NICOLA Sturgeon has signalled more help for first time house buyers in next month’s Scottish budget after the Chancellor announced a tax break south of the border.
The First Minister is under pressure to mimic Philip Hammond’s key Budget announcement to exempt first time buyers from stamp duty on the first £300,000 of the purchase price.
The move will cut the tax bill by up to £5000 in England.
In Scotland, the devolved equivalent of stamp duty, land and buildings transaction tax (LBTT), would impose a £4,600 bill on a purchase of £300,000.
Asked about the issue at First Minister’s Questions, Ms Sturgeon suggested she would not copy the Chancellor’s move outright, but hinted an alternative option was being examined.
She told MSPs: “As we finalise our budget in the next couple of weeks we will consider whether or not it is appropriate to give any further assistance to first time buyers.”
She indicated a tax break on purchases of up to £175,000 would help an equivalent level of first time buyers in Scotland as the £300,000 figure would in England.
The current threshold for paying LBTT is £145,000, so lifting this to £175,000 for first time buyers would not be a great shift, and would allow Mr Sturgeon to argue Scots first time buyers are not disadvantaged relative to their English counterparts.
Ms Sturgeon introduced the figure into the debate on tax after being urged by Scottish Green co-convener Patrick Harvie not to copy Mr Hammond’s stamp duty cut, which he called “one of the most short-sighted mistakes in the UK Budget”.
He said the move would push up house prices and fail to help first time buyers and asked for a “clear guarantee” that the Scottish Government would not follow suit.
However Ms Sturgeon refused and said: “The Treasury said yesterday that the policy that was announced in the budget was intended to exempt 80 per cent of first-time buyers from stamp duty.
“In Scotland, 65 per cent of first time buyers are completely exempt from LBTT. Eighty per cent of first time buyers already pay either no tax at all or less than £600 in LBTT.
“So we already provide much more generous support to first time buyers.”
She said that as the SNP Government worked towards publication of its draft budget for 2018/19 on December 14, it would consider two key points.
The first is that house prices are lower in Scotland than they are in the rest of the UK. Ms Sturgeon added: “So for example, the equivalent of a house at £300,000 in the rest of the UK in Scotland would be around £175,000.”
She also raised the Office for Budget Responsibility’s view that “the policy announced by the Chancellor would push up house prices and result in first time buyers actually paying more”.
Ms Sturgeon added: “So even with the voodoo economics you get from the Tories, I don’t think that would make much sense.
“So these are the considerations we have in mind as we finalise our budget proposals in a couple of weeks’ time.”
Following Wednesday's Budget, Moira Kelly, of the Chartered Institute of Taxation, said changes in stamp duty south of the border were likely to prompt discussions over how LBTT "can be adapted to support first-time buyers in Scotland".
She said: “Recent history has shown a high degree of back and forth between LBTT and stamp duty policy decisions."
It comes as the Scottish Conservatives accused the SNP of “hypocrisy” over its claim that Scotland’s £2 billion Budget boost was a "con".
The Chancellor said spending decisions in the Budget would mean £2bn for the Scottish Government in what is known as Barnett consequentials.
But Ms Sturgeon dismissed the move as “smoke and mirrors”, insisting more than half was in the form of financial transactions – restricted cash that has to be paid back.
During First Ministers Questions, Tory leader Ruth Davidson said the SNP had used hundreds of millions of pounds of the same transactions in its own budget in the last year.
And she pointed out that “the £50 million announced so far of the SNP’s trumpeted Scottish Growth Scheme depends entirely on financial transaction funding”.
She said: “The usual complaint from the SNP is that it’s not getting enough money.
“Now that money has arrived, the nationalists claim it’s just the wrong kind of money."
Faisal Choudhry, director of Scottish research at Savills estate agents, said first time buyers in Edinburgh or Glasgow could expect to spend between £160,000 and £200,000 – placing them above the current LBTT threshold.
He said: “In terms of the exemption for first time buyers, I think Scotland should offer something.”
Joanne Walker, a technical officer at the Chartered Institute of Taxation, said the Government could also look at ways to help first time buyers outside of tax relief.
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