Increasing the stamp duty threshold

Well, it's here. The incredible economic package that is going to turn around the Government's electoral fortunes.

There are measures to help out some families facing repossession but the headline policy is that for a year the stamp duty threshold has been raised from £125,000 to £175,000. Stamp duty works on a slab basis so all this is meaningless for any home purchase outside that band (i.e. most homes in London and the South East). Putting this plan into action will cost around £600 million.

It won't do much to help the property market. There are too many other, much more important, variables at play. As Chris Dillow has shown Lamont's stamp duty holiday didn't do much for the market in 1992.

There is no particular reason why the Government should want to prop up house prices anyway. High prices that kept young people off the ladder were hardly a great social boon.

Does that mean pushing the threshold up is a bad idea?

Not really. This will, at a fairly low cost in the grand scheme of things, be a considerable boon to a lot of young families on the early rungs of the housing ladder. They will be able to keep £1,750 of their own money that the Government would otherwise have purloined. People in that situation often have a great many financial strains: taking care of a growing family or just furnishing their new home. £1,750 would make their lives significantly easier and helping them out is a legitimate social objective.

Nick Robinson asks "who pays?"

Well, at last year's budget public spending was increased by around £30 billion. There is a problem with the deficit but to ask "who pays?" about a puny little £0.6 billion tax cut when a spending rise that is around fifty times as large has been pushed through each year for the last five years clearly completely misses the point.

Some of that increased spending would be hard to avoid in an economic downturn, such as benefits, and inflation obviously pushes up spending as well. The main cause of increases in spending, though, is the decisions made in the various budgets and spending reviews. Those are the decisions that ate up economic growth and the proceeds of tax rises year after year and created the current deficits. Not the few shoddy tax cuts we've enjoyed. The Government can easily fund this tax cut if they stop growing public spending so quickly.

In the end, the problem with these tax cuts isn't that they won't do much to help the housing market or that they can't be funded. It's that this pissant tax cut doesn't even approach the kind of scale that would be needed to make a dent after a decade of rising taxes. That's the proper criticism of the proposal advanced today.