Brown cuts stamp duty at start of fightback

Brown's government said properties worth less than 175,000 pounds would be exempt from the tax, known as stamp duty, for one year, up from a 125,000 pound threshold now.

That is expected to take half of all home deals out of the tax net and cost the government an extra 600 million pounds at a time when the public finances are already stretched.

Brown needs to revive consumer confidence in the face of the credit crunch and soaring energy bills. A Times newspaper poll showed his Labour Party was 15 points behind the opposition Conservatives - and on track to lose the next election.

The stamp duty step was accompanied by a one billion pound package to aid first-time home buyers and people struggling to keep up with mortgage payments, as well as helping property developers to shift newly-built homes.

Shares in British homebuilders and home improvement-retailers jumped on the news but analysts were sceptical about whether the moves could pull the housing market out of its worst slump since the early 1990s.

"The stamp duty holiday may provide the domestic housing market with a marginal stimulus but we doubt it will have a major effect in getting the housing market moving again," said Philip Shaw, chief economist at Investec.

The package is a key part of Brown's efforts to relaunch his premiership in property-mad Britain after a bruising few months. He is also expected to unveil measures later this week or next to help households cope with the rising cost of fuel bills.

"These are the things a government should do to help people as we come through what is a difficult situation and then show that our economy is resilient and will come through these problems," he said after the housing package was released.

HOUSING BUST

House prices in Britain are sliding after a decade in which they trebled as the credit crunch, which started with a slump in the U.S. housing market, has forced banks to make it much harder for people to get mortgages.

Two-third of households own their homes in Britain, making prices a key plank for consumer confidence. The 10 percent fall in prices over the year and collapse in transactions is now hitting the economy hard as housing-related businesses suffer.

Construction activity shrank for the sixth month running in August, according to an economic report published on Tuesday.

Some analysts cautioned that a previous stamp duty holiday introduced by the Conservatives in the early 1990s housing crash had little discernible impact on new home loans.

"I don't think this changes much at all. People would be better waiting for house prices to fall," said Ed Stansfield, property economist at Capital Economics.

They also cautioned that the measures would do little to help middle-income Britons living in London where the average house price stands at 291,000 pounds, though that is inflated by large numbers of million-pound plus properties.

Still, shares in housebuilders such as Taylor Wimpey and in home improvement group Kingfisher jumped 9 percent and 5 percent respectively on the package, which included a plan to offer five-year interest-free loans to some first-time buyers moving into newly-built properties.

"The market's thinking that if they can turn work-in-progress into cash more quickly, it will help them keep within their banking covenants," Kaupthing Singer & Friedlander analyst Kevin Cammack said.

The government said its measures were targeted at the most vulnerable sections of society but the Conservatives said Brown's housing package would not help the vast majority of families facing a rising cost of living.

"I suspect what we will see in the coming weeks is a desperate and short-term survival plan for the prime minister rather than the long-term economic plan the country needs," the party's economic spokesman George Osborne said in a statement.