You’ve likely had your fill of responses to Wednesday’s non-budget, but here are what I hope are some slightly different takes on a couple of the Chancellor’s announcements.
Have a good weekend when you get there.
GROWTH AND HOUSING
Two separate announcements: the UK’s economic growth forecast has been slashed, and the Chancellor has scrapped stamp duty for first-time buyers on houses up to £300,000.
The key here is whether the stamp duty move will do anything to improve Britain’s weak productivity – which should be the headline, rather than the giveaway.
Britain’s productivity woes are, to a great extent, a mobility issue. So argues the Adam Smith Institute, in a report published last month entitled “Scrap stamp duty to get Britain moving and generate £10bn of economic growth”. Stamp duty, the argument goes, stops people moving for work and keeps older people in houses that are too large for what they need.
Philip Hammond went on to pledge (again) 300,000 new homes a year and started talking about garden towns (downgraded, plainly, from garden cities, which is what they were being called last time around).
But none of this is freeing up the housing market – it’s just more of the same old central planning. We’ll end up with entire towns no-one really wants to live in populated with expensive identikit boxes with tiny windows. For supply to go up and prices to come down, we need serious reform of the planning system, homes on the Green Belt (building on just 3.7 percent would mean 1m houses) and heavy decentralisation. Local governments should have control of the taxes they raise, while local residents could be compensated by developers for the added strain on public services (which could do with some decentralisation themselves).
And stamp duty – even though it will raise house prices in the short term because demand will increase – should be scrapped across the board.
Do check out the ASI’s work on housing (and other things, for that matter) because they have some well thought-out solutions to things government persistently gets wrong.
DRIVEN BY THE GREEN LOBBY
There will be driverless cars on Britain’s roads by 2021, which brings me closer to never having to do the school run. The government has pledged £75m for AI, £400m for electric car charge points and £100m to encourage the purchase of clean fuel cars.
Some of this cash will help get our infrastructure ready for the supposed driverless revolution; some of it, like all subsidisation, will just make life a little more comfortable for affluent people. Think about the cost to serve net-metered solar customers being passed on to those who can’t afford to have panels fitted in the first place.
Ignoring the fact that less than one quarter of Britons say they would choose to ride in a driverless car (that’s from a YouGov poll out this week), there are still some good debates to be had, like whether they will mean the end of public transport. A friend of mine has a vision of government-owned autonomous buses, while I assume that, having a vehicle you can rent out (as a car or a battery) will open up access and, therefore, ownership. And with no stopping distance needed, vehicles can lock together and save space, meaning more of us can be on the road at once.
Perhaps we should spend more time and money getting petrol cars even cleaner and safer. One company worth looking at on this front is Camcon Automotive in Cambridge. You might disagree that there’s any point continuing to bet on the 160 year-old invention that is the combustion engine. But electric cars can still only go for around 100 miles, take 6-12 hours to charge and are too expensive for most people. Is the government right to continually laud them as the gateway to a driverless future?
News broke yesterday, incidentally, that Tesla has completed the installment of the world’s largest lithium-ion battery (it will store enough energy to power 30,000 homes for about an hour) and will switch it on in a few days.
WHAT ABOUT EIS?
We knew the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) would get some attention in the Autumn Budget, and many of us were fidgety because we know the schemes were designed as temporary measures to help ignite private investment in startups.
However, the headline was a beefing up of the tax relief. EIS investment limits will double from £1m to £2m, provided the investor is putting money into “knowledge-intensive companies”. These are firms that, for instance, have been spun out of a university, are high-tech or focus on life sciences. Much of the criteria focuses on the amount of R&D they do. Moreover, the amount a high-tech firm with the potential for fast growth can receive through an EIS or venture capital trust (VCT) has also been doubled to £10m.
But other rules have been tightened. An investor holding shares in an EIS-qualifying company cannot now buy more shares in that same company and get the relief. And a new “risk to capital” test will see companies having to be deemed eligible by HMRC to qualify for EIS, SEIS and VCTs. The Treasury wants to ensure that the schemes are not used in a way where the tax relief itself provides all or most of the benefit for the investor, but only for genuine growth companies. A difficulty may arise, however, for firms that come under the “knowledge intensive” bracket, but are very high risk, so don’t make the HMRC cut.
The (pleasantly surprising) EIS news was part of a £20bn “action plan” unveiled by the Chancellor to unlock more patient capital for scale-up businesses. There was a lot more to it, but we’ll come back to the subject another week.
WHAT’S PLAYING AT OFF3R HQ?
This week, the office stereo was voiced by Guy Raz and his inspiring “How I Built This” podcast, where we got the scoop on two childhood friends, Ben Cohen & Jerry Greenfield. Hearing how they went from university drop-outs to being advocated as creators the “best ice-cream in America” by Time Magazine.
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