As a budding chartered accountant in the 1950s, I recall preparing tax returns for clients that included a tax (known as Schedule A) based on the imputed net income derivable from their home (“Reeves has best chance since Lloyd George of reforming property tax”, Opinion, August 16).
The principle of the tax was, and remains, a sound one; that whether an individual’s savings are directed towards productive or unproductive investment, the tax implications should be broadly neutral (unless specific policies directed otherwise).
Unfortunately, by the late 1960s, the yield from this tax had fallen to a derisory level, simply because no government was prepared to raise the base imputed income level to match rising mortgage interest rates and inflation. The tax was abolished but then the resulting distortion was compounded by mortgage interest relief continuing to be allowed against earned income. One need look no further for a major cause of the UK’s property price boom from the 1970s onwards, and for the UK’s historic low levels of productive investment.
The UK is almost alone among western democracies in not taxing owner-occupiers. The theoretical case for doing so — on the grounds of fairness as between other investors and renters — is unanswerable.
I accept that a full-scale revival of an effective tax based on an imputed rental value of owner-occupied properties is beyond practical politics. Nonetheless, a truly courageous chancellor could make the case, and perhaps make a start.
Robert McFarland
London W14, UK
