Our new Chancellor, Philip Hammond, looks like a considered man and one hopes that he will be able to ‘kick away’ some of the ‘old baggage’ left there by the discredited former Chancellor, George Osborne. Below, is my wish list for the forthcoming Autumn Statement.
Even though one full year of the new stamp duty regime shows a small gain of 5% in revenue, the negative effect on retail spending and the impact on the economy of the vastly reduced volume of sales - down in some sectors by 60% - is having and will have a profound and deleterious effect. If you remove the surge in receipts from the buy-to-let tax change watershed, at the end of March 2016, the net SDLT receipts will show a loss.
Stamp duty, at the bottom end of the scale, was reduced as an ‘election bribe’ by the last ‘Cameronian’ regime and thereby stimulated this already excited sector which served to further disenfranchise the first time buyer. The draconian buy-to-let stamp duty imposition has reduced the amount of private sector rental properties available, which has driven up prices for the most vulnerable who are exposed to this which means they will have been hit by a ‘double whammy’.
Osborne believed in ‘shock and awe’ and was not known for his ‘deftness of touch’ in this regard and this may be a perfect opportunity for the new Chancellor to ‘re-set’ these taxes at a lower level and, by doing so, will stimulate activity and may well raise more money for the Treasury at the same time.
Of all taxes, stamp duty is the most perfectly avoidable one. Just don’t move and you won't have to pay it! Stagnant markets are not good for the country, as the health and vigour of the Residential Property Market is one of the main drivers of the UK Economy as a whole.
In the post Brexit era we should be considered ‘treasure island’ for the UK and we need to encourage the national and international companies who want to invest here to take advantage of our discounted currency and deregulated, less bureaucratic, post Brexit economy. This should be reduced to 15% or below and before we know it, the likes of Starbucks, Microsoft, Google, Amazon, Apple etc., will soon be ‘swanning over’ to share the ‘booty’ away from the draconian corporation tax regimes of the USA and Europe, which are set at a ludicrously high level of 35%. It will annoy our competitor countries but who cares if it does!
Lest we forget, it was the German Trade Minister, Ludwig Erhard who, after the war, de-regulated Germany and allowed its economy to soar to its gargantuan present status, so much so, that rationing ended six months after the War, whilst the so called ‘victorious Britain’ had to suffer this affliction for six years beyond, as the UK was so ‘ham strung’ by regulations at the time.
In the post-Brexit era we have an opportunity to ‘re-write the rule book’ so let’s take a ‘sledge hammer’ to all this ‘red tape’ and bureaucracy which has ‘wafted’ over like a ‘locust storm’ from Brussels. Countries that are de-regulated thrive and those that do not, or cannot, release themselves from these ‘shackles’, usually suffocate under their own weight.
Building more homes
‘For Pete’s sake’, we urgently need reform of the local borough planning processes. It is rife with petty politics, nimbyism, localism, bureaucracy and mindless ecological and environmentalist issues and all this conspires against the efficient management of planning consents. This has resulted in the building in the UK of less than a third of the private and public sector housing that this country needs for its wellbeing and social stability. We need a radical re-think here and if this means that the Department of the Environment should take charge of these matters in place of the councils, then so be it.
Extending Help-to-Buy is a good thing and perhaps there should be greater funds for housing associations to build more affordable homes on brown field, if not green field sites and certainly we need to utilise redundant land owned by governmental departments.
To be fair, councils should be able to keep more of the receipts from the sale of excess council homes than the third share they enjoy at present. This will encourage them to release money in redundant assets and that can be used to much greater effect.
The temptation to reform the private pension schemes from ‘non-taxed in’ and ‘taxed-out’ to ‘taxed-in’ and ‘non-taxed out’ will be a great cash flow boost for the Treasury. Osborne wanted to do it in spring of this year, but was prevented from doing so by his political ‘spin masters’, for fear of middle class retribution at the referendum.
This would be a huge windfall for the Treasury, but at the same time a further burden on the middle classes who, after all, should represent the ‘heartland’ of Tory support. It’s all ‘fine and dandy’ for Mrs May to demonstrate a centralist, if not left wing bent, but she should not, at the same time, forget ‘what puts the food on the table for Tory politicians to eat’.
The reason why people turned to buy-to-let investments was to protect their family's future and all the more so, since private and public pensions have become such feeble alternatives of late. Since private pensions have been taxed so heavily by the clumsy Chancellor Osborne and his Labour predecessors, I think this is one reform which should be passed over, since there is only so much that the middle class electorate can take by way of taxation.
What about poor savers?
We all understand the reason for lower Interest rates and the need to keep the economy buoyant in the post-Brexit era, but returns on savings, particularly for pensioners and retirees, is a major problem and somehow needs to be addressed. Surely, a generous tax break could be introduced that will help alleviate the pain somewhat!
Retail businesses, particularly in London that, after all provides 30% of GDP, have been hit hard by the relentless rising of business rates, rent and salaries. The explosion of e-commerce, with its negligible overheads, has exacerbated this process and unless the Chancellor does something about this hindrance, before we look around, the high street will be full of cafés, mobile phone shops and ‘pop up’ charity outlets where former thriving private businesses have failed. This affects diversity and, let’s not forget, the high street is effectively the ‘beating heart’ of a healthy and vibrant community.
The ‘moral repugnancy’ often expounded by Osborne which morphed ‘tax avoidance’ into ‘tax evasion’ (which hitherto was a perfectly acceptable custom) as well as the changes to the non-dom Taxation requirements, has resulted in an exodus of wealth creators leaving these shores for no material gain to this country whatsoever. The Treasury has not earned a penny from this and given that 95% of non-doms were taxpayers either in the UK or other jurisdictions i.e. the USA (where US citizens are taxed worldwide) it represents mindless ‘pseudo socialism’ gone mad! Taxes are there to raise money, not to penalise success and this 200-year-old tax law served to help to make London the ‘greatest city on earth’, populated by icons of industry and commerce, where there is almost full employment.
Mr Hammond needs to look at this again, in the light of the ‘unforeseen circumstances’ that have resulted with this foolhardy tax change.
A repeal of this law will certainly encourage some entrepreneurs to stay here who, otherwise, may feel tempted by the beckoning overtures of Frankfurt, which the Germans would love to make the new financial hub of Europe, in place of London, after Brexit.
For ‘heavens sake’ let's get on with the third runway at Heathrow and be done with it! Zak and Boris were hamstrung by their own self-defeating convictions on these politically and environmentally charged subjects. The sooner that we clear the blockage here, the better ... we have the ‘greatest city on earth’, T5 is a world class terminal, so let's get on and increase the capacity and forget about the ‘hellhole’ of Gatwick, which even off-duty BA employees try to avoid ‘like the plague’. We need this and HS2, to stimulate the capital projects of the country in order to reflate our economy and make it a better place for all of us to live.
Now that Mr Hammond has made it quite clear that he will relax the deficit reduction programme towards 2020, there is a golden opportunity to ‘plough back’ some monies into the UK, so that it can continue to be one of the fastest moving economies in the G7. Despite all the predictions to the contrary the UK has confounded the financial analysts and the Institutions who had ‘written us off’ after the June referendum result.
We are a proud, successful nation and let’s think like one!
Trevor Abrahmsohn is the owner of north London based Glentree Estates.