Liz Truss reportedly set to include stamp duty cut in ‘emergency budget’

Good morning. Jacob Rees-Mogg, the business secretary, will this morning give details of the energy support package that will be available for businesses over the next six months. I will cover political reaction here, but my colleague Graeme Wearden will be leading on coverage of this on his business live blog.

In normal circumstances a government announcement of this kind, involving spending worth tens of billions, would be made to the House of Commons, where MPs would be able to quizz Rees-Mogg on the detail. The Commons is open today, but only for MPs to swear oaths to the new King. It is not having a proper sitting until tomorrow, and it is not clear why a full statement could not have been scheduled for today. This is the second time an energy support measure has been announced in a manner to minimise parliamentary scrutiny; when Liz Truss announced her energy price guarantee, she did it in the form of a speech at the opening of a debate, instead of a Commons statement, which would have allowed up to 100 or so MPs to ask a question about it.

But we are getting a Commons statement on Friday, when Kwasi Kwarteng, the chancellor, will unveil his “emergency budget” and this morning Steven Swinford and Henry Zeffman in the Times say that it will include a surprise cut to stamp duty, as well as the tax cuts already promised (the reversal of the national insurance increase, cancellation of planning corporation tax increases, and the temporary suspension of green levies on fuel bills). In their story – which is not being denied by No 10 – Swinford and Zeffman report:

Truss believes that cutting stamp duty will encourage economic growth by allowing more people to move and enabling first-time buyers to get on the property ladder …

Under the present system no stamp duty is paid on the first £125,000 of any property purchase. Between £125,001 and £250,000 stamp duty is levied at 2 per cent, £250,001 and £925,000 5 per cent, £925,001 and £1.5 million 10 per cent and anything above £1.5 million 12 per cent. For first-time buyers the threshold at which stamp duty is paid is £300,000.

During the pandemic the stamp duty threshold was increased temporarily to £500,000 to help to stimulate the property market. Truss has previously said that cutting stamp duty is “critical” to economic growth. As chief secretary to the Treasury she said that the highest rate of stamp duty, which was introduced by George Osborne, was “clogging up” the housing market and leading to fewer transactions.

Much later today Truss will give a speech to the United Nations general assembly. As Pippa Crerar reports in her preview, Truss will link her own low-tax economic philosophy to the cause of global freedom.

Here is the agenda for the day.

9am: Jacob Rees-Mogg, the business secretary, is due to announce details of the plan to cap energy prices for businesses.

From 10am: In the Commons MPs swear oaths of allegiance to the new King.

11.30am: Downing Street holds a lobby briefing.

Lunchtime (UK time): Liz Truss hosts a business roundtable meeting on economic growth in New York, where she is attending the United Nations general assembly.

Early evening (UK time): Truss holds various bilateral meetings in New York, including with Joe Biden, the US president, and Ursula von der Leyen, the European Commission president. She is also delivering a speech to the UN general assembly, but that will not happen until around 2am UK time.

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Key events

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This is from Paul Johnson, director of the Institute for Fiscal Studies, on the news that stamp duty may be cut in the “emergency budget” on Friday. (See 8.49am.)

Blimey. Did well to find that article from 2016!

Yes, stamp duty is a terrible tax and abolishing it would be a good thing.

A good example of where Liz Truss is right. Just because a change benefits better off more than poor doesn’t make it wrong. https://t.co/asaOtCxDfw

— Paul Johnson (@PJTheEconomist) September 21, 2022

Labour sounds alarm over Fullbrook in letter to civil service head

Labour has formally written to the head of the civil service to seek more information about what it called “incredibly alarming revelations” that Liz Truss’s chief of staff, Mark Fullbrook, was questioned as a witness as part of an FBI inquiry, my colleague Peter Walker reports.

‘No way’ Truss’s policies are trickle down economics, says minister

Gillian Keegan, a Foreign Office minister, has rejected claims that Liz Truss is a supporter of “trickle-down economics”. She told BBC Breakfast that the label did not apply to what the Truss government is doing because it has announced an energy support package which will help everyone, not just the rich. She said:

You cannot say what we’ve done is trickle down economics. You know, we’ve just put a massive package in place, which the chancellor will outline the cost of that and how we’re going to deal with that.

But it is massive, the package we put in place to make sure that we support people at this time. So if you look at the definition of trickle down economics, that definitely does not fit it.

My colleague Rowena Mason has the full story here.

There is no precise definition of trickle-down economics, and the term is a perjorative one anyway, more commonly used by opponents of the idea than supporters. Keegan was keen to disown the concept because Joe Biden, the US president, denounced it in a tweet yesterday. But, as a general description of an approach to economic policy, the term is well understood, and it fits exactly what Truss says about the case for cutting taxation and regulation. My colleague Larry Elliott has a good explainer here.

Back to stamp duty, and these are from Ben Zaranko, an economist at the Institute for Fiscal Studies thinktank, on the Times story. (See 8.49am.) Like other economists, Zaranko is not opposed to cutting it in principle because he views it as an inefficient form of taxation.

Stamp duty is a bad, distortive tax. Not much to be said in its defence, apart from the fact that it raises quite a lot of revenue. This could be a positive move if – and it’s admittedly a *huge* if – this is the start of a wider overhaul of how we tax housing in the UK. https://t.co/bvKrBDpIHk

— Ben Zaranko (@BenZaranko) September 21, 2022

Stamp duty has been around since 1694 – but maybe it’s time for some reform to how we tax land and property. For a sense of what that might look like, look no further than this chapter of the IFS Mirrlees Reviewhttps://t.co/74APieMd3X

— Ben Zaranko (@BenZaranko) September 21, 2022

Putin’s partial mobilisation ‘admission his invasion is failing’, says defence secretary

Ben Wallace, the defence secretary, says President Putin’s decision to announce a partial mobilisation in Russia is an admission that the invastion of Ukraine is failing. Wallace said:

President Putin’s breaking of his own promises not to mobilise parts of the population and the illegal annexation of parts of Ukraine are an admission that his invasion is failing.

He and his defence minister have sent tens of thousands of their own citizens to their deaths, ill-equipped and badly led.

No amount of threats and propaganda can hide the fact that Ukraine is winning this war, the international community are united and Russia is becoming a global pariah.

My colleague Martin Belam has more on this story on our Ukraine live blog.

Robert Peston, ITV’s political editor, is more sceptical about the plan to cut stamp duty. He explains why in these tweets.

The achilles heel of the British economy has for decades been the link between consumer confidence and house prices, and the associated link between a government’s popularity and the health of the housing market. If @KwasiKwarteng and @trussliz announce plans…

— Robert Peston (@Peston) September 21, 2022

to slash stamp duty, as revealed in @thetimes, they’ll have to explain how this does anything but reinforce the excessive concentration of UK households’ wealth in the homes they occupy – which has been the limiting factor on so much important economic and social reform…

— Robert Peston (@Peston) September 21, 2022

for as long as I can remember. The simple question would be whether this is simply a crude way to partially offset the negative impact on the housing market of expected rises in interest rates, which could cost the Tories huge numbers of votes, rather than one of the…

— Robert Peston (@Peston) September 21, 2022

productivity-enhancing structural fiscal reforms that the new PM and chancellor have been promising.

— Robert Peston (@Peston) September 21, 2022

Here are tweets from two thinktank leaders responding to the report saying Kwasi Kwarteng will cut stamp duty in the “emergency budget” on Friday. One is on the left, and the other is on the right, but there is considerable overlap in what they are saying.

These are from Torsten Bell, chief executive at the Resolution Foundation. He was a policy adviser to Ed Miliband when Miliband was Labour leader.

The case for: There’s a strong case for reform. Stamp duty is a pretty bad tax – especially at high levels – that impedes mobility.
The case against: a general stamp duty cut will raise house prices and principally benefit wealthier households in south east https://t.co/dyU6jGbuey

— Torsten Bell (@TorstenBell) September 21, 2022

Ideally you’d cut stamp duty at the same time as reforming council tax, particularly to raise more from higher value properties. Then you’ve got a genuinely valuable tax reform – extra bonus that it’d be unpopular with many, which is all the rage

— Torsten Bell (@TorstenBell) September 21, 2022

And Robert Colvile has posted a long thread on Twitter about stamp duty. It starts here and is worth reading in full. Covile runs the Centre for Policy Studies, and helped to write the Conservative party’s 2019 manifesto.

And here are his conclusions.

So yes, we need to cut stamp duty – we suggested 0 up to £500k, 4% from £500k-£1m, then 5% above that (with an extra surcharge for non-resident foreign buyers).

— Robert Colvile (@rcolvile) September 21, 2022

But we also need to at the very least maintain and ideally increase the supply of land for development, in order to ensure that any cut doesn’t simply increase demand for the existing supply of houses.

— Robert Colvile (@rcolvile) September 21, 2022

PS If your response is that we still need to capture more of that unearned housing wealth, then a council tax revaluation to move away from 1991 valuations is a much fairer and less distortive way to do it (though not exactly popular either)

— Robert Colvile (@rcolvile) September 21, 2022

The Department for Business, Energy and Industrial has now published details of its energy support package for business. The department says:

Through a new government energy bill relief scheme, the government will provide a discount on wholesale gas and electricity prices for all non-domestic customers (including all UK businesses, the voluntary sector like charities and the public sector such as schools and hospitals) whose current gas and electricity prices have been significantly inflated in light of global energy prices. This support will be equivalent to the energy price guarantee put in place for households.

It will apply to fixed contracts agreed on or after 1 April 2022, as well as to deemed, variable and flexible tariffs and contracts. It will apply to energy usage from 1 October 2022 to 31 March 2023, running for an initial six-month period for all non-domestic energy users. The savings will be first seen in October bills, which are typically received in November.

As with the energy price guarantee for households, customers do not need to take action or apply to the scheme to access the support. Support (in the form of a p/kWh discount) will automatically be applied to bills.

To administer support, the government has set a supported wholesale price – expected to be £211 per MWh for electricity and £75 per MWh for gas, less than half the wholesale prices anticipated this winter – which is a discounted price per unit of gas and electricity. This is equivalent to the wholesale element of the energy price guarantee for households. It includes the removal of green levies paid by non-domestic customers who receive support under the scheme.

My colleague Graeme Wearden has more on this on his business live blog.