Terry Murden: A cut in stamp duty would only scratch the surface of our housing crisis

OUR question and answer feature today ("How do you fix the recession?") provides a snapshot of opinion on who's to blame for the economic downturn and what can be done about it. The banks, particularly in the US, come out badly, while there are numerous calls for help for the housing market, typically a cut in stamp duty.

It is likely that the Government will indeed cut this tax, not least because it has grabbed the front pages of the newspapers and is now an election issue. It would also be a relatively quick and easy remedy.

But will it work? Some say a stamp duty "holiday" would help kick-start the housing market and that with home sales practically at a standstill the Government is not exactly earning much from the tax anyway. It may also be a timely moment to axe what has always been an unpopular tax. Previous calls to abolish it have been rejected because of fears it would send house prices rocketing. There is little chance of that just now.

However, there must be a concern that scrapping stamp duty will only scratch the surface of the housing crisis. After all, the few who are buying new houses are likely to be offered a package that pays their stamp duty anyway. As for the banks, the crisis afflicting the US mortgage companies Fannie Mae and Freddie Mac risks unsettling the economy to a degree that is almost unthinkable. There was talk on Friday that failure of the duo could undermine the entire US financial system.

Closer to home, the Bank of England's Monetary Policy Committee chose to keep interest rates on hold, though some are beginning to wonder what real difference it would make if the base rate were to be cut. When the ship is holed and sinking fast there is not much to be gained by restarting the engines.

With the MPC playing with a limited toolbox, and the Government sticking to its 2% inflation target, there's little room for manoeuvre. The banks, meanwhile, remain unwilling to lend to each other and are changing the rates offered to borrowers and savers so often as to appear indecent. One high-street lender changed its mortgage rates three times in a week. This was to meet its own liquidity requirements, but volatility such as this is playing havoc with customer confidence.

Unless and until the banks are willing to pump money into the system and reduce their own lending rates nothing will move. We could be waiting a while for that to happen.

Questions remain over RBS sell-off
IT CAN'T be much fun being a banker these days, especially in Scotland. Royal Bank shares plunged another 9% on Friday amid news about the worsening global economy and the withdrawal of the main bidder for its insurance business.

Over at HBOS headquarters, there must be few nerves left to fray as the deadline approaches for the take-up of the rights issue shares. With shares trading below the 275p issue price and London now in the grip of a bear market there is a real chance that many of the bank's two million retail shareholders will not take up their rights. While HBOS will get its £4bn, the board will not enjoy seeing the issue turned over to its underwriters with the prospect of unwanted shares being dumped on the market.

RBS is now trading at a 10-year low, hit by its exposure to an American financial system close to meltdown and Zurich Financial's decision to pull out of the bidding for its insurance division. Investors fear that RBS will not be able to sell its Direct Line and Churchill businesses, or at least not for the £6bn to £7bn asking price.

Hopes of a sale now appear to rest on the German firm Allianz and American insurers Allstate and Travelers, but at a significantly lower price now that they hold a stronger bargaining position.

Sir Fred Goodwin, the RBS chief executive, has stated that the businesses will not be sold if he doesn't get the right price, which only fuels concerns that he'll be forced to look elsewhere to plug the gap in the bank's balance sheet.

Goodwin is already in talks with National Australia Bank, owner of the Clydesdale, to sell the Australian assets of ABN Amro acquired in last year's blockbuster deal that is fast becoming a millstone.

Analysts are beginning to question why Goodwin is so eager to sell off parts of the business so quickly and will be alarmed if it is merely to prop up the balance sheet. He will argue that the long-term benefits remain, though the numbers that justified the deal a year ago will look a little flaky in today's climate.