Autumn Budget 2017: Saying nothing or nothing to say?

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Philip Fisher
Columnist
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I am a great believer in the maxim “if you have nothing to say, then say nothing”. Sadly, my namesake Mr Hammond comes from a different school of thought.

Readers who were expecting Black Friday to come two days early in the form of fantastic deals presented to UK plc by the Chancellor of the Exchequer will have spent the best part of an hour and a quarter waiting for Santa Claus to arrive, to mix far too many metaphors.

Indeed, the Treasury has helpfully provided a highlights document entitled “25 things you need to know”. Having read it, my initial reaction is that this includes 22 things that I didn’t need to know.

You know that you in for a dull Budget when the man delivering it starts boasting about the massive savings that government is providing by failing to increase taxes rather than reducing them. Similarly, a letter from the Chancellor to the OTS explaining why he is not reducing the VAT threshold is hardly riveting. All of this is the kind of behaviour that makes one suspicious, potentially heralding the implementation of stealth taxes either now or not too much further down the line.

Investing £3bn in the fund to leave Europe is hardly encouraging either with 10 to 20 times as much to follow, while the boost for the NHS is significantly less than had been requested or is needed to prevent the service from disintegrating.

According to the BBC, the great man saved the best till last but frankly, a saving of a couple of thousand pounds on average for first-time homebuyers is far from exciting. The vast majority won’t be able to find the initial £300,000 to buy the property thus missing out on a pretty meagre kickback. Anyone living near me in North West London will not benefit anyway since one-bedroom flats now frequently cost more than the £500,000 limit set for the scheme.

This is about as illusory as the main announcement in my own field, employment taxes. While anyone charging their electric car at work will theoretically be better off as a result of the removal of the benefit in kind charge, I’d wager that it had never occurred to accountants, let alone Lehman, to declare this on a P11D in the first place.

A slightly better EIS deal for those investing in high-growth, knowledge-intensive start-ups is good news but is equally unlikely to boost the economy to any great degree.

On the tax avoidance front, with all due respect to Mr Hammond, he talked big but delivered small. A change to VAT for the likes of eBay might make a small dent in their profits unless they can spot some loopholes but catching them for a much higher level of corporation tax would have been far more effective.

The one document that initially seemed like compulsory reading has the snappy title “Tackling tax avoidance, evasion and non-compliance”. It stretches to 37 pages (including some blanks and titles, not to mention lots of historical data) but unambitiously starts off by boasting that the UK’s tax gap is one of the lowest in the world at 6%. It then moves into some tedious boasts about achievements to date, many of which are far from earthshattering.

Bizarrely, there were only a handful of new measures within this grand-sounding document, most of which seem unlikely to generate any significant amounts of income for the Exchequer. Can you get excited about the announcement that “The government will publish a consultation response on the proposed requirement for designers of certain offshore structures, that could be misused to evade taxes, to notify HMRC of these structures and the clients using them. This work will be taken forward in conjunction with the OECD and EU”? Why not take substantive action now?

Extending time limits for non-deliberate offshore tax non-compliance to 12 years will do no harm but once again, doesn’t impress.

The other changes are equally inconsequential and, in many cases, represent no more than consultations on issues that have been damaging the economy for many years eg fragmentation of profits, VAT fraud and depreciatory transactions.

“Stopping digital multinationals who hold intellectual property in low-tax countries from avoiding tax” sounds good, but is addressing little more than another drop in an extremely large ocean of tax avoidance and evasion. Frankly, a detailed analysis of the Paradise Papers would almost certainly bring in a more significant yield.

Those involved in the industry might get concerned about the position paper on corporate tax and the digital economy but, once again, they can probably make hay while the sun shines for several years longer.

Apologies if I have missed some of the juiciest cherries in the fruit bowl but remarkably I’m already missing the heady days when George Osborne cracked slightly better jokes and delivered rather meatier promises, even if you frequently fail to deliver on them.

About Philip Fisher

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22nd Nov 2017 14:55

What you might want to follow up on Philip is the proportion of extra mortgages taken out in comparison to the extra money/slashing of stamp duty going in. My feeling is that it doesn't matter how many houses you build if the lenders will not lend there's not a lot you can do about it. If Government want to revert back to council housing then they will have to pump a lot more money in to build the required houses needed.
As you say most of it was skirting.

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By DJKL
22nd Nov 2017 15:49

Be fair, the Clarkson, May,Hammond gag was okay.(ish)

In effect they sent him into the Bake Off tent with no ingredients.

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to DJKL
22nd Nov 2017 16:40

DJKL. With all due respect, if I want comedy, I tend to look for experts in the field. Mind you, the same could be said for running the country's finances.

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By DJKL
to Philip Fisher
27th Nov 2017 17:08

Ouch, heckled on a blog.

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22nd Nov 2017 17:14

SDLT surcharge is certainly a consideration when extending a portfolio but the curtailment of new building starts, partly as a result of the disalowance of finance costs for all property investors, is far more serious for the aspiring FTB.

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to moneymanager
23rd Nov 2017 08:49

You're right. The disallowance of finance costs have stopped a lot of the investors, that lenders want to lend to, investing. Those FTB that are not squeaky clean or don't have a large deposit have not been helped at all. Builders will not build if they can't sell. Overseas money will wait until after brexit. So TM and DD tell the EU if they don't start trade negotiations to go whistle.
I certainly don't think house prices will go up because there will be less buyers in the next 4 years.
A far smarter idea would be for the government to guarantee 25% deposit for FTB (charge on property) as long as the buyer(s) can afford the repayments (repayment mortgage). To avoid house prices going up there would be a limit on the cost of the property (say £250K but with area flexibility)

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By DJKL
to johnjenkins
27th Nov 2017 17:44

It all depends where you are in the UK, Edinburgh has seen pretty keen competition this year re the FTB market, it is once you head over say 350k mark that the market is thinner, and outwith the city Borders lifestyle properties have certainly slowed/ prices are reducing. (I watch this segment as at some time will sell up and move somewhere quieter)

As one who has played their part in adding to the housing stock in the past , obtaining planning for > 250 units between 1997 and 2007 and building 61 ourselves, the main issue is not selling the things it is getting funding to build them, banks did not quite laugh at smaller developers but it was a near thing, albeit they have improved over most recent 3-4 years, they will at least talk to you.

For a sector of the housebuilding market that used to knock out circa 30% of all completions the SME sector took a pounding in 2008 onwards and as a business we are not currently building nor purchasing sites to obtain planning for others to build; lack of funding for builders to buy sites with planning means we are not forking out £500k-£1.3 million (as in the past) to pick up a site, steer the planning, spend say another £300k or so en route over 2-4 years just so if and when we get to the end nobody will buy, this is moreso because a lot of builders/developers went to the wall in 2008-2010 so there are fewer local purchasers for sites.

Our skill set re site acquisition is no longer used, a collective 147 years in the industry if I include the two owners who these days do not bother coming in any more.

I thought the sentiment in the budget re housebuilding down south was fine (will see what if anything we get offered) but past experience suggest delivery will not overwhelm expectation, and galloping build costs will put pressure on affordability with skills shortages, labour issues, imported material costs rising etc and lip service to property training schemes re apprenticeces in construction.

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to DJKL
28th Nov 2017 09:29

Banks do not want to lend when property is involved. I have a farmer turned developer in the south west and he has awful problems getting property developing finance. I'm pretty sure it stems from the GB days when he was PM telling the banks not to go after property in the last recession. People of my age (68) who have equity are just not giving it to our children as deposits. The main reason is that they are still at home at 25 - 30 and hopefully most of us are still young enough to enjoy and don't want to have that extra burden of a mortgage. Equity release is rammed down our throats. The recession of the late eighties early nineties shook the property market and I don't think it has really recovered. Gone are the days of "your home is your castle". The relentless attack by HMRC on the "subbie" will eventually make buying houses for the FTB even more difficult. Perhaps the ploy of Government is to have all workers on PAYE and renting from financial institutions. Stops them being independent and enquiring doesn't it?

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