Scrap stamp duty to get country moving
February 2017: While stamp duty might raise billions for the government, it is putting a real brake on social and economic mobility, and should be abolished, argues Malcolm Bacchus.
There have been headlines in the press recently about how the increases in stamp duty over the past two years have raised extra income for the government – on track to exceed the £10.7bn raised during 2015-16.
Much has also been written about how this increase has reduced sales – and sales prices - of houses. While much of the fall was originally at the top end, and overseas buyers, the effect cascaded down through the market.
However, it is not the impact on house sales itself that is the most iniquitous part (and overlooked) of stamp duty. It’s the social and economic effect.
That people are not moving is hardly surprising. After all, who, for a fairly average house in London, would want to contribute anything between £10,000 and £45,000 to the government’s coffers just for the privilege? Particularly when, by the time estate agents’ fees and removals costs have been added, someone might easily be looking at a year’s net salary going, never to be seen again.
Stamp duty therefore acts strongly to reduce social mobility. It makes it more difficult for a family to move to a larger house when they have children. It makes it less attractive to downsize when children have left home. So more people are forced to stay in accommodation that is too small, while others occupy properties that are now too large.
As bad, if not worse, is the impact on workforce mobility. While obviously not the only consideration, costs of moving compel people to think twice about taking a job in another part of the UK or even a different part of London.
People add hours on to their weekly commute rather than incur the cost of moving and economically this is madness. Given the time commuting, the stress involved, the cost of providing the necessary transport infrastructure and the mismatch between skills and employment opportunities, we should be making it as easy as possible to move to new jobs, not throwing massive financial burdens in their way.
There may be an argument for taxing second homes, but the social and economic consequences of stamp duty on primary residences is far too high. The tax is ill-judged, out-of-date and should be abolished.
Malcolm Bacchus is LSCA Deputy President
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