The Finance Acts 1998 and 2000: can the owners of agricultural land continue to gain from their capital disposals?

This paper seeks to analyse and discuss, from the perspective of the owners of agricultural land, the main changes to the Capital Gains Tax regime introduced in the Finance Act 1998 and subsequently amended in the Finance Act 2000. The replacement of indexation with a new Taper relief is examined, along with the phasing out of Retirement relief, and the interaction of Taper relief with Rollover relief. The opportunity for tax mitigation by the owners of agricultural land is critically examined.

Technological change and the challenges for regional development: building social capital in less-favoured regions

The relevance of regional policy for less favoured regions (LFRs) reveals itself when policy-makers must reconcile competitiveness with social cohesion through the adaptation of competition or innovation policies. The vast literature in this area generally builds on an overarching concept of ‘social capital’ as the necessary relational infrastructure for collective action diversification and policy integration, in a context much influenced by a dynamic of industrial change and a necessary balance between the creation and diffusion of ‘knowledge’ through learning. This relational infrastructure or ‘social capital’ is centred on people’s willingness to cooperate and ‘envision’ futures as a result of “social organization, such as networks, norms and trust that facilitate action and cooperation for mutual benefit” (Putnam, 1993: 35). Advocates of this interpretation of ‘social capital’ have adopted the ‘new growth’ thinking behind ‘systems of innovation’ and ‘competence building’, arguing that networks have the potential to make both public administration and markets more effective as well as ‘learning’ trajectories more inclusive of the development of society as a whole. This essay aims to better understand the role of ‘social capital’ in the production and reproduction of uneven regional development patterns, and to critically assess the limits of a ‘systems concept’ and an institution-centred approach to comparative studies of regional innovation. These aims are discussed in light of the following two assertions: i) learning behaviour, from an economic point of view, has its determinants, and ii) the positive economic outcomes of ‘social capital’ cannot be taken as a given. It is suggested that an agent-centred approach to comparative research best addresses the ‘learning’ determinants and the consequences of social networks on regional development patterns. A brief discussion of the current debate on innovation surveys has been provided to illustrate this point.

Towards the "cult of the equity"? Insurance companies and the interwar capital market

This article examines the ways in which insurance companies modified their investment policies during the interwar years, arguing that this period marked the start of the transition from ‘traditional’ to ‘modern’ investment practice. Economic and financial conditions raised considerable doubts regarding the suitability of traditional insurance investments, while competitive conditions forced insurance offices to seek higher-yielding assets. These pressures led to a considerable increase in the proportion of new investment devoted to corporate securities, including ordinary shares. Meanwhile new insurance investment philosophies began to be advocated, which accorded both legitimacy and importance to the role of ordinary shares in insurance portfolios.

Capital market expectations and the London office market

The analysis of office market dynamics has generally concentrated on the impact of underlying fundamental demand and supply variables. This paper takes a slightly different approach to many previous examinations of rental dynamics. Within a Vector-Error-Correction framework the empirical analysis concentrates upon the impact of economic and financial variables on rents in the City of London and West End of London office markets. The impulse response and variance decomposition reveal that while lagged rental values and key demand drivers play a highly important role in the dynamics of rents, financial variables are also influential. Stock market performance not only influences the City of London market but also the West End, whilst the default spread plays an important role in recent years. It is argued that both series incorporate expectations about future economic performance and that this is the basis of their influence upon rental values.

The impact of energy performance certificates on the rental and capital values of commercial property assets: some preliminary evidence from the UK

This paper focuses on the effect of energy performance ratings on the capital values, rental values and equivalent yields of UK commercial property assets. Of which a small number are also BREEAM rated, the study is based upon 708 commercial property assets held in the IPD UK Universe drawn from across all PAS segments. Incorporating a range of controls such as unexpired lease term, vacancy rate and tenant credit risk, hedonic regression procedures are used to estimate the effect of EPC rating. The study finds no evidence of a strong relationship between environmental and/or energy performance and rental and capital value. Bearing in mind the small number of BREEAM rated assets, there was a small but statistically significant effect on equivalent yield only. Similarly, there was no evidence that the EPC rating had any effect on Market Rent or Market Value with only minor effects of EPC ratings on equivalent yields. The preliminary conclusion is that energy labelling is not yet having the effects on Market Values and Market Rents that provide incentives for market participants to improve the energy efficiency of their commercial real estate assets.

The Finance Act 1998: can the owners of agricultural land continue to gain from their capital disposals?

This paper seeks to analyse and discuss, from the perspective of the owners of agricultural land, the main changes to the Capital Gains Tax regime introduced in the Budget of March 1998 and contained in the Finance Act 1998. The immediate replacement of indexation with a new Taper relief is examined, along with the phasing out of Retirement relief, and the interaction of Taper relief with Rollover relief.

Language capital and development: the case of African language publishing for children in South Africa

In recognizing 11 official languages, the 1996 South African Constitution provides a context for the management of diversity with important implications for the redistribution of wealth and power. The development and implementation of the language-in-education policies which might be expected to flow from the Constitution, however, have been slow and ineffective. One of the casualties of government procrastination has been African language publishing. In the absence of well-resourced bilingual education, most learners continue to be taught through the medium of English as a second language. Teachers are reluctant to use more innovative pedagogies without the support of adequate African language materials and publishers are cautious about producing such materials. Nonetheless, activity in this sector offers many opportunities for African language speakers. This paper explores the challenges and constraints for African language publishing for children and argues that market forces and language policy need to work in mutually reinforcing ways. Further progress is necessarily dependent on the political will to implement language-in-education policies that promote additive bilingualism and, in the process, guarantee sales for risk-averse publishers.

Rental depreciation and capital expenditure in the UK commercial real estate market, 1993–2009

This paper identifies the long-term rental depreciation rates for UK commercial properties and rates of capital expenditure incurred to offset depreciation over the same period. It starts by reviewing the economic depreciation literature and the rationale for adopting a longitudinal method of measurement, before discussing the data used and results. Data from 1993 to 2009 were sourced from Investment Property Databank and CB Richard Ellis real estate consultants. This is used to compare the change in values of new buildings in different locations with the change in values of individual properties in those locations. The analysis is conducted using observations on 742 assets drawn from all major segments of the commercial real estate market. Overall rental depreciation and capital expenditure rates are similar to those in other recent UK studies. Depreciation rates are 0.8% pa for offices, 0.5% pa for industrial properties and 0.3% pa for standard retail properties. These results hide interesting variations at a segment level, notably in retail where location often dominates value rather than the building. The majority of properties had little (if any) money spent on them over the last 16 years, but those subject to higher rates of expenditure were found to have lower depreciation rates.

Varieties of capitalism and investments in human capital

This paper explores the relationship between national institutional archetypes and investments in training and development. A recent trend within the literature on comparative capitalism has been to explore the nature and extent of heterogeneity within the coordinated market economies (CMEs) of Europe. Based on a review of the existing comparative literature on training and development, and comparative firm-level survey evidence of differences in training and development practices, we both support and critique existing country clusters and argue for a more nuanced and flexible categorization.

Human capital and growth under political uncertainty

In this paper we show how political uncertainty may impede economic growth by reducing public investment in the formation of human capital, and how this negative effect of political uncertainty can be offset by a government contract. We present a model of growth with accumulation of human capital and government investment in education. We show that in a country with an unstable political system the government is reluctant to invest in human capital. Low government spending on education negatively affects productivity and slows growth. Furthermore, a politically unstable economy may be trapped in a stagnant equilibrium. We also demonstrate the role of a government retirement contract. Public investment in education and economic growth are higher when the future retirement compensation of the government depends on the future national income, in comparison with investment under zero or fixed retirement compensation.

Social capital and the role of trust in aspirations for higher education

This paper considers the role of social capital and trust in the aspirations for higher education of a group of socially disadvantaged girls. Drawing on data from a longitudinal, ethnographic case study of an underperforming secondary school, the paper considers current conceptualisations of social capital and its role in educational ambitions. The paper concludes by tentatively suggesting that whilst social capital is extremely helpful in explaining differences within groups, trust appears to be a pre-requisite for the investment and generation of social capital, as opposed to the other way around. The paper also suggests that young people are not necessarily dependent on their families for their social capital but are able to generate capital in their own right.

Cross-country effects of regulatory capital arbitrage

One reason for the recent asset price bubbles in many developed countries could be regulatory capital arbitrage. Regulatory and legal changes can help traditional banks to move their assets off their balance sheets into the lightly regulated shadows and thus enable regulatory arbitrage through the securitized sector. This paper adopts a global vector autoregression (GVAR) methodology to assess the effects of regulatory capital arbitrage on equity prices, house prices and economic activity across 11 OECD countries/ regions. A counterfactual experiment disentangles the effects of regulatory arbitrage following a change in the net capital rule for investment banks in April 2004 and the adoption of the Basel II Accord in June 2004. The results provide evidence for the existence of an international finance multiplier, with about half of the countries overshooting U.S. impulse responses. The counterfactual shows that regulatory arbitrage via the U.S. securitized sector may enhance the cross-country reallocation of capital from housing markets towards equity markets.

A word of caution on calculating market-based minimum capital risk requirements

This paper demonstrates that the use of GARCH-type models for the calculation of minimum capital risk requirements (MCRRs) may lead to the production of inaccurate and therefore inefficient capital requirements. We show that this inaccuracy stems from the fact that GARCH models typically overstate the degree of persistence in return volatility. A simple modification to the model is found to improve the accuracy of MCRR estimates in both back- and out-of-sample tests. Given that internal risk management models are currently in widespread usage in some parts of the world (most notably the USA), and will soon be permitted for EC banks and investment firms, we believe that our paper should serve as a valuable caution to risk management practitioners who are using, or intend to use this popular class of models.