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Whilst we aim to ensure that the details in the following blog entries are correct at the time of writing. However , please be advised that any references to legislation and taxation may become out of date.

The report by the Institute for Fiscal Studies, which it describes as the most far-reaching analysis of the UK tax system in more than 30 years, also recommends integrating income tax and National Insurance payments.

Targets for change include Inheritance Tax where the individual would be taxed and not the estate on a person’s death.

The IFS believes there is also a case for taxing gifts of cash over the recipient’s lifetime. But it says that exempting estates from capital gains tax should definitely stop.

The report describes housing taxation as “a mess” and recommends that instead of stamp duty, residents of larger houses would pay more council tax so that bills reflected real property values.

Review chairman Sir James Mirrlees, the Nobel Prize economist who gave his name to the five-year report, said: “The system imposes unnecessary costs on the economy.

“It reduces employment and earnings more than it needs to. It discourages saving and investment and distorts the form they take.

“It favours corporate debt over equity finance. It fails to deal effectively with either greenhouse gas emissions or road congestion.” The IFS believes the Government could raise just as much money and distribute wealth around the population in about the same proportions as now but in much cheaper ways, by moving to the simpler system it recommends.

Taxes raise £500billion a year, taking about £4 in every £10 earned in the UK.


Housing taxation is one area the IFS says is crying out for reform.

Stamp duty is levied on the whole value of a property.

It varies from one per cent on houses sold between £125,000 and £250,000 (except for first time buyers who pay nothing), three per cent on homes worth over £250,000, four per cent over £500,000 and five per cent over £1million.

The IFS said it was among the most “inefficient and damaging” of all taxes.

Scrapping the tax would remove a disincentive to moving home, which keeps some people in bigger properties than they need and would help free up the housing market.

Council tax, currently based on 1991 values and capped, would be reformed into a “housing services tax” levied as a proportion of actual value with no cap and no discount for unoccupied or single-person homes

Posted: 22/09/2011 20:51:56 by Mark Williams | with 0 comments

 Three years ago today, the collapse of Lehman Brothers sent shockwaves around the world, resulting in sheer panic in the financial markets and driving the final nail in the coffin of the wholesale funding markets.

Suddenly, big banks really could be allowed to fail.

The spectacular bust of America's fourth largest investment banks on 15 September 2008 lead to the bailout of multiple major banks in the UK and US and stiff action from governments to prevent a severe depression.


Clearly, the ramifications of Lehmans' bankruptcy, a year after the credit crunch and five months after it pulled out of the UK mortgage market, are still being  felt today.


Funding remains extremely restricted, banks are still attempting to repay their debts as several remain within the public purse, and general economic gloom dogs consumers as the austerity measures hit home (quite literally).Indeed, one senior investment adviser says the knock on wider monetary impact of Lehmans' failure is quite likely to be far bigger than it would have ever cost to bail it out.


So, where is the mortgage market now, three years on?


Following two years of serious strictures, the UK and the housing market both appear to be in a slow, fragile recovery. Mortgage funding has eased over the last 12 months, with house prices stabilising and gross lending holding at around £135bn.


Most notably, lenders have gone to war over fixed rates recently, slashing deals on an almost daily basis as funding gets cheaper, and long-term fixes dropping to the lowest levels ever seen. There has also been an increase in high LTV mortgages, but in reality it is those with large deposits who are really feeling the love from banks that remain deeply risk averse. And this is unlikely to change as concerns grow that the industry, and economy as a whole, could face further set backs.


It is interesting that the third anniversary of Lehmans falls in a week when the eurozone slides ever-closer towards a Greek default and the ensuing fallout, and the much-discussed Vickers report is published.The shadow of the eurozone looms large on the financial markets, with warnings that the "contagion" of a Greek default could create a bigger banking crisis than we saw in 2008.


Of course, hindsight is a wonderful thing and the lessons of old seem to be getting relearned the hard way.


Consider that, at the height of the "no more boom and bust" bluster in 1999, US President Bill Clinton decided to repeal the 1933 Glass-Steagall Act- a set of bills designed to prevent deflation and reform the banks following the financial crisis of 1929.The repeal essentially removed the protection dividing investment and retail banks, so allowing the casino banking deplored in recent years.


On this side of the water, lax regulation and lending rules allowed a similar scenario to build up, with government, homeowners and the industry caught in the thrall of believing that growth (and house prices) would continue to climb forever. Now, of course, in the UK we have the Vicker's report proposing the ringfencing of bank's retail and investment divisions by 2019.


Does anyone else smell a (strong) waft of irony? Good old fashioned prudence really is the order of the day for everyone from banks to consumers.


So, what of the future?


The effects from Lehmans will likely be felt for the rest of the decade, with lenders managing to pay down their debts in the next few years. Meanwhile, the easing availability of funding for mortgages could rely on how the eurozone fares. The financial markets are extremely nervous and the eurozone crisis could simply reverse the recovery we have seen in wholesale funding, mortgages and the economy.


How much more pain we have still to come is anyone's guess and I will leave conclusions and forecasts to the experts.


However, banking crises are a once-in-a-century event (we hope) and happily, most of us are unlikely to be around if/when the next bankers and politicians decide less regulation is a "good thing".
Posted: 15/09/2011 12:50:54 by Mark Williams | with 0 comments