Joined up government.

1. Although Stamp Duty Land Tax is a tax on land values, it is not Land Value Tax because it is only triggered when somebody does something positive and is not an annual tax. It is therefore a bad tax.

2. The government’s subsidy for land values, Help to Buy, is a very bad subsidy, firstly because it is a subsidy, and secondly because it is a subsidy to the main thing the government should be taxing i.e. land values.

So we have two bad things, which actually cancel out. We could get rid of both.

Let’s look at one individual purchaser:

a) Buys a new build for £400,000 (approximately double the UK average excl. London).

b) Gets a Help To Buy loan of 20% of the price = £80,000

c) Pays SDLT of £10,000 up front.

d) That loan is interest free for five years, so the notional interest saving @ 2.5% per year = £2,000 x 5 years = £10,000.

He wins £10,000 on the Help To Buy swing and loses £10,000 on the SDLT roundabout.

This works out slightly ‘progressive’ relative to house prices/land values (or sellers thereof), i.e. at prices below £400,000, the subsidy is worth more than the tax and vice versa.

The Tories don’t like ‘progressive’, of course, so they introduced a special Help To Buy for London, where the interest free loan can be 40% of the price paid. Helicopter money for people selling land in London! The break even point for that works out at £500,000, which is approximately the average price paid for a home in London.