Andrew Southern: Scrapping stamp duty could ease the housing crisis

It’s easy to forget that the stamp duty regime we have today is a relatively recent invention – so it’s astonishing that successive governments persevere with a regime that is so damaging. What began as a way of taxing paper and other sundries in the 17th century was actually only extended to property in the 1950s. We should be replacing this most counterproductive of taxes with an annual property levy to put an end to its debilitating impact on the housing market.  SDLT is a major reason UK residential sales are still significantly down on their pre-crisis peak. The financial crisis is what sparked the market’s sales slump, but it is stamp duty that has held the numbers down. We need to reverse this trend, but successive governments have backed the Treasury into a corner.  We need politicians to open up their history books and see SDLT for what it is — an experimental tax grab that was allowed to escalate out of control.  Other countries can show us the way. For example, in the US an annual property tax works well. This would remove the problem we have in Britain of people living alone in large properties, reluctant to downsize and strangling supply.  An annual property tax would also ensure a correlation between the value of a home and someone’s financial situation. It would encourage people to move whenever their home was not appropriate to their needs or circumstances. And it would stop people holding onto assets they couldn’t afford to maintain or live in.  The good news for any government considering such a switch is that it exists here in the UK already. We already have an annual tax, levied monthly and linked directly to the value of our homes. It’s called council tax and, with a little imagination, this could be expanded to create a property tax that is no longer just a function of price.  Today, properties over £1 million account for less than 3% of sales but represent over 45% of total stamp duty receipts. Politicians will be reluctant to be seen cutting taxes for the most wealthy, but the least well-off need to be shown how taxes that are this high affect their house purchases – and their housing market, too.  Andrew Southern is founder and chairman at the Southern Grove Group of companies.