Since the Referendum and in the reaction since the Autumn statement I’ve seen a worrying rise in the amount of abuse being directed to older members of society based on the notion that they are somehow groaning under the weight of so much cash, greedily demanding benefits, whilst denying subsequent generations access to the EU with their vote to leave.
I am worried.
We, as a society, seem to be lurching from one scapegoat to the next in a desperate attempt to blame anyone except ourselves for the state this country finds itself in. Whilst it is true that many pensioners have large savings pots, pensions and may have done well from the property booms of the 80’s and 90’s, others do not and find themselves truly just about managing. The exception is not the rule. Yet the generalisations seen during our last panic towards working age benefits recipients seem to be being applied to pensioners. They are all bleeding this country dry and something must be done, some penalty must be paid for denying the generations to come access to a European future.
I can truly understand why the young feel aggrieved. They are having it tough. Living independently is hard, property prices are ridiculous and to top it all they are facing future bills in leaving the EU they – not the generation that voted out – will be forced to pay. But the young need to understand that the older generation may have had their own reasons for voting out. Not all is racism or xenophobia. Some have truly held beliefs that we are on the wrong course. You may, as I do, disagree passionately with this assessment, but pensioners don’t deserve the bile I’ve seen directed towards them. If we are sure of our arguments we must engage and persuade them why they are wrong, not seek to punish or attack them. Doing so will only make us more divided.
Let’s remember we are one country. We walk on roads, travel on trains and attend hospitals paid for by previous generations. We all have a stake, and all pay in for our present and future. Let’s stop scapegoating and move forward together as one United Kingdom.
* Robert Coster is an ex-Labour IT geek now happy to have found a home with the Liberal Democrats.
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48 Comments
Scapegoating is always wrong. The EU was scapegoated for taking away our sovereignty and self determination and blamed for the lack of funds to pay for our NHS etc. etc.
The Liberal Democrat party must be the Party of Freedom. The corollory of that is that we must also be the party of Personal Responsibility. However, that can only be true if evryone has equal access to legal rights. If you are poor or a so-called JAM family, you have none. Give personal legal power to everyone so that people can take responsibility for their own lives.
Perhaps I will have to write another e-book to explain what I mean by the above comment.
Thank you for that Robert Coster.
Although I voted Remain, those I know in my age group who voted Leave are also parents and grandparents and they do have an investment in the future of this country after they themselves have gone. They were simply not persuaded by the arguments for Remain.
I resent the fact that ‘oldies’ have become scapegoats for underfunding of the NHS. Many like myself paid taxes and had little need of it. That some need to use it more often in old age is simply part of the normal cycle of life. The ‘cradle to the grave’ life-cycle.
Pensioners should not be held responsible for the woeful economic management of this country that led to house inflation, nor the triple lock pension, nor free bus passes. Nor that unlike us, young people would have to pay to go to university. ( Indeed, most pensioners have the life- experience necessary to determine when attempts are made to ‘buy’ our votes.
I don’t remember any ‘oldies’ of my acquaintance asking for any of this, theirs and my main concern being for grandchildren, the debts they will have when they are starting out on life, whether they will have a job and be able to afford a house.
Divide and rule…
The problem in society is not that we have been too generous to the elderly, but that a succession of policies and house price inflation have penalised the young. Young working people are now divided into the haves, who can take an early inheritance from parents to get them on the housing ladder or even set them up in business, and the have-nots who cannot. I read last week that soon the squeeze will fall again on the elderly and with the generous workplace pensions enjoyed by many of today’s pensioners now a thing of the past, in future only those pensioners who have inherited wealth will be comfortable.
We are entrenching the inequalities in society from generation to generation and this should be completely unacceptable to Liberal Democrats. That is why the recent reductions in inheritance tax were totally wrong. We should be campaigning to reduce inheritance tax thresholds and close the loopholes that allow so much tax-free transfer of wealth from generation to generation.
Andrew,
This is the politics of envy that we need to get away from. If people have saved from income during their working lives and managed to save out of taxed income sufficiently to live comfortably in retirement they should have the freedom to pass on their assets as they wish when they die or at any time previously. To prevent this is pure theft.
On the other hand, the unearned element of income (land rent) derived from property and natural resources including costs of pollution and other environmental damage should be collected source. i.e. Land Value Tax. Why is this policy not being more actively promoted when it could have such a dramatic effect on mitigating the housing crisis?
Andrew, I agree with you about inheritance tax and find the phrase ‘politics of envy’ quite nauseating because those who use it are happy to see the poor, the sick and the elderly bear the brunt of cuts in benefits so they can keep their riches.
As Lib Dems we should be thinking hard about inheritance tax and how it could be implemented to achieve a fairer society. It may well be that a certain amount of wealth should be passed on to the next generation, especially that accumulated from earned income under a defined level, but we have to right the wrongs of our present unequal society.
@Jayne Mansfield.
We need to remember why the ‘triple lock’ on pensions was introduced in the first place. It was a direct result of state pensioners getting a 75p/week increase in their pensions because of the low inflation rate at the time. After the link between earnings and pensions was broken in 1980, increases in the state pension fell behind increases in average earnings over the following two decades, leading to greater pensioner poverty. My union (Prospect) has calculated that had the earnings link been maintained a full state pension would now be over £180 per week.
The Pensions Policy Institute http://www.pensionspolicyinstitute.org.uk/ is a good independent source of information on pensions. You can search their reports back to 2002.
We also need to remember that buses are run as a scheduled service, so have to run whether there are passengers on them or not. The marginal cost of carrying extra passengers (particularly outside the rush hour) is negligible and the free bus pass, which is paid by the local Council, can be seen as replacing some of the subsidy that would otherwise need to be paid to the bus company. If the result is that fewer pensioners use cars where there is a public transport alternative, then there is also an environmental benefit.
Now the pensioner bonuses I do have more difficulty with are the winter fuel allowance and the free TV licence. These could easily be rolled up in the standard state pension, which would mean that well-off pensioners would be taxed on them, as opposed to them being tax-free for all who qualify.
My point in writing this article was basically to say this country needs to stop searching for the easy answers to its problems, solving them does not lie in the demonisation of yet more sections of society. We need, as a society, to stick with the basic principles of fairness and decency to all. On Brexit this means trying to understand those with genuine fears. For the young it means understanding how tough it has become to survive and thrive. I believe most British people are fair and decent, we’ve just been led by successive Tory and Labour governments down the wrong path.
Sue,
Apologies for nauseating you and agree that we need to think hard about inheritance tax and then phase it out.
Unfortunately the autumn conference rejected proposals for citizen’s income which could, and in my opinion should, be funded out of LVT. Double taxation is generally acknowledged to be a bad principle and not less so because people tend to die eventually.
I would correct Benjamin Franklin’s quote to ” There are two certainties Death and Rent”.
‘I can truly understand why the young feel aggrieved.’
If they feel so aggrieved why didn’t they bother to vote ?
A mere 25% of voters aged 18 – 24 voted Remain in the refrendum
John Payne,
I am not suggesting that people should not be able to use their accumulated wealth to live comfortably in retirement, although I am not quite sure why we give them a state pension as well..
I agree with you on land value tax but this means a huge change in the tax system which would be very hard to get right. Such changes have many unexpected consequences, typically.
But the majority of wealth in this country has not been earned, but is the result of property price increases. I am not suggesting we should”steal” this money, but I see no reason at all why we should not tax it. It is quite reasonable to expect to be able to pass on to your children enough to place a deposit on a home sufficient for a couple with a couple of children. Even in London, £50k should be enough. For an above average family of 3 children that would be £150k tax free, with anything above that being taxed.
What I would do however is protect £50k per child from the highly iniquitous practice of forcing people to spend all their wealth on care. A lottery which punishes those unlucky enough to suffer long term ill health
John,
You are (mis)quoting a “made-up” Sky Data figure for youth participation in the referendum (which was 36%, not 25%) , which only gained currency from being the only available figure for a while.
The only reliable figure I am aware of is 64% see https://www.theguardian.com/politics/2016/jul/09/young-people-referendum-turnout-brexit-twice-as-high
That is lower than for other age groups (which is not surprising given that the referendum was held at a time when students had just left university, the Glastonbury festival and European championships were on, etc), but still higher than the overall turnout in either the 2001 or 2005 GE.
“Whilst it is true that many pensioners have large savings pots, pensions and may have done well from the property booms of the 80’s and 90’s, others do not and find themselves truly just about managing.”
There are people just about managing (and those dreaming of doing so) at all ages in life. The Lib Dems shouldn’t be afraid of policy that supports pensioners that need support despite their age group being hit least by the political policy of the last 10 years.
For the most part it is also those just about managing and those dreaming of doing so who voted to leave the EU – it is so easy to support the outward looking way of doing things if you’re not really missing anything in your day to day life. It would be wrong to dismiss these as xenophobes without trying to understand where their ideas come from.
# Andrew McCaig “We are entrenching the inequalities in society from generation to generation and this should be completely unacceptable to Liberal Democrats.”
I agree. That is why I have been arguing for new types of business organisation that has a statutory wage differentil of 20 to 1; an eqPLC. This type of of business organisation does not exist.. The current way of trying to get employers to be “fair” is mere exhortation, threats of penalties, fines etc. This does not work. The economics works against this. It is necessary to change the dynamics of the economic system. This may mean “shock horror” having a zero rate of tax on dividends for the investors in the new “eqPLCs”
A sort of “economic ju-jitsu” by using the greed of the HNWI to invest inequitable businesses.
Can the webmasters of this site have a “preview button” for comments? I just reread my last comment and the phrase “investors inequitable businesses” should read “investors in equitable businsses”
Bob Wootton
Wage differential occurs in Mondragon Spain, with ratios much smaller than 20:1
https://en.wikipedia.org/wiki/Mondragon_Corporation
I found out about the Mondragon experiment nearly 40 years ago by reading “Good Work” by E.F. Schumacher. If you have not read it I thoroughly recommend it!
I am delighted to see that Mondragon seems to be going from strength to strength along these lines, to the extent that the Mondragon Group is in the top ten in Spain in both finance and industry
Andrew McCraig’
The Guardian figures are not reliable and is in truth virtually the only report saying the turnout was that high. The lower estimate of youth turn out, from what I’ve read, were based on voting averages in areas with lots of young people and the number of people registering in that age group. It could also be that numbers voting Leave could be higher than assumed if the over all percentage is as high as the Guardian suggests. The thing is there is no way of really saying who voted what or who didn’t bother at all because the ballot papers are anonymous and people sometimes give evasive answers or even lie in surveys.
Quit frankly. In light of recent events I now think polling is next to useless and it may be because it is being used as another arm of campaign material.
Pensioners should not be a scapegoat, and neither should they be used as a human shield by those who seek to perpetuate an unjust economic system that only benefits a tiny wealthy elite.
I believe Winson Churchill called it the Poor Widow Bogey.
Glenn,
Well, you don’t give any citations to your data. Polling data can be innaccurate in predicting a close result but the polls all got the referendum result +/- 5% and it is very unlikely the Guardian poll is more wrong than this on youth turnout.
Anecdotally, I was knocking up in Leeds on referendum day and the students and young professionals had all voted in the morning before we got there (pretty much unheard of), while many of those who were away had organised proxy votes. That group of students and young graduates were very keen to vote Remain, and simply do not tally with 36% turnout… It is certainly true that Leave voting areas turned out more enthusiastically than Remain voting areas (probably somewhat more complacency especially in London where “everyone” was evidently voting Remain and the polls suggested a Remain win. Since young voters were tending to vote Remain, that may be part of the reason for the relatively low (64%) turnout in that group…
A figure of 36% for younger voters is so improbable for any age group in an election with a turnout of 72% that I have no idea why people believe it (except to confirm some preconception)
Moral hazard is where people are absolved or indemnified from any consequences of their actions. It is very destabilising and can undermine social cohesion. It is a very disturbing aspect of the Brexit referendum. Ultimately it produces losers who lack the privileges of indemnification, yet acted to bring about their plight. These are the true scapegoats; scapegoats to whom this article merely pays lip service; they are scarcely directly blamed; they are dismissed as losers and somehow unworthy.
I was young once, and angry with the olds.
Not so young now, not quite old, but I look back now on my younger self full of righteous anger at the state of the country, never mind the world and think ‘ah bless’. I look back at mid twenties me, obviously so much wiser and think ‘ no ‘. I look forward to my older self……and can only hope.
@ John Payne
“Land Value Tax. Why is this policy not being more actively promoted”
Because it is not simple. I understand how Income Tax, VAT and Corporation Tax work, but I don’t understand how Land Value Tax works. I expect it isn’t as simple as rates.
Perhaps you could write an article that sets out at what rate it should be set and how it would work on say a factory, a disused industrial site, a farm and two examples for a site before and after the road nearby has been made dual carriageway.
It is nice to see someone defend the inheritance of wealth. The question for inheritance tax is at what level should people start to pay it? Should someone be able to pass their house to their children without them having to sell it to pay the inheritance tax? I think so and therefore it needs to be higher than the cost of a semi-detached house. Another question is should it be set at different levels – say 25% on the first million over the threshold, 40% on the next, 50% on the next, 60% on the next, 70% on the next and 75% on the rest?
@ Lawrence Cox,
Many thanks for the link.
I remember well who was PM when the link between earnings and pensions was broken. Unfortunately Thatcherism has continued to influence too many politicians since.
I read a critique of the triple lock pension by the IEA , which asserts that criticism of Gordon Brown was unfair because in a time of low inflation, the amount maintained the real purchasing power of pensioners. It then goes on to argue that the triple lock pension was a costly, unaffordable mistake. (unsurprising coming from the IEA).
Robert in his article makes a plea to stop scapegoating’ old people for the result of Brexit. I would argue that the reason some feel that they can scapegoat the old is that we are the demographic that people can still stereotype.
I understand that the little goodies given to pensioners irrespective of need can sometimes be well- meaning and unrelated to buying votes, but just as in any other age group, be it children in poverty, people of working age suffering in-work poverty, the disabled who cannot afford a life that ameliorates their disability etc., any available money ought to be directed at people most in need, irrespective of age.
Andrew,
I never gave any figure at all. The reason for this is simple. There is no definitive way of telling. Nothing on a ballot paper gives away the age of the voter, who they are and therefore how individuals actually voted. It’s an entirely anonymous process. An agenda is invariably being pushed from both camps and to an extent that’s what polling shows and that’s why they keep getting it wrong.
I also don’t see these “shocks” as proof of anti-politics or confusion or even that they should come as a shock in the first place.
I’d like to pick up on the point made by Jenny Barnes: which is “Divide and rule”.
Young against old: public sector against private sector: town against country; public transport against private transport; private houses against social houses and so on. Divide and rule might work (well, it seems to at the moment) but it does not bring about or sustain a good community. Not the one in which I would like to live in, anyway. Can we bring our nation together I wonder? Well we could try I suppose. Might work – or am I being too optimistic? I can’t see the present Liberal Democrat leadership doing anything about it. Well? Any riposte? Unlikely, I think. They are (rightly) focused on Syria – but what about Sunderland?
Why don’t we scrap inheritance tax on an estate itself but tax individual beneficiaries at their tax rate? Those beneficiaries could also be allowed to use their capital gains tax allowances against an inheritance as few ‘ordinary’ tax payers ever get to use it. So the wider an estate is spread the more tax efficient it is and it helps more people.
Inherited money would be better taxed as part of the income of the recipient, rather than on the estate. Maybe the taxable amount could be spread over ten years – the whole tax collected in year 1 and then re-evaluated in each subsequent year.
Year 1 – 10% of inheritance taxed as income, 90% taxed at 50% (say)
year 2 – repayment of 1/9 of the tax paid on the 9 parts, then another 10% taxed as income
year 3 – repayment of 1/8 on 8, ditto
and so on.
Inherited money is clearly income for the recipient, all this hand waving about people paying tax on it already is nonsense. I paid tax on my income, and I have to pay VAT on things I buy. If those things are – say – some work on my house, the workman has to pay tax on that income. They can’t go round saying that the money has already been taxed.
Jenny Barnes
“They can’t go round saying that the money has already been taxed.”
I’m afraid they can. If the Lib Dems tried to sell this policy at Richmond Park they would be lucky if they saved their deposit.
Glenn,
There was an opinion poll where people were asked if they voted. That data was then adjusted in the usual ways. Polls are generally accurate to within 5%.
This is the ONLY data that has any basis in reality on how younger people voted in the referendum, since no other polls have asked that particular question as far as I can tell. All the other stuff is complete speculation
However, you are not correct that more accurate data is not available. There is a marked register for each election that can be purchased from the local electoral office – political parties do this routinely. Voter ages are often recorded on the register particularly for younger voters (because when they come of age is important. ). In other cases you could call on a sample of people who voted and find out how old they are…
You have to be careful though – students may be on the register both at home and at university (although they are only supposed to vote once in a referendum!). I was when I was a student.. Only looking in one place might underestimate turnout, and looking in two might find a few instances of fraud!
Scapegoating is not nice, but it is also not nice if all pensioners are cossetted unduly when some younger people are under terrific pressure. Governments look after pensioners partly because pensioners vote. The ‘grey/white’ vote is very significant, especially in a ‘low turn-out. Those of us who enjoy occupational pensions might reasonably be asked to share a bit more in the austerity programme – dual locks rather than triple?
Michael BG
Why exactly should people be able to pass on their house without it being sold? I understand perfectly well why people with a house would WANT to do that, but why should they be able to? Whenever there is more than one child it is absolutely normal that the house is sold and the proceeds divided up. No-one complains about that. The children get on with their lives and invest the money in a deposit on another house
Personally I find the rules that force elderly people to sell their house to pay Care costs far far worse.. They remove far more from the estate than the inheritance tax would… , and are based on a complete lottery of whether you die quickly or slowly.. yet these rules have been in place for many years.
As a Liberal Democrat I want to see enterprising people make money for themselves and their families. And I also want people devote themselves to public service as teachers and nurses and firemen, with a decent wage. But I don’t want to see people being given a huge advantage or disadvantage in life PURELY through birth, and I don’t want to encourage people to live their lives off unearned income like Zac Goldsmith. Being able to pass on 60% of your wealth should be quite enough, and I would use the proceeds to pay for proper care for the elderly (easing the unfair burden on family members that exists now) among other things.
And I really don’t like to see “Politics of Envy” bandied about here… I don’t want to live like Zac Goldsmith.. I would not be able to live with my conscience, which is challenged enough by being considerably better off than many people
Michael BG 29th Nov ’16 – 3:22am
“@ John Payne
“Land Value Tax. Why is this policy not being more actively promoted?”
Because it is not simple.”
I would contend that it is simpler to administer than direct taxation of productive economic activity i.e. Income Tax, VAT, Corporation tax etc.
Land like Hancock’s gravy doesn’t move around much whereas multi-national companies do.
However, while I have reasonable grasp of the history and philosophy I would refer you the Lib Dems Alter website where the subject is much better explained than I could.
https://libdemsalter.org.uk/en/
Malc,
LVT might well go down quite well with the more left element of Labour supporters in Richmond Park. It’s an area we have common ground with John McDonnell.
@ John Payne
I couldn’t see anything on that website that looks like it explains Land Value Tax. Also you have not done so or said you would do as I requested. It is no use asserting that LVT is simpler to administer when my request was to give examples with rates so I can understand it. I can give you examples of how Income Tax works on different incomes. I am well aware of the assertions made for LVT, but I do not strongly support it because I cannot explain it to someone else.
@ Jenny Barnes
I don’t think there should be a tax collected and then paid back even in part. It seems unfair to me and would increase administration costs for the government.
@ Andrew McCaig
“Why exactly should people be able to pass on their house without it being sold?”
Personally I like the idea that one child will inherit the family home they grew up in, especially if it has been in the family for a few generations. Of course where the younger generation is now not able to afford to buy a house it would make sense for a grandparent to leave their home to one of their grandchildren.
I would be happy for the tax free amount to be just over the average cost of a semi-detached house in London (£637,823) say £650,000 and linked to this average price. I don’t see inheriting £650,000 as being a great advantage especially when if saved in a bank or building society this amount would earn less than £6,500 a year with our low interest rates. I feel that my proposal is a good compromise, but for some it is a compromise too far. This seems surprising for me because liberals support the idea of owning property and protecting property rights. The question is how much wealth is needed for it to become power and once it is power at what level should this financial power be reduced. The idea of taxing inherited wealth at 75% over £5 or 6 million seems to be the right level, but I understand that everyone has their own opinion of where to set the level at.
I agree with you about the rules for selling one’s home to pay for care costs are problematic. The coalitions changes now postponed to April 2020 would help a bit but didn’t really go far enough. If they had been introduced from April 2016 I would still want greater reforms. I think I would scrap the £72,000 cap on total life care costs while increasing the total disregard and the amount for council contributions to end. Top of my head figures could be:
2017 – 20,300 to 122,000
2018 – 24,360 to 126,000
2019 – 29,230 to 130,000
2020 – 36,000 to 135,000
2021 – 43,000 to 140,000
2022 – 50,000 to 150,000
2023 – 60,000 to 160,000
Thereafter each increasing by 10,000 ever year until the bottom figure equals the inheritance tax threshold.
If the 18- 25 year olds voted in the referendum on a level anything close to the average turn out, and anecdotally I would suggest they did not, then Brexiteers have much less to fear from any second referendum. If I am right and their turn out was much lower and if, as is so often stated,the majority of them want to remain, Brexiteers should be concerned. Assuming those that didn’t last time can be bothered to vote at all.
Andrew,
They still do not only you who voted not how they voted. If they did tell you how they voted that’s despicable and should be investigated. And the polls are plainly a crock. People, apart from anything else, sometimes lie in surveys just as they do on CVs and the social media.
IMO You see what you want to see. I see nothing except the results and don’t care who voted what way because it alters nothing about that result.
@Glenn “And the polls are plainly a crock”
You and I have sparred before, but this is a weird one, even for you. Opinion polling is not, as Andrew has said, an exact science, but they are almost always within a handful of percentage points of the actual result. Even in 1992, a very bad year for pollsters, where the polls (even exit polls, usually more accurate) were neck-and-neck before the election at around 38%, they were only 4 percentage points off (in different directions) for Labour and the Tories.
In short, polls aren’t perfect. But they’re not “a crock”, and they’re not valueless.
@ Michael – “I would be happy for the tax free amount to be just over the average cost of a semi-detached house in London (£637,823) say £650,000 and linked to this average price. I don’t see inheriting £650,000 as being a great advantage especially when if saved in a bank or building society this amount would earn less than £6,500 a year with our low interest rates.”
I always said three times the average house price, which is very similar both in principle and in practice.
And i agree on the answer to Andrew’s question; because property rights is something we take seriously in this country – i have bought and paid for it, so it is mine and not a bauble to be coveted at the whim of the state.
Daniel,
I don’t see anything weird in what I said. If I said the polls were an elephant in pixie boots . That would be weird. As it is I could be Wrong. Maybe. Maybe not.
P.S.
I don’t think we have sparred before? And I don’t really spar.
@Glenn Re: sparring, You’re right, all I can find is this brief interaction. I must have been confusing you with someone else. Apologies.
When I said “weird” I mean “a conclusion not well-supported by available evidence”, but I accept it was poorly worded.
Michael BG 29th Nov.,
Perhaps if you look a bit more carefully you will find loads of information on the Alter website; https://libdemsalter.org.uk/en/.
Under the menu tab if you refer to the recent posting of a paper entitled “THE FIRST STEP: ABOLISH STAMP DUTY AND REPLACE WITH LVT” if you accept that the information therein is from a reasonable authority, a ballpark estimate of the potential revenue yield of LVT can be extrapolated to an indicative figure in the order of £100billion p.a. or 15% of total HMRC revenue. This is in no way intended to be an accurate figure just my own back of the envelope calculation based on assuming a yield of 5% land rent could be collected i.e. ten times the 0.5% yield estimate given in the paper for replacing current stamp duty with LVT.
We could do a lot for the poor, the sick and the elderly with that kind of money.
@ John Payne
Thank you for providing a link to some examples of LVT, but I again note you have felt you could not explain LVT yourself, which is my problem with it. The examples given by the author of that paper values the building etc. at £120,000 and then sets the rate at 0.5% which might be the same sort of level as Council Tax, but I do not think this point is made in the paper. However I am not convinced that it would be a good idea to replace stamp duty with LVT. Also when LVT is advocated is 0.5% the rate we think it will be set out? Do we wish to abolish Council Tax and replace it with this? I thought we didn’t want to charge LVT on houses only on other land. I am concerned that you think 5% is a better rate than the 0.5% used in the paper. I can see it as a massive vote loser if explained that we wish to add a new tax, which would mean that someone living in the South-East would have to pay an extra £11,500 a year for the house they live in either directly as tax or via an increased rent.
Michael BG,
A problem with trying to explain Land Value Tax (LVT) is that although unfamiliar to many they tend to criticize on the basis of their preconceptions after due consideration for maybe twenty seconds.
I don’t see any logic in your inference that I could not explain LVT from the fact that I chose to direct you to more expert sources of information. In particular, Conall Boyle’s paper explores the political acceptability of introducing LVT as a replacement for Stamp duty (SDLT) on domestic properties and he specifically addresses the advisability of exempting lower value properties that are not currently subject to SDLT.
My back of the envelope calculation was not a recommendation to use 5% of the current Land Value as the basis of assessment, that is only a means of approximating the current annual rental value on which LVT should be based, but to illustrate the capacity to raise considerable public revenue to substitute for or reduce economically harmful forms of taxation. As far as I know no serious advocates of LVT envisage an overall increase in revenue raised for public purposes but rather the contrary as the benign effects of its implementation result in greater efficiency in the use of our natural resources that the tax take overall could be reduced.
However, I will offer one more rough calculation taking into account that you seem to be suffering the usual confusion of conflating house prices with land values as follows:
Example for a house and site currently valued at £600,000. The site land value for the purposes of this hypothetical exercise can be taken as 40% i.e. £240,000 so that at a yield of 5% the annual rental value would be £12,000 and charging LVT at 20% would raise £2400 p.a. approximately the same as current council tax in the areas in the south east with which I am familiar.
@ John Payne
Firstly thank you for continuing to engage with me.
In Conall Boyle’s paper he is clear that the value of the buildings is £120,000 no matter where it is built and therefore my figure for 5% was 10 times his figure for 0.5% I did not make any of my own assumptions (however I did not state the value of the land). I therefore did not conflate house prices with the land value. In your example you bring in the rental value and then charge LVT on this just like the rates, but this is not my understanding of LVT or that set out in Conall Boyle’s paper. LVT is a tax on the value of the land not a tax on the rent which can be made from the land. However I am content to agree with you that the value of the building etc. would not be the same across the whole of the UK because the labour costs at least will vary from region to region.
According to Wikipedia Denmark’s LVT varies between 1.6% and 3.4%
As I stated earlier LVT is not simple to explain. This I think is because the value of land is determined by lots of different factors.
Michael BG,
Thanks for your response.
My understanding of LVT is slightly different. I suspect, though I can’t know, that Conall Boyle used site values rather than annual land rental values in order not to over complicate his calculations. At an initial low rate of LVT it will probably not produce any great difference in revenue yield. However at the other extreme if, hypothetically, 100% of the annual land rent was collected for public revenue then the exchange value of the land would be zero and the total exchange value would be that of the buildings and improvements only. This I think demonstrates why it has to be based on annual land rental value.
The experience where LVT has been adopted elsewhere is very relevant I’ll have a look at the reference to Denmark. The list is quite long including Australia, California, Hong Kong, Pennsylvania, Taiwan etc.
@ John Payne
If LVT was based on rents wouldn’t it have a different name? I have read that some people think it would be difficult to calculate the value of the land minus the buildings, but I think it would be very difficult to calculate the rentable value of land without its buildings. There is of course economic rent which has some relationship to the value of the land. However Wikipedia in their land value tax article refer to it as also being called “site valuation tax” (https://en.wikipedia.org/wiki/Land_value_tax).
Michael BG,
No that’s just what it is called. Land Value Tax is not really a tax either because it doesn’t increase the burden on the occupier or user. In the UK the term Site Value Rating (SVR) has traditionally been used to indicate LVT collected by local authorities.