MS Leader: Govt stamps out hopes

MS Leader

Sadly it came as no surprise last week that the Chancellor George Osborne failed to tackle stamp duty land tax in his Autumn Statement.

For years, brokers, lenders and the mortgage industry as a whole have watched on frustrated as one Government after another has failed to get a proper handle on the impact it has on the wider housing market.

Stamp duty reform consistently tops industry wishlists for the part of the market they would most like to change and the rhetoric used by pro-reformists is powerful.

The tax has been called “perverse” by the Council of Mortgage Lenders and this week our Marketwatch columnist, director of London brokerage Coreco Andrew Montlake, went as far as to say stamp duty “the single biggest issue stopping many people moving”.

As it stands, stamp duty is highly inefficient and creates a distortion around each of the tax bands.

Moreover, it discourages people from moving home at a time when the Government is attempting to stimulate the mortgage market.

Reformists are pushing for a switch from the “slab” structure to a more marginal system, like income tax.

Under the current slab structure the duty is charged at the highest rate on the whole of the purchase price, including the parts below the threshold, whereas under the marginal system the higher rate of tax would only be charged on the part that crossed the final threshold.

If the Government was really minded to release some of the pent up transactions in the market then reforming stamp duty is key to this.

Unfortunately, it looks as though the market is set to be frustrated for some time yet, especially after the Funding for Lending scheme was pulled for mortgages, stating clearly the Government’s intention not to overstay its welcome in the mortgage market.