One of the chief figures behind Brexit and Boris Johnson’s role as London Mayor is now advising that stamp duty should be scrapped on low-value homes - and maybe abolished completely.
Gerard Lyons was chief economic adviser to Johnson during his second term as the Mayor of London and played a leading role in the 2016 Referendum, co-founding Economists for Brexit.
Lyons - considered to be an expert on the UK and world economy, global financial markets and economic and monetary policy - is now a senior fellow at the Policy Exchange think tank.
He says: “The current stamp duty holiday should become permanent with stamp duty being abolished on lower valued properties.”
However, he is critical of the current stamp duty holiday which reaches a much-debated cliff edge finish on March 31.
“Temporary freezes in stamp duty are not a solution as they prompt a spurt in demand as people try to buy before the tax is raised again, pushing prices higher, out of the reach of many first time buyers” he writes in a new Policy Exchange document.
He continues: “More generally, as there is a need to improve turnover in the housing market, stamp duty on housing transactions is a bad tax. Ideally, stamp duty should be abolished, but as a first step it should cut to zero permanently on lower valued properties and reduced on higher valued properties.”
Lyons says as far back as the March 1988 Budget the then-Chancellor, Nigel Lawson, announced that multiple mortgage tax relief would be scrapped later that year, prompting a surge in house prices as people rushed to beat the deadline. Now the same is happening with the stamp duty holiday cliff edge, he says.
An even more fundamental issue, he says, is that houses are sold with stamp duty ‘paid on top’ - meaning buyers typically cannot borrow to pay the stamp duty, adding to the affordability problem of raising money to buy in the first place.
“There are often various schemes, particularly if a new build is being purchased, but generally speaking – and particularly if one is looking to buy a home that is not a new build – it exacerbates the financial challenges, particularly for first time buyers seeking to raise a deposit” says Lyons in his Policy Exchange report.
He notes that shifting the burden of stamp duty to the seller rather than the buyer might make it easier for borrowing, but would simply mean the cost was added to the asking price.
Lyons then writes: "Ideally, stamp duty should be abolished. If it was abolished completely it would help turnover across the whole property market, including making it easier for people to downsize from properties that are too big for them.
“If abolishing was seen as too radical, then another approach would be to lower stamp duty across the board and to cut it to zero permanently on lower valued properties, up to half a million pounds, or so. This would help first time buyers.
“This would imply that the present stamp duty holiday on lower valued properties should become permanent.
“There is a wider issue as to whether the current debate on stamp duty could, perhaps be the first stage in an overall review of property taxation.”