There is a widely held view that at some point in the Noughties, culture came to a standstill. New cultural works continued to be made and people continued to think new things about them, but we have come to occupy a kind of endless present in which the past is never swept away. A look at the biggest live music acts of this year – Oasis, Coldplay, Sugababes, Busted, McFly, Will Smith, Scissor Sisters, Robbie Williams, Stereophonics, Linkin Park – does not exactly dispel the idea. If there is some truth to this theory, it may be related to the other thing in our society that has stopped moving: money.
The “velocity” of money is a measure of how often a pound changes hands. According to Bank of England research, the velocity of “narrow money” (meaning the most liquid types of money, suchas cash and current account deposits) rose in Britain throughout the postwar era, as incomes grew and people spent them more readily.
Then, in the Nineties, money slowed down. The velocity of money stopped growing, and began to decline. We continued to become a richer country, as measured by nominal GDP, but the rate of earning and spending – the opportunity for any one person to get their hands on any individual pound – slowed.
Why? A long period of low inflation (prices rising more slowly) is part of the explanation. But it’s also fair to say that the way in which people make money in Britain has become slower.
This brings us to the fisherman and his landlord. Whose income is more important? Pound for pound, landlords seem to be the more economically important group. The British fishing fleet employs about 10,000 people, who in 2023 landed fish worth £1.1bn. The British landlord fleet comprises 2.86 million individuals and 5.5 million properties, which in 2024 brought in £55.53bn in rent. The landlord industry eclipses the economic output of other totemic sectors, such as pharmaceutical manufacturing (£20bn) or mining and quarrying (£33bn). It brings in more than three times as much money as agriculture.
The landlord is also better treated by the tax system. The fisherman hauls pollock out of the North Sea, in waves that would leave most of us retching and screaming, for about £30,000 a year (according to the National Careers Service). He and his skipper pay National Insurance contributions (NICs) on this income, but the landlord, who can on average expect to earn £52,000 a year (gross) according to the most recent government survey, does not have to pay NICs.
This is unfair – the fisherman is effectively subsidising his landlord’s state pension – but it’s also bad for the economy, because the money made from fishing is faster. When the fishing boat lands its catch, the produce immediately becomes part of other transactions. Fish is a high-velocity product. Its value swims off and reproduces in the pay packets of market traders, drivers, chefs and waiters. The returns are quickly reinvested into the inputs (fuel, maintenance and labour) for the next trip.
The money spent on rent comes to a halt. Most landlords say they are using their investment to save for retirement. The average age of private landlords is 59, and a third of private renters are aged 25 to 34. This means the £56bn of economic activity that the landlord industry represents is largely just older people taking money from younger people and putting it into savings accounts. This is money that could have been spent on goods and services, which would have supported jobs and businesses. London is being drained of dynamism by the fact that the rent on a one-bed home is now 46 per cent of the city’s median income.
That is the key difference between investing in a British company (which helps to create jobs and grow the economy) and investing in a British house. The buy-to-let landlord is not creating new jobs or exports, developing new technologies or helping people acquire new skills. They are taking spending away from goods and services, and they are denying capital to other, higher-velocity businesses. They are a brake on the economy.
Last week, there were rumours that the upcoming Budget could require landlords to pay National Insurance contributions on rental income. A Treasury source told me these rumours did not come from their department, and that no one outside Rachel Reeves’ office can claim to know if a measure will be in the Budget. Nevertheless, it’s an interesting idea.
There are plenty of arguments against it. The National Residential Landlords Association immediately confirmed that its members would pass the cost on to renters. They’ll probably do so anyway; the latest government survey found that most landlords raised the rent last time they began a new tenancy, by an average of 11 per cent. A new tax would just be a fresh excuse. So, any tax increase would need to be accompanied by regulation. And as with the winter fuel allowance, a large number of people who benefit unfairly from the current system would complain loudly. But the issue here is bigger than pulling together a few billion for the Exchequer; our irrational housing market has become the enemy of growth.
[See also: Downing Street has derailed its own good news agenda]
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This article appears in the 03 Sep 2025 issue of the New Statesman, The Age of Deportation
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