Duncan’s Economic Blog

A Couple of Things…

Posted in Uncategorized by duncanseconomicblog on October 19, 2009

Just two quick links today, I’m afraid.

I like the look of this:

Borrowers face a mortgage affordability test from lenders amid plans by the Financial Services Authority (FSA) to step up the regulation of home loans.

Self-certification mortgages will be banned under the proposals with lenders required to verify borrowers’ incomes.

FSA chief executive Hector Sants said that some people who were able to get home loans in the boom would no longer be able to under the proposed rules.

The industry will have until 30 January 2010 to comment on the plans.

The FSA, in its mortgage market review, has outlined a series of proposals for increasing regulation in the mortgage market.

 And I’m amazed that banks have to be told to do it.

Second, a question of ethics. I was reading the Sunday Times Money Section over a pub lunch yesterday and came across this long article on how to ‘beat the 50% rate’. This raises two questions, first how many Sunday Times readers actually earn £150,00 a year? More importantly why do we, as a society, consider it acceptable to publish this sort of advice? How would people react if a tabloid started publishing ‘ maximise your benefits’?


14 Responses

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  1. newmania said, on October 19, 2009 at 11:30 am

    Maximising your benefits is already a subject that we pay additional taxes to make advice available on. Few people earn enough to worry about the 50p rate but all people know when they go for one they go for us all .There is no money in the 50p rate so the money will come from the middling .
    Tax payers have to stand together against the State who are employing envy to break up the alliance . None of this is our fault and “we” have enjoyed no boom in living standards whatsoever . Only the Public Sector have been feasting and they are going to have to pay (see Latvia ).

  2. Liam Murray said, on October 19, 2009 at 11:39 am

    I’m in the uncomfortable position of making a point similar to the one Newmania makes above but ‘maximising your benefits’ advice is not only very common but paid for by the public purse unlike the article you highlight in the Sunday Times.

    Quite right too of course – the vast majority of benefit recipients are genuine cases of people in need so they shouldn’t be denied that which they’re due. Articles helping those at the other end of the scale avoid paying more than they’re obliged to are, therefore, a matter of balance and little more; I can’t see why you’d object?

    • duncanseconomicblog said, on October 19, 2009 at 11:50 am

      Liam & Newmania,

      The reason I object is very straightforward. The various reliefs in the tax system are designed to serve a specific purpose. I don’t like people ‘gaming the system’ purely to reduce their tax bill.

      The Sunday Times article, for example, suggests forming a company so that a couple could each, for excample, claim to be effectively earning £100,000 a year rather than one earning £200,000 – no 50% rate and two personal allowances. This is simply dishonest. As are many of the accepted practices in accountancy and tax law.

  3. VinoS said, on October 19, 2009 at 12:13 pm

    The analogy between the Times article and benefit advice would perhaps be “How to maximise _illegitimate_ benefit claims”. Benefits advise is designed to give people advice on benefits they are entitled to but not claiming. That is perfectly legitimate.

    This tax article is about how to _abuse_ the tax system. And that is what I find immoral.

  4. dannyboy said, on October 19, 2009 at 12:19 pm

    Off topic: duncan can you comment on this:


    £ billion (2009) % of GDP Debt per household £ billion (2008)
    Official net debt 805 57.5% £31,320 633
    Public pensions 1,104 78.9% £42,960 1,071
    PFI 139 9.9% £5,410 100
    Network Rail 22 1.6% £860 20
    Bank bail-outs 130 9.3% £5,060 30
    Total 2,200 157.2% £85,610 1,854

    I know unfunded liabilities are not debt, but rather I’m after some feedback on whether these numbers look right? It certainly seems unnacceptable that by far the largest portion of future liabilities are for public pensions, unless the private sector can expect similar pension opportunity.

    • duncanseconomicblog said, on October 19, 2009 at 12:39 pm

      Thanks for this Dannyboy.

      A few things really.

      The Network rail figure is simply wrong. They include NR’s debt but not it’s assets.

      Look at the balance sheet:

      Assets of £40.1bn, liabilities of £32.9bn for a net asset figure of £7.2bn. Yet they list it purely as a liability. It made a £0.6bn profit last year!


      As for the banks. £130bn is certainly plausible but it’s a guess. (Our stakes in Lloyds and RBS are currently worth £29.9bn). Scanning the report I’m not at all sure of the methodology used to reach that figure, they seem to conflate several issues – looking at the banks’ debt but not assets, guessing what future write downs will be, etc. I think this one remains very difficult to judge.

      As for the pensions point… As they say “ Estimating public sector pension liabilities is notoriously difficult. Calculations are affected by assumptions on individuals’ pension tenure, their final salaries, the method of indexing
      pension benefits and the longevity of public sector workers.”

      The number is pure guess work. And future liabilities are, as they say near impossible to forecast accurately. Of course, private sector pensions are not accurately forecast either.

      • dannyboy said, on October 19, 2009 at 2:09 pm


  5. Tim Worstall said, on October 19, 2009 at 12:26 pm


    As to legitimate/illegitimate claiming of tax reliefs. We have, as Englishmen, an absolute right to organise our affairs so as to minimise our tax due. We must remain within the law, of course, but subject to that we can do whatever we wish.

    Of course, you don’t have to like people doing such things but they do have the legal right to do them.

  6. Tim Worstall said, on October 19, 2009 at 12:52 pm

    Richard’s reform is to overturn the 1688 Bill of Rights which really seems to going a tad too far in trying to catch up with tax avoidance.

  7. newmania said, on October 19, 2009 at 2:09 pm

    The point that is being made is that the rate will not raise money, people who need to already know all this. What you find distasteful is people behaving in a way you perceive as selfish.
    The answer is that ordinary people do not think rational behaviour of this sort is selfish because they have no loyalty to state sponsored collectivism . They are loyal to the country and under stress imagined community can command huge reserves, this kind of feeling is despised by New Labour (National loyalty above all ). Otherwise people are altruistic to friends , family and locale .
    It was always the project of Marxist derived socialism to destroy all these human feelings and replace them with a rational civic altruism . Essentially you are travelling down the same cul de sac .

  8. Danivon said, on October 19, 2009 at 11:40 pm


    I thought that “we are all in this together” was the Tory theme the other week. Or is it really “we are all in this together, well, not me of course. I’m all right, Jack, and I’ve a duty to screw the tax man”?

  9. Will M said, on October 20, 2009 at 3:16 pm


    Maybe I’m just being too much of a Tory here, but why is legitimate to claim as many benefits as you legally can but not avoid as many taxes as you legally can? You say that the article tells people how to abuse the tax system, but that’s a remarkably subjective word – surely its either criminal or its not?

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