According to various polls, such a move would have the backing of around 75 per cent of voters and it is easy to see why. After all, goes the general sentiment, why should a relatively-small number of fat cats rake in all this money when millions of ordinary people are feeling the pinch – especially when it’s caused largely by the price of commodities that the energy companies are themselves producing?
If only it were that simple. As someone who has spent most of his working life in the small- to medium-sized business sector I have, in the past, questioned the justification of some corporate director super-salaries. However the fact remains that just a small amount of these profits will be creamed off by the top brass; a much larger figure will be spread out among shareholders, some directly invested in the companies themselves but probably more likely as part of a wider portfolio. Consequently the recipients will include those with a private pension (having earlier in life taken responsibility for retirement income, aware the State pension would be insufficient for their needs). So a beneficiary is more likely to be the elderly couple next door than someone with homes in Mayfair and the Caribbean.
So what does this have to do with residential property, I hear you ask?
Well the fact is that helping to underpin many regional markets (the Edinburgh area being a prime example) are what one might call the “comfortably retired”. They are neither rich nor poor; just as worried about rising food and energy prices as younger families but nevertheless still have sufficient savings to fund two, three or more holidays a year when working households are struggling to afford one.
They live in locations which might be described as “middle-market plus” but are not top of the range either. They ensure the houses or flats they live in are well-maintained and they tend to be good neighbours to those around them. And when they find themselves with too much space, or mobility starts to become problematic, they will happily “downsize” to something smaller or more manageable, at the same time releasing stock for families wishing to trade up. Downsizing tends to happen for “lifestyle” reasons rather than to release equity (and when it does some of the money goes to adult children – perhaps to assist them in realising their own housing aspirations).
All in all, the “comfortably retired” are an important link in any local property chain.
The problem is that as government debt grows and the tax base fails to keep up, the “comfortably retired” may be seen as an easy target for increased taxation through company profits or private pension income (i.e. the energy windfall tax). For a start it would mean more money going to Whitehall and less to local economies in terms of consumer spending. But taken too far it could also lead to distressed sales of housing, something that most retired homeowners have, until now, not had to do.
And if you think that might be one theory too far, consider how quickly the government broke its election manifesto promise on the “triple lock” - which promised that State pensions would rise by either inflation, earnings or 2.5pc (whichever was the highest) – once it became clear that the next annual inflation rate would reach at least 8pc.
Think too of how a Conservative government has gradually tightened the financial squeeze on private landlords – even though many of these landlords are plugging a gap has arisen because of the failure of successive administrations to build sufficient new social housing.
In a nutshell, an extra tax burden will not just be bad for the “comfortably retired” but for those in the wider housing market – of whatever age.
David Alexander is managing director of DJ Alexander