By the time you read this, we will be a month or so away from the March 6th Budget and it is therefore unsurprising to see potential policy measures being ‘leaked’ and debated prior to that.
After an Autumn Statement which contained little of note for the housing and mortgage sectors, the expectation is this Budget will contain some potentially sizeable, dare I say, market-shifting measures designed to win favour with both prospective and existing homeowners. Or as you might also call them, voters.
One of those to have hit the headlines in recent weeks is a Government scheme designed to help first-time buyers onto the ladder with much lower deposit levels. 99% LTV mortgages have been touted as a way to potentially do this, although industry reaction has perhaps not been as vociferous in its support as the Government might have wished, given it is boosting demand again, when the greater issues lie in boosting supply.
Stamp Duty reforms and potential U-turns
As we approach any Budget announcement, it’s inevitable that stamp duty changes and reform will be brought up, and this time is no different.
I read a very interesting piece from Paul Johnson, Director of the Institute for Fiscal Studies in The Times recently – you can read it – which begins by arguing for a U-turn on the extra stamp duty surcharge that landlords are required to pay, but moves into a much more ground-breaking argument for abolishing stamp duty altogether.
This is not new in itself of course, there are many bodies and individuals who believe stamp duty is a major drag on the property market, and who believe the money recouped in tax would be dwarfed by the greater activity levels which the abolition of stamp duty would bring.
Johnson argues for other changes alongside this, namely bringing back mortgage interest relief for landlords, reforming CGT charged on the sale of a property so it’s only on the real increase in value, plus argues for scrapping stamp duty on all property purchases while increasing council tax on more expensive properties.
It’s hard to argue against much of this but one point that is often made is the amount of money stamp duty generates for Treasury coffers, and how difficult it has been for Government to turn their backs on this. However, and I’m not disputing this is a huge sum of money, recent figures from HMRC confirm that buyers paid £11.8 billion in stamp duty during 2023.
In the grand scheme of things, the Government could easily mitigate such a dip, and what could be delivered is a much more vibrant and progressive property market, where people are not deterred, by the painful tax hit.
What we gain from that greater level of activity would manifest itself in terms of retail sales, in terms of mortgage lending, in terms of GDP, and in terms of what it could add to the bottom line of UK plc, given we know how important our sector is to the wider UK economy.
The Chancellor’s dilemma: removing Stamp Duty once and for all?
In that sense, could the Chancellor be thinking the hitherto unthinkable in terms of stamp duty – removing it once and for all?
Stamp duty is an interesting measure for so many reasons but one of the key ones is the Chancellor’s ability to make changes and deliver consumer benefits with almost immediate effect.
We’ve seen a significant number of changes to stamp duty thresholds and holidays over the last couple of decades, and the Chancellor can start the firing gun on these straight away. They can therefore influence the housing market from the point of announcement and that might well be alluring for an existing party in power, looking to shift the dial quickly.
Certainly, if we are to believe the opinion polls and if they do translate into anywhere near the same result at a General Election, the Conservative Party could suffer a very heavy defeat, and therefore you can expect bold moves in terms of progressive taxation policy.
We have been told tax cuts are coming on March 6th – an end to stamp duty would perhaps be the most ground-breaking for our sector and related industries. It could change our market forever, especially as I think it would be unlikely for any future Government to subsequently reinstate a deeply unpopular tax.
Rob Clifford is Chief Executive of Stonebridge