Kevin Cahill: The myth spun about Britain is that land is scarce
tony at cultureshop.org.uk
Thu Oct 3 23:44:40 BST 2013
The great property swindle
The myth spun about Britain is that land is
scarce. It is not landowners are paid to keep it off the market
CAHILL PUBLISHED 11 MARCH 2011
may be owed compensation!
Modern British history, excluding world wars and
the loss of empire, is a record of two
countervailing changes, one partly understood,
one not understood at all. The partly understood
change is the urbanisation of society to the
point where 90 per cent of us in the United
Kingdom live in urban areas. Hidden inside that
transformation is the shift from a society in
which, less than a century and a half ago, all
land was owned by 4.5 per cent of the population
and the rest owned nothing at all. Now, 70 per
cent of the population has a stake in land, and
collectively owns most of the 5 per cent of the
UK that is urban. But this is a mere three million out of 60 million acres.
Through this transformation, the heirs to the
disenfranchised of the Victorian era have
inverted the relationship between the landed and
the landless. This has happened even while huge
changes have occurred in the 42 million acres of
rural countryside. These account for 70 per cent
of the home islands and are the agricultural
plot. From being virtually the sole payers of
such tax as was levied in 1873 (at fourpence in
the 240p pound), the owners of Britain's
agricultural plot are now the beneficiaries of an
annual subsidy that may run as high as £23,000
each, totalling between £3.5bn and £5bn a year.
Urban dwellers, on the other hand, pay about
£35bn in land-related taxes. Rural landowners
receive a handout of roughly £83 per acre, while
urban dwellers pay about £18,000 for each acre
they hold, an average of £1,800 per dwelling, the
average dwelling standing on one-tenth of an acre.
Britain urgently needs land reform, but there is
a problem. The "tenants" of between 30 and 50 per
cent of the Home Island land mass are unknown. I
use the word tenant deliberately. Here's why. In
a written response to a question by Andrew George
MP in February 2009, Bridget Prentice, a
parliamentary undersecretary at the Ministry of
Justice, replied, "The Crown is the ultimate
owner of all land in England and Wales (including
the Isles of Scilly): all other owners hold an
estate in land. Although there is some land that
the Crown has never granted away, most land is
held of the Crown as freehold or leasehold."
Prentice omitted to add that, as the preamble to
the Land Registration Act 2002 put it, "the
concepts of leasehold and freehold derive from
medieval forms of tenure and are not ownership".
What this means is that, in relation to land in
the UK, we are all tenants on the basis of the
feudal superiority of the Crown, a superiority
created in 1066 and founded on legal norms that
were created to uphold that same feudal superiority.
This expensive medieval legal miasma in relation
to land might not matter, if the confusion did
not directly impinge on the size of our homes and
even more directly on the price of land, which
can be as much as 80 per cent of the cost of a
new home. Both the size and the cost of houses
are predicated on the idea that land is scarce in
the UK, but this is a myth propagated by those
with an interest in selling plentiful land expensively.
The home islands together with Northern Ireland
are 60 million acres in extent. It is estimated
that there are 62 million people living on those
acres, giving every man, woman and child a little
under an acre apiece. An acre is a little over
half the size of a standard Football Association
pitch, which is why that measurement is used
here. Almost everyone in the country knows what a
football pitch looks like. Very few people know how to visualise a hectare.
So, who wants the acre on the top of Ben Nevis?
You don't have to go to a Scottish mountain to
find plenty of land, however. England, one of the
most urbanised countries in the world, has
abundant spare acres. This is because less than 6
per cent of the entire island of Britain - and 10
per cent of England - is urban. Put another way,
for every acre that is bricks and mortar, home or
business premises, nine acres are not. This is
not counter-intuitive. Most people understand it
as they get out of urban areas, big or small, and
journey by train or car through some of the
greenest and most pleasant land on earth.
What runs counter to what you see is the
propaganda, unremitting and relentless, from the
environmental and countryside lobbies, telling
you that the UK is a small and crowded island and
that within 30 years the last blade of grass in
England will be concreted over. At the current
rate of urbanisation, which is about 14,400 acres
a year, England won't finally fall to "concretisation" for 2,014 years.
Behind the scare stories is a very simple
financial fact: an acre of rural land worth
£5,000 becomes an acre of development land worth
between £500,000 and £1m once planning permission
is obtained. Moreover, most land granted planning
consent is registered offshore and is thus
tax-free, or virtually so. If the true
availability of land in the UK were known, the
conversion factor would not be quite so generous.
The true availability of land starts with who tenants or holds it freehold.
What we need in this country is a debate about
land, informed by facts. The obvious place to
look for the facts is the three land registries
of England and Wales, Scotland and Northern
Ireland. Here we encounter two extraordinary but
related anomalies: we have land registries that
do not record the ownership of land at all and a
second Domesday book that did record the
ownership of all land in the UK but vanished. These facts are not unrelated.
First, the land registries. Most people think
that this is where the ownership of all land in
the UK is recorded. They are wrong. Formally
created by the Land Registration Act 1925, the
current three land registries only partly succeed
where a series of earlier attempts failed,
beginning in 1875. Before that, there were deed
registries in most counties in the United
Kingdom. The effort to create a land registry
happened at roughly the same time as the
publication in 1873 of the Return of Owners of
Land, the so-called second or new Domesday Book,
a coincidence that almost certainly led to the
failure of the push for a registry.
The second Domesday of 1873 exposed the inequity
of land ownership in Victorian Britain - that all
land in the UK was then "owned" by just 4.5 per
cent of the population, while 95.5 per cent of
the population owned nothing, not even a blade of
grass. Domestic home ownership was in its infancy
at the end of the 19th century; most of the land
was the property of a very small network of
aristocratic families, most of which had dual
links to the House of Commons and the Lords.
Those who owned everything also had political control of everything.
The second Domesday recorded the ownership - yes,
the word used was ownership - of at least 98 per
cent of all land in the four countries of the
then United Kingdom: England, Scotland, Wales and
Ireland. The details of each owner's holding,
name and address, together with the valuation of
any land of more than one acre, were recorded and
printed in four volumes running to 2,300 pages
and containing 321,000 names and addresses. The
details of the owners of less than an acre were
recorded but not printed. And it was all
completed in four years. The current Land
Registry for England and Wales is at least 35 per
cent short of that achievement after 86 years of
trying, and in the age of computers.
The failure to record the ownership of land in
the UK arises not from failures by the staff
running the registries, but from the way they
were constructed by lawyers on behalf of
landowners. The land registries were designed to
conceal ownership, not reveal it. Shocked by the
detailed revelation of the actual acreage that
they held, the great landowners did two things.
First, they refused to register their land with
the new land registry in 1875. Second, they had
one of their own, the Hon George C Brodrick, Old
Etonian warden of Merton College and second son
of Queen Victoria's chaplain, the landowning 7th
Viscount Midleton, damn the Returns in his 1881
work, English Land and English Landlords. No
academic work relating to the Returns appeared subsequently until 2001.
By the early 1920s, the pace of urban home
ownership in London and throughout the UK
necessitated an expansion of land registry
activity. This resulted in a series of land
registration and land regulation acts that
reaffirmed the Crown's feudal superiority by
creating two forms of lease - for a term of
years, or freehold of indefinite duration. The
structure passed into law in 1925; nothing significant has changed since.
With rare exceptions, ownership dictates how land
is used. Those who now "hold" the bulk of the
acreage of the UK are extremely hard to identify,
almost entirely because of the defects in the
land registries. But they are for the most part
the descendants - the so-called cousinhood - of
the great landowners of 1873. Among them are the
current Duke of Buccleuch, with his 240,000
acres, the Duke of Northumberland, with 131,000
acres, the Duke of Westminster, with 129,000
acres, and the Prince of Wales, with 141,000 acres.
With ownership information missing, planning of
any kind, whether national or local, is extremely
difficult. And finding out who is getting the money is almost impossible.
In 2002, Michael Wills, then parliamentary
secretary in the lord chancellor's department
with responsibility for the Land Registry, wrote
to the Liberal Democrat MP Adrian Sanders setting
out the limitations of its remit:
1. The Land Registry does not record ownership of land.
2. It records two forms of tenancies: leaseholds
for a term of years and freehold tenancies of indeterminate duration.
3. It creates titles without recording the acreage of each title.
4. Its records are not kept in a manner which
would enable the registry to establish with any
certainty what land was owned by a particular organisation or individual.
5. The titles to only about 65 per cent of the
acreage of England and Wales are recorded; in
Scotland and Northern Ireland it is 85 per cent and 50 per cent respectively.
What the land registries do is record the
freehold titles of the domestic dwellings of the
UK, and they do that in an exemplary way. This is
to damn with faint praise, however, given that
domestic dwellings cover three million acres in
the UK at most. Those may be the most valuable
parts, but they still constitute only 5 per cent of the country's land mass.
The 60 million acres of the UK are broadly
comprised of 42 million acres of "agricultural"
land, 12 million acres of what is called natural
waste (mountains, bog, moor and so on) and six
million acres of the urban plot (houses, shops,
businesses). When it comes to our homes and the
taxes we pay, only two of the three sectors are
significant. These are the taxed land where most
of our homes and businesses are, and agricultural
land, which is untaxed and subsidised.
Many businesses are subsidised by the taxpayer,
for various reasons - to retain jobs, to improve
technology, to keep businesses in the market. But
the agricultural subsidy is strange. Pared down
to its essentials, it is a permanent and
unaudited gift from the taxpayer to the owners of
rural land. Introduced in America in the 1920s,
in Britain after the Second World War and in the
European Union in the 1970s, subsidies were
intended to keep the agricultural sector viable
and food supplies secure. In practice, the
agriculture subsidy appears instead to have
become a permanent prop to an unprofitable
business as well as a free handout to the rich.
If the business of farming is profitable, why
does it need the subvention? It is most abused
internationally by the United States, whose farm
subsidy regime distorts trade throughout the
world, making it impossible for many farmers in
the developing world to enter international
markets, much less trade in them. But the EU, and
its member states, mirror every bad American practice.
In the UK, the average "farmer" receives between
£18,260 and £23,000 every year from the taxpayer
for an average farm of 220-plus acres, whether or
not he or she grows or herds anything. There are
no current subsidy figures specifically for
England and Wales, according to Jack Thurston, a
London-based expert on the subsidy regime. "The
UK government has refused to supply them," he says.
However, according to Andy Wightman, author of
The Poor Had No Lawyers: Who Owns Scotland (And
How They Got It), quoting figures from the
Scottish government: "During the ten years from
2000 to 2009, the top 50 recipients of
agricultural subsidy received £168m - an average
of over £3.3m per farmer. Among the top 50 are
some of Scotland's wealthiest landowners,
including the Earl of Moray, Leon Litchfield, the
Earl of Seafield, Lord Inchcape, the Earl of
Southesk, the Duke of Buccleuch, the Earl of
Rosebery and the Duke of Roxburghe."
The crucial point is that the subsidy ultimately
winds up with landowners, giving them greater
flexibility in relation to the release of land
for building homes. Wightman cites the case of
Frank A Smart & Son Ltd, a company that owns 39
farms in Speyside. In 2009 it received over £1.2m
in single farm subsidy, the largest payment in Scotland.
The same company sold 18 building plots and six
building properties on one of its farms, bought
for £300,000 in 1991, for £1.3m. It made a profit
of over £3.1m in 2008, and in March 2009 sold 24
plots of land with planning consent for more than £2.9m.
This pattern is repeated throughout the UK. A
subsidy originally intended to help poor farmers
winds up padding the profits of rich landowners
while keeping poor farmers in the developing
countries out of the market altogether. Is this
the worst case ever of unintended consequences?
Together, homes and businesses in the UK pay as
much as £57bn annually in de facto land taxes,
such as business rates (£22bn) and council tax
(£35bn a year, including stamp duty and charges).
The subsidy of up to £5bn that the UK
agricultural sector receives comes from British
taxpayers, not some remote bureaucracy in Brussels.
In the UK, 90 per cent of the population lives on
the three million acres of the urban plot. They
work in the remaining three million acres of
industrial and business land and live in an
estimated 27.1 million homes, 18.9 million of
which are privately owned and 8.2 million of
which are publicly or privately rented. So 90 per
cent of the population has made a deliberate
choice and has paid for it, usually at double the
cost of the home over the term of the mortgage needed to secure it.
The annual cost of that choice in terms of tax
paid by the 70 per cent of us who are private
owners, in addition to mortgage interest,
averages out at £1,851 per home. Those in rented
accommodation pay no mortgage but do pay some
rates. People living in rented accommodation end
up without an asset, whereas private homeowners
at least acquire an asset. It comes at a very
high cost, however, one that is subject to severe fluctuations in value.
The estimated gain on a UK house over the past 20
years, inclusive of tax and mortgage, is less
than 4 per cent per annum. Over the long term -
and most people change homes perhaps only once or
twice in a lifetime - homes turn out to be a very modest investment.
The financial crisis demonstrated the raw
capacity of capitalism to destroy or place entire
economies at risk as well as to expel hundreds of
thousands of people from their home through
repossession. The world financial system had to
be rescued by emergency state spending and the
imposition of taxes on entire populations and
countries. A properly functioning system should
not require subsidy on that scale to save it.
Free-market capitalism failed because it suffers
from huge design flaws. It is inherently unstable
and lopsided. And nothing in the UK demonstrates
this quite like the housing market.
Most land in the UK held monopolistically by
large landowners or estates follows the rules of
what the American social economist Mancur Olson
called "hidden coalitions". How these work in the
UK and their impact on the housing market is very simply explained.
First, no one knows just how much land is
available for development or from whom it is
available. The result is that UK homes are both
the smallest in Europe and the most expensive,
with the land or site costing a vast proportion
of the value of the dwelling. From the
perspective of the 31 million people, or half the
UK population, who pay direct taxes, what we are
doing is in effect paying an inefficient business
- the 325,000 "farmer" holders, or 0.5 per cent
of the population - to keep hold of building
land, further falsifying an already rigged
market. The finer figures are worse. Only
two-thirds of UK farms are owned; the other
one-third is rented, mostly from the owners of
the other two-thirds. In effect, the agriculture
subsidy goes to the 0.36 per cent of the
population that owns 70 per cent of the country.
If the 65,000 "farms" of under two acres are
subtracted as economically meaningless, what you
have is 50 per cent of the population, the
taxpayers, paying 0.28 per cent of the population
to hold the bulk of the country's landed assets
and to make those plentiful assets scarce. The
result is that the cost of a building site is two
or three times what it should be for 70 per cent
of the population. This is Britain's great property swindle.
When home ownership became endemic, two things
happened. First, the banks, highly monopolistic
institutions with a profound lack of
understanding of money, as they recently
demonstrated, commoditised and monetised the most
basic human need for shelter: our homes. But then
those of us who managed to buy a home and hold on
to it finally had a stake in the capitalist
system. This was economically novel. It had never happened before.
The Domesday Book of 1873 records the beginning
of private home ownership in the UK - in effect,
the beginning of popular participation in the
capitalist market system. No economist, not even
Karl Marx, who was still alive when the second
Domesday was published, foresaw the
transformation that this would bring about. Marx
thought that capitalism would always be confined
to a minority, and that the majority would be a
rent-paying proletariat. A superficial look at
the second Domesday would have confirmed this.
That is how it was then, but it's not how it is
now. The transformation is fundamental to both capitalism and democracy.
Private home ownership destroys the notion of
rent as a significant element of the overall
economic equation. The estate agent Savills
recently demonstrated what this means. The
national debt, which we are supposed to lie awake
at night worrying about, is roughly £1trn. The
total value of the privately owned national
housing stock is over £3trn. The ratio of debt to
equity in the housing stock is about 1:4. In
other words, for every £1 of mortgage debt, there is £3 of free asset value.
Back in 1870s, for a UK population then of 28
million, there were just over 3.84 million
dwellings, of which 703,000 were privately owned.
Between 1873 and 2010, the population multiplied
by 2.2, but the number of houses jumped more than
sevenfold. The number of privately owned houses
increased to 18.6 million, a 26-fold increase, as
the majority of the population moved from
landless to landed, from a waged proletariat to an asset-owning democracy.
Today the great popular asset pile is threatened
by tax addicts on one side, acting for
inefficient government, and defective
bank-dominated capitalism on the other. The
banks, knowing the real situation about the land
supply market, that it is rigged and opaque,
recently felt safe enough to inflate a
house-price bubble that showed reckless disregard
for housing's primary purpose - to provide
enduring shelter for people. That problem could
have been contained eventually by normal domestic
fiscal adjustments, no matter how brutal. What no
one allowed for was that the banks, the masters
of money, would blow a second, and even more
destructive, asset bubble in their own basic commodity, money.
The banks created fictional assets and ran a
bubble market in these, using other people's
money. They incinerated about half the global
stock of money, other people's money. When the
banks' internal bubble burst, it left no assets,
just worthless paper. The property bubble at
least left some habitable assets behind. No
matter how financially damaged, something could
be rescued from the crash in house prices. The
only rescue available for the banks was for money
to be printed and for a lien to be taken on the
entire nation's taxes for the next ten to 15
years. We owe the banks nothing except our debts.
What we urgently need is a clear, simple and
logical land registry in each of the four nations
of the Union, with all land ownership recorded
and the names of the owners indexed, as at the
present Scottish land registry, and with the acreage stated.
In parallel with that change, we need formally to
extinguish the Crown's expensive, legally
meaningless and complex feudal claim to all land
in the UK, a claim that was informally challenged
by parliament in 1873 by using "owners" in the
title of the Return of Owners of Land. Finally,
and even more urgently, we need to simplify both
land law and the appalling and wholly unnecessary
language in which it is dressed up by fee-farming lawyers.
If these three things can be achieved, it will
lead to a simplification of documentation and a
lowering of lawyers' fees for land
transactions.Yet those three steps, useful though
they might be, will not take us to the heart of
the matter, which is the urban acreage of the UK
and the houses we live in, which stand on it.
To become environmentally efficient and more
habitable, and with ever larger numbers of people
working from home, houses need to be larger and,
wherever possible, to have a garden. To achieve
this transformation, we need to know the facts
about land and its use, not the fiction spun by
those trying to sell plentiful acres as if they were a scarce commodity.
Next week, in the second part of his
investigation into land ownership, carried out
exclusively for the New Statesman, Kevin Cahill asks: "Who owns the world?"
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