What David Cameron’s tax returns say about property

Next time you read about ‘fat cats’ earning more than the prime minister here’s something to bear in mind: so does his house.

The summarised tax returns released by David Cameron this weekend show that he had a total taxable income of just over £200,000 in 2014/15. The first £141,000 of that were his earnings as prime minister: he has not taken a pay rise since 2010 and has also voluntarily waived a £20,000 prime ministerial expenses deduction since 2011.

Most of the Panama Papers coverage has concentrated on Cameron’s links to his father’s offshore fund and an inheritance gift from his mother. However, he is also the first prime minister to rent out his existing home while living tax-free in Downing Street. The accounts show that he had a net rental income of £47,000 from letting out his house in Notting Hill, an amount that notes to the accounts confirm is his 50 per cent share of the proceeds:

So the total rent (after expenses) received by the Camerons last year was £94,000 and in the first five years since he became prime minister they gained a total of £432,000 in rent.

However, that is not the total amount they will have ‘earned’ from their house as London house prices have also soared over the same period. The exact value of the Cameron house is hard to pin down, since they are reported to have spent £600,000 on renovations after buying it in 2006. Some reports put the value at £2 million in 2010, others £2.7 million.

To give a rough idea though, Land Registry data shows that the average price of a semi-detached house in Kensington and Chelsea (the local authority covering Notting Hill) was £2.3 million in May 2010, the mid-point between those two figures. By April 2015 that had risen to £3.6 million, an increase of £1.3 million over his five years as prime minister or £260,000 a year.

The total ‘earnings’ of the Cameron home could therefore work out at around £350,000 a year. Even Dave’s 50 per cent share works out at £175,000 a year, or comfortably more than his earnings as prime minister.

And that of course is not the limit of the Camerons’ property interests. They also own a second home in Chipping Norton in his Oxfordshire constituency: this was bought for £650,000 in 2001 with Cameron claiming mortgage costs under the old parliamentary expenses system. By 2010 it was said to be worth £1 million and some reports put the current value at £2 million.

Amazingly, the prime minister forgot to mention this substantial asset in the second of the series of statements and clarifications on his finances issued last week. ‘I have some savings which I get some interest from and I have a house which we used to live in which we now let out while living in Downing Street,’ he said. ‘And that’s all I have.’

I’m not saying there is anything new about houses in London earning more than the people who live in them, nor trying to defend the salaries earned by some public sector chief executives, nor even arguing that forgetting a £2 million house is easily done. The point is rather that sums like this demonstrate just how dysfunctional our housing market has become and how unbalanced our economy is as a result.

More specifically, David Cameron, the Conservatives and the ‘Tax Payers’ Alliance have regularly used the argument that ‘fat cats’ are paid ‘more than the prime minister’ as a device to call for more austerity. Cameron was ‘furious’ with town hall chiefs over this and it’s also been a feature of (Downing Street-inspired?) attacks on housing associations in the Daily Mail, on Channel 4 News and (only last month) in The Times.

The comparison was always a false one since it fails to account for rent-free perks, platinum-plated pensions and the huge sums that ex-prime ministers can earn from writing their memoirs, or giving speeches or arranging trade deals for dodgy dictators.

But there is a particular reason why Cameron’s property income is relevant this week. Cast your mind back to 2011: £145,000 a year union leader Bob Crow is under attack for living in a council house and paying a rent of £150 a week. That’s used as justification for giving social landlords the power to charge high earners higher rents and Crow is explicitly mentioned when the government announces a new Budget crackdown in 2015. The Housing and Planning Bill, which comes back to the House of Lords on Monday, makes higher Pay to Stay rents compulsory for council tenants. Except that they no longer have to ‘earn more than the prime minister’: the thresholds are now just £40,000 in London and £30,000 in the rest of the country.

That’s also household income. Imagine if Pay to Stay were applied to the public housing the Camerons live in rent-free: with a household income of at least £500,000 they would be paying a full market rent even on the proposed 10 per cent taper above £40,000. That would be enough to wipe out pretty much all of their rental income from Notting Hill.

Then consider what this says about property and the political elite. The rental income and capital gains that Cameron has made on his London home dwarf anything that’s been revealed so far about what he received from his father’s offshore fund or was given by his mother.

Cameron is not the only one. George Osborne is reported to make £10,000 a month from renting out his Notting Hill house while he also lives rent-free in Downing Street drawing up plans for austerity. Reports suggest he bought the house for £1.8 million in 2006 and it could now be worth up to £4 million. In addition, he made a £400,000 profit on the sale of a taxpayer-funded second home in his constituency. Iain Duncan Smith defended the bedroom tax and other housing benefit cuts while living rent-free in a £2 million house on his father-in-law’s estate.

It’s not just the Conservatives of course. Many Labour politicians live in London pads worth well into seven figures, even if they are not quite in the league of the Blairs and their £27 million property empire.

But it is Conservatives like Cameron who appeal to ‘hardworking families’ struggling to get on to the property ladder while looking down on them from the top few rungs. And it’s the Conservatives who accuse claimants of having a sense of entitlement while living in what could be seen as a ‘dependency culture’ created by London house prices. As property prices and rents become normalised at these levels, so the meaning of ‘affordable’ comes to be anything less than them, no matter how unaffordable.

Is it any wonder that housing policy seems dedicated to propping up those prices rather than bringing them down? Or that the London property market is so popular with an international elite looking to re-invest their offshore funds? Or that the system is so skewed in favour of existing owners and landlords? Or that real reform to shift the burden of tax from earned income to unearned property wealth looks as far away as ever?