From tax rejigs to royal yachts; non-doms to nimbyism – here’s Trevor Abrahmsohn’s comprehensive ten step plan for setting Britain a steady course…
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.
1. Stamp Duty
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 stimulating an already excited sector, which has 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 rental prices for the most vulnerable who are exposed to this which means they have been hit by a ‘double whammy’.
Osborne always believed in ‘shock and awe’ and was not known for his deftness of touch 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. A ‘win-win’ I’d say.
Of all taxes, Stamp Duty is the most perfectly avoidable one. You just don’t move and you don’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 and a much-needed one in the post-Brexit environment.
2. Corporation Tax
In the post-Brexit era the UK should be considered ‘treasure island’ and we need to encourage the national and international companies who want to invest here to take advantage of our discounted currency and our 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 irritate competing countries but this is an incidental benefit.
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 ‘victorious Britain’ had to suffer this affliction for six years as the UK was so ‘ham strung’ by its own 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.
4. 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 for worthy development schemes. 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 (DOE) 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 has put the food on the table for Tory politicians.
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 ‘feckless’ 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 should shoulder by way of burden.
6. What About The 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!
7. Business Rates
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 with no apparent gain for the Treasury or the UK for that matter.
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. Even the arch socialist M. Hollande is now trying to tempt back these high net worth individuals to France with enticing tax schemes.
For heavens sake let’s get on with the third runway at Heathrow and be done with it! Zac 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’, Terminal 5 is world class, 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 UK in order to reflate our economy and make it a better place for all of us to live as a thriving, thrusting, 21st Century economy of the future.
10. Royal Yacht Britannia
The Royal Yacht, Britannia was not so much a spectacle of avarice and ‘embarras de richesses’ but it embodied the wonderful heritage and pageantry that the Monarchy represents in the world. Captains of industry, dignitaries, Prime Ministers and Presidents of many foreign countries were ‘courted and fêted’ on board and goodness knows how much valuable business and foreign earnings were ensnared for the benefit of the UK as a result. Ignore the bearded, open sandal-ed, vegan leftists telling us that this is an unacceptable vestige of a bygone era. What a load of hogwash! Mr. Hammond, please re-commission this historic trophy or sanction the re-building of a new one and let us have, once more, a living example of the emerging ‘phoenix from the ashes’ of the EU in the post-Brexit world and let’s show them how proud we are to be part of this enterprising, innovative nation which was once ‘the greatest empire on earth’ but still is very relevant with an important part to play in todays world.
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 so let’s think and act like one!
Trevor Abrahmsohn is Managing Director of Glentree Estates
Views of Contributors are not necessarily those of PrimeResi or its Publishers