It was an intriguing idea that initially flew skywards like a well-honed kite only to fall like a stone 24 hours later.
I refer to the suggestion attributed to Sajid Javid last Saturday that responsibility for stamp duty (in England and Wales) might be shifted from homebuyers to sellers, which our new chancellor was quick to deny on Twitter not long afterwards.
The Times front page heading seemed to be an unequivocal statement to that effect although this was not supported by the actual story text. On Sunday, Javid tweeted in response: “More speculation about stamp duty this morning. To be clear, I never said to @thetimes I was planning to put it on sellers. I wouldn’t support that.”
So that seems to be that. However, prior to the fallout that followed the original story, I watched Javid take part in a TV interview during which he declined to rule out all options in respect of reform of stamp duty.
My feeling is that his backtracking may not be unconnected to one of the consequences of switching the burden of stamp duty from buyers to sellers: ie its effect on downsizers, a majority of whom are probably older Conservative voters.
However, following publication of The Times story, the Association of Accounting Technicians (AAT) welcomed the possibility of a switch, saying: “AAT has been campaigning for this change for several years, met Boris Johnson to discuss the plans earlier this summer, and has already had an exchange of correspondence with the new chancellor on the idea.”
Its head of public affairs and policy, Phil Hall, said AAT was “naturally pleased that the chancellor has publicly acknowledged he is giving serious consideration to our proposals. AAT does not believe switching stamp duty liability is a panacea, but it would be considerably fairer, simpler, more effective and cheaper than the current stamp duty regime.”
Stamp duty does not, of course, apply in Scotland, where there is a separate property taxation regime. However, Scotland is inexorably linked to the wider UK market so given that a tax switch from buyers to sellers does have its supporters, what effect would it have at the property “coalface” – whether practices in Scotland or England or both?
As already stated, it would certainly discourage the practice of downsizing. For example, a retired couple moving from, say, a large family villa to a more manageable flat and hoping to release some equity are unlikely to be happy at the prospect of a chunk of that “freed money” being taken by the state in tax. So less downsizing would obviously result in fewer opportunities for younger homeowners to upsize – a problem exacerbated in Scotland by the rate of Land and Buildings Transaction Tax (LBTT) on higher-value properties.
On the other hand it would take first-time buyers out of stamp duty altogether and they are the most disadvantaged by rising house prices. Concerns that this would be inflationary because sellers would then seek to reclaim the LBTT through higher prices are unfounded. Even in what might be termed our “hot spots”, buyers are now less inclined to throw funny money at properties as a result of the information contained within Home Reports. So sellers hoping to add the cost of LBTT on to their asking prices are unlikely to be successful.
The main advantage of a seller-orientated tax is in aiding transparency for buyers because a system in which they know that “the price you see is the price you will pay” is likely to have a stimulating effect on the market.
What is likely to diminish the market, however, is the habit of politicians making public statements about changes to property (and other) taxes which, in truth, are no more than “thinking aloud”. This simply creates more uncertainty in the housing and wider commercial markets when, for most people, the prospect of a no-deal Brexit means the UK is caught in the most uncertain of times (the Cuban missile crisis excepted) since the end of the Second World War.
David Alexander is MD of DJ Alexander