Brown's stamp duty cut condemned as 'too little too late'

Gordon Brown's giveaway to homebuyers has done little to brighten his prospects amid mounting evidence that Britain has plunged into recession.

The Treasury announced a one-year stamp duty holiday on houses worth up to £175,000. It will save buyers up to £1,750.

There will also be interest-free loans for first-time buyers on low incomes, help for those facing repossession and more money for social housing.

brown and darling

Crucial times: Gordon Brown and Alastair Darling discuss their plans to kickstart the housing market

Downing Street called it a modest but essential package of help for those at the sharp end of the credit crunch.

But the emergency scheme, worth a total of £1.6billion, was dismissed by experts as 'a drop in the ocean' and a 'political sticking plaster'.

They pointed to a stark assessment from the Organisation for Economic Cooperation and Development that Britain was now in recession for the first time since the Tories were in power.

Even more embarrassingly for Mr Brown, it said Britain was the sole major G7 economy facing imminent recession, although France and Germany are expected to grow only marginally this year.

The assessment severely undermines the Premier's claims that the UK is well-placed to withstand the global downturn.

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The surprise announcement on the housing market crisis was supposed to reassert Mr Brown's economic credibility.

He is likely to follow it with measures aimed at unclogging the paralysed mortgage market which is making it impossible for many would-be buyers to find loans.

But confusion over how the Treasury will fund the £600million cost of raising the stamp duty threshold from £125,000 fuelled speculation that the package had been cobbled together at short notice.

Although his officials have been working on changes, Chancellor Alistair Darling was said to have been reluctant to throw money at homebuyers.

Insiders denied, however, that the announcement was rushed out to counter the damage done by his weekend warning that Britain faced its worst economic prospects in 60 years.

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Last night there were fears that Mr Darling will have to announce even higher borrowing in his Pre-Budget Report later this year to pay for a measure that may produce few results.

And the modest scale of the moves risked drawing attention to the Government's powerlessness in the face of global economic forces.

The tax saving is relatively minor in the context of house prices falling at their fastest for 18 years. The cut of £1,750 on a £175,000 home is the equivalent of the amount of money being wiped off the price of the average home every 12 days.

Experts said would-be buyers who cannot quite afford a £175,000 home will simply wait for its price to drop rather than rush to take advantage of the stamp duty holiday.

The FTSE bounced up after the package was unveiled but the pound dropped further against the dollar.

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Housing gloom: Brown is desperate to kickstart the UK's flagging mortgage market

Shadow Chancellor George Osborne dismissed the move as 'a short-term survival plan for the Prime Minister, not a long-term recovery plan for the economy'.

But Mr Brown insisted the Government had a duty to act in times of economic difficulty.

'Homeowners need to know that we will do everything we can to keep the housing market moving forward,' he said.

But experts said little will change until mortgages become more easily available again.

James Scott-Lee, from the Royal Institution of Chartered Surveyors, accused ministers of 'failing to listen to the property industry'.

He said: 'Without making it easier to get a mortgage, the Government is tinkering around the edges.'

Ed Stansfield, UK economist at the consultancy Capital Economics, said: 'There is nothing in yesterday's announcements to prevent the housing market correction from running its course.'

Despite the changes, the mortgage meltdown means it will remain almost impossible for young people to buy a home. Soaring household bills and poor pay rises mean few people can save for a deposit.

The biggest winners could be professional buy-to-let landlords, many of whom do not face the same financial constraints as younger people.

The average price of a buy-to-let home is £160,000, in the band which now does not qualify for stamp duty.

The last stamp duty holiday, introduced by Tory Chancellor Norman Lamont in 1991, was a disaster.

Even though the threshold was raised from £30,000 to £250,000 - nearly four times the average - it was followed by further sharp falls and a drop in the number of buyers.

Mike Warburton, senior tax partner of accountants Grant Thornton, said last night: 'You cannot buck the market. Fiddling with stamp duty creates a false market, and does not change the fundamentals.'

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