Inflated house prices have become a cash cow for the Exchequer, as you say (The Tablet, 24 May). More than that, we have become a nation of property speculators – whether sitting tight, trading-up, or starting with the help of a granny who covers our mortgage deposit.
Eventually we will bequeath our appreciating asset free of capital gains tax. Our house is what benefits most from inheritance tax allowances. We enjoy it without tax on its income in kind, because Schedule A was eroded after 1936, until abolished in 1963. No wonder this exceptional treatment creates an insatiable demand for housing. Restrictions on supply are but one part of the problem.
Forty years ago in 1974 the then Government made a “fundamental review of housing finance” but ducked issues of demand and tax reform. Many of us economists warned that the nation would pay dearly for inaction. Then, there was much handwringing when average house prices rose above three times average earnings; now, in London they approach eight times.
Furthermore, to be economic, rent levels follow the dominant trends of the owner-occupied sector. Hence, tenants are progressively squeezed and the cost to public funds of social welfare payments becomes prohibitive.
You show Mark Carney’s new buyer experience and purchasing power, plus his warning that the tail is wagging the rest of the economy. Shouldn’t the Bank of England initiate a new, non-political, review of housing finance?
Bernard Kilroy, Hook, Hampshire
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