Woolly Hutton and his knowledge of the tax system

Britain\’s tax take from property is, in the round, absurdly low.

Sigh.

Low compared to what you fucking dingbat?

Last time I looked domestic and business rates together were £50 billion and rising. Over 10% of the total tax take.

Oooooh, look!

The UK raises near 12% of total revenue from property taxation. That\’s the highest in the OECD and over twice the OECD average.

Maybe that\’s not enough, maybe the system should be different. But if you\’re to pontificate on matters economic you should at least have a rough notion of what you\’re pontificating upon.

What he, and other banks, need is the capacity to bundle up new loans into new aggregated investment vehicles that the Treasury can indemnify, and which can then be bought by investors or by the Bank of England\’s quantitative easing programme.

Not satisfied with proposing Gordon Mac three weeks before Freddie Mac and Fannie Mae when bust, now he\’s suggesting that we should have a Willy Mac for business loans.

Dear Lord, does reality never prick Woolly\’s little bubble? Haven\’t we just seen what happens when we do this? The largest bankruptcies ever?

10 comments on “Woolly Hutton and his knowledge of the tax system

  1. I suspect Will Hutton doesn’t regard Council Tax as a proper property tax. It’s a charge to pay for local services levied on some random perception of what your house was worth in 1991. And based on how needy/efficient your local council happens to be.

    Not quite the same as a 1% annual charge on your actual house value. As happens in USA and Switzerland etc.

  2. We don’t pay for services, we pay to have the services provided whether we use them or not. The amount we pay is based on property value.

    That’s pretty close to a property tax in my book.

  3. Oor Wully is certainly not the first person to propose securitising SME loans – in fact he is (once again) simply jumping on a fast-moving bandwagon. If I remember rightly it was mentioned in the Chancellor’s Autumn statement, and I rather think one Adam Posen of the MPC was the first person in the UK to suggest it. And the Department of Business, Innovation and Skills has an “independent taskforce on non-bank lending” which has just produced (16 March) a report recommending, among other things, “opening up access to capital markets financing for smaller companies through the creation of a body to bundle and securitise SME loans”. I’d call this a GSE, myself, though maybe not a Willy Mac……Report summary is here and the whole report can be downloaded:

    http://nds.coi.gov.uk/content/Detail.aspx?ReleaseID=423740&NewsAreaID=2

  4. Mind you, he could say that merely by being a disciple of Mark Wadsworth.

    In, say, a Disney film situation, of course…

  5. Frances Coppola – “Oor Wully is certainly not the first person to propose securitising SME loans – in fact he is (once again) simply jumping on a fast-moving bandwagon.”

    I doubt Will has ever seen a band wagon he has been able to restrain himself from jumping on. He, along with Shirley Williams, defines the stupidity of conventional wisdom as far as I am concerned.

    However the question is probably not about securitisation but over the State’s involvement. If people wanted to bundle up their loans and sell them to moronic Germans, I can’t think of anyone who wouldn’t be delighted. If, on the other hand, Gideon wanted to give them the backing of the Treasury, well, I wouldn’t be surprised. We need a Conservative government and it is a pity we don’t have one.

  6. SMFS

    No, securitisation isn’t the issue. It’s the assumption that the bundling and securitisation will be done by a State institution, with the intention that the Bank of England will then buy up the SME loan securities through open market operations – which provide funding to banks, who make the SME loans. Frankly the whole scheme makes my hair stand on end. There is almost no private sector involvement and all the risk is borne by the State. It is a completely circular movement of State funds.

    Then I looked at the other proposals in the BIS taskforce report. Mezzanine finance and peer-to-peer lending……how risky do they want SME lending to be? And in these risk-averse times, how do they think they will “increase the UK retail investor appetite for corporate bonds”, presumably including mezzanine tranches and bundled SME loans, except by providing a Treasury guarantee?

    The NDS summary could be better entitled “How to throw lots of taxpayer money down the drain”.

  7. Lies.

    Business Rates is pretty close to full-on LVT, that’s £25 billion a year (from 0.3 million acres), great stuff, well done UK!

    If you strip out the poll tax element of council tax (total £25 billion a year), the land value tax element is tiny, maybe £10 billion a year (from 2.1 million acres).

    As you first commenter points out, residential land taxes in other countries are much higher. And it is also true that in other countries (Germany) they are much lower or non-existent.

  8. Mark,

    Hmm. Mirrlees recommends a Land Value Tax. If business rates are as close to LVT as you suggest, why does Mirrlees recommend abolishing them?

  9. And answering my own question on Mark’s behalf:

    “First, we are proposing to abolish the current system of business rates and replace it with a system of land value taxation, thereby replacing one of the more distortionary taxes in the current system with a neutral and efficient tax. Business rates are not a good tax – they discriminate between different types of business and disincentivize development of business property”.

    Mirrlees report, chapter 20, p.19.

    http://www.ifs.org.uk/mirrleesreview/pamphlet.pdf

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