North or South Falling the Most?

MissMoneypenny

Guy_Montag wrote: »

What it needs is less money spent & more tax breaks to encourage companies to set up or move north.

The government have tried that before and it didn't work ie Midland Bank in 1975 moving a large section to Sheffield. A lot of their key staff refused to leave London. Some people I knew, went as they got more for their money in property, but they returned to London. Later, a lot of the work was returned to London.

dopester

mitchaa wrote: »

Dopestar...You my friend are deluded if you think Scotland is currently falling as hard as England, you have absoloute no evidence of this.

You are letting this whole HPC thing take over your life, i think you need to take a step back from this all as you are getting a bit obsessed by it all now

Playtimes over mitch.

Take comfort in those Scottish house price stats all you want.

Those stats are meaningless to me as they do not look forward. A country in so much debt, a HPI boom-boom linked economy on the brink, a banking system with serious hull damage and now throwing excess weight overboard in the hope they'll reach safe harbour, and a population which will come to learn their wealth locked in property can crash harder that it boomed.

sdooley

If the government is going to employ someone to do a job, I would rather they do it in the North where the pay will be lower for the calibre of employee and the cost of the building, land, etc will be far cheaper than yet another Whitehall white elephant. Plus it reduces regional unemployment.

The argument about the overall appropriate level of taxation is another one, but there will always have to be some government employees and it makes economic (and social) sense for as many as possible of them to be in the North not London.

MissMoneypenny

Even Shell seems to be watching its costs.

"Last June Shell put part of its North Sea operation up for sale and abandoned plans for a £25 million headquarters in Aberdeen. The company said today's announcement, which followed a cost and efficiency study, would help to secure its long term competitive future in the UK."

http://www.theherald.co.uk/news/news/display.var.2218343.0.shell_axes_180_oil_jobs_in_aberdeen.php

Guy_Montag

dopester wrote: »

Can Government afford such generous tax breaks for companies already under the strain to relocate somewhere up North? And I'm talking about companies which haven't hitched their whole strategy and survival on the HPI boom-boom bandwagon, because nearly everywhere I look UK companies are getting hit hard.

My own view is our Government coffers will be hit harder, just like New York found that in June of last year it took $176 million in taxes from the top 16 banks, but this June it only took $5 million - with the Governor of New York strongly calling it a real funding CRISIS.

That Policy Exchange study that broke a couple of weeks ago..

http://news.bbc.co.uk/1/hi/uk_politics/7556937.stm

There will be less and less Government money to spread around in my view. People should prepare themselves for a real drop in living standards (not the end of the world and still better living standards than in previous ages or during war, unless society really turns on itself in a self-indulgent strop).

And "when opportunity is cut off in one direction, people will move in another" as part of the "mechanism through which individuals actively seek their happiness and societies maintain their balance".

Yeah, I wasn't very impressed with, at least the way it was reported, the policy exchange. Point is there's very little entrepreneurial spirit in the NE so you have to build it. That means, not just encouraging some people in, but discouraging those that have it from leaving. What would you imagine the proportion of uk business revenues come from round here? Maybe 3-4% (I'm sure Generali will be along soon to tell us) & what proportion of government revenues are spent here?

So if you invest the 3-4% revenue by making business rates zero in the NE then companies will set up here, people will set up small ventures & a sense that there's more to life than the next dole cheque will start to evolve. I'm not thinking of banks trying to relocate here, that seems unlikely, but other companies will.

Huge amounts are currently ploughed into regeneration schemes, I'm suggesting encourage the people to regenerate the areas themselves.

Generali

It's virtually impossible to split business tax take by region - if someone in Tiverton takes out a business loan with a bank based in Glasgow to build a factory in Cardiff where do you book the profits? As far as I'm aware, nobody bothers to try to produce those sorts of numbers.

What we can say about the NE of England economically is that 70% of GDP comes from Government spending and that puts the people of the region in a very vulnerable position. If the Government can't or won't spend so much money in the area then that's going to mean a lot of people losing their jobs. For example, when the Tories get into power (as presumably they will eventually) do you really think they'll keep ploughing money into a region that so whole-heartedly votes against them?

My suspicion is that the Govt is going to start running out of money a lot sooner than the next election: UBS announced yesterday that they are going to cut their salary bill by 1/3rd. My guesstimate is that would be about £350 million knocked off London's GDP in UBS employees' salary reduction alone.

Mutliplier effect fans would reckon that reduces GDP by about £500 million and thus the tax take by £200 million (govt takes about 40% of GDP in tax). UBS is just one bank in trouble and there are a lot of troubled banks. Plus all those builders up a certain creek without any obvious paddle.

I think we are starting to see a real head of steam building towards a very nasty recession indeed in this country. Banks haven't got money to lend to businesses. The stock markets are fck'd so that's another source of investment cut off (and you ain't seen nothing yet on that score - dividends are falling fast which is going to weigh heavily on stock prices). The Government's tax take will head south with the rest of the economy just as welfare bills start to soar so they are going to struggle to try the Keynesian route out of recession (more Govt spending).

To help the North East of England thrive once again as a region, the best thing to do IMO is to cut Corporation tax and business rates to nil or as close to as possible for a limited, defined period of 10 years. If possible also reduce CGT on the sale or liquidation of small businesses started in that area during the period to a nominal amount, say 5%. If it can't be afforded for the entire region then try it in one town and then spread it if it proves to be a success. Then again, that's the best thing to help any economy - low tax, light regulation.

Edale

Generali, I still don't see why this will have a more dramatic effect on the NE than the south. You have just said that the action of one bank wipes off £500 million from London's GDP. Lets face it the personal income of many people will be drastically reduced affecting their ability to buy expensive London homes. Now take the Teacher, Nurse, Doctor, Local Government employee, Central Government employee etc etc in the North East, there may be some job cuts but it won't happen overnight. Other people on benefits don't have that much to lose and how can the government just stop paying benefits? Tax receipts won't really be hit for many months yet and even then they can soon change their golden rules and borrow a bit more. What I am saying is there is much less pressure on the Government to stop spending than Business.

I can see from your land registry graph that prices have risen much more in the NE but this is from a much lower base. I am sure the profile of housing has changed with 'regeneration' in the North East and cheap terraced houses replaced my more spacious newbuilds (I am not wanting to argue which is best!).

I have a pal who is an Economist and he argues the same point that areas previously reliant on heavy industry will be the worst hit, I can understand all his economic arguments on other matters but can't agree 100% with this one.

Interestingly and slightly ot he thinks that the BOE needs to start cutting interest rates very quickly to avoid a very deep recession and deflation problems a la Japan, he specialises in the Japenese economy and wrote a massive book on their problems since the early 90s and sees worrying similarities.

Generali

Edale wrote: »

I have a pal who is an Economist and he argues the same point that areas previously reliant on heavy industry will be the worst hit, I can understand all his economic arguments on other matters but can't agree 100% with this one.

Interestingly and slightly ot he thinks that the BOE needs to start cutting interest rates very quickly to avoid a very deep recession and deflation problems a la Japan, he specialises in the Japenese economy and wrote a massive book on their problems since the early 90s and sees worryingly similarities.

London and the South East is going to be hit hard by the reduction in City wages and the large rise in unemployment that will go with it. The thing is, so are Government revenues. The money that the Government has to spend can come from only 2 places, it can tax or it can borrow. If tax receipts fall then that source is removed. That leaves borrowing and as the Government is doing that pretty heavily already there isn't much room to increase borrowing further either. For me that leaves the North East of England looking in trouble as so much GDP comes from Government spending.

I agree with your friend. Deflation is the enemy right now or will be in about 6 months IMO.

IveSeenTheLight

dopester wrote: »

Playtimes over mitch.

Take comfort in those Scottish house price stats all you want.

Those stats are meaningless to me as they do not look forward. A country in so much debt, a HPI boom-boom linked economy on the brink, a banking system with serious hull damage and now throwing excess weight overboard in the hope they'll reach safe harbour, and a population which will come to learn their wealth locked in property can crash harder that it boomed.

simple fact.
House prices in Scotland are the most affordable in the UK throughout all the regions

Affordability is the key

http://www.hbosplc.com/economy/includes/25_07_08Affordability.xls

dopester

IveSeenTheLight wrote: »

simple fact.
House prices in Scotland are the most affordable in the UK throughout all the regions

Affordability is the key

http://www.hbosplc.com/economy/includes/25_07_08Affordability.xls

Yes; Scotland. The place the crash won't hit.

Prices were 10.5% lower in August than they were a year ago. Prices fell by 1.9% compared with July. The average home now costs £164,654, which is more than £19,000 cheaper than the average price one year ago.