Stamp duty versus mansion tax

Although superficially similar, high stamp duty is not a mansion tax

It seems increasingly likely that one of the measures to be announced in the budget in a couple of hours will be an increase in stamp duty to 7 per cent for properties worth over £2m. The argument seems to be that because the Conservatives will be compromising on the 50p tax – cutting it to 45p rather than scrapping it altogether – the Liberal Democrats will compromise on the mansion tax, allowing Osborne to introduce it as a new rate on an existing tax rather than new tax altogether.

Unfortunately, while the mansion tax isn't a great tax – it was sold as a proxy wealth tax, when household value isn't that great a proxy for wealth – it is still better than stamp duty. This is because it is at heart a consumption tax (you pay it for "consuming" a year's worth of £2m+ housing), whereas stamp duty is a transaction tax.

As the Mirrlees review on taxation explained (volume II, page 151):

Any tax on transactions will reduce expected welfare by discouraging mutually beneficial trades. Welfare is maximized when assets are owned by the people who place the highest value on them. Taxing transactions will affect who owns an asset, and so can disrupt the efficient pattern of ownership.

The value of a good or service is determined by the flow of benefits that are derived from owning it. So a consumption tax can be levied either on the purchase price of the good or service when it is first sold or on the flow of benefits over time. A transactions tax does not do this and it always seems preferable to tax the benefits directly...

Stamp duty on house transactions, for example, taxes according to the number of times a house changes hands over its lifetime. Houses vary considerably in the number of times they are traded, but there is no good economic argument for taxing more-frequently-traded housing more. Worse still, a tax on transactions reduces the incentive to trade in housing and leads to less efficient usage of the housing stock. A tax on the consumption value of housing would make sense... but a stamp duty on transactions does not.

It is a basic tenet of capitalism that, in a free market, transactions are good. By definition, if they are entered into, they make both parties better off – and stamp duty, by imposing a cost on it, means that otherwise beneficial exchanges may not occur.

This is, incidentally, the basis of the argument against a financial transactions tax; the comeback is that financial transactions occur in a broken market, and so cannot be expected to be mutually beneficial – and certainly not socially beneficial.

The Mirrlees report ended up recommending that stamp duty be abolished in its entirity, but instead the chancellor will be putting an even greater proportion of the UK's fiscal burden on it. Given it is being used as a proxy version of a proxy version of an efficient tax, it is not surprising that it has problems.

Mansion: The house allegedly bought by Saif Gaddafi in Hampstead, London (Getty)

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Getty
Show Hide image

Sadiq Khan likely to be most popular Labour leader, YouGov finds

The Mayor of London was unusual in being both well-known, and not hated. 

Sadiq Khan is the Labour politician most likely to be popular as a party leader, a YouGov survey has suggested.

The pollsters looked at prominent Labour politicians and asked the public about two factors - their awareness of the individual, and how much they liked them. 

For most Labour politicians, being well-known also correlated with being disliked. A full 94 per cent of respondents had heard of Jeremy Corbyn, the current Labour leader. But when those who liked him were balanced out against those who did, his net likeability rating was -40, the lowest of any of the Labour cohort. 

By contast, the Labour backbencher and former army man Dan Jarvis was the most popular, with a net likeability rating of -1. But he also was one of the least well-known.

Just four politicians managed to straddle the sweet spot of being less disliked and more well-known. These included former Labour leadership contestants Yvette Cooper, Andy Burnham, and Hilary Benn. 

But the man who beat them all was Sadiq Khan, the Mayor of Lodon. 

YouGov's Chris Curtis said that in terms of likeability Khan "outstrips almost everyone else". But since Khan only took up his post last year, he is unlikely to be able to run in an imminent Labour contest.

For this reason, Curtis suggested that party members unhappy with the status quo would be better rallying around one of the lesser known MPs, such as Lisa Nandy, Jarvis or the shadow Brexit minister Keir Starmer. 

He said: "Being largely unknown may also give them the opportunity to shape their own image and give them more space to rejuvenate the Labour brand."

Another lesser-known MP hovering just behind this cohort in the likeability scores is Clive Lewis, a former journalist and army reservist, who served in Afghanistan. 

Lewis, along with Nandy, has supported the idea of a progressive alliance between Labour and other opposition parties, but alienated Labour's more Eurosceptic wing when he quit the frontbench over the Article 50 vote.

There is nevertheless space for a wildcard. The YouGov rating system rewards those who manage to achieve the greatest support and least antagonism, rather than divisive politicians who might nevertheless command deep support.

Chuku Umunna, for example, is liked by a larger share of respondents than Jarvis, but is also disliked by a significant group of respondents. 

However, any aspiring Labour leader should heed this warning - after Corbyn, the most unpopular Labour politician was the former leader, Ed Miliband. 

Who are YouGov's future Labour leaders?

Dan Jarvis

Jarvis, a former paratrooper who lost his wife to cancer, is a Westminster favourite but less known to the wider world. As MP for Barnsley Central he has been warning about the threat of Ukip for some time, and called Labour's ambiguous immigration policy "toxic". 

Lisa Nandy

Nandy, the MP for Wigan, has been whispered as a possible successor, but did not stand in the 2015 Labour leadership election. (She did joke to the New Statesman "see if I pull out a secret plan in a few years' time"). Like Lewis, Nandy has written in favour of a progressive alliance. On immigration, she has stressed the solidarity between different groups on low wages, a position that might placate the pro-immigration membership. 

Keir Starmer

As shadow Brexit minister and a former director of public prosecutions, Starmer is a widely-respected policy heavyweight. He joined the mass resignation after Brexit, but rejoined the shadow cabinet and has been praised for his clarity of thought. As the MP for Holborn and St Pancras, though, he must fight charges of being a "metropolitan elite". 

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.