Land value taxation: some issues

Sam MacArthur is a fourth year undergraduate economics student at the University of Strathclyde and had a summer internship in the Fraser of Allander Institute supported by the Carnegie Trust. This blog summarises some of Sam’s research from last summer into some of the issues around land value tax.

The Scottish Government recently released their Programme for Government 2017-2018, ‘A Nation with Ambition’, which reiterated their commitment to land reform.

Consequently, the newly formed Scottish Land Commission have been tasked –among other things- with carrying out and commissioning research into “a range of radical options for further land reform in Scotland, including the potential for a land value tax”.

In recent years, calls for a land value tax (LVT) have moved into the mainstream of political debate in Scotland, driven by perceived criticisms of the current system of local taxation, the Council Tax. One concern with fundamentally reforming the existing system is a concern about the potential impact of this change on different household types across Scotland. The lack of detailed analysis on this point is hindering fuller debate.

This blog reports on some work I undertook while completing a Carnegie Vacation Scholarship at the Fraser of Allander Institute this summer. It begins by briefly reviewing some conceptual issues in implementing local taxation, before moving to consider how (in principal) we might produce some estimates of land values.

Continue reading “Land value taxation: some issues”

October Nowcast update!

Grant Allan & Stuart McIntyre 
Fraser of Allander Institute, University of Strathclyde

This month we’ve again run our nowcasting model with the latest data for the Scottish economy, and have produced the following estimates:

  • GVA growth in 2017 Q2 is nowcast to be 0.37% (which, at an annual rate, is 1.50%)
  • GVA growth in 2017 Q3 is nowcast to be 0.43% or 1.75% at an annual rate.

These essentially represent ‘no change’ relative to our estimates from last month.

Since we produced these estimates we received a official data from the Scottish Government on GVA growth in Q2 2017. This (first) estimate put GVA growth in the period from April to June relative to the previous three months at 0.1%. The published data also include revisions to the previous GVA estimates as discussed here.

This is lower than our nowcast, although it is worth noting that as highlighted here, Q2 GDP growth in the Services sector (representing three-quarters of the economy) grew at +0.7%. Similarly in the previous quarter, as detailed here, the original estimate of +0.8% GDP growth (since revised down to +0.6%) was driven by strong growth among sectors representing around 6% of the Scottish economy (sectors which historically have quite volatile output growth). In addition, this growth was driven almost entirely by external demand growth (i.e. exports to both the rest of the UK and rest of the world).

The chart below illustrates how our model has performed relative to the initial release of Scottish GVA in each quarter (this is the measure we ask the model to nowcast). Our model appears to generally track the trend in Scottish GVA, including the slowdown at during the first half of 2015.

Overall, our nowcast is much more stable than the actual GDP series. This is not that surprising. Because our nowcast is based upon a wide variety of official and unofficial data it should tend to track general conditions in the economy relatively well. What it will be less able to track are unique one-off events in individual sectors – like we have seen in the last two quarters – which given Scotland’s size can influence the headline GDP series. In times of volatility, it is best to focus on longer-term trends rather than individual quarterly changes.


Over the period on the chart below (representing the period where we’ve produced nowcasts in real time) our average GVA growth estimate is 0.45% compared to an average growth rate from the initial official estimate of GVA growth of 0.37%.

We will produce our first estimate for 2017 Q4 at the start of November.

A summary of Q2 2017 Scottish GDP figures

Today we had figures for GDP growth in Scotland for Q2 2017.

On the one hand, continued growth is clearly welcome. And on the back of the strong growth in Q1 2017, we always said that holding on to some of these gains would be a success in its own right.

But growth of just +0.1% is still disappointing.

As we said on a number of occasions, it is important not to get too carried away with one quarter’s set of results (positive or negative). The Scottish series can be volatile so focussing on longer-term trends – at least over the year – is much more relevant if you are to reach a proper conclusion about the relative health of the Scottish economy.

This blog provides a brief summary of today’s key results. Continue reading “A summary of Q2 2017 Scottish GDP figures”

Outlook for the Scottish Budget – our report in 8 key points

On Tuesday 26 September, we published our report on Scotland’s Budget 2017. Many thanks to those who attended our seminar.

For those unable to come along, or who do not have time to read the full report, here we summarise some conclusions from the sections that looked at the outlook for public spending over the next few years.

A follow-up blog in the coming days will discuss our analysis of longer-term trends. Continue reading “Outlook for the Scottish Budget – our report in 8 key points”