6th December 2005

A £3bn property tax giveaway that could have led to the end of affordable housing in Gloucestershire has been halted in it's tracks after a dramatic U-turn by the chancellor. Greens are celebrating the end of a controversial tax break, that would from April next year, have allowed the well-off to put their properties into a Self-Invested Personal Pension (Sipp) effectively tax-free (i).

Philip Booth, a spokesperson for the Gloucestershire Green party said: "This is a victory for common sense. It is quite extraordinary that Labour ever got this far with a measure to give the rich, monster-size tax breaks so that they can buy second homes at 51% off the price of a property! This would have led to prices for holiday homes and buy-to-let properties soaring and making it even more impossible for first-time buyers in the county to afford a home. This would have been the final nail in the coffin for affordable homes in Gloucestershire."

Philip Booth added: "Sadly all this detracts from the fact that all the main parties seem scared to tax the rich. Wealth inequality is rising and contributes to ill-health, crime and other social problems and even those who are materially better off are not always happier. We are far too soft on the super-rich and the fact that these tax breaks could even be considered is disturbing. It is a great pity that the Chancellor's pre-budget speech fails again to seriously tackle inequality or get serious about climate change."

Philip Booth said: "Where is the tax on 4x4s? Or energy efficient initiatives for homes and businesses? We must start moving towards Greener living."



Notes:

(i) News release from Stroud District Green party earlier this year:

"End of affordable housing in Gloucestershire"

Labour tax breaks for rich mean affordable housing could completely disappear in Gloucestershire - Greens say this is "Most unjust tax yet"

The Royal Institution of Chartered Surveyor have releases a report saying that new pension rules, allowing well-off individuals to buy residential property at a fraction of its real cost, could prompt investors to embark on a £24bn spending spree on buy-to-lets and second homes (a).

Cllr Sarah Lunnon, a Green party District Councillor in Stroud said: "This is one of the most absurd and unjust tax policies. Labour are already talking about changes and possible cuts to Incapacity Benefit which hit some of the poorest in Gloucestershire (b) yet here they are more than happy to give the rich monster-size tax breaks so that they can buy second homes at 51% off the price of a property! This is likely to lead to prices for holiday homes and buy-to-let properties to soar making it even more impossible for first-time buyers in the county to afford a home. This could be the final nail in the coffin for affordable homes in Gloucestershire."

RICS found that a higher-rate taxpayer from April next year would be able to buy a £150,000 house with just £60,000 of their cash, because this would be topped up with £40,000 in tax relief, and they would also be able to borrow up to 50% of the value of the pension fund - in this case, up to £50,000.

Philip Booth, a Gloucestershire Green party spokesperson added: "The average house price in Gloucester is £143,000 and in Stroud £219,000. These are crazy prices. Over 2,500 people are on Stroud District's housing waiting lists alone and the figure is likely to be much higher. A Dorset study showed only one in 6 people in housing need were on the waiting list. We urgently need more affordable housing not less. This must be Labour's most unjust tax yet."

Philip Booth concluded: "Labour must scrap this unfair policy and start insisting the planning system is used to ensure that any new housing development has a higher proportion of affordable houses, fully integrated into the scheme (c)."


Notes from earlier news release:

(a) The Royal Institution of Chartered Surveyors' predictions will fuel the debate over a new tax break that will allow well-off individuals to buy residential property at a fraction of its real cost. From April, holders of self-invested personal pensions (Sipps) can spend their pension pots on buy-to-let and holiday homes tax-free. The RICS report said the new rules could trigger 50,000 more property purchases a year. It assumes a typical buyer would spend £150,000 - the average British house price recorded by the Land Registry. That suggests that over three years, investors could spend up to £24bn tax-free on residential property.
See: http://www.guardian.co.uk/business/story/0,,1601284,00.html

(b) See Green party news release: www.glosgreenparty.org.uk

(c) There are currently not enough homes to go round as it is without making it even more profitable to buy a second house. It is unclear exactly how this legislation will impact on the rental sector - it may lead to more rental properties but if there are less homes available then that means higher prices. Higher prices means larger rents. Larger rents means more money being spent on Housing Benefit and that means more spending on welfare benefits. So not only does the taxpayer pay a huge subsidy to wealthy people who want to buy a second home but they also end up spending more going to Housing benefits. Labour once had great social policies, we now know from there latest plans to further privatise health and education, that these policies are long gone. This is yet another example of Labour favouring the rich at the expense of the poor.