Dear baby boomer, the government is coming for you and your store of wealth. The property and pensions built up over the past 40 to 50 years are, for the first time, in play. The triple lock on the state pension might be guaranteed, at least for the time being, but for the wealthier boomer, it looks like their private assets are being laid out on a chopping board, ready to be carved like a Sunday roast and fed to hungry government departments starved of funds for almost two decades.
These are desperate times and taxing the wealthy is a desperate measure. No government wants to do it. If you tax the rich, they might fly away in their private jets. That’s happened in Norway, one of the few European countries to retain a wealth tax. It’s true that older middle-income voters are more likely to stay put, but they also have a tendency to vote with their self-interest in mind. And because baby boomers are the most active age group on polling day – many of them among the richest in society – that has always spelled disaster for the party in government.
There have been skirmishes in the past. This time it’s serious.
Property wealth is the focus of the latest leaks from the Treasury. And there is a good reason why when the housing market is gridlocked and needs to be more flexible. The Treasury is considering changes to the tax regime that will shift the burden of council tax and the centuries-old property transaction charge – stamp duty land tax (SDLT) – towards more expensive homes.
One proposal is less about an increase in the total amount of money raised from SDLT for the exchequer than encouraging more transactions. The payback for a heavier tax on the sale of more expensive homes is a discount on the charge applied to cheaper ones. As the average worker discovers that moving house involves paying less tax, they will be more likely to take work in a different area, boosting labour mobility and economic growth. With more economic growth comes higher tax receipts. Bingo.
It’s true there will probably be more transactions in the short term. Unfortunately for property buyers, the experience of David Cameron and George Osborne’s help to buy scheme is that tax incentives are absorbed into a new higher price and the only winner is the seller. There should be a question mark over the plan when ministers consider why many people stay put, rather than sell. And, in particular, why those who have retired cling to the family home well into their late 70s, 80s and 90s.
The UK’s 12 million over-65s should be the focus of any property tax debate, because they occupy a disproportionate share of family homes. According to a study by the research charity the Intergenerational Foundation using official data, the average 65-year-old lives in a home offering more than 65 sq metres of space per person. By contrast, those aged 30 to 44 have less than 40 sq metres to move around in. Homes with three or more bedrooms are in short supply and hundreds of thousands of them are owned by older people who only use a fraction of the space, except maybe when family members gather at Christmas and Easter.
Resistance to selling is strong. Older people will have emotional ties to a property they have owned for a long time. And they will often defy the urging of their family to downsize when they consider all the filling of forms and anxiety connected with it. Yet more than anything, studies have shown downsizing is stymied by a lack of suitable properties – ones that are smaller and yet have features that make them attractive to people moving from large homes.
Flats in modern tower blocks designed for young professionals are often narrow and cramped, ill suited to a buyer who is considering a last-ever property, one that can cope with a wheelchair. We could blame councils that fail to take into account older people whenever they consider public housing. And the Ministry of Housing, Communities and Local Government does not seem to have the subject on its radar. Older people’s housing is strictly of the sheltered variety and the preserve of private providers such as Axa and McCarthy Stone.
But dear boomer, you must accept that your inaction has consequences. There is very little demand for the flats and small homes that might fit your whole-life needs. It appears that all you want is to retire early and cash out, taking your accidental winnings with you. Accidental because they were only accrued as a consequence of you being born at the right time, when by sheer force of numbers, your generation pushed property and share prices higher.
Boomers are the problem, but could also be the solution – and less
of a target. If boomers gave more of their time to local communities rather than jetting off on several holidays a year, and if they moved out of their main homes in good time in favour of younger families, there might be less reason to pursue their wealth.
The government is in a financial fix because the wheels of the economy are turning slowly. That’s been the case since the financial crash. But it doesn’t have to be. If better-off retirees demanded smaller, appropriate housing, the private sector would begin to provide it, home sales would increase and the economy turn at a faster lick. Otherwise the UK, like so many rich, ageing countries, will be stuck.
If boomers cannot bring themselves to act collectively and patriotically for the greater good, as seems unlikely for many reasons, then it will be legitimate for the government to pursue their lottery winnings with higher property and pension taxes. Still, dear boomer, it was a good ride while it lasted.