In the News

UK government signals yet another cut in stamp duty

Geoff Riley

21st September 2022

We have been here many times before. The government seems to think that cutting stamp duty will act as a stimulant to the housing market that will feed an expansion of new building and a much-needed pick up in housing supply. The reality is different.

Reducing stamp duty – a tax on the value of housing transactions – works mainly on the demand-side of the market. The dominant effect is to raise average prices (already surging towards £300,000) and thereby make property even less affordable for first-time buyers and those hoping to trade up as family circumstances change. Policy myopia rules again.

One of the fault-lines in government economic policy is the belief that rising house prices are a reliable indicator of a successful, growing economy. And that policies deliberately designed to increase demand and prices will have all kinds of wider effects including increased investment by house-building companies. Cutting stamp duty raises average prices and tends to benefit those looking to buy second-homes. It is ignores the wider, deeper, structural supply-side constraints that have and are holding back the building of new affordable housing in the UK.

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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