In today’s newsletter:
The case for the abolition of Stamp Duty Land Tax (SDLT)
Should we means-test the state pension?
Is the Green Party’s Zack Polanski Britain’s Donald Trump?
This week, the IEA team went up to Manchester for Conservative Party Conference. We hosted fringe panel events and a late-night drinks reception, which brought together MPs, journalists, policy professionals, and friends of the IEA for serious discussion (and a fair bit of fun) on the future of free markets in Britain.
I interviewed conference attendees on what they want from economic policy, which you can watch here.
Across the week, we heard some interesting proposals come from the Shadow front bench. On the Monday, Shadow Chancellor Mel Stride MP announced their commitment to £47 billion of public spending cuts, predominantly from reducing working-age benefits.
Public spending cuts are certainly welcome. No Government will be able to balance the books unless public spending is dramatically reduced.
However, there is still the huge elephant in the room that the Conservatives are reluctant to acknowledge: pensions. They still haven’t quite grappled with age-related public spending. My suggestion that the triple-lock on pensions should be means-tested was so shocking, it was reported in the BBC.
The Conservatives have not committed to changing the triple lock, which guarantees that the state pension will go up each year in line with either inflation, wage increases or 2.5% - whichever is the highest. Balancing the books will be very difficult to achieve unless these realities are confronted.
On Wednesday, in her keynote speech, the Leader of the Conservatives Kemi Badenoch pulled a rabbit out of the hat. She announced that the Conservatives would commit to abolishing Stamp Duty Land Tax (SDLT) entirely.
The UK already has a dysfunctional housing market. We have a chronic housing shortage, artificially pushing house prices up and making home ownership an impossible feat for many. House prices were approximately 2-3 times the average salary in the 1990s, and are now more than 10 times, or 12 times in some big cities. The solution to our housing shortage is to build more homes, and that would require radically reforming the planning system.
Making matters worse is the damaging and distortionary property tax system. Stamp duty is Britain’s worst tax. It is a tax on transactions, meaning that fewer people make that transaction. It makes absolutely no sense to tax a house based on how often it changes hands, and in doing so, it prevents homeowners from moving into the homes they actually want to live in.
It penalizes people for downsizing and prevents them from relocating around the country for work. It means that fewer transactions are made, and so housing is kept in the hands of people who may not want it as much as another property.
Abolishing stamp duty would be the single best tax reform that any Government could make to Britain’s tax system.
The Conservative Party’s pledge to abolish Stamp Duty is a genuinely bold and welcome step — a recognition that growth won’t come from tinkering at the edges, but from removing barriers.
We need a planning system that allows more homes to be built, a tax system that rewards work and enterprise, and a spending model that reflects the fiscal realities of an ageing population. The IEA will continue to make the case for all three.
Reem Ibrahim
Head of Media & Linda Whetstone Scholar
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IEA Podcast: Head of Media Reem Ibrahim, Executive Director Tom Clougherty, and Editorial Director Kristian Niemietz discuss Kemi Badenoch’s Conference speech, the triple lock on pensions, and the Green Party’s renters reform — IEA YouTube
Abolishing stamp duty single best tax reform any government could make
Reacting to the Conservatives’ pledge to abolish Stamp Duty Land Tax, Tom Clougherty, Executive Director of the Institute of Economic Affairs, said:
“Abolishing stamp duty is the single best reform any government could make to Britain’s tax system.
“As things stand, this outdated and uneconomic levy is wreaking havoc on our already troubled housing market – by deterring sales and depressing house-building.
“Indeed, research suggests that the wider social and economic harms are equivalent to three-quarters of the revenue raised – and that’s on top of the loss to the people actually paying the tax.
“This means that stamp duty is many times more damaging, as a source of revenue, than broad-based taxes on income and consumption.
“Any proposal to permanently cut or abolish it is therefore extremely welcome.”
There have been calls from left-leaning think-tanks such as the Institute for Public Policy Research (IPPR) and right-leaning ones such as the Institute of Economic Affairs (IEA) to ditch stamp duty, a tax which raised £13.8bn for the Treasury in the 2024-25 tax year alone.
I couldn’t have bought my first home without discounted stamp duty: This anti-growth tax has got to go, says HELEN CRANE, This is Money
Tom’s quote was also featured in the Daily Mail, Guido Fawkes, Politics Home, the Daily Express, The Standard, ConservativeHome, Daily Business, Newsflash, Place North East, Bromsgrove Standard, Business Money, Redditch Standard, Housing Today, Mortgage Solutions, Mortage Finance Gazette, Amed Post, The Intermediary, and British Bulletin.
Scrapping stamp duty is such a good idea that I’d steal it if I were Keir Starmer, Executive Director Tom Clougherty writes for the Daily Express
Stamp Duty Land Tax (SDLT) is an outdated and uneconomic levy that wreaks havoc on Britain’s already troubled housing market. It deters property sales, depresses house-building, and hurts the wider economy. Getting rid of it is the single best reform that any government could make to Britain’s tax system. The crucial thing to understand is that SDLT is a tax on transactions – specifically, on moving house. And whenever you tax something, you get less of it. Mutually-beneficial trades that would otherwise have taken place no longer do.
Executive Director Tom Clougherty appeared on GB News to discuss Stamp Duty, GB News
Kemi Badenoch vows to abolish stamp duty, Head of Media & Linda Whetstone Scholar Reem Ibrahim appeared on TalkTV to discuss Stamp Duty Land Tax, TalkTV
Stamp duty is a tax that deserves the axe, Head of Media & Linda Whetstone Scholar Reem Ibrahim wrote in The Critic
A middle-aged couple living in a family home worth £500,000, whose children have moved out, may wish to downsize. They would be able to free up some equity and spend it on holidays or have a more comfortable retirement. They would also be able to live in a home that they actually want to live in, one that may be easier to clean, and would cost less to heat in the winter.
If the couple wanted to buy a property worth £350,000, they would be required to pay £7,500.
News and Views
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Tories promise to scrap business rates for most high-street shops and pubs in England, Executive Director Tom Clougherty quoted in the Financial Times
Tom Clougherty, head of the free market think-tank the Institute of Economic Affairs, said the £47bn in proposed cuts was an “excellent start” but the Conservatives would still struggle to address rising spending for older members of society.
What Are The Economics Behind the American Dream? - Ep 2 - Land of Opportunity, IEA YouTube
Badenoch urged to ditch pensions triple lock, Head of Media & Linda Whetstone Scholar Reem Ibrahim’s remarks quoted in the BBC
Reem Ibrahim… said: “The triple lock is just completely unsustainable and it’s being spent on some of the wealthiest demographics in the country.”
Speaking at a fringe meeting at the Conservative conference in Manchester, Ms Ibrahim branded the triple lock a “Ponzi scheme”.
Rachel Reeves ‘driving UK into full-blown crisis’ - will she bankrupt Britain?, Executive Director Tom Clougherty quoted in The Express
Ernest Hemingway famously wrote that bankruptcy happens two ways: gradually, then suddenly. That could apply to Britain.
The UK budget hasn’t been balanced since the start of the millennium. We are borrowing more than £300million daily, yet we’re not at war or in a pandemic.
Among advanced economies, we have the third-highest deficit and borrowing costs, and fourth-highest total debt.
There’s the risk of a fiscal doom loop: rising debt leads to higher borrowing costs, which widen deficits, and pushes debt even higher. Once established, that cycle is hard to break.
That’s put the mockers on your mocker refill, Head of Lifestyle Economics Dr Chris Snowdon quoted in the Sun
Christopher Snowdon, from the Institute of of Economic Affairs think-tank, said: “This is the nanny state on steroids and there is more to come. These policies are supposed to be about childhood obe-sity and junk food, but it’s ordinary adults buy-ing ordinary products.”
Zack Polanski is Britain’s Donald Trump, Editorial Director Kristian Niemietz wrote in CapX
For Trumpians, tariffs have become an all-purpose tool, which supposedly achieves multiple policy objectives all at once. Tariffs are presented as an easy way to raise revenue (‘a tax on a foreign country’). They are also presented as a tool to discourage imports, and thereby stimulate domestic production. Thirdly, tariffs are also presented as a tool to get foreign governments to do what Trump wants them to do.
Common sense capitalism is the new third way, Junior Research Associate Mani Basharzad, CapX
TS Eliot once wrote that ‘the middle way is no middle thing at all, but the highest and the hardest thing to reach.’ That also seems to be the view of Kemi Badenoch, who is trying to reunite the fractious Conservative Party around the seeming contradiction of ‘responsible radicalism’.
State pension triple lock trapping UK in ‘vicious cycle’ as workers ‘pay higher taxes’ for retirees, Executive Director Tom Clougherty, GB News
Tom Clougherty, the executive director of the Institute of Economic Affairs (IEA), is among the many analysts sounding the alarm over the payment uprate mechanism’s growing cost.
Head of Media Reem Ibrahim appeared on the Jeremy Vine Show on Channel 5
Tax warning: Britons warned over ‘double taxation’ as Rachel Reeves eyes fresh hike, Executive Director Tom Clougherty quoted in GB News
The Institute of Economic Affairs has highlighted that CGT receipts fell by 18 per cent in July compared with the previous year, despite the recent rate increases.
Tom Clougherty, the IEA’s executive director, argued that capital gains taxes create “strong behavioural effects” that distort economic decision-making.
Scale of dread about Rachel Reeves’s tax hikes laid bare, Director of Communications Callum Price was quoted in the Daily Express
Callum Price of the Institute of Economic Affairs said: “The public are right – taxes are going up, but they don’t have to. We already have a generational high tax burden and public spending is out of control.
“The Government should put spending cuts first, and resist punishing businesses and tax payers ever more, which will only keep damaging our economy and perpetuating the doom loop we are in.”
This house believes Thatcherism was good for Britain, IEA Head of Media Reem Ibrahim and Cleo Watson will be debating Journalists Peter Hitchens and Suzanne Moore at the Emmanuel Centre on Monday 13th October.
