It is interesting to me that one of the candidates to be the next leader of the Conservative Party has put as one of his key policies, the scrapping of stamp duty if he is elected Prime Minister in five years’ time.
Just reading that might give us all pause for thought, not least because five years is a long time away, a lot of water can flow under the bridge, and there’s the somewhat daunting prospect of the Conservatives winning power back at the next General Election. A mighty task given the scale of their defeat just a couple of months ago.
However, as we all know, Opposition policies – if deemed popular – can make it not just into future manifestos but legislation much sooner than waiting for a change of Government. And therefore we shouldn’t necessarily rule it out from happening based on the time it might take to be introduced.
Clearly, James Cleverly thinks it’s a good idea, although he might also have some questions to answer in terms of where the lost taxation revenue that stamp duty brings in might come from should he get his wish to see it scrapped in its entirety.
Which again is not to say it isn’t out of the question as a policy. Certainly, as an industry I can recall a large number of commentators, trade bodies, policy people and economic ‘influencers’ suggesting a similar policy in the not so recent past.
The argument being put forward that stamp duty is a major block on housing transactions actually taking place, as it is ‘dead money’ which can be significant, and adds to the overall cost of moving home in the first place. In other words, it acts as a hindrance not a help.
Certainly, there’s a very good reason why recent Governments have cut stamp duty for first-time buyers over the last couple of decades, recognising that the tax has to be taken into account when it comes to saving up for a home, and that without such a cost, the ability to find a deposit amount can be achieved sooner rather than later.
Stamp duty holidays may well seem more likely to be repeated than a wholesale scrapping of the tax, but it would be interesting to review the figures Cleverly might have about the benefit to the housing market specifically, and the UK economy more generally, if there was no duty to be paid and this resulted in a significant uptick in transactions.
We’re all acutely aware that the housing transaction is the just the centre of the wheel when it comes to other economic activity that is generated as a result, not least all those housing market stakeholders who benefit from sales, to the removal firms, the sellers of white (and other) goods, and everything that is bought as a result of just one move, let alone a chain of them.
I tend to think there must be a better way to generate tax from housing than stamp duty, and it might just come from a system which encourages more activity and transactions, rather than one which adds an often significant tax burden. Indeed, there are plenty of arguments made about the ‘unseen’ damage of stamp duty taxation. It’s why we often hear calls for downsizers to be provided with a holiday in order that they might save money in any move, freeing up family homes that are often in short supply for those who want to get on, or move up, the ladder.
I feel it’s much more likely that we’ll see piecemeal interventionist stamp duty measures by the Government, rather than looking at Cleverly’s policy and thinking that sounds like a good idea.
Indeed this Government has been explicit in its need to raise taxes rather that opting for a policy which, in the short-term at least, would take money out of the Treasury coffers. Plus, we should not forget that a first-time buyer stamp duty incentive is actually going to be taken away in the next tax year when the threshold drops to its previous level. In other words, more first-time buyers are going to be dragged into paying stamp duty from April next year, rather than less.
That being said, Governments of all hues have often been quick to pull the handle marked ‘stamp duty holiday’ at various points, and the picture might look very different in a 18-24 months if it feels it has got more of a handle on the country’s finances and it is already looking towards a second term.
Overall, while the stamp duty scrappage policy might be worth pursuing at some point, it’s not going to happen any time soon. We need to be in a position where the Government is more likely to be talking about surpluses rather than black holes, and while I’m not ruling out further tinkering of thresholds and the like in the next five years, I’m fully expecting stamp duty to be around for many more years to come.
Patrick Bamford is Head of International Business Development at Qualis Credit Risk, part of AmTrust International
