Sunak needs to go further than a stamp duty holiday
For the Government to truly ‘level up’ the country, as they promised during the 2019 General Election, the Autumn Budget must include the fundamental reform of property taxes.
THE CHANCELLOR’S solution to provide a temporary ‘stamp duty holiday’ on the first £500,000 of all properties sold until March of next year is a welcome one and may help to stimulate the housing market.
Will this policy have the desired effect? Potentially. However, many households will choose to stay put because they have lost their jobs, or are rightly concerned about the outlook for the economy or the industry in which they work. The stamp duty cut may bring forward purchases but it might not stimulate a flurry of activity.
This begs the question – why is it not permanent? As the Institute of Economic Affairs explained: “Making it permanent would get the property market moving and encourage those who want to downsize as well as those looking for family houses, freeing up homes for firsttime buyers.”
It is important to note that the cut in stamp duty majoritively benefits existing home owners as the saving is likely to be capitalised into house prices.
We should also remember that it is renters who have been at the sharp end of the effects of Covid-19 – this policy does very little to help the many renters who are struggling to get by.
The biggest savings will be received by those who own the more valuable properties, and given regional disparities in house prices, much of the benefit will accrue to those in London and the South East.
If the Government is serious about levelling up the country, then they need to build this short-term fix into a longterm solution.
To compound matters, modest properties and areas of the country with less property wealth are already being hit with higher council tax bills as a percentage of their property value.
This unfairness has been exacerbated by a lack of property revaluations since 1991. The effective tax rate on residential property is just 0.2 per cent in London, compared to 0.63 per cent in Yorkshire and the Humber.
Indeed, our country’s two primary property taxes, council tax and stamp duty, have evolved into taxes that are neither reasonable nor right.
Meanwhile, across the country, we are seeing rising levels of inequality – both regional and intergenerational. These divides have been exacerbated by the financial crisis of 2008 and there are further challenges ahead as the Chancellor addresses the costs and the implications of the current Covid-19 pandemic.
The International Monetary Fund (IMF) highlights that economies with more equal distributions of income and wealth tend to have stronger and more stable paths of economic growth than those with greater inequality. A fairer economy will lead to a stronger economy for our country.
The philosopher Sir Roger Scruton noted: “A conscious effort to direct resources northwards, and to provide for the people of the northern cities the education and career opportunities that currently exist to the south of them, would begin to heal one of the most painful divisions in our country.”
For the Government to truly “level up” the country, as they promised during the 2019 General Election, the Autumn Budget must include the fundamental reform of property taxes, to put money into people’s pockets, stimulating the housing market and the wider economy.
Fairer Share, a campaign I helped to found, proposes to scrap both council tax and stamp duty, replacing them with the ‘proportional property tax’ – a simple flat rate of 0.48 per cent on the value of property.
Central redistribution from London and the South East would maintain local council budgets, sustaining tax revenues while reducing property tax bills for 75 per cent of households across the regions.
If Fairer Share were to be adopted, Yorkshire and the Humber would receive an average saving per household of £615 per year, bringing an overall annual tax saving of £971m to the region. This would represent a huge boost to countless communities and their local economies.
Renters have thus far been ignored as part of the Chancellor’s generosity. I believe the tax should be collected not from tenants, but directly from owners who are in a better position to pay.
If this were the case 8.7 million households would be removed from property tax altogether. This would be in line with international practice and would save local councils £400m in administrative costs. These savings could then be applied to more productive use – funding vital local services whose budgets have been stretched as a consequence of the current crisis.
On balance, the Chancellor’s stamp duty holiday is welcome. But we need to go much further if we are to rebalance the economy. It’s time we ensure that changes to how we tax property benefit those in key regions like Yorkshire, and those who rent as well as own property.