The Conservative Party’s recent pledge to abolish stamp duty on primary residences marks a significant moment in the ongoing debate surrounding housing affordability, economic mobility, and tax reform. The party leader Kemi Badenoch’s announcement aims to remove stamp duty land tax (SDLT) on home purchases over £125,000 in England and Northern Ireland, a move endorsed as necessary by many economists who view the tax as a barrier to housing transactions and broader economic dynamism. The intention is to increase labour mobility, stimulate the housing market, and rejuvenate local economies through the associated knock-on effects such as renovations and furniture purchases. However, the proposal also carries substantial fiscal implications, with lost revenue estimated to be between £4.5 billion and £9 billion annually, prompting calls for compensating spending cuts or alternative taxation measures to bridge the gap. Half of these savings, as outlined by Badenoch, are earmarked to reduce the national debt, which nears 100% of GDP, while the rest support growth-enhancing reforms, underpinning a broader economic strategy amid challenges to the Conservative Party’s appeal post-Brexit.

While the focus has understandably centred on housing, there is a strong argument for extending reform to stamp duty on share transactions, which currently stands at 0.5 percent. This tax levied on stock purchases is increasingly seen as anachronistic and harmful to the UK’s competitiveness in global capital markets. Unlike most major economies that have eliminated or never introduced such transaction taxes, the UK’s stamp duty on shares acts as a deterrent to investment, encouraging investors to turn to private markets, overseas exchanges, or complex derivatives to avoid the charge. The Centre for Policy Studies (CPS) has presented new research showing that abolishing stamp duty on shares could lead to a permanent GDP uplift of between 0.2% and 0.7%, alongside a £6.8 billion boost in business investment annually and a significant increase in pension pot values. The long-term benefits suggested by these findings argue for permanent reform rather than limited exemptions such as those occasionally proposed for initial public offerings (IPOs).

The parallels between the housing market and public financial markets are striking. Both suffer from low turnover, excessive friction, and a climate of lost confidence, which dampens participation and growth potential. Stamp duty in both sectors acts as a tax on movement—a cost that ultimately restricts economic activity and opportunity. Critics of the housing stamp duty reforms caution about unintended consequences; increased demand could push house prices higher, potentially disadvantaging first-time buyers, especially since properties under £300,000 are already exempt from the tax. Moreover, the reduction of revenue from stamping housing sales could compel governments to raise other taxes or cut public spending, which could shift burdens elsewhere. The proposed abolition also raises concerns about the rental market, where fewer available properties might drive up rents, impacting affordability for tenants.

More broadly, some experts advocate for a fundamental overhaul of the UK’s property tax system. Alongside the abolition of stamp duty, they suggest replacing other property-related taxes such as Council Tax and business rates with a land value tax, a model used in other countries that is seen as simpler and less distortionary. Although such reform is politically challenging and complex to implement, it reflects a growing consensus that the current patchwork of property taxes is economically inefficient and inequitable.

International experience, such as from Australia, where stamp duty is also considered a significant economic drag, reinforces the argument for abolition. Reports from Australian authorities demonstrate substantial economic growth and improved household welfare following the removal of such levies, indicating that, despite immediate fiscal costs, the longer-term economic and social benefits can be substantial.

Ultimately, removing stamp duty from both housing and shares sends a powerful signal that the UK is committed to fostering ownership, investment, and economic growth. It moves beyond the narrative of temporary reliefs or narrow exemptions towards a permanent policy that might restore confidence and dynamism across the economy. However, the success of such reforms will depend on careful fiscal management and complementary measures to ensure that the benefits are broadly shared and that the shift does not disproportionately disadvantage vulnerable groups. It remains to be seen whether the Conservative Party’s ambitious plans can navigate the complex political and economic terrain to secure lasting change.

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Source: Noah Wire Services