What on earth are they up to on stamp duty?
The current uncertainty about stamp duty is ridiculous. If Alistair Darling is going to suspend stamp duty or defer its payment so as to boost the housing market, then he needs to do so right now; otherwise he should have dampened all speculation with a firm denial he was even thinking about it. And Treasury officials should have been instructed to give those same firm denials. To float the idea as something that may happen in a few months, as he has done, is bound to have the opposite effect, if any, to the one Darling would like, as the handful of potential buyers with mortgages decide to sit on their hands until autumn in the hope of saving themselves a couple of grand. One has to wonder about competence at the top of government when this kind of thing happens. Darling needs to achieve complete clarity, within days.
I want to look at some broader issues, though, First, would suspending or deferring stamp duty actually have much if any effect on the housing market? I doubt it. The real problem with the housing market right now is that prices are still punitively high, added to which, hardly anyone can actually get a mortgage to cover those prices. I doubt that fiddling with stamp duty will do anything to make houses more affordable (in fact of course the idea would be to support prices) or encourage lending during this credit crunch. Potential buyers would still find it difficult to buy, and attractive to wait until prices fall yet further; many would gamble that any suspension would be likely to last for some time, so that waiting for price falls is still the most sensible thing to do. And deferral of stamp duty would surely have no effect whatever. How on earth does it make you feel better off to delay paying a couple of thousand pounds? The bill will come eventually, and you know it will. All it would do is create a temporary illusion that buying a house is cheaper than it really is - but that's the kind of thinking that got us into the housing bubble in the first place.
I'm not convinced that any subsidy for the housing market is sensible: even schemes such as the special one for key workers seem to me likely to have a marginally inflationary effect, and the heart of our housing problem is price inflation. Except for those people who will go into negative equity, house price falls should be welcome, and the government should do nothing to try to prevent them. So I think tax breaks to prop up the market are a mistake.
What's more, suspending stamp duty would be an unfair mistake. If Darling decides to suspend it for properties sold for under £250,000, say, then fair enough: most people, but only the majority for whom £2,500 is significant, would benefit. But if he decides to suspend the 1% rate on all properties, then the very well off will benefit, too - but why should you be spared £2,500 if you can afford to buy property costing a million? That'd be putting money in the pockets of the rich, without any real effect on the market. And if Darling suspends stamp duty entirely, or even defers it on all purchases, then the super-rich will benefit massively more than anyone else. There are still houses in London for sale at over £20,000,000: you could save something like three quarters of a million on one of those if stamp duty is suspended, or save a really welcome bit of interest if it's merely deferred.
A Labour government should simply be trying to help those at risk of repossession.
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