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Longinthetooth

What If Stamp Duty Became Payable By The Seller?

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It can't - other landlords will sell in response to the tax, making your intended higher price impossible
which will be bought up by the larger cash rich landlords, who will force prices for rent up. And you will be forced to pay those rents, so save less and so will never be able to buy .....

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The reason is that it imposes a fixed, periodic monetary cost to land ownership, at the moment you can leave your land unexploited and it need cost you nothing, you don't need to command a constant stream of currency in order to continue owning the land.

You just need a very much larger debt + interest.

The total usage cost is reduced with the tax which argues the precise converse.

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A tax on produced goods reduces the incentive to produce, thereby increasing the scarcity of those goods and raising price. You can model it as the producer keeping his costs, but price is not directly a matter of producer costs, scarcity is.

However, land is not produced, so all of that is academic when it comes to land.

Land that has to earn tax will be put to work and so planning laws will have to fall, otherwise, this just amounts to a landgrab by the government and the actual land will become unsellable too. So, land may not be produced from scratch, but it offers an opportunity to produce, and how well it does this determines it's value.

Even if we find a sane replacement for the planning laws, such a tax would still force people to vandalise the lands -- a forest that needs to produce £nk per year will have to be logged, hunted, touristed etc in order to achieve this, the meadow will have to be turned into strawberry poly tunnels. parking lots, camping grounds and so on.

Taxing existing stuff instead of generated wealth and the resulting surplus is always a bad idea, it doesn't save a thing but merely changes the ruler (as in measurement) and makes everyone poorer in the end.

That scarcity ideas of yours is a confusion -- land is not scarce, affordable land that allows people to start a business (or build houses) however is.

And your 'reducing incentive' mechanism is a result of reducing the incentive to buy by impoverishing the customers. Raising the price when people are too broke to afford the cheaper stuff now isn't going to help you out here.

Nonesense - if nobody wants to pay to do anything with it, its ‘keep’ is zero.

Now that would be a great idea, no? Tell me what is good about a tax that impoverishes us all? The problem with this tax is that it's affecting almost everything, so you end up in a long audit trail just like VAT and the tax itself not only destroys wealth, but also costs collectively more to administer than it brings in.

But that is a charge on production; land is not produced and so there can’t be any charge on its production when it is taxed.

It does not matter, the cost of the land is part of the cost of production and so, whatever you charge for the land will end up in the price of bread (etc)

If the tax man charges for owning 1 acre of land, the price a owners can sell the land for reduces.

Think about it, this really is quite simple

What if he cannot sell (tax too steep?) or, if he does not manage make the money to pay the tax? (sickness etc) The tax basically means you're renting the land from the govt., the deed merely is an AST on steroids.

A land tax falls directly on owners and cannot be passed on – for reasons outlined above.

The producer will not pass on the tax he pays on the land to his customers? Of course he will the same goes for anyone who is renting -- they won't go to work without making enough money either, so, his tax is passed on to his employer who then passes it on to the customer.

Btw, this idea of land taxes was what caused a lot of misery post hyperinflation in Germany -- everything was taxed to the hilt with the idea that all the owners surely made a packet when the currency was reset. It was a very bad idea all round and punished millions of ordinary tenants with sky-high rents -- see: http://de.wikipedia.org/wiki/Hauszinssteuer

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Stamp Duty is probably a necessary evil but is there an argument that if it were paid by the seller, not the buyer, it may assist the housing market in the long term. It would reduce the incentive to push up prices whilst potentially increasing affordability. What does the panel think?

it wouldn't work. stamp duty is a voluntary tax - buyer needs to pay it to get title. why would the seller bother?

but i would favour a change in the tax rules such that the principal private residence wouldn't apply in all situations eg flipper - perhaps as a tax payer you can only rely on the exemption once in a 5 year period.

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and if you added CGT to sales, you'd just see a complete freezing of the market as people just did not sell and held their property

I agree, but that wasn't the suggestion I was responding to.

tim

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Land that has to earn tax will be put to work and so planning laws will have to fall, otherwise, this just amounts to a landgrab by the government and the actual land will become unsellable too.

It amounts to no more of a landgrab by government than the present ownership arrangement . The land will not be unsellable, its exchange price will be severely reduced and will stabilize at quite low amounts, which will mean the only way money can be made with land is by doing something productive (merely holding it in ownership, would be pointless and expensive, if others wanted to use it)

The part about planning laws seems to be a total non sequitur

So, land may not be produced from scratch, but it offers an opportunity to produce, and how well it does this determines it's value.

And so landowners get to charge other people for an opportunity to produce – as if they in actuality supplied it.

The value does not disappear; it’s merely that the owner now has to pay for value he has taken from everyone else. So ownership has a lower price because its value does not include a component ripped from others people’s natural rights.

Even if we find a sane replacement for the planning laws, such a tax would still force people to vandalise the lands -- a forest that needs to produce £nk per year will have to be logged, hunted, touristed etc in order to achieve this, the meadow will have to be turned into strawberry poly tunnels. parking lots, camping grounds and so on.

The amount it would have to produce to be held would be lower than the presently charged private rent.

Taxing existing stuff instead of generated wealth and the resulting surplus is always a bad idea, it doesn't save a thing but merely changes the ruler (as in measurement) and makes everyone poorer in the end.

Taxing production, reduces production – taxing the ownership of a fixed supply used in production dis-incentivises holding the fixed supply in price speculations and so reduces its cost of usage to producers.

And your 'reducing incentive' mechanism is a result of reducing the incentive to buy by impoverishing the customers. Raising the price when people are too broke to afford the cheaper stuff now isn't going to help you out here.

It would reduce the price ; you even agree this above, but try to paint this a negative.

Now that would be a great idea, no? Tell me what is good about a tax that impoverishes us all? The problem with this tax is that it's affecting almost everything, so you end up in a long audit trail just like VAT and the tax itself not only destroys wealth, but also costs collectively more to administer than it brings in.

Land is not produced by the owners and so a tax on it will not reduce the amount of land – so where precisely is this reduced wealth?..oh you mean those relying on holding and selling land will instead have to make a productive contribution to society rather than merely inflicting costs on producers by holding out of their reach something that cannot be produced; and so this will mean their wealth is reduced? But in compensation for this other people who do make a contribution will no longer have to pay them for something they aren’t supplying.

It does not matter, the cost of the land is part of the cost of production and so, whatever you charge for the land will end up in the price of bread (etc)

Land rents are already charged, privately – this cost already ends up in the price of bread and so switching the destination of the funds exacts no extra burden on producers, it merely changes who passively benefits from his production. One objective of constructing this transfer as ‘tax’ rather than a private transfer to an owner is to reduce the payment production must make by stripping the heavy cost of land speculation from the price.

What if he cannot sell (tax too steep?) or, if he does not manage make the money to pay the tax? (sickness etc) The tax basically means you're renting the land from the govt., the deed merely is an AST on steroids.

All of sudden he is in the same position as one who cannot make rent, or fails to make a mortgage payment. What do you think should happen to such people?

By reducing the price and eliminating interest on a loan we make this FAR LESS LIKELY. By allowing private owners to collect value that they did not produce, we turn land ownership into a privilege whose price reaches unattainable levels for producers.

The producer will not pass on the tax he pays on the land to his customers? Of course he will the same goes for anyone who is renting -- they won't go to work without making enough money either, so, his tax is passed on to his employer who then passes it on to the customer.

The producer owner already incorporates rent into market prices; if this were not the case the only people who could compete would be landowners.

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It amounts to no more of a landgrab by government than the present ownership arrangement . The land will not be unsellable, its exchange price will be severely reduced and will stabilize at quite low amounts, which will mean the only way money can be made with land is by doing something productive (merely holding it in ownership, would be pointless and expensive, if others wanted to use it)

Why will the land not be unsellable if it does not produce as much as it costs? Property is a liability at the best of time, without increasing this (see current destructive laws on commercial property rates) Any such land will in the end be mopped up by the crown...

The part about planning laws seems to be a total non sequitur

Planning laws define what can be done with land. Once you start to tax the land, it means the land has to earn money to pay for itself. Unless you want the crown to own most of the UK once again, you have to find some sort of compromise here -- you cannot put a farm without planning permission, etc. and so, planning laws will have to change to accommodate this. (compare EU payments here for letting land lie fallow too). And too much abandoned land will also pose it's own problems (but that is another can of worms I'm not going to open lol)

It would reduce the price ; you even agree this above, but try to paint this a negative.

No, this is not what you said -- you said: scarcity makes for higher prices, but you were told that it's not rarity or scarcity but the inabilty of people to pay for the goods that throttles production because people cannot afford it. Now, if they don't have the money today at cheaper prices, where will the find the dosh to pay your higher prices? Prosperity will improve with debt?

Land is not produced by the owners and so a tax on it will not reduce the amount of land – so where precisely is this reduced wealth?..oh you mean those relying on holding and selling land will instead have to make a productive contribution to society rather than merely inflicting costs on producers by holding out of their reach something that cannot be produced; and so this will mean their wealth is reduced? But in compensation for this other people who do make a contribution will no longer have to pay them for something they aren’t supplying.

Landowners supply land to people and business who do not have the cash flow or the need to own land/buildings themselves. This is a service and it 'produces' instant land and housing for people who would otherwise be totally locked out of opportunities. In other words, they are bankrolling the tenant, like a silent partner in their business. Without landlords, newcomers or people without large sums in the bank would find life rather static and none of them would ever make it up the social ladder.

Land rents are already charged, privately – this cost already ends up in the price of bread and so switching the destination of the funds exacts no extra burden on producers, it merely changes who passively benefits from his production. One objective of constructing this transfer as ‘tax’ rather than a private transfer to an owner is to reduce the payment production must make by stripping the heavy cost of land speculation from the price.

You're not switching the destination, you're adding an extra tax to an already expensive commodity, making it even more unaffordable. There is not free lunch here...!

All of sudden he is in the same position as one who cannot make rent, or fails to make a mortgage payment. What do you think should happen to such people?

Right now, fittingly so since April 1st, commercial property is destroyed eventually when it's empty -- either the landlord goes bust or takes the building down because of the tax on non-productive assets. I don't think that this is the smart way of preserving the little we have left, no? Buying property carries many risks, and your idea of the landlord as a leech is not useful here. Some landlords are leeches, most are simply people trying to earn some money by providing a service that others want. Without landlords, many people and businesses will be left out in the cold (literally).

By reducing the price and eliminating interest on a loan we make this FAR LESS LIKELY. By allowing private owners to collect value that they did not produce, we turn land ownership into a privilege whose price reaches unattainable levels for producers.

Funny that, this is exactly the unintended consequences that I'm trying to warn you about. All the land will end up being owned by the crown and whoever runs the country. This type of situation happened to the Romans more than just once, there were a number of land reforms and whatnot -- fact is, there is no steady state, every system you build eventually finds the path of the least resistance, at what point a new system has to be brought in to perturb encrusted positions.

The producer owner already incorporates rent into market prices; if this were not the case the only people who could compete would be landowners.

Often the only people who can compete are landowners or those who have access to sizable loans, until the crash, may businesses were making their main profit in property and the retail profit just about paid to keep the business' cashflow ticking over smoothly. It's a fact in life and on the poker table -- having a lot of chips makes you more likely to win the tournament...

Putting tax on anything increases the price of it. Taxing homes and land generates inflation, because human logic dictates that they don't like losing out on assets that do not seem overtly like a consumable (which housing is in many ways). So, you tax them n% to buy the next house, they slap it onto the one they are selling, also, because it is such an eye watering amount, moving house can easily lose you an entire year of income in the end after all is paid for . This happens down the entire chain and so, the FTB and the lower end of the chain ends up paying the tax in some way.

So, stamp duty and other such taxes (HIPS etc) are a tax on moving and create HPI by definition.

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Planning laws define what can be done with land. Once you start to tax the land, it means the land has to earn money to pay for itself. Unless you want the crown to own most of the UK once again, you have to find some sort of compromise here -- you cannot put a farm without planning permission, etc. and so, planning laws will have to change to accommodate this. (compare EU payments here for letting land lie fallow too). And too much abandoned land will also pose it's own problems (but that is another can of worms I'm not going to open lol)

At best, this is two different issues conflated, at worst total confusion on your part . The second issue, has already been dealt with - the land rent is ALREADY charged – privately. A taxation on land would reduce the total charge on users by removing the speculative component in land pricing . As far as planning permission is concerned, i would lean to the most anarchic, least regulated situation that is practical. There is no reason useful land will simply be abandoned; the total price will simply follow present use a with what's left being available for anyone to use for free (without paying anyone)

No, this is not what you said -- you said: scarcity makes for higher prices, but you were told that it's not rarity or scarcity but the inabilty of people to pay for the goods that throttles production because people cannot afford it. Now, if they don't have the money today at cheaper prices, where will the find the dosh to pay your higher prices? Prosperity will improve with debt?

Higher prices (greater scarcity) make it more difficult to pay for goods. Taxation on production makes it more difficult to pay for goods because it reduces production and increases the scarcity / price of goods. If you do, then, go into one level of recursion, you can see further, that if production is taxed, then it is harder to hold the production necessary to pay someone else, the increased cost to produce for you.

You are going around in circles looking for a flaw in something that isn’t even particularly controversial (except if you are left wing)

Landowners supply land to people

No they don’t. Take the landowners and all their actions away and the land is still there; ergo, they can in no sense be described as actually supplying the land. In fact, in their role as landowner they don’t supply anything to anyone – they do charge though.

and business who do not have the cash flow or the need to own land/buildings themselves.

Buildings are a different matter – people do supply buildings

This is a service and it 'produces' instant land and housing for people who would otherwise be totally locked out of opportunities.

As I said, there is no sense in which the land is supplied by landowners and so to extent that they charge for land itself, they charge for no service.

In other words, they are bankrolling the tenant, like a silent partner in their business. Without landlords, newcomers or people without large sums in the bank would find life rather static and none of them would ever make it up the social ladder.

Without landlords, nobody would own the land and so tenants would be free to accommodate themselves with their own work without paying anyone for the privilege of doing so. Landlords aren’t in reality bankrolling anyone; they are sitting on a monopoly of something they didn’t / don’t supply.

You're not switching the destination, you're adding an extra tax to an already expensive commodity, making it even more unaffordable. There is not free lunch here...!

The rent is already being paid by producers – if someone else receives the payment for land, it is changing the destination of the payment, not increasing it. As the ‘provision’ of land requires no productive effort, the payment going to someone else makes no odds to production.

The payment producers make for land is already a tax, presently it is collected privately. If you analyse what is being paid for when land (location) is paid for, you can see quite clearly that none of it (proximity to schools etc etc), is actually being provided by the landowner in his role as landowner.

That said, keeping other taxes in place and adding a land tax is absolutely not what I advocate.

Right now, fittingly so since April 1st, commercial property is destroyed eventually when it's empty -- either the landlord goes bust or takes the building down because of the tax on non-productive assets. I don't think that this is the smart way of preserving the little we have left, no? Buying property carries many risks, and your idea of the landlord as a leech is not useful here. Some landlords are leeches, most are simply people trying to earn some money by providing a service that others want. Without landlords, many people and businesses will be left out in the cold (literally).

Funny that, this is exactly the unintended consequences that I'm trying to warn you about. All the land will end up being owned by the crown and whoever runs the country. This type of situation happened to the Romans more than just once, there were a number of land reforms and whatnot -- fact is, there is no steady state, every system you build eventually finds the path of the least resistance, at what point a new system has to be brought in to perturb encrusted positions.

I have no wish to attack landlords perse – landlords provide a service, they simply aren’t providing the land. Unfortunately, because of the system of bad taxation, most of the people who presently called landlords are inflicting more cost with their monopoly than the meager service they provide. Most of these problems are directly caused by taxation policies that punish producers for making improvements, so that those merely holding locations for a period can have a free ride and collect from production without contributing.

Often the only people who can compete are landowners or those who have access to sizable loans, until the crash, may businesses were making their main profit in property and the retail profit just about paid to keep the business' cashflow ticking over smoothly. It's a fact in life and on the poker table -- having a lot of chips makes you more likely to win the tournament...

The first line is nonsense, most farmers (for instance) are tenant farmers

What do tenants pay rent out of if they are competed out of the market?

The price of goods incorporates land rent, because the competitive advantage of holding land can not be competed away by production because land cannot be produced. The only way to get the advantage it is to pay the owners of land and replace them – now another holds the advantage, which (again) cannot be competed away because to gain it the new owner must be paid its value in competition.

Putting tax on anything increases the price of it.

Except land

If you are buying two identical pieces of land at the same location – one comes with an ongoing tax liability, the other doesn’t, which one would you be prepared to pay a higher price for? If you hold a piece of land you have no use for, but are paying a tax on, will you accept higher or lower bids for exchange?

The tax vs price rule of thumb, you are using, is only good for items which are extracted or produced, because a tax acts to disincentivise further production; but land is not produced. Land is the only exception to this rule of thumb that is economically significant.

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You just need a very much larger debt + interest.

The total usage cost is reduced with the tax which argues the precise converse.

This is an argument against debt-based land speculation, not an argument in favour of land tax. There's no fundamental reason why debt has to be an intrinsic part of land ownership; as you'll see from my sig, I dislike land-debt as well.

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This is an argument against debt-based land speculation, not an argument in favour of land tax. There's no fundamental reason why debt has to be an intrinsic part of land ownership; as you'll see from my sig, I dislike land-debt as well.

If you simply reduce the access to credit needed to purchase land you push the abusiveness of land in a different direction - now credit supplies less alternative to tenancy and rents increase

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the only way money can be made with land is by doing something productive (merely holding it in ownership, would be pointless and expensive, if others wanted to use it)

This is exactly the point I've been trying to make to you: the use of land would be determined purely by the immediate needs of the market; anybody who tries to take the longer-term, less-immediately profitable view faces being bankrupted by tax demands on the "valuable" asset they own.

The planning horizon of market economies just isn't long-term enough.

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If you simply reduce the access to credit needed to purchase land you push the abusiveness of land in a different direction - now credit supplies less alternative to tenancy and rents increase

I don't think it's that clear cut -- credit enables asset prices to be bid up; restricted/no credit would force asset prices down to what people could actually afford. This would enable people to buy land without enslaving themselves either to a bank or to a tax-collector -- and there's your alternative to tenancy and rents. Lower asset prices and less debt-servicing should actually lead to lower rents.

Edited by huw

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I don't think it's that clear cut -- credit enables asset prices to be bid up; restricted/no credit would force asset prices down to what people could actually afford. This would enable people to buy land without enslaving themselves either to a bank or to a tax-collector -- and there's your alternative to tenancy and rents. Lower asset prices and less debt-servicing should actually lead to lower rents.

I'm not suggesting that exchange prices would be unaffected; they will come down with credit control; they just will not be effected enough to offset the reduction in the ability of producers to buy real estate to work for a living. The reason for this is that, for a lot of the big actors in the real estate, credit is not the issue and these people will monopolise the market to greater degree than they do now. Bear in mind that all the big increases in home ownership have come with increased credit beimg made available to working people, and it is not easy to imagine the reverse being true - that contracted credit results in a real estate market in which fewer own and more rent. This is the political reason the credit taps are turned on and credit regulation is abandoned during an upswing; without the capacitor of credit, the pain of real estate inflation during an economic upswing becomes very quickly a stark political issue, with working people trapped in tenancy while rents rise and rise and rise.

Edited by Stars

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I'm not suggesting that exchange prices would be unaffected; they will come down with credit control; they just will not be effected enough to offset the reduction in the ability of producers to buy real estate to work for a living. The reason for this is that, for a lot of the big actors in the real estate, credit is not the issue and these people will monopolise the market to greater degree than they do now.

A variety of components from the tax tool-kit could address that problem, not just land tax.

Bear in mind that all the big increases in home ownership have come with increased credit beimg made available to working people, and it is not easy to imagine the reverse being true - that contracted credit results in a real estate market in which fewer own and more rent. This is the political reason the credit taps are turned on and credit regulation is abandoned during an upswing; without the capacitor of credit, the pain of real estate inflation during an economic upswing becomes very quickly a stark political issue, with working people trapped in tenancy while rents rise and rise and rise.

Agreed, that's the political reality but we're talking about the potential for change and improvement as part of the fallout of what's happening now, right? (Even if we don't quite see eye to eye on how best to implement that). And let's not lose sight of the fact that the elevation of home ownership to some kind of sacred goal is largely because in the UK it's the only way for many to achieve an acceptable quality of tenure; we could easily reform our rental system along the lines of (say) the Dutch one to give tenants the rights they need to make a secure home for themselves.

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A variety of components from the tax tool-kit could address that problem, not just land tax.

Not imo true

Any other form of tax will compound the problem because it will provide public value / services which will appear in real estate price at the expense of producers rather than those holding the real estate. To put it another way, it will provide value to the owners of real estate at the expense of someone else and so (if anything) compound the way in which real estate sucks up all available value.

Agreed, that's the political reality but we're talking about the potential for change and improvement as part of the fallout of what's happening now, right? (Even if we don't quite see eye to eye on how best to implement that).

I agree we are broadly on the same side here. But we have been here before and are poised to make more or less the same gargantuan mistakes we made last time - to restrict credit and create a command economy. It really isn't the answer, because it just shifts the symptoms around and then at some point (the next upswing) the restrictions seem positively malicious and against the interests of working people and are removed (back to square 1).

And let's not lose sight of the fact that the elevation of home ownership to some kind of sacred goal is largely because in the UK it's the only way for many to achieve an acceptable quality of tenure; we could easily reform our rental system along the lines of (say) the Dutch one to give tenants the rights they need to make a secure home for themselves.

You'll probably find that the dutch system differs from ours in more ways than simple regulation of tenant's rights and that it taxes the owners of land at quite a high rate in comparison to the uk (i haven't looked). The reason i say this is because such tenant's rights could only be practically implemented in a situation in which these owners could not simply withdraw their assets from the rental market and instead make some money on the rise in exchange price.

Edited by Stars

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Not imo true

Any other form of tax will compound the problem because it will provide public value / services which will appear in real estate price at the expense of producers rather than those holding the real estate. To put it another way, it will provide value to the owners of real estate at the expense of someone else and so (if anything) compound the way in which real estate sucks up all available value.

Inheritance tax?

I agree we are broadly on the same side here. But we have been here before and are poised to make more or less the same gargantuan mistakes we made last time - to restrict credit and create a command economy. It really isn't the answer, because it just shifts the symptoms around and then at some point (the next upswing) the restrictions seem positively malicious and against the interests of working people and are removed (back to square 1).

Well, yes -- but any measure undertaken to solve a problem can be undone by people who no longer think the problem is important.

You'll probably find that the dutch system differs from ours in more ways than simple regulation of tenant's rights and that it taxes the owners of land at quite a high rate in comparison to the uk (i haven't looked). The reason i say this is because such tenant's rights could only be practically implemented in a situation in which these owners could not simply withdraw their assets from the rental market and instead make some money on the rise in exchange price.

I owned a house in Holland ... I just had to pay "gemeentebelasting" which is the equivalent of our council tax and didn't seem disproportionate at the time (income and payroll tax was another matter!).

A Dutch landlord used to post here, maybe he still does (?) From what I recall his opinion was that the Dutch rental system was better all round: secure tenure for tenants as long as they pay the rent and abide by the contract; effective protection for landlords when tenants don't play fair. Such transparency (which we're far from having in the UK) can only encourage investment in the sector, not discourage it.

Edited by huw

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