This is not good news for either Consumer Spending or the Treasury Receipts from SDLT that are so badly needed to reduce the stubborn Budget Deficit which, at best, remains unchanged from last year’s level of £70billion. There should have been a mid-way mark between the old rate of 7% Stamp Duty and the extraordinary level of 15% set by Osborne in his clumsy and ill-considered Autumn Statement in 2014 – he should have consulted more widely at the time before he ‘blurted’ this out but consensus policy-making was never his ‘Schtick’.
As a direct result, homeowners are ‘staying put’ and instead spending their money on improving their existing homes, rather than moving, which is fine for the builders and builders’ merchants, but estate agents, solicitors and the Chancellors ‘coffers’ all suffer as a result – lest one should forget, the Treasury is a partner in every home sold.
The Non-Dom changes have not raised a penny, but worse, they have served to expel countless wealth creators who have ‘pulled up sticks’ and moved to other more welcoming fiscal climates. These important people, most of whom pay worldwide tax anyway, are the ‘wealth of the nation’ and have invested huge sums in the UK for decades now. France, Israel, Dubai and Switzerland are all trying to ‘seduce’ them with hurriedly arranged tax breaks and, once they have gone, they won’t be back.
A tumbling residential Property Market is only good for the first time buyer but is highly damaging and disruptive for everyone else – particularly, as it is self-induced. No one wants runaway prices but perhaps there is something between this and what is going on at the moment? We are a consumer-led economy and we need a healthy, liquid property market and consumer spending to help stimulate it, otherwise there will be a ‘DIY recession’, as the former Chancellor so famously said.
There are some mutterings from local councils that they need greater receipts from Council Tax and, I hope, that Mr. Hammond does not ‘get busy’ with raising Council Tax Bands given the parlous state of the Property Market today, which would exacerbate the collapse and its effects.
Even the Commercial Property Market is struggling now with lower upward pressure on rent levels and higher yields that needed to be offered to Investors in order to get the sales away. Un-let properties will struggle in this market place and will be marked down as a result.
At first, the former Chancellor, Osborne, was talking enthusiastically about a Budget surplus during the electoral term, then he amended it to provide this by 2020 but, if the Economy and the Tax Receipts continue to shrink, the new Chancellor, Hammond, will simply not have the money to meet this target, given the restrictions of the Manifesto promises. He will have enough trouble trying to reduce the Deficit from £70 billion last year to the same level this year, given the effect of the four-month hiatus before the Referendum and the ramifications from the result.
We all know that for political expediency the blame for this will be rested ‘squarely’ on the Referendum result and although this has, and will, serve to exacerbate matters, it is not the root cause of the malaise.
I would imagine that with Prime Minister May’s centre-left leanings, austerity will be the casualty of the new regime, which may not be such a bad thing in the present circumstances.
Cameron and Osborne inadvertently undermined our belief in ourselves, whilst they were trying to win the Referendum and that is a crime – we are a great country, a proud, enterprising maritime nation and we have done great things in the past and will do so in the future. There was a reason why the most aggressive ‘killing machine’ in the last War was not able to conquer us and it wasn’t the 22-mile channel that saved us – it was the legendary and indefatigable ‘British Bull Dog’ spirit.
We must not take for granted that London is the ‘Greatest City on Earth’. We need to constantly work to keep this accolade current and relevant, and Mr. Hammond needs to signal to the International community that we are ‘open for business’, investment here will be handsomely rewarded and it is the best environment for principals and their families to live, eat and thrive.