Now that Andy Pandy from ‘oop norf’ is de facto the Prime Minister elect and will shortly be choosing the colour scheme of No 10, in advance of his investiture, we need to take more seriously his policy initiatives.
I am bound to say that I don’t fully understand the most recent lionisation of Mr. Burnham. Let us not forget that he failed to beat Mr. Corbyn in the Labour leadership contest at the time.
This is a little like Arnold Schwarzenegger being beaten in a wrestling contest by Mr Bean.
If Mr. Burnham is the ‘Great White Hope’ what does this say about the rest of the potential Labour Party candidates for the top job? Derr!
SDLT OR MANSION TAX?
In his pre-Makerfield electioneering patter, he has floated the idea of replacing Stamp Duty Land Tax (SDLT) with an annual wealth or mansion tax, allow me to compare these two fiscal arrangements, side-by-side, to see which of the ‘two root canal treatments’, we would prefer.
Stamp duty remains one of the Treasury’s favourite comfort blankets: reliable, easy to collect, and politically painless, because it arrives in chunky, irresistible lumps every time somebody dares to move house. In recent years, it has delivered a cosy £9–£11 billion annually to the Chancellor. Not bad for taxing people simply for changing their address.
Most homeowners have never quite understood the logic. It’s a bit like buying a train ticket and then being charged extra for moving to another seat. Yet in Britain, mobility has become a taxable luxury.
The modern era of SDLT savagery began in 2014, when George Osborne introduced the current graduated system, taking top-end rates from a relatively survivable 5% to an effective 19% for overseas buyers purchasing additional properties. Less welcome to Britain, more, please empty your pockets at customs.
The effects have been profound.
Transactions have slowed, prices have been distorted, and SDLT has become one of the greatest obstacles to moving home. It is, in effect, a tax on aspiration, flexibility and common sense.
“Because it is elective it traps vast amounts of capital inside residential property.”
Because it is elective, you only pay if you move, it traps vast amounts of capital inside residential property. Money that could otherwise be sloshing through the economy on kitchens, builders, furniture, restaurants, holidays, or indeed anything more productive than sitting mummified in Zone 2 brickwork.
That released capital would generate its own tax revenues: VAT, PAYE, Corporation Tax, the Treasury’s other beloved feeding troughs.
But the damage goes beyond economics.
SDLT traps empty nesters in oversized family homes because downsizing means handing HMRC a six-figure cheque for the privilege of buying something smaller. That blocks younger families from moving up the ladder, chokes labour mobility, and leaves Britain’s housing stock distributed with all the precision of musical chairs at a care home.
Scrap SDLT and the ripple effect would be immediate. Solicitors, removal firms, housebuilders, furniture retailers, lenders and, whisper it, estate agents, would all feel the uplift.
“Economists view SDLT as the fiscal equivalent of ‘yanking on the handbrake’”
One housing transaction is often said to stimulate around 20 sectors of the economy. Which is why many economists view SDLT as the fiscal equivalent of ‘yanking on the handbrake’ and calling it a growth strategy.
The theory is seductively simple: tax ownership, not movement.
Land, after all, rarely relocates to Monaco.
Unlike SDLT, which vanishes the moment the market seizes up, a wealth tax is recurring, stable and gloriously predictable. To the Treasury, that’s less tax policy and more Barry White.
To replace roughly £10billion of SDLT revenue, you’d need something like a 0.75% annual levy on higher-value homes:
- £2 million house = £11,400 a year
- £5 million house = £28,500 a year
- £20 million house = £114,000 a year
Or, spread more widely, perhaps 0.48%:
- £500,000 house = £2,400 a year
- £5 million house = £24,000 a year
Sounds neat. Until reality arrives.
Because then comes the classic British political booby trap: the asset-rich, income-poor widow sitting in a £4million house on £40,000 a year. Taxing paper wealth without cashflow to support it is electoral napalm.
The obvious workaround is deferral, roll it up against the estate until sale or death. But that requires political bravery, particularly when Inheritance Tax is already hovering in the hallway like an undertaker with a clipboard.
And that is the dilemma.
“SDLT is economically clumsy but politically convenient. A mansion tax may be economically cleaner, but politically radioactive.”
SDLT is economically clumsy but politically convenient. A mansion tax may be economically cleaner, but politically radioactive.
It’s no accident that Nigel Farage and the Conservative Party have both flirted with abolishing SDLT, while becoming noticeably vague when asked how to replace the missing billions.
And therein lies the rub.
Scrapping SDLT would almost certainly unleash a surge in transactions, perhaps a violent one. The Treasury would lose revenue upfront, but if enough capital was released into the bloodstream of the economy, much of that loss could return elsewhere.
“Today’s ‘modest’ mansion tax could very easily become tomorrow’s fiscal ratchet.”
But and here comes the trapdoor, today’s ‘modest’ mansion tax could very easily become tomorrow’s fiscal ratchet. A harmless looking 0.5% can, in the hands of an ideologically enthusiastic government, become 1%, then 2%, then ‘temporary emergency measures’ until the end of civilisation.
After all, taxing the rich is one of Britain’s favourite spectator sports, particularly among politicians who never seem to define ‘rich’ until they’ve lowered the threshold to your postcode.
Add this to the recent non-dom debacle and this, de facto, amounts to a single fingered salute by ‘raising the drawbridge’ to foreign capital and wealth creators.
And herein lies socialism’s dirty little secret: tax changes do not actually have to raise money. Sometimes the symbolism alone does the heavy lifting. The applause line matters more than the arithmetic even if the economy, investment, and the public itself take the hit for this folly.
Contra intuitively, in a stagnant economy like ours, starved of momentum, abolishing SDLT may not just be tax reform, it could be the closest thing Britain has left to a shot of fiscal Lucozade on steroids!
