Friday, 15 May 2009

Feathering their nests?

Few people would disagree with the concept of helping so-called 'key workers' — nurses, teachers, firefighters — to own decent homes even in those areas where house prices make this difficult on a modest salary.

Under the current scheme, extended in 2006 by the then Office of the Deputy Prime Minister under John Prescott, housebuilders are required to include a number of properties in new developments specifically for key workers in order to get approval from local authority planning departments; the nurses and teachers then get an equity loan of £50-100k to help pay for them.

I was interested, then, to read in a recent book from the Institute for Public Policy Research that the definition of key workers includes not only police officers, nurses and so forth but also — wait for it — local authority planning officers.

Wednesday, 22 April 2009

Poor Darling

Interesting choice of £150k for the new higher rate tax band: Mr Darling's salary is £141,866.

Looks like I was wrong about the internal taxation of mutual funds. Maybe next time.

Tuesday, 21 April 2009

A new stealth tax?

While everyone is making their predictions for tomorrow's budget, here's something I wonder if we might see: the introduction of a tax on capital gains within mutual funds. Currently unit trusts and OEICs pay no tax on capital gains on the holdings within the funds themselves (although of course the returns to investors are taxable 'externally') - finance portal Invidion has more on the internal tax treatment of investment products.

If the market goes up 10% — a fair assumption in the next year or two — and the roughly £350bn of UK domiciled mutual funds (source: IMA) pay a 10% tax on the capital gain, the Exchequer gets £3.5bn. On the back of my envelope, this is of a similar order to putting a penny on the basic rate of income tax.

The attraction of this for the Chancellor is that the tabloids won't notice, or much care. Asset managers and pension funds will point out the ill effect on the savings rate and private sector pension values, but if Mr Darling can spin it as 'squeezing the bankers' then that could even make it popular. Of course ultimately it will be savers, investors and future pensioners who will pay, but that hasn't stopped the Government in the past. And the argument will run that they're not losing out, they're just sharing some of their 'unearned' gains.

Is it too much to hope that this budget will do something to encourage people to save for their own future?

Monday, 20 April 2009

The short selling ban: not so bright after all

EDHEC, a prestigious French business school, has released a paper on the ill-effects of the recent ban on short-selling of financial stocks (read it here). I was thinking just this morning how nice it is to see my RBS shares starting to recover now the ban has been lifted.

It least it showed a clear strategy from Mr Brown and Mr Darling: The headline writers say hedge funds are bad and something must be done - here's something - let's do that.

Hopefully this week's budget will be based on more robust thinking. Fingers crossed.