Stamp duty devolution could boost local authority funding by £10bn a year and should be the next step in the government’s “devolution revolution”, a thinktank has announced.
A new report by Centre for Cities argued that in order for devolution to be successful, the regions must be given more control over their own finances – including the power to retain stamp duty tax revenue and responsibility for funding local housing benefit.
Chancellor George Osborne said earlier this year he will allow newly combined authorities in the north and Midlands to keep extra revenues from business rates collections by 2020.
But Centre for Cities is calling for the full £23bn in business rates alongside £10bn in stamp duty to be devolved together to encourage local authorities to approve developments, adding an extra £1bn to council coffers.
“The Government’s move to devolve business rates was an important step in the right direction, but doesn’t go far enough”, said Alexandra Jones, chief executive of the Centre for Cities.
“Devolving land and property taxes would encourage places with weaker economies to develop their tax base, while also giving places with high economic demand more incentives to take the often difficult decisions needed to invest in infrastructure and new housing.”
Incentivising councils to drive growth in their local economies by offering more revenue options was found to be more effective than redistributing monies from relatively prosperous areas to those with weaker economies.
If the authorities of the Oxfordshire LEP delivered on existing housebuilding targets between now and 2031, between £730m and £830m would be generated in Stamp Duty on local new build sales alone – or between £45m and £52m per year.
This equated to between £67 and £77 per resident – much more than the current £14 equivalent in New Homes Bonus.
Devolving land and property taxes, on top of business rates, would mitigate the risk of cities becoming dependent on one tax stream and give local authorities control over 41% of their spending, the report said.
