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Stamp duty cut 'to be extended' Stamp duty cut 'to be extended'
(about 9 hours later)
Chancellor Alistair Darling is set to extend the stamp duty "holiday" on homes costing up to £175,000 by three months, to the end of the year.Chancellor Alistair Darling is set to extend the stamp duty "holiday" on homes costing up to £175,000 by three months, to the end of the year.
It is expected to form part of a £1bn housing package in Wednesday's Budget.It is expected to form part of a £1bn housing package in Wednesday's Budget.
The government is also set to provide money for construction sites where work has stopped because of funding problems and for building council houses.The government is also set to provide money for construction sites where work has stopped because of funding problems and for building council houses.
The Conservatives say Wednesday will be "a day of reckoning" for Labour. The Lib Dems have called for tax changes. But a Bank of England official warned the best way to revive the market is to let prices adjust, not change policy.
It will not be known until Mr Darling's Budget is published how much of the £1bn housing package has been previously announced but the package is intended to boost house building and to increase the buying and selling of existing homes despite the recession. Unsold homes
'Efficiency savings' It will not be known until Mr Darling's Budget is published how much of the £1bn housing package has been previously announced.
It is intended to boost house building and to increase the buying and selling of existing homes despite the recession.
A new announcement is anticipated on a scheme to turn unsold homes into social housing.A new announcement is anticipated on a scheme to turn unsold homes into social housing.
You have to be very careful with a policy intervention that you don't make it worse Paul FisherBank of England Monetary Policy Commitee Mortgage support scheme under way
In September 2008 Mr Darling said that for one year the 1% stamp duty would not be paid on any property purchased for less than £175,000.In September 2008 Mr Darling said that for one year the 1% stamp duty would not be paid on any property purchased for less than £175,000.
The "holiday" was due to end this September, when the threshold at which buyers would have to pay the tax would fall back to £125,000.The "holiday" was due to end this September, when the threshold at which buyers would have to pay the tax would fall back to £125,000.
The Treasury will also publish reports on Tuesday ahead of the Budget setting out how "efficiency savings" in Whitehall could help pay for some government spending plans. But speaking to MPs on the Commons Treasury Committee on Tuesday, Paul Fisher, who is on the Bank of England's Monetary Policy Committee, warned that house prices should be allowed to adjust to affordable levels.
One report will suggest government departments which fail to make savings could have funding taken away from them. He said: "We have to allow the housing market to reach a new level at which people can enter it. If it means in future that people will have to save up a bit more to have a larger deposit, that's probably a very sensible thing."
He added: "There is a danger that policy intervention in the housing market could actually stop those sorts of adjustments happening. You have to be very careful with a policy intervention that you don't make it worse."
Car scrapping
The chancellor told Labour MPs on Monday night the Budget would focus on providing jobs and helping industries that would be important in the future.The chancellor told Labour MPs on Monday night the Budget would focus on providing jobs and helping industries that would be important in the future.
He is expected to reveal a rise in public borrowing, possibly up to £160bn, as tax revenues fall in the face of the recession.He is expected to reveal a rise in public borrowing, possibly up to £160bn, as tax revenues fall in the face of the recession.
Sustained spending
Mr Darling is also to revise forecasts about how much the economy will contract this year from between 0.75% and 1.25% to between 3% and 3.5% - which would be the worst recession since 1945.Mr Darling is also to revise forecasts about how much the economy will contract this year from between 0.75% and 1.25% to between 3% and 3.5% - which would be the worst recession since 1945.
But the chancellor is expected to say the economy will return to growth next year and gain further strength in 2011.But the chancellor is expected to say the economy will return to growth next year and gain further strength in 2011.
On BBC Two's Newsnight, Business Secretary Lord Mandelson said borrowing was growing as a result of the recession but sustained public spending and investment in the economy were necessary.
But his Tory shadow Ken Clarke said he expected Mr Darling to announce that the UK had the "worst budget deficit in the G20" on Wednesday.
While some borrowing would have to take place, it should not be borrowing for "political reasons", he told the BBC.
The Liberal Democrats have proposed raising the tax threshold to £10,000 - which would work out as a £700 income tax cut for people earning over that amount. They would pay for it by closing tax loopholes for big business and the wealthy.
Leader Nick Clegg said: "These plans will give money back to the people who really need it at the time when they need it most."
Car scrappage
Tuesday's government reports are expected to say it is possible to make a further £10bn efficiency savings from Whitehall departments from 2011/12 - on top of the £5bn already pledged for 2010/11 - as Mr Darling tries to show how he intends to balance the public finances.Tuesday's government reports are expected to say it is possible to make a further £10bn efficiency savings from Whitehall departments from 2011/12 - on top of the £5bn already pledged for 2010/11 - as Mr Darling tries to show how he intends to balance the public finances.
Other announcements on Wednesday may include a car scrapping scheme - in which people are paid to trade in older cars and buy new ones - a scheme for businesses struggling to get credit insurance and possible tax changes to help savers. Other announcements in the Budget may include a car scrapping scheme - in which people are paid to trade in older cars and buy new ones - a scheme for businesses struggling to get credit insurance and possible tax changes to help savers.
However, the Institute for Fiscal Studies (IFS) has warned that Mr Darling's plan, announced in the pre-Budget report, to introduce a new 45% tax rate on earnings over £150,000 from April 2011 was "very unlikely" to raise the £1.6bn a year predicted.However, the Institute for Fiscal Studies (IFS) has warned that Mr Darling's plan, announced in the pre-Budget report, to introduce a new 45% tax rate on earnings over £150,000 from April 2011 was "very unlikely" to raise the £1.6bn a year predicted.
The IFS predicted it would raise about £550m and could even cause tax revenues to fall if extra steps were not taken to reduce tax avoidance or discourage people from reducing their income.The IFS predicted it would raise about £550m and could even cause tax revenues to fall if extra steps were not taken to reduce tax avoidance or discourage people from reducing their income.
The Treasury said it stuck by its forecasts which were based on "detailed work on tax revenues that the IFS would not have had access to".The Treasury said it stuck by its forecasts which were based on "detailed work on tax revenues that the IFS would not have had access to".
The Liberal Democrats have proposed raising the income tax threshold to £10,000 - which would work out as a £700 income tax cut for people earning over that amount. They would pay for it by closing tax loopholes for big business and the wealthy.
Leader Nick Clegg said: "These plans will give money back to the people who really need it at the time when they need it most."
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