Stamp duty is making the housing crisis worse because it is deterring younger and older homeowners from moving, a new report has claimed.

The rate of home moving would be 27 per cent higher if the surcharge was abolished, the report by the London School of Economics and the VATT Institute for Economic Research says.

Older homeowners who want to downsize and younger families seeking to ascend the housing ladder are the victims of high stamp duty costs - forcing many to remain where they are in homes that are either too big for pensioners, or too small for the needs of a growing family.

Professor Christian Hilber, who co-authored the report, said: "Stamp duty discourages young expanding families from moving to more adequate, larger housing and it discourages the elderly from downsizing.

"Our analysis suggests that mobility would be 27 per cent higher if stamp duty was abolished or replaced with an annual tax on the value of property."

The report shows how the cost of stamp duty has risen substantially for those buying more expensive homes since banding was first introduced by Gordon Brown in 1997, before that stamp duty was a flat 1 per cent.

In addition, many pensioners in larger homes in more expensive areas are unable to move because buyers are put off by stamp duty, which costs £20,000 on a £600,000 home and a huge £143,000 on a £2million property.

Chancellor George Osborne’s 3 per cent stamp duty surcharge came into force on April 1, 2016, and applies to anyone who already owns one residential property as their principal place of residence and is buying an additional residential property within England, Northern Ireland, Wales, and Scotland.

The stated aim of the increase was to cool rising house prices, which some commentators blamed on the BTL boom, and create a level playing field for aspiring homeowners eager to join the property ladder.

But critics warned the move would hit the private rented sector disproportionately and reduce the number of available homes during a time of shortage, as landlords were driven from the market