On the Wednesday in early July when Rishi Sunak announced a temporary increase from £125,000 to £500,000 in the stamp duty threshold for house purchases, a record 8.5 million people visited the Rightmove property website and I’m pretty sure I was one of them. I continued visiting it weekly: it became a lockdown obsession, alongside French television thrillers, until last month I finally spotted a London flat I wanted to buy. Now, like thousands of others, I’m pushing to complete before 31 March, when the stamp duty holiday — a £15,000 saving for me but the equivalent of a £3.9 billion annual giveaway for the Treasury — is due to expire.
The housing market has run hotter than anyone expected for the past six months and is still ticking along in lockdown, but pundits fear it will go cold again — with price falls of 5 per cent or more — when the stamp duty incentive is taken away. The Chancellor, under pressure to keep pumping cash on many fronts, also has to explain in his March budget how he plans to start rebalancing his books. There’s talk he might opt for the abolition of stamp duty (for which the Telegraph is vigorously campaigning) and council tax, and replace both with a new valuation-based property levy that sounds a lot like a first step towards a wealth tax.
But that’s surely too radical while he’s still in crisis-management mode, and meanwhile I’m hoping he has read a report from the CEBR think tank which argues that the £500,000 threshold is in fact close to fiscal neutrality (that is, the extra revenue from other taxes generated by higher house prices, a flurry of sales and related spending have more or less replaced the lost duty) but that a better result for the Treasury — possibly a ‘net annual fiscal gain of £546 million’ — would be achieved by reducing the threshold to £250,000.
That judicious middle way would still be a doubling from where it started, and a levelling-up boost for buyers at the bottom of the ladder. If I were the Chancellor, it’s the way I’d be thinking.
It’s hardly original to observe that stock markets have a mind of their own. Leading indices, including the FTSE 100, have been riding the Biden bounce since November and looking beyond the pandemic since the first vaccine announcements. Their collective buoyancy defies the live-stream of doom which is our daily news diet while their valuations often defy rational analysis: see my comment on Tesla last week, or consider the idea that Deliveroo (the take-away service valued at around £5 billion this week) plus the ex-punk boot brand Dr Martens (up to £4 billion) could now equal the aero engine maker Rolls-Royce, currently knocked down to £9 billion.
Pondering how to navigate this alternative world, I sought the wisdom of a brace of veteran investors — Robin Andrews, regularly of this parish, and Jonathan Davis, another long-time Spectator contributor and editor of the Investment Trusts Handbook. If there’s a common thread in their answers it’s that carefully chosen small companies always have the capacity to outperform large ones (‘Elephants don’t run,’ as super-veteran Jim Slater used to say), while the passive investor with a fee-laden ‘diversified’ portfolio merely gets what he deserves; but that the well-run specialist investment trust offers a happy medium between those two approaches.
In a UK context, both see the Aim market for smaller companies as the best hunting ground for the independent stock picker who’s prepared to do some homework. Up 21 per cent last year while the FTSE All-Share was down 10 per cent, Davis says Aim is ‘no longer just an arena for punting on dodgy commodity plays’, pointing out that it includes lockdown-winner online retailers such as Asos and Naked Wines, tech plays such as Keyword Studios in gaming and Blue Prism in robotics, and growth stocks such as the tonic-water phenomenon Fevertree. Andrews — a self-confessed former commodity-play punter — is nowadays excited by Aim names such as Zytronic in touchscreens, Kape Technologies in cybersecurity, Invinity in vanadium batteries and Pressure Technologies in hydrogen power.
So there’s ten to explore for starters. As for investment trusts, the best of the most established — the likes of Baillie Gifford’s Scottish Mortgage Trust, founded in 1909 — offer global spread plus stakes in the US tech-stock surge. But they don’t have to be big or old; as Andrews says: ‘One City reform Rishi Sunak should be promoting for the new era is the creation of more small investment trusts dedicated to pharma, emerging tech and green industries.’
Battling for business
The almost invisible Alok Sharma has taken my advice (3 October) and vacated the office of Secretary of State for Business, Energy and Industrial Strategy — leaving not a rack behind, to misquote Prospero, but a mountainous pending tray — to focus on running the Cop26 climate change conference in November. His successor at BEIS is Kwasi Kwarteng, a forceful fellow whose CV includes stints with JPMorgan and Odey Asset Management, so I hope he’s ready to do battle for UK financial services in Europe, and I hope he’s genuinely prepared to engage with the ‘30 top business leaders’ we’re told now form the Prime Minister’s Build Back Better Business Council and were due to meet ministers this week, though curiously BEIS was unable to tell me any of their names.
Boris Johnson’s recent demonstrations of his well-known disregard for business extend from a shambolic rescheduled speech to the CBI in November to the still unravelling chaos of post-Brexit border rules now afflicting every mover of goods, whether they be lobster suppliers, car factory managers or wine importers. Let’s be fair to Sharma and say he was an improvement on his own predecessor, Andrea Leadsom; but Kwarteng, Johnson’s third business secretary in 18 months, can only do better.