Further pressure is being heaped on the Scottish budget as speculation mounts that the Chancellor will slash stamp duty for homebuyers south of the border.
Jeremy Hunt is said to be looking at the plan as a general election sweetener following a series of heavy by-election defeats which put Labour’s Sir Keir Starmer on course for Downing Street.
Talk of a cut in stamp duty comes amid resistance from Prime Minister Rishi Sunak and the Chancellor to cut tax in the autumn statement. Backbenchers are demanding lower taxes while the Institute for Fiscal Studies last week warned that it would be inflationary and could push the economy into recession.
Mr Sunak and Mr Hunt are said to be waiting for signs of economic recovery before making any tax concessions and stamp duty is seen to be in line with Tory voting aspirations on home ownership.
Should they opt for this route it may force the Scottish Government to follow suit by cutting land and buildings transaction tax (the Scottish equivalent of stamp duty), or risk creating another gulf in wealth either side of the border.
Mr Yousaf, the First Minister, is determined to make higher earners pay more and is considering a new income tax band. Scottish Labour, which hopes to form the next Scottish Government, has said it would use the council tax to tackle the housing shortage and a mortgage rescue scheme to help those at risk of lowing their homes.
A Tory source told The Times: “Cutting stamp duty would cost a lot of money but it is not a good tax because it disincentives people from moving, which is not good for the economy.”
Sunak’s leadership is facing its most significant challenge since entering Downing Street last year following defeat in Mid Bedfordshire and Tamworth.
Alistair Strathern overturned a bigger majority than any other Labour candidate since 1945 to win ex-Culture Secretary Nadine Dorries’ once-safe seat in a tightly-contested three horse race.
Sarah Edwards’ victory in Tamworth will worry Tories as Labour won the seat just months before the party’s 1997 victory.
The Prime Minister was keen to stress how “mid-term elections are always difficult for incumbent governments”.
Sir Keir hailed the victory as an example of the country wanting change, adding: “Winning in these Tory strongholds shows that people overwhelmingly want change and they’re ready to put their faith in our changed Labour Party to deliver it.”