Landlord Today receives a number of unsolicited contributions from readers. These are always welcome but few are as well argued and impassioned as one we received recently from Dr Peter Marshall, a former foreign correspondent and long time journalist and author. We are reproducing it in part below, with thanks to Dr Marshall.

——

The right of a sole trader to be treated the same as other forms of business

Since time immemorial it has been enshrined in our way of life and in our norms, institutions and laws that business in our society has been legitimately conducted in three alternate forms – the sole trader, the partnership and a limited company. 

The sole proprietorship has always been regarded as the most appropriate form where there is only one proprietor and the partnership or the limited company, where there is more than that. In fact, individuals in business on their own, cannot incorporate, as the latter requires a minimum of two shareholders. 

Furthermore, certain kinds of businesses were not permitted to become limited companies in the past and mortgage companies would not lend to the latter entity. Many will not do so even today. The important point I am making is that the sole trader business is and always has been just as acceptable and just as much a legal entity as a limited company, under UK law and, therefore, has and deserves the same rights and privileges.

The right to set all business expenses against tax

The long established and legally accepted business model in our society has always been that expenses are deducted from revenues to arrive at profit, and that the tax is charged on the latter – revenue minus costs incurred in generating those revenues.

The denial of rights

A few years ago, George Osborne, then Chancellor of the Exchequer, declared war on one sector of UK society and set out to deprive them of their rights and privileges, driving them out of business by rendering their businesses financially unviable and forcing some into bankruptcy. That sector is private landlords operating as sole traders.

He did this by disallowing them to deduct their main costs from the revenues to arrive at the calculation of profit, therefore effectively taxing them on their costs as well as any residual profits.  The other sector of the population, those landlords who had incorporated themselves into limited companies, were not treated the same; they were allowed to continue to deduct their interest payments from the revenues before tax was computed. This amounts to unequal and discriminatory treatment of sole traders.

Even worse, he then prevented sole traders from joining the incorporated sector by slapping a 3% premium on Stamp Duty Land Tax, if they did, thus making it financially impossible for them to do so.

This move was not only cruelly and unfairly persecuting one sector of the population, it greatly advantaged the other sector – the incorporated landlords, for some of the private landlords had to sell up, which reduced the number of houses available to let in the market. This had an inevitable upward force on rental prices, benefiting the incorporated landlords. 

Furthermore, those private landlords who have been able to keep afloat and chose not to sell up had to increase their rents very significantly, to cover the interest payments and this benefited the incorporated landlords even further. All of the increase for them amounted to extra profit, while for the sole trader landlords it only covered the extra outlay.

Motives

The government argued that this was done to provide a fairer system, in the interests of tenants, but it certainly did not do this. Quite the reverse, it led to a huge hike in rents and even that benefited only the incorporated community landlords, which were and still are overrepresented among the politician-landlords and upper middle classes.

So why did the government actually launch the war on private landlords, if not to benefit tenants. 

One theory I would put forward is that it’s a matter of scapegoating. Throughout the centuries, whenever the country was in a major economic, social or moral crisis, governments have looked for scapegoats, upon which  to focus all the anger of the population. 

We have had several national scapegoating movements since the 16th century … involving different objects of focus and now that our society is in one hell of a seemingly, unresolvable mess, the government has found a new scapegoat to turn all the blame onto – private landlords.

In so doing, it has and is using all the tools of manipulation by propaganda. You will see, if you look at the reports, that most of the news reports of major faults, rendering homes, uninhabitable have begun with social housing. Immediately, then, the problem tends to be spun onto private landlords, who, in reality, would simply not get away with, the conditions reported in the original reports relating to social housing. 

The councils would be onto them like a ton of bricks, but not the social housing organisations. They commit the offences and the private landlords just get the blame.

Another theory of mine is that, despite all of the lip service to levelling up and social mobility, our class ridden system in the UK has always unconsciously resented and resisted social mobility. There are forces to ensure the rich stay rich and the poor stay poor. The old money sector hate the idea of new money and private landlords represent the march of social mobility more than any other sector, for it has provided a means for those who have had no other chance of becoming wealthy doing so. 

I think there is a good argument that it is this unconscious force that would explain it. This would explain why New Labour, under Tony Blair, actually encouraged buy-to-let, as did Conservative, Margaret Thatcher, for both stood for aspiration, while the current Conservative government, populated by billionaires and largely members of the old money sector are trying to destroy it, cutting away, the rungs of the ladder of social mobility. 

Why have the government been wilfully alienating a large sector of voters, though, most of whom would have, in the past, been pretty certain conservative voters. I think they were misguidedly thinking that, as there is a greater proportion of renters in the UK than there had been for a long time, the government could attract many of these by attacking landlords. 

I believe they were wrong in thinking this, though, as many of them were and are staunch Labour voters. In contrast, the ones that they are alienating – the landlords – would have largely been safe Conservative voters. 

Well  I think they know that they are out of office from the next election for at least twelve years, so the emphasis is on serving the old money sector’s interests – keeping the rich rich and the poor poor.