The intellectual wing of the Tory Party?
For those who still stick to this view of Boris Johnson I urge them to read his colum in today's Telegraph. For those who haven't registered, the strange bit is,"To slow the housing market, then a more elegant solution – as this column has suggested before – would be to raise the threshold for inheritance tax to £500,000, so allowing many family homes to be kept in the family"
Now let's not argue over whether the threshold should be raised. Let's argue over whether doing so would curb house prices. I assume what he means is fewer large houses would be sold, while fewer smaller houses would be bought. Thus prices might rise at the top, but they would slow in the middle/bottom.
Ok..well here is the data. In 2002 around 24,000 estates paid inheritance tax. Assuming (generously*) one fifth of those had to sell the 'family home' to pay their inheritance tax bills, then around 5,000 houses would have been sold, and so (say) 10,000 would have been bought lower down the market. In 2002 around 1,500,000 houses were bought and sold, so forced selling/buying due to IT accounts for about 1/150 of house sales. In earlier years when house prices were lower it would have been much less. Yet house prices have soared in this period.
Incidentally, if Boris really thought making people sell their family homes was a scandal he should look at nursing care for old people. In a typical year 70,000 (family?) homes are sold for this purpose.
* Generously for many reasons. First, IT is paid only on every pound above £255k. Thus most houses it captures will pay very little. Second, where families include more than one child many will want to sell their home anyway. Or where it is in the wrong location, is the wrong size, etc. Third, people with very expensive houses will be able to afford their IT bill without selling.
Update: The Telegraph publishes my letter on the subject.
posted by Matthew @ 12/04/2003 12:58:00 PM
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