Why stamp duty looks a good Budget bet for Brown

IN THE past week, three of the country's biggest mortgage providers have told us the housing market is booming. Nationwide said prices had risen almost 14% in the past year and would increase another 10% in 2002. Halifax said values had gone up 16% and would rise a further 7% in the next 12 months and Northern Rock said mortgage lending has ballooned by 55% since January.

Chancellor Gordon Brown admitted he found the situation potentially worrying and dropped dark hints about being able to change the Bank of England's remit on interest rates if he felt there was good reason for doing so.

The Bank kept rates at 4% this month, largely because it wanted to see what the Chancellor pulls out of his Budget box next week before making any precipitate moves.

This Budget has been more widely trailed than any before. We know measures are in the pipeline to help business. We know there is a need to increase spending on the health service and we know Brown is seeking ways to raise £5 billion.

One obvious contribution is an increase in stamp duty on property. As things stand, sales worth between £60,000 and £250,000 are subject to a 1% tax; between £250,000 and £500,000 it is 3% and on all homes and offices valued at more than £500,000 the rate is 4%.

If the latter two bands rose to 4% and 5% respectively, the extra revenue would be a useful £850 million, according to the Centre for Economics and Business Research. It would raise howls of protest from the commercial property sector and would hit London and the South-East particularly hard, but that is unlikely to sway the Chancellor. The housing market has defied all predictions of a slowdown. Brown might well take the view that raising stamp duty would be an excellent way to help control the boom.

HMV Media has had a chequered history. Formed in 1998 from the combination of HMV music stores and the Waterstone's bookshops chain, the company has never seemed totally comfortable in its skin.

In recent months, however, a quiet revolution has been taking place. HMV sales have powered ahead, driven by the continuing popularity of DVDs and computer games. HMV managers have also been parachuted into Waterstone's to encourage a more aggressive sales approach. The process has worked and Waterstone's sales have been exceptionally strong.

So it is hardly surprising that an imminent flotation is on the cards for HMV Media. Third-quarter trading figures are due this week and the company may choose to enlighten the market then about its plans.

The business, 85% owned by music group EMI and venture capital outfit Advent, has an enterprise

A flotation would probably involve raising £400 million via a primary share offer to pay down debt. There would also be a secondary offer as EMI and Advent sell some of their holding. This may be as little as £100 million, which the owners would ply as an indication of their faith in the business.

HMV hope
HMV is making no official comment but eager salesmen at the book-running banks Schroder Salomon Smith Barney and UBS Warburg have been ringing institutional investors to arrange premarketing appointments.

The company hardly ranks as a risk-free investment. But it has turned a corner and the amount of money being raised is sufficiently small that both HMV management and owners can be reasonably confident of a successful sale.

CAA holds key
EASYJET does not expect to make a return on its investment in National Air Traffic Services for at least eight years. The airline has therefore decided to write off the value of its stake in the company.

Sensible accounting from easyJet - bad omen for Nats, which has been fighting for survival following the 11 September attacks on the US. The company, which makes its money from planes using British airspace, had to borrow £30m from the Government and gain early access to £30m from its banks.

Now everything hangs on the Civil Aviation Authority, the body that decides how much Nats can charge its customers. The banks hope the CAA will accept Nats' plea for an increase in charges. It seems unmoved by Nats' position, and a decision is not due until later this year

But, behind the scenes, intense negotiations are taking place. In the meantime, air traffic is slowly rising. The banks are optimistic that stakeholders will not let Nats collapse. It could be a close-run thing.