The comedian and TV presenter Griff Rhys Jones is reported today to be ready to quit the UK in protest at plans by the Labour Party to introduce a mansion tax if it wins the 2015 General Election. As the Telegraph reports,

He himself lives in a “gigantic” house in a part of central London that was, when he bought it 15 years ago, a “slum”. He has a track record of buying large, run-down properties and turning them into homes for himself and his wife, Jo. His Fitzrovia house has appreciated so significantly that he is contemplating moving overseas if Labour win the election and introduce a mansion tax.

“It would mean I’d be paying the most colossal tax, which is obviously aimed at foreigners who have apparently come in and bought up all the property in London,” he says. “That sounds about as fatuous an idea as that immigrants are stealing all the jobs. I’d probably go and live abroad because I could get some massive palace which I could restore there.”

There has been a lot of nonsense talked about the mansion tax. This, from the Chief Executive of Legal & General, is typical.

“People who choose to prioritise buying a home have typically made sacrifices to do so: fewer foreign holidays, meals out or other luxuries. Through no fault of their own, their prudence would be punished by a Mansion Tax.” (Telegraph 27 October 2014).

The idea that folk who own houses worth in the millions have made sacrifices, saved hard or been prudent may well be true (at least for some). But that sacrifice, saving and prudence is not what has been responsible for their homes being worth so much money. The inflated price of houses in many parts of the UK is a consequence of scarcity and a lax fiscal regime. The financial gains made by homeowners are only in very small part due to their own efforts (for example, insulating or other improvements). The vast majority of the gains are as a consequence of rising land values.

Labour has yet to spell out the details of its plans but they involve a levy on properties worth over £2 million. Ed Balls announced the policy in an article in the Evening Standard on 20 October 2014. The Financial Times calculated that on average, the owners of properties worth over £3 million would pay an average of £19,000 per year.

Griff Rhys Jones and his partner Joanna own 2 Fitzroy Square (shaded red above) in the London borough of Camden. They bought the property for £1,450,000 in 1998 after Camden Council granted planning consent for a change of use from offices to a residential home (see Land register title). The couple then undertook the renovations and the property is now a domestic dwelling with 7 bedrooms, 3 bathrooms and 4 reception rooms.

Image: Extract from Title Plan for 2 Fitzroy Square.

According to Zoopla, the property is currently worth £7,012.156 and has risen in value by £3,015,251 over the past 5 years. The rental value is estimated at £16,167 per month (£194,004 per year). Rhys Jones currently pays £2640.96 in Council Tax to Camden Council.

Assuming that £1 million was spent undertaking renovations, the Rhys Joneses have seen their property rise in value by around £4.5 million. That sum is unearned increment (economic rent in economic theory) and, since principal residential properties are exempt from capital gains tax, the gain is entirely tax-free. This tax relief is worth an estimated £10.4 billion per year to homeowners according to the National Audit Office.(1)

Successive governments have put in place a fiscal regime for domestic property that allows Rhys Jones to make a £4.5 million tax-free capital gain without any effort on his part.

A sensible system of recurrent taxation would be designed to curtail such asset inflation by socialising this rent rather than allowing it to be appropriated tax-free by private interests. The mansion tax is a badly designed tax. As the Institute of Fiscal Studies commented in February 2013,

Rather than adding a mansion tax on top of an unreformed and deficient council tax, it would be better to reform council tax itself to make it proportional to current property values.”

If property taxation was properly proportional and the Rhys Joneses paid the percentage rate (1.85%) that a mid-point English Band D property is liable for, then they would be paying £129,724 per year. The Mansion tax is liable to be about a tenth of that.

That kind of liability would deter most buyers who, as a consequence would offer less for the property so as to pay less in annual holding costs – which is precisely what a well-designed system of recurrent property taxation would do. Lower property prices means less indebtedness and more resources invested in the productive economy. But that is not the kind of economy that either Labour or the Tories appear to be interested in.

In the meantime perhaps Rhys Jones should be grateful.

NOTES

(1) See Figure 6 in Tax Reliefs.

 

This is a brief blog to note the fact that Glasgow City Council has advertised for lease 2.7 hectares of former playing fields in Victoria Park, Glasgow (top left in picture above and Rydens brochure here). The closing date for offers is 12 noon on 26 September 2014.

From the evidence I have seen, this park, which was acquired by the Town Council of Partick in 1887, appears to be inalienable common good land. A lease for a period of around 10 years or more would constitute a “disposal” for the purposes of Section 75(2) of the Local Government (Scotland) Act 1973 and thus require the approval of the Courts before it could be executed.

The Friends of Victoria Park group has raised this matter with Glasgow City Council on 8 September 2014 and awaits a response.

The law relating to common good is in serious need of modernisation. If this land in Victoria Park is indeed inalienable common good land then the City Council will be acting unlawfully if it attempts to lease it out on a lengthy lease.

Ian McHarg died this day in 2001 (NY Times obituary). He was a Scottish landscape architect who made his name in the University of Pennsylvania where he founded the world famous Department of Landscape Architecture and Regional Planning in1955.

He was born in Clydebank in 1920 and (for those with an interest in the history of mountaineering in Scotland), was one of the Craigallian Fire men.

Arguably his most famous legacy is his 1969 book, Design with Nature. One of his pupils and collaborators in the project was the Scottish landscape architect, Mark Turnbull, who is still practising in Scotland today [EDIT – Mark sadly passed away in May 2016 – obituary here]. His book sat on the shelves of my Dad’s study when I was growing up. He was an architect and, as a student, I thought it would make an interesting contribution to the forestry course I was doing at Aberdeen University. However, so dismal was the outlook of the staff there (there were a few honourable exceptions), that the notion of even reading such a book was regarded as too radical. I read it though and recommend it to anyone with an interest in environmental and spatial planning (McHarg invented the sieve mapping technique now standard in GIS – the European Geosciences Union awards a medal in his honour).

His vision of how to understand ecosystems and undertake regional planning was so advanced that, as this blog notes, he predicted the areas unsuitable for urbanisation on Staten Island (dark shading on right). He was ignored and those areas match almost exactly the evacuation zones (in yellow left) at the time of Hurricane Sandy (see below).

But my favourite story about Ian McHarg relates to his involvement in the scoping work for Scotland’s third new town. McHarg worked in the Scottish Home and Health Department between 1950 and 1954 and in his 1996 autobiography, A Quest for Life, he writes,

One day I was summoned by the chief of the new towns section, an architect named Alex Wylie. East Kilbride and Glenrothes new towns were underway. There was considerable interest in yet another; both the cities of Glasgow and Edinburgh thought that a site near Cumbernauld, between these cities, should be investigated. However, it was likely that this new town would be a satellite of Glasgow and administered by her. Would I undertake the study?

I immediately visited Cumbernauld. It had the virtue of proximity to the major highway connecting Edinburgh and Glasgow. As at East Kilbride several years before, the wind howled, the rain drove horizontally, the whole site was awash. Morevoer, the farms were few and scattered. Anthropologists long ago had learned that sparse human settlement bespeaks adverse environments and impoverished resources. I spoke to several farmers whose opinions were united. It was a miserable place, wetter than most, with intractable mud, poor soil, a high water table, few trees, and those wind-pruned.

…….

The ideal site, in classical and Renaissance times, was a southeast-facing slope. That could not be found on the Glasgow-Edinburgh road nor on the south of the Clyde, but north of it were admirable classical sites, south and southeast-facing, at elevations above fog with beautiful views to the Firth of Clyde and, south, across the Clyde, to the Renfrewshire Hills. On the day I went there, the sun was shining; protected from the wind I lay in heather and exulted in the views. There was Dumbarton Rock, a volcanic cone with a ruined castle atop, ancient capital of Scotland, the gleaming Clyde, and , far out beyond the estuary, the Paps of Jura.

There was one problem; the site was steep. Now this had halted neither Rome, Siena, Frascati; nor San Francisco. This constraint must be transformed into an opportunity; we are not building for popes or cardinals. I recalled a project in Zurich, the Neubuhl, by Haeflie and Moser, where housing stepped down a steep slope and the flat roof of the lower house became terrace, balcony, and garden of the upper house. This would be the answer. Hanging gardens, stepped housing, each one having the merits of an attached single-family house, each with as much outdoor and indoor space, and the gardens entirely private. If the block was to be composed of four houses in depth, then the occupants at worst would walk down three flights or up one. In city where the commonest house form was a four-storey walk-up tenement, this was not a serious objection. So house plans developed, simple rectangles, L-shapes and T-shapes with different dimensions. They were all modular and could be fitted in various permutations, but all had uninterrupted views to south and east and all had private entrances and gardens. Open space equalled the building area. On the skyline, out of every view but overlooking the whole, were towers and slabs for older people, single households, and couples without children. The towers provided views of a landscape of gardens.

McHarg goes on to describe the detailed design, “extraordinary economies in construction costs” and the energy efficiency.

I submitted the plans to Alex Wylie, chief architect for new towns, who then arranged for me to present the material to the permanent undersecretary, Mr McGuiness, an Irishman with a Scottish accent. Wylie introduced the idea and gave his endorsment. I was asked to add my remarks. I spoke glowingly of the hanging gardens, the morning-golden windows, the beautiful views, access to workplaces on the Clyde, proximity to Glasgow, the beautiful landscape setting and, above all, of the greater economy of this scheme as compared with conventional bulding. There was a long silence.

“Well.” McGuiness said, “It is certainly revolutionary. There’s no doubt about that, and I am impressed by the arguments about its economy, but we can’t build this in Scotland. Why, they haven’t even built it in England yet.”

“Sir,” I said. “If the Scots have to wait for the bloody English to build something before we can, this is not the country for me. Good day, sir.”

That night, McHarg wrote to Dean Perkins of the University of Pennsylvania, and asked “Do you know of any opportunities which I might pursue in the United States? I find the professional life here is far from gratifying.”

He was immediately offered a position as an assistant professor to set up the Department of Landscape Architecture and the rest is history.

McHarg writes,

A small ceremony was held before my departure, at which time I was presented with a handsome briefcase. Kind words were said. I decided that this was not the occasion for criticism, thanked my colleagues, wished them well, and left.

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PS McHarg’s Wikipedea entry is very good account of his life.