Tories set ?250,000 stamp duty threshold

The Conservatives yesterday spent the last remaining £1bn in their election package of promised tax cuts, announcing that Oliver Letwin will raise the threshold for stamp duty on house purchases from £120,000 to £250,000 if he becomes chancellor on May 6.

Michael Howard appeared with Mr Letwin at the Tories' daily press conference to announce that the plan to abolish stamp duty for the av erage home in most of the country would - at the very least - "send a message" to Tony Blair about the need for fewer stealth taxes.

Labour retaliated by reminding voters that Mr Letwin's talk depends on fulfilling a contradictory bundle of promises to cut taxes and borrowing as well as both cut and increase spending - and an irresponsible "spend, spend, spend" spree by local Tory candidates.

It would mean an end to the 1% rate and see stamp duty begin at 3% on properties worth £250,000-plus, rising to 5% on purchases above £500,000. But in many marginal constituencies it amounts to abolition of the duty.

When justifying a U-turn in favour of cancelling England's current property revaluation - which threatens to raise council tax - the Tories argued that regional property variations were levelling out. Yesterday's policy document admitted "there are significant regional variations in house prices" - just the opposite.

The move, which comes on top of a Tory pledge to ease council tax for the elderly and help families to save for retirement, prompted a withering pre-emptive attack from the chancellor, Gordon Brown. He warned that his challenger cannot afford any such cuts because the Letwin spending plans lack credibility.

"No tax announcement today can obscure the basic problem the Conservatives face - the problem Labour had in elections of the 1980s, the problem John Major had in 1992, irresponsible and ultimately fraudulent promises on tax, spending and borrowing that do not add up and that they simply cannot afford," Mr Brown told Labour's campaign press conference.

To press home his point, Mr Brown published dozens of local spending promises by "out of control" Tory candidates and cited examples where the James Review of spending waste, on which Mr Letwin relies for his cuts, are offset by commitments to spend more.

The Tories have targeted their well-trailed £4bn package of tax cuts at middle-income earners at every stage of the "life cycle".

· raising the stamp duty threshold to £250,000, at a cost of £1.04bn, is designed to help first-time buyers in their 20s and 30s who manage to raise a mortgage but struggle to raise a deposit (cost £1 bn);

· adding an extra £10 to every £100 that basic rate taxpayers in their 30s and 40s put into their pension fund (cost £1.7bn);

· giving households where every adult is over 65 an annual 50% council tax discount up to a maximum of £500 (cost £1.3bn).

Yesterday's final announcement confirmed that the leadership has ignored many of the recommendations of its own tax reform panel, chaired by the former cabinet minister, Stephen Dorrell.

It set out options for raising personal tax allowances in order to stop more and more people being caught in higher brackets by creeping inflation, the so-called "fiscal drag" that allows the Treasury to make extra billions.

But the Tories will have to answer Mr Brown's charge that many candidates, including the shadow treasury chief secretary, George Osborne, have made uncosted pledges in their election leaflets.

Mr Osborne had promised to "do whatever it takes" to get an important bypass built in his Tatton constituency. Yesterday he explained: "Labour said they'd pay for the bypass and now they've referred it to the regional assembly."