Mr Speaker
I will take a point of order from the Secretary of State for Work and Pensions, but then we must proceed with Shabana Mahmood’s speech.
Mr Duncan Smith
On a point of order, Mr Speaker. May I, on behalf of the Government, unreservedly apologise to you if any indiscretion has been performed or any bad opinion has been made? This is not intentional. My Ministers and I will see this debate through to its conclusion on behalf of the Government.
Mr Speaker
I am very grateful to the Secretary of State. We will see whether the Treasury Minister turns up, but the willingness to help of the Secretary of State for Work and Pensions is noted and appreciated, and I thank him for his typical courtesy in what he has just said. Let us now proceed in a pragmatic way and listen to Shabana Mahmood.
The Financial Secretary to the Treasury (Mr David Gauke)
Inadvertent though it may have been, may I begin by apologising to you, Mr Speaker, and to the House for my late arrival for this debate? May I also thank my right hon. Friend the Minister for Pensions for moving the motion and the hon. Member for Birmingham, Ladywood (Shabana Mahmood) for permitting me the opportunity to address the House on this important matter? May I also thank you, Mr Speaker, for your encouragement and support on delivering this important reform and for having the opportunity to discuss the parliamentary procedure in advance?
Yesterday, as we have heard, the Chancellor, in his autumn statement, announced an important reform to stamp duty land tax. Moving from a slab to a slice arrangement is right in terms of fairness and economic efficiency. As the Chancellor set out, 98% of people who pay the tax will benefit, and the previous economic distortions in the system have been removed, benefiting the housing market generally.
Sir Oliver Heald
The Minister will be aware that in north Hertfordshire house prices are challenging for first-time buyers. I believe that 91%-plus of people will benefit from this reform and that the relief for the purchaser of an average house costing £275,000 is as much as £4,500. I do not know whether he can confirm that, but I just wish to pay tribute to the reform, which will help a lot of people to get on to the housing ladder.
Mr Gauke
I thank my hon. and learned Friend for his thoughtful and timely intervention. He raises an important point and is exactly right in saying that the purchaser of a house worth £275,000, which is the average house price in the UK, will pay £4,500 less in stamp duty land tax than they would have done under the old system. The purchaser of a property worth the London average of £510,000 will pay £4,900 less SDLT, and in every region, nation or city of the UK people will pay less in the vast majority of transactions.
Mrs Anne Main (St Albans) (Con)
I am delighted that the Treasury has been persuaded of the argument I have been making for some time. I recall saying to the Minister that this would be on my Christmas wish list for my constituents, and I have already received e-mails congratulating the Chancellor and his Department on doing this. It is going to save a lot of young people a lot of money when they are trying to get on in the difficult housing market.
Mr Gauke
I am keen that this does not become a Hertfordshire-dominated debate, but let me thank my hon. Friend, who has been tireless in campaigning on this issue. Indeed, she attracted attention to it in an Adjournment debate earlier this year, expressing her views clearly. In particular, she made the case for helping those who want to get on to the housing ladder, and I know that is a big issue in her constituency, as it is in mine, where house prices are above the average. She has made some important points in this area.
Richard Graham
I stand to speak on behalf of my constituents of Gloucester, providing the geographical diversity the Minister was seeking, where the average house price is about £165,000—considerably less than the national average of £275,000. So the vast majority of my constituents buying houses will benefit from either a zero rate of SDLT or the 2% rate he has mentioned. Does he agree that it would be helpful if the Treasury were able to provide information to all of us as to what the savings will be for our constituents, based on the average house price?
Mr Gauke
My hon. Friend raises an interesting and important point, and we could provide information on the basis of local authorities figures. What I can tell him is that in the Gloucester local authority area—I am not sure whether it is coterminous with his seat—more than 99% of those who pay SDLT will pay less as a consequence of these changes.
It is striking to note the diversity of commentators who have been positive. Estate agents, professional bodies and others have all shown support. The Royal Institution of Chartered Surveyors has called it a “long overdue” reform. The director-general of the Council of Mortgage Lenders said:
“This fundamental reform has been a long time coming...the vast majority of mortgaged transactions will benefit from lower tax as a result of this move.”
The Building Societies Association has welcomed the announcement. It said:
“It will help individuals and families buy their own home, and smooth out the crazy tax jumps buyers have suffered around the top of each band.”
This is a principled reform that exemplifies the Government’s commitment to a fairer and more efficient tax system.
The previous SDLT regime created distortions in the housing market, imposed perverse incentives and made it harder to get on and move up the property ladder, or indeed move down the property ladder for those wishing to downsize. This major and, as some have argued, overdue reform demonstrates that even in the past six months of this Parliament, we are a Government who are continuing to make radical change for the benefit of the British people.
We realise that this is a big change, even for those who will benefit at such a significant moment in their lives. We have ensured that the changes have been properly explained. Her Majesty’s Revenue and Customs has produced full guidance on the Government website, including a calculator that compares the old and the new systems. As of 9 am this morning, that calculator had been used almost 500,000 times, with no significant delays reported, showing the level of interest in this reform among the public. Critically, HMRC’s specialist call centre was manned until midnight last night when the changes took effect, and is open now. HMRC specialists responded to around 250 inquiries by telephone and all but 3% were resolved immediately, and the remaining handful are being followed up.
Steve McCabe
Will the Minister confirm that, under the Labour party’s mansion tax proposals, it would take more than five years for a person in a £2 million property to pay the same amount of tax that they will pay on a single transaction under these proposals? Is that a recognition that people in those properties are simply not paying enough tax?
Mr Gauke
The point I would make, as the hon. Gentleman draws me into that issue, is that it is better to collect this tax at the point at which people are entering into transactions, the revenue is available, and there are not the same cash-flow difficulties and problems with the asset-rich cash poor. This is a much better policy than a mansion tax, which would create very significant difficulties—a point that was repeatedly made by a number of Opposition Members who represent London seats.
Sir Oliver Heald
My hon. Friend talks about Opposition Members, but they are not here in the Chamber. The hon. Member for Birmingham, Selly Oak (Steve McCabe) is the only one and he has come in to moan about a policy that will help 98% of homebuyers. What sort of party is that?
Mrs Main
The other point that the hon. Gentleman fails to realise is that the mansion tax that Labour proposes would be on top of this measure, so therefore he is doubly worried about the millionaires whom he wishes to protect. On top of that, Labour would roll up the mansion tax into a death tax for millionaires.
Mr Gauke
As my hon. Friend has raised that point, I will make this observation. Labour says that more money should be raised from properties worth more than £2 million. In 2015-16, this measure will raise more than £300 million from such properties. Obviously, that is a useful sum for the Exchequer, but if the view is that Labour wants to raise £1.2 billion from the mansion tax on those properties, will it drop that figure down to £900 million? That is a question that the hon. Gentleman will no doubt be seeking to respond to later.
Robert Jenrick (Newark) (Con)
This policy was hugely welcomed in my constituency—Newark and Bingham, two of the fastest-growing towns in the east midlands, have lots of first-time buyers—but will the Minister provide some reassurance over rates? Will the rates, which are very high at the top, keep pace with rising house prices? We do not want reasonably affluent people on middle incomes being drawn into these rates in five, 10 or 20 years.
Mr Gauke
We have set out the rates as they stand. If there is to be any uprating, it will be a matter for future Budgets and autumn statements, but I stress that across the country 98% of transactions where stamp duty is paid will see a reduction in SDLT. My hon. Friend raises a matter that might be an issue in the future, but in every city, town and county the majority will benefit.
So far, I have touched on the administrative transitional steps for the major reforms introduced yesterday and on HMRC’s support. We have also put in place arrangements for individuals who have exchanged contracts but not yet completed. When the new system came into force, transitional rules ensured they would not lose out compared with what they expected to pay in SDLT. In those cases, people have the choice to choose the lesser of the tax rates under the old and new systems. That is only fair.
I look forward to debating the reforms in full as the stamp duty land tax Bill progresses. As my right hon. Friend the Leader of the House made clear earlier, that discussion will begin on Second Reading next Wednesday. However, today, I would like briefly to explain our rationale for introducing the measures via two motions under the Provisional Collection of Taxes Act 1968. First, it was important to act quickly, because reform to SDLT was long overdue. Usually, the measures would have formed part of the annual Finance Bill following a Budget, which is why the stand-alone Bill I am introducing today is premised on the same financial motions as those that would follow a Budget. The first motion, which the Chancellor moved yesterday at the end of his statement, gave effect to the changes from midnight. That was important to give people certainty and to avoid forestalling.
Secondly, hon. Members will understand that the measure was subject to strict confidentiality. Given the potential impacts on the housing market of a tax change of this significance, it was right that the measure was announced first by the Chancellor to the House. We ensured that the motion passed yesterday was available in the Vote Office immediately the Chancellor sat down after his main speech and then voted on at the end of questions and answers. The motion is effectively the Bill I hope to introduce in a few moments. For the reasons I set out, it was necessary to have two motions under the Provisional Collection of Taxes Act and today to allow for a fuller discussion.
I look forward to discussing the Bill in greater depth next Wednesday, but today is also an opportunity for the House to debate the matter, and I commend the motion to the House.
Shabana Mahmood
My hon. Friend is absolutely right. The Government said in their autumn statement that everything was on course. If the finances are in such a good state, why will they not adopt an ambitious programme of house building? Until we have action on the supply side, we will not be able to get to grips with this lop-sided housing market.
We need to get more homes built, and we also need to deal with the underlying causes of the crisis. For example, we know that too much land is being held as a speculative investment even though local people need homes, and that the trickle of new developments that are being built are snapped up long before people from the area can benefit from them. We also know that our country’s capacity to build homes has shrunk drastically. Fifty years ago, the public and private sectors between them built more than 300,000 homes a year; now we rely on a small number of volume house builders and, as a result, we build far fewer homes.
A number of measures are needed to deal with the underlying causes of the housing crisis and to get the number of homes built that this country needs. We have proposed new powers for local authorities, as well as a help to build scheme to run alongside the Government’s Help to Buy scheme, which we support. We particularly want to see an increase in the role of small and medium-sized construction firms, because the resulting diversity in the market would help to get more homes built and deal with the underlying causes of the crisis. As I have said, we need to see supply-side measures in conjunction with the proposals on stamp duty and the Help to Buy scheme. That would help us to get to grips with the crisis and arrive at a position where the dream of home ownership was not so far out of the reach of our constituents across the country.
I also want to mention our proposal for a tax on high-value properties—the so-called mansion tax. We believe that that is a necessary measure to get an annual sum of money into our national health service, which is in crisis and in desperate need of further, stable funding. It is interesting that the Chancellor has accepted, in his stamp duty proposals, the principle that very high-value properties in this country are under-taxed. Earlier in this Parliament, he introduced the annual tax on envelope dwellings—the ATED—which is described as a kind of mansion tax for high-value properties held by companies in a corporate envelope. Now, the Government are characterising the new stamp duty changes as their version of a mansion tax. I wonder why, as they creep towards an actual mansion tax, they will not make that final leap and simply adopt our proposal, thereby guaranteeing an annual sum for our national health service.
The Prime Minister is reported to have remarked some time ago that the Government could never introduce a mansion tax because the Conservative party’s donors would not accept it. I wonder whether that is the only thing holding the Government back. The truth is that they should go further and adopt our proposal. There is a difference between what they are doing today and our proposal. Stamp duty is a transaction tax, but our tax on high-value properties would be an annual charge that would provide a stable source of revenue for the national health service.
One of the Government’s regular criticisms of our proposal is that it would hit those who were asset rich but income poor. However, we have already set out how that could be dealt with through a system of deferral for anyone with an income of less than £42,000 a year—in other words, a basic rate taxpayer. That would be a perfectly sensible and adequate way of helping those people. We could then fairly and progressively introduce a tax that would help to get the national health service’s finances back on track.
Mr Gauke
I should like to ask the hon. Lady a practical question about her policy of excluding from the mansion tax those with an income below £42,000. She will be aware that some of the richest people in this country live off their capital rather than their income. Does she acknowledge that such people could conceivably fall within the proposed exemption?
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. We need to be a bit careful here. We should not really be discussing the policies of the Opposition. The debate is about stamp duty. We have already had a difficult start, and I do not want things to get any more difficult.
Mr Gauke
It is a pleasure to reply to this debate. I am grateful for the warm support for this measure. I am sometimes so enthusiastic about these changes to SDLT that I am almost breathless, but thankfully on this occasion I am not. A number of points have been raised about this measure. Of course, there will be an opportunity to debate the legislation on Second Reading next Wednesday, when we might pick up some of those points. However, I will attempt to address some of the issues that have been raised in the debate.
The hon. Member for Birmingham, Ladywood (Shabana Mahmood) asked why we are not reforming non-residential SDLT at the same time. The argument I would make is that the market for non-residential property is very different, and the urgency for change is not the same, so I think that a different case needs to be made in that regard. We are not persuaded by the need to change that at present. Of course, all taxes are kept under review and the Government will consider that ahead of future fiscal events.
The hon. Lady also asked about the impact on the housing market. As I have said, our reforms will change the amount of SDLT due for the majority of homes, leading to a cut in the cost of moving home in the vast majority of cases. That will have a small impact on house prices overall, although the size of that effect is expected to be lower than the usual fluctuations in the housing market caused by many factors that occur year on year. I am not denying that there will be an effect, but there are many factors that come into play when it comes to house prices—
Mark Reckless
Was the Minister citing his own view just now, or merely regurgitating that of the OBR, because the major change in its forecast, of course, is that it has just changed its forecasting method from assuming that it will be average earnings in future to employing a model that it had only used in earlier years?
Mr Gauke
The hon. Gentleman brings me to his points about the OBR assessment. I was interested to hear what he said about modelling. He argued that the consequence of the changes we are implementing would be more beneficial for the economy than the OBR has set out in its projections. It is right that the OBR is independent and reaches its own conclusions. If the numbers are of a cautious nature, as he argues, then it is better to err on the side of caution. He made an interesting argument. I believe that these changes will have a beneficial effect in terms of labour market mobility and so on, and should therefore be welcomed. In putting the numbers into the public finances, it is right that we follow the independent body.
As I said earlier, my hon. Friend the Member for St Albans (Mrs Main) has been very prominent and persistent in making the case for reform of stamp duty. I am pleased that she welcomed these reforms so enthusiastically. I shall certainly ensure that the Chancellor is made aware of the views of Lori, her constituent, who is putting up a poster of him as a consequence of the reforms. I am very pleased that they have pleased Lori, and, I am sure, many other residents of St Albans. My hon. Friend made an important point about “zombie zones”; I think the hon. Member for Birmingham, Ladywood referred to “bunching”. The OBR statistics on how the pattern of transactions can be distorted are interesting. For example, there are 30 times more transactions in the £5,000 band below the £250,000 threshold than in the £5,000 band above it. That gives an indication of the scale of the distortions in the previous regime.
The hon. Members for Rochester and Strood (Mark Reckless) and for Redcar (Ian Swales) asked whether cash-neutral reform would be possible. It would have been very difficult to make these changes without some cost to the Exchequer in terms of forgone revenue. That might answer the question, “Why do this now?” As a consequence of other measures brought forward in the autumn statement, we can afford to fund these reforms, and it is right that we took that opportunity.
The hon. Member for Redcar referred to avoidance. Stamp duty land tax was being avoided far too often. One of the significant achievements of the Government and HMRC in the past few years is that we have managed to address that in relation to the number of SDLT schemes marketed by tax avoidance advisers, if I may put it that way—promoters of tax avoidance schemes. The amount of that avoidance has reduced very sharply. We have brought in a number of effective measures. For example, the annual tax on enveloped dwellings has played an important role. We have made great progress on this. For that reason, we are able to get the revenue that we will get because of the changes affecting high-end property.
My hon. Friend the Member for Nuneaton (Mr Jones) highlighted the reasons for ensuring that there is no gap between announcement and implementation. That is why this is a PCTA motion. I remember him making that point to me in private some months ago, so he may well have influenced the way in which the Government have proceeded, given the need to move forward.
My hon. Friend the Member for Esher and Walton (Mr Raab) made a very thoughtful speech, and I am grateful for his observations. He is a long-standing critic of the stamp duty regime, and he has been very energetic in highlighting some of the failures in the system. He talked about future uprating. He was also the first speaker to use the expression “long-term economic plan”, so I congratulate him on rectifying a grievous omission from the debate until that point. On future uprating, as I said to my hon. Friend the Member for Newark (Robert Jenrick), we have set out the bands. We have not set out plans for indexation or future uprating, but future Governments will clearly wish to return to that in the long term. As my hon. Friend the Member for Esher and Walton said, we will no doubt have this debate on a number of occasions. I dare say that he will be very energetic in campaigning for uprating in future, and I look forward to receiving his representations.
I thank the House for its support for this measure, and reiterate my apology for not being here at the very beginning of the debate. I hope that the motion will have the support of the House.
Question put and agreed to.
Ordered, That a Bill be brought in upon the foregoing Resolutions relating to Stamp Duty Land Tax (Residential Property Transactions);
That the Chairman of Ways and Means, the Prime Minister, the Deputy Prime Minister, Mr Chancellor of the Exchequer, Danny Alexander, Secretary Eric Pickles, Mr David Gauke, Priti Patel and Andrea Leadsom bring in the Bill.
Stamp Duty Land Tax Bill
Presentation and First Reading
Mr David Gauke accordingly presented a Bill to make provision about stamp duty land tax on residential property transactions; and for connected purposes.
Bill read the First time; to be read a Second time tomorrow, and to be printed (Bill 132) with explanatory notes (Bill 132—EN).