Budget: Hunt should prioritise cutting ‘damaging’ stamp duty rather than income tax, IFS says
Cutting stamp duty on the purchase of properties and shares should come top of the Chancellor’s list of potential tax cuts in the Spring Budget, a leading think tank has said.
Despite the government’s parlous fiscal position, with debt at its highest level since the 1960s, Jeremy Hunt is all but certain to unveil tax cuts in the Budget next week.
The Institute for Fiscal Studies (IFS) argued that rather than focusing on attention-grabbing cuts to income tax, Hunt should focus his attention on “particularly damaging” taxes, such as stamp duties.
Paul Johnson, director of the IFS, said stamp duties on property purchases “gum up the market and keeps new and younger people from entering the market”.
Stamp duties on shares, meanwhile, “clearly create inefficiencies in the market,” Johnson argued.
The IFS said cuts to stamp duty should be “towards the front of the queue for growth-friendly tax cuts.”
However, the IFS warned that if the Conservatives wanted to cut taxes, then they should provide more detail on how government spending would change after the election.
“Until the government is willing to provide more detail on its spending plans in a Spending Review, it should refrain from providing detail on tax cuts,” Martin Mikloš, a Research Economist at IFS and an author of the report, said.
Currently the Conservatives have pencilled in an increase of 0.9 per cent on day-to-day public spending after the election. Given new population projections from the Office for National Statistics, this amounts to a 0.2 per cent increase in per person spending.
Taking into account the government’s pre-existing spending commitments on the NHS, childcare and defence, this means unprotected departments will see real terms spending cuts of around £20bn by 2028-29.
But the government does not have any detailed departmental spending plans, making it unclear where the axe will fall.
Johnson argued that cuts on this scale would put immense pressure on public services which are already feeling the pinch. “We know that a lot of public services are really struggling,” he said.
“We see huge backlogs in the justice department, local councils going bust left right and centre and huge waiting lists in the NHS,” Johnson continued.