APPRENTICESHIP LEVY LAUNCHED INTO CHAOS

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26 OPINION THURSDAY 6 APRIL 2017 CITYAM.COM FORUM EDITED BY TOM WELSH The disastrous new tax on buy to let landlords is really a tax on tenants THERESA May stood on the steps of Number 10 Downing Street last summer and pledged to help those “just about managing” families and build “a country that works for everyone”. After a divisive referendum campaign and a period of political turmoil, it was a reassuring message. Tackling Britain’s housing crisis was quickly identified as one of the government’s top priorities. We had a Housing White Paper in February aimed at “fixing our broken housing market”. There were some welcome measures to stimulate housebuilding, and a pledge for new Build to Rent initiatives. The rhetoric has been strong, but it’s action we should be focused on. Government reforms that come into force today will disqualify mortgage interest from being classed as an expense for landlords with mortgages owned in their personal names. Of course, mortgage interest tax relief is not the sexiest of subjects, and most people will be unaware of the changes – and perhaps won’t even care. But if you’re renting in London, if you’re investing in property as part of your retirement plans, or if you care about Britain’s housing crisis – you should pay attention. Section 24 of the 2015 Finance Act removes landlords’ ability to deduct their finance cost for residential property from taxable income, replacing this relief with a tax “deduction” equivalent to the basic rate of income tax. In practice this WOMEN are pushing through the glass ceiling. A higher percentage of women are on the boards of FTSE 350 companies. Women are setting up their own businesses. And women are continuing to thrive in industries that have for too long been predominantly male domains – construction, technology, finance. But there is a long way to go to smash that ceiling completely. Even though the gender pay gap is at its narrowest level on record, it still stands at 18.1 per cent. That’s 18.1 per cent too high. We need to push further to eliminate it, not only because it’s fair, but because it’s good for our economy. I’m saying this as a former businesswoman, as well as a government minister. According to McKinsey, eliminating work-related gender gaps could add £150bn to our country’s annual GDP in 2025. As we leave the EU, we need to build a modern and forward-looking Britain where success is defined by work and talent, not by background or gender. Far too many highly skilled workers are being forgotten or overlooked. This is an opportunity the UK – and British businesses – cannot means many landlords are being taxed on a significant proportion of their turnover, rather than profit. Furthermore, it is estimated that vast numbers of accidental, amateur and professional landlords will be moved into a higher rate tax bracket. Unincorporated, smaller landlords who pay higher rate tax will face an effective tax rate of 76 per cent for properties that are 50 per cent funded with a mortgage. The government defends the policy by saying it will make the tax system fairer and will ensure landlords with higher incomes no longer receive the most generous tax treatment. But 80 per cent of landlords own only one property and are “amateurs”, perhaps relying on their property for an income in retirement. There is nothing fair about introducing retroactive tax changes that penalise small landlords. And just like the ill-considered changes to National Insurance contributions in the Spring Budget, the government has failed to fully consider the consequences of this policy. The changes will affect more than just small landlords. Survey data of landlords by Orchard & Shipman suggests nine out of 10 landlords will increase rents in response to this policy. This is bad news for tenants. In February, property experts at the Royal Institution of Chartered Surveyors (RICS) predicted that rents are set to rise by 25 per cent over the next five years. RICS said the increase in rents would be triggered by landlords decreasing their portfolios, leaving tenants to compete over a smaller afford to miss. If these issues are going to be tackled, they need to be brought into the light. That is why from today the government is requiring large employers with 250 or more staff to publish their gender pay gap and bonus pay gap for the first time. This follows the government’s commitment to introduce the requirements at the last election and is a key part of our work to eliminate the gender pay gap. These regulations will help drive culture change in our workplaces and create a diverse workforce that makes the most of everyone’s talents. The gender pay gap exists for many reasons, which are often complex and overlapping. Women are less likely to progress to senior roles and within higher paid sectors, such as finance or STEM, which tend to be male dominated. There is a lack of high-skilled jobs available to women who need to work part time. And women who take time out of work, most often to raise a family, earn less money when they return, receiving around 2 per cent less for every year they spend out of paid work. That is why it’s so important that employers have the data to understand why the gender pay gap exists in their organisation. The figures will be based on hourly wages, helping to account Steve Bolton 80 per cent of landlords own only one property, perhaps relying on their property for an income in retirement pool of properties. Pushing up rents in the private rented sector penalises some of the most vulnerable people in society – young people and low earners, those who are just about managing. Rent already accounts for almost 50 per cent of most private tenants’ costs, and we shouldn’t forget that 30 per cent of private tenants have a weekly household income under £300. The government is also ignoring the lessons of history. In Ireland, similar proposals were introduced in 1998 that resulted in a 50 per cent increase in average rents. In the three years that the policy was in operation, aver- for those who work part time. It will also show the distribution of male and female earnings across an organisation, helping to show where women are struggling to progress to the very top. But reporting is just the beginning. With this transparency, employers will be able to take action to close the gaps, and ultimately improve their bottom line. I love being a mother and a career woman but I wouldn’t have been able to carry on working while raising my two boys had I not had help from my family. Too many women feel unable to progress in their careers, especially after starting a family, and employers are losing talented individuals and corporate memory from their workplace. Government is playing its part, introducing shared parental leave and new rights to request flexible working, as age monthly rents in Ireland rose from €600 in 1998 to €900 in 2001. Attacking the private rented sector won’t solve the UK’s housing crisis, it will make it worse. If the government wants to fix what it calls the broken housing market, it needs to get on and build more homes. Indeed, under the coalition, housebuilding fell to the lowest level of any peacetime government since the 1920s. Driving smaller landlords out of the market won’t help limit house price increases, it won’t help the thousands of young people in private rented accommodation in the capital saving for a deposit for their first home, and it won’t help vulnerable tenants worrying if they can afford their rent this month. This is a tenant tax in everything but name. That is why I, together with concerned members of the private rented sector across the country, am leading the Axe the Tenant Tax Campaign. The campaign is fighting back against the disastrous changes to mortgage taxation announced by the previous chancellor and enforced by the current one. We will continue to warn people about the harmful effects of the tax changes, mobilise supporters and put pressure on the government to act. The government is hitting the private rented sector, and it’s those “just about managing” families that will pay the price. £ Steve Bolton is founder and executive chairman of Platinum Property Partners and co-founder of the Axe the Tenant Tax Campaign. Gender pay gap reporting will ensure we make the most of everyone’s talents Caroline Dinenage well as offering 30 hours of free childcare to working parents from September. In the Budget we also announced £5m which will be invested in developing schemes to help people return to work after a career break. But we need individual employers to look at what they can do in their own organisations. This could include introducing more flexible working arrangements, setting up their own returner schemes, or using new recruitment methods – particularly in finance and STEM industries. Removing these barriers will mean that every employee will be able to fulfil their potential. That is good for morale, which is good for productivity and ultimately good for business. Reporting doesn’t only support women’s economic empowerment, it’s a smart business move. It’s an opportunity to fix a problem that is holding business back, significantly increase our GDP, and open doors previously closed to female employees. There has been no better time to be bold and take action for change and I am confident that British businesses will rise to the challenge. £ Caroline Dinenage MP is parliamentary under secretary of state for women, equalities and early years. DEBATE Q: With the latest figures showing Scotland’s GDP shrinking, is the economic case for independence all but dead? Daniel Mahoney YES In the short to medium term, the case for independence is absolutely all but dead. Scotland’s economic growth was over four times slower than the UK’s last year, and Scottish output actually fell in the fourth quarter of 2016. Figures published by the Scottish government last year also highlight just how precarious Scotland’s fiscal position is. Scotland’s budget deficit is now higher as a percentage of GDP than any other European Union member state. An independent Scotland would currently face a toxic combination of fiscal instability, higher taxes and lower government spending. And, of course, if an independent Scotland were to leave the UK’s single market in order to remain part of the EU single market, its long-term fiscal position would face further challenges. Scotland trades over four times more with the rest of the UK compared to other EU countries, making the short and long-term economic case for independence highly questionable. £ Daniel Mahoney is deputy director and head of economic research at the Centre for Policy Studies. Mark Littlewood NO Spot price statistics about the Scottish economy are a rounding error in weighing up the benefits of Scottish independence. It is certainly not the case that Scotland needs to be richer to make departure from the UK viable. An independent Scotland would be around about the fiftieth largest economy on the planet and somewhere in the top 30 on an income per capita basis. That makes Scotland larger than Hungary or Bulgaria and richer than South Korea or Spain. Of course, this doesn’t mean an independent Scotland would face no challenges. But it may well be better for them to tackle such challenges in their own fashion, rather than to be largely subject to Westminster rule and diktat. As with Brexit, a vote for ending current constitutional arrangements is no guarantee of increased prosperity and growth, but it does provide an opportunity to pursue these goals with much greater freedom and flexibility. The economic case for an independent Scotland remains credible and strong. £ Mark Littlewood is director-general of the Institute of Economic Affairs.
CITYAM.COM THURSDAY 6 APRIL 2017 OPINION 27 WE WANT TO HEAR YOUR VIEWS › E:theforum@cityam.com COMMENT AT:cityam.com/forum LETTERS TO THE EDITOR Fail to prepare, prepare to fail [Re: Britain should prepare for Article 50 talks to fail, Tuesday] It is totally logical that everyone in the UK should be working from the base assumption that the talks will fail. There are simply too many states and EU institutions who need to approve any deal on the EU side for it to be likely that any worthwhile deal will be forthcoming. The temptation for small states and small minds in the EU Parliament to hold the whole process up for individual gain or simply to grandstand will be too great. Waiting as the clock ticks down on the two year Article 50 deadline for a Will o’ the Wisp trade deal to turn up is a recipe for confusion. Better that all individuals, businesses and even the EU institutions assume the UK will be trading on WTO terms without paying EU budget contributions (the equivalent of a 7 per cent tariff on UK exports) and that neither EU law nor freedom of movement will apply in the UK after March 2019. Name withheld Too late to walk [Re: Forget a €60bn Brexit bill: The EU should pay the UK to leave, yesterday] Brian Monteith writes that we should be prepared to walk away from talks. But the government has already indicated that it is not willing to do so – more, that such a result would be a failure. As such, the EU knows we will have to accept whatever is thrown our way, regardless of the rights and wrongs. And that includes paying a bill for leaving the EU, even if it is not quite as high as the €50/€60bn figure cited. J Miller ABATTLE is raging in the war of ideas, and the future prosperity of the world will determine who is right. The battle is over optimistic or pessimistic views as to the future impact of technological change. It’s a battle with problems on all sides. The economists tend not to understand the technology, and the technologists fail to understand the economics. The result is that there are lots of technologies being talked about, but nobody is pulling them together into a coherent view of the future. When it comes to the scale of future technological change, there is enormous uncertainty, with a very broad spectrum of views, from pessimists to utopians. On the pessimistic end of the spectrum are those who see the productivity boost from the digital economy as largely “been and gone”, a phenomenon of the late 90s and early 00s, which has disappeared post financial crisis. For many, this is a case of secular stagnation, enough said. BEST OF TWITTER I am 100 per cent sure that – one day – there will be a young leader who will try again to lead Britain back into the European family. #EPlenary @GuyVerhofstadt The UK is not leaving the family, Guy Verhofstadt. It is moving out of the house. Big difference. @DrBrexit Sole “Liberal” “Democrat” MEP Catherine Bearder showing precisely why she’s neither liberal nor democratic by pledging to reverse Brexit. @A_Liberty_Rebel It will take effort for Trump to handle Syria and North Korea more ineffectively than Obama. But I think he’s up for it. @ianbremmer PMI shows welcome pick-up in UK services activity in March as up to three month high of 55.0 from five month low of 53.3 in Feb. New business up. @HowardArcherUK Le Pen up a notch in the betting following last night’s marathon presidential debate with all 11 contenders. @MSmithsonPB Moving rightward across the spectrum, the next port of call is mild optimists, those who believe that, while we shouldn’t get carried away, traditional National Accounts statistics fail to capture key elements of the new economy. The stats capture Google advertising revenue but omit all those hours we surf the web, and the activities this spawns. Shifting further right, optimism rises, with an emphasis on potential generalpurpose technology (GPT) effects. An example of a GPT is electricity, which had a broad and deep impact across the whole economy. Many see similar potential in the information and intellectual revolution currently underway. But some also see beyond general-purpose effects to a fourth industrial revolution, moving on from the first steam revolution, the second electricity revolution, the third electronic and automation revolution, to the fourth information and intellectual revolution. The difference between a GPT and fourth industrial revolution is the Don’t mess with the Rock: An insider’s account of the last Gibraltar fire-storm THE ONE iron rule in British politics is don’t mess with the Rock. Gibraltar is pure thirdrail politics that can ignite into a political fire-storm at the drop of a peseta, cent or penny. I discovered this as a Foreign Office minister who spoke Spanish and knew many Spanish politicians and journalists (and still do.) I loved going to Gibraltar as it was a wonderful step backwards into my youth, with Watneys Red Barrel on sale, a Woolworths, and people dressed in the blazing Andalusian sun as if going to church on a sunny Sunday in Wiltshire. In fact, the Rock’s politics is dominated by the Labour Party and trade unions. Its biggest defender used to be Jack Jones, the legendary trade union leader who fought in the Spanish Civil War and hated Franco, and thus raised Gibraltar as a symbol of freedom until 1975 when Franco died. Luckily for Gibraltar, the UK had entered Europe by then and Margaret Thatcher became a strong supporter of Spain entering the European Community too. Under EU rules every UK citizen in Gibraltar has the right to live in Spain, and many do as the colony is so small the only way to get a nice house with a swimming pool is to live across the border. Indeed, all the UK citizens in Gibraltar speak Spanish as well as and often better than English. Ten thousand Spanish citizens cross the frontier every day to work. For sure, Madrid does not like the Union Flag flying over the territory. The UK handed Minorca back to Spain in the nineteenth century but the Royal Navy wanted its base at the entry and choke point into the Mediterranean. There is now a much bigger US naval base at Rota just up from Gibraltar. Spain is one Denis MacShane of America’s closest Nato allies, so one wonders what the Pentagon makes of bellicose jingoism from the defence secretary, let alone Michael Howard’s invocation of the war over the Falklands. Up to 1m Brits have quietly retired to or live in Spain and get on well locally. Their fate is now up for grabs as they lose EU citizenship. Less than one third are registered as officially resident, and it is going to be a nightmare to get every EU citizen in the UK and all British expats in Europe listed, named, identified and registered once they lose EU treaty rights to live, study, work or retire anywhere in Europe. Spain would love a joint sovereignty deal over Gibraltar and in order to curry favour with the then right-wing Spanish Prime Minister, José Maria Aznar, who was lining up with George W Bush on Iraq, Tony Blair initiated talks carried out by Jack Straw as foreign secretary and Peter Hain as Europe minister. They turned into a political disaster. The Conservatives led by Howard accused Labour of betraying Gibraltar. The Gibraltar government spent fortunes flying down any MP who wanted a jolly little trip to the sun, and very effective lobbying by the Gibraltar Office in London made sure there was almost unanimous Commons and tabloid fury at even discussing a deal with Madrid over the Rock. When I became Europe minister I breadth and depth of technological change. There are some who envisage an even greater technological era to come, a singularity. The singularity is a utopian world of exponential change induced by artificial intelligence (AI) and machine learning on an unimaginable scale. This is an age of abundance, with advances in AI and computing exceeding human intelligence. If something sounds too good to be true, it probably is. But even with a step back from the singularity, a fourth industrial revolution would still entail enormous technological change, the consequences of which are only dimly understood at present. The battle of ideas is also being waged over the employment impact of technical change. Here again there are optimists and pessimists i.e. optimists about the scale of technological change, but pessimists about the employment consequences of automation. Economic history teaches us that technological change is good, not bad for :@cityam decided to shut it down, close the file, and return it to the Foreign Office drawer marked “Not to be opened for another 50 years”. I went to Madrid and gave interviews which led to front pages comparing Gibraltar to Ceuta and Melilla – two Spanish enclaves on Moroccan territory. Now it was the turn of Spain to go mad as they regard those enclaves as 100 per cent Spanish, just as we regard El Peńon – as the Spanish call Gibraltar – 100 per cent British. Aznar even called up Blair to abuse me personally, but I just knew that opening up the Gibraltar wasps nest was loselose and nothing would be achieved. When the Spanish Socialists won power in 2004, they were more reasonable and we could negotiate a deal to allow direct fights between Madrid and Gibraltar. While the very short airstrip is on Gibraltar-UK territory, all the approaches need Spanish permission which is given under EU aviation laws and directives. It is clear that the UK government was asleep at the Brexit wheel in not highlighting Gibraltar in its Article 50 letter. But once the UK leaves the Single Market, the Customs Union, repudiates free movement, and opts out of EU aviation treaties and the right to defend Gibraltar’s exotic tax arrangements in Brussels, the Rock will be very exposed. Perhaps we can give a pair of cutlasses to Howard and Nigel Farage, but Gibraltar is going to face a very tricky future when the UK leaves Europe. And no amount of jingoistic invocations of the Falklands can alter that worrying reality. £ Denis MacShane was a PPS and minister at the Foreign Office 1997-2005. He is a senior adviser at Avisa Partners, in Brussels. New technology will bring a roaring tornado of change: Or will it? Graeme Leach The singularity is a utopian world of exponential change induced by artificial intelligence and machine learning on an unimaginable scale employment. But the shelves are beginning to fill up with new books arguing that this time it’s different, and that massive technological change heralds mass unemployment. It’s an interesting argument, but there’s precious little evidence to back it up. The opposite in fact, with strong US evidence of high jobs multiplier effects from new economy companies. From the Internet of Things, AI, robotics, nano technology, autonomous vehicles, new materials, energy storage and superconductors, 3D printing, automation, biotechnology and genome sequencing, to a payments revolution and blockchain, all these technologies are huge in and of themselves. But together they could swirl into a roaring tornado blowing down industries and institutions in their path. £ Graeme Leach is chief executive and chief economist of macronomics, a macroeconomic, geopolitical and future megatrends research consultancy. Fountain House, 3rd Floor, 130 Fenchurch Street, London, EC3M 5DJ Tel: 020 3201 8900 Email: news@cityam.com Certified Distribution from 30/01/2017 till 26/02/2017 is 90,743 Editorial Editor Christian May | Deputy Editor Julian Harris News Editor Tracey Boles | Digital Editor Emma Haslett Business Features Editor Tom Welsh | Lifestyle Editor Steve Dinneen Sports Editor Frank Dalleres | Creative Director David Rile y Commercial Sales Director Jeremy Slattery Head of Distribution Gianni Cavalli Distribution helpline If you have any comments about the distribution of City A.M. please ring 0203 201 8955, or email distribution@cityam.com Our terms and conditions for external contributors can be viewed at cityam.com/terms-conditions Printed by Trinity Mirror Printing, St Albans Road, Watford Herts, WD24 7RG
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