Aide Memoir to Chancellor Hammond, in advance of the autumn Budget, 2018

 

Aide Memoir to Chancellor Hammond, in advance of the autumn Budget, 2018

Dear Chancellor,

I know you have some competing issues to consider at the moment, not least of which is finding the resources to meet ‘Maybots’ NHS largesse of £20billion. Nevertheless, for pity’s sake, you must do something about the distorting effect of the existing Stamp Duty regime on the UK Residential Property Market.

Whilst the SDLT changes may have been a laudable aim of the former Chancellor Osborne, to slow the property market down, thereby protecting the housing stock, the measures he used were closer to ‘stingers’ than they were to ‘sleeping policeman’.

The problem being, that most people have lost out by these draconian measures and, so it would appear, has the Treasury, where the Stamp Duty receipts are down by £542million or 7.7% and transaction numbers are down from a torrent to a trickle.

This looks like a classic case of ‘lose, lose’, which is the last thing that this country needs at a critical time in the post Brexit era.

It isn’t just foreign oligarchs that have stopped buying property, as no one cares about them, but it is the wider ramifications of the market slow down which is having an even greater effect, when you take the holistic view.

Every business connected with the Residential Property Market is being deleteriously affected and is paying less VAT, PAYE, Corporation Tax which must be affecting the Treasury receipts.

No one will ‘shed a tear’ about the fact that estate agents are in a parlous state, as evidenced by the plummeting shares in publicly quoted companies, but what about surveyors, solicitors, advertising companies, publishers, board contractors, retail sales of white and brown goods, building contractors, mortgage brokers and a pot pourri of other related industries who are presently ‘nursing their wounds’?

In Mr. Osborne’s own words, he has created a ‘DIY recession’ and this surely is the antithesis of what we need at present.

Now, no one is advocating the virtues of a runaway property market, but perhaps there is something between this and total stagnation. A liquid market growing at say 3-5%, is healthy and stimulates retail spending, which helps to drive the UK consumer led economy.

Of course we need to be cognizant of the lack of housing supply at the lower end of the market, but constraining demand so aggressively, is not the way to do it, my friend.

Yes, we need to build at least double the number of new homes to satisfy demand, but you will help to do this more readily, by releasing inappropriately designated green field sites across the country and, amongst other things, by reforming the planning process within local councils, so that the criteria for decisions on notable schemes is based on planning, rather than petty politics as at present.

A number of nationwide, UK, Developers, such as Barratt Homes, are pulling out of London altogether, due to the recession in parts of the Capital and, the contagion effect of this, does not help to get more homes built, which will add to the housing supply.

Canny, wealthy buyers are choosing to rent properties, rather than to buy them, which denies the Treasury their greedy share of Stamp Duty and, in some cases, they are purchasing the shares of the underlying companies, which own the property assets and, in doing so, paying ½% Stamp Duty in the process. Can you blame them?

Other buyers are choosing to buy land, rather than the completed development of a single house, since they save two thirds of the Stamp Duty, that would otherwise have been paid.

When you double a tax, you create distortions and ‘shooting yourself in the foot’ Mr. Chancellor, is no way to impress your adversaries.

My advice to you, in your forthcoming Budget next week, is to reduce the Stamp Duty at the higher end in order to get things moving again. Not enough to create a stampede, but just enough to create a liquid market, which will percolate down through all the other price ranges and, hey presto, before you know it, you will have a vibrant, growing, property market again.

If politically, you cannot bring yourself to do even this, then as a poor, second alternative, I have suggested ad-nauseam, at the very least, you should split the liability of Stamp Duty between the buyer and the seller.

Ignore the UK Residential Property Market at your peril, Sir! It is after all the ‘golden goose that lays the golden eggs’, but for the foregoing reasons, they have been few and far between recently and it is time you corrected the errors of the past.