Flat rate property tax of 0.48% to replace council tax and stamp duty.

[Ferdinand]

2 hours ago, PeterW said:

Wouldn’t get through parliament as it would crucify the London renters who pay £1,400 a year council tc in Shoreditch for a 2 bed flat worth £800k. They would see their bills jump by over 2.5 times, and if they go after the landlord then they will just add it to the rents. 
 

 

 

OTOH might it encourage an adjustment through moves and different supply/demand balance?

 

London rents are substantially down after COVID - like 5-20% down, and have been softer than everywhere else for several years.

 

No idea how it will go.

[PeterW]

7 minutes ago, epsilonGreedy said:

The people of this country have little perception how different their remaining life will be.

On what basis ..? That there is a nice big hole in the deficit so that we need to find the money somewhere ..?

 

I don’t see that much changing in the short or medium term, this is just going to be kicked down the road by successive governments for years to come. 

[Mr Punter]

Have we paid for the war yet?  Which one?

[Ferdinand]

11 minutes ago, Adsibob said:

I hope you are right. I paid £90k in SDLT a couple of years ago, which added some 5 years to my mortgage. This change would quintuple my annual council tax as well as introduce a burden on me as a landlord.

 

Running a few numbers on mine.

For my personal property it would be virtually neutral.

 

For a rental at say 100k value, Council Tax could be £1000 very ish, and the new one would be £480.

 

I think my Ts would agree to such a change in rent, as it is a split of benefit and that is a principle I often use.

 

One fly in the ointment is if they tried to do the Osborne "business expenses are part of taxed income" thing, which would make it more difficult.

[SteamyTea]

I wish we just had a poll tax again.

I fail to see what the price of an individuals property has.

I think we forget what councils are really for, rubbish collecting and put in park benches.

[dpmiller]

which regions of the UK would this be for then?

 

And will water costs be included?

 

[daiking]

3 hours ago, Mr Punter said:

Have we paid for the war yet?  Which one?

We won’t ever pay back world war Covid.

[Temp]

5 hours ago, Ferdinand said:

It's not the big one though. 

 

CGT relief on main dwelling needs to just go to undistort the market. That is worth £25bn a year and the benefit is heavily tilted to the better off and the rich areas.

 

As it is a tax on gain, all that happens is that the gain is a little smaller.

 

?

 

So let's say you buy for £200k and sell 10 years later for £400k. Gain of £200k. At 10% you would pay £20K leaving you with £380k to buy the new house. But new house the same size costs £400k. Need to increase mortgage £20k.

 

[MikeGrahamT21]

Would work out cheaper for me too...but who determines the price of the house, and is it fixed, or dynamic?

[daiking]

11 hours ago, Temp said:

 

So let's say you buy for £200k and sell 10 years later for £400k. Gain of £200k. At 10% you would pay £20K leaving you with £380k to buy the new house. But new house the same size costs £400k. Need to increase mortgage £20k.

 

???

 

The immutable fact that houses have not ever and will not ever reduce to reflect a new economic environment. Like everything, the market will adjust. In this case finance will undoubtedly be made available so that your precious house prices don’t ever fall. 

 

One of the big issues we have is not that evil Tory politicians want to run national economics as one might want to run a balanced budget household...

 

But...

 

That centrists everywhere want us to run our households like a national government would (mis) manage their finances over generations.

[daiking]

15 hours ago, epsilonGreedy said:

 

I agree. Paying back the £400 billion of funny money quantitative easing created in the last 9 months out of thin air, is going to require tax reform of stupendous proportions. The people of this country have little perception how different their remaining life will be.

Back in your (X-er’s smaller than a Boomer’s) box 

https://primeresi.com/no-radical-change-to-property-taxes-in-the-march-budget/

Edited January 18, 2021 by daiking

[Bitpipe]

 

The comparison between running a nations budget like a household budget is a well worn politician's trope.  https://neweconomics.org/2018/10/a-government-is-not-a-household

 

The nettle to grasp is whether to tax income or wealth. The former is very easy to monitor (PAYE) but does not address the real inequality where massive amounts of wealth are in the hands of a small percentage of the nation. However those with appreciable wealth also have the means to obfuscate it and effectively influence government not to tax it.

 

The property tax vs fixed charge is interesting but as discussed earlier, how do you effectively calculate the property value on an annual basis?

 

RBWM, where I live, has the highest average house prices in the UK and our longe term conservative led LA boasted of keeping the CT low every year. However it now transpires that we have a massive hole in the budget so that magic trick hasn't worked. Still, I can get into Windsor Castle for free whenever I want so, silver clouds and all that.

 

I grew up in a fairly grim NI housing estate but benefited from free education (just) and random house price inflation. Navigated a few recessions and would consider myself comfortable. Always happy to pay tax and would happily pay more if I felt it was being spent improving social mobility, which benefited me. I didn't see anything in the last Labour manifesto that scared the horses and the current govt has shown that there is there ability to access resources when they're required.

 

It's a choice...

 

[daiking]

8 minutes ago, Bitpipe said:

 

The comparison between running a nations budget like a household budget is a well worn politician's trope.  https://neweconomics.org/2018/10/a-government-is-not-a-household

 

The nettle to grasp is whether to tax income or wealth. The former is very easy to monitor (PAYE) but does not address the real inequality where massive amounts of wealth are in the hands of a small percentage of the nation. However those with appreciable wealth also have the means to obfuscate it and effectively influence government not to tax it.

 

The property tax vs fixed charge is interesting but as discussed earlier, how do you effectively calculate the property value on an annual basis?

 

RBWM, where I live, has the highest average house prices in the UK and our longe term conservative led LA boasted of keeping the CT low every year. However it now transpires that we have a massive hole in the budget so that magic trick hasn't worked. Still, I can get into Windsor Castle for free whenever I want so, silver clouds and all that.

 

I grew up in a fairly grim NI housing estate but benefited from free education (just) and random house price inflation. Navigated a few recessions and would consider myself comfortable. Always happy to pay tax and would happily pay more if I felt it was being spent improving social mobility, which benefited me. I didn't see anything in the last Labour manifesto that scared the horses and the current govt has shown that there is there ability to access resources when they're required.

 

It's a choice...

 

I don’t disagree about the political trope regarding national budgets, I just think that  the increasing expectation that households should be run this national government perpetual debt way is even worse. We’re expected to prop up the economy, spend everything, saving is a sin etc, etc.

 

And I don’t know about you but I was worried about plenty coming out of the Labour Party last autumn.

 

The anti-Semitism?

The confiscation of private property?

The carbon net zero targets?

 

The reason not to have winter elections is not the weather, it’s because the lunatics at the party conference are still all too readily remembered.

Edited January 18, 2021 by daiking

[epsilonGreedy]

7 minutes ago, Bitpipe said:

The comparison between running a nations budget like a household budget is a well worn politician's trope.  https://neweconomics.org/2018/10/a-government-is-not-a-household

 

 

So says a political think tank funded by unions and more curiously something called the Peoples Health Trust who chipped in a donation of £ 1/3rd of a million. What the Peoples Health Trust does and where its money comes from is an even greater mystery. In summary a bunch of liberal luvvies who want a bigger public sector have concluded the Government should not worry about the size of the national debt. Hmm!

 

 

[Bitpipe]

29 minutes ago, daiking said:

I don’t disagree about the political trope regarding national budgets, I just think that  the increasing expectation that households should be run this national government perpetual debt way is even worse. We’re expected to prop up the economy, spend everything, saving is a sin etc, etc.

 

And I don’t know about you but I was worried about plenty coming out of the Labour Party last autumn.

 

The anti-Semitism?

The confiscation of private property?

The carbon net zero targets?

 

The reason not to have winter elections is not the weather, it’s because the lunatics at the party conference are still all too readily remembered.

 

I didn't say I liked everything about them politically, my point was more on the economics.

[Bitpipe]

33 minutes ago, epsilonGreedy said:

 

So says a political think tank funded by unions and more curiously something called the Peoples Health Trust who chipped in a donation of £ 1/3rd of a million. What the Peoples Health Trust does and where its money comes from is an even greater mystery. In summary a bunch of liberal luvvies who want a bigger public sector have concluded the Government should not worry about the size of the national debt. Hmm!

 

 

 

Look, you can shoot that particular messenger, was first one I found.

 

However the fact remains that a nation state is not a household and exists in a very different economic sphere.  

 

I found this useful https://obr.uk/forecasts-in-depth/brief-guides-and-explainers/public-finances/ and this one https://www.economicshelp.org/blog/334/uk-economy/uk-national-debt/

 

I do wonder is the national debt is such a huge day to day concern? Like any debt, providing it can be serviced it is a useful tool for the government. 

 

From the second link above:

Comparison with other countries

Although 80% of GDP is high by recent UK standards, it is worth bearing in mind that other countries have a much bigger problem. Japan, for example, has a National debt of 225%, Italy is over 120%.  The US national debt is close to 80% of GDP. [See other countries debt]. Also, the UK has had much higher national debt in the past, e.g. in the late 1940s, UK debt was over 200% of GDP.

 

However, government borrowing is not always as bad as people fear.

• Borrowing in a recession helps to offset a rise in private sector saving. Government borrowing helps maintain aggregate demand and prevents a fall in spending.
• In a liquidity trap and zero interest rates, governments can often borrow at very low rates for a long time (e.g. Japan and the UK) This is because people want to save and buy government bonds.
• Austerity measures (e.g. cutting spending and raising taxes) can lead to a decrease in economic growth and cause the deficit to remain the same % of GDP.  Austerity measures and the economy | Timing of austerity

Edited January 18, 2021 by Bitpipe

[epsilonGreedy]

12 minutes ago, Bitpipe said:

I do wonder is the national debt is such a huge day to day concern? Like any debt, providing it can be serviced it is a useful tool for the government. 

 

 

What should be a concern is the rate of increase of the public debt and how it is financed.

 

Quantitative easing (QE) was coined in the 2008 crash and started with £75 billion of emergency money printing. Prior to Covid QE had risen to nearly £400 billion. Now in the past 9 months Government operating costs have has been funded by another £350 billion of money printing in place of proper gilt sales on the open market. In the past the Government was kept honest because to fund its deficit it had to persuaded others with cash to give it to the Government in return for an IOU (a Gilt). The prospect of a failed Gilt sale, where the buyers did not turn up, haunted UK Government for decades and this prospect kept things in check.

 

Today is a different game, our youthful Chancellor (40) now believes any Government crisis can be solved by phoning up the Bank of England and telling it to print money which is then given to the Government. Fashionable wacky baccy new age economic theories about it being different this time might embolden our youthful Chancellor but history shows this desperate economic plate spinning financial stunt will eventually crash.

 

The final years of the Roman Empire illustrate that QE does not work in the long term. The emperors of Imperial Rome could not magic up cash in a computer at the Bank of Rome so instead they progressively cut the silver content of the denarii until eventually even the roman legions refused to paid in the emperor's funny money.

 

Those OBR reports were written in November before the Kent mutation, at the time the pandemic seemed to be peaking. Now the economy is back in the deep freezer until April I cannot see this ending well.

[Ferdinand]

3 hours ago, daiking said:

???

 

The immutable fact that houses have not ever and will not ever reduce to reflect a new economic environment. Like everything, the market will adjust. In this case finance will undoubtedly be made available so that your precious house prices don’t ever fall. 

 

One of the big issues we have is not that evil Tory politicians want to run national economics as one might want to run a balanced budget household...

 

But...

 

That centrists everywhere want us to run our households like a national government would (mis) manage their finances over generations.

 

I think there are still places which are below their 2003-7 levels, in cash terms ... never mind inflation.

 

I would look for success to be that prices rise broadly in line with somewhere between inflation and wage inflation.

[Temp]

 

2 hours ago, Bitpipe said:

I do wonder is the national debt is such a huge day to day concern? Like any debt, providing it can be serviced it is a useful tool for the government. 

 

+1

 

The big risk is that printing money and a poor balance of trade leads to inflation and higher interest rates. Then we start having to pay a lot of tax just to service our debt leaving less for public services and investment.

 

[Adsibob]

1 hour ago, Temp said:

 

 

+1

 

The big risk is that printing money and a poor balance of trade leads to inflation and higher interest rates. Then we start having to pay a lot of tax just to service our debt leaving less for public services and investment.

 

True, but only a theoretical risk in my opinion. As long as there are plenty of wealthy countries run surpluses (e.g. South Korea, the Netherlands, Switzerland, Singapore) there will always be demand for cheap debt. Even after the rating agencies downgraded the UK's sovereign debt rating from the top quality rating to the next rung down (I can't remember when, it was two or three years ago due to brexit and the fall in the pound) it was still incredibly cheap to borrow. 

[Bitpipe]

The best 'cure' for national debt is to grow the economy as then it becomes smaller as a % of GDP.

 

However that requires increases in productivity which requires investment in people and plant. Some of that is investment by business itself (internal and external) however the government needs to ensure that education is fit for purpose and that the national infrastructure is up to scratch. Trade and non trade barriers should also be eliminated where possible. 

 

Brexit is expected to drag GDP by a number of % points over the next few years so that will be a challenge on top of the short term Covid shock.

 

 

[epsilonGreedy]

2 hours ago, Bitpipe said:

Some of that is investment by business itself (internal and external) however the government needs to ensure that education is fit for purpose

 

 

There is a growing realization that many student debts will never be paid off before the 30 year term expiry which is a strong indicator higher education has not been fit for purpose for a decade or two. No doubt in the post Covid national recovery plan our dimwit establishment will throw more money at higher education in a desperate effort to be seen to be doing something.

[Temp]

2 hours ago, Adsibob said:

True, but only a theoretical risk in my opinion.

 

It seemed very real when we were paying over 16% interest on our mortgage in the late 70s. For something like 20 years it was over 10%.

 

 

 

 

 

 

[daiking]

3 hours ago, Bitpipe said:

The best 'cure' for national debt is to grow the economy as then it becomes smaller as a % of GDP.

 

 

Are you familiar with the Paris Hilton meme? The way to solve poverty, is to stop being poor. The problem is if you 'grow the economy' by pumping debt into it (broken housing market, student fees etc, etc) and unlimited immigration you may be increasing the number of buttons in the economy but you're not improving the economy ?

 

I wouldn't recommend turning the country into an English speaking, patronisingly caricatured  tax haven based on over-enthusiastic sentimentality either. 

 

6 hours ago, Ferdinand said:

I think there are still places which are below their 2003-7 levels, in cash terms ... never mind inflation.

 

I was going to lower the tone there but I'll just give you another Partridge-esque shrug. 

 

6 hours ago, Ferdinand said:

I would look for success to be that prices rise broadly in line with somewhere between inflation and wage inflation.

 

Sounds reasonable and also shows what a resounding failure the last few decades have been.

[daiking]

13 hours ago, Temp said:

It seemed very real when we were paying over 16% interest on our mortgage in the late 70s. For something like 20 years it was over 10%.

 

And the pay rises were how much? Its an old one but its a good one https://www.ft.com/content/241733ea-317b-3256-ba63-bb3571e0a1f4

 

https://grandemotte.wordpress.com/modern-myths-2-interest-rates-are-lower-so-buying-an-expensive-house-is-cheap/

 

Quote

The distinction between affordability and cashflow is crucial. It is this difference that confuses many people into thinking a ‘70s mortgage is harder to pay than a modern one. Paying the 1^st years payments on a 20% loan will take a large percentage of your pay during that year. The cashflow will be tight and most of your money will go towards paying your mortgage. However, once you have your first pay increase, which in a high inflation world will be substantial, it will become a lot easier. The cashflow eases, and becomes easier still after two years, and even easier after three. So whilst the initial cashflow is tough, the affordability over the lifetime of the mortgage is actually very good.

The experience of the 1970s has even affected our culture. Most people who have started out in the housing market since the year 2000, or are hoping to start out today, have parents who bought their homes in the ‘70s. High inflation and high interest rates during this period meant that many home buyers of the time will remember that they had to make significant sacrifices and experienced very tight finances for the first few years of their mortgage. If you are borrowing money at 15% per year you can only borrow a relatively small amount if you want to have a chance of making the first year’s payments – the initial cashflow. But as shown, if your wages are rising significantly every year then it gets easier quite quickly. This is exactly what happened during the ‘70s. People took out mortgages with challenging cashflows in their initial years, meaning that they felt poor, but inflation and wage increases rapidly improved their lot. This meant that after a few years their debt was actually a very manageable percentage of their salary and their cashflow had considerably eased. At this stage they could choose to trade up to a larger property or simply have more money to spend. The concept of a housing ladder was born.

 

 

Plus from 1983 to 2000 you were getting tax relief on mortgage payments.