Can the right be persuaded to back a "mansion tax"?

ConservativeHome editor Tim Montgomerie says the right should support higher property taxes.

Tim Montgomerie has a typically thoughtful piece in today's Guardian on social justice and the coalition. The ConservativeHome editor points out that the right has accepted significant parts of the Blair-Brown settlement - a ring-fenced NHS (at least in theory), higher international development spending, the minimum wage, a panoply of pensioner benefits - and asks if the left can make similar concessions. He writes: "[C]an the left acknowledge the harm caused by family breakdown? Can Labour politicians get to the point where they agree that single parenthood is sometimes wonderful, often unavoidable but rarely ideal?"

As luck would have it, this week's New Statesman is on that very subject. We asked ten left-wing politicians and thinkers, including Spirit Level authors Kate Pickett and Richard Wilkinson, Marc Stears, Diane Abbott, David Lammy and Melissa Benn, to address the issue of family breakdown and you can read their responses in the new issue (out today in London and in the rest of the country tomorrow).

Blue Labour thinker Marc Stears, for instance, writes:

For far too long, many of us on the British left have spoken to the country like washed-out tutors of Marxist social science. All questions of family breakdown, domestic abuse and personal ethics have been rendered as issues of material distribution. Problems have been presented as the all but inevitable outcomes of inequalities in income, wealth or opportunity and their solutions said to lie almost exclusively with the redistributive power of the state ... The call to re-engage with the family presents the perfect moment for us to put this oversight right.

In his Guardian article, Montgomerie argues that we must rebalance the welfare state in a pro-family direction. As this week's NS leader noted, a remarkable number of the coalition's benefit cuts - from the abolition of baby bonds and the Health in Pregnancy Grant to the three-year freeze in child benefit - hit families hardest. In addition, as I revealed last month, Cameron has broken his promise to protect Sure Start, a lifeline for low income families, and 20 centres have already been closed. By contrast, benefits for the elderly - free TV licences, free bus passes, the winter fuel allowance [WFA] - have been ring-fenced for entirely political reasons (the elderly vote more than any other age group). Montgomerie proposes means-testing the WFA (80 per cent of recipients are not in fuel poverty) and investing savings of £2.2bn in early intervention programmes. It's a stance that Labour's boldest thinkers, most notably James Purnell, will be sympathetic to.

But Montgomerie also wants the right to make some more concessions of its own. He calls for greater taxation of wealth, including high-value properties, and supports a version of Vince Cable's "mansion tax". Britain, he writes, has taxed income too heavily and wealth too lightly.

It's a subject that the New Statesman has devoted considerable attention to over the past year. In a cover story published in October 2010 ("The coming battle over land and property") NS editor Jason Cowley argued for a new model of taxation that shifts the burden of taxation from earned to unearned income; from taxes on income and consumption to those on property, inheritance and land.

In our leaders, we have long argued that there are strong, principled and pragmatic arguments for higher taxes on property. As a recent editorial noted:

These automatically apply to largely untaxed foreign owners, target the source of much unearned wealth and are harder to avoid than taxes on income. In addition, they reduce the distorting effect that property speculation has on the economy.

As the coalition's internal debate on taxation continues (the Lib Dems want the 50p rate to be replaced with a range of new property taxes), it's encouraging to see one of the right's brightest thinkers take up this agenda.


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George Eaton is political editor of the New Statesman.

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Stability is essential to solve the pension problem

The new chancellor must ensure we have a period of stability for pension policymaking in order for everyone to acclimatise to a new era of personal responsibility in retirement, says 

There was a time when retirement seemed to take care of itself. It was normal to work, retire and then receive the state pension plus a company final salary pension, often a fairly generous figure, which also paid out to a spouse or partner on death.

That normality simply doesn’t exist for most people in 2016. There is much less certainty on what retirement looks like. The genesis of these experiences also starts much earlier. As final salary schemes fall out of favour, the UK is reaching a tipping point where savings in ‘defined contribution’ pension schemes become the most prevalent form of traditional retirement saving.

Saving for a ‘pension’ can mean a multitude of different things and the way your savings are organised can make a big difference to whether or not you are able to do what you planned in your later life – and also how your money is treated once you die.

George Osborne established a place for himself in the canon of personal savings policy through the introduction of ‘freedom and choice’ in pensions in 2015. This changed the rules dramatically, and gave pension income a level of public interest it had never seen before. Effectively the policymakers changed the rules, left the ring and took the ropes with them as we entered a new era of personal responsibility in retirement.

But what difference has that made? Have people changed their plans as a result, and what does 'normal' for retirement income look like now?

Old Mutual Wealth has just released. with YouGov, its third detailed survey of how people in the UK are planning their income needs in retirement. What is becoming clear is that 'normal' looks nothing like it did before. People have adjusted and are operating according to a new normal.

In the new normal, people are reliant on multiple sources of income in retirement, including actively using their home, as more people anticipate downsizing to provide some income. 24 per cent of future retirees have said they would consider releasing value from their home in one way or another.

In the new normal, working beyond your state pension age is no longer seen as drudgery. With increasing longevity, the appeal of keeping busy with work has grown. Almost one-third of future retirees are expecting work to provide some of their income in retirement, with just under half suggesting one of the reasons for doing so would be to maintain social interaction.

The new normal means less binary decision-making. Each choice an individual makes along the way becomes critical, and the answers themselves are less obvious. How do you best invest your savings? Where is the best place for a rainy day fund? How do you want to take income in the future and what happens to your assets when you die?

 An abundance of choices to provide answers to the above questions is good, but too much choice can paralyse decision-making. The new normal requires a plan earlier in life.

All the while, policymakers have continued to give people plenty of things to think about. In the past 12 months alone, the previous chancellor deliberated over whether – and how – to cut pension tax relief for higher earners. The ‘pensions-ISA’ system was mooted as the culmination of a project to hand savers complete control over their retirement savings, while also providing a welcome boost to Treasury coffers in the short term.

During her time as pensions minister, Baroness Altmann voiced her support for the current system of taxing pension income, rather than contributions, indicating a split between the DWP and HM Treasury on the matter. Baroness Altmann’s replacement at the DWP is Richard Harrington. It remains to be seen how much influence he will have and on what side of the camp he sits regarding taxing pensions.

Meanwhile, Philip Hammond has entered the Treasury while our new Prime Minister calls for greater unity. Following a tumultuous time for pensions, a change in tone towards greater unity and cross-department collaboration would be very welcome.

In order for everyone to acclimatise properly to the new normal, the new chancellor should commit to a return to a longer-term, strategic approach to pensions policymaking, enabling all parties, from regulators and providers to customers, to make decisions with confidence that the landscape will not continue to shift as fundamentally as it has in recent times.

Steven Levin is CEO of investment platforms at Old Mutual Wealth.

To view all of Old Mutual Wealth’s retirement reports, visit: products-and-investments/ pensions/pensions2015/