There is stiff competition but stamp duty on house purchases has a strong claim to be Britain’s worst tax. That’s “worst” in the sense it creates economic distortions while doing absolutely nothing to guide behaviour in a socially helpful direction.
Labour reintroduced stamp duty bands in 1997. These kicked in on the entire value of properties sold above £60,000 (1 per cent), £250,000 (2 per cent) and £500,000 (3 per cent). But there was rampant house- price inflation in the next decade (10 per cent a year on average) and politicians failed to lift the thresholds in step. The result was more home sales were pulled into the tax net. The proportion of property sales liable for stamp duty rose from half in 1997 to three-quarters in 2003.
Governments have been fiddling around the edges since. Alistair Darling removed the tax from most first-time buyers. George Osborne brought it back (although he has replaced the perk with equity loans and subsidised mortgages). His Labour shadow, Ed Balls, still talks of granting new buyers a “holiday” from the duty. But this is no way to run a taxation system. Short-term relief and arbitrary tinkering creates uncertainty and pushes the problem out to another day.
