Transforming Public Finance
Good morning. We have three debates this morning, the first one being on motion S1M-3818, in the name of Robin Harper, on transforming public finance for social justice, regeneration and the environment, and an amendment to that motion.
We have an environmental crisis. Almost half the world's population lives in poverty, for want of access to the resources that should support them and allow the development of their communities, while the rest of us enjoy comforts unparalleled in history. The unrepayable money debts of the impoverished global south are balanced, it is argued, by a sum five times as large that the west owes to the south by way of a climate debt resulting from our massive overuse of the world's finite resources.
It is increasingly clear that how we go about sharing the wealth of the world—how we manage access to our common resources of nature and community—is the central issue facing humanity today. That is as true nationally and locally as it is globally, and it is certainly true in Scotland. The world's problems need local solutions, and Scotland needs hers. The Parliament has a responsibility to find those solutions. To do that, we must look into matters much more deeply than we have done to date. Indeed, we must be willing to consider proposals that might be thought to be outrageous and radical but which, on considered reflection, our successors will see as no more than common sense.
As a Parliament, we know that since 1999 we have made a difference, which is what we were established to do, but we have not yet made the big difference that we and our constituents—the people of Scotland—hoped we might. Many of Scotland's problems, while slightly eased, remain unsolved. It falls on our shoulders to do what is necessary to release our country from the spectres of one in three children living in poverty; the ransoming of our marginal communities; rising household debt that cripples families; rising intergenerational debt due to the burden that we choose to place on our descendants through private finance initiatives and public-private partnerships; the breaking pensions scandal, which will relegate many of our present generation in their advancing years to circumstances that they will find unexpectedly unsatisfactory; and an underfunded further education system that is still not free, the cost of which its potential users must still weigh up and which privileges the wealthy and excludes the disadvantaged from what should be a basic social opportunity. How many more 14-year-olds will be selling their first editions of Harry Potter?
We have a public sector that is encouraged by the taxation regime to destroy the environment, waste its assets and throw away wealth, and a fiscal regime that rewards those who keep back from use resources whose value is created by society at large, in order to speculate on them to their own private advantage. How can we ensure that the value of Scotland's common inheritance can be enjoyed freely and equally by all our citizens? Surely the answer is not charity. Redistribution and lottery handouts are sticking plasters to put on the injury after it has been inflicted. We need to sort out the order that is best in the first place for the distribution of wealth. We must remove the basic causes of social injustice. That means taking a systemic approach to reform.
How might we achieve equity in sharing the value of our natural resources? How might we achieve equity in sharing the value of our community resources—that is to say, the value that is created by us working together and which presently is largely privately controlled? How might we share in the value created by, for instance, those things that we foolishly take for granted, but which at present a minority are able to tap into and use for their gain, to the hindrance of others? Common resources, such as social stability, economic opportunity, physical infrastructure, public services, and cultural advantage are not available to all Scottish citizens equally—never mind the ability to pay.
The issues manifest themselves in rising, and sometimes falling, locational land prices, speculation in which fuels the crazy boom-and-bust cycles of the housing market. That is a phenomenon of which Edinburgh is enjoying the soon-to-end upswing. Not all corners of our country are so privileged. The capital's house owners—among whom I number myself—are benefiting from the value of Scotland's renewed confidence and are building unexpected and undue personal wealth through rocketing house values.
There is only one way to equality. As resources cannot be divided up fairly, their value must be assessed. Those who choose to monopolise and benefit directly from those resources should pay the rest of us the market rental value of what they take for the privilege of doing so. That is the argument for reform based on fairness.
Another reason for carefully considering land value taxation is its practicality and economic efficiency. Land value taxation raises revenue completely differently from conventional taxation. As a fiscal mechanism, it operates to a different macroeconomic effect. The principal difference is the fact that its application does not pull down general economic activity. The concept of dead-weight losses reveals that most traditional taxes induce a negative inertia in the economy. Income tax dissuades people from working. National insurance dissuades employers from employing more people. Corporation tax prevents enterprise from reinvesting. The sum of those effects is that our national economy is hugely weighed down by traditional taxation regimes.
The Centre for Land Policy Studies has calculated that the Scottish economy would have been £48.5 billion better off in 1996-97 if the Government's revenue-raising system had not rested on taxes that undermine people's capacity and willingness to work and save. That loss is equivalent to about £9,700 per capita. Of course, that is not a fine—that is what we could have had under a different system.
I have an answer that I would like members to consider. The idea has some pedigree but has been suppressed for many years by landowning interests. The landed lobby has defeated the popular will to collect community-created values for the public purse, notably in the Crofting Act 1886, the 1912 people's budget of Lloyd George, which attempted to introduce LVT, Snowden's 1931 budget, the London Rating (Site Values) Bill that was proposed in 1939 by Herbert Morrison—who happened to be Peter Mandelson's grandfather—and the Town and Country Planning Act 1947.
This land-reforming Parliament, which is largely freed of the influence of the old guard of Scottish politics, has the opportunity and the obligation to consider and investigate land value taxation. The idea sits at the heart of global green thinking. For Scotland, it is an idea whose time has come. As Peter Gibb of Land Reform Scotland said in Saturday's issue of The Herald, by releasing the double bind of taxation on enterprise and the dead-weight losses that it induces,
"the introduction of land value taxation and the diminution of other taxes could see Scotland becoming the economic powerhouse of Europe."
The business columnist Antonia Swinson wrote in the New Statesman last year:
"the charm of a land tax is that, unlike other forms of taxation, it stimulates economic activity rather than dampening it."
A core part of the solution to Scotland's problems is the introduction of the fiscal measure that is known as land value taxation, as part of a deep and extensive transformation of our public revenue system. It would be a replacement rather than an additional tax. It would be no stealth tax.
Will the member explain how LVT will stimulate economic activity?
That will be explained.
Land value taxation would simply be a payment for benefit directly received. When the Jubilee underground line extension was built recently in London, the UK taxpayer coughed up the cost of £3 billion, but the direct advantages of the development were enjoyed by the city landowners along the route, whose sites had new-found amenity. The collective value of their sites rose by £13 billion. If we want new public infrastructure, is it not reasonable to use the fund that our developments create? The money that the land value tax generated could be fed back into the economy.
The land value tax would be an annual charge on the rental value of the land alone, excluding the value of buildings and other improvements. It would be levied on all land parcels—rural and urban, developed and undeveloped. Land that was held deliberately idle or underused would have no exemption. That is another answer to Alasdair Morgan's question. The economy would be stimulated because land that lay unused would be taxed, which would stimulate its owners to bring it back into use for the community. Valuation would be based on the optimum permitted use within planning and environmental constraints.
Land values are a measure of public demand for one location over another and are generated by the public at large—not by individual title holders. Therefore, they are a natural source of public revenue. Surges in property prices, such as those that are currently being seen in Edinburgh, are largely a site-value phenomenon; they have little to do with variations in the cost of buildings or developments per se. The resulting values must be used to benefit the community as a whole and must not go as windfalls into private pockets.
Land value taxation is an alternative way of raising public money. In spite of its name, it is a form of charging rather than a tax. It would bring all the efficiency benefits of charging without the inevitable disadvantages of taxation. The necessary corollary of the introduction of land value taxation would be the diminution of traditional taxation, which would act as another stimulation to economic activity.
The Parliament has the competence to introduce land value taxation as a reform of our local taxation system, including our council tax and business rates. The reform, although radical in its effect, would not be onerous in its implementation. It would require a revaluation based on bare land value alone without regard to improvements such as houses and buildings and other so-called improvements.
Given the nature of the bulk of that work, such a reform—with far less need for site visits—would be considerably easier and cheaper to instigate and maintain than the current, unpopular revaluation system, which is based on land and buildings. LVT would allow for easy, periodic valuations that could be undertaken annually, at less financial cost. It would have the happy secondary effect of avoiding upset to the public and business and so the political cost and fallout that presently attend such revaluations.
I have made what members may consider at first sight to be an outrageous case for the policy, but I commend it, with a view to increasing and promoting administrative efficiency in the Treasury and civil service, which would lead to better government, and greater ease of compliance, which would lead to a happier electorate. LVT would also: effect a step-change in the dynamism of the national economy, creating greater transparency about the social and environmental constraints and bringing a new-found enterprise to the people of Scotland; allow the physical regeneration of our built environment into places in which we wish to reside, not run from, using and not speculatively hoarding brownfield sites; avoid the spoiling of our natural environment with inappropriate developments; and—most fundamental of all—institute the reforms that would lead to profound social justice, environmental fruitfulness, cultural progress and democratic renewal.
I have the honour to move,
That the Parliament notes recent studies by the Scottish Executive and is interested in building on them by considering and investigating the contribution that land value taxation could make to the cultural, economic, environmental and democratic renaissance of Scotland.
I am sure that the chamber will join me in offering Mr Harper our sympathy on the recent loss of his father.
The proposal for land value taxation is interesting. It is a proposal for a change in the system of taxation, the effect of which might be to remove taxation from enterprise. I always thought that that was good Conservative policy, but I did not think that I would hear it from the Scottish Green Party.
It is certainly the case that we need a good dose of wealth creation in Scotland. We also need to recognise that, by creating tax, wealth creation makes our world go round. Because of that, I have difficulty understanding exactly how Mr Harper expects his tax to benefit the economy. My colleague, Alasdair Morgan, raised a similar point a couple of minutes ago.
We need to have opportunities for people to become less reliant on the state. We also need to fund public services in a clear manner. However, Mr Harper is a self-confessed socialist and an advocate of redistribution. I am not so sure that those philosophies sit with what he said this morning.
He made no mention of the ability to pay, which is something that Mr Harper and Mr Sheridan have often spoken about—no doubt we will hear more about that later. Mr Harper naively assumes that all land has a value before going on to say that that value is dictated by the marketplace—I always thought he was a protagonist of that concept.
The fact is that American cities such as Philadelphia are in the process of introducing LVT, the Russian federal Parliament is considering the introduction of a similar measure and Hong Kong has long benefited economically from the application of land rents to public expenditure. Does not that suggest that some of the fears that Mr Davidson expresses may be less than real?
The issue is not so much my fears as what Mr Harper is selling us. It is his job to tell us exactly how the scheme will work and how the exemptions will apply. If all pieces of land were to have an independent value, I could understand where Mr Harper is coming from, but he said that marketplace demand decides the value of land, which we all recognise.
The proposal also takes no account of the economic benefit to be gained from aggregating land parcels. For example, economies of scale would come into play on a larger farm where the land value was higher because of an aggregation. That issue does not seem to have been dealt with. What of the bogs, rocky areas and hilltops of Scotland? Would they have a value? What about someone on their own—a widow, for example—who has inherited a small house with a very large garden, which is next door to a very large house that has a lot of people living in it who are using public services but which has a very small garden? Is Robin Harper suggesting that the widow, on a low income, would have to pay a larger amount than the people in the house next door? What about tenement properties? Does he have an answer to how they would be dealt with?
The Philadelphia model is based on the redevelopment of city centres. I have some sympathy with the view that we should be seeking to reuse brownfield sites in the cities rather than take over greenbelt sites surrounding the cities. I also recognise the economies of scale that could be achieved by using the existing infrastructure, assuming that it is up to the required standards. However, surely all of that could be achieved if there were a better planning system. I hope that, when we reconsider the planning system—I am not sure that it will be in this year of the Parliament, but it is certainly an issue that the Parliament will address—we will consider carefully how we can reuse neglected sites.
The simplistic view that land measurement is easier than building valuation does not take account of people in relation to services. Land value taxation would also be a central tax that would take away all the accountability of local government. I am sure that Mr Harper has, in the past, talked about councils having more responsibility and more ability to do their own thing locally. That is certainly where the Conservatives are coming from. We believe in decentralising things so that councillors are made accountable. Perhaps Mr Harper would like to discuss that.
I am interested in Mr Davidson's current line of argument. Is he saying that the Conservatives now support the idea of returning control of business rates to local authorities?
I do not have to deal with that just now, as we are discussing Mr Harper's motion, but I would not support that. We would end up with an issue that the next debate, on Mr Sheridan's motion, will raise—the emigration of businesses for economic reasons away from areas of high taxation.
What about the cost of land value taxation to hospitals and councils? Would councils have to pay a large charge because they happen to have large burial grounds or large public parks and playing fields? What about school playing fields? We have not heard from Mr Harper any details of how the taxation would be applied, what sort of moneys would be produced, or how the money would be reallocated to provide local services. He suggests that we do away with income tax. Is it his intention that land value taxation should be the only form of taxation and that Scotland should be completely different from the rest of the UK—in some areas, having a very high level of taxation but receiving no economic benefit whatever? Nowhere in the world is there a model like those in the briefing paper on land reform that Mr Harper passed round by e-mail the other day, which are all variations on a theme.
Nonetheless, we are encouraged that people are prepared to consider alternative systems to produce effective and acceptable levels of taxation. One of the problems in Scotland is the fact that there are so many high taxes. Therefore, we do not write the proposal off; however, Mr Harper must come up with a detailed description of how the taxation would apply and what the transitional arrangements would be. It is not good enough for us to say, "It sounds terrific and will solve the problems of the world." It will not work like that.
Mr Harper must come to us with well worked-out details of how the policy would work, how arbitration would be brought into it, where the exemptions would lie, and how councils—indeed, anybody—would be held accountable for the money that they spent. It seems that all that Mr Harper and his colleague Mr Sheridan want to do is to invent a large system of taxation, which is run, and has its spending directed, from the centre. Mr Harper's proposal is worthy of discussion, but it would remove local accountability and would give more power to the state. My party does not want large government; we want small government, with local devolution of powers and decision making.
I move amendment S1M-3818, to leave out from "is" to end and insert:
"considers land value tax to be a punitive form of taxation which takes no account of existing taxation, profit or income streams and requires payment in respect of land regardless of an absence of income."
Before moving on to the debate, I associate myself with David Davidson's comments about Robin Harper's recent bereavement.
I acknowledge that Robin Harper makes his proposition today in the genuine way in which he generally makes propositions to the Parliament. I am grateful to him for spelling out in slightly more detail the thinking that lies behind land value taxation. I am also grateful to him for circulating the leaflet, "What is Land Value Taxation?", which I studied at some length in preparation for the debate. I have to say that it is an extremely illuminating document.
The document echoes some of the sentiments that David Davidson just expressed. In some of the propositions, there is a sense of naivety. I will come to that shortly. We could almost call LVT the Del Boy tax: "No income tax. No VAT." The problem is that there is also: "No money back. No guarantee." I hope to show that.
The land value taxation campaign makes it clear that LVT would replace all existing taxes, so it is a fundamental proposal that goes well beyond the competence of the Scottish Parliament. I note that Robin Harper's motion does not limit consideration of the matter to the areas that are within the competence of the Parliament, which are principally local taxation matters.
The motion is also rather unusual because it does not ask the Executive to do anything; it simply calls for the Parliament to consider and investigate the contribution that LVT can make. That is why we have not lodged an amendment; the matter is for Parliament to consider and to agree on what it does. However, I make it clear that the Executive has no plans to investigate the matter further. Indeed, we should note that the Parliament has already taken evidence and reported on the matter. As we all know, the Local Government Committee took considerable evidence on future tax systems during its inquiry into local government finance—which lasted more than a year—and that included evidence on LVT. The committee did not see sufficient merit in LVT to recommend it to the Executive or, indeed, to Parliament. Members must draw their own conclusions from that.
One of Scotland's quangos, the Scottish Valuation and Rating Council, also considered LVT. I quote its conclusion:
"The view of the council is that moving to a system of Land Value taxation would be unlikely to lead to sufficient benefit to merit such a wholesale change in the rating system."
Robin Harper might be glad to know that that quango has been abolished. Nonetheless, that was its particular recommendation.
I want to limit the Executive's contribution to the issues that Parliament might want to consider if it decides to consider the LVT matter further. There is an implication in what is said about LVT that it is somehow an almost perfect form of taxation. Of course, there is no perfect form of taxation. There are only systems that offer advantages relative to other systems. Factors that are important are the ease of administering the system; the achievable rate of collection; the certainty of yield; the ease of understanding the system; and the fairness of the system.
Across the world there are some systems of land value taxation, as Robin Harper indicated, but they are by no means universal. In the countries where they exist, they are responsible for collecting a smaller and smaller part of revenue. Land value taxation is unlikely to be a panacea; if it were, it would be universally used. However, property taxation is a virtually universal form of taxation, because it is stable, predictable and comparatively easy to administer and collect, and has a high degree of certainty of yield. Taken together with the benefits system, property taxation can be made more and more progressive. That is why its use is so widespread.
The proposal for LVT is based on rental value for every parcel of land, in the way that Robin Harper indicated. It would ignore the value of any buildings, roads, drains or crops on the land. Within the arena of local taxation in Scotland, instead of allocating a value to built property, we would allocate a value to each and every bit of land in Scotland. That value would reflect not just the current value, but the value according to the optimum use of the land within planning regulations.
I understand the economic theory that lies behind Robin Harper's thinking, but we need to be concerned with the practical effects of new forms of taxation, not just the economic theory. The advocates of land value taxation need to be clear about the practicalities, not just the theory. It is not clear whether the tax is viewed as a national or a local system of taxation. If it were national, with national decisions and national collection, what would that do to local discretion, local decision making and local democracy, other than to compromise it?
I was interested in the minister's point about the setting of national standards leading to a diminution of local democracy. How does that sit with the existence of the uniform business rate?
Notwithstanding the uniform business rate, local authorities have the power to set their council tax levels locally, which allows an element of discretion that a nationally set system would not allow.
If the land value tax were local, would there be different valuation principles between localities? Would there be scope for different tax rates locally? Would the tax be collected locally? Alternatively, would the system be a mix of local and national, with valuation principles being set nationally, tax rates being decided locally and collection being conducted locally? If that were the case, the system would resemble the current property tax system, so what would be the case for change?
What would happen to the current system of benefits that exist within the council tax system? Would those benefits disappear? How would that affect current recipients of council tax benefit? Would we lose the income that Scotland gets from the Treasury for that benefits system, which is some £300 million a year? If we lost that money, which is targeted at the poorest in Scotland, what would that do for social justice and efforts to support the poorest in our society?
What, too, of the single-person discount that is available in the current system, which is of particular benefit to the most elderly in our society? Would there be a single-person discount for land ownership under a land value tax system?
What would happen to the private rental market in Scotland? Would there not be pressure for rents to rise across all of Scotland to pass on the new tax burden to tenants?
Is the purpose of the proposal to yield more tax or exactly the same amount of revenue as at present? Whichever it is, how will the tax burden fall in future? Will it fall more heavily on the poor or on the more wealthy? Does Robin Harper know in any detail? What mitigating measures to offset the tax would be introduced to protect the weakest from any unintended consequences of how its burden fell?
What would happen to the many people across Scotland who live in areas where land values are rising dramatically, such as Edinburgh? What would happen to the group of home-owning and private-renting elderly people who live in my area of the city, in properties that are in the lower council tax bands but which are increasingly surrounded by new and higher value properties? Given that the advocates of land value tax believe that the value should be based not on the value of the property but on the optimal value of the land, presumably those elderly people would see their taxes rising dramatically. What would happen to them? The economic theory suggests that they would be forced to leave their homes and their city to move to lower valued properties in areas that have a lower land valuation.
Who would be the beneficiaries of such circumstances? Certainly not the elderly. Almost certainly, it would be the wealthiest, those with the capital and the property developers. How would that serve social justice?
What might be the effects in rural Scotland? The obvious effect is that agricultural land would be taxed, even if some argue that it would be at a low level. Would that be the case across rural Scotland? In many parts of my own part of Scotland, the Highlands and Islands, land values are inflated because comparatively few extremely wealthy people want large tracts of land for their pleasure and enjoyment. Would those people set the optimal value of the land in those areas? What would be the knock-on effect for crofters and tenant farmers in the area?
Also in rural Scotland, especially in the Highlands and Islands, there is the phenomenon of holiday homes, where property prices are inflated by rich city dwellers who seek a second home. Would they, in effect, set the optimal value of the underlying land as well? If that were to be the case, locals would find not only that local properties were outwith their reach, but that their taxes would rise.
That leads me to what is meant by the "optimal value" of land. Does it mean optimal in terms of the market value, the social value or the environmentally sustainable value of the land? Who would decide that? What might their view be and how might it vary over time?
Far from being a panacea, land value tax raises fundamental questions to which very few answers are yet available. In that sense, it is not yet a well-formed proposition. Before Parliament signals that it has any interest in considering the matter further, it would be wise to be clearer about the proposition and to have significantly more detail. Far from being a utopian future, for many it might be the beginning of a nightmare of considerable proportions.
I associate myself with the sentiments that my colleagues expressed on Robin Harper's recent bereavement.
I have no problem with Robin Harper's motion as it stands. No one should be in the least afraid of considering alternatives to the current taxation system. However, I must admit that I have not been greatly convinced by anything that I have heard in the debate so far.
Robin Harper began by talking about the world's environmental problems, our local environmental problems and the financial problems that we have in Scotland, such as the cost of education. He also talked about the need to remove the basic causes of social injustice. However, he did not make the connection between those remarks and the motion.
For example, Robin Harper talked about the Edinburgh property boom, but the point is that the value of somebody's property—or the land on which somebody's physical property stands—is only real when that person realises it. The owner may benefit at the moment—he can expect a higher rental for whatever property he has on his land—but he is already taxed through corporation tax if he is set up as a firm, or through income tax if he is taxed as a private individual. The benefit is already being taxed under the current system.
I am a bit concerned about what would happen to businesses that are sited near a proposed transport improvement. We do not exactly have the equivalent of the Jubilee line anywhere in Scotland—the way that things are going, I suspect that we will never have one. The Jubilee line effect would mean that if a business were sited near such a transport improvement, it would find that its tax bill would go up hugely once that transport improvement was put in place. However, there would be no need for that business's wealth and profits to increase as its prospects might not change at all because—
That is a convincing argument for the return of the uniform business rate.
I thought that we had a uniform business rate. Perhaps Mr Davidson is talking about a uniform business rate vis-à-vis Scotland and England.
Mr Davidson indicated agreement.
We will come to that later—the Executive has put up charges for Scottish business.
Under Robin Harper's proposals, there would be no link between the prospects and success of a business and the amount that it could be taxed. The presence of a transport improvement might force some small businesses out of the area in which they were located.
David Davidson mentioned the sensible use of land and the preference for greenfield sites over brownfield sites, but those matters also owe more to transport issues than to land value. I was struck by the problems that would arise—in addition to those that would face the businesses that I mentioned—when I considered the briefing paper that Robin Harper circulated. The proposed tax would not be in any way related to income, so how would the taxpayer find the money to pay his bill? He would probably have to sell the land that we would be taxing to do so. It is sometimes a feature of death duties that the asset must be sold to pay the tax, but I do not think that that is meant to be a feature of other taxation systems.
The paper criticises the current council tax banding system, which at least has the advantage over the old rating system that it is cheaper to administer. However, it is not clear to me how land value taxation would work unless it was also banded in some way. Otherwise, it would simply be a field day for the surveyors, who would go about valuing every parcel of land in Scotland.
The briefing paper discusses surges in property prices as a site-value phenomenon, which is probably correct: if the value increases, the tax increases. I return to my earlier point: the person who owns the land can benefit from it only if the value is realised when they sell the asset.
As far as my area is concerned, the proposals would affect agriculture significantly. Agricultural land is, quite rightly, not taxed. Given the current economic circumstances of most people who are engaged in the farming industry, I do not see how they could bear an extra tax based on the value of their land. Such a tax would close down large parts of Scotland, certainly as far as agriculture is concerned, and would force moves towards more housing developments on agricultural land.
Many people who live in country areas are on very low incomes compared with their neighbours in the cities, and land prices may well be increasing owing to the pressures created by people moving into those areas from outside. People move to country areas having realised the value of their assets in the hotspots where they have come from. They push up prices in rural areas, and the existing residents of those areas, who are already on low incomes, would be forced to pay higher taxes for no benefit to themselves.
I have a further criticism to make. Tax ideas are often simple when they are first put forward. The poll tax was meant to be a very simple idea: everybody paid the same amount. However, when the Conservatives tried to implement it, they found that they had to put in place so many caveats and exemptions that it became a nightmare to administer—even before they encountered the problem that a lot of people did not want to pay it anyway.
Income tax, which I think was introduced by William Pitt to pay for the Napoleonic war, was no doubt a very simple idea at the time, but let us consider how many volumes are needed to describe income tax law. How much is an income tax consultant paid to tell people what income tax actually means? Does the Chancellor of the Exchequer even understand it? Sometimes I wonder.
Land tax sounds just as simple on the surface but, in practice, it would prove just as complex once all the exemptions—or even only those suggested so far in the debate—had significantly complicated it.
The Conservative amendment talks about
"a punitive form of taxation".
I am not sure what the word "punitive" means in the Conservative context, but I suspect that, to the Conservatives, "punitive" means, "I pay it," while "fair" would mean, "Somebody else pays it." For the party of the poll tax to talk about another tax as "punitive" is a bit rich. I suspect that the Conservatives really hanker after the poll tax, however.
That takes me back to something I said about the poll tax in the House of Commons. During one of the early House of Commons debates on devolution—during a debate on the referendum, I think—I recall putting a question to Eric Forth, who has since found even more favour with the Tory front bench: he is now shadow Leader of the House of Commons and therefore his views have to be taken seriously. In that debate, he was wittering on about the benefits to Scotland of the union and about the situation then, with no devolved Parliament. I asked him whether he thought that one of the benefits of the union was
"that we got the poll tax a whole year earlier"
than England. The bold Mr Forth then referred to "the excellent poll tax" and said:
"I hope that we return to it in a different form in the future."—[Official Report, House of Commons, 31 July 1997; Vol 299, c 490.]
Perhaps Mr Davidson—or whichever Conservative member is summing up—could say whether that is still Conservative policy.
It may be fine to discuss what an ideal tax system might be in an ideal world, but this is the here and now, and I do not think that Scotland's problems have much to do with the type of taxation system. Rather, they are more to do with the fact that Scotland has no control over the taxation system and that Scotland's growth rate is miserable compared with that of the rest of the United Kingdom and Europe, which, in fiscal terms, we cannot do anything about. We need to be able to incentivise business through the tax system and to grow the income stream, not through higher tax rates but through a more buoyant economy. That is how we will deliver better-quality public services to the Scottish people.
The Liberal Democrats and Liberals have long had an interest in this subject. Lloyd George introduced various land taxes in his budget. I have with me a pamphlet from 1909 entitled, "The Budget, the Land and the People", which explains those taxes. Lloyd George was defeated on the issue by the massed forces of reaction, but his ideas are worth pursuing.
Our starting point is that society needs good public services, which must be paid for. The Government also has a duty to stimulate the economy, to help people to help themselves by developing businesses and so on. At issue is how to do so fairly and efficiently—in this context, how to tax people to achieve that.
The Parliament has powers over local government taxation, so I will stick to that issue. For many years, the Liberal Democrats have argued that the council tax—and, before that, the poll tax—should be replaced by a local income tax on individuals, as that is the fairest way of taxing people. No one likes to pay tax, but there is general acceptance that income tax, as opposed to cooked-up taxes such as the council tax, is a reasonably fair way of paying.
My intervention anticipates the next debate. Under the Liberal proposal for a local income tax, how much would someone who earns £20,000 a year pay?
We produced figures some time ago, but those will have to be changed. The calculation would depend on how much the council tax is producing at the moment and how much national income tax could be transferred to local authorities, to provide more local control of taxation. I cannot give the member a precise figure, but we accept absolutely the principle of a local income tax.
We have long been interested in land value taxation. We recognise that people can produce arguments against it, as speakers have done today. The way forward is to examine how the system works in other countries. Land value taxation works in countries and states as diverse as Denmark, Hong Kong, New South Wales and Pennsylvania. In the United Kingdom, two large English local authorities—Liverpool City Council and Oxfordshire County Council—are taking part in trials to determine how the system might work. The Scottish Executive should introduce trial schemes that would allow us to determine on paper how the system would work and how difficulties might be overcome. To explore all aspects of the system, trials should take place in part of one city, the whole of a town and an area of the countryside.
In the first instance, the system would be applied to commercial property. Robin Harper has set out the utopia of land value taxation, but in a cautious country such as Scotland we must introduce it gradually. From trial schemes, we could establish who would be the gainers and losers from land value taxation, and by how much. We would also see how the suggested practical difficulties of the system would manifest themselves in practice and how they might be overcome.
A number of serious commentators have suggested that we use land value taxation to help to pay for railway extensions. That proposal has been made not just by bleeding-heart liberals, but by people who are seriously involved in business in London, such as the ex-head of Wimpey Homes. They have pointed out how much people gain from railway developments and have argued that companies that gain from such developments should be taxed in some way. We should explore that suggestion.
The issue is not just about London, although we have an interest in those developments. There is a project to introduce a brand-new, high-speed railway from London and the channel tunnel to central Scotland, helping Glasgow and Edinburgh. That could be paid for, at least in part, by taxation from the companies that would benefit from it—they would make a contribution. More locally, we could explore how companies might contribute to paying for the Borders railway or the Bathgate-Airdrie railway, the proposals for which are being considered seriously. When I was involved in that side of City of Edinburgh Council's work, the Edinburgh park development—
Is the member seriously suggesting that we should increase tax on firms in the Borders to pay for the Borders railway?
I should not have let the member intervene, because Mr Gorrie is in his last minute.
It is reasonable that companies that would benefit should contribute. They should not pay for the whole project, but they should contribute. I am not talking about individuals, because they would pay in another way.
The better use of underdeveloped sites is an important part of land value taxation and our exploration of how the taxation system would work would develop that. The idea of land value taxation is worth serious consideration and gradual progress could be made through exploration. I do not think that we will have a sudden apocalyptic change, but the idea is important. I support it and I think that my party supports exploring it carefully.
We move to open debate. Four members want to speak and we start with Maureen Macmillan.
Thank you, Deputy Presiding Officer. I beg you pardon, Presiding Officer—that is me out.
I am aware that politicians of the utopian tendency have advocated land value taxation for a long time, but I have not taken it as a serious proposal. I have read the briefing that Robin Harper circulated, which gave examples of countries that have applied land value taxation to some degree. However, I was rather alarmed that the briefing described those instances as not being pure enough. I must say that I get very nervous when politicians talk about wanting a pure version of a policy, whether pure socialism, pure capitalism or pure environmentalism.
Until I heard the member's opening speech, I had not realised that the land value tax was to replace all other forms of taxation, such as income tax and VAT. How would we square that with our European obligations, given that it would replace inheritance tax, corporation tax and business rates? I believe that such a changeover would lead to a chaotic situation.
My other worry is that Robin Harper spoke in general terms, but I want to know the details of how individuals would be affected by such a tax regime. The idea might be beguiling for some, but would it work? Would a long single-storey shed be taxed more heavily than would a six-storey office block, because it took up more land space? Would a farmer's byre be taxed more than would his house?
How would LVT deal with the situation that Peter Peacock mentioned, in which city folks inflate values in rural areas when they buy a second home? How would the empty family croft house, often retained for holidays by the second generation, be distinguished from a second home? What would be the impact on communities wishing to purchase from the estate the land on which they live as a result of the Land Reform (Scotland) Bill, which we recently passed? How would an old-age pensioner in a small Highland village be affected if she were surrounded by well-heeled retirees from Edinburgh who push up land values? Would her taxes increase to match theirs? How would we give rebates? If there were no income tax, would not very rich people occupy small areas of land to dodge their social responsibilities?
Land value taxation is not a new idea. Think of the border keep—the six-storey house with one room on each floor. Would we see a return to castles being built all over Scotland as people tried to dodge their tax obligations?
That would be a case of towering taxation.
The member had better watch out—the Presiding Officer lives in one.
I have already insulted the Presiding Officer—albeit inadvertently—earlier in my speech.
People may laugh, but Scottish keeps and tower houses might make a comeback. That might be a good thing—architecturally speaking, we might welcome it. However, we would find that the state coffers would soon be empty.
If there were no income tax, what would happen to the tax credits that are paid to families—and will soon be paid to pensioners—through the income tax system? Would only those who own the land pay LVT or would those who rent it pay too? Most important, what social and economic upheaval would such a total restructuring cause? One would have to be very sure that the resulting chaos would lead to social justice and I am not convinced that it would.
What would the new tax yield? How would it interact with the benefits system? Would it be sufficient to support all the services that are supported by the present taxation regime, such as child benefit, support for projects for the homeless, subsidies for lifeline ferry services and railways, road building, schools, hospitals and women's refuges? Would schools and hospitals, which take up a lot of space, be exempted from a land value tax?
An article in Land and Liberty suggests that LVT would be an answer to urban blight. It is interesting that it mentions lowering the tax burden. If the tax burden were lowered, there would be less money to spend on social objectives; only those who had money to spend on their properties would be rewarded. Hong Kong has been cited in reference to LVT, but it is hardly an example of a socially just society.
Rural blight is another issue that arises. The case for LVT in rural areas has not been made. For example, it would favour the vast estates of empty land on which the huge mansion would provide only a peppercorn tax, rather than the communities that sought to regenerate after exercising their right to buy. How would one value the Cuillins?
I would need a great deal of convincing to support such a sweeping change that might penalise the very people who need our support and might not raise nearly enough revenue to carry out badly needed social programmes.
It will come as no surprise to Robin Harper and others to hear that the Conservative party in Scotland does not support the motion. It is also unsurprising that we are against land value taxation and can see little or no benefit in further taxing landowners, regardless of how beneficial the expenditure of the resulting tax revenue might be.
Although all Governments aspire to being able to tax people and to please them at the same time, that is not easy to do. Land value taxation would not be welcome in Scotland as an additional tax or as a substitute for the council tax, as it would remove public accountability for local taxation.
Members will be pleased to hear that my speech doubles up as the Conservative winding-up speech. As David Davidson said, we do not view land value taxation as a way of delivering public finance for social and environmental justice or for regeneration. As Peter Peacock said, there is nowhere in the world where a land value tax works. Alasdair Morgan also expressed great scepticism about the tax.
Given our existing tax burden, which has increased by £1,961 per head since 1997, this is not the time to consider the introduction of another system of taxation. Maureen Macmillan raised significant doubts about the practicalities of implementation.
The existing system of taxation should be used to deliver social and environmental justice. Like Donald Gorrie, we believe that individuals and businesses should be encouraged to set up new ventures to create jobs and wealth, which could be taxed more than adequately under existing systems. The creation of a society in which dependence on the state is discouraged, in which choice is not only promoted but available, and in which a sense of self-belief and self-worth is encouraged would do more for social justice in the long term than would the creation of a resigned dependence on state intervention and support.
We need to move on, where and as we can, from the dependency culture that exists in Scotland. Our devolved Parliament ought to be a symbol of how we can establish a belief in ourselves as Scots. The Parliament will continue to allow us to create legislation that reflects the political mood of the time.
The Parliament should deliver social and environmental justice not by redistributing Scotland's existing wealth but by giving people belief in themselves. Our Parliament should seek to foster in people the terrific can-do attitude that is so wonderfully evident in exiled Scots across the world. That can-do attitude is not just a Tory aspiration but a spirit-lifting objective, which should be metaphorically tattooed on every native Scot's forehead at birth. Scots elsewhere in the world are not genetically different from us. Rather, the environment in which they live brings out a belief in their own value and self-worth. That ability to take on and accomplish any task sets Scots abroad apart from Scots at home.
Creating the right fiscal and financial climate to encourage the best facets of the Scottish character is surely more worth while than talk—however well intentioned—of yet more tax and redistribution. For those reasons, I will not support Robin Harper's motion. I urge members to support the Conservative amendment.
Until John Scott's speech, the statement in the debate with which I found most accord was Peter Peacock's assertion that there is no perfect system of taxation. He is absolutely right on that issue—I am glad that the minister sees the truth.
However, we should not stop there and—thank goodness—John Scott did not. He made a fantastic nationalist speech about the inherent dignity of Scots and, I think, their inherent genetic superiority. He waxed lyrical about how well we have done in other parts of the world that have excellent fiscal systems to support all that entrepreneurialism.
All Robin Harper's motion asks for is the imaginative blue-sky thinking that John Scott outlined—I see Robin Harper nodding—which is absolutely terrific. The motion simply asks the Executive to investigate land value taxation.
Although I hate to say this, Maureen Macmillan's speech, which outlined all the possible downsides of such a tax, made me quite sad. The Parliament was supposed to take time to investigate new ideas and new ways of doing things. Just because we have not done something in the past does not mean to say that we cannot do it in the future. We should not be so negative in our approach to this new system of taxation.
Contrary to the Tories' fears, land value taxation does not necessarily mean that Tory supporters—there must be some to whom the tax would apply—would be required to pay more tax. Land value taxation would mean that people would pay taxation in a different, fairer way. That is why I think it is a great idea that the Executive should investigate the proposal.
To be quite serious, we have got to the stage where Scotland's universities are under fantastic threat because of the way in which our tax system and social service delivery are interlinked. We seem no longer to be able to ensure that money is spent on providing for the next generation the quality, standard and equity in public services that should be taken for granted at this stage of the 21st century.
It would be worth while to investigate a system that promises to redistribute more fairly. I make no apologies for saying that. My former colleague, Alasdair Morgan, said that there is not much wrong with Scotland's system of taxation, but that the problem is that Scotland has no fundamental control over it. He is right in the latter statement, but quite wrong in the former. When people live in abject poverty in blankets on Princes Street while other folk live off the fat of the land and do not pay the income tax that they should, there is something wrong with our tax system.
Therefore, I support Robin Harper's motion. The Executive should look into the future to see if there is any other way in which we could prevent land values from being distorted. In rural parts of Scotland, such distortion can discriminate against people and cause fantastic rural poverty, but the issue is equally important in a city such as Edinburgh, where land values can mean that house prices and property prices are utterly distorted. In turn, that means that a community or a society can be distorted because there is not that mixture of people to form a community in which, theoretically, people would help one another. I would like to see anything that would investigate an evening-out of land values in Edinburgh in particular. That is why I want members to support Robin Harper's motion.
I also support the Liberal Democrats' reasonable proposal that there should be trials. As one would expect, Donald Gorrie outlined the reasonable man's way of trialling: perhaps in a whole district, a part of a city or a rural area. That is very sensible, good thinking.
Of course there would have to be variations in the application of LVT. Robin Harper said that there were variations in how the principle was applied throughout the world—and why not? There are different conditions throughout the world. Events, dear boy, change people's priorities, and so they should. The Parliament must not sit on its laurels and get dug into a taxation system simply because it has been used for a long time. For goodness' sake, let us think about alternatives. As Peter Peacock said, we do not have a perfect system.
The last thing that the Parliament should do is sit on its laurels.
My problem with this debate is that I am not sure that Robin Harper has made the case for land value taxation. He made the case for a renewed effort to develop inner-city areas and to tackle derelict land in rural areas. However, I am a bit sceptical that his proposal for moving things forward is the right one.
The pamphlet that was circulated before the debate says that it would be easy to change the current system. The suggestion is that all we have to do is get surveyors to look at maps. Values could then be established and that would be it—very straightforward.
I am suspicious of anything that is portrayed as being simple. Taxation is one of the most complex matters that individuals or parliaments have to deal with. A strong case has to be made for change. Robin Harper raised some interesting questions and I am glad that he chose this subject for the debate—we should be thinking about and debating such ideas. However, I am not convinced by the case that he made.
The thought of moving to a simple form of taxation fills me with horror, especially when I consider the history of innovative taxation. Alasdair Morgan mentioned the poll tax. That was a simple tax, which the Tories would love us to go back to. However, it caused huge social justice problems, which are still filtering through today—people are not registering to vote because they are worried that they will be picked out.
Will the member take an intervention?
No, thank you.
Attempts have been made to make some taxes greener. Since 1997, the Labour Government has been considering more equitable company car taxation and fuel taxation, for example. Those taxes are very easy but very controversial, as every member knows. We need to think about a range of taxes.
In his summation, I would like Robin Harper to say how land tax would impact on people in my constituency, which is located in a city centre. Margo MacDonald talked about developments in Edinburgh. When I was a student in Edinburgh in the mid-1980s, we had a great opportunity to study a series of vacant sites in the city. We went to them for practice as town planners and we came up with ideas and new visions on how the city could be developed. The Tollcross triangle now has good-quality flats and a superb set of offices and shops. The hole in the ground is now Saltire Court, which is a superb legal and financial centre. The Morrison Street car park is the last of the big sites in Edinburgh and is now going to be developed into a range of offices and shops.
Would land value tax have brought an instant solution to the development of those sites? I do not think so. The social and economic changes that have taken place are complex. There is a need for partnership. The Edinburgh Labour council has worked hard with the business community to bring about development on all those sites. I do not believe that flicking the switch from property and business tax to land value tax would have made that task any easier. Some of the developments that I now see in my constituency, such as hospitals, might have been made more difficult.
I think about people who are living in areas such as Dumbiedykes, which is right in the city centre, beside the new Parliament building. The value of land there must be astronomical. How could people who are on lower incomes or benefits pay if land value were taken into account? The amenities in the area are not good and property values have changed. If we want to levy a land value tax rather than a property tax, we must be able to answer such questions. I would be worried about people on low incomes and pensioners in my constituency if a tax were introduced that is portrayed as simple but would have real social justice implications.
I am glad that Robin Harper has raised the issue today, but we should consider other good forms of taxation. His motion rightly talks about a social, cultural and economic renaissance. The hard work that is going on in some of our big cities in Scotland is beginning to bring that about. In the case of Glasgow, the issue is not only land or property values, but giving people skills, rebuilding communities, injecting confidence, creating jobs and ensuring that there is affordable housing. Dundee is a great example of investment in the arts. There, a per-cent-for-art scheme was introduced, in which new developments were invited to contribute voluntarily to the arts in the area. The city centre of Dundee has been revolutionised in the past few years because such imaginative, broad approaches have been taken.
Let us look at taxation and how we can improve it, but let us not pretend that there is a simple solution. Hard work is required, including a range of policy initiatives and partnerships, such as those between the business community and the local councils. Local communities will have to be involved in deciding how their area should change. Imaginative ideas such as the planning-for-real initiative will bring communities into play and let them take part in the renewal of their areas.
We do not want a simple approach. We had the poll tax and it was a disaster. Not only was it not thought through, but it was socially unjust. The point is that taxes have to work not just in economic terms; we have to think through their political and environmental implications. Indeed, I know that Robin Harper would be keen to see the latter issue taken forward.
I am glad that we have been able to debate some of these complex issues this morning. However, we must not forget about the problems of social and urban deprivation, which a land value tax would not sort out at the flick of a switch.
Maureen Macmillan mentioned utopia. Indeed, discussing land value taxation in a national Parliament might be part of a Liberal Democrat utopia. Perhaps devolution is worth while for that opportunity alone.
However, for a Liberal Democrat, I am a bit of a heretic on land value taxation and I am not as enthusiastic as my colleague Donald Gorrie is about it. In theory, it is a beneficial form of taxation that is worthy of further investigation. That said, I have some concerns about the practicalities of its operation, as I shall explain.
I am somewhat surprised by the Conservatives' attitude to the land value tax. I know that they are against funding public services through taxation, but I am surprised that they are against replacing our current form of taxation, which discourages enterprise, with a form of taxation that encourages it. For example, if we replaced business rates with a land value tax and perhaps reduced national insurance contributions, we could reduce tax on labour, building, machinery and plant, which would represent the very investment in enterprise that the Conservatives tell us the current taxation systems discourage. As a land value system taxes the use of land, not investment in that land, it encourages enterprise, so I am surprised that the Conservatives think it punitive.
Land value taxation essentially encourages the best use of land. It represents an incentive to invest in land, whereas the current taxation system often acts as a disincentive in that respect. Furthermore, it allows the public to tap into the increase in the value of land from investment in public services. The system is based on market rents, so if the development of a new railway system increases those rents, why should the public purse not make any gain on that public investment? The Edinburgh-based E-Rail group has estimated that it would be possible to raise the £25 million that is needed to restore the old south suburban railway purely from the rising value of rents on adjoining land. Moreover, New Edinburgh Ltd recently announced that it would contribute £1.5 million to the new Edinburgh Park station, in recognition that such a development would increase rents and land values.
People misunderstand land value taxation in that respect. They fail to understand that, just because it taps into increased rents, that does not mean that someone will be punished if they happen to own land that is next to a development. They would be making a contribution because they had gained from increased rent or increased land value. The system also encourages better use of land by encouraging people to use brownfield sites rather than greenfield sites, although that gives rise to some practical difficulties.
As has been highlighted in the debate, we are not clear whether Robin Harper is talking about local or national use of land value taxation and whether he thinks that it should be used for domestic or non-domestic purposes. Those important issues must be resolved.
Even if the proposed tax were to replace non-domestic rates as a local taxation and its introduction were revenue neutral, there would still be practical difficulties. There would be losers and gainers as there inevitably are in any change of system. That could cause difficulties in competitiveness for firms that happen to be in areas with high land values, such as Edinburgh, rather than in parts of Fife, for example, where land values are lower.
The system might operate well in industrial and commercial central Scotland, but it might not work as well in rural Scotland, as Maureen Macmillan said. That is the position taken by the Scottish Liberal Democrats—although we recognise the value of LVT, we are concerned that it would not work in parts of Scotland, particularly in rural areas.
I find the Conservative amendment bizarre in its language. I am surprised that David Davidson is so keen on taxation according to the ability to pay—if that is the case, he should support the Liberal Democrats' local income tax, which is also based on ability to pay. However, the Conservative party introduces taxes regardless of ability to pay. Council tax is not about ability to pay and business rates are not about ability to pay. Similarly, the poll tax was not about ability to pay, nor was doubling VAT, which the Conservatives did while they were in office. They also increased prescription charges, eye and dental check-up charges and student loans, all of which have nothing to do with ability to pay. The Tories want to abolish taxes and introduce charges for everything. They are against pubic services and they are against local control of public services. Given that the Conservatives centralised local taxes in the unified business rate, it is absolutely absurd for them to suggest that they are in favour of more local control of taxation.
I thank Robin Harper for giving us the opportunity to have a debate on a different form of taxation. From the broad nature of the motion, I assume that he is happy for us to debate the general issues. For that reason, the SNP will support Mr Harper at decision time.
I say to Margo MacDonald that Alasdair Morgan did not suggest that all was well with the current taxation system. In fact, he offered a number of solutions to stimulate business and the economy in Scotland, which would naturally drive up the income stream to the Government and bring about greater social justice.
The member should concede that Alasdair Morgan did not say how he would redistribute wealth via the taxation system from those who have too much to those who do not have enough.
This is not the time for a debate on how redistribution should be achieved. However, as Margo MacDonald knows well, the SNP's unchanged position is that it favours a reduction in indirect taxes, which are regressive, and a move towards a more progressive taxation system.
I was most interested to hear the Liberal Democrats' attack on the Tories. That attack was sound, as the Tories favour taxation across the board and not at all related to people's ability to pay. Of course, the Liberal Democrats, with the Labour party, introduced a new tax in this session of Parliament. It was called a graduate endowment, but in reality it is a tax and it is certainly of doubtful beneficial value.
Would Brian Adam say to those students who are now getting £2,000 a year as a maintenance grant that the £2,000 graduate endowment at the end is not beneficial to them? They get £8,000 over four years and have to pay £2,000 back. Is that not beneficial?
That affects a small number of students and is in direct contravention of the Liberal Democrats' policy prior to the election, which was to scrap the tax rather than introduce it by the back door and give it a fancy name. "Endowment" is a total misnomer. In terms of the misuse of language, it is almost as good as some of the phrases in the Labour lexicon of lies. It suggests that, somehow or other, the opportunity to pay a further £2,000 in taxes is a gift from the Government, when students had been promised before the election that they would not have to pay any at all.
Let us move back to the subject of this morning's debate. People have rightly raised concerns about the proposals. There are no details and there are genuine concerns about whether what is, in effect, a tax on capital will stimulate economic growth. The example of the Jubilee line was given and the idea was suggested that people could be taxed on speculative gains when they have made no direct contribution. There may be some value in considering that, but Alasdair Morgan's example of the Borders railway was a good one. We do not want to punish those folk who might benefit from improvements in transport infrastructure and who might generate new business activity because they believe that those improvements will be made. That would put a brake on something that we want to happen. We welcome the debate and will support Robin Harper at 5 o'clock.
I have found the debate enjoyable, interesting and useful, which I cannot always say about finance debates in the Parliament. However, very few of the questions that I posed at the beginning of the debate have been answered by anything that has been said. In fact, the number of questions has risen considerably, particularly given the speeches made by Maureen Macmillan and Alasdair Morgan. I hope that Robin Harper will not attempt to answer all those questions—if he did, we would have to extend the debate by a considerable margin. However, those questions are a measure of the challenge for Robin Harper and those who advocate a land value tax. Much firmer propositions must be made before such a tax can be considered at any point in the future.
Donald Gorrie and Margo MacDonald suggested that we could experiment with a land value tax in parts of Scotland. That would be a rash idea and we could not support it. One of the theories that lies behind the tax is that it is not really a local tax, but must apply across an entire economy. To isolate certain geographical pockets would be damaging and would not give results that showed how the tax would work in a bigger locus.
Donald Gorrie also suggested that we could conduct such an exercise to find out who was better off and who was worse off. If someone is part of an experiment and ends up worse off as a result when other people are not being experimented on, that can be extremely damaging for society. We had that situation with the poll tax under the Tories, when Scotland was the bed of experimentation. I would counsel strongly against such an approach.
I obviously failed to make clear what I was suggesting. I was proposing that there should be a trial on paper and that ministers should then decide whether the scheme would go ahead. They could analyse the pluses and the minuses of how the system might work and the alleged failures of the tax could be addressed before pilot schemes were embarked on. I am not suggesting that we go from here into actual pilot schemes in which people would pay money.
I am grateful to Donald Gorrie for clarifying that, as that was not my impression of what he said. That now stands on the record.
As someone who, in a previous life as finance convener of a big regional council, was responsible for having to implement the poll tax under the Tories and then dismantle it just a few years later, I recognise the point that Sarah Boyack made. Disrupting the administration of any kind of taxation system also disrupts cash flows. Moreover, a new system changes where the burden falls on society. Huge consequences flow from any fundamental tax change and none of them is trivial. Before we enter into any fundamental tax reform, we would have to be absolutely satisfied of the consequences.
That is to say nothing of the sheer costs involved. The cost of initiating the tax that Robin Harper proposes would be considerable. We know from experience with the rating system that the cost of the annual revaluation would also be very big. The system would be bureaucratically cumbersome and bring about huge uncertainties with regard to the yield.
It is a rich irony that the Scottish Green Party is proposing the introduction of a tax on or increased rents for organic farmers. On the one hand, Robin Harper is promoting their interests through his Organic Farming Targets (Scotland) Bill, yet on the other hand his is the first party to seek to tax them under his optimal use of land proposals. It is also a rich irony that the Scottish Green Party is proposing a tax, for the first time, on our sites of special scientific interest, our Ramsar sites, our special areas of conservation and our nature reserves.
Is not it ironic that the Scottish Green Party is seeking to impose new taxes on the conservation organisations, which are among the new land-owning classes in Scotland? The party would impose taxes on such notable bodies as the John Muir Trust, the Scottish Wildlife Trust, the Woodland Trust and RSPB Scotland, among others. Only a week after the Parliament passed the Land Reform (Scotland) Bill, which Maureen Macmillan alluded to, the Scottish Green Party is proposing to tax the very land that we have liberated crofters and communities to buy. I find that all deeply ironic.
As I have said, before Parliament takes the issue of land value taxation any further forward, the nature of the proposition needs to be much clearer. We need to hear the answers to the many complex questions that have been put today on taxation in the form that Robin Harper has proposed. In the spirit of giving Robin Harper more time to conclude than he might otherwise have had, I will be happy to conclude on that point.
Thank you. That is helpful. We are a little behind time, because of late arrivals to the debate.
We are not quite at you yet, I am afraid, Mr Harper, because David Davidson has a couple of minutes to wind up for the Tories.
The reason why I used the word "punitive" has just been highlighted again by Peter Peacock. If the tax were introduced, rural Scotland would virtually close down, unless there were massive exemptions, which would detract completely from the principle that Robin Harper set out. I said earlier that I felt that Robin Harper had not brought the issue to the point of refinement at which it was worthy of debate. I did not say that we should never debate changes in taxation, but I believe that any such changes have to be thoroughly worked out before we contemplate implementing them. Peter Peacock reminded me that the transition costs of moving from one tax system to another are enormous.
I was a little amused by Donald Gorrie's proposal that the people in the Borders—in whom I thought the Liberals had an interest—will have to pay extra for any benefit that they get out of the new railway line. He will obviously have to face the consequences of that at the ballot box.
I was also a little amused by the rest of the Liberal contribution. I am not sure whether parliamentary vocabulary allows the word "drivel" to be used, but that is exactly what Liberal members' speeches sounded like. The poll tax and Eric Forth were mentioned. Eric Forth is not seeking to come to the Scottish Parliament, members may be relieved to hear. In any event, we introduced the council tax in 1993. It has lots of fair aspects, but one of its worst aspects is the failure of councils to collect the money.
Name them.
There are also lots of exemptions. No doubt Mr Rumbles knows that.
Will the member give way?
I am sorry, but I do not think that I have time.
I stand by my amendment. Although the tax may have merit in classical and academic terms, it does not seem worthy of discussion at this time. If anything, it would be a punitive tax on people who do not have the ability to pay. For example, if there is no income stream in farming, how on earth would farmers pay such a huge tax? I mentioned the widow in the small house with a large garden and Maureen Macmillan mentioned Aikwood Tower. I stand by my amendment and seek support for it.
It is your turn now, Mr Harper.
I have in my hand a paper by James Howard Kunstler called "A Mercifully Brief Chapter on a Frightening, Tedious But Important Subject"—land value taxation. I hope that I have not frightened the lieges too much by calling the debate, which I have not found tedious. I hope that I have persuaded members that land value taxation is worthy of further discussion.
I cannot give Colbert's words in the original French, because I forgot to look them up, but he said that the art of taxation is the art of plucking the live goose without being bitten. All sorts of worries have been expressed about how land value tax would bite. The case of the poor little old lady who is left alone in the big family house has been described twice. Two main options are available for dealing with that situation. Society or a local authority that made up its mind how to introduce land value taxation could take the democratic decision that land occupiers in such circumstances could be exempt. Of course, that approach would be problematic.
The other option is the correct one. A scheme could be available under which the annual tax that was due was amortised by the local authority and collected on the disposal of the property or estate. That would ensure that rightful payment was made eventually for the property benefits that were directly received because of increasing community-created land values, without inconveniencing the owner or visiting injustice on her heirs. If the land value tax were not collected on that property, the remainder of the community would have to pay for the land value increases that the woman and her heirs enjoyed. Would that be fair?
My friend, colleague and adversary this morning, David Davidson, called me a socialist, which I am not. The socialist is Tommy Sheridan. I am a Green. I make that distinction clear.
Is Robin Harper a green socialist?
Some people describe themselves as green socialists.
Peter Peacock said that annual revaluations would be horrendously expensive. They would not be. They would be considerably cheaper and easier than revaluations under the present system and they could be undertaken annually.
I thank Maureen Macmillan for all her questions and I thank members for all the questions that they asked. I shall study the debate in the next months—I might have to leave that until after the election—and I hope to return to the chamber to answer as many of the questions as I can. Maureen Macmillan compared a big shed with a block of flats. If having a long shed in the middle of the community were in that community's interest, that piece of land would be site-value rated.
One theory of land value taxation is that the community should define the taxation level. The fear has been expressed that the introduction of LVT would mean taxes on organic farms and sites of special scientific interest. That is not how LVT works. We could say that land for organic farming would attract even less tax than land for conventional farming would. That is how LVT can be used to encourage positive land uses.
Does the member appreciate that LVT would mean taxation for the first time on organic farms and sites of special scientific interest, notwithstanding the rating?
I contend that they would be zero rated.
How would agricultural interests pay the tax? Would the member expect any agricultural activity to attract tax?
At the moment, the answer is no. It would be rather bizarre for the subsidy that is handed out to agriculture at present to be drawn back into the coffers through land value taxation.
Land value taxation is used in countries around the world, including South Korea, Denmark, Ukraine, Estonia, Hong Kong, Finland, Canada, the United States of America—including Alaska—and Jamaica. If all those countries are using various kinds of land value taxation in various cities and in various ways, surely the system is worthy of the Scottish Parliament's consideration.
There must be a benefit to Scotland of our considering some level and some kind of land value taxation. We have the powers to address the matter and we should take the opportunity to do so. The purpose behind my motion is to ask the Parliament to continue to discuss land value taxation.
Thank you. We are almost on time again.