From The Daily Mail:
The tax plans are part of a report by Labour adviser and former Wickes DIY store boss Bill Grimsey, aimed at reviving struggling town centres.
His blueprint would impose new levies on shop owners and businesses in the prosperous South of England – in addition to all farmers – to provide extra funds to run-down towns, mainly in the North...
Suffice to say, the plan is stumbling vaguely towards tweaking Business Rates to make them a bit more like LVT.
Anyway, here come the KLNs:
But the Conservatives last night claimed the plans would set North against South, lead to a rise in high street prices, including food, and hit rural areas. In addition, they said the proposals would mean a return to Labour’s failed high-tax policies of the 1970s.
... Business Minister Matthew Hancock said: "Labour tried this flawed and divisive approach in the 1970s. It didn’t work then and it wouldn’t work now. It would increase rents, raise rates and cost residents.
"Instead of penalising those who are doing well, Mr Miliband should focus on helping others learn from their success. Labour has no ideas other than taxing and spending more. If shops and farms have to pay more tax, shopping bills will go up, making a nonsense of Mr Miliband’s talk about cutting the cost of living."
We can safely assume that Mr Grimsey, who ran a national chain of retailers, in low-rent and in high-rent areas, knows perfectly well that rents and taxes on rents have absolutely no impact on retail prices.
We don't have to theorise and waffle about this, simple fact is, retail prices are pretty much the same everywhere in the country. They are the same in shops in good, high rent locations in a prosperous town as they are in shops in less favoured locations.
We also know that taxing the rental value of farmland would have no impact on food prices, because the rental value of farmland is dictated by the value of food which can be grown on it and not the other way round. They are mixing up cause and effect.
For more examples and explanations, go to the Killer Arguments blog.
UPDATE: Bob in the comments misses the point gloriously and points out that goods and services consumed at point of sale (pubs, restaurants, cinemas etc) are more expensive in expensive areas.
Which is quite true and I have often mentioned this, I refer you to my posts Embedded rents and Embedded rents (2).
a) I specifically referred to retail prices (which are uniform around the country) and proved that rents have no impact on retail prices. That is a fair comparison and a good control experiment.
b) The relationship between pub prices and rents is exactly the same. Rents have no impact on pub prices. High pub prices lead to higher rents, not the other way round. Cause and effect.
c) If the freeholder of a restaurant generously halved his rent, the occupying business would not drop their prices one penny. If he tried to double the rent, the occupying business would not increase their prices by one penny, they would go out of business.
d) I explained all this on the Killer Arguments blog.
I would have thought this is all blindingly obvious, but clearly Bob, like so many Tory MPs does not understand it. Or perhaps he's trying not to understand it?
Thursday, 12 June 2014
From The Daily Mail: