Spare a thought for the poor APMs

Jock — Fri, 05 Oct 2007 23:32:48 +0000

Property "guru" (well I say guru as I understand she participates in one of those DIY developer programs on a TV channel I don't receive, probably thankfully) Lucy Alexander reflects in the Times today on some of the potential effects of the Tory plans to try to take most family homes out of Inheritance Tax by lifting the threshold to £1m:

The property boom under Labour has created a generation of accidental property millionaires, many of whom are forced in later life to sell their homes to avoid imposing a punitive inheritance tax burden on their children.

Under the Tory proposals, the inheritance tax threshold would be raised from £300,000 to £1 million, knocking £280,000 (40 per cent of £700,000) off the tax bill for £1 million-plus homeowners. Will these now choose not to sell and instead, in time-honoured fashion, leave their homes to their children when they die?

Bless 'em. These poor APMs ("accidental property millionaires") are clearly now left in a dilemma few of the rest of us can actually comprehend. But the solution is all in the name...ACCIDENTAL property millionaires. Of course no doubt Ms Alexander, echoing Mlles Beeny and Allsopp, would say it is all down to the skill of the purchaser some years, perhaps decades, earlier that they had spotted an "up and coming neighbourhood" and bought into it when it was good value and have just sat back and enjoyed their "investment".

"Ricardo's Law:
House Prices and the
Great Tax Clawback Scam"
(Fred Harrison)

Well of course as property professionals they have to sell the dream, and Mandy Rice-Davies Applies; they would say that wouldn't they? But in reality it's absolute rubbish. When one spots an "up and coming neighbourhood", if one has been so assiduous in looking for a home, it's up and coming because other people want it, because there is public and private investment going into the local infrastructure and environment. It's yours and my tax money often enough that has been ploughed into an area and filters out like gold in a panning tray in the form of increased property values - as we shall perhaps one day see again when all the property around new Crossrail access points shoots up in value as a result of our billions of public investment.

Now I have said many times before I have no problem with the handing down of wealth from one generation to another. I do not share the notion of J S Mill that wealth ought to revert to the state upon death. If one has offspring, one works for them as much as for oneself. But what one passes on to them on one's death ought to be honestly and fairly gained. Not the result of hoarding what others need as a particular location gains in popularity and value because of the commercial and public economic activity that builds up around it.

If we taxed the land properly, the house buyer would perhaps be paying less than half what they have to today for their home, leaving them the opportunity to save their spare money in truly productive financial assets to leave to their heirs instead of the accumulation of other people's tax and economic activity and need for a place convenient for their work or their children's schooling or their college campus in the case of Oxford.

And how on earth are the non-Tory media and the other political parties letting the Tories get away with this scam of a tax cut for the tiny minority as if it's some beneficent gesture of redistribution? It's quite the opposite - the enclosure of the returns to public, commercial and community investment. Protectionism for the already privileged.

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Spare a thought for the poor APMs