Thesis Number: #9 (Page 5 of 10)

The Englishman’s Castle

Is it possible for people to buy back their ancestral land? That could be one way to view the “property owning democracy” heralded by Margaret Thatcher’s “right to buy” policy of the 1980s. Low-income families were encouraged to purchase social housing at big discounts. They reaped big capital gains and joined the rent-seeking class. But the exercise has failed: the numbers owning their homes in the UK are now declining. Nor could it work. For if we all become rent-seekers, who would work to create the rents?

The way in which the people of Britain were lured into accepting the culture of greed is illuminated by the “the Englishman’s castle” metaphor. That castle is the semi-detached family dwelling. The purchase of real estate is promoted as virtuous. People burden themselves with mortgages to “get on the property ladder”. This is prudent, because homes have been converted into financial assets. This, in turn, has pushed acquisitiveness to the point where the rent-seeking culture is itself in jeopardy. Examination of the housing market illuminates the way in which the viability of the state is being eroded. The starting point is people’s attitudes towards the way government raises revenue to fund public services.

This is what families pay to access the public services they need:

•  taxes to government, plus
•  location values to vendors of dwellings.

The irrational basis of the public’s collective consciousness is displayed when they attack taxation. They complain about direct payments to their elected governments, but remain silent about the indirect payments which are levied by property owners. This difference is explained by the way people are coached to attack “big government” and its powers of taxation. Vitriol is never directed at vendors who charge families that want to live in the catchment area of the public services they need. Economists encourage these lop-sided prejudices by remaining mute on the sociology of fiscal policy. An example is the work of distinguished American economist Martin Feldstein. He has emphasised the damage caused by conventional taxes, but he fails to explain that governments would not distort people’s lives if they collected revenue direct from rents (Feldstein 1996).

All of this explains why people do not challenge the vendors of dwellings with this kind of question: “Why have you included in the price of this home the value of public amenities that you do not own and which you do not provide?” On the contrary, we celebrate the success of those who reap capital gains from their properties. Out of that loot, some of them

•  paid for their children’s privileged access to fee-charging schools;
•  funded additional health and recreational services that add to longevity of life; and
•  purchased status symbols that signify wealth (such as high-end cars).

The collateral impact of this behaviour:

•  house prices were pushed beyond affordable limits for many families;
• shortfall in government revenue, so deadweight taxes had to be raised; and
• distortions to labour and capital markets as investors sought “tax-efficient” solutions.