First some background on Capital Gains Tax (CGT).
CGT was 40% under John Major, with taper relief which took into account that part of capital gains was down purely to inflation, but distorted the market in that it forced entrepreneurs and shareholders to wait ten years or more before their CGT tax dwindled to anything bearable.
Gordon Brown as chancellor changed this to a flat 10%, so that start-ups could if they wanted float their companies within three years or less and not be penalised. This did encourage start-ups such as Phones4U and others. Of course his CGT cut also benefited the new Buy-to-Let entrepreneur.
Alistair Darling then raised the CGT rate to 18% in 2008 (though it remained 10% for business payouts under £1 million).
The new ConDem government aims to raise CGT to the marginal tax rate on "non-business assets" - so 20% for basic rate taxpayers, 40% on higher rate taxpayers and 50% of those whose income is over £150k. It's also clear that they don't regard property to be a business asset.
Unfortunately, they haven't said "this tax increase is effective at midnight tonight". They've given notice that it will come into effect at the emergency budget in June. Anyone around at the time of Nigel Lawson's idiotic "notice" that he was removing double tax relief on property will recognise the dangers. You'd think the Tories would learn from their mistakes, but no!
We are going to see a flood of properties listed on the market by entrepreneurs hoping to beat the tax deadline, and they are likely to slash prices just to get a sale (the CGT increase is so eye-watering, it's worth cutting prices).
The increase in supply will undoubtedly lead to a crash in prices. Especially when the sellers have a deadline. One of the successes of the Brown government was to ensure that property prices did NOT crash during the recession. The idiotic Con-Dem'd government appear to be undoing all the good work.
There are 14.5 million homeowners in England alone, who will all be affected by a property crash precipitated by the stupid Con-Dems.
Some on the extreme right and the extreme left like to rail at landlords, take pleasure in property prices falling and long for the disappearance of the private landlord. However, landlords service a need in our economy. People aged 18-30 need somewhere to live, this is the stage of their career where they move about the country and homeownership hampers them. Private landlords fill a need. The alternative is council housing, but most of it was sold by Thatcher and there wasn't any capital to rebuild the stock (and even less capital to do so now). It's either rent a flat or live in a cardboard box. There is no benefit to these entrepreneurs being forced to sell out, and no benefit in precipitating a property crash.
On a lot of the financial forums there are people ruefully wishing they had voted Labour. New Labour was a careful balance between helping the poor through a minimum wage increased faster than inflation plus tax credits, and supporting the middle class by underpinning the property market and encouraging entrepreneurship, with the governmemt always ready to support the economy in downturns through public spending.
The Con-Dems by contrast have an incoherant set of policies. The stability of the economy seems secondary to getting themselves into government with ministerial Jags. I understand that some LibDems are peeved that Ed Balls was scornful of their fiscal policies during the coalition talks. Apparently he hurt their feelings. Well, Good On Ed Balls, I say. If the Conservatives had any sense they too would have sent the LibDems away with a flea in their ear.
As the distress in Middle Britain sharpens, my sense is that Labour's best chance to win the next election is from the centre where we won in 1997. I was going to go for Ed Miliband for leader just because he's nice, but am now seriously considering Ed Balls. Telling the fruitcakes in the LibDems where to go shows great judgement. Among his achievements is the original idea to make the Bank of England independent, and he was key to persuading Gordon Brown that the euro was rubbish (and Brown, with his usual political skill used Blair's weakness over Iraq to permanently rule out the euro in summer 2003). He has the brains to make a great Prime Minister.