Addressing The Deficit withoutIncreasing Taxes or Reducing Services               Dave Wetzel FCILT      President, Labour...
The UK is in Debt
The UK has a deficit - Because the UK’s annual expenditure  is higher than our    annual income
But let’s put the totaldebt into proportion
UK Debt as percentage of GDP        1945 to 2010
UK DEBT 1945Was 3.2 times more than 2010                                UK                               Debt             ...
And remember in 1945 the UK had to:•   repair or rebuild bomb damaged homes, docks,      bridges, roads, business premises...
Suppose the UK found a new rich    oil field in the Midlands?
Like oil-rich Middle East countries   we could not only pay-off our debtsBut also IMPROVE publicservices and CUT thosetaxe...
But the UK is unlikely to find new natural resourcesBut we could make better use of an existing resource    But what could...
To produce wealth we require three factors:1. Labour    (all mental and physical human effort in the production process)2....
What is the return to these three factors?:1.    The return to Labour is   WAGES                                   (salary...
Who deserves to receive these returns?1. WAGES?          surely belong to those who create wealth by working2. INTEREST?  ...
RICARDO’S THEORY OF RENT         As agreed by         Adam Smith        Henry George          Karl Marx        William Vic...
Imagine Four Fields                 of equal size4 x fields
These sites could be used for factories…4 x fields
Offices or hotels…4 x fields
Shops…4 x fields
Or housing…4 x fields
We’ll use agriculture for this example  4 fields of  equal size  and equal   access.   The only difference is  the fertili...
Profit £10kCapital £90kLabour £100k   Land      What do we need to produce wealth in these fields?
Breakeven               £200 k p.a Profit £10kCapital £90k per annumLabour £100k per annum    Land
Breakeven    £1.2m                       £200 k p.a  Income       £210k   RENT        £10k                 £1m Profit £10k...
GDP          £1.2m                               £600k                       £250k  Income       £210k    Rent       £10k ...
But not a good model  of the economy  What’s missing?
Breakeven                   £1.2m                            £200 k p.aBreakeven now: £260k                      £600k    ...
£1.2m                               £600kBreakeven now: £260k                       £250k  Income       £210k    Rent     ...
GDP    £1.2m                               £600kBreakeven now: £260k                       £250k  Income       £210k    Re...
£1.2m  Income    Rent        £1m Profit £10kCapital £90kLabour £100kWhat is the    10 - 20 freehold      years  price?    ...
£1.2m                                       £600k                            £250k   Income        £210k     Rent        £...
Income        £210k    Rent        £10k Profit £10kCapital £90kLabour £100k               x 10 yrs  Freehold =            ...
Income        £210k                          Land Value Tax £5k    Rent        £10k Profit £10k                Landowner £...
£250k  Income                  Land Value Tax £25k    Rent        £50k       Landowner £25k Profit £10kCapital £90kLabour ...
£600k  Income       Land Value Tax £200k    Rent                               £400k Profit £10k    Landowner £200kCapital...
£1.2m  Income               Land Value Tax £500k    £1m    Rent Profit £10k     Landowner £500kCapital £90kLabour £100k   ...
£1.2m                                                £500k                                       £600k                    ...
£1.2m                                                £500k                                       £600k                    ...
£1.2m                            GDP                  £500k                                       £600k                   ...
LVT HELPS AVOID URBAN SPRAWLIf land is used efficiently in towns and cities with   no empty or underused buildings or site...
Why collect land rent?• Land is a natural resource• Land values are created by whole communities• Landowners do not create...
Land Value Tax is one way to collect land rent • LVT is a fair way of paying for public services • LVT encourages new capi...
ThankyouFor listeningDave Wetzel
Questions/Discussionwww.LabourLand.org  www.TheIU.org
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Dave wetzel global net 21 webinar nov 15 2011 [3]

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Dave wetzel global net 21 webinar nov 15 2011 [3]

  1. 1. Addressing The Deficit withoutIncreasing Taxes or Reducing Services Dave Wetzel FCILT President, Labour Land Campaign Chair, The Professional Land Reform Group General Secretary: The International Union for Land Value Tax Former Vice Chair, Transport for London Former Leader London Borough of Hounslow Former Transport Committee Chair, Greater London Council GlobalNet21 Webinar 15 November 2011
  2. 2. The UK is in Debt
  3. 3. The UK has a deficit - Because the UK’s annual expenditure is higher than our annual income
  4. 4. But let’s put the totaldebt into proportion
  5. 5. UK Debt as percentage of GDP 1945 to 2010
  6. 6. UK DEBT 1945Was 3.2 times more than 2010 UK Debt 2010
  7. 7. And remember in 1945 the UK had to:• repair or rebuild bomb damaged homes, docks, bridges, roads, business premises, roads, railways etc.• find jobs for demobilised servicemen and women.• and shift industry from producing armaments to selling manufactured goods to a war-ravaged world economy.Not only did they achieve this but the 1945-51 Govtalso managed to create full employment (for the firsttime after a major war), establish the welfare state,introduce decent pensions and unemploymentbenefits, improved education, and create The NHS!
  8. 8. Suppose the UK found a new rich oil field in the Midlands?
  9. 9. Like oil-rich Middle East countries we could not only pay-off our debtsBut also IMPROVE publicservices and CUT thosetaxes that damageour economy Taxes like vat which increases prices and income taxes which reduce workers’ spending power
  10. 10. But the UK is unlikely to find new natural resourcesBut we could make better use of an existing resource But what could that be? Our LAND
  11. 11. To produce wealth we require three factors:1. Labour (all mental and physical human effort in the production process)2. Capital (Man-made wealth used to produce more wealth e.g. Tools, equipment, machinery, business buildings, parts etc.)3. Land (all the free gifts of our universe such as dry land, oceans, fish in the sea, natural resources oil, coal, gas, ores, space, the electro- magnetic spectrum etc.)
  12. 12. What is the return to these three factors?:1. The return to Labour is WAGES (salary, bonuses, peace-work etc.)2. The return to Capital is INTEREST (interest rates, profits, dividends, etc.)3. The return to Land is RENT (economic rent as opposed to rent for hire cars, buildings, equipment etc.)
  13. 13. Who deserves to receive these returns?1. WAGES? surely belong to those who create wealth by working2. INTEREST? surely belongs to those who save and invest3. RENT? the rent for hire cars, buildings, equipment, domestic appliances etc. must surely belong to those who made these items or who fairly transferred their ownership – But Who deserves the economic rent of NATURE?Who deserves the RENT of LAND?
  14. 14. RICARDO’S THEORY OF RENT As agreed by Adam Smith Henry George Karl Marx William Vickrey and others
  15. 15. Imagine Four Fields of equal size4 x fields
  16. 16. These sites could be used for factories…4 x fields
  17. 17. Offices or hotels…4 x fields
  18. 18. Shops…4 x fields
  19. 19. Or housing…4 x fields
  20. 20. We’ll use agriculture for this example 4 fields of equal size and equal access. The only difference is the fertilityresulting fromMother Nature
  21. 21. Profit £10kCapital £90kLabour £100k Land What do we need to produce wealth in these fields?
  22. 22. Breakeven £200 k p.a Profit £10kCapital £90k per annumLabour £100k per annum Land
  23. 23. Breakeven £1.2m £200 k p.a Income £210k RENT £10k £1m Profit £10kCapital £90kLabour £100k
  24. 24. GDP £1.2m £600k £250k Income £210k Rent £10k £50k £400k £1m Profit £10kCapital £90kLabour £100k
  25. 25. But not a good model of the economy What’s missing?
  26. 26. Breakeven £1.2m £200 k p.aBreakeven now: £260k £600k £250k Income £210k Rent £10k £50k £400k £1m Profit £10kCapital £90kLabour £100k Doesn’t include Government expenditure
  27. 27. £1.2m £600kBreakeven now: £260k £250k Income £210k Rent £10k £50k £400k £1m Profit £10kCapital £90kLabour £100k
  28. 28. GDP £1.2m £600kBreakeven now: £260k £250k Income £210k Rent £10k £50k £400k £1m Profit £10kCapital £90kLabour £100k
  29. 29. £1.2m Income Rent £1m Profit £10kCapital £90kLabour £100kWhat is the 10 - 20 freehold years price? rent
  30. 30. £1.2m £600k £250k Income £210k Rent £10k £50k £400k £1m Profit £10k Capital £90kLabour £100k x 10 yrs x 10 yrs x 10 yrs x 10 yrs Freehold = £100k £500k £4m £10m
  31. 31. Income £210k Rent £10k Profit £10kCapital £90kLabour £100k x 10 yrs Freehold = £100k
  32. 32. Income £210k Land Value Tax £5k Rent £10k Profit £10k Landowner £5kCapital £90kLabour £100k x 10 yrs Freehold = £100k
  33. 33. £250k Income Land Value Tax £25k Rent £50k Landowner £25k Profit £10kCapital £90kLabour £100k x 10 yrs Freehold = £500k
  34. 34. £600k Income Land Value Tax £200k Rent £400k Profit £10k Landowner £200kCapital £90kLabour £100k x 10 yrs Freehold = £4m
  35. 35. £1.2m Income Land Value Tax £500k £1m Rent Profit £10k Landowner £500kCapital £90kLabour £100k x 10 yrs Freehold = £10m
  36. 36. £1.2m £500k £600k £200k £250k Income £210k £25k Rent £5k £5k £25k £200k £500k Profit £10kCapital £90kLabour £100k x 10 yrs x 10 yrs x 10 yrs x 10 yrs Freehold = £100k £500k £4m £10m £50k £250k £2m £5m
  37. 37. £1.2m £500k £600k £200k £250k Income £210k £25k Rent £5k £5k £25k £200k £500k Profit £10kCapital £90kLabour £100k x 10 yrs x 10 yrs x 10 yrs x 10 yrs Freehold = £100k £500k £4m £10m £50k £250k £2m £5m
  38. 38. £1.2m GDP £500k £600k £200k £250k Income £210k £25k Rent £5k £5k £25k £200k £500k Profit £10k Capital £90kLabour £100k x 10 yrs x 10 yrs x 10 yrs x 10 yrs Freehold = £100k £500k £4m £10m £50k £250k £2m £5m
  39. 39. LVT HELPS AVOID URBAN SPRAWLIf land is used efficiently in towns and cities with no empty or underused buildings or sites - SPRAWLThen the needs of investors and residents are met without being forced onto less advantageous marginal land which incurs extra cost and inconvenience.The disruption to the countryside is saved, urban environments become more efficient and journey times are reduced for transporting goods and for individuals commuting.Energy is saved – i.e. we help to address climate change.
  40. 40. Why collect land rent?• Land is a natural resource• Land values are created by whole communities• Landowners do not create land values• Expenditure on public services usually leads to an increase in land values• The planning process often provides landowners with huge windfalls• Taxes on labour and capital act as a drag anchor on the economy
  41. 41. Land Value Tax is one way to collect land rent • LVT is a fair way of paying for public services • LVT encourages new capital investment • LVT promotes the use of empty sites • LVT helps prevent urban sprawl • LVT cannot be avoided - unlike other taxes • LVT is easy to assess and collect • LVT would provide automatic compensation • LVT facilitates lower interest rates • LVT evens out the property cycle
  42. 42. ThankyouFor listeningDave Wetzel
  43. 43. Questions/Discussionwww.LabourLand.org www.TheIU.org
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