The move could send house prices even higher (Picture: Rex)

The government has announced it will cut stamp duty, raising the possibility of house prices being pushed even higher in the short term.

Chancellor Kwasi Kwarteng set out his stall in his first ‘mini-budget’ after taking the great office of state this morning, saying we were ‘at the beginning of a new era’.

He said he was focused on growth, and wanted to ‘support families to own their own home’.

To help this, he said that from today he would double the threshold where home buyers started to pay stamp duty to mean there would be none on the first £250,000 of the property.

The rate at which first time buyers start paying stamp duty would also be raised, this time to £425,000.

And he increased the value of the property on which first-time buyers can claim the relief, from £500,000 to £625,000.

He said this would take 200,000 people out of paying the tax altogether, and was a ‘permanent’ cut rather than just a holiday.

This will apply mainly to people living in England, however, as stamp duty is decided by devolved governments in Scotland and Wales.

It is an ‘important principle that people should keep more of the money they earn’, Mr Kwarteng said.

But the move, which was expected before the budget, sparked fears that it could push already-inflated house prices even higher.

The New Economic Foundation was among those to respond, saying: ‘A stamp duty cut pushes up house prices further and makes homes in our already overheated market more expensive for people on ordinary incomes.

‘This mainly benefits the wealthiest and puts affordable homes further out of reach for millions desperate for a secure place to live.’

Joshua Raymond, director at financial brokerage XTB, said the cut to stamp duty was ‘absolutely welcome for new prospective buyers’.

But he said that it wouldn’t necessarily mean people would pay any less than they are now.

‘With interest rates rising and expected to hit just below 5% by the start of 2023, much of the cut to stamp duty will be quickly absorbed by higher mortgage costs,’ he said.

Rachael Griffin, tax and financial planning expert at Quilter, said: ‘Stamp duty is one of those taxes, like inheritance tax, that everyone loathes.

‘Older generations in particular will stay in homes that are too big for their needs just to avoid paying this despised tax.

‘We only need to look back a matter of months to see what a transformational impact stamp duty holiday has on the market. However, more demand also means higher prices unless more stock is built and this will spell bad news for many.’

She said the move was a ‘gamble that may not pay off’, as ‘getting rid of stamp duty epitomises Truss’ trickle down economic plan to try and kickstart the economy into growth through lower personal taxes.’

Kwasi Kwarteng at Downing Street in Westminster before the budget today (Picture: Shutterstock)

Speaking in the House of Commons this morning, Mr Kwarteng said his main focus was on helping people with the cost of energy bills, blamed on the war in Ukraine.

‘People will have seen the horrors of Putin’s illegal invasion of Ukraine,’ he said. ‘They will have heard reports that their already-expensive energy bills could reach as high as £6,500 next year. Mr Speaker, we were never going to let this happen.’

Prime minister Liz Truss has already announced a package of support by limiting the unit price people pay for electricity and gas.

Mr Kwarteng said this meant the average household would pay £2,500 this year – a saving of £1,400 when the £400 extra help with bills was taken into account.

The Government’s energy package will cost £60 billion for the six months from October.

But this is to be funded by government borrowing, rather than from a windfall tax on inflated profits made by energy companies due to the crisis.

Mr Kwarteng said he aimed to stimulate the economy by cutting taxes, saying he wanted to ‘turn this vicious cycle of stagnantion into a virtuous circle of growth’.

He said he would bring forward a plan to review the planning system for major infrastructure, and to ‘liberalise’ the planning rules in certain ‘investment’ zones.

Among the policies set out was to reverse the rise in National Insurance put into place by Boris Johnson’s government.

His successor Ms Truss made her pitch promising tax cuts, claiming this will stimulate the economy and therefore bring it more money via tax.

Mr Kwarteng also said he would ‘get rid of’ the cap on bankers’ bonuses with the aim of making Britain more competitive, aiming to make the UK the world’s financial services centre.

And he said he would abolish the top rate of tax for people earning over £150,000 – affecting just the 629,000 richest people in the UK.

It means the top rate of tax will be 40% rather than 45%, which usually kicks in for income over £50,270.

Responding to his budget, Shadow Chancellor Rachel Reeves said his plans showed he was on the side of the wealthy.

She said the government was promoting ‘trickle down’ economics, which theorises that all will benefit if the already-wealthy become even richer.

Citing US President Joe Biden, who criticised the theory shortly before he met with Liz Truss, she said it had been discredited.

Mr Biden had tweeted: ‘I am sick and tired of trickle-down economics. It has never worked. We’re building an economy from the bottom up and middle out.’

Meanwhile, the SNP’s Treasury spokesperson called the Chancellor’s mini-budget a ‘plan for recession’ which will not provide any reassurance to ordinary people.

Alison Thewliss told the Commons: ‘It is a plan for recession, for debt on an unsustainable trajectory and almost inevitable public-sector cuts to come.

‘Actively choosing to permanently cut taxes and spend eye-watering sums to patch up a failed energy market while inflation soars, interest rates are hiked and recession looms, it will not create growth, it’ll create economic chaos.

‘Nothing he has said today will provide any reassurance and give hope to ordinary people, folks struggling to get by in broken Britain.’

As Mr Kwarteng spoke to Parliament, the Pound hit lows not seen for almost four decades.

Sterling declined by as much as 0.89% to 1.115 US dollars.

It has since stabilised at around 1.119 dollars, but this remains below the previous 37-year low struck earlier this week after concerns over surging interest rates.

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