Month: April 2010

Wow! What a response to my questions on housing. As a good number of you say, it is a crucial issue for many. There are two nations, the haves and the have nots, when it comes to home ownership.

As many of you also rightly say, homes are very expensive for people starting out on average or below average salaries. Now the banks require a much larger deposit it is doubly difficult.

That produces a paradox. If the government follows policies to cut house prices more and more quickly, that entails rationing mortgage credit even more strictly That makes it in the short term even more difficult for people to buy their first home. If the government relaxes mortgage credit too much more people can start out, but the homes absorb an ever bigger proportion of people’s incomes. Ultimately it is self defeating. The main driver of high house prices in the period from 2002 to 2007 was excess credit flowing from weak regulation of the banks and the low interest rate environment. That leaves first time buyers today in great difficulty.

We need to work towards a better relationship between average income and home prices, without a violent shake out which will damage existing owners too much and will put off or prevent first time buyers from starting out on ownership. Ideal would be a period of no rises in house prices coupled with a resumption of real income growth, leading to a better balance over a few years. That is easier said than achieved.

One of the main drivers of high or sustained house prices in the last eighteen months has been the big fall in the pound. This has meant that central London property prices which are very high for any normal tax paying UK earner have become a lot cheaper for overseas buyers buying from a stronger currency base. This in turn has enabled more UK central London residents to sell at good prices and then pay higher prices than otherwise for alternative property elsewhere in the UK. The continued strong flow of migrants into the UK has also created a strong demand for housing of all kinds, against a background of relatively low build rates.

So, to get prices and incomes into better balance we need a number of measures, each inadequate in itself but together helping to move the balance:

1. Lower Stamp duty tax on purchases
2. Aboliton of Seller’s packs, which act as a deterrent to putting your home on the market
3. Deficit reduction and monetary policies designed to stop further falls in the pound
4. Re balancing of the credit available to private and public sectors through the banks – credit for mortgages has lurched from being far too easy to being too tight
5. Incentives for local homeowners and their Councils to accept new development – compensation for affected neighrbours, developer contributions for infrastructure and extra Council tax receipts for Councils
6. A Simplified planning system capable of giving quicker answers – whether Yes or No – without the cumbersome regional level interfering. Local people need to feel more in control of whether and where new development should go.
7. Proper controls on borders and migration rates.

They say charity starts at home. In that case public spending cuts should start abroad.

The Uk does not just have a problem of overspending in the public sector. It also has a big balance of payments problem. The UK needs to buy too much expensive overseas currency to pay its bills abroad. This is helping drive the pound down, making us even worse off.

So if the public sector can cut its spending in foreign currencies, that provides a double help to the struggling economy. Fortunately, it should not be that difficult to do so, as some of the more wasteful or less desirable spending is the spending the government does abroad.

Here are some examples:

1. Withdraw the army from Germany, and house them in UK barrracks. Follow the suggestions on this site to allow soldiers to own their own married quarters whilst in barracks, and to sell them back at market values on leaving, using private finance. This will save large Euro based spending, allow disposal receipts of assets in Germany and provide extra private capital for much needed improved housing.

2.Cut the wasteful and often undesirable expenditure incurred by the EU. Much of the non agricultural spending is at best marginal and at worst undesirable. All EU states are wrestling with budget problems, and the EU itself says they should all cut their budget deficits to 3% of National Income. Shouldn’t the EU lead by example and slash its own spending to make that easier? That’s more hard currency cost for the UK. The government says it has influence in the EU – now’s the time to use it. Would Labour rather cut the NHS than the EU budget? If so, why?

3. Transfer spending on reconstruction and development in Afghanistan and Iraq to the Overseas Aid budget where it belongs, removing aid to richer countries from that budget whilst continuing to meet the international targets that both main parties have agreed. Overall betweent he Defence and Overseas Aid budgets there would be a cut, but the overseas aid budget would go up and be better targetted on need.

4. Pull the army out of Afghanistan as soon as possible. We should not commit ourselves to an intensification or prolongation of the war in a situation where the effort needs to be put into the politics rather than the fighting.

5. Review all the imports of goods and services within the public sector and hold competitions to see if domestic suppliers can provide a good alternative as contracts come up for renewal. Every transfer of a service or good from overseas to UK will help relieve pressure on the currency, and will help cut the benefits bill as more UK people go to work to service the state.

The UK has to earn its way out of this mess. It is importing too much, and that includes the public sector.

Mr Farage appeared on “Have I got news for you”. His main political message was that Vince Cable is the best of the three “Chancellors”. He was fulsome in his praise of Mr Cable, and gave him strong support against his main rivals.

This just goes to show that UKIP are not dedicated to combatting federalism in the UK. Mr Cable is one of the leading Lib Dem Euro federalists. He not only wanted and voted for all the transfer of powrs that have happened under Nice, Amsterdam and Lisbon, he not only voted against a referendum on Lisbon having promsied one, but he wants the EU to take more of our powers of self government away. He supports the Uk joining the Euro in principle. He is a keen advocate of regional government which represents Brussels remodelling our democracy in a European burreaucratic way. He was the leading advocate of the ruinously expensive and unsuccessful bank nationalisations. He is against cutting National Insurance. He is a strange cheer leader for UKIP

Indeed, UKIP”s whole strategy for this General Election is more of the same. They promise not to stand against strong Eurosceptic other party candidates that can win, yet they are busily putting up UKIP candiates in seats with Conservative candidates who have voted against Nice, Amsterdam and Lisbon, who have voted for a refererendum, and think the UK would be better off out. As expected you can’t trust their word. They are determined to split the Eurosceptic vote in a way which doubtless delights Mr Cable.

Mr Farage is himself standing against the independent Speaker, himself a former Conservative Eurosceptic. This is against the convention of the UK democracy Mr Farage sometimes claims to hold dear. More importantly it means Mr Farage himself, the most newsworthy of the UKIP slate, is not taking the fight to a leading federalist MP and putting him on the spot as to why he has sold the UK down the river and done so much damage to our democracy by giving away so much power. Surely UKIP should be tearing into Lib Dem and Labour federalists who led the charge to damage our democracy by such huge transfers of decision making? Why isn’t Mr Farage standing against Mr Cable, for example?

Judge people by their actions. Mr Farage and his party are just another anti Conservative party. They are not furthering the cause of Uk democracy and independence with their interventions in this UK General election.

Today is Easter Sunday.
What does Easter mean to modern Britain?

As I attended services on Good Friday, one of the biggest days of the Christian year, I noticed the attendances were not high given the size of the population. Regular practising Christians I have talked to recently feel they are now a minority group. We have passed through that time when the Church goers could assume that a majority of the rest of the population were Christian but just a bit busy at Church times on Sundays, to a feeling that religious belief and practise is for a series of minorities strongly supporting their own religion or their own Church.

We still have an established Church and an official religion. The shrewdness of the Elizabethan compromise settlement – bishops and liturgy, the bible and services in English, believe as you will on the wine and the bread – has proved long lasting. The Church of England and Christian observation is an important part of State as well as of Church, and still inspires our teaching and charitable traditions. Parliament starts every day with Prayers, and many of our schools have religious connections.

For most people in modern Britain Easter is a secular public holiday, an opportunity to have a long week-end off, a chance to go out with the family or to buy in enough food for a siege and have friends or family round to lunch. For others it is a very busy commercial opportunity, with the shops and service providers working hard ahead of the week-end. It’s a time for hair dos, for new clothes, for special meals, for spending time with family and friends. The local supermarket said it was a big selling point for turkeys and fresh vegetables, just like Christmas. When the weather permits it is the first big opportunity of the year to get out and about for pleasure.

The inconography of easter is more pagan fertility rite than Christian symbolism. Shops are full of bunnies and eggs, daffodils and greenery, signs of new life and fecundity. The easter egg is the main gift and currency of Easter. It is the chocolate industry’s opportunity to come to the retail party.

It is true the hot cross bun survives as a poignant reminder of the Cross and the sufferings of Christ, but in a six pack for 50p probably few pause to remember the events in Jerusalem almost 2000 years ago as they place it in the basket. As I put the eleven apostles on my Simnel cake I wondered how many households still bake one or recreate the gospel references in marzipan?

The muddle is very British. Easter is as each person defines it. Perhaps we should remember our great tradition – do not make windows into men’s souls.

This morning Labour put Geoffrey Robinson on to run up the white flag with the business leaders who have backed the Conservatives on National Insurance. That looked like wise and sensible politics, and he did it professionally. He told us the= business leaders were great guys who had a point of view, and that in one sense all taxes are taxes on jobs.

So why then did Lord Mandelson chose this same moment to attack Mr Diamond of Barclays? Unsubsidised banks are businesses too, as the Today interviewer spotted. Is Labour losing its touch? Is it rattled by the success of the first new tax cut of the campaign?

If Lord Mandelson is serious about rebuilding links with business, and if he wishes to stop the flow of new investment, company headquarters and new jobs to overseas countries with lower tax rates, he should announce an end date for the 50p Income Tax rate.

On Thursday I spent time talking to employees in a local super market. They were full of commonsense.

Together they were of one voice that too many people are on the dole and needing benefits. They feel strongly that the world is too tough on those who try hard and turn up for work, and not tough enough on those who prefer to stay at home when there are jobs available. They want a welfare reform that works – not to kick the crutches from the cripple, but to pull the duvet from the idle.

The younger ones face a big problem with housing. They want to climb the property ladder. In today’s conditions that is very difficult. House prices did fall as we thought on this site during the recession, but have been rising again more recently. They remain high compared to incomes. Banks under the new regulatory cosh are no longer prepared to lend 90% or 95% of the value, so buyers need substantial deposits. Mortgage rates for new mortgages are many times the 0.5% base rate Labour boast about, making monthly mortgage payments large for the beginner.

I went on from the supermarket to talk to a group of senior managers from a wide range of businesses. They too raised the house price issue. One of them recommended creating the conditions for a further subtsantial house price fall because he was worried about affordability. The others, all home owners, thought this a dreadful idea. They asked what the political parties thought. I said the parties thought there were a lot of home owners out there! Conservatives proposed removing the tax on first time buyer purchasers, and Labour have now done just that, which will help a little.

We are in bind. House prices are too high in many parts of the country for new buyers without rich or generous parents prepared to pay the deposit. The banks are forced to be more prudent, so many go without access to the credit they need. Any ideas?

The UK is over taxed. The deficit has not been brought on by taxing too little, but by spending and wasting too much. Labour’s offence is not for setting tax rates that are too low, but wasting so much money on self promotion, poor purchasing, too much bureaucracy, political correctness – and above all on far too many people out of work and living on benefits. The total benefits bill is larger than the massive deficit, including huge spending on more than 5.5million people of working age without a job.

The taxes which are most damaging are the ones which tax saving and earning. We need to work harder, earn more, invest more. To do that the enterprise economy needs lower taxes on effort and success. We are not going to get the deficit down enough without getting many of the 5.5 million into work. We are not going to get it down without more tax revenue, and more tax revenue requires lower rates of tax to stimulate more income to tax, and more jobs to cut the benefits bill.

So I am wholeheartedly behind George Osborne when he recommends making a start with a lower Corporation Tax rate, with the possible abolition of IR 35 and other penal taxes on self employment, the reduction of Labour’s very high National Insurance, and his removal of non millionaires from Inheritance Tax. It’s the right direction for policy. I think we will need to do more to be sure of sufficient response from the enterprise economy to boost jobs and the revenues by enough.

Labour’s petulant and shrill attack on George Osborne for his latest tax cutting proposal has back fired. The more Labour complains about the tax cut, the more business lines up to support it. Labour suddenly realises they face fighting the leaders of the UK’s biggest companies, instead of fighting George alone. They realise that whilst they can brief unpleasant things about George they will not get away with that about the UK’s main bosses.They must be regretting the amount of publicity they have given this popular, sensible and modest Conservative proposal.

So why did they do it? How did the King of Spin make such a mistake? They did it because they know a tax cutting Conservative party will be much more popular than a Conservative party wedded to Labour’s uncompetitive tax regime, based as it is on jealousy and folly. They did it because they have always thought they can lambaste the man and by undermining him damage the policy. This time it hasn’t worked.

They should remember a previous time when George Osborne outwitted them by proposing a tax cut. In the early autumn of 2007 Gordon Brown was riding high. The polls said he go for an early election and win it. Those of us who were keeping the flame of lower taxes alive in the Conservative party had not been having a good time. George Osborne emerged at the Conservative party conference, with the Conservatives staring a fourth General Election defeat in the face, and announced a cut in Inheritance Tax.

It was electrifying. You could feel the whole Conservative party transform from gloom to hope. More importantly, outside the Conference Hall opinion changed dramatically. A tax was going to be cut. People were allowed to aspire again. If you were successful your worldly goods were not to be confiscated by the state. The Conservatives shot up in the polls. Labour back tracked, to pursue a longer personal vendetta against George Osborne.

That is why Labour ware so worried when Mr Osborne returns to tax cutting, and this time proposes cutting a tax that practically all working people have to pay. Tax cuts are lethal chemicals in Labour’s timbers. To the rest of us they are yeast, providing hope, rising spirits, the prospect of a better tomorrow.

The irony is that lower tax rates will help cut the deficit. They are the main way to restore some enterprise, some more manufacturing, some more private sector jobs to a dangerously lop sided economy. The media complaint to George Osborne should not be that he has offered too big a tax cut, but that he will need to offer bigger ones still if we are to recreate a successful enterprise economy in a hurry,. as we need to do.

Labour are wrong, wrong, wrong to oppose the Conservative policy of cutting National Insurance taxes. They put substantial extra tax into their budget deficit cutting plans for the next four years which will only materialise on the scale imagined if they cut tax rates on company and individual incomes. As I have often argued on this site, the way to increase the tax take is to cut the tax rate.

Labour’s case against George Osborne is that his NI cut is “unfunded”. Well, that’s a bit rich from the people who have brought us £167 billion of wasteful and unfunded expenditure this year, and are planning almost as much again next year.

The Tories are right that the UK is no longer tax competitive. That matters. If we do not change that soon, more businesses will leave, fewer will come here to set up in the first place, more UK entrepreneurs will go on strike. The Tories say they will cut Corporation Tax to 25%, cut small business tax to 20%, and take 1% off NI. The only worthwhile question to ask is “Is that enough?” Once a country gets a reputation for being uncompetitive, once it gets out that the government hates the private sector and clobbers enterprise, a new government may need to send a very strong message that things have changed.

Holland offers a lower Corporation Tax rate and a 36% top rate of income tax. The UK at 28% and 50% is way off the pace. There need to be more tax cuts for stronger growth, more tax cuts even to hit Labour’s targets for the amount of extra tax we will get in from growth. I want to tax the rich more. To do so we need a top rate of 40%, not 50%.