Treasury quells stamp duty speculation as house prices plummet

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The Treasury has moved to dampen speculation over the future of stamp duty after estate agents and surveyors warned of a potential collapse in the property market prompted by uncertainty over the tax.

Following a report in a red-top newspaper this week suggesting that the Government was planning a stamp duty "holiday", the Chancellor of the Exchequer, Alistair Darling, notably refused to rule out such a move, and confirmed that he was looking at "a number of measures" and "a range of options" over stamp duty as part of a wider economic recovery package.

But the Treasury statement yesterday described the speculation as "simply wrong". It said: "These stories are based on speculation.

"The Government has made clear that there are a number of options we will need to consider to help businesses and people get through what is undoubtedly a difficult time."

Fresh figures released by the Halifax yesterday showed that house prices were 11 per cent lower in July than the same month last year. The fall has wiped £20,000 off the price of the average home and it is the first double-digit percentage fall since the building society started its property healthcheck 23 years ago.

Estate agents suggested yesterday that buyers might step away from sales amid the uncertainty over stamp duty, stalling the market between now and when any such decision is taken, which could be as late as October.

Peter Bolton King, the chief executive of the National Association of Estate Agents, said last night that he backed a suspension of stamp duty but that the Treasury's message remained very unclear. "If the Government is going to come up with something, then we need to know about it now," he said.

Amid reports that buyers would delay their entry into the market, the Liberal Democrats said the move would further destabilise the economy and the Conservative Party accused the Government of "playing games".

John McFall, the chairman of the Treasury Select Committee, said he did not interpret Mr Darling's comments earlier this week as an indication that he was considering a suspension, and added that the committee has repeatedly expressed "real concern" at the prospect of announcing tax measures outside Budgets or pre-Budget reports. Referring to Mr Darling's comments on Tuesday, he said that "maybe he should have been more specific".

Currently, those buying properties for between £125,000 and £250,000 pay 1 per cent in stamp duty, people spending more than £250,000 pay 3 per cent, and homes worth more than £500,000 incur a 4 per cent rate.

During the recession in 1991, the Tories temporarily suspended the tax by raising the bar to £25,000. Mr McFall said the move by John Major's government, announced months in advance, sent the market "wild".