Cut Stamp Duty to fight inflation and expand housing supply
Christopher Snowdon writes for The Critic
Christopher Snowdon appears on BBC Radio Scotland
Alex Morton writes for CapX
“Residential housebuilding is already falling, and rising interest rates will constrain it further, which will shrink the economy – not just consumption, but the supply of new homes. The NHBC found that registration of new homes fell by 40% from Q1 2022 to Q1 2023. Savills found completions fell by 20% in Q1 as housebuilders slowed their output. Falling new build supply will hit growth without helping lower inflation. It will also send yet another signal to younger people (anyone under 40) and their increasingly worried parents (almost anyone else) that this Government seems unserious about housing supply.
“The Government is unlikely to reverse its position that now is not the right time for substantial tax cuts. However, a £1.7bn tax cut to stamp duty, backed by almost all economists, would not drive inflation.
“But for it to have a serious impact on housebuilding, any cut must take place now. Delaying until the Autumn will mean the impacts on new build statistics or economic growth will not be felt until it is far too late, and at that point the construction sector may well be in such a downward spiral that nothing can lift it out. The Government should act now, before the summer recess, to cut residential stamp duty sharply. This would also pave the way for a future pledge to maintain the current temporary stamp duty changes at the appropriate time – but the first thing is to try to stabilise new build supply.
“For a fairly low and marginal cost to the Treasury, and with no real inflationary impact, cutting stamp duty would likely boost the economy, employment, and housing supply by tens of thousands, and generate genuine supply-side benefits. There is no time to lose.”
Read Alex’s full piece here.