Lifting the stamp duty threshold would help Labour to be the party of aspiration

by Callum Anderson

A couple of weeks ago, the Office for National Statistics (ONS) released its latest data on UK property prices. For anyone, particularly young people, who aspire to getting themselves onto the property ladder, the data did not make good reading. It showed that house prices in December were 5.7 per cent higher across the UK compared with a year earlier, predominately driven by a 12.3 per cent increase in London.

Indeed, the average property in the UK will now set you back a cool £250,000. For people looking to settle in London or South East England (which as a result of the unbalanced UK economy and jobs market is a substantial proportion), this rises to £450,000 and £306,000 respectively.

But what would that even buy you these days?

Save for the rare gem that quite probably requires a lot of work, a £300,000 property (be it a house or a flat) in London or South East England is likely to be only a fairly modest 3-bedroom semi of the type to which many young families will aspire. Yet, the stamp duty bill on this purchase will be £9000, equal to several months’ entire after-tax pay for average earners.

This has resulted in the government pocketing £16.6 billion in stamp duty tax since 2010.

Many financial experts agree that stamp duty is not fit for purpose. For instance, Susan Spash, tax partner at chartered accountants Blick Rothenberg stated that, “Stamp duty is out of date and the government needs to modernise the thresholds and the way it operates so that the tax moves with the times”, whilst Peter Bolton-King said, “It’s an unfair tax that distorts the property markets and stops people easily moving around the country and makes the market inefficient.”

So what could a Labour government offer?

First, Labour should call for a rise in the stamp duty threshold from its current £125,000 to £250,000 for all UK citizens. This would be hugely beneficial to first time buyers, who would be able to put the money saved (up to £2,500) towards the actual value of the property they are buying, or simply other consumer goods associated with moving house. In particular, this policy would be popular with the young, many of whom feel that they are being frozen out of the property market.

Second, a future Labour government could end the illogical banding of the stamp duty tax. It is clearly extremely unfair that purchasing a property for £250,000 results in you paying £2500 in stamp duty, yet if you buy a house costing just £1 more, you are hit with the 3 per cent stamp duty bracket, and pay £7500 – a difference of £5000. The government should seek to make it more progressive, as with almost all other taxes. Quite simply, it makes no sense.

These policies would enable Labour to be the true party of aspiration, not to mention the party of young people.

Clearly, as part of any future prudent government, this would need to be funded. A land value tax, something that I have argued for recently, could go some way to addressing this, and would be a good start. It is a fairer tax, that would be not only more efficient, but also more equitable.

Of course, merely raising the stamp duty threshold is only part of the answer to our housing crisis. A mass house-building programme, using buildings and brownfield areas that we currently have more effectively, must all play a large part of UK housing policy. However in the meantime, Labour has the opportunity to show voters that it is truly the party of aspiration again.

Callum Anderson works at a national charity

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7 Responses to “Lifting the stamp duty threshold would help Labour to be the party of aspiration”

  1. Jolyon Maugham says:

    Doesn’t the Funding for Lending scheme demonstrate that reducing the cost of buying simple leads to price inflation? Or putting the matter another way, it helps investors more than first time buyers?

  2. John Reid says:

    Not sure Joylon,I know of people who voted labour in 1983′ have been arguing for this for years

  3. Ex Labour says:

    Stamp Duty and LVT are taxes. If Labour really wants to radical why not abolish SD and not introduce LVT ? Why should we tax wealth ? Is it just because they are wealthy people and the left dont like it ?

    First time buyers would benefit by scrapping SD and it would kick start a building program due to demand. The problem with LVT is that your conclusion that it would encourage people and organisations to bring land into use is, in reality wrong. Whatever the financial models say, those who had paid the LVT would expect more for its sale or rent. Its just human nature. If you had paid £100 per annum in tax for say 10 years, you would just add £1000 to the price to get your costs back.

  4. Tafia says:

    This is without doubt one of the most London-centric arrogant pieces I have ever read. You have the gall to say Labour should help people who are buying houses over 250K? Do you have any idea how big a house 250K will get you in most of the country?

    The vast bulk of the electorate (including the vast bulk of Labour voters) are not in the 250K bracket and never will be and know they won’t so it is – to the bulk of the natural Labour ‘pool’ a total non-issue.

    Start sorting out the housing problems of people earning less than 18K a year. The majority of the work force earns less than that and huge numbers don’t vote because they believe – and quite correctly, that no-one gives a toss about them.

    Labour my arse. Tory-Lite.

  5. Tafia says:

    And as for But what would that even buy you these days?

    Try this, which is pretty standard over most of the country for that price.

    The fact that people in the south are pathetic enough to pay the prices they do is not an excuse to expect them to pay less tax.

  6. Vern says:

    I would support the aboloshing of stamp duty tomorrow. Millions more would too! So do it!

  7. Tafia says:

    Vern, do you think the price of houses will come down if stamp duty were removed? Dont be so absurd.

    All that will happen is that house prices will continue to rise faster than wages and at the same time the government will have a huge chunk of revenue removed and so have to put taxes up elsewhere in order to just stand still. And you would be looking at a considerable amount of tax increases elsewhere – which would actually impact on people who can’t afford to buy a house to start with.

    If you can afford to buy the house you can afford to pay the tax.

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