Monday, August 28, 2006

Guardian gives the green light for cutting stamp duty on shares

The pledge to abolish stamp duty on shares passed its first test today when Manchester Guardian attacked the proposal with its usual ignorance of the financial world. The Guardian's comments are of course in red

"The awkwardness of the party's stance - promising to put economic stability above cuts, and to focus on helping the poorest in society" - the policy most helps anyone with a pension. Anything to encourage the low level of pensions savings, especially among low to medium earners should be highly welcomed.

"Treasury sources said cutting stamp duty would primarily benefit the wealthy." In proportionate terms it most helps those planning to make contributions into their pension funds and other long-term savings. All too predictably, the Guardian ignores the fact that measures that increase the UK's competitiveness generally translate into more jobs, and better paid jobs at that.

"The people who benefit directly [from axing stamp duty] will be merchant bankers and traders. Think what you could do with the £4bn it will cost." The Guardian won't let research or basic knowledge of city finance get in the way of its polemics. The biggest payers are Pension Funds and Life Assurers. Merchant bankers arrange the sale of shares, they don't pay for them. Stamp Duty is usually passed onto the ultimate holder of the shares, banks holdings of equities are actually relatively small.

If the Guardian wanted to make its outdated socialism more accurate it should have mentioned that since Gordon Prudence Brown ended dividend tax credits, and hence made debt more attractive post-tax than equity, then UK investors have invested more in debt. Compared to 1997, a notably higher percentage of UK shares are held by overseas investors, they will benefit from this policy, and are likely to increase their investment in the UK as a consequence.

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