If it was up 2 me

Tag: Politics

  • Stamp duty on Housing is restricting the Housing Market in the UK

    I consider the biggest hinderance to the housing market is the middle band of stamp duty between £250 and £925k.

    Using myself as an example, I am lucky enough to have a nice 4 Bed house in a nice area in Cheshire. It is a good Neighbourhood with good schools, close motorways, train stations and airports. Ideal when you have a young family.

    The approx. value of this house is £550 to £600k

    Now, I have considered moving to a different part of the country, perhaps downsizing in terms of size but have a bigger garden, larger garage etc

    However, if I looked at a £600k house, it would cost me £20,000

    And if I chose to move further south closer to my grown-up family, where house prices are more expensive, the stamp duty increases significantly.  

    So, I and many of my generation,  who moved to an area of good schools 20 years ago, have now become a blocker to younger families who want to live in the area and are unable to do so as there are not enough houses on the market.

    The consequence are: –

    • that there are less children in the local schools residing in the local village. (I say village but with 7500 residents).  More children must travel. The consequence of which are children do not walking to school (health benefits) and more traffic.
    • there is a shortage of houses in areas they are needed
    • there is less tax revenue as less people moving.
    • less stimulus in the housing market and associated trades
    • the tax man gets no money out of me as I do not move.

    It can be seen from the statistics that the revenue on Stamp Duty has fallen from £11.7Bn in 2022/23 to £8.57Bn in 2023/24 and the number of house moves have fallen from 1.06 million to 0.872million over the same period. So we can see, the trend is down causing more of a shortage in the housing market.

    So. what would I do if it was up 2 me, I have 2 ideas.

    Option 1 – Changes to Stamp Duty Rates

    Any House between £150k and £1million would be subject to a 2.0 % levy. If the market stayed the same as 2023/44, this would reduce the tax take by 2.5Bn.

    However, I consider this will stimulate the market and increase the number of transactions. If this only increase to 2021 / 22 levels, there will be an increase the  number of transactions by 39% in the  under £1m price bracket.(yes that is the amount it has fallen in 2 years , number of transactions have fallen to 845,000 from 1,175,000)

    So, on the basis of this will stimulate the housing market in third and fourth time buyers sector, and the levels only reach 2021/22 levels, the tax take would be £3.552Bn, a shortfall of £1.167 Bn.

    In addition to the above, house prices have increased by 6% over the last 2 years  so the revenue will increase by £0.2Bn for houses under £1m and by 0.23Bn for those over £1m

    This gives  a total receipt of £4.0 Bn

    So, in theory, I am costing the country £ 0.7Bn. How am I going to pay for this.

    The government has promised 1.5 million new homes over 5 years which equates to 300,000 per year which would cover the 0.7Bn shortfall.

    So the above, in my opinion would be revenue neutral as it would stimulate the housing market sufficiently to offset the lowering of taxes.

    Option 2 – Pay on the difference

    This is the option I would prefer, and I think it is the fairest.

    The basis is that you only pay a %age on the difference in house value, so that you only  pay on the increase.

    If you sell your house for £400k and buy for £550k, you pay on the difference of £150k. I do not have any data on the difference, so I have just made an assessment.

    So based upon 1.2m transactions, that would generate at 5%, £9.3 Billion, more that recovered in 2023/24.

    The additional benefits of stimulating the housing market will be felt across all the building trades, from plumbing, extensions, patios, conservatories DIY etc as more and more people will want to improve their new homes. This will create more jobs and greater tax revenue.

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  • Reforming Winter Fuel Allowance: A Fair Approach for All

    Reforming Winter Fuel Allowance: A Fair Approach for All

    Following the announcement this week, it looks like the Labour government is going to u turn on the Winter Fuel Allowance. My comments are therefore far more limited than they would been.

    It is not really a surprise given what a badly implemented policy it was and the way it affected the less well off pensioner. It beggars belief how the government and Rachel Reeves could have thought this was a good idea in the first place.

    I suppose the reason was, in their election promises, they said they would not put up income tax and national insurance, but said very little on many other issues. This gave them the opportunity to hit people in their pockets in other ways whilst keeping the facade of not going back on election promises. I wonder how that is working out for them! (no increase in national insurance, smash the gangs!)

    But at least now, they are going to backtrack.

    The question is to what extent they will roll back this policy? I expect a very limited increase will be announced in the autumn but it will not revert to previous levels of benefit. I also expect it to be complicated to manage causing further waste in Whitehall. We will have to see!

    So, if it was up to me, what would i do?

    Firstly, I would get on and announce the change, not wait until the autumn. Why wait? If the people in charge can’t come up with a plan and get on with implementation, they should not be in power.

    I worked in Civil Engineering for 35 years and knew that deferring a decision was the worst thing we could do. We had to quickly consider the situation and solutions, make a decision and get on with it and live with the consequences.

    Secondly, one of the injustices of this allowance , whilst it is to help the vulnerable with their winter fuel bill, it also helps the wealthy pensioners.

    So if we were to limit the payments, it would cause a significant amount of administration to means test the benefit. We want to make things simple.

    So what i would do, is make it a taxable benefit, so those who pay no tax , get 100% of the benefit. Those on basic taxation they get 80% of the allowance and those on the higher rates will only get 60% of 55% of the allowance.

    Doing this means all those getting the state pension would get the allowance included in their OAP payments and HMRC would sort the rest via tax code / tax returns. You do not need extra staff to administer the means testing of individuals.

    The above will cost an additional £1.3 billion when compared with 2024/25 (£311m) but save £0.5 billion when compared with 2023/24

    And how would I pay for this? Well, as stated in my earlier page on the triple lock, this payment would come out of the massive saving by scrapping the triple lock and just increasing pensions by inflation.

  • Why the UK Should Scrap the Pension Triple Lock.

    THE TRIPLE LOCK

    As many people are aware, the UK state pension increases by either, CPI, earnings or 2.5% minimum. This is great for the pensioner, and I will benefit from this when I get to 67. However, I am not sure that people understand how unfair it is on the younger, working age people who are going to get increasing levels of taxation imposed on them to cover the costs.

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    Since the triple lock was introduced (2011), the state pension has increased by 80% whilst inflation has only increase by 55%.  Average earnings has increased by 58.8% just keeping ahead of inflation.

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    So, all those below the state retirement age have been paying a higher and higher proportion of their wages / taxes to cover someone else’s state pension.

    In fact, if the triple lock continues, the state pension would continue to increase at a higher rate than peoples wages until such time, it becomes impossible to continue due to the size of the black hole in the government’s finances. Things have to change.

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    To understand the scale of the problem, in 2025-26, the UK government is projected to spend approximately £145.6 billion  on the state pension which equates to £5100 per household per year.

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    If the increase had been based upon inflation (CPI) alone, the government spending on the state pension would have been about £20 billion less per year.

    Over the period of time that the triple lock has been place, I estimate the triple lock has cost the country £120 billion extra (2011 to 2025) than it would have cost, had it been calculated by inflation alone.

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    The problem is only getting bigger.

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    The projected number of those of pensionable age in the UK will increase from the current 13.4 million to 15.6 million in 10 years, which in today’s terms will increase the bill by £26.34 billion (2.2 million x £11,973 per year)

    If the level of pension is increase over the next 10 years at the same level of the last 10 years, that will be an increase the cost of the state pension by a further £74 billion resulting in a total annual cost in 2035 of £245 billion.

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    The country cannot afford this level of triple lock increase that, on average, is always going to be more than wages.

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    Don’t get me wrong, I do not want the old and vulnerable to be without food and heat. (Winter fuel allowance to be covered on separate Blog) but many pensioners have other private / company pensions, meaning they are not living on state pension alone.

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    The average personal pension size of someone in their 60’S is £190k which if taking an annuity at 67 would produce and income of over £15k (single life level no guarantee) That is not an insignificant amount, yet they are being increasingly supported by those who are working.

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    It is reported that currently, 70% of pensioners receive income from private pensions.  This percentage is increasing due to auto-enrollment in pension schemes which means that, only 7% of those under 35 will relying on state pension alone. This gives ample opportunity   and time (42 years) to reduce this percentage.

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    The other problem with the triple lock happened for the 2 years 2023/24 and 2034/25.

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    In 2023/24, the pension was adjusted by 10.1% as it was higher than the wage increase of 5.54%. However, the year later, wage rises rose by 8.5%, basically because wages were increased due to the effects of inflation the previous year. —

    So the pension had the effect of the inflation of 2023/24 in both years. None of the political parties wanted to rock the boat as an election was coming up  and did not want to address the situation.

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    My solution

    • Scrap the triple lock and just link State Pension Increases to Inflation. This should keep the status quo for pensioners so that they are no better or worse off due to inflation.
      • This would save £34 billion per year (in the year 2034/35) if the increase was based upon what happened over the last 10 years with a total saving over 10 years of £190 billion.
      • I hear in my head all those critics that say, well the last 10 years have been exceptional, due to covid and the effects of the Ukraine war on fuel costs, which I am inclined to agree with.
      • I estimate that if we exclude the extreme triple lock adjustment years, the saving would still be £18 billion or £79 billion over 10 years. The pensioners will still get increase covering inflation / cost of living so that they are no worse or better off. If they wish to be better off, they need to do that as an individual by having a job or making provision before retirement, as 70% of people already do and 93% of under 35’s do.
    • Do not allow opt out of Private Pension.
    • Self employed required to make pension provision and this must be detailed on annual tax return.
    • The pensions credit system remains as is, allowing a top up to pensions for those who fall short. Overtime as more people retire with some form of Personal Pension, the cost of this will fall.
    • Use some of this money to reinstate the Winter Fuel Payment to those whose income is below a certain level. Those high earning pensioners do not need it and should be excluded (A separate Blog on this subject will be done in due course) This would cost a max of £1,889 billion of the saving (£2.2 billion(2024 cost) minus 0.311 billion(2025 cost)

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    Conclusion

    • All the Major parties should get together and agree on the removal of the Triple lock. However, I fear none of them have the bottle and there will always be one who will pledge to keep it on the hope it will get them into power.
    • However, I think if this is all explained in detail why we cannot continue, the vast majority of the pensioners will understand, after all, those with private pensions have all benefited from the tax breaks that have helped build up their pension pots.

  • Finding Solutions to Political Issues in Britain

    Finding Solutions to Political Issues in Britain

    Having retired (early), I have more time on my hands to get annoyed at the news and politicians. (becoming a grumpy old man).

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    I hear comments on the radio from people that just want to criticise with very few coming up with practical solutions that could work.

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    As for the politicians, they just say the opposite of the others and I think their conduct on many occasions is poor and rude. These politicians should be held to the highest of standards but all too often, they fall short.

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    I have been waiting to see what Reform would have to say, given their increase in popularity. My concern is that they are slipping into the same old roll of telling the public what they want to here, without a credible financial plan on how this can be achieved. This week there was talk of increasing the personal tax allowance to £20k. Whilst we would all welcome it, where will the money come from and by when. We cannot complain about public services if we are not prepared to pay our taxes.

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    Labour, with their large majority have made several major blunders including Winter fuel allowance, Employees NI and Inheritance tax on pensions and farms (I am not sure many people appreciate the consequences of this). Yes,they needed to control the spend and try and balance the budget, but I thinks they have gone about it the wrong way. I do not think the public will forgive them.

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    As for the Conservatives, not sure what to say, they are in a state of flux, without identity and clear direction.

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    The LibDems, they should sit in the centre, but they seem too bland.

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    What we need is a party that will sit in the centre and take policies from both sides as it sees fit, but all the parties are too stuck in their ways. I wonder if any of the Parties have the capability to adapt over the coming years to put the “Great” back in Britain.

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    So, my Blog is to take some of the problems issues we have as a country and come up with workable solutions, I intend to explain my logic and as best i can have the financial basis for my proposals.

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    The subjects that annoy me currently are

    • Winter Fuel Allowance
    • Increase in Employers National Insurance
    • Inheritance tax on Pension Pots.
    • Student loans.
    • Changes to non-dom status and the exodus of the wealthy
    • Stamp Duty on Housing
    • Paying For illegal Immigrants (Not genuine asylum seekers)
    • Politicians making statement that fall flat when confronted with reality “Smash the Gangs” etc
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    So, I think I will comment on the above over the coming months and put forward my potential solutions that I would implement if it was up to me. (Ifitwasup2me).

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    I would welcome constructive feedback to my comments and would alter my views based upon reasoned arguments.