The Daily Telegraph

Stamp duty costs economy billions by stopping people living where they want, says think tank

- By Steven Swinford and Verity Ryan

STAMP duty is damaging the economy because it stops people from living where they want and forces them to spend longer commuting, a think tank says today.

The Adam Smith Institute suggests that stamp duty is costing the economy an extra £9.28 billion because it is gumming up the housing market and stopping people from living where they want. The estimated economic damage is on top of the £11.6billion that stamp duty cost home owners last year. Official figures suggest that the number of people spending at least two hours commuting rose by a third to more than 3.7million between 2011 and 2015.

Ben Southwood, an economist at the Adam Smith Institute, said: “With stamp duty people move to houses they value less in areas they don’t necessaril­y want to live. There is an economic cost to that. When people buy houses they buy lots of other things. Furniture, pots and pans, you change the garden. This is usually worth around 10 to 20 per cent of the value of the house.

“There is reasonably good evidence that when people aren’t mobile they can’t go to areas of the country where they could get better jobs. Another reason that you can’t do it is that it forces you to commute from a further distance. It’s the cost of the transport and the time it takes getting there.”

Jacob Rees-mogg, the Euroscepti­c Tory MP, has called for stamp duty to be cut “as a matter of urgency”. Ministers, peers and think tanks are urging Philip Hammond, the Chancellor, to cut the duty – dubbed a “tax on moving” – in his autumn Budget.

Paul Johnson, the head of the Institute for Fiscal Studies, said: “The more times you move house, the more stamp duty you pay. In practice it clearly does reduce the amount of moving that people do, that means you end up with a misallocat­ion of houses with too many old people in big houses and too many families in small houses. If they cut stamp duty that would reduce what is quite clearly a bad and damaging tax.”

A Treasury spokesman said: “We reformed stamp duty so that more people can achieve their dream of owning a home, and cut the tax for 98 per cent of people who pay it. The independen­t OBR forecast that the reforms would lead to more housing transactio­ns and more investment in residentia­l property.

“Our recent £2.3 billion Housing Infrastruc­ture Fund will free up over 100,000 properties in high demand areas so that people can live and work where they want to. And we’re helping more people buy their first homes through policies such as Help to Buy and the Lifetime Isa.”

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