Page last updated at 17:08 GMT, Tuesday, 5 August 2008 18:08 UK

Government 'may defer' stamp duty

Estate agent window
Stamp duty raised 6.5bn for the government last year

Chancellor Alistair Darling has refused to rule out changes to stamp duty after reports it may be temporarily axed to boost the housing market.

He said he was considering "a number of measures" to help people during the economic downturn.

The BBC understands that the most likely option is to allow home buyers to postpone payment of stamp duty.

The Conservatives temporarily suspended the tax on homes worth less than 250,000 during the 1991 recession.

Currently, people buying properties for between 125,000 and 250,000 pay 1% in stamp duty at the time of sale.

Those spending more than 250,000 pay 3%, while homes worth more than 500,000 incur a 4% rate.

Windfall tax

The Sun newspaper reported on Tuesday that stamp duty was to be temporarily axed, as part of an economic recovery package being put together by the prime minister.

Asked about the report in a wide-ranging interview on BBC Radio 4's Today programme, Mr Darling said he was "looking at a number of measures" and had not "concluded exactly what we need to do".

The government shouldn't be trying to bribe people into buying houses in a falling market
Vince Cable
Lib Dem Treasury spokesman

Treasury officials say nothing has been agreed, but it is understood one of the options they are considering is to allow people to defer payment of stamp duty - which is considered more likely than temporarily suspending the tax altogether.

A temporary deferral would allow house buyers extra time to pay the tax while the government would not lose out on the revenue altogether - last year it raised 6.5bn from stamp duty.

Shadow chief secretary to the Treasury Philip Hammond told the BBC the government should adopt the Conservatives' "fully costed" plan to lift 90% of first-time buyers out of stamp duty altogether.

But he added: "There's no magic wand. They got us into this mess by not behaving prudently during the good years."

'Painful'

Liberal Democrat Treasury spokesman Vince Cable said: "The government shouldn't be trying to bribe people into buying houses in a falling market.

"With the economy grinding to a halt, we are already likely to see a shortfall in taxation. Suspending stamp duty, even on a temporary basis, will only make this situation worse."

He said falls in house prices were "painful but necessary" if first time buyers were to be able to get on the housing ladder.

John Stewart, chief economist at the Home Builders Federation, told the BBC he did not think deferring stamp duty would have much effect - but backed a "holiday" for first-time buyers altogether for a fixed period.

He said this would have to be considered as part of a package of measures which also addressed the "mortgage crisis", consumer confidence and cutting interest rates.

Mr Stewart told BBC Radio 4's The World at One: "The most important is to resolve the mortgage crisis. There is a very serious shortage of money for the lenders to lend...

"We're in a situation this year where lending this year will probably be about half what it was last year. Now, that's a very serious drop and we need to see something done to address that."

During his interview, Mr Darling conceded that it was "very difficult to speculate" on what would happen to house prices in the coming year, but added that it was "perfectly true" the British economy would slow down.

He also argued that there were problems of "practicality" with calls for a windfall tax on energy companies but said he would work with energy companies to try to help people meet higher payments.


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