Axe stamp duty in the Budget, Hammond is told

Philip Hammond must scrap stamp duty on property sales to solve the housing crisis and boost the economy, a think-tank warned last night.

The Adam Smith Institute said the ‘damaging’ tax – which raised £11.7billion last year – stopped Britons moving jobs and kept them in houses too large for their needs.

By penalising older people for downsizing, stamp duty makes the number of larger homes on the market for growing families even smaller. 

Meanwhile, ahead of the November 22 Budget:

• It was reported that Mr Hammond was set to unveil a U-turn on the Government’s controversial Universal Credit welfare policy;

• Health Secretary Jeremy Hunt confirmed yesterday that the Treasury was looking at a possible pay rise for NHS workers;

•  A leading think-tank warned Mr Hammond he would have to abandon plans to eliminate the deficit if he wanted to put more cash into public services.

The Adam Smith Institute called on Mr Hammond to cover the cost of scrapping stamp duty by raising council tax on the most expensive homes. 

Sam Bowman, of the think-tank, said: ‘Stamp duty is the worst tax we’ve got, almost as bad as setting fire to the money instead of raising it in tax.

‘The reason is that Britain’s productivity problem is in large part a mobility problem. People cannot move to where the best jobs for them are because the houses aren’t being built, and that’s made even worse by stamp duty keeping older people in family homes that are too large for them.

The Adam Smith Institute called on Mr Hammond to cover the cost of scrapping stamp duty by raising council tax on the most expensive homes

‘Stamp duty is gumming up the housing market and keeping people trapped in the jobs that aren’t best for them, and scrapping it should be a no-brainer for a government looking for a bold, affordable way to take back control of the agenda in British politics.’

Earlier this year, a report by the London School of Economics and the VATT Institute for Economic Research said the rate of home moving would be 27 per cent higher without stamp duty.

Meanwhile, it was claimed yesterday that Mr Hammond was set to reduce the waiting time for claimants to get their first universal credit payment from six weeks to four. The six-week wait has been highly controversial, with some saying it has forced them into destitution.

The Chancellor is also under pressure to end the public-sector pay cap. The IPPR think-tank has said allowing an increase in NHS pay would cost £1billion.

However, the Institute for Fiscal Studies (IFS) warned an expected downgrade to economic growth forecasts would squeeze the Chancellor’s room for manoeuvre and he may have to scrap his pledge to run a budget surplus by 2022.

A drop in productivity could add £20billion to the deficit, the IFS said. Tax rises, which would be one potential source of cash, are also thought to be unlikely because the Tories lack an outright majority in Parliament to push them through.

The IFS’s Carl Emmerson said Mr Hammond faced a choice between sticking to austerity and dropping his borrowing targets.

Scrapping the target for eliminating the deficit would be a blow for the Government, which has already pushed it back previously.