Who will do more to help the nation's desperate first-time homebuyers? The Conservatives are desperate to turn stamp duty into an election issue. Labour says its plans to build more housing are the policy on which we should all be focusing.
At first sight, the Tories' plans look likely to be more popular. On Thursday, Michael Howard announced that a Conservative government would more than double the stamp duty threshold, the value of property below which no tax is payable.
Moving the threshold to £250,000 would mean that the average home would be exempted from the tax altogether, he pointed out.
But is this really the best way to tackle the cost of getting a foot on the property ladder? There is no doubt that stamp duty is unfair, but that is more because of the way in which it is charged than because of the rates that are payable.
Currently, there is no tax to pay on properties worth less than £120,000, but above this level 1 per cent duty is payable on the whole purchase price. The same thing happens at £250,000, where the stamp duty rate rises to 3 per cent, and again at £500,000 where the rate reaches 4 per cent.
As a result, the stamp duty bill for a house priced at, say, £249,000 is £2,490. Perversely, a sum of £2,000 added to the purchase price raises the cost of the tax to £7,530.
Raising the stamp duty threshold to £250,000 does nothing to tackle this injustice. At best, it simply makes it a bit cheaper to buy a home - and in theory, first-time buyers should benefit most because they're more likely to be buying property below the Tories' suggested new threshold.
In practice, however, even these benefits are transient. The cost of housing is determined by demand and supply. Cutting stamp duty gives buyers more disposable income - which is effectively a stimulus to demand. In the absence of any increase in supply, that means further increases in house prices.
In other words, the effect of the Conservatives' plans to raise the stamp duty threshold may simply be an increase in house prices. The cost of property might even rise by more than the savings that first-time buyers stand to make from their stamp duty exemption.
Focusing on the supply of housing, by contrast, is a much less populist strategy. Building more homes takes time and Labour strategists don't get to publish headline-grabbing figures showing that people will be hundreds of pounds better off.
However, increasing the number of homes available, particularly in the areas of the country where the demand is most acute - the South-east and East Anglia, in particular - is the only way to help first-time buyers in the longer term.
Labour's target is to increase home ownership by up to 2m in the next parliament; increasing the housing stock will help it to achieve that goal.
Labour's other focus - though it doesn't shout about it - is on shared-ownership schemes, particularly for key workers such as police officers and nurses. This, too, is a useful source of help for first-time buyers. Public sector workers, in particular, have no hope of getting on the housing ladder by themselves while house prices remain at current levels.
Tory tax break will be lost in the pensions black hole
It's good to know Michael Howard is such a keen reader of The Independent. Last weekend on this page, I castigated our political party leaders for failing to offer any real solutions to Britain's pension crisis in their election campaigning. Within 24 hours, the Conservatives announced plans for an extra 10 per cent tax break for basic-rate taxpayers who put money into private pension plans.
Having been so critical of our politicians for silence on pensions, it would be mean not to give Howard some credit for at least trying to address this issue. But extra tax breaks are not likely to come anywhere near filling the nation's pensions black hole.
The Tories' proposal would add £1.7bn a year to savers' pension funds, assuming they continue making the same contributions. This is small change when set against the £27bn of extra saving that experts say we should make each year.
Howard hopes the extra tax break would encourage people to boost their own pension contributions. But it's difficult to imagine the 10 per cent making much difference. Government spending on tax relief on private pensions totals £19bn a year. That has not been sufficient to persuade people to save enough.
Back to the drawing board, then. And maybe giving Howard credit is over-charitable. Labour's failure on pensions has been to say nothing about the hard choices people face. The Conservatives, on the other hand, are being dishonest: they are presenting a small tax windfall for savers as a pensions panacea.Reuse content