Is The Conservative Party Really One For Home Ownership (or is it the CON-servative party)?
Many people, including lots of landlords, are of the opinion that the Government is trying to force private landlords out of the market in order to free up properties for first time buyers (FTBs) AND to make way for big corporates that want to build huge rental complexes . With the Chancellor’s frenzied attack being somewhat similar to Anthony Perkins stabbing away at the shower curtain in the film classic ‘Psycho’, there is certainly plenty of evidence to support these views. The question is whether he’s trying to kill landlords off, or is he just trying to bleed the sector dry.
We’d suggest that George Osborne (GO) doesn’t really care whether landlords are forced out or not, and actually isn’t worried if the aspiring youngster gets on the housing ladder as long as he can take tax, hit his personal goal of paying down the deficit and of course win votes.
We have listed numerous points below that show this Government is clearly pretending to support FTBs and is probably more deceitful and duplicitous than any other party we have seen for many years.
Our question to anyone reading this is; with David Cameron indicating that he intends stepping down at the end of this Government term, would you really want George Osborne running the country?
Whether you do or not, you can join the Conservative Party at https://www.conservatives.com/join.
On various landlord forums we have noted that many people have stated they have been lifelong Conservative voters but will never vote for them again. We would further suggest that perhaps they would still want to be members of the party so that when the leadership contest takes place to replace Mr Cameron, they can as a member vote for Mr Osborne or one of his competitors.
Our bullet points….
- Under the last coalition Government the role of Housing Minister was removed from the Cabinet and has not been reinstated under this Conservative term. If the Tories were really that serious about home ownership then surely the Housing Minister (Brandon Lewis) would be in the Cabinet? As he isn’t we must assume that the Government is only paying lip service to aspiring home-owners in order to win votes in the next election.
- If GO wanted to assess how best to help FTBs then you might expect Government to have carried out a full and impartial study of housing and the interaction of markets between buying and renting. This wasn’t done so the Chancellor is forming policies on rumour, gossip, anecdotal evidence and a very flawed report we’ll talk about more later. This is no way for a country to base its fiscal policies!
- GO has not forecast what he expects to happen due to the property taxation policies, other than taking tax. No targets or expected outcomes on how this will have a positive effect on FTBs have been established because they can’t be without having carried out the study of the market. The reason must be that the changes are all about taking tax revenue and forcing out landlords out so he can collect Capital Gains Tax, but nothing to do with encouraging home ownership.
- Following the Summer Budget announcement it was stated that Government does not expect rents to rise. If there has been no in-depth study of the market then what is this based on?
- The Conservatives took thousands of votes from landlords in the election because they had not stated this tax policy beforehand. GO is therefore betraying an enormous number of landlord voters, and indeed other Tory voters with this move. Is this a man that should lead his party?
- Some of the General Public are of the opinion that high house prices are the fault of the landlord. Whilst we would strongly argue against that elsewhere, we would make the point that what has largely allowed people to purchase BTL in property in recent years is the policy of the Chancellor under the Funding For Lending scheme. This gave the banks the greater ability to lend to the housing sector (including BTL) in order to revive the economy. Mr Osborne could easily have barred landlord purchasers had he wished, but he chose not to. GO has actually caused the house price crisis firstly in London, then allowed it to spread across the country with easier borrowing for all, EXCEPT FTBs who are being restricted by the Mortgage Market Review. Please refer to http://www.theguardian.com/business/economics-blog/2015/oct/04/george-osbornes-housing-based-revival-stands-on-flawed-foundations. So after encouraging people to help him to get the economy moving he has now stabbed them in the back. How can we trust him to run the country?
- Mr Osborne gave the over 55’s access to their pension pots knowing that a great amount of money would be taken from funds to buy property. It’s estimated that the Treasury will take £1.2bn in tax on the withdrawals this year, but those that put their money into property will now be hit again. We’d suggest that GO didn’t just dream up the tax on landlord turnover overnight. He had planned this before the pension reforms so has duped people out of their pension funds to a level far worse than Gordon Brown was known for. It seems GO is another Chancellor that supports pension misery!
- George Osborne does not seem to communicate with Mark Carney (Governor of the Bank of England) as Mr Carney is actually worried about landlords selling up if the housing market collapses. GO appears to be trying to force this to happen.
- If indeed GO is trying to force prices down then it is unlikely to happen to any significant level as demand is so enormous. His policies will however mean there is less choice for renters. Is this a good time for the Chancellor to be attacking the rental market when our net immigration is so high and we have another 20,000 refugees heading our way? We already know of Town Councils asking landlords if they can take refugees but are being politely told ‘No’ due to these taxation changes. So where does GO expect them to live – B&B? At taxpayer’s expense??
- Paul Johnson is a Director of the Institute of Fiscal Studies and is therefore one of the most senior economists in the country. He has publicly stated the tax change is flawed and will not help FTBs, but the Chancellor is not listening. Paul Johnson is an economist, the Chancellor’s degree is in modern history. Who is right?
- Professor Philip Booth is another senior economist (Professor of Finance, Public Policy and Ethics at St. Mary’s University, Twickenham) and has said that GOs position on taxation of landlords is ‘an elementary undergraduate public finance error that should not be made in the Treasury’. Again, this man is a senior economist but GO’s degree is in modern history. Who is right?
- What has recently come to light is the source document for the attack on the private rented sector and quite frankly it is a shocking discovery. We would urge you to read about it at http://www.property118.com/landlord-tax-grab-source-document-exposed/83110/#comments. Is it any wonder that the sector is misunderstood when it takes account of a biased and flawed report like this??? Economists are ignored when writing fiscal policy. Graduates in geography are not.
- As there was no study done then there has been no allowance for the positive impact of landlords that help FTBs and the housing market in general. By this we are referring to:
- The many properties that have been long-term empty that landlords have purchased and brought back into use, relieving pressure on the other housing stock. The tax changes will prevent many landlords doing this in the future.
- The thousands of larger houses or old pubs and hotels that have been converted into HMOs housing multiple people. If landlords sell up and these convert back to homes with only one or two people living in them, the pressure on the FTB market will rise very significantly.
- Many builders rely upon landlords to buy ‘off-plan’. These deposits give the builders working capital to continue with their developments. The double whammy of tax on turnover and the extra 3% Stamp Duty will stop many landlords buying these houses and the builders will suffer. Houses won’t be built, the crisis will worsen, more people will be trying to buy the same houses. How is this going to help home ownership?
The media seldom report these positive aspects of landlords. It would be nice to think a Chancellor could see them, but if he can he is not interested. The reason is that he just wants to take the tax and doesn’t care for the future.
- If the Chancellor wanted to get ideas for how the rental market could really help FTBs he should have consulted with the landlord bodies, but there was no consultation phase whatsoever. Consultation is one of the ten guidelines (or tenets of taxation) that HMRC say should be utilised on tax policy. In fact GO has broken 6 of the 10 tenets with this tax on turnover. If Mr Osborne is breaking the Government’s own guidelines so blatantly then should he be making fiscal policies?
- Approaches were made by landlord bodies to HMRC and GO for relief on Capital Gains Tax for landlords that would sell their properties to FTBs but this was refused. If Government was that serious about helping people on to the housing ladder then they would have jumped at this offer. The conclusion we draw is that GO really couldn’t care less and the change is completely about tax take.
- Leading up to the election, the Prime Minister made the promise that he wouldn’t be increasing income tax but this tax on turnover is doing just that. It is possible for landlords to be taxed at a rate far in excess of what they earn. The Chancellor has turned Mr Cameron into a liar.
- Mr Osborne has said ‘’There are many people who have saved hard throughout their lives to buy a little property and rent it out. Those are people we absolutely want to support and help”. If that were true then why is the increase on stamp duty due to come in next April to apply to those people with less than 15 properties? Those with more than that are exempt the extra duty. Hardly something that supports the small-time landlord that the Chancellor says he wants to ‘support’. He is not being straight, how could we trust him to lead his party? How can we believe anything else that he says?
- When GO discussed the tax on turnover with HMRC, they would surely have known instantly that thousands and thousands of lower rate taxpayers would artificially be moved into higher rate and some would be moved into upper rate brackets, even though they won’t be earning more. HMRC say the change will affect only 1 in 5 landlords and it’s been indicated that they are the ‘wealthiest’ of us. This is completely untrue as the tax take is based on borrowing, not wealth. The wealthiest landlords that have no mortgages will not be affected so this is an enormous deception.
- A Freedom Of Information request was submitted to ascertain what calculations had been done to quantify the numbers of landlords that will move up tax bracket(s). The response was that no calculation had been made! Is this incompetence or is it indifference?
- When the Scrutiny Committee met on the Finance Bill, David Gauke (Secretary to the Treasury) was asked how many landlords would change tax bands but he avoided answering, saying nothing meaningful. This is despite the National Landlords Association stating that it will be in excess of 135,000.
- GO must be aware that rents will be forced up by limiting mortgage interest relief to 20% because a milder version of this was tried in Ireland, where it was limited to 75%. Rents there went up officially by 24% in a year (though unofficially it was closer to 40%). If the Chancellor didn’t know this he really should have done, he’s the Chancellor of the Exchequer!
- We believe that GO actually wants to force rents up because he’ll grab even more tax to clear the deficit. As he has falsely moved thousands and thousands of landlords into the higher tax bracket he will take 40% of any profit, plus 40% of the mortgage cost (before gifting back 20% as relief). Whilst he has cleverly sold the tax change to Generation Rent as something good for them, it is them that will pay the tax.
- Another reason that GO wants to force rents up is because there are big corporates that want to move into the rental market. Many of them have plans of building huge developments to house lots of renters. Higher rents make it more attractive for them to come but it’s not really a policy that encourages home ownership is it?
- The working family tax credit reform was shown to be a fiasco but illustrated the uncaring side of our Government. It was all about tax grabbing.
- Now that the Lords have shown they cared more for the lower paid than the Conservative Government, and took an unprecedented move to block the reform, GO is taking steps to prevent them acting again. It seems the Chancellor cannot accept that he was wrong and is acting like a spoilt child with a revenge attack? This is despite him saying that he has ‘listened’ and acted accordingly.
- GO is forcing some landlords to evict their low-paid tenants with this tax change. Sometimes it will be to replace them with people that can pay more rent, sometimes it will be just to sell up. What will happen to the families that have been evicted? We currently have a mammoth crisis of families with dependent children living in B&B accommodation at the tax-payers expense. The bill is set to soar now and families may be broken up, children uprooted from schools, etc. How callous can he be? All because the Chancellor is determined to take more tax to clear a deficit. How will the increase in B&B costs be better?
- An ‘inside source’ (Conservative MP) has said that the change in taxation is nothing to do with helping FTBs but is all about taxation.
- In a letter to a Town Councillor, the Financial Secretary to the Treasury (David Gauke) has admitted that the taxation change is to help bring down the deficit. He made no mention of helping FTBs. His standard response letter to others is all about wanting a ‘fairer tax system’. Why can’t Mr Gauke be honest with everyone instead of just his own Conservative Party members?
- In Parliamentary debate, Thangham Debonnaire (Labour MP for Bristol West) asked Mr Gauke if the tax changes to mortgage interest relief applied to properties held within a limited company. Mr Gauke replied that the changes brought the tax on individual landlords more in line with a company structure. This is simply untrue and bears no relation as an answer. Either Mr Gauke didn’t understand the question (it was simple enough), doesn’t understand the Government’s own policy, or is being deliberately misleading.
- We perceive potential dreadful long-term outcomes for the country if rents are forced up. Our population is ageing dramatically. The graph and text that can be seen at http://www.ons.gov.uk/ons/rel/pop-estimate/population-estimates-for-uk–england-and-wales–scotland-and-northern-ireland/mid-2014/sty-ageing-of-the-uk-population.html paints a bleak future. If rents are driven ever higher as GOs policies bite, then it is possible that many young foreign workers will return to their home countries. GO will no doubt be crowing how he has sorted the net immigration figures, taken pressure off the housing market and probably had a positive impact on the employment figures. However future Chancellors will have the problem of raising tax revenue on a significantly older generation. Senior Citizens don’t tend to earn much, living off inadequate pensions and nor do they spend much either, thus the opportunities for raising tax are low at a time when the country’s support services are needed more than ever, particularly the NHS to look after the older generation. Is GO thinking long term with his policies or just far enough for vote grabbing in the next election?
If you want to vote for Mr Osborne to lead the party when David Cameron steps down you can join the Conservative Party at https://www.conservatives.com/join. If on the other hand you’d like to vote for someone else it’s the same address.