Kemi Badenoch pinned her own and her party’s hopes of revival on the Thatcherite principle of home ownership by pledging to abolish stamp duty on the purchase of all main homes.
In a bold move that could cost as much as £9 billion by the time of the next election, the Tory leader received a standing ovation at the party conference in Manchester that helped lift the overall mood.
She said: “We Conservatives believe that owning your home gives you a real stake in society. There is a big barrier in the way and that barrier is the tax you have to pay when you buy your own home. That barrier is stamp duty. Stamp duty is a bad tax, it is an un-Conservative tax.”
Her plans sparked a call from Tories north of the border for the Scottish government to follow suit by abolishing Land and Buildings Transaction Tax (LBTT) on personal homes to “encourage aspiration and help people get onto and move up the property ladder”.
Shadow Scottish housing secretary Meghan Gallacher said the policy would be paid for by Barnett Consequentials from the UK government which would come to the Scottish government as a result of the stamp duty cut in England.
She said the proposals are fully funded, as the UK Conservative party announced proposals this week to make £47bn of savings by reducing spending on areas such as social security benefits and foreign aid.
“The SNP’s instinct is to punish people with ambition and aspiration. Our party is different. We believe in bringing down bills for the strivers who want to put in hard graft and get ahead,” she said.
The Institute for Fiscal Studies has warned that stamp duty is the “most economically damaging tax”. Scrapping stamp duty would save £15,000 for buyers of a £500,000 home, rising to a saving of £43,750 on a £1 million home and £153,750 for a £2m property.
Tom Clougherty, executive director of the IEA, 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“As things stand, this outdated and uneconomic levy is wreaking havoc on our already troubled housing market – by deterring sales and depressing house-building.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.”
Ms Badenoch, whose leadership has been questioned over a lack of policy statements, argued that removing stamp duty would “benefit people of all ages”, from first-time buyers to pensioners wanting to downsize.
She argued the policy would “bring wider benefits to our economy too, because every time a home is sold it triggers a chain reaction of activity: movers, builders, decorators, flatpack furniture and DIY, trips to Next, John Lewis and Ikea.”
The announcement came without warning and means the Tories have announced tax cuts and spending pledges totalling £21bn, including the scrapping of business rates for retail, hospitality and leisure.
Stuart Cheetham, CEO of the mortgage lender MPowered, was sceptical about scrapping stamp duty, saying: “As ‘rabbit out of the hat’ moments go, this was right up there. But as policies go, it’ll be an albatross if the Tories defy the odds and win the next election.
“Stamp Duty isn’t just the bane of housebuyers or the plaything of politicians. It generates billions for the Treasury every year. In 2023 to 2024, people buying homes paid £8.6bn of Stamp Duty straight into Government coffers – and the figure is likely to have been even higher in the latest tax year.
“Promising to forego billions in tax revenue is bold stuff, and one of the few privileges enjoyed by opposition parties. No party currently in office would dare give away so much revenue, given the weakness of the government’s finances.”
He warned of a risk that it would drive up prices and would not benefit first-time buyers.
“The total abolition of stamp duty would deliver the biggest tax breaks to everyone but first-time buyers. People buying a second home or very expensive properties would save the most tax. First-time buyers currently pay no stamp duty on properties costing less than £300,000 – and the changes would do nothing for them.
“Kemi Badenoch’s announcement will fly when it comes to headlines, but on every other count it’s unlikely to get off the ground.”
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