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July 14th 2020

Steffan Evans reflects on the Finance Minister’s announcement about changes to Land Transaction Tax in Wales.

A street of terraced housing

Ever since the UK Government announced that it was temporarily increasing the threshold for Stamp Duty in England to £500,000 the Welsh Government has been under pressure to respond. The Finance Minister’s announcement that changes will also be made to Land Transaction Tax in Wales was therefore of little surprise.

There are some important distinctions between the Welsh Government’s policy and the UK Government’s policy. In Wales, the threshold above which tax will have to be paid will only increase to £250,000 and, importantly, second homeowners and buy to let landlords will not benefit from the tax holiday. Serious questions remain however about the value of introducing a tax cut for many better off people in Wales at a time when the rent on an average 2-bedroom home is unaffordable for the lowest quartile of earners in all local authority areas, be this social or private rent.

Work undertaken by the Wales Governance Centre highlighted that if the Welsh Government had applied the same changes to Land Transaction Tax as the UK Government then the policy could have cost the Welsh Government £77m. Whilst the cost to the Welsh budget is likely to be less given the changes made by the Welsh Government it is still likely to be significant.

At the Welsh Government’s daily press conference the Finance Minister announced a further stimulus to the housing sector in Wales, with an additional investment of £30m for the construction of new, environmentally friendly social housing. Whilst the announcement of any additional extra sums for the construction of new social housing is to be welcomed, the sums pledged are nowhere near enough to significantly increase the number of affordable homes in Wales. As announced by the Minister herself, the additional £30m will construct just 400 new socially-rented homes. This despite the Welsh Government being significantly short of its own target to construct 20,000 new affordable homes in Wales.

The case for investing in a new generation of social housing in Wales has never been stronger. It would increase the availability of homes that are affordable to rent, reduce some of the pressures faced by families on low incomes and provide a route out of poverty. It would create jobs in the construction industry at a time when we are expecting unemployment to soar. And it can play a vital role in the Welsh Government’s attempts to decarbonise.

To maximise these potential benefits however there is a need for significantly greater public investment than the additional £30m pledged by the Finance Minister and the £223m allocated for Social Housing Grant in the Welsh Government’s Budget for 2020/21. In recent years social landlords have increasingly had to turn to private finance to get enough funds to construct new social housing given that the Welsh Government’s investment has not been sufficient. This has put pressure on social rents which have increased above inflation for a number of years. This has seen us move away from a redistributive model of funding new social housing to a system where the people who already live in social housing are having to shoulder more of the burden, despite being at greater risk of living in poverty. In this context is a tax break for house buyers the policy we should really be pursuing?

Steffan Evans is a Policy and Research Officer at the Bevan Foundation

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