No surpises on Stamp Duty

Tuesday 15th December 2009

By Phil Whitehouse, head of The Mortgage Alliance (TMA)

I wonder if the Chancellor Alistair Darling ever watched the wonder of TV that was Surprise, Surprise with Cilla Black? I doubt it somehow. For those that don’t remember Surprise, Surprise, the format involved moments when estranged families would be reunited and other quirky segments where the host played pleasant surprises on members of the general public.

There is rumoured to be a sequel hosted by Mr Darling called No Surprise, No Surprise. Yes you guessed it, the format will follow similar lines and contain various degrees of regularly letting down the public. The speciality of which would be introducing people, preferably first-time buyers, to their dream property only then to pull the rug out from under them and tell them that they can’t afford it anymore. Of course in saying this I’m referring to the announcement in the recent pre-budget report regarding the closure of the Stamp Duty exemption period.

The current stamp duty holiday will cease at the end of this year, as previously announced, and it is this non-extension that has raised the ire of the industry. Whilst this is disappointing and represents yet another missed opportunity, it was hardly – and here is that word again – surprising. It’s clear to all those, except the current government, that whole scale fundamental reform of this tax, which continues to distort the housing market, is still required in order to fuel the market.

Properties under GBP 175,000 are currently exempt from the tax but the threshold will return to the original GBP 125,000 limit at the turn of the year. In the pre-Budget report Mr Darling said: “By the time the Stamp Duty holiday finishes at the end of this month, I expect 240,000 homebuyers to have been helped.” This is great but think of how many others could have been helped without the reintroduction of this ‘stealth’ tax.
I can’t help but agree with the comments made by Peter Bolton King, chief executive of the National Association of Estate Agents in response to this issue:  “The chancellor missed an open goal with his statement. By ignoring the advice of much of the property industry there is a real danger that the property slump that has hit thousands of families hard over the past 12 months will hit thousands more, harder, in the year ahead.

“Stamp Duty unfairly distorts the property market. It is prohibitive to people looking for a step up the housing market and unfairly penalises people investing in buy-to-let portfolios. As a first step the chancellor should keep the Stamp Duty threshold as it is when the current holiday ends in December. More importantly, the government should commit to a complete reform of the tax to produce something that is fairer for everyone.”

Concerns over stamp duty thresholds are nothing new. Before every budget or pre-budget report this is an issue raised with increased fervor as commentators and economists debate thresholds and even abolition. But the current government continues to show no signs of heeding industry warnings and there are no obvious signs that they ever will.

Looking in-depth at the report, when highlighting negatives it is only appropriate to highlight any positives. One such positive was the extension of the governments support for its Support for Mortgage Interest Scheme for another six months. It has been stated that over 220,000 people have been helped through the scheme already.

In other mortgage related pre-Budget news the Chancellor said the government is exploring ways of encouraging more sustainable, transparent and standardised mortgage-backed securities markets.
To which Mr Darling said: “It is important that lenders continue to have access to a diverse range of funding sources, including securitisation markets. These markets need, however, to be robust, more liquid and consistent with financial and macroeconomic stability more broadly.”

It will work with the Bank and the Financial Services Authority through the Council for Financial Stability, and in discussion with issuers and investors, in order to establish a broader investor base and lay the foundations for stronger markets in the future.

So whilst there are some slight positives for the industry, the government continues to notch own goal after own goal regarding Stamp Duty. But then again as we all probably knew deep down this came as no real surprise, surprise.

Phil Whitehouse is head of network, The Mortgage Alliance. The Mortgage Alliance has a loyal data base of 7,000 Directly Authorised mortgage intermediaries and as with most firms operating within the mortgage market it is having to overcome a number of obstacles in order to help members write business. He previously worked as a senior manager for Pink Home Loans and spent 25 years with Halifax/Leeds Permanent Building Society running various high street branches. Phil enjoys golf but says: “No matter what I do I cannot get any better and I beat myself up crazily about something that on the face of it is such a simple game."