Sunak’s Stamp Duty Holiday Hard to Reconcile With ‘Ditching Up’ Rhetoric | Larry Elliott
RIsis Sunak’s approval ratings tell their own story. The Chancellor’s stock is high as the Treasury leave scheme has limited job losses due to the pandemic. But while Sunak has had a much better crisis than some of his colleagues, his record is far from flawless.
Two errors of judgment stand out: the “eat out to help” discounts for diners, blamed for a wave of infections last fall, and the decision to raise the stamp duty threshold for home purchases in England and in Northern Ireland from £ 125,000 to £ 500,000.
Of the two, the stamp duty holiday is the more inexplicable. There was some justification for giving consumers – unvaccinated at the time – a push to go out for a meal last August. There was no need to rocket the housing market.
The consequences of this decision are only apparent. House prices rose at their fastest annual rate for 17 years in June, as buyers rushed to pass the deadline to lower the stamp duty threshold to £ 250,000. Then, as the latest figures from HMRC showed, there was a 63% drop in transactions in July. Another mini boom can be expected in September before the stamp duty returns to its pre-crisis level of £ 125,000.
There are structural factors that mean house prices in Britain are skewed upward. It is a small country with a large population and strict planning laws. Add to that ultra-low interest rates, stiff competition from mortgage lenders, and a large amount of pent-up demand resulting from last spring’s foreclosure, and it was obvious the market was going to take off even without the Chancellor’s help.
The extension of the stamp duty holiday for another six months in this year’s budget has compounded a policy error that has seen prices rise by an average of £ 2,500 per month over the past year, pushing property to ownership beyond Generation Rent’s reach and exacerbating the intergenerational divide. The government is ostensibly determined to take it to the next level. It is difficult to reconcile this with a program whose main beneficiaries are real estate agents, large builders and the already wealthy.
Fast food runs out quickly
Last week the news was that Nando was out of chicken. This week, McDonald’s is running out of milkshakes. While neither is truly categorized as a national disaster, there are clearly supply chain issues at play here, most notably a shortage of truck drivers.
The blow to German exports following a global shortage of computer chips shows that the UK is not alone in having supply chain problems, although the problems are more evident here than in d ‘other countries.
There are three reasons for this: truck drivers are not paid enough; not enough truck drivers are trained; and the traditional way of covering the cracks – by employing drivers from elsewhere in Europe – is no longer available due to tighter immigration controls after Brexit.
Tesco and Ocado are offering hiring bonuses to heavy truck drivers for the simple reason that the supply of workers is insufficient to meet demand in the trucking industry. Higher wages will be needed to attract and retain drivers, who are currently under-rewarded.
This is a textbook case of how market forces work, and it should be welcomed by those who say the UK labor market has a bias in favor of poorly paid, ill-trained and low-income workers. productivity. Even if that means consumers pay more for a strawberry milkshake (when they become available again, of course).
New green ships a drop in the ocean
First it was hybrid cars, now it is hybrid container ships. Maersk, the world’s largest shipping company, has announced orders for eight South Korean-built ships that will run on traditional bunker fuel and green methanol.
While this is clearly a welcome development, driven in large part by pressure from the company’s customers, this decision needs to be put in context. Maritime transport has been much slower than other sectors to respond to the challenges of global warming, even though it is responsible for 3% of total emissions. The auto industry is already moving away from hybrids.
Additionally, Maersk owns or leases over 700 ships, so eight new ships are the proverbial drop in the ocean.