Scrapping stamp duty is better than cutting 1p off income tax, says IFS chief
THE Chancellor should axe stamp duty in the Budget rather than cut income tax, a leading economist urged last night.
Paul Johnson said abolishing the property- purchase levy would cost around £6billion – roughly the same as taking 1p off income tax – but it would have more impact.
His plea came two days after it was revealed that Jeremy Hunt had an extra £20billion to play with in the Spring Budget on March 6 partly because publicsector borrowing has tumbled.
Days earlier, Mr Hunt hinted that tax cuts could be on the cards, saying that countries with lower taxes had more ‘dynamic, fastergrowing economies’.
Mr Johnson, director of the Institute for Fiscal Studies (IFS) thinktank, said stamp duty ‘gums up the housing market’.
He advocated abolishing it altogether, at a cost of £12billion a year, but said that even if it was only removed for owner-occupied properties – excluding second-property buyers – it would be good for the economy and tax system.
Mr Johnson told the Mail: ‘If the Chancellor wants to cut taxes, one of the things he might want to do is cut taxes on housing – so stamp duty would be probably top of my list.
‘We know it really badly gums up the housing market. Increasing housing transactions is most certainly good for the economy and the labour [market].
‘There are also penal rates of taxation on landlords. They’re not a politically popular group, but that flows down into the supply of rental housing and tenants.’
Mr Hunt is reportedly considering taking 1p off the basic rate of income tax, but the IFS chief said that would cost ‘a similar amount or a bit more than getting rid of stamp duty for owner-occupiers’. He added: ‘I’m pretty sure getting rid of stamp duty would have a more positive effect.’
Mr Johnson also argued that raising the thresholds at which families start to lose child benefit – £50,000 – and entitlement to free childcare – £100,000 – would be a ‘trivial’ cost to the Chancellor.
‘Those are the sorts of things the Chancellor could do almost irrespective of the headroom,’ he said. If one parent has a taxable income of more than £100,000, they are not eligible for free childcare.
He also said: ‘We’ve had a 60 per cent tax rate over £100,000 since 2009, but there’s a vastly higher fraction of people affected than when it was introduced.’
He suggested the Government could ‘bring down the point at which you pay 45p tax – to something like £80,000 – and get rid of the 60 per cent rate’.
Yesterday, Tory chairman Richard Holden held up the possibility of tax cuts in the Budget – and said there would be ‘more of that later in the year as well’.
He told GB News: ‘We are... coming out of that very tough period, and we’re able to outline our plans for the future, and I think the actual tax cut – you mentioned the national insurance cut for working people – is the start of that.
‘We’ll see more of that in March, and more of that later in the year as well. We have that new direction of travel, which is clear.’
Tory aides insisted he was trying to express positivity for March and beyond rather than hyping any specific tax-cut announcements.
But his comments will be red meat to Tories who are angling for major tax cuts to revive the party’s fortunes, with polls suggesting they are 20 points behind Labour.