As an illustration, someone buying a £400,000 house will save £2,500 if they are a home mover and £5,000 if they are a first-time buyer. It is not yet clear whether the cut will also apply to landlords and second home owners like previous stamp duty holidays.
“For most home-buyers, savings on stamp duty will be rapidly wiped out by rising mortgage costs. Interest rates rose this week and are likely to rise even further once the Bank of England digests this week’s tax cuts – and those tax cuts will in turn give higher earners even more money to invest in property for themselves and their families”
The government’s argument is that the cut will boost growth by generating an estimated 29,000 extra house moves a year and supporting jobs and businesses like estate agents and builders that rely on the property market.
However, that is tiny in the context of the housing market as a whole, and critics argue that the cut will simply be capitalised into higher house prices, moving the housing ladder further out of reach for first-time buyers and holding back growth in the longer term.
For most home-buyers, savings on stamp duty will be rapidly wiped out by rising mortgage costs. Interest rates rose this week and are likely to rise even further once the Bank of England digests this week’s tax cuts – and those tax cuts will in turn give higher earners even more money to invest in property for themselves and their families.
Apart from tax cuts, the other element of ‘proper Conservatism’ is supply-side reform. The programme of freeports put forward by Rishi Sunak has been scrapped in favour of much bigger investment zones featuring time-limited tax reliefs and planning liberalisation to accelerate development including housing.
In what is essentially a more pro-business version of levelling up, planning applications will be streamlined and “legacy EU red tape” (which seems to mean environmental and habitat regulations) disapplied, while there will be full stamp duty relief for purchases of land and buildings for new residential development.
“Protecting the green belt remains a manifesto commitment and much more modest planning reforms proposed under Robert Jenrick had to be scrapped after a Tory backbench rebellion”
An annex to the Growth Plan lists 24 illustrative sites that may be included, plus 38 local authorities that have expressed an interest. These include councils in Kent, Essex and Bedfordshire, but none in Tory heartlands.
This is far from the first time that a government has tried special development zones as a route to growth and their record is at best mixed. It also remains to be seen what will happen to existing levelling up programmes.
However, there is also a signal of wider planning reform to come in proposals to accelerate housing delivery that appear to apply to the country as a whole.
The Growth Plan says that: “Later this autumn, the government will set out its vision to unlock homeownership for a new generation by building more homes in the places people want to live and work and by getting our housing market moving. This will boost growth across the UK, helping more people afford to live near good jobs. The government’s full proposal will be set out in due course.”
Quite what this means remains to be seen. Taken literally it would be a huge change.
A proper Conservative government might look first at the planning restriction that is most vilified by the right-wing thinktanks that seem to have drawn up so much of this one’s agenda.
But protecting the green belt remains a manifesto commitment and much more modest planning reforms proposed under Robert Jenrick had to be scrapped after a Tory backbench rebellion.
With tax cuts delivered, will the government really allow more housebuilding in the areas where core Conservative supporters already live and work?
Jules Birch, award-winning blogger and columnist for Inside Housing
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