Page last updated at 11:38 GMT, Wednesday, 3 September 2008 12:38 UK

Clegg stamp duty 'bribe' warning

Nick Clegg
Nick Clegg says the stamp duty move is 'dangerous'

The government has been accused of trying to "bribe" people into buying into a falling housing market with its stamp duty holiday.

Lib Dem leader Nick Clegg said raising the level the tax starts from 125,000 to 175,000 could lead to people being "saddled with negative equity".

He also accused foreign-owned energy companies of "blackmailing" the government over fuel costs.

Ministers are in talks with the energy firms over help with winter fuel bills.

The government is playing down talk of an economic relaunch and instead stressing it simply wants to help hard-pressed families deal with the credit crunch and rising prices.

Unveiling the 12-month stamp duty holiday, Prime Minister Gordon Brown said: "Home owners need to know that we will do everything we can to keep the housing market moving."

'Small beer'

But economists warned it would have little impact on the housing market and may put public finances under more pressure.

Investec economist David Page called the move - which will save housebuyers a maximum of 1,750 - "small beer".


"To put this in context, it is the equivalent of less than one month of house price falls at the moment," he said.

The Conservatives - who want stamp duty axed for first-time buyers of properties up to 250,000 - have also said the move will make little difference to the housing market.

Shadow chancellor George Osborne said: "This is a short-term survival plan for the prime minister, not a long-term recovery plan for the economy."

And Mr Clegg warned it could lead to people becoming trapped in negative equity.

"We certainly would not have tried to bribe people through this stamp duty holiday into buying into a falling housing market," he told BBC Radio 4's Today programme.

"That's terrifically dangerous, because you might well be tempting people back into a housing market just at a time when they'll be saddled with negative equity in the months ahead.

"In my view, the priority for the housing market is first to stem the possible flood of repossessions, by making repossessions very much the last resort.

"And secondly, freeing up - and this is what the government has refused to do, it's the major mistake in their strategy - freeing up councils to borrow against their own assets so they can buy up unsold properties and provide more social housing."

'Windfall tax'

Mr Clegg also attacked the government's efforts to secure a deal with the energy companies - who are reportedly threatening to increase bills for the better-off or cut investment in infrastructure to pay for a handout to poorer customers.

The Lib Dem leader said that, if true, this amounted to a "glorified form of blackmail, particularly by the foreign-owned energy generating companies".

"This is a ridiculous state of affairs, not least because this government has issued more than 9bn of windfall subsidies to precisely those energy generating companies," he told Today.

But he rejected calls for a windfall tax on the energy firms - saying the money would simply "disappear into the clammy hands of the Treasury".

Instead, the companies should be forced to "plough back" some of the 9bn "windfall" he said they had received from the European emissions trading scheme into home insulation and help for vulnerable consumers.

The government is expected to make an announcement in the next week on help for energy consumers.

Downing Street is insisting it has not ruled out a windfall tax - and dismissed suggestions the idea had been raised simply to put pressure on them to offer concessions.

The prime minister's official spokesman said: "Our position has not changed. We want to work with the energy companies but we rule nothing out."

The spokesman described ongoing talks with the energy companies as "constructive."

Backbench pressure

Last week, government sources indicated Chancellor Alistair Darling had "serious reservations" about the idea of a windfall tax.

Mr Darling said he "was not minded" to impose a such a tax as the companies could simply pass the extra cost on to customers.

However, the government is under mounting pressure from Labour backbenchers, with more than 100 signing a petition calling for a windfall tax.

Organisers of the campaign say they have also secured a resolution on the issue to be debated at the TUC conference next week, which they claim is almost certain to be passed. And they are hopeful of ensuring the issue is also debated at Labour's annual conference in Manchester later this month.

Nick Robinson
02 Sep 08 |  UK Politics

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