The poor persecuted buy-to-let landlords of Britain. Many are developing a martyr complex – victims, they feel, of a barrage of new taxes coming in from next year. They will have seen the latest intervention last week – potential new powers for the Bank of England to restrict buy-to-let mortgages – as yet another blow. In online forums landlords share their woes about the “latest tax grab” and ask “why are we so reviled?” – although the answer may lie in another discussion thread where landlords swap tips about “How to tell a great tenant the rent has to go up a third”.
All the Bank of England is doing is saving landlords from their own greed. It is almost beyond dispute that buy-to-let landlords have fuelled price rises generally, and priced out many potential first-time buyers. Now the Bank is concerned about risky lending and wants powers to restrict the size of buy-to-let mortgages, to prevent boom turning into bust. In other words, the Bank is intervening to protect the value of landlord’s assets from falling.
If the Bank really wanted to level the playing field between landlords and first-time buyers, it could require buy-to-let investors to take out repayment mortgages rather than interest-only ones. After all, that is what conventional homebuyers have been forced to do since the regulatory crackdown on the mortgage market after the financial crisis. It’s just not fair, argue young buyers, that landlords are able to enjoy much cheaper mortgages, which give them the financial firepower to elbow aside other buyers.
It should also vex the Bank that the Financial Conduct Authority makes lenders “stress-test” first-time buyers to ensure that they can still afford their mortgage at 7% interest rates, yet landlords are only tested at rates rising to just 5% or 5.5%. One department of Halifax or Santander will ask a homebuyer if they can afford the loan at 7%, while the other asks if they can afford it at 5% or 5.5%. It is inexplicable.
But the Bank knows that if landlords were forced to take out repayment mortgages and be stress-tested at 7%, then almost the entire buy-to-let game would implode, sparking the sort of market rout that the Bank is so keen to avoid. The truth is that the Bank’s new measures are not about fairness and equity between types of buyers in the property market, but in making sure that financial institutions are not resting on a bed of buy-to-let nitroglycerine.
It is understandable that the Bank should want some stability in asset values. But it’s a shame it can’t also intervene to offer tenants some stability. The words “rent control” raise the blood pressure of the landlord-martyrs to dangerous levels, yet if policymakers want to maintain financial stability not just for landlords but also for their far more numerous tenants, they need to be considered.
Last month, Ireland introduced “rent certainty”, largely to protect tenants in the Dublin area, where the property market is once again at feverish levels. The measures include increasing the rent review period from one to two years, so that someone who saw a rent rise in 2015 won’t see another until 2017, and much greater protections for tenants. We need to start contemplating measures like this for Britain, but also offer landlords a quid pro quo. It can take six months or more to evict rogue tenants, who find it easy to abuse the legal process. This is daft: Germany gives tenants much greater financial stability than Britain, but is tougher on both rogue tenants and rogue landlords. The private rented sector in Britain has grown like Topsy. We should be taking a leaf out of Ireland and Germany’s books to make sure it doesn’t go turvy.
Rolls-Royce now need the PM’s vocal support
In Whitehall, they’re getting nervous about Rolls-Royce. The government has drawn up plans to nationalise the company’s nuclear submarine division if the corporate crisis worsens, we learned last week. Alternatively, parts of Rolls – those critical to the defence of the realm – could be shunted into BAE Systems, the other big UK contractor to the Ministry of Defence.
Naturally, everybody hopes drastic remedies won’t be required. After five profit warnings, Rolls finally has a chief executive who sounds serious about cutting costs and bureaucracy. Warren East removed a senior layer of management last week in what he called “the first important steps in driving operational excellence and returning Rolls-Royce to its long-term trend of profitable growth”.
Yet no one – certainly not East – expects the self-help plan to be achieved quickly. Thus the “what-ifs” are being asked. What if an opportunist bidder turns up? What if ValueAct, the US hedge fund that has accumulated a 10% stake, sees disposals of large chunks of Rolls as a quicker route to higher returns for shareholders?
In theory, there is a simple answer: under provisions from 1987, the government can block Rolls from selling 25% or more of its assets or its nuclear division. In practice, life could be more complicated. Engines for civil aerospace are plainly not essential for defence. If a new owner offered guarantees on jobs and investment, where’s the problem, the City might ask. The politics could become as messy as when Pfizer took a tilt at AstraZeneca.
On that occasion, David Cameron was woefully underprepared. This time, at least, he has spotted a potential problem. But drawing up measures to protect the UK’s nuclear interests is not enough. The civil aerospace division is vital to prosperity: it is the flagship of the UK’s engineering industry, and a big contributor to exports.
Vince Cable’s suggestion that the government take a strategic stake is interesting. It may come to that. Before then, though, Cameron could do more than mutter concern. A firm statement that bidders are unwelcome, and that East’s plan must be given time, would be a useful deterrent. Say it out loud, prime minister: hands off Rolls-Royce.
A good way to boost productivity? Cut executive pay
Boris Johnson warned the Conservative party conference in the autumn of the damage that could be done to society by the widening gap between the pay of bosses and their staff: “There are some gigantic self-appointed sequoias that pay themselves 780 times the salary of the little shrublets they employ.” His colourful turn of phrase is believed to have referred to the WPP advertising boss Sir Martin Sorrell, who earned 780 times the average £38,000 salary of his staff.
But research published last week by the Chartered Institute of Personnel and Development shows that the pay gap is also about more than inequality. It also about motivation. Six in 10 employees said high level of chief executive pay discouraged them in the workplace. So now the Conservatives surely have a reason to back the publication of pay ratios – not just to tackle inequity but also to boost productivity.
0 nhận xét:
Đăng nhận xét