Tag Archives: Government

Feb 25 2012

The economics of it all….

In the week I was sent this rather brilliant essay. I am not sure who wrote it, but I think it is brilliant!

An economics teacher at a local school made a statement that he had never failed a single student before, but had recently failed an entire class. That class had insisted that Gillard/Brown socialism worked and that no one would be poor and no one would be rich, a great equalizer.

The teacher then said, “OK, we will have an experiment in this class on the Gillard/Brown plan”. All grades will be averaged and everyone will receive the same grade so no one will fail and no one will receive an A…. (substituting grades for dollars – something closer to home and more readily understood by all).

After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little.

The second test average was a D! No one was happy.

When the 3rd test rolled around, the average was an F.

As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.

To their great surprise, ALL FAILED and the teacher told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great, but when government takes all the reward away, and gives to those who do nothing, no-one will tryor want to succeed.

These are possibly the 5 best sentences you’ll ever read and all applicable to this experiment:

1. You can not legislate the poor into prosperity by legislating the wealthy out of prosperity.

2. What one person receives without working for, another person must work for without receiving.

3. The government cannot give to anybody anything that the government does not first take from somebody else.

4. You cannot multiply wealth by dividing it!

5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what theywork for, that is the beginning of the end of any nation.

Feb 1 2012

Charity shops – illegal?

You might have started to notice a proliferation of Charity Shops on our High Streets. It isn’t, in my view a good sign. Our measure of aspirational shopping – which leads to a feel-good factor doesn’t normally include Oxfam and the like. I have nothing against these shops – they do serve a purpose – but there is a point at which they can destroy a street-scene.

One of the reasons we have seen the growth is not necessarily them selling ‘cheap’ goods – although that does have a part to play in the current economic climate. There is another reason – landlords are pay full business rates on empty commercial properties, but charities using commercial property for charitable purposes qualify for an 80% automatic discount on business rates – plus a discretionary further discount of 20%.

This clearly can be a good deal for the landlord – and likewise for the Charity tenant. Despite the Governments contention that the removal of empty rate relief encourages landlords not to leave premises vacant we all know that this is rubbish. My landlord clients don’t wait for a rising market – they do deals with people who come along.

But something interesting has now happened. The Charity Commission is investigating over 700 deals between charities and landlords where concerns have been raised by local authorities that the properties appear to be unoccupied and that the arrangements may constitute business rates avoidance. This is because we have seen a new phenomena. This is where the Charity make an approach and offer to ‘take’ the premises with some form of sharing – i.e. the landlord pays the Charity (because anything less than the Rates bill is a saving!). They don’t occupy they simply pocket the cash.

The Charity Commission are now saying that they will look closely at these ‘arrangements’ and the Charities might fall foul of the law.

The angle taken is to see that Charities are not being taken advantage of by business…

This I find rather amusing – my dealings with Charities suggest that some (not all) of them know precisely the position they occupy and use it to further their interests. Fair? – I’m not sure. But this little loophole might now get closed – and with it comes more misery for landlords and more vacant shops on the High Street.

Jan 27 2012

2011 – a miserable year for property…

I guess we knew what the headlines were going to be – and they haven’t disappointed…even if they are disappointing!

One trillion pounds - piled up next to an arctic....

In the commercial market in 2011 the value of UK commercial property investment transactions in Q4 2011 was £8.69 billion, down 25% on the same period for 2010. We were hit hard by the lack of liquidity in the market and by the Euro-Crisis.

UK house sales fell last year to 869,000, one of the lowest totals on record, HM Revenue & Customs has said. House price growth was just 1% – which in the circumstances was probably fairly good!

This seems to have been a long depression – the back end of 2008 was when we saw the writing on the wall – that is nearly 3.5 years ago. I don’t think we ever anticipated the market to flat-line for so long.

This week the UK reached £1tn (£1,000,000,000,000) in debt. To understand what one trillion looks like – go and have a look at your doormat – 1 Trillion of them would cover the whole of England, Scotland, Wales and Northern Ireland. Alternatively if you had spent £1m every day since Jesus was born, you would still have some change!

The really worrying thing is that there is little sign of a change in the short term. However, in the medium term I am involved in a number of major projects which could come to fruition in 2013-15. They have a long lead in, but I take some comfort in the fact that people are considering them. Of course this Parliament must be dissolved by May 2015, it is unlikely that the current incumbents will want to go to the Country with the current state of play.

Further I suspect that there will be some monies available starting next year. We will have the Olympics out of the way – I doubt we will ever know how much that has cost us. The budget of £9.3bn is apparently robust, money we can ill afford in the current economic climate!

Perhaps it is better in the middle distance than we think? I hope so!

Jan 3 2012

Another knee jerk policy : the feed in tariff cut was illegal

You might have spotted this story just before the Christmas break. Friends of the Earth and two solar firms, Solarcentury and HomeSun took the Government to court over the decision to slash the Feed in Tariff from 43.3p to just 21p per kilowatt hour. The favourable rate was introduced in 2010 as a deliberately attractive rate to encourage the fitting of panels.

A whole industry sprang up. Thousands signed up and this technology has the prospect of making real inroads to our CO2 emissions. Self generation (and selling surplus power back the grid) are clearly very green. Your south facing roof could save CO2 and potentially make you money.

But no sooner had the movement started than the Government slash the rate of the feed in tariff. Not by a few percentage points, but by half. The announcement was made in the middle of the consultation period! Mr Justice Mitting in the High Court found the Governments decision to slash feed-in tariffs (FiT) several months early, before a consultation on the issue ended, was “legally flawed”. There is likely to be a Judicial Review in the New year.

Of course a number of people paid premium prices to get panels fitted before the cut off date – which now looks like a waste of money. But more fundamentally, this whole debacle has put some people off the fitting of the panels.

Like most things, we don’t like uncertainty. The smart money is that this is a set-back. the Government have had their knuckles rapped. But they will almost certainly reduce the rate – they’ll just have to it a bit smarter next time!

Nas the clue is in the official Government response – Greg Barker the Climate Change Minister said the government disagreed with the court’s decision and would seek an appeal.

Perhaps the Government are not quite as Green as they suggest?

UPDATE 4 January

Climate change minister Greg Barker has today said, “We disagree with the court’s decision,” adding, “We will be seeking an appeal and hope to secure a hearing as soon as possible. Regardless of the outcome, the current high tariffs for solar PV are not sustainable and changes need to be made in order to protect the budget, which is funded by consumers through their energy bills.”

Oct 13 2011

Planning…again

I seem to be coming back to our Planning system a lot at the moment – I blogged about the proposed changes a couple of weeks ago. I have taken a bit of heat for some comments I made to the Estates Gazette about Nottingham‘s old Planning regime.

Not the sort of Green Belt I had in mind, but you get the picture?

The point I was making was that a few years ago, the Nottingham Planners hadn’t covered themselves in Glory. I thought that they were unresponsive and had caused the City some bad press with developers who went elsewhere. Elsewhere to towns which gave them an easier ride.

Actually my comments were aimed at a Planning system in general – as well as the one in this fair City. It has become a complex matter to get a Consent on anything significant. Some say – so it should. But I see some of the process – which can be over-burdensome, slow and extremely frustrating.

It was interesting to read at the weekend that the Government are now slowing down the possible changes to the system – it looks like they will get delayed by around 18 months. I guess those of us who are used to the system won’t be surprised. The lobbying has been powerful against the streamlining of the system.

We do need Planning controls – they are important. I am a huge fan of the green belt. I think in some cases we could extend it – which would force urban renewal. But sometimes the controls become politicised and that is when we fall into difficulty. No one is going to oppose buildings which create jobs, but sometimes the places which used to house those jobs are no longer fit for purpose. A change of use is needed. And on this occasions what we need is a Planning system which responds quickly to our chaining circumstances – before end up with white elephants for buildings…

Sep 26 2011

Market threats or opportunities?

It’s fair to say that this is a pretty weak market. Although the Government seem to have taken some tough measures to cut Public Sector Borrowing, we don’t seem to be dragging ourselves out of recession.

The optimism of 2010 has gently slipped away. We all though that the market would be back in mid 2011, that has been and gone. And it’s not back.

I can’t see much improvement until 2012 now. The major economies of the world seem to be struggling to get things going again. There is very little optimism around. We rarely hear great news stories in the property industry.

So we all need to be gloomy?

Well, not quite. In any market place there are opportunities when the market is weak. In fact their are opportunities because the market is weak.

Offering great service stands out in a poor market. But we also need to think strategically at these times. It is possible to find win:win situations in deals – particularly in commercial let property. As an example we are seeing more leases being negotiated early – well before lease end. Tenants can drive good deals, but landlords can also protect their interests too, by securing an income stream.

I think we are going to be in a period of uncertainty for some time to come.

But the market has always been cyclical – and it always will be. It is only a matter of time before it comes back…

In the meantime – we have to make the most of it.

Sep 15 2011

Empty Rates – no real winners?

I blogged a couple of weeks ago about the removal of Empty Rate relief for commercial property. It has been a bit of a disaster for some of our clients.

But the property industry is a pretty resilient place and much smarter, it seems than the Government. Although it is not always possible to avoid paying the Rates, the position can often be ‘mitigated’. And the industry seems to have out-foxed the Government. In the latest figures from the Office for National Statistics (ONS) the Government has failed to save the millions of pounds it had hoped by scrapping the Empty Rates relief. In fact they awarded more in relief in 2010 than they did in the preceding two years.

This is despite the fact that there are now 269,000 vacant commercial properties in the UK – amounting to 16% of the total stock.

So how do you avoid the Rates? Well, it’s easy really! We find people who want temporary occupation of property and are prepared to do deals. They move in for 6 weeks and then move to another property. The 6 months relief starts again after 6 weeks occupation…

It doesn’t work for everyone, but we have a number of properties where we can do this. And it seems that it is working!

I am sure that the loophole will be closed when these clever folks running the country hear the penny drop. But bear in mind that the Tories in opposition said they would scrap the charge, only then to change it a few weeks before the election.

Yes another example of an ill-thought through piece of legislation?

Aug 26 2011

You need Planning Permission – of course Sir….

The Government are currently consulting on a Draft National Planning Policy, by all accounts it’s creating quite a kerfuffle!

The document tries to set out some key parameters – one of which suggests that there will be a presumption in favour of sustainable development. On the face of it this sounds admirable – we should be encouraging ‘green’ developments – but this policy goes a bit further than that as I read it. It is a short document – around 50 pages – down from the 1,000 plus we had before.

The granting of Planning Permission for ‘green’ development doesn’t come with many other strings as far as I can see. In other words if it’s green you can have permission? Is this what was intended? Or is that one of those great political statements as opposed to a great policy statement?

There are good arguments on both sides. On the one hand it will probably surprise you to know that the UK only has around 9% of its area developed. Thats 91% ‘available for development’? Our towns are fairly well constrained – often by green belts I blogged about a couple of weeks ago. The amount of green space in our cities has been decreasing as we cram more of the built environment onto constrained parts of the Country.

But the other argument runs that our Countryside should be sacrosanct – we don’t need urban sprawl. Where is has happened it has failed. I saw this in Los Angeles which is a fine example of how not to ‘plan’ a place. We do have space in our Cities – even if it needs renewing and updating. But that is a good thing. Keeping communities together help with critical mass for shopping, transport and other infrastructure.

The argument is going to run – the consultation ends on 17th November… It will be interesting to see what the feedback is.

Apr 13 2011

The housing crisis solved?

By all accounts we have a housing crisis. Or if we don’t there is a train smash ahead – and we are heading into it.

Des-res of the future - squint for the after effect

We are not building enough houses. Government figures suggest we need 232,000 each year and in 2009/10 we built 129,000. Obviously the problem is compounded with time. Future generations are going to be “living in t’ shoebox in t’ middle o’ road” (the lucky ones).

So HM Government has come up with a whizz scheme. They have noticed there are a couple of empty offices lying around the place – making the skyline look untidy. Often on Industrial estates or in business parks they are obviously capable of making warm cosy homes.

So the Cameron & Clegg show are consulting the people. The document runs to a healthy 66 pages – but you really only need read page 7 – the rest are sort of belly button fluff. Warm and soft but pretty useless.

Page 7 sets forth thus…(my precis – to save you time):

Planning is always a problem. So side-step the planners. If you want to convert an office or light Industrial unit to a bijou residence, crack on. Don’t stop for the permissions. Just build – and you’ll get a pat on the back.

Sounds great. Especially the bit about side-stepping the Planners!

But is it really? It sounds ok to start – as there are some reasonable buildings with four walls and a roof. But the configuration can be difficult to remodel. Shared toilets are often seen as ‘poor’ by residents. Suspended ceilings aren’t gig in people’s lounges – nor are paper thin partitions.

But these can be put right. What can’t be put right is the location issue. We have ‘zones’ in case anyone hadn’t noticed. Zoning works to keep the uses apart (although I accept that there are some areas where we do have mixed use). Once we start on this route it’s a slippery slope – it’s not going to easy to go back.

Perhaps just simplifying the Planning process full stop would be better?

Oct 27 2010

The spending review and Nottingham

The Chancellor used the word “fair” or “fairness” more than 30 times in his Comprehensive Spending Review speech.

Unless we want our children and their children to pay for the boom and bust years, we needed to get a grip with the deficit. At nearly £843bn this is an eye-watering amount of money.

But what of the effect on the commercial property sector, and specifically in the East Midlands? Was it “fair”?

Well there was some good news. The go ahead for the Nottingham tram lines two and three. Such infrastructure projects really do help the city make progress. More money being spent on the M1 would, in my view, have been better for Nottingham if it had been pumped into the single cart track A453. I believe this is a genuine barrier for growth for Nottingham and, without a mention in the spending review; it looks like this has been shelved.

The bad news may be that we see a return to the early 1990’s when the Inland Revenue walked away from all of the temporary offices they had mopped up while Castle Meadow was being built. As Government departments look to save costs there will inevitably be surplus property – think emda, GOEM and the like. As other agencies become rationlised we could see some of this old stock dumped on an already fragile market.

This might present opportunities for the property market, but it could also have a suppressing effect by flooding it.

The real issue is that unemployment is likely to rise as direct cuts in the Council budget takes effect. Half a million people might be affected. But there are secondary effects too as they start to cut external spend like on PR and marketing, some of which is done by external firms, and that number is simply unknown.

Unemployment affects confidence. A lack of confidence usually hits the housing market as occupiers choose to cut down debt rather than investing – and the same traits then usually feeds into the commercial sector.

So I think we can expect a lacklustre commercial market place as firms contemplate investment. This tends to be quite long-winded and means that 2011 will be interesting in terms of transactional business.

We also have a VAT increase on the horizon. This too impacts on spending power and it seems this has pretty much been forgotten about.

Health and education budgets have been protected but these departments and sectors are going to need to have a root and branch review of costs. They are likely to be brought closer into the marketplace. Student fees may well increase, which has a long term effect. Students are likely to be debt-ridden for many years to come.

There was good news for the green sector as £1bn was earmarked for the Green Investment Bank, which will encourage low carbon technologies. Feed-in tariffs also appear to have escaped the axe in the short term.

The banks do not look as though they have escaped, with levies on their profits becoming permanent. On the face of it this might be seen as a victory for Jo Public who baled them out; but in reality we need a healthy banking sector to lend to business. The level of lending at the moment is very low. Some of these banks also directly invest in property. We need to keep them incentivised to do so and not provide barriers to the market.

Overall, my view is that this is not as bad as we expected. The recovery (if that’s what it is) is very fragile and only time will tell if the Government has got it right. Forget “fairness”, I think it’s more a case of “fingers crossed”.

Article first published as The UK Spending Review and the Impact on Nottingham on Technorati.