The HICE in CityAM:
SELL, sell, sell – or so we must hope.
With a bit of luck, the government is finally about to kick-start a massive and long-overdue sell-off of its vast estate. All of central government’s land and property holdings – worth £330bn – will soon be available for perusal on a Rightmove-style website. Individuals and companies will be encouraged to apply to buy assets that they believe they could make more use of than the public sector currently does…
… there is plenty of land and property that the government already wants to get rid of – and it hopes that people trawling through its new website, many with local or specialist knowledge, will be able to find a lot more obscure state assets that could be viably redeveloped.
One of their rather more convoluted KLNs is that landowners have some special insight as to the best use of their own sites - even if that means keeping them out of use, that what the landowner thinks is in his own best interests must automatically be in the best interests of the wider society. They then embellish this by saying that the rental value of land merely reflects the landowner's own investment in the site, or 'discovery costs' or some such gibberish, and that land rents are this merely a normal return on capital.
And, they say, as Land Value Tax would encourage landowners to put their sites to some sort of productive use* rather than being used purely to make speculative gains, this is some sort of chronic distortion of private enterprise free market economics.
Well, well, well.
We now learn that non-landowners might know how to make "more use" of a plot of land than the current owner, and that there are many non-landowners with "local or specialist knowledge".
Admittedly, the government and its myriad departments have often been pretty rubbish at making best use of their land and buildings, but what if there are two similar vacant plots next to each other, and one belongs to the Department for Social Affairs and one belongs to some investment fund?
Our local builder comes along and offers to buy the DSA plot with the intention of putting up a building. He can make a fair guess of the final selling price, knocks off his build costs and a fair profit margin and is happy to pay the balancing figure at the auction - exactly the same price he'd be prepared to pay to buy the investment fund's site.
And as it happens, he would not be bothered whether he pays it in one lump sum borrowed from the bank, on which he has to pay interest or whether he pays it in instalments, i.e. in Land Value Tax, which would be the same as the interest payments to the bank, and if LVT means he pays less tax on his profits and the wages he pays out, then so much the better, that's a win-win (except for the bank).
Meanwhile, the plot next door remains vacant and un-used.
Question for the Faux Libs: who is making the better economic decision and creating more wealth? The local builder or the investment fund? If one is right, then the other one must be wrong.
* Which ninety-nine times out of a hundred means simply doing the same as whatever is being done on surrounding sites. This requires f- all in the way of special insight. A vacant building in the middle of the high street is best used as a shop; derelict land on an industrial estate is best used for industrial units; an empty plot in a suburban residential area is best used for building houses etc. And if you can't make up your mind, turn it into a car park for the time being.
Rather conveniently, this would also be the basis for each plot's assessment to Land Value Tax.
Wednesday, 8 January 2014
The HICE in CityAM:
My latest blogpost: I wish these Faux Libs would make up their minds...Tweet this! Posted by Mark Wadsworth at 20:40