Philip Hammond’s Budget bid to woo younger voters with stamp duty cuts unravelled within minutes after the UK’s economic watchdog warned the move would push up house prices.
The Chancellor was cheered by Tory MPs as he unveiled a surprise move to scrap stamp duty for first time buyers of homes worth less than £300,000 and Treasury officials claimed it would save a million people an average of £1,600.
But the independent Office for Budget Responsibility (OBR) demolished the policy, declaring it would lead to a spike in house prices - and may only result in just 3,500 more people buying a home than otherwise.
Hammond’s wider claim to be spending £44bn on housing also came under fire as it emerged the actual new money was £15bn and not a single new home would be built as a direct result of the measures unveiled on Wednesday.
After the summer’s snap election disaster and weeks of Cabinet resignations and Brexit rows, Hammond tried to reconnect with voters with a £25bn spending package aimed at the cost of living, NHS underfunding and the housing crisis.
But his hopes of a political recovery were knocked back as:
* A new pledge of £3.7bn for Brexit preparations outstripped the £2.8bn promised in day-to-day spending for the NHS
* Growth forecasts were slashed, with claims that weaker pay will lower household income by £540 by 2023 and the national minimum wage going up slower than planned
* A promised pay rise for nurses was unspecific and delayed, with no other public sector workers given an penny extra
* Universal Credit wait times were cut by a week but not down to the month demanded by critics, with no halt in its roll-out nationwide
* Fast-tracked plans to sell off state shares in RBS bank to raise £15bn were described as “desperate”
Jeremy Corbyn attacked the Budget’s failure to provide the radical policies Britain needs and seized on the housing measures as more spin than substance.
“The government promised 200,000 starter homes three years ago and not a single one has been built. We need a large-scale public housebuilding programme, not this government’s accounting tricks and empty promises.”
The stamp duty change – which kicks in from midnight on Tuesday - won cheers from Tory MPs as it was the “rabbit in the hat” plucked out by Hammond to end his Budget speech with a final flourish.
Yet the OBR was swift with a savage take-down of the plan and the Resolution Foundation claimed that “it would be literally cheaper” to buy the tiny number of winners a house each.
In a withering verdict, the OBR said: “The main gainers from the policy are people who already own property, not the first time buyers themselves... It is also possible that non-first time buyers will abuse the relief.”
The stamp duty cut only applies to house sales over £120,000 and as a result won’t help many people outside the south east and in poorer parts of the country.
A Treasury spokesman insisted the stamp duty cut would make a difference to many. “We don’t think that £1,600 on average for a million people over the next five years is a small move at all,” he said.
The Treasury repeatedly refused to say if a single new home would be guaranteed as a result of the wider housing package, which includes loans and funds and incentives for developers rather than concrete spending for things like council homes.
But officials stressed instead that there was now a “commitment” to get 300,000 home starts every year.
“The chancellor was clear that he’s making a commitment to doing whatever it takes and this is the first step.”
In London and other property hotspots, stamp duty will be axed on the first £300,000 of a purchase price up to £500,000 – a cut of up to £5,000.
But critics point out that the average saving of £1,660 paled in comparison with the huge cost of saving for a deposit large enough to actually buy a home in many parts of the country.
Shadow Housing Secretary John Healey added that the OBR was also warning that there would be no measurable impact on new housing supply.
“There’s zero chance that this Budget will enable the country to build 300,000 new homes a year,” he told HuffPost UK.
“There is no extra Government investment in new affordable homes, no action to help private renters with soaring costs, and just three small-scale pilots to help the homeless.”
And the Chartered Institute of Taxation said a similar previous stamp duty holiday “had little effect on improving the affordability of homes”, helping a tiny number of people. It added that the majority the tax relief “was capitalised in higher prices”.