Osborne has a mini-mansion tax already up his sleeve

Coalition negotiations over the Autumn Statement are fraught but there is one wheeze that could help the Chancellor.

After November’s rash of mini-elections, the next big item on the political calendar is the Chancellor’s Autumn Statement on the economy – on 5 December. (Yes, it is autumn. Winter formally begins with the solstice, but that’s a debate for a different blog.)

The weak performance of the economy means new devices are required if George Obsorne is to show sufficient progress towards his key fiscal targets. That obligation has forced the coalition into another tricky round of tax and cut negotiations. Broadly speaking, the Chancellor wants the lion’s share of the savings to come from the welfare budget. The Lib Dems accept that the benefits bill is too big to be spared but they insist on some form of wealth tax to spread the burden of pain. Their preferred device is the “mansion tax” – a levy on posh real estate.

There are a number of obstacles to this. For one thing, the Chancellor appeared to rule it out before his party’s annual conference. But I’m told by a number of sources that the Prime Minister is the bigger obstacle to wealth taxes of any kind. Perhaps the Chancellor was stung by his misreading of the politics around the 50p income tax rate into recognising the public appetite for conspicuous contributions from those at the very top. David Cameron, by contrast, is said to be stubbornly hostile – something which is causing the Lib Dems considerable frustration.

Usually, people around Nick Clegg are careful not to criticise the Prime Minister too much, saving their darkest whispers for moans about Tory backbenchers who are perceived to be sabotaging the coalition project. The tone now seems to be changing as top Lib Dems mutter about Cameron’s “Shire Tory” instincts and impulse to protect “his rich friends”. In the last couple of weeks I have heard language from people very close to Clegg that echoes the Labour charge that Cameron is out of touch, doesn’t understand how much ordinary people are suffering and is the product of a rarefied, gilded world where his priorities have been warped. As coalition mood music, this is new.

Cameron is also steadfastly refusing to consider any cut in pensioner benefits, having made a “read my lips”-style pledge to protect them in the election campaign. As one government strategist puts it, the PM is terrified of a “split-screen moment” in 2015, with the sequence where he flatly denied he would raid pensioner entitlements in 2010 run alongside some mealy-mouthed U-turn. He will do anything to avoid that hazard.

That doesn’t leave much room for manoeuvre. A freeze in the overall level at which benefits are paid (experienced as a cut when inflation is rising) is likely to do a fair amount of the fiscal work. Another idea floating around is to limit the number of children for whom families can claim child benefit. Iain Duncan Smith has floated a cap of two. The Lib Dems seem divided on this. Some hate the whole idea, thinking it redolent of Victorian-era horror at the idea of poor people breeding. Others think it might be necessary but resist the IDS level. One figure close to Clegg describes a two children-per-family benefit rule as “a bit Chinese” – a reference to Beijing’s one-child-per-family rule.

There’s much more of this kind of argument (and briefing) to come in the weeks ahead. I’m told by someone intimately involved in the negotiations that they will “go to the wire”. So I’ll save some more observations for another blog.

One final thought. Someone in Westminster who spends a lot of time looking at fiscal policy, among other things, yesterday drew my attention to a little-advertised consultation the Treasury carried out over the summer.

It stems from a line in the 2012 Budget, in which the Chancellor promised to raise some money by taxing property transactions carried out by “non natural persons”. That means, roughly speaking, companies, investment schemes and “non dom” individuals who are resident abroad for tax purposes. The relevant section of the Budget speech is as follows:

A major source of abuse – and one that rouses the anger of many of our citizens – is the way some people avoid the stamp duty that the rest of the population pays, including by using companies to buy expensive residential property. I have given plenty of public warnings that this abuse should stop.

Now I'm taking action. I am increasing the Stamp Duty Land Tax charge applied to residential properties over £2 million bought into a corporate envelope.

The charge will be 15%. And it will take effect today.

We will also consult on the introduction of a large annual charge on those £2 million residential properties which are already contained in corporate envelopes. And to ensure that wealthy non-residents are also caught by these changes, we will be introducing capital gains tax on residential property held in overseas envelopes.

Then go to section 2.12 of the consultation document and you get some more detail on the “annual charge” on properties worth more than £2m owned by “non natural persons”, due to be introduced next year. The idea is to make it less attractive for the owners of high value residencies to hold them in corporate vehicles. That in turn should make it easier to charge the new 15 per cent stamp duty rate and capital gains tax on any transactions involving those properties.

I can’t begin to speculate about how much money the Treasury would realistically expect to make from this device. I would, however, hazard a guess that it can be spun quite heavily as a tax clampdown on rich foreign tax dodgers and a kind of mansion tax. That would, of course, mean essentially re-announcing something that has already been signaled, but this government is as good at serially re-announcing things as the last one was. Better even.

To form part of a credible “wealth taxes” story it will have to be packaged up with something much more substantial, but it has Osborne wheeze written all over it. The consultation has been done, it hits “foreign millionaires” and “mansions” and it’s been flagged up already so can be squared with the PM. From the Chancellor’s point of view, as headline-nabbing political tactic, what’s not to like?

Chancellor George Osborne speaks at the Conservative conference in Manchester last month. Photograph: Getty Images.

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

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Erdogan’s purge was too big and too organised to be a mere reaction to the failed coup

There is a specific word for the melancholy of Istanbul. The city is suffering a mighty bout of something like hüzün at the moment. 

Even at the worst of times Istanbul is a beautiful city, and the Bosphorus is a remarkable stretch of sea. Turks get very irritated if you call it a river. They are right. The Bosphorus has a life and energy that a river could never equal. Spend five minutes watching the Bosphorus and you can understand why Orhan Pamuk, Turkey’s Nobel laureate for literature, became fixated by it as he grew up, tracking the movements of the ocean-going vessels, the warships and the freighters as they steamed between Asia and Europe.

I went to an Ottoman palace on the Asian side of the Bosphorus, waiting to interview the former prime minister Ahmet Davu­toglu. He was pushed out of office two months ago by President Recep Tayyip Erdogan when he appeared to be too wedded to the clauses in the Turkish constitution which say that the prime minister is the head of government and the president is a ceremonial head of state. Erdogan was happy with that when he was prime minister. But now he’s president, he wants to change the constitution. If Erdogan can win the vote in parliament he will, in effect, be rubber-stamping the reality he has created since he became president. In the days since the attempted coup, no one has had any doubt about who is the power in the land.

 

City of melancholy

The view from the Ottoman palace was magnificent. Beneath a luscious, pine-shaded garden an oil tanker plied its way towards the Black Sea. Small ferries dodged across the sea lanes. It was not, I hasten to add, Davutoglu’s private residence. It had just been borrowed, for the backdrop. But it reminded a Turkish friend of something she had heard once from the AKP, Erdogan’s ruling party: that they would not rest until they were living in the apartments with balconies and gardens overlooking the Bosphorus that had always been the preserve of the secular elite they wanted to replace.

Pamuk also writes about hüzün, the melancholy that afflicts the citizens of Istanbul. It comes, he says, from the city’s history and its decline, the foghorns on the Bosphorus, from tumbledown walls that have been ruins since the fall of the Byzantine empire, unemployed men in tea houses, covered women waiting for buses that never come, pelting rain and dark evenings: the city’s whole fabric and all the lives within it. “My starting point,” Pamuk wrote, “was the emotion that a child might feel while looking through a steamy window.”

Istanbul is suffering a mighty bout of something like hüzün at the moment. In Pamuk’s work the citizens of Istanbul take a perverse pride in hüzün. No one in Istanbul, or elsewhere in Turkey, can draw comfort from what is happening now. Erdogan’s opponents wonder what kind of future they can have in his Turkey. I think I sensed it, too, in the triumphalist crowds of Erdogan supporters that have been gathering day after day since the coup was defeated.

 

Down with the generals

Erdogan’s opponents are not downcast because the coup failed; a big reason why it did was that it had no public support. Turks know way too much about the authoritarian ways of military rule to want it back. The melancholy is because Erdogan is using the coup to entrench himself even more deeply in power. The purge looks too far-reaching, too organised and too big to have been a quick reaction to the attempt on his power. Instead it seems to be a plan that was waiting to be used.

Turkey is a deeply unhappy country. It is hard to imagine now, but when the Arab uprisings happened in 2011 it seemed to be a model for the Middle East. It had elections and an economy that worked and grew. When I asked Davutoglu around that time whether there would be a new Ottoman sphere of influence for the 21st century, he smiled modestly, denied any such ambition and went on to explain that the 2011 uprisings were the true succession to the Ottoman empire. A century of European, and then American, domination was ending. It had been a false start in Middle Eastern history. Now it was back on track. The people of the region were deciding their futures, and perhaps Turkey would have a role, almost like a big brother.

Turkey’s position – straddling east and west, facing Europe and Asia – is the key to its history and its future. It could be, should be, a rock of stability in a desperately un­stable part of the world. But it isn’t, and that is a problem for all of us.

 

Contagion of war

The coup did not come out of a clear sky. Turkey was in deep crisis before the attempt was made. Part of the problem has come from Erdogan’s divisive policies. He has led the AKP to successive election victories since it first won in 2002. But the policies of his governments have not been inclusive. As long as his supporters are happy, the president seems unconcerned about the resentment and opposition he is generating on the other side of politics.

Perhaps that was inevitable. His mission, as a political Islamist, was to change the country, to end the power of secular elites, including the army, which had been dominant since Mustafa Kemal Atatürk created modern Turkey after the collapse of the Ottoman empire. And there is also the influence of chaos and war in the Middle East. Turkey has borders with Iraq and Syria, and is deeply involved in their wars. The borders do not stop the contagion of violence. Hundreds of people have died in the past year in bomb attacks in Turkish cities, some carried out by the jihadists of so-called Islamic State, and some sent by Kurdish separatists working under the PKK.

It is a horrible mix. Erdogan might be able to deal with it better if he had used the attempted coup to try to unite Turkey. All the parliamentary parties condemned it. But instead, he has turned the power of the state against his opponents. More rough times lie ahead.

Jeremy Bowen is the BBC’s Middle East editor. He tweets @bowenbbc

This article first appeared in the 28 July 2016 issue of the New Statesman, Summer Double Issue