Sirius Minerals and the case for a land-value tax
Why should people who have done nothing in particular receive a huge windfall just because they happen to own land in the right place at the right time, asks Merryn Somerset Webb.
Imagine working for 50-odd years at an RAF radar station in Yorkshire. You retire to a five-acre farm nearby with your comfortable but not exactly luxurious pension. You raise a few dairy goats. Then one day someone comes by and tells you that there are millions of tonnes of a fertiliser called polyhalite under your goats. They're going to start digging it up. And when they do, you'll get a cut of its value. Hello luxury.
That's what's happened to Liz Worthy.
Sirius Mining has broken ground on what the Sunday Times called the "biggest mining project ever undertaken in Britain" and she will get a cut of the £65m-odd a year they think they will be paying out in royalties to around 500 landowners (including the Crown Estate).
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However, Worthy won't be getting anywhere near as much as some. Larger scale farms will bank "seven-figure royalty cheques".
It's heartwarming stuff. But is it reasonable? Why should a group of people who have done nothing in particular taken no risk, had no ideas, dug no holes receive a huge windfall just because they happen to own land in the right place at the right time?
It's a question you might also ask about anyone owning land near a big taxpayer funded infrastructure project (Crossrail for example)? And if you think about too long you will end up wondering about the concept of a land value tax as a possible replacement for our current system of taxation. You can read all about that here.
In the meantime, if you aren't lucky enough to own a farm in the right place in Yorkshire but still fancy an outside chance of getting rich from polyhalite you could buy the shares (LSE: SXX). We haven't looked at the company in detail but it is getting into a high-risk business: the construction work will be tough, the project is huge and the market is uncertain. Midas in the Mail on Sunday rates it "an adventurous long term buy."
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Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).
After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times
Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.
Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.
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