Bill Gleeson: Tax breaks? Just build a lot more new homes

Oct 3 2007 by Bill Gleeson, Liverpool Daily Post

WHAT does the tax cutting speech at this week’s Conservative Party conference by George Osborne have in common with record levels of emigration and a recent council decision to turndown an application to expand the number of places at a Liverpool primary school?

The Tories announced two big tax cuts that they would introduce should they be elected to government. One of the measures would abolish stamp duty on the purchase of homes worth less than £250,000. Mr Osborne said this would help first-time buyers, many of whom are finding it difficult, if not impossible, to get a foothold on the bottom rung of the housing ladder.

The second measure would raise the threshold for paying Inheritance Tax from £300,000 to £1m. Pressure has mounted for this change because rising property values mean that more people than previously anticipated are inheriting estates that exceed the current threshold.

While the changes to IHT will offer relief to those who stand to receive a massive windfall following the death of a parent, the stamp duty measure is a nonsense. It would save the first-time buyer about £2,000 when buying an average priced home worth around £200,000. The tax saving is small compared to the mortgage that the would-be homeowner has to raise to buy an average property. Assuming a 5% deposit, the mortgage would be £190,000. Using traditional lending criteria, our first-time buyer would need a household income of £65,000. Firemen, nurses, teachers, social workers, electricians, local government employees, shop staff, probation officers and waiters are among the very long list of those who couldn’t manage it. Mr Osborne’s stamp duty concession isn’t going to change their lives. We hear a lot from politicians about the harm caused by immigration, yet the fact is emigration from the UK is at record levels, offsetting a high proportion of the influx. Indigenous Britons are moving overseas for a better climate and, I would hazard a guess, to escape our absurdly high property prices.

You could sell a two- bedroom flat in Clapham or three- bedroom semi in Mossley Hill and use the proceeds to acquire a five-bedroom detached house with an acre of garden and a swimming pool in Southern Australia.

Anybody who works in the above-mentioned trades and professions would easily find a job there.

And then there is the school. The real reason Childwall C of E’s primary school’s expansion plans were turned down had nothing to do with the merits of the school. Instead, my guess is Liverpool City Council’s decision last week had more to do with the fact that the city’s birthrate is falling alarmingly fast. As a result, there are not enough children enrolling in schools to sustain the present over-supply of school places. Due to this trend, it is foreseeable that some schools will close in the near future.

And why is the birthrate falling? Yes, you guessed it, house prices. Young people are unable to afford the homes they need to house a family. As a result, they are postponing or even completely cancelling the ordinary life plans many people readily achieved just a few years ago.

When the current primary school and pre- school generation reaches the age to enter the employment market, there won’t be enough of them. That will leave Britain in one very big demographic and economic mess.

The solution is simple enough. Forget tax breaks and build a lot more new homes. That way, house prices will fall, would-be emigrants will think twice before leaving, and the birthrate will start rising again.