torsdag 20 mars 2008

Poor transport links hit wealth of outlying northern towns

The economies of northern towns are falling behind their southern counterparts because transport links to the big cities of Leeds, Manchester and Newcastle are inadequate, according to a study by the Centre for Cities thinktank. There is a comment on the report in the Guardian.

The study focuses on the poor local public transport and road links in the satellite towns around cities such as Manchester and Leeds, compared to those with better connections, and, more generally, in comparison with London and the south-east. Average pay is lower where transport connections are bad and the report argues the case for improvements.

What the study fails to mention is the sky-high housing prices - in reality, land values - in the prosperous areas of the UK, which gobble up much of the advantage of the economic benefits of better transport.

Suppose, for a moment, that substantial investment was made in transport around, say, Manchester, leading to higher pay and improved economic performance. This would quickly push up land values, with higher house prices, and higher commercial and residential rents. In other words, the benefit of the investment would be mostly taken by land owners. Little of the return from that investment would turn up in higher tax revenue, and then only slowly and haphazardly.

If, on the other hand, a tax on annual land rental values was in place, the increasing values resulting from the investment would be captured and provide the revenue stream which would repay the cost of the investment. Indeed, the projects could be paid for from bonds issued on the strength of the enhancement to land values and consequently raised revenues. But it is not going to happy any time soon.

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