A former Tory treasurer has said scrapping stamp duty would be cost neutral as homeowners would spend more on home improvements.
Lord Stanley Fink, who is one of the Conservative’s biggest donors, told the Telegraph Newspaper that high stamp duty bills are stopping even wealthy home movers from spending money on furniture, home decor and extensions as the cost of moving is at an all time high.
Scrapping or cutting stamp duty on home purchases would lead to a rise in such spending, he said, resulting in a loss-cancelling boost for the Treasury from a bigger tax take via the home improvements industry.
A report by the Centre for Economics and Business Research showed that stamp duty is preventing 45,000 house purchases a year, including expanding families who need bigger homes.
Following pressure the Chancellor used his last Budget to help first-time buyers get a foot on the ladder via a stamp duty break on purchases up to £500,000.
Lord Fink said: “If you look at transactions at the top end of the market it is clear the market is not functioning. And I worry that having put the [stamp duty] tax on the purchase of homes, that for the first time, people are looking to rent rather than buy when they never would have before”.
“Historically when people bought at the top end they tend to spend money on their homes through improvements – new carpets, new kitchens – people want it to be right. It is one of the few expenses and areas of the economy which stays domestic, which means the tax on this industry goes back to the Government, so by cutting stamp duty it would not lose out.
“I do believe that if the Treasury found that because of stamp duty transactions were drying up significantly – they would want to cut it. But anything that’s seen to be a tax break to the rich is going to be hard to implement, especially in the current climate.”
Lord Fink has invested more than £3m in Project Etopia, a modular home developer which claims to deduct up to 25 per cent of the cost of building homes by using a flat-pack style construction technique.
The homes are also super energy efficient, meaning very low or non existent energy bills. This is because their homes contain solar panels capable of generating more energy than the home uses.
If such homes catch on it could allow the Government to extend its annual house building targets as they can be built in just four weeks, compared to several months for a standard brick house.