Environment minister Greg Hunt’s new ‘value capture’ language
Environment minister Greg Hunt, on behalf of the Turnbull government, is offering new language about ‘value capture’ – a fresh way to fund infrastructure using the uplift in land values from civic investment.
“Mr Hunt will warn that the public purse cannot fund the infrastructure needed to keep up with rapid growth in capital cities, and will point to flexible financial arrangements being considered by the government.
“These include “value capture” – finance models that aim to capture the gain in land value that property owners enjoy when public infrastructure is built nearby.
It can include property taxes, parking levies or giving property development rights to transport operators.
“One of the fairest ways to fund new infrastructure investment is for the beneficiaries of that infrastructure to contribute to the cost,” Mr Hunt will say.
And he means every word of it.
Take note of the explicit direction ‘beneficiaries’ of investment should pay. Until recently the Liberals spoke of ‘user pays’. What’s the difference? In the latter, the baker pays for the road to deliver his bread, in the former, the landowner does.
Greg’s dad Alan Hunt was Victorian planning minister and member of the Legislative Council for 31 years. He was committed to land tax and the removal of taxes that cause harm, which Greg would know very well.
Delivering the Inaugural Alan Hunt Oration to the Urban Development Institute of Australia in March 2014, Greg said:
“Moreover we are seeing in the US and the UK, new financing models for other forms of urban renewal. Both the UDIA and the Property Council have proposed New City Deals using what is known as incremental tax financing.
“This is not about the Commonwealth paying out funds in advance. It is about a deal where an initial state investment to regenerate a degraded urban area is then followed by an uplift in economic growth and an agreed proportion of the additional Commonwealth revenue is returned to the State.
Comparing the two statements reveals just how far Liberal Party thinking has moved. The Liberals are cautious creatures who test everything, and we can be sure the language has been market researched for appeal.
Australia funds infrastructure investment from Consolidated Revenue, overwhelmingly sourced from labour taxes. Infrastructure that shrinks distance and improved amenity lifts land prices. So homeowners roughly break even, the landless lose badly as the improved amenity lifts land prices and rents, and rentiers make an low-tax/no-tax killing.
A neat transfer of wealth; shocking economics.
Political tea leaf readers see the Liberal Party as a coalition of conservatives and liberals (Greg and Malcolm Turnbull are liberals). It could with equal accuracy be describes as a coalition of capitalists and rentiers. The ideas behind ‘value capture’ neatly divide the interests of these two groups: capital abhors waste and mal-investment; rent-seekers forment it.
We look forward with interest to Greg Hunt’s next public foray.