'Millions to escape stamp duty'

MICHAEL HOWARD today pledged to abolish stamp duty on millions of house purchases. He completed his tax-cutting General Election agenda with a dramatic vow to more than double the tax-exempt threshold for homebuyers to £250,000.

The bold cut will save £1,800 for the buyer of the average £180,500 house.

At present, buyers pay 1% of the entire house value on any purchase costing between £120,000 and £250,000. Under the Tory plan buyers of properties in this price range would pay nothing in stamp duty.

The new threshold would allow many first-time buyers in the South East to escape one of the most unpopular stealth taxes, one that has soared under Labour.

Some two million properties in London and the South East would be taken out of the stamp duty trap altogether, according to Tory estimates. About half a million of the gainers would be in the capital. With the reform aimed squarely at first-time buyers and young families, it would not benefit those buying homes worth over a quarter of a million pounds. Senior Tories are certain the eye-catching cut will boost their election campaign, with two weeks to go.

Stamp duty bills have risen remorselessly since Labour came to power in 1997, when the average home attracted a charge of £680. Revenue for the Treasury has rocketed from £675m to £3.8bn.

The Tory plan would cut £1bn from the Treasury income - completing a £4bn programme of tax cuts, with £500 slashed from pensioners' council tax bills and tax breaks for people saving for retirement. It was kept top secret, even from Shadow Cabinet Members, until early today. Until late last night, only Howard, Shadow Chancellor Oliver Letwin and around four senior party officials were in the loop.

A party figure said the package was designed to overcome the idea that tax cuts benefited only the wealthy. 'Today's stamp duty cut will make it easier for young families to buy their homes, while the others will reward hard-working people saving for their retirement and give people more dignity and prosperity in old age,' he said.

House prices have more than doubled since 1997, but the stamp duty threshold stood at £60,000 until last month's Budget, when the Chancellor doubled it to £120,000. Gordon Brown's cut gave almost no benefit to Londoners because house and flat prices were already racing far above the new threshold.

Surveys showed barely one in 20 homes on the market at the time would be exempt - compared with four in 10 when Labour came to power. By contrast, Howard claims his plan is generous enough to help London.

Shadow Chancellor Oliver Letwin said: 'Under our plans, the number of London homes exempt from stamp duty will rise fivefold to around one million. We want to help people who work hard and do the right thing and support themselves and their families. That means helping people who want to buy their own home.'

Out of some 2.34m privately owned London homes, only 210,000 are valued below £120,000 and therefore exempt at present. Under the Tory plan, around an extra 800,000 would be exempt, taking the total to more than a million. In the South East outside the capital, just 276,000 out of 2.12m homes are exempt. The number who would not pay would leap to 1.45m - more than half of them.

The Tory proposals will not help those in the most expensive properties, which have been heavily targeted by Labour. Stamp duty has risen steadily from 1% to 4%. But in some parts of London, a majority of homes would become tax-free.