Thursday, 6 February 2020

Good idea; good idea; bad idea

Good idea

Paul Ormerod in City AM:

Here is a great opportunity for the government to both increase the level of human capital in the economy and be seen to be delivering for the "left behind". There are already rumours that the chancellor is planning a big increase in spending on FE in the March Budget.  

Investment in university students has gone well past the point of diminishing returns. In contrast, the neglect of the FE sector offers the chance of getting a real return on increased spending.

The obvious beneficiaries will be the young people who do not go to university. With extra skills, they can earn an "FE premium". It may be modest, but being able to earn even £10 an hour instead of the minimum wage makes a big difference to the individual concerned.

Good idea

From The Daily Mail

Prince Andrew was urged by lawyers today to 'get on a plane' and answer questions from the FBI as part of a reciprocal deal that would see US spy's wife Anne Sacoolas sent to the UK where she is accused of killing teen Harry Dunn.

The demand was made in an extraordinary press conference in New York where Lisa Bloom, lawyer for alleged victims of billionaire paedophile Jeffrey Epstein, teamed up with Dunn family lawyer Radd Seiger in an attempt to break the stalemate that has ensnared both of their cases in political red tape.

A publicity stunt, but an excellent one, even better if it works. The UK is way too keen to extradite people to the US, or let the threat hang over UK citizens' head for years and years (Gary McKinnon, Hound of Hounslow etc), funny how that doesn't apply to Prince Andrew. The US never sends anybody back, but that woman quite clearly killed somebody.

Bad idea

Also from City AM:

The [Retail Sector Council] report is expected to include several recommendations, including the proposal to raise corporation tax by two per cent to raise around £6bn a year by 2022/23.

According to Sky News, the extra revenue would be used to reduce the business rate multiplier to around 40p in the pound. Other proposals cover VAT reform and tax and property cost transparency.

Robert Hayton, head of UK business rates at real estate adviser Altus Group, said the move to increase corporate tax and reduce business rates would be an "eminently reasonable fiscally neutral solution".

The actual rental value is a fairly fixed figure and is shared between landlord and government. The tenant doesn't care how it's split.  A corporation tax change does not affect total rents as they are paid out of pre-tax profits.

Let's do a worked example and see who gains or loses from this, using premises with an actual rental value of £21,000, which is currently split into £14,000 to landlord and £7,000 to government (50% of £14,000). Under their suggestion, it would be split £15,000 to landlord and £6,000 to government (40% of £15,000).

Winner #1 - the landlord, who currently gets £14,000 less 19% corporation tax = £11.340. That would go up to £15,000 less 21% corporation tax = £11,850.

Winner # 2 - owner-occupier business with low profits (pre tax or rent) of £40,000 who owns such premises. Current net profit after Business Rates and corporation tax = £26,730. That would go up to £26,860.

Loser #1 - tenants - the higher their profits, the bigger the hit..

Loser # 2 - owner-occupier business with high profits of £100,000 (pre tax or rent) who owns such premises. Current net profit after Business Rates and corporation tax = £75,330. That would go down to £74,260.

Not huge numbers, but a marginal gain for landlords and unprofitable owner-occupier businesses, and a tax hit for tenants and profitable owner-occupier businesses.


mombers said...

I don't know how that woman lives with herself. Just come back to the UK, do a year or so in jail then you're done. Now she's the killer driver who won't face the music for the rest of her life. Can't imagine she's not lost a number of friends.

Mark Wadsworth said...

M, exactly. If the daft bint had waited at the scene, stayed in the UK, she would have got a few months or a year, probably suspended. No biggie, hardly any headlines.

Bayard said...

Mark, she's from the US, so she knows that foreign countries' laws don't apply to her. They're exceptional in that way.

Dinero said...

Have high street rents been falling or rising over the last 15 years.

Mark Wadsworth said...

B, true.

Din, in most areas, falling. In London, rising.