Tuesday 24 February 2009

A brief history of UK tax, Part 3.

Things took another turn for the worse after the Industrial Revolution. Because living standards in towns and cities, however awful, were slightly better than in the countryside, people moved to towns to work in factories. While Victorian industrialists contributed to the rapid growth in prosperity, it shouldn't be forgotten that many mill owners also owned the houses in which their workers lived, so they could cash in three times - they made a profit from their labour, charged them rent and allowed them to fund what little 'public services' there were out of their own taxes.

There was still some residual taxation of agricultural land values at the time, although the agricultural sector became less and less relevant to the national accounts. Over time, and culminating in the Town & Country Planning Act 1947, rural landowners were cut off from the growth in land values enjoyed by urban land owners (see dotted line) and need not be considered further. As compensation for this, a system of agricultural land subsidies was invented by which agricultural land-owners are paid money for, simply owning land, which of course do not benefit tenant farmers or keep food prices down.


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9 comments:

Anonymous said...

As compensation for this, a system of agricultural land subsidies was invented by which agricultural land-owners are paid money for, simply owning land,

Not at all true, I'm afraid. Until recently, all subsidies were in the form of subsidies for production, or price controls (minimum values), which were also subsidies for production.

Per area subsidies are new to cap. Still shit, unjustified, and counter productive, but they are relatively recent.

The history of agri subsidies also has nothing to do with the artificial restriction of availability of land for building, having it's roots initially in a paronio about food security( post war) and then CAP (i.e. keeping French farmers happy) which we inherited afterjoining the EEC.

Mark Wadsworth said...

HH, factually correct, but a subsidy for agricultural production is always directly or indirectly a subsidy for agricultural land. Or do you think that farm labourers got a pay rise as a result? Do you think that tenant farmers didn't see their rent increased on the back of rising profits?

Restrictions on new buildings on the edges of towns are far older than you think, these things came in gradually. They may even have been voluntary, because said Victorian mill owner wanted his workers nice and close to the factory.

Anonymous said...

Oh, yes, don't misunderstand me, most (but not all) subsidies relied on the use of land therefore artificially increased it's market price, which is why they are by and large self defeating, i.e. they also put up the price of combines, tractors, etc etc. Wages actually did increase with production based subsidies for a while, because the greater the production, the greater the profit, and you needed the manpower to bring in the harvest. This was short lived, however, as technology and mechanisation made labour less of a factor per ton of grain produced. The situation with tenant farmers is complicated, mainly because many of the remaining farms were held under various restrictive land use and other contracts, those that weren't were invariably consolidated and sold off due to aforementioned mechanisation and the increased farm sizes this demanded.

As for planning restrictions, I didn't make any comment ~ I was simply pointing out that the subsidies weren't a compensation for these, but were due to other factors.

You won't find me arguing for agri subsidies. Ever. I think they are destructive and completely unjustified.

Mark Wadsworth said...

HH, agreed to all that, I have to simplify it a bit as the chart covers a couple of centuries. Agricultural subsidies were never given as explicit compensation, but it was good old fashioned pork barrel spending and as such, low politics did play some rôle in it.

Lola said...

O/T Re online poll:

"Who would you trust more to run the economy?
Lord Mandelson of Thingy
Howard Schultz (Founder and CEO of Starbucks"

Bad question. No-one needs to 'run the economy' at all. In fact it is because that someone has been trying to 'run the economy' that we are in this mess.

Mark Wadsworth said...

L, which is why I included the word 'more'. Including the option 'neither' wouldn't give a clear result.

Anonymous said...

A while back I pointed out on Worstallworld that agri subsidies always go to the least elastic factor of production i.e. they end up with the landowner. Lord Tim seemed displeased with that statement of the obvious. I've no idea why.

Mark Wadsworth said...

D, exactly. I thought that this rule of thumb was widely accepted as being true.

Anonymous said...

"many mill owners also owned the houses in which their workers lived, so they could cash in three times - they made a profit from their labour, charged them rent and allowed them to fund what little 'public services' there were out of their own taxes."

They also benefited in a fourth way, through the "Truck System", where they paid their employees in some way that could only be redeemed at the company shop(s).