"Onshore Atolls" - A Statistical Solution for Housing, Unemployment and Government Finances

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This article is a non-political investigation into links between issues around housing, unemployment and Government finances in the UK. A simple solution, based on statistics rather than emotive policies, may be the answer - Zero Corporation Tax Zones.

Statistics are loved by politicians. Figures not only support political points but are hard to argue against. However, statistics also benefit Government as clear numerals can remove moral predispositions from decisions. The big problems faced by modern Government are housing, employment and its own finances. These are emotive issues with many moral and social view-points across the political spectrum. But if looked at through statistics there may be a simple approach to tackling these issues collectively.

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. That demand consists of affordable homes for working families to purchase, and social housing for local authorities to own to provide to shelter some of the most vulnerable in society.  

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. This includes over 200,000 that have been vacant for more than 6 months. 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 only affordable 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% in October 2011 to 6.2% in June 2014. 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. The table below details the 10 local authorities with the highest proportion of long term empty property in the UK and where it correlates to levels of unemployment.

Top 10 Local Authorities Highest Proportion of Unemployment Rate

Total Long Term Empty Housing

1. Burnley 10.1%

2. Pendle 8.1%

3. Hyndburn 8.2%

4. Blackburn & Darwen 8.6%

5. South Lakeland 2.7%

6. Blackpool 9.8%

7. Hartlepool 13.6%

8. Rossendale 7.7%

9. Gateshead 8.5%

10. Copeland 6.7%

We can see from the above that 90% of the areas with the highest proportion of long term empty property have local rates of unemployment above the national average of 6.2%. This shows that while there is a housing crisis regarding demand 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% of money in. Then we have VAT (17.1%), National Insurance (17%), Excise Duty (7.3%), Corporation Tax (6.3%) and Council Tax (4.2%). “Other” revenue amounts make up 18.2% of money in but this is made up of no single amounts greater than Council Tax. The total expected income revenue in 2014 - 2015 is £648 billion. The simple statistic is Income Tax and National Insurance will make up 42.7% of all the money the UK Government receives while Corporation Tax is just 6.3%.

If the Corporation Tax ‘main rate’ rose by even 20%, still the proportion of Government income would rise only a minimal amount compared to the amount of tax paid by citizens.

The question of whether corporations should pay more tax, and the almost unanswerable further question of whether those companies would remain in the country, deserves a closer view in a further article.

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% more in Corporation Tax this amount would pale beside the amount of tax paid by its employees and demonstrates 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, and modern global corporations, like Starbucks and ArcelorMittal, 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 the 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.

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” 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, that should be researched and implemented, where, for example, employing 5,000 people would mean paying 15% Corporation Tax, 10,000 people, 5% and over 15,000 would equal 0% Corporation Tax. 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. 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 Zero Corporation Tax Zones 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. 

So, in answer to the questions of how do we attract the business behemoths of tomorrow, how do we lower unemployment in local areas of the UK, how do we use the existing surplus housing stock, and how does Government generate more income, “Zero Corporation Tax Zones” may be the statistical solution to all of our big problems.

 

1. http://www.theguardian.com/society/2010/jan/24/affordable-homes-shortfall

2. https://www.gov.uk/government/statistical-data-sets/live-tables-on-dwelling-stock-including-vacants

3. http://www.bbc.co.uk/homes/property/buying_rescueahouse1.shtml

4. 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

5. According to the Empty Homes Agency June 2014

6. The top 10 List of areas with Highest Unemployment can be found in Top 10 Areas of UK Unemployment September 2014 according to ONS.

7. UK Government Receipts 2014-15 http://www.ons.gov.uk/ons/taxonomy/index.html?nscl=Government+Receipts+and+Expenditure

8 Amazon News Article http://www.thisismoney.co.uk/money/news/article-3139123/Amazon-pays-just-11-9m-tax-5-3bn-worth-UK-sales.html

9. ONS UK Average Net Wage http://www.ons.gov.uk/ons/taxonomy/index.html?nscl=Annual+Earnings

10. Silicon Republic article: https://www.siliconrepublic.com/careers/2013/12/02/tech-industry-in-ireland-now-employs-105000-people

11. ONS UK Average Net Wage http://www.ons.gov.uk/ons/taxonomy/index.html?nscl=Annual+Earnings

12. Number derived from ONS UK Average Net Wages and disposable income after direct taxation.13. 

13. 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.


Submitted: October 23, 2015

© Copyright 2021 Thom Goddard. All rights reserved.

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