Policies aimed at curbing second home ownership are causing unintended harm to local economies, particularly in areas reliant on tourism. The increased taxes on second homes are reducing disposable income among a group of people who spend significant sums locally.
Local businesses, from restaurants and shops to construction and cleaning services, are suffering as second home owners reduce their spending due to increased taxation. This is pushing local economies towards decline, potentially undermining essential services.
Critics argue that the government's policies are exceeding the optimal tax rate, as described by the Laffer Curve. Raising taxes beyond a certain point may actually reduce government revenue, a point many affected communities are now experiencing. High tax rates are driving wealthy homeowners to reduce spending.
There are concerns that an adequate impact assessment was not undertaken before implementing these policies. The result is a widespread economic backlash which could have been mitigated with proper planning.
Second home owners are actively seeking relief from these measures, facing significant financial burdens. Local communities and businesses await the resolution of the situation with uncertainty, hoping for a solution that protects both economic interests and community stability.
Roberts points out that it’s not just shops and restaurants that benefit from tourism. “So do construction workers, gardeners, cleaners, there’s all these different jobs for locals that come from it.
“And you know, one of the arguments put forward is that those houses are being put out of the reach of locals. But those houses would be out of the reach of locals anyway. What local has got £2.5 million to put into a house? So I don’t understand the reasoning behind some of the policies.
“A lot of the second home owners in this village don’t rent it out, but they come every weekend. So for the council they’re actually not having their bins emptied as much, not using the roads as much, not creating traffic, but they’re still being asked to pay double? It’s busy here, but if they keep putting the screws on, it’ll stop, I’m convinced.”
Cushing is in agreement: Burnham Market doesn’t profit from turning off the tap of visitors. “If you want a village to die, as so often happens with villages that were formed out of agriculture, then this is the quickest route,” he says. “This village will always be popular because it has fantastic facilities, and it’s a beautiful place to live. But without that money coming in, those facilities wouldn’t exist. That’s the reality.”
Critics of the anti-second home measures have suggested that ministers and councils are heading for the wrong end of the Laffer Curve, the economic theory that once taxes are raised beyond a certain point, revenue will fall. In order words, you can only soak the rich so much before they simply stop spending.
At the mention of this, Nelson begins nodding.
“Yes, which is a problem, a big problem. This is an area which bears the brunt of the Laffer Curve quite early on, because you’re taking disposable income from a group that spends their money here. Cornwall will feel it harder and earlier, then us. And we’ll feel it this year. How can we not? If we’ve got customers with £30,000 less disposable income, that’s going to come out of the woodwork somehow, isn’t it?”
How much the government – either Sunak’s or Starmer’s – saw this backlash from regular people coming is unclear. Lyons doesn’t believe “any impact assessment seems to have been done for this to determine the full consequences, which is another question mark. But from a political perspective, second homes is probably one of those things which local and central governments probably feel they’re able to push fairly easily without much resistance.”
Not for the first time, it turns out there’s greater resistance to a squeeze on perceived wealth than the Government imagined. Second home owners are now desperately searching for a reprieve – or at the very least a sympathetic ear that’s willing to listen to some nuance.
Meanwhile, the locals, businesses and other bystanders and beneficiaries can only wait and see. In Burnham Market, you suspect that Satchells, which has stood firm through it all, will ultimately be fine. Whatever happens, people will always need a drink.
Additional reporting by Ollie Corfe
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