Tyrie said the key to a mobile and functioning labour market is an affordable housing market, in the Treasury Select Committee’s (TSC) report on the Autumn Statement 2015.
“Labour, Conservative and Coalition governments have for decades recognised the crucial importance of maintaining confidence in the buy-to-let sector, perhaps aware of the damaging, unintended consequences of the heavy-handed regulatory interventions by both Labour and Conservative governments of the 1950s and 60s.
“Any impediment to labour mobility will reduce employment, economic activity, and the economy’s long-run productive potential,” he said.
Promised tax changes including the 3% Stamp Duty surcharge from 1 April 2016 and the decision to tax landlords on income not profits from 2017 have already taken the steam out of this fast-growing market.
The Committee said: “The Chancellor’s attempts to resolve what he calls a ‘home ownership crisis’ should not come at the expense of the private rented sector. Housing policy in the UK has been in a mess for a long time – caused by the policies of successive governments over decades and, often, their unintended consequences. Sooner or later, more thoroughgoing reform will be essential.”
The Chancellor came under concerted fire, as the TSC roundly criticised his reports of improving fiscal forecasts which were not driven by the improving economic outlook, as he suggested, but changes to modelling and assumptions by the Office for Budgetary Responsibility (OBR).
“Changes to the OBR’s modelling and assumptions gave the Chancellor a fiscal windfall at the Autumn Statement. But what the OBR provided in the last set of forecasts, it may decide to remove in the next. If that were to happen, given the inflexibility of his fiscal rule, the Chancellor would have to raise taxes, cut spending, or abandon the rule.”
The report also highlighted the fact the tax burden, which was 33% of GDP in 2014-15, will rise to 34.2 % by 2017-18.
It said the Chancellor’s objective of moving to a “lower tax society” was not advanced by the measures contained in either the Summer Budget or the Autumn Statement.
“These will raise the tax burden faced by individuals and businesses, through new taxes, including the apprenticeship levy and the Stamp Duty surcharge, and the raising of less salient ones, including dividend and insurance premium taxes,” said Osborne.
On the buy-to-let tax changes, HM Treasury has outlined the ‘significant’ nature of the tax burden heading towards landlords, totaling extra government revenues of about £1.7bn a year.
In its first full year of implementation in 2020-21, restricting the mortgage interest tax deduction to the basic rate will raise £665m. The 3% Stamp duty surcharge is expected to raise £625m in 2016-17, mostly paid by landlords. The reduced window for payment of capital gains on residential property is expected to bring in £230m in 2020-21 and the reform of the wear and tear allowance is expected to raise in £205m in its first year, 2017-18.
