The Tories have accused Alistair Darling of playing “damaging short term games” with the property market, after he failed to clarify his position on stamp duty.
The chancellor has refused to rule out changes to the controversial tax - including a possible temporary suspension - in a bid to boost the ailing housing market.
And Darling’s failure to confirm his position one way or the other has angered Shadow Chief Secretary to the Treasury, Philip Hammond.
In a letter to the chancellor, Hammond claimed that his procrastination was merely exacerbating problems in the property market, as many potential buyers would now hold off in the hopes of winning a tax break from the government.
End the uncertainty now
“Labour's dithering over the issue has undermined the housing market at a historically low point by creating a significant incentive for people to delay house purchases," said Hammond.
“The uncertainty can only undermine the market further. Indeed, we now have the worst of both worlds - a potential delay in property transactions, but with no definite proposal on the table."
Hammond said the housing market was in need of "certainty and a steady hand" and demanded that Darling end the uncertainty over the matter. He also pledged cross-party support if Labour were to adopt plans to lift the stamp duty threshold for first-time buyers to £250,000.
A political hot potato
Under the current system, anyone buying a property worth between £125,000 and £250,000 must pay 1% in stamp duty at the time of sale. Those spending over £250,000 will have to pay 3%, while homes worth more than £500,000 incur a 4% tax.
These thresholds have remained largely unchanged over the past decade, meaning that, as house prices have rocketed, so to have the government’s stamp duty revenues - up from £800 million in 1997 to £6.5 billion last year.
However, the number of people buying homes has fallen drastically this year – due to a combination of expensive mortgage rates and the soaring cost of living – and analysts predict the government will lose around £1.5 billion in stamp duty revenue as a result.
With the government not exactly cash flush right now, that is money they can ill afford to lose.
Elephant in the room
Up until now, Labour has been happy to ignore calls to tinker with stamp duty. As hated as the tax was, people were still buying homes and revenues were soaring.
Now all that has changed, Labour can no longer ignore the elephant in the room and Darling has some difficult decisions to make.
One thing for certain is that this under-fire government can not afford to get this one wrong, either from a financial or a political perspective.
