Shabana Mahmood is expected to be named Andy Burnham’s chancellor (Image: Getty)
Andy Burnham is set to become Britain’s next Prime Minister after being elected Labour leader today, with attention already turning to who will take charge of the nation’s finances. Home Secretary Shabana Mahmood has most recently emerged as the frontrunner to become Chancellor – a prospect that has been welcomed by financial markets when compared with the possibility of Ed Miliband taking the role.
But while investors may have breathed a sigh of relief, millions of homeowners, first-time buyers and landlords are now waiting to see how Burnham’s first Budget will impact their finances. According to Peter Stimson, director of mortgages at lender MPowered, the biggest question facing the housing market is what Burnham decides to do with stamp duty and council tax.
Peter Stimson of MPowered (Image: Supplied)
“What we’re really looking for is what he does around stamp duty and council tax. Everyone agrees stamp duty is outdated and council tax isn’t very fair,” he told the Express, adding that the current question is what policies replace them.
He said: “If Burhnam gets it right, it could be a game changer for the market in terms of getting people moving, because stamp duty is a tax on people moving areas and moving jobs. If you can change the system so that you pay annually in some form of land tax, that would be a lot better.
“The idea is actually a pretty good one, but it’s all about how you implement it.”
However, Stimson warned any new system would need to avoid unfairly penalising homeowners in London and the South East, where property values have risen far faster than elsewhere. “It needs to be fair and proportionate,” he said. “Otherwise, it could become a tax on the South.”
There has also been speculation that Burnham’s Government could lower the threshold for a mansion tax, which Stimson finds “ridiculous”, arguing it would cost more to administer than it would raise.
Craig Hughes, partner and head of private client at Menzies LLP, added: “An expected double hit of a lowered mansion tax threshold and an annual charge on land value could risk hitting homeowners based on local price growth rather than a build-up of wealth, which would widen the regional gap that Burnham’s agenda claims to close.
“Put together, these measures would add fixed costs to households already stretched by an inflated cost of living, while simultaneously damaging the prospects of investment in an already fragile housing market.”
Despite uncertainty over future tax reforms, the immediate market reaction to Mahmood’s expected appointment has been more positive.
Experts see her as more fiscally conservative than some of the other names linked to the Treasury, easing fears about Government borrowing.
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Lower gilt yields and swap rates could eventually feed through into slightly cheaper fixed-rate mortgage deals for borrowers.
Stimson believes now could be a good time to buy a property, citing falling prices in some parts of the market, particularly flats, and stronger negotiating power for first-time buyers.
Giving some tips to first-time buyers, he said: “Make sure you choose a good financial advisor. And when you’re buying your home, make sure you negotiate hard. There are more sellers than buyers in many parts of the market.
“And there are lots of bargains out there if you negotiate hard enough.”
Angeline Ong, investing expert at IG, cautioned that markets are currently reacting more to confidence in the incoming leadership than to any concrete economic programme.
She said: “It’s far too early to talk about ‘Shabanomics’ as a coherent economic doctrine. What markets have responded to is the appointment of a credible, disciplined operator rather than a defined economic agenda.
“Mahmood arrives without the economic baggage of some potential rivals, and the Government’s commitment to the fiscal rules has helped reassure investors in the short term. But beyond that, there is very little for markets or businesses to price in.
“The honeymoon will only last if it’s followed by credible policy. Until then, ‘Shabanomics’ is more a story of confidence than conviction.”