Cut stamp duty and see renovations soar

SCRAPPING stamp duty would be costneutral because homeowners would spend more on home improvements, a former Tory treasurer has said.

Speaking to The Sunday Telegraph, Lord Fink, one of the Conservatives’ biggest donors, said high stamp duty bills were prohibiting even wealthy home-movers from spending money on furniture, decor and extensions.

Scrapping or cutting stamp duty on home purchases would lead to a rise in such spending, he said, resulting in a loss-cancelling boost for the Treasury from a bigger tax take via the homeimprovements industry.

This newspaper is campaigning for the Government to cut stamp duty after a number of studies concluded the land tax is clogging up the housing market.

One report by the Centre for Economics and Business Research concluded stamp duty is preventing 45,000 house purchases a year, including families with children who need bigger homes.

The Chancellor used his last Budget to help first-time buyers get a foot on the ladder via a stamp-duty break on purchases up to £500,000.

For other buyers stamp duty is still paid at two per cent on the value of homes purchased between £125,000 and £250,000, five per cent between £250,001 and £925,000, 10 per cent up to £1.5million and 12 per cent above this level.

Lord Fink said: “If you look at transactions at the top end of the market it is clear the market is not functioning. And I worry that having put the [stamp duty] tax on the purchase of homes, that for the first time, people are looking to rent rather than buy when they never would have before.

“Historically when people bought at the top end they tended to spend money on their homes through improvements – new carpets, new kitchens – people want it to be right.

“It is one of the few expenses and areas of the economy which stays domestic, which means the tax on this industry goes back to the Government, so by cutting stamp duty it would not lose out.

“But anything that’s seen to be a tax break to the rich is going to be hard to implement, especially in the current climate.”

Meanwhile, Lord Fink has invested more than £3million in Project Etopia, a modular home developer which claims to shave up to 25 per cent off the cost of building homes by using a flatpack-style construction technique.

The “off-the-shelf” homes are also super energy-efficient, meaning owners are likely to have very low or nonexistent energy bills because they are built containing solar panels capable of generating more energy than the home uses.

If such homes catch on it could allow the Government to extend its annual housebuilding targets because they can be built in just four weeks, compared with several months for a standard brick house.