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 HUMOR Training goggles on the bubble  I love pubs. I consider them educational institutions, for in no other place but a "local" can one get so quickly the gist of a neighborhood. A pint offered to the fellow next to you soon begets a torrent of information about who's doing what to whom in the district. A second gets you the "why." Now I wasn't looking for soap opera fodder when I popped 'round to the Builders Arms on Britten Street, but Jack gave me a bit of it anyway. Jack works in The City, but moved not too long ago to a terraced home in Chelsea. Finishing his first pint, Jack fretted: "I may have bought my digs just as the real estate bubble reached bursting point." For Jack, now viewing the market through the lens of his second pint, he just bought too much house. Pundits differ mightily about the extent of property overvaluation near the London Embankment. Some experts think the market hasn't been stretched at all, and others, such as Roger Bootle of Capital Economics, proclaim that property has been over valued by as much as 20 percent. One thing is certain: The average house price in town, unadjusted for seasonality, has fallen month-by-month for the last year. Jack, now viewing the market through the lens of his second pint, thinks he just might have bought too much house. Or, more accurately, he says, "I mortgaged too much." Jack is part of a demographic cohort that fought so hard to get into the housing market that it doubled the house price-to-gross-earnings ratio over the past decade. And that includes those with City salaries. The UK doesn't have housing afford ability programs like the U.S. There's no Fannie Mae or Freddie Mac to lower entry costs. Comparatively little in the kingdom's budget goes to broaden home ownership. In the upcoming fiscal year, for example, only two percent of government spending increases a re earmarked for housing. But it's not for lack of taxes. The burden of taxes weighs especially heavy on Jack. Not only is he giving up 35 percent of his income to the Inland Revenue, he's also forking over a nice of chunk of change in hidden taxes for his vices, like the very beer he quaffed during our discourse. "I figure I put away ten pints a week," he says. Eying my tab, I totted up an annual expense of £1,170, of which duty and VAT t a kes nearly 28 percent. Cigarettes, consumed at a rate of a packet a day, cost him another £1,800 a year. A whopping 78 percent of that expense goes to Her Majesty' s Customs & Excise. Jack also admits spending "about five quid a week" on the National Lottery, for which the government skim is 12 percent. That's not an especially sinful lifestyle by UK standards. The threshold for "heavy" beer consumption, according to the British Market Research Association, is 14 pints a week. And it's safe to say that Jack isn't telling me about all his predilections, either. A fter all, the latest numbers from the British Beer and Pub Association indicate that Britons, in addition to their beer, are putting away 20 liters of wine and 2 liters of spirits per capita every year. The government's effective take on those libations is better than 62 percent. It's no surprise that European Consumer Goods Intelligence, a service that monitors market and price trends in the European Union, declared booze to be "overwhel mingly more expensive in the UK" than in other EU countries, due mostly to taxes. I'm beginning to rethink my love of pubs. A fter a little bar coaster number-crunching over his admitted vices, Jack was surprised to discover that his blended sin tax rate is a shade under 55 percent. More surprising to him was the revelation that if he foregoes just the beer, cigarette and lottery expenses for investment at a rather humdrum seven percent per annum, he'd have £105,000 to add to his housing-or retirement-kitty over 20 years. That lifted Jack's gloom a bit. With this fresh perspective on his future, he called for a final ale. But, of course, I had to stand the round. "A fter all," he said, "I don't want to ruin my housing budget." |
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