Madness is rare in individuals – but in groups, political parties, nations, and eras it’s the rule.
So Treasury officials are looking into the idea of scrapping stamp duty as one of the ways they could kick-start the housing market.
I think there are certainly reasons why this is worth looking at. I’ve been keeping an eye on housing transactions in my neck of the woods and it’s those properties which are marketed just under the thresholds which seem to move most quickly – and by quickly I mean at all.
It’s a bizarre tax when you think about it – why should you pay the government for privilege of purchasing a property? If you go above the 1% threshold, the Treasury trousers at least £7,500, for doing bugger all. It might be a tad more logical if it were a tax on the profit, though of course it’s the profits which mean that people are able to trade up, and also to do up – with all that lovely RMI spend – their next house.
The government made some £31bn in stamp duty over the last 10 years so it’s a measure of how desperate they ate that they are even considering the thought. And also perhaps an indication that, finally, they have realised just how important a part of the whole economy the construction sector is. Organisations like the CPA and BMF have been pushing this message for years, maybe, just maybe, it’s sinking in.
So, on the surface, it sounds like there might be some light coming through the tunnel. But what scares me most about this is the hint in the original newspaper report that it would just be a temporary suspension.
A temporary suspension would mean that one day there would be no stamp duty and the next day there would be stamp duty. This would be a very bad thing. Rather like in 1988 when Chancellor Lawson gave a stupidly long lead-time for the abolition of double mortgage tax relief, thereby triggering massive house price hikes as punters raced ahead of each other to get in before the deadline.
Either abolish it all together (although they would have to plug the revenue hole from somewhere else) or make it a flat rate, like income tax. But don’t stop it and then start it up again when things get better. That way more madness lies.