DTel: Stamp duty bleeds the middle classes

Stamp duty bleeds the middle classes
By David Derbyshire and Brendan Carlin

Daily Telegraph
(Filed: 02/11/2005)

Home buyers paid a record =A35.5 billion in stamp duty last year,
prompting new accusations yesterday that the Government is presiding
over a "property stealth tax".

Over the past year the amount of stamp duty pouring into the coffers of
Gordon Brown, the Chancellor, rose by almost 50 per cent, new figures
showed.

Revenue from the tax has increased eightfold since Labour came to power
in 1997. Stamp duty on house sales now generates more money for the
Chancellor than spirits and beer duty combined and is fast approaching
the level raised by tobacco tax.

The figures emerged as council tax payers in England were warned that
they could face a =A3100-a-year increase on their bills unless the
Government plugged a =A32.2 billion "black hole" in its finances.

Although critics say the Chancellor has presided over an unprecedented
number of "stealth" tax rises, few are as unpopular as stamp duty. Over
the past few years rising house prices have dragged millions of homes
over the threshold for the duty, with London and the South East, where
house prices are highest, bearing the brunt.

Caroline Spelman, the Conservative local government spokesman, accused
the Government of squeezing home buyers dry.

"Stamp duty is yet another stealth tax," she said. "It is clearly being
used to enrich the Treasury at the expense of home owners.

"What they have failed to do is adjust the stamp duty threshold to
reflect the huge increase in house prices. For the whole nation, the
average stamp duty has gone through the =A31,000 barrier, while for
London it is around =A36,000. This is a tax on London and the South
East, and on middle England."

The year before Labour came to power stamp duty on house sales raised
=A3675 million.

At that time 610,000 people paid the tax when buying a house. Inland
Revenue figures show that by this year, about 1.2 million home buyers
were paying, which generated =A35.49 billion for the Treasury.

The stamp duty threshold has failed to stay in line with average house
prices, which have risen from =A368,000 in 1997 to =A3170,000.

The lowest threshold was frozen at =A360,000 between 1993 and March this
year - a period of dramatic house price inflation.

Over the same period, Mr Brown increased stamp duty four times.
Although he gave in to pressure and doubled the lowest threshold to
=A3120,000 in March, the higher thresholds remain untouched.

Today, stamp duty is charged at one per cent on homes sold for
=A3120,000 to =A3250,000, three per cent between =A3250,000 and =A3500,000
and four per cent for those above =A3500,000.

"This is a stealth tax," said Martin Ellis of the Halifax. "Rising
prices have dragged a lot of properties into the net and also into the
higher rates. This hits first-time buyers particularly.

"The Government doubled the lower threshold, but there aren't many
houses in London and the South East that are exempt. We would like to
see them linking thresholds to price inflation."

Last year's increase in revenue from stamp duty was fuelled by
increases in house prices of 17 per cent in 2003 and 14 per cent in
2004. The number of people buying a home also increased from 1.5
million in 2003-04 to 1.7 million in the last financial year.

London and the South East pay the lion's share, each contributing more
than =A31 billion to the Treasury. When the number of people living in
each region is taken into account, a huge North-South divide emerges.
In London, every man, woman and child pays the equivalent of =A3173 in
stamp duty, while in the South-East the figure is =A3148.

In the North-East, where house prices are lower, people pay the
equivalent of =A344.

A Treasury spokesman said: "In the Budget the Chancellor doubled the
starting threshold from =A360,000 to =A3120,000.

"As a result, half of all first-time buyers and 45 per cent of all
house purchases are totally exempt from duty, and five in every six
purchases pay either no stamp duty at all or duty at the one per cent
level."

The Local Government Association said council tax bills could rise by
=A3100 next year unless ministers filled a =A32.2 billion shortfall. This
prompted the Office of the Deputy Prime Minister into denouncing the
LGA for using "fantasy" figures and "crying wolf" yet again.

But council leaders insisted their figures were correct and said only a
last-minute =A31 billion injection from Mr Brown in December prevented
bills rising by almost 10 per cent.



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