BUDGET 2010: Well-off to finance help for first-time buyers

WEALTHY home owners were the Government's prime Budget target yesterday as Chancellor Alistair Darling increased stamp duty on million-pound properties to fund a pre-election gift for thousands of first-time buyers.

From April next year stamp duty will be increased to five per cent for houses worth more than 1m, while at the lower end of the market the threshold for first time buyers was doubled from 125,000 to 250,000.

The change will benefit 200,000 first-time buyers a year across Britain; in Yorkshire in 2009 91 per cent of first time buyers bought property worth less than 250,000.

There was further bad news for higher earners when Mr Darling announced the most expensive houses would now be excluded from housing benefit.

Mr Darling said: "In 2008, we also brought in a stamp duty holiday on all transactions under 175,0000, which ended in December.

"By helping 260,000 home-buyers, it supported the entire housing market when it needed it most.

"I can announce I will double the stamp duty limit for first time buyers from midnight tonight – from 125,000 to 250,000, for this year and next. This means nine in 10 first-time buyers will pay no stamp duty at all.

"To ensure this measure does not burden the public finances, this relief will be funded through an increase in the stamp duty to five per cent for residential property over 1m, from April next year."

House sales above 1m accounted for 0.6 per cent of all sales in Britain in 2009, with 53 properties sold in Yorkshire.

Seven-figure sales are most common in Greater London; representing 3.2 per cent of all sales last year.

Conservative leader David Cameron accused Mr Darling of stealing Tory policies on stamp duty.

He said: "The only new ideas in British politics are coming from this side of the House. Labour have made a complete mess of the British economy and they have done nothing to clear it up. They have doubled the national debt and on these figures they are going to double it again.

"The biggest risk to the recovery is five more years of this Prime Minister."

Mr Darling also announced that the much-criticised mortgage support scheme, launched in January 2009, will be extended for a further six months.

The flagship 285m project enables vulnerable households facing repossession to sell some or all of their home to a social landlord and rent it back.

It was later extended to include people in negative equity, while a fast-track team has been set up to handle certain applications following criticism over how long it took people to go through the application process.

The scheme came under fire after being used by only 18 households in Yorkshire last year – despite being designed to help more than 5,000 families across Britain and repossessions nationally hitting a 14-year high.

Stuart Cottee, head of tax at accountancy firm Deloitte, said: "We welcome the Chancellor's move to introduce a cut in stamp duty for first-time buyers for properties up to 250,000.

"This will undoubtedly prove a welcome stepping stone for those first-time buyers keen to get a foot on the property ladder in what is a challenging property market.

"We expect this to benefit over 200,000 buyers a year. The measure will reinvigorate the housing market after Bank of England mortgage data shows the end of the 175,000 holiday at the start of the year held back the house price recovery."

Mr Cottee said earlier this month first-time buyers dropped to 25 per cent, down from a usual 40 per cent of the total market.

Tax changes to hit high earners

High earners are to be hit hardest by the Budget as the Treasury stops tax relief on large pensions and removes personal allowances.

Chancellor Alistair Darling announced a raft of measures to raise revenue from the rich – to great cheers from Labour backbenchers – and told MPs how the cash would fund benefits for poorer members of society.

He said that for people with incomes of more than 100,000 a year – the top two per cent – the value of their personal allowances would gradually be removed.

The Chancellor also announced that tax relief on pensions would be restricted from next year, but again only for those with incomes above 130,000 a year.

He said: "Looking across all the tax rises since the beginning of this global crisis, 60 per cent of them will be paid for by the top five per cent of earners.

"We have not raised these taxes out of dogma or ideology.

"We are determined to ensure our overall tax regime remains competitive.

"But I believe those who have benefited the most from the strong growth in incomes in past years should now pay their fair share of tax."

BUREAUCRACY

THOUSANDS of civil service jobs will be moved from London to spread economic benefits and make cost savings.

The number of civil servants in London will be reduced by one-third, starting with 15,000 posts to be relocated within the next five years.

The news comes after the Yorkshire Post revealed last month that regional development agency Yorkshire Forward has produced a prospectus seeking to entice Whitehall Departments to the region.

The agency believes that if successful the initiative could be worth nearly 2bn to the economy and create 14,000 indirect jobs in the supply chain.

In 2009, more than 4,000 civil servants moved to Yorkshire and the Humber.

Chancellor Alistair Darling said: "We will also find savings by relocating civil servants from expensive London offices to elsewhere in the country.

"In the long term, I am announcing that the number of civil servants in London will be reduced by a third.

"As a first step, 15,000 posts will be relocated within the next five years. "

Yesterday's latest announcement was made as civil servants mounted picket lines outside the Houses of Parliament as part of a national strike over redundancy pay.

Union leaders complained that the relocation has cost jobs and forced some staff to seek alternative work because their families were unwilling or unable to move.

The general secretary of the Public and Commercial Services union, Mark Serwotka, said: "The Government needs to recognise that they can't force civil servants out of a job if they are unable to relocate.

"Relocation needs to be done with the consent of the workforce, not forced through and with proper equality impact assessments carried out."

A Government White Paper published last year raised the prospect of tens of thousands of the 132,000 civil servants along with 90,000 employees of "arm's-length bodies" currently based in London and the South-East moving to cheaper areas of the country.

DRINK AND TOBACCO

MORE misery was piled on the struggling pub industry with above inflation tax increases on beer, wine and spirits as well as a massive 10 per cent increase on cider.

Blaming a "tax anomaly", Chancellor Alistair Darling revealed the drastic changes to cider were necessary to bring it into line with other drinks.

He said changes will be made to the definition of cider to ensure specific strong versions are taxed more appropriately. Britain's best-known cider drinkers The Wurzels said their beloved brew was being "unfairly penalised".

The West Country hitmakers, who scored hit singles in 1976 with I Am A Cider Drinker and Combine Harvester, said: "We are all very upset that scrumpy cider, being one of the few pleasures that we cherish down here on the farm, is being hit by such a tax rise.

"We all realise that, in these current times, we have to tighten the string on our trousers, but we must admit that having to cut down on this local favourite leaves us feeling that we are being unfairly penalised."

Other alcohol duties will increase by two per cent above inflation for two further years from 2013.

British Beer and Pub Association chief executive Brigid Simmonds said alcohol taxes had cost thousands of jobs and "piled on the misery for Britain's hard-pressed pubs and beer lovers."

"Since 2008, beer tax has increased by an eye-watering 26 per cent – a 761m tax rise – and we have seen the loss of 4,000 pubs and over 40,000 jobs up and down the country.

"Beer sales are down 650m in the last year alone."

There was also bad news for smokers – tobacco duty rose again and further increases are on the way.

Tax on tobacco products has risen by one per cent above inflation, with two per cent real-terms increases to follow each year until 2014.

But the move won only limited praise from health groups, who claimed a larger rise in duty would have encouraged more people to give up smoking.

Action on Smoking and Health (Ash) chief executive Deborah Arnott said: "Raising the price of tobacco is one of the most effective ways of reducing smoking."

Tobacco Manufacturers' Association chief executive Christopher Ogden said the announcement would only provide "further stimulus" to criminals seeking to profit from the illicit trade in tobacco.

"On January 1 the Government imposed the largest tax increase on tobacco products in 10 years and now, less than three months later, taxes are to rise again."

Suleman Khonat, president of the National Federation of Retail Newsagents, said: "The increase in tobacco tax will drive sales away from legitimate businesses and into the hands of criminals."