Lie of the land: How the soil under our feet could fund services
Morning Star : June 23, 2004 : Jerry Jones
Reproduced here by kind permission of Morning Star.
Unlike goods and services, land – which encompasses mineral resources below the ground, as well as the sea and outer space – has no cost of production. It is what nature has provided for free.
If an ample supply of land of equal desirability were available, there would be nothing to pay for its use.
However, unlike the two other primary factors of production, namely capital and labour, the supply of land is fixed.
Thus, if the demand for capital is rising, its supply can be increased by performing more surplus labour, that is working over and above that required to satisfy immediate consumption needs.
And the supply of labour can be increased through working longer hours, or more productively as a result of investment of capital in more productive technology – or by having more children or encouraging immigration.
But land cannot be expanded however much demand is growing. Meanwhile, land in some areas is in greater demand than in others, perhaps because it is more fertile, or well endowed with natural resources.
Or simply it may be because it is where more people want to live or work – perhaps because it is near markets or transportation routes, or is well supplied with services, such as water, electricity or gas, or shops, schools, or hospitals – and not too close to railway lines, motorways, airports, or rubbish dumps, and so on.
In short, the value of a particular area of land is created not by the occupier, but by nature, and by other people, or the community at large, through the provision of various services, and their demand for the products of the land, including simply its natural beauty.
The more that society invests in particular areas – and the greater the population – the greater will be the demand for land in those areas, and therefore its value.
When land is privately owned, it is the landowners, without having to lift a finger, who benefit from this rising value of land.
They are able to sell the land or rent it out at a higher price than otherwise, and therefore profit freely at the expense of other people who had financed the investments, perhaps through taxes, that had increased the value of the land.
The amount over and above which landowners are able to sell or rent out their land as a result of such investments has come to be known as “economic rent”.
Note that “rent” as used here has two quite distinct meanings. In everyday usage, such as “renting out land”, it means simply payment for the hire of land, buildings, or equipment, or whatever, and, is equivalent to returns on capital invested.
“Economic rent”, on the other hand, is the excess income arising from the monopoly ownership of a particular asset, such as a unique piece of land – or the unique skills of a footballer, pop star, actor, opera singer, high court judge, or top manager, whose high earnings derive mostly from the economic rent that they can command.
Since economic rent is created by society as a whole, there is a moral argument for returning a major part of it to society, such as subjecting it to a high rate of tax.
However, in the case of land, it can be argued that it should not be owned by individuals at all, since it is what nature has provided for all of humanity.
This also begs the question how land came to be owned by individuals in the first place.
Thus, at one time, societies everywhere treated land as common property, and it was allocated more or less according to need through various systems of customary tenure such as that which still exists in some parts of Africa and elsewhere today.
The land was yours as long as you used it, but it would be re-allocated if you did not.
In fact, wherever land is privately owned, as in the case of Britain (see below), it can almost invariably be traced back at some stage to its outright theft by those with political and coercive powers.
That is why socialists, starting with Marx and Engels in the Communist Manifesto, published in 1848, have called for the ‘abolition of property in land and application of all [economic] rents of land to public services’.
However, according to some, including the Labour Land Campaign, the nationalisation of land, as implied here, is unnecessary.
All that is required is to tax the economic rent according to the value of the land, perhaps progressively raising the rate of tax eventually to 100 per cent, by which time land ownership would have lost its significance.
I shall explore this approach in my next column.
Meanwhile, whether land is formally nationalised or not, the key issue is for the state, acting on behalf of society, to capture the economic rent. This would not only act as a major source of revenue for the provision of public services, but also lead to the most efficient use of land.
It was one of the major failings of the former socialist countries that they did not do that.
Who owns Britain's land?
As discovered by Kevin Cahill, author of Who Owns Britain (published in 2001 by Canongate, priced £16.99), when first assigned the task of investigating land ownership for the first Sunday Times Rich List, information is hard to come by.
The Land Registry, in existence since 1925, has managed to register not much more than half – and what’s missing is the land owned by the rich.
However, during the course of piecing together information from press cuttings, and records of wills and estates, Cahill heard about a “second Domesday Book”, a report submitted to Parliament in 1876.
He asked the Royal Agricultural Society if they had a copy. They assured him that there was no such thing, while at the same time possessing several copies in their library. The Country Landowners Association at least admitted to having a copy but refused to let Cahill see it.
Eventually he was able to obtain a copy of extracts from Ealing library, and later a view of the whole thing in the Devon and Exeter Institute.
The report, entitled The Return of Owners of Land, contains the names, addresses, acreages and valuations for all landowners of over one acre.
As Cahill puts it, ‘the UK’s large landowners had been appalled by its appearance and moved, with their academic friends, to bury it. In this endeavour they were eminently successful, with nothing of significance written about it in 126 years…. It had, in effect, vanished’.
Having rediscovered it, Cahill was able to trace most of the missing estates, and in many cases discover their current owners.
He found that just 189,000 families own two-thirds of the UK’s 60 million acres, of which nearly three-quarters is owned by the top 40,000.
Meanwhile, Britain’s 16.8 million homeowners account for barely 4 per cent of the land, about the same as that owned by the Forestry Commission, the top institutional landowner.
The biggest landowner is the Duke of Buccleuch with 277,000 acres, and the wealthiest is the Duke of Westminster with 140,000 acres, including 100 acres in London’s Mayfair – which alone is valued at £3.35 billion – and 200 acres in Belgravia, its even more expensive neighbour.
Land owned and controlled by Britain’s Royal Family, comprising the Crown Estates, the Duchies of Cornwall and Lancaster, and private land, amounts to some 677,000 acres.
However, some 5.6 million acres, or nearly 10 per cent of Britain’s land area could still not be accounted for.
Most of the big private estates can be traced to appropriations and handouts from the reigning monarch in bygone days, and more recently through purchases by those who had made money through large-scale theft in other ways.
The ‘first great land grab’ came with the Norman Conquest when William donated the lands acquired to himself and his brigands.
The second came when Henry VIII dissolved the monasteries, and distributed their 10 million acres to those followers and barons willing to accept the new Church and impose it in their local areas.
Thirdly, some major redistributions and awards of land according to political allegiances took place during Cromwell’s rule and following the Restoration, which more or less settled the broad nature and ownership of Britain’s land through to the present time.
This was consolidated further between 1700 and 1900 when common land used for grazing was incorporated into private estates through the various Enclosure Acts pushed through Parliament by the big landowners themselves or their representatives.
Most freeholds of owner-occupied houses and businesses that exist today derive from the big landowners cashing in from selling off small parcels of their land to property developers.
Read second article in series of 5.