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Treasury head Alistair Darling eliminated the tax that buyers are required to pay on home purchases of less than 175,000 pounds ($312,565) to encourage first-time buyers to jump on the property ladder.

Prime Minister Gordon Brown also unveiled plans to spend 1 billion pounds ($1.8 billion) to help buyers hit by a cut in bank mortgage lending in the face of the global credit crunch.

Property prices have fallen by 10.5 percent in the last 12 months, according to Nationwide Building Society.

The Treasury said that for the next year, people buying homes worth 175,000 pounds ($312,565) or less would not have to pay the 1 percent “stamp duty” tax, saving them as much as 1,750 pounds ($3,126).

Brown’s 1 billion pound ($1.8 billion) housing scheme, which he and communities secretary Hazel Blears will formally announce later Tuesday, will target first-time buyers and families at risk of having their homes repossessed.

Under the plans, first-time buyers with an annual household income of less than 60,000 pounds ($107,000) will be entitled to a free five-year loan worth up to 30 percent of a home’s value.

The government promised to help vulnerable families, hit by higher mortgage rates and rising fuel and food costs, from having their homes repossessed.

In some cases, the government will give money to families to help with mortgage payments in exchange for an equity stake in the homes.

In others, the government will buy the home from the mortgage company and then rent it back to the family at an affordable price.

The measures are aimed at keeping the stagnating British economy from falling into a recession, and boosting the popularity of the ruling Labour Party, which is currently lagging 20 points behind the opposition Conservative Party.