Jim Armitage: Tories’ inheritance tax budget plan makes house prices even less affordable
03-18-2015
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Can you hear the cheers from Barnet and Harrow?
These are, according to research by Savills, the two areas of the country containing the biggest number of estates paying inheritance tax.
The Tory heartlands of London (with 3000 IHT payers last year), and the South-East (with 3700), have been smothered with love in today’s leaked plans to allow properties worth up to £1 million to be passed on without IHT.
While the move is undeniably appealing to elderly, wealthy people and their kids, will it make house prices even more unaffordable for the rest of us?
It won’t have much of an impact on the supply of homes coming onto the market — sales of properties will simply be postponed until after the parent dies.
But it will mean the children get to keep far more of the proceeds to spend on their next property. And it’s a substantial saving, too: for those selling mum and dad’s place for up to £2 million, the children retain an extra £140,000.
It’s fair to assume such a windfall will often go back into the housing market as the offspring spend it moving up the housing ladder.
And that extra cash, still chasing too few properties, can only send prices in one direction.
Try as he may, the Chancellor cannot get global oil prices back up to $110 a barrel.
In tomorrow’s Budget, George Osborne is expected to take numerous actions on North Sea oil taxes to ease the pain which is being felt by the explorers tending this once-great resource.
In all likelihood it will be announced with much fanfare as evidence of a government pushing the economic growth of the nation.
But we should be wary about exactly how much good tinkering with the tax code will do.
Whatever Osborne pulls out of the bag tomorrow, the fundamental issue remains: the North Sea is a patient long in the hospice. Recovery is not an option.
At her peak in 1999 it was producing well over four million barrels of oil and gas a day. Now we are looking at more like 1.5 million and falling.
What oil is left is harder — and therefore more expensive — to reach, even before the price collapsed. Now the black stuff is worth half its “normal” value, explorers’ budgets all have a gaping hole in them.
The Chancellor can tweak taxes to make it slightly more tempting for companies to keep maintaining the 30 year-old pipelines. Perhaps he can incentivise explorers to try their luck in small, new oilfields.
But, absent a miracle in the global price of crude, the fundamental, structural change needs to come from the industry itself.
This means some unprecedented cost cutting and, sad to say, far more job losses.