BoE Base Rate, What if...

[turbobloke]

While appreciating the OP 'what if' and not wishing to take the thread off on a tangent, what if the BoE base rate went negative? It's been that way with Sweden and with the hugely successful ECB for a year or two and Japan has gone the same way.

[gibbon]

uk CPI is at 0.5 year on year. RPI is at 1.6% year on year. Not big numbers.

[JagLover]

Derek Chevalier said:

We have plenty of inflation, but this is not picked up on official measures

This

CPI inflation is supposed to measure the cost of living. Hence why pensions are raised in line with it.

[Murph7355]

Adam Ansel said:

We have massive house price inflation, our nation's biggest problem. The cost of a roof over a person's head is now a huge % of their income. Thus seriously eroding life quality for many millions.
The ONLY answer is a big relaxation of planning rules.

It's not the only answer at all. It's a lazy answer, and one that potentially exacerbates other problems (schools and health care for example). Every input into this "problem" (multiple property ownership; dormant properties; salaries; regional loading of demand; etc) needs looking at.

And the main "problem" in terms of house price inflation is in a small area (or small pockets of areas) of the country.

[Esseesse]

Adam Ansel said:

The ONLY answer is a big relaxation of planning rules.

There are plenty of other answers.

[JagLover]

Esseesse said:

Adam Ansel said:

The ONLY answer is a big relaxation of planning rules.

There are plenty of other answers.

There are plenty of other answers that can help mitigate the inevitable effect of constraining the supply of land where building is allowed in a country with both a rising population and smaller household sizes, but none that tackle the fundamental reason for the rise.

Compare the cost of land as a proportion of the sales value of a house in 1947 (when the current planning regulations started) and now.

[Mr Whippy]

In a world where economic growth is slowing and/or reversing then the debts and leverage we all carry has to unwind at some point.

But before it does, we'll have our wealth raided as much as is possible before reality bites.

Things that will happen eventually.

1. A crash.

2. Helicopter money and a debt crash/rapid inflation.


At that point then we can move forward again because debts have been written off one way or another, and we can move forward again getting new debts. But this time we'll have learned our lessons and won't borrow too much we promise

Interest rates can then rise.


Sadly going through that won't be nice one way or another. GDP boosters and distractions like wars are probably what we'll have to put up with.

[edh]

JagLover said:

Esseesse said:

Adam Ansel said:

The ONLY answer is a big relaxation of planning rules.

There are plenty of other answers.

There are plenty of other answers that can help mitigate the inevitable effect of constraining the supply of land where building is allowed in a country with both a rising population and smaller household sizes, but none that tackle the fundamental reason for the rise.

Compare the cost of land as a proportion of the sales value of a house in 1947 (when the current planning regulations started) and now.

Which is why Land Value Tax is the answer (I know I sound like a stuck record on this, but it's such an elegant solution)

[Gecko1978]

BigLion said:

So basically 15 years experience have taught you that some banks were operating beyond their means pre credit crunch vis-a-via a shock scenario - sorry but no st Sherlock.

See if you knew as you imply they were operating beyond their means then you would also know they were breaking the law....funny I dont recall anyone being sent to jail.

The key example is always NR who pre there collapse said to share holders they were sorry they had not managed to push lending to its 8% capital limit. So even they were not operating beyond there means though its fair to say like many they were not operating responsibly. Your car might do 150 mph but you would not drive it at that speed all the time. Which I guess some banks effectively did.

Re a shock having worked on varouse securitisations there was always a margin built in to cover defualts then beyond that profit an beyond that the funding of that product which was often from market sources. The crash as you know was a result of default margins profit margins and then the ability just to service the debt all being wiped out by the unprecedented scale of the defualts.

I will allow here that many could see this was a bad thing about to happen but when your on the gravy train you dont want to jump off too early etc.


I understand risk in markets and can foresee what might happen if rates rose to 5% but I cant say for certain the exact impact an nor can you hence its not helpful to mock others who don't work in same industry or who do but have a different view to you.

[turbobloke]

edh said:

JagLover said:

Esseesse said:

Adam Ansel said:

The ONLY answer is a big relaxation of planning rules.

There are plenty of other answers.

There are plenty of other answers that can help mitigate the inevitable effect of constraining the supply of land where building is allowed in a country with both a rising population and smaller household sizes, but none that tackle the fundamental reason for the rise.

Compare the cost of land as a proportion of the sales value of a house in 1947 (when the current planning regulations started) and now.

Which is why Land Value Tax is the answer (I know I sound like a stuck record on this, but it's such an elegant solution)

With several inelegant problems attached! In practice it would just be yet another tax, not a replacement tax, politicians never change their tax spots. It would create new distortions in the property market. Unlike other countries, decisions on use of land are made by planners not owners, and apart from any other implications some say (The Stig may also say) that this gives rise to legal uncertainties not to mention treating different circumstances the same way when one size does not fit all.

Full credit for perseverance though

[anonymous-user]

edh said:

Which is why Land Value Tax is the answer...

I agree. Especially if the question is; how can we now fvck everyone who has anything left after income tax.

Edited by anonymous-user on Monday 25th April 14:18

[Jockman]

[JagLover]

turbobloke said:

With several inelegant problems attached! In practice it would just be yet another tax, not a replacement tax, politicians never change their tax spots. It would create new distortions in the property market. Unlike other countries, decisions on use of land are made by planners not owners, and apart from any other implications some say (The Stig may also say) that this gives rise to legal uncertainties not to mention treating different circumstances the same way when one size does not fit all.

Full credit for perseverance though

If you were starting from scratch, and with far more limited planning constraints, a tax on the unimproved value of land would encourage the most efficient use of land.

With the current UK system it would just be another tax.

[Murph7355]

edh said:

Which is why Land Value Tax is the answer (I know I sound like a stuck record on this, but it's such an elegant solution)

We should just have done with it and tax air. Free meters for everyone (that cover both mouth and nose to capture all demographics) and add 1p per litre tax to it. Job done, no one can escape it.

[JagLover]

Murph7355 said:

We should just have done with it and tax air. Free meters for everyone (that cover both mouth and nose to capture all demographics) and add 1p per litre tax to it. Job done, no one can escape it.

In principle there is no more fundamental objection to a LVT than there is to taxes on income or consumption. The idea has been championed by a number of famous economists. In fact in pre-modern times the majority of taxation often came from taxes on land.

The issue is that the rigid planning system in the UK means that the efficiency gains associated with LVT (that make it superior to taxes which distort or reduce economic activity) will not be realised.

[turbobloke]

JagLover said:

turbobloke said:

With several inelegant problems attached! In practice it would just be yet another tax, not a replacement tax, politicians never change their tax spots. It would create new distortions in the property market. Unlike other countries, decisions on use of land are made by planners not owners, and apart from any other implications some say (The Stig may also say) that this gives rise to legal uncertainties not to mention treating different circumstances the same way when one size does not fit all.

Full credit for perseverance though

If you were starting from scratch, and with far more limited planning constraints, a tax on the unimproved value of land would encourage the most efficient use of land.

With the current UK system it would just be another tax.

It could be a better approach than it would be now, if we were starting from scratch, but we're well beyond scratch as you acknowledge (implicitly).

[Mr Whippy]

fblm said:

edh said:

Which is why Land Value Tax is the answer...

I agree. Especially if the question is; how can we now fvck everyone who has anything left after income tax.

Edited by fblm on Monday 25th April 14:18

That should make our small business farming even more competitive then

So while the wealthy utilise land as a well performing wealth store and make it's value go up because it's value is going up, so it's a good investment... it actually just means that only the wealthy can afford land. Great.


Remember that whatever happens, while the current type of government we have exists, the tax/policy screws will turn to enrich the few... and I'm probably right in saying that is no one on the PH forums.


What this country needs wrt land/farming, is lots of social housing that is built with quality allotments of land that is locked into public ownership for 200yrs+

Just build build build. Print money and build. Rent them out and use it to service debts today, and give a whole generation a chance to have a decent enough house to have a family in and grow some of their own food.

Will it happen? No.

Why? Because we live in a crony capitalist society.

Worrying about interest rates when you know you're gonna be screwed and shafted in any case is thus pointless.

[edh]

turbobloke said:

With several inelegant problems attached! In practice it would just be yet another tax, not a replacement tax, politicians never change their tax spots. It would create new distortions in the property market. Unlike other countries, decisions on use of land are made by planners not owners, and apart from any other implications some say (The Stig may also say) that this gives rise to legal uncertainties not to mention treating different circumstances the same way when one size does not fit all.

Full credit for perseverance though

You'll see the light one day

Would replace SDLT, council tax, business rates (which are similar to LVT), & enable income tax rates & VAT rates to be reduced. It's not a "tinkering at the edges" tax change, but a fundamental re-ordering, which is why it could be used as I described rather than just another tax. The general principle is tax income & consumption less, tax land more.

It would remove distortions in the land market... encouraging productive use not speculation and capturing planning gains, also addressing evasion by offshore and / or crooked businesses (you can't hide land).

[turbobloke]

edh said:

turbobloke said:

With several inelegant problems attached! In practice it would just be yet another tax, not a replacement tax, politicians never change their tax spots. It would create new distortions in the property market. Unlike other countries, decisions on use of land are made by planners not owners, and apart from any other implications some say (The Stig may also say) that this gives rise to legal uncertainties not to mention treating different circumstances the same way when one size does not fit all.

Full credit for perseverance though

You'll see the light one day

edh said:

Would replace SDLT, council tax, business rates...

Except that, knowing politicians, it could replace another tax or taxes, but in practice that doesn't mean it would, given the tax-happy nature of our politicians. Also in my weighing of the pros and cons, the other cons still outweigh the other pros, so I doub't I'll see it differently any time soon

[anonymous-user]

Mr Whippy said:

That should make our small business farming even more competitive then

So while the wealthy utilise land as a well performing wealth store and make it's value go up because it's value is going up, so it's a good investment... it actually just means that only the wealthy can afford land. Great.


Remember that whatever happens, while the current type of government we have exists, the tax/policy screws will turn to enrich the few... and I'm probably right in saying that is no one on the PH forums.


What this country needs wrt land/farming, is lots of social housing that is built with quality allotments of land that is locked into public ownership for 200yrs+

Just build build build. Print money and build. Rent them out and use it to service debts today, and give a whole generation a chance to have a decent enough house to have a family in and grow some of their own food.

Will it happen? No.

Why? Because we live in a crony capitalist society.

Worrying about interest rates when you know you're gonna be screwed and shafted in any case is thus pointless.

feel better?