Samizdata

“In many parts of the country the graduate earnings premium is negative – these local economies are unable to absorb or properly use higher qualified people because of the structure of the local economy.”

– From this essay, “Levelling up: against just “cities and skills”, by Neil O’Brien, who I think is the Conservative MP of that name. I found the link via the trade unionist Joe Allen.

Though I salute Mr Allen’s open-mindedness in linking across the political aisle, I would like to make one observation with which he probably – and his employer the TUC certainly – disagrees: to whit, the fact that there are parts of the country where going to university on average makes a young person poorer is yet another argument against rent control.

Again and again I see the argument that, far from it being a problem that landlords are being driven out of the rental market, it is a fine thing, because landlords selling up will make more homes available. “Home” is a beautiful word, but there are and always will be people who are not looking for a permanent home. Some of this group are students, obviously, alongside those in temporary jobs, those whose work requires them to move frequently – and those who have a choice between staying at home where their degree is useless or moving to some place where it isn’t. A strong rental market allows rural people to try out life in the city, and vice versa for city people. In a society where landlordism is banished and every house is a home, you had better pray that the waiting list to leave your quaint village is exactly equal in length to the waiting list to join it.

Politicians of all stripes like to talk about “sustainability” – although I’ve noticed that some of the enthusiasm for this when it comes to the “green” angle has been dented by rising energy costs and worries about how we keep the lights on when the wind does not blow and sun does not shine. The realities of how to produce energy when fossil fuels are off the table and nuclear is not taken seriously are going to bite us, and hard, in the years to come.

Even so, sustainability is a useful word, and it is a shame that it gets tainted as the word “liberal” does by association with bad ideas. (The same goes for “progressive”, while we are at it.)

Well, one point I come across in my day job in covering business and finance is how family-owned/run firms can often show superior returns, when compounded over time, and be more robust, and more sustainable, than those that don’t have a family connection. That’s not cheesy sentimentality about how a business is better when Grandad, Mum and the cousins are around. (There can be very tricky succession and control issues with families; wealth advisors often earn big bucks advising families in how to resolve conflicts. And we’ve all seen Dallas.) Even so, for all the caveats, family businesses are important. They employ millions of people. In countries such as Germany and Italy, family-run firms have been the norm; the fashion houses, specialist sportscar firms, and many others, have deep and long family connections. Same goes for agriculture and food, for example. Here is some UK family business data that shows how big these firms are, in aggregate.

Well, it seems that one thing that the UK government is thinking of is ending the business property and agriculture reliefs from inheritance tax. At present, the tax – 40 per cent above a “nil-rate” threshold of £325,000 – does not hit if you inherit a family business, including a farm. In the US, such tax is called Estate Tax, and thresholds are far higher than in the UK.

But apparently, Rachel Reeves, the UK Chancellor of the Exchequer, is considering sweeping some of these reliefs away. It means family businesses where the stake in a business are high might get broken up and sold, such as to corporations and private equity firms, when a founder or business holder dies. Family-run farms will be a one-generation gig. And corporates, sovereign wealth funds and big groups such as pension funds will consolidate their ownership of business, including the land. Wealth becomes more centrally concentrated, not more dispersed. This seems a very paradoxical outcome from a supposedly egalitarian government. Maybe Ms Reeves does not understand this point or is indifferent to it.

However, ignorance is only part of it, I think. There’s a general hostility towards inheritance of any kind in our culture today, from my impression. There is a lot of the “tall poppy” mindset around. Years of central bank QE also inflated asset prices, and certain groups did well, but that’s not really what is going on, in my view, because things such as QE are too abstract for the average voter.

I think resentments are given more respect today, when in fact they should be called out. I think we allow jealousy of others’ good fortune to be given the time of day, when in the past that would be seen as a bad thing.

There are many good, consequentialist reasons why this dislike has bad outcomes when used as a motor for public policy, but there are important moral arguments against this attack on inheritance: the rights of those of those who own the property and want to give it to this or that cause are being violated. If I want to give my sons and daughters a business, or a 400-acre farm, for example, that’s my affair, period. Whether those persons “deserve” what I give them, in the eyes of some sort of social justice advocate, is irrelevant. If economics is not a zero-sum game, such demands for redistribution are just thieving.

What inheritance taxes do, at root, is make it clear that ownership of wealth and control of it is at the sufferance of the State. The justifications of insisting on this servile relationship may vary – sometimes by reference to the flawed ideas such as those of a Thomas Piketty – but the underlying position remains.
The argument seems to say that you don’t really ever own anything absolutely and control it. You have to defer to the crowd if it, and its elected representatives, wants your stuff, however virtuously you acquired it in the first place. It is only one step from saying that because we don’t “deserve” our brains or bodies, that we don’t have grounds for objecting to other coercive measures to take the fruits of our mental and physical labour, either at source, or when we die. (The dystopian novel, Facial Justice, by LP Hartley, shows where this leads when it comes to beauty and physical appearance.)

I see little by way of fundamental critiques of this assault on inheritance of honestly acquired wealth. The Tories, now in opposition, don’t really take the discussion to this level; neither do other supposedly more conservative parties in other parts of the world. But the monstrosity of what attacks on inheritance amount to needs to be more widely remarked on than it is.

On the subject of the family and why protecting it is subversive of overweening authority, I can recommend this book, The Subversive Family, by former Downing Street policy unit figure and journalist/novelist Ferdinand Mount. He’s deeply influenced by the Origins of English Individualism, by Alan Macfarlane, for example.

On a more prosaic level, the ever-widening burden of tax in much of the developed world, and particularly in the UK, means that even people who are not by any means well off are going to learn about the joys of inheritance tax and all that goes with it. That might ultimately shift the needle against the tax. But a lot of hard work in changing attitudes is also needed.