In a speech this morning from the new Shadow Chancellor which was rather longer on rhetoric than concrete policy, one measure stood out.
True, it stood out was because it was the only concrete policy announced. But it also stood out for its wrongheadedness.
McDonnell called for this:
But in the Summer Budget, the Conservatives had already promised to introduce exactly this measure:
What certainly is different is the proposed yield. The Conservatives predicted a steady state yield from their proposals of about £170m per annum.
John McDonnell seems to be promising a yield of up to a staggering 7,600% of this. Indeed, as David Pegg of the Guardian has pointed out, the expenses claimed (in 2012/13) by individuals for property repairs, maintenance and renewals was just over £3bn – and the value of the ‘tax breaks’ on those expenses is a maximum of 50% (the then top rate of income tax) of that, or £1.5bn. On any view £13bn is fantasy forecasting.
The list of Labour’s tax bloopers since the General Election defeat is already a long one.
The mathematically impossible £5bn of yield from a 50% rate; the promised £120bn receipts from tackling tax evasion and avoidance (now downgraded, according to McDonnell on Today, to an equally illusory £20-25bn); £93bn of savings from tackling corporate welfare (now downgraded to unspecified “cuts“); and the shambles around Labour’s position on cutting the rate of corporation tax (where, in a single day, McDonnell called on Question Time for the Tories’ cuts to be reversed whilst in Parliament, Labour supported them).
But even with such worthy competition, this measure really stands out.
Michael in the comments section following has pointed out that McDonnell can be read as promising savings of less than £13bn. In other words, that he’s again (c.f. the £120bn tax gap and £93bn corporate welfare) performing a kind of fiscal dance of the seven veils – tempting his audience with the suggestion of a yield greater than that he knows is possible. This reading would not, however, explain why McDonnell mentions the £13bn figure if what he means is something closer to HM Treasury’s £170m estimate, or how £13bn hugely overestimates the scale of possible savings given the cost of the relief.
“John McDonnell seems to be promising a yield of a staggering 7,600% of this”
Did he? I read it as the £13bn being the current expense in total, rather than the amount saved/raised by reform.
The only matter that is surprising here is that you are surprised by headline grabbing soundbites which are fundamentally flawed.
To coin a phrase “why let the truth get in the way of a good story”
In the interests of democracy and the implementation appropriate strategies,the media mandarins should be challenged and held to account publicly. History has thought us that politicians are so far removed from reality and capable of such extraordinary stupidity that they are incapable of being held to account or meaningfully challenged to stand over their statements.
Your link to his speech is actually a link to the 1959 Labour Party manifesto.
Corrected, with thanks
I suspect the £13 billion figure comes from something like this: http://www.theguardian.com/politics/2015/may/26/landlords-14bn-tax-breaks-buy-to-let-expansion-mortgage-interest
About half of the £14 billion of “tax breaks” in that report is due to interest on debt. Repairs etc are £3 billion. It is hard to tell from the story, but I suspect the numbers are the size of the deduction, not the tax saved: the “cost” to the exchequer (of only taxing net profits rather than gross income) will be somewhat less than half of these figures. (Of course, another change in the most recent Budget is to phase in a restriction on tax relief for debt costs of buy-to-let landlords to 20%.)
The floating of purely imaginary amounts of tax revenues that could be raised is a little like the illusory “save up to 50%” offers that you get in high street stores, where just one item is marked down by 50% if you can find it.
I’m not sure if you are channelling Britney Spears or Victor Meldrew with the title of your post, or some horrific combination of the two.
This may be a sorce, or even the source for the £13bn. Still can’t explain why the focus was o repairs.
Click to access Why-BTL-Equals-Big-Tax-Rip-off.pdf
That paper would have been immeasurably improved by taking some tax advice, rather than by simply reading HMRC’s website (which seems to be the main source of tax information cited).
It doesn’t half get things confused. I didn’t realize that here was a hard line between “unearned income” and “a business”, for example – here’s me thinking that there are quite a few different categories, and different ones for different taxes. Hey ho.
The £13bn is explicitly the deductions, not the tax saving, in that report.
Overall, I was rather surprised by the positive way the tax position for landlords is portrayed in that report. I might start sending copies to clients who complain that the tax position is unfairly harsh – what with no capital allowances, no Entrepreneur’s Relief, no holdover relief on incorporation, no Business Property Relief, capital gains and IHT when you try to pass it on to your children, and so on…