Emer Ó Siochrú

Economics for Conscious Evolution London July 2013

The Boom … Increased economic activity in the 1990s, due to higher

productivity, created wealth that was recycled to boost consumption through the widespread ownership of land.

Continued economic activity in the 2000s, due to higher consumption, fueled a Ponzi property bubble by a handful of developers backed by the banks.

Transaction taxes on property funded the Social Partnership deals.

Cheap easy credit augmented the static incomes of ordinary people.

The Crash By 2007, the Irish banks had bet most of their resources

on the speculative deals of less than 10 developers.

Property prices and sales slowed. Economists predicted ‘a soft landing’.

Skeptical international lenders withdrew deposits, sold Irish bank shares and precipitated the banking crisis.

The Irish government then famously, gave a State guarantee to all bank depositors and bondholders thinking it was a liquidity crisis.

The problem was solvency ; the EU were asked for help. ‘Austerity’ was the price of the bailout

Lax planning regulation

Local councilors, supported by their officials zoned between 3 and 5 times the land area required to meet Irish housing demand by any conceivable criteria.

Zoning is not a prerequisite to get planning permission for new house construction in Ireland. 30% of new houses in the boom were built in the un-zoned open countryside

Some of the best zoned and serviced housing sites in urban areas were withheld from development in the boom and are now empty or derelict

Lax of banking regulation

Better regulation would undoubtedly have helped…but

The Irish government could only regulate Irish banks and non-national banks operating under its remit. Under free market rules, international banks could continue to lend recklessly

And

Other European countries such as Germany, France and Italy did not suffer the same level of imprudent property lending even though they have a shared currency and similar banking regulations

Home ownership incentives

“Imputed income from housing assets is not taxed, mortgage interest is tax deductible and capital gains on the principle residence are exempt from the tax applying to realised gains on most assets. There was no local tax or charge collected on residential property. Many countries pursue some of these policies but Ireland appears to have been the only one to pursue all four simultaneously”

Economist Com McCarthy, Preface to the “Fair Tax” 2012

“(Property) Taxes that would otherwise be paid to the government will be paid to bankers. The result – what you are seeing today in Europe and North America – is an economic grab that is in many ways like that which gave birth to European feudalism. But this time round it is financial not military. “

Economist Michael Hudson, MMT conference, Rimini 2012

Unsuitable sites were developed i.e. on flood plains

All urban housing and apartments speculatively built

Ghost estates in the outer commuter belt

Derelict key urban sites

Many empty homes scattered over the countryside

Poor design and construction quality

No innovation in local energy and waste systems

Impacts on Irish Housing

Other impacts Lack of employment: investment was diverted from

productive activities into property

Retirement poverty; pension saving in bonds and stocks was neglected in favour of ‘buy to lets’

Intergenerational inequity; older people who sold in the boom or got social partnership deals gained while families with children are stuck with un-repayable debt and higher taxes. Young people have had to emigrate.

Damage to farming and tourism; impacted by the scattered rural houses abandoned by their owners in search of work

History of land reform 1 1850s: The Irish land struggle influenced by Henry George started with the

3Fs Fair Rent, Fixity of tenure and Free sale of tenants improvements but led instead to ‘tenant right to buy’ and the 1903 Act.

1916: The transfers of land to tenant farmers was substantially complete. Padraig Pearse wrote that the land should belong to the people of Ireland not just the farmers.

1950s: Economic underdevelopment after the 2nd World War was the result of a frozen land market, under-investment and insular economic policies.

1960: Irish economist Raymond Crotty recommended a land value tax. His call was ignored as Whittaker and Lemass opened the economy to foreign direct investment and industrialisation began.

1970s: Politically connected developers made fortunes by speculating on land rezoning. Fianna Fail abolished domestic rates. The Kenny Report recommended compulsory purchase of development land at agriculture plus 20% prices. It was never implemented.

History of land reform 2 1990-: More tax reliefs for property and first time buyers. More EU aid

and FDI. Social Partnership set up. Ireland joined the Euro. Property transaction taxes filled government coffers.

2003: Housing had become unaffordable. Feasta hosted conference ‘The Irish land Struggle, Unfinished Business” and warned of a property bust

2007: Property boom ends. The Coalition government agree a site value tax on residential property.

2008: The Coalition government announced the Bank Guarantee. The Taxation Commission was set up. Smart Taxes was set up.

2010: The Troika arrived. The Coalition government fell. New Fine Gael / Labour government set up the Property Tax Expert Group.

2012: The Expert Group rules that SVT was too difficult to understand. The new government brought in a conventional residential property tax

Mixed group of environmentalists, Georgists, planners, architects and social reformers

Comparative economic research

Land valuation map

Political campaign

Publication of ‘the Fair Tax” 2012

Faults of the Residential Property Tax

Development land and sites that comprise 30% of the total housing area owned by developers and banks is not taxed by RPT. So homeowners who paid too much in the boom have to pay again

The new 80% Development Land Tax does not apply to already zoned land of which there is a surplus for many years. It will never be collected.

The RPT penalizes improvements that homeowners make for for energy efficiency or for more space for their family.

The RPT discourages construction when workers are idle and emigrating

Call for an agricultural land tax

Under the new CAP (Common Agricultural Policy), farmers will get payment for simply owning land

Active farmers cannot buy or even lease enough land to viability

More Irish farmers are over 80 than under 35

Tom Barry Fine Gael TD calls for a land tax on inactive farmers !

Call for Site Tax on vacant land

Windfarm protests growing Ireland has excellent wind energy resources

Developers are doing deals with landowners to rent their land for wind turbines for up to €18,000 per annum

Community groups are being offered ‘swimming pools and community centres’

Commercial Rates are circa €5-7000 per turbine and can be 30% of total receipts for western local authorities

Residents health is likely to be affected and their properties certainly devalued

Owners of windy Natura designated sites get nothing

What have we learnt? Accept that taxation reform can only come with monetary (or

at least banking) reform. They are two sides of the same coin.

Engage ‘Progressives’ as allies not rivals.

Stop work on economic arguments for land value tax already! Reform is a political project.

Make common cause with youthful movements ie. Occupy, Pirate Parties, Anonymous, P2P, Arab Spring etc. under a ‘reclaim the commons’ banner

Be more flexible and opportunistic i.e. renewable energy is a ‘land value tax’ / ‘reclaim the commons’ issue

In short

Recognise our natural and social commons and charge appropriately for their use so as to protect them for the future