51乱伦

There were two major economic updates in the space of 36 hours last week and neither had any discernible impact on the UK property market.

Inflation figures were largely as expected on Wednesday and the Bank of England surprised nobody by leaving the bank rate unchanged on Thursday. 

Financial markets shrugged their shoulders, with the five-year swap rate opening trading on Monday and Friday at virtually identical levels.

Instead, the real of the last seven days was that the Office for Budget Responsibility (OBR) could downgrade its UK productivity forecast at the Budget on 26 November.

Why does that matter for the property market?

In simple terms, a downgrade means Rachel Reeves would have to find more money to plug the fiscal hole and property taxes could become a more credible target.

The story was the sort of leak you expect from the Treasury to prepare the ground ahead of the Budget, according to a former Downing Street official speaking on the latest episode of the .

James Nation, managing director of UK politics at consultant Forefront Advisers, was formerly a special advisor to Rishi Sunak as Chancellor before becoming deputy head of the Number 10 Policy Unit.

Other topics covered in the podcast include the impact of the Labour deputy leadership race on economic policy, how secure Kier Starmer is and why Treasury officials now track their Bloomberg terminals more closely.

Whirling into Action

鈥淚 think this is Treasury and special advisors whirling into action,鈥� said James in relation to the OBR speculation. 鈥淭he government has probably been told privately or at least been given indications that a downgrade is on the cards. And they'll be thinking, let's get ahead of it now, let's blame it on the last lot.鈥�

We will discover the size of any downgrade on Budget Day, but what would a lower forecast mean?

鈥淎 0.1 percentage point downgrade means Rachel Reeves needs to find about £9 billion,鈥� said James. 鈥淚f that become 0.2 percentage points, that goes up to £18 billion. That means the Chancellor is going to have to consider doing some more politically controversial stuff.鈥�

The list of possibilities includes changes to stamp duty, capital gains tax on residential property, re-banding council tax and levying National Insurance on rental income, if recent media speculation is to be believed.

Property Tax Rumours

In relation to the property tax rumours, which we explored in more detail here, James says scrapping stamp duty and replacing it with a sellers鈥� tax and re-banding council tax 鈥渇eels like a tall order鈥�.

鈥淭he revenue foregone from stamp duty in the early years would be a problem and I think that sort of full-scale tax reform is disruptive. It is a bit 鈥榥ovel and contentious鈥� to use Treasury language.鈥�

What about charging capital gains tax on main residences above a certain price point, an idea that was also floated?

鈥淚 think it's very tricky. I see this as similar to how the British public think about inheritance tax. It is uniformly unpopular even though the vast majority of the public won't qualify and that鈥檚 because of the principle.

鈥淵ou'd be saying to someone that in theory, if you improve the state of your property, there is a world in which the taxman would be able to come and take away some of that gain. That is a hard political sell.鈥�

Annual versus Transactional

However, he believes charging National Insurance on rental income fits the philosophy of individuals like Torsten Bell, the former chief executive of the Resolution Foundation think tank, who is helping to draft the Budget.

鈥淭orsten Bell and others are sympathetic to broadening the base on national insurance and you could well see that coming in the Budget,鈥� said James, referring to National Insurance generally. However, the government would be wary of squeezing rental supply further because it could drive rents and inflation higher, he said.

He believes a 鈥渓imited revaluation of properties in higher council tax bands鈥� could be proposed as it鈥檚 something that has been looked at by previous administrations.

It would also be more straightforward than overhauling stamp duty or capital gains tax.

鈥淭he pull towards the (tax) status quo gets stronger, the weaker you feel. This is not a confident government that's just won a majority coming in with their first budget. This is a government that I'm sure will have to do some quite big things simply because of the arithmetic, but also just needs this budget to go well. It means the scope for bolder, riskier, more radical options is slightly diminished.鈥�

We will find out how diminished in nine weeks鈥� time.