I know the money is there, because I can see what is happening to London property values, and I can see the money still washing in from overseas. The other day I met a distinguished gentleman who told me he had lived in his house for about 35 years. It is a large, terrace family home – creaking staircase, cracks in the wall, a faint suggestion of cats as you enter the front hall. It is the kind of Georgian or Victorian home that you find in large numbers in London, and of course, after years of property price inflation, it is worth a fortune.
Some people – mainly but not exclusively “non-doms” – get around stamp duty by treating the house as a company. They buy shares in the company, and therefore pay tax at 0.5 per cent rather than at 5 per cent for expensive homes. But there is an even larger group of people who are exploiting a loophole, and going for a (legal) dodge called subsale relief. The result is the same: through the agency of some clever lawyers, they avoid a tax that is paid by virtually everyone else. According to a leading tax accountant, this loophole is being ever more ruthlessly exploited, and the loss to the Treasury could easily now be a billion pounds.
It is time that it was closed. Yes, of course London’s destiny is to be a great global metropolis, and of course it is right that people should come here to enjoy the many pleasures of London life. I have nothing against such people – and I do not blame them for trying to minimise their tax exposure. At least they are frank about what they are doing. They are not hypocrites, like some people, ahem, I could mention – no names, no pack drill – who foamingly denounce tax avoidance, and call for bankers to be hung, and who then turn out to have elaborate schemes to avoid paying the full whack of income tax on their earnings.
What all these people need to remember, humbugs or otherwise, is that hundreds of thousands of Londoners cannot afford the accountants to help with this kind of avoidance, and that there are hundreds of thousands who cannot afford any kind of property at all, let alone the fleshpots of Cricklewood or Mayfair. Here in London we will have built 50,000 new homes over the past four years, homes for social rent or part-buy, part-rent. It is a record number, and will help huge numbers of people who cannot afford to live in the city. We believe we can do even more over the next four years, in a programme of construction that will help to get large numbers of people into employment. Of course, it would be easier if we had an extra billion to spend on support for the housing construction programme.
Think of that Russian oligarch and the house he wants to buy for his cleaner. There are all sorts of reasons for him to love London. We have the right time-zone, the right language, we have excellent schools, more museums than Paris, more theatres than New York and a murder rate now at its lowest since the 1960s and considerably lower than Moscow’s. Is he really going to hop it to another jurisdiction, just because he has to pay the same for his property as any other UK taxpayer? I don’t think so. Sauce for the goose, sauce for the gander.