My hon. Friend has made a typically astute point. The problem has a social impact as well as an economic one. Let us remember that stamp duty
costs are on top of the tax on income, the money that families scrape together for a deposit, the legal fees, which are increasingly high, and the money for a survey. The cumulative bill in my constituency is staggering. To give a sense of the big picture, for 2012-13, residents in my constituency paid £56 million to the Exchequer in stamp duty on residential property. That is more than the total paid in the whole of the north-east of England. I am not trying to set off some sort of north-south divide, but at some point in the debate on the redistribution of wealth, there needs to be some recognition that it is not just the uber-wealthy and the super rich who are paying the burden; it is middle England, the middle classes and those on relatively low and middling incomes.
The amount of stamp duty paid in my constituency is equivalent to a third of the figure for the entirety of Scotland. Frankly, in constituencies such as mine, stamp duty feels like an assault by the taxman on hard-working, middle-income savers, who are precisely the people we should be incentivising, not walloping—I would have said “clobbering”, but my hon. Friend has used that word. Of course, Esher and Walton is just one example of the geographic unevenness of stamp duty. London accounted for 41% of residential stamp duty last year, with the south-east accounting for a further 22%. England as a whole accounts for 94% of UK stamp duty. The tax clearly has an arbitrary effect in different areas of Britain.
More broadly, the tax is not economically efficient. If we look at the raw economics—I know my hon. Friend the Member for Harlow (Robert Halfon) and the Minister care deeply about economic efficiency—we see that it is an inefficient tax. Stamp duty on residential property distorts the whole structure of the housing market. My hon. Friend the Member for St Albans has mentioned the slab structure, under which the relevant rates apply to the full sale price, not just the part above the relevant threshold. That creates huge cliff edges. A £1 increase in the price of a home, from just under £250,000 to just over, triggers an extra tax liability of £5,000. The cliff edges have been shown to harm both home owners and would-be buyers. After all, why would someone put an offer in for a property at £255,000, when for the extra £5,000 in bricks and mortar, they would pay more in stamp duty? They would not—no one does, and the data from all the estate agents bear that out.
Data on the distribution of transactions show that most buyers are simply unable or unwilling to meet asking prices just above the £250,000 threshold, because of the extra £5,000 penalty in stamp duty. As a result, the property experts London Central Portfolio, together with the Cass business school, has estimated that 13,800 home owners a year are being forced to reduce the asking price of their house to get under a stamp duty threshold. Other would-be sellers are either unable or unwilling to reduce their prices to below the nearest threshold. That causes bottlenecks in the market and a drought of available properties in certain price ranges in certain areas, until market prices rise far enough to justify the additional stamp duty, which takes a while. That deters buyers and sellers and reduces labour mobility, as my hon. Friend pointed out, because people are discouraged from moving to where suitable jobs are available, which damages the economy as a whole. It is little wonder, therefore, that the Institute for Fiscal Studies has described stamp duty as
“a strong contender for the UK’s worst designed tax”,
with a “perverse” and “absurd” structure. The director of the IFS argued earlier this year that in the modern era of broadly-based taxation, the case for maintaining stamp duty is “very weak indeed”.
However, it is not just the economic distortions and inefficiencies that we should care about. Frankly, Government Members have perhaps been a bit too defensive about coming out and saying squarely, as my hon. Friend has, that this is socially unfair and wrong. That is illustrated by the data from my constituency and the impact of the 1% rate, let alone the 3% rate. Take a family—a two-salary couple who both earn £15,000 a year—who are mortgaged to the hilt to buy a property. The usual limit, which is strictly enforced, is debt at four times joint salary. They have scraped together the money for a 10% deposit, and that way they can buy a property at £150,000. Why should they pay £1,500 extra in tax at that point? It is just a penalty. It might seem like a small percentage of the price of the property, but for families on tight margins, working hard, it is utterly punitive.
When the additional 3% and 4% rates were introduced in 2000, they were designed to target the wealthiest, and had the original threshold for the 3% rate risen in line with house price inflation, it would be levied only on properties worth £1.3 million or more today. In 2000, 391,000 homes were exempt from stamp duty. Today, that number has almost halved. That is the level, scope and scale of the fiscal drag we are discussing. The average UK house price in 2000 was around £110,000, which is well below the 3% threshold, but the average price today, according to the Office for National Statistics, is £265,000, which is well over the 3% rate, landing middle-income home buyers with a bill of some £8,000. If we are really in the business of supporting and encouraging savers, how on earth can we justify such a penalty? Sales in the 3% band covering homes worth between £250,000 and £500,000 increased from 8% as a proportion of total sales in 2003 to 19% in 2013. According to London Central Portfolio and the Cass business school, revenue from the 3% band has almost tripled since 2000, rising from £724 million to close to £2 billion this year.
Such a fiscal drag is not only a serious problem in its own right, but should also serve as the starkest of warnings to anyone in any party who is tempted by a mansion tax, as proposed by Labour and the Liberal Democrats. That is perhaps why no Labour Back Benchers are here to justify either the stealth tax implemented by the former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), or their current proposals.