If you want to win the heart of the average British voter, it helps if house prices are going up. It's the one measure of economic prosperity that almost every homeowner genuinely cares about or understands.
Politicians realise this only too well for example, the best line of attack the Tories could come up with in the recent Rochester by-election was to warn that a win for Ukip would hit house prices in the region. The Tories still didn't win but it might conceivably have reduced theUkip majority.
In the old days, juicing prices ahead of an important vote used to be easy the chancellor had control of interest rates and so could give them a little tweak before the election rolled around and hopefully get a boost from falling mortgage rates and rising prices.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Nowadays, of course, the central bank has its nominally independent hand on the tiller. And in any case, interest rates have been at near-zero levels for years.
So it's trickier you have to get a bit more creative. But Chancellor George Osborne looks like he managed to pull it off in his latest Autumn Statement. The headline-grabber was the change in the way stamp duty is levied.
Before now, stamp duty was a slab' system. If you paid £249,999 for a house, you'd pay 1% £2,499.99 in stamp duty. But if you paid £250,001, you'd pay 3% of that just over £7,500.
Now it's more like income tax. You won't pay anything on the first £125,000, then 2% on the portion up to £250,000, and so on, up to 12% on prices over £1.5m. Apparently, around 98% of buyers will pay less than under the old system, saving an average of around £4,500.
The only people who will pay more are the sorts of buyers who'll be fretting about the introduction of Labour's proposed 'mansion tax'. On top of that, this move dispenses with a widely-hated tax that people have wanted politicians to reform for years.
So far, so good. But what's really smart about it is that the average house buyer won't really save anything like £4,500. Under the old system, no one in their right mind would ever pay £255,000 for a house, given that the stamp duty differential was so substantial that £250,000 barrier was a massive sticking point for prices.
However, under the new system, buyers will be a lot more willing to offer just that couple of thousand more for a £249,999 house they really want, particularly in any sort of competitive market. So the chances are, any tax savings will be split between buyers and sellers and knowing the UK property market, it's the sellers who will get the lions' share.
So Osborne's done nothing to make houses more affordable. But he has pushed through a policy that promises to tax wealthy (quite possibly foreign) house buyers more heavily than the rest, and that also gives house prices (outside London at least) that little leg up for the feel-good factor. What politician on the make could ask for more?
-
Cash in on the growth prospects of Europe's companiesOpinion Marcel Stötzel, co-portfolio manager of the Fidelity European Trust, selects three stocks
-
Is the AI boom another dotcom bubble?25 years on from the dotcom bubble bursting, is it time for investors to consider the sustainability of the AI boom in the stock market?
-
Inflation may be slipping but there is still plenty of misery aheadEditor's letter Inflation may be a little lower than last month as the prices of petrol and diesel fall back, but it remains structural and long-term, says Merryn Somerset Webb. And there are no painless solutions.
-
Beat the cost of living crisis – go on holidayEditor's letter As inflation rages, energy bills soar and the pound tanks, what’s a good way to save money this winter? Go on holiday, says Merryn Somerset Webb.
-
How capitalism has been undermined by poor governanceEditor's letter Capitalism’s “ruthless efficiency” has been undermined by poor governance, a lack of competition and central banks’ over-enthusiastic money printing, says Andrew Van Sickle.
-
The biggest change in the last 17 years – the death of the “Greenspan put”Editor's letter Since I joined MoneyWeek 17 years ago, says John Stepek, we’ve seen a global financial crisis, a eurozone sovereign debt crisis , several Chinese growth scares, a global pandemic, and a land war in Europe. But the biggest change is the death of the “Greenspan put”.
-
Things won't just return to normal – that's not how inflation worksEditor's letter You might think that, if inflation is indeed “transitory”, we just need to wait and everything will return to “normal”. But this is a grave misunderstanding of how inflation works, says John Stepek.
-
The public may have reached its limit for tax risesEditor's letter The UK tax burden is now at a 70-year high. And, while there may be some reason to hold off on cuts right now, taxes are too high because the state tries to do too much. Perhaps it should do less, says Merryn Somerset Webb.
-
Things may look bad – but they’re not that badEditor's letter The UK faces plenty of problems, says John Stepek. But things may not be as bad as they look. Our debt to GDP ratio is lower than many other major economies, and high employment means a healthy tax take. That gives the new chancellor room to cut taxes so people can keep more of their own money.
-
Car hire and the strangeness of the post-pandemic economyEditor's letter A global shortage of hire cars and unusually high hotel occupancy rates sum up the post-pandemic global economy in a nutshell, says Merryn Somerset Webb, with enhanced demand meeting restricted supply.
