Chancellor takes Labour head on

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The UK is today digesting the implications of the Chancellor of the Exchequer’s Autumn Statement. My over-riding impression is that the government’s new measures are aimed squarely at Labour’s more high-profile policies, with the ultimate goal of overtaking Labour in the polls ahead of the May elections (see Labour still ahead of Conservatives but UKIP is potential kingmaker).

olivier desbarres fig 1

Figure 1: New stamp duty smoothes out the step-jumps of old system…

Figure 2:  …and will benefit those buying properties just above £250,000 the most

Figure 2: …and will benefit those buying properties just above £250,000 the most












The new stamp duty goes toe-to-toe with Labour’s proposed Mansion Tax. The consensus is seemingly that the new, “smoother” stamp duty is an improvement over the old “slab” system, which was distortive, and fairer than the ill-conceived, arbitrary, and difficult-to-enforce Mansions Tax.


  • Incidentally many papers and commentators are saying (and HM Treasury is implying) that properties above £937,500 (the green dotted line in the figures below) will incur a greater stamp duty than under the old system. That’s not strictly true. Stamp duty on a £1.1 million property is now £53,750 versus £55,000 previously – a saving of £1,250. That’s where the red line in Figure 1 slightly (and temporarily) dips below the blue line. It is easier to see in Figure 2, which looks at the percentage point change in the effective rate of stamp duty between the new and old regime.


  • The biggest saving – about 2 percentage points – is for properties just above £250,000. The biggest increase in stamp duty is for properties just above £2 million and above £4 million (see Figure 2).


  • NHS: Osborne promised an extra £2bn for the health service – arguably similar to Labour’s promise to spend an extra £2.5bn in the NHS, of which £1.2bn would come from Mansions Tax revenues.


  • Northern powerhouse: Osborne announced the new £250 million Sir Henry Royce Institute for advanced material science in Manchester and committed to investment in businesses, academies, research and culture, to create a “northern powerhouse” in England.  This, presumably, is partly designed to make the Conservatives more appealing in a region where Labour has typically edged them out.


  • Multinationals, banks and non-domiciled. The chancellor introduced a number of measures which try to address the concern that some large multinationals, banks and non-domiciled people have had it too easy in terms of taxation – again typically a ground occupied by Labour. These measures include i) a 50% limit on bank profits which can be offset by losses for tax purposes, ii) a 25% “diverted profits” tax, and iii) higher charges for non-domiciled people.


Olivier Desbarres currently works as an independent commentator on G10 and Emerging Markets. He is a former G10 and emerging markets economist, rates and currency strategist with over 15 years’ experience with two of the world’s largest investment banks.


Fig. 1 –
Fig. 2 –; *Note: Calculated as the difference between the new and old stamp duty effective rates, measured in percentage points. The effective rate is simply the stamp duty divided by the property price.


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