Mansion Tax: a self-indulgence to make a point, not fix a problem

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Nik Darlington 11.10am

In the 1920s and 1930s the sociologist Elton Mayo conducted a series of experiments to test the productivity of workers at the Hawthorne Works in Chicago. Later in the 1950s, Henry Landsberger interpreted the data to show how people change their behaviour when being studied closely. It is a crucially inherent human bias, called the ‘Hawthorne Effect’ after the location of its first monitoring.

Translate it to the public realm today and it can go some way to explaining why figures of public attention and certain significance embrace a stance on an issue purely for political effect. A psychological underpinning for ‘triangulation’ tactics, perhaps, to wrong-foot opponents; or simply self-indulgence, in the knowledge that one’s every utterance is being watched and measured by others.

Something like a mansion tax is such an indulgence. The only problems it solves are those embedded in its proponents’ own thinking.

True, there is a concerning malfunctioning of the free market in property in Britain. We live on a small archipelago, which as much as it might surprise cultural apologists is actually a very popular archipelago. Demand for scarce land and property is great, compounded by our little archipelago containing some of the most ravishing sylvan scenery known to man.

It is correct for any good Tory to question the proper functioning of free markets. Perhaps the most invidious Tory fallacy of recent decades has been the conflation of capitalism with free market libertarianism.

Yet let’s not chuck the proverbial cherub out with the bath water. Penalising the owners of expensive homes is not the proper way to correct property market imbalances. The unintended consequences of an arbitrary tax ceiling are well-explained by Toby Young here.

Furthermore, while it is true that the London property market is a bit berserk in parts, many marketplaces have their relatively crazy quirks. Should we whack a super tax on the salaries of footballers at Manchester United, because they collectively outweigh the wages of all players plying their trade in the lower leagues of Wales, Scotland and Northern Ireland? Actually, if anyone has proper stats on that, do let us know.

But of course not, that would be daft. What’s more, while we ought by default to dislike the coarse linguistics of ‘mansion tax’, who is the arbiter? This country house is a bit mansion-like; this dearer two-bed flat isn’t. The ‘problem’ of high property prices is not confined to London either. Even the good burghers of provincial towns like Cheltenham could fall prey to the punishments that shall befall ‘unearned’ wealth (again, who is the arbiter of whether wealth is ‘earned’?).

The the fact that good ‘working people’ might one day want to work so hard that the fruits of their labour reap a £2 million property is of no concern to proponents of a mansion tax; albeit such a purchase would most likely be weighed down by several years of mortgage debt and the onus to work on and on to pay it off. Moreover, the fact that someone, somewhere, is being hammered at approximately £80,000 a pop for owning an expensive home is little consolation to the person on an annual salary of one-quarter that figure (if you can identify a consolation, please say it).

The mansion tax’s introduction would be a policy of momentary significance and soon forgotten - relegated into the midst of myriad other taxes and conveniently forgotten by a succession of politicians drawn to the windfall begotten by negligent fiscal drag.

Ultimately, if the sole intention of a mansion tax is to send a message - and I cannot discern a practical fiscal rationale - it is philosophical navel gazing, not pragmatic policymaking. In other words, the type of approach followed by socialists supped on grand ideas and structural-theoretical solutions. Merely meaningless gesture politics.

Yet people can do funny things when they know other people are watching.

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Macmillan Lecture 2012: Nick Boles sets out ‘national mission’ for improving Britain’s competitiveness

Nik Darlington 7.01pm

This evening at the Tory Reform Group’s annual Macmillan Lecture, Nick Boles sets out what he describes as a “new national mission” to improve Britain’s competitiveness.

Mr Boles, who was elected MP for Grantham & Stamford in May 2010, is a former director of the Policy Exchange think tank and has been at the forefront of efforts to modernise the Conservative party in recent years.

Given his proximity to David Cameron and Number 10, the speech and the policies proposed in it are being closely watched as possible indicators of current thinking at the top of the Government.

The weekend just gone has been dominated by arguments over bankers’ bonuses. The chief executive and chairman of RBS, which is 82 per cent owned by the Government, renounced this year’s share amid significant public pressure.

In his lecture, Mr Boles warns:

"The obsession with the incomes of the wealthiest…is blinding us to the biggest challenge our country faces."

"As much as we all enjoy the thrill of the chase when our prey is a feather-bedded banker, we in the political pack must not duck the really hard economic question - which is, why have people in the low and middle-ranking jobs not been able to secure a real increase in their pay for nearly a decade?"

"And we must not dodge the really hard answer - which is, that the productivity of people in those jobs is falling behind that of their competitors."

Though honest about the country’s failings, Nick Boles is upbeat about Britain’s chances for the next twenty years if we are “clear-sighted and quick-witted”.

We have heard much about London’s fledgling web-tech community at the 'Silicon Roundabout', and lately the Prime Minister described the M4 corridor as Britain’s very own ‘Silicon Valley’ of high-tech industry.

And the first of Mr Boles’ policies to re-energise Britain’s competitiveness is the creation of a new economic cluster, the ‘Oxbridge Brain Belt’, through the construction of a motorway between Oxford and Cambridge funded by the building of a new garden city along the route.

Such a motorway could link up with as many as four existing motorways but it would have to be careful to avoid the Chilterns AONB, through (and under) which the controversial HS2 line is intended to run. Once bitten, twice shy and all that. But with high-speed rail, Crossrail and possibly the much-heralded ‘Boris Island’ airport, this Government is proving to have a penchant for big infrastructure projects.

Secondly, Mr Boles also wants to introduce a Land Value Tax (LVT) to fund a permanent cut in employers’ National Insurance contributions. A form of LVT was suggested by current shadow health secretary, Andrew Burnham, during his failed Labour leadership bid. It is an idea backed by the Lib Dems and some of Mr Boles’ fellow Conservatives who advocate a rebalancing of the taxation of wealth versus income, such as Tim Montgomerie.

Exempted from the LVT, however, would be farmland (a common point of contention) and people’s main homes. Mr Boles criticises Nick Clegg’s proposals for a ‘mansion tax’ to fund an increase in personal tax allowances because it misses the target and won’t create jobs.

Thirdly, Mr Boles wants to see new foreign students excluded from the Government’s immigration cap and the introduction of a £5,000 immigration bond, to be repayed by foreign students when they leave the UK on completion of their studies.

Mr Boles advocated some radical policies for immigration in his quietly acclaimed 2010 book Which Way’s Up?, including a 50,000 cap and surety deposit for non-EU migrants. The Government’s tightening of immigration policies has drawn some criticism from business leaders and universities, so this could be the first sign of some relaxation as the Government tries to boost economic activity.

Above all, says Nick Boles, this must be treated as our “new national mission”.

"If we want our economy to grow again, if we want our national income to be honestly earned and fairly shared, if we want to take home more in wages than millions of equally qualified people around the world, if we want to hang on to paid maternity and paternity leave and protect our rights to an annual 28 days’ holiday, if we want to benefit from healthcare that is high quality and free, if we want to live comfortably in retirement, if we want all these things, we need to ensure that we are all a lot more productive than our competitors."

"And right now we are not."

It isn’t promising little more than blood, toil, tears and sweat, but it’s not far off it. It is a national growth agenda for little platoons. Through individual endeavour we may collectively prosper.