Osborne stamp duty hike sees dramatic slump in tax revenues

GEORGE Osborne’s controversial tax raid on Britain’s most expensive homes has triggered a dramatic slump in stamp duty revenues.

Sales of properties worth more than £1.5million fell by almost 40 per cent last year, according to analysis of Land Registry figures provided to the Daily Mail.

This has caused the total amount of stamp duty collected by the Treasury to fall by around £440million, from £ 1.079billion to a possible £635.7million.

The figures cover the period between April and November last year compared to the same period in 2015. The latest evidence of the collapse in stamp duty comes as Chancellor Philip Hammond faces pressure from estate agents and MPs to reverse the tax grab on more expensive homes in next month’s Budget.

His predecessor George Osborne introduced the reforms in December 2014. He said the changes would leave 98 per cent of buyers better off, but that stamp duty bills would rise for those who purchased properties worth more than £1million. Those buying a £1.5 million house faced an extra £18,750 in stamp duty.

The Treasury expected to rake in less money overall from stamp duty but predicted the tax take from the most expensive homes affected by the rate increases to go up.

This happened in the first year after the reforms when stamp duty on properties worth more than £1million rose by 15 per cent, or £320million, to £2.46billion in 2015.

But estate agents say more recently the reforms – as well as uncertainty over Brexit – have caused the top end of the housing market to stall.

Concerns about the impact of the slump on tradesmen led Celia Sawyer, an interior designer and presenter of Channel 4 show Four Rooms, to commission accountancy firm PwC to crunch the numbers. She said: ‘The Government needs to recognise that its stamp duty reforms on more expensive homes have backfired. The Chancellor should reverse these tax hikes as soon as possible to get the market moving again.’

Miss Sawyer, 50, has the backing of Tory MP Jacob Rees-Mogg.

He described Mr Osborne’s ‘punitive’ stamp duty hikes as the ‘politics of envy’, adding that they have also failed because they have raised less money for the Treasury.

Under the system a £1.5million property will incur duty of £93,750 compared to £750,00 before the changes. A £2.5million property will incur tax of £213,750, up from £175,000.

Estate agents have called for the Government to reverse the stamp duty hikes on more expensive properties. They point out that many people who own homes worth £1million or aspire to buy them are not wealthy. Many are based in parts of the country where property prices have soared.

Charlie Willis, senior partner at Strutt & Parker, described the stamp duty rise as a ‘kick in the teeth for the squeezed middle’. ‘It’s a punitive tax that stops movement,’ he said.

A Treasury spokesman said: ‘Lower transactions in recent months are likely to reflect wider factors in the housing market. The top end of the market is affected by a range of international and economic factors, but overall our reforms have reduced stamp duty for 98 per cent of homes bought.’

‘A kick in the teeth’

WHEN Theresa May stood on the steps of Downing Street in July last year and pledged that foreign takeovers of British firms would have to be in the national interest, my heart soared.

In recent decades, successive British governments have stood silently on the sidelines as overseas marauders have bought up the nation’s vital infrastructure.

Many of our most emblematic companies, including the industrial and chemical giant ICI and consumer favourites such as Cadbury, Boots the Chemist and Scottish & Newcastle Breweries have all fallen into foreign hands.

More recently, we’ve seen an overseas assault on our brilliant technology companies, such as computer chip maker ARM Holdings, gobbled up by Japan’s SoftBank for £24 billion at the very moment the new PM seemed to be drawing a line in the sand.

Alarming

The sorry truth, however, is that despite Mrs May’s fighting words, nothing has changed. Yes, the PM has her hands full negotiating our divorce from the EU. Nevertheless, since her rallying cry, some £ 70 billion worth of overseas bids have been announced and then consummated, with no notable obstacles placed in their path.

Among the most far-reaching and alarming assaults is the effort by the German stock exchange, Deutsche Boerse, to seize control of one of the great pillars of the City, the London Stock Exchange. Another is the sale by National Grid of the gas distribution network of pipelines that feed homes and businesses, to a consortium of Chinese and Qatari interests.

The latter deal would not be tolerated in the United States, Canada or Australia. In fact, all three have invoked legal powers to rebuff China’s efforts to gain control of vital infrastructure.

The chaotic approach of Westminster and Whitehall to foreign takeovers has been brutally exposed in the past few days by the £125 billion bid by the Brazilian-controlled food group, Kraft Heinz, for Unilever, one of Britain’s iconic companies.

The Anglo-Dutch firm is a vast enterprise with a distinguished history dating back to the late 19th century, when the Lever brothers built a soap factory and a model workers’ village at Port Sunlight on the Wirral.

Unilever touches every aspect of our daily lives, from Dove soap and shampoo to the Hellmann’s mayonnaise and Marmite that are such staples of the British diet.

It is my understanding that over a febrile weekend both Kraft Heinz and Unilever sought guidance from No 10, and Greg Clark’s Business Department, about the Government’s attitude to what would be the world’s biggest takeover.

But the firms failed to get any clarity, despite reports which suggested that Mrs May had expressed her concerns.

Government has also been found badly wanting in its supine response to the effort by Peugeot to buy Vauxhall from America’s General Motors, putting UK jobs and pensions at risk.

The problem is that Whitehall itself is riven with divisions over the rights and wrongs of foreign takeovers. The nation’s top civil servant, Sir Jeremy Heywood, a former investment banker, rarely sees an overseas takeover offer that he doesn’t like.

He was a major supporter of the failed 2012 attempt by Franco- German Airbus manufacturer EADS to buy Britain’s top defence company, BAE Systems — which foundered because of the resistance of the German government. Heywood was also a supporter along with former Chancellor George Osborne of the aborted effort by the U.S. drugs giant Pfizer to buy one of Britain’s leading pharmaceutical companies, AstraZeneca.

Osborne supported the deal because he thought it showed the attractiveness of Britain’s corporate tax regime. He was thwarted by combative hearings before a Commons committee, which established that Pfizer would slash and burn jobs, and research and development budgets, as it had done in the past.

Unlike many of its competitor nations, Britain has operated a free- market capitalism which puts up few barriers to overseas takeovers. It is only companies seen as vital to our national security, most notably jet-engine maker Rolls-Royce and BAE, which have a ‘golden share’ controlled by the government of the day, which is designed to keep corporate predators at bay.

When it came to the Kraft Heinz offer for Unilever — which ground to a halt at the weekend — ministers lacked powers to block the deal, although a show of disapproval from No 10, or Greg Clark, might have been enough to send it packing.

Aggressive

In the end, the deal was aborted as a result of a robust rejection by Unilever chief executive Paul Polman and his board, which made it clear they didn’t appreciate the aggressive behaviour of Kraft Heinz and its owners.

The Brazilian billionaire proprietors were left in no doubt they would face a bare- knuckle fight if they went ahead.

The would- be buyers of Unilever were not helped by the fact that they own the Kraft brands. As the recent buyer of Cadbury — founded in Birmingham nearly two centuries ago — Kraft is among the most despised names in British business.

After the takeover seven years ago, it reneged on pledges to keep a factory near Bristol open, moved its official domicile to low-tax Switzerland, cut jobs at the company’s home in Bourneville, and changed the formulas of some of Cadbury’s best-loved products.

But there are greater concerns in this debate than the ingredients in a Creme Egg.

As a result of our willingness to sell off four out of our six biggest power companies to foreign owners, command and control of decisions affecting our energy supplies are now taken in Frankfurt, Paris, Madrid and Beijing, rather than London.

Danger

No wonder it’s proving hard to keep the lights on and the factories operating in winter cold snaps.

Equally worrying is the drain of patents, technical knowhow and advanced technology as our high-tech firms are snapped up by the Chinese, Japanese and Americans. Expertise funded by the taxpayer through our great research universities of Cambridge, Oxford, Imperial College and University College London is vanishing overseas.

As we negotiate our departure from the EU, there’s never been a more important time for Britain to nurture its great global companies like Unilever, which have been enormously successful in selling into the newly rich countries of Asia, Latin America, Eastern Europe and Africa.

But every overseas takeover is a danger to the nation’s balance of payments with the rest of the world, to the Exchequer’s corporate tax take, and to our ability to manage and control our own economic affairs.

That is why Mrs May needs to ride roughshod over the spineless ditherers of Whitehall and follow through with her Downing Street promise to end the plundering of our greatest companies.