No stamp duty cuts in Budget due to fears it would drive inflation
Jeremy Hunt has ruled out cuts to stamp duty in next week’s Budget as he believes it would fuel inflation, i understands.
The Chancellor plans to cut taxes on Wednesday and has faced calls from experts to act on the levy on buying homes.
But despite drawing up proposals for a stamp duty cut when he had more spare cash around a month ago, Mr Hunt has ruled out taking the policy forward, even if he could afford it.
A Treasury source said that cutting stamp duty would amount to acting contrary to the aims of the Bank of England as it tries to grip inflation with high interest rates, which are designed to cool the housing market and bring down the rate of price rises.
Rishi Sunak has also made clear his desire to bring inflation down, having achieved his pledge by bringing inflation down from 10.7 per cent to 4 per cent in January 2024.
Explaining why a stamp duty cut would not be in the Budget, the source said: “We’re not going to move against the Bank of England, it would be fiscal policy fuelling a market the Bank of England is deliberately trying to cool.”
But it comes despite demands from experts and Tory MPs for cuts to stamp duty.
The Institute for Fiscal Studies (IFS) think-tank has said that stamp duties on purchases of properties and shares are “particularly damaging taxes” and should be towards the front of the queue for growth-friendly tax cuts.
A group of Conservative MPs – the One Nation group – has requested a different change.
It has suggested that if a local authority hits 100 per cent of its house building targets, it will receive as funding 15 per cent of the stamp duty from the house sales – rising to 25 per cent if the authority exceeds 125 per cent of its targets.
Meanwhile, the Conservative Environment Network has called for a “green” stamp duty cut for energy-efficient homes.
Separately, Mr Hunt’s desire to cut personal tax by 2p has been thrown further into doubt after the Budget watchdog delivered worse-than-expected economic forecasts, i understands.
The Chancellor had submitted a draft of headline policies he is planning for the Budget, including tax cuts, to the Office for Budget Responsibility (OBR) this week, but in forecasts returned by the OBR on Wednesday night, Mr Hunt was told the measures do not generate as much economic growth as the Treasury had estimated.
It means that the policies he submitted were too expensive as a package, and ate into the £6bn spare cash he was planning to keep as a buffer out of his £13bn so-called “headroom” – the amount the Government can spend while fulfilling a promise to get debt falling in five years.
