Isn’t it ironic, that the main plank of the former Chancellor Osborne’s fiscal discipline was to produce a Budget surplus in 2020, which has now been revised by Mr. Hammond, to approximately £20bn and 50% of this shortfall, will be due to lower Stamp Duty Receipts; which was Osborne’s folly.
‘The world and his Auntie Nelly’ were aghast at the time, following the Autumn Statement of 2014, when the autocratic and misguided Osborne, hiked Stamp Duty from 7% to 12% and then 15% for offshore companies. Not content with this breathtaking mismanagement, he went further still by ‘jacking up’ Stamp Duty by an additional 3% for Buy-to-Let investors and ‘second steppers’.
Reduced Stamp Duty created ‘frenzied state’
As if this was not enough ineptitude, he reduced Stamp Duty at the lower end of the market, that was very active at the time, and this created a ‘frenzied state’ where price inflation in this sector reached 10% in certain parts of the country. The very vulnerable first time buyers, who were trying to get onto the housing ladder, were further left moribund by this ill-fated deed.
In his wisdom, he thought that the drop would be compensated by the rise and therefore be a budgetary neutral event – how foolish was this?
Whilst the new Chancellor has had to relax the budgetary fiscal disciplines, in order to maintain growth in the post Brexit era, reducing the budget deficit is still a vital Conservative aspiration which is enshrined in their Manifesto.
Stamp Duty Receipts will be down by £9.5bn
According to the OBR (Office for Budget Responsibility) Stamp Duty receipts will be down by £9.5bn over the electoral term which, ironically, will amount to a staggering 50% of the budget deficit at that time.
SDLT, after all, is an easy tax to collect and an even easier one to avoid, by simply not moving. Who would have thought that measures taken by any Conservative Chancellor would reduce the tax take so significantly and at the same time, destroy the middle to upper property markets, mainly in London? As we all know, taxes are there to raise revenue and when they don’t, they need to be re-set. I am sure even the fervent socialists amongst us, would not be prepared to subsidise this Stamp Duty shortfall, which is now costing tax payers a fortune.
Hammond’s Spring Budget Opportunity
Mr. Hammond, Sir, you have an opportunity in the Spring Budget of 2017 to correct this error by lowering the Stamp Duty levels at the higher end which will gain much needed revenue for you and, at the same time, revive the ‘sagging fortunes’ of this part of the property market, where illiquidity has significantly increased during the last 18 months.
Worry not, it will not be ‘pandering to the rich’ as undoubtedly the socialists would have us believe, but instead it will earn vital and much needed revenue for the Exchequer, in order for you to bring down the stubbornly high budget deficit and by doing so, get the finances of this country in order.
London: 30% of GDP
‘Like it of lump it’, London represents a 30% of the GDP of the UK Economy and if you stifle its property market, the ripple effects from this are wide spread amongst many other diverse, but related, industries which is not clever ‘politic’.
Construction in London is down and house developers are building less homes which is further endangering the aspirations to build 250,000 new homes in the UK. There is a litany of related businesses connected with the property industry ie Surveyors, Valuers, Estate Agents, Advertising companies, Media, sale of white goods and brown goods who are all affected by this DIY recession and Osborne’s legacy.
Come on Mr. Hammond, be bold, do the right thing with Stamp Duty before it undermines your economic policy any further.