Stamp Duty should be abolished for FTBs, says think tank
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Abolishing Stamp Duty for first-time buyers would help aid UK growth by stimulating the housing and construction industries, says a report out today from the Ernst & Young ITEM Club.
It points out that during the depression of the 1930s, when interest rates were also very low, house building boomed.
Peter Spencer, chief economic advisor to the Ernst & Young ITEM Club, says the chancellor might be able to take advantage of the same conditions whilst also providing some protection to the sector if Greece defaults and interbank lending freezes up again.
In the report, Spencer says: “To help buffer the UK from strengthening headwinds from the Eurozone, the chancellor needs to look to the tax system and measures that still remain within his control.
“The housing market is an important driver of the construction industry and consumer spending. Cutting Stamp Duty, particularly for first-time buyers would, in our view, be money well spent. The chancellor should perhaps also consider putting up sin taxes to pay for this kind of tax cut.”
The ITEM Club says that uncertainty across the Eurozone and a slowing world economy is undermining business confidence and investment decisions, putting the brakes on UK growth.
It says that the Bank of England’s injection of an additional £75bn of Quantitative Easing is unlikely to put the recovery back on track and that the government should also be looking to use targeted monetary and fiscal measures to support growth.
ITEM Club has downgraded its GDP forecast to just 0.9% this year, down from the 1.4% it predicted three months ago, it predicts growth of 1.5% in 2012 and 2.5% in 2013.
It warns that the additional £75bn of asset purchases announced by the MPC earlier this month is unlikely to be the silver bullet to the UK’s economic woes. It says long term gilt rates are already at all-time lows and, given the current uncertainty in the market, asset prices may not respond.
Spencer says the Bank of England should consider using monetary policy to lower interest rates by another 25 basis points.
He says: “The MPC have self imposed an interest rate floor of 0.5%, however we think they could afford to trim rates by another 25 basis points or more, particularly with inflation set to come back to target next year. It would provide a boost to borrowers and potentially help to stimulate consumer spending during the difficult months ahead.”
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Readers' comments (2)
Anonymous | 17 Oct 2011 5:17 pm
My advice to the chancellor is to abolish stamp duty for FTB and give 100% mortgage relief to stimulate the Economy.
FTB are the most important segment of the community that requires incentives to inspire them to be home owners and less dependent on council homes.
It is first few years in life of this group that requires to keep most of their earnings to spend on furnishings and education of their siblings. We often forget that young parents have also one salary to bear all the burden and if this group is taxed like all the rest, it is not only a punishment but a crime to the self dependence.
Who wants a dependent society scrounging on council homes and social security handouts.
Government fails to understand the basics thus the the state of our economy. PS Finsbury Park.
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Anonymous | 2 Nov 2011 7:49 pm
What about those selling around £275/285k? They are being forced to sell at £250k because of stamp duty. I'm on the market at £285k and can't afford to drop £35k. It would be fairer to graduate the tax levels rather than 1% to 3%. a few years ago I decided to get a degree as a 'last chance saloon' attempt to make a better life for myself, but I've been unable to get the job in the career I've trained for. Having accumulated student debt to get me there, on a poor salary with little hope of a future career, this is just another huge loss that I and many others are having to face.
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