The Treasury is facing a £5bn black hole in its finances due to falling property prices, according to the Liberal Democrats.
Falling stamp duty revenues, caused by the dropping value of property and the stalling of commercial and residential markets, could have serious repercussions for the UK’s economy.
The Liberal Democrats say the Government allowed Britain’s housing boom to go too far, and will now have to face the consequences.
Lord Oakeshott, Liberal Democrat Treasury Spokesman, says: “Gordon Brown let Britain’s house party get out of control. Now Alistair Darling has been left with a £5bn Stamp Duty hangover.
“The Chancellor had hardly sat down on Budget Day before the housing market fell off a cliff in early April.”
The Liberal Democrats estimate the Government’s revenues will fall by £5.2bn in 2008, based on a central projection of property prices falling 15% and transaction levels falling 50%.
Even on an optimistic projection of house prices falling 10% and transaction volumes dropping 40%, the Government will face an additional shortfall of £4bn.
Oakeshott says Britain now faces a mortgage famine, after a ‘wild feast’ led by Northern Rock, as most house sales are forced and often at knock-down prices.
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