Kemi Badenoch’s proposal to eliminate stamp duty has been criticized as “desperate” and reminiscent of Liz Truss by a prominent minister.
Pat McFadden, the Secretary of State for Pensions, has accused the Conservative Party of introducing tax changes without proper funding, citing the failure to heed the lessons from Ms. Truss’s ill-fated mini-budget.
During a lackluster party conference, the Tory leader unveiled the plan to abolish Stamp Duty, labeling it as a burdensome tax hindering the housing market.
Mr. McFadden expressed skepticism, stating, “We’ve seen this scenario unfold before with the Tories announcing unfunded tax changes. It occurred three years ago and was part of their manifesto.”
He added, “It appears desperate for a party that couldn’t finance our previous tax cut promises. By hastily introducing new measures, including the stamp duty policy, without adequate funding, they risk repeating the mistakes of 2022, which continue to impact the British people.”
The minister highlighted the detrimental effects of the 2022 mini-budget, which caused significant economic damage due to billions of pounds in unfunded tax reductions.
Ms. Badenoch initially announced the stamp duty abolition plan at the Tory conference, but subsequent details revealed that the exemption would only apply to primary residences, with second homes, properties purchased by businesses, and foreign buyers still subject to the duty.
The elimination of stamp duty would disproportionately benefit buyers of high-value properties, as no duty is levied on homes valued up to £125,000, with the exemption decreasing as property prices rise.
First-time homebuyers purchasing properties below £300,000 would not be required to pay stamp duty.
The Conservative Party estimates the annual cost of the plan at around £9 billion, to be offset by £47 billion in cuts to welfare, foreign aid, and civil service size. However, economists caution that the proposed cuts lack clarity and are challenging to evaluate.
Experts argue that while scrapping stamp duty could be popular and stimulate the housing market, the resulting surge in house prices might negate the benefits to buyers.
Stuart Cheetham, CEO of mortgage lender MPowered, stated, “While abolishing stamp duty entirely could provide a significant boost to the sluggish property market, it may also lead to rapid price inflation, potentially nullifying savings for first-time buyers.”
Lucian Cook from Savills noted that if the removal of stamp duty simply translates into higher property prices, it would not necessarily benefit buyers effectively.