fredag 21 september 2007

What housing crisis?

The Chief Executive of Shelter has written an article in today's Guardian about the housing crisis and the need to build more.

It is not a crisis. The situation has been much the same since the end of World War 2. The problem is chronic. Houses are affordable. What is not affordable is the land the houses stand on. Land value taxation is an essential element in any solution to this.

But where are all these new houses going to go? And if they were all built, how would their occupants get to work? And where would their children go to school? And what about all the other services they will need? The problem cannot be considered in isolation.

A major factor in all this is regional imbalance. 85% of the UK population live within an area bounded by Leeds, Dover, Bournemouth, Bristol, Birmingham and Liverpool - about one third of the total land area. And most of that within a 100 mile circle centred on Oxford. This is due to decades of economic mismanagement. A major factor is our tax system which ignored the benefit of location. Thus, fringe areas such as Devon and Cornwall, and most of Britain north of Manchester, are marginalised, as the higher costs of production in those areas, due, eg to transport, are not compensated for in any way. So the drift to the South East goes on as it has for the past fifty years.

To keep on building houses in London and the South East is not a policy. A policy must include tax reform so that the amount paid reflect location value - ie land value taxation again, which effectively creates tax havens precisely where they are most needed. This will help to redress regional economic imbalance and revive those parts of Britain remote from London and the South East.

And it need major infrastructure improvements such as a new high speed rail link with full size trains (not the mini-trains they run at the moment), a shift of freight on to rail and urban light rail/tramway schemes to provide adequate feeder for long distance travellers. And land value taxation must be part of the policy for infrastructure improvements, because without it, the benefits of the enhanced values are just picked up by landowners who happen to win out and the Treasury has to fork out but gets little in return.

The issue is one of land use and fiscal planning. And it also needs vision, a commodity that seems to be in short supply in the UK at the moment.

It is alarming that the Chief Executive of Shelter does not appear to appreciate the big picture which forms the background to the problem they are concerned with. Really, one despairs.

I look around me in Scandinavia and see that people generally are enjoying a markedly higher quality of life than in the UK, both in their own private spaces and in the public environment. Yet these are poor countries with small populations on the fringe of Europe. If they can afford it then the big wealthy UK can.

måndag 17 september 2007

Swedish house prices

Swedish house prices in millions of SEK.
Stockholm: 3,4 mkr (+15%)
Skåne: 2,1 mkr (+11%)
Halland: 2,0 mkr (+8%)
Uppsala: 1,9 mkr (+9%)
Västra Götaland: 1,8 mkr (+12%)
Gotland: 1,6 mkr (+15%)
Södermanland: 1,6 mkr (+9%)
Östergötland: 1,6 mkr (+8%)
Västmanland: 1,5 mkr (+7%)
Blekinge: 1,2 mkr (+5%)
Jönköping: 1,1 mkr (+3%)
Kronoberg: 1,1 mkr (+8%)
Örebro: 1,1 mkr (+6%)
Västerbotten: 1,1 mkr (+12%)
Jämtland: 1,0 mkr (+16%)
Kalmar: 1,0 mkr (+9%)
Värmland: 0,9 mkr (+9%)
Gävleborg: 0,9 mkr (+8%)
Dalarna: 0,9 mkr (+6%)
Västernorrland: 0,8 mkr (+10%)
Norrbotten: 0,8 mkr (+8%)


Stor-Stockholm: 3,4 mkr (+15%)
Stor-Malmö: 2,7 mkr (+10%)
Stor-Göteborg: 2,6 mkr (+11%)

Source: Källa och defenitioner: Statisktiska Centralbyråns småhusbarometer. Siffran i parantes anger prisförändringen jämfört med samma period 2006.
Figures in brackets are increase compared with 2006. One million kronor is about £75,000, which is roughly equal to the value of the building.

This is very interesting. The prices look dirt cheap compared to the UK. A typical house - about 90sq metres floor area, in SE England is 4,000,000 SEK and that will be in quite a poor area with rotten public transport. And in Greater London nearer 6,000,000 SEK.

Of course, most of that is land value. The value of the actual bricks and mortar is around 1,000,000 SEK which shows that the land value outside the main cities in Sweden is very low.

Since the division in Britain is primarily between those who own property (land) and those who do not, this could go a long way to explaining why Sweden does not have the inequality problem that Britain suffers from. And why Swedes seem to enjoy a higher standard of living. They are not burdened for half a lifetime with huge debts to pay for the land their homes stand on.

Liberal Democrat Conference

For the first time for years, I will be away from Brighton during the LibDem conference. I like the LibDems. They are nice people, generous, worthy and well-intentioned. They are not greedy, or envious or bitter or over- ambitious. They are polite, they will listen and they are generally open to new ideas. They are exactly the kind of people who ought to be running the country. And with the largest number of LibDems in parliament since the end of World War 2, they might have been expected to make a big impact on the British political stage. Sadly they do not. Why could this be?

It seems to me that the Liberal Party lost its soul when it joined with the Social Democratic Party.

Liberalism was once a coherent political philosophy. It did not stand at a half-way point between the Left and the Right but in a triangular relationship to them. This was a good place to be. If you believe both Left and Right to be wrong, then a judicious mixture of the two is unlikely to be right. But that is what the Liberals espoused when they amalgamated with the Social Democrats, although this merely confirmed a tendency which had been gathering force since the end of World War 2.

The best thing the Liberal Democrats could do, both for themselves and the country, would be to examine the philosophy of their late nineteenth century predecessors and reflect on its relevance to our present troubles. It is just 101 years ago when a genuinely reformist Liberal government introduced a package of radical measures, including land reform, which would began the transformation of the country into a fairer society. Sadly, the First World War destroyed those hopes.

söndag 16 september 2007

On the rocks

There is lots of comment on the Northern Rock affair again today in the Sunday papers. Now there are calls for regulation.

The next great crash is unstoppable. It will probably come in a couple of years' time. It is too late to do anything about it. The time to have acted was some time between the previous one of 1992 and 2005. The best analysis of the process is by Fred Harrison, who successfully predicted the crash of 1992. Harrison has now demonstrated that the boom/bust cycle, which recurs about every 18 years, is due to the interaction of the land and financial markets. Harrison's prediction is for 2010. Read Harrison on the next great crash

The Northern Rock affair shows the process in actions. Their imprudent loans have been helping to stoke up house prices. But, and this seems to go unremarked by the politicians and pundits, it is not house prices that have been stoked up. What has been stoked up is the cost of land. And the stupid lenders imagine that land is solid wealth and safe collateral.

LAND IS NOT WEALTH. Everyone needs to understand this: politicians, economists, people who work in finance, journalists, and the man in the street.

This is indeed an area where governments should intervene. Lenders should not be allowed to advance loans using land as collateral. But a direct prohibition is not the way to do it.

The whole process which causes these cycles and the associated problems could be prevented through the right tax reform. If land was subject to an annual tax based on its rental value at market assessments, the entire crazy roller-coaster of land-price boom and bust would come to a stop.

How to tax land values

Thatcher takes tea with Gordon Brown

I noticed an article on the subject in the Guardian. It is worrying that anyone should even read anything into this event, let alone write an article about it. It was basic good manners. Have the Guardian's commentators nothing better to think about?

What makes matters worse that the space could have been used for a biting analysis of Brown's economic policies since 1997. The Northern Rock problem is the harbinger of the great collapse which can be expected around the year 2009 and which is now unstoppable. Had Blair acted any time between 1997 and around 2004, the coming disaster could have been avoided.


lördag 15 september 2007

Rock on

9 minutes to 3
Originally uploaded by ne15.

I had long invested in Northern Rock term bonds as they give a good rate of interest. But a year or so ago, when I saw their lending offers - I began to have my doubts and did not reinvest. They were offering silly loans, annual incomes multiplied by an absurd figure. All of which helped to stoke up house prices.

Only it is not house prices that have been stoked up. Builders' wages and the cost of building materials have hardly risen. What has been stoked up is the cost of land. And the stupid lenders imagine that land is solid wealth and perfect collateral for loans.

But when I was taught economics it was drummed into me that LAND IS NOT WEALTH. Every bank manager should have that slogan facing his or her desk.

This is an area where governments should intervene. Lenders should not be allowed to advance loans using land as collateral.

fredag 14 september 2007

Fruit and veg handouts

Zoe Williams, writing in today's Guardian (Wednesday September 12, 2007), criticises the government over its policy to give all pregnant women £120 towards fresh fruit and vegetables. Her criticism is that the money will go to everyone and not just the needy. It is a pity that she did not dig deeper into this issue. She is right about questioning handouts for fruit and vegetables and baby bonds, etc, but wrong on the matter of means testing.

Much of the whole relationship between the state and the individual is means-tested. This is true of the entire tax and benefits system and it is part of the problem. Not only does it give no incentive for people to move out of the underclass - it helps to keep them in it. In this context these fringe benefits are marginal to the issue of what to do about Britain's growing wealth gap and the growing hereditary underclass.

If one takes a long view, it can be seen that the underclass first arose in England (Scotland has a different history) in the late middle ages. It was related to the break-up of the feudal system of land tenure following the Black Death, when land was enclosed for sheep and was no longer available for people to work.

The next stage came following the Reformation, when more land was enclosed and people were driven off.

The final stage was the period of agricultural enclosure in the years 1760 to 1840 when the last of England's peasantry was driven off the land. In Scotland, the Highland Clearances achieved the same purpose.

Once people were driven off the land they had no option but to work as agricultural labourers and live in dirt-poor circumstances or to move into cities, live in slums and work for subsistence wages. This was the situation that Marx formed his theories upon, but that is incidental since his analysis was faulty and could produce no lasting solution.

Successful welfare socialism in the years after World War 2 enabled most people to move out of the underclass and better themselves, but in the seventies and eighties, economic circumstances and government policies promoted the collapse of traditional British industry and the underclass is back. But the underclass has been an enduring feature of the British economic landscape for centuries. The thirty years after World War 2 were exceptional. Welfare socialism proved to be no more than a palliative that could not survive changing circumstances. It has lasted longer in some other countries but is under pressure there too. Other solutions are needed.

In this context, handing out potato vouchers is risible. What a pity that Guardian journalists fail to see the bigger picture.

torsdag 13 september 2007

Public Sector pay row resurfaces

I see this hardy perennial has come up again.

Nobody seems to mention how public sector labour costs are distorted by our tax system. One might have expected someone - commentators, union representatives, journalists, politicians, economists etc - to have referred to this. But it does not happen. In the face of this kind of blindness, problems are insoluble and all we get is strife.

Real wages are the goods and services that can actually be purchased in exchange for labour.

Owing to the way the tax system is constructed, it costs an employer over £1.80 in order to leave the employee with £1 of actual purchasing power. This is how we have achieved the seemingly impossible - the low wage, high labour cost economy.

In the public sector or course, where the labour costs are paid by the taxpayer, the money is given with one hand and taken away with the other. This is called churning. It is an expensive administrative exercise which produces nothing and achieves nothing, apart from deceiving most people about what is actually happening.

But the reality is that over 40% of the public service labour costs are actually tax which is paid straight back to the government. Lunacy or what?

onsdag 12 september 2007

Catholic Superstition

Ängelholm pilgrimage 028
Originally uploaded by [florestan].

This illustrates the core of Catholic superstition. The priest is holding up what is known as the Blessed Sacrament. It is just a piece of bread that a Catholic priest has pronounced the words of consecration over. According to Catholic doctrine, it has become the Body of Christ, that is, God.

My nice rational friend told me that, chemically, it is unchanged. I suggested that it cannot be proved that it is still in the same quantum state. I have not received a response.

Chemical states, quantum states or whatever are, in truth irrelevant. I am happy to accept the Catholic doctrine on this matter. There are some things one knows, like relationships, for example, without having to have them explained by rational argument. This is one of them.

tisdag 11 september 2007

Britain's growing wealth gap

The TUC conference has prompted a lot of comment, for example an article by Polly Toynbee on the growing wealth gap. There is talk of a commission, and giving the unions more power.

A commission will not solve anything. And the unions can only exert power in economic circumstances that are favourable to them. In harsh conditions they are irrelevant. And if work is plentiful they are superfluous.

What we are seeing is a re-run of what happened in the early part of the nineteenth century. During this period, an enormous increase in productivity following the Industrial Revolution had, paradoxically, produced a small class of wealthy people and a huge class of the wretchedly poor. The extra wealth had not been distributed.

Marx tried to analyse what had happened and his view remains generally accepted even though it will not stand up to close examination. But an American economist Henry George, who also looked at the problem, came up with an altogether more convincing explanation. This was explained in his book called "Progress and Poverty", published in 1880 and still in print. George proposed some simple and liberal measures to ensure that wealth was fairly distributed. No bloody revolutions were required, or even great upheavals to the system.

Unfortunately, the Marxist analysis prevailed. This was defective, but because it was widely followed throughout the twentieth century, the result was megadeaths, tyranny and no progress.

The past forty years have seen further increases in the productive power of labour, due to, first, the electronics revolution, then information technology and most recently, the communications revolution. These far outstrip the increases due to the industrial revolution.

In the absence of the measures proposed by George, it was inevitable that there would be a widening in the wealth gap, one indicator being the huge increases in land values that occurred in the nineteenth century and has happened again in the past 15 years.

So if anyone is seriously interested in addressing the problem, they need to start with Henry George.

Two strange things about Sweden

SWEDISH DOGS are a special breed. They have no rear-end orifice. I have not seen any deposits since I arrived and can only conclude that is the explanation.

SWEDISH TEETH are funny too. It could be because of the Swedish style of dentistry. Anyway, the Swedes can't suck them as in ssssssssssssst, can't do that, it'll cost you. If they can help you, they normally will and won't make a big thing out of it. Often they will help more than they need or one would reasonably expect.

måndag 10 september 2007

Cutting the pay gap

"Nearly 85% of Britons want a smaller gap between rich and poor, with just 34% believing Britain became fairer under Tony Blair, according to a poll of 3,000 voters conducted by YouGov for the Fabian Society. It found only 2% believed much progress had been made in narrowing the gap between rich and poor in the past 10 years. The poll is one of the best indicators of the public mood as Gordon Brown makes his strategic choices for the spending review. The findings show the public believes it is possible to reduce the gap between poor and rich significantly without damaging the economy, but there is support only for targeted tax increases. Nearly 80% thought taxes could be raised on big company profits and 67% supported a rise in the top rate to 50% for those earning over £100,000 a year."

The widening gap between rich and poor in Britain is obviously something that a lot of people are worried about, but the statistics about wanting higher taxes on big company profits and people earning over £100,000 a year sounds as if it has come from asking people leading questions.

The depressing thing is that a respected body like the Fabian Society cannot break away from the old assumptions that amount to nothing more than "Soak the Rich". Even within the accepted framework of thought, they could, for instance have asked questions like "do you think that tax thresholds should be raised so that poor people pay less tax?" Or "do you think that VAT should be cut?"

The problem with asking any such questions is that almost nobody bothers to think through the ultimate effects of what they are being asked to give an opinion on.

"Soaking the rich" is a notion based on emotion, principally that of envy. It is a bad starting point. It ignores the fact that people become rich in many different ways. If people have earned their wealth from hard work and the application of their intelligence, why should they not keep all of it? I have become quite rich because many years ago I bought a house, an ex-slum, in a town which subsequently became fashionable and was at the receiving end of a lot of public investment. I am just small fry but in Britain the way to become seriously rich is not through hard work and the application of intelligence, but through playing the property market, with the help of some good luck. Sadly, the think tankers who work for the Fabian Society and similar bodies are unable to grasp the fact that there are different routes to becoming rich, some of them legitimate and others merely parasitic.

The end result of soaking the rich is that they just arrange their affairs to avoid their tax liabilities. The tax system is full of loopholes - it is, indeed, a construction of loopholes, like a string bag. "The Rich" can well afford to pay for the advice needed to escape the net. Companies can do even better. They set up operations in different countries and with clever internal accounting the profits magically pop up where tax rates are lowest.

It is depressing that the people who could shift the terms of public debate can do no better than keep on recycling the same tired old concepts and ways of looking at the world. And why is this? Think tanks are a popular place for freshly qualified graduates to work and they have the pick of the bunch. But most of them have never even had a Saturday job at a market stall and know nothing about the way the economy works on the ground. And they will have have been taught by the most brilliant of the previous generation who have gone straight into the world of academia and also know nothing about the way the economy works on the ground. Yet this is the source of the body of "knowledge" on which governments base their policies.

söndag 9 september 2007

The Pilgrimage to Vadstena - 8 September 2007

Originally uploaded by seadipper.

On the way back to the coach. People from different places had different flags to follow so they would not get lost. This is the recently invented flag of Västgötaland. The papal colours with the blue of Sweden.

There were a lot of regional flags being waved, which made for a colourful occasion despite the grey sky.

The Pilgrimage to Vadstena - 8 September 2007

Originally uploaded by seadipper.

In the afternoon there was a Blessed Sacrament procession from the modern Brigittine nuns' church to the original fourteenth century pilgrimage church where St Brigit's relics are kept. The heavens opened and people got their feet wet. There was Benediction in the church. The picture was taken afterwards.

I think it is good that the protestant Church of Sweden allows its buildings to be used for Catholic services. It is as if Glastonbury Abbey had not been destroyed and was being used by the Church of England and the C of E let the same thing happen there.

The Pilgrimage to Vadstena - 8 September 2007

Originally uploaded by seadipper.

Bishop Arborelius saying Mass.

The Pilgrimage to Vadstena - 8 September 2007

Originally uploaded by seadipper.

The Brigittines again.

The Pilgrimage to Vadstena - 8 September 2007

Originally uploaded by seadipper.

Some of the congregation, with the Brigittines in the foreground.

Mass in the Castle at Vadstena

Originally uploaded by seadipper.

People came from all over Sweden to attend Mass in the courtyard of the castle at Vadestena. This was when people where just starting to arrive - eventually the space was full up.

torsdag 6 september 2007

Does Britain really need a new high speed railway?

Originally uploaded by iwouldstay.

I have been pondering this further. What actually is the aim and purpose of a long distance high speed rail link? And how might such a link be tied into Britain's sub-standard infrastructure? And what might be/needs to be done to upgrade that?

There are obvious gaps in electrification. London to Bristol and Cardiff/Oxford/Banbury/Birmingham, Bristol to Birmingham, Leeds to Manchester come to mind and there are probably others. And capacity improvements can be achieved by grade separated junctions, signalling schemes, platform lengthening, upgrading of alternative routes. As well as improved design of rolling stock; replacement of slam door stock actually resulted in a loss in seating due to poor design.

Then the Channel Tunnel High Speed line needs to be brought further into the country, as much for freight as passenger services. Since this runs on the east side of England, much of which is flat and relatively undeveloped, it might be possible to construct a new route northwards, perhaps parallel to the East Coat Main line for some of the way.

The problem zone is in the Leeds - Manchester - Dover - Bournemouth "box" where 85% of the population live and generate most of the journeys, too many of which are by car rather than any form of public transport. The comparable area on mainland Europe is not France with its TGV but Belgium, Holland and the Rhine-Ruhr conurbation north of Cologne. The most important routes there are served not by high speed trains but by double-deck regional expresses, which are efficient peoplemovers and run at a top speed of about 160kph. It is just possible that the former Great Central alignment could be used as a spine route for this purpose. If some way of linking it to the Channel Tunnel, this too would be a good thing, primarily as a freight distributor. Which if I recall was the Central Railways plan, which the government knocked on the head.

So that is a programme in itself. As for the 300+ mile journeys which people are tending to make by air, perhaps we should not worry unduly as the numbers involved are relatively small and in any case the problem will solve itself as the cost of air travel rises.

If the aim is to promote regeneration of the north and Scotland, there are other ways of doing it than putting in expensive infrastructure, most importantly, through the tax system which at present fails to take account of geographical disadvantage.

For LVT geeks - Capital or Annual Values

There has been a email discussion on this for the past couple of weeks. A lot of US supporters of land value taxation advocate Capital Value (CV) lists as the basis of assessment. The argument against is that the tax erodes its own base and is arithmetical nonsense once the rates get high. I quoted a figure of 5% as the most that could be raised without knocking CVs down to the point they would be meaningless as a revenue base. And a response came back like this...

New Hampshire has ad valorem rates of 4%, and no problems. Kiaochow, which probably recovered the highest fraction of land rent in history, used an ad valorem rate of 6%. You appear not to understand the effect of an increase in the ad valorem rate on capital value.

Yes. It knocks it down. Unless other taxes have come off at the same time or there are other factors pushing up the price.

If you are taxing 6% of assessed capital value, then the capital values must be around 45% of what they would be in the absence of the tax. Try a worked example.

If assessed capital value is £100,000 then the tax is £6000. Using a 20 years' purchase (YP) figure, this means that the true CV is £220,000 (what it would be in the absence of the LVT) and its AV is £11,000. And you are actually collecting 55% of the land rent (£6000/£11000) and 2.7% of the real CV. Which is a good figure. And isn't it good to know precisely what is going on, which you can do when the thing is annualised.

But note how using CVs means that what is actually going on is less transparent than using AVs.

Now see what would happen if 80% of land rent is collected. 80% of £11000 is £8800. £2200 is now left with the land owner and so the CV has dropped to £44,000. Which is good in itself but the problem is that this would mean levying a 25% rate on this discounted value, which is what the value for assessment purposes would be to collect what is really 80% of land rent. It just obscures what is going on. And if somebody tried to collect 100% of land rent, the land bwould have no capital value and the revenue raising would have to be on a list consisting of a string of zeros! Whilst the rental values would have remained intact.

A system running on CVs can obviously remain as it is until an opportune moment arises or there is a desire for real tax reform in which LVT is the principal source of public revenue. But where CV assessments have caused problems, or where AVs are used already, and in new schemes, where there is a bubble element in the price of land, they are not a good idea and it is better to adhere to the original concept of taxes on the rental value. Especially where there is some property taxation already in place which affects capital values and makes it difficult to determine what the capital values would be in the absence of the tax.

Measuring land values

There is a massive rental market in both residential and commercial sectors. This makes it easy to calculate land rental values by the residual method.

eg a 100 sq metre flat in Hove lets for £12000 a year. This has been the case for the past five years at least. Council tax is another £1000. ie Gross value is £13000. Maintenance is £2000. Administration et is £2000 a year. So AV is £9000. Building value is £90000 at a building cost of £90 per square metre. To convert this into an annual figure, say 5% (OK, it might be between 4% and 6%) of that is £4500 ie within the range £3600 and £5400. The balance is the annual value of the land AV (land), £4500 (land rental value range is £5400 to £3600).

At the £4500 figure, if the initial rate of land rent charge is 22%, they will be paying the same and will not complain. In fact, they are used to increases of up to £150 a year and would probably only grumble a bit if the initial rate was 25%, which would come to £1250. However, because there are some very high land value properties within the administrative area, as well as some vacant sites with planning consent, this rate of tax, which is probably what the median resident pays, will yield substantially more revenue. Which is sorely needed. Obviously the well-heeled of Withdean are going to complain. And if it came with a tax cut somewhere else, eg income tax allowances, then it would sugar the pill nicely.

And with 40 flats in the block, this gives a site value of £180,000 per year. And with the area known - say 1000 square metres, an annual value of £180 per square metre is established. Now do the whole street and even them out. In any case it matters not at all if they are up to 10% wrong as what counts are the relativities, which is why the choice depreciated interest rate for the building value is not critical.

Why capital value assessment is unsuitable for Land Value Taxation

The problem surfaced in a land valuation study carried out in West Oxfordshire. The aim was to see what would happen if the same revenue was raised from the same area using land values as the basis of the assessment. In effect, it was a notional pilot study.

Residential property is subject to the Council Tax, a relatively small charge locally determined and based on banded selling prices.

Commercial property is subject to the National Non Domestic Rate (NNDR or UBR) which is a relatively larger charge based on rental values. The same property will be subject to much higher charges if it goes from residential to commercial use, which distorts the property market and patterns of land use in the UK. This differential has the effect of depressing the price of property, actually the price of land, in commercial use.

The valuation was on capital values. The valuer applied a correction to strip out the hope values. But no correction was applied to adjust for the differential taxes currently being paid. This made the aggregate residential values appear artificially high and the study showed that to raise the same amount from LVT as from the present taxes, some residents would have ended up paying more, which promoters of the scheme thought could be electorally bad. And so all sorts of compromises and complications were suggested.

There had been two further problems here due to the nature of the study. First was the choice of the study area, which was largely residential. In an LVT situation the collection would be nationally and would lump together areas of high land value in city centres in SE England and areas of low land value in remote parts. The study could not not even draw in the areas of high land value in central Oxford and the assumption of trying to raise the same revenue over such a small area was an artificial one.

LVT assessments using rental values should initially be current use value except where there was an actual planning consent for development. Nobody can be asked to pay tax on the basis of a value that could not actually be realised there and then. With selling prices as the basis, the introduction of the LVT would promptly hit those prices. But it would have no effect on land rental values.

How to measure the rental value of land

Over the past few years the idea seems to have grown up amongst supporters of land value taxation that it is impossible to determine the rental value of land. It has apparently come from the USA. They claim that it is irrelevant how the valuation list is done, but that it is too difficult or politically problematic to measure rental values.

To assess the rent of land from capital values by the residual method on a developed site, in principle this is the process.

1. deduct the value of the structures on the site.
2. deduct hope value.
3 decapitalise this value using an agreed figure of probably around 5%.
4 add in all property taxes actually being paid at the time of valuation.

To assess from rental values of a developed site the process is.

1 deduct the decapitalised value of the structures.
2 add in all property taxes actually being paid at the time of valuation.

Site values as determined by a variety of methods are then "smoothed". The first valuation is obviously the most difficult. After that the process is iterative. But with rental values as the basis of the tax, as existing taxes come off, yields will rise even at a fixed rate of LVT. Essentially, the whole exercise is a tax shift. Vic Blundell, an expert on the subject in the immediate post-war period, compared it to rearranging the load on a pack horse. If the load is tied to its feet the beast cannot move. If it is put on its back then it can carry the load all day long.

Owing to the way LVT has been promoted and applied, it seems as if too many of its advocates are proposing capital valuation and assuming that this deviation from the original concept is just a detail and that people who make an issue of it are niggling. They are not. It is critical for the long term success of LVT.

More on high speed rail - does Britain need it?

There was a long discussion thread this week on the Guardian's web pages, following the test run of the Eurostar train over the newly finished route into London.

First. The entire conventional rail network in the UK is sub standard. Britain has a narrow gauge railway running on standard gauge track, with sharp curvature. This precludes double deck trains entirely and results in all other trains being cramped and uncomfortable. Compare Eurostar with the TGV to see the difference.

Therefore to get proper value out of new high speed lines, they cannot use existing routes into city centres, though there may be some alternatives such as the line into London Marylebone.

Second. What counts is door to door journey times. Within the UK, people are concentrated into an area bounded roughly by Leeds, Manchester, Bournemouth and Dover - over 85% live and work there. But within that area they are quite dispersed - it is a pattern of development that cannot be served efficiently by public transport. But it means that a high proportion of journey times are both too short for significant savings to be made by high speed rail and are not in any case city-centre to city-centre.

Third. The same reasons also make it very difficult to define acceptable routes especially in the approaches to cities, and when a route is established, land acquisition costs are vast.

Fourth, there is the general and unresolved question of paying for infrastructure. If it is worth having it will result in an overall enhancement of land values. But the government has no mechanism for capturing land values and so, unsurprisingly, the Treasury is lukewarm.

But assuming money were to become available for public transport investment, probably the best priorities would be (1) local transport improvements (2) gauge enhancement and platform lengthening and grade separation of junctions to improve passenger and freight capacity; it is absurd that, eg the busy junctions at Reading and Didcot are still flat and not flyovers.

These are in any case essential preliminaries in order to make effective use of high speed trunk routes, which come third in any sensible list of priorities. And at the same time the government needs to switch to a system of land value taxation so that the return on the investment does not end up in the pockets of landowners who happen to have owned property in the right location. Just watch Folkestone as an example of the process at work.

tisdag 4 september 2007

Eurostar record breaker

milf eurostar train paris
Originally uploaded by candidphoto.

The Eurostar was due to make its record-breaking test run over the new route today.

Whether this investment was actually good value for money is a moot point. There may be a case for a high speed rail link to the north but most journeys are local and urban, not between cities hundreds of miles apart. It would probably be better to spend the money on local transport instead, for example on urban tram systems. And also on electrification and upgrading of existing routes.

Due largely to decades of economic mismanagement, around 85% of the population of Britain live in about one-third of the land area, roughly speaking within a radius of about 150 miles from Coventry. This means that inter-city journeys are typically a lot shorter than they are on mainland Europe, and so higher speeds do not give such useful reductions in journey times. Bearing in mind that costs rise exponentially with speed, and that there is an optimum speed for trains of around 160 km/hour, and the case for high speed lines in the UK looks a bit shaky.

In addition, it is essential to remember that what counts are door-to-door journey times. There is no point in spending £5 billion so that passengers can get from Paris to London half an hour faster, only for them to be delayed in traffic jams outside the station, or, for that matter, in pre-travel check-in delays.

Not only would investment in urban and local travel be of benefit to far more people, it would also reduce actual long-distance journey times as well.

It is unfortunate that rail commentators focus on things that look good on the headlines.

And incidentally, Eurostar should update their computer sytems; they could not book me a return journey for a three-month stay away, so I ended up taking the ferry. This proved so pleasant and inexpensive that I will travel the same way again in the future.

Engineering for safety

Plaxton Premiere Volvo B10M
Originally uploaded by inglian.

Yesterday there was a report about a coach overturning due to dangerous driving - the driver was arrested on suspicion of being drunk. Earlier in the year, another coach overturned. And ten years on, there is still discussion about how Princess Diana was killed. Was it dangerous driving or was there a conspiracy?

What does not seem to get much of a mention is the contribution of engineering design towards safety or the lack of it.

Princess Diana's car could not have ended up running into a concrete column in Britain or other countries where potential hazards are protected by ARMCO barrier. This is the corrugated steel strip used in the centre reservation of motorways and can be seen in the left of the picture.

And now take a look at the coach, which is a standard contemporary design with a high floor.

Single deck buses and coaches from the 1940s and earlier had low floors with the engine at the front. But then came the underfloor-engined single-decker with a higher floor. This was also an essentially sound design as the heavy engine was mounted low.

But for the past couple of decades, coaches have had high floors with a luggage space beneath, and often a toilet as wall. This is obviously an advantage to passengers and operators, but it must inevitably raise the centre of gravity, making the vehicle less stable on curves and in cross-winds, and more easily overturned.

Is this something that needs to be examined?

måndag 3 september 2007

Mass at Ängelholm

This was a surprise. There isn't a Catholic church there, so the priest comes from Helsingborg and says mass on Sundays at 2.00 pm in the Rönne Church (Baptist).

What did we get? A very well attended service, with a full church. The mass was in Swedish and the Ordinary was sung in Latin, Gregorian Chant, Mass VIII. And as usual in Sweden, the congregation was from a diverse range of places. All the same, everyone joined in the singing.

They are hoping to get a church of their own. There is a lesson in this.

Something I had never seen before

Originally uploaded by HaPe_Gera.

Camberwell Beauty - I saw one when I was staying on Åland.

Other creatures I have seen for the first time were a tawny owl. a grass snake and an adder.

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