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

[SteamyTea]

2 hours ago, daiking said:

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

Double MIRAS stopped in 1989 for new mortgages.  Caused a spike in prices over a very short time period.

Took years for the housing market to recover.  But then we did have the Chancellor setting the interest rates.

 

Regarding local authorities spending.

I think each department head should go to every single household and ask for their slice of the cash, i.e. 'I am head of road repairs, can I have £100 please'.  Be interesting to see which department collect the most.

[ProDave]

6 minutes ago, SteamyTea said:

Double MIRAS stopped in 1989 for new mortgages.  Caused a spike in prices over a very short time period.

Took years for the housing market to recover.  But then we did have the Chancellor setting the interest rates.

 

The "mistake" there was ending it with > 6 months notice that caused a boom, followed by a bust when the double MIRAS ended as everyone that wanted to buy had bought and did not want to move again because they would loose the double MIRAS.

 

Does anyone else think the present stamp duty holiday to "get the market moving" has also caused a boom, and will likely cause the very same bust when it ends in March.

 

I wish they would stop trying to "help"

[daiking]

23 minutes ago, SteamyTea said:

Double MIRAS stopped in 1989 for new mortgages.  Caused a spike in prices over a very short time period.

Took years for the housing market to recover.  But then we did have the Chancellor setting the interest rates.

 

Regarding local authorities spending.

I think each department head should go to every single household and ask for their slice of the cash, i.e. 'I am head of road repairs, can I have £100 please'.  Be interesting to see which department collect the most.

Is it wrong to suggest that if one complained about the removal of double tax relief it would smack of entitlement?

 

As for councils, road repairs and bins, maybe the EHOs at a push.

Edited January 18, 2021 by daiking

[Ferdinand]

Quote

 

18 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. 

 

 

Perhaps a wrong call on tor part imo. I think COVID will have a significant effect on all of this.

 

Not perhaps in my area ... here prices are low enough that the market has always been functional, even for eg minimum wage couples. Here trad 2 bed terraces are available at around 70-75k or 60k for a doer upper. You can get a new 2 bed semi on a new estate for under 140k. That is the same in cash terms as the peak of 2003/4 when they previously doubled in 18 months in the Blair property boom, and then drifted back down by nearly half. It took 15 years to recover.

 

But imo there will be a change in London. I monitor a small no of developments for rents and prices, and even the desirable have *far* more availability than usual. 

 

Many Central London asking rents are 5-25% down, after several years of static or down-ward drift before that. Add in that it is reported to be 300k down in population, plus COVID fleeing work-from-homers. And that will imo may well take down quite a few of the highly leveraged zombie LL businesses, who have been under the cosh since 2015. I'm expecting a lot of letting-sized flats going through auctions in the next 2 years. There will be some investment from LLs, but investment plummeted after the various Osborne taxes.

 

The upshot will be more availability, and perhaps lower prices for a catchup period.

 

Given that there are particular segments of the population that have fared better financially during COVID - yes some service pros, but also public sector working every hour God sends.

 

I think that some of those will be buying in some parts of London and other places.

 

Maybe not a sea change, but a change.

 

F

[Bitpipe]

11 hours ago, daiking said:

 

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. 

 

 

Interested to hear your proposed solution.

 

I'd like to see proper investment in national infrastructure (from trains to roads to broadband to housing) and an overhaul of the education system that promotes social mobility. I'd axe the private school system, or at least remove their charitable status, increase funding of the current system and revert to free third level education, but seriously look at culling the plethora of profit centred degree factories and focus them instead on vocational / apprentice style training. Much to learn from the german system where there is no shame in being a highly skilled worker and an engineer is akin to a doctor or lawyer, not someone who fixes your washing machine. And rejoin the SU and SM Norway style (we can stay out of the EU politics if we want) to prevent our shrinking manufacturing sector from shrinking further. And a proper progressive taxation system to fund it too that has an element that looks at wealth as well as income. Plus a welfare system that has dignity at its heart rather than spite.

 

A lot of that will require new money and that's best done through cheap debt vs waiting another 30 years until we've saved it up in the national piggy bank. We're the 5th/6th richest country in the world, we can afford it.

 

 

[daiking]

1 hour ago, Ferdinand said:

 

Perhaps a wrong call on tor part imo. I think COVID will have a significant effect on all of this.

 

Not perhaps in my area ... here prices are low enough that the market has always been functional, even for eg minimum wage couples. Here trad 2 bed terraces are available at around 70-75k or 60k for a doer upper. You can get a new 2 bed semi on a new estate for under 140k. That is the same in cash terms as the peak of 2003/4 when they previously doubled in 18 months in the Blair property boom, and then drifted back down by nearly half. It took 15 years to recover.

 

But imo there will be a change in London. I monitor a small no of developments for rents and prices, and even the desirable have *far* more availability than usual. 

 

Many Central London asking rents are 5-25% down, after several years of static or down-ward drift before that. Add in that it is reported to be 300k down in population, plus COVID fleeing work-from-homers. And that will imo may well take down quite a few of the highly leveraged zombie LL businesses, who have been under the cosh since 2015. I'm expecting a lot of letting-sized flats going through auctions in the next 2 years. There will be some investment from LLs, but investment plummeted after the various Osborne taxes.

 

The upshot will be more availability, and perhaps lower prices for a catchup period.

 

Given that there are particular segments of the population that have fared better financially during COVID - yes some service pros, but also public sector working every hour God sends.

 

I think that some of those will be buying in some parts of London and other places.

 

Maybe not a sea change, but a change.

 

F

My point was there are always outliers that people can pick to ‘prove’ that some hugely unfair system is completely and utterly fair. Look at house prices in Northern Ireland for instance.

 

None of that negates the fact that a lot of central bank financial support post 2007 went straight into residential property and not into all the good things @Bitpipe mentions. It is confidence in this market that seems to be the underpinning of the entire UK economy. A market where the bulk of the democratic power is held by you know whom ?

[daiking]

35 minutes ago, Bitpipe said:

 

Interested to hear your proposed solution.

 

I'd like to see proper investment in national infrastructure (from trains to roads to broadband to housing) and an overhaul of the education system that promotes social mobility. I'd axe the private school system, or at least remove their charitable status, increase funding of the current system and revert to free third level education, but seriously look at culling the plethora of profit centred degree factories and focus them instead on vocational / apprentice style training. Much to learn from the german system where there is no shame in being a highly skilled worker and an engineer is akin to a doctor or lawyer, not someone who fixes your washing machine. And rejoin the SU and SM Norway style (we can stay out of the EU politics if we want) to prevent our shrinking manufacturing sector from shrinking further. And a proper progressive taxation system to fund it too that has an element that looks at wealth as well as income. Plus a welfare system that has dignity at its heart rather than spite.

 

A lot of that will require new money and that's best done through cheap debt vs waiting another 30 years until we've saved it up in the national piggy bank. We're the 5th/6th richest country in the world, we can afford it.

 

 

All good stuff and I’ve long wanted to be more like Germany but not actually a mercantilist bully.

 

But it didn’t happen 1997-2010, didn’t happen 2010- now and won’t happen in the future. 

[SteamyTea]

43 minutes ago, Bitpipe said:

to prevent our shrinking manufacturing sector from shrinking further

You can play on this site to compare with other countries.

https://tradingeconomics.com/united-kingdom/manufacturing-production

 

 

[jack]

10 hours ago, ProDave said:

Does anyone else think the present stamp duty holiday to "get the market moving" has also caused a boom, and will likely cause the very same bust when it ends in March.

 

Yup. I have two friends who are trying to move in time to get the benefit of the stamp duty holiday. One would likely have moved around now-ish anyway, but the other has brought forward their decision to move by at least six months, if not more.

 

15 minutes ago, daiking said:

All good stuff and I’ve long wanted to be more like Germany but not actually a mercantilist bully.

 

But it didn’t happen 1997-2010, didn’t happen 2010- now and won’t happen in the future. 

 

Unfortunately, I fear you're right.

 

I've long thought the lack of respect for vocational jobs is a serious failure of our national character. Many seem to believe that anyone working in an office is immediately in a "better" job than someone working a trade. Doesn't matter if the office job is a junior admin role or the trade is difficult and highly skilled, the office is still perceived as superior.

 

I've been haranguing my kids for years about the downside of working in an office environment. Whatever they do, I hope it involves more than sitting in front of a computer screen in a beige open-plan wasteland.

[epsilonGreedy]

24 minutes ago, jack said:

I've long thought the lack of respect for vocational jobs is a serious failure of our national character.

 

 

Youngsters who see past this national failure can end up doing well £££.

 

The last but one electrician working on my site was moaning about the cost of maintaining two horses horse his wife and daughter plus the £22k price of the paddock.

 

Another gas safe fitter whose economic fortunes I track now has three houses in his portfolio before reaching the age of 40. 

Edited January 19, 2021 by epsilonGreedy

[jack]

6 minutes ago, epsilonGreedy said:

Youngsters who see past this national failure can end up doing well £££.

 

100% agree. I've put it to my kids that they'll likely get more job satisfaction and earn more money if they stay away from most desk jobs.

[SteamyTea]

Interesting this office vs skill attitude.

When I was at school, thick kids did apprenticeships, clever ones went to work in an office, the really clever ones went off to university.  Quite a few joined the family firm/farm.

The only person I keep in tough with is a production planner.  He did an apprenticeship in the merchant navy, but hated not having a proper base, he has been very happy in his work.

I think a lot of it is 'do what you like doing' and don't bow to outside pressure when it comes to careers.  I stuck at production management way too long, and really hated it, what I liked was product development, not sorting out (expletive deleted)ing staff issues.

[epsilonGreedy]

28 minutes ago, jack said:

and earn more money if they stay away from most desk jobs.

 

 

Many desk jobs these days involve information reformatting and shuffling between poorly integrated computer systems, in effect the office staff are IT sticking plasters.

 

One day IT will get its act together and properly integrate stuff. 

[Bitpipe]

 

2 hours ago, daiking said:

All good stuff and I’ve long wanted to be more like Germany but not actually a mercantilist bully.

 

But it didn’t happen 1997-2010, didn’t happen 2010- now and won’t happen in the future. 

 

Almost happened in 1941 but there you go, another missed opportunity

[jack]

1 hour ago, SteamyTea said:

I think a lot of it is 'do what you like doing' and don't bow to outside pressure when it comes to careers. 

 

Had exactly this discussion with my older boy last night.  

 

The other thing that's worth considering is how easy a job will be to replace over the course of a few decades. It seems unlikely that electricians and plumbers are going anywhere soon, but a lot of desk jobs can - and will - be outsourced (unless they fall within some sort of regulated profession).  

[Adsibob]

3 minutes ago, jack said:

 

Had exactly this discussion with my older boy last night.  

 

The other thing that's worth considering is how easy a job will be to replace over the course of a few decades. It seems unlikely that electricians and plumbers are going anywhere soon, but a lot of desk jobs can - and will - be outsourced (unless they fall within some sort of regulated profession).  

And a lot of jobs will be outsourced to robots! (Though I agree electricians and plumbers are safe.)

[daiking]

15 minutes ago, Bitpipe said:

 

 

Almost happened in 1941 but there you go, another missed opportunity

I know, right?

 

Blair, Brown, Cameron, May, Johnson,

[Bitpipe]

46 minutes ago, daiking said:

I know, right?

 

Blair, Brown, Cameron, May, Johnson,

 

That money was only resting in my account.

[Ferdinand]

Back on topic.

 

I have been running some numbers on the proposals we discussed for replacing Council Tax and Stamp Duty with an annual tax of 0.48% on house value, and it is surprising in 2-3 respects:

 

1 - Significant benefit for less wealthy areas. In eg Bolsover virtually everyone will benefit. A household in a 80-100k trad terrace will be approx £1000 a year better off. In that sort of area the balance is between Council Tax and the new Tax, and Stamp Duty is nearly irrelevant for the huge majority. That is a 2-3% uplift in a typical household income.

 

It becomes neutral at roughly the level of a  250k-300k house in that area.

 

But above that no Stamp Duty becomes a bonus.

 

2 - In wealthier areas the balance at 300k-500k or so house level is between CT and the new Tax, with no Stamp Duty as a long term sweetener as the new tax exceeds current CT level. Even in London the median house price is 450k-ish, so a majority benefit.

 

3 - In really wealthy areas it alters. Take George Osborne's old house in Notting Hill, £4m ish, and the Annual Tax is 19k, but about 400k of Stamp Duty is taken out of the transaction on sale or purchase. Is that a loss?

 

It is a really intriguing hybrid of a services tax and a wealth tax, and very well designed by the coalition.

 

The website for the original proposers are here, and it includes a loss/gain calculator:

https://fairershare.org.uk/

 

Their numbers are that 75% of households will save.

 

To me this looks like potentially the first strategic shift towards the so called "levelling up" agenda, whilst so far we have had proposals for revectoring of Govt Expenditure.

 

May write to my MP on this one.

[Ferdinand]

A couple of potential impacts:

 

1 - I would see low end house prices in Bolsover drift up over time due to the reduced cost of running a house, which would lift certain zombie infill building plots into viability. ie Plot work cost + build cost becomes > potential sale price. ie Some plots become worth more than zero.

 

2 - Potential price reductions in London and similar? Needs more evaluation, and the London market is slightly chaotic at present. 

 

F

[Bitpipe]

I'd end up paying more but have no issue in doing so if its equitable.

 

Also want to see the LAs, or more accurately the services they provide, properly funded. There is something of a sleight of hand where central government tweaks the grant to make some areas (usually Labour, more deprived) need to charge more and then get painted as poorly run, high CT etc.

 

Other big question is how property values are assessed - for CT it's not that relevant as you get put in a band with equivalent properties but if a % is being paid then it needs to be more accurate and regularly reviewed. Also value for taxation is always going to be higher than the real world 'what would someone pay for it' value which could be contentious.

 

SD is obviously paid on an actual transaction so is indisputable.

 

With all these things you need to visualise the Daily Mail headlines as this will set the political weather to some degree.

[Mr Punter]

This is a transfer of wealth from rich to poor.  It would kill affluent areas and benefit poor areas.  It will bear no relation to the funding of local services.

 

It is not a terrible idea but I think a halfway house would be more acceptable.

 

Also, I am not sure how they arrived at 0.48% as I think it may need to be nearer to 0.6% to be revenue neutral.

[Adsibob]

20 minutes ago, Ferdinand said:

The website for the original proposers are here, and it includes a loss/gain calculator:

https://fairershare.org.uk/

 

Their numbers are that 75% of households will save.

The problem with their modelling is that it is fundamentally flawed, in two ways:

First, their website states that their model assumes people will moved every 20 years. That is accurate when looked at restrospectively, but as one of the points of this tax reform is to increase mobility, using retrospective data for this makes no sense. 

Secondly, the website assumes that removing SDLT will make property more affordable. That makes no sense in a market where property prices are dictated by insufficient supply to meet demand. Prices are established at the price that the competitive process results in. If people aren't being taxed SDLT, they will have more available cash for their purchase and the price will therefore be established at a higher price than before. That's why historically any good mortgage broker will make sure his client is factoring in SDLT before answering the question most people ask their broker "how much can I afford to borrow", simply because that depends on affordability, which depends on borrowing cost, which depends on LTV ratio, etc. 

[SteamyTea]

5 minutes ago, Mr Punter said:

It will bear no relation to the funding of local services

I agree.

 

We already have a transfer of income from high earners to low earners though the income tax and benefits systems.

What we need it a simpler system that is transparent, not another layer of complexity.

[Mr Punter]

I looked at the Fairshare website.  It assumes that I will move to a house of equal value and pay SDLT at the current rate every 20 years and uses this to claim that an annual increase in property tax of £1450 per year is in fact a 'saving' of £292.