Stamp duty to blame for lack of housing mobility, claims thinktank
The Adam Smith Institute has claimed the UK housing market suffers from a lack of mobility as a direct result of the continued existence of Stamp Duty Land Tax (SDLT).
In a report ahead of this month's Budget, the organisation argued that the tax acts as a "deadweight" on the economy, deterring people from moving to the most suitable homes for them.
The free market thinktank argued that while the biggest problem in the market is the undersupply of homes, this is "exacerbated" by stamp duty. It said: "By penalising older people for downsizing after their children have left home, for example, Stamp Duty stops larger homes from being sold to new families, making the effective supply of family-sized homes even tighter."
As a result, it is causing people to not only live in homes of the wrong size for them, but also to be stuck too far from the jobs they need. The organisation concluded that this makes it "the most damaging" tax Britain has and claims that on top of the £12 billion impact it has on house sellers, the wider economic consequences cost the country another £10 billion a year.
Executive director of the Adam Smith Institute Sam Bowman said that while chancellor Philip Hammond is not the sort to go looking for ineffective but eye-catching measures, getting rid of stamp duty would be both effective and attractive.
He declared: "Stamp Duty has had its day and should be consigned to the dustbin of history!”
The thinktank argued that the lost revenue should be replaced by implementing a higher band of council tax on the most valuable properties.
Stamp Duty has already been replaced in Scotland and the Welsh Assembly has been considering how to use new devolved tax powers to create its own alternatives.
However, the Scottish Land and Buildings Transaction tax, which came into effect in April 2015, has raised less revenue than hoped. By levying higher charges on more expensive homes, it has suppressed sales of more expensive properties.
Earlier this year, finance secretary of the Scottish Government Derek Mackay told the Sunday Times that he would consider an "amendment of the current bands" to help stimulate the top end of the Scottish property market.