Inequality – it’s getting worse

The Office for National Statistics published data yesterday on economic well being. One of the main points from the ONS report was on household property wealth. This data shows that we now have even more inequality between generations. The report reads

The gap in net household property wealth between those aged 30 to 32 and 60 to 62 years has widened in the last 10 years; the net household property wealth of those aged 60 to 62 years was six times that of those aged 30 to 32 years during July 2006 to June 2008, however, this difference increased to 17 times by July 2014 to June 2016.

Also, research showed that consumers’ perceptions of their own financial situation has worsened for three consecutive quarters.

In Quarter 4 2017, the average aggregate balance was negative 1.6 – a decrease from positive 0.7 recorded in Quarter 4 2016. The chart shows a steady drop over the last two years.

ONS clarify the remit of their report by saying

This release reports measures of economic well-being in the UK. Rather than focusing on traditional measures such as gross domestic product (GDP), these indicators aim to provide a more rounded and comprehensive basis for assessing changes in material well-being.

Vince Cable, Leader of the Liberal Democrats said:

While it is now clear that Brexit has negatively impacted the economy by increasing inflation, eroding wages and holding back business investment, this data proves that these factors are translating into lower economic well-being.

With the household savings ratio at record lows and indebtedness approaching pre-crisis levels, it is no wonder that people feel financially insecure. More than ever, we need an Exit from Brexit so we can get on with the solving the real challenges facing the British economy.

Intergenerational equality is increasing and is something we need to deal with. Citizen’s income anyone?

 

* Kirsten Johnson was the PPC for Oxford East in the 2017 General Election. She is a pianist and composer at www.kirstenjohnsonpiano.com.

Read more by or more about , , , or .
This entry was posted in News.
Advert

19 Comments

  • Yes, it confirms the trend already established in the IFS Report in January, 2015.

  • Tony Greaves 6th Apr '18 - 3:07pm

    Time for this party to start to take these things seriously.

  • Daniel Henry 6th Apr '18 - 3:14pm

    Given that the graph is about homeowner wealth, I’d say that house prices are the key issue here.

    In the 1970s, working people without qualifications could save up and afford to buy a home. Now even graduates struggle to do so.

    How do we turn that around?

  • The housing market isn’t working and is grossly unfair. The only people who can afford to buy a house are those who already have one – or can turn to the ‘bank of mum and dad’!
    As Lloyd George said: “You cannot build houses without land”. It is actually the land market that isn’t working – and a land-value tax (LVT) on housing land is the answer.

    A fundamental unfairness exists with a property tax that does not distinguish between what the owner and occupier do to the house – which they’ve earned – and what happens to the site and its surroundings – out of pure luck. That is where LVT comes in. There would be no tax on the building: only the annual rental value of the site would be taxed. It is important to emphasise rental value, because rents vary over time much less than capital / market prices of dwellings. People are more familiar with house prices than rents.

    Moving business rates to a site-value basis (Lib Dem policy for 25 years) will help the housing market significantly – but not enough. Underused commercial land currently paying little or no rates will cost owners more to hold, thus become more likely to be built out in whatever use is most appropriate – and in most of the country it is homes that are most needed.
    The Co-op Party’s 2009 Manifesto, supporting LVT, expressed it well:-
    “A key policy concern for the future has to be to keep growth in house prices consistent with other parts of the economy…. the shortage of homes in the UK has been artificially created by a poorly functioning property market.”
    Since the late 1990’s there has been a massive transfer of wealth towards those with existing housing equity, that is towards the wealthier and older (although the ‘bank of Mum and Dad’ often shields the children of the wealthier from the worst effects of the housing market).

  • As Lloyd George said: “You cannot build houses without land”. It is actually the land market that isn’t working – and a land-value tax (LVT) on housing land is the answer.

    Come on, Joe. LVT might (just might) have a part to play – but don’t try to replace the one trick pony of Brexit with the one trick pony answer of LVT (which, in any case can’t/won’t be introduced and legislated for by a party with just 12 MP’s.)

    As for LL.G. – he’s the rascal who split the party and killed it off as a party of Government in 1918 when he got into bed with…………… the Tories.

    But …… here’s a bit of historical entertainment for you from his more radical days :

    The Land Song – YouTube
    Video for The land song▶ 3:05

  • David Raw,

    when the Attlee government was nationalising the commanding heights of British industry after the war and implementig Beveridge’s blueprint for the welfare state, they enacted the 1947 Town and Country Planning Act. Understanding full well the need to capture for the public benefit gains arising from government grants of planning consent the Act included provisions for a betterment levy.
    The levy was a flawed piece of legislation and many landowners sat tight waiting for a change of government which duly came in the form of your old buddy Churchill in 1951, following which the levy provisions were partially repealed. However, the right to compulsorary purchase land at pre-planning consent values was retained.
    The compulsory purchase provisions allowing land to be acquired at agricultural values was important, and Macmilan made great use of these provisions in assembling public land banks for the creation of new towns and building 300,000+ houses per year in the 1950’s. This state of affairs ended with the 1961 Land Compensation Act requiring payment to landowners of the full post-planning consent market value when compulsory purchase was used.
    We have never achieved MacMillan’s rate of building since and likely never will until the issue of land values is effectively addresed.
    All parties are looking closely at the issue of land Value capture now including both the Conservatives and Labour parties, as everyone realises the distortions in the housing market cannot continue as they are.

  • David Evershed 6th Apr '18 - 7:53pm

    As internationalists we should not be blinkered by the UK and take a World view.

    The World Bank says poverty is steadily reducing.
    ” According to the most recent estimates, in 2013, 10.7 percent of the world’s population lived on less than US$1.90 a day, compared to 12.4 percent in 2012. That’s down from 35 percent in 1990.
    Nearly 1.1 billion people have moved out of extreme poverty since 1990. In 2013, 767 million people lived on less than $1.90 a day, down from 1.85 billion in 1990. ”

    Source: http://www.worldbank.org/en/topic/poverty/overview

  • It is interesting to note the value of the medium home for 60 to 62 fell after 2008 and it isn’t much higher in 2016 than it was in 2008. It is the medium home value of the 30 to 32 which has fallen. I am not sure how useful knowing this is. It would be useful to know that fewer 30 to 32 year olds are owning their own home as a percentage of the age group. However, one of the reasons might be that more houses were built between 2000 and 2006 than between 2008 and 2014.

    @ Joe Bourke

    While “moving business rates to a site-value basis” might have been party policy for 25 years (page 90 of the 2010 manifesto) we failed to even get a trial scheme up and running when in the coalition government.

    @ David Evershed

    It is really good that extreme poverty across the world has declined significantly. However relative poverty is a huge problem in the UK and we as liberals have to address it because people living in relative poverty are less free than the rest of the population and this is unacceptable to liberals.

  • Kirsten Johnson 7th Apr '18 - 8:10am

    Thank you for reading. I’d like LVT to become party policy for all the reasons mentioned above. We need to get behind transformational ideas to reduce inequality.

  • My grandparents in the 1960’s and 70’s owned houses with more than one bedroom. In fact three bedrooms. So we could have holidays with them. What is it about our members who think it is liberal to stop this happening now? Should grandparents not have the freedom to have extra bedrooms so their children and grandchildren can stay with them. My answer is yes of course they should.

    @ Benjamin Weenen

    I note you provide no evidence from any country in the world where land prices are “near zero”. I can’t imagine why you think just because the government taxes something its value with fall to near zero.

    You are wrong to think LVT would make average mortgage payers £10,000 better off a year. According to the Money Charity (http://themoneycharity.org.uk/media/April-2017-Money-Statistics.pdf ) the average mortgage debt is £119,937 and the average interest rate is 2.63% making the average mortgage interest payments over the year £3,154. I see you assume the land is a third of the value of the home so they would save 1/3 of their payments which is only £1051.33 (you are out by a factor of 10) if the land was valued at zero. If the value of the land fell by only 50% then many people would end up with negative equity and there would be a housing crisis as repossessions increased and the number of homeless increased.

    As we believe in rational argument it is very important we actually present the facts and not make wide unsubstantiated claims.

  • @ Benjamin Weenen

    While the total amount of land in the UK is limited, the supply of land for any particular activity is not. There are still areas of land in the UK which are unprotected ancient forests which could be cleared to be used for some productive activity. Only 5.9% of UK land is classified as built on of which just over 42% is classified as green urban (which is likely to be an under estimate) which leaves 3.4% of UK land for roads, houses and non-farm businesses. Therefore the supply of land for any use apart for being left as natural is not inelastic.

    There are 27.1 million households in the UK (https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/families/bulletins/familiesandhouseholds/2016). About 8.13 million rent. About 7.9 million households own their home outright. I don’t think you looked at my link, which would have informed you that for new loans the interest rate is 2.1% not your mythical 5% and their average interest is £3,347. Only 5% of new mortgages are for 90% of the value of the property. According to the ONS first time buyers put down on average a 20% deposit, while other buyers put down 35%. Just because the average house price is £240,000 this does not mean that the average mortgage is this size. I have informed you of the average amounts paid in interest, but when faced with the facts you just ignored them. To be clear of the 27.1 households 7.9 million would be worse off or have no income benefit from a LVT. Of the 11.1 million with mortgages if there was a reduction in the value of their homes they would have negative equity but still owe the same amount and still have to pay the same mortgage payments plus they will have to pay the LVT. It is often asserted by supporters of LVT that those who rent will not see an increase in rent. This is not correct. Only those paying the highest rents would see little increase in their rents. No one paying rent will have a rent reduction when landlords have greater expenses to pay.

  • John Roffey 8th Apr '18 - 10:31am

    This would seem to be of significance in this discussion:

    Richest 1% on target to own two-thirds of all wealth by 2030

    https://www.theguardian.com/business/2018/apr/07/global-inequality-tipping-point-2030

  • Laurence Cox 8th Apr '18 - 7:52pm

    @John Roffey
    You have to put the richest 1% globally in context. For income, it is above $32,400 (£23,000) per annum. For assets it is above $770,000 (£546,500).

    https://www.investopedia.com/articles/personal-finance/050615/are-you-top-one-percent-world.asp

    So you don’t have to be earning the median salary here in the UK to be in the top 1% globally. I don’t think that the majority of people in this country would be very happy if you told them that they all had to make sacrifices to benefit the global 99%.

  • Peter Martin 8th Apr '18 - 8:32pm

    The effectiveness of LVT depends on the rate at which its set. If it’s set very low it’s neither here nor there as a potential solution to any problem. If it’s very high it will adversely affect many people who don’t deserve to be so affected. I suppose a very high LVT will depress land values to such a level that the tax collected will be then lower. Isn’t that going to be self defeating?

    It’s probably too much like Communism for most Lib Dem tastes but why not just nationalise the lot, without compensation, and lend it back to its current occupiers at a peppercorn rent? It’s not going to affect anyone who farms or has a block of land to live on while they still alive but it will certainly level up the playing field for the next generation.

    It would have a similar effect to a LVT.

  • @ Peter Martin

    If we apply LVT to home owners then nationalising all the land does seem a much fairer system so no one can own the land except the government in trust for all the people, but it isn’t liberalism.

    @ Benjamin Weenen

    The price of a product is partly determined by how much can be supplied. Therefore house prices and rents are determined by the number of homes available for people to either rent or buy. Therefore knowing that less than 3.4% of UK land is used for houses we know the number of houses in the UK can be expanded dramatically.

    I am glad you have accepted that 5% is not the current average mortgage interest rate. I note you have provided no link for any evidence that 5% is the historical norm.

    Every year I have to estimate the rebuilding costs of my home and I can assure you it is more than 2/3 of the value of my home. It would be reasonable to assume this is the case for most homes in the UK even if not for London.

    Your common sense would only be true if there were a surplus of homes for rent and we ignore Ricardo’s Law of Rent and the idea that land has alternative uses to the one they are being used for now. In fact if we just forget everything we know about economics.

  • @ Benjamin Weenen

    It seem strange that as you are using The Young People’s Party UK assertions you couldn’t be bothered to supply a link to their website – http://www.yppuk.org/2012/06/how-much-tax-would-you-like-to-pay.html. If you are using their figures I don’t think you have understood them. They are talking about replacing all taxes people pay with a property tax of 7% and have factored in raising £50 billion from the banks currently they are paying less than £4 billion a year. They have over valued the value of the land by £1,600 billion according to the ONS. So their property tax should be 10%. Your figure of £12,792 is therefore wrong and it applies to a particular family. This figure is not related to their mortgage or the rent they pay it is only about the switch in the taxation system. I wonder if you noticed that?

    As you point out the income poor/asset rich will be worse off. Those without the income to pay the tax will get the biggest increase in tax such as pensioners

    If you had looked at the data on households (using the link I supplied) you would have discovered that only 6.2 million houses are two adults with children so we need to reduce your too high figure (by 43%) by a further £3,500 for the children’s citizens income down to £3,792 for the 12.7 million couples without children assuming they are not pensioners.

    If companies have to pay 9% more in property taxes they will pass this on to the consumers and this is likely to wipe out the rest of the mythical benefit of this tax reform.

Post a Comment

Lib Dem Voice welcomes comments from everyone but we ask you to be polite, to be on topic and to be who you say you are. You can read our comments policy in full here. Please respect it and all readers of the site.

If you are a member of the party, you can have the Lib Dem Logo appear next to your comments to show this. You must be registered for our forum and can then login on this public site with the same username and password.

To have your photo next to your comment please signup your email address with Gravatar.

Your email is never published. Required fields are marked *

*
*
Please complete the name of this site, Liberal Democrat ...?

Advert



Recent Comments

  • User AvatarSandra Hammett 21st Nov - 3:32pm
    Watching Politics Live in our BBC mandated 4 minutes of coverage Andrew Neil and panel were questioning whether our campaign as been to presidential, falling...
  • User AvatarBarry Lofty 21st Nov - 3:29pm
    John Marriot, I happen to be in the same age group as you and have always voted Liberal/Liberal Democrat but have not put my principals...
  • User AvatarJohn Marriott 21st Nov - 2:56pm
    To all those who bridle to my comments let me just say that I joined in the old Liberal Party in 1979 and also joined...
  • User AvatarPeter Watson 21st Nov - 2:50pm
    @Charles Pragnell "The view is that a second referendum is the only way out of this mess. However if you ask graduates , or business’s...
  • User Avatarnvelope2003 21st Nov - 2:46pm
    Keeping fares down was tried in the 1950s to keep commuters voting Conservative. Unfortunately all the money needed for investment in an out dated system...
  • User Avatarchris moore 21st Nov - 2:22pm
    I am one of a small minority of Lib Dem members, who though a Remainer, thought that we should have worked towards a compromise deal...