Osborne's House of Cards..

While much has been made of the pledge to raise the IHT threshhold to £1 million, George Osborne's speech to the Conservative Party Conference in Blackpool had another headline-grabbing commitment relating to Stamp Duty.

Let me see if I've got this straight: Stamp Duty will be abolished for all first-time buyers buying a property under £250k. This move has long been wanted by the building societies and Osborne clearly has listened but is this all that it seems ?

Stamp Duty has a function - it's about the only mechanism the Government has (apart from damaging rises to interest rates) to curtail house price inflation. In my part of east London for example, two-bedroom houses, however good they are, don't sell above £250k because that's where a level of stmap duty cuts in.

Lower down the market, stamp duty threshholds act as a barrier and it takes a lot for prices to break through the barrier and move up to the next level but Osborne's plan would change that.

Below £125k, no stamp duty is paid - between £125k and £250k the rate is 1%, above £250k it is 3% so first thing to say is that Osborne has said nothing about the bulk of property transactions.

Back to our first-time buyer - at £150k, stamp duty is £1,500 which is an unnecessary burden for the buyer (and does nothing for the seller). Now, let's take stamp duty off - the seller can of course raise the price of the property to £151,500 and effectively take the "duty" him or herself. The Osborne plan may mean less tax revenue for the Government but don't let's assume the buyers are the winners here. The REAL winners are going to be the sellers. When Nigel Lawson tried something similar with stamp duty in 1987, he triggered a massive boom in property which came crashing down around the ears of hundreds of thousands a few years later.

What we will see is a new round of house price inflation at the low end of the market with sellers seeking to profit from the stamp rate "holiday". Osborne's proposals won't change the fundamentals - if there is a glut of buyers and a shortage of sellers, the prices will rise and houses in the £110k - £200k range (which covers a lot of ground outside London and the SE) will rise the most. The first-time buyers whom Osborne is trying to court will be further priced out of the market or forced to take on bigger mortgages.

As with many other Conservative proposals, the headline-grabbing rhetoric is superficially attractive and many will buy into it but take a moment to think about it and you will realise it is flawed and dangerous. Housing in this country is a problem and a serious and complex problem. Osborne has not only shown a crass level of understanding of that problem - he is playing politics with people's aspirations. We should have no confidence in this charlatan or his leader.