Budget Day: Time for Some Radical Proposals

Today is budget day and the desperate economic crisis suggests the urgent need for some radical policy proposals. Unusually, the BBC has allowed its business correspondent to actually think outside his corporate box and propose some genuinely innovative policies. We have already covered the proposal for negative interest rates on this blog, which might serve to circulate money currently being hoarded by companies and financial institutions.

More interesting is the fact that some ideas to tackle the debt directly, since until this millstone is removed the economy cannot flourish. Under the rather misleading heading of 'Helicopter Money' Lawrence Knight suggests the creation of new money for public investment or to be given to citizens to spend. Although he claims that the process of money creation is 'rather hazy' he seems to accept the proposal for direct money creation along the lines argued for by monetary reformers. Professor Richard Werner's letter to the FT earlier this month is like sunshine on a hazy day in terms of its clarity of presentation. His proposals for direct money creation by the government to fund public infrastructure projects is the sort of advice the Chancellor should pay heed to.

Relying on Steven Keen as cover, Lawrence Knight, BBC business correpondents, then makes a proposal to actually just cancel the debts. The concept of 'odious debt' finds its place for the first time on the BBC's business pages, although the social and political implications of the massive reapportioning of assets that such a debt repudiation would result in are not discussed. As a long-term supporter of the idea of odious debt I am greatly cheered to see the BBC at least reporting this proposal, if not supporting it.

Meanwhile, Green MEP Caroline Lucas has proposed a Private Members' Bill on Land Value Taxation. The bill is summarised as follows:

'A bill to require the Secretary of State to commission a programme of research into the merits of replacing the Council Tax and Non-domestic rates in England with an annual levy on the unimproved value of all land, including transitional arrangements; to report to Parliament within 12 months of completion of the research'.

How might a Land Value Tax help us out of our current predicament? I think it is a novel and creative solution. It identifies clearly the source of all true value within an economy: the land itself. It was forgetting this link that led to the divorcing of real and nominal value and bankruptcy for many economies. Iceland and Cyprus have become demonstrably bankrupt but many of Europe's economies would already have been obliged to call in the receiver had they been corporations.

A Land Value Tax would challenge the government's so-called 'presumption in favour of sustainable development' that is supposed to underpin its approach to planning found in the National Planning Policy Framework. What this policy and its unaccountable but clearly biased National Inspectorate really supports, however, is speculative developments whose value ends up in the pockets of property developers and those who hold land banks. A Land Value Tax could end this at a stroke, since the value of development would be taxes into the public coffers. While this might put put a break on speculative development in the short term, in the medium term it would shift the ownership and value of land, breaking the bottleneck that prevents citizens and communities from developing their local land for social and environmental benefit.
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