A brief history of UK tax, Part 4.

We now move to the system that has been in place for the last half a century. Faced with the threat of introduction of Land Value Tax by the Liberal Government in 1909, when only ten per cent of households were owner-occupiers, landowners, whether represented in the House Of Lords or not is moot, decided to stage a tactical retreat and co-opt ever larger sections of the working population into what is essentially a giant Ponzi Scheme.


Because notional income and capital gains on homes are now lightly taxed (relative to taxes on income and production), their resale values are artificially inflated. The two boxes 'landlords' and 'households and businesses' are largely synonymous of course - but once they have overpaid for buying a home, people think with their 'homeowner' hats on and want this state of affairs to continue, so that they can in turn sell for an inflated value later on (without thinking about exactly when they hope to do this), but without them noticing that they are paying far more in income taxes etc than they would ever be paying in LVT. Compare the outcry over a 3% rise in Council Tax, that might cost an average household an extra £35 a year, with the relative lack of outcry at the government's announcement that National Insurance would rise by 0.5% in a year or two, which would cost the average household £200 a year.

Schedule A taxation and Domestic Rates (as the last vestiges of some sort of land or property value taxation) were scrapped in the 1960s and the late 1980s respectively, as a result of which property price bubbles and busts have grown larger and larger.

The penultimate throw of the dice was the sale of council housing at massive undervalue in the 1980s by the Tory government, in the hope that becoming a homeowner would make voters both more small 'c' and large 'C' conservative, since when 70% of households have been homeowners. The irony is that taxes on income and production erode the tax base, so tax rates have to rise ever higher to compensate for this and to pay for a welfare system for those that are excluded from the party.

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