Lord Alexander of Weedon, the NatWest chairman, called for a doubling in mortgage interest tax relief to pounds 60,000 to boost the housing market, but that the relief be phased out over 10 years.
He also urged the Government to consider greater tax incentives to industry for capital investment and to increase spending on transportation and infrastructure. 'It is important for the Government to take action to ease the economy through the process to a low inflation environment,' Lord Alexander said.
The Woolwich also called for the Government to double the mortgage limit on tax relief to pounds 60,000 for 12 months, but recommended that the benefit be available for at least five years. The threshold on stamp duty on housing transactions should also be increased to pounds 60,000, it added.
The Treasury has been considering measures to boost the economy if the recession continues, such as reducing value- added tax for a fixed period. However, officials are understood to have ruled out all such measures except those related directly to housing.
The continuing housing market slide was illustrated yesterday by Department of the Environment figures which showed building started on fewer private houses between April and June than in any quarter since the end of 1981.
Some 30,800 private-sector houses were started in the second quarter, adjusting for normal seasonal variations. This was 6.1 per cent down on the previous quarter and 7.5 per cent down on the same quarter last year.
Economists fear that any revival in the rest of the economy will be muted until the housing market picks up and rising house prices make people feel more confident about spending in the high street.Reuse content