(10 years ago)
Commons ChamberRead Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Mr David Gauke)
I beg to move, That the Bill be now read a Second time.
My right hon. Friend the Chancellor announced in last week’s autumn statement an important and comprehensive reform to stamp duty land tax—SDLT—on residential property. Many Members made their views known on the SDLT changes in last week’s debate on the provisional collection of taxes motion. Today is an opportunity for others to raise their voices, although looking around the Chamber, it appears possible that the House’s appetite for debating this matter was sated last week.
With effect from 4 December, the structure, rates and thresholds of stamp duty land tax have changed, and stamp duty has moved from a slab to a slice arrangement.
Alok Sharma (Reading West) (Con)
Of course I, like many colleagues, welcome the measure. My constituents are some of the most aspirational people in the country, and they think that this is a great move by the Government. What assessment has my hon. Friend, or perhaps the Office for Budget Responsibility, made of likely increases in the volume of property transactions as a result of this change to stamp duty?
Mr Gauke
This is likely to have an impact, with more transactions for properties on which the stamp duty bill has fallen—some 98% or so—and slightly fewer transactions when a larger stamp duty bill will apply. Although there will be an element of behavioural change as a consequence of the measure, property transaction numbers and house prices will be affected by a whole range of factors, so it can be difficult to ascribe any particular changes to one particular reason. However, it is likely that there will be more transactions, and that has certain advantages, such as for labour market mobility, and if it means that people are living in the homes that they want to live in as opposed to feeling trapped in their property to a certain extent. I think that the measure will have a beneficial impact on the housing market.
Each new SDLT rate is now payable only on the portion of the property value that falls within each band. That is in contrast to the old system, under which tax was due at one rate for the entire property value. Moving from a slab to a slice arrangement is right in terms of fairness and economic efficiency. The new arrangement will cut SDLT for 98% of people who pay the tax, and no one who is buying a home worth up to £937,500 will pay more.
This Government believe in aspiration. The aspiration to own our own house is one of the elements of human nature. It is something that, for generations, has been totemic for people in this country. This is a Government who will help people to achieve that ambition, and do so in a fair and equitable way.
The previous stamp duty system was flawed. It had been criticised by hon. Members on both sides of the House, industry and think-tanks. It was
“one of the worst designed and most damaging of all taxes”,
according to the director of the Institute for Fiscal Studies, and “unfair” according to the Building Societies Association. According to the Royal Institution of Chartered Surveyors, it did not
“work as it stands and creates large distortions”.
The problem with the previous system was simple. The slab approach created an enormous hike in taxes at certain thresholds. If someone paid £250,000 for a house, they would pay £2,500 in stamp duty. If they paid £250,001, however, they would pay £7,500—three times as much. In reality, of course, nobody did; they would have been crazy to. What happened was that there were dead zones—in this case a little above £250,000—in which almost no transactions actually took place.
To return to the intervention made by my hon. Friend the Member for Reading West (Alok Sharma), this change is likely to result in a substantial increase in the number of transactions in those dead zones because of the ending of the bunching effect, which should help us to have a more efficient market. Let me again give an example that I cited in last week’s debate: in 2013-14, there were over 30 times as many sales between £245,000 and £250,000 as there were between £250,000 and £255,000. Given that the average UK house price is around £275,000, this was a big distortion affecting a significant number of properties.
What also happened was that people owning properties a little under the threshold were reluctant to improve them for fear that that would be money thrown away if they came to put the property on the market. Also, people wishing to move up the property ladder as their families grew, but who found themselves on the wrong side of the step upwards, had to find a significant—and arbitrarily imposed—lump sum precisely at a time when there are hundreds of other one-off expenses to worry about. We have got rid of the inefficient and distortive old system, and replaced it with a fairer new system that cuts SDLT for 98% of people who pay it.
Under the new structure, no buyer purchasing a property will pay anything at all up to the first £125,000. Buyers will be charged 2% for the portion from £125,000 to £250,000, and 3% for the portion from £250,000 to £925,000. Those individuals buying a house worth more than £925,000 will be charged 10% for the portion of the price between £925,000 and £1.5 million, and buyers will pay 12% tax for any portion of the price above the £1.5 million threshold.
I stress that the tax will be paid once, and once only, at the point when the purchaser has the cash to do so. Once it has been paid, that is it, because we do not believe in introducing a system that would require homes to be revalued every year, or in imposing a large liability on people who may be asset-rich but cash-poor.
Ian Swales (Redcar) (LD)
I welcome the rate profile that my hon. Friend has put into the Bill. Does he agree that the measure is another example of this Government increasing taxes for the wealthy and making those with the broadest shoulders bear the biggest burden?
Mr Gauke
It is an example of that. In yesterday’s Treasury questions, in the context of the reduction of the 50p rate of tax to 45p, I pointed out that the proportion of income tax paid by the top 1% has been higher—and is projected to be higher—in the years since that cut than it was when the 50p rate was in place. There is a similar point to be made here. For properties, we estimate that the top 1% will be paying just under 40% of all stamp duty yields, whereas in 2010, under the old system, the top 1% were paying only 19% of all yields. Stamp duty has become more progressive as a consequence of our changes.
Mr Jim Cunningham (Coventry South) (Lab)
How does that affect the shrinking tax base? This is a genuine question, by the way. The tax base seems to be shrinking at the moment, so will this change have an impact on the tax base, or will it be neutral?
Mr Gauke
I do not know whether the hon. Gentleman is referring to the fact that there has been a deliberate shrinkage of the tax base, in that we have taken 3.4 million people out of income tax. Perhaps that was not what he meant, but I am happy to draw the House’s attention to that policy none the less. The Government have, on a number of occasions, made the tax system more progressive. At a time when the public finances are in a difficult position and we need to consolidate them, we have ensured that the wealthiest in society bear a significant burden, and this measure is an example of that. We have made stamp duty land tax more progressive by reducing the burden on ordinary households and collecting more tax from the top end, where there has been a significant appreciation in values in recent years.
Alok Sharma
My hon. Friend talked about the yearly property tax that others have proposed, but irrespective of whether such a tax were introduced, is it not the case that it would not help those who want to buy their own house? Does he agree that the Government are introducing aspiration into home buying, which is something that we should all be encouraging?
Mr Gauke
Indeed; that is right. These measures will be helpful for those who want to get into the housing market and who often face significant challenges in putting together a deposit and meeting the transactional costs involved. I believe that it will be helpful that we have been able to reduce the transactional costs. I return to the point I made a few moments ago: this measure will help households up and down the country and we, as a Government, believe in aspiration.
Let me stress that in every city, town and county in the United Kingdom, a large majority of people will benefit from the new system. No buyer of a property under £937,000 will pay more tax than under the previous system, and there will be a tax cut for 98% of home buyers who currently pay SDLT. In London, 91% of home buyers who pay SDLT will see their tax bill cut. In Scotland, Wales and Northern Ireland, over 99% of those paying SDLT will see the rewards in their pockets. A buyer of the average Help to Buy home priced at £185,000 will be £650 better off as a result of these reforms.
The reforms came into force at midnight on 4 December to avoid creating undue distortions in the market, meaning that a stand-alone Bill was necessary. The Bill was introduced in Parliament on 4 December, following a provisional collection of taxes motion at the end of the autumn statement. If a person had exchanged contracts before 4 December but completes on or after that date, our transitional arrangements mean that they can choose whether to use the old or the new rates and structure. We have provided a calculator on the Her Majesty’s Revenue and Customs website so that people can work out how much tax they would be paying, and I am happy to confirm that it has been used more than 880,000 times since it was put in place on Wednesday.
It is a bit of a standing joke that the UK is a country obsessed with house prices, but for most of us, buying a home involves the biggest amount of money we will ever spend. Stamp duty land tax is an important source of Government revenue. It raised £6.5 billion in 2013-14 to pay for the essential services that the Government provide and support. However, it is only reasonable that the tax should be imposed fairly and equitably. As a result of difficult decisions that we have taken elsewhere, we are now able to forgo £800 million of revenue to introduce these changes.
The changes have been warmly welcomed. They are
“great news for those buying a home or considering a move”,
according to Nationwide. They are particularly good for
“first time buyers and second steppers”,
according to Savills, and
“a shot in the arm for families and growing firms”,
according to the CBI. My particular favourite came from a Mr Tom Whipple—a science correspondent for The Times—on Twitter, who wrote:
“We are moving home next week. Osborne just saved us £400. I’m calling our new fridge freezer George.”
That is how to become a household name in politics!
On a more serious note, I would like to touch on how the change affects Scotland. From 1 April 2015, the land and buildings transactions tax—LBTT—will replace stamp duty land tax in Scotland. Up until that point, these reforms will apply to all residential property transactions in the UK, including Scotland. This will ensure that home buyers in Scotland do not miss out on a potential tax cut before the LBTT comes into operation.
I am aware that there are some in the UK who will be unaffected by this change. As housing has become less affordable, the rate of home ownership has fallen from its 2003 peak of 70% to around 65%. Many are wondering whether they will ever get on to the housing ladder. Our reforms to SDLT will assist those households by reducing the amount of cash needed at the point of purchase. It should be stressed that SDLT is part of a much wider set of reforms designed to get Britain building, to increase radically the supply of housing units, and to release some of the pressure on our housing market.
Alok Sharma
The Minister cites the schemes that the Government have implemented to help people to buy their own homes. Will he tell us how many people have benefited from the Help to Buy scheme? Will not these changes give a further boost to the scheme?
Mr Gauke
My hon. Friend raises an important point. Indeed, I am about to mention some of the measures that we have taken in respect of helping the housing market, including Help to Buy.
We are investing billions of pounds of public money to provide affordable new homes, including £4.5 billion during this spending review period to provide 170,000 new units, and a further £3.3 billion to deliver 165,000 more units over three years from 2015. As announced in the autumn statement, there will be another £1.9 billion between 2018 and 2020 to continue delivering homes at the same rate. We are also reforming planning laws. The autumn statement package contains commitments on releasing land with capacity for up to 150,000 homes and new measures to support up to 133,000 homes.
Mr Gauke
I should like to make some progress, as I want to answer the question asked by my hon. Friend the Member for Reading West.
In September, we introduced a new £400 million rent to buy programme, boosting the building of new rental homes to help people to upgrade into home ownership. The programme allows people to rent affordably and to save for a deposit, and then to buy that home or another one. To answer my hon. Friend’s question, more than 66,000 households have benefited from the Help to Buy equity loan and mortgage guarantee schemes, four fifths of whom were first-time buyers.
Mr Cunningham
Obviously we want people to be able to own their homes, but there is another facet to this: social housing, either through local authorities or housing associations. What element of the money that the Government are putting into these schemes is going to that end of the market? The drop from 70% to 65% that the Minister mentioned earlier probably relates to people going into the rental market.
Mr Gauke
The hon. Gentleman should bear in mind that almost 217,000 affordable homes have been delivered since April 2010. Between 2011 and 2015, some £19.5 billion of public and private investment is going into affordable homes, and we are on track for the highest rate of affordable house building in at least two decades. The Government are delivering on all aspects of how we ensure that we give people the opportunity to have decent housing. These SDLT reforms will give another boost to people wishing to fulfil their aspirations to own the place they live in.
Jake Berry (Rossendale and Darwen) (Con)
I apologise to the House for not being here for the start of the debate. I am sure that the Minister will be aware that when the previous Government introduced a new SDLT regime, there were several avoidance schemes, most of which involved sub-selling at below the market value. I applaud the Bill and look forward to its passage through the House. Will he confirm that the anti-avoidance measures under the previous regime will be read over to this Bill to stop the abuse of the tax system?
Mr Gauke
I am grateful to my hon. Friend for raising that point, because the Government have addressed this issue fully during this Parliament. A few years ago, SDLT was starting to develop a reputation as a tax that was easily abused—he mentioned one means by which that was done—but this Government have introduced several measures to deal with that. We have seen a substantial decline in the marketing of SDLT avoidance schemes, and the introduction of the annual tax on enveloped dwellings has been successful in discouraging avoidance. He is right to highlight the issue, but we are making changes in the context of an SDLT that is perhaps less leaky than when we came into office a few years ago. That enables us to make our changes, which benefit properties in a way that is, none the less, affordable for the Exchequer. As the Chancellor made clear last week, the policy will deliver a tax bill cut for 98% of people who pay SDLT, and the previous economic distortions in the system have been removed, which benefits the housing market generally.
John Stevenson (Carlisle) (Con)
First, I apologise for being late, as I was serving on a Delegated Legislation Committee. I welcome the reforms for the residential market, but do the Government have any intention to introduce similar provisions for the commercial market?
Mr Gauke
I am grateful to my hon. Friend for raising that point, which we debated briefly last week. Particular issues with the residential market meant that we needed to address that quickly, and some of the pressures to reform the system applied particularly to the residential market. Clearly, any Government will want to keep this matter under review, so I would not want to rule out looking at the commercial market. However, the imperative was to press on for the residential market, and no doubt commercial property and SDLT is a matter to which the Government will wish to return in the future. I know that he welcomes these reforms, and I should point out that more than 99% of transactions in his constituency will benefit from our changes.
Jake Berry
What will be the SDLT position when there is a mixture of residential and commercial property? How will a shop with a flat above it, for example, be treated under the new SDLT regime?
Mr Gauke
The residential property would be considered under the new residential regime, and an evaluation would be needed to distinguish between the commercial and the residential premises.
This reform will improve the fairness and efficiency of the tax system. It will make a real, tangible, positive difference to the lives of people up and down the country, and I hope that hon. Members will think fit to give the Bill a Second Reading.
Shabana Mahmood (Birmingham, Ladywood) (Lab)
I am grateful to the Minister for his introduction to this Bill—I am only sorry he was not breathless with excitement today as he was last week when we first debated the stamp duty changes. He is, however, right not to spoil us with a repeat performance, and I was amused to see that we all arrived super-early for this afternoon’s debate.
I wish to indicate, as I did at the outset of last week’s debate, that we support these measures, and will be supporting the Bill on Second Reading and during its remaining stages. The Minister mentioned the procedural mechanism adopted to give effect to these changes: the Government moved a resolution under the Provisional Collection of Taxes Act 1968, which was passed last week in order to give immediate effect to the stamp duty measures unveiled in the autumn statement. We debated that motion the day after the autumn statement and today we move on to the Bill’s Second Reading. The Government have proceeded with a stand-alone Bill rather than await the next Finance Bill in order to give immediate effect to the stamp duty changes and thereby prevent distortions within the housing market. We recognise the importance of that and support the mechanisms adopted to give effect to this measure.
As the Minister said, stamp duty has been charged at a single rate on the whole purchase price of a property, with different rates for different value bands. When a property exceeds the threshold for a higher rate of duty, tax is charged at the higher rate on the whole value of the sale—this is the so-called ‘slab basis’—rather than on the part of the price above the threshold, which is the so-called ‘slice basis’. The tax has been charged on the slab basis for more than 40 years, and the slab basis design has caused much consternation and complaint, with regular calls for reform.
In recent years, stamp duty has come under the spotlight much more because of the increasing burden the tax has placed on home buyers, especially first-time buyers, as a result of the huge increases in house prices. Between 1997 and 2005, house price inflation averaged more than 10% a year, and the proportion of property transactions attracting stamp duty rose from about half to more than three quarters during roughly the same period. In order to assist buyers, and first-time buyers in particular, we have seen a number of measures designed to alleviate some of the burden caused by stamp duty under its previous structure. They focused primarily on thresholds and stamp duty holidays: the threshold was doubled in 2005; it was temporarily increased by £50,000 for one year in 2008; and it was doubled again for first-time buyers for three years from March 2010.
The burden of stamp duty, however, has continued to be significant, increasing by 30% between 2009-10 and 2013-14. The continued growth in the housing market has been the reason for the increasing stamp duty burden. In that context, today’s reform is sensible and has attracted support from across the House. SDLT rates will now only apply to the part of the property’s selling price that falls within each value band, and new rates and thresholds have been introduced.
I have a number of questions on specific elements of the changes, and I hope that the Exchequer Secretary will deal with them when she responds to the debate. The changes came in with immediate effect on 4 December. The Government have explained that those who had exchanged contracts before 4 December but who were completing on or after that date will be able to choose whether the old or the new rules apply. Will the Minister update us on how many people she anticipates will opt for one or other of those options, and what impact the changes have had on property transactions in the period immediately following the autumn statement?
The Financial Secretary to the Treasury made it clear both last week and this afternoon how Her Majesty’s Revenue and Customs has been giving advice on the implications of this reform. I think he said that the calculator on the Government website had been used 500,000 times last week. That figure has now gone up to 880,000. He also told us that the HMRC call centre was manned until midnight on 3 December when the changes took effect, and that HMRC specialists responded to 250 inquiries by telephone, and all but 3% of them were resolved immediately. Will the Minister update us on whether the remaining handful of inquiries have been followed up, and on what points were members of the public or their advisers seeking clarification? It would be helpful for the House to understand how the public are responding to these changes.
I also wish to press the Minister on the revenue implications of the measures. It is estimated that, in 2014-15, the reform will cost £395 million, which rises to around £760 million in 2015-16. That is a significant amount of money at a time when the public finances remain challenging to say the least. How certain is the Minister that the other measures in the autumn statement, which the Government say will raise enough revenue to offset the cost of this measure, will in fact raise the amounts that they hope? Today, the Government have published the draft Bill for the new diverted profits tax, which they say will raise £1.3 billion over the scorecard period. However, the Office for Budget Responsibility says that those numbers are uncertain, and, in its fiscal outlook, gives a new rating system to reflect the degrees of uncertainty over some of the figures in the autumn statement. For the diverted profits tax and the SDLT numbers, for example, it gives a medium to high uncertainty rating. What impact will that have, and how confident is the Minister that we will not have future debates on the failure of some of these measures to live up to the Government’s claims?
We have just heard how these changes will apply only to residential properties. The Institute for Fiscal Studies and others have queried why the changes have not been extended to cover commercial property, too. When I raised that point last week, the Minister said that the Government were not persuaded of the case, but it does seem odd to be running two different systems for the same tax, especially when the Government have acknowledged, as we all have, that the slab structure has a very distorting effect.
The Government say that the slab stamp duty system had a negative impact on labour mobility. Why do they think that the same will not happen in relation to business mobility? Perhaps the Exchequer Secretary can give us some more detail on the Government’s thinking in that regard. Has any assessment been done on the impact of retaining the slab system for commercial property, and on how competitive a place this country is in which to do business? Are there any plans to look at this matter again ahead of the general election?
Last week, the Minister said that the changes will have a positive effect on labour mobility and productivity, but the OBR says that the effect will be limited and highly uncertain, because while
“higher rates of stamp duty reduce households’ propensity to move, the adverse effect was confined to short-distance and non-job related moves—an impact less likely to have direct implications for GDP.”
Why do Ministers think slightly differently on the matter of labour mobility?
As the Minister has explained, the measures apply to Scotland only until April next year, as responsibility for this tax was devolved to the Scottish Government in the Scotland Act 2012. The Scottish Government have announced details of their land and buildings transaction tax, which also has a slice structure. The Scottish LBTT will apply to both residential and commercial properties. I want to press the Minister on what impact that will have on the rest of the UK when it comes to the question of where businesses choose to buy commercial properties. Is there a risk that England may be disadvantaged? The more favourable regime in Scotland, with the slice structure for commercial property, might mean that businesses avoid buying commercial property in England where the less favourable slab structure applies. What impact will that differential treatment of commercial property have on business mobility? Although devolution is an important process, as it puts decision making closer to the people whom it affects, we all want to avoid unhealthy tax competition among the nations of the UK. Has any assessment been carried out to consider the implications of such competition?
Of course none of the measures that we are debating today deals with the main cause of the biggest housing crisis for a generation, which is the lack of supply. Last week, I asked the Minister about how the stamp duty changes will impact on house prices. He said that there would be some impact, but that house prices are affected by a number of factors. I wish to press him and the Exchequer Secretary on the assumptions that the Government have made, and what outcome they would like to see when it comes to the interaction between the stamp duty changes and house prices. It looks like we are seeing a 1.4% increase in prices against a 1% reduction in stamp duty at the lower end, and it seems also that the tax take from stamp duty will rely on a 5% annual increase in property prices.
The OBR says that house prices will continue to rise faster than incomes, which will risk pushing home ownership further out of reach for many more people. Have the Government assessed how many more people might be priced out of the property market?
Measures to alleviate the burden on buyers are welcome, but we are experiencing the worst housing crisis for a generation and need much more action on housing supply if we are to get our housing market into better shape and help more young people and families to realise their dream of home ownership. I note the comments that the Financial Secretary to the Treasury made in his opening speech, but the truth is that we need to build many more homes than this Government have managed in their term of office. At the moment, the Government are primarily focusing on the demand side of the housing equation, whereas we, on the Opposition Benches, think that they should have taken the opportunity to balance things up on the supply side, too.
However, the measures before us today are reasonable and sensible. We support them, and I look forward to further debate in Committee.
Mrs Anne Main (St Albans) (Con)
I am delighted with the changes to stamp duty; I have been campaigning for them for a significant period of time. It is worth observing the old adage that success has many parents, but failure is an orphan, as it could be relevant to the campaign. When I was claiming a bit of a victory on this, having campaigned for it for so long, I was amazed to read that the Liberal Democrats had campaigned equally long for the change. Surprisingly, though, not a single Liberal Democrat turned up to the Back-Bench business debate that I secured on the matter on 4 September. Perhaps lobbying is more in the mind than in the actuality.
Let us not be bitter today, as I welcome the proposals. It was good to follow the shadow Minister, as she was raising some of the concerns that I have about a differential tax system. It will have to be addressed, because altering the designation of a property from commercial to residential, or residential to commercial, could provide a way of avoiding tax, as one situation may be seen as more beneficial than the other. To have a dual system running may well cause problems.
I also worry that in areas where it is hard to keep small commercial operations going, the temptation to flip a property’s designation to residential, rather than trying to maintain it as a commercial property, will be even higher if there is also a tax advantage in doing so. I urge the Government to keep that under review, because if the slab system was hated—and it was—it was hated not just for its effect on homes.
John Stevenson
Does my hon. Friend therefore suggest that commercial and residential properties should have the same rates and thresholds?
Mrs Main
I do suggest that. I am sure that budgetary constraint is the reason that has not been done, but I am concerned that that slice system, which will not apply in Scotland and will apply in England only to residential properties, could result in complicated reasons why commercial properties might end up being vehicles for tax avoidance, which would not be good. The slab system was roundly denounced by all parties and all commercial commentators, so I think that is something we should look at.
I welcome the moves to get more young people on the property ladder. In St Albans, the Help to Buy scheme was not utilised at all because, as has been widely observed, if people cannot save up a deposit in a very expensive area, how on earth can they save for the tax to be paid to the Chancellor? The reform is therefore very helpful in that regard. However, we must ensure that we do not allow the properties that we are trying to help—those targeted by lower and middle-income buyers—to be dragged further into the higher levels. In 2003 only 10% of properties were caught by the 3% rate, but just prior to these reforms the figure had risen to 25%. It is important that the Government do not sit back and wait for too long following these reforms, because too many of the families that they have sought to help will be dragged into the higher rates.
According to Savills, which I was talking to today, people in St Albans have already benefited. The amount paid under the previous regime was, on average, £17,273 per transaction. Under the new regime it will be £16,020. That is still very high, but of course that is an average, and the average house price in St Albans is over £500,000, but there are still many houses that fall well below those transaction levels. My constituents are hugely grateful that they can at least start trying to get on to the property ladder without having to pay such an enormous burden to the Treasury. That is welcome.
There are two points that I would like some clarity on. Why have we decided to keep a dual system going when the previous regime was agreed to be so demonstrably flawed? It might be unaffordable, but I think that is almost indefensible. If it is a bad scheme, it is a bad scheme. I do not want business owners and people who wish to aspire to own their own business feeling that they are labouring under a bad scheme that has been roundly denounced, and quite rightly so, by all parties in the House.
Ian Swales (Redcar) (LD)
I will not detain the House for long but I want to register the Liberal Democrats’ support for these proposals. They are important measures that relate to the liquidity of the housing market. The point at which people pay a lot of money is generally a good point at which to raise taxes, but if they are levied in a way that causes the market to be less liquid, that is a bad thing.
I said in my speech last week that slab systems in general need to be looked at, on both the tax and benefits side, because by definition they produce cliff edges and cause sub-optimal behaviour at the boundaries. For that very reason I will join the chorus of people who have said that it is also time to look at the commercial SDLT arrangements. I think that all slab systems should be reviewed, because we can be sure on the income side that tax is avoided near those boundaries, and on the benefits side people are encouraged or discouraged in their behaviour because of the cliff edges.
I understand the need to introduce these measures quickly, and therefore why the Minister might not want to review all such systems with this kind of speed, but I urge him to initiate reviews to see what other changes might be needed on the commercial side and in any other slab systems. I think that the system proposed is very good. It is progressive. I take the point made by the hon. Member for St Albans (Mrs Main) and ask the Minister what inflation arrangements he is considering for the boundaries of the new system. The fact that the budget document shows an increasing take from stamp duty rather suggests the fiscal drag that the hon. Lady fears. I would appreciate it if the Minister responded to that point.
As I said in an intervention, this reform joins the long list of measures that the Government have introduced to increase taxes on those who can best afford it, such as the large increase in capital gains tax and in tax on pension contributions and, indeed, the fact that the top rate of income tax is now 5% higher than it was for the entire period of the previous Government, except for their very last day in office. I welcome the progressive nature of those changes. Very wealthy home buyers will be paying a lot more to the Treasury, which I welcome. The Minister talked about the percentage effects in various parts of the country. I can report that, to the best of my knowledge, the figure for those benefiting in Redcar is 100%, so I thank him for that. I believe that this change is an important matter of fairness, and my party will support it.
The Exchequer Secretary to the Treasury (Priti Patel)
It is a pleasure to respond to this efficient debate, and I welcome the consensus on it across the House. The measure has been debated over the past week, so it is not surprising that we have reached a conclusion quickly today. We have had an effective debate today. This is a landmark reform, as my hon. Friend the Financial Secretary has said. The Government announced it in the autumn statement. It is the most radical restructuring of stamp duty we have seen. It cuts stamp duty for 98% of people who pay it. It eliminates damaging distortions in the housing market, where someone buying a house for £250,001 pays three times as much tax as someone buying a house for just £1 less.
Priti Patel
The reform cuts stamp duty for 98% of people who pay it. That is the point I was making.
The reform reduces the tax bill for first-time buyers. As my hon. Friend the Financial Secretary highlighted, this is about aspiration. Everything about the debate we have had is about supporting home owners, first-time buyers and the principle of aspiration.
In a moment I will move on to the points that have been raised by my hon. Friend the Member for St Albans (Mrs Main). The Labour party made a number of points about how many people have benefited from some of the advice that Her Majesty’s Revenue and Customs provided last week on the transitional support. The Government do not have the current figures on how many home buyers have benefited from the transitional reviews. As with most cases where stamp duty is paid, we get the information only after a transaction has been fully completed. However, we expect that as many as 35,000 transactions will benefit from the transitional rules, which is a substantial number.
My hon. Friend the Member for St Albans and the hon. Member for Redcar (Ian Swales) mentioned stamp duty on commercial properties. They will not be surprised to hear that the Government rightly keep all taxes under review. We have taken swift action on the residential front, as my hon. Friend the Financial Secretary has highlighted, and that was debated in the House last week. That swift action has obviously removed the distortions that acted as a break on aspiration and made it harder for first-time home owners.
The market for commercial property is different and, as I said, we will keep all taxes under review. My hon. Friend the Member for Rossendale and Darwen (Jake Berry) asked about mixed-use buildings. Those are subject to the commercial rules, not the residential rules, as my hon. Friend the Financial Secretary highlighted. The Government keep all taxes under review and will give consideration to mixed-use buildings ahead of future events as part of our normal review process.
My hon. Friend the Member for St Albans touched on Government forecasts. Forecasts of house prices and stamp duty land tax revenues have been verified by the Office for Budget Responsibility. My hon. Friend has been an assiduous campaigner on these issues and had a debate on the subject in the House not long ago. She referred to flipping between commercial and residential rates for avoidance purposes. We are clear that the reform is not an opportunity for avoidance.
Ian Swales
Can the Minister clarify the situation where buy-to-let residential property might be owned within a corporate envelope? Is that treated as a commercial business or does it still fall within the residential arrangements?
Priti Patel
Property in the buy-to-let framework would be treated as residential.
Jake Berry
I refer to the point about flipping between commercial and residential arrangements. My hon. Friend will be aware that one of the welcome reforms of this Government has been to give automatic planning permission for vacant commercial office buildings to become residential property. The substantive implementation of a change of use and planning permission between a commercial office building and a residential property would be minimal and could involve, for example, just bringing in desks and putting in more male and female lavatories. There is concern about avoidance, and where two systems exist, there is greater opportunity for avoidance by those who seek not to pay their tax. Will she commit from the Dispatch Box to keep this matter under review and ensure that as the Government take the Bill through the House, they will review it and seek opportunities to tighten up the law to ensure that everyone pays their fair share of tax?
Priti Patel
My hon. Friend makes a valid point about keeping the arrangements under review. We want to ensure that people pay not just their fair share, but the right amount. The Government keep all taxes under review.
Sir Greg Knight (East Yorkshire) (Con)
Clause 2 refers to the purchaser being able to elect that the new calculations do not apply, and the explanatory notes that my hon. Friend has helpfully supplied state:
“An election must be made in a land transaction return . . . and must meet any requirements specified by the Commissioners for Her Majesty’s Revenue and Customs.”
Will any terms so imposed be subject to ministerial scrutiny and approval?
Priti Patel
Absolutely. Ministers are involved in the process and will be consulted. That is right and proper. The point that my right hon. Friend makes is about the transitional rules, which we touched on earlier.
The hon. Member for Birmingham, Ladywood (Shabana Mahmood) mentioned Scotland and the changes to stamp duty land tax, which has been devolved to Scotland. The Government will monitor how stamp duty land tax receipts change in the light of that. That is part of the usual policy-making process.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
Was discussion with the Scottish Government held in advance of the announcement? Will there be additional discussions during the coming weeks and months to ensure that there are no adverse consequences?
Priti Patel
This is a commercially sensitive area so specific discussions were not held. I reiterate that as part of the usual policy-making process there will be ongoing reviews of how the system works between Scotland and England. Now that the change has been made, discussions will take place when necessary.
Cathy Jamieson
The Minister refers to the normal policy-making process. However, given that the changes in Scotland are due to be introduced in April, there is a very short opportunity for discussion, particularly about any adverse impact that there might be on the market. Does the Minister have plans to meet her counterparts in Scotland for discussions?
Priti Patel
These are now devolved matters, as the hon. Lady knows. As part of not only the devolution process but future policy formation, I have no doubt that discussions will take place.
John Stevenson
I am grateful for the earlier clarification about the Government’s position on commercial property. Can the Minister clarify the position on agricultural property?
Priti Patel
Agricultural property would be treated in the same way as commercial property. I hope that answers my hon. Friend’s question.
On housing supply and affordable housing—a point made today and last week from the Opposition Front Bench—all the work that the Government have put in place in relation to the stamp duty land tax measure has been about supporting aspirational home ownership and making home ownership a reality for as many households as possible. This Government support more home ownership, and stamp duty reform is part of that. We are investing billions of pounds to provide affordable homes including, as my hon. Friend the Financial Secretary mentioned, £4.5 billion during the spending review period to provide more than 170,000 new units, and a further £3.3 billion to deliver more than 165,000 more homes over three years from 2015. We have also speeded up reforms to planning. Housing starts in England are at their highest level since 2007, which we all welcome. In the autumn statement last week we announced a package to do even more, by introducing measures to support more than 133,000 new homes. My hon. Friend the Financial Secretary touched on rent-to-buy and help-to-buy schemes.
In conclusion, our long-term economic plan has supported home ownership through stamp duty land tax reform and increased supply through the measures that I have just outlined. Importantly, the economy is growing, the deficit is falling, and employment is at a record high. These are all economic measures that should be welcomed across the country. We are building a stronger, sustainable and healthier economy. The autumn statement set out a modest fiscal tightening and does not shy away from the challenges that remain.
Against that backdrop, we believe that aspiration should be supported. For centuries it has spurred people on. The Bill backs those who aspire. I am proud to be part of a Government who stand by aspiration and advocate it. This Bill reforms a fundamentally flawed system and will help make the dream of owning a home a reality, while cutting the tax bill for the overwhelming majority of people affected by it. There is consensus on this, as we heard this afternoon, and I hope the House will give the Bill a Second Reading.
Question put and agreed to.
Bill accordingly read a Second time.
Stamp Duty Land Tax Bill (Programme)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the Stamp Duty Land Tax Bill:
Committal
(1) The Bill shall be committed to a Committee of the whole House.
Proceedings in Committee, on consideration and on Third Reading
(2) Notwithstanding the practice of the House as to the intervals between stages of Bills brought in on Ways and Means Resolutions, proceedings in Committee, any proceedings on consideration and proceedings on Third Reading shall be completed at one day’s sitting.
(3) Proceedings in Committee and any proceedings on consideration shall (so far as not previously concluded) be brought to a conclusion, on the day on which proceedings in Committee are commenced, two hours after the commencement of proceedings in Committee.
(4) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion, on the day on which proceedings in Committee are commenced, three hours after the commencement of proceedings in Committee.
(5) Standing Order No. 83B (Programming committees) shall not apply to proceedings in Committee, to any proceedings on consideration or to proceedings on Third Reading.
Other proceedings
(6) Any other proceedings on the Bill (including any proceedings on consideration of any Message from the Lords) may be programmed.—(Gavin Barwell.)
Question agreed to.
Wales Bill (Programme) (No.3)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the Wales Bill for the purpose of supplementing the Order of 31 March 2014 in the last Session of Parliament (Wales Bill (Programme)), as varied by the Order of 30 April 2014 in that Session (Wales Bill (Programme) (No. 2)):
Consideration of Lords Amendments
1. Proceedings on consideration of Lords Amendments shall (so far as not previously concluded) be brought to a conclusion three hours after their commencement at today’s sitting.
2. The Lords Amendments shall be considered in the following order: Nos. 1 to 13, 17 and 14 to 16.
Subsequent stages
3. Any further Message from the Lords may be considered forthwith without any Question being put.
4. The proceedings on any further Message from the Lords shall (so far as not previously concluded) be brought to a conclusion one hour after their commencement.—(Gavin Barwell.)
Question agreed to.