This won’t actually work I’m afraid

Griff Rhys Jones has said he is thinking about moving abroad if Labour wins the election and introduce a mansion tax.

The TV star described the idea of a levy on properties worth more than £2million as ‘fatuous’.

Under Labour’s proposals, owners of homes worth between £2million and £3million would pay £3,000 a year extra in tax.

Owners of homes worth more than £3million could pay as much as £30,000 extra per year.

Rhys Jones, 60, who made his name in shows such as Alas Smith and Jones alongside comedian Mel Smith, told the Daily Telegraph: ‘It would mean I’d be paying the most colossal tax, which is obviously aimed at foreigners who have apparently come in and bought up all the property in London.’

He added: ‘That sounds about as fatuous an idea as that immigrants are stealing all the jobs. I’d probably go and live abroad because I could get some massive palace which I could restore there.’

The presenter lives in a ‘gigantic’ house in Fitzrovia, central London, which he described as being a ‘slum’ when he bought it 15 years ago.

He said it has appreciated so significantly in value that he may move overseas if Labour wins next May’s election.

Because the new tax will be pretty immediately incorporated into the capital value of the place. Indeed, we’re seeing reports that even the idea of the tax is reducing top end house prices. That being so there’s no way to avoid it. You’ll either pay the tax year by year or get less money when selling. You’ll pay either way.

40 thoughts on “This won’t actually work I’m afraid”

  1. Much as I agree with him in principle, there can be few threats less likely to produce results and more likely to provoke derision than very rich people the earning to leave the country if X policy is enacted.

  2. Whichever numpty thought up the “mansion tax” (actually a South East England property tax) deserves the Order of Lenin 1st class for this piece of envy taxation.

    It destroys the value of property even before it has been enacted – and it surely will if Ed Millipede gets in next year.

    I’d have had more respect for Griff if he’d just sold up and left as others have done.

    Not that he’d be buying and restoring that crumbling French chateaux because of course he’d then be subject to 75% ++ French income taxes, etc.

    If you’re going to piss-off Griff, the key is to go somewhere that you pay less taxes overall.

    How’s about restoring a nice Estonian castle? Bit too cold and lonely for you far from the bright lights of the city?

    Fucking tough!

  3. John Galt,

    “Whichever numpty thought up the “mansion tax” (actually a South East England property tax) deserves the Order of Lenin 1st class for this piece of envy taxation.”

    It’s not a property tax. It’s a land tax. The bricks and mortar of a 2 bed house in London are worth about the same as the bricks and mortar of a 2 bed house in Hull. People are being taxed on the land. And as the value of land in London is mostly created by the state, that’s fair enough.

  4. I really can’t fathom how someone with a property worth 2-3 mn can be more pissed off about paying 30k in property taxes than they are about paying multiples more in taxes on income… It has to be a question of path dependency (i.e. the income taxes are considered sunk whereas these taxes are new).

  5. Stigler

    I am not looking to take issue with you. However, I don’t see how how the value of land is created by the state and would appreciate you taking us through that.

  6. Stigler

    Me neither. However if I bought a house in London with a 500m² footprint for £1m and it’s now valued at £2m, how has the state contributed to the notional added value?

  7. @Emil

    ‘I really can’t fathom how someone with a property worth 2-3 mn can be more pissed off about paying 30k in property taxes than they are about paying multiples more in taxes on income…’

    It’s the difference between wealth and income. My old granny lived in a 16th century manor house with lot of acres of land but was absolutely borassic. She was like lots of people of her ilk – walking round the place in tattered old clothes and burning two lumps of coal at a time. She had to sell the place even as it was, and fair enough, but the ‘mansion tax’ would have kicked her out much quicker.

  8. @MB

    ‘Me neither. However if I bought a house in London with a 500m² footprint for £1m and it’s now valued at £2m, how has the state contributed to the notional added value?’

    Encouraged Russian and Chinese billionaires to move here, and five million poorer people, restricted the flow of new housing, kept interest rates low to encourage asset prices to rise?

  9. Saw Carter USM play the Glasgow Cathouse just after the election in 97. Jim-Bob started the show by gleefully reeling off the names of every rich person who’d ever threatened to emigrate if Labour got in again. “Paul Daniels has left the fucking country! Phil Collins has left the fucking country!” Every one got a huge cheer. My politics have changed considerably since then, but I think I’d still cheer. Bloody slebs who think they’re such a boon to the nation that they can actually threaten us with going away: derision is the correct response.

    I like Griff. But you’d think someone with a background in satire would get this.

  10. Interested

    Thanks, that explains it. The state makes a total horlicks of everything except my theoretical (and now also metaphorical) house which remains standing higher up the shore while the tide runs out.

  11. Ironman/Meissen,

    “I am not looking to take issue with you. However, I don’t see how how the value of land is created by the state and would appreciate you taking us through that.”

    OK. Let’s say I’m the government and I decide to build a new shiny opera house. I throw a few hundred million at building it and a few more million at maintaining it. That’s money from all over the country and I decide to build it in Hull.

    Can you tell me where the builders are going to live when they’re building it? It’s not going to be Truro, is it? It’s going to be somewhere near Hull. The glazers, the blokes fitting out furniture. When it opens, the tenors that sing there, the people running the box office, the cloakroom attendants, they’re all going to have to be within reasonable proximity of Hull.

    The effect of all this extra money coming into Hull is that it’s going to increase the demand for land, and with limited supply of land, that will raise the prices. Therefore, the owner of that land gets richer, and gets richer for no other reason than that the state chose to stick an opera house there.

    When the BBC built their media city in Salford, house prices rose (http://www.telegraph.co.uk/property/buyingsellingandmoving/9836890/BBCs-Media-City-causes-house-price-boom-in-Salford.html). The land owners of Salford didn’t create the wealth that increased the value of their land, the state did. People from all over the country via their TV taxes. If the state had stuck Media City in Belfast or Bangor, it would have had the same effect.

  12. TMB,

    Whether it’s B&Bs or houses, it has the same effect. People need a place to rest their heads. The more people want a place, the higher the prices will rise.

  13. The Stigler, so the state blows £millions on a new toy for the state’s favoured group du jour, and then demands more in tribute as they’ve just made everyone’s housing more expensive?

    Doesn’t sound to me like a very convincing argument for either state spending or more tax to fund it.

  14. A new report out today by Knight Frank, the property firm, seems to show that London real estate prices in the posher bits of town are flattening. The risk of a MT coming in might be a factor, as is the dawning realisation that the era of endless confetti money might also have to end some time.

    The threat of a tax, in other words, can have an effect. However, what happens if Millipede and Co don’t win, and if the Mansion Tax idea is thrown into the bin? There might be another rise in prices.

  15. The State doesn’t “create” the value of land other than in influencing it one way or the other, such as through coercive means like land planning laws (Green Belt, laws preventing high-rise flats, etc), or through state actions that increase/reduce its value (rail links, waste disposal plants, power stations.)

    The land value tax people argue that an land value tax can be equitable by redistributing the “unearned” rise in the value of land from those who have been boosted by State action to those who have been harmed by it. The problem, despite this idea sounding very simple, is that there are a lot of effects on land values that aren’t state-created at all. And it remains difficult sometimes to disentangle the impact of a specific owner from external factors.

    There is also the problem of LVT and efficient land use. We want the value of land to reflect relative changes of scarcity and demand – that is market forces at work. If people did not benefit (via rising land values) from certain things (such as transport links) then speculators would have no incentive to take a risk and build in places where they hope there will be some positive development, which could be entirely from the private sector.

    Even without a state, where there are cities and the benefits of people clustering together, there will be an impact on land values from this. Which is entirely as it should be.

  16. BiW,

    “The Stigler, so the state blows £millions on a new toy for the state’s favoured group du jour, and then demands more in tribute as they’ve just made everyone’s housing more expensive?”

    Someone’s got to pay for their new toy for the state’s favoured group du jour. In the case of the Hull opera house, should it be the people near Truro that won’t be using it, won’t get jobs fixing it, or the people near Hull that will?

  17. Jonathan Pearce,

    “The problem, despite this idea sounding very simple, is that there are a lot of effects on land values that aren’t state-created at all. And it remains difficult sometimes to disentangle the impact of a specific owner from external factors.”

    OK. Show me an anomaly. Somewhere where house prices are high where you think the state wasn’t involved in helping that.

  18. Stigler

    Whether it’s B&Bs or houses, it has the same effect

    Up to a point (Lord Copper). My point, no doubt poorly expressed, was that the project was likely to be one of those white elephants conceived at the time of a by-election.

    Folk do not as a rule make longer term decisions on what they consider to be short-term opportunities. In other words, the orchestra won’t be buying houses in Hull if the gig looks like a turkey.

    If and when the BBC loses its current funding arrangements, I would guess that prices in Salford will plummet.

  19. bloke (not) in spain

    @the Stigler
    It’s a zero sum game. Every person you’re talking about moving to Hull has left some other part of the country. Thereby incrementally reducing property prices where they were. So the State hasn’t created any net value.
    Of course you could argue a land tax redistributes the benefits back again. And neatly destroys the arguments for State spending projects.
    I’d argue against land value/mansion taxes because houses aren’t strictly speaking a consumer durable, although that’s what they’re used for. And nor are they a tradeable commodity, which is what they’re treated as. That the value of any individual house doesn’t really exist until it’s bought/sold. On the basis that if a sizeable proportion of the housing stock was available for purchase, no-one would have the slightest idea what the striking prices would be.

  20. TMB,

    “If and when the BBC loses its current funding arrangements, I would guess that prices in Salford will plummet.”

    Yes, but people are currently buying land there because they’re betting that they’ll stay high enough for long enough.

    I’m not disputing that there’s going to be a smaller effect on short-term than long-term projects, but there is still an effect on rents, which themselves have an effect on house prices.

  21. bnis,

    “It’s a zero sum game. Every person you’re talking about moving to Hull has left some other part of the country.”

    Correct.

    “Thereby incrementally reducing property prices where they were. So the State hasn’t created any net value.”

    Again, correct.

    “Of course you could argue a land tax redistributes the benefits back again. And neatly destroys the arguments for State spending projects.”

    Well, probably a lot of BS government projects, but you still need parliament somewhere, the MOD somewhere, the patent office and DVLA somewhere.

    “I’d argue against land value/mansion taxes because houses aren’t strictly speaking a consumer durable, although that’s what they’re used for. And nor are they a tradeable commodity, which is what they’re treated as. That the value of any individual house doesn’t really exist until it’s bought/sold. On the basis that if a sizeable proportion of the housing stock was available for purchase, no-one would have the slightest idea what the striking prices would be.”

    Land isn’t a commodity? I can’t buy or sell land? And yes, it does have value. If it didn’t, people wouldn’t pay rent to have a house (which is really, a house on a piece of land).

    Mark Wadsworth came up with the idea of using the postcode sector, and then within that you work out the square footage.

    And no-one’s saying it’s perfect, but income tax isn’t perfect either, and has far more damaging effect, in that it makes no distinction between mobile jobs (like film companies) and immobile, rent-seeking jobs (like people selling cups of tea near Windsor Castle).

  22. The discussion here seems to have got a bit convoluted. The values of ordinary suburban London semis are, in large part, propped up by the state refusing to issue sufficient planning permission to allow enough homes to be built.

    The more expensive houses in London, though, tend to derive most of their value from their location in particularly attractive (FSVO attractive) parts of London. Those are the ones the mansion tax is actually intended to hit, and they’re the ones where government action has had much less of an effect on value.

    Emil>

    “I really can’t fathom how someone with a property worth 2-3 mn can be more pissed off about paying 30k in property taxes than they are about paying multiples more in taxes on income.”

    My dad has a much higher proportion of his total wealth tied up in his house than most people, but not to an unusual degree – he doesn’t generally have expensive tastes, except when it comes to where he wants to live. He’s comfortable enough, could afford a £3k a year tax, but £30k would be out of the question unless he stopped being semi-retired and went back to work full-time.

    Put another way, an interest only mortgage for a £2m property would be about £60k a year. A tax of half the annual cost of a house seems a bit steep.

  23. If you want to see the State affecting house prices look at what happens when a bypass is announced (eg Puddletown in Dorset) or a new tube station in London. Aren’t hose prices correlated with distance from tube stations?

    When the M40 was widened and extended those close to the motorway in Stokenchurch received compensation for the drop in house prices whilst those a couple of miles away saw house prices rise.

    Not that I’m defending LVT, I see the merits but I’m still not convinced. What worries me is that once politicians get hooked on the revenue they have an(other) incentive to manipulate the market to keep prices high. And experience shows us that some form of fiscal drag will be applied over time and eventually the average house will be sucked in.

  24. Mr Jones’ view is one shared by most people which is that taxes aimed at other people are invariably a good idea while those aimed at yourself are invariably a bad idea.

    A tax “obviously aimed at foreigners” no doubt sounded wonderful to Mr Jones until he realised it was aimed at him.

  25. My problem with this ‘Sate created rise in land values’ is that London has had a boom that really hasn’t happened anywhere else, at least not in the same way. If this were truly State created then we would see a hugely disproportionate level of expenditure in London. That immediately sounds like Ritchie bollocks to me. For the last 20 years gov’t has taken every opportunity to spend outside London and move national institutions and gov’t agencies out to the provinces.
    London’s rise is far more due to London ‘s economic advantages and it’s entrepreneurship.

  26. bloke (not) in spain

    @The stigler
    Land isn’t a commodity? I can’t buy or sell land?

    Not in the sense of most traded commodities. It’s not particularly fungible. If one was trading in copper or coconuts one could assume one parcel of either was pretty much the same as any other parcel. And one would expect all parcels within the market to be traded. Neither apply to land.
    If there is a similarity to a commodity, it’d be gold. Where the value is not reduced by being used. But’s what the value of gold?
    Having worked with the stuff, it’s an interesting metal, fun to make things with. And not of any particularly high value, because almost all the value of the finished product is in the value added in manufacture. (See the scrap value of an engagement ring). But out of the context as its role as a jewelry base constituent, almost all of its value is its “investment” value.

  27. bloke (not) in spain

    One can appreciate your amusement SQ2. IanB’s “money cannons” argument. But how much of the London economy is the result of it being both a centre of government & centre of commerce? S’pose looking at Washington, Canberra etc might be instructive.

  28. Let’s see:
    In the real world, the world that actually exists, over 50% of Employment in the North East is in the public sector and large chunks of Merseyside are similarly subsidised. They make for good examples. Then there is the undeniably progressive. redistributive nature of taxation. Redistributive means it doesn’t go to London and the South East.
    In the other world all the money gets spent in London and anybody pointing out what happens in the real world gets met with haha hahaha.

    BinSp
    By all means look at Canberra, Washington, Brazilia. You might also though want to look at New York, Paris, Moscow and, er, London.

    I’m sorry but every so often ideas get pushed on this blog that are so stupid they defy contradiction. London’s pre – eminence being due to government favour is just such an idea.

  29. Ironman,

    “In the real world, the world that actually exists, over 50% of Employment in the North East is in the public sector and large chunks of Merseyside are similarly subsidised. They make for good examples. Then there is the undeniably progressive. redistributive nature of taxation. Redistributive means it doesn’t go to London and the South East.”

    Wrong. According to the ONS, 22% of people in the North East are in the public sector, compared to nearly 17% of employment in London.

    But, it’s not about numbers of jobs that matter, it’s spending.

    So, what shall we start with? How about housing benefit where London gets around half of the £11.8bn per year spent on it? Then there’s the £3bn subsidy to London Transport.

    According to the government’s National Infrastructure Plan of 2013, £36bn of spending was in the piepeline for London. If you exclude Hinckley Point, that’s as much as the rest of the UK put together. £9.5bn on Crossrail, £17bn on TFL etc etc.

    Then there’s the highest levels of Local Government Settlement, about 30% higher than the North East.

    And of course, the arts spending which is 10 times per head higher than the average spending in the country.

  30. Stigler

    That’s an impressive list but is London a net contributor of funds to the rest of the UK or does it require subsidy from outlying parts that derive no benefit from its facilities? Like Hull’s opera being paid for by Truro’s citizens in an earlier example?

  31. OK Stigler, London is being subsidised by the rest of the UK, the moon is made of cheese and English coastal towns really are being swamped with immigrants. Turns are going to believe what you want to believe and nothing will shift you, certainly not the tax streams from London that are actually paying for it all.

  32. Ironman,

    Your initial claim was nothing to do with how much money gets paid in tax versus how much money gets spent by region. It was, rather:

    > For the last 20 years gov’t has taken every opportunity to spend outside London

    You want to say that London should have more money spent on it because of the population density, or that what government spending does occur in, say, Hull is actually higher than would be justified merely by Hull’s tax receipts: no argument from me. There are perfectly good obvious reasons why London Transport should get a bigger subsidy than public transport in Glasgow or Norwich.

    > In the real world, the world that actually exists, over 50% of Employment in the North East is in the public sector and large chunks of Merseyside are similarly subsidised.

    Looks like your stat has already been debunked. By a mile, too.

    That aside, in the real world, a lot of the country have public transport services that consist of a bus or two a day, but having to wait more than three minutes for the next Central Line train is considered such a disaster that it can only be met with beeeeeeellions of pounds from the state.

    Stigler,

    > £9.5bn on Crossrail

    Going to have to pick a slight nit there. The effect of Crossrail, once it’s finished, will be that people travelling East-West will no longer have to stop (and spend money) in London. It’s a bypass.

  33. S2,

    “Going to have to pick a slight nit there. The effect of Crossrail, once it’s finished, will be that people travelling East-West will no longer have to stop (and spend money) in London. It’s a bypass.”

    In theory, yes. But in reality, it’s just providing more commuter trains into London. If you live in Reading, why would you commute to Ilford instead of Liverpool St?

  34. Ironman,

    “Turns are going to believe what you want to believe and nothing will shift you, certainly not the tax streams from London that are actually paying for it all.”

    Are you going to bark, little doggy?

    Produce some data, there’s a good chap.

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