Stamp Duty Land Tax (Temporary Relief) Bill

(Limited Text - Ministerial Extracts only)

2nd reading & 2nd reading: House of Commons
Monday 13th July 2020 Commons Chamber

[The Economic Secretary to the Treasury (John Glen)]

I beg to move, That the Bill be now read a Second time.

There is no doubt that the spring and early summer of 2020 will be forever remembered as one of the most testing periods in our nation’s post-war history. Covid-19 is both a health crisis and an economic crisis. It has tested the public and private sectors in equal measure, just has it has tested the population as a whole. But the virus has been brought to heel, and thanks to our collective efforts we are now in a position where it is safe to reopen our economy.

From the outset of this crisis, the Government have sought to protect business, jobs and incomes. The coronavirus jobs retention scheme and self-employment income support scheme have between them preserved millions of livelihoods through the lockdown. Meanwhile, our VAT deferrals and business rates reliefs, alongside the coronavirus business interruption loans and bounce-back loan scheme, have carried many businesses through the hardest months, so that they now have a fighting chance to recover.

In the autumn, the Government will bring forward a Budget and a spending review that will set out a longer-term strategy for the United Kingdom’s economic recovery.

However, this pandemic is not yet over. Even as we step out of lockdown, a great deal of disruption and uncertainty remains. Many businesses have yet to reopen their doors. Up and down the country, people are worried about whether their jobs will be secure when they return to work, and that is why my right hon. Friend the Chancellor of the Exchequer came to the House on Wednesday to set out the Government’s plan for jobs. As a first step, the Government are introducing a one-off job retention bonus of £1,000, available to employers for each furloughed employee who is still employed as of 31 January next year.

There will also be new, high-quality jobs for hundreds of thousands of young kick-starters. We will invest £1 billion to double the number of work coaches and support the unemployed. There will be more apprenticeships, traineeships and skills funding, and we will bring forward £8.6 billion of investment in our public services and infrastructure to trigger new job creation projects around the country. However, we know that some sectors of the economy have been hit particularly hard, and that is why the Government will support the hospitality and tourism sectors by cutting VAT on food, accommodation and attractions from 20% to just 5% for the next six months. It is why the Government have put in place a £1.57 billion rescue package for theatres, museums and other cultural industries, in recognition of the 700,000 people employed in those sectors and to safeguard the incalculable contribution they make to our national life.

[Chris Grayling (Epsom and Ewell) (Con)]

May I congratulate my hon. Friend and his colleagues on the Treasury Bench for what I think has been an exemplary response to an unprecedented crisis? He describes the challenges that still remain in the economy. Many people still face tough times, particularly in the events sector, where businesses remain as yet unopened. Many of the people who work in the events and entertainment sector have not, for various reasons to do with their employment or tax status, been able to take advantage of the schemes we have seen over the past few months. Will my hon. Friend, together with his Treasury colleagues, look at whether there are additional things we can do to support those sectors and those people in the months ahead, because for them times are still tough?

[John Glen]

I thank my right hon. Friend for his kind remarks. There is more work to be done, and I acknowledge the challenges faced by different industries in different ways. We will continue to look very carefully at further interventions that we could make and shall make in the Budget later this year.

I turn to the housing market, which is another example of a sector that has experienced considerable disruption and which brings me to the subject of this Bill. The Government’s plan for jobs will support the construction sector by injecting new confidence and certainty into the housing market. It will do so by ensuring that anyone buying a main home for under £500,000 before the end of March next year will pay no stamp duty whatever.

A thriving housing market is critical for growth and jobs in this country. Most obviously, a healthy labour market relies on people being able to move home to be closer to the jobs that match their skills, but the building industry is itself a major contributor to jobs and prosperity in the country, adding £39 billion a year to the UK economy. House building alone supports up to three quarters of a million jobs, and let us not forget the many related sectors that benefit from property transactions: estate agents, removal companies, furniture retailers, DIY stores, self-employed decorators and so forth. The lockdown sadly brought much of that trade to a juddering halt.

Rightmove estimates that 175,000 sellers were prevented from coming to the market between March and May this year. Meanwhile, HMRC data shows that residential property transactions in May were about 50% lower than the same month last year. For the first time in eight years, house prices have fallen.

[Matt Western (Warwick and Leamington) (Lab)]

The Minister is making a fair argument in support of the construction and housing sector, but, as he just described, the sector is down by 50% in terms of sales. He will appreciate that the automotive and car sector was down by 97% over the two months of April and May and down by 30% in June. Does he not think that that sector is worthy of support as well?

[John Glen]

I thank the hon. Gentleman for his observations, which he made last week as well. Of course the Government look at all industries. The automotive industry is a key industry, and we are in dialogue with companies across the country looking at the appropriate interventions necessary. Obviously, commercial sensitivities sometimes prevent us from discussing those at the Dispatch Box.

With restrictions easing, the Government have been able to reopen the housing market, and there are signs of tentative movement. Transactions in May were 16% higher than in April. It is crucial to our recovery that we maintain this momentum. People should feel confident to move, to buy, to sell, and to renovate and improve their homes. This is why the Government are cutting stamp duty land tax by temporarily increasing the nil rate band for residential property from £125,000 to £500,000, with effect from last Wednesday—8 July—until 31 March 2021.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I draw the House’s attention to my entry in the Register of Members’ Financial interests. I am very supportive of these measures. One of the risks to the housing market is the withdrawal by the lenders of high loan-to-value mortgages, especially for first-time buyers. We know that 90% and 95% loans can become a self-fulfilling prophecy that damages the market. Will the Minister do whatever he can to make sure that our banks support high loan-to-value mortgages throughout this time?

[John Glen]

I am grateful, as ever, for my hon. Friend’s intervention. Of course, he has enormous expertise in this sector. He is right to say that there is a threat given the changes in the profile of LTV mortgages that are being offered. We hope that that will return to more of the normal schedule that we would have seen pre-pandemic. We will be actively looking at this, and I am in conversations with the banks and building societies about it.

[Siobhain McDonagh (Mitcham and Morden) (Lab)]

Does the Minister agree that this is actually more than a threat for first-time buyers at the moment—it is a reality? First-time buyers are queuing online for websites of lenders in an effort to get the small number of 5% deposit mortgages. Providing more incentive to people who already own their own home or are part of the buy-to-let market effectively crowds out first-time buyers.

[John Glen]

I thank the hon. Lady for her point. I would look at it in terms of opening up the market, creating more churn and momentum that allows all participants to be able to get on the housing ladder.

The Government’s cutting stamp duty land tax in this way will mean that nine out of 10 people buying their main home will pay no stamp duty at all, and buyers can save up to £15,000. In my own constituency, the average family looking to buy a home worth £349,000 will go from paying £7,450 in stamp duty to absolutely nothing. Indeed, this Bill will take most properties outside of London and the south-east out of stamp duty entirely.

The Bill is the latest in a long line of measures from this Government designed to support current and prospective homeowners in this country. Historically, stamp duty has been charged at a single rate on the whole purchase price of a property, with different rates for different value bands. The same rate of tax was charged irrespective of the number of properties owned by the buyers. In 2014, the Government reformed stamp duty land tax on residential properties, cutting the tax for 98% of buyers who pay it, unless they are purchasing additional property. In 2015, the Government introduced the higher rates of SDLT, which apply on purchases of additional residential properties such as second homes and buy-to-let properties. Finally, in 2017, the Government introduced first-time buyers relief. This increased the price at which a property becomes liable to pay stamp duty, for first-time buyers, from £125,000 to £300,000, with a reduced rate between £300,000 and £500,000.

Together, these reforms have made the tax system fairer and more efficient. They have cut the cost of home ownership for first-time buyers, helping more than 500,000 families to secure a foot on the housing ladder. This Bill will cut the cost of home ownership further, at a time when personal finances are under considerable pressure. In doing so, it will inject new momentum into the property market, protecting thousands of jobs in both the construction industry and the wider economy.

This stamp duty cut is one of several measures in the Government’s plan for jobs that will benefit families and businesses across the country. From September, homeowners and landlords will be able to apply for a green homes grant of up to £5,000 to make their homes more energy efficient. For low-income households, we will go even further, with vouchers covering the full cost up to £10,000. This, too, will support local jobs, as well as reducing carbon emissions and cutting energy bills for hard-pressed families.

[Craig Mackinlay (South Thanet) (Con)]

I wonder if the Minister could clarify a couple of points. On the 31 March date, we all worry that this will end up being a cliff edge, as the date approaches. Will that be the date of exchange, which is usual, I think, in these matters? Is he not concerned about that cliff edge? For some people, for no reason of their own, late finishing of their property will mean they fall the wrong side, very expensively?

[John Glen]

I thank my hon. Friend for his point. We are in a situation where, if the transaction is substantially completed by 31 March, it will be able to qualify for the relief.

Almost four months ago, the Government took the extraordinary step of ordering businesses across the country to close for an extended and unspecified period of time. Millions of people put their lives on hold for the greater good, but now that the virus is under control, the time has come to reopen our economy. Providing infection rates remain low, people should be able to get on with their lives, wherever possible. There are few aspirations more important to the British people than home ownership, and this Bill will ensure that those looking to buy a family home will see their stamp duty bill disappear altogether. It is part of our plan to turn our national recovery into millions of stories of personal renewal. In doing so, it will stimulate the housing market, safeguarding many thousands of jobs and helping Britain to bounce back stronger than before. For all these reasons, I commend the Bill to the House.

--- Later in debate ---

[Kevin Hollinrake (Thirsk and Malton) (Con)]

It is a pleasure to follow my hon. Friend the Member for Runnymede and Weybridge (Dr Spencer), and I will address one or two of his points, but first I must draw the House’s attention again to my entry in the Register of Members’ Financial Interests, and also apologise to the shadow Minister, the hon. Member for Liverpool, Walton (Dan Carden), as I inadvertently misled the House earlier when I said that Labour did not cut stamp duty in 2008; actually, they did, from a £125,000 threshold to a £175,000 threshold, but they crashed the housing market so badly that it made no difference whatsoever, which is why I cannot remember it. Interestingly, however, at the time, despite what he said in his speech, they made no dispensation in terms of buy-to-let investors—stamp duty was just cut across the board, regardless of what the property was for, so there was not some carve-out only for homeowners. According to the research, one thing that cut did do was boost activity, by 20%. Activity was at a very low level, as transactions were normally at 100,000 a month but they were down to 40,000 a month, so it was a pretty painful time, but the cut boosted activity, from that low level, by about 20%. Labour then withdrew the measure pretty early and activity fell away again, which is one of the reasons why we had such an extended recession from 2008 onwards.

I think certain Members have missed the point of the measure we are debating today. It is not just about helping some people get on to the housing ladder; it is also about activity. We all know that the housing market is a major driver of activity right across the economy. That is why many hon. Members have asked why on earth we are taxing something that is a major driver of activity across the economy. This is a transaction tax, and is therefore bound to slow the market down even in good times, let alone times such as this when we are trying to stimulate the economy.

This is not just about driving activity. Residential stamp duty brings in important revenue—about £8.3 billion every year. When my hon. Friend the Member for Runnymede and Weybridge talked about stamping out stamp duty entirely, I saw the sweat on the Minister’s brows as he was thinking, “Where are we going to find that £8 billion?”

[The Financial Secretary to the Treasury (Jesse Norman)]

My hon. Friend will be pleased to know that actually I remained as implacably calm as I always am. As a test of all colleagues who want to scrap taxes, I invite them to do exactly what he is doing and supply the missing revenue with some other suggestion. I did not notice that in the speech of my hon. Friend the Member for Runnymede and Weybridge (Dr Spencer), but I am still waiting; I look forward to hearing that before we finish.

[Kevin Hollinrake]

The Minister is absolutely right, and I will come to that.

The Conservative Government have improved the system of stamp duty significantly. It used to be a ridiculous slab tax that created distortions all the way through the market, but we made it into a slice tax—perhaps a slam tax—that gets very expensive at the higher levels and deters activity at the top end.

On the Minister’s point about where on earth we are going to get the money from, the reality is that this nation will come under huge tax pressure over the next few decades, not just the next few years. According to the Office for Budget Responsibility, because of the demands of healthcare and social care, if we do not change the tax system and claim more tax, our national debt will grow to three times our GDP—it is one times our GDP today—so we cannot simply scrap taxes without introducing alternative measures.

I am going to propose a measure. I would like the threshold remain at £500,000, as my hon. Friend the Member for South Thanet (Craig Mackinlay) proposed. We have to find that £8.3 billion annually, so we have to look at annual property taxes. The council tax system, under which people pay pretty much the same whether they live in a castle or a cottage, cannot be right. We need to revisit it and have a proper discussion about it. It is controversial. Some people think it is right that people who own bigger houses should pay more, and other people think it is wrong. We should certainly have a conversation about that.

The think-tank Onward recently proposed that there should be a council tax revaluation, and even the Prime Minister suggested back in 2014 that we should look at it. The thing about it is that it is simple. We can scrap stamp duty completely up to £500,000, and keep it at that level. We can also adjust the bands to make it cheaper for people in lower-value homes, to help people on lower incomes, and make it more expensive for people in higher-value homes.

It is simple, but it is not easy. Simple and easy are two completely different things. As Ronald Reagan said, there are simple solutions, but there are no easy solutions. If we are to tackle some of the unfairnesses in society, we must not duck the tough issues; we must look at the things that make the system unfair in the first place. This is an excellent measure, and I will support it tonight if we enter the Lobbies.

[Anthony Browne (South Cambridgeshire) (Con)]

I refer the House to my entry in the Register of Members’ Financial Interests. I am on the advisory council for the Institute for Fiscal Studies, which I am about to quote, and back in 2012 I co-founded the HomeOwners Alliance, Britain’s only consumer group for homeowners, because I was alarmed by the prospects of the home ownership gap—the 5 million aspiring homeowners who cannot own their own home. We have done a lot of work promoting policies to help people get on to the housing ladder.

I was concerned about the home ownership gap because, as Opposition Members said, home ownership levels have declined. What they did not say was that home ownership levels went up almost every year for the past 100 years and stopped in the year 2000—three years after the new Labour Government came in. They then started declining for a decade or so. They are now going back up again. I commend the Government’s policies for increasing home ownership levels.

Various people on both sides of the House have mentioned the deposit barrier. It is a huge barrier for first-time buyers who are trying to save up a deposit. The reason banks have increased the deposit requirement and got rid of 95% loans is that house prices are falling, as the latest data shows. Therefore, if people take out a high-value mortgage, they end up in negative equity. That is why banks are legally required to do only affordable lending. The best way to help homeowners get high loan-to-value mortgages is to have a confidently stable or rising housing market, where there is no risk of negative equity. This measure will do that.

In my time at the HomeOwners Alliance over the past decade, I have done a lot of policy work on stamp duty and written loads of reports on it, including one back in 2012 or 2013 that argued for a differential stamp duty system for second home owners and property investors. There is absolutely no reason why they should benefit from the low stamp duty rates for first-time buyers and so on. I lobbied the Treasury, No. 10 and the Ministry of Housing, Communities and Local Government, and I was delighted when they finally introduced it as the stamp duty premium for additional homes. I would not have introduced it in quite the way they did, but the policy has made a big difference.

Two months ago, I called on the Government to introduce a stamp duty holiday to kick-start the housing market, so naturally I am delighted that the Government have done it.

[Jesse Norman]

It was only you saying it.

--- Later in debate ---

[The Financial Secretary to the Treasury (Jesse Norman)]

I thank all hon. and right hon. Members for what has been a very interesting debate, across the Chamber. I also thank the Labour Members for their support on this measure, because it is wise on their part but also indicates that they share at least this aspect of the Government’s vision for the economy.

This pandemic represents, as the right hon. Member for Wolverhampton South East (Mr McFadden) said, not merely a public health crisis but a profound shock to our economy. That is why, last Wednesday, my right hon. Friend the Chancellor unveiled the Government’s plan for jobs. The purpose of that plan, as he articulated, was to protect, to support and to create jobs across this country.

As we have heard in this debate, the property market has been particularly hard hit, with almost 90% fewer mortgage approvals in May than in February, before the lockdown at began. Not only is this a source of terrible frustration and uncertainty for buyers and sellers who must put their lives on hold in that respect as in so many others, but the reverberations have been felt across the economy. More than 24,000 people are directly employed by house builders, with hundreds of thousands more in the supply chain, and there is a knock-on effect for removal companies, furniture stores, painters and decorators, and many other businesses large or small that benefit when people move—a point nicely made by my hon. Friend the Member for Dudley South (Mike Wood) when he talked about his role as chair of the APPG on the furniture industry, and rightly so.

There are, however, signs that the market is beginning to recover, with some 16% more transactions in May than in April. It is in the interests of both homebuyers and the wider economy that that trend should gather momentum and speed over the coming months. That is why the plan for jobs included a commitment to increase temporarily the nil rate band of residential stamp duty tax from £125,000 to £500,000. Alongside the green homes grant, the aim was to inject momentum back into the housing market so that the economy can start to move forward once again. The Bill today puts that commitment into action and will ensure that the new band can take effect from 8 July—last Wednesday—until 30 March 2021.

Turning to the points raised in the debate, the right hon. Member for Wolverhampton South East asked whether this policy was designed in some way to benefit second home owners. I can reassure him that it is quite untrue to suggest that the measure will disproportionately benefit second home owners. Although those buying second homes or buy-to-let properties will benefit, and make a very important economic contribution in so doing, they will continue to pay an additional 3% on top of the standard stamp duty land tax rates. Let us not forget that it was this Government who introduced the phasing out of finance costs relief, as well as the higher rates of stamp duty land tax for the purchase of additional property—all steps towards a more balanced tax treatment between homeowners and landlords.

The hon. Member for Liverpool, Walton (Dan Carden), in his opening speech, talked about the limited scale of this package of measures. All I can say to him is that his memory is a lot shorter than many others, as £30 billion used to be considered a rather large amount of money. Certainly, it was no slouch of a budget statement to announce that much. It is a measure of how much our times have changed that that should be seen to be the case.

The right hon. Member for Wolverhampton South East raised the question of whether the Government were reacting in some sense to a leak which, nevertheless, would have itself encouraged forestalling. I can tell him that I have dozens of officials across the Treasury thinking about tax strategy who have the concept of avoiding forestalling ingrained, tattooed on their eyebrows and embedded in their heart like the word “Calais” on the heart of Queen Mary in the 16th century. The idea that they would ever have contemplated that is risible. They did not.

Let me turn to some of the other comments that were made in the debate. The hon. Member for Warwick and Leamington (Matt Western) shared with us his concerns about growing wealth inequalities. I understand that. Would he, or maybe the hon. Member for Liverpool, Walton, like to clarify his position on a wealth tax? Would he be in favour of that? What is the Labour party’s position? He is welcome to intervene on me if he has a view on that, as is the hon. Member for Liverpool, Walton, who perhaps could do so in Committee. It is causing us a certain amount of uncertainty and it must be causing voters even more.

The hon. Member for Mitcham and Morden (Siobhain McDonagh), in a very thoughtful speech, invited the Government to build more. I can direct her, if I may, to an article in The Guardian on 14 November last year, which points out that house building in England is at a 30-year high. As colleagues have mentioned, we have a £12.2 billion affordable homes programme in place at the moment, so she can take it as read, I hope, that both sides of the housing market are very well attended to at the moment.

My hon. Friend the Member for Runnymede and Weybridge (Dr Spencer) raised whether we should scrap stamp duty all together. I was perhaps slightly harsh, but I always take it as an additional measure of credibility when colleagues can come forward, as my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) did—and my hon. Friend the Member for South Cambridgeshire (Anthony Browne)—with a specific suggestion for how the gap could be filled. What was charming about my hon. Friend the Member for South Cambridgeshire was that although he believes the abolition of this tax will fire up the market, temporarily at least, he did not seem to think that doubling the additional tax would have any effect on the market. I thought that was an interesting economic contribution and I invite him to raise that possibility with his friends at the Institute for Fiscal Studies, since he is a board member or senior advisor there.

Let me wind up by saying that this is an important measure, which comes at a time when the pandemic has tested our economy to the limit. Through our collective effort, we will bring this virus under control. We have done so and we will continue to do so, and we will support our economy as it reopens in a way that is safe. For those reasons, I commend this Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time; to stand committed to a Committee of the whole House (Order, this day).

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. Before I ask the Clerk to read the title of the Bill, I should explain that, in these exceptional circumstances, although the Chair of the Committee would normally sit in the Clerk’s Chair during Committee stage, in order to comply with social distancing requirements I shall remain in the Speaker’s Chair carrying out the role of Chairman of the Committee. We should be addressed as Chairs of the Committee rather than as Deputy Speakers.