Addressing the stamp duty dilemma
Brian Murphy is head of lending at Mortgage Advice Bureau
Are the days of stamp duty – labelled Britain’s ‘most hated’ tax – finally coming to an end?
North of the border in Scotland it is clearly surviving on borrowed time as the Scottish government works to finalise a replacement.
Now a business consultation will determine whether the Welsh government will also gain control of stamp duty land tax and the ability to adjust how it works.
Change is certainly afoot, but where does this leave the English housing market?
Housing minister Mark Prisk told the Royal Institution of Chartered Surveyors’ national residential conference there has been ‘no decision’ on when stamp duty might be reformed to deliver a better balance of winners and losers for the same level of tax.
The need for reform is well documented: the current ‘slab’ approach is crude, unwieldy and takes no account of regional differences which make buying a home in Humberside a different financial proposition to buying a home in the South East. Surely by now we should have agreed on a more progressive alternative?
But before we go the Greenpeace route and scale the Shard in protest, let’s consider the government’s position. Faced with the difficult job of balancing its books in these times of austerity, it has not turned its back on the housing market and instead made a substantial commitment through Help To Buy.
Adjusting stamp duty land tax would clearly affect a significant government revenue stream. When money is scarce, the reality is that absorbing a loss through tax cuts means more pressure to impose additional taxes elsewhere or otherwise limit spending, when many people want more investment to stimulate construction and the wider economy.
A revised tax that works on a ‘marginal’ basis makes perfect sense in principle, but without a view of the balance sheets it is hard to judge the extent of the financial hole it might create. At this stage it seems prudent to explore the options and avoid a hasty, populist decision that carries greater risks further down the line.
Perhaps part of the answer is for vendors and not just buyers to make stamp duty payments – after all, many sellers will be making a profit on their home while first-time buyers especially are hard pressed as it is to raise a deposit.
If nothing else it is encouraging that the ‘distortion’ of stamp duty land tax is being acknowledged at the highest level of the government. To address the problem effectively, they now need to come up with a first-class solution.