Economists call to scrap Section 24

Ever since the Government announced that landlords would no longer be allowed to offset the finance costs of their businesses, prominent economists have opposed this.  Immediately following the Summer Budget of 2015, Professor Philip Booth from the Institute of Economic Affairs and Paul Johnson from the Institute of Fiscal Studies were invited to scrutinize the Finance Bill and give their expertise.

Both of them pointed out that this move was wrong and based on the false premise that landlords enjoyed a tax advantage compared to owner occupiers (when the opposite was the case). One would have assumed then, that as this was a big mistake it would be promptly overturned.

In fact, their evidence was ignored.

Over the following eighteen months, Professor Philip Booth elaborated on several occasions his reasons for arguing that this tax levy on “individual” landlords was so wrong.  He even stated that it was based on an undergraduate error which should not be made by the Treasury and that George Osborne was either being deliberately dishonest or simply did not understand the issue.

Yet still the Treasury refused to see reason or listen to experts in fiscal affairs, tax and housing.  Dame Kate Barker, economist, former member of the Bank of England monetary policy committee and advisor to the Government, has now spoken out against the tax levy – but still no u-turn from the Treasury.

Dr Kristian Neimitz, Head of Health and Welfare at the IEA has also published a report on the housing crisis in which he states “The higher tax burden on buy-to-let landlords is a step in the wrong direction.  Letting a property is a business like any other, and the cost of servicing the mortgage is a business cost like any other.  Thus, the tax system should treat it as such.”

It is astonishing that the Treasury appear determined to go ahead with Section 24 in the face of a wealth of advice from experts to the contrary.

 

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