Difference between revisions of "Flipping (United Kingdom)"

The etymology of the term ‘flipping’ is the English language verb ‘flip’, which can mean to put something into motion, and also to turn something over (Oxford English Dictionary 2015)<ref>Oxford English Dictionary. 2015. ‘Flip, v.’ OED Online. Oxford University Press. Accessed December 30. http://www.oed.com/view/Entry/71654#eid4108895.</ref>. This second meaning is implied in the practice of flipping because MPs changed, or ‘flipped’, the status of a particular home for the purpose of claiming expenses. Flipping also has a specific business definition and refers to the practice of purchasing an asset with the intent of quickly reselling the asset at a higher price (Ii, Hollans, and Swidler 2009: 249)<ref>Ii, Craig A. Depken, Harris Hollans, and Steve Swidler. 2009. ‘An Empirical Analysis of Residential Property Flipping’. The Journal of Real Estate Finance and Economics 39 (3): 248–63. doi:10.1007/s11146-009-9181-3.</ref>.  This definition is relevant to the accusations levelled at some MPs, who were alleged to have made substantial profit by selling taxpayer-funded second homes at the market rate and exempting any profit from capital gains tax.

The etymology of the term ‘flipping’ is the English language verb ‘flip’, which can mean to put something into motion, and also to turn something over (Oxford English Dictionary 2015)<ref>Oxford English Dictionary. 2015. ‘Flip, v.’ OED Online. Oxford University Press. Accessed December 30. http://www.oed.com/view/Entry/71654#eid4108895.</ref>. This second meaning is implied in the practice of flipping because MPs changed, or ‘flipped’, the status of a particular home for the purpose of claiming expenses. Flipping also has a specific business definition and refers to the practice of purchasing an asset with the intent of quickly reselling the asset at a higher price (Ii, Hollans, and Swidler 2009: 249)<ref>Ii, Craig A. Depken, Harris Hollans, and Steve Swidler. 2009. ‘An Empirical Analysis of Residential Property Flipping’. The Journal of Real Estate Finance and Economics 39 (3): 248–63. doi:10.1007/s11146-009-9181-3.</ref>.  This definition is relevant to the accusations levelled at some MPs, who were alleged to have made substantial profit by selling taxpayer-funded second homes at the market rate and exempting any profit from capital gains tax.

[[File:Satirical effigy representing the expenses scandal.jpg|300px|thumb|left|Photograph showing a satirical effigy representing the expenses scandal being paraded at Lewes Guy Fawkes night. Artist: Peter Trimming]]

[[File:Satirical effigy representing the expenses scandal.jpg|300px|thumb|left|Photograph showing a satirical effigy representing the expenses scandal being paraded at Lewes Guy Fawkes night. Artist: Peter Trimming]]

The practice of flipping came to prominence with the so-called ‘expenses scandal’ that broke in 2009. The Daily Telegraph first brought the expenses scandal into the public eye and in doing so, focussed heavily on flipping as one of the most financially significant and unethical abuses of the parliamentary expenses system (Daily Telegraph 2009)<ref>The Daily Telepgraph. 2009. ‘MPs’ Expenses: Six Figure Profits from Sale of Taxpayer-Subsidised Homes’. December 13. http://www.telegraph.co.uk/news/newstopics/mps-expenses/6797620/MPs-expenses-six-figure-profits-from-sale-of-taxpayer-subsidised-homes.html.</ref>. As the expenses scandal gained public notoriety by mid-2009, particular attention was placed on flipping as one of the most deviant abuses of the expenses system. Many high-profile MPs including cabinet ministers were accused of flipping. Perhaps the most high-profile resignation to result from the scandal was that of the Secretary for Communities and Local Government, Hazel Blears. Blears brought a property in Kensington, London that was sold after four months at a profit of £45,000 (BBC 2009)<ref>BBC. 2009. ‘Blears Will Pay Tax on Flat Sale’, May 12, sec. Politics. http://news.bbc.co.uk/1/hi/uk_politics/8047005.stm.</ref>. Because the property was designated as a second home, it was exempt from capital gains tax and mortgage repayments, leading to widespread criticism that the property had been bought with the intention of making a profit by ‘flipping’ it under the second home allowances system.

The practice of flipping came to prominence with the so-called ‘expenses scandal’ that broke in 2009. The Daily Telegraph first brought the expenses scandal into the public eye and in doing so, focussed heavily on flipping as one of the most financially significant and unethical abuses of the parliamentary expenses system (Daily Telegraph 2009)<ref>The Daily Telepgraph. 2009. ‘MPs’ Expenses: Six Figure Profits from Sale of Taxpayer-Subsidised Homes’. December 13. http://www.telegraph.co.uk/news/newstopics/mps-expenses/6797620/MPs-expenses-six-figure-profits-from-sale-of-taxpayer-subsidised-homes.html.</ref>. As the expenses scandal gained public notoriety by mid-2009, particular attention was placed on flipping as one of the most deviant abuses of the expenses system. Many high-profile MPs including cabinet ministers were accused of flipping. Perhaps the most high-profile resignation to result from the scandal was that of the Secretary for Communities and Local Government, Hazel Blears. Blears brought a property in Kensington, London that was sold after four months at a profit of £45,000 (BBC 2009)<ref>BBC. 2009. ‘Blears Will Pay Tax on Flat Sale’, May 12, sec. Politics. http://news.bbc.co.uk/1/hi/uk_politics/8047005.stm.</ref>. Because the property was designated as a second home, it was exempt from capital gains tax and mortgage repayments, leading to widespread criticism that the property had been bought with the intention of making a profit by ‘flipping’ it under the second home allowances system.

Although a reform process of the expenses system is taking place that may curb the continued occurrence of flipping, the damage done to Parliament’s reputation by the practice may be difficult to repair. Understanding the institutional dynamics that caused flipping to emerge is necessary to explain its occurrence and provide solutions for preventing further abuse of the Parliamentary allowance system.

Although a reform process of the expenses system is taking place that may curb the continued occurrence of flipping, the damage done to Parliament’s reputation by the practice may be difficult to repair. Understanding the institutional dynamics that caused flipping to emerge is necessary to explain its occurrence and provide solutions for preventing further abuse of the Parliamentary allowance system.