Stamp Duty, zero carbon homes and other gimmicks

Stamp Duty Transfer Tax is a jolly way for the Government to raise money. Traditionally, Governments have used Stamp Duty as a means of raising tax for hundreds of years; it was one of those taxes to which the American colonists objected. If you wanted to become a solicitor eighty or so years ago you had to pay stamp duty on your deed of articles of clerkship – then £80, which was more than the average annual wage. Up until about 1965 every cheque you issued attracted a two pence stamp. 

The present Government has raised stamp duty on the purchase of property. Homes under £125,000 are exempt, homes up to £250,000 attract a 1% stamp and homes up to £500,000 attract a 3% stamp; more expensive properties are taxed at 4%. These are historically high levels of stamp duty for homes. There were a plethora of schemes to avoid stamp duty on property but the loopholes have been closed and if you want to move house, or if you need to move house, you will have to pay what amounts to a large tax on your change of one capital asset for another. 

In 2001 only 6% of house buyers paid the 3% paid of stamp duty but now around 20% of them pay 3%, so taxing homes as they rise in price is, as I said, a jolly way to raise money. 

The Government have been looking for ways to reward home buyers that use microgeneration because these people have invested in personal infrastructure which lowers their own carbon footprint for the common good. I have always thought that the best way to do this is to provide a council tax discount, and if that is not possible to provide income tax relief.

When I discussed these possibilities with treasury officials last year they pointed out that historically reliefs for income tax were very limited. Yes they were, but historically income tax was imposed in a time of crisis to raise money to fight Napoleon, who threatened us with invasion. The threat from the crisis of global climate change is greater than Napoleon’s threat. 

Anyway back to stamp duty. Some bright spark at the government thought up a concept of providing a stamp duty exemption to encourage microgeneration. This was announced in Gordon Brown’s last budget. As stamp duty is only charged when people buy property, the microgeneration exemption could only apply easily apply to new homes, otherwise you might create a huge rush for people to avoid stamp duty on expensive homes by installing solar panels, heat pumps, under floor heating and the odd wind turbine.  

Personally I think that such an encouragement to avoid stamp duty by laying out on microgeneration before you sell would be a very good thing for the environment. It would reduce the money that the government raises from stamp duty, which would have to be made up elsewhere – possibly by increasing stamp duty on homes that do not install microgeneration. 

Obviously I think very differently from the government on this, because the government came up with an exemption (up to £15,000) for stamp duty on what they called “zero carbon homes”. Now I have described “zero carbon homes” as a holy grail, which is genuinely impossible to achieve; the phrase is a gimmick, a marketing device. The definition of a zero carbon home showed this. 

Last month the government published a law to provide stamp duty exemption on zero carbon homes. They have apparently taken my views into account, but the wrong bit of them. They have in the new law created a definition of a zero carbon home that will be virtually impossible to meet, because it would be virtually zero carbon.

Is this incompetence or is there some sinister force at the Treasury that thinks climate change is nonsense and it is not worth changing tax rules to alleviate it? It is sad for the world that the government have let us down on this point.

It is right to be ambitious and aim for “zero carbon homes” and “carbon sequestration” and “carbon offsetting” and all sorts of other things that cannot be achieved from our present knowledge.  Ambition to alleviate climate change by radical means is entirely laudable but those who frame laws and tax reliefs seem to have no understanding on the laws of physics and technology.

In particular they do not understand that every present technology must be used now, rather than wasting time chasing a pot of gold at the end of a rainbow.  Something positive has to be done now. Introducing a stamp duty relief that no one can claim is not being positive, but simply spinning a good yarn, but a yarn nevertheless.  

You can find the regulations at http://opsi.gov.uk/si/si2007/uksi_20073437_en_1