Kemi Badenoch boosted the Tory faithful – and her own chances of survival – with a surprise £9bn giveaway pledge to abolish stamp duty, piling pressure on Rachel Reeves ahead of next month’s budget.
The Tory leader unveiled the eye-catching promise in her speech to close the party’s often moribund conference in Manchester, to rapturous applause from the faithful.
A spokesman for Badenoch challenged Reeves to slash welfare and cut taxes at November’s Budget to boost flagging growth. He told The i Paper: “We need to cut Government spending, cut welfare, live within our means, and get our property market moving.”
Badenoch said her stamp duty pledge would be funded from £47bn of savings identified by the Tories, including £23bn slashed from the welfare budget, a near-scrapping of overseas aid with £6.9bn of further cuts, and £3.9bn of saving from the affordable homes programme, among other measures.
It would apply to primary residences only, meaning stamp duty would still apply on second homes, and is an example of Badenoch’s new “golden rule” to spend half of public savings on tax cuts and other growth-boosting measures and half on deficit reduction.
Badenoch’s move, which is likely to quieten talk of a leadership challenge for now, is a deliberately contrast with the Government which is preparing to fill a £40bn hole in the nation’s finances mainly through tax rises rather than spending cuts.
Conservative Party leader Kemi Badenoch shakes hands with delegates followed by her husband Hamish after delivering her well-received speech on the final day of the Conservative party conference (Photo by Ian Forsyth/Getty Images)Reeves has reportedly been toying with a new property tax that could replace stamp duty, and while it is unlikely to see the light of day in next months’ budget, if Badenoch’s stamp duty policy gains traction Reeves will have to find a way to counter it.
Stamp duty land tax is paid on the purchase of a property of between 5-12 per cent depending of the property’s value, with the first £125,000 exempt. It is critised for the considerable cost it can add, especially to first-time buyers, and so holding back the housing market.
Badenoch’s plan has been cautiously welcomed by economists, albeit with concerns about benefitting the wealthiest and the plan to fund it
The Tory leader unveiled promise as she sought to answer critics’ accusation that her failure to develop policy has left the political pitch clear for Nigel Farage’s Reform to threaten to supplant the Tories as the main party on the right.
The Institute for Fiscal Studies (IFS) has estimated that abolishing stamp duty on primary residences will cost around £4.5bn.
But, claiming that the Chancellor Rachel Reeves would preside over a significant increase in stamp duty as people get dragged into paying higher rates as house prices rise, the Tories said they had “cautiously” estimated that the policy would cost £9bn.
Badenoch said: “Stamp duty is a bad tax.
“We must free up our housing market, because a society where no one can afford to buy or move is a society where social mobility is dead.”
Badenoch’s leadership still in doubt
The Tory tax-cutting pledge was welcomed across the party but Badenoch was warned that it would not fully quell questions over her leadership, with many expecting her to be challenged either this autumn or after May’s local elections and shadow Cabinet member Robert Jenrick, who was defeated by the current leader in a contest last year, widely seen to be on manoeuvres.
One Tory insider said Badenoch’s pledge is “what is needed”, as even if it is a “big gift to wealthy boomers… that’s the vote they need”, adding that it would help get the housing market moving and aid both first-time buyers and older people who want to downsize.
They added that they “doubt it will save her [Badenoch] long term, but it gives the party something to sell”.
Tory election expert Lord Hayward said: “The Tories had to have a policy-heavy conference and play to their strengths, i.e. the economy.
“I think they have achieved that with stamp duty and [a pledge to scrap] business rates.”
The Resolution Foundation however warned the way the Tories are funding the promise could backfire.
Research director Lindsay Judge said: “Stamp duty is a good tax to cut as it damages the economy by making it harder for people to move around the country. The devil however is in the detail of how you’d fund such a cut.
“Funding a reduction in stamp duty by cutting the affordable homes programme – and building even fewer new homes – is a bad idea. This would subsidise more affluent people who can afford to buy a home at the cost of aggravating the housing crisis for those on lower incomes who will never be able to afford to do so.
“It would be far better to fund this welcome tax cut through an overhaul of council tax.”
Estate agents Knight Frank said cutting stamp duty would increase social mobility and immediately boost the housing market but warned there are risks: “If bond markets feel confident that it has been fully costed and mortgage costs don’t spike, buyers and sellers would warmly welcome the move.
“It would inevitably have positive repercussions for the wider economy and increase social mobility.
An unpopular tax
“The only downside is that if the Tories are leading in the polls ahead of the next general election, the housing market could grind to a halt.”
Luke Tryl, director of More In Common, said polling data shows stamp duty is one of the most unpopular taxes
He went on: “More than that though this pledge matters because it gives the Conservatives an opportunity to get back into the conversation with an eye-catching announcement that is also distinctively in line with a low tax/fiscally conservative brand.
“The question is will this be able to move the dial in the way George Osborne’s inheritance tax pledge did the last time the Conservatives were in opposition, or have the public just stopped listening, the polls over the coming weeks should give us an idea”.
Theo Bertram, Director at Social Market Foundation, added: “Stamp duty is a brake on the housing market, stops people moving for work, prevents more downsizing. Scrapping it solves these issues, but the benefit will disproportionately go to homeowners and to those in the south east and London, who will gain the most.
square KITTY DONALDSON This was Badenoch's best speech yet - it's a shame no one was listening
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“The credibility test for the Conservatives is whether they can really make sustained savings of at least £12bn annually to fund the cut. Reforming council tax and introducing a property-based tax could make the stamp duty cut more credible, sustainable and fairer, helping those on lower incomes and around the country.
Labour Party chair Anna Turley: “Kemi Badenoch set herself a new ‘golden economic rule’ today and broke it immediately. It’s the same old Tories, with the same old policies without a plan. They didn’t work then and you can’t trust them now.”
A Reform source said stamp duty went up when the Tories were in power, adding: “Who can trust them after last time?”
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