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Mrs Anne Main (St Albans) (Con)
It is a pleasure to serve under your chairmanship, Mr Betts. This debate is broad, and I am sure that there will be various takes on stamp duty. I wanted it to be broad because people will have different views on what we should be doing about stamp duty, which is incurred by many constituents throughout the country.
Stamp duty land tax first appeared in its current form in 2003, and it is interesting to note that it has not been debated outside its legislative context since then. It was debated briefly in 2006, when the zero-rate threshold was raised from £120,000 to £125,000, but other than that the House has not debated it, yet stamp duty has been putting increasing pressure on home buyers since then.
I am sure that the public find it odd that such a burdensome tax affecting that most British of ideals—home ownership—has not been properly examined by Members in the House. As a Conservative, I am proud to say that I believe we are the party of home ownership. Indeed, it was under Margaret Thatcher in 1980 that we encouraged people to believe that owning their own homes gave them a stake in society and their community, aspiration and a belief that they and their families could get on. I am sure that many people in your constituency, Mr Betts, have aspired to own their own homes and taken up the right to buy introduced in 1980.
It is depressing to realise that, in constituencies such as mine, not a single property will be left below the 1% threshold. Even a tiny one-bedroom flat—an ordinary flat, not in a chichi area—will cost £170,000. I am concerned that by allowing so many people to be sucked into paying ever-higher rates of tax despite the fact that earnings have either risen only modestly or been frozen, such as in public sector jobs, we are denying our families of the future the chance to own their own homes. In 1980, we believed in encouraging families at all income levels to own their own home, and I hope that we have not moved away from that ideal.
Labour introduced the tax in 2003, but I believe that we should move away from politics on this matter, as the tax now sucks in many constituencies represented by Labour Members. Many of them are on the payroll, like Government Members, and will not be able to discuss the matter in this debate, but they know who they are. A quick look on Rightmove, Zoopla or similar sites will show how many constituencies—often ones with areas of multiple deprivation—have hugely expensive house prices. They are victims of what I like to call bracket creep.
The House might be interested to hear a few figures from Zoopla, showing how the tax hits huge numbers of people across the political divide. In Rutland, Leicestershire, the average house price is £319,000. In Witney, Oxfordshire, it is £324,000. In Twickenham, it is £653,000; in Bath, £355,000; in Cheltenham, £304,000; in Southwark, £653,000; in Bethnal Green, £447,000. I hope that I have demonstrated in that snapshot that the issue affects all parties and areas across the country. The Chancellor might be interested to know that the average house price in his constituency of Tatton is £640,000, with a stamp duty liability of £25,600.
As MP for St Albans, I am regularly told tales of woe by home buyers there. When I asked my local estate agents at Collinson Hall what effect they believed the stamp duty land tax was having on the housing market, some of the things that they said were shocking. To quote their e-mail to me:
“I do, however, believe that the real lack of supply of properties in St Albans between £650,000 and £1 million is due to the majority of local people who in earlier times would have been looking to sell in this price range and buy upwards in the market deciding to extend their own property instead of moving, due to the moving costs including SDLT of around 6%. This scarcity is in turn having a direct impact on prices increasing.”
People’s lack of willingness to move and their decision to stay put, rather than be clobbered with the duty, is resulting in a sclerosis in the market.
Shockingly, Collinson Hall went on to say that
“we find that more buyers use stamp duty as a negotiating tool to drive an asking price down, and we do have to be extremely careful when pricing a property that would be close to a stamp duty threshold. For example, if we feel a property is likely to be worth £265,000, the conversation would likely be, ‘You are definitely going to get £250,000 because of the change in stamp duty, but if you price it at £275,000-£280,000’”—
thus inflating the price—
“‘you may get someone that feels it is priced enough over the threshold to justify paying the extra stamp duty.’”
That is bizarre. I cannot believe that we should price houses to move them away from certain thresholds so that in the end people feel, “Well, they’re never going to accept the lower figure, so I’ll pay it.” It is having an effect on the market in areas such as mine.
According to the TaxPayers Alliance, by 2017-18, 87% of homes in St Albans will be in the 3% band or higher. If we believe that the levy was introduced to clobber those who are more affluent, I cannot accept that 87% of all homes in my constituency will catch those people. I have areas of multiple deprivation in my constituency, as I am sure do other colleagues here, and people there are being hit just as hard trying to stay in the area close to their families.
It is getting harder and harder for public sector workers to afford living in higher-priced areas such as my constituency. They are priced out by high house values and doubly clobbered by having to pay stamp duty. A tax that I believe was originally designed for wealthy home buyers now brings so much money into the Treasury that—I say this to the Minister—it is now seen as an untouchable cash cow, too big and too lucrative to be tinkered with.
Collection of stamp duty in its current form enshrines inequality, denies fair access to home ownership and taxes aspiration. It is discriminatory, targeting certain areas of the country regardless of ability to pay. That cannot be fair. Ordinary families are being clobbered the most by the tax. To give an example of how the middle-class postcode tax, as I call it, works, here are three starting salaries for public sector workers: a nurse is paid just over £21,000, a teacher just over £22,000 and a police officer just over £23,000. Those are certainly not riches beyond avarice, but many in the public sector in my constituency and others like it earn such salaries.
If such people are trying to save for their first home, they have a mountain to climb. While they wait to get their finances in place, they will face, according to Zoopla, a crippling average home rental in the south and east of £1,765 a month. They will have to shell out an awful lot of their modest salaries just to live in the area that they serve by working in the public sector. If they are not paying rent, they may be squatting like overgrown cuckoos in their parents’ home, while they pile as much money as possible into their savings pot or piggy bank to get on the housing ladder. If they are young graduates, 9% of their income will already have been sliced directly out of their salary through the tax system to pay for any student loans. They face a housing market that has risen by 27% over the past five years, according to the Office for National Statistics. House prices are zooming out of reach. They will have to scrape together a deposit and fees. Then, if they happen to be a victim of the postcode tax, they will have to save for stamp duty on top of everything else.
The reason why it is a postcode tax is that—as will become apparent if hon. Members go to property websites—in some postcodes, hardly anyone pays any tax to the Chancellor, not even 1% tax on a modest three-bedroom semi-detached house. In other areas, such as mine, the same house has a huge 3% tax bill attached to it. Houses of £500,000 and under are not mansions. They are ordinary family homes for many of us. That is why we must tackle the bands to banish the unfairness of bracket creep.
Take the middle figure among our public sector employees, a young teacher with a salary of just over £22,000. That salary would go a lot further, for example, in Droitwich, a pleasant spa town in the midlands where the average house price is £203,000—well under the 3% limit with a tax duty of just over £2,000. In St Albans, the same house would cost an average of £475,000. According to the latest figures, it would incur a whopping £13,701 in tax.
People working in our public sector, aspiring to achieve the same things, are, in certain areas, having to put a large amount aside to pay tax—and for what? What are they getting that that teacher in Droitwich does not get? They have the same salaries, same job, same hopes and dreams of their own home and, hopefully, a family; but in areas such as mine, there is a massive financial hill to climb, and people are finding themselves unable to access the housing market, no matter how hard they work or save, and doomed, at best, to squeeze into tiny spaces unsuitable for family living.
Is it any wonder that, according to MoneySuperMarket, people are aged 36 before they can expect to get on the property ladder in the south and east? That is nearly middle-aged. By 36 most of us feel that we should have achieved things with our lives. We are sitting on a time bomb. A whole generation will, according to the Office for National Statistics, have their first child when they are 30—before the age at which they can expect to be on the housing ladder—and probably be divorced by 40, possibly due to the pressures of trying to get on the housing ladder, having spent their entire adult lives, or at least the most productive part of their adult lives, unable to put a roof over their own heads and battling financial stresses. That is not the mark of a caring or fair society. I do not believe that that was intended when stamp duty land tax was originally thought of. It is a stealth tax, because people are unaware of exactly how much they are going to pay until they find the house that they want to buy. It is not a tax that allows anyone to figure the amount of savings into paying it. It is variable.
This is a timely debate, as the major parties are now furiously refining their policies, which will later appear in manifestos, and then we will have a chance to thrash things out. It was interesting to see that in a speech in “Total Politics”—it was pointed out to me—the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), prior to the Labour party’s manifesto being made, gave a commitment to get rid of stamp duty land tax for all houses under £250,000. Sadly, that did not make it into his manifesto, or into ours. I should like to know the Labour party’s view of whether there should be movement in the bands.
It is time to give some helpful suggestions to the Chancellor before his autumn statement and tease out from the Labour party what commitments it would like to make to the British public, because as I said earlier, this affects everyone; it does not matter whether people are in a Labour, Conservative or Liberal Democrat constituency.
We have a duty to help the next generation get on the ladder to owning their own home. The Government have recognised this. On 30 April, during Prime Minister’s questions, I asked him about considering stamp duty thresholds and helping young people get on the housing ladder. He said that he was
“very happy to look at the issues that she raises, but the weapon that we have used to try to help young people who do not have rich parents but who can afford mortgage payments is Help to Buy”.—[Official Report, 30 April 2014; Vol. 579, c. 828.]
I agree with the Prime Minister that home ownership should not be about the bank of mum and dad, but in constituencies such as mine, it is about the bank of mum and dad. In many ordinary families, parents do not raid the savings account or the trust fund, but will often downsize to release equity.
It is ironic that in constituencies such as mine parents who trade down to release equity to help their children will usually pay stamp duty on their smaller property as well, and then hand over money to help pay the stamp duty on the son or daughter’s purchase. Taxed on the way up and taxed on the way down.
Although the Help to Buy scheme is a valuable tool that works in some parts of the country, as has been shown by statistics, the areas where it does work are those with lower-priced houses. It is not well taken up in areas with high-value house prices, such as mine. In the two years between March 2012 and 2014, only seven people have used the Help to Buy New Buy scheme in St Albans. No one has just used the Help to Buy scheme. Why? If a buyer cannot scrape together a big enough deposit to qualify for the Help to Buy scheme, how on earth are they going to save to pay the tax associated with it as well? The Chancellor is helping giving with one hand and taking back with the other. That is so unfair. If a young person qualifies for the Help to Buy scheme, where are they getting the money from for the tax due on a high-value property? It cannot be rolled up into their mortgage, so is it the bank of mum and dad again? I think that it would have to be; either that or, hopefully, somebody will lend it to them from another source. Therefore, we are pushing people more into debt.
We must not try to tinker with the Help to Buy scheme, because it will not remain in place in perpetuity for first-time buyers, and it certainly does not help people who are downsizing. Unless we tackle stamp duty, it will be an ever-increasing obstacle to property ownership. The Homeowners Alliance points out that stamp duty has risen 7.1 times faster than inflation, 6.5 times faster than average earnings and 4.6 times faster than house prices. Stamp duty is proving a significant barrier to first-time buyers getting on to the property ladder and slowing existing homeowners’ progress up the ladder. The average stamp duty bill is now the equivalent of 11 weeks’ wages—for what?
Too many constituents of all ages, whether they are moving up or down the ladder, point out the unfairness of being taxed multiple times in high-value areas such as the south and the east. People are taxed if a couple splits up and one has to buy the other out if they want a property; taxed if a divorcing couple have to buy two less expensive properties in areas like mine—they will still pay stamp duty—further diminishing their ability to stay in the area, which is perhaps where their children go to school; taxed if a separated single father tries to buy to stay near his children; taxed if they are elderly and want to downsize to help supplement funds for personal care. Taxed on the way up and taxed on the way down.
Stamp duty land tax is a strong contender for the worst-designed tax, because the relevant rate applies to the full sale price. Transactions of very similar value are discouraged to completely different degrees and there are enormous incentives to keep prices just below the thresholds, as Collinson’s estate agents have pointed out. The Government should move away from this slab structure and tackle the unfairness of paying stamp duty on ordinary homes below £500,000. Overhauling stamp duty, as my hon. Friend the Member for Esher and Walton (Mr Raab) said today in The Daily Telegraph, would fuel growth and increase wider tax receipts, and, above all, it would be fair and increase property ownership for those we say we would like to help.
These artificial ceilings distort the market. Builders tell me that home owners put off doing improvements to homes—I had an e-mail to that effect—that are at threshold level. What would be the point of making those improvements if no money would ever be recouped? Sellers come up with creative wheezes to stay just below the threshold. Such a ceiling reduces labour mobility, because people are discouraged from moving to where suitable jobs are available. Data from the Land Registry show bunching below stamp duty thresholds.
Let me mention a St Albans house move example that could so easily be an example from Cheltenham or Tatton. On average, a person moves four times in their lifetime. In St Albans and many other areas, particularly in the south and east, this could be their property journey: first home, a small flat, average price just over £262,463 and purchase price incurring 3% tax of £7,873; second home, a small terrace, average price of £393,543 but more than £11,806 tax due; third home, a modest family detached, £759,191 and now paying more than £30,000 tax; and when the family flies the nest, hopefully when deposits have been saved up, Mr and Mrs Average in St Albans downsize to their fourth home, a modest semi-detached at £492,802, paying nearly £15,000 in tax. Of course, that family could have moved many more times. Nevertheless, during those four moves, they will have a stamp duty spend of more than £64,000. The average wage is only £37,000 in St Albans, and obviously a lot less for younger people, so that is nearly two years’ pay just to be able to move house, on top of all the fees.
According to a Lloyds survey of my constituency, people in St Albans pay 34% of their disposable income on their mortgage payment, compared with the 28% average. Although stamp duty hits London and the south-east particularly hard, analysis of the data shows that it is a huge burden on the entire country. The key findings of this research are that in 2012-13, more than £4 billion was paid by home buyers in stamp duty, of which £3.6 billion was paid at a rate of 3% or more, which shows that a significant number—indeed, the majority—of homes are coming into this 3% bracket. We should not be clobbering people just because we can. I think that tax should be fair and proportionate and should not suck ever more people of modest means into its remit.
If a tax has a negative impact on society, as Members of Parliament, we should tackle it. It too easy to say, “There is a black hole. Let’s fill it.” I read in the paper yesterday that Mr Speaker has decided to spend £100,000 more in his budget. We spend a lot of money in the House moving the furniture around and decorating things that seem perfectly fine to me. We waste money, left, right and centre, in Departments, on ministerial cars, and so on, and even, I would say, giving free school meals that we cannot afford or need to give to children in areas such as mine, for example. We can look at other budgets. Why are we clobbering young people trying to own their own home? It is not fair; it is too simplistic and too easy; and the desperate aspiration to get on the housing ladder means that people will have to stump up somehow, if they wish to do it.
It is obvious that the first two brackets are catching significant numbers of ordinary people, many of whom can least afford it. I call on the Minister—I am pleased to see him here—to go back to the Chancellor, persuaded of the case that we should get rid of this unfair postcode tax on thousands of ordinary families with homes worth less than £500,000. They are being stamped on by the Treasury, and it is just not fair.
Mr Dominic Raab (Esher and Walton) (Con)
It is a great pleasure to serve under your chairmanship, Mr Betts, I think for the first time. I congratulate my hon. Friend the Member for St Albans (Mrs Main) on securing this important debate with her characteristic tenacity. I can only reinforce the compelling arguments she has made, which I am sure will be conveyed to the Chancellor through Treasury Ministers and Parliamentary Private Secretaries. I hope that that will result in further action on this important issue.
I start on the key point of principle of economics: a well functioning housing market should enable people to engage in mutually beneficial transactions and make efficient use of existing housing stock. We know that we have a problem with the supply of housing stock, which is all the more reason to make the best use of the stock we have. I pay tribute to the coalition for its efforts to increase the overall housing supply and, in particular, the supply of affordable housing.
What does that principle mean for the average person? A family in a small house should be able to move to a larger one, if they need to or if they have a growing family, or because of a promotion from working harder. Older couples should not be forgotten. They want to be free to downsize when and how they want, not least to free up cash for other needs. They might want to go travelling, if they are in good health. They might want or need to use the money for care, or they might want to realise some of the value from their assets and free up some money from them. We should not be creaming money off people with those real social needs. The key point is that stamp duty is a poorly designed tax that undercuts that type of social mobility in both directions.
Further to what my hon. Friend said, I have all sorts of horror stories from my constituency, where we feel the disproportionate burden of stamp duty. Some families in Elmbridge are on very high incomes, but overall, looking beyond the small minority who are doing incredibly well and are very affluent, the truth is—I see this day to day, week to week and month to month—that it is no land of milk and honey. The vast majority are hard-working people on low and middle incomes. We also have pockets of acute deprivation and, in particular, as I alluded to, elderly deprivation. For many residents, their home is a nest egg that has been built up after years of saving. They may be asset-rich in statistical terms, but they are income-poor. They might want to downsize or need to release the cash for income or the cost of care, and stamp duty has an utterly arbitrary impact on them.
As my hon. Friend said, many key workers in local public services simply find it unaffordable to live locally, and stamp duty exacerbates that problem. Above all, I want to take time to speak out as a voice for the many people in low and middle-income households. They are working hard and facing high cost of living pressures, of which affordable housing is a major factor. As of the second quarter of last year, the median house price in Elmbridge was £445,000. That does not buy a mansion. Typically, it fetches a nice, but relatively modest-sized, two-bedroom home. According to market data, a family in a small home looking to buy a larger one would face a bill of £13,000 on the average two-bedroom property and a bill of £23,000 on the average three-bedroom home.
Mrs Main
Is my hon. Friend as concerned as I am about families growing up in cramped environments? What space is there for children to study? There is a direct correlation between people living in cramped conditions and achievement in life. If we are not allowing people to move up, that could be part of the problem.
Mr Raab
My hon. Friend has made a typically astute point. The problem has a social impact as well as an economic one. Let us remember that stamp duty costs are on top of the tax on income, the money that families scrape together for a deposit, the legal fees, which are increasingly high, and the money for a survey. The cumulative bill in my constituency is staggering. To give a sense of the big picture, for 2012-13, residents in my constituency paid £56 million to the Exchequer in stamp duty on residential property. That is more than the total paid in the whole of the north-east of England. I am not trying to set off some sort of north-south divide, but at some point in the debate on the redistribution of wealth, there needs to be some recognition that it is not just the uber-wealthy and the super rich who are paying the burden; it is middle England, the middle classes and those on relatively low and middling incomes.
The amount of stamp duty paid in my constituency is equivalent to a third of the figure for the entirety of Scotland. Frankly, in constituencies such as mine, stamp duty feels like an assault by the taxman on hard-working, middle-income savers, who are precisely the people we should be incentivising, not walloping—I would have said “clobbering”, but my hon. Friend has used that word. Of course, Esher and Walton is just one example of the geographic unevenness of stamp duty. London accounted for 41% of residential stamp duty last year, with the south-east accounting for a further 22%. England as a whole accounts for 94% of UK stamp duty. The tax clearly has an arbitrary effect in different areas of Britain.
More broadly, the tax is not economically efficient. If we look at the raw economics—I know my hon. Friend the Member for Harlow (Robert Halfon) and the Minister care deeply about economic efficiency—we see that it is an inefficient tax. Stamp duty on residential property distorts the whole structure of the housing market. My hon. Friend the Member for St Albans has mentioned the slab structure, under which the relevant rates apply to the full sale price, not just the part above the relevant threshold. That creates huge cliff edges. A £1 increase in the price of a home, from just under £250,000 to just over, triggers an extra tax liability of £5,000. The cliff edges have been shown to harm both home owners and would-be buyers. After all, why would someone put an offer in for a property at £255,000, when for the extra £5,000 in bricks and mortar, they would pay more in stamp duty? They would not—no one does, and the data from all the estate agents bear that out.
Data on the distribution of transactions show that most buyers are simply unable or unwilling to meet asking prices just above the £250,000 threshold, because of the extra £5,000 penalty in stamp duty. As a result, the property experts London Central Portfolio, together with the Cass business school, has estimated that 13,800 home owners a year are being forced to reduce the asking price of their house to get under a stamp duty threshold. Other would-be sellers are either unable or unwilling to reduce their prices to below the nearest threshold. That causes bottlenecks in the market and a drought of available properties in certain price ranges in certain areas, until market prices rise far enough to justify the additional stamp duty, which takes a while. That deters buyers and sellers and reduces labour mobility, as my hon. Friend pointed out, because people are discouraged from moving to where suitable jobs are available, which damages the economy as a whole. It is little wonder, therefore, that the Institute for Fiscal Studies has described stamp duty as
“a strong contender for the UK’s worst designed tax”,
with a “perverse” and “absurd” structure. The director of the IFS argued earlier this year that in the modern era of broadly-based taxation, the case for maintaining stamp duty is “very weak indeed”.
However, it is not just the economic distortions and inefficiencies that we should care about. Frankly, Government Members have perhaps been a bit too defensive about coming out and saying squarely, as my hon. Friend has, that this is socially unfair and wrong. That is illustrated by the data from my constituency and the impact of the 1% rate, let alone the 3% rate. Take a family—a two-salary couple who both earn £15,000 a year—who are mortgaged to the hilt to buy a property. The usual limit, which is strictly enforced, is debt at four times joint salary. They have scraped together the money for a 10% deposit, and that way they can buy a property at £150,000. Why should they pay £1,500 extra in tax at that point? It is just a penalty. It might seem like a small percentage of the price of the property, but for families on tight margins, working hard, it is utterly punitive.
When the additional 3% and 4% rates were introduced in 2000, they were designed to target the wealthiest, and had the original threshold for the 3% rate risen in line with house price inflation, it would be levied only on properties worth £1.3 million or more today. In 2000, 391,000 homes were exempt from stamp duty. Today, that number has almost halved. That is the level, scope and scale of the fiscal drag we are discussing. The average UK house price in 2000 was around £110,000, which is well below the 3% threshold, but the average price today, according to the Office for National Statistics, is £265,000, which is well over the 3% rate, landing middle-income home buyers with a bill of some £8,000. If we are really in the business of supporting and encouraging savers, how on earth can we justify such a penalty? Sales in the 3% band covering homes worth between £250,000 and £500,000 increased from 8% as a proportion of total sales in 2003 to 19% in 2013. According to London Central Portfolio and the Cass business school, revenue from the 3% band has almost tripled since 2000, rising from £724 million to close to £2 billion this year.
Such a fiscal drag is not only a serious problem in its own right, but should also serve as the starkest of warnings to anyone in any party who is tempted by a mansion tax, as proposed by Labour and the Liberal Democrats. That is perhaps why no Labour Back Benchers are here to justify either the stealth tax implemented by the former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), or their current proposals.
Mrs Main
I am pleased that my hon. Friend mentions the mansion tax, because there has been much rhetoric about it catching only the wealthiest. I completely agree with him that people felt that the 3% stamp duty threshold was not for them and only for the wealthiest, but in areas such as mine and his, it will soon become a mansion tax for the ordinary and not the wealthy.
Mr Raab
My hon. Friend is absolutely right. When the Liberal Democrats originally started discussing a mansion tax, it was to be levied on homes worth £1 million, and when everyone complained about fiscal drag, stamp duty and the like, it was increased to £2 million. What is most interesting is that if the Liberal Democrats use that extra money for the perfectly laudable objective of increasing the personal tax allowance still further, there is a black hole of something like £6 billion in their spending plans, so they would have to increase the net of their mansion tax. The lesson from stamp duty that the Labour party has offered us, which the Liberal Democrats ignore and which Conservatives must take on board, is that what starts out as a tax on the rich always ends up—I will use the word my hon. Friend used—clobbering the middle classes. That is the stark reality that we must guard against.
Stamp duty should be abolished for homes under £500,000 and the remaining thresholds should be indexed to house price inflation in primary legislation. It would be a dynamic tax cut that would probably—it can never be guaranteed—raise additional revenue. I set out in a report for the Centre for Policy Studies how we could fund the change up front by cutting back on the waste mentioned by my hon. Friend. Extra revenue could be raised while a major economic and social issue is dealt with.
Stamp duty has morphed into a vindictive stealth tax on aspirational Britain. It distorts the housing market. It warps labour mobility. It penalises savers. It wallops those on relatively low and middle incomes. The case for reform is overwhelming.
Zac Goldsmith (Richmond Park) (Con)
It is a pleasure to speak under your chairmanship, Mr Betts, and to follow two superb speeches from my hon. Friends the Members for St Albans (Mrs Main) and for Esher and Walton (Mr Raab), both of whom have made points with which I agree completely; I will do my best not to duplicate the message that they have delivered, partly because I will not deliver it as well as they have. I will be interested to hear a thorough response from not only the Minister, but also the Opposition Front-Bench spokeswoman, because many questions have been asked about matters such as the mansion tax and the central issue of stamp duty.
We have a housing crisis in this country. No one argues with that. Home ownership is in historic decline, falling to the lowest levels since 1988. That matters if one cares about social harmony and stability and if one believes it important that people should have a stake in society. It could not be more important. We clearly need more homes, a big issue debated in the House on many occasions, and people need better access to finance, another massive issue that has already taken up a lot of time in the past four years that I have been an MP. I will not dwell on those issues today, however, because we have in front of us a simple but radical tool that, as my hon. Friends have pointed out, could make an immediate difference—the difference between affordability and unaffordability for a whole swathe of people.
The problems that have been highlighted are particularly acute in London, where the average first home price is some £330,000—squarely within the 3% stamp duty band, adding thousands of pounds to the bill. My constituency covers Richmond and north Kingston, but according to the latest figures for Richmond borough, 96% of homes are likely to be in the 3% band by 2017-18. It is worth repeating that of the total £4.7 billion stamp duty yield in England, almost half is paid by those living in Greater London. Stamp duty could therefore fairly be described as a tax on London. Unsurprisingly, young people in London find it almost impossible to get a foot on the property ladder as a result. The surge in property prices means that the number of households paying stamp duty has more than doubled over the past decade. It is particularly punitive for first-time buyers, who are denied access to home ownership.
Rather than repeat all the excellent remarks that have been made, I am going to get straight to the point. I strongly support the campaign to reform stamp duty. We should absolutely abolish stamp duty for first-time buyers. I would set the threshold at £500,000, but there is a debate to be had about where it should be. It is worth remembering that in 2007 the Chancellor pledged to scrap stamp duty for first-time buyers up to a level of £250,000. The stamp-duty holiday was tried for a couple of years and ended in 2012. It is worth reminding the Chancellor that it was an important pledge at the time and is probably more important now than when it was initially made. He ought to revisit it, but more bullishly this time. We could form a consensus, certainly on this side of the House, at a threshold of some £500,000 for first-time buyers.
We should change how stamp duty works and move away from the brutal, nonsensical cliff-edge system that distorts the market, and we could form a consensus around that. We need to move towards a progressive system in which the increased rate from one band to the next applies only to the difference between the two bands. The current system makes absolutely no sense at all.
All that could mean a loss of revenue to the Treasury, but I doubt that. It would stimulate activity and have a positive impact. If it led to a decline in Treasury income, we could adjust rates for foreign buyers of UK properties and apply capital gains tax even to their primary residences, because the evidence suggests that overseas investors in bricks and mortar are having an impact on the housing market, particularly in London.
At the end of the day, we want people to get on the housing ladder, and the current stamp duty regime inhibits that. It inhibits something that every single person in the House would support. With minimal effort, the Chancellor could make the world of difference for countless aspiring home owners. I strongly urge him to do so.
Mr Clive Betts (in the Chair)
Order. Before I call Marcus Jones, I thank him for the indication that he may have to leave this debate for PPS duties in the Chamber if the next debate there starts before we finish here.
Mr Marcus Jones (Nuneaton) (Con)
Thank you, Mr Betts, for that latitude.
I congratulate my hon. Friend the Member for St Albans (Mrs Main) on securing an extremely important debate. I come to it as one of the many Members, particularly Conservative Members, who have worked in the real world before coming to the House; I used to act for people buying and selling residential properties. I have conducted thousands of residential conveyancing transactions, so I have seen at first hand the effect of stamp duty and some of the challenges that it can cause.
Back in the ’90s, the stamp duty level was £30,000, although it was quickly doubled to £60,000 by the Conservative Government of the time. I remember, however, a long period under the Labour Government when the rate was held at £60,000, and right up until 2003 virtually every single transaction was subject to stamp duty. We are getting back to that point now, even in the type of area that I represent in the midlands, where house prices are below the average. When stamp duty was first introduced, it was not envisaged as catching people buying at the bottom end of the market, as it now seems to be. Stamp duty does not affect only the south-east and London. I understand why Members representing those areas, where it is an issue, are present, but it is something that affects the whole country.
I am going to make a few points about how stamp duty is calculated. First, there is the slab rate; as we all know, if people buy a property at £250,000, they have to pay £2,500 in stamp duty for the privilege of that transaction. If they purchase a property for £250,001, the stamp duty goes from £2,500 to £7,500—a massive leap. As my hon. Friend the Member for Esher and Walton (Mr Raab) said, that causes a huge market distortion, particularly for people who are selling properties valued by estate agents at £255,000, £265,000, £270,000 or even £275,000. In such cases, most buyers will say, “That’s fine, but I don’t want to pay £8,000 or £9,000 in stamp duty, so I do not want to pay £270,000 for your property. I want to buy it for £250,000, because the stamp duty is far lower.”
There is also a problem for many second-time movers. At one time, many of them would have been able to take mortgages with a loan-to-value ratio such that they could afford to finance the stamp duty out of the overall transaction, putting it into their mortgage. People might think that that is a good or a bad thing, to put a tax debt over 25 years or whatever the mortgage term is, but that is what a lot of people did to accommodate it. Over the past years, however, with the tightening of mortgage lending, lenders have decided that they no longer want to see that happen, which has made things difficult for second-time movers.
Another thing caused by stamp duty has been, traditionally, the move by some people to commit tax avoidance—on the part of some, even tax evasion. For obvious reasons, I always discouraged people from doing that; in some cases, I said that I would not act for those trying to commit tax evasion. I have heard of all sorts of ideas—carpets and curtains for a couple of thousand pounds being the obvious trick to avoid stamp duty.
I have even heard of someone saying, “This is the price, then x amount on top, and I will throw in a second-hand car.” That type of practice is what people talk about as a way to get around our slab rate system. I do not condone it and I would never do that for people; I hate to think that others have conducted such transactions. When people are buying property and paying stamp duty, we must always remember that it is their personal liability and not that of the adviser advising them.
Mrs Main
One of the worst cases that I have heard is of people selling properties with planning permission for a large extension, so that they do not then pay stamp duty on the builder building the extension, but simply on the property that they have bought. That is the most outrageous case that I have heard recently.
Mr Jones
That can also happen.
We need to look at the slab rate again and to consider the distorting effect that it has on the market and the difficulties that it causes people, whether buying or selling—for people who want to sell because they want to downsize, or people who want to sell because they want to move on. That is one of the reasons why some of the suggestions that I have heard over the years to charge stamp duty to the seller would also be completely inappropriate and unacceptable; it would place a massive burden on those trying to sell the investment that they have often worked for over many years.
I make a final plea to Ministers. If they are ever minded to make any changes to how stamp duty is charged or to its rates, will they be extremely careful about how they do it? Back in the dark days of the great Labour recession in 2008, following pressure from the Conservative party, the then Prime Minister and Chancellor decided to create a stamp duty holiday. They announced it with great fanfare in the press and on the media, but it was probably six or seven weeks before the policy was implemented.
I can tell hon. Members that a flat property market was depressed further, because people did not want to conduct transactions between when that announcement was made and when the measure came in, because that would not make financial sense and they could save money. I implore Ministers to make any changes carefully and to consider the implications for the overall housing market, which is extremely important to our economy. The housing market is now on the move, which is part of the reason why our services sector in this country is doing so well.
I ask Ministers to consider the issue extremely carefully. It affects not only the south-east or London, but all parts of the country in differing ways. It creates massive distortion, because of the slab rate. I ask the Minister to consider it carefully not only in reply to the debate, but in his work on our party manifesto.
Mr Clive Betts (in the Chair)
Order. I say to the right hon. Member for Wokingham (Mr Redwood) that it is slightly unconventional to come into the Chamber halfway through the debate; as he is aware, other people have spoken and a debate is normally about exchanging views and listening to other people. On this occasion, however, we have plenty of time and I will still call him.
Mr John Redwood (Wokingham) (Con)
I am grateful, Mr Betts, and I give my apologies to you and to the Chamber, but my constituents also wanted me to make it clear that Wokingham supported the puppies motion in the main Chamber. I felt that I had to do that first, before coming to debate the important issue of stamp duty. I pay tribute to my hon. Friend the Member for St Albans (Mrs Main), who proposed it as a subject for debate. I supported her, so it would have been wrong not to attend and pledge my support.
I have three main reasons to advance for why the Government should do something to reduce the imposition of individual stamp duty on property transactions. First, the existing stamp duty regime has an adverse impact on home ownership, which the Government should wish to promote. Secondly, the regime does not optimise the revenues; we could get more revenue out of stamp duty if we had lower and different rates. Thirdly, it distorts the housing market adversely, meaning that many people are deterred from buying and selling and from obtaining the kind of housing that they most need or want by the extra charges that the Government have imposed on this most essential of goods and services.
I strongly support the Government in their wish to see home ownership promoted. As they are well aware, however, in many parts of the country house prices are high relative to incomes and have been rising in recent months as a result of the Government’s success in stimulating credit, transactions and activity in the economy again.
Although we welcome the general growth and that upward movement, as well as the fact that some extra houses are now being built, the Government must be aware that housing is extremely expensive for many people who wish to get on the first rung of the housing ladder or who would like to trade up from a smaller house to a location where they can accommodate their children and make a good family home for them.
One reason for that expense is that many people now face paying stamp duty on quite modest homes. Such people are often not rich but are having to pay substantial sums—many thousands of pounds—to the Government for the privilege of getting their first home or moving to a home that is more suited to their needs. I would hope that the Government would want to find a way of easing the burden on people who wish to buy their first home or the right home for their family, particularly if that can be done without having much or any adverse impact on revenues.
My second reason is that if we look at the pattern of stamp duties, we see that the Government have not got total revenues back to their level prior to the crash, yet we now have extra higher rates in the system. We should ask whether the rates are now acting as a kind of deterrent to people undertaking transactions, particularly at the top end of the market, leading to revenues being depressed. We need to bear in mind that in the most expensive parts of the country—indeed, in large areas of the country—house prices are now at or higher than their level before the crash. Stamp duty on shares is now also reflecting the fact that share prices are back at new highs thanks to the success of the general economic policy. There is a case for saying that we would get more transactions if we had a different structure of rates or, in some cases, lower rates, and that there would be a volume offset to the obvious loss on individual transactions.
The third reason is the damage being done to the general market. I know quite a few people who would like to move down the housing ladder—their families have left home and they could do with a smaller place—but the total costs of the transaction put them off. The fact that the buyer has to pay a large stamp duty on the house they are going to buy might be a further deterrent to the transaction taking place at all, because that will affect market prices.
We can see an obvious market distortion because the Government have inherited and lived with the slab-rate approach to stamp duty taxation. If someone moves from trying to buy a flat or house at £125,000 to trying to buy one at £125,001, they suddenly have to pay £1,250 in tax, whereas they pay none when the price is £1 lower. At the £250,000 threshold, there is a sudden slab increase of £5,000 in extra tax if the flat or house someone is trying to buy goes up from £250,000 to £250,001, and at the £500,000 threshold there is a £5,000 increase if the price goes up by £1. In practice, people will not try to sell properties at £250,000 plus a little bit or at £500,000 and a little bit, because the huge increase in tax incurred when that threshold is crossed makes that unrealistic.
We therefore now have zombie price ranges in the marketplace, in which there are very few or no transactions. People hold fire: if they have a property worth £250,000, and the market is rising, they think, “Well, I’ll wait until it is worth £275,000 or £300,000. I won’t sell now because it will be very difficult to sell at £255,000: everyone will want to knock me down by £5,000 or so, to avoid the big increase in stamp duty.” We are creating a distortion, which is another reason why there are parts of the market in which people are much more reluctant to bring their properties to the market at all, because the stamp duty is getting in the way of proper price formation.
What could be the answer to all those problems? I do not like taxes very much at all, as the Minister knows, but I know that our constituents want good schools and good hospitals, and that those cost money; I also know that we are still borrowing too much as a country. The Minister therefore has a problem and needs to maintain revenues from a variety of sources. We need a system that still enables him to collect revenue from property—that is the situation he inherited and that is the current need—but we also need one that is more likely to produce a bit more revenue while easing some of the burdens.
My first suggestion, then, is that we taper the tax rather than having a slab rate. If we put in a taper, it would make homes more affordable at £125,000 to £150,000 and at £250,000 to £300,000. The market would start to clear again in those quite popular price ranges, which are currently being restricted or removed altogether. That would also help with extra transactions.
That is how I would start off. The Minister will doubtless have some figures from his Treasury model claiming that that would produce too big a revenue loss. He will also know, however, that the Treasury has always been wildly pessimistic about any kind of Laffer effect on taxation and that the policy of cutting top-rate income tax from 50% to 45% has produced a massive surge of revenue. There was obviously no loss there, but in fact quite a big increase. Conversely, we know that moving the capital gains tax rate up from 18% to 28% has done a lot of damage to revenues and did not produce the expected increase.
The same could be true of stamp duty. We need to experiment. The Minister could try the idea at one or other of the thresholds, rather than the whole lot, if he is really nervous and cannot get the Treasury numbers changed, but we need to find out. I think I will be right. I would start at the lowest end, because that is where most people are affected and where affordability is the biggest issue of all. I urge the Minister to do that. We need more home ownership, which means having a lower and a different profile of tax, and better market clearing so that people can buy and sell and have the property they want of the size they want, which will also help. I urge him to do it for the revenue as well.
Shabana Mahmood (Birmingham, Ladywood) (Lab)
It is a pleasure to serve under your chairmanship, Mr Betts. I congratulate the hon. Member for St Albans (Mrs Main) on securing this important debate. She was right that the matter of stamp duty has not been debated very much from a principled position; we have had a number of debates in proceedings on Finance Bills about technical changes that the Government have introduced to stamp duty, particularly on the annual tax on enveloped dwellings, but we have only rarely discussed the issue in the manner that we have today. Her securing of this debate has allowed some important issues to be raised.
The hon. Lady said that she hoped that we could move away from politics. I am not sure about that, as taxation and tax issues are perhaps politics in its purest form, but I accept her point about partisanship in our approach to this debate. People across the country, in constituencies of Conservative, Labour and Liberal Democrat Members alike, are all affected in various ways by stamp duty and the rising cost of housing. Her argument about the impact in London and the south-east on people on more modest incomes was particularly well made.
The hon. Member for Esher and Walton (Mr Raab) and other Members discussed the slab structure that is a particularly problematic feature of this tax. Many commentators have called for reform of that structure. He also raised our mansion tax policy, so I hope you will forgive me, Mr Betts, if I take a moment to clarify the details of our proposals.
I make no apology for our policy to levy a mansion tax on properties worth £2 million or more. Let me be clear: only properties worth over £2 million would be affected by our proposals and that limit would be raised each year, either in line with the overall rate of inflation or—and there is a strong case for this—in line with the rise in house prices, to make sure that more modest properties were not brought into the scope of the tax.
Mr Raab
I thank the hon. Lady for that clarification, although there are serious questions about the amount of revenue that a Labour Government would be able to raise. Will the indexation be linked to local house prices or overall house prices? Although the threshold for the tax would rise superficially, there would still be a real risk of the arbitrary geographical unevenness that hon. Members have talked about.
Shabana Mahmood
I am grateful to the hon. Gentleman for his intervention. I have received submissions from various experts on the matter and we are looking at it very closely. We are clear about our start position. We do not want more modest properties to be brought into the mansion tax regime, and we are looking carefully at the details of our ultimate policy to ensure that that does not happen. I have had conversations with people about the issue, but I cannot tell him today what we will ultimately be able to take forward.
Mrs Main
For clarification, before the hon. Lady moved on to her mansion tax, she mentioned the slab structure, which was introduced by a Labour Government. Do the Opposition have any plans in their manifesto to tackle the slab structure at the same time as introducing the mansion tax? I am sure that she has received representations on that.
Shabana Mahmood
I am grateful to the hon. Lady for her intervention. She is right. I have received representations about the slab structure, as, I am sure, has the Minister. It is one feature of stamp duty that causes particular consternation, as we have heard from all hon. Members who have spoken in the debate today. I cannot make a manifesto commitment today, but I will make it clear later in my speech that we are alive to the issues raised today and that we are looking at them carefully.
I was pleased that the right hon. Member for Wokingham (Mr Redwood) made a customary reference to the Laffer curve. I feel that these debates are not quite what they should be if there is not at least one reference to the Laffer curve. I was pleased that he was able to make that point.
I acknowledge the passionate views of hon. Members in this debate. There has been a vigorous campaign on the issue. I suspect that many hon. Members are less concerned about what I have to say about Labour policy and more concerned about what the Minister might do ahead of the autumn statement on 3 December. We saw a similar vigorous campaign ahead of the Budget earlier this year. In the lead up to that Budget, the expectation was that there might be a doubling of the threshold to £250,000 and the introduction of a stamp duty tax credit system, but the Government did not ultimately go down that path. I suspect we are seeing a similar build-up of lobbying for the Government to do something in the autumn statement.
Shabana Mahmood
I am grateful to the hon. Gentleman for his intervention. I think the point that the deputy leader was making was about progressive taxation and the argument that those who are wealthier should pay more. That is the thinking behind our mansion tax policy. His Government have presided over more people being brought into the 40p tax band, for example, and he could ask his Minister about that today.
Stamp duty is a matter of growing concern to the public and a significant burden on people wanting to buy a new home, particularly first-time buyers. I acknowledge the strength of feeling among hon. Members and throughout the country, but I am not in a position to make a spending commitment via this debate. Stamp duty brings in a large and growing amount of revenue, and any policy change in this area would have to be fully funded. Our start point as an incoming Labour Government in 2015 would be the current Government’s spending plans for 2015-16 and any change to that spending round would have to be fully funded. That has been the thinking behind the policies we have unveiled. They are all fully funded and primarily involve switching from one area of spend to another to deal with some of our child care priorities and other measures.
The difficult financial position that an incoming Labour Government in 2015 would inherit means that we would have to make some difficult choices. Given that, our focus has been wider reform of the housing market and how it might stimulate greater home ownership. In particular, the problem of housing supply has become acute in the past few years and is causing many problems, such as people having to rely on the bank of mum and dad and home ownership occurring much later in life. The hon. Member for St Albans made a point about that, and it is true.
We are seeing the biggest housing crisis in a generation and we are not building even half the homes we need to keep up with demand. The shortage of decent homes has much wider social and economic costs and we heard about some of those relating to inflexibility in the labour market, as well as the impact on people in overcrowded homes and the impact on children’s health and educational outcomes.
What can we do to build more homes? That must be the centre point of getting more sense and fairness into our housing market. We supported the Help to Buy scheme, but we would have preferred a scheme that focused more on first-time buyers. Our policy shows that the Government have simply not understood that boosting demand without boosting supply risks putting prices out of reach of the very families and young people we particularly want to help to get on the housing ladder. That is why we have committed ourselves to building 200,000 homes a year by 2020. That is probably not enough, and we should build many more than that, but it is an ambitious start point. We currently have a housing commission, led by Sir Michael Lyons, which is looking at a detailed road map, so that we may be able to deliver our vision.
Mrs Main
Does the hon. Lady share my concern about the Help to Buy scheme? It has proved to be a good scheme in the north by helping people, but has not worked in the south because people must save the stamp duty as well as being helped with the mortgage deposit. We cannot get past that with the current Help to Buy scheme. Stamp duty is the barrier, especially in the south, no matter how many houses are built.
Shabana Mahmood
I take on board the hon. Lady’s point. She is certainly right about the interplay between the Help to Buy policy and the burden that remains with stamp duty. As I have said, in constrained financial circumstances, difficult choices must be made and we have preferred at this stage to look at how we might do the one central thing that we know can reform the housing market and get more homes within the reach of more people: build more homes. That must be the start point, and that is the key issue with the Help to Buy scheme. It is not a bad policy and we should be helping people to buy homes, but we must boost supply, and we are failing to do that at the moment.
Zac Goldsmith
Every Government whom I have heard discussing this issue and every party in opposition have promised to build endless new homes, but how will the hon. Lady’s party, if it achieves government, deliver those new homes? What will make her future Government different from previous ones?
Shabana Mahmood
I am grateful to the hon. Gentleman for his intervention. We have made it clear that that is a central commitment of our party. We acknowledge that we simply did not build enough homes when we were in government. No Government for 20-odd years have built enough homes. We recognise that without boosting supply we will simply not have fairness and sense in our housing market. That is why we set up the Lyons commission. We want to ensure that we have a detailed road map. We will unveil it in our manifesto ahead of the general election and it will show exactly how we will realise our ambition in government.
Shabana Mahmood
I disagree with the hon. Lady. I think that it is right to set targets and ambitions, and it is right that we look to such experts to help us to get to that position. We are looking partly at the expense of land and the housing market in different parts of the country. We will discuss those issues in greater detail as we get closer to producing our manifesto.
Mr Raab
I understand the shadow Minister’s caution, but she slated the coalition’s record even though if we compare the average number of affordable homes built each year, we see that it was some 31,000 under Labour and it jumped to 48,000 under the coalition. She slated that record, despite its being so much better than Labour’s, yet when asked a number of times what a Labour Government would do to spur the supply of housing, there is absolutely nothing that can be said within a year of an election. Does she understand that that totally undermines her criticism of the current Government’s supply-side record, but also any confidence that anyone could have that a Labour Government would make any difference in this area?
Shabana Mahmood
I make this point about the last Labour Government as well as the current Government. No Government have built anywhere near enough homes to ensure that supply keeps up with demand. That is why we are in this position with the housing market. I cannot pre-empt some of the proposals under discussion in the Lyons commission, but I am sure that we will return to the debate when we unveil what our road map towards the pledge of 200,000 homes a year looks like.
As I have said, given the very constrained financial circumstances and the difficult choices that have to be made, we have focused our energies on measures to increase supply. We did also put forward to the Government back in 2012—I am sure that the Minister remembers—a proposal for the Government to implement immediately. It was about using the sums raised by the sale of the 4G spectrum towards getting more homes built and towards a stamp duty holiday of two years for first-time buyers. That measure could have been taken forward by the Government. It might not have helped the constituency of the hon. Member for St Albans, but it would have helped first-time buyers looking at properties below the £250,000 threshold.
Changing the thresholds and providing holidays was something that we looked at and implemented towards the end of our term in office as we sought to stimulate the market post the financial crash. These are issues that we have considered, in the context of a stamp duty holiday for first-time buyers, in this Parliament. They are issues that we continue to receive representations on and continue to look at very closely. As I have said, I am not in a position to make any commitments today, but I suspect that the commitment that Government Members are looking for is from the Minister, who may or may not indulge them when he responds.
The Financial Secretary to the Treasury (Mr David Gauke)
It is a great pleasure to serve under your chairmanship, Mr Betts. I congratulate my hon. Friend the Member for St Albans (Mrs Main) on securing the debate and putting forward her case with such tenacity, if I may borrow that word from my hon. Friend the Member for Esher and Walton (Mr Raab). I thank my hon. Friends the Members for Esher and Walton, for Richmond Park (Zac Goldsmith) and for Nuneaton (Mr Jones) and my right hon. Friend the Member for Wokingham (Mr Redwood) for their contributions to the debate.
I also thank the hon. Member for Birmingham, Ladywood (Shabana Mahmood) for her remarks. She said that she thought that the hon. Members present would be more looking to me, as a Minister, to outline possible thoughts for the autumn statement than expecting her to say anything about Labour party policy in this matter. I am sure that my right hon. and hon. Friends would not expect me to outline any announcements for the autumn statement, but I suspect that they did not expect to get much from the shadow Minister, either.
Ensuring that there is good-quality, affordable housing for all and an effective housing market is an important priority for this Government. As my hon. Friend the Member for St Albans said in her opening remarks, home ownership is very important to us. It is very important to the Government and the Conservative party. I entirely endorse and share her views about the importance of ensuring that as many people as possible have the opportunity to own their own homes.
Although I understand the concerns raised today that stamp duty is putting people off moving and preventing people from getting on the housing ladder, the fundamental point is about the high cost of property. Removing or reducing stamp duty land tax will not by itself address the fundamental issues. I will deal with SDLT and the various points that have been raised, but as other right hon. and hon. Members have acknowledged, we have to look at the housing market as a whole; in particular, it is worth highlighting the steps that the Government are taking to increase housing supply. Those measures, combined with support for home buyers, are, we believe, the right way to address this issue. That is why we have introduced a range of measures to get Britain building again, to fix the broken housing market and to help hard-working people to get the home that they want.
We are supporting home buyers, including through the Help to Buy scheme—a major package of measures to increase the supply of low-deposit mortgages for creditworthy households. We are also increasing housing supply through schemes such as the £474 million local infrastructure fund, the £19.5 billion of public and private investment in the affordable rented sector and the £1 billion Build to Rent scheme to support the growth of the private rented sector, because we believe that those matters are important.
Mrs Main
My point is about the Help to Buy scheme. Has the Minister done any analysis of the situation in areas such as mine, where, over two years, only seven people have availed themselves of the Help to Buy scheme? Has he considered that that could be because people still simply cannot afford to use the scheme?
Mr Gauke
Undoubtedly, the vast majority of those who have made use of the Help to Buy scheme have been at the lower end of the market in terms of house prices and have generally not been in London and the south-east—the greater south-east, if she will forgive a fellow Hertfordshire Member of Parliament for using that phrase. That, however, was the intention of the Help to Buy scheme—for it not to be focused at the top end of the market and more expensive homes.
I acknowledge my hon. Friend’s point that much of the activity has been away from areas such as London and the home counties, but that is not something that we are necessarily ashamed of. However, I will deal with her fundamental argument. I know the point that she is making—that stamp duty land tax has prevented use of Help to Buy in some parts of the country.
Let me return to the issue of the housing market. We are maintaining stability in the housing market by keeping interest rates low and supporting improvements to the mortgage market—and that is working. The number of first-time buyers is at a six-year high, mortgage approvals are up 8% on last year and repossessions are at their lowest level since 2007. More than 150,000 households have been helped to buy or reserve property since spring 2010 through Government-backed schemes. That includes nearly 50,000 supported through our Help to Buy schemes.
Housing supply is up. Almost 480,000 new homes have been delivered since April 2010. Starts on new homes in the past year totalled 137,780—up by 22% on the previous year and the highest annual total since 2007. The construction sector has been growing for 16 consecutive months and is currently experiencing the sharpest rise in house building orders since 2003, while companies are taking on new workers at the fastest rate since 1997. A growing pipeline of new projects is also emerging from the reformed planning system. Last year, successful applications for major housing schemes were up 23% and planning permissions were granted for 216,000 new homes.
The Government remain committed to improving the housing market, and that will remain a vital part of our long-term economic plan. That is why at the last Budget we introduced programmes including the £525 million builders finance fund and a £6 billion extension for the Help to Buy equity loan scheme, to run until 2020. We also announced our plans for an urban development corporation to deliver a garden city at Ebbsfleet and deliver up to 15,000 new homes.
In June, we announced that £400 million would be made available to support 20 housing zones to provide new homes on brownfield land. We remain on track to deliver 170,000 new affordable homes in the four years to March 2015, and a further 165,000 between 2015 and 2018. That will constitute the fastest rate of affordable house building for 20 years, a record that well withstands comparison with that of our predecessors. We must remember that the housing market, like the rest of the economy, is recovering after having suffered a severe downturn following the financial crisis, but we have taken measures to ensure that it is moving in the right direction. That is important to today’s debate, which is about ensuring that there are opportunities for people to own their own home.
I recognise that stamp duty land tax is an important issue, and my constituency, like that of my hon. Friend the Member for St Albans, experiences many of the issues that have been raised. The Government, however, remain committed as a priority to tackling our record deficit. SDLT is an important source of Government revenue; it raises several billion pounds each year to help pay for the essential services that the Government provide and support, and to reduce the deficit.
In 2013-14, SDLT raised £9.3 billion, a substantial sum—money that we need. I appreciate the argument that we have to ensure that taxes bring in the requisite revenue, and that it is perfectly possible for a tax rate to be too high and above the optimum level. My right hon. Friend the Member for Wokingham and I have often argued in the House of Commons Chamber in favour of the reduction of the top rate of income tax from 50p to 45p, which is a good example. I am not convinced, however, that the case is as strong in this context and that reductions in SDLT would pay for themselves.
My hon. Friend the Member for St Albans made the case for increasing the SDLT threshold to £500,000. On a static analysis, if we were to do that for 2015-16, the cost would be £4.2 billion. That static analysis does not take into account the behavioural response, but I do not believe that the behavioural impact of increasing the SDLT threshold to £500,000 would substantially reduce that cost. We should bear in mind that that is a substantial amount of money, especially at a time when we have to be careful with the public finances.
It is also worth pointing out that the majority of the revenue comes from those who buy the most expensive homes: 52% of SDLT residential yield comes from properties bought for more than £500,000, despite the fact that such properties represent only 6% of transactions. A third of all residential transactions do not involve the payment of any SDLT, which is a higher proportion than in 2007, when that figure was 29%.
Mr Gauke
I recognise that that is not a third of transactions in Hertfordshire, which I suspect is the point that my hon. Friend is itching to make. In 2013, a further 42% paid the 1% rate, which meant that 75% of all residential property transactions resulted in the payment of less than £2,500. Even the proportion of residential transactions involving the 3% rate has remained broadly stable. In 2007, 18% of transactions were affected by the 3% rate; in 2013, the figure was 19%. I argue that SDLT is progressive, because those who purchase higher-value property pay a higher share of tax.
We must also consider who ultimately bears the burden of SDLT. The hon. Member for Birmingham, Ladywood referred to the Labour party’s policy announcement of an SDLT holiday for first-time buyers. We implemented such a policy for properties worth up to £250,000 from March 2010 until March 2012. HMRC analysis of the impact of that relief indicated that the majority of the saving was incorporated into higher property prices, which made the relief largely ineffective and poor value for money; what buyers did not pay in stamp duty, they paid in higher property prices.
My hon. Friend the Member for Nuneaton made the point that the situation can be complicated by the fact that it is easier to get a mortgage that covers the purchase price rather than one that covers the purchase price and the SDLT, but we must bear in mind that the impact of changes in SDLT can result in benefits to the seller, rather than to the buyer.
Shabana Mahmood
On a point of clarification, I should say that my point about a stamp duty holiday concerned a proposal that we made in 2012 about the sale of the 4G spectrum. I acknowledge that the Government proceeded with our proposal in March 2010 for a stamp duty holiday.
Mr Gauke
I am grateful for that clarification. If I maligned the hon. Lady, I will certainly withdraw those remarks.
Nearly everybody who contributed to the debate mentioned the fact that SDLT has a slab structure rather than a slice structure. I will make two points in response to that. If we wanted to raise the same level of revenue under a different structure, it would be necessary to increase the applicable rates. That would not mean that people would pay more, but it would mean that rates would increase. We would need to think about that.
My hon. Friend the Member for Nuneaton spoke from his experience of life before he entered the House about difficulties that arose in terms of reforms to stamp duty and their impact on the housing market. Before changing the slab system, which predates 2003—in fact, it goes back to the 17th century—we would have to think carefully about the potential impact on the housing market.
Zac Goldsmith
Is that work being done by the Treasury? Is the Treasury looking at how one might go about removing the slab or cliff-edge system and shifting towards a progressive system?
Mr Gauke
The Treasury keeps all taxes under review. If we look at the subject historically, there have always been challenges associated with reforming SDLT, because to do so can result in disruption to the housing market.
I thank all hon. Members who have contributed to the debate, in particular my hon. Friend the Member for St Albans. We will continue to ensure that we take every step necessary to increase the supply of good quality, affordable homes. As hon. Members might expect, we will continue to keep all taxes under review. Any decisions on future changes will be taken as part of the annual Budget process and in the context of the public finances. Having the opportunity to debate these matters has been beneficial to the House.
Mr Raab
I thank the Minister for giving way and for what he has outlined. I hope the Treasury will keep stamp duty under review, not just because of the situation and the snapshot we have now, but because of the risks of further fiscal drag. The average median property price in London and in my constituency will soon go through the 4% rate. There is also the impact of interest rates on those with mortgages at very fine margins. As a Government and as a party, we ought to put more cash into people’s pockets and leverage them off a reliance on increasing amounts of debt. Stamp duty is constantly under review, but I ask the Treasury to think about what is coming forward as well as the situation as it currently stands.
Mr Gauke
I am grateful to my hon. Friend. As a Government we have a proud record of ensuring the economic stability of this country, of putting in place the conditions for growth, and of addressing the challenges we face. The generation now seeking to get on the housing ladder faces perhaps greater challenges than earlier generations faced. Essentially, it is very important we ensure we have the supply of new homes to address that, but we want to ensure we have in place the right tax and spending policies to enable people to achieve home ownership. That is a long-standing and proud tradition of our party, and one that we continue to hold as extremely valuable.
With those remarks, Mr Betts, I thank you and hon. Members for our debate this afternoon.
Question put and agreed to.