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James Macintyre: How the Government spun itself into another mess

It began on Monday as a piece of diversionary spin that by the end of the week had backfired spectacularly and created a fresh crisis in an already turbulent housing market.

With an increasingly frantic Downing Street desperate to distract media attention from the Foreign Secretary, David Miliband, and his domestic manifesto, as well as the news that Northern Rock needed an injection of taxpayers' money, ideas abounded about how to regain the initiative. At times of crisis, New Labour often turns to Rupert Murdoch's media vessels. Sources last night suggested that it was someone at No 10 – and not, as has been reported, the Treasury – who approached The Sun newspaper with the idea of a stamp duty "holiday". The Prime Minister is known to feel that the only way to tackle gossip in the Westminster "village" is to bring out "real world" stories that affect people's lives.

The problem, inexplicably not anticipated, was that this story was a little too "real world". Tuesday's edition of The Sun splashed on the story, and that morning on BBC Radio 4's Today programme the Chancellor, Alistair Darling, was caught off guard as he refused to deny the plans and confirmed that "a number of measures" and "a range of options" were being considered.

For a few hours, it seemed like a populist and substantial plan, capable of replacing a windfall tax to tackle fuel poverty. But by Wednesday, the backlash among estate agents had begun. Peter Bolton King, the chief executive of the National Association of Estate Agents, backed the move but added: "If the Government is going to come up with something, then we need to know about it now." Others warned that the speculation was resulting in people pulling out of planned purchases in anticipation of not having to pay the tax later. Suddenly, with experts warning of a further slump in a downturning market, the matter was urgent.

On Thursday, John McFall, the normally loyal Labour chairman of the Treasury Select Committee, said that Mr Darling had been misinterpreted but "he should have been more specific". The Chancellor pulled out of a separate BBC interview and disappeared.

By yesterday, Labour MPs were dismayed as another week of poor coordination and miscommunication drew to a close. After Caroline Flint, the Housing minister, popped up on Radio 4's World at One to confirm that the Government was "looking at a range of options [and] stamp duty is one of them", and later told Sky that the measure was anyway "not the Holy Grail", one former minister said she was floundering. Ms Flint's claim that "the only people continually talking about it are the media" was dismissed by the former minister, who said it was "nonsense" to suggests that the media made up the story.

But Ms Flint may have been right about one thing: the Treasury's relative ignorance of the matter. Sources say Mr Brown is keen to take personal charge of a policy "blitz" the minute he returns from the Olympics closing ceremony at the end of August. He has been itching to end the break prematurely but been advised that this would look desperate.