"There is an alternative to austerity."

Phillipe Legrain: There is an alternative to the VAT rise

The government claims that the alternative to today's VAT rise is bigger spending cuts. But that isn't true. Yes, the coalition government needed to set out a credible framework for stabilising the national debt, but its decision to tighten the screws so far and so fast was a political choice....

Instead of raising VAT and national insurance this year, the government could introduce taxes on carbon and financial transactions next year. And it should levy a tax on land values. Since all the land in Britain is worth some £5 trillion, an annual levy of 1% could raise £50bn a year – without depressing economic activity, because land is in fixed supply: central London can't be spirited away to a tax haven.

As well as preventing property bubbles (and busts), a land tax would be fair. A mere 160,000 people (mostly hereditary landowners) own more than two-thirds of Britain – and the value of that land increases not through their own striving, but through that of others....

http://www.guardian.co.uk/commentisfree/2011/jan/03/public-sector-cuts-alternative-vat-tax

Philippe Legrain writes about globalisation, migration and European issues. He is the author of Aftershock: Reshaping the World Economy After the Crisis