In an open letter ahead of this week’s Autumn Statement, Trevor Abrahmsohn raises a few issues for George Osborne’s urgent attention…
I am certain that you have a lot to do before next Wednesday’s Autumn Statement and I am sure you are mindful that you are not only our esteemed Chancellor, but you could be Prime Minister Elect.
There are a few issues that need your urgent attention.
Firstly, despite what you read in the headlines, the Residential Property Market in London beyond £1.5million is grinding to a halt. I know you are not ordinarily concerned about deflation in prices of the more expensive properties in this sector for the moment but, if there is a full-blown recession, it may come up and ‘bite you on the bottom’.
Transaction numbers are down by 40-50% and values by about 10%. Unfortunately, as we all know, the top and bottom of the markets are interconnected and as there is a cascading down, there is also a percolating up effect. It is inconceivable that the middle to higher end of the market will remain in the doldrums whilst the lower end is having a ‘field day’.
It is inconceivable that the middle to higher end of the market will remain in the doldrums whilst the lower end is having a ‘field day’
One of the reasons you should be concerned about this is that the Treasury receipts from Stamp Duty are being deleteriously affected by these tax changes resulting in lower volumes.
Why on earth should you be that bothered? We know that you are serious about bringing down the deficit, which is the reason you are asking your various Ministries to save 25% over the Electoral Term apart from education and front line medicine. However, you are going to need every penny you can get and, if I may say so, you can’t afford a ‘leak of funds’ at this time.
When preparing for the last Autumn Statement in 2014 you were looking at the prospect of a ‘hung’ parliament in the May Elections and your Party had to appear to be as ready to tax ‘the rich’, via SDLT, as were the Labour Party with their lunatic Mansion Tax. But, as you know, things have changed.
Your laudable attempts to reform the Stamp Duty Calculator from ‘Slab-sided’ to the more ‘Progressive’ version were well intentioned but the unintended consequences of this was to ‘hit’ the higher end with a ‘sledge-hammer’ whilst, at the same time, stimulating the lower end with a tax give-away (call it a bribe) that was needless, since this sector was thriving beforehand and didn’t need any further stimulation.
Nevertheless, we are where we are, but if you don’t relieve the homeowners at the higher levels of Stamp Duty from this draconian 12% levy you will effectively be tightening the tourniquet around the neck of the ‘Golden Goose’. May I be as bold to suggest that you should either bring it down to a much more affordable 8% or, at the very worst, get purchasers and sellers to share the 12% so that you spread the load?
Sadly, the Non-Dom Tax changes and different Tax treatments to offshore vehicles buying in the UK have all conspired together and are bearing down on activity. If I were not so worried about this I may have suggested to you that you should put a few more bands on Council Tax but I am naturally concerned (and I am sure that you are) that this could be ‘the straw that breaks the camel’s back’.
My fear is that the growth in economy is so valuable, yet so fragile, and is dependent on a consumer-led economy which is partly driven by the need for the great British public to fuel retail spending. If the property market is flagging, before you look around, the shops will empty and growth affected. Already retailers are not looking forward to a boom Christmas with the negative effects on VAT, Corporation Tax etc.
Your construction and manufacturing sectors are under pressure and if you are not careful UK growth, overall, will attenuate.
Humility is a precious and finite resource seldom seen in Parliament today therefore if, on balance, you feel you may have over-cooked SDLT don’t resist the temptation to do something about it before it’s too late…you never know you may even get the credit for it.
You are otherwise doing a grand job so here’s wishing you ‘more power to your elbow’ and a Happy Christmas.
Trevor Abrahmsohn is Managing Director of Glentree Estates
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