Author: johnredwood

Ed arrived just as Nick was being shown the door by Santa’s helpers. They exchanged a nervous hello as Ed checked to make sure he was next.

In the grotto Ed said:

“Thanks for seeing me today Santa. I have had a rough few weeks, what with a difficult visit to Scotland and then that photo of all those English flags. I just want you to know we are a good lot really, and just want to get back into power so we can make everything just right again with some proper public spending. So my present is not really for me, it’s for the public. You see I would like my Christmas present this year to be having a go as Prime Minister. Can you fix it for me?”

Santa looked grave. He replied:

“I do not fix things for people. That idea came to a sticky end. I have to decide what presents to bring people. They can ask me for their favourites, but it is not always right or possible to give them what they want. I don’t suppose you will be the only one this Christmas who wants to be Prime Minister. I’m not saying it is impossible, but it’s not going to be easy. It would help me if you would ask for a more realistic present which I could give.”

Ed stumbled: “Well let’s say Dave wants to be it again, is it fair that he should have two goes when I don’t get one? You see they will get rid of me if I don’t get the PM job”

“Well” said Santa ” you have been lucky so far. Not so long ago you asked for the same Christmas present as your brother, to be Leader of the Labour party, and I gave it to you. Just last year you privately told me the absolute must for your Christmas was to have a No vote in Scotland, which you got. I can tell you I upset some others who wanted the opposite in their stockings. You can’t expect to win the best present every year. Now you tell me you are ready to be Prime Minister and want to spend some more money, yet you are also telling everyone you will get the deficit down. I don’t see how that works. Your tax rises will bring in peanuts at best and may even lose you revenue.  So I say, go home and think again. If there is something else less contentious you want then drop me a line.”

A little while after Ed had left the Prime Minister turned up. “I’m not late, Santa, am I” asked Dave. Before he got an answer he went on “You see there was another of these dreadful meetings about Europe which just went on and on and I wasn’t allowed to leave. I did tell Mrs Merkel it was important to be here with you, but she seemed to think EU regulations on derivatives were more important. I did tell her that all this banging on about Europe is not a good idea, but she keeps doing it and sending me the bills.”

He flowed on perfectly with Santa speechless. “What I want for Christmas Santa is the continued delivery of my long term economic plan. More jobs, more growth, you know what George is up to. It’s all clever stuff. . That means I just have to be PM for a bit longer – nothing personal, difficult job, gets in the way of the family a bit. I’m sure you will see it’s a simple choice, and I am afraid it just has to be me again just to get us to the sunlit uplands”

Santa decided he did not need more explanation of the long term economic plan. He interrupted and said:
“I have given you your preferred present every year for the last five years. You have been Prime Minister. You have kept a coalition going. You got your econo0mic recovery and all those jobs you insisted on.  Your critics did not want those you know. You have seen off challengers for your job. Last year you asked to win the referendum on Scotland which I gave you. Fortunately more than one of you wanted that, so it was a present which helped several. This year you are asking for something others also want but only one can have. That’s  not easy for me.  Isn’t there something else you would rather be sure of having? How about a really good international job on a much bigger salary?”

“No” said Dave, “that won’t do I’m afraid. I’ve made them all a promise. I don’t think they could manage without me yet. I never like to let people down”

“Well I am pleased to hear that” said Santa. “When are you planning to get immigration down to tens of thousands?  How’s the deficit coming along? I’ve  had a very difficult day. I will let you  know later what I propose to do”

It’s that time of year when children agonize over their present list. The lucky ones get to visit Santa’s grotto to tell him in person what they want for Christmas. Our party leaders have been especially keen to meet  Santa this year  with a General election coming up. Their conversations have not gone quite as they hoped. When Santa came to Westminster he was in an argumentative mood. I have obtained a transcript for greater accuracy.

First to arrive was Nicola Sturgeon. She thought Christmas was going to be early this year so she did not want to miss her big ask. As so often, the person who had the furthest to travel got there before the start. When Santa saw her, she said:

” What I would like for Christmas is an increased SNP membership, clear leadership in the Scottish polls, and the certainty that we can win all the seats in Scotland in the General Election. That’s all I want for Christmas. It’s not asking a lot, as I lead the only party that has Scottish in its name, and the only party which really cares about my country. We need this to stop all those English MPs going back on their word over Home Rule”

Santa looked cross, and replied:

“Last year I gave you the wonderful present you had been asking for, a referendum on Scottish independence. You didn’t look after that present and managed to lose the vote. What you are now proposing is I should give you effectively  the same present again this year in the hope that you could look  after it better. If I grant your wish all your SNP MPs will claim they now have every right to independence because they have just won  an election campaigning for  Out. I have to ask you to think again, and try and find a present you would like which matches with the settled will of the Scottish people to stay within the Union”

Next to arrive, fresh from a pub in Thanet, was Nigel Farage. He had decided to be moderate in his requests in the hope that Santa would be kindly to him. As he spoke, however, the significance of the moment and the opportunity started to overtake him:

“Hi there Santa. You’re doing a great job. I don’t want to make your life too difficult. So all I want for Christmas is momentum going in to the General election. You know the sort of thing – a few good opinion polls, the odd Tory defection. You see I reckon I need just 30 seats in the Commons to make me the third largest party. Then I can decide who the Prime Minister should be, and require him to hold a referendum, and then get us out of the EU and then we can close our borders, and then everyone will be so grateful to UKIP we will be on a roll…”

Santa was dumbfounded by the gap between the ambition and the current polls  and Parliamentary forces of Mr Farage. So he said in a friendly but slightly patronising way:

“Well Mr Farage last year I gave you exactly that same present. You have had two defections, some good opinion polls and you came first in the European elections which I thought were your best opportunity to make your point. What have you and your colleagues managed to do for the UK now you are the largest UK party at Brussels? What single law have you stopped or expenditure have you cancelled? What progress have you made on changing the UK’s border arrangements?  If I granted your wish, how do I know that you  would be any part of a new government, and that you could carry out  the things  you promise? I think you need to choose a more suitable present, that is not the same as last year.

By now The Deputy Prime Minister was getting angry, because he was having to wait outside whilst Santa talked to  Mr Farage . It seemed like salt in the wounds of the Clegg/Farage debates, which some had dared say Mr Farage had won. His wait  came on top of poll after poll showing UKIP well ahead of the Lib Dems in the fight for one of the minor places in the next Parliament. At last he was told Santa would see him. Mr Clegg asked

“I don’t want to ask for much for myself this Christmas. I would just like you to make sure the British people understand how difficult it has been for my party in this coalition. You know, we are not the sort of people who believe in cutting welfare or other spending. We do not like having to keep public sector pay and pensions down. We would be much happier imposing new taxes on the rich, but the Tories wouldn’t let us do any of these things, We only went along with all this because we thought it was grown up and responsible to help form a government, but we do think it would be very unfair if people thought we were to blame for anything the public thought was  wrong.”

Santa appeared dismissive as he came to reply. “I cannot possibly give you such a valuable present. Of course all political leaders would dearly love to be absolved of all blame for what they and their parties have done, but the whole point of democracy is they have to stand or fall by what they did. It certainly helps them if what they did squares with what they said, but that is all too rare these days.It was your Dr Cable that put through the unpopular tuition fees proposal when you had all promised the opposite in the election. It was your Mr Davey who pressed on with dear energy, making it difficult for families to pay their power bills. It was you yourself who wasted so much time on constitutional changes which the public did not want. Your whole party said they would help get the deficit down, now they all want to distance themselves from any difficult decisions. Think again, Mr Clegg, about a present appropriate to your straitened circumstances”

Tomorrow we will see what the famous duo, Ed and Dave, asked for.

Let us suppose  that someone’s spending over recent years was as follows:

Date   of spend                          Total          Total day to day spending

2009-10    (last Labour year)            £6693                      £6009

2010-11                                                  £6944                     £ 6328

2011-12                                                   £6936                    £6438

2012-13                                                  £6737                     £6572

2013-14                                                  £7200                    £6679

2014-15                                                  £7371                     £6717

I don’t think anyone would say that person had experienced “colossal cuts” . Some would write in and say this person had done better than they had, as their day to day  spending had gone up each year. Others would point out that inflation meant not much of a real increase, though in practice it is a small real increase in day to day to spending.  A fair commentator would conclude that the person had done all right considering the overall background, where others  had suffered actual falls in income and spending. It had been tight but was  not a case of a massive cuts.

If you multiply that person’s spending by 100 million you have the government figures for its total spending (including capital) and its total current spending. So why when we have the big figures for the government do some go on about massive cuts?

Some say in real terms it was a cut. The OBR now tell us not even that is true. Now they say it is a cut as a percentage of GDP. Yes, that’s true, because GDP is going up faster than public spending. However, that does not make it an actual overall cut. Today the government is delivering more school places, more doctors appointments, more operations in hospitals, more subsidised rail services and more success in controlling crime than five years ago.

If we are to have a sensible debate about public spending we first need to start with an honest factual base of what has been spent and what planned spending looks like. Over the next five years on current plans public spending rises by a further £42bn a year. That’s tight, but it only becomes a real cut if public sector costs escalate and if the public sector is unable to deliver say 2% per annum productivity and efficiency gains which are the bare minimum in much of the private sector.

The biggest lie of all is the one which says we are going back to 1930s levels of spending by 2010. This country is many times richer now than in the 1930s, so we will be spending many times the real level of the 1930s by 2010.

I reproduce below my case to abolish the slab approach to Stamp duty and to offer us all a cut in the amount of this transaction tax. I first wrote this in August 2013, and renewed my proposal in a debate in the Commons this year.I would like to have seen a more generous reform, but the one the Chancellor has proposed does mean some reductions in Stamp Duty for all homes under £940,000 in value, which is good news.The interesting question will be what impact the new 12% rate has on high priced homes, especially in central London where most of them are concentrated. As the Chancellor needs the continuing revenue from these dear properties he will need to watch carefully what impact this tax has on transactions volume.

Stamp duty – make it a progressive tax

By johnredwood | Published: August 26, 2013

I do not like Stamp Duty. Houses are dear enough, without imposing an extra tax on people trying to buy a home.

I am also a realist. This Coalition government, and any likely successor, will need revenue from taxing property transactions. They are not about to abolish the tax and give up the money. We need to find a fairer way of charging the tax, and set rates which are more affordable so there can be more transactions. That way homes can be cheaper, and the taxman can still raise substantial sums of money in a more buoyant economy.

One of the worst features of the current Stamp Duty is the cliff edge approach to the rising tax rates. Buy a home for £125,000 and you pay no tax. But a home for £125,001 and you pay £1250 of tax.

The increases in tax at threshold points become very high as the price of the property rises. Pay £1 over £250,000 and your Stamp Duty bill shoots up from £2,500 to £7,500, a 200% increase, or an extra £5,000 on your purchase. Pay £1 over £500,000 and your Stamp Duty bill surges from £15,000 to £20,000, another £5,000 increase, though a smaller percentage.

Pay £1 over £1million and your Stamp Duty bill is a hefty £10,000 more, rising from £40,000 to £50,000. That’s £50,000 tax to buy a one bed flat in central London, for example. Be in the fortunate enough position to be able to buy a 2 or 3 bed flat in the best parts of London and you would have to pay £100,000 of Stamp Duty at £2m. Pay £1 more and the tax bill climbs to a giddy £140,000, a £40,000 increase. Just the increase in the Stamp duty is considerably higher than average annual earnings.

The £1250 tax rise at £125,000 and the £5,000 tax rise at £250,000 are particularly onerous on many people trying to buy a family home in many parts of the country. It can be the last straw, that stops people buying the home they need and want.

The cliff edge thresholds of course distort the market. Homes for sale cluster just below the threshold points. There are large tracts of pricing territory but sparsely populated with homes for sale. £250,000-£260,000, £500,000 to £525,000, £1m to £1.1 million are not popular. The tax intervention creates a lumpy and jumpy market, where there are gaps in price availability, with vendors either holding down the price or leapfrogging it upwards, clear of the danger zone.

So my main recommendation for reform would be to make the Stamp Duty levy progressive like Income Tax. A home priced at £300,000 should pay no Stamp duty on the first £125,000, 1% on the next £125,000, and 3% on the last £50,000 of the price. Total Stamp Duty under this system would be £2,750 on a £300,000 house, instead of £9,000 today.

This would make homes more affordable. Could there be a loss in revenue? There may not be. Transactions would increase. The loss of revenue at the top end, where much of the duty is raised, would be very slight. The London market with its £10m plus transactions at the top end would still see such buyers paying nearly £700000 as today on a £10m purchase. The higher the price, the lower the loss of revenue as a proportion of the tax from the system I have described.

Given the political dislike of rich people and high property prices in modern UK, the government could introduce a hybrid system, where anything over £2m still had to pay 7% on the lot.