“Michael Heseltine was a minister under Prime Minister Margaret Thatcher and was heavily involved in urban regeneration (i.e. had direct contact with the economics of infrastructure and land).”
“I landed at Dover after a choppy crossing of the Channel in 1962, and for the next 40 years I paid my taxes to Her Majesty’s Treasury. Working in the computer industry…I did not dodge my obligations to the public purse. After all, I was married, raising two children and using the public services; so I was happy to pay my share of the costs of the schools and hospitals that my family needed.
Then, as the millennium was dawning, a miracle happened. The government returned every penny that I had paid in taxes over the previous 40 years.“– Don Riley, in the Forward to Wheels of Fortune: Self-funding Infrastructure and the Free Market Case for a Land Tax by Fred Harrison, The Institute of Economic Affairs (2006)
n order to understand Don Riley’s good fortune, think about railways. Consider High Speed 2, the long and heavily contested plan for a modern rail connection between London and the north of England, which has just been given final approval. The campaign to cancel the project has featured prominently in the mainstream. But just before the final decision was made, the conservative peer, a terse Lord Heseltine was given time to dismantle the main objection:
BBC Radio 4: “Lord Heseltine are you worried by the poor benefit-cost ratios that have come out of studies of HS2?”
Lord Heseltine: “But how do you know they are poor? The last statement of the chairman, I’m going to quote: ‘the benefits to the economy for the regeneration around HS2 stations and local growth strategies have been excluded from the benefit-cost ratio.‘ …”
Michael Heseltine was a minister under Prime Minister Margaret Thatcher and was heavily involved in urban regeneration (i.e. had direct contact with the economics of infrastructure and land). Here, he is presenting a Georgist* perspective on economic growth: growth raises land values. And it lowers wages. People bid more and more for productive, connected, trustworthy, high wage locations. HS2 will extend London’s commuter belt, bringing southern wages into northern property markets. HS2 will raise land values all along its catchment. Landowners in some locations will make, in Lord Heseltine’s words, “a fortune.”
“A note on semantics: It seems public works create or raise land value. They don’t. Saying so is merely convenient. What’s really going on is that the new project converts public demand into a money flow, technically called “rent.”…Buildings and other improvement don’t create land value. They attract it. They convert demand for the improvement into a revenue stream.” – Jeffery J.Smith, The Shape of Rent (2015)
Thus, Don Riley, owner of a location near to brand new infrastructure (along with many others), was in the right place to collect all of the taxes that paid for it.
“Taxpayers generously funded the extension to the Jubilee Line, one of London’s Underground lines. Two of the stations were located close to office properties that I own. Those two stations raised the value of my properties by more than all the taxes that I had paid into the public’s coffers over the previous 40 years.”
Somehow, the Jubilee Line windfall—and numberless similar others—evades the HS2 debate.
“Infrastructure projects almost always bring about a large increase in the value of adjoining land. For example, Transport for London estimate that the extension of the Jubilee Line of the London Underground that opened in 1999 increased land values by £2 billion in Canary Wharf and £800 million in Southwark. When such infrastructure projects are funded by government they therefore almost always involve a substantial transfer of wealth from a large number of taxpayers to a small number of property owners.” – John Meadowcroft, Deputy Editorial Director, Institute of Economic Affairs in the Introduction to Wheels of Fortune: Self-funding Infrastructure and the Free Market Case for a Land Tax by Fred Harrison
Many thousands of landowners, mainly home owners, are going to receive a completely unannounced windfall from HS2. (Do they all know?) Don Riley wrote a book about his windfall, Taken for a Ride (2001). He calls it a “confession.”
Later in the same interview, speaking very deliberately and pausing on the word land, Lord Heseltine continued:
“The private sector should be brought in along with a development corporation to achieve [i.e. acquire] the land that is otherwise going to be developed piecemeal at great benefit to the people who now own land, which is worth relatively little, but could be worth a fortune if these stations get under way. The benefit of that should go to the public sector.” – Michael Lord Heseltine, PM Programme, Radio 4, 24 Jan 2020
Land value is the hidden pot of gold made visible through a Georgist lens.
*The Georgist perspective emerges from an economics where the concept land is restored to equal status with labour and capital.
Darren Iversen is an independent student of Georgist history in England.