• Minimum Wage? Property Investors? Don’t Touch Our Profits

    It has never ceased to surprise me that those who profit at the expense of others are so unaware of the harm suffered by those they exploit, and are so convinced that they have a right to do the exploiting and that their profit is a proper and justifiable reward for doing so.

    There have been two cases in point over recent days. The first was the introduction of measures to restrain the impact of property investors on the housing market. The government extended the “brightline”test for property investors, (so that their tax exemption in those cases where they made a quick profit by selling on was reduced), and the government removed the concession whereby investors could set interest costs against their tax liability. The squeals of protest that greeted these measures were matched only by the unlikely claims of investors that their activities in reality provided a social service and that their real concern was not for their own interests but for their tenants and for first-home buyers.

    Do they not realise that an investor could typically use the rules (as they previously existed) to walk into any auction room and effortlessly outbid a roomful of first-time buyers? Property investor could obtain virtually unlimited and cost-free credit from their banks, and use it to buy almost any property, secure in the expectation of a substantial and tax-free capital gain – which was virtually guaranteed as a result of their own activities – within a short time. Little wonder that first-time buyers stood little chance.

    The consequence was that first-time buyers were increasingly priced out of the market and that there was constant upward pressure on prices. When investors squeal about how hard done-by they have been, do they not realise that the government correctly recognised that there could be no relief for first-time buyers and no slowdown in property prices unless the advantages enjoyed by investors were limited?

    Their response shows instead that they believed that their “right” to go on making large tax-free profits at the expense of others should remain intact and take precedence over the distortion of the housing market that was inevitably the consequence. They were angry that a government elected to serve the needs and interests of the whole population should step in to alleviate a problem that was bringing misery and disappointment to many young families.

    The second instance was the raising of the minimum wage. The air was thick with warnings about the damage to the prospects, not just of small businesses, but also to employees themselves (whose jobs, it was said, would be lost) and to shoppers, who would have to pay higher prices – and all because employers would be obliged to pay their employees something approaching a wage that could support a family.

    As with investors, the response was one of outrage – how dare the government intercede in an attempt to mitigate the shocking child poverty that disfigures our society? The mindset – again – was one of entitlement – our ability to maintain our own living standards must be left untouched, even if the price of that is the impoverishment of others.

    In both cases, terms like “communism” were carelessly and inaccurately flung around. It is evidently hard for those with vested interests to understand the democratic concept of a government that is ready to act in the general interest. Differential privileges, arising from the ability to bid up house prices or to take profits from a business that cannot afford to pay its employees a living wage, must, it seems, be maintained at all costs.

    Bryan Gould
    3 April 2021