I’ve been wondering for a while now how much the shortfall in stamp duty will be this year, given that house sales could be down 40 per cent and prices 10 per cent.  

Lord Oakeshott, the Lib Dem Treasury spokesman for the Lords, has an estimate of £5bn, down from £10.1bn in 2007/8:

To put this in perspective, it’s almost DOUBLE the £2.7bn cost of compensating the abolition of the 10p tax band.

True, the Treasury did forecast in the Budget that stamp duty receipts would fall…..by about 5 per cent, not 50 per cent. Soon we’ll see who is right.  

Oakeshott makes the astute point that as property prices fall, buildings enter lower stamp duty bands, accentuating the effect.

You might argue that the Treasury will be compensated by rising oil prices, which result in higher VAT at petrol pumps and more North Sea Oil tax. Unfortunately, officials were knocking down this theory a few weeks ago (see Blogs passim).

Entrepreneurs should not start to see risk as a “four-letter word” because they are worried about the credit crunch, John Hutton will say in a speech later today.

The business secretary will tell a CBI audience that business people should not lose their nerve despite the well-publicised difficulties facing lenders and borrowers.

Mr Hutton will concede that fears over liquidity have spread from the stock market to “workplaces and homes” around the world. Tougher lending conditions are already having an impact - in particular on the retail, real estate and leisure sectors - he will say.

But he will emphasise the UK’s strong business growth and the trend for new companies to last longer.

Mr Hutton will tell the CBI Entrepreneurs Conference in London that business people will receive support from the government to keep on taking risks in order to benefit the economy.

The various schemes set up to aid entrepreneurs - such as the small firms loan guarantee, which was recently expanded - will help provide that support, he will add. Banks remain “ready and willing to lend to small and medium businesses”, the minister will maintain.

The fact that he needs to address the issue at all, however, is a tacit acknowledgement that this is a growing worry.

It seems odd given what has happened since.

But a bill* published last year gave new powers to building societies to borrow more from the wholesale markets. That is, the ones which enabled Northern Rock to grow like topsy and then implode. The bill has increased the maximum wholesale borrowing level from 50 per cent to 75 per cent.  

Luckily, the timing means few if any building societies will have taken advantage of this new freedom. Even if they wanted to - unlikely given the Rock disaster - the credit markets have been frozen.

The purpose of the change was to place building societies on a level playing field with banks. In theory this could help create more long-term (25-year) fixed mortgages, something which Gordon Brown is keen on.

Lord Davies of Oldham, deputy chief whip in the Lords, told a debate in October that “in the light of recent events in wider financial markets, we will want to consider carefully whether such a power should be used.”

Later he added:

“The concentration of funding will also pose risks that need to be effectively managed by firms. The recent case of Northern Rock is a clear example of the importance of risk management in this regard.”

Just when the government should have been worried about the growing credit bubble they were taking steps to encourage building societies - Britain’s most prudent lenders - to loosen up. Bizarre in retrospect.  

   * Building societies [funding] and Mutual Societies (Transfers) Bill

The man from the Halifax sounded quite convincing on the Today programme this morning when he said house prices wouldn’t fall much - because the labour market was sound.

This is the line we have been spun for ages by the government. (It was repeated this morning in an editorial in The Times). It doesn’t ring true.

The problem is that last time around - nearly 20 years ago - employment did not go into meltdown until nearly a year after house prices started to fall. Just as is now happening in the US.

The UK housing market peaked in 1989. Employment kept on rising and peaked in April 1990. Before dropping like a stone.

If this sounds unlikely, check out the chart supplied by our friends at Bloomberg. It augurs very badly indeed. Meanwhile, check out the Spectator blog for an accurate take on Gordon’s “no recession” strategy is faring.

What to make of Alistair Darling and his sunny forecasts? It takes an exceptional orator to combine such dour delivery with such optimistic content.

Last time I looked, the stock market had collapsed by about 15 per cent, house prices had fallen four months in a row and mortgage applications had slumped.

But the Chancellor of the Exchequer still takes a rose-tinted view of how things are going. To hear him in his first Budget today, it was almost as if he was discussing another country; and I don’t mean Scotland.

“Uniquely placed to succeed in the global economy,” he droned. “Better placed than any other global economy….pre-eminent world financial centre…”

You could be forgiven for thinking that Great Britain was a fortress and every other country - in the US, Europe, Asia - were mere sandcastles, reduced to nothing by a few sub-prime waves.

Page 149 of the Red Book has more of this: “Box 4: Resilience of the UK economy” describes the ”improved resilience” of Britain and how it survived the Asian crisis of 1997, the Russian debt crisis of 1998, the terrorist attacks of 9/11, etc (all of which happened to other countries).

“The UK (was) estimated to have been the most resilient of the economies studied in the latter period (of 1994-2005),” it said.

Mocking Mr Darling’s confidence may be dangerous, given that the Treasury has beaten most economic forecasters since Labour came to power in 1997.

 But why the apparent complacency about the UK housing market, where plenty of “sub-prime” lending has been going on unchecked in recent years?

Another weighty document published today by the Treasury - “Housing Finance Review: analysis and proposals” - makes for a rather serious read. Though lacking in sensationalism, it spells out the consequences of the credit crunch for Britain’s mortgage market. Answer: very bad.

Page 61 has an illuminating chart which shows typical lending rates in different countries around the world. Loan to value ratios range from 55 per cent in Italy, 67 per cent in France and 65 per cent in Canada to - at the most extreme - 80 per cent in two countries.

Can you guess which?

 The US (where falling house prices have sparked a global panic). And the UK.

 The small print of the Red Book does have a few signals about what the government really thinks. It expects revenues from stamp duty, capital gains and inheritance tax all in the next financial year, partly thanks to “sluggish or flat house price growth”. The fact that it is lifting its borrowing targets is another clue.

Gordon Brown said something today which I have never heard him say before. Sorry.

Referring to the government’s loss of 25m pieces of personal data in the post - described by one security expert as a "starter kid for identity fraud" - the prime minister did not mess around.

"I profoundly regret and apologise for the inconvenience and worries that have been caused to millions of families who receive child benefit," he told the Commons.

This seems to be the first time Mr Brown has apologised for anything as prime minister. I don’t recollect him ever apologising for anything, and his aides looked flummoxed when I asked them whether this was a first.

Mr Brown has expressed regret for his decision to raise the state pension by just 75p one year, according to Downing St officials. But that isn’t exactly the same as issuing an apology.

So - if this is indeed a first for Mr Brown - it shows the political magnitude of this data blunder and the possible damage it could do to the government.

What I’d like to know is whether the government is now going to underwrite every case of fraud committed on every parents’ bank account in the land - if these discs got into the hands of big-time crooks.

Mr Brown again repeated that any fraud would be compensated through the banking industry’s own code. But Treasury officials have also told me that the banks could then get that money back off HM Revenue and Customs, if they could show the fraud was linked to the lost data.

What we know about fraudsters is that - if they got their hands on the missing CDs - they would probably wait a few months before starting to rip off the banks.

In which case, how would the banks know whether HMRC was to blame? Or, put it another way, how could the government say it was not its fault, if the discs are still out there somewhere?

Is the government nationalising the Banking Code and its fraud compensation scheme? After guaranteeing deposits in the Northern Rock, is this starting to become a habit?

Can ministers convince business that, after a decade in power, Labour can be the answer to - rather than the cause of - many of employers’ main grievances? The question came to the fore this week when John Hutton, the business secretary, kickstarted a review of small business policy by inviting 20 entrepreneurs to a shindig at Number 11. The government says it plans to hold a series of meetings over the next few months, before setting out a proposed new "framework for entreprise" next year.

The Tories believe this tacit admission that existing policies for smaller firms need to be rethought is a valuable weapon to beat ministers with. Alan Duncan, the shadow business secretary, responded to the Downing Street summit by accusing Labour of having "undermined the UK’s economic success" through high taxes and regulation.

A slam dunk for the opposition? Not necessarily. As Mr Hutton told the FT the Tory attack on the regulatory front has been blunted by the party’s floating of a string of policies - including new employment and environmental laws - that would impose new red tape on business. Mixed messages from David Cameron on his stance on business caused the CBI this summer to wonder aloud whether the opposition leader was a chameleon. The battle for the corporate vote is far from over.

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