The Statistical Solution to all our Big Problems

8^th October 2015

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. 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.

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 relevant 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.

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. The same is true of other large companies, for example Google, Facebook and Apple.

The simple 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.

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. Income Tax rates would remain the same and economic growth could be a secondary benefit without being the ultimate aim.

The 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.