The comedian and TV presenter Griff Rhys Jones is reported today to be ready to quit the UK in protest at plans by the Labour Party to introduce a mansion tax if it wins the 2015 General Election. As the Telegraph reports,
He himself lives in a “gigantic” house in a part of central London that was, when he bought it 15 years ago, a “slum”. He has a track record of buying large, run-down properties and turning them into homes for himself and his wife, Jo. His Fitzrovia house has appreciated so significantly that he is contemplating moving overseas if Labour win the election and introduce a mansion tax.
“It would mean I’d be paying the most colossal tax, which is obviously aimed at foreigners who have apparently come in and bought up all the property in London,” he says. “That sounds about as fatuous an idea as that immigrants are stealing all the jobs. I’d probably go and live abroad because I could get some massive palace which I could restore there.”
There has been a lot of nonsense talked about the mansion tax. This, from the Chief Executive of Legal & General, is typical.
“People who choose to prioritise buying a home have typically made sacrifices to do so: fewer foreign holidays, meals out or other luxuries. Through no fault of their own, their prudence would be punished by a Mansion Tax.” (Telegraph 27 October 2014).
The idea that folk who own houses worth in the millions have made sacrifices, saved hard or been prudent may well be true (at least for some). But that sacrifice, saving and prudence is not what has been responsible for their homes being worth so much money. The inflated price of houses in many parts of the UK is a consequence of scarcity and a lax fiscal regime. The financial gains made by homeowners are only in very small part due to their own efforts (for example, insulating or other improvements). The vast majority of the gains are as a consequence of rising land values.
Labour has yet to spell out the details of its plans but they involve a levy on properties worth over £2 million. Ed Balls announced the policy in an article in the Evening Standard on 20 October 2014. The Financial Times calculated that on average, the owners of properties worth over £3 million would pay an average of £19,000 per year.
Griff Rhys Jones and his partner Joanna own 2 Fitzroy Square (shaded red above) in the London borough of Camden. They bought the property for £1,450,000 in 1998 after Camden Council granted planning consent for a change of use from offices to a residential home (see Land register title). The couple then undertook the renovations and the property is now a domestic dwelling with 7 bedrooms, 3 bathrooms and 4 reception rooms.
Image: Extract from Title Plan for 2 Fitzroy Square.
According to Zoopla, the property is currently worth £7,012.156 and has risen in value by £3,015,251 over the past 5 years. The rental value is estimated at £16,167 per month (£194,004 per year). Rhys Jones currently pays £2640.96 in Council Tax to Camden Council.
Assuming that £1 million was spent undertaking renovations, the Rhys Joneses have seen their property rise in value by around £4.5 million. That sum is unearned increment (economic rent in economic theory) and, since principal residential properties are exempt from capital gains tax, the gain is entirely tax-free. This tax relief is worth an estimated £10.4 billion per year to homeowners according to the National Audit Office.(1)
Successive governments have put in place a fiscal regime for domestic property that allows Rhys Jones to make a £4.5 million tax-free capital gain without any effort on his part.
A sensible system of recurrent taxation would be designed to curtail such asset inflation by socialising this rent rather than allowing it to be appropriated tax-free by private interests. The mansion tax is a badly designed tax. As the Institute of Fiscal Studies commented in February 2013,
“Rather than adding a mansion tax on top of an unreformed and deficient council tax, it would be better to reform council tax itself to make it proportional to current property values.”
If property taxation was properly proportional and the Rhys Joneses paid the percentage rate (1.85%) that a mid-point English Band D property is liable for, then they would be paying £129,724 per year. The Mansion tax is liable to be about a tenth of that.
That kind of liability would deter most buyers who, as a consequence would offer less for the property so as to pay less in annual holding costs – which is precisely what a well-designed system of recurrent property taxation would do. Lower property prices means less indebtedness and more resources invested in the productive economy. But that is not the kind of economy that either Labour or the Tories appear to be interested in.
In the meantime perhaps Rhys Jones should be grateful.
(1) See Figure 6 in Tax Reliefs.
Insightful and informative article missing only the key fact that Rhys Jones is an irritating and over exposed presenter we can happily do without
Unfortunately we can’t tax people for being irritating little twats; if we could there would be no difficulty raising money for whatever purpose.
Sporting estates have enjoyed similiar appreciation and pay not at all, not even council tax.
They are exempt from inheritance tax even though agriculture is not even a secondary landuse, and much of it is totally unfarmed.
When I wrote to my SNP MSP, she was pretty noncommital about Land Value Tax/Rent. Do you think that’s because of the difficulties inherent in updating the Land Register?
No – that’s all doable. The real problem is a political one. The SNP is, I think, still wedded to the idea of a “local” income tax. I say “local” because it’s not really local. Income tax is a bad tax as it disincentivises work. It will probably always be with us but the last thing we need to do is to increase the taxation burden on wages when unearned increments and economic rent could yield plenty and act as a positive influence on the economy. Your MSP may have been uncertain about LVT but the bigger challenge is to get the SNP to accept the merits of levying any kind of recurrent charges on land.
Mansion tax is spiteful. The obvious, and sensible, route is to get the valuers out now doing a full revaluation, and then to put new Council Tax bands above the current ones, which stop, even at 1991 prices, far too soon.
You have a good point that a better solution is to use the existing Council Tax system but the end result should be the same: higher valued properties should pay higher taxes. If we’re going to tax earned income at a starting rate of over 40% (20% income tax, 20% National Insurance when you include the “employer’s” contribution which simply depresses salaries), then taxing completely unearned wealth is morally fair. A problem with Council Tax is that it is not secured against the property (i.e. payable by the landowner), but even then it has a collection rate of 97%, which is vastly more efficient than taxes on income that are evaded and avoided on an industrial scale and impose an enormous burden on businesses.
The problem with council tax is that there was once a riot, which scares politicians senseless.
Well Griff’s done pretty well out of the BBC since I were a young lad so it may be that if he does move abroad there may be another national broadcaster that employs ex-Footlights’ members by the barrowload where he will be able to network to his heart’s content. I’m sure the French or the Spanish perhaps even the Canadians would love to hear about his boyhood times in Wales. I mean… which national broadcaster (or commercial channel of course) wouldn’t love to hear about what’s new with Griff? Perhaps Dara, Rory and Griff could be filmed boating down the Yukon…even if I couldn’t see if it on British TV I would pay shedloads of cash for the boxset. A true national treasure.
Er! well, whatever rows your boat, isn’t it!
If you listen carefully…you can hear the irony…
PhilJoMar, I think you were too subtle for the Internets.
I do recognise irony hence the ‘yo bro’ comment. Well it’s meant to be yo bro but it wasn’t taught at public school in the 1950s and 60s so may not be quite authentic, well no it isn’t authentic as I’m not one of the bro!
GRJ’s boyhood in Wales? His family moved to England when he was just a few months old. He spent his childhood mainly in Sussex and Essex.
I was referring to what he had said about childhood holidays in Wales. I’m half-Welsh so I actually watched his show about his ‘great Welsh adventure’. I was able to enjoy everything I could see outside of the GRJ stencil I made specifically for the occasion.
It could be argued that as Griff’s pay came largely from the BBC, his property was funded through the public purse via the license fee !.. just thought I’d throw in the point !
Unearned income seems to be an accepted part of British life. I think the thought of taxing all income equally irritates and worries a certain level of society – who just happen to include decision makers. The parallel with what a concomitant percentage would bring in was highly illustrative.
According the wikipedia its not his only residence, he owns a property in Holbrook, Suffolk as well.
According to Rory McGrath last night GRJ owns ‘about eight’ houses… but McGrath was horribly drunk, so I wouldn’t write it in a newspaper.
This country has a debt of £1.4 trillion and growing at the rate of £100 billion per year.
We have no alternative but to tax property, as happened post world wars when finances were bad but not this bad.
Second homes and third homes should receive punitive taxation to discourage the practise, with ownership of larger numbers made untenable.
You hear of so many people buying a house and “just keeping the old one” for occasional use or to rent out, this needs to be stopped, rather than building more shoeboxes on prime farmland.
Planning controls should be put on rural cottages and farmhouses to ensure that the locals have enough houses, to stop such houses being converted to holiday lets.
I heard a comment on BBC Radio 4 the other evening that the people being made to pay for the mess we are in are not those responsible for it. It’s the banks that should be paying; if they can afford to pay millions in fines for various misdeeds they can afford to pay towards clearing up the mess they made.
Unfortunately, fining banks is all show. The regulators show they are regulating and the banks show they are regulated. No one gets charged with a crime.
However, banks are credit (debt) creating machines. Customers & the public pay the fines through future credit creation & interest charged (usury).
Banks create 97 percent of our money supply as loans & mortgages ( see Bank of England Quarterly Bulletin 2014 Q1) They therefore decide who gets paid.
We are losing vast amounts in seigniorage by allowing private banking corporations to get away with the crime of the centuries: counterfeiting our currency.
That’s where to look to tax. Follow the money to its source.
It’s all debt in the modern world, apart from the 3 percent of cash. Therein lies a solution.
The principle should be to tax money & assets, not people.
The government also needs to take a large share of the blame. What about Brown, who inherited a reasonably strong economy, and his years of spending money that wasn’t there? His irresponsible attitude at the top of the pile only encouraged the rest of society to be irresponsible, and the mess won’t be cleared up for decades, if ever.
Indeed. GB who, in his first budget in 1997 said “I will not let house prices get out of control”. When he left office as Chancellor they had trebled on the back of a pile of cheap private credit.
The banks would certainly pay – higher property taxes will reduce capitalised values, hence smaller mortgages and less interest paid to the bank. That’s the beauty of property taxes – they are borne by the owner, not the occupant or buying. In fact when the mansion tax a.k.a. domestic rates was abolished in 1989, it gave existing owners a massive windfall as the absence of a £10k (over £20k in today’s money) rates bill means that buyers can afford a much bigger mortgage.
over rated over paid let him go and tax him 99 pence in the pound on the sale of his properties as the tax payer has funded his pretentious life style for to long. goodbye and good riddance
Perhaps Mr Jones should consider a move to the US where property taxes average 1.4%.
So he be paying nearly £100K a year instead of £2.6K, or a 3800% increase 🙂
Orleans County in New York pay 3.28%.
Perhaps our Griff might like to try there?
What manipulative bullshit.
If he is earning a rental income from 2 Fitzroy Sq, it is not exempt from capital gains tax. And if the property is rented out by himself and not a foreign company, he is paying a substantial income tax on the rental income.
What good reason is there to penalise owners of expensive houses apart from envy? Is it reliable and sustainable source of revenue. Have you really surveyed to check if the targets of this punitive tax actually have the resources to pay the tax?
Wealthy people are not wedded to the concept of living in large houses. Maybe this politics of envy will lead to people choosing to live in smaller apartments in gated communities. Or perhaps in other countries.
While you may not end the world if the large mentions get converted to small bedsits, there is considerable economic activity destroyed by destroying mansions, not to mention killing off aspiration and social cohesion between people of different wealth. All this in aid of envy?
One reason why UK has not suffered the more severe consequences of the recent recession is the wealth that foreigners have poured into the UK. This is largely because of the readily available expensive houses people could invest in readily. This might be unfair, but it is unfair to countries where the wealth has fled from, not to the UK. The UK benefitted enormously from this inward investment. Released capital for people to invest in businesses and create jobs. This has not happened by magic!
The housing crisis (supply and affordability) can be addressed more simply in introducing how much residential property individuals can own directly or indirectly. The problem is not the aristocrat in Holland Park, but the small time buy-to-let investor with 20 terraced houses.
As far as I am aware, Rhys Jones is nit earning a rental income from 2 Fitzroy Sq. – it is their principal residence. I am not wanting to penalise anyone – merely argue for a well-designed fiscal regime on land and property – one which actually doesn’t create such huge asset inflation. Private debt in the UK stood at £1.432 trillion in January 2014 of which £1.273 trillion is mortgage debt. If houses were cheaper, there would be less indebtedness and the economy would be in far better shape. Foreigners spending on expensive houses in the UK is not “investment” because housing is an unproductive asset. Even Boris Johnson freely admitted last week that this is not useful investment – it merely pushes prices up and makes housing more expensive for everyone else.
With respect, you seem confused. If I am competing with Greek millionaires to but that mansion in Kensington, I don’t deserve this benevolent intervention in trying to deflate mansion prices. It is confusing that you are concerned about inflation in cost of mansions – a lot of wealthy people are putting their spare cash into an overinflated property. I’m happy as long as they don’t start spending money on 50 two-bedroom flats, or a million loafs of bread, or 20,000 bus tickets or whatever else that causes inflation.
When a Greek billionaire buys a mansion, it IS an investment, unless the Englishman selling it with take the money and spend it on a Greek mansion (which hasn’t happened, trust me). Mostly the investors are foreign , with foreign cash (not mortgage). Reason to be ecstatic, no?
Save your concern for people struggling to buy their first property or are living in unsuitably small or distant properties.
What most people really want is a slight more comfortable 1 bedroom flat or maybe a two/three/four bedroom flat /house. The government can help by increasing the stack of such housing, by 1: encouraging new construction, 2: limiting how much housing (my amount not value) and individual can own. Many countries have adopted land-reforms and UK needs the same at least for land for housing.
The number of mansions which is the targets of this proposed tax are quite a small number. Even if you convert all of them into small flat, it wouldn’t make any difference on the housing crisis.
It’s depressing to see so many people on the left motivated by pure envy. It doesn’t matter if someone has too much, worry about those who have too little. There are other more important things that determine quality of life. Having friends, being genetically gifted with advantageous physical and mental attributes, ect are more important that flat screen TVs and foreign holidays.
I don’t expect politicians to ever admit that actually given the circumstances, we have had it rather good. But this whore politics of envy and resentment is a huge distraction from people who actually need help: people sleeping rough, people with severe mental illness, refugees etc. This constant ‘woe-be-me’ and ‘that-groups-fault’ politics is scam.
Poverty is only relative if want an everlasting vote bank with ‘victim’ permanently tattooed on their foreheads.
PS; ‘Even Boris Johnson’ is never a realiable test of any theory.
PPS: Maybe the use of Griff Rhys Jones as an example is merited as he initiated it, but the land-registry documents, the satellite imagery and personal details betrays a very ugly sentiment.
Selected examples don’t prove the rule, but is very handy if you want to elicit a reactionary sentiment.
You wouldn’t like an argument about disability benefits being based on the example of Welsh body-builder who claimed to bed-ridden, would you?
No ugly sentiments – just facts in the public domain to counter the claims that he is making from a position of privilege. If you want to understand more about land and property taxation, read the Mirrlees Report Chapter 16 (and perhaps 15). Then perhaps look at Northern Ireland LVT report to see the devastating economic consequences of housing bubbles.
Sorry, you’re still missing the point. People adversely affected by increasing house prices do not live in mansions. Normal houses and mansions are different markets. You can’t control cost of omelettes by taxing Faberge eggs!
Even if you think they are the same market and admit that you are driven by envy (i.e. you want that mansion), taxing them further isn’t going to make them more affordable for you. Unless you are in the tiny minority of people who may pay less for it, ergo less stamp duty, and also fall below the threshold for mansion tax. A lose-lose for treasury.
Forget your envy, think rationally. Your idea of super-rich is Mr Scrooge from DuckTales. Reality is quite different. The super-wealthy who are sitting on idle liquid-capital are losing it at at least the rate of inflation.
To sustainably raise money out of millionaire, you tax expenditure not assets. For once UKIP came with a decent policy idea (the Gucci tax), the lefty mongrels mocked and ridiculed it.
Complaining about the politics of envy is just an attempt to dismiss legitimate concerns about fair-dealing.
No-one minds if people work hard and manage to receive a reasonable level of wealth in return. The problem comes when people receive wealth which they cannot reasonably be said to have earned by virtue of any work they have done (excluding welfare support for the retired, sick & disabled etc). Inevitably, this means taking wealth from other people who did create it.
From this perspective, we live in a pretty dysfunctional society. The (self-harming) level of inequality in the UK is a clear sign that something is badly wrong. This can’t happen without a system which repeatedly creates opportunities to exploit other people rather than encouraging fair-dealing.
In London, housing costs are driving many low-income people out of their homes and communities. I’m not sure if they’d agree with your claims about zero impact from rising house prices.
There is a severe housing crisis in the UK and in London in particular where about 14000 new homes are needed every year. It is not caused by 14000 super rich families moving to the UK.
I don’t have a problem with people being envious or hateful. You may continue envying the rich and hating the immigrants, but apart from the obvious risk to groups that are targeted by these sentiments, it clearly makes for dumb electrorate. Not very healthy in a democracy. No wonder politicians say one thing to the public (anti-immigration / anti-rich rhetoric) and do the exact opposite in private. If people really to change politics, they should stop thinking like a rabid mob and think more rationally. Whatever party you vote for, vote for those with rational policies rather than for those pandering to biggest vote-bank.
If an economic system creates opportunities to accrue wealth without doing a reasonable amount of work to earn it, that is in effect a kind of informal welfare system for those in a position to exploit it.
Strangely such opportunities don’t seem to exist for those on lower incomes, or no incomes, although they will often be the subject of stern lectures about a “something for nothing” culture from those who are exploiting various welfare schemes for the wealthy.
Note that I have not said anything about envy or hate. I’m just talking about fairness, and the idea that wealth should be earned not handed to you on a plate. Isn’t that an old-fashioned, Conservative value?
Would just add that even if GRJ were renting out his Fitzrovia mansion, he would pay capital gains tax on the income at 18% and 28%. These rates are lower than the taxes on income (aka work), at 20% and 40%. Is it not mesmerising that we tax unearned income more lightly than earned? Is not beyond mesmerising that this tax regime was largely put in place by the last Labour government?
As Mr Wightman implies here, the comment poster understands neither economics nor perhaps common sense. This stuff has got nothing to do with envy. It is about fairness (and also about laying fiscal foundations that might increase the dismal productivity gains recorded in the UK, but that is a much more complex story).
I agree with your last paragraph entirely, but mr jones mansion was 3 or 4 flats before, so he is keeping 2 or 3 families from owning a home.
Same as the duke of norfolk owns a hundred farms and 1000 cottages, thereby denying 1,100 people the chance to own a home/farm.
Where part of the population has money to burn, they will increasingly acquire the assets and therefore the wealth of the other larger part of the population who are not so lucky.
Thomas piketty explains it all very well in “capital in the 21st century”
“The problem is not the aristocrat in Holland Park, but the small time buy-to-let investor with 20 terraced houses”
20 terraced houses pay 20 sets of council tax, which in undesirable areas is a tax on the building, not the land. The rental income is taxed as well, and they are subject to CGT. How much more tax would you propose extracting from this, while leaving the idle mansion owner untaxed? The tenants of 20 flats in an undesirable area impose very little burden on everyone else, whereas the underoccupied mansion in Central London imposes higher rents on everyone else.
“Have you really surveyed to check if the targets of this punitive tax actually have the resources to pay the tax?”
VAT, National Insurance and other taxes on earned income also don’t take into account the ability to pay. Hundreds of thousands of jobs that are marginally profitable are destroyed when 20% VAT is imposed on their output. This is a far bigger crime that affects far more people’s private property than nudging someone to live within their means, i.e. consume housing services that they can cover with their earned income.
Some of the ‘mentions’ in my comment above are infact ‘mansions’. See what the mansion tax does?
The same Griff Rhys Jones who signed the ‘Love Letter To Scotland’ telling us we were better together has now decided it’s better for him to leave the country all together. What a grade A tosser.
Of course, it’s ‘do as I say not do as I do’; just like all the other overpaid celebs singing from the Cameron song sheet all signing up for OBEs and what have you!
Great to see you on Comment is Free today Andy.
My Housing Association home in Glasgow is band F – only a G away from Mr Jones’s Camden mansion, Don’t seem right!
So essentially what we are saying here is that 15 years ago Griff Rhyl Jones took the risk to invest his hard earned money into property in a less than favourable area. He then spend more of his money on renovating said property. Money which he will already have paid tax on.
Now years later he is potentially faced with a huge bill. So yet again we are looking to punish someone who has worked hard and invested wisely. Maybe rather than punishing those who have made a success of themselves we should get the people off free handouts from our benefits system (where our taxes go to encourage people to not work have large families and have the state provide everything for you) and get them working and paying their own way !!
Well done Griff I applaud your vision 15 years ago.
No-one is being punished. A long line of economists from Adam Smith and David Ricardo to Milton Friedman have recognised unearned increments (which is what several millions of the house is) as precisely that – unearned. They are a return provided by the demands placed on the location value by wider society. If this kind of return was made by real investment in labour, plant, ideas etc then that would be perfectly reasonable. But UK is paying a price for this with over £1.273 trillion of private debt on over-priced houses – that’s debt that could instead have been invested in productive enterprise creating jobs and generating tax revenues.
I know the area where the house is and it was never a slum. Run down maybe but always a good investment for property. GRJ wasn’t taking a chance when he bought it and for those who are overpaid their earning are hardly got the hard way.
A well aimed personal attack on a well paid jester of the BBC has stirred more interest in LVT than screeds of academic musings , well done , keep it up.
I take issue with your assertion that house price inflation was a result of a ‘lax fiscal regime’. Fiscal policy in the UK is the responsibility of the Treasury and may have been lax, but it had no influence on house price inflation.
Inflation is argued to be a monetary phenomenon and consequently monetary policy is utilised to control it. Monetary policy includes the setting of the price of money, interest rates, and is the responsibility of the Bank of England’s Monetary Policy Committee. In broad terms, the MPC attempts to control inflation in the economy by setting the price of Central Bank Reserves, which are a form of money utilised solely to settle payments between Commercial Banks within the closed loop banking system. The Bank of England Central Bank Reserves interest rate influences the interest rate offered by Commercial Banks in the real economy and consequently stimulates or otherwise lending.
Unfortunately this form of monetary policy is not wholly effective because it does not per se impose restrictions on the lending activities of Commercial Banks. Commercial Banks are incentivised to lend because the more they lend the more profit they make; that is their business and they preferentially lend into the mortgage market because collateral is required in the event of default, thereby minimising risk. In essence, it is confidence that really determines the extent of their lending activities.
It is important to understand however that ‘lending’ is a misnomer because Commercial Banks do not lend bank deposits, they create bank deposits. In fact, when a Commercial Bank extends a loan to a customer it simultaneously creates an asset and a liability on its balance sheet. The loan agreement sits on the asset side of its balance sheet and newly created bank deposits sit on the liability side of its balance sheet. It is equally important to understand that the converse is true, when ‘loans’ are repaid bank deposits are destroyed. However, logic dictates that when more money is created than is destroyed the money supply necessarily increases, thus creating inflationary pressures within the economy due to its monetary nature.
Between the years 1996 and 2007 confidence was high across the economy and collectively Commercial Banks preferentially allocated newly created money to customers in the mortgage market, in search of profit, thus affecting house prices. I understand that over £1 trillion of new money was created by the system between 2000 and 2007, effectively doubling the money supply to £2 trillion; a large proportion of this new money was allocated to mortgage ‘lending’. I am convinced that this goes someway to explain house price inflation between 1996 and 2007 and that it had nothing to do with a ‘lax fiscal regime’.
Bank of England Quarterly Bulletin 2014 Q1 Money creation in the modern economy.
I am aware of the Bank of England report and the wider issues you raise. But fiscal policy in relation to land is the responsibility of local government (albeit constrained by the attempts by central government to over-rode its autonomy).
In 1990 under the old rating system homes in London were paying up to £10k pa (so £21,700 today). Westminster’s band H council tax now? £1,353. That’s lax fiscal policy.
Yes, I would agree…is that socialism for the rich? It would appear so.
Its a lax fiscal regime all the way.
Capital gains in housing should have been taxed annually just as income is taxed.
Capitalism must be controlled or we will continue to slide backwards to victorian times, indeed we are already there.
You can’t tax capital gain annually if it hasn’t been realised, where is the cash to do it? What happens if the value goes down the year after?
Its not earned yet, because it isn’t real. A house value is only real when you buy it or sell it. THe rest of the time it could be worth 100 billion and its still not real. I appreciate some homes in London need to pay more council tax. But to tax something that isn’t real is silly.
Then what is council tax and non-domestic rating if it is not taxing something real? The point here is to capture economic rent – the site value that is not created by the owner. That is the price of owning land and a price that will work to moderate capital values thus releasing more resources into the productive economy. Taxing expensive houses now is clumsy – had a decent system been in place (see previous comments about the rates) then we would not be in the situation where Britain is swimming in £1.2 trillion of personal debt which id dragging the economy, promoting inequality, inhibiting investment in jobs and killing the aspirations of young people.
Council tax is a tax to pay for local services. A capital gain isn’t real until its realised. The other point you seem to gloss over is just because someone has an expensive property doesn’t necessarily mean they are rich and can afford huge taxes – they may also have massive debts.
The CGT exemption on principle residences probably encourages people to buy larger houses (and borrow more) than they need because they see it as a tax free savvy investment. Which it clearly was for our celebrity friend here.
The Mansion tax is a rubbish idea, it’s poorly targeted , to clobber the so called rich. Who is richer the person with £100m in the bank and lives in a £1m home or the person with a £3m home and a £2m mortgage. It will also raise bugger all and devalue lots of properties thus raising even less. Better is to reform the council tax bands. Much fairer too. But this won’t happen because it’s a vote loser, too many people will lose out. The mansion tax is just a populist gesture, immature unfair and unworkable.
Now what would be fair is to remove the CGT exemption on principle residences. That money is unearned and the result of post code lottery. It would raise a shitload of money . But it would of course be a massive vote loser , can’t imagine our shabby career politicians considering it. But for all you armchair warriors who think mansion tax is the way to go you should consider this to be the fairest and most effective land tax reform and simple to apply
For the record, I agree the mansion tax is a rubbish idea. I wouldn’t got for a re-banded council tax – why have bands at all? Have individual valuations. Northern Ireland does it, most states in the US, most of Europe etc. Then split the value into the site (land) component and the improvements (buildings etc.) If I were in charge I would levy the whole tax on the site (land value tax) but councils could set the split how they want to. Makes no sense to tax improvements though which are made out of taxed income and which we want to encourage. Key to reform is to persuade the younger voters (under 40) that tax reform is in their interests and also highlight the massive costs of the UK’s level of personal debt. In Northern Ireland, had house price inflation kept at 2%, there would be £5.6 billion less personal debt – that is a call on present and future post-tax earnings going straight to banks instead of being invested in the productive economy creating jobs and tax revenues.
Ok but you haven’t commented on my scrapping of CGT exemption idea. Having read through your work on LVT whilst I can sympathise with the fairness the practicalities look extremely difficult and makes my idea seem far simpler and can come into immediate effect. A 10 year transition as you propose would be hard for politicians not to meddle with and looks very complicated.
CGT is a bad idea full stop – it discourages transactions (avoidance) and encourages evasion. Similar to Stamp Duty, it will reduce the number of transactions as people will simply not move to avoid the penalty. At the moment, a move to a better job in a different part of the country carries a SDLT penalty, meaning that salary has to be a LOT better to justify the move. CGT would arguably be a bit less terrible as it wouldn’t create negative equity but still a terrible tax
LVT is a far fairer system than council tax, local income tax or “mansion tax” because – properly designed and administered – it generates most money from people who can afford to pay it and/or prompts action to make better use of a land-based asset, as well as helping land-owners and government to engage on use and management. That latter point may or may not be major, and liek all taxes LVT creates winners and losers but it tends to favour the poorest and most productive, and is certainly an improvement on the passive / furtive / exploitative relationship in operation at present. I’m guessing most folk on this site get that so I’ll move on to the more substantive point.
As the prospect of a Labour government approached in 1992 and again in ’97, I recall certain celebrities securing big newspaper splashes on how they would “leave the country” if Labour was elected. Phil Collins, Joan Collins, Frank Bruno and wur ain wee Stephen Hendry all spring to mind, along with several others whose names elude me right now. So if C-list Tory spin fodder such as Griff – or indeed idiot Better Together supporters such as Sharleen Spiteri – spit their dummies oot and begin lecturing the public it behoves us to acknowledge their brave foray into the political arena and ensure appropriate journalistic scrutiny of their motives, analysis and alternatives. Showbiz hacks, of course, aren’t really trained to do that kind of questioning so we’ll just have to rely on hard news and political journos to exercise their finely honed, incisive…
I think I’ve spotted a flaw.
It’s all politics: democracy is an irritating thorn in your side when you’re “designing” a tax.
The mainstream parties fiddle about with daft mansion taxes while the Greens promote LVT in order to look “progressive” to the middle classes (on whom their electability depends because the working classes are more likely to defect to UKIP) whilst concealing that LVT threatens to stiff their property values.
I agree with a commentator above that the only honest – in political (democratic) terms – way to tax house prices is to remove the CGT exemption. It also has the huge advantage of being easy to collect in that you have the value of your house liquid in your bank account the day after you’ve sold it so it’s easy for HMRC to get their hands on a chunk of that.
Plus, as Andy Wightman is fond of telling us when he’s got his legal hat on (the one with the political blinkers down the front), it’s a no-brainer because all you have to do is repeal a single section of an Act of Parliament (s.223 of TCGA92). Simples!
As a matter of interest, what is UKIP’s policy on this? Or the SNP’s come to that …
Just like Stamp Duty, primary residence CGT will be easily avoided by anyone whose CGT bill is more than the accountant/lawyer’s fees to avoided. Easiest way is to own the place through an offshore company – no SDLT, IHT, nothing. Interestingly, the government closed this down by imposing a mansion tax on such properties – ATED. People not willing to pay can just put their real name on the Land Registry but – no surprises – lots didn’t. It’s worth £143k / year to avoid CGT and IHT and/or keep your anonymity. Drug lords + dictators can launder their money through London with ease, at least now we’re taking a cut.
This is only of marginal interest, but I tried to discuss Rhys Jones with Rory McGrath last night and found myself confronted by a very aggressive drunk. They really are quite shameful. I blogged it at http://joestudwell.wordpress.com/2014/11/07/threatened-in-a-cambridge-pub/
Well now, you really were playing with fire there; in McGrath’s entry in Wikipedia I read:
‘McGrath has starred in the BBC’s Three Men in a Boat series, alongside Dara Ó Briain and Griff Rhys Jones.’ (Birds of a feather and all that!)
And further down it says:
‘In July 2013, McGrath received a caution for assaulting two people while he was “heavily in drink” in May that year.’
Rough old place Cambridge, better Sauchiehall Street on a Friday night.
I had no idea he is a violent drunk when I spoke to him. It became quickly apparent during our conversation because I don’t think I have ever heard someone with such violence in their voice in a pub … except for the person who pulled a knife on me in circa 1985, as I mentioned in my blog. Anyhow things became clearer when I googled his name. I almost never watch live tv, so I was certainly uninformed about what I was dealing with, knowing only that he did something related to narrow boats with Rhys Jones and Daira O’B.
LVT is the only way to fund govt and curb property speculation
Andy, Is there any reason that crofting law could not be extended scotland wide as originally intended in 1886?
Hector, the Crofting Act 1886 was extended Scotland wide in 1911 by the Small Landholders Act of that year. It brought into crofting all holdings in the rest of Scotland of less than £50pa rent and where the tenant had provided the bulk of the permanent improvements. In 1955, a new regime was set up in the crofting counties for crofts but the 1911 Act remains in force in the rest of Scotland. The main difference between crofting county crofts and those in the rest of Scotland is that the latter can’t be assigned outside the family.
Very interesting neil.
£50 pa of rent in 1911 was probably around the annual average wage back then.
If the act was updated to all holdings with a rent less than the average wage of£26,000 today, most family farms would qualify as crofts.
GR Jones has some ego if he thinks we care where the hell he goes, as long as it is not to Scotland. Were we we all meant to say “Oh please don’t go, we love you so”?
However, it has little relevance to us in Alba. Had we as a wee nation had the bottle, we could have already freed ourselves from this horrendous and corrupt establishment. We could have been on the way already to creating the infrastructure to increase and refresh manufacturing in Scotland and thus creating wealth and jobs for the people of Scotland, without the nonsensical and insane borrowing by Westminster and increase of national debt, together with unregulated and corrupt banking,
I think of all the countries who have had to take up arms and fight for their freedom and independence and yet all we had to do was put a cross in the correct box as a response to a simple question. It was indeed, a question of hope versus fear. It seems courage was lacking in Alba. I have hope for independence, but I have fear also. However, it is a profound fear of remaining part of the Union and all that entails.