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Philip Hammond has rejected a claim by the government’s fiscal watchdog that scrapping stamp duty for first-time buyers will push up house prices.
The chancellor was warned by the Office for Budget Responsibility that the move would benefit homeowners more than first-time buyers, pushing up house prices by 0.3 per cent by the end of next year, because buyers would be able to afford bigger deposits.
But Mr Hammond told the BBC Today programme that the OBR calculations did not take into account other measures that would encourage more housebuilding and therefore put downward pressure on house prices.
“They look at what would happen if you cut stamp duty for first-time buyers and did nothing else,” he said. “But we have a big package on the housing market to create growth and deliver more homes.”
For instance, the Treasury argues that it recently imposed measures on buy-to-let investors — including a 3 per cent stamp duty surcharge and a cut in mortgage interest relief — that will lessen demand for homes from professional investors.
The government is scrapping stamp duty for first-time buyers on homes up to £300,000. In expensive areas such as London, homes costing up to £500,000 would maintain a zero per cent tax rate on the first £300,000.
Usually, stamp duty of 2 per cent is paid on the value of a property over £125,0000 and 5 per cent on £250,000 to £500,000.
Mr Hammond was also pressed on his plans to carry out a review of the reasons why housebuilders sometimes “landbank” — sitting on plots of land rather than building homes.
On Wednesday a company founded by the chancellor, Castlemead Limited, was found to have left a plot empty for seven years after winning planning permission to build four homes.
The chancellor said that, like other government ministers, his assets were in a blind trust and he did not know what had happened at the site. “I don’t know the current circumstances of it,” he said.
Housing was one of the centrepieces of the Budget on Wednesday, as Mr Hammond promised a package of investment and planning reform as well as the stamp duty holiday.
But of the £15bn of new money pledged for housing, it turned out that more than half — £8bn — was for guarantees for housebuilders which have not yet been discussed with the industry, let alone agreed.
The Budget was overshadowed by the biggest downgrade in the UK’s economic prospects since the financial crisis. Official forecasts for the UK’s economic growth were cut sharply for the next five years because of weaker productivity growth, leaving the chancellor with much less room to offset any shock from leaving the EU.
The gloomy forecast also means households are facing an unprecedented 17 years of stagnation in pay levels.