A stamp duty cut for first-time homebuyers looks like just another empty promise from Shadow Chancellor Ed Balls. Speaking at this year’s Labour Party conference, he said that he would use money from the sale of 4G mobile phone licences to fund a two-year stamp duty holiday for purchases below £250, 000, as well as promising 100, 000 affordable new homes.
It doesn’t look likely that he will be able to put his promises into action anytime soon, as the present government seems committed to stay in power for its full five-year term. But perhaps Ed might win a few votes come the next election.
Of course by then it is more than likely that George Osborne and the present government will have already spent the phone money, so Ed (if he ever becomes Chancellor) will have to think of something else.
Another stamp duty holiday won’t provide any lasting benefits
It would no doubt be welcomed by first-time buyers, but it is questionable whether it would provide any lasting benefit to the housing industry and the property market generally. At the moment the main difficulty that buyers face is getting a mortgage, and if you can’t find the money to buy a home then saving stamp duty becomes irrelevant.
The present government has already tried offering a stamp duty holiday to first-time buyers – but while it did create some lift in the market, the effects soon wore off once the holiday period expired.
Time for a change – abolish stamp duty
The time has come for politicians to consider a more drastic review of the property market. In particular should stamp duty be replaced by a land value tax, or some similar annual property tax?
As it exists at present, stamp duty is a considerable disincentive to the buyers who have to pay the tax. It is generally admitted that the way it is charged, with broad bands at each rate of duty, is unfair. But it is easy and cheap to collect, so governments of every complexion have been reluctant to consider anything else.
On the other hand a land value tax could help stop the present scandal of empty homes across the country. A report by the Institute of Economic Affairs http://www.iea.org.uk/sites/default/files/publications/files/Abundance%20of%20Land%20Shortage%20of%20Housing.pdf earlier this year estimated that there are some three quarters of a million unoccupied properties in the country. If a land tax persuaded some property owners to sell or let their homes, surely that would help.