Badenoch pulls stamp duty rabbit out of the hat

The Conservative leader said she would get rid of the “bad tax” if her party returned to power.

Speaking at the Tory Party conference in Manchester, Kemi Badenoch said abolishing stamp duty, the tax you have to pay when you buy a home above a certain value, would result in higher levels of homeownership and get more young people on the housing ladder.

Homeownership, she said, makes people feel that they have “a real stake in society”.

“[Abolishing stamp duty] is how we will help achieve the dream of homeownership for millions,” she said.

“Young people trapped in the pain of renting” are among those who would benefit from the abolition of stamp duty, according to Badenoch. However, first time buyers, unless acquiring a house for more than £300,000, are exempt from paying stamp duty.

Many renters who aspire to owning a home would point to other factors, like the cost of living crisis, as impacting more on their inability to buy a house.

“Workers who want to further their careers and pensioners looking to downsize” would also benefit, Badenoch said.

The announcement was greeted with applause from members in Manchester Central but reaction outside the cordon has been mixed.

Paula Higgins, chief executive of the HomeOwners Alliance said the announcement could be a “real vote winner”.

“Kemi Badenoch is right: it’s a tax that traps households, hampers mobility, and suppresses market activity,” she said.

Research by Higgins’ organisation found that more than 800,000 homeowners put plans to move on ice in the last two years and cited stamp duty as a “major barrier”.

“Homeownership is the foundation of a fairer and more secure society — but stamp duty has denied that opportunity to too many for too long,” Higgins added.

“By scrapping it, we don’t just help first-time buyers: we unlock supply, free up stock, stimulate related trades, and get the housing market moving.”

It is estimated that stamp duty generates £11bn a year for the government. Badenoch said the tax cut had been costed and would be covered by up to £47bn of savings the Tories have identified, chiefly in welfare.

Tom Clougherty, executive director of the Institute of Economic Affairs, is also in favour of the move. He 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“As things stand, this outdated and uneconomic levy is wreaking havoc on our already troubled housing market – by deterring sales and depressing house-building.

“Stamp duty is many times more damaging, as a source of revenue, than broad-based taxes on income and consumption.”

Luke Piggin, financial director at developer Cityheart also welcomed the announcement.

“For too long, SDLT has been a significant barrier to social mobility, discouraging people from moving to where jobs and opportunities are located and keeping many in homes that no longer suit their needs,” he said.

“By scrapping SDLT, people will have the opportunity to move freely for better jobs, grow their families in the right homes and downsize when life changes. It’s about giving people freedom to live where they want and need to be.”

However, not everyone is convinced that scrapping stamp duty will have the desired effect.

Andrew Charnley, managing director of Sancus Lending UK, said: “Whilst any announcement to address a key blocker in the housing chain is welcome, the abolishment of SD alone will not boost home ownership.

“I would rather see resources and focus placed into a coordinated and well executed strategy to address planning reform. This, although a systemic UK problem, is particularly relevant in many parts of the North West region.”

Stuart Cheetham, chief executive of mortgage lender MPowered, was more sceptical.

He said the policy would become an “albatross” around the Tories’ collective neck if the party got into power. 

“Promising to forego billions in tax revenue is bold stuff, and one of the few privileges enjoyed by opposition parties,” he said. “No party currently in office would dare give away so much revenue, given the weakness of the government’s finances.”