Debate Magazine

"Rishi Sunak to Reform anti-Northern Spending Bias"

Posted on the 21 November 2020 by Markwadsworth @Mark_Wadsworth

From the BBC:
Part of what will change is the Treasury's Green Book - a set of rules it uses to determine the value generated by government schemes. It will mean - as the first portions of £600bn in planned public investment are delivered - the process of ranking transport, energy, schools or hospital investment will be widened beyond a narrow definition of benefit compared to cost.

Those calculations, the Treasury now acknowledges, have inherently favoured the government investing continuously in the South East of England and London. That's because the values of economic return are influenced by existing high property prices in those regions. For example, a transport link between London and Reading would always have ranked as better value for money for the taxpayer than linking two northern cities.

I'm reading between the lines a bit here, but I assume what they mean is that if spending £X billion on better transport links increases economic activity in an area by Y per cent, then it is better to spend it in a densely populated = high wage = high land price area.
On a national level, that makes sense. It would be pointless spending umpteen billion on bridges connecting sparsely populated Scottish islands.
The real issue is not where the money is spent, the issue is who benefits from the spending. Under current rules, it is mainly people who own homes or business premises in the South East, so a double slap in the face for people and businesses in other areas, who have to pay their share of the cost via taxation. Or indeed tenants in the South East who end up paying more tax and higher rents.
If LVT were a major source of revenue, then money would still be spent on whatever things in whatever areas where the extra LVT exceeds the cost, but instead of all the benefits going to landowners there, everybody in every area of the country would benefit because that surplus LVT would be used to reduce taxes on output and earnings for everybody. Like people who pay £100 for a front row seat subsidising people in the back row who only have to pay £10. If the theater charged a flat £50 on a first-come first-served basis, they'd only fill half their seats and the back rows would be empty.


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