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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.