Matthew Pratt comments on Budget 2021

3rd March 2021

Summary:

Boost in funding for apprenticeships “welcome” to “help encourage a vital stream of talent into the construction industry”.

“In the medium-term and beyond October, we would like to see wholesale reform of stamp duty land tax”.

“We would encourage Government to consider permanently reducing the current stamp duty tax bands across all levels, including the higher bands”.

Matthew Pratt, Redrow’s Group CEO, comments: “Overall today’s Budget gives hope for the UK’s recovery, and we welcome the boost in funding for apprenticeships, which will help encourage a vital stream of talent into the construction industry. The stamp duty holiday extension will be welcome news to those buyers caught up in the home buying process and who may have otherwise missed out on a saving, and the element of tapering between June and September will also be welcome to a number of new market entrants.

“However, in the medium-term and beyond October, we would like to see wholesale reform of this tax, as stamp duty outside of the current holiday is a barrier to people moving home, and it shouldn’t be. Facilitating mobility is especially important to the UK’s recovery as we move out of the Covid-19 lockdown and people find themselves needing to move due to job changes and other important life stage reasons.

“Home moves should be encouraged, not least because each transaction acts as a catalyst for wider consumer spending in the economy such as on soft-furnishings, new kitchens and bathrooms in the second-hand market, and a host of tradespeople. Recent research puts the net contribution each housing transaction makes to wider GDP spending at a significant £9,500*.

“Historically stamp duty was not a significant contributor to Treasury coffers, but it became more onerous from the mid-1990s onwards, and a 10% and 12% band was introduced for higher value homes in 2014. Stamp duty is also inconsistent with other property taxes and schemes, particularly when it comes to the new Help to Buy regional caps, and the upper threshold value of properties under the new mortgage guarantee scheme. Simplicity is to be strived for**.

“We would encourage Government to consider permanently reducing the current stamp duty tax bands across all levels, including the higher bands, and we believe the abrupt leap from the 5% to 10% tax band is particularly prohibitive. A lower, flat rate of tax across homes of all value would be much simpler and far less restrictive. It is right that first-time buyers get more support than others on paying stamp duty through any new regime as they don’t currently have any equity built up.

“For a functioning housing market people have to move up and down the ladder, and the need to find significant sums of money can prevent those at the top of the property ladder from moving to a more appropriate home for their requirements, and freeing their current larger property up for a family. Sideways moves are often crucial for people who might be moving away for job or life stage changes, and the current stamp duty levels can stifle a choice which can massively improve people’s lives and open up options.” 

*Research from the HBF and Knight Frank, which can be viewed online here.

** To provide specific examples; once the stamp duty holiday is over in October, first-time buyers will have full or partial relief on stamp duty up to £500,000 on residential properties, whereas the upper threshold for properties under the new mortgage guarantee scheme is £600,000. Whilst this scheme isn’t exclusive to first-time buyers, helping people out of renting into buying is the policy driver here. The Help to Buy regional caps for first-time buyers under the new scheme running from 2021-2023 range from £186,100 in the North East to £600,000 in London.