Policy-induced uncertainty

[Originally posted on The Policy Press blog, 24/07/15, under a different title. Reposted here under the original title.]

Choices of a businessmanGeorge Osborne’s recent “emergency” budget proposed many changes to state support to lower income households in a bid to fulfil the Conservatives’ manifesto pledge to cut £12bn from welfare spending.

One unexpected aspect of this package was the proposal to cut housing association rents by 1% each year for the next four years.

This proposal was justified with reference to social housing rent rises over the last few years. These have pushed up the already substantial housing benefit bill. Households have needed greater state assistance in order to afford the rents being set. Bearing down on rents over the next few years will, it is claimed, both reduce the housing benefit bill and force social landlords to deliver efficiency gains.

To the unwary or unfamiliar this argument could appear entirely plausible. It is surely time to try to rein in this sort of behaviour: landlords extracting income at the taxpayers’ expense.

Yet, it is important to understand how we have arrived at the current situation and what the consequences of this policy change are likely to be. [Read more…]

Through a glass, darkly

414585868_2c8513d269_nThe community of housing bloggers has already offered plenty of comment on the implications of the Chancellor’s “emergency” budget for housing. Comment from almost all quarters – be it Jules, Ken, Joe, SteveTom or Gavin – highlights, in more or less lurid terms, the challenges the budget measures are going to present the housing sector.

Some of the changes announced in the budget – the reduction in the benefit cap, cuts in tax credits, and the benefit freeze – were heavily trailed. However unwelcome they might be, they didn’t come as a huge surprise. Yet, the precise dimensions of the change – the reduction of the cap to £20,000 outside London and the inclusion of LHA in the benefit freeze – made for grimmer reading than many might have hoped.

But other policy changes were rather more of a surprise. [Read more…]

Help to Buy?

House front in scaffoldsThe objections to George Osborne’s latest wheeze to assist the housing market are hardly worth discussing. They are almost too obvious. And they have been rehearsed at length in relation to similar, smaller scale initiatives that have already been tried.

The new “Help to Buy” scheme, announced in today’s Budget, aims to provide equity loans of up to 20% of the value of new properties worth less than £600,000. Households have to come up with a 5% deposit to participate. The Chancellor is proposing that the scheme be backed up with government guarantees sufficient to support £130 billion of mortgages. The guarantee scheme will start in 2014 for a period of three years.

Just about the only perspective from which this initiative makes sense is carrying through on an absolute determination not to add directly to the public sector deficit, but not minding too much if the guarantees get lost amongst everything else in the public debt.

So it probably makes perfect sense to the Treasury.

Otherwise, the scheme has almost nothing to commend it. The economic illiteracy it displays is remarkable. The fact that, coming from the current occupant of No 11, this is no great surprise is perhaps equally remarkable. [Read more…]

Age, ignorance or incompetence?

What a shocking week for the Government. We’re well past the odd mishap. As the Government careers from one problem to another we’re now shading into something rather more embarrassing. With the exception of some über-loyalists with an eye to preferment, excoriating comment is emerging from all points on the political spectrum.

[Read more…]

The car crash Coalition and the corrosion of democracy

Is this Government corrupt? It depends on how you define corrupt. If the focus is upon demonstrable criminality then the answer would have to be no. More pertinently, is it corrupting?

Recent events should concern anyone who believes that healthy democratic practice is important for a healthy society. I wrote several months ago that the Government already had a Fin de siecle feel to it. If anything the evidence of sharp practice is arriving ever more frequently. [Read more…]

Taxing property

Why is there a lot of talk about a mansion tax at the moment? The short, obvious answer is because the budget is imminent.

Liberal Democrats have long held the belief that it is better to tax wealth than income. This position was reaffirmed at Spring Conference. A belief in the desirability of a mansion tax is not restricted to the Libdems. You can even find the odd Tory who is sympathetic to the idea.

In the context of the budget the Libdems were campaigning for a switch to a mansion tax to accompany a reduction in the higher rate of income tax. Not a reduction in the overall tax burden for wealthier households but a change in its composition. Moving taxation to wealth reduces the disincentives on productive effort. Taxing high value property is seen as also having the advantage that it is harder to avoid or evade than taxes on income. That has got to be true, assuming that it is possible to curb the ruse of setting up offshore companies to hold property and avoid tax. While the property itself can’t easily be hidden, a bit of creativity over legal ownership can reduce or remove tax liabilities. [Read more…]