Savings Income Tax Review

In addition to the review of Inheritance Tax previously covered, the Office of Tax Simplification (OTS) are also undertaking a review of ways to simplify the taxation of income from interest on savings and dividends. Although 95% of the population pay no tax on such income as they have relatively little, the complexities of calculating the tax due on those with higher levels are mind boggling. Here’s a couple of quotations from the OTS Report (see https://www.gov.uk/government/publications/simplifying-the-taxation-of-savings-income ) which explain why:

“Many of the issues have arisen because of a series of changes, each working well enough taken by itself but which together create significant complexity that is not easily resolved”; and:

“The starting rate for savings (SRS), personal savings allowance (PSA), dividend allowance and other allowances and features of the tax system mean that most people pay no tax on their savings, but the interactions between the rates and allowances is sufficiently complex at the margins that HMRC’s self-assessment computer software has sometimes failed to get it right. It is proving to be very difficult to create an algorithm that calculates the tax correctly in all circumstances and HMRC does not expect to bring the complete calculation online until 2018-19.”

For those with complex tax affairs, or significant levels of dividend income who are probably some of the readers of this blog, this is not a trivial problem. Even my large firm of accountants who do my personal tax returns seem to be having problems with the software they use of late. I would certainly hate to try and do my own tax returns now.

One of the past simplifications which has been very damaging to stock market investors was the introduction of a “dividend allowance” of £2,000 to replace the dividend tax credit system. Although investors can put money into an ISA where dividends are not taxed (and could be paid out), there are severe limits on the amounts that can be invested in an ISA. That limit is £20,000 in the current tax year but has been much lower in the past and may get reduced again. For those shareholdings not in an ISA or SIPP, the removal of the dividend tax credit system means that the Government is collecting tax twice on the same company profits. Once when corporation tax is paid by the company and again when dividends are paid to investors out of those profits. This is surely iniquitous even with the current relatively low level of corporation tax. This change was allegedly made to prevent small incorporated businesses from avoiding income tax by paying profits out via dividends instead of via salaries subject to PAYE, but there were other simple rule changes that could have prevented that.

What does the OTS propose to do to simplify the calculation of savings tax? They wish to introduce a “personal tax roadmap” incorporating a plan for consolidation of the savings income tax rates and allowance. Also they wish to improve guidance because it is clear that people have difficulty in understanding the existing system. More flexibility in ISAs might also be considered to allow partial transfers of money and simplify the rules.

One specific threat in the document is this: “A more radical option would be to end the differential tax rates for dividend income. If all taxable income was taxed at the same rates, it would not matter how the personal allowance was used. Making this change would have the effect of increasing the amount of tax due from those who receive amounts of dividend income above the allowance. It would also impact on the taxation of profit extracted as a salary or as a dividend, from family owned companies.”

Investors receiving substantial dividends directly have already suffered a major tax increase from the removal of the tax credit system (the £2,000 tax free allowance is trivial in comparison with the income likely receivable by a portfolio large enough to fund a retirement for example). The new suggestion that dividends should be taxed the same as earned income would be another damaging imposition (the former are currently taxed at somewhat lower rates, although Trust rates are higher – another anomaly that is difficult to explain).

You can send your own comments to the OTS via email to: ots@ots.gsi.gov.uk .

As I said in the Inheritance Tax Review you might suggest to them that the present arrangements seem to generate work for tax accountants while baffling the general public. Like IHT, income tax is certainly a tax that requires simplification. A more fundamental review is surely required. However it’s worth bearing in mind that individuals have often planned their financial affairs based on existing tax rules. Abrupt changes to tax rules and allowance should be avoided, but that’s all we have had for the past few years, driven by political imperatives. The result has been the unintended consequence of a very complex tax system that few people understand and which makes tax calculations only possible by experts.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Inheritance Tax Review

The Office of Tax Simplification (OTS) have published two items that will be of interest to investors. Firstly they have called for evidence to support a review of Inheritance Tax (IHT) and secondly a note on “routes to simplification” of the taxation of savings income. The latter is horribly complex so I will deal with that later in a separate post.

Inheritance tax is slightly less complex but since recent Chancellors decided to use it as a sop to the middle classes with such rules as the ability to leave property to children and grandchildren of up to £1 million, it’s been getting a lot more complex. It’s now reached the level where few people understand it and what effect it may have even when their tax affairs are otherwise relatively simple.

Part of the problem has been rising property prices. More than 14,700 homes were sold for more than £1 million last year according to Lloyds, and a lot of those will have been in London and the South-East. The Government sees it as a popular political stance to enable such homes to be passed on to children, rather like one can pass on certain pensions now, while not requiring their sale to meet medical or social care in later life.

Rather than simply raise the inheritance tax threshold, to stop the rapid increase in the number of people who are liable for inheritance tax (although that’s still less than 5%), the clever folks in the Treasury devised alternative rule changes that ameliorated the impact of increasing property wealth for certain sections of the population (e.g. property owners). But those who have to act as executors and deal with probate are faced with increased complexity.

You can see the impact of rising property prices if you know that IHT is charged at 40% and applies to assets as little as £325,000 (that’s where the nil rate band ends) – so almost everyone living in London may pay it if they have no close relations or other “allowable” exceptions such as business assets.

It’s not just property that causes complications though. Unlisted companies such as AIM stocks are business assets and hence with typical private investor share portfolios now often holding a significant proportion of such shares these complicate the calculation. That is particularly so as not all AIM shares qualify and they need to have been held for some years.

The OTS are keen to hear from individuals as well as professionals with an interest in this area. There is an easy on-line survey you can complete here: https://www.gov.uk/government/consultations/inheritance-tax-review-call-for-evidence-and-survey

Please help them by responding. You can also send comments to them via email to: ots@ots.gsi.gov.uk . You might suggest to them that the present arrangements seem to generate work for tax accountants while baffling the general public but at the same time generating very little in revenue to HMRC. It’s certainly a tax that requires simplification. The original objective of inheritance tax seems to have been the socially beneficial aspect of preventing large wealth being passed on and accumulating through the generations. But at present the rich mainly avoid it – they set up trusts or move to another country. Meanwhile the middle classes tend to pay it and suffer the absurd complexity at the same time.

Here are some personal suggestions from me for simplification:

  1. The nil rate band should be raised to £2 million – effectively covering most normal family homes and avoiding the need to sell the house to meet IHT liabilities for children still in occupation. The Osborne changes that permitted property to be passed on should be scrapped.
  2. The IHT exception for AIM shares should be abandoned. The complexities of what may or may not qualify for that make planning difficult and potential savings on IHT are a poor reason or motivation for buying high-risk AIM shares. The desire to encourage investment in early stage companies is hardly a justification for most retail investors as they can rarely buy AIM company shares in IPOs and management/founders have other tax incentives such as entrepreneur relief. If such encouragement is required then other tax concessions (e.g. on capital gains) might be better.
  3. The seven-year rule for exemption of gifts is actually more complex than it first appears to be and can extend more than 7 years if multiple gifts are made I understand. Together with the tapering of such relief, it can become difficult to predict the likely liability particularly as forecasting when the donor might die is usually not easy. I suggest this relief be restructured to provide more certainty about the tax liability and it’s worth considering switching to a tax on gifts received.
  4. The existing IHT rate of 40% should be reduced as it encourages complex, and expensive, tax planning. A lower rate of tax might actually encourage more people to pay it rather than go to the trouble of setting up complex plans to avoid it.

In summary IHT has become too complex and needs to be simplified. However it’s worth bearing in mind that individuals have often planned their financial affairs based on existing tax rules. Abrupt changes to tax rules and allowance should be avoided.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Musings on Mortality, and Year-End Tax Planning

The death of Steven Hawking at the age of 76 gives those who are trying to figure out how long we may live some cause for thought. He was given only a few years life expectancy soon after he was diagnosed at the age of 21 as having motor neurone disease. This problem of forecasting how long you may live is a key concern of many elderly people like myself as it has a big impact on investment and tax planning.

I am likewise living much longer than my doctors forecast 20 years ago. Despite one near death experience I have reached the age of 72 in reasonable condition, although I do get offered seats on tube trains of late. Do I really look that knackered?

But can I live another 7 years? That’s how long you need to do so to avoid tax on gifts. It can even be as long as 14 years if you have made gifts in prior periods. Now even allowing for the pessimism of doctors who seem to err on the downside on the principle that at least if their forecasts are wrong the patient may be pleased, I think tax planning will have to take another approach in my position.

Gifts of £3,000 per year are possible regardless, and gifts out of “surplus income” can also be made so now is the time of year to work out what you can do in this regard before the tax year ends. Of course it means that you need to have kept track of all your income and expenditure during the tax year which many people do not. If you have not, perhaps it’s time to start for the new tax year? The wealthiest man in the world at the time, John D. Rockefeller, was reported in his biography as keeping a pocket notebook with him at all times where he recorded the smallest expenditure. Perhaps no need to go to such extremes but the principle is worth following.

As it’s coming up to the end of the tax year, now is the time to review holdings and transactions that are not in ISAs or SIPPs in case you are likely to be paying capital gains tax. I get my accountant to work out my capital gains tax position a few weeks before the year end, then if I have gains exceeding the annual allowance (£11,300 for the current tax year), I sell any losing positions to reduce the liability. If I have gains less than that I might sell profitable holdings to maximise the use of the allowance. One can always buy any holdings back later that you prefer to keep them (more than a month later, or buy them in your spouse’s name).

This year, with the stock market being buoyant and not having made any big investment mistakes, I don’t seem to have much in the way of losses to realise. So I thought I would take a quick look at an EIS fund which was the subject of a mailing I received (EIS funds are also topical because of the Government consultation on future options for them). I previously expressed some doubts about EIS funds, but the one I received information on (Guinness AIM EIS) has been around for some time and AIM listed stocks should be less risky than unlisted investments. But when I look through the information on “historic” investments it lists the following: Chapel Down, Coral Products, Fishing Republic and Yu Energy which I do not view very positively although the last one is growing rapidly. The charges on the fund are high – 5% initial, 1.75% annual and a 20% performance fee.

You don’t get the EIS tax relief certificate until the funds are invested which could be a year or more after the closing date according to the prospectus. You also need to stay invested for at least three years to retain the income tax relief and bear in mind in any case that these are long-term investment vehicles. The immediate tax relief might be substantial but it could be a long time before there is a good return on your investment. If you die holding an EIS investment then the capital gains relief you obtained still applies (i.e. there is no tax due), but the complications of death are mind boggling on EIS investments. Anyone considering EIS investments should certainly consult an accountant who is expert in this area.

EIS funds might be one way of deferring capital gains tax liabilities, but I think I might pay the tax instead. Capital gains tax rates are currently low (10% or 20% on shares depending on your total taxable income), and there is no knowing what future Chancellors might do to change the rates and EIS rules.

There is one change in tax rates to bear in mind for the new tax year. This is that the dividend tax allowance reduces to £2,000 from April. So wealthy investors will be paying a lot more tax as a result of the dividend tax credit system being dismantled. Just to remind you, the companies you have invested in get taxed on their profits, and now you are also being taxed on the profits they distribute as dividends to you. So investors are being taxed twice on the same profits!

The conclusion is that you should avoid receiving dividends if possible. If you wish to hold high dividend paying stocks then put them in your ISAs or SIPPs. For direct holdings, it’s preferable to achieve gains by buying growth stocks rather than low growth mature companies that pay high dividends. You can always sell a few shares to generate cash income if needed. Alternatively buy such holdings indirectly in investment trusts and funds, who do not have to distribute the income, although it’s generally a good idea to avoid “income” funds. Such funds tend to underperform as Terry Smith recently pointed out. That’s probably because they tend to buy low-growth mature businesses which is a sure recipe for pedestrian stock market performance. High dividends do not compensate for lack of growth.

Another way to minimise dividend income taxes is to put money into Venture Capital Trusts. Dividends on those are tax free.

Lastly, don’t forget that giving money to registered charities can minimise your tax bill so that’s another subject to consider before the tax year end.

In conclusion, I would suggest three mottoes to follow: 1) Don’t bet on your life expectancy – it could be much longer, or shorter, than you think; 2) Keep your tax affairs simple; and 3) Encourage the Chancellor to simplify the tax system, and not keep changing the rules.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Chancellor’s Statement, EIS Funds and EMIS Results

The Chancellor’s Spring Statement yesterday was generally positive but there are some aspects that it’s worth talking about. Mr Hammond was right to be cautious because although new Government borrowing is falling, the total debt is still rising. It’s only forecast to fall as a proportion of national income by 2020-21 because of rising GDP. There is “light at the end of the tunnel” as the Chancellor put it, but it’s still some distance away.

GDP is only rising slowly and it is forecast by the Office of Budget Responsibility (OBR) to be rising at near 1.5% in the next few years which is not exactly rapid. The OBR also forecast that we will have to pay £41 billion to the EU after Brexit as a settlement of our obligations, although it will also free up £3bn or more per year that can be spent on other things, i.e. they suggest in the long term we will save money but the impact of changes in migration and trade terms might be more significant.

The Labour party wants the Chancellor to free up the purse strings and increase expenditure on the NHS and other areas. The Government could only do that by borrowing more which would not only increase the cost of their debt but would seem unwise given the economic outlook and the uncertain impact of Brexit. Because of an ageing population, but a growing one, more money will need to be spent on local authorities and the NHS anyway but the growth in productivity remains poor which ultimately determines the wealth of the nation.

Will the estimated figures have an impact on likely future interest rates (which have a significant impact on stock market investment)? Interest rates might need to rise somewhat to make Government debt continue to be attractive but it is not obvious that the economy is overheating as yet – inflation seems to be driven more by rising import prices as the pound has fallen rather than wage rises. The Government will no doubt be keen not to increase the cost of its debt, even if it has only indirect influence on the rate. Interest rates lower than real inflation are a good way for the Government to reduce its debts however much it prejudices savers.

One interesting mention for investors was a mention of a consultation on EIS funds that includes several options for more tax reliefs to encourage investors to put money into early stage “knowledge-intensive businesses”. That might include tax free dividends (only available on VCTs at present), or capital gains exemptions. I may write some more on this topic after reading the full consultation document which is here: https://www.gov.uk/government/consultations/financing-growth-in-innovative-firms-enterprise-investment-scheme-knowledge-intensive-fund-consultation . Investors interested in this subject should of course respond to HM Treasury’s consultation.

Some Venture Capital Trusts (VCTs) have fallen in price today. Perhaps because they might be perceived as less attractive to investors if such new EIS funds were introduced. But they would surely be very different beasts even if they might provide more competition for new investor subscriptions.

Comment: having invested in both EIS funds and directly in EIS qualifying companies in the past, I have vowed only to do the latter in future. Finding an experienced fund manager in early stage companies who can pick out the good EIS businesses is not easy and the lemons they pick ripen quickly (a common VC adage) while the good investments can take years to mature. If there is very generous tax relief (at a level where investors ignore the merits of the underlying investee companies because the tax reliefs are so generous it looks like they can’t lose money), then this will encourage all kinds of dubious promoters to enter the field.

One company that is sensitive to Government spending on the NHS is EMIS Group (EMIS). They announced their Final Results this morning. They previously warned in January that they had breached their service level obligations to the NHS and the cost might be “in the order of upper single digits of millions of pounds”. I commented on the company then and still hold some shares in it. The actual damage is a provision of £11.2 million in these accounts for a “financial settlement and costs to remedy past issues”. The share price rose today perhaps in relief that the news was not worse.

Few more details of the contract breach are provided and when I talked to my GP who uses EMIS-Web and used to be active in their user group, he knew nothing about any service failures. All rather odd.

Even excluding that item which is being treated as an exceptional cost, the figures were disappointing though. Revenue was only up 1% and adjusted earnings were down 4%. The CEO commits to a “robust management of legacy matters” and a commitment to being “more performance-led with greater accountability, improved operational execution and an increased focus on our customers”.

Dividend has been increased though which suggests some confidence in the future, putting the shares on a yield of 3.5% and a possible forecast p/e of 16, but the company certainly needs to show better signs of growth if the share price is to get back to where it used to be a couple of years ago.

The Government might spend more in the Autumn budget, but whether EMIS will see much benefit remains to be seen.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Chancellor’s Budget and How It Affects You

What follows is a summary of Chancellor Philip Hammond’s Budget speech today, and the impact of the tax changes. Private investors were particularly concerned about the impact of tax reliefs in the VCT/EIS schemes following the Patient Capital Review but these are in fact relatively minor (see end of document).

This is a summary of the key points he announced:

  • The Chancellor said we are on the brink of a technological revolution, we must embrace it. Britain is at the forefront, but we must invest to secure it.
  • Regrettably our productivity performance remains disappointing.
  • Our debt interest is too high. OBR expects debt to peak this year and fall thereafter.
  • He maintained his commitment to fiscal responsibility but will use the headroom to prepare Britain for the future.
  • The strategy is to raise productivity and employment in all sectors of the economy. A white paper will be issued on this within a few days.
  • Following the Patient Capital Review an action plan will be published which commits to more funding of the British Business Bank, including £2.5 billion of Government seed funding (to co-invest with private firms). But there will be some restrictions on EIS tax relief (see later).
  • First year VED on cars that do not meet the latest emission standards will be increased. However there will be no “benefit in kind” from the provision of free electric charging of vehicles at work.
  • There will be more support for maths teaching including specialist schools. More maths for everyone! And there will be a tripling in the number of computing teachers. There will also be more “distance learning” support.
  • Universal credits will be paid more quickly and there will be easier access to advances to overcome complaints in this area.
  • The National Living Wage will rise by 4.4% from April (Comment: this will obviously impact employers of large numbers of low paid staff such as retailers and hospitality firms).
  • The Personal Tax Allowance will rise to £11,850 from April and the Higher Rate Threshold will also increase to £46,300, in line with inflation.
  • Taxes on beer, wine and spirits will be frozen (apart from cheap cider). A Merry Christmas to all. Fuel duty will also be frozen.
  • An additional £10 billion of capital investment will go into NHS frontline services. That includes £7.5 billion this year and next, plus there will be a review of staff pay.
  • There will be more attacks on tax evasion. In addition, the anomaly of the indexation of capital gains for companies (but not individuals) will be removed.
  • The VAT registration threshold will be reviewed but it is not intended to amend it from the current £85,000 level for at least two years.
  • There will be amendments to business rates to help smaller businesses.
  • There will be a review of international taxation arrangements. Royalties paid to low tax countries will be taxed and on-line marketplaces will be jointly liable for the sellers VAT.
  • Councils will have powers to tax empty properties, plus the Government will look at barriers to long tenancy agreements.
  • The Chancellor said house prices are getting out of reach. Successive Governments over decades have failed to meet the demand for housing (comment: surely nobody can dispute that). He committed £45 billion in capital and loans to boost the supply of skills, resources and building land. Plus there will be reforms of the planning process/laws. There will also be an inquiry into why plots with planning approval are not built.
  • Seven new town developments are planned with 1 million new homes in the Cambridge, Milton Keynes, Oxford corridor. The plan is to build 300,000 new homes per year.
  • Stamp duty will be abolished on the homes up to £300,000 in price for first time buyers and the same allowance available for homes up to £500,000 in price.

More details on taxation changes.

Changes additional to those mentioned above include:

  • The IR35 rules allowing contractors to avoid being taxed as employees may be tightened further (to follow through changes in the public sector to the private sector).
  • There will be a consultation on reform of the taxation of trusts to make them simpler, fairer and more transparent (Comment: surely a positive move).
  • Individuals operating property businesses will have the option of using mileage rates to simplify their tax affairs.
  • ISA subscription rates will remain unchanged (£20,000 for 2018-2019).
  • Lifetime allowance for pensions will be increased by inflation to £1,030,000.
  • Carried interest transitional arrangements will be removed with immediate effect (so pity those asset managers who will now pay full capital gains tax rates).
  • The restriction of relief on VCT investments sold within six months where VCTs merge will no longer apply to mergers more than two years after the subscription or where they do so only for commercial reasons. This will avoid a trap that investors can accidentally fall into.
  • VCT and EIS schemes tax relief will need to ensure they are investing in assets subject to “real risk” rather than those simply aiming for “capital preservation”. Certain “grandfathering” provisions that enable VCTs to invest funds under older rules will be removed from April 2018.
  • VCTs will need to invest 30% of new funds raised to be invested within 12 months.
  • VCTs will need to have 80% of their funds as “qualifying” investments (currently 70%) from April 2019, but they will have 12 months to reinvest the proceeds of disposals (currently 6 months). This presumably might enable them to smooth dividend payments somewhat when currently they often have to pay out the result of realisations rapidly.
  • EIS rules will double the limit on the amount an individual can subscribe in a year to £2 million, but any amount over £1 million must go into “knowledge intensive” companies. Comment: I await some simple definition of what they might be. Such companies will also have the limit on annual EIS and VCT investments raised to £10 million

I have only included what seem to be the most significant changes in the above. In general there seems to be a policy to avoid rapid and abrupt changes to taxation (which thwart people from planning their tax affairs) which is to be welcomed.

Whether the VCT and EIS tax changes will have significant impact on those vehicles remains to be seen although some of the changes had already been indicated and threats of major changes that had been rumoured seem to have been avoided. This writer expects that the managers of those funds will adapt as they have already been doing. Encouraging investment in riskier assets may increase the risk profile of those companies but might also increase the returns and a large size and diverse portfolio will provide a hedge against the risks.

The full report on the Patient Capital Review consultation has also been published and is available here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/661398/Patient_Capital_Review_Consultation_response_web.pdf

I may provide further comments on that after reading.

In summary I view this budget positively with no unexpected surprises or likely perverse outcomes from unintended consequences we have seen from the surprises announced by previous Chancellors. But it would be interesting to get readers comments – please add.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Back to the Jeremy Corbyn Future

With the latest revelations from the Labour Party conference, we now know what their policies are likely to be if elected. These include

  • Nationalisation of the railways and utilities (including National Grid).
  • Scrapping all Private Finance Initiative (PFI) deals by buying out the owners with Government debt.
  • Rent controls in the private housing sector.
  • Reform of leaseholds.
  • Workers in the gig economy will get full employment rights.
  • The NHS will get more money.
  • Student loan debts will be written off (at least it’s an “ambition”).

Now some of these policies are not totally daft (the last four for example), even if the cost is probably unaffordable at tens of billions of pounds. But for those of my readers who do not remember the times when we had rent controls, and nationalised industries back in the 1960s and 70s, let me remind you.

Rent controls meant that rents stayed low, but private rented housing pretty well disappeared as a result over the years from 1950 to 1960. Nobody would invest in rented housing when they could get better returns on other investments. Or it promoted the spread of Rachmanism where landlords would allow properties to run down and then use aggressive tactics to remove sitting tenants. In other words, a great example of the usual “unintended consequences” of economically illiterate policies.

The control of industries by politicians and civil servants created hopelessly inefficient industries like the nationalised railways, the car industry and the coal industry which should have been shrunk in size well before Mrs Thatcher took steps to do so.

There would of course be an enormous flight of capital from the UK if these policies were implemented, and it seems the shadow chancellor is already anticipating a run on the pound. What he could do about it other than get the IMF to bail us out is not clear. To remind my younger readers, this is exactly what happened back in 1976 under Prime Minister James Callaghan when the IMF enforced massive cuts in the UK’s budget deficit as a condition of a large loan (the UK had been living beyond its means for some years, and building up large debts, very much like recent years under another socialist government who invented PFI deals to enable them to borrow money without putting it on the Government balance sheet – but the interest payable has now caught up with us). Would a new socialist Government simply default on the contracts or borrow even more money to get out of the PFI deals? Either way it looks a grim financial future for UK Plc.

The last Labour Government made a big mistake when they nationalised a small UK bank called Northern Rock – we just passed the year anniversary of that event. That proved disastrous when other banks such as Bradford & Bingley, RBS, HBOS, et al, who were dependent on short term money market lending needed liquidity. Nobody was keen to lend to UK institutions so British banks and the UK economy were some of the hardest hit worldwide by the events of 2008/9.

As for renationalising the railways, they may get more subsidies from the Government now than they did when they were last nationalised, but ridership has increased, new tracks are being laid, and services improved. The problem was surely the nature of the privatisation and the fact that all railways are horribly inefficient and an inflexible means of moving goods and people around. Old technology, beloved by users who do not have to face up to paying the real cost of the service.

So the policies of Mr Corbyn and his colleagues may be exhilarating for LabourParty supporters, but no I don’t want to go back to a future set in the 1960s. Been there, done that, and no thanks.

But if the Conservatives wish to win the next election, they certainly need to look at tackling employment law to bring it up to date for the gig economy, to tackle the problem of funding education and relieve students of the enormous debts they are now incurring, to deal with the problem of insufficient housing in the South-East (and associated over-population which is the cause) which is leading to demands for rent controls, and tackle the thorny question of funding the NHS. Yes we need some new ideas, not old policies recycled Mr Corbyn.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Response to Financing Growth Review

The Government is currently consulting on “Financing Growth in Innovative Firms” (otherwise known as the Patient Capital review). It covers the perceived problems in building world-beating companies from a small size in the UK, and the ways the Government provides support to early stage companies. That typically means the VCT, EIS and SEIS schemes with their associated tax reliefs and other possible “support” programmes where the Government funds them directly.

Anyone who invests in this area, directly or indirectly, should respond to the public consultation – the deadline is the 22nd September to do so. That is particularly so because reading between the lines it seems that some folks in the Government feel the tax reliefs are too generous and even suggest that investment would take place even without the tax reliefs. But my view is very different – I certainly would be very unlikely to invest in VCT and EIS funds without generous tax relief. They frequently generate dismal investment returns and have very high management fees plus administration costs. In reality, the historic record has been very patchy and the tax reliefs only help to offset the duds (which were difficult to identify in advance).

As someone who has experience of this sector both as an investor and a director of companies needing to raise capital, I have put in a personal submission on the topic. It is present here: Financing-Growth

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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