Osborne's plan to tax foreign property owners is smart politics and smart economics

Imposing capital gains tax on this increasingly resented group will gift the Treasury more easy revenue.

After stoking a new housing boom with Help to Buy, George Osborne has every intention of taking advantage of it. Sky News's Ed Conway reports this morning that the Chancellor is investigating imposing capital gains tax on foreign property owners with an announcement expected in the Autumn Statement. At present, while British citizens pay CGT at 18% or 28% when they sell a property that is not their main home, non-residents are exempt. But with foreign investors purchasing around 70% of all new builds in central London, Osborne, still burdened by a deficit that stood at £115bn last year, has spied a revenue-raising opportunity. 

The move would follow logically from the new charges already introduced by the Chancellor. Largely unnoticed, he has imposed CGT on residential properties bought through overseas companies (thus eliminating a popular loophole) as well as stamp duty of 15% - and the Treasury is pleased with the results. As the Telegraph's Benedict Brogan wrote in his column this week, "Not only did introducing a swingeing 15 per cent recurring levy on properties held by off-shore companies drive plenty of buyers to switch to pay high levels of stamp duty, but it appears a good number of wealthy foreigners are more than happy to pay the charge, enriching the Exchequer still further." He added: "Indeed, it is tempting for the Treasury to conclude that there is more to be plucked from this golden goose than initially realised. First non-doms, then company-held property, next the foreigners queuing at property fairs in Singapore and the Gulf to buy a little piece of London off-plan, with no intention of ever living there: the political case for monetising this wealth looks increasingly attractive."

It is the latter group that Osborne is targeting with his new raid on capital gains. Esate agency Knight Frank estimates that 65% of overseas buyers rent their London properties rather than live in them, using the housing market as a global reserve currency. For this reason, the move is politically astute; it targets an increasingly resented group and allows the Chancellor to claim, however implausibly, that he is ensuring the wealthy pay their fair share. 

It is also smart economics. Property taxes are easy to collect (you can't move a mansion to Geneva) and aid growth by shifting investment away from housing and into wealth-creating industries. Consequently, they are less economically harmful than taxes on consumption, income and corporations.

But one person unlikely to be impressed by Osborne's plans is Boris Johnson. The capital's mayor wrote recently in his Telegraph column: "It is true that London is now globally recognised as such a desirable city that its property is treated effectively as another asset class – a safe investment in a turbulent world. It is also true that this phenomenon has helped – I stress helped – to buoy property values and to fuel the anger of professional people who cannot live in districts where their parents grew up, and who cannot see how their kids will ever be able to afford to buy in London.

"But the answer is not to try to persecute rich foreign investors with new mansion taxes, or complicated and unenforceable taxes on the tiny proportion of homes they leave empty."

It looks as if Osborne, to quote Gordon Brown, has rejected his representations.

 

George Osborne leaves 10 Downing Street on October 7, 2013 in London. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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The boy who lies: what the Daily Prophet can teach us about fake news

The students at Hogwarts are living in an echo chamber of secrets.

They can make objects levitate, conjure up spirit animals and harness the power of invisibility. But perhaps the strangest thing about the witches and wizards of the Harry Potter universe is that despite all their magic, they still rely on old-fashioned print media for their news.

Although the Daily Prophet bills itself as “the wizarding world’s beguiling broadsheet of choice”, the reality is that its readers have no choice at all. Wizards don’t have their own television network – the risk of muggles accidentally tuning in was deemed too high – they don’t generally use the internet, and rival publications are virtually non-existent. (No, Witch Weekly doesn’t count.)

JK Rowling clearly sought to satirise the press in her portrayal of the Prophet, particularly through its poisonous celebrity journalist Rita Skeeter and her tenuous relationship with the truth. And in doing so, the author highlighted a phenomenon that has since become embedded within the muggle political landscape – fake news, and how quickly it can spread.

In the run-up to the recent French presidential election, an Oxford University study found that up to a quarter of related political stories shared on Twitter were fake – or at least passing off “ideologically extreme” opinion as fact.

While they don’t have social media at Hogwarts – probably for the better, despite the countless Instagram opportunities that would come with living in an enchanted castle – made-up stories travel fast by word of mouth (or owl.) The students are so insulated from the outside world, the house system often immersing them in an echo chamber of their peers, they frequently have no way to fact-check rumours and form rational opinions about current events.

When the Ministry of Magic flatly refuses to believe that Voldemort has returned – and uses the Prophet to smear Harry and Dumbledore – most students and their parents have no choice but to believe it. “ALL IS WELL”, the Prophet’s front page proclaims, asking pointedly whether Harry is now “The boy who lies?”

While Harry eventually gets his side of the story published, it’s in The Quibbler – a somewhat niche magazine that’s not exactly light on conspiracy theories – and written by Skeeter. He is telling the truth – but how is anyone to really know, given both the questionable magazine and Skeeter’s track record?

After Voldemort’s followers take over the Ministry, the Prophet stops reporting deaths the Death Eaters are responsible for and starts printing more fake stories – including a claim that muggle-born wizards steal their magical powers from pure-bloods.

In response, Harry and his allies turn to their other meagre sources such as The Quibbler and Potterwatch, an underground pirate radio show that requires a password to listen – useful to some, but not exactly open and accessible journalism.

Rowling is clear that Harry’s celebrity makes it hard for him to fit in at Hogwarts, with fellow students often resenting his special status. Do so many believe the Prophet’s smear campaign because they were unconsciously (or actively) looking forward to his downfall?

We are certainly more likely to believe fake news when it confirms our personal biases, regardless of how intelligently or critically we think we look at the world. Could this explain why, at the start of last week, thousands of social media users gleefully retweeted a Daily Mail front page calling on Theresa May to step down that was blatantly a poorly-edited fake?

The non-stop Hogwarts rumour mill illustrates the damage that a dearth of reliable sources of information can cause to public debate. But at the other end of the scale, the saturation of news on the muggle internet means it can also be hugely challenging to separate fact from fiction.

No one is totally free from bias – even those people or sources whose opinions we share. In this world of alternative facts, it is crucial to remember that all stories are presented in a certain way for a reason – whether that’s to advance a political argument, reaffirm and promote the writer’s own worldview, or stop an inconvenient teenage wizard from interfering with the Ministry of Magic’s plans.

Now read the other articles included in the New Statesman’s Harry Potter Week.

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