tamp duty reforms have slowed the housing market and raised half as much money as the Treasury predicted, it has emerged, amid calls for Philip Hammond to review the tax.
The Exchequer received £370 million less in stamp duty than the £700 million it expected following major changes made by George Osborne, new analysis shows.
Experts also said it led to a steep decline in property sales and has cost the economy nearly £1 billion because of a reduction in the number of people selling homes and a flow-on reduction in demand for services such as removals or renovations.
Today The Daily Telegraph launches a campaign calling on Mr Hammond, the current Chancellor, to address the issue in next week’s Autumn Statement.
Two senior Conservative members of the Commons Treasury committee last night described stamp duty as “punitive” and said the current system “distorts both the housing and the labour markets”.
Under Mr Osborne’s reforms, announced in December 2014, the long-standing “slab” system, with homebuyers charged a percentage of the full purchase price as soon as it hits certain thresholds, was scrapped. Instead, the former Chancellor created a “slice” approach, with different percentage rates applied to each portion of the price.
There is no levy under £125,000, then two per cent up to £250,000, five per cent up to £925,000, 10 per cent to £1.5 million, and 12 per cent above that. Mr Osborne said the changes would leave 98 per cent of buyers better off, but that stamp duty bills would rise for those who purchase properties worth more than £1 million.
When he announced his reforms, Mr Osborne called stamp duty a “badly designed system that has distorted our housing market for decades”.
However, the research suggests that the Government was not aware of the potential impact on transactions that the reforms would have.
It found that raising stamp duty by just 1 per cent on homes worth between £1 million and £2 million, led to an eight per cent decline in transactions. This is far higher than what was forecast by the Office for Budget Responsibility, which said the figure would be 2.8 per cent.
Oxford Economics calculated that, as a result of the stamp duty changes, 1,950 fewer properties worth more than £1 million were sold in 2015 compared what would have been expected without the reforms, equal to 10 per cent of turnover.
MPs, housebuilders, building societies and estate agencies last night called on the Government to reverse Mr Osborne’s changes in the Autumn Statement.
Andrew Tyrie, the Conservative chairman of the Treasury committee, said: “Stamp duty on residential property distorts both the housing and the labour markets. Successive governments have made a mess of housing taxation, of which stamp duty’s distortions are only a part.”
Jacob Rees-Mogg, a Conservative member of the same committee, added: “Taxation ought to be about raising the revenue governments need – not the politics of envy.
“Punitive stamp duty rates seem, unsurprisingly, to have failed, so ought to be normalised at sharply lower levels.”
Rob Perrins, chief executive of Berkeley Homes, said that the current system “is stopping social mobility and will result in lower GDP and fewer homes getting built”.
Housebuilder Cala Homes, estate agency Haart and Yorkshire Building Society all hit out at the current system, which has had a “detrimental impact” on the property market.
Alan Brown, chief executive of Cala, said: “Philip Hammond must address the area of stamp duty in his first Autumn Statement next week, as the current set-up is having a detrimental impact on the market for family homes in the UK. So much of the current Government’s focus to date… has been targeted at first-time buyers and affordable housing.”
A Treasury spokesman said: “The overwhelming majority of those who pay stamp duty – 98 per cent – are saving money thanks to our reform, which has done away with the unfair old system.
“Over 780,000 homebuyers saved an estimated £657 million on stamp duty in the year since the tax was reformed.”