Property: Message to Lamont: please do nothing: Builders and lenders are awaiting next week's Budget with bated breath, bad memories and fears of more wrong moves, reports David Lawson

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The Independent Online
WILL HE or won't he? A sense of anticipation that the Chancellor will tinker with mortgage tax relief in next week's Budget is almost palpable. With lengthening queues outside estate agents, many housing professionals are holding their breath. Perhaps for the first time in living memory there has been no great barrage of advice on how to boost the market. Everyone is staying quiet. Why this nervous silence? The industry is scared witless that Norman Lamont will make a wrong move.

A few siren voices still bay for buying incentives, but even they have painful memories of too many false starts and withered green shoots.

'My wildest hopes are that he will do nothing that directly meddles with housing,' says Simon Agace, chairman of London estate agents Winkworth. 'The market is coming back nicely. Our monthly sales have increased 90 per cent since November. But anything the Chancellor does that pushes recovery too fast could start the cycle of speculation again.'

Mr Lamont's past tinkering has left a deep well of suspicion. 'Look what happened after he dropped stamp duty for a couple of months last year,' says housing analyst Jimmy Adams. 'The summer boom turned into an autumn crash, knocking confidence even further.'

Even the chief tub-thumper for mortgage tax relief has pulled its horns in this year. 'This is not the right time to be asking for increases,' says Adrian Coles of the Council of Mortgage Lenders. The big problem at present is confidence, he says; and the solution, everybody acknowledges, lies elsewhere.

'Instead of using a boost for home- buying to kick-start the economy, he should try to revive the economy to boost housing,' Mr Adams says. 'Fear of unemployment is holding back buyers. Spending money on projects like the Channel tunnel link and Jubilee Line would help reduce that.'

Roger Humber of the House Builders Federation is also more concerned with the general thrust of the Budget on the economy. 'I have a horrible feeling this will be a pallid, neutral Budget - just the thing we don't want,' he says. 'If it shows no leadership, raises no confidence among buyers, I fear the recovery will drift away as it has so many times before. The Chancellor has to get the economy moving.'

Despite hopes that nothing will change, housing professionals are well aware that mortgage tax relief at 25 per cent on the first pounds 30,000 of a mortgage is not long for this world. Higher-rate mortgage tax benefits were dropped a couple of years ago without any tragic impact on the market. Mr Lamont may feel the time is now right to reduce relief again, to the 20 per cent basic income tax rate that the Conservatives are aiming for.

Only a few years ago, the merest mention of cutting mortgage tax relief was laughed into oblivion. But pressure has built from the Rowntree Trust and the Duke of Edinburgh Committee investigation, which claimed that incentives favoured the rich and boosted prices beyond the reach of many first-buyers.

Even the most fervent supporters now realise that subsidies are living on borrowed time. They know the Government wants to encourage renting, with new tax incentives for landlords likely to be announced this week. But such reforms will not work while buying is more attractive. The Treasury is also frightened of a return to the pounds 8bn annual bill for mortgage tax relief seen in the boom.

That leaves a small gap for those who still feel the need for tinkering with housing. They want to turn these dying incentives into a short-term market boost, no matter what others say about the dangers of tinkering. 'Double the tax relief threshold to pounds 60,000, but only for a year,' suggests Mr Humber. 'There are 1.3 million people in this country who want to move. They have jobs and no problems with negative equity. This would bribe them to change homes quickly.'

First-time buyers could be offered pounds 6,000 as a lump sum, representing 10 years' relief on a pounds 30,000 mortgage, but only on the assumption that nothing more would be available for the rest of their lives. But Mr Humber floats these ideas almost with the bravado of someone who knows they will not happen.

He argues that a boost which produced 30,000 new homes could create 100,000 jobs, cutting dole payments and raising enough tax income to wipe pounds 1bn off the Government's borrowing bill. 'But I accept that's not the way politicians work things out,' he adds.

Logically, Mr Lamont should do nothing next week to threaten the fragile housing recovery. There is another Budget later this year, because of reforms in government spending procedures, and by then the market will be more able to withstand cuts. Of course, Mr Lamont, too, may have moved on, leaving a new Chancellor to face any fireworks.