Good question on the Today programme

It was good to hear Mrs Blears wriggling when asked if she would recommend a young friend to buy a flat or house today, now there is to be no Stamp Duty on a property between £125,000 and £175,000 for a year.

It is the crucial question. If you can now recomment first time buyers should buy, the measure might help the market a little. If advisers and analysts still think there could another 5-10% fall in residential property prices, it would be better advice to the young person to wait a few months, as saving 1% to lose several times that is not good business.

I wonder where the government gets the £600 million of lost revenue figure from. Presumably it is left over from the out of date and inaccurate forecasts given at the time of the last Budget.That may be what is pencilled in at the moment for Stamp Duty on such properties, but it is highly unlikely they will collect that much anyway, given the very low level of mortage availability and the freezing of the residential property market generally.

One cheer for the government’s housing package – tax cuts are welcome. It was a pity they refused to tell us how the package will be paid for, or to change the government’s economic forecasts. As the OECD is now forecasting a recession in the UK – two down quarters this year – we need a counter forecast from the Treasury.

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12 Comments

  1. Rose
    Posted September 2, 2008 at 2:47 pm | Permalink

    Mrs Blears is one of the more honest members of the government: she often blushes, and sometimes apologises. What was more disturbing this morning was to hear Jack Straw and Evan Davies calmly discussing the causes of prison overcrowding without once mentioning immigration.

  2. Thatcher-right
    Posted September 2, 2008 at 2:58 pm | Permalink

    Well, at least this government is keeping one of their promises… They are increasing the supply of affordable housing. 10% more affordable already with another 30% to go before we hit the bottom.

  3. anon
    Posted September 2, 2008 at 3:00 pm | Permalink

    The Japanese slump lasted for 18 years: the rescue of Northern Rock, tax breaks for first time buyers; stamp duty tweaks; mortgage loan underwriting etc etc will only make our slump last longer.

    What's crueller: getting someone to struggle to pay down a mortgage loan for a further five years and loose the house anyway; or just allow them to walk away and start again? Bear in mind that the five year payment will most probably be for the interest on the loan rather than drawing down the loan.

  4. Man in a Shed
    Posted September 2, 2008 at 4:26 pm | Permalink

    It would be interesting to correlate house prices with geographical location, housing stock and a political map.

    A bit like the NHS heat map Hazel Blears had of the NHS vs Labour marginals a few years ago.

    I'm guessing it would show this move is very political. Of course its the outlying, economically, areas where house prices will drop the most, so Hazel is perhaps helping her own supporters into negative equity.

    When you deal with the Labour party you should use a long spoon.

  5. anon
    Posted September 2, 2008 at 5:52 pm | Permalink

    Oh, and another thing. According to S Gerlis J, "What is also intriguing is that a substantial number of defaulting borrowers are those who have taken out mortgages in the last couple of years, including a sizeable number who have not paid a single penny since the mortgage was taken out.

    There could be a number of reasons for this odd situation: …"

    "How the courts are coping with the mortgage crisis
    Stephen Gerlis
    Times Online, August 18, 2008

    I would respectfully disagree with the reasons given by the judge (follow the link to the article); instead, I would suggest that the people who haven't paid a penny on their mortgage loans are either greedy profiteers who were hoping to sell on the property at a higher price, or greedy rentiers who cannot find tenants. Instead of Neu Arbeit trying to help these people, shouldn't they be cleared out of the market as soon as possible?

    I refer to my previous complaint about interfering with the market only having the effect of prolonging the recession.

  6. mikestallard
    Posted September 2, 2008 at 6:22 pm | Permalink

    Did I hear this right? Or is the abolition of stamp duty to be limited to houses which have no part of any business within their walls?
    Erm…..
    That seems to rule out a lot of houses to me. I mean, teachers doing their homework? Journalists with a computer? MPs writing their blogs…..

  7. StevenL
    Posted September 2, 2008 at 6:39 pm | Permalink

    It just gets funnier and funnier doesn't it. First Darling admits he didn't have a clue about what was actually happening last summer. Next thing you know Blears comes out touting a solution to all our problems that involves government bribing people to buy all the overpriced shoebox flats that no-one wants.

  8. Acorn
    Posted September 2, 2008 at 7:46 pm | Permalink

    Have you noticed just how difficult it is to find out what the true state of the UK economy is. As an amateur, I find it easier to find out the state of the US economy because their "think tanks" appear much better at getting information than their UK equivalents.

    US contacts are telling me that the dollar is going up because a lot of Euro and Pound holders are selling these currencies and buying dollars as they fight pressure for their currencies to depreciate. Too difficult for me. Also, "the market rewards those countries where the authorities are focused on fighting inflation, and punishes those currencies where the authorities are more focused on growth".

    He added; "if you haven't bought your dollars for Aspen next February, buy them now, I am forward on the pound at a dollar 56 by then."

    F************************k !!!!!!!!!!!!!!

  9. William B.
    Posted September 3, 2008 at 8:32 am | Permalink

    Welcome though any tax cut is, I fail to see how this piffling reduction in Stamp Duty could have a real effect on anything.

    Is it a sign of things to come? Will we see a series of toe-in-the-water policy changes made more in hope than expectation? That is certainly how I view this announcement.

    Why are we not hearing of a suspension of the £1.5billion promised just a couple of months ago for a congestion charge scheme in Manchester? Why are we not hearing of a culling of Quangos? Why are we not hearing that a dozen or more reviews into proposed new spending plans are being put on hold? The list can go on and on.

    The current state of the economy requires such a radical (and structural) change to government policy that dabbling at the edges is likely to do more harm than good. The problem is that after 11 years of building the problem it is politically impossible for Labour to take the steps needed to avert a long-lasting downturn.

    I wonder how many deckchairs there were on the Titanic.

  10. anon
    Posted September 3, 2008 at 10:11 am | Permalink

    "Welcome though any tax cut is, I fail to see how this piffling reduction in Stamp Duty could have a real effect on anything."

    WilliamB makes the point above as well as many others: all correct, all sensible.

    However, one point that we are all missing is that Neu Arbeit says that the fundamentals of our economy are sound. Particularly, they trot out 'low interest' rates and high levels of employment.

    Can they not see that the economy must have some sort of fundamental fracture within it if, under these two conditions, people can't afford to buy a house?

  11. Neil Craig
    Posted September 3, 2008 at 4:37 pm | Permalink

    The problem with the question is that it shows how much house buying is about investing/gambling & how little about living. A house should be bought because you want somewhere to live. If you make a profit on it thats cool, if you make a small loss thats rent.

    The reason house prices are both so high & fluctuate so much is because it is government regulation not supply & demand that controls how many are built. Houses have risen in price 4 times faster than the RPI whcih means in a free market they would cost 1/4 of what they do. Obviously this is not what statist politicians mean when they talk about "affordable housing" – they mean government subsidies to mitigate the government price rises.

  12. john miller
    Posted September 3, 2008 at 8:10 pm | Permalink

    Strange. I'm a Chartered Accountant, but I am not licenced to give investment advice and would be committing a criminal act if I advised anyone on such an investment as Mrs Blears is doing. Is she above the law?

    Reply: No she is not above the law. She was talking about buying a house rather than stocks or shares, and she did fall short of telling any individual to buy one.

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    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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