Why our housing boom portends tax gloom

A less-noticed problem, however, is what the housing market does to the resilience (or conversely, vulnerability) of the public finances.

The Office for Budget Responsibility's document accompanying today's Budget sets out that stamp duty land tax (SDLT) is forecast to increase from £9.5 billion in 2013/14 to £18.1 billion in 2018/19 - a huge increase, taking it up to 0.9 per cent of GDP. Some 40 per cent of this is paid on London properties.

In addition, as the OBR points out, the 'slab structure' of stamp duty means it is highly geared to rising house prices, since the amount paid triples once a property passes the 3 per cent threshold at £250,000. The average house prices is expected to exceed £250,000 this year.

What's more, rising house prices boost inheritance tax (IHT) too. The OBR estimates that the proportion of deaths resulting in an estate that attracts IHT will double over the next five years, from one in 20 to a little under one in 10. We can expect to see this reflected in renewed pressure to cut IHT rates, as we did before the financial crisis. All-in-all, receipts from capital taxes are forecast to rise to 1.8 per cent of GDP in 2018/19, above their peak of 1.6 per cent of GDP in 2007.

You might argue that these kinds of capital taxation should rise - and indeed, fairer wealth taxes should form part of our armoury for restoring our fiscal fortunes. But not only are these receipts being given away in tax cuts for the better-off, they are also making our public finances more unstable again.

During the financial crisis, the UK's deficit swelled to over 11 per cent of GDP, compared to over a little over 4 per cent in Germany, despite the fact that the loss of economic output was similar in both cases. In large part, this was because of the collapse in our tax receipts, rather than overspending (indeed, Germany's stimulus was larger as a proportion of GDP than ours). And this in turn was related to the structure of our tax base, which was heavily dependent on receipts from volatile sources like stamp duty and the corporation tax paid by City banks.

As it stands, we are making this problem worse, not better. Our tax base is getting weaker and less resilient. If your strategy is to 'starve the beast', you will shrug your shoulders at that. But if you care about fiscal prudence and the funding of public services, you should be very worried indeed.