‘The dream of a property-owning democracy is alive,’ David Cameron will say today as he launches the Conservative manifesto, promising to extend the right to buy to all 1.3 million housing association tenants. Why, then, if he wants to promote a property-owning democracy is he also proposing to raise allowances for inheritance tax, allowing people to inherit homes worth up to £1 million without paying a penny in tax?
Inherited wealth is a huge factor in the concentration of property-wealth in ever fewer hands. This is what happens: middle-aged couple inherit large family home. They then sell it and reinvest the money in several buy-to-let properties, outbidding in the process several first time buyers who are as a result forced to rent a home instead. Here is a taste of the importance of inherited money in the property market. In 2010/11 the Land Registry recorded £135 billion worth of transactions. In the same year, as recorded by HMRC, Britons inherited £33 billion worth of property. Not all of the latter, of course, will be reinvested in property but a fair amount of it is.
We are returning to a pre-20th century social structure, where a class of property-owners lord it over a class of tenants. In spite of Cameron’s claim to be the champion of a property-owning democracy, the rate of home-ownership has continued to plummet during his time at Number 10, falling to 64.6 per cent in 2013, down from a peak of over 70 per cent in 2002.
If the Prime Minister really wanted to encourage home-ownership he would be jacking up inheritance tax. If, on the other hand, he wants to champion the right to inherit wealth free of tax then he should stop talking about a great property-owning democracy. He cannot succeed at both policies simultaneously.