The government is set to cut stamp duty as part of Liz Truss’s attempt to drive growth in a mini-budget later this week, according to reports.
The economic blueprint, to be unveiled by chancellor Kwasi Kwarteng on Friday, aims to stimulate further growth in the property market and help more young people buy their first home.
Whitehall sources told The Times that stamp duty cuts were the “rabbit” in the mini-budget, and government officials had been working on the plans for more than a month. Critics said the move would make the housing crisis “even worse”.
Commenting on reports of the stamp duty cut, Liberal Democrat MP and former party leader Tim Farron tweeted: “How to make the housing crisis in Cumbria even worse: give an extra incentive for people to buy homes they don’t need, pushing them even further out of reach for those who do need them.”
It comes as the average UK house price leapt by 15.5 per cent annually in July, marking the biggest increase in 19 years, according to official figures.
The percentage increase was around double the rate recorded in June, when the typical property value increased by 7.8 per cent annually.
Former chancellor Rishi Sunak introduced a stamp duty holiday in 2020 in an effort to cushion the property market from the impact of the pandemic.
Raising the threshold for paying stamp duty from £125,000 to £500,00 cost the Treasury £6.4bn, and economists said the policy did more harm than good for buyers.
While the tax break boosted the number of house sales, experts said any savings for buyers were eaten up by house price rises, which were pushed higher because of the measure.
Critics also said the move punished first-time buyers by increasing competition and sending property prices even further out of their reach.
George Dibb, head of the IPPR think tank’s Centre for Economic Justice, said of Mr Sunak’s policy: “Even before the pandemic, house prices in the UK were too high for most people – yet the stamp duty holiday further boosted prices.
“Getting on the housing ladder is now harder than ever, and those struggling to save for a deposit will be rightly angry that government policies have made this even more difficult.”
Ms Truss has said she is willing to be an unpopular prime minister to bring in measures she believes will grow the economy, admitting her tax cuts will disproportionately benefit the rich.
On Tuesday she confirmed she would be reversing the national insurance hike and axing the planned increase to corporation tax.
She also effectively confirmed a plan to scrap the cap on bankers’ bonuses as she argued she needs to make “difficult decisions” under her political and economic gamble to focus on growth.