Stamp duty on house purchases is a bad tax. There is a strong case for abolishing it and replacing it with something else. There is also a plausible argument for altering the level of stamp duty – up as well as down – in order to smooth fluctuations in the economic cycle. But there is no case for easing stamp duty as a one-off measure to stimulate a weak housing market. That the Chancellor appears to be considering such a move is an indication of disarray in Downing Street.

Economic management under new Labour used to mean adhering to a framework of rules rather than engaging in discretionary interventions. Tinkering with stamp duty would be a populist measure whose most visible effect would be to distort a market that already enjoys favourable tax treatment.

The objection to stamp duty on house purchases is that it is a tax on labour mobility. People who move home in order to take up new jobs ought not to be penalised for their initiative. The housing market as a whole is not highly taxed: VAT is not charged on houses, and homeowners pay no capital gains tax on their main residence. There are thus tax advantages to investing in housing, as opposed to investing in companies that produce goods or provide services. Some of the pain associated with the boom and bust of the housing cycle might be alleviated by ensuring that tax is paid by all homeowners instead of concentrating it among those who move home and thus pay stamp duty. But that is not the debate that the Government is proposing, being interested in reform only as a short-term expedient.

If a proper framework were introduced, stamp duty could respectably be reduced at a time of falling house prices, but increased when house prices are rising. This would imply, however, that seeking to moderate the pace of housing inflation is a worthwhile aim. However first-time buyers might feel, such an aim would certainly not be politically popular with homeowners.

It would also be difficult to achieve in practice. There is recent historical evidence. The Conservative Government raised the threshold for paying stamp duty – from £30,000 to £250,000 – in December 1991, amid a downturn in the housing market. The new threshold remained in place for nine months. There was an increase in the number of transactions immediately before the threshold was brought back to its original level of £30,000 in August 1992. In the next quarter, transactions fell back. It is likely that housebuyers were merely bringing forward their purchases in order to beat the deadline.

There is an appreciable danger that this sort of intervention, so far from smoothing economic fluctuations, might actually aggravate them, as well as putting further pressure on government borrowing.

Altering stamp duty in 1992 was of scant usefulness. The same would be true now. It would also give a damaging signal. It would indicate that the Government sees its role as targeting a particular level of asset prices. Government does not have the type of insight necessary to set a “fair value” for assets. Nor is it legitimate to aid housebuyers at the expense of other sectors of the economy and those who are still priced out of the housing market.