It is that time of year when the Budget circus hits town and most of the press is full of the standard “will he or won’t he” stories with lot’s of the usual specially prepared “leaks” doing the rounds.
As usual by the time the actual speech comes round, most of the measures to be announced are already in the public domain, save the one big “surprise” measure that is saved for dramatic effect.
This budget on the face of it could be a dull affair as, let’s be honest, the Chancellor has no money to really play with, but for me that is exactly why it will be more interesting than usual.
Tax measures are under particular scrutiny, with areas such as Stamp Duty, the 50p tax rate, initial tax free allowances, tax avoidance measures and corporation tax all up for debate.
In the property market the biggest issue is where Stamp Duty is concerned and the Chancellor has made no bones about “coming down like a tonne of bricks” on those wealthy individuals buying properties in company names to avoid Stamp Duty. So expect a major headline pleasing measure to try to clamp down on this.
At the top end of the market this has been a popular method of transacting for a while, where purchasers either buy the property in an offshore Ltd company name or simply buy the share capital of a company that already owns the property asset.
This practice is now firmly in the Chancellor’s sights and he was very clear in an interview yesterday that this should be changed on “homes that people live in”. Whether this will leave investment properties free to escape whatever the new rules look like remains to be seen however, which could in turn present another little loophole to be exploited?
It is a shame that it looks like nothing more will be done to help 1st Time Buyers where Stamp Duty is concerned, but we can but hope. Despite the fact that there are claims that the moratorium for 1st Timers has not generated the interest expected, I suspect this is more to do with lending policies and availability of stock than anything else.
It strikes me that there is an opportunity now that does not come around very often to do something different or radical and changing the very nature of stamp duty is one such opportunity. Reworking this tax and charging it in a similar way to income tax seems far more sensible and would allow for different rates to be set in a way that perhaps reflects today’s values more accurately.
Of course the Chancellor will go on about how great NewBuy is, (which is not a bad idea and will help a few people and support builders), as well as the new Right To Buy moves, (which seems an iffy idea when the UK’s social housing stock is so low and doesn’t really solve any issues), but it remains to be seen as to whether there will be anything else of real substance to assist the housing market.
Of course there is also the prospect of a highly debated Mansion Tax on high value properties as well. This would not be popular in Tory enclaves and the difficulty here is actually assessing whether someone is actually wealthy or that they just happen to be living in a property that has grown in value over the years or a family highly geared desperate for the space and access to decent schools.
As ever the devil will be in the detail that follows after the speech, but there could be a lot more to this budget than initially meets the eye. After all, the Chancellor has a tough balancing act of Tory party faithful, Coalition partner politics, populist bashing of the rich, support for the business community, the so called “squeezed middle” and help for those who really need it.
Over to you George.