Sunday, 4 May 2008

Andrew Marr demolishes Gordon Brown

A lot of people think that Andrew Marr is far too soft on The Goblin King. Having watched several interviews over the years, I strongly suspect that Marr despises him with a passion.

Today's killer question was dead simple;
"Well let's just continue with the economy for one further round, which is that a lot of people would say actually what's happened over the last ten years is we've had a huge boom on the back of vastly inflated housing prices, and unsustainable personal borrowing, and as Chancellor you never tried to stop that happening. You went along for the ride and you didn't warn people. And that's what's gone wrong now."

The Goblin King just waffled the usual waffle about low interest rates, high employment, economic problems in the USA, hard working families blah blah blah. It is difficult to tell whether he really is that out-of-touch with reality.

But this is the whole point! Marr summarised the whole 'Brown Bubble' in one short question!
What could The Goblin King have done to prevent this? Let's jump in a time machine back to 1997 and imagine that the new government had had the nerve to scrap all property related taxes*, total annual revenues est. £30 billion. Remember that UK gross government debt under Maastricht criteria was around £400 billion when Nulab took over and stayed at that level under the spending splurge really took off in 2002-03, since when it has been increasing by about £40 billion a year, so cutting taxes by £30 billion while the economy is growing is not particularly reckless.

As a quid pro quo, and to prevent property price bubbles, they could have introduced a Property Bubble Tax. Very briefly, the tax would be charged at 10% of the difference between property values at the end of each year and their values as at 1997 (I have a cunning plan how to do work this out, but that's not important right now).

Such a tax would have acted like a much higher interest rate on the speculative element of property prices; I'd guess instead of trebling they might have gone up in line with average incomes, in other words up by 60% - 80%.

The total revenues raised by the tax might end being more or less than the current revenues from property-related taxes of about £60 billion, that's not so important. If it raised little or nothing, then great, it's achieved its aim of keeping property prices low and stable (and prevented the corresponding credit bubble). If it raised more, then great as well, we could use the money to cut the really bad taxes like VAT, Employer's National Insurance and on increasing the tax-free personal allowance.

And as property prices reflect people's expectations about the economy, it would be counter-cyclical in the down-turns as well, in other words, right now, when prices are falling again - especially in commercial property - at least people would see automatic tax cuts.

* Here's the list, for clarity; Council Tax, Business Rates, Stamp Duty, Inheritance Tax, TV licence fee, Capital Gains Tax, VAT on domestic fuel, Insurance Premium Tax, s106 agreements, 'roof taxes' and anything else you can think of, less subsidies for land and property, such as Council Tax Benefit, agricultural land subsidies, VAT zero-rating for new residential construction etc etc.


Anonymous said...

"I strongly suspect that Marr despises him with a passion."

Is there anyone who doesn't?

Anonymous said...

Property Bubble Tax?

So your plan is, I live in my house doing nobody any harm; El Gordo inflates house prices hugely by constricting supply (we call the Planning System), and devalues the currency by various debauches, so that the price goes up even more.

I don't sell, don't reap the "benefit", don't do anything in fact except go on living.

And suddenly I owe HMG even more?? Those same f***ers who caused the problem in the first place? And who will spend the money so wisely?

THAT is your plan?

Oh yes that will be very popular.

Mark Wadsworth said...

"by constricting supply"?

It's the NIMBYs who want to restrict supply, and they are more prevalent in the Tory party.

"I don't sell, don't reap the "benefit", don't do anything in fact except go on living"?

Income tax is a tax on living, VAT is a tax on living, what's your point? These are bad taxes because they discourage work and enterprise. My PBT would replace as many other taxes as you can think of. It's the only tax with more beneficial knock-on effects than harmful effects.

Anonymous said...

"Income tax is a tax on living, VAT is a tax on living, what's your point?"

Income tax is tax on, err, income. There's cash to pay the tax. VAT is a tax on spending. There's cash to pay the tax. Your tax is a tax on an asset: there's often no cash to pay the tax, forcing a liquidation of the asset. That's bad. The Council Tax is already doing this to some people, and your asset tax would be hugely worse.

Mark Wadsworth said...

KT, so what you envisage is a tax system whereby the productive economy subsidises people who happen to own land and buildings?

Does it not occur to you that the value of land and buildings is a function of the value generated by the productive economy? But this is not much solace to tenants and potential FTB's, is it? They are running just to keep still.

It's not an 'asset tax' FFS it is a user charge. It is about price-rationing rather than socialist/authoritarian rationing.

If you, as a property-owning NIMBY want to prevent the local council from building more houses, to maintain the value of your own property, then fine. You have prevented surrounding land-owners from capitalising on the potential value of their land and made it far more difficult/expensive for people to move to where they'd like to live, all to your own benefit.

But ask yourself, who suffers and who should pay?

Anonymous said...

I agree. In his quiet way, Marr slaughtered Brown.