This week the Renegade Economists radio show celebrated ten years on the 3CR airwaves. Much of the show was based on the following. Have a listen:
Reverberations from Phillip Anderson’s presentation to the 126th Annual Henry George Dinner are still being felt.
Phillip revealed that the Queen, as Sovereign of the UK, pays a significant land rent to the UK Treasury. The Queen’s property company is called the Crown Estate but it is not part of the Queen’s private wealth as it always passes from one sovereign to the next. The Crown Estate:
delivered a record of £328.8 million to the Treasury last year, up 8.1 per cent on 2015. In the past decade it has returned more than £2.6 billion to the exchequer.
The Queen receives a Sovereign Grant (£42.8m last year) from those £328.8m in land rents paid to government. Every five years the grant repayment rate is reviewed with percentages varying from the current 15% to 25% in 1919 to meet the extra cost of modernizing Buckingham Palace.
News media tends to focus its lens on the size of these sovereign grants.
More attention should be spent on the leadership the Queen demonstrates by paying land rents. Let’s take a look at the numbers.
The Crown Estate’s capital valuation is currently £13.1 billion. In order to deduce the percentage of her holdings paid as land rent, we need to estimate the land component of the Queen’s estate. Land typically accounts for some 70% of mortgages. With many of the Queens most valuable sites commercial property, we conservatively apply a 60% land value ratio to her total holdings.
That equates to a land value of £7.86 billion.
The intriguing question for Georgists is to calculate the Queen’s effective land rent rate. We can do that by dividing £7.86bn by £328.8m to find a 4.2% repayment rate.
Let us reiterate that. The Queen pays an effective land rent of 4.2% on the value of her land holdings.
This is an important leadership signal. The Queen recognises that her land rents are partly created by the public. If nobody lived in England, what would the value of land be? Very little. If everyone moved back, the price of location, location would skyrocket.
The land holder does very little for the naturally rising value of location, location. Any such increase is known as an unearned income.
An economic measure to recognise this relationship between location and land price is to repay some of that rising value to the community, via government. This adds a layer of integrity to the right to claim some of the earth as ‘one’s own’. The Queen demonstrates this in repaying 4.2% of the £7.86 billion in land values back to the UK Treasury.
If land holders in Australia were to follow the monarch’s lead, the Australian ‘fair go mate’ mantra could be answered with conviction.
We are one of the only nations on the planet that still has a government mandated land valuation system. Most nations are willing to go to war to defend their land, but very few make an economic distinction between land values and the buildings that sit upon them. Such conflations are economically dysfunctional.
The ABS’s System of National Accounts reveals that land values across residential, commercial, rural and ‘other’ equated to $5.105 trillion in 2015-16.
If we apply the Queen’s 4.2% land rent to $5.105 trillion, land holders would contribute some $213.55 billion in potential revenue to government.
In 2015 -16, Australian land prices increased by $258 billion. These gains were literally equivalent to income taxes AND company taxes of $265 billion (15-16).
As Georgists we advocate for a tax shift away from taxes on productive activities and onto the unearned incomes that today’s frenzied land bonanza exhibits.
If Australian land holders followed the Queen’s lead to repay government for the services provided to their particular location, the $213 billion in potential revenues would account for 80% of all taxes on labour and capital.
Imagine the spur to small business, job growth and wages if we could remove 80% of the taxes on labour and capital?
For those staunch royalists with multi-generational land holding families, we challenge you to repay 4.2% of your land values back to government. With some effective lobbying, we expect Treasury would in return refund all income, company, sales and any other of the 122 taxes you pay.
Join our chariot as we race towards a future where, like the Queen, we recognise the immense privilege land ownership embodies and how we should all recompense government for the right to place a fence around a piece of the planet.