How the OBR quickly ruined Hammond’s housing help lines | Deal



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T The excitement over the Chancellor's modest surprise – the abolition of the stamp duty for first-time buyers buying property worth up to £ 300,000 – lasted about five minutes. The Budget Accountability Office quickly pointed out that this so-called raffle will increase housing prices. The winners will be people who already own a house, not those who try to enter the market.

Philip Hammond could answer that first-time buyers, saving up to £ 5,000 in stamp taxes, will be able to save more money for a deposit. Yes, but the numbers will not impress outside of London.

The Office of Budgetary Responsibility is the independent forecaster of the government, which gives its verdict on growth prospects and public finances twice a year.

Forecasts are published to coincide with the two major pieces of the Chancellor's year – the autumn budget and the spring declaration – and take into account the impact of any tax and spending measures announced in those statements.

The OBR also uses its public finance forecasts to judge the Treasury's performance against the Chancellor's fiscal objectives, indicating whether or not it has more than 50% chance of achieving the objectives in the current policy.

It was established in 2010 by then Foreign Minister George Osborne with the objective of improving the credibility of the government's official growth forecasts. The forecasts were previously produced by the Treasury itself and often criticized for being unrealistic.

The OBR is headed by three members of the budget responsibility committee, including President Robert Chote, former director of the Institute of Fiscal Studies, with the support of the permanent OBR staff of 27 officials.

Anthony Codling, an badyst with the municipal firm Jefferies, estimates that the average buyer spends £ 165,000 on his first home. The elimination of stamp duty on a property of this type will have a value of £ 800, a small beer if you intend to obtain a deposit of 5%, which represents £ 8,250 in this example. "If the goal of the budget was to help increase the ownership of the home, the wrong lever was thrown away," was Codling's common-sense conclusion.

Still, it could be said, the Chancellor's housing package was worth £ 44bn, which sounds like serious money. More or less Only around £ 15bn represents new support and the various forms of financing, loans and guarantees will arrive in five years. Given the size of the housing problem, it can not be called a radical intervention.

What about the threat of defeating the big house builders that take over the land? That line made a dent in stock prices, but let's see what Oliver Letwin's opinion reveals.

Companies swear that they are not executing quasi-investment funds. They say they will work as soon as planning permits arrive in an "implementable" way, in other words, after the relevant conditions have been met, covering access by road or whatever. That final stage can take a year or more, they say, what sounds plausible.

The real problem may be more subtle. It's about the construction speed once it starts. The firms argue that it is not possible to build important sites, those in which a couple of thousand new homes are being built, whichever is faster. They say they fear flooding local markets. For real? The argument sounds selfish. The real concern may be that reducing sales prices would hurt profits.

Since many large builders are generating 25% fat margins, many would conclude that what is really needed is a big push to hurry. A slow pace adapts very well to the builders. Sales prices flutter more and the flow of dividends to shareholders, which has been spectacular in the last half decade, is not threatened.

But it's hard to see how Letwin's review of "use it or lose it" could solve this more complex problem. Pure landmarking is relatively simple to detect. It is more complicated to define, and then punish, the slow construction.

On the positive side, Hammond has understood the need to encourage small builders. There will be £ 630m to "take off" the delivery of 40,000 homes in small sites, that is, those that large firms ignore. This effort to identify a new supply of urban brownfield sites is essential. It is where the Chancellor's predecessor should have started, instead of stimulating demand with help to buy.

Stamp tax is a tax charged by the government when you buy a property for more than £ 125,000. The amount you pay depends on the cost of your new home.

The tax was first introduced in 1694 as a way to raise money for a war against France, and was eventually introduced in a wide range of purchases, including newspapers and perfumes.

In 2003, then-Chancellor Gordon Brown introduced the stamp duty tax (SDLT) to replace the old duty and homebuyers were legally responsible for declaring their purchase and paying the tax.

In recent years, successive rectors have used the tax as a lever to alter the course of the housing market. In 2008 and 2010, Alistair Darling launched holidays of stamps designed to encourage sales; in 2012, George Osborne introduced higher rates for properties over £ 2 million bought by foreign companies; and in 2016 added a surcharge on second homes in an attempt to calm the market of buying to rent.

The biggest change occurred in December 2014 when Osborne reviewed the way the stamp duty was calculated. Before that, the total value of a purchase was taxed at the same rate, which caused property prices to be grouped below each threshold. Since then, it has been charged as income tax: you pay a higher rate only for the part of your purchase that falls on each threshold. Anyone who buys a property that costs up to £ 937,000 pays less than under the previous rules.


Photography: Matt Cardy / Getty Images Europe

Guarantees are also accepted to support new rental properties. That part of the market is often overlooked in the obsession with home ownership. Hammond could have gone further: a wall of money from pension funds wants to invest in the rental sector.

However, there is an additional threat to the Chancellor's ambition to build 300,000 additional homes per year by the mid-2020s: labor shortages, a problem that Brexit can intensify. An extra £ 34m "to develop building skills across the country" will hardly move the dial. Believe in the goal of 300,000 only when it has been fulfilled.

VAT fraud needs joint liability laws

The best announcement in the budget was the vote to crack down on online VAT fraud, that is, the practice of companies, often Chinese. illegally selling duty-free products to consumers in the United Kingdom on sites such as Amazon and eBay. The Chancellor's proposal will make the online markets jointly and severally liable for VAT. Good play.

Past investigations by The Guardian have shown how abundant fraud is. We find sellers who trade without showing VAT numbers. Others showed invented numbers or cloned numbers of trusted legitimate businesses.

Relying on Amazon and eBay to warn sellers of their obligations, or to eliminate criminals, has achieved little. Hammond put the cost to the tax fraud contributor at £ 1.2 billion per year. If such a sum was leaked through traditional retailers, there would be outrage.

Online giants generally complain that they should not be responsible for VAT compliance of independent sellers. That is fake nonsense. They have helped create the problem: joint responsibility can make them solve it.

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