ECONOMIC PERSPECTIVES 19
Does Labour respect sanctity of private property?

Lessons to be discerned from the tragic Grenfell Towers fire transcend the immediate questions on cladding, stairwells, sprinklers, alarm systems, escape routes, incandescent materials and faulty appliances. Far more has been revealed than a recital of fire regulations in need of modernisation.

The political exploitation of the fire’s horrendous impact on those most sorely afflicted, including scores of unregistered immigrants is, sadly, unsurprising. Jeremy Corbyn’s immediate response was to demand the requisition of empty luxury homes in the same borough to rehouse the fire’s victims.

Labour’s unsubtle subtext exploits these horrific events to plant in the public mind the notion that there is a direct, causal relationship between (i) the wretched plight of the homeless, and (ii) the existence of empty houses owned by rich people. While both phenomena are socially unacceptable, the truth is that neither of the main political parties, beyond glibly declaring that more homes should be built, has advocated policies capable of addressing these extremes.

Labour’s predictable Grenfell response starts from an unwritten but unmistakeable premise: the state, as de facto owner of all property, may with impunity intervene to decide what uses are socially beneficial. Putting it at its simplest, Labour does not recognise that every such intervention would undermine the role of private property as the foundation and guardian of economic freedom, and would ultimately lead all the way to Venezuela or Zimbabwe.

A concept held in disdain

The Labour Party, unmasked, holds the very concept of private property in disdain – though not yet to the degree advocated by the “Economic Freedom Fighters” (EFF), the loathsome South African party that rioted in Parliament in Cape Town while I was there in February, and whose major policy objective is “land reclamation without compensation”.

“land reclamation without compensation”

[The EFF is not referring to land that should be reclaimed from sea, deserts, marshes or swamps – but from the descendants of Jan van Riebeck, the Dutch explorer who landed at the “Cape of Good Hope” in 1652 – in other words, from the descendants of every arrival in the country over the past 365 years! Proof of the utter insanity of this policy objective? President Jacob Zuma has endorsed it!]

Labour also promotes other examples of populist egalitarianism that are simply no business of politicians of any stripe, such as demands that football club owners should offer shares to fans; or a demand that government should veto the closure of bank branches; or demands that workers should be the “buyers of first refusal” when their company is up for sale. And so on.

Thin end of the wedge

Be under no illusion: this is what we would be up against if these characters were to gain access to real power. In fact the manifesto itself, which Corbyn, McDonnell, Milne, Harman, Thornberry, Lansman, Starmer, Abbott, Watson and the host of other well-to-do lefties keep citing, actually reads like a catalogue of “good ideas” rather than reasoned policies. But it is truly the thin end of the wedge.

Corbyn has previously advocated extending a “right to buy” to the tenants of private landlords – in effect legislating to deprive property owners of the ability to sell their assets, or at best to sell at a heavy discount, being encumbered by the handicap of sitting tenants with a prior right to buy. The effect, of course, would be to reduce the number of tenancies available to the very people whose needs he purports to champion.

well-established private property rights: the foremost prerequisite for communal prosperity

Members of this anti-property brigade have blinded themselves to the fact that well-established private property rights are the foremost prerequisite for communal prosperity – “for the many, not just the few”, as Corbyn loves to put it! Hugo Chavez was the arch exponent of state control and anti-market policies and he took Venezuela all the way from prosperity to basket case in record time. When he died four years ago Corbyn eulogised him. “Chavez showed us that there is a different and better way of doing things. It’s called socialism, it’s called social justice and it’s something that Venezuela has made a big step towards.”

Oh, that people could see for themselves the unvarnished reality of what they long for without having first to endure it! But that is not how history works!
The historical record shows that whenever property ownership is threatened by an agency of the state, that agency, as the state’s representative, wields complete control over its subjects. If well-established private property rights are undermined, you will not be able to rely on the most elementary entitlement of all: to reap what you, by your own industry and risk-taking, have sown. Without the freedom to use the returns of your labour as you wish, what would be the point of working or investing? It’s as basic as that.

Anomalies and contradictions

So – returning to the closely related problems of:

  1. severe shortages of homes in urban centres;
  2. the related escalation of house prices, to the point of being beyond the reach of those most in need of shelter;
  3. hoarding empty homes “as an investment” or as a hedge against still further escalation – which market forces duly fulfil;
  4. (exacerbation of housing shortages by faceless and wholly unaccountable foreign corporations that buy property with laundered money yet have no intention to occupy it;
  5. developers holding options on brownfield sites and sitting on them in anticipation of planning consent – possibly in league with local council planning officers, creating a veritable breeding ground for corruption;
  6. attempts by local authorities to alleviate the crisis by engaging cowboy builders to erect flawed structures thrown together with scant regard for building standards, then charging rents that working citizens on low incomes struggle to afford; and
  7. local Councils depleting the public coffers by incurring costs beyond any objective economic analysis, and filling the substandard apartment blocks with society’s most deprived, often nameless, underclass – just to get them off the streets. After all, it’s not their money that these authorities are throwing around! Unlike Housing Associations and other charities in the private sector, they are virtually unaccountable, and beyond audit.

Site Value Taxation the key

The resolution of this circuitous conundrum is emphatically NOT to seize privately owned property that is empty or under-utilized. A better answer, site value taxation, would tackle the problem head-on and bring empty sites into use. It has been known to economists since the days of Adam Smith, David Ricardo, John Stuart Mill, the Physiocrats and, later, with even greater focus, the American economist Henry George. Even Milton Friedman acknowledged that a tax on the value of unimproved land is the “least bad” of all taxes! It has in fact been widely promoted and applied in varying degrees in several countries around the globe, none of which has subsequently given it up.

site-value taxation would bring idle land into productive use

Its rationale: since the value of an undeveloped site reflects the value of its potential development, what could be more natural than applying a low-rate tax on that site to bring it into productive use?

To be fair to Labour, its manifesto does mention the possibility of land value taxation, but only in the context of a “review” of all property related taxes, such as council taxes and business rates.

Labour’s main policy thrusts, however, are designed to be far more eye-catching, such as its undertakings “to build a million homes” and “impose rent controls”.
Controls, indeed! Labour, like its counterpart in North Korea, is in its element when threatening controls over other people.

And “build a million homes”? As the late, great Tommy Cooper would have quipped: “Jus’ like that!”

“Oh, but it’s all fully costed”, is the smug response to any rational challenge. Believe it if you wish!
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EMILE WOOLF, JULY 2017