Stewardship Economy
 
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Are there unexpected consequences?

Would it cause over-development?

Stewardship brings underused land into better – that is to say, greater – use.   Will it force the over-use and over-development of sites that would be better left relatively under-developed – businesses of low economic but high social value, low-rent housing  and workspace?

Stewardship applies a financial pressure to put each site to the best possible use.  Across the country as a whole, however, this brings into use derelict land, underused land and second homes .  The new availability of this land relieves some of the pressure on sites of low economic but high social value.  

      If the pressure to develop these sites nevertheless proves to be excessive, it may be necessary to use the planning system  to restrict the use to which those plots of land are put.

Would a Universal Income discourage work?

We know for sure that the system of unemployment benefits with which we are familiar in the UK already discourages people on benefit from working.  Mass unemployment, combined with a conditional benefit system that actually requires people not to work at all if they want to receive unemployment benefit, provides perhaps the worst of all possible solutions.  For some people up to 95 per cent of earned income is taken away from them through taxation and withdrawal of benefit when they enter work, and even the most ambitious reforms of the coalition government are to reduce this to 60 per cent.  The benefit system actually makes it illogical for people to work.

      I believe that we should design the benefit system so that it allows those who want to work to do so without impediment.

      Most individuals with a small independent income from the Universal Income would want to earn more, and they could do so with no more than 30 to 40 per cent of it being withdrawn during transition.  Some of these people might work fewer hours per week than they would in an ownership economy, but most would probably work just as much, or even more when Income Tax is lifted.

      There is also a big difference between choosing not to work and being excluded from work. Unemployment in an ownership economy results in a contraction of choices and possibilities, while being without paid work in a stewardship economy could be a positive choice and an expansion of possibilities.

Would people squander their Universal Income?

A stewardship economy provides people with opportunities for self-determination not protection from themselves.  There certainly have been examples where the provision of unearned income has had a destabilising effect, particularly if it is introduced rapidly or as a one-off payment.  A win on the lottery or a sudden influx of oil money to a country may be spent on displays of wealth, for example.  But this is largely a problem of rapid transition.

      Perhaps it would be best to ask parents whether they squander their Child Benefit and pensioners whether they squander the Basic State Pension.   About a third of the recipients of the Alaska Dividend Distribution Scheme  (The Why? Supplement: Chapter 13) spend it all, about half the recipients save it all and the rest spend some and save some (Peter Barnes 2001:71).   In Namibia,  after introduction of the Basic Income, hunger and undernutrition fell and the use of (fee-paying) schools  and health clinics rose.  Economic activity and household income increased as people were able to purchase the means of making an income (Basic Income Grant Coalition 2009:3).

Would stewardship fees be passed on to tenants and consumers?

Taxes on things like sales or wages, for example, are passed on to the consumer - remember what happens to pump prices when tax on petrol is increased at the budget.  Won’t the landlord just pass the cost of the stewardship fee on to the tenant, and the tenant then pass it on to customers through higher prices?

Taxes on sales and wages are passed on to consumers because they fall equally on all competitors, competing products or workers.  Charges on the market rent of land cannot be passed on because they fall very unequally.

            At the marginal site (the least productive site at which anybody would choose to engage in production) there will be no rent, and thus no fee or charge, to pay  (The Why? Supplement Chapter 8).  A high-value site commands a higher rent than a marginal site because it can charge more for goods or sell more of them.  At these sites, however, any attempt by the landlord to pass the fee on to the tenant by asking more than the market rent will fail, as no tenant is going to be able to make enough profit to pay it.  It is competition from sites with lower market rents that makes it impossible to pass stewardship fees on to the consumer.

      Adam Smith distinguished between the two components of the rent of a house, building rent (‘rental’ in our terms) and ground rent (‘market rent’)  (Adam Smith 1776 Volume III Book V Chapter II: 232).  Since his time there has been general agreement amongst orthodox economists that taxes and charges on the market rent cannot be passed on:

‘Ground rents are a still more proper subject of taxation than the rents of houses.  A tax upon ground-rents   would not raise the rents of houses.  It would fall altogether on the owner of the ground rent, who acts always as a monopolist, and exacts the greatest rent that can be got for the use of his ground ........Whether the tax was to be advanced by the inhabitant, or by the owner of the ground, would be of little importance.  The more the inhabitant was obliged to pay for the tax, the less he would incline to pay for the ground;  so that the final payment of the tax would fall altogether on the owner of the ground-rent’ (Adam Smith 1776 Volume III Book V Chapter II:238).

‘A land-tax, levied in proportion to the rent of land, and varying with every variation of rent, is in effect a tax on rent;  and as such a tax will not apply to that land which yields no rent, nor to the produce of that capital which is employed on that land with a view to profit merely, and which never pays rent, it will not in any way affect the price of raw produce, but will fall wholly on the landlords’ (David Ricardo 1817 Chapter X: 232).

Would stewardship fees reduce profitability?

You often see business premises, such as shops in a city,  unoccupied because of the heavy burden of rent and rates.   Surely a stewardship fee would reduce the profitability of enterprises just as the rent and rates do?

If the stewardship fee for a site was incorrectly set at a level above the market rent it would indeed lead to that site being unoccupied.  That is why it is so important to design the practicalities of valuation  so that the stewardship fee really does equal the market rent using direct market mechanisms wherever possible.

A landlord  who rents out their land to another enterprise would, if transported from an ownership to a stewardship economy, suffer from having to pay a stewardship fee equal to the market rent.    Their income from the land element of their property, net of stewardship fees, would be zero. 

     A business that rents its land would be unaffected by any liability to pay the stewardship fee, which is paid by the landlord and not passed on to the tenant.  Government revenue from stewardship fees is used to fund reductions in taxes such as Income Tax, National Insurance  contributions, VAT  and Corporation Tax  so a stewardship economy would increase the profitability of such a firm.

A business that owns its own land would pay no more in stewardship fees than a competitor who is a tenant pays in rent, or a competitor who is buying their site with a loan pays in interest on the loan.

So the only businesses whose profitability is compromised by the introduction of stewardship fees are those who had previously been receiving a hidden subsidy as the outright owner of their site.

Would people take to the road?

Wouldn’t people take to the road to avoid paying the stewardship fee, increasing the number of travellers?

Most people at present pay rent or a mortgage, and this doesn’t drive them to travel.  The stewardship fee is simply a form of rent that is paid to all of us rather than to a landlord.


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