The first is that she will abolish stamp duty. The aim, she says, is to help young people buy homes. What she has very clearly never done is look at the data on what the impact of changes to stamp duty have on house prices. Almost invariably, cutting stamp duty results in an increase in house prices.
So cutting stamp duty on shares will increase share prices and so increase investment.
The case against the Financial Transactions Tax is proven……
One of the hazards of Spud’s life. Say anything and he contradicts something he said before. It’s only going to get worse as he goes round the bend even further…
Stamp duty was never paid on new issue shares. And they are investments. The issued share market is a zero sum game. The buyer’s investment is the seller’s disinvestment.
So sure, it’ll make a slight difference to the attractiveness of buying a new issue because when you come to sell it as an issued share, the profit should be greater by the stamp duty amount. But in practice, the effect would be trivial. What’s important is the earning per share which translates into share price.
Stockbrokers will be pleased. Abolishing stamp duty will make churn cheaper. More lovely commissions!
For how long? Won’t competition drive them back to their current margins, or close to it?
We’re talking about managed portfolios here. Sure there could be competition over fees & commissions & one could move one’s portfolio to a more competitive manager. Whereupon the new manager would say the previous manager had left the portfolio “unbalanced” & it needs “rebalancing”.. Churn.
I inherited a “managed” portfolio worth over half a million quid. It only had 10 shares in it & a third of them in one sector. Looking back over its history, more than half the meager annual capital appreciation had disappeared in management fees. Back when I was doing portfolio management there would have been far more diversity to spread risk. But a portfolio like that takes much more work to manage. Back then the ethic was we were managing the portfolio in the client’s interest, not ours. That went out the window years ago.. And I learnt my lesson years ago. Don’t rely on other people to make your money for you. They’ll look after their interests before yours. So I do direct investment in my own projects.
Tim, I’m in an ethical pickle. Do I slag off Ritchie or Kemi? Both are pitiably easy. 🙁
OK: Kemi. Stamp duty is a bizarre choice to build your sink-or-swim keynote pitch around. Not saying anything about the economics of it, just from a political pov.
Does stamp duty come up in doorstep conversions often with the Tories’ 6 remaining activists? She might as well have picked insurance tax or something. Stamp duty might well be important, but I don’t think it has much persuasive power. I just don’t think people think about stamp duty very much. Maybe they should, but it’s hard to imagine stamp duty inspiring protests or riots, no? Suggesting this is not the peg Kemi should have chosen to hang her jacket on in these emotional and distressed times. It would have been a great pitch circa 2008, but now?
Sort of like promising to radio for help an hour after Jap bombers started firing torpedoes at your battleship. At least Admiral Phillips had the decency to go down with his ship. I expect Kemi to commandeer a lifeboat tho.
What you say is true, Steve, but at this stage she’s fighting to hang on to her job as Tory leader rather than win a general. In that context Stamp Duty is a winning topic ‘cos Tories still care a lot more about house prices than they do about foreign occupation.
Ooh, you’re right. I’d completely forgotten Kemi’s idea of political positioning is whatever she last read in the Daily Mail. Tbh if they didn’t have a conference this week, I could easily have forgotten Kemi exists.
It was a belter of a speech that might just have changed the course of political history. Some of our best leaders are black don’t you know.
I care a lot about both, but I’m not a Tory.
Everyone gets their knickers in a twist about Boomers sitting on the property wealth of their under-occupied vast houses and insist they downsize. A large number look at the costs of doing so and realise that after those costs they’ll simply be considerably worse off with little to show for their expenditure, so sensibly enough they sit tight instead.
In two years I’ll want to “downsize” from my very pleasant 2-bed flat in leafy but increasingly diverse Norf Lahnden, and buy somewhere modest outright in somewhere hideously white. To do this I need to extract the most equity I possibly can from this flat. Stamp duty, and the way it is tiered, hits me hard both directly and by depressing my flat’s potential selling price, although not a hard as Reeves’ threatened wealth tax @ £500,000 will.
Downsizing and moving for older people has obvious costs other than financial. One has to endure the disruption, make a new life and friendship circle at a time when it is difficult to do that. If you want to encourage older people to do it, make is as cheap and easy as you can for them.
Incentives – and disincentives – matter.
I certainly don’t think anyone should be encouraged to downsize.
Foreigners should be compelled to fuck off in large numbers instead.
Britain would benefit hugely from a house price crash. Always boiled my piss seeing those stupid stories in the Daily Mail celebrating rising housing costs. I’m a homeowner too but my house is not an “investment”, it’s where my family lives. I’d rather houses were cheap as chips to benefit our people as a whole even if it means I can never move.
It’s not about encouraging so much as not discouraging.
The bigger thing though is people getting out of London and the South East. It’s why I would end ALL council housing and ALL housing benefit to the city. You move there if you can afford it. You’re unemployed, barely earning, retired, go to Norfolk or Somerset where you can do those just fine.
Foreigners notwithstanding one can have enough of the bright lights Downtown, Steve. (And I knew the bass player on that record.) If you’re in the position of having to sell at the mortgage end to pay off the capital, as I am, then you’re looking at what you can get for what you have left over. With current mortgage repayments, service charges, council tax and utilities my flat costs around £20K p.a. to live in. I couldn’t afford to stay here anyway.
Foreigners should be compelled to fuck off in large numbers instead.
Bring back Oswald Mosely.
He’d be a shoo in now.
I think Kemi is trying to play a long game, correctly in my view. She was elected with a promise to spend time in introspection because the Tories were utterly spent and utterly untrusted. You don’t fix that with a new logo and heady rhetoric.
You stay relatively quiet and then come back with a modest, roundly welcome policy with no great political benefit.
Low-key and sensible – that’s what may start to rebuild trust amongst the salt-of-the-earth folks the Tories need to win back. It’s what she was elected to do and it’s a harder road than noisy Labour bashing. Eroding trust in them doesn’t automatically build trust in you.
Of course, Reform may well smash ’em to bits anyway but I’m more willing to listen now.
PS, is anyone else impressed by Zia Yusuf’s media performances?
And at least they’re starting to look at supply side reforms, if only modestly but it’s a start.
But she’s already promising 150,000 deportations a year and £47Bn of spending cuts, leaving the EHCR, slashing foreign aid and a whole bunch of other things Tory MPs have no intention of doing.
There’s been tons of heady rhetoric coming out of the Dead Tree Party this week, they’ve been desperate to let us know they’re more radical than Reform. There’s nothing modest or incremental about this.
Then, on the day of her big speech, she reverts to stamp duty. This is a wildly inconsistent tone imo, and looks like they’re just randomly throwing shit at a wall hoping something will stick.
They might as well promise 10 billion deportations and 8 trillion cuts. None if it will happen. It’s a bit like when you get a scam email and they only offer you $10 million. Feels like they’re being cheap.
Exactly. In a recent poll only 40% of Tory MPs agreed Net Zero by 2050 is impossible. 30% were strongly in favour, 30% undecided. So what chance is there of a Tory government enacting the leadership’s recently announced anti-Net Zero policies? None
It really doesn’t matter what lipstick Kemi and Co put on the pig, its still the same Parliamentary Tory Party, that gave us mass immigration, DEI, Net Zero , high taxes and massive State spending. The rank and file Tory Party MPs are exactly the same.
Kill it with fire.
How do I sue Kemi if it doesn’t happen? How do I get rid of her before 5 years?
They had a 20 year opportunity to demolish large chunks of the state and did nothing. Why would I give them another 5?
Who had twenty years? Apart from Gladstone
Cameron elected leader in 2005. Immediately made it clear he was a collectivist
David Cameron PM from 2010 to 2016, in coalition with LibDems for 5 years, leading a Conservative government from the 2015 GE until he resigned fourteen *months* later. Have you been taking arithmetic lessons from the Grauniad?
“Does stamp duty come up in doorstep conversions often with the Tories’ 6 remaining activists? She might as well have picked insurance tax or something. Stamp duty might well be important, but I don’t think it has much persuasive power. ”
I always say this about EU and fishing rights. Utterly irrelevant to the UK economy. But it pushes people’s buttons, like the video game industry doesn’t. You announce things about fishing (and do them) so you can get into power to liberalise the video game or whisky industries.
No-one ever talks about things like open skies, which allowed for more airline competition. It had a bigger impact than rail privatisation, which was really a total non-event (because the government still micromanage what runs). I think liberalising the spectacles market under Thatcher was probably a bigger deal than privatising electricity.
What he has clearly never done is look at the data or studies on what the impact of changes to stamp duty have on house prices…
Academic studies (e.g. Best & Kleven, Journal of Public Economics, 2018) found that around 60–70% of UK stamp duty cuts are capitalised into higher prices in the short term, but also that transaction volumes rise and that the overall welfare effect is negative — meaning it’s a bad tax economically, even if it raises revenue easily.
Over the longer run, modelling suggests the price effects fade as the housing stock and supply respond to the higher turnover.
QED… or quantum erat dimwitum
Removing Stamp Duty would enable people to afford to move more frequently, which is good.
The unpleasant side effect is more conveyancing work hence revenue for the legal profession.
On the lunchtime news yesterday they kept saying “they’ll have to find the money from somewhere else…”
NOOOO!!!!!!!! JUST STOP SPENDING!!!!!!!!!!!!!!!!!!!!!!!
The Spudster makes a valid point. A buyer adds to the house price stamp duty, transfer fee, mortgage raising fee, removal van, new curtains, furniture, and so on and so on, to calculate a total price. The mortgagor does the same, to calculate affordability. In exactly the same way an employer takes wages, contributions, workspace, equipment, tea & biscuits, and so on and so on, to get to the total cost of an employee.
Mike Finn is the only one here who has grasped this.
I thought that most people on this site had accepted Tim’s point that market deals only take place when they benefit both participants. So a deadweight transaction tax that hampers deals to the extent that some never take place reduces welfare. I assume that Mick Finn meant “positive” when he wrote “negative”.
If 60-70% of the rax cut goes into higher prices for the sellers (but still lower prices for the buyers), it will marginally improve the economics of building new houses and the artificial shortage caused by planning restrictions will be gradually eased.
As for down-sizing: I wonder how many servants the Boomers sitting in large houses employ to look after them – the UK adults born in the ‘bulge years’ 1945-9 are now 76-80 and we are less enthusiastic about digging gardens and scrubbing floors than we were in out thirties; fifty-sixty years ago lots of elderly folk moved into bungalows to avoid climbing stairs; flats are much easier to look after and downsizing would free up family-sized housing for young families surely a policy that makes down-sizing easier is to be welcomed?
[For avoidance of doubt: I have never had a servant and intend never to have one in the future]
If you ever do want servants there’ll be a lot of unskilled people looking for work after the next election. Might be able to manage simple tasks if given diagrams.
Good spot. Yes – I meant stamp duty itself is welfare negative, not cuts to it. Back to grammar school for me.
I understood you!
The difference is not necessarily in the price paid.but in the equity held. You don’t pay stamp, the total remains the same but more of the house belongs to you. Which is better.
Would it not increase house prices because initially it will spark an increase in people buying homes – thus driving up the price? Which then fades away after a time?
Or does he not ever do analyses past the point where it confirms whatever he’s believing today?
So, if this theory is correct, you could increase stamp duty fivefold and the gov’t would get lots more revenue and house prices would fall. Sounds like a win-win.