Increase housebuilding by a factor of 6, build more railways, bring in Land Value Tax and abolish VAT

Jeremy Cliffe, the Economist’s correspondent in Berlin, tweeted his own radical ideas for the British economy, after complaining that the Jeremy Corbyn Labour programme is anything but.

What looks like a list compiled during a long boozy summer afternoon in a German beergarden is superficially attractive. Taxing wealth, rather than income or consumption, and improving Britain’s infrastructure through a massive building programme for housing and railways is the economic mainstay of this plan. And something you will not see in the Economist, which will prefer to tell you that markets and free trade solve virtually all of societies’ ills.

So, a radical programme for Britain! Just the kind of thing this blog loves to review.

Let’s check out four of the main ideas:

1) Build 1 million houses per year for 5 years

That certainly is ambitious. Last year about 170,000 were started. So this proposes to increase housebuilding 6-fold.

Over 2 milllion people work in construction, and its current part of GDP is about 6%.

Clearly, even if only half of these workers are employed in housebuilding, we will not find another 5 million construction workers to build 6 times more houses than we do now.

It’s radical, but completely impossible to build 1 million houses a year. The workforce is just not there. Five million extra construction workers could not be imported, or trained.

Further, house builders would suffer and not allow it. The market would collapse, if all of a sudden 1 million additional houses would be offered. Falling prices is not in the interest of developers, who currently make sure, given their oligopoly, that the supply of new housing is strictly limited.


2) Reduce VAT and bring in Land Value Tax

Currently VAT brings in about £120bn a year.

Land Value Tax, which would presumably replace council tax and business rates, would have to be introduced. These two taxes currently amount to about £30bn each.

Abolishing VAT, council tax and business rates and bringing in Land Value Tax (a property tax) would make taxes more progressive. Poorer people pay less, and people with lots of land and property (especially in the South East and London) pay a lot more.

However, to move all of current VAT income onto Land Value Tax would roughly triple the current cost of your council tax/business tax (on which land value tax would be based). Not a very simple thing to do, certainly not very popular in the South East. But perhaps possible gradually over a longer time frame.

3) Move to higher inheritance tax, and reduce income tax

The problem here: inheritance tax income is £5bn a year, and income tax £180bn. So the government could double inheritance tax, which would annoy almost everybody, but income tax would hardly budge.

4) More new railways

If more high speed rail lines, either suburban, or nationwide represent value for money (as opposed to extra spending on health or education) would have to be investigated. I doubt it. And again, there will be a lack of builders and engineers. So sorry, trainspotters. Not a good idea.


What would be radical, but what is not mentioned?

1) Carbon tax instead of National Insurance
2) Transaction tax (including, but not exclusively, on financial transactions)
3) Green Quantitative Easing
4) Increasing services on existing railways/public transport and giving incentives to use them
5) rental income taxes


But that is just some of my ideas.