John Charcol comments on pre-Budget

Ray Boulger, senior technical manager at John Charcol has welcomed some of the news form the Budget but says there is the usual missed opportunities.

Boulger comments: The plight of the first-time buyer has dominated the personal finance and news pages, and indeed the mortgage industry, for some time now. A lack of first-time buyers reduces liquidity in the market and addressing this has been a priority for the government. After all, less liquidity means fewer transactions and fewer transactions means less tax for the Chancellor.

However, whilst it is ok in principal, the devil is always in the detail. The questions that need answering are what exactly will the criteria be to decide who has access to the shared equity scheme and why is the government being so parsimonious with the funding helping only 20,000 first-time buyers by 2010 will hardly make a dent in the problem.

He adds; It is obviously disappointing that the government will fail to meet its target date of April 2006 for the start of this scheme by six months. This is probably, in part, due to their failure to understand early enough in the process that their creation, the FSA, needed to be involved. Producing compliant Key Facts Illustrations is an additional complication as this will be the first shared equity scheme where the mortgage lender has provided part of the equity funding. In addition, the suggestion that allocation of funds will be controlled regionally does perturb me somewhat. It would not surprise me if we had another postcode lottery on our hands.

Boulger says that the government has missed an opportunity for Stamp Duty.

He adds: We hear frequently that the government is keen to remove inequality in the tax and benefits systems, but actions speak louder than words and the current structure of Stamp Duty land tax is not only grossly unfair, but also distorts the market. Abolishing this tax is clearly a non-starter and so John Charcol would like to see it reformed to reflect the way income tax is structured. With income tax, the higher percentage rates of tax are only payable on the amount of income over certain thresholds. However, with stamp duty land tax, once you reach a certain level, borrowers are forced to pay the higher percentage on the total amount.

Another inheritance tax threshold increase slightly above inflation just won’t do. Millions of homeowners who certainly don’t consider themselves to be well off have been catapulted above the current threshold simply because they own their own home, something the government has actively encouraged. Much of the increase in house prices over the last ten years has been as a consequence of the governments successful control of inflation, with the resulting low interest rates being the most
having created this extra wealth for homeowners the Chancellors stealth tax is now stealing some of it back.