What caught my eye this week.
I can’t get very het up about housing secretary Angela Rayner’s resignation on Friday, as a result of her underpaying stamp duty on a flat in Hove.
For starters, it’s pretty clear that Rayner is just the latest person to run into the buzzsaw of Britain’s ludicrously complicated tax code – even with professional help in her case – and to come out supremely chaffed by the contact.
Nothing in this sad story involving divorce, a disabled child, and divided duties across the country has the hallmarks of a grand conspiracy to dupe the taxpayer.
All the same, as a leading minister she should have got it right and she didn’t.
And honestly, after the past few years it’s refreshing to see an MP resigning in good time, rather than having to be burned out of office like a recalcitrant tumour.
This is the way our knockabout democracy used to work.
Snagging issues
Perhaps as housing secretary she should have gone anyway, given Labour’s dismal showing to-date in homebuilding.
True, the creation of the Building Safety Regulator in 2022 long predates Rayner’s taking on the housing brief.
But industry voices have been warning for years that the new body was underfunded and that this was severely delaying development.
The construction sector is running at levels last seen during the pandemic – you know, when most of us weren’t even allowed out of the house. According to homebuilder Berkeley, new home starts in London are as low as in the aftermath of the financial crisis.
Sure I’m gloomy about the UK economy, but even I think it should be a better time to be building houses than during a plague or a potential depression.
Rayner must have seen similar numbers crossing her desk. I didn’t notice any urgency in response. Perhaps the next one can do better.
Homebuyer’s report
It’s notable that it’s a housing-related scandal that’s delivered this speedy resignation.
Would Rayner have faced quite the same opprobrium if she’d made a mistake on her self-assessment tax form?
Possibly not.
It’s an interesting coincidence too that Trump is currently pressuring the still-independent US Federal Reserve by firing a Fed committee member over alleged mortgage fraud.
Of course this is just the latest in his ongoing belittlement of the US institutional framework. He might have fired her for being late returning her library books if that was all his people dug up.
But mortgage fraud hits the sweet spot.
Indeed given how politically hot this potato is in the US and UK, I was surprised to also read a story in The Guardian this week that detailed the property holdings of Australian politicians.
Out of the 236 federal Australian MPs and senators who’ve disclosed their housing interests, more than half – 130 – have multiple homes, investment properties, or both.
Some have six properties! (Some have cattle ranches, but we’ll put that to one side. Fair dinkum mate.)
Australia is a vast country, and there’s lots of room for more homes. Though most of that room is in a desert and Australia has its own housing affordability crisis.
How are the Aussie lawmakers getting away with their side hustles as property tycoons? It must come down to cultural norms.
In her recent FIRE-side chat, Melbourne-based Monevator reader London a Long Time Ago told us how everyone with any money in Australia does property like we do ISAs.
I suppose that keeps any stone throwing through glasshouse windows to a minimum.
Fixer-upper
Will Rachel Reeves still go after stamp duty and other property taxes in the November Budget, given her own colleague just blew up on contact with this touchy subject?
The chancellor could spin it either way – as yet another pointer that complex property taxes are overdue reform, or as deciding to avoid complicating the situation even further given those infamously hard-working families already have enough on their plate.
Reeves should at least scotch the rumours pronto if there’s nothing doing. The uncertainty is slowing down the housing market, and the UK (and Treasury) needs all the economic growth it can get.
As for building more homes, an interesting article behind the paywall in the Financial Times this week makes the case that supply isn’t actually the problem many of us think it is. It even advocates for a wealth tax on land as a salve to a distorted market.
Personally, while I think stamp duty is a dysfunctional tax that desperately needs reform and that something must be done to slow the UK’s descent into neo-feudalism, the reality is an Englishman or woman’s home is their castle – one with barrels of explosive gunpowder in the basement.
If Reeves wants to follow Rayner out in a blaze of glory, then she only needs to light the fuse…
Have a great weekend!
From Monevator
When are fund fees low enough? – Monevator
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From the archive-ator: It’s survival of the fittest with ESG returns – Monevator
News
Rachel Reeves sets Budget date for 26 November… – UK Gov
…and the rumour mill has put plenty on the table… – Which
…prompting savers to pull tax-free cash from pensions again – This Is Money
Former footballers lost millions in investments – BBC
Gold price hits record high – BBC
UK fintech pioneers unite to build bank for high-net worths – Finextra
Average UK house costs a record £299,331, says Halifax… – Guardian
…though Nationwide says they fell – This Is Money
Google’s parent soars as court rules it doesn’t have to sell Chrome – Sherwood
High-frequency trading intern wanted. Monthly salary $35,000 – FT
Bitcoin treasury companies collectively own over one million BTC – The Block
The US population could actually shrink in 2025 – Derek Thompson
Products and services
Households urged to lock down new mortgage deals now – This Is Money
The death of the wallet – Guardian
Get up to £1,500 cashback when you transfer your cash and/or investments to Charles Stanley Direct through this affiliate link. Terms apply – Charles Stanley
“Can I use a trust to pass my property to my adult children?” – This Is Money
Average pot to purchase an annuity rises 160% to over £166,000 – Which
Fixed tariffs to beat the energy price cap – This Is Money
Get up to £100 as a welcome bonus when you open a new account with InvestEngine via our link. (Minimum deposit of £100, T&Cs apply, affiliate link. Capital at risk) – InvestEngine
The self-storage pitfall that could cost you £2,000 a year – This Is Money
How to qualify for the attendance allowance benefit – This Is Money
Homes for sale near great schools, in pictures – Guardian
Long-term gilts rise mini-special
UK government borrowing costs hit a 27-year high – BBC
BoE chief warns against ‘exaggerating’ rise in government borrowing costs – Guardian
Torsten Bell has made me want to buy bonds – The Times
Note long-dated bond yields are rising globally – Reuters via MSN
Comment and opinion
AI hype will spur investors to do the wrong thing – Behavioural Investment
Four years on, the cost-of-living crisis endures – David Smith
Europe’s small-cap golden age – Verdad
The relationship between time and money – We’re Gonna Get Those Bastards
Proof of wealth – Of Dollars and Data
The case for short-term TIPS [PDF, holds for linkers, too] – Mekata
How to never run out of money in retirement – The Times
The 4% ‘rule’ and risk – Humble Dollar
Why it’s a terrific environment for bond income – Morningstar
The benefits of not regularly checking your net worth – Financial Samurai
Not-at-all biased Coinbase makes the case for crypto [PDF] – Coinbase
At what point do passive investing principles no longer apply? – Oblivious Investor
Naughty corner: Active antics
The new currency is narrative liquidity – Groundwork [h/t Abnormal Returns]
How consumer surplus affects pricing power – Flyover Stocks
Big fund inflows can be a precursor to poor returns – Morningstar
A good memory makes you a better investor – Klement on Investing
Is Venture Capital finally starting to come back? – Institutional Investor
Multi-asset managers ‘stuck in the past’ – Trustnet
IPOs don’t really leave that much money on the table [Research] – SSRN
Kindle book bargains
Flash Boys by Michael Lewis – £0.99 on Kindle
Alchemy by Rory Sutherland – £0.99 on Kindle
The Green Budget Guide by Nancy Birtwhistle – £0.99 on Kindle
Techno Feudalism by Yanis Varoufakis – £0.99 on Kindle
Or plump for one of our investing favourites – Monevator shop
Environmental factors
Why plastic-filled ‘Neptune balls’ are washing up on beaches – BBC
Europe debates restoring wetlands for defence – Semafor
Global temperatures to remain above normal, despite La Niña… – Guardian
…with Panama’s ocean upwelling failing for first time in 40 years – BBC Wildlife
World’s largest sand battery switched on in Finland – Independent
Electric cars’ range almost halves when driving in heatwaves – This Is Money
Robot overlord roundup
Chat GPT-5: the case of the missing agent – Second Thoughts
AI and jobs, again – Noahpinion
Will AI ‘do a Bloomberg’ on private markets? – Colossus
Cloudflare’s CEO on saving the web from the AI oligarchs – Crazy Stupid Tech
AI will end the Magnificent Seven’s dominance, says fund manager – Trustnet
Not at the dinner table
The authoritarian checklist – Can We Still Govern?
America’s gun problem isn’t hard to diagnose – Garden of Forking Paths
The myths of Chinese exceptionalism – Scott Sumner
Online speech laws in need of review after Lineham arrest, says minister – BBC
UK suspends refugee family applications – BBC
Xi Jinping says it’s peace or war at China’s grand military parade – Guardian
Off our beat
UK graduates crippled by debt swap degrees for plumbing courses – Standard
Breakneck’s take on China vs the US pits engineers vs lawyers – Noahpinion
Why US capitalism is a success story like nowhere else – WSJ
Hot mic catches Xi and Putin talking organ transplants and immortality – BBC
American Football teams ranked by value on the eve of new season – CNBC
This is still your first time – Raptitude
And finally…
“Life makes you pay…everybody pays something.”
– Min Jin Lee, Pachinko
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Re: the “America’s gun problem” article, I don’t know if there’s anything new being stated in the article, but it all does bear repeating into the apparent void.
I’ve seen for myself otherwise reasonable US people on social media suddenly go into these ludicrous logical contortions when this totally insane situation is brought up. However, there seems to be no limit to the number of innocent children slaughtered to make them reconsider, it’s simply astounding.
Join the dots. Cherrie Blair. Bristol. Flats.
It’s grubby how they all aim so small.
Your Rayner stamp duty fiasco analysis is extremely kind. With her already having had one close call over council tax to have not been diligent in getting the situation double and triple checked is downright stupid at best even if she wasn’t negligent. It’s not as if in her position she wouldn’t have had easy access to plenty of folk with the necessary knowledge. Whole thing smacks of a serious lack of ability in our policy classes which explains a whole host off current affairs in UK plc.
Super links, thanks @TI. Hmmm, well there’s a can worms! Agree with your observations on complexity, competence and sad stories but can only admire your generosity wrt conspiracy I’m afraid. The hallmarks are writ large in this government’s blatant ’snouts in the trough’ attitude (Rayner being a conspicuously willing participant), possibly even worse than the last lot. Sadly conviction (as opposed to career?) politicians seem to belong to a bygone era. If you’re going to put yourself on the highest pedestal and get caught cheating by your own rules (however complicated, that all us little people have to obey) good riddance to bad rubbish.
@far_wide – our governments have a monopoly on violence. It’s just not highlighted in the MSM for obvious reasons.
Do you really think they should have all the guns ?
Stamp duty used to be mildly irksome, but they kept cranking up the rates, and fiddling with bands, and it’s ended up being by far the largest cost associated with moving and/or downsizing. The easiest way to simplify and reform it is the just undo (say) the last three dozen changes that have been made to it!
The point about property being like ISAs in Australia got me musing a little. There are often debates in the UK about the relative merits of property investing versus pensions versus ISAs. I’ve personally always steered clear of property in the BTL sense as it sounds too much like hard work, so have split between ISAs and pensions. But if there are further attacks on DC pensions (and it’s a rare budget when there aren’t) then we’ll surely see people steer more money into property given the ISA subscription limits, which might not be exactly what HMG want to be encouraging.
Stamp Duty is archaic in a digital age. Our national tax system is in dire need of simplification but the air of desperation from the Government implies yet more short term complexity and kicking the simplification can down the road once more. They had the popular mandate but collectively and, in many cases, individually lack the intellect and wisdom necessary to govern effectively.
I don’t happen to believe the sad example of Angela Rayner is about tax complexity but if it triggers a focus on simplification then at least something good will have come of it.
As Billy Connolly wryly observed “The desire to be a politician should bar you for life from ever becoming one.”
Can’t say I’ve been impressed by the first year of this government, and I say that as someone who was glad to see the Conservatives go.
Way too many own goals, including the policy u-turns. Let’s hope they make a better job of the coming Budget.
Also agree with FrequentFlyer – I’m not sure they have what it takes to improve.
Politicians lying and breaking the law is a red line for me.
I don’t mind she is a blatant hypocrite and broke a Ministerial Code. It’s quite secondary to the above for me.
This budget is going to be depressing. Please leave pensions and ISAs alone.
Interesting that property is this society’s sweet spot for malfeasance
The British don’t do the stockmarket because ignorance of this area is frightening to the average U.K. investor but “we all have a house” therefore we comfortable with buying bigger and more homes
(Similar situation in teaching “we all have kids or did have” so we are comfortable telling teachers how to teach)
Americans however do the stockmarket as well as property because they are more entrepreneurial?-another major cultural difference between them and us
Property also seems the only way to go if you have surplus wealth in U.K. as all other avenues of saving have been closed down and given severe limitations
xxd09
@xxd09 (#10):
Came across this recently that may be of interest: https://www.visualcapitalist.com/ranked-top-countries-by-stock-market-ownership/
Some of the difference between UK and mainland European countries may be down to differences in pension schemes.
@marc1485153 ‘Please leave pensions and ISAs alone.’
– Maybe they could do something positive though, e.g. like increase the pension tax free lump sum, since they’re inflating the value of it away with the current unchanging limit ?
(of course I know that will never happen, as the inflating / taxing the citizen’s wealth away is one of their core strategies).
House prices going up? That’s certainly not my experience trying to sell a central London flat, although I appreciate that central London is a different market to the rest of the UK. Yet another buyer pulled out after we refused his attempt to cut a silly amount off what was already a low offer. We will cut the price to offers over £1m next week (orignially £1.65m in Dec 2023) to see if that generates any interest. If not we will take it off the market and renew the lease. The low lease is I think a big turnoff in a buyer’s market and limits us to cash buyers. A higher lease will of course mean more SDLT will eventually be paid by the buyer.
Given that she already had a shonky record on property manipulation before this latest episode, the question with Rayner is how much more there is to come out.
She used her disabled son’s trust as an ATM, taking out the sort of liquid capital that could provide the poor lad with an income and replacing it with an illiquid 25% share of a house (or, more exactly, a purported 25% share, depending on how accurate the valuation was).
Handily this let her pay a 20% deposit on the flat in Hove. Perhaps it also means that when the boy turns 18 he’ll get more “benefits” money from the taxpayer since his trust will generate less income. This rather suggests to me that she may have had some reasonably expert advice on the matter.
Now that the trust owns 75% of the house what value should one attribute to it? How many angels can dance on the head of a pin? How will such considerations affect eventual CGT liabilities on the house? Dunno, but perhaps she has had advice on that too.
If this is malfeasance – and I am too ignorant of trust law to know – then presumably her enemies in the Labour Party will try to defer using it until she needs a further setback at some point.
As for her claim of having had bad advice, why would anyone believe her? We don’t know how many firms she paid for advice, we know only that she vaguely claims that she received some bad advice. Maybe she also received some good advice but decided that it didn’t suit her objectives and therefore that she’d ignore it. Who knows? Who can know? But I laugh at the suggestion that we should now trust her every word on the subject.
The pensions hokey cokey: it seems that with some providers you can withdraw your lump sum a week before the budget and then reverse your decision a week after if the budget turns out not to alter the tax situation. With others you can’t. Anyone know of a list, or what the situation is with aj bell? Would this be a useful and timely post on monevator?
Something like two-thirds of Australian rental properties have negative gearing/cashflow (i.e. the rental yield is lower than the cost of debt). These losses can be deducted from employment income alongside depreciation which significantly reduces the loss. People are relying on capital growth to be made whole. This tax policy only benefits owners, many of whom appear to sit in the same parliament that sets the rules they benefit from.
The impact of the Building Safety Regulator (BSR) has been more pernicious than it might appear. It’s not just the backlog and delays but they are rejecting 70% of applications and there are very poorly thought through requirements with very low cost to benefit ratios (like the requirement for two staircases). New housing construction starts in London are now at post GFC levels.