Friday 10 July 2015

Giving And Taking

There was an old refrain, commonly sung by men in bars having had a few, to the tune of "Onward Christian Soldiers".  It went, "Lloyd George knew my father, my father knew Lloyd George" repeated until the end of the tune.  It was alleged to reflect on his many personal amours and their consequences.

In many minds the question of Inheritance Tax is linked to Lloyd George, picture above, arising from the 1909 Peoples Budget and the political controversies of the time.  His drive as Chancellor of the Exchequer in the Liberal Government at the time is said to be the beginning of our modern welfare state.

It is rather more complicated than that as this brief Wikipedia summary indicates and this only refers to modern times.  As long ago as 1215 the propertied class objected strongly to Good King John's attempts to raise enough tax to keep the government going and wardships of the time were part of the problem.

Ever since there has been an uneasy and often bitter history of taxing property and the handing on of rights etc. to later generations.  With the votes being given to lower classes who once rarely had much if any property or wealth it was inevitable that they would want to make those with it pay.

In the later 20th Century the idea of allowing as many as possible to own their homes had widened the issues, especially when inflation of prices runs well ahead of changes to the levels of taxation.

Mr. and Mrs Average who bought their semi-detached house in a nice London suburb for £15,000 when that was a lot of money may now be sitting on a million or more at current prices that has made them very taxable, despite the problem that the money can only be realised on sale.

When you add to that those in the private sector with a few savings for pensions etc. and it all takes it further.  There are a lot of them and their families and this kind of issue is critical to their voting habits and ambitions.  They do not like the idea of paying a large chunk of it in tax.

More to the point the financial services sector has been doing deals and making arrangements for the wealthy for some time now, around the same period as the idea of owning your own home.  I suspect there are few really wealthy left who have left themselves vulnerable.  There may be some, foolish or just unlucky who might get caught but not many.

What has been happening is that more and more people have been arranging their affairs to reduce, in fact minimise, their tax liabilities for inheritance.  This has grown from being a cottage industry to being a key part of the finance sector.  Again, there are those who have failed to do it but they are shrinking in number.

All the old arguments about Inheritance fortunes and monies now are of less and less relevance.  What does matter is a Treasury needing more and more loot to stave off borrowing and finding less and less places to get it that are reliable.  At the moment their political bosses are reluctant to touch property.

The result is what is called a "giveaway" or popular tax reduction when in fact most of those who might have paid it have legally avoided doing so.  So if you cannot get the tax in somewhere or other you have to cut the spending.  The statue above seems to show Lloyd George giving with one hand with the other putting something in the pocket.

It is not going to get better.  Now whatever happened to Lloyd George and his once mighty Liberal Party?  Was it something that went wrong in a Coalition?


  1. Demetrius writes, clearly with meaningful intent: "The statue above seems to show Lloyd George giving with one hand with the other putting something in the pocket."

    As far as I can see, in the given photo, and also in the photo of Statue of David Lloyd George, Parliament Square, the right hand is fully employed in holding onto a hat.

    Best regards

  2. «despite the problem that the money can only be realised on sale»

    The key aspect of the current property bubble is that the profits can be realized without a sale, with a remortgage.
    Which has the "benefits" that it delivers profits to the financial sector and does not need to have the property actually put on sale, which would depress prices.

    Remortgages are a big deal:
    «Under Thatcher, this exploded to over £250bn across her premiership – a staggering 104% of GDP growth. ... But Blair did his homework and let loose – as did Thatcher – a wave of cheap credit, financial deregulation, house price inflation and an equity withdrawal-led consumption boom. Withdrawals under Blair’s leadership totalled around £365bn, that’s a full 103% of GDP growth over the same period,»

    A typical :-) user:
    «Certainly, we overstretched ourselves when we bought our lovely period home for £419,000 in 2002. But with mortgage companies practically throwing loans at us in a rising property market, we slept soundly at night, smug in the knowledge the house was making us money. [ ... ] The valuer had barely been in the house for five minutes yet we were able to borrow a further £80,000. [ ... ] We were lulled into a false sense of security about our wealth. Whenever we overspent we just remortgaged without comprehending the consequences of taking yet more equity out of the property. [ ... ] In our defence, we weren’t spending the money on expensive designer clothes, luxurious holidays or flash cars. Much of it was going on school fees and upkeep of the house.»