One of the most influential select committees in parliament has told the government that it needs to do more - much more - to solve the country’s housing crisis.
The Treasury select committee, chaired by Conservative former cabinet minister Nicky Morgan, says that last year's cut in stamp duty to help first time buyers get on the housing ladder is likely to increase prices by at least the amount the reduction is intended to save.
The MPs warn that the stamp duty change announced by Chancellor Phillip Hammond last year will create a ‘cliff edge’ at £500,000 - exactly the structure of duty which was scrapped in the more fundamental reform announced by George Osborne back in 2014.
“A house worth £500,000 will attract £5,000 less in SDLT than a house worth £500,001” says the report.
“When the previous government redesigned it to remove cliff edges faced at certain property values, the then Chancellor [Osborne] said that he had reformed a ‘badly designed system that has distorted our housing market for decades’. It is regrettable that the abolition of SDLT for first-time buyers reintroduces a cliff edge into the SDLT schedule” continues the report.
The committee also says the duty change introduced by Hammond last year would help only an extra 3,500 first time buyers to get on the property ladder. “In isolation, the reduction in stamp duty is likely to increase prices for first-time buyers by as much, if not more, than the amount they save as a reduction in stamp duty,” says the select committee, citing a separate report by the Office for Budget Responsibility.
Morgan’s committee also urged borrowing caps on councils to be lifted if the target to build 300,000 new homes a year is to be met.
"Greater measures are needed to increase housing supply," the report states. "300,000 homes a year will not be achieved with the current measures. The government will need to show greater commitment to housing supply to achieve its aspiration and will need to bring forward additional policy measures."
MPs also called for the Office for Budget Responsibility to issue a special forecast on the economic impact of Brexit before Parliament votes on crucial exit laws.
"The OBR expects a fall in private sector investment due to Brexit-related uncertainty. An agreement between the UK and the EU27 on a 'standstill' transitional arrangement is therefore urgent" urges Morgan.