ALTER Questions the Leadership Candidates
 on the Land Value Tax and Economic Reform

ALTER is an Associated Organisation within the Liberal Democrats dedicated to advancing the causes of the Land Value Tax and other economic reforms. We chose to use the leadership contest as an opportunity.

We are aware that party policy is not determined by the leader, it is instead determined democratically by members at federal conferences. However, it is our experience that the leader has a large amount of influence in terms of which policies are given priority. So although motions and amendments on the Land Value Tax have been regularly passed at conference with near unanimity, the party has largely been quite shy about the policy, leaving it hidden within the small print of our manifesto rather than properly campaign on it.

For this reason we wished to challenge both leadership candidates as to whether they’d be willing to grasp the nettle and get seriously behind LVT, and also take their view on other areas of economic reform including workplace democracy and monetary policy.
We sent our questions and their responses are below.

Land Value Tax

Whenever the Land Value Tax has been debated at a Liberal Democrat conference, support for it is almost unanimous. While the party has consistently supported introducing the Land Value Tax, it has in recent years been highly shy about it. ALTER had to fight for it to even make the small print in our manifesto.

As leader, would you be willing to grasp the nettle and make it a front and centre policy?

TIM

As you know, the party makes policy not the leader but I hope my answer gives you a sense of where I am coming from, and what I would encourage – so just to confirm, I’m an enthusiastic supporter of Land Value Taxation and truly believe that it’s an idea whose time has come. In an era when national tax bases are under threat because of the mobility of capital, LVT is one of the few ways in which governments can fight back. LVT is also a useful tool in regenerating urban areas and dealing with the housing crisis.

NORMAN

In his revolutionary work, Progress and Poverty, Henry George argued over a century ago that disadvantage was entrenched in society by our system of land ownership, which meant that wealth would always accumulate to those who were already wealthy. For a decade at the end of the 19th century, his book sold more copies even than the Bible! His arguments sparked a new political movement across Britain, and arguably set the terms of political debate for a generation. And the underlying ideas advocated by Henry George are as relevant today as ever.

I want our party to support radical reform of our tax system, shifting the burden away from tax on income to tax on unearned wealth. Crucially, I think we need a new approach to the way that we tax land, not just to make our tax system fairer, but also to help meet our housing needs, and ensure effective use of our natural resources – and I would want to work with ALTER to find the best, and most practical, way to achieve this.

Co-ownership and Workplace Democracy

The Liberal solution to industrial relations has always been about increasing worker empowerment and ownership of their work. There are already successful examples of this working, such as the John Lewis model and German Stakeholder model.
As leader, what would you do to advance the cause of co-ownership and workplace democracy, in both the public and private sectors?
NORMAN

I’ve been championing co-operatives, and mutual organisations, for years – there are so many organisations which would benefit from giving employees and customers more of a stake. This is a fundamentally liberal cause – and as an employment lawyer before winning my seat I saw for myself the value of engaging employees actively in the way their business or service is run.
In my role as a Business Minister early in the Coalition I championed this although I was appointed as heath minister before I could complete my work at BIS.

At the Department of Health I continued to advocate for mutuals, and launched a scheme of pilots to look at how NHS organisations could benefit from giving staff more of a stake in their organisation. Existing examples already showed we can save lives and dramatically improve the care patients receive by giving more of a stake to employees. You also reduce staff turnover and sickness. The evidence is compelling.

As leader I would want us to argue for a much stronger role for mutual organisations in both the public and the private sectors. As a party we also need to do some of the intellectual “heavy lifting” – developing compelling ideas for how mutuals can work in practice in different parts of our society, winning the battle of ideas against Labour’s support for the status quo, and the Tory assumption that privatisation can solve every problem. In government we also introduced tax incentives to encourage co-operates, which I would fight tooth and nail to ensure aren’t overturned by a Tory government intent on finding huge levels of savings from the public finances.

TIM

I believe we need to give new life to our longstanding commitment to democracy at work, an idea we have allowed to slip down the agenda in recent years. The day to day experience of millions of people in their working lives is the opposite of democratic. Their basic rights to privacy and freedom of expression are not respected, they are subject to arbitrary power and they feel they are not listened to. That’s not only bad in itself but its knock-on effects on the way people think and feel about politics shouldn’t be underestimated.

The John Lewis model and the German co-determination model are both ones I like but there are other methods, such as the promotion of co-operatives and other types of mutual, that we should have room for in this country. I would welcome further thoughts on this issue, if the Party are keen to explore this.

Monetary Policy

a. Nominal GDP Targeting is recommended by a number of economists as an alternative to inflation targeting by the Bank of England for stabilising the economy and countering the damaging effects of economic crashes and recessions. Bank of England Governor Mark Carney has, in the past, also expressed interest in the policy.
What is your position on NGDP Targeting?

TIM

When the Liberal Democrats started out, nominal GDP targeting and an aggregate savings target were both part of our macro-economic policy. I’d be very happy for the party to look at these approaches again. NGDP targeting has definite advantages over inflation targeting, especially in a slump and when inflationary expectations are low. There’s a practical difficulty at the moment, however, that the GDP data is too often not very good and ends up being revised – which means that policy responses might be either too slow or wrong. But that’s the kind of issue we should be looking at. We have become far too conventional in our macro-economic thinking. That’s not good enough for the party of Keynes!

NORMAN

I completely understand the appeal of NGDP targeting, and can see why the idea has attracted significant discussion in recent years. The Bank has already made a significant change through the introduction of the ‘forward guidance’ where the BoE targets inflation and a ‘real economy’ variable in the form of employment, which is one of the advantages of NGDP targeting. A key part of the economic recovery was an activist monetary policy that I believe helped contribute to the recovery that is now well entrenched.

Ultimately, no single metric is perfect in guiding monetary policy. My view is that the Bank of England could use NGDP as one of a range of measures in guiding policy, but I think ultimately that decision should be one that has to be informed by Governor Carney. If he thinks it will help the BoE then it would be foolish to not give it full consideration.

A key priority for me would be a much clearer focus from government on productivity as a measure of the economy. In the long term, by improving productivity we can boost competitiveness in the global economy, and secure a broad and sustainable improvement in living standards – which surely must be one of the primary measures of success for government.

 

b. Britain currently suffers from high levels of private debt. This is not only a burden on those indebted, but many economists consider it to be a leading cause of economic crashes. To address this, the Bank of England could set a target ratio between GDP and private debt, and accordingly use measures to reduce debt, such as a suitable inflation target.

Would you support the setting of a target ratio between GDP and total private debt?

NORMAN

Unregulated private borrowing can be incredibly dangerous. As a business minister in the last government, with shared responsibility for regulating payday lenders, I saw for myself the consequences of unethical lending practices, and its impact on some very vulnerable people.

My personal view is that this would be extending the remit of the BoE beyond what is appropriate. High levels of personal debt do make for unstable economic conditions, but far more dangerous-as we found in the crash of 2008-is the behaviour of banks and lenders, which is why I think we already have the appropriate response to the risk through the creation of the FPC.

The terms and conditions of consumer lending should be designed to protect borrowers from arbitrary changes in lending policy – and lenders must be adequately capitalised to continue to support responsible borrowers even in times of economic shock. This is crucial in reducing the severity and impact of economic cycles. Rather than give an added remit to the BoE, I believe we are better off continuing down the path of properly regulating the banks and lenders, whilst also educating people about the perils of high levels of personal borrowing.

TIM

I understand that it’s increases in the household debt to GDP ratio that presage recessions rather than its absolute level (the absolute level might be even be related to good things, like the rule of law and social stability) but we should certainly treat rapid increases in the household debt to GDP ratio as an early warning sign and we should be devising policies that prevent it happening and that cool things down if it starts..

 

c. A number of economists have recommended that money created through Quantitative Easing would be more beneficial if allocated into the real economy rather than to bank reserves. This would both stimulate the economy and help to reduce the high levels of private debt.
As leader, would you consider a policy that supports “QE for the people” as outlined here?

TIM

I’m very interested in this idea. Inequality in our country is a big problem and conventional QE, because it inflated asset prices, made inequality much worse. If there were a way of achieving the same results as QE without adding to inequality, I’m up for looking seriously at it.

NORMAN

I can understand why there is a concern that too little of the benefit from the massive Quantitative Easing programme over the past few years has been felt by the people outside the City of London. But we should remember that part of the QE programme involved the Funding for Lending scheme, to ensure that QE benefitted businesses by putting requirements on banks to lend to businesses and the real economy.

And when we are faced by massive challenges in the coming years – in particular from global climate change – I would boost economic demand by prioritising much greater investment in green infrastructure, targeting our financial resources to safeguard our planet and economy for future generations. Much of this investment would benefit regions of the country well away from London, creating jobs in hi-tech manufacturing and engineering, and helping us build up the skills and capacity to compete internationally in the green economy.

* Daniel has been a member of the Liberal Democrats for 5 years and is a member of the ALTER exec team

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4 Comments

  • Jane Ann Liston 6th Jul '15 - 1:04am

    The Scottish conference passed a motion a year or so back supporting an investigation into LVT as a replacement for Business Rates (as far as I know we still back a local income tax to replace council tax). As yet, though, no report back.

  • Gwynfor Tyley 6th Jul '15 - 10:04am

    Reforming property tax is desperately needed as the distortions created by our current system are at the heart of our economic woes:
    Scrap stamp duty on principal residences
    Uplift council tax and remove the upper limit – include higher rates at higher values
    Uplift council tax on second properties/foreign ownership

    This will encourage people to move to more appropriately sized properties and remove the barrier, freeing up 100s of thousands of properties without having to lay a single brick (though I would also encourage building more properties suitable for the elderly)

  • The case of LVT perfectly illustrates how, although Conference may think it decides party policy, it’s actually the outcome of an fudge – Conference proposes, the leader disposes.

  • Richard Underhill 6th Jul '15 - 7:30pm

    The Gladstone Club, meeting in the National Liberal Club, had several speakers on this issue. Chris Huhne was one, speaking for an hour and taking questions for about 45 minutes. Another had written books on the subject.

    This needs thinking through in depth. Powerful vested interests owning or developing property oppose debate. On the other hand Chris Huhne said that he wanted to “rescue this policy from the hands of its most enthusiastic supporters”.

    One problem is the conflict with planning with which there seems to be no compromise possible.

    Another is tall buildings, erected by people with huge egos and encouraged by some architects. Challenged to design a building a quarter of a mile high, or half a mile, or a mile, they will take on the job if they are paid.

    An American writer called Mark Twain said “Buy land, they are not making it any more” but, although they had reached the west coast, he was wrong, the floors of these building are land which has been created, so are off-shore oil rigs, etc.

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