Stamp Duty Land Tax (Temporary Relief) Bill — House of Commons, 2020-07-13
Topic: Housing
Anthony Howe Browne (Conservative, Centre-right): Not at all; I am sure lots of people called for it. I am just showing that I am consistent in my views Stamp duty—SDLT—is one of the most unpopular taxes, and not just with homeowners and the public, but with economists. The Institute for Fiscal Studies—a very wise organisation—has called for stamp duty to be abolished outright, because it is one of the most economically inefficient taxes. It is always worth listening to the IFS. I serve on the Treasury Committee, and we took evidence last week from Nick Macpherson, the former permanent secretary at the Treasury. He said he really dislikes stamp duty because it is a transaction tax that reduces transactions, and it has a very bad impact on labour mobility and bungs up the whole labour market. He would certainly not be sad if it went We know that there is huge pent-up demand in the housing market. That is not just about Brexit uncertainty and all the missing transactions from the coronavirus crisis; there was pent-up demand beforehand, partly because stamp duty rates have been so high. Before the financial crisis, there were on average about 1.7 million transactions a year. In recent years, there have been about 1.2 million a year. We are about 30% below the pre-financial crisis average. A large part of that is because of stamp duty, although there are other reasons The housing market is very sensitive to changes in stamp duty. That is why Opposition Members said earlier, "Don’t speculate about stamp duty changes. Just get ahead and do it." That is what the Government have done. That is why a cut in stamp duty is so effective in rapidly driving up activity in the market and releasing the animal spirit—the huge backlog of people who want to move are released to get on with it. As several of my hon. Friend have mentioned, we have already seen the number of transactions shoot up in the past few days, which is very much to be welcomed Several Members on both sides of the House have worried about the £3.8 billion in forgone revenue. I have a solution to that, which I will come to in a minute. However, I do not think the figure will be anywhere near £3.8 billion. That is just the forgone revenue from stamp duty that has been calculated by the Treasury. That is slightly unlikely because the whole stamp duty take last year was £4.5 billion just for primary residential homes, if we get rid of the additional premium We have heard about all the additional economic activity that goes along with housing transactions—the builders, the furniture makers, the removal companies, the lawyers and so on. All that is taxed at 20% VAT. On average, only about half the tax paid in a single housing transaction goes on stamp duty; the other half goes on all the associated economic activity through VAT to the Government. If we scrapped stamp duty outright but the number of transactions doubled, the revenue to the Government would be the same. It just comes not as stamp duty but as VAT However, that is not the proposal I was going to make to help my Treasury friends with the £3.8 billion. There is another £3.8 billion: the latest available figures show that the amount of money the Treasury made from the additional premium for second homes was also £3.8 billion, as it happens. That is made on a rate of 3% above the existing stamp duty. If we increased that 3% to 6%, there may be a slight decline in transactions, but basically we would raise another £3.8 billion. That is what I proposed a couple of months ago—that we should increase the rate for second home owners and property investors, and use that to cut stamp duty for people buying a home for what houses are for, which is to have a place to live in So I very much welcome this policy. I urge the Government to look at increasing the rate for second home owners, not now, when we are in the middle of the financial crisis, but when we get back a bit to normality. Let us make this a flat rate. There is no social or economic reason why people buying second homes or homes for investment should get discounted rates on lower-valued properties. This should be a flat rate, like VAT, where it is the same whatever the value of the transaction. Lastly, we should give strong consideration for this temporary cut in stamp duty to be made permanent.