The Scottish Conservatives today warned the new Finance Secretary Keith Brown that LBTT rates must be reduced to avoid “virtual stagnation” at the top end of the market.

Shadow Finance Secretary Murdo Fraser MSP believes that sluggish activity in the market for homes above £500,000 has cost the Scottish government £30 million in lost revenue and argues the rate must be cut.

The warning follows previous intimations to then Finance Secretary John Swinney, who was minister behind the introduction of the legislation earlier this year, that setting the rate too high for more expensive properties would be highly detrimental to Scotland.

Now the party argues that the housing market for larger properties in many parts of Scotland has stagnated.

Scottish Conservative shadow secretary for finance, Murdo Fraser said: “There is a salutary lesson for the Scottish Government in the setting of the rates for LBTT by the previous Finance Secretary. My predecessor as continually warned Mr Swinney that he was setting the rates too high on more expensive properties, and the consequence of this would be a slowdown in the housing market at the upper ends, and a decline in tax revenues. Mr Swinney refused to listen and carried on regardless.”

He added: “The effect of that stubbornness is now plain for all to see. For Mr Brown’s warnings have been proven entirely true. While the housing market at the lower end has grown in activity, for larger properties over £500,000, outside hotspots like the centres of Glasgow and Edinburgh, there has been virtual stagnation. Just ask any property agent or lawyer and they will confirm that that is the case. And the net result has been that domestic LBTT has raised more than £30 million less than John Swinney originally budgeted for.

“If the new Finance Secretary wants a quick win, he needs to look again at the evidence of the impact of LBTT rates on the housing market, and even a minor tweak could end the stagnation and bring in more, much needed, tax revenue.”

A spokesman from the SNP responded: “In the very first economy debate of the new parliament, the Tories have chosen to focus on cutting taxes for those in £500,000 homes. Murdo Fraser couldn’t be any more out of touch with ordinary people in Scotland – or with the first-time buyers who benefit from the introduction of LBTT, a progressive replacement for Stamp Duty.

“In contrast, the SNP will use this debate to outline our plans to improve Scotland’s economy – with investment and tackling inequality at the heart of our economic strategy.”