Is it morally right to bribe voters into taking a huge leveraged bet on an asset class which is overvalued?
That will be the question if Alistair Darling, as rumoured this morning, introduces a stamp duty exemption on houses up to £250,000.
The policy may be a vote winner in Middle England; presumably that is its intention. It’s also no co-incidence that it has been Tory policy since 2007.
But bear in mind that house prices, after a dip in 2009, are now once again close to their pre-credit crunch highs.
This is not due to any obvious reason other than the fact that the Bank of England interest rate has been at an artificially low level to stave off depression. When it goes back up again – from its current 0.5 per cent – so to will mortgage costs. At that point house prices are likely to fall.
Ken Clarke, to his credit, made this very point a few says ago, advising people not to buy a house unless they could handle an interest rate spike.
Labour, cynically, appear to be doing the complete opposite.
One of my contacts suggests that the announcement could have a sting in the tail: what if they also introduce a new, higher band for stamp duty: or increase the existing higher band from 4 per cent to 5 per cent? This would certainly counter the charge that this is an unfunded handout – of the kind which Darling had promised not to deliver.