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September 03, 2008



Doesn't the stamp duty change have a slightly larger impact than that as most people's problem is the deposit, not the value of the house. If you are buying a £175,000 house and need a 10% deposit (probably more now) than you need £17,500. You also need £1,750 for stamp duty. This removal means your up front cost has fallen by nearly 10%.


The point is that both statements are true; yes, a stamp duty cut will be absurdly puny and won't do anything useful, but any effect it does have will be at the margin, so it will help people who probably can't pay get mortgages on rapidly depreciating property.

In fact the only effects it will have will be a) a giveaway to people who own their homes outright, the only ones with enough equity to still be in the market, and b) to help a small number of people get mortgages who probably shouldn't. You're missing the full crapness of the policy.


It's not about solving the economic problem--it's about solving the political problem. The political problem is that pols cannot stand around during a crisis doing nothing. They must act. Whether their actions are good for the economic problem is irrelevant.


Still removing stamp is not necessarily a bad thing in its own right. There should be a flat fee for registration services. One view is that there should make portfolio adjustment as cheap as possible (minimise transaction costs). Another view is the opposite, that we should make it expensive to discourage speculation. I'm inclined to think both views are correct, but I'm not sure how to support both simultaneously.


Of course I agree the effect is puny, and what is worse it is a once off - you have to do the opposite at some stage if you want to do it again. It reminds me of the German employers organisation pushing to cancel public holidays (effectively a 0.5% cut in wages - how much do exchange rates fluctuate again)? What would make sense is to replace public holidays with movable holidays (remove the congestion and inconvenience cost - definite utility gain).

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