Don’t betray the young by hiking stamp duty again
In 1798, while Wordsworth and Coleridge flitted about the Quantock Hills and Edward Jenner busily transcribed his smallpox research, Pitt the Younger was contemplating a new levy to fund the Napoleonic Wars. The “strictly temporary” revenue raiser he devised was known as income tax. Though swept aside after a few years, Robert Peel soon revived it – and it’s been with us ever since.
Taxes, like the last Bounty in a box of Celebrations, have a bad habit of sticking around. And they bloat and expand as inevitably as post-Christmas waistlines. Stamp duty is a particular offender. It began life as a low, simple tax, levied on relatively few properties – yet under New Labour it mutated into a swollen cash cow afflicting huge numbers of transactions.
So when Rishi Sunak announced a stamp duty holiday last summer, I only wished he could have gone further. It’s not just that many young people are struggling to get on the housing ladder. Stamp duty is a universally illogical tax, driving harmful disincentives across the market. In rewarding staying put and punishing moving, it is a tax on mobility and freedom, which prevents people from buying the homes they really want to live in and negates the pay rises associated with relocating for work. Like all stupid taxes, it makes people behave in ways they would otherwise have considered absurd.
As policies go, stamp duty is perhaps second only to rent control for its ability to unite economists in condemnation. The best argument the Government can muster in its defence is that it raises £12billion a year, but there are much less distortionary ways of raising this money. Some have argued that stamp duty cuts are merely capitalised into higher house prices, but this isn’t an argument against relief per se; it’s an argument for planning liberalisation.
Since the Eighties, when the amounts involved in stamp duty were trivial, the numbers moving around the country, for work or otherwise, have fallen. Some conservatives might welcome this trend, perhaps believing that people should stay near the communities where they grew up. But the restless surge of people, chasing opportunity, is something Tories should champion – especially if “levelling up” is to mean more than belatedly shuffling a few thousand civil servants or the odd government department to other parts of the UK. Already, people are reacting to changing work habits or seeking to mitigate their risk from endemic Covid by moving out of cities to suburbs or the countryside. Potentially transformative choices will be far more expensive with stamp duty gumming up the market.
What happens next with stamp duty – whether they extend the holiday beyond its March 31 deadline – will therefore be a stress test for this Government. What do Conservatives stand for? Do they value freedom and a flexible, dynamic economy? Do they take seriously their moral obligations to younger voters?
The coming years may see a permanent Leftward shift in the “Overton window” of politically acceptable ideas; just as taxes tend to linger, new spending commitments quickly come to be seen as inalienable rights. Nothing is so permanent as a temporary government programme, but the Tories should make stamp duty the one that bucks the trend.