Here’s why Philip Hammond should abolish stamp duty

Looks like he’s thinking about it. Image: Getty.

When it comes to causes of the housing crisis, stamp duty land tax is far from the most important. And since it claws nearly £12bn out of primarily well-off peoples’ hands, many of those who care about housing will be content to let sleeping dogs lie, unpopularity notwithstanding.

But stamp duty does a lot more damage than it might seem – and when the housing market is so broken, it’s especially important to support any politically-achievable change that might make things a bit better.

Back in 1997 less than half of housing transactions faced stamp duty at all, and when they did, it was at a proportional 1% rate all the way up the schedule – that is, for houses worth both £50,000 and £2m (although there were next to no houses in the country worth £2m back then). Ever since then, politicians of both parties have been unable to resist ratcheting the rate up: the top rate is now 12 per cent.

It is progressive. But taxes on bicycles, using the train, and eating free range chicken would be progressive: progressivity isn’t the be-all and end-all of a particular tax, even if we want the system to be very progressive overall. There are many ways to soak the rich and if we want to do it then we should do it in a way that causes the least collateral damage to the economy at large – that is, to the rest of us.

Stamp duty is uniquely bad by this measure. The key problem is that stamp duty stops people from moving.

Housing ownership needn’t be the tenure that most people aspire to, but in practice it is. That means that, for people to live in a place they love, close to their family or friends, in range of a job they want – or indeed near that job so they don’t have to endure a hellish commute – they often need to own a house there. To own a house there, there needs to be a house there, and that’s why the most important solution to the housing crisis is building more houses. But even of the stock we have, we can use them more efficiently.

However, we do most of our property taxation specifically by taxing these moves. We barely (and regressively) tax people for occupying expensive property – or valuable land – through our ageing, ailing and increasingly preposterous council tax system. But we tax them heavily and progressively when they move.

Economists have tried to measure the effect many times, and find that even in the middle of the distribution, where tax rates are relatively modest, the impact can be large. The best research papers typically find that a 1 per centage point increase in tax rate cut property transactions in the affected range by something like 10 per cent – sometimes larger in the short run, when including re-timing to take advantage of a lower rate.

My suggestion is that the chancellor abolish it in the budget this year. Taxes don’t typically get abolished, but stamp duty isn’t a typical tax.

And there is an obvious place to get the revenue back: council tax. Council tax is regressive by design, and has become more regressive over time as property prices in certain parts of the country have soared, and yet have faced no extra tax due to already being in the top band.

This banding itself is ridiculous. New build homes are put in bands based on what they would have been worth in 1991, assuming nothing had changed. So Brixton, for example, is still assumed to be cheap and relatively run-down, and new flats in swish Oval Quarter worth hundreds of thousands of pounds are in band C, paying peanuts.

Reforming council tax so it taxed properties at around 10-15 per cent of their rental value up the scale, like if VAT was on housing services, would easily cover the cost of scrapping SDLT. It would be similarly progressive, fairer, and have none of the damaging economic disincentives to moving.

No, it wouldn’t solve the housing crisis – but none of the real solutions to the housing crisis are on the table. This move is exactly the sort of thing a Tory chancellor could and would do. And at times like these the housing market can do with all the help it can get.

Ben Southwood is head of research at the Adam Smith Institute.

 
 
 
 

Barnet council has decided a name for its new mainline station. Exciting!

Artist's impression of the new Brent Cross. Image: Hammerson.

I’ve ranted before about the horror of naming stations after the lines that they’re served by (screw you, City Thameslink). So, keeping things in perspective as ever, I’ve been quietly dreading the opening of the proposed new station in north London which has been going by the name of Brent Cross Thameslink.

I’ve been cheered, then, by the news that station wouldn’t be called that at all, but will instead go by the much better name Brent Cross West. It’s hardly the cancellation of Brexit, I’ll grant, but in 2017 I’ll take my relief wherever I can find it.

Some background on this. When the Brent Cross shopping centre opened besides the A406 North Circular Road in 1976, it was only the third large shopping mall to arrive in Britain, and the first in London. (The Elephant & Castle one was earlier, but smaller.) Four decades later, though, it’s decidedly titchy compared to newer, shinier malls such as those thrown up by Westfield – so for some years now, its owners, Hammerson, have wanted to extend the place.

That, through the vagaries of the planning process, got folded into a much bigger regeneration scheme, known as Brent Cross Cricklewood (because, basically, it extends that far). A new bigger shopping centre will be connected, via a green bridge over the A406, to another site to the south. There you’ll find a whole new town centre, 200 more shops, four parks, 4m square feet of offices space and 7,500 homes.

This is all obviously tremendously exciting, if you’re into shops and homes and offices and not into depressing, car-based industrial wastelands, which is what the area largely consists of at the moment.

The Brent Cross site. Image: Google.

One element of the new development is the new station, which’ll sit between Hendon and Cricklewood on the Thameslink route. New stations are almost as exciting as new shops/homes/offices, so on balance I'm pro.

What I’ve not been pro is the name. For a long time, the proposed station has been colloquially referred to as Brent Cross Thameslink, which annoys me for two reasons:

1) Route names make rubbish modifiers because what if the route name changes? And:

2) It’s confusing, because it’s nearly a mile from Brent Cross tube station. West Hampstead Thameslink (euch), by contrast, is right next to West Hampstead tube.

Various other names have been proposed for the station. In one newsletter, it was Brent Cross Parkway; on Wikipedia, it’s currently Brent Cross South, apparently through confusion about the name of the new town centre development.

This week, though, Barnet council quietly confirmed it’d be Brent Cross West:

Whilst the marketing and branding of BXS needs to be developed further, all parties agree that the station name should build upon the Brent Cross identity already established. Given the station is located to the west of Brent Cross, it is considered that the station should be named Brent Cross West. Network Rail have confirmed that this name is acceptable for operational purposes. Consequently, the Committee is asked to approve that the new station be named Brent Cross West.

Where the new station will appear on the map, marked by a silly red arrow. Image: TfL.

That will introduce another irritating anomaly to the map, giving the impression that the existing Brent Cross station is somehow more central than the new one, when in fact they’re either side of the development. And so:

Consideration has also been given as to whether to pursue a name change for the tube station from “Brent Cross” to “Brent Cross East”.

Which would sort of make sense, wouldn’t it? But alas:

However owing to the very high cost of changing maps and signage London-wide this is not currently being pursued.

This is probably for the best. Only a handful of tube stations have been renamed since 1950: the last was Shepherd’s Bush Market, which was until 2008 was simply Shepherd's Bush, despite being quite a long way from the Shepherd's Bush station on the Central line. That, to me, suggests that one of the two Bethnal Green stations might be a more plausible candidate for an early rename.


At any rate: it seems unlikely that TfL will be renaming its Brent Cross station to encourage more people to use the new national rail one any time soon. But at least it won’t be Brent Cross Thameslink.

Jonn Elledge is the editor of CityMetric. He is on Twitter as @jonnelledge and also has a Facebook page now for some reason. 

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