REMEMBER the righteous folk telling us that the problem with banking was all those nasty, profit making global corporations, with their horrid shareholders and especially those awful hedge funds? And that the answer was to encourage small, regional co-operatives, with their senior management drawn from a broader cross-section of the community to boost corporate governance? And to ban costly, value-destroying takeovers, and allocate the cash instead on bigger capital reserves and better IT systems? And to crack down on badly-behaved bankers whose hedonism clouded their judgement and might even affect bondholders’ investments?
And how – worst of all – the government and much of the establishment (including the FSA) fell for all of this pathetic nonsense, failed to realise that all the points above were equally applicable to Britain’s self-styled ethical bank, and even sought to subsidise the creation of new co-ops through the tax system, and to encourage the Co-op to bid for Lloyds bank branches it couldn’t afford? The speed at which the Co-op has gone from being the poster-boy for the anti-City, anti-corporate brigade to proof that amateurishness is a no-no in banking has been truly astonishing.
Bizarrely the Co-op, now partly owned by hedge funds, is still making donations to the Labour party – it should stop them immediately; the fact that it is launching a root and branch review of the way it operates is welcome, if belated. Arrogance, poor controls, incompetence, politicisation, hubris and especially self-righteousness and moral superiority – guess what? They never work.
PROPERTY TAX MYTHS
THERE are facts – and then there are myths. The proposal to slap capital gains tax on the sale of properties owned by overseas investors falls into both these camps. It is true that some overseas-based investors – for example, Gulf state residents or those who live in low-tax countries – don’t currently pay CGT on any gains they make from selling a home in the UK. Tax is payable in their own country, their country doesn’t currently believe that gains made on transactions ought to be taxable, and the UK currently respects that. But contrary to the way this story keeps being presented, however, plenty of other overseas investors already pay CGT on UK homes, and often at high rates: a French resident who sells a flat in Chelsea would be liable for CGT in France, just as a UK-resident Brit who sells a home in Dubai would pay tax on any gains and would have to declare the gains to HMRC. There will therefore be little impact on European purchasers of UK property.
What the government is proposing to do is to impose the tax on the residents of countries that don’t currently levy CGT, or who levy it a lower rate, payable to the UK. George Osborne no longer believes that countries can decide their own tax system, at least when it comes to some UK-based assets. Much less controversially, it will also hit some of those laundering money or who don’t declare their gains to any jurisdiction.
Yet the real problem is a lack of suitable new homes for London’s growing population, not the fact that rich moguls are snapping up over-priced super-homes in prime central London (in fact, they bring jobs and capital with them, and ought to be welcome).
The answer is to triple or quadruple house building in London, and ensure that at least 60,000 new homes are made available every year, to tackle our housing crisis and make sure that here is enough property for everybody. The problem is the artificial scarcity created by the planning system: when the pie isn’t allowed to grow, people fight over the spoils. If instead we sought to defuse the tensions by dramatically growing the housing pie to meet demand, the politics of envy that increasingly overshadows discussions about property would soon vanish.