Cllr Thom Goddard is the Portfolio Holder for Sport and represents Stansted South & Birchanger Ward on Uttlesford District Council, Essex.
The big problems faced by modern Government are housing, employment and its own finances. What if there were a policy that might address all three?
I propose that, by creating on-shore Corporation Tax havens in areas of high unemployment (which are also areas with excess housing supply), the Government could ease the housing crisis, increase tax receipts and lower unemployment.
The United Kingdom has been in the grip of a housing crisis for more than a decade due to the rate of houses constructed being unable to keep up with demand.
The National Housing Federation put a figure on the shortfall of available housing to demand at 500,000 dwellings.
However, the Department for Communities and Local Government net supply of housing report in April 2015 details 610,000 empty homes across the UK. In 2014, the Empty Homes Agency estimated there are up to 870,000 empty homes in the UK.
These are not £50 million riverside flats in London, affordable only by the very wealthy or large investors. The vast majority of vacant housing in the UK is normal family homes either repossessed or unwanted because of the region of the country where the properties are located.
The statistics indicate that the housing crisis is not a question of supply but a crisis of location.
Unemployment in the UK has been falling steadily since its peak of 8.4 per cent in October 2011 to 6.2 per cent in June 2014. 1
Yet the statistics show that at a local District Council or Unitary Authority scale, rather than at larger regional areas such as North East or Yorkshire/ Humberside, spikes of high unemployment can be seen.
We can see from the above that 90 per cent of the areas with the highest proportion of long term empty property have local rates of unemployment above the national average.
This shows that while there is a housing supply crisis in the South of England, in the North where there are not enough jobs there is high availability of property.
The UK Government’s monetary practices are more complex than any corporate accounts department trying to avoid paying taxes. But if UK Government accounts are simplified into income and expenditure the picture becomes clearer.
The government receives money from taxes, business rates, excise duties and other revenue streams. By far the largest revenue, estimated by the Office of Budget Responsibilities for 2014 – 2015, is income tax at 25.7 per cent of money in.
Then we have VAT (17.1%), National Insurance (17 per cent), Excise Duty (7.3 per cent), Corporation Tax (6.3 per cent) and Council Tax (4.2 per cent). “Other” revenue amounts make up 18.2 per cent of money in but this is made up of no single amounts greater than Council Tax.
The simple statistic is Income Tax and National Insurance will make up 42.7 per cent of all the money the UK Government receives while Corporation Tax is just 6.3 per cent.
If the Corporation Tax ‘main rate’ rose by even 20 per cent, still the proportion of Government income would rise only a minimal amount compared to the amount of tax paid by citizens.
Take, for example, the online retailer Amazon, who has been at the forefront of charges of not paying enough Corporation Tax.
According to the ONS, in 2014, Amazon’s UK Corporation Tax bill was £11.9 million. The company’s UK workforce is 7,722 staff. If we work on the UK average wage before tax, the company’s workforce paid £57.3 million in direct taxes (Income and N.I.) and had £193.5 million after tax to spend in the local economy.
In 2014 – 2015 direct taxation of Amazon’s staff will bring the Treasury 16 times the amount of Corporation Tax the company pays. Even if Amazon paid 10 per cent more in Corporation Tax, this amount would pale beside the amount of tax paid by its employees.
This demonstrates that the best way to increase government receipts is to have more people in work paying taxes.
It is not just Amazon that has been the focus of media attention on the amount of Corporation Tax paid. Modern technology companies, like Google, Facebook and Apple, have avoided paying large amounts of Corporation Tax in the UK by being based abroad.
Statistically, if you disregard Corporation Tax and focus on the number of employees that are based abroad, that should be the core issue. Google, Facebook and Apple are based in Dublin solely due to the low Corporation Tax rate.
According to Silicon Republic, 105,000 people are employed in the technology industry in Dublin and many more are employed in industries that service those workers such as shops and restaurants.
Disregarding Corporation Tax, if that amount of people worked in the UK, at the national average wage, it would be worth £778.86 million in direct taxes to the Treasury and £2.631 billion to the local economy where the companies are based each year. 4
The simple, statistical solution to the housing crisis is for the Government to create jobs in areas of high unemployment, enabling local workers to remain in their areas and attracting new residents to make use of the available housing and reduce pressure elsewhere – thus killing two birds with one stone.
However, to return to the 1980’s and the creation of enterprise zones or more urban development corporations/quangos would be a mistake: this has cost previous governments hundreds of millions of pounds with little sustainable achievement by the end.
The statistics show the most important aspect to a local economy, and therefore the take up of housing supply, is employment. A reliance on income from Corporation Tax cannot compare with having people in work.
The creation of onshore financial facilities, or “Zero Corporation Tax Zones” (ZCTZs), would create isolated, low-tax atolls, similar to the Cayman Islands or Bermuda, but on the mainland UK.
These “onshore atolls” would provide enormous benefit to the local community around them without altering the Corporation Tax rates of the country as a whole.
A sliding scale should be researched and implemented, where, for example, employing 5,000 people would mean paying 15 per cent Corporation Tax, 10,000 people paying five per cent and over 15,000 paying 0 per cent.
This would encourage new technology companies to base themselves in areas of high unemployment and surplus housing stock: a new generation of industry to replace the ones that have declined.
This does not advocate the removal of Corporation Tax from the UK as a whole. Corporation Tax spurs business transparency and accountability to government.
Further, this is not another proposal for supply-side economics. 5 Income Tax rates would remain the same and economic growth could be a secondary benefit without being the ultimate aim.
The new-technology, global corporations ZCTZs would attract to the UK are already paying low rates of Corporation Tax in other countries; however, the UK would offer one of the best countries in the world in which to do business and the appealing low tax along with it.
“Zero Corporation Tax Zones” would attract the business behemoths of tomorrow, lower unemployment in local areas of the UK, use the existing surplus housing stock, and generate more income.
1 Office of National Statistics. The unemployment rate has continued to fall since, but I am using the June 2014 figure to correlate with other data
2 According to the Empty Homes Agency June 2014
3 The top 10 List of areas with Highest Unemployment can be found in Top 10 Areas of UK Unemployment September 2014 according to ONS.
4 Number derived from ONS UK Average Net Wages and disposable income after direct taxation.13.
5 The idea that greater income tax cuts for investors and entrepreneurs provides incentives to save and invest, and produces economic benefits that trickle down to the overall economy.