14:22 PM, 29th February 2016, About 6 years ago 7
At the danger of sounding like Mrs Osborne, there are surprisingly many of us speaking to the television in front of us while we watch the news. Right before last year’s summer holiday, George Osborne introduced yet another stealth tax on hardworking savers: he cancelled deductibility of interest for buy to let landlords. Complex to understand and with delayed impact, just like reduction of the lifetime allowance for pensions, it took over half a year before landlords woke up to its effect – an increase to nigh 100% tax on buy to let income, such in addition to an new, special discriminatory punitive stamp duty just for landlords. Then, landlords commenced legal action with a judicial review by no one less than Cherie Blair’s firm of QCs. And questions were asked in Parliament. George Osborne answered these questions on scrapping the deductibility of interest for landlords by stating that he did this “to ensure equality between home owners and buy to let landlords” – as it is not possible for private homeowners to deduct interest, neither should buy to let landlords.
Why is his argument not only flawed, but why is he deceiving voters and insulting voters’ intelligence at the same time ? Everyone can see that he is quite deliberately and flagrantly, comparing the wrong groups. If you have a sandwich shop, you are allowed to deduct from the income of selling sandwiches, the cost of the bread, ingredients and labour to arrive at a net profit, to then pay tax on such net income. A private homeowner is not running a business, nor receives taxable income from his home. A buy to let investor is. Interesting to see as well is, George is trying to deceive not only the general public by a reasonable, even somehow noble sounding statement, but it seems he does not think whom he is speaking to is that intelligent.
I have not heard so many staunch Tories among my friends complain about George Osborne and his relentless attacks on the income and savings of the classic, conservative hard worker that saves. People who have carefully avoided bad investments, did not want mutual funds with fund managers that charge lots of fees for what really are tracker funds, who do not want complex investments where it turns out interest rates are fraudulently manipulated, but who have chosen to invest in something they can oversee themselves, a buy to let, albeit with a lot of effort and hassle making it a cumbersome investment. 96% of the 2 million landlords only have one property. They do the hard work of dealing with tenants, builders, cleaners – a lot more work and hassle than investing in a mutual fund online. They are correctly in my opinion, not relying on George to do his job to regulate the financial sector properly, but are wisely choosing to invest in bricks without middle men, to save for their families and their pensions. They have taken this upon themselves often also with a feelgood factor arising from renewing the housing stock and providing accommodation to a market that desperately needs it.
The second inference of George’s reasoning, that there will be more houses for first time buyers, is short sighted, as it does not create more housing supply. There are currently over a dozen tenants per available property to let. And as it appears from recent national insurance numbers suggesting there are three times the number of immigrants as previously believed – this acute and massive shortage in housing supply is not solved by a communist in Tory blue clothes, stealing life savings of people forcing them to sell, so not increasing the number of new houses. All he is achieving is firstly eradicating many small landlords, and he is hurting mostly those one property landlords that had married or could at the time not sell their house, the “accidental landlords”, and secondly he is helping accountants by forcing many of the remaining landlords into a limited company, where they can still set off interest costs in full against rental income.
The real issue is an unprecedented new housing supply that is to be stimulated – not only to give people a home but also to slow down the increase in house prices, to stabilize the economy and to make it safer for both banks and borrowers/homeowners. Over 600,000 new homes need to be built, but contrary to claims of the government that this is underway, they are not being built in practice, as many a large fully planning approved scheme shows it is not being built. Even if it were, George and colleagues must be aware there are simply not enough builders.
All these factors are known and it is a mystery to me why politicians are not fulfilling their primary task of planning and project financing properly. Then again, I am Dutch of origin, we have a different system of government than the archaic and polemic two party system and are more focused on the long term than the next four years, and being largely below sea level, we are more focused and historically disciplined with our long term project finance for infrastructure, whether for dykes and ports, railways or roads or health care.
Another thing that surprises me is that you won’t read about it in the papers, but anyone around me understands well why George Osborne is inflicting these punitive measures, not to achieve “equality between homeowners and helping first time buyers”, but to further his own blinding ambition to become prime minister. There, his problem is one of incompetence or recklessness, where he promised to have a budget surplus in the near future. A promise which is impossible and in reality just a gamble, because no one is able to predict the growth numbers on which a budget deficit or surplus depends, and creating a budget surplus with the deteriorating world economy is looking less possible than ever. To keep to his political promise he needs to fulfil to become Prime Minister, George is now frantically stealing from the good guys, busy with his series of tax grabs on pensions, buy to let life savings and livelihoods of people, and anything else belonging to hardworking savers. He hopes to bet on the landlords and pensioners to be less in number to vote than tenants which he hopes will still vote for him.
I don’t quite see how stealing pensions and buy to lets from the classic hard working savers who are archetypal conservative material, limiting their freedom in both the personal space as the business space by increasing stamp duty to punitive levels and limiting their future pensions by reducing the lifetime allowance and soon also scrapping the tax free lump sum. As a foreigner, I am not allowed to vote, but would have voted Conservative. I am astounded to see the Tories have turned red and are turning to nationalization of private assets.
Drs Jaap Rademaker LLM
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