A housing boom could lose the Conservatives as many votes as it wins


Luke Major

Britain’s rural landscape is under attack in the name of economic growth – despite David Cameron’s promise to lead the “greenest government ever.” The Prime Minister believes that the key to recovery is to build our way out of recession as was the case in the 1930s. But how much of our glorious greenery will we have sacrificed before we are satisfied with the rate of growth?

One significant cause of the threat to rural Britain is the National Planning Policy Framework (NPPF). Put forward in March 2012, with a presumption in favour of ‘sustainable’ development, it makes it extremely difficult to carry out the mandate of preserving the rural nature of the area in which rurally based Conservative Councillors are elected.

Not only does the nature of the NPPF suggest worrying implications for our idyllic landscape, but it also makes our Council look ‘spineless and inept’ as we were referred to in my first parish meeting two days after I was elected. We can no longer take the rural vote for granted. In my by-election back in May 2013, nearly all of the spoiled ballots I was shown had some reference to the lack of a UKIP candidate standing. Another more recent by-election in my area saw an extremely narrow victory for a Conservative where a UKIP member had stood against him. In most areas of my district, we nearly always see a huge victory against the sum total of Labour, Lib Dem and the Green’s vote combined.

I would not dispute that the vast majority of Britain’s countryside (over 90%) remains untouched, but it is where the development is taking place that is harming the Tory vote. According to the Campaign to Protect Rural England (CPRE), over one thousand hectares of green belt land (an area of open land around a settlement on which building is restricted) have been lost each year since 1997, covered in over 45,000 houses, spanning an area that roughly equates to a city the size of Bath. This is happening right on the doorstep of a great number of people who very often elect local Conservative Councillors for the purpose of preventing it. Is it any wonder that 13% of the almost exclusively Conservative Countryside Alliance now intends to vote UKIP in 2015?

The most frustrating aspect of the housing vs. environment issue is that plenty could be done to accommodate Britain’s growing population that would offend very few. Another CPRE report has identified derelict brownfield sites available for building approximately 1.5 million new homes. This would be on top of the 300,000 empty houses in the UK unoccupied for months, as well as the vast amount of land that our nation’s major house builders have permission to build on that could accommodate another 280,000 homes. Somewhat surprisingly, this report came after the last Labour government smashed targets to increase brownfield development by 60% before 2008, eight years ahead of schedule. Furthermore, back in 2011, local authorities identified an estimated 63,750ha of Brownfield land in England, up 2.6% from 62,130ha in previous year. Half of this land was derelict or vacant, with the other half in use, but with potential for redevelopment.

Clearly then there is a case for more ambitious targets in regions across the UK which could be encouraged through corporation tax relief for housing developers. The Conservative Party could even re-consider the Lib-Dems controversial Land Tax which would deter Greenfield development. Many commentators have pointed out that one of the main barriers to brownfield development is the uncertainties around cost, particularly during negotiations surrounding the clean-up operations of the areas on which they are to build, so the government U-turn to abolish Land Remediation Relief is welcome.

Eric Pickles’ recent announcement to grant more power to local councils could not have come soon enough. By making it more difficult to build on green belts, developers will naturally gravitate towards brownfield growth and focus on smaller urban properties that are more realistically priced for the people who need housing most.

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A curate’s egg of a Budget?

David Cowan 6.02am

On Wednesday, George Osborne grew in stature as a Tory Chancellor. The Budget was the most definitive account of the Government’s plan for growth. Yet it was mainly framed as a tax reform budget, and it is by this standard it should be judged.

In which case, it was also something of a curate’s egg. In places it was bold and radical, while in others it did not go nearly far enough.

Mr Osborne articulated a clear, long-term vision for tax reform. He began by claiming Adam Smith as his guide, embracing the principle that taxes ought to be “simple, predictable, support work, and they should be fair”.

The establishment of the Office for Tax Simplification (OTS) demonstrated Mr Osborne’s commitment to sustained reform of a tax code that must be “fit for the modern world”. (This already comprises measures such as merging the rates of income tax and National Insurance.)

There is the Personal Tax Statement, first proposed by Ben Gummer MP, which will appear for the first time in 2014. It will tell taxpayers exactly how much they are paying in tax and exactly where that money is being spent. This is particularly important at a time when people do not know how much of their hard-earned cash is consumed by the costs of servicing our £7.9 trillion debt.

At the heart of this Budget is the start of a serious shift in taxation from income to wealth.

The 50p top rate of income tax will be reduced to 45p in April 2013, but Mr Osborne has already reassured Conservative MPs that the new top rate will not be permanent. Following the announcement on Wednesday, Ed Miliband immediately rolled out the tired old rhetoric of faux class warfare. The fact is that the top rate was not raising any meaningful revenue - a mere third of what was promised - and as page 91 of the Red Book proves, it will actually be the millionaires paying more after this Budget.

The group of taxpayers that Mr Osborne ought to be most concerned about are the taxpayers still stuck in the 40p higher rate, between £41,450 and £150,000, especially since he has just shifted 300,000 new taxpayers into that category.

This situation is not helped by the changes to Child Benefit. What the economist Andrew Lilico has persuasively argued is a tax rebate, not a welfare benefit, has effectively been taken away from the important ‘squeezed middle’ at a time when living costs are still rising painfully.

Then there is the so-called ‘Granny Tax’, which was ‘unearthed’ by linguistically creative journalists hours after the Budget. Despite the Brown-esque manner in which it was delivered, the policy remains a sensible one. Mr Osborne has said that the age-related allowances will be frozen from April 2013 onwards. The impact has been exaggerated, as Sara hinted at yesterday, and it will be alleviated by the planned increases in the personal allowance.

This leads on to the Liberal Democrats’ key victory: the acceleration towards a £10,000 income tax personal allowance. As a result of this Budget, no-one will pay income tax on their first £9,205 as of April 2013. Everyone working for the minimum wage will see their income tax bill halved.

This has not stopped Conservative MPs from claiming some credit for the policy, as Nick Boles did during the pre-Budget PMQs, and as Robert Halfon’s fascinating Right Angle campaign web site has done of late.

However, what really matters is how these tax changes are funded. Mr Osborne, under pressure from the Lib Dems and even Tories such as Boris Johnson, unleashed a new set of measures to target wealth, largely through tinkering with Stamp Duty.

A new 7 per cent rate will be levied on £2 million properties and a new 15 per cent charge will be used to crack down on the use of corporate envelopes to avoid tax when purchasing properties.

Capital Gains Tax (CGT) will also be extended to residential properties being held by overseas envelopes. This will be accompanied by a new range of anti-tax avoidance and evasion measures.

Altogether, it means that the richest will pay up to five times more than they would have done with the 50p income tax rate.

This is the correct direction of travel for direct taxation. Wealth should be taxed in a manner that is fair and which encourages wealth creation. Yet it still remains the case that the best way to do this is a Land Value Tax (LVT), within the context of simplified property taxes.

The main rate of corporation tax was reduced by 2 points, which will eventually mean corporation tax of 22 per cent in April 2014 - well below the level of comparable countries like the United States but not as low as Ireland’s 12.5 per cent. Mr Osborne wants the rate to come down to 20 per cent by 2015.

But the method taken to fund the reductions in corporation tax was misguided. The bank levy is one of Mr Osborne’s more harmful gimmicks and has yet again been increased (to 0.105 per cent) at a time when our financial services industry needs to be made more competitive, not less.

Mr Osborne has also taken a leaf out of Sir Geoffrey Howe’s book by increasing indirect taxes on consumption (e.g. 5 per cent hike on tobacco duty) to fund deficit reduction and ever-increasing public expenditure. Albeit to his credit, he has managed to keep fuel and vehicle excise duties lower than they would have been under a Labour government.

George Osborne’s vision is of a tax code that is more transparent, where direct taxation moves away from income towards wealth, in which a more competitive business tax regime can boost growth, and where taxes on consumption help to maintain ‘fiscal stability’. Regrettably, political gimmicks like the bank levy and other tax raids continue to infect Mr Osborne’s agenda.

Earlier this week, I asked whether George Osborne could join Neville Chamberlain and Sir Geoffrey Howe among the pantheon of great Tory Chancellors. Wednesday’s Budget brought him closer to the mark, but not quite the whole hog. His fiscal plans have been blown off course since last November and we are yet to experience the full dangers of the largest experiment in quantitative easing ever embarked upon.

Follow David on Twitter @david_cowan

If Osborne succeeds, he could join Neville Chamberlain and Sir Geoffrey Howe in the pantheon of great Tory chancellors

David Cowan 10.26am

As George Osborne has approached his third Budget as Chancellor, the press has been abuzz with speculation about future taxation.

This has largely been fuelled by the public airings of Liberal Democrat tax demands, such as an accelerated timetable for raising the income tax threshold to £10,000 (itself a policy strongly supported by Conservatives) or Nick Clegg’s nebulous 'tycoon tax'.

Even Ed Miliband has waded in with a proposal to reverse tax credit cuts. But there has not been any word from the Conservative front bench - as traditional Budget purdah prescribes.

Any meaningful discussion of Mr Osborne’s economic policies cannot be centred on ideology, but on political pragmatism.

Certain commentators, such as Spectator editor Fraser Nelson and the Telegraph's Peter Oborne, have noted how Mr Osborne is a part-time Chancellor of the Exchequer, and full-time political strategist.

For Mr Osborne, taxes should in the long run be lower and simpler, but fully funded tax cuts can only be made once fiscal stability has been achieved. Above all, tax cuts cannot allow the Conservatives to look like the party of the rich. This ‘fiscal conservative’ approach is very much part of the strategy for a Conservative majority in 2015.

The narrative weaved in the press and driven by Lib Dem leaks has so far described a Budget in which the 50p top rate of tax will be scrapped and the lower threshold raised faster, both policies funded by a new tax raid on pensions. It is all symptomatic of the wider tax debate within and without the Conservative party that says direct taxation should be shifted from income to wealth.

The last two Budgets have been attempts to raise additional revenue by targeting the wealth of the ‘super rich’ but they have tended to result from confused tactics rather than coherent strategy. The arbitrary increases to the bank levy, a £50,000 non-dom charge, a tax raid on North Sea oil and gas, new taxes on private jets - these are all policies motivated by envy, not sound economics.

Other ideas produced by the Lib Dems, such as a mansion tax on £2 million-properties or new council tax bands for high value homes, or Labour’s Bonus Tax, which the party has already claimed will support nine different schemes, are similarly flawed. It wouldn’t be surprising if this sort of misguided thinking infected the Budget tomorrow.

Yet there is a robust case for transferring direct taxation away from income, towards wealth. Nick Boles recently argued at the TRG’s Macmillan Lecture for a Land Value Tax (LVT), and I have previously described on these pages how a LVT could form the basis of a new agenda for tax reform. This is the only fiscally sustainable and fair means by which direct taxation can make the transition from income to wealth but it is unlikely to make an appearance tomorrow.

Mr Osborne must stand by his ‘fiscal conservative’ strategy by not allowing unfunded tax cuts to threaten deficit reduction or to portray unfairly the Conservative party as the party of the rich. The Lib Dems cannot be permitted to imagine themselves as the solely compassionate side of the coalition.

Nor should tax cuts come at the expense of costly gimmicks to ‘bash the rich’ without raising substantial revenues, and merely serving to foster the growing anti-enterprise culture in this country.

Instead, Mr Osborne must outline a ‘middle way’ via a clear, long-term vision for lower and simpler taxes, based on sound public finances and the effective taxation of wealth, rather than income.

If he succeeds, then he could secure his accession to the ranks of Neville Chamberlain and Sir Geoffrey Howe in the pantheon of great Conservative Chancellors.

Follow David on Twitter @david_cowan

Progressive Conservatives should support a Land Value Tax

David Cowan 9.51am

In this year’s Macmillan Lecture, the Conservative MP Nick Boles proposed a series of ideas to improve Britain’s economic competitiveness. By far the most fascinating idea was a land value tax.

In the past it has usually been those on the socialistic Left and the libertarian Right who have advocated a land value tax (LVT). But Mr Boles is a prominent Conservative moderniser, founder of the Policy Exchange think tank, and known to be close to the party leadership.

The introduction of a LVT ought to be viewed as the most legitimate way to raise new revenue.

For too long, landowners and speculators have been able to reap sizeable economic outputs from rising land values, though contributing little economic input. One example being how the construction of the Jubilee line sent surrounding land values shooting up to £10 billion, to the benefit of landowners, while taxpayers still had to foot the bill.

The idea strikes to the heart of David Cameron’s vision of responsible capitalism:

“We need to reconnect the principles of risk, hard work, and success with reward”.

Another benefit of LVT is it would create a more stable and productive land market. There would be no benefit in owning land without utilising it since landowners would have to raise enough income to pay the LVT bill. The reduction in speculative activity would help drive down prices and rent, so ensuring that growth in the land market is based on sustainable and real returns instead of artificial and speculative booms.

LVT would also be a new ‘eco-tax’ that discourages construction on expensive ‘greenfield’ areas in favour of cheaper ‘brownfield sites’, so limiting urban sprawl. This brings the consequent benefits of reduced commuting distances and less costly road works, which contribute to CO2 emissions and atmospheric pollution.

However, Mr Boles’ LVT proposal should go a step further. Properties of all shapes and sizes are already overtaxed by the likes of council tax, business rates, stamp duty land tax, planning charges, and landfill tax. If these taxes were to remain then LVT would be burdening people with further unwelcome costs.

Instead, LVT should replace those property taxes - either entirely or at the very least mostly.

It would still raise sufficient revenue if pitched at the correct rate and included main homes, with exemptions for farmland, national parks, charities and pensioners’ main homes. The fact that LVT would also apply to land which at the moment is not taxed at all goes to show how it would raise more revenue than the current property taxes that place a heavy burden on ordinary homeowners.

This would be simple to implement since land cannot be hidden in an offshore tax haven and calculating the tax bill would be made easier by the fact that land values are already measured by the market, therefore compliance costs could be reduced. The same bureaucratic processes for collecting business rates could readily be translated to the collection of LVT.

The LVT would not harm enterprise. It would boost productivity, discourage urban sprawl, could replace the plethora of punitive property taxes, and would be relatively simple to administer and collect.

The extra revenue raised would be enough to fund a radical package of tax cuts to “put fuel into the tank of the British economy”, as George Osborne promised last year, and would reconnect the link between effort and reward by making sure everyone pays their fair share. This is very much a policy that ought to be part of any modern, progressive Conservative agenda.

Follow David on Twitter @david_cowan

Macmillan Lecture 2012: Nick Boles sets out ‘national mission’ for improving Britain’s competitiveness

Nik Darlington 7.01pm

This evening at the Tory Reform Group’s annual Macmillan Lecture, Nick Boles sets out what he describes as a “new national mission” to improve Britain’s competitiveness.

Mr Boles, who was elected MP for Grantham & Stamford in May 2010, is a former director of the Policy Exchange think tank and has been at the forefront of efforts to modernise the Conservative party in recent years.

Given his proximity to David Cameron and Number 10, the speech and the policies proposed in it are being closely watched as possible indicators of current thinking at the top of the Government.

The weekend just gone has been dominated by arguments over bankers’ bonuses. The chief executive and chairman of RBS, which is 82 per cent owned by the Government, renounced this year’s share amid significant public pressure.

In his lecture, Mr Boles warns:

"The obsession with the incomes of the wealthiest…is blinding us to the biggest challenge our country faces."

"As much as we all enjoy the thrill of the chase when our prey is a feather-bedded banker, we in the political pack must not duck the really hard economic question - which is, why have people in the low and middle-ranking jobs not been able to secure a real increase in their pay for nearly a decade?"

"And we must not dodge the really hard answer - which is, that the productivity of people in those jobs is falling behind that of their competitors."

Though honest about the country’s failings, Nick Boles is upbeat about Britain’s chances for the next twenty years if we are “clear-sighted and quick-witted”.

We have heard much about London’s fledgling web-tech community at the 'Silicon Roundabout', and lately the Prime Minister described the M4 corridor as Britain’s very own ‘Silicon Valley’ of high-tech industry.

And the first of Mr Boles’ policies to re-energise Britain’s competitiveness is the creation of a new economic cluster, the ‘Oxbridge Brain Belt’, through the construction of a motorway between Oxford and Cambridge funded by the building of a new garden city along the route.

Such a motorway could link up with as many as four existing motorways but it would have to be careful to avoid the Chilterns AONB, through (and under) which the controversial HS2 line is intended to run. Once bitten, twice shy and all that. But with high-speed rail, Crossrail and possibly the much-heralded ‘Boris Island’ airport, this Government is proving to have a penchant for big infrastructure projects.

Secondly, Mr Boles also wants to introduce a Land Value Tax (LVT) to fund a permanent cut in employers’ National Insurance contributions. A form of LVT was suggested by current shadow health secretary, Andrew Burnham, during his failed Labour leadership bid. It is an idea backed by the Lib Dems and some of Mr Boles’ fellow Conservatives who advocate a rebalancing of the taxation of wealth versus income, such as Tim Montgomerie.

Exempted from the LVT, however, would be farmland (a common point of contention) and people’s main homes. Mr Boles criticises Nick Clegg’s proposals for a ‘mansion tax’ to fund an increase in personal tax allowances because it misses the target and won’t create jobs.

Thirdly, Mr Boles wants to see new foreign students excluded from the Government’s immigration cap and the introduction of a £5,000 immigration bond, to be repayed by foreign students when they leave the UK on completion of their studies.

Mr Boles advocated some radical policies for immigration in his quietly acclaimed 2010 book Which Way’s Up?, including a 50,000 cap and surety deposit for non-EU migrants. The Government’s tightening of immigration policies has drawn some criticism from business leaders and universities, so this could be the first sign of some relaxation as the Government tries to boost economic activity.

Above all, says Nick Boles, this must be treated as our “new national mission”.

"If we want our economy to grow again, if we want our national income to be honestly earned and fairly shared, if we want to take home more in wages than millions of equally qualified people around the world, if we want to hang on to paid maternity and paternity leave and protect our rights to an annual 28 days’ holiday, if we want to benefit from healthcare that is high quality and free, if we want to live comfortably in retirement, if we want all these things, we need to ensure that we are all a lot more productive than our competitors."

"And right now we are not."

It isn’t promising little more than blood, toil, tears and sweat, but it’s not far off it. It is a national growth agenda for little platoons. Through individual endeavour we may collectively prosper.