An Open Letter to Rachel Reeves

NB Somebody on social media is impersonating me again, sliding in to DMs, soliciting investment. Please ignore, block, report etc. Here they are on Substack.

Right, here we go.

Dear Chancellor Reeves

“Revenue cannot be derived unless the land is productive.”— Ali ibn Abi Talib, the fourth caliph

I hope you have a moment to consider what I have to say.

My name is Dominic Frisby. Among other things, I am the author of a well-received book on the history of taxation, Daylight Robbery: How Tax Shaped Our Past and Will Change Our Future.

I am writing to you about Stamp Duty — a tax that is causing stagnation, where you need growth.

At present, if I wish to buy a house, I must first sell other assets to fund the purchase. This incurs capital gains tax. Then, on buying the property, I face another sizeable tax in the form of Stamp Duty. So I am taxed twice on the same money.

The alternative is simply to stay put and do nothing, thereby paying no tax at all. Unsurprisingly, this is what most people do, which is why turnover in the housing market is so poor.

How much economic activity is lost, when I stay put?

* The stocks and shares I might have sold miss out on the fresh investment they would otherwise receive from their new buyer — investment so vital for businesses to grow.

* All the economic activity that follows a house purchase vanishes: estate agents, conveyancing solicitors, surveyors, removals companies, builders, decorators, materials suppliers, architects, furniture shops, DIY stores.

* I do not take out a new mortgage or insurance policy, nor hire tradesmen to upgrade kitchens, bathrooms or gardens, nor set up new utilities, broadband contracts or local services.

* I do not trigger a purchase chain, meaning the person I would have bought from does not buy somewhere else, and all the activity that would create is lost too.

* Nor do I relocate for work, missing new job opportunities, so the economy loses the productivity boost of people moving closer to better jobs.

When I stay put, there is no revenue at all for the Exchequer — neither from Stamp Duty, nor from VAT on all these goods and services, nor from increased corporation tax on profits, nor from higher Income Tax on increased earnings, nor from the local spending that supports countless jobs and wages. Instead, there is stagnation where there could have been growth.

Stamp Duty, largely a creation of the Tories, has immobilised the country.

Britain desperately needs growth. Growth requires turnover. The best way to encourage turnover is to remove barriers to trade. Taxes — whether tariffs or duties, whatever form they take — are the biggest barriers of all.

When Rishi Sunak temporarily reduced Stamp Duty during Covid, we saw exactly this effect: turnover increased, economic activity surged. Revenue to the Exchequer followed.

A permanent removal of Stamp Duty would trigger a powerful boost not just to the property market but to the entire economy, meaning the government, too, would have more money to spend on whatever it sees fit.

There is so much pent up demand, the resulting economic growth might even be enough to save this government at the next election.

What’s more, the Tories imposed these duties, so it is an opportunity to score some points against their failure.

It would, quite literally, get Britain moving again.

Counter-intuitive as it may seem, the golden rule of taxation is that lower taxes and fewer taxes lead to higher revenues. History shows this time and again.

In the words of John F Kennedy

It is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now.

I hope you will give this serious thought.

With kind regards,

Yours sincerely,Dominic Frisby

PS If you enjoyed this letter, please like, share and all that stuff. It helps.

You can find more on this subject in this video:

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Finally, ICYMI, here is this week’s mid-week piece:

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