That house is no swankier than an identical house in a cheaper part of the country, and indeed it is still the same house that you bought all those years ago. It still has a worrying damp spot in the bathroom and it still has a couple of tiles missing from the roof – but irrespective of any defects it may or may not possess its value has maintained a continuous and fairly vertiginous upward trajectory.
You don’t think an ordinary home in London could be hit by this tax? You think I must be talking about rich people? Well, let us look at the story of London house prices since 1983, when the Halifax building society started recording them. In that year the average purchase price for a property – across all buyers and house types – was a derisory £38,000.
Then of course the economy started to roar away. We had the Big Bang, the rise of popular capitalism; we had growth in the London population and the return of confidence in the city. By 1989 that same average home was worth an astonishing £102,000. It had more than doubled in just six years – and then there was the bust of the early Nineties. Property prices tumbled in a recession that was exacerbated by the ERM and high interest rates. Everyone who wishes that house prices could fall again should remember that time, and be careful what they wish for. It was a pretty grim period, of very high unemployment, massive repossessions, and much economic grief.
By 1995 that average London property was worth only £77,000. It was the following year, however, that things really started to pick up. The economy was being well managed by Ken Clarke. Interest rates were back down, and an amazing 12-year boom began, as the incoming Blair government enjoyed the fruits of Tory reforms and a propitious global economy.
Here is how that average London house price performed, year by year, during that complacent epoch from 1997 to 2007: £96,000, £104,000, £121,000, £144,000, £158,000, £185,000, £219,000, £241,000, £258,000 £270,000, £314,000. And then of course there was the crash of 2008, as Gordon Brown, Ed Balls and Ed Miliband collectively drove the economy off the cliff.
By 2008 they had succeeded in bringing the average price down to £251,000 – and were rightly booted out of office. Since then there has been a recovery, and last year for the first time the average house price in London was above pre-crash levels at £356,000. It is vital to stress that these extraordinary house prices are very far from unalloyed economic good news.
These values are now many multiples of average incomes. It is grotesquely unfair to millions of young people, who feel they have no hope of getting on the ladder as their parents did. We need to tackle the problem, as we are, by making more homes available, of all types. We are building record numbers of homes – more this year in London than since 1980; we have built record numbers of affordable homes, and we can do it on brownfield sites: there is scope for about 400,000 new high-quality homes just on London’s brownfield land.
We must insist on steep taxes on foreign buyers who invest in flats but leave them empty – and all London boroughs should be making use of their existing powers to levy a punitive council tax. We cannot have homes being marketed overseas before they are advertised to Londoners – an outrageous and long-standing practice that developers agreed to drop last year.
And we must stop the injustice by which London families are being forced by inheritance tax to sell off the family home simply because it was their fate to grow up in London, the most successful urban economy in Europe. It wasn’t their fault, or their parents’ fault, that the asset should have appreciated so fast – with the digits almost visibly spooling round in the estate agents’ windows.
With the average London purchase price last year at £356,000, it is now literally true that a tax intended for the very rich is now hitting ordinary families in average homes. It is entirely right that this tax cut should be funded by changes to the pension arrangements of the tiny minority earning over £150,000. The Conservatives are helping huge numbers of people to pass on a little bit more to their children. They are supporting a natural human instinct. Inheritance tax has been falling on the wrong people. If the Tories win, an injustice will be righted.