Producers using an asset they use to produce from is hoarding apparently:

There is no acknowledgment of the potential wider benefits that go beyond the non-trivial contribution the tax will make to relieving the crisis in public services. The hoarding of land that has gone on….

That farming is an activity with large economies of scale, that farms need to be of a certain size to even be economic, seems to escape. But, you know, Will Hutton.

It’s the other argument deployed here which interests today:

…since the bung was introduced by Margaret Thatcher in 1984, which has so steadily driven up land prices and farmers’ rents, will at last be checked as some of the larger estates are obliged to sell parcels of land to pay inheritance tax, as they did before 1984 without the world falling in, rather than be enabled to own it in perpetuity. Young farmers, now increasingly crowded out of the market, will get a chance to buy land: there is the prospect of a levelling off, even a fall, in farm rents. New life and ideas will be brought to the rural economy as innovative, energetic farmers enter the market – and production even increases.

The argument is that high farmland prices are a barrier to new entrants into farming. We agree, as we’ve said before. High farmland prices also mean that the return on capital of farming is pitiful. As we’ve also pointed out before. And as we’ve pointed out more than once there’s a strong implication of these truths. We must abolish farm subsidies.

Farm subsidies drive up the price of farmland. This isn’t a difficult point to grasp. If farming were subsidyless then there would be less money in farming. Land would therefore be worth less. This is more obvious under schemes that just pay a per acre amount but it’s true of any form of such subsidy. More money from the activity means the limited stock of assets upon which to undertake the activity are higher priced. Just are, obviously.

So Hutton’s telling us it’s righteous to take money off farmers in order to reduce land prices. Possibly - but if we accept that contention then it’s also true that we should stop giving tax money to farmers in order to reduce land prices. Something we wholly agree with - we’re always more favourable to not spending taxes than we are to collecting taxes after all.

So, great. If it is just and righteous to tax land prices down it’s also just and righteous to abolish farm subsidies. Go the full New Zealand. So, when do we do this then?

Tim Worstall