economic justice
The biggest threat to the UK’s borders comes from climate change
Rishi Sunak was interviewed by Trevor Phillips on Sky News this morning. He was petulant, pedantic, defensive of his record and simultaneously aggressive towards Phillips, whilst also being inappropriate and evasive. Apart from that, the interview went well.
I do, however, wish to ignore all those points and pick up an issue which he did not, of course highlight. Nor did Phillips.
Sunak’s claim was that we have to increase defence spending in the UK as part of our programme of defending our borders. It’s all very Trumpian.
Simultaneously, he was adamant that we have to ‘stop the boats’, and that those words should be interpreted in accordance with their plain meaning. In other words, he was saying that there should be no more of what he describes as illegal immigration, even though the vast majority of people crossing the Channel do so legally, meaning he entirely misdescribes the problem.
In all this Sunak downgrades the significance of any measures to tackle climate change. He has no interest in doing that. Trump does not believe climate change is real, so nor can Rishi. In doing so he does, however, miss the glaringly obvious point, which is that the biggest threat to our borders comes from climate change.
We face the threat of serious inundation of large parts of the country from floodwater, whilst anyone who pretends that climate change will not create refugees in record numbers is straightforwardly in denial of a glaringly obvious truth that is staring us in the face.
That is what Sunak is now doing.
Unfortunately, it seems to be what Labour is doing as well.
We have a particular problem there seem to be no grown-up thinkers in UK politics right now who can look at the underlying long-term causes of the issues that we face and base policy upon addressing those issues so that we might anticipate and even prevent problems arising. They prefer short-term posturing instead.
It would really help if we could have politicians who could think beyond their need for instant gratification right now, but Labour and the Tories (at least) do not seem capable of providing them.
Large company accounts are works of fiction
I have this morning posted this video on YouTube, addressing an issue of accounting and transparency that matters to me.
I think the format for accounting used by large companies might provide data of use to financial markets. However, the impression that these accounts give to the world is also seriously misleading, not least because they suggest that a company undertakes transactions that it has never had legal responsibility for.
Most people need different data from that which large companies provide about themselves. They need detailed information about the individual trading entities that those large companies own, wherever they might be in the world, and a great deal of that data is still too often hidden from view by the accounts that large companies present. It’s time that these largest companies were a great deal more transparent about themselves.
The transcript is here:
The accounts of large companies in the UK are complete works of fiction. Now, I don't make that claim lightly. I make it because that's, well, completely true.
If you pick up the accounts of any large company - the bank that you probably save with, or an energy company like BP or Shell, or the companies who are going to supply you with your water if you live in some parts of the country, or the energy suppliers, or a retailer - the accounts that you'll pick up are really big.
If you've got a physical copy, hundreds of pages - and they are literally a work of fiction. Why? Because those accounts are presented as if they are the financial performance of the parent company. Call it Marks and Spencer PLC, call it Tesco PLC, or Barclays PLC, whoever it might be. It literally makes no difference. Those accounts pretend that they are the trading of that particular parent company. But, every single one of those companies operates through very large numbers of subsidiary companies.
In other words, if you go into a supermarket, you don't buy from Tesco PLC. You'll buy from Tesco Stores or something like that.
If you go into a bank in the UK, you will probably not trade with the parent company but with its banking subsidiary.
If you deal with a manufacturing company, you won't deal with the parent company. You'll deal with the company that operates the particular site where you are buying from or selling to.
Now this really matters because, first of all, there is literally no company that undertakes the transactions that are reflected in those accounts, which is why I call them a work of fiction. They are simply created by adding together in a very particular way the accounts of all those subsidiary companies.
And I say in a very particular way because in accounting we call it consolidation, and that means we take out of view all the transactions between the subsidiary companies - which is where vast amounts of tax abuse takes place, by the way - and exactly how tax abuse in tax havens always occurred.
So first of all, we don't see the true picture about what's going on with regard to the true level of trading within the group and between group companies.
And secondly, if we're trading with a particular subsidiary, or if you're employed by a subsidiary, the fact that the group as a whole might claim to have great performance doesn't mean to say that the part of the group that you're interested in - who might owe you money, who might employ you, who might be polluting your environment, or whatever else it might be - you don't know how they're doing.
Nor do you know if they're paying tax.
And you also don't know if you look at the group as a whole, how much of its activity is hidden in tax havens or anywhere else. Where in the world is it operating?
Large companies might want to present this particular view to the world as if they are a single entity, which makes their shareholders very happy. But the rest of us who deal with that group need to know, who are you?
What companies do you own?
Where are you?
Where are you trading in the world?
What do you do? Because no group does just one thing.
How many people do you employ?
How much profit you make in that activity?
So, will that particular activity survive?
Do you pay your tax?
How much is invested in this? Because if that money is withdrawn from your community, it might have a real impact.
Something called country-by-country reporting, an idea that I created in 2003, and which was endorsed by OECD - the Organisation for Economic Cooperation and Development, based in Paris, in 2015 - would deliver that information for us, but as yet, it's not on public record in the UK.
We need it because we need to end the fiction that one set of accounts will tell us everything that a large company is doing and we need to find out what it is doing in every single one of its subsidiaries as well. And we can never do that at present because they aren't required to even put the full list of their company names in their accounts.
And they aren't required to put a copy of the subsidiary accounts for every company that they own on their website.
Those last two things will make a big difference. Talking about what is going on in all their subsidiaries in clear, unambiguous language to everybody they engage with is critical if they're to have the license to operate that we as a society give them. And we aren't, as yet, getting a fair bargain in that process.
Why Kemi Badenoch was wrong about the Glorious Revolution
It is a week or so ago now that Kemi Badenoch claimed that it was wrong to suggest that the wealth of the UK was founded on the basis of its slave-owning and imperial past. She did, instead, suggest that the foundations of modern British wealth could be found in the relationships embedded in the Glorious Revolution that ended the rule of the Stuarts and brought William and Mary to the throne in 1688.
In a post I published here I expressed my considerable doubt about this claim, with reasons given.
In response a commentator named Steve Cushion offered a much more detailed analysis. He has, since then, explained that this comes from academic research that he has been undertaking on behalf of Caribbean Labour Solidarity, who have published his work here.
I did, however, feel it worth promoting both that paper and his original comment as a weekend read on the blog, just to show how utterly unfounded is the claim made by people like Badenoch.
This is the comment that he posted:
A different explanation of the “Glorious Revolution”
The Royal African Company, which had a monopoly on the trafficking of enslaved Africans, acted as a means for the Stuart royal family, Charles II and James II, to finance their dictatorial rule without Parliamentary sanction, while personally enriching themselves and their associates and backers from the City of London. However, denying other City of London businessmen, as well as traders based in other cities, access to this profitable trade was one of the reasons the increasingly powerful capitalist class in England turned against Catholic King James II. It led to their support for the 1688 invasion from the Netherlands, led by Protestant William of Orange and James’s daughter Mary Stuart, resulting in the coup d’état known as the Glorious Revolution. Opposition to the monopoly of the Royal African Company also came from the owners of the slave plantations in the West Indies, whose increased wealth enabled them to buy growing influence in the British Parliament. The Royal African Company could not supply enough enslaved labourers to meet the West Indian landowners’ requirements for the growing slave-based economy. At the same time, restricting the numbers shipped by the Company enabled it to exploit its monopoly to force up the price of enslaved Africans.
Pressure from those businessmen excluded from the trade, as well as the demands of the West Indian plantation owners for ever increasing supplies of enslaved labour, forced Parliament to pass the Trade with Africa Act 1697. This opened the slave trade to all English merchants who paid a ten per cent levy to the Company.
Colonial commerce, including the business of slavery, was one of the driving forces of the capitalist economy from its earliest manifestation, encouraging the expansion of a manufacturing economy. Exports from Britain accounted for around half of all industrial production in the 18th century. Inikori tells us that, in 1770, the slave trade and the plantation economy furnished as much as fifty-five percent of gross fixed capital formation investment in Great Britain.
The increased rate of industrial growth based on exports depended on purchasing power generated by the British West Indies. Demand stemming from Africa, the Caribbean and North America based on the sugar industry was responsible for more than half of the growth of English exports in the third quarter of the eighteenth century. The business of slavery greatly contributed to increasing investment in the British Empire, particularly the construction of the infrastructure that such trade required. Additionally the re-export of sugar to the Europe brought enormous profits. Half of the non-agricultural workforce in England and Wales was employed in production for export, accounting for much of the growth in manufacturing output.
Based on: Patrick K. O’Brien and Stanley L. Engerman, “Exports and the growth of the British economy from the Glorious Revolution to the Peace of Amiens in Barbara Solow (ed.), Slavery and the Rise of the Atlantic System (Cambridge: Cambridge University Press, 1994) and Joseph E. Inikori, Africans and the Industrial Revolution in England (Cambridge: Cambridge University Press, 2002)
Penalties on carers make clear that we are being governed by people who do not care
As the Guardian has noted:
New figures show more than 150,000 unpaid carers are now facing huge fines for minor rule breaches, as MPs, charities and campaigners demanded an immediate amnesty.
They added:
The Guardian can reveal 156,000 unpaid carers are repaying severe penalties – in some cases tens of thousands of pounds – for often unwittingly overstepping the £151-a-week earnings limit while caring for a loved one.
11,600 carers hit by the penalties are paying back sums of more than £5,000. About one in five unpaid carers in work breached the strict weekly earnings limit last year, an illustration, campaigners say, of a broken system.
The last point is the key one. Of course, benefits have to be limited as to who can claim them. But benefits also have to recognise the realities of life - where rigid control of everything that happens within chaotic real-world situations - as the lives of carers usually are - cannot be controlled. That is most especially true when care-giving is the absolute and necessary priority of those providing it.
A system that does not provide for that is callous.
A penalty system that imposes costs way in excess of the loss suffered by the government, as this one does, is beyond callous.
Creating the capacity to pursue claims that impose poverty when the object of this benefit was to relieve it is indicative of a mindset that has lost touch with reality.
Of course, if there is fraud, chase it, but I very much doubt that many of these claims involve fraud. They refer to simple human error. In that case, there should be forgiveness in most cases, coupled (perhaps) with repayment, at most, of a part of the sum overpaid, representing a fair tax rate (ten per cent?) on the excess earnings not declared.
But so long as this persecution continues, we are living in a country governed by a political party that shows it just does not care.
Scotland’s political problem
The SNP government in Scotland is in trouble. The coalition agreement with the Greens in Scotland (who are a different party to the Greens in England and Wales) has collapsed over the admission that the Scottish government cannot meet its 2030 climate targets.
The SNP is a minority government now.
Former SNP MSP, Ash Regan, now with Alba, is setting out her terms for supporting the SNP.
And there is a real risk that Humza Yasouf might lose a confidence motion shortly before a general election, which can hardly help the SNP’s electoral prospects in Westminster polling. None of this is good news for the independence movement.
I am not in the business of defending the SNP. I do not do party politics. Nor am I supporting any other pro-independence group, even if my overall bias in favour of the cause they promote is clear. What I am in the business of is spotting political problems, and Scotland has a massive one right now.
Leave aside the fact that it suffers the general problem of attracting seriously competent people into the political arena. Instead note that in Scotland this problem is exacerbated by the fact that the Holyrood parliament might grant titles like first minister, and allow parties to form cabinets, and posture as if they really are governing the country, but they are not.
This is not to say that the Scottish parliament is without powers. It clearly has some. In general, it has used them to Scotland’s advantage. Even in areas like education, where both Scotland and Wales have been criticised for allegedly poor performance it can be argued that is because neither country prioritises the meaningless rote learning that Tories - and Michael Gove in particular - have long been obsessed with. In other words, they have exercised their right to choose.
But - and that is a massive but - that right to choose is quite extraordinarily constrained. Some issues are not devolved to Scotland to decide upon. Others that are cannot be delivered upon because the devolution of financial powers to Scotland is far too limited.
Most taxes in Scotland are subject to decision making by Westminster alone. Corporation tax, VAT, national insurance, capital gains tax, inheritance tax and income tax on anything but work, plus most income tax allowances, are all subject to Westminster control. Almost the only tax levers Holyrood has are over income tax rates, local taxes and some specific charges that raise little.
Since, as I gave long argued, tax is not primarily about revenue raising but is instead a tool for controlling inflation, with massive opportunities for influencing the delivery of all other policy built in, then what is clear is that in the situation in which Holyrood finds itself, there is only a limited chance of ever effecting significant change. That is because the most fundamental range of tools for doing so - called taxes - are beyond Holyrood’s control.
This is why the green agenda of the Scottish government failed, above all else.
And that is why the Bute House agreement between the Greens and SNP has failed.
And this is why any government in Holyrood is destined not to deliver. It can’t, because London created a system that was bound to fail as a way of securing continuous control whilst ensuring that blame would be directed inward in Scotland itself, as might well happen now.
How does the SNP address that? The answer is straightforward. After many years in supposed power the SNP has to say that is not the case. It has to drop its own pretence that it is in charge, when it isn’t. It has to say that there is nothing that can be done about some problems in Scotland because Westminster will not let it act on them. It has to call the Unionist’s bluff, because there is nothing they could do to make things better in the system that they created. And they have to say time and again that if Scotland wants to be different it has to totally reject the failed Westminster agenda.
Bizarrely, Wales’ Labour government will have to do the same thing, even if Labour is in office in London.
The pretence of devolution has to end. It’s time for power to leave London. Unless it does the gross injustice of institutionalised regional inequality in the UK is bound to continue. And to prevent devolved governments taking the blame for that they have to make clear none of that failure is their fault. Only then can things change.
Rail nationalisation is a welcome step – but only the first step of many Labour will need to take
Labour has said it plans to renationalise almost all of Britain’s railways.
I welcome that. The simple fact that it is willing to acknowledge that in a sector previously privatised the state might be a potentially better supplier of services is clearly good news. It is also very obviously true.
Before we get too excited though there are observations to make.
Firstly, rail is easy to renationalise because all Labour has to do is let rail franchises expire and then not re-let them. There is no similar model elsewhere.
Second, they are not planning to renationalise the rolling stock companies that have leeched money out of the system for decades. It would, apparently, be too costly to do that, which is nonsense since if a premium is paid now that will only and inevitably reflect the fact that this will be settled anyway over time through excessive payments over remains lives of leases. I am still baffled by where Labour gets its corporate finance advice from.
Third, there is no apparent plan to set up a new state owned rolling stock company to supply new rolling stock and reduce the cost of new investment. That makes no sense.
Fourth, nor does it appear to make much sense to allow some small operations that piggy-back the existing system to continue.
Fifth, the consumer focus of the announcement does, however, make sense. Most especially a system of offering cheapest prices on apps is essential. In that context though, permitting Trainline to continue selling tickets is utterly illogical. Their app never seems to find that solution whenever I encounter it. I gave always thought its existence was an extraordinary error of judgement on the part of those who permitted it.
But all this being said, this plan leaves many questions unanswered. For example, if national co-ordination will work for railways, why not for the NHS, where decentralisation has created chaos?
And why, if a failed model resulting in the need for subsidy has resulted in the requirement to nationalise the railways, is Labour not planning on doing the same for water, where I argue that all the English water companies are environmentally insolvent and so never able to meet the requirement that they simultaneously supply clean water, rivers and beaches and meet net-zero targets? They are bust.
The same can also be asked of the electricity and gas companies, where the charade of competition is a total sham. Changing supposed supplier never actually changes the wires or pipes into your house or who actually puts gas and electricity into them, after all. So why not address failings there as well? Much of that sector exists simply to free-ride on the back of consumers. Shouldn’t that end too?
In summary, this baby step forward is welcome, but to come close to supplying this country with a suitable structure for the infrastructure that it needs Labour has a very long way to go.
We need to be awake to nature
One of the strangest consequences of running a blog that has quite a high volume of traffic is that I receive a great many press releases a day. Most go straight into the electronic bin, but there are exceptions that demand that I read them. One of those came in from Extinction Rebellion this morning.
It said, and I unashamedly quote:
Extinction Rebellion, BBC Wildlife legend Chris Packham and tens of thousands of members of the public will ‘unite for nature’ by joining a legal and family-friendly demonstration on the streets of central London on Saturday 22 June 2024.
Backed by a wide-range of nature, wildlife and climate groups, from RSPB to the National Trust, the demonstration aims to be the biggest-ever gathering of nature and climate supporters in the UK.
The Restore Nature Now demonstration will bring thousands of people together to call on all political parties to take action to restore nature and tackle climate change in the UK, as one of the worst nations for nature loss.
Environment campaigners are urging everyone who cares for nature to unite and march through London to Parliament Square on Saturday 22 June, with a simple demand to all political parties: Restore Nature Now.
The press release includes quotes from Chris Packham, the RSPB, the Wildlife Trusts and others. XR is clearly working with them on an agenda that they say demands:
- A pay rise for nature – Farmers manage 70% of UK land and have a huge role to play in supporting environmental recovery. But they need more support. We want to see the nature and climate-friendly farming budget doubled.
- Make polluters pay – Big businesses – from water, to retail, to energy – all contribute to environmental decline. We want new rules to make them contribute to nature and climate recovery, and an end to new fossil fuels.
- More space for nature – Just 3% of English land and 8% of waters are properly protected for nature and wildlife. To meet UK nature and climate commitments we need to expand and improve protected areas, and ensure public land and National Parks contribute more to recovery.
- A right to a healthy environment – Limited access to nature, and pollution in the air and water, affects everyone’s health. We’re calling for a commitment to an Environmental Rights Bill, which would drive better decisions for nature, improve public health and access to high-quality nature.
- Fair and effective climate action – We cannot save nature without solving the climate crisis. We want to see investment in warm homes and lower bills by increasing home energy efficiency, supporting active travel and public transport, and replacing polluting fossil fuels with affordable renewables to ensure we at least halve UK emissions by 2030.
As they also note:
Polls have revealed that the British public is highly concerned over inadequate UK climate and nature action. Results from two UK-wide surveys conducted by The Wildlife Trusts showed that irrespective of voting choice, nature matters to people across the electorate, with 93% of voters reporting that they believe nature loss is a serious threat to humanity. Recent YouGov UK polling on behalf of WWF-UK also showed that the majority of people (70%) think it’s possible to avoid the worst effects of climate change but more than half (58%) think it’s only possible with more drastic action.
I am in that last category.
As a founder member of the Green New Deal Group, as well as an enthusiast for nature, I unsurprisingly support these demands made by organisations, many of which I belong to. I will look to take part in this activity in some way.
There is, however, I think much more to this. As John Harris suggested in an article in the Guardian earlier this week, our attitude towards nature might now represent the real faultline in politics and the source of the new radicalism that we need if our society is to survive.
Business does, through its actions, deny the reality that we are facing. For example, I noted a Telegraph headline this morning suggesting that airports want more tax exemptions for tourists to encourage greater air travel to the UK, which is exactly the opposite of what our planet needs.
Similarly, tech companies work their very hardest to make sure that children’s exposure to nature is minimised as their screen time is maximised. In the process they undermine the understanding that our existence is utterly dependent upon our relationship with nature, which relationship is in peril.
Despite these best efforts by those businesses and others, I am also quite sure that a growing majority are aware of the risks that we face. There may not be enough people willing to take action as yet. Far too many remain dedicated to consumption-based lifestyles. The reality of the need for change has not permeated the consciousness of sufficient people as yet, but maybe it is beginning to be a major concern for enough people to effect change.
That is my hope. That is why I share this. That is why I am more than happy to be considered decidedly woke on this issue. I am awake to nature. We need everyone to be so.
Capital gains tax on houses – again
I returned to the subject of capital gains tax on people's homes yesterday, knowing well that of all the proposals I made in the Taxing Wealth Report 2024, this was the one that proved least popular when I put it out in the first draft. Despite that, I felt it appropriate to include it in the final report and to raise the subject again.
The fundamental reason for doing so is that the capital gains tax exemption on people's homes is now creating enormous divisions within our society because of the massive wealth divide that home ownership is now creating in our country. This is being repeated amongst younger generations, depending upon their parent's good fortune. I see no way to overcome this growing division without the use of taxation, and inheritance tax captures far too few of these gains for it to have a meaningful impact.
The objections come in several forms. The first, not generally specified, but I feel implicit in some of the comments, is a distaste for this in general. I accept that others do not share my belief, but I think that a tax on these gains is now essential.
Some commentators objected because of the impact on social mobility. They had clearly neither read the report nor listened to the video that I have produced because the whole reason for making the charge I propose on either death or last use of a property by its owners is to avoid the impact on social mobility. The charge that I suggest would almost always arise on death, or in old age when the property was no longer needed, or on emigration. It would be very rare in other circumstances, but in any of these situations, the funds to make payment would be available without any impact on social mobility, meaning that this objection is not relevant.
Thereafter, the objections appear to very largely be on administrative grounds. I think these objections fall into two parts.
One is the suggestion that records of purchases and sales over life would not be available, and I recognise that this is plausible, although I would be very surprised if most people make so many purchases and sales of homes that they cannot recall what they bought and sold them for, whilst standard allowances for costs of transactions, including legal fees and stamp charges, could be made without difficulty to overcome that issue.
Alternatively, in the absolute absence of data, I propose the use of an index basis for taxation instead, with the value of a property finally disposed of being compared to the value of a similar property in the place in which it is located and in the share in which it is owned in the year that a property might have been first acquired by the person now making the disposal as a substitute basis evaluation. Again, if evidence of the number of moves that have taken place in the meantime without evidence of precise transaction costs having been made available could be provided, then a claim for appropriate estimated transaction costs might be added. Compared to most other taxation charges, this is, frankly, no big deal and well within the scope of normal taxation advisors to calculate, probably in a few minutes.
As for those who separate, capital gains taxes are almost invariably an issue addressed at this point because such a charge can arise on separation. There are also, invariably, agreements as to how property ownership and associated liabilities are to be shared. The likelihood is that in these situations records will exist, but again, in their absence, an index basis could provide an alternative to overcome any such difficulty.
Let me provide an example. Suppose X and Y buy a property for £100,000. Three years later, they sold it for £120,000 and bought another one for £150,000. They then separate a little while later. X agrees to pay Y £60,000 for the equity in the property. Y then buys a new property using those funds. So, X has, after this, an interest of £50,000 from the first property and an additional £15,000 (£150,000 new cost less £100,000 original cost, less £20,000 gain, all divided by two) from the second property. X then adds £60,000 to their base cost by buying out Y, giving a total base cost of £125,000 at that point.
Meanwhile, Y also had a base cost of £65,000 at separation. Presuming the £60,000 was all gain, this base cost is not changed by the disposal, and so long as they reinvest in a new property, no tax is due. Instead, they take the £65,000 and any difference between the £60,000 and the sum invested in a new property into their next property. So, if they spent £80,000 on the new property, their base cost would rise by £20,000 as £60,000 of that was rolled over gain. If they spent £40,000 extra on the new property they would reduce their base cost by £20,000 as this sum would not have been reinvested. This last point is important for downsizing. I cannot see the complication in this.
But whatever happens, no one would need to prepare documentation unless they thought they would get a better outcome than the indexation option would provide.
So, these points having been made, what are the remaining objections?
Or, alternatively, what are the better options?
Or are we simply to accept that this inequality should continue because politicians do not have the courage to address it, leaving us in a deeply divided society?
As a footnote, I had a look at the reactions on YouTube to this video. The majority of the videos that we are posting relating to tax are getting approval ratings of 99%. This one has not. Its approval rating is about 90%. That, of course, is not persuasive, nor does it necessarily represent the population as a whole, but it does suggest that there is an awareness of this issue and the need to address it, and I find that encouraging.
Comments are genuinely welcome, because I may not have put forward the best solution to this problem. I recognise that possibility. But, if I have failed, it does not mean that the problem goes away.
Why is there no capital gains tax charge on houses?
I posted this video on YouTube this morning:
The transcript is:
Why is there no capital gains tax charge on private houses in the UK? It's a question that's entirely fair to ask because we've all got so used to the fact that people who own their own homes don't pay capital gains tax when they sell them. We just think it's normal, but it is in fact a tax exemption and it is an incredibly costly exemption - the second most costly exemption in the entire UK tax system. In fact, costing in excess of £30 billion a year in the estimate of HM Revenue and Customs.
So, is it a good exemption? Does it achieve a useful outcome? Could we do something different?
Is it a good exemption? Well, yes, to an extent. Why do I say yes to an extent? Because we would have difficulties if we charged capital gains tax - that is the tax on the increase in the value of a person's home between the time that they bought it and the time that they sold it - every time they wish to move during their life, particularly if those moves were required, for example, by the need to change jobs. We don't want people to be stuck in a location because they can't afford to move because they can't pay the tax on selling one property before buying one in another location where their work is available. So, there is a real problem with charging capital gains tax on people's capital gains arising on the sale of their homes during their lives.
But, should we end up with a situation where, as a result, a lot of people - people of my sort of age, with my sort of hair colour - are sitting on a lot of private wealth based upon the fact that they bought their own homes when they were relatively young - which was easy when I was knocking around in my 20s - and now appear to be very wealthy through nothing that they ever earned but by the chance or fortune that they bought a house when they were young.
No, that is not fair. And it's not fair because it concentrates wealth in their hands and in the hands of the children who they can pass that wealth on to. So, we do need to tax this more than we are at present, which is by inheritance tax, which only falls on about 5 per cent of all estates in the UK?
We should be charging capital gains tax on every final disposal by a person or their spouse or their civil partner at the time that the last of those two ceases to use that property, whether that's either because they die, on the second death, or because they move into a nursing home or whatever else, or both of them quit the country and move abroad. Whatever the reason, on the last disposal of a property without there being a reinvestment, which if both are dead there couldn't be, then there should be capital gains tax charged on the whole of the lifetime gain that they've made.
That would be fair. It would collect serious amounts of tax. I reckon at least £10 billion a year at present, rising over time as more and more properties come within the scope of the charge.
And it would also put downward pressure on house prices - which would be good news - while also requiring that properties be sold, which would open up the market to more people who could come into it.
All in all, a win.
But we have to do such a change with care because we can't stop people moving during their lifetimes.
There is more on this in section 8.4 of the Taxing Wealth Report 2024.
Plain words
Some will have noted that the trolls were very active over the weekend, suggesting I had made a mistake in the video I put out on ’Welfare for the wealthy’. In it I said:
The interest rate went up from 0.1 per cent to 5.25 per cent. It's unusual for anybody to have earned 5.25 per cent on their deposits, of course, over that period. But real interest rates have risen from well under 1 percent in 2021 to over 4 percent still if you search around. In other words, the wealthy have benefited enormously from the welfare that has been provided to them by the Bank of England's benevolence, which is biased in their favour.
I thought that what I meant was unambiguously clear. My reference to ‘real’ interest rates referred to those actually on offer to real people in contrast to Bank of England base rates. It never occurred to me that anyone would interpret what I said in the context of the economic theory of ‘real’ interest rates, which compares those paid with the inflation rate.
I am, of course, familiar with that concept, much beloved by right-wing microeconomic fetishists who think the concept isat the forefront of the mind of all savers, none of whom should ever hold cash in their opinion because real rates, according to this theory, have been negative almost continuously since 2009 according to World Bank data.
Despite these people’s belief, in the real world , bank deposits remain as popular a mechanism for saving as ever and might have increased in value in real terms, just to prove that the claims of those rather desperate proponents of microeconomic theory are totally disconnected from the way real people actually behave.
I am only concerned in the videos I make, as well as in the posts here (unless I make it very clear otherwise) with the economics of the real world. So, I use words with their normal usage as indicated by the context in which I use them. And if there are multiple meanings possible, then the right interpretation is invariably the one that common usage requires.
So why were the trolls so active? I think there could be two reasons. One is that the video series is proving very popular, especially on YouTube. That one has been viewed more than 9,000 times now, with a very high promotion watching it all the way through, which is rare on any video platform. Without any real narrative to address the issues I am raising of course they are being pedants.
The other is about framing. They want debate on economics to be framed using the failed language and theories of the pseudo-science into which they have invested time and effort, even though it is very clearly incapable of explaining what is really going on in the world.
They are offended by my refusal to comply with their demand that I must frame things as they do, within the context of the rules that the lay down. I will not do that.
I will, instead, talk about what is very obviously happening in the real world where, for example, real (nominal, paid, call them what you like, all terms refer to the sum actually paid) interest rates are very clearly distorting consumer behaviour patterns and spending power in favour of the wealthy, whatever their relationship with inflation. If they don’t like me noticing that because it offends their beliefs, tough luck. I do not share those beliefs. Nor do I think that much of their analysis stands up to scrutiny.
My delete button is going to see a lot of use if this trolling continues, because I am not going to bore people here with the nonsense these people talk.