The Great Tax Unsimplifier

As you might have gathered from my textual analysis of the Budget speech for The Independent today, I disliked almost everything in it.

You would have thought that a Conservative such as George Osborne would understand (a) market economics and (b) the virtues of tax simplification. Indeed, his spinners presented him as the new Nigel Lawson, who does perhaps have a better claim to be a tax simplifier than any.

Not only was it a horribly complicating Budget, but most of the complications were economically illiterate.

Help for first time buyers. Just saying it doesn’t make it so. Subsidising the purchase of one class of property by one class of buyer could mean that, at the margins, a few of the 10,000 families targeted are genuinely being “helped”. But we don’t know how many of them will be deadweight (that is, would have bought anyway). And for every family “helped”, another family is not buying a home that they would otherwise have bought.

The housing market is a bit more complicated than sound bites (“help for first time buyers”, “affordable housing”, “build more houses”). House prices reflect the interaction of incomes, mortgage interest rates and availability, household formation, buy-to-lets, housing benefit, immigration, new building, and other factors I cannot remember. Try to influence one and the pressures escape to another part of the system. “Help” first time buyers and you raise the price of starter homes mostly to the benefit of vendors. Build more houses and you might increase demand by attracting workers from other parts of the UK or EU.

As for Enterprise Zones. We’ve had them before. They didn’t work. They are a pointless and unnecessary complication. If there are regulations that can be abolished to encourage enterprise in zones, abolish them everywhere. The only place where the idea has worked is London Docklands, where the City had huge pent-up demand for nearby office space. What it needed was expensive road and light rail links. The idea is utterly ghastly.

Yet, overall, the Cameron-Osborne judgement on public finances seems more right than the Miliband-Balls one, so far as that can be defined. But on that I will save my thoughts for The Independent on Sunday.

Photograph: Eddie Mulholland

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