Kemi Badenoch’s pledge to abolish stamp duty on homes was today welcomed as the “single best tax reform any government could make.”
The Tory leader told her party conference to rapturous applause: “At the heart of a Conservative Britain is a country where people who wish to own their first home, can," she says. "But our housing market is not working as it should."
"The next Conservative government will abolish stamp duty.”
Stamp duty on homes starts at 2% at £125,000 - or £300,000 for first time buyers - but rises to 12% on the value of homes above £1.5 million, with an extra 5% on top for second homes or investment properties.
It raises around £15 billion nationally, of which around a third comes from London home buyers. It has been blamed for slowing down activity in the property market, particularly in the capital, where many buyers are saddled with tax bills for many tens of thousands of pounds.
The Tory leader did not explain how she would pay for such a big loss of tax revenue.
Tom Clougherty, executive director of the free market think tank the Institute of Economic Affairs said:
"Abolishing stamp duty is the single best reform any government could make to Britain's tax system.
"As things stand, this outdated and uneconomic levy is wreaking havoc on our already troubled housing market – by deterring sales and depressing house-building.
"Indeed, research suggests that the wider social and economic harms are equivalent to three-quarters of the revenue raised – and that's on top of the loss to the people actually paying the tax.
"This means that stamp duty is many times more damaging, as a source of revenue, than broad-based taxes on income and consumption.
"Any proposal to permanently cut or abolish it is therefore extremely welcome."
Richard Donnell, executive director at property portal Zoopla, said: "Stamp duty hits four in five homeowners and two in five first-time buyers across the country, especially southern England where 60% of all stamp duty is paid. We welcome any proposals that remove the financial barriers to moving home. More home moves would support economic growth and the ambition to build more homes."
Guy Meacock, director of buying agency Prime Purchase, says: “This is a wonderful soundbite but I would imagine it’s not deliverable, even if Kemi Badenoch is the next prime minister.“
Removing stamp duty would be transformative but one wonders how on earth the government would finance such a sweeping change. How would they budget for it, particularly as the economy is in such a sticky spot? They would need to recoup the money some other way.
“It’s a shame as this is the first piece of good news the property industry has had in a long while. Finally, someone is listening, has the common sense to realise that stamp duty is having such a detrimental impact on people’s mobility and is a block in every direction for the housing market.
“It is also making London and the UK far less investable. More realistically, a rebasing of council tax, using up-to-date property values, would be far more equitable and go some way to helping end the inherent injustice in the system."
