Housebuilding and taxes must come centre-stage
The argument for widely spread asset-ownership is a politically ecumenical one. On the left, a radical tradition of supporting equality in property ownership can be traced back to Tom Paine, via a host of thinkers such as the economist James Meade, the Labour revisionist Douglas Jay, and pre-war social liberals like Leonard Hobhouse. But it was a Tory member of parliament, Noel Skelton, who first coined the phrase ‘property owning democracy’ in the 1920s. He provided intellectual leadership to a group of young Conservative MPs that included Anthony Eden and Harold Macmillan, for whom broadly shared economic prosperity was a touchstone belief. Only later did the term become associated with Margaret Thatcher, who, unlike Eden and Macmillan, presided over a period of rapidly rising income and wealth inequality, but whose signature policies of utility privatisation and council house sales came to epitomise popular capitalism in the public mind.
These traditions informed the introduction of a suite of asset holding policies during the New Labour government, mediated via the intellectual spadework of Gavin Kelly, Matthew Taylor and others then at IPPR, and resolutely promoted by David Blunkett. The flagship policies were a universal programme of child trust funds, created at the turn of the century and abolished in 2010; and the Savings Gateway, a targeted policy aimed at boosting the savings of low-income families, similarly cut by the incoming coalition government but now reinvented as the Help to Save programme (To this list we might also add auto-enrolment in pension schemes and different tax reliefs for savings and investments).
Each of these policies promoted the ownership and accumulation of assets across the population, most radically in the case of the child trust fund. They also introduced into public policy the progressive concept of matching savings, rather than giving relief from tax. But they were too small scale and given too little time to have any effect in reducing wealth inequality. Moreover, the heavy lifting in constraining income inequality was done by tax credits and other income transfers; reducing wealth inequality per se was not a central policy objective during these years.
If reducing wealth inequality is a goal of policy, housebuilding must come centre-stage. Rising house prices have been a key driver of widening intergenerational and class inequalities in wealth in recent decades, and increases in property values in London and the south-east explain the tick up in these wealth inequalities in the latest data. Increasing the supply of housing is the only way to bear down on prices and the wealth gaps they generate, but this will take time and sustained investment over a number of parliamentary terms, just as happened in the postwar period. Home-ownership cannot be the only objective either – an expansion of social homes is critical if housing needs are to be met.
Compared to other Organisation for Economic Cooperation and Development countries, Britain taxes wealth at a respectable proportion of GDP. But it does so in relatively regressive and suboptimal ways, largely through council tax and stamp duties. Reforming council tax is politically perilous, but it can be brought back onto the agenda, as the debate in Scotland has shown. Land taxes also need to be part of the policy mix, perhaps by focusing on undeveloped land to start, before being widened out. Moving income and investments in and out of a country is straightforward for the global wealthy. It is much harder to avoid tax on property or land. The fiscal challenges of the 2020s, principally the costs of an ageing society, are likely to force these tax debates, long repressed, out into the open.
There remains a place for savings and asset accumulation policies. A targeted version of the child trust fund could be reintroduced by freeing up subsidies given to those on higher incomes in the new Lifetime Isas. Reform of tax reliefs on pension savings – ducked by the chancellor in the budget last month – could also generate resources to plough back into the new Help to Save scheme.
Greater equality in property ownership remains an attractive and plausible goal for social democrats. It will involve confronting some shibboleths on tax, as well as summoning the imagination to devise new and popular policies. But the long pedigree of radical ownership ideas is proof of their enduring appeal.
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Nick Pearce is professor of public policy and director of the Institute for Policy Research, University of Bath
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