Tuesday, June 7, 2011

So many problems

EU Commission issues first economy reports to members

"....The UK was also was told to reform its housing market, planning system and mortgage market, as well as to tackle youth unemployment and skills shortages."

Posted by dill @ 08:34 PM (4051 views)
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30 thoughts on “So many problems

  • Oh dear, more singing, cookery, diy and football coaching.

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  • happy mondays says:

    Let’s get the youth’s building crappy little houses, which then can be sold to them for an extortionate amount by a spivvy young mortgage adviser… Simples all problems solved 😉

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  • mark wadsworth says:

    Well, as a Ukipper, it pains me to say this, but the EU are bang on the money there.

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  • Mark, I’ve wanted to ask how you square this off for a long time.

    As a UKIPper, you must appreciate that a large part of the UK’s current malaise is due to the Bank of England’s ability to set interest rates to meet whatever political end sees favour. The European Central Bank on the other hand is independent and not open to such persuasion.

    This alone means that European control of monetary policy must surely be a good thing to ensure sustainable and equitable policy measures, non?

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  • 3. paul

    The more diverse the economies, the less positive control one body has on them.

    I’m excluding the abuse of seemingly independent authority in this example.

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  • montesquieu says:

    Not wanting to speak for Mark but I’m sure he has other mechanisms in mind than EU control …. I can certainly think of a few.

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  • I’m sure the DM and Telegraph will manage to put an anti-EU spin on the story.

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  • mark wadsworth says:

    Paul, the ECB and BoE are both laws unto themselves, the UK is in a mess and so are lots of Euro-zone countries. It’s the very existence of central banks that causes these problems.

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  • Surely the appropriate UKIP response is: ‘Mind your own f***ing business’

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  • Full text of the European Commissions report on the UK:

    http://ec.europa.eu/europe2020/pdf/recommendations_2011/csr_uk_en.pdf

    Key passages:

    (10) The UK experienced a house price boom in the decade before the crisis. Prices fell sharply after the crisis hit but have since recovered partially and remain at historically high levels. Transaction levels collapsed and have remained very low. The house price boom contributed to the large increases in household indebtedness and unsustainable growth in household consumption in the pre-crisis decade. The collapse in housing transactions drove corresponding falls in receipts on housing transaction taxes, contributing to the worsening of the UK fiscal position. Weaknesses in the housing market also help explain the UK’s high expenditure on housing benefits and high share of the population in state-subsidised housing. The UK has announced initial reforms to its planning system and to mortgage regulation. Reflecting the importance of this challenge to all sectors of the UK economy, there is a case to build on these measures to develop a more comprehensive package of reforms including in the mortgage market and property taxation to address these issues.

    [The Commission] HEREBY RECOMMENDS that the United Kingdom should take action within the period
    2011-2012 to:

    (2) Develop a programme of reform which addresses the destabilising impact of the house price cycle on public finances, the financial sector and the economy, with a view to alleviating problems of affordability and the need for state subsidy for housing. This should include reforms to the mortgage market, property taxation and the planning system.

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  • ontheotherhand says:

    “…UK’s high expenditure on housing benefits and high share of the population in state-subsidised housing.”

    I would love to see the comparitive stats.

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  • ontheotherhand says:

    Oh, I found the answer in another paper on their site http://ec.europa.eu/europe2020/pdf/recommendations_2011/swp_uk_en.pdf

    “Fourth, high house prices help drive the large share (around 25%) of the population living in state-subsidised accommodation and the high cost (around 1.5% of GDP) of housing benefit for poor households.”

    Lots of LVT fodder in there MW.

    “The UK share of total revenues from property taxes is, at 12% in 2009, by far the highest in the EU. Around 80% of this is accounted for by council tax, which is mainly residency rather than ownership based and only loosely linked to property value.”

    “A single annual property tax based on current values could avoid many of the problems of the current regime. The regressivity of Council tax and perverse incentives of SDLT could be eliminated. A higher tax burden on more expensive properties would discourage speculative investment and hoarding, reducing pressure on housing supply and helping to discourage bubbles. Revenue from such an annually recurring value-based tax would be more stable than SDLT since prices are much less volatile than transaction volumes. A value-based tax could also help weaken the linkbetween house price inflation and consumption since post-tax income would be supported by lower taxes during times of falling house prices and held back when house price inflation was high.”

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  • As you can see above, the BBC have omitted to mention the recommendation for reform to property taxation, and I haven’t yet seen any UK media outlet include this in their reports.

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  • Given what happened when the government set about reforming the funding of local govt in the 1980’s, it’s a dead cert that this govt won’t contemplate any major changes.

    However, two modifications are serious possibles:

    1) One or more extra council tax bands at the top and of the scale.

    This mainly to keep Vince happy, and to give the LibDems something to claim as an achievement.

    2) Reform of the tax treatment of empty properties.

    Local councils still have to maintain roads etc. when a property is empty, and there are crime issues and a much higher chance of fire brigade attendance when a property is vacant. Zero council tax on empty property is therefore unfair on the rest of the community.

    It is also self-evident that if council tax is charged on empty property, many would be let or sold as a result, thereby helping to alleviate the housing shortage.

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  • mark wadsworth says:

    Dill, OTOH, splendid stuff, thanks.

    UT, indeedy, if all they did were to scrap Inheritance Tax, reduce SDLT, add several new council tax bands at the top following a full revaluation of all homes (and reduce Council Tax in bands A and B and scrap CT Benefit as well for good measure) and place a CT surcharge on vacant or derelict properties, I would consider that a good day’s work.

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  • mark wadsworth says:

    OTOH: “The UK share of total revenues from property taxes is, at 12% in 2009, by far the highest in the EU. Around 80% of this is accounted for by council tax, which is mainly residency rather than ownership based and only loosely linked to property values”

    That bit puzzles me, total UK govt revenues approx £540 bn, of which £60 bn is “other receipts” and £480 bn is taxes and duties, out of this, about £50 billion is taxes on land and buildings, a bit less than 12%, (council tax £23 bn, Business Rates £23 bn, SDLT £6 bn,) so council tax is less than 50% of taxes on land and buildings.

    Hmm.

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  • MW,

    – The Tories are not fond of inheritance taxation, but as it’s an easy target, they are in a coalition, and the government needs the revenue; I’ll bet on no major changes.

    – Stamp duty also represents revenue the govt can’t easily forego; but the method of calculation is idiotic, causing market distortion at the thresholds.

    Far better to have zero SD on the first £100k, and a single fixed rate on the balance.

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  • mark wadsworth says:

    UT, council tax raises £23 bn (or whatever) and it’s in eight bands A to H, Inheritance Tax raises less than £3 bn at present, surely it cannot be beyond the wit of mankind to invent a few higher CT bands to raise an extra £3 bn from the top tenth of houses (i.e. those over the IHT threshold)? From my own workings, I am pretty confident that nearly all IHT is from housing, so you might as well scrap it on everything else.

    And surely it cannot be beyond wit of mankind to ditch TV licence and/or just add it to Council Tax? It’d save collection costs and hassle if nothing else.

    As to SDLT, how about a single flat rate with no exemptions? Call it 1% like in the good old days? Why exempt stuff under £100,000, if you buy a £90,000 home and pay £900, that is not the end of the world, is it?

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  • “surely it cannot be beyond the wit of mankind to invent a few higher CT bands to raise an extra £3 bn from the top tenth of houses”

    Entirely possible, but will the ire induced by landing 2.5m households with an extra £1200 tax bill each year be offset by their gratitude for the abolition of IHT? – I wouldn’t put my money on it!

    “Why exempt stuff under £100,000”

    – Because it is generally accepted that those of lesser means should pay less taxation.

    “And surely it cannot be beyond wit of mankind to ditch TV licence”

    – Now, here there is a problem that needs to be addressed. The gradual merger of computers, TVs and phones is making the licence fee untenable, whilst the beneficiary is conspiculously wasteful and bloated.

    But people don’t want the Beeb abolished, or loaded with commercials…

    The only credible solution is to make BBC services pay to view, with those currently entitled to a free licence entitled to unlimited free access.

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  • mark wadsworth says:

    UT, look at it this way – there is one department in charge of collecting council tax, which is pretty efficient and another in charge of collecting TV licence which is pretty inefficient, why not just add the TV licence to council tax and have done with it? It is quite a separate issue how much money the BBC should get.

    “Entirely possible, but will the ire induced by landing 2.5m households with an extra £1200 tax bill each year be offset by their gratitude for the abolition of IHT?”

    I would hope yes. What’s £1,200 between friends? I’m going to lose £1,600 Child Benefit from next year because I’m higher rate taxpayer, that’s just life. Mustn’t grumble.

    And I’d rather be able to choose to pay less tax overall by having less house and more cash than my kids losing 40% of [some of it – admittedly not much] whatever I do.

    As to SDLT exempt bands, I am a flat taxer, same rate for everybody on everything, no loopholes, exemptions etc. Poor people by definition would pay a lot less SDLT because they buy cheaper houses (and if you rent, you pay nothing).

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  • letthemfall says:

    A publically funded BBC is an important cultural matter; it’s not just about tax and telly provision. Pay per view would pretty much destroy the BBC as it stands, as would the loss of public funding wipe out museums, art galleries, fundamental science, libraries …
    The beeb has undoubtedly dumbed down a lot but still manages to outshine all the rest of the broadcasters put together.

    MW. I think you love the EU really. One good thing about belonging is it helps counter the relentless Americanisation of this country.

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  • MW,

    I’m all for simplifying taxes, but council tax is seen as a local thing while the TV licence is a national tax – proposing to merge them would not rest well.

    You could merge the TV licence into income tax, but you are still left with the problem of a BBC that does what it feels like, rather than produce programs that people want to watch.

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  • mark wadsworth says:

    UT: “council tax is seen as a local thing”

    Yes, it is seen as a local thing, but it isn’t. That’s just a particularly successful bit of Home-Owner-Ist propaganda.

    How much councils raise in CT is pretty much determined by central government, because central government tells them how much to spend and gives them grants to cover most of it. Or in the Morbidly Obese One’s case, pays them extra if they freeze Council Tax.

    It’s hardly a co-incidence that Labour-controlled councils had the lowest council tax – it’s not because they spent less or more wisely, it’s because they got far more in grants than Tory or Lib Dem councils. The Lib-Cons will now probably turn this on its head, fair enough.

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  • orcusmaximus says:

    @LTF; Here here!

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  • @19. letthemfall, “Pay per view would pretty much destroy the BBC as it stands” so you are saying no-one wants it?

    I’d like the choice please. If there are people who so love the BBC then let them DECIDE to pay for it. Don’t impose it upon people to pay for a ‘service’ they don’t use.

    “Important cultural matter”….like population control…. keep em dumb

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  • tom101..

    ..amen to that.

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  • We’ve discussed the BBC’s rather lopsided take on how its license fee is paid for vs how it remunerates its staff. I think we should be able to choose however I’ve no idea what the resulting BBC would look like and while I think it would enrich the UK broadcast industry as a whole, I’m not sure it would make the quality better.

    @Mark the UK is in a mess and so are lots of Euro-zone countries. It’s the very existence of central banks that causes these problems.

    Agreed, but an inch is better than a mile in the wrong direction (with apologies to Bill Wyman), isn’t it? Wresting that power by decree from the BoE is much better than allowing it to perpetuate (which is what UKIP is rooting for by rejecting Europe’s advances).

    Any further thoughts?

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  • mark wadsworth says:

    Paul, we’ll have to disagree to disagree. The BoE is bad enough but an even remoter EU/ECB/EFSF/IMF/World Bank is even worse.

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  • letthemfall says:

    tom101

    You remind me of the American holding up the baby, who “says,” if people want medical care let them pay for it. (What has population control got to do with it, btw?) Not quite the same thing, true, but your approach leads to inevitable cultural decline I think, a race to the bottom – keeping them dumb indeed. It’s not a question of whether people want the BBC – I think they do, possibly for different reasons – but what the BBC would do should it rely on direct payments. We’ve already seen the trend to the Strictly Come Dancing kind of programme, the lightening of science programmes, the relegation of the more serious stuff to digital. Good programming is expensive; we’d see a lot less without public funding.

    I don’t want all TV and radio to be full of commercial rubbish and adverts. Radio 3, 4, BBC4 would probably all disappear without funding. Cultural decline is bad enough as it is. Why make it worse for the sake of saving a few quid?

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  • Adam Smith Fan says:

    Funding the BBC after the abolition of the TV licence is straightforward even if you rule out pay-per-view and commercial advertising. The commercial TV and radio broadcasters already pay a licence fee for their right to use the public airwaves. Use that income to fund the BBC. This won’t cost the commercial broadcasters anything that they aren’t already paying and is much easier to enforce than the current method of charging viewers. It also avoids the “undue influence” problem which arises if the BBC is funded via taxes or advertising. If the income isn’t enough to sustain the BBC at its current size, it will just have be reduced in size until income matches expenditure.

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