a different ball game in respect of political persuasion.
I understand the theory but what I can’t grasp is the practical reality given the need to make it a saleable proposition. Just saying it will be good won’t convince voters. You’ll need to make many of them better off than they are – net cost to exchequer – at an obvious cost to others. I am far from clear that that can be done without huge disruption to our existing property market, banking sector and economy as a whole. I agree you can’t take land anywhere but you can take your money and future investment. It’s all very well some people feeling they’re better off because of no income tax etc (assuming that saving to them isn’t eroded by LVT on land they have) but many urban owners and investors may be hugely worse off. They may well take that an as opportunity to wave Scotland good bye – or at least be very hesitant about future investment. So, never mind the economic theory what about the real world – political and economic?
Subsidies paid to the tenant farmer get ploughed in to the farm as improvements ie drainage , buildings , fences etc .
Unfortunately , up pops the landlord wanting a large rent increase due to these improvements !!.
Is that fair ?.
With changes to farm support with Single Farm Payments down by 40% in some cases , do you see farm rents coming down next year .?.
If not , why not ?. Remember that land values of the landlord are still rising rapidly !!.
You don’t get rent on improvements – thats the law. Land values have nothing to do with rents. That’s the law. If your landlord says anything else you can tell him/her with confidence they’re wrong.
John Elliott or Ian paterson of moonzie would beg to differ.
A hypothetical incoming tenant in those cases would have paid full rent on improvements, therefore the sitting tenant must pay as well.
Andrew, my understanding was that the most recent independent figures are in the 1989 book “Costing the Earth” (ed. Ronald Banks, pub. Shepheard-Walwyn) which, based on 1985 figures, calculated that LRV/LVR at 100% would produce only 44% of central and local government tax revenue.
The fourth paragraph of the Sandilands article says …
“First, we need to know whether the annual rental value of land and natural resources … would likely be sufficient to finance modern governments’ fiscal needs if these rents were its main revenue source, with a corresponding reduction in taxes on other incomes.”
… but I couldn’t find the answer to that. I do, however, admit that I didn’t read through to the end of the article because it was so dense and unreadable to the non-academic economist. Perhaps Ron could pin-point the paragraph(s) with the answer.
Neil. Thanks. I may have just had a road to Damascus moment whilst pondering the issue. As a higher rate tax payer with virtually no property I’ve just realised how spectacularly better off I’m going to be in this brave new world. Am now mulling over what I intend to spend it all on! In fact I may just work less to enjoy my new found wealth. Could afford to take a pay cut / reduce productivity etc etc. Happy days.
With your new freedom from state expropriation of the wealth you have created via your own sweat and intellect, there is basically two things you can do with your money: save/invest it or spend it, The former will help create the fluidity in the banking/financial system that the bankster-hoarders did not do with their taxpayer funded bale-outs and the latter will create demand in the economy and stimulate job activity as per Roger Sandilands’ opus.
so will you enjoy your new wealth, by sitting round your table looking at bank statements and piles of banknotes or will you indulge in economy -boosting hobbies. There will be an exciting challenge on the investment markets for you too, as since you cannot invest in portfolios based on land-monopoly bahookie -sitting exploitation of societally-created LVR, you will have to explore the options for investing in those companies and enterprises providing the best services/products at the keenest possible prices. Adam Smith would have been proud of you.
There will be many relatively high earners like me who will receive this benefit as our property interests are limited to a house and that in an area where land values would be limited. For instance my house sits in birch woodland on land of limited fertility. Other than stimulating the economy my contribution to the costs of society will become very limited. Although I huff and puff at my tax bill in moments of reflection I am actually satisfied that it is a fair return for what society provides me and my family. Shifting the tax burden to almost only land instinctively feels far too narrow and thus unbalanced.
unlike some, I do not grudge you that high wage and I don’t think fining you( tax) for it is a good idea. You could have chosen to live in a location where the ‘national parking fee'( LVR) is comparatively low. and well, fair enough.
I will refrain from making a value judgement on your attention span. You can contact Professor Sandilands through the SLRG site and ask him yourself. I’m sure you can tie your own shoelaces too.
Thank you very kind. Slip ons just to make sure no mistakes.
You could of course take the view that the problem is more a failure on your part to articulate how this would all work in practice. Easier of course to console yourself that your students are idiots.
Andrew, I was replying to Neil
Andrew, The banks abandoned “ability to repay” and relied on “collateral asset value” as the basis for lending money. Every investor has to accept the risk that prices can fall and should not be allowed to rely on being rescued by central bank money printing. Although the market price of our farm is likely to fall by more than £3m. I will not consider myself to be a loser after LVR is introduced. The current unsustainable price of farmland is no advantage to us because we do not want to sell. What matters is the earning capacity of the farm, not its price and the earning capacity will not fall, no matter how low its price is. I am confident that we will be winners with LVR because our costs of production will fall when taxes on earnings are abolished. High land based asset prices are harmful to the national economy because they result in high levels of debt. The banks like a debt based economy – it allows them to collect lots of unearned rent, which they call “interest”. On the subject of the resistance to LVR from those who think they will be worse off with LVR, the abolition of apartheid (and slavery) attracted comments similar to those expressed in response to LVR. Please look up the speeches made by Winston Churchill more than 100 years ago when he advocated getting rid of employment tax and collecting land rents. The landowners in the House of Lords then had the power of veto and were able to block his proposal which was passed by he Commons.
Duncan. Our business runs on the same basis – that is relying on what we can make from land not trading it. However I fear many others will not be so blase about a loss in their personal wealth -and that is how they will see it. And the banks will certainly not as many will have lent using that value as collateral. Its all very well saying that banks should face the consequence of that but the state rescused them in 2008/09 to avoid general financial contagion which would have hurt many more than just banks and their shareholders. As loans would have been called in, working capital reduced etc. Proponents of LVT need to demonstrate how you could move from one system to another without tanking the economy.
As a by the by I think comparison with slavery and the resistors to that reform is risible. Slavery was abhorent – and consider so by many even at the time whereas LVT is a discussion about alternate methods of financing the state with the current system prevalent throughout the developed world. Having said that I do accept your point may be limited to the denial of change. If so perhaps an alternative analogy might be in order.
Aye Duncan—the House of LANDlords, more like
Why can a 1991 Act secure tenant not have borrowing power from the value of this type of tenancy ?.
There must be a value as , if the landlord manages to evict the secure farm tenant the landlord doubles his own capital value . When I was at school 1 + 1 = 2 .
The secure farm tenant could then invest in the farm the same way as the neighbours who own their farms which they previously tenanted .
At the moment the landlord is trying to evict all 1991 Act secure tenants to satisfy his greed and personal gain .
As far as new entrants are concerned . This is a deceitful illusion. Yes , some will gain a token tenancy , but it will be The Big Rent of established farmers who will rent and farm more ground .
And all the time Landowners will howl for more incentives to let land . Hypocrites !.
As I understand it a 1991 act tenancy is not registrable for the purpose of granting a security because it’s only for a term of one year. During discussions with banks to inform the current review They told us (SLE) that their focus in deciding to lend was the businesses ability to repay. If that is good then the tenant can borrow. We have also confirmed to the banks of tenants (on request) that an improvement proposed will be treated as such so in extremis the bank would have that comfort should the tenancy end.
I’m aware landlords are offering purchase tenant’s interest in the lease but I’m not aware of landlords “evicting” tenants. Could you elaborate. For a start its very difficult as the grounds to do so are very limited.
The CAAV looked at who took on new tenancies when offered in E & W. 20% were new entrants. Clearly they will always be at a disadvantage to existing farmers – just as in the purchase market – but if you create supply the evidence from not that far away suggests some will go to new entrants.
Fortunately , at the moment , the law protects security of tenure for 1991 Act tenancies .
But I am sure that S L and E ( formerly Scottish Landowner’s Federation ). Have always wanted rid of security so that the landlord has full capital value of the farm as well as total control and power over those who work and live on the estate .
Of those new entrants that you mention . How many are actually farmers sons or daughters who have added more land into the larger family business ?..
When available you will be able to confirm that SLEs submission to the review group did NOT ask for 1991 Act security to be removed.
To your second question I’m afraid I don’t know but I’d hazard a guess that quite a number of them were.
This is all part of S L and E’s gameplan .
What you say publicly and what you do privately are very different .
You have an agenda to have total control over land .
As for my second question . What has that achieved ?. . What good has that done for genuine new entrants . They are competing against large farm businesses . The big rent is your end goal with new entrants a token gesture .
You are entitled to your opinion but I’m afraid it’s wrong. SLE’s public position is it’s private position. It would also be spectacularly political niaive to think that 1991 act tenants would have their security removed by any Scottish Government.
What its acheived is a let land market south of the border which has stablised at a higher level than here (about 30%) and a market in which opportunity to be a tenant exists. Of course larger established farmers have an advantage. That’s a fact of life and short of buket loads of public money to new entrants it’s hard to see how that will change. A problem that exists in any capital intensive business.
Yes, the opportunity exists in england to be a rackrented slave to the landlord, just counting down to eviction day. If the scottish tenanted sector fell to 10%, that would be a result for all concerned, except the lairds of course.
Back with LVR, may I ask if Duncan Pickard could, without disclosing any more of his personal financial information than is necessary, share with us the arithmetic by which he concludes that LVR would reduce the value of his farm by £3 million?
are you thinking of putting in a cash offer for the farm?
I stand by what I have written.
I think what you have mentioned in your last two sentences sums up the challenge for new entrants . It is not the lack of land but the lack of money that is the main problem . Landlords would let land if the prospective farm tenant paid a big rent on a short term let .
Landlord very happy .
Just to reiterate, charging rent on improvements is illegal, but every landlord does it.
Roxburgh mains proves the point.
that sounds like what happened to friends of ours who took over the tenancy of a failing pub .. the new landlady had a catering background and got a good pub-restaurant business going due to her good food, so the alcohol sales also went up to the benefit of the (owning) brewery (this was in England, by the way). Brewery then increased the rent to match the higher (food and liquids) turnover so friends were working morning ’till night for limited reward. Gave it up after 3 years.
Ian w, that is classic landlord behaviour. Thats why scots people often despise go ahead people, because their historic ingrained experience with factors told them that rents would be put up, and everyone would end up working harder for less money.
the ‘you’re wasting your time’ attitude? I understand it, but can’t sign-up to it myself … my friends walked-away and the brewery lost out … taking it laying-down is a problem in itself.
How does it prove the point. Did the Land Ct allow the Landlord to charge rent on improvements. Could you refer to the relevant part of the judgement please?
Rent was assessed on open market ,ie what someone else would pay for the land after Elliott had knocked it into shape.
Not quite. What the court allowed was comparable rental evidence which led with evidence from open market LDT lets which is consistent with what the court concluded in Moonzie. That figure was then adjusted to reflect the cicumstances at Roxburghe Mains, including what was a tenants improvement.
The end result was a rent which I’ve yet to see argued wasn’t fair in quantum. Most of the fuss was about the increase from the passing rent. Of course the other point of view would believe that the tenant had obviously been paying too low a rent before and had enjoyed the benefit of that.
To amplify that Andrew, the legislation (1991 Act, s.13(5)) explicitly requires the tenant’s improvements to be disregarded when fixing the rent so as necessary they would be factored out of the comparable evidence of market lets. In the application of that principle to Roxburgh Mains, the Land Court said (para. 188):-
“Although some evidence was led of improvements Mr Elliot had made to drainage at Roxburgh Mains no submission was made by either party that any of the disregards for improvements referred to in subsec (5) of sec 13 came into play …”
Why Mr Elliot chose to waive his right to seek a discount for his improvements we are not told – presumably because he realised it wouldn’t make enough of a difference to the result to spend time on – but Roxburgh Mains is most emphatically *not* an authority for the proposition that tenants are rented on their improvements, sorry!
The tenant had a low rent from 1994 because the farm was in a poor state.
The rent should have been sustantially reduced in 2000 when barley and wheat were £60/ton, but it wasnt, so the rent should not have been increased in 08 at all.
Thats why it is called the rentrack, or ratchet rent.
There is a clear message to all tenants post roxburgh, DO NOT IMPROVE YOUR LAND.
Clearly that version of events didn’t convince the land court. In fact I don’t believe the tenant led with such a position.
Is it possible for a tenant to convince the land court of anything? They are totally discredited in tenants eyes. They can make tenants improvements disappear in a puff of smoke.
Justice does not exist on the land.
The cost of this shambles would nearly have bought roxburgh mains in 1994.
Hector, I know you deplore market driven rent increases but they are not the fault of the Land Court.
It is the job of the LC (any court) to apply the law as it stands and, in the context of agricultural rents, the law requires – rightly or wrongly and this may change as a result of the AHLRG – that they be fixed according to the market. A court is not entitled to say “The law is X but we don’t think that’s a good idea so we’re going to decide Y.” That’s effectively what the LC did at Moonzie (by factoring out SFP in the face of the market evidence) and, of course, it was immediately overturned by the Court of Session.
As for the suggestion that Mr Elliot got Roxburgh Mains at a low rent, he’s done it up and is now being rented on his work, why didn’t he make this point to the LC considering that the law explicitly allows him to do so? I can hear you drawing breath to say “He knew it would have been a waste of time because the LC wouldn’t have listened” and, if so, that is – to use your expression – “tosh”.
And finally, you say the rent should have been reduced in 2000 when barley and wheat were £60/ton so should not have been increased now. If that were so, then why didn’t Mr Elliot apply for a rent review in 2000 (or 2001 or 02 etc.)? Rents are set according to the market prevailing at the review date in question (Whits 2009 for RM), not a date of your choosing as being the high or low point of the market when you could have reset the rent but didn’t bother. Imagine if people could sell their houses today in 2015 for the price they would have got for it at the peak of the market in 2007. Cake, eat?
Asking for a reduction in 2000 would have been pointless as the supposed “earning capacity” was not introduced till the 2003 act.
Several other tenants tried to achieve a reduction post 2003,notably at moonzie, but due to cost he had to back down. If he had been able to press on, things might have been different and general reductions might have followed.
If reductions had followed, increases post 2007 would not have been opposed as they have.
The law on improvements is an ass, and an ass bred in the landlords stable.
There is no formula to assess the condition of land re improvement. A wet,rocky field , full of wild oats or thistles is assessed identically to a ferfectly dry, stone free, perfectly farmed field.
We had a tenant who’s rent was reduced in 1994/5 so it was possible if a case was made pre 2003.
Surely the point with Moonzie was that case made by the tenant was rejected by the Ct of Session. In fact had the Land Court judgement held theres plenty of evidence that based on that formula rents would have increased in the bouyant years of 2010-13.
I’m afraid your interpretation of the law of improvements is incorrect. If a field is drained by the tenant then that can be treated as an improvement. And if your point is about rent the idea that those two types of land would be treated the same is risible.
The reason most relationships work well is that the legislation (despite being past it’s sell by date) has had 50 years of trying to refine how the relationship between parties – including over rent – should be managed. You may not like it but 80% + seem to find it suits them. We’re about to turn some of those things (rent) on their head and I have a sneaking suspicion you’ll be moaning about those changes in a few years time.
To add my take on hector’s points:-
In Roxburgh Mains, the LC explicitly marked the rent down for the fact RM was stonier than the comparable (Palace) the market rent was derived from. So I disagree with hector completely when he says good fields and bad fields are assessed identically – simply not true. The LC treated stone removal as an ongoing cost rather than a completed improvement – hector/Andrew will know better than I whether that’s a reasonable approach but the fact remains that, one way or another, the tenant was given credit for it.
hector also mentioned the “earning capacity” change brought in by the 2003 Act. I’d forgotten about that. In fact it was “economic conditions” but, either way, I’m convinced that neither the Minister, nor any of his civil servants or the MSPs really understood the issue in 2003. The result was legislation that was a meaningless hash so much so the LC in Moonzie felt able to step right over it as if the 2003 changes hadn’t been made. In fairness to the LC, the tenant’s counsel didn’t press the point very strongly and they ended up fixing the rent by budgets (i.e. earning capacity) anyway for want (as they saw it) of market evidence.
It highlights to me the need to focus clearly on the distinction between market rent and fair (earning capacity) rent and choose one or the other because a fudgy compromise between them is unworkable. The Rent Review Working Group muddled (or deliberately fudged?) this issue. I’ll need to go back and read the AHLRG in detail to see what they’re saying but I hope a clear decision is made so there’s no more muddled legislation like 2003 or cases like Moonzie.
The reality is that a one size (“market” or “fair” rent) may not fit all (“family farms” vs “agribiz”) and that a division of lettings may need to be made, cleaving family farms off into crofting and letting agribiz stand or fall with market forces. Difficult to know where to draw the line between these two. We need a proper study on that – the AHLRG was too narrow.
We’ve wandered so far off topic, I can’t remember what it was now! Something to do with Nicola Sturgeon?
We’re miles off the original subject but hey-ho. A couple of observations. The RRWG reached the conclusions they did, as relayed at the time, because little advantage (probably considerable disadvantage) was perceived from a change. No one argued the existing system was perfect but it may well be better than the rest. I fear the basis for the recent decision on rent from the AHRG was a political one NOT one based on practicality and efficacy in practice. Time will tell but I fear those who exect less conflict under the new system are in for a profound disappointment.
I most certainly disagree with your assessment that perhaps a split in farms should be considered with some locked in some sort of sub-market quasi croft status whilst others operate in the market. I’m afraid without facing the economic realities of the farms sector those quasi crofts will do nothing for the future of agricultural sector. The great challange we face is declining productivity and 80% of farms making no profits without subsidy. The industry faces some difficult decisions but preserving structures in aspic is not an appropriate response.
My god, i agree with you!!!!!!!!!!!!! about putting farm tenancie into crofts.
but not about stone removal.
I knew we’d get there eventually!
do you mean crofts or a new democratic system of small holdings?
50 odd years ago most large farm estates had an estate factor who knew the farms and the farm tenants for many years . He acknowledged every improvement that was being carried out by the farm tenant therefore disregarded drainage of fields at tenants expense during a rent review .
However nowadays the estate factor is gone , with his house on the estate now being let .
Landlords are trying to make out that ” the fields ” have been like that since the tenant’s family took on the tenancy . In most cases they were not !.
We now have factors being parachuted in to create chaos in the search for a high rent . These factors or agents have no idea of the history of the farm over the last 50 years or more and this is where a major breakdown of relationships between landlord and tenant lie .
We’re not all gone yet!
This issue is one of the reason’s I’m a supporter of the Tenant Farming Commissioner. It should flush out whether yours, and others, assertions are correct. Personally I’d have that Commissioner have “spot check” authority so they don’t have to wait for a complaint to avert the inevitable claim that tenants are “intimidated” (which I’ve always been doubtful of as yet to meet one intimidated by me!) and thus don’t rise issues.
Absolutely concur with this reply and until we get rid of commission led land agents then both landlords and tenants will suffer.
A comment on the argibuisnesses mentioned above. At a college reunion a few years ago I listened to some old friends with thousands of acres of farmland either rented in or bought on overdraft. Some grew hundreds of acres of tatties and loved telling of their 2 million pound loss one year and their 3 million pound profit the next and their 3 million pound loss the next.
I listened to others who were quite happy to discuss their X many million pound overdrafts renting in or buying land to grow grain.
I came away thinking that just because I did not have their massive acres my net worth might not be very far behind them once they cleared all their debt and I really wondered if they were just on an ego and vanity trip so they could say I farm more acres than you and not because it made financial sense to acquire more acres.
Maybe a case of greed not need and all that glistens is not gold.
I haven’t gone back to read the RRWG (which I really should) but I’ll moderate my comments to suggest it was about the *process* of rent review rather than the criteria (market or earning capacity) BUT unmerited claims were made about it with the landlord lobby saying it justified “the existing system” (implying market rents) and the tenants decrying it because it didn’t recommend EC rents (which was not its remit). That’s still maybe an oversimplified portrayal but do you see what I mean?
As regards dividing farms into EC rented “quasi-crofts” and market rented agri-businesses, you say the former “will do nothing for the future of agricultural sector” but does that not depend on what one means by “agricultural sector” – i.e. diversified country living or efficient food production at all costs? After all, real crofts long since ceased to have very much to do with food production but are nonetheless thought still to have merit in a new context.
If farming is the backbone of the rural economy, the more I think about it “land reform” is currently blundering around under the banners of meaningless slogans like 432/50 making populist changes like banning offshore ownership while all the time missing the real point – what is the future of Scottish agriculture? Maybe issues of food security are such that we can’t afford the luxury of quasi-crofts. Or maybe Scotland’s contribution to food security would be such a drop in the bucket, there’s no point trying and we might as well devote the countryside to quasi-crofting. Only once all that’s been looked into and macro-policy decisions made, can we then consider what “land reform” changes may be required to deliver them. Until then it’s cart before horse.
[BTW – no disrespect to any hardworking farmers intended by use of phrases like “quasi croft” or “diversified country living”!]
It is certainly correct that rather than arguing about who owns what we would be better starting by decising what we want acheive from our rural areas. A genuine land use strategy for which agriculture is a part.
The RRWG did look at alternative arrangements and both NFUS and STFA made the case for a budget based approach. The group also reviewed arrangements in E & W and concluded the results were broadly the same either side of the border even if the methodology differed. So, I think they did conclude that alternative arrangements were unlikely to yield more staisfactory arrangements than we have.
One observation I will make about the socio-cultural consequences of maintaining more farmers than economics might support is that this should not be subsidised by private landlords. If that is public policy objective fine but the price for occupation should reflect what it might have been were no constraints on tenure were in place. The price to the tenant of course being supported by subsidy directed to keep them there.
I refer you to my post of 3.21pm today where I believe these old college friends of mine get into a bidding war( just to make sure no one else gets it) end up paying to high a rent even with their economies of scale and then lose money on a vast scale if the weather or markets go against them.A lot of these so called good examples of large scale economic farming buisnesses seem to make more losses than profits and their scale just magnifies the losses. These high uneconomic rents are then taken as the norm.
How do they keep going if they rack up losses?
There are a few years when they make vast profits when weather and markets are both good but they do what every owner occupier does sell a few sites for houses in the bad years like 96/97 BSE collapsing/ grain prices and in one case put up a wind farm in his own words to support the ordinary farm.
How long is it since there has been an adjudicator in the retail trade . Has one producer ever complained about how they have been treated ?.
Tesco are being investigated as we speak.
Meant to ask you how much the Land Court case cost John Elliot a farm tenant of Roxburgh Estate ?.
If that is not used as a weapon of intimidation , I do not know what is ?.
But he could have settled. As I understand it he was offered a settlement at less than the eventual decision prior to the case. At Moonzie the case was taken by the tenant arguing about a serious point of law in what looked like a case motivated by trying to over turn the rental system not settling a rent. And in each case you might say the Landlord’s case was supported.
What is clearly wrong is the cost of the cases but then I imagine all parties were culpable to building up their armouries in the hope of victory.
Were the tenants not covered by the STFA insurance which, and there are conflicting statements on this, required the case to be determined in court?
Moonzie was not trying to overturn the rental system, he was following the guidance from the 2003 act. That act stated that precedence was to be given to economic conditions, ie a budget, but the court of session threw it out as it didnt suit the landed class.
Rents should only be increased if the landlord has improved the earning capacity of the holding, otherwise they should be frozen.
Private landlords are currently subsidised by tenant farmers capital, and that needs to be stopped.
The agreement between us has been short lived. That’s not what the 2003 Act said which was re-affirmed by the Court of Session. As Neil said the courts enforce the law as it stands not make it up to suit one party or another.
As for your next idea I take it you don’t support the budget approach either?
I was agreeing with neil, not you andrew.
Hell would have freeze over first, as well as the rents.
Do you think that a farmer would dare approach the adjudicator to complain without anonymity ?.
How much in £ notes did it cost the farm tenant John Elliot ?.
I think they would and in any case I’ve suggested spot checks.
To your second question I don’t know. It would depend if he had insurance and if he had to meet the landlords costs.
What other country within the Western World have so few people owning so much land ,
and why ?.
Other countries seem to have managed to address the issue .
What has happened here in Scotland ?.
Quite a bit of Europe has had either a reform process – pre modern circumstances and ECHR – or have different inheritance systems so may have less concentrated patterns. That said you have to adjust for quality of land. Scotland has by far the highest ration of LFA in the EU so large holdings in those areas is hardly surprising. There are large land holdings in Spain, Austria, Spain, England, Norway, Australia, USA etc and I bet there’s a strong correlation between poor land quality and holding size. Whether it be the Aussie outback or the English up-lands thats by and large where large land holdings are found.
If you flick through the chapters of Andy’s book you will see this illustrated. Fife, a county of little upland has very few landholdings of large scale. Inverness-shire, a county of little lowland has many more large landholdings. Frankly I’m neither susrprised nor concerned.
The more fertile and urban bits of Scotland are owned by tens of thousands of people and probably in a not dissimilar pattern to the rest of the UK and many other developed nations.
What about roxburgh estate? 50,000 acres of the best land in scotland?
Weymss and march owns the best too.
Buccleuch owns massive amounts of good land, although its deteriorating fast.
If estates continue their running down policy, the public may eventually buy that arguement.
Land reform even makes an appearance in Viz in a powerful piece of satire – http://viz.co.uk/wp-content/uploads/2015/02/Farmer-Palmer.jpg
I wonder if FP is Andy’s neighbour on the moon?
Where is the reference to land reform?
Come on Andrew . Answer the questions . You know all the answers .
Come on Neil .
Answer the questions .
Sorry Fergus – the answer to your questions is: I don’t know.
Do you know how many people own half of Scotland by value?
Here is another quote.
“Unquestionably , the best farmhouses in the county have been built by tenants at their own expense, with the spirit of proprietors,though, perhaps,indeed , with more taste than prudence”
In other words the houses were very good, but would soon fall to the landlord free of charge.
Today these houses still stand, as a monument to monumental theft.
Other than annecdotes from the 19th C have you any evidence of widespread building of farm houses by tenants on farm holdings. In 20 years I haven’t come across any. I asked STFA for data when the TFF was running. None supplied and, I’m sure Chris will correct me if I misinterpreted him, but it was clear that it was not the norm and applied in only a small number of cases.
I have many cases from the court of session .
Or is that court an “anecdote”
It is safe to assume that for every case that reached the court of session, there were over a hundred who did not, either because they didnt have the money or were already bankrupt.
In order for you to find evidence of house and steading building, you would first have to start looking.
No the court is not an anecdote. But can you really extrapolate that because a case was heard in Ct there were 100 others? This probably also takes us back to the stolen car.
Lets turn this around.
Let the estates produce the invoices for the buildings on the farm inc the house, and in the event they cannot, assume that the tenant built them.
Remember that all compulsory carriages of materials by the tenant would be 30% of the cost even where the laird paid for them.
Land values change dramatically upwards with very poor land which can hardly support one sheep tp 30 acres becoming very valuable .
Just ask Andrew how much money the Braes of Doune wind farm is producing annually ?.
With the area hardly supporting 5 ewes , the turbines are believed to be earning the estate a fortune ( rumour has it at £20 , ooo per turbine per year for 25 years ) Andrew will correct me and tell us how many turbines there are .
Is this windfall fairly shared within the community or is it all going to the estate ?.
That kind of upland land use is rather exceptional. The vast majority of upland land is not valuable.
There are 36 turbines on the Braes of which 30 are on the estate. The rent is about 50% of your estimate and varies quite a bit depending on wind / power price etc. The community get £72,000pa into a Trust which they administer.
Fergus, my question was not about agricultural land (upland or arable) but about *all* land in Scotland, including urban. Do you know how many people own 50% of that by value and why?
Roxburghe owns 50,000 acres plus, much of it the best in scotland.
Hardly a low value,high acreage holding.
I am not sure that this is correct. The applicant (the landlord) in the Roxburgh Mains case was The Capital Investment Corporation of Montreal Limited which, as I understand is a company registered in Bermuda. Is this company connected with Roxburgh Estates?
Yes. Very likely a corporate trustee for a Roxburgh family trust.
You say “yes” but then say “very likely”. Is it or is it not connected with the Roxburghe family? If you don’t know, how can one find out? Is this something the Scottish Government is proposing to reform so that landownership can be made more transparent and accountable?
Alan, the “yes” bit was to confirm that the company is connected with Roxburgh Estates and the “very likely” bit was regarding the nature of the connection.
You might be able to find out more by checking the Register of Sasines or Land Register which might reveal that the owner is “The Capital Investment Corporation of Montreal Limited, address, as the trustee presently acting under Deed of Trust by the Most Noble George Victor Robert John Innes-Ker, 9th Duke of Roxburghe dated …” (or similar) It might even reveal that the Deed of Trust was registered in the Books of Council and Session in which case you could get a copy of it and find out who the beneficiaries are.
But the Reg of Sas or Land Reg may not reveal that CICML are acting as trustee because trustees are not obliged to reveal the fact and/or the deed of trust may not be registered in BCS because, although common, that’s not obligatory either.
I think greater transparency is something the Scottish Gov and UK Govs are both looking at but this is a prime example of the sort of thing I was talking about earlier with “land reform” presently missing the point completely. Everybody knows that CICML is the Duke of Roxburghe. Like everybody knows that Smech Properties is the Sheikh of Dubai and Ginge Manor Estate Ltd is Lord Astror and Corrour is Lisbet Rausing and Blackford is the Al-Tajirs. One could go on and the point is none of these people try to hide their involvement.
Can anyone actually name a single example of not being able to find the beneficial owner of an estate or their local agents? (I’m not talking here about not being able to find the relevant deeds in the Reg of Sas because there is an issue about it not being indexed by map which is being phased out by intro of the Land Reg. I mean has there ever been an example of “This belongs to Hankypanky Ltd inc. in the BVI but we don’t know who to speak to about it.”)
Point being, politicians and civil servants are wasting their time trying to cure problems that in reality don’t exist and indulging in gesture politics with the attendant risks of unintended consequences, adding to red tape etc. etc.. It’s called fiddling while Rome burns.
That’s this thread gone even further off topic now!
Hector, you have a very selective attitude to Court of Session decisions! When it produces a decision you don’t approve of (Moonzie), you brush it aside as a tool of the landed class but when it produces decisions you do approve of (19th century improvements cases) you hold it up as some kind of gospel that can’t be argued with!
Neil, if you read the case quoted, you will see that the tenant LOST his houses to the landlord without a penny of compensation. Please read before posting!!!
Where did i say that i approved of that?
It is merely historical evidence of the crime.
You’re splitting hairs now but if you insist, I am happy to reword my comment as “… but when it produces decisions which you think prove your point (19th century improvements cases) …”
Every single judgement of the court of session proves my point.
Yet here am I paying my taxes to the country that I love .
Yet here is a very wealthy family who by tax avoidance which is really tax evasion by the back door deny this country the revenue that it needs to support it .
There is something really wrong when the rich get richer from not paying their fair share yet the working man gets taxed for his honest day’s work .
Do these people that evade tax not love this country ?.
Was that an answer to my question “Do you know how many people own 50% of all Scotland (urban and rural) by value and why?”
(BTW – my answer to your last question: yes I think they do.)
No I do not know by wealth .
I read and hear in the popular media that only 432 people own half of Scotland .
Now that should be easier for you to answer me why .
Apparently its 432 own half of the privately owned land in Scotland. The state is the biggest owner – FC, MoD etc.
Lets assume that’s correct (I haven’t seen the evidence) you can look at Andy’s book and see that those owners will by and large own miles of very little. Ie the relatively unproductive half of Scotland. Hence Neil’s point is who owns the other half – the productive and valuable half. Tens of thousands of people. But that’s a less sexy message for the media.
We often hear about all the small scale owners in the rest of Europe including finlands many small forest owners. What is often ignored are the large owners elsewhere. As an example UPM (major forest products co) own 800,000+ hectares of forest in Finland. Odd this sort of thing never mentioned.
Replying to Fergus.
It’s the coincidence of two factors: there’s never been a revolution in Britain such as dispossessed large scale landowners in other countries coupled with the relatively high percentage in Scotland of upland suited to extensive uses like sheep farming.
So that’s the 18th century dealt with. Hector’s taking care of the 19th. Does anybody want to talk about the 21st century? Or would we all prefer to keep wallowing around in the past for fear of having to make any meaningful decisions in the here and now?
Why has this unhealthy situation arisen in Scotland whereas it appears that in other countries with similar land that the land distribution is a lot higher than 432 / 50 . Something has happened to create this ?.
See above which I think over lapped. I suspect a mix of climate, land quality, inheritance policy and no formal land reform policy. Won’t be one issue. And the pattern is changing markedly anyway. Look at 1872 figures and present and dramatic change in that time. In 1872 something like 75% + of farms tenanted now 25%. Impression given is of stasis. Miles from the truth.
Oh, and it’s a big assumption to say it’s unhealthy. We don’t know that and we don’t have a comprehensive land use strategy to inform what society thinks are the desired land use outcomes. Shouldn’t therefore be taken as read that ownership is either wrong or even where problems are found to exist is the key problem. More likely to be physical isolation, infrastructure inadequacies, distance from markets etc
You can dress this up any way you want .
Why has Scotland allowed this 432/ 50 to happen . Where else in Europe do you find the same situation ?.
It’s not dressing up. 432:50 is simplistic twaddle but it plays well with the press and politicians. If you want to make informed decisions about rural Scotland it’s understanding that’s needed not slogans.
So why is Scotland unique with this unhealthy monopoly of land ownership ?.
It’s splitting hairs but even 432 isn’t a monopoly. Scotland’s landownership pattern reflects natural resource, historical policy, relative cost, inheritance policy etc. If you adjust for land quality and climate it may be that Scotlands not quite as different as you think. Even if it is a little different it doesn’t mean it’s wrong or crucially is impeding the effective use of our rural resource. Any way lets agree to differ.
If only 432 people out of a population of more than 5 million people own 50% of Scotland is not a monopoly then what is ?.
It is wrong !!.
And I think you know it .
How many people own 50% of Scotland’s buses (by passenger/mile)? Or shops (by net retail area)? Airports (by passenger throughput but runway length if it would make for a more arresting stat)? Fish farms (by consented biomass)? Power stations (by megawatt or chimney height if you prefer)? Breweries (by % volume)?
Well one person owing everything would be a monopoly. You can’t judge land simply by acreage. It’s an incredibly poor metric by which to measure wealth or power. One acre in Edinburgh City Centre would be worth millions. That would buy thousands of acres in many parts of Scotland. That acre in Edinburgh, depending on how it’s used, also affects many more people than thousands of acres of hill and moor. So I will repeat if you want to optimise outcomes in rural Scotland nonsensical measures like 432:50 do nothing to inform the debate. But then I’m not sure many reformers do want to optimise land use in Scotland (though I accept some do I just disagree with their approach) they just don’t want those that currently own it to carry on doing so.
Have a keek at this site, showing the landscape and socio-demographic outcomes in another part of the Caledonide mountain chain, in our nearest mainland European neighbour, in a region categorised by two senior Scandinavian biogeographers as being in the same bioclimatic and ecological region as upland Scotland. Apart from the close geo-botanical, topographical, bioclimatic and phyto-geographical affinities, the area also suffered from mass emigration on a scale approaching that of Ireland and Scotland.
The majority of the rural properties are privately owned, by local permanent residents in a living, working landscape in which, though grouse and deer are sporting target species, there is no equivalent of the externally owned ‘Scottish’ sporting estate.
Once in, it’s worth clicking on the other locations and scrolling through the thumbnails at the bottom of each section.
A quick google check indicated the largest private landowner in Norway had 328,510 acres. I went down to 10th and they had 83,980 acres. Seemed to be plenty of large private landowners. State appears to have a bigger role in Norway. I can’t verify the facts but as I’d been annecdotally told the largest in Norway had 500,000 acres the figure above may well be perfectly correct. 328,510 is bigger than any owner in Scotland by some way.
And do they have the right to steal tenants improvements?
Never mind Neil and andrew, the 18th revolution we missed out on is coming. Pitchforks and flaming torches wont be the weapons of choice though, just the good old ballot box.
Jus the ballot box. A pity as I had you down as a pitchfork and flaming torch kind of chap. But then for all I know you may have a large successful tenanted unit and if you get to own it you’ll be a part of the very establishment you claim to want to over throw. I wonder how views will change then eh?
Pitchforks can be organised if you so wish. I do not possess a 91 act tenancy so can not benefit from ARTB.
Even if i did i would never be part of the 432 who are the problem.
I take an interest in injustice wherever it is found, even where it may be against my own personal interests.
Noble of you. Thank you for the clarification.
After being away (Glasgow on Wed, taking sheep to Stirling yesterday) it’s time to catch up with the LVR debate. Neil, I was pleasantly surprised to see that you have read Costing the Earth. Perhaps I can persuade you to read Lie of the Land (Shepheard -Walwyn 2004) ? In answer to your question about the estimate of £3m for the reduction in the price of our farm, it is based on the fact that with LVR the price of farmland will revert to being based on its productive capacity. The price of farmland was for many years estimated to be 20 times its annual rent. That was our offer price when we bought this farm in 1992. The current price of good arable land in Scotland is about £8000 per acre and can only be justified by people with cash such as bankers with bonus money or existing farmers with surplus subsidy money who are looking for further rises in price, inheritance tax advantages and an effective means of transferring wealth. With LVR these speculators will leave the land market. The price of wheat will again be relevant. You don’t need a very sharp pencil to calculate that wheat at £120 per tonne and production costs of £100 per tonne (£140 if you believe official figures) to see that £8000 per acre is way too high. Subsidy income, aka non means tested income support for wealth landowners, is also sure to fall. It is beyond my comprehension how the UK can justify continuing to contribute about £8bn per year to fund the CAP when the UK by any objective measure is bankrupt and will never repay its debt with the existing taxes on employment and trade which destroy their own tax bases. LVR will stimulate the production of wealth and rental values will rise.
The banks need to have their ability to create money from nothing removed and sovereign money produced instead, for use without debt. Those who continue to believe that fractional reserve banking is essential for economic progress are deluding themselves.
Very fag packet sums here but if we just look at crop land alone there’s 1.25m /acres of that in Scotland. I don’t know to what level you expect land to fall to with LVT but lets say it knocks a conservative £2K/a off land values. That’s £2.5bn. If we say £4K/a obviously £5bn disappears. Again I ask what do banks, farmers and economists make of this. Cropping land is 10% of the farmed area and you’d have to expect the rest to go down as well. So £2.5 – 5.0 bn likely to a drop in the ocean to the final value. Pretty drammatic stuff to take that kind of value out of peoples pockets – most of them farmers not big landowners. I’m not that sure the comfort of not paying income tax will take the sting out of it personally.
Duncan is absolutely correct, but i cant see the establishment and the banks allowing their gravy train to be derailed.train
So what ?.
Nobody asked them to borrow against the value of the land they owned so that they could own more .
Share values go up as well as down .
Grain prices go up as well as down .
House prices go up but sometimes come down .
There are some people who own land that think they have the divine right of owning resource in the form of land that will always gain in value and borrow against it .
If land drops in value will this not create the opportunity for new entrants to agriculture ?.
So what?! Two key responsibilities for politicians. Run the economy well and get elected. Economic shocks and angering swathes of property owners from rural to urban land doesn’t bode well on either count. LVT is about much more than new entrants and a few big landowners. No one has yet spelt out how you avoid LVT causing a property devaluation crisis with all the attendent impact on owners, banks etc etc.
Land has no capital value to depress and the land rental value was not the owners in the first place to speculate upon. The collection of land rental values will not affect the price of buildings one iota. The combi-phantasm of a fiat currency operating in conjunction with speculation on a publically created value is going to vanish like a puff of smoke. The boom and bust cycle goes with the collection of LVR.
Nobody asked them to borrow against the value of the land they owned so they could own more .
This is sheer speculation giving a feel good to those who own . Those who rent are dragged up with it as well , by having to pay higher rents , but they do not get the ” feel good ” feeling . They get another type of feeling . Probably one that you have never felt .
If land prices fall it will create opportunity . If land prices keep rising as they have over the last ten years then we will have created rich landlords into very rich landlords .
Andrew “The politicians have a responsibility to run the economy well”. But they have neglected that responsibility by allowing the national debt and deficit to become incapable of control. Their incompetence is almost complete. I will admit that they are good at getting elected and will use any means available to do so, with false promises at the top of their list. They have used bogus indices of “growth” (GDP) and inflation (CPR) which do not represent reality. These indices are often quoted but are rarely defined, A lot of what is included in gross national product has nothing to do with production. GDP should be called GDC, Gross National Cost. Inflation should be measured by the increase in the price of all things, including land. What would the rate of inflation be now if land prices were included? As for economists, it’s not that most economists do not know, it’s that most of what they know just is not so, They lost their way years ago when they persuaded themselves that Land was just another form of Capital which meant that the definition of economic rent was rendered irrelevant to the study of economics. Please look for a copy of “The study of Political Economy” by Henry George if you want to put the present mess which passes for economics into perspective.
Book ordered. Will report back. May even tell me what a combi-phantasm is!