Thursday, 20 January 2022

That's the beauty of LVT - reply to Doonhamer

Doonhamer left this comment on the subject of the Scottish government's auction of offhore wind turbine licences:

Yes, but what is the guaranteed price for all those expensive kWh?
And what do they get paid for NOT producing kWh when the wind is too strong?
And who pays for all the interconnecting copper?*
And who pays for the clean up when the rusting stumps and sea bottom concrete are no longer useful?*
And who pays for the fossil fuel back up when the wind speed is too low or too high?

No, I jest. I already know who will pay.

Let's assume the kWh price is 'too high' (which it almost certainly will be, to "kick start the Green Economy" and suchlike bullshit) and all the other costs are borne by consumers and taxpayers (who are largely the same people).

That means that the future profits will be correspondingly higher - but with a properly run auction (the English/Welsh method; not the Scottish method) that doesn't matter too much. Competing businesses will be willing to submit higher bids for the licences, so the government has more money available to pay all the costs and doesn't need to make consumers/taxpayers pay all over again via taxation.

The same general principle applies to all forms of Land Value Taxation. If the actions of government and society in general benefit particular areas or businesses, the beneficiaries pay the value back into the pot (which hopefully covers the direct costs with some left over to be spent on 'everybody') and those who don't benefit aren't forced to contribute via income tax etc.

* In an ideal world, the National Grid would still be state-owned, so it would have to bear these costs anyway, which it would more than recover by charging generators for transporting electricity. The generators should all be private, competing businesses. Fancy owning a power station? Raise some money, build one and hook it up to the Grid. The most efficient forms generators will win out, the inefficient ones go to the wall and society as a whole benefits.


Vova said...

Doonhamer not hammer- it means someone from Dumfries and thereabouts as they used to say they were going doon hame (home)

Mark Wadsworth said...

V, oops, I will amend.

Doonhamer said...

The people from up round Aberdeen are "the furry boots folk". Not because of what they wear.
The beauty of dialect.

Robin Smith said...

Would you say the potential inflation caused by quantitative easing acts like a tax?

Mark Wadsworth said...

RS, inflation is generally accepted as being a stealth tax on savers and a subsidy to borrowers i.e. land price speculators.

Robin Smith said...

OK MW. Why not abolish taxation. And just print the money needed to buy govt things(rhetorical question)

I realise it's very regressive. But that doesn't seem to bother governments of all party's.

Mark Wadsworth said...

RS, because that would cause hyper inflation, which is a bad thing.

Robin Smith said...

MW only if the new money is being spent. On goods and services, right? Or being sent at all rather than saved.

And, lots has been created. Yet we're only seeing a small amount of inflation. So the theory is not complete?

So is there a case where it would work without inflation, remembering all past hyperinflations have been due to loss in public confidence in the currency rather than too much money alone?

I'm thinking, come the next recession, there will a large vacuum from loss of confidence. And this time will be the first time crypto currency (not bit or shitcoins per se) is there to fill a gap. And stick.

Mark Wadsworth said...

RS, try looking at actual numbers.

UK debt-to-GDP ratio is about 80%, so not unusually high and about average for developed countries. It's not panic stations yet. The recent surge in the inflation rate is a global thing and everybody has a different explanation.

Also, try logic.

Of course the new money has been spent. The government spent it into existence. Whether the lucky recipient spends it or saves it makes no difference, that just changes who the government owes the money to, and not the amount it owes.