Housing minister says stamp duty holiday is still 'an option', as Darling goes to ground

Leading figures in the property sector and MPs added their voices to concern that the uncertainty over a possible cut in the tax was hitting the housing market.

Television presenter Kirstie Allsopp said she had been inundated with calls from sellers and estate agents reporting that buyers are pulling out because of the speculation. 

As Caroline Flint confirmed a 'tax holiday' was being considered, leading figures called for Alistair Darling to make a statement in order to clarify the position

The co-host of Location, Location, Location warned: 'Buyers are dragging their feet, hoping that they will save £9,000 or £15,000 or whatever on stamp duty.

'I am in despair that the Government could have made such a mess when the housing market is particularly fragile. We really must have clarity.'

A furore has been growing since Chancellor Alistair Darling refused to deny reports that stamp duty could be temporarily suspended to boost the market.

Miss Allsopp also expressed incredulity at a claim from Housing Minster Caroline Flint that the market always 'flatlined' in August. 

Official figures show there were 143,000 house sales in August 2007, more than any of the previous six months.

Miss Flint confirmed that a 'tax holiday' was being considered but said it would be weeks before an announcement.

Philip Hammond , Shadow chief secretary to the Treasury, said Labour's position on the issue was a 'toxic combination of chaos and denial.'

He added: 'This continued dithering is undermining the housing market and damaging the wider economy.

'Alistair Darling must make an immediate statement to clarify the position and end this fiasco.'

Peter Bolton King, chief executive of the National Association of Estate Agents, said there was increasing evidence that the speculation was undermining the market.

'The calls and e-mails I have been getting over the past 48 hours indicate that people do not know what to do,' he said.

'The Government cannot play with the market like this when it is in such a delicate state.'

He urged ministers to copy an American housing rescue plan that included £4,000 tax breaks for first-time buyers.

Miles Shipside, commercial director at property website Rightmove, said: 'Speculation over a potential stamp duty holiday has helped to further contract the market as purchasers drag their feet hoping to benefit. It's a total red herring.

'The Government needs to make a decision quickly to remove this uncertainty.'

There is also increasing dismay among senior Labour figures at another PR shambles. One minister said 'You'd have to try quite hard to cock this up, but somehow we've managed it.'

The Treasury has launched frantic efforts to limit the damaging speculation.

In a statement, it said reports claiming that firm proposals had been drafted were 'simply wrong'. But it admitted several unspecified options were being studied.

A similar stamp duty moratorium was introduced by John Major as Tory Prime Minister in 1992.

Properties worth up to £250,000 were exempted from the charge for eight months. Last year, stamp duty brought in £6.5billion from homebuyers.

The Tories last night called for Home Information Packs to be suspended immediately to help revive the housing market.

Shadow housing minister Grant Shapps called on ministers to use a clause in the law allowing the controversial packs to be put on hold at any time.