Finance (No. 2) Bill

Alison McGovern Excerpts

Committee: 1st sitting: House of Commons
Monday 18th December 2017 Commons Chamber

[James Cartlidge]

I entirely disagree. The absolute root cause of it all was not saving enough and having a bad culture of over-reliance on debt. I well remember that back in ’98 and ’99 when Francis Maude was the shadow Chancellor, he kept saying, with regard to the low savings ratio, “We are storing up problems for the future.” At every Budget, no matter how high Labour was in the polls, our shadow Chancellors and shadow spokesmen—people like Howard Flight—would say that the savings ratio was way too low and we were storing up problems for the future. We did warn, we did say it, and we were ignored.

[Alison McGovern (Wirral South) (Lab)]

The hon. Gentleman is making the case that people borrowed too much because they were somehow feckless or immoral. [Interruption.] He mentioned the poor savings culture in this country and said that people were unable to save. Actually, is it not the case that the picture has worsened since then, because the simple fact is that wages have been held down and people are now unable to save? How has his party in government fared on the issue that he has raised?

[James Cartlidge]

I never talked about fecklessness or being immoral. I was talking about the economic fact that the savings ratio was dangerously low throughout much of the Labour Government’s time in office, and they were warned about it. Labour Members are saying that we never said anything, and that simply is not true.

The hon. Lady seems to think that Labour had good policies on debt. I remember when someone could get a self-certified mortgage, with no proof of income, on an annual percentage rate relating to bad credit, so they could have a history of failing to pay debt. Not only that, but it was interest-only, so they were not even repaying the capital. There was a whole menu of different types of sub-prime such as light-adverse, medium-adverse or heavy-adverse. As I have said before, basically the question was, “Do you have a pulse?”, and then one got a mortgage.

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[Alison McGovern]

My hon. Friend is making an excellent speech. Given the comments that we heard earlier about recent history, does she agree that the brutal cuts to important children’s services such as those that she describes go completely against the rhetoric with which David Cameron and George Osborne came to this House when they went into government in 2010, after the events we heard described just a moment ago?

[Rosie Duffield]

Absolutely—

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[Mel Stride]

As the hon. Gentleman may know, the figure of 0.3% takes a static view of this policy and its effect on house prices. It does not take into account the supply side changes that I have mentioned. As we increase supply, prices will inevitably begin to fall. There is no single solution to this challenge and no magic bullet.

[Alison McGovern]

Will the Minister give way?

[Gareth Snell]

Will the Minister give way?

--- Later in debate ---

[Mel Stride]

The figures the hon. Gentleman chose to use were, I think, a range between £250,000 and £300,000, and he says there are 15 properties in that category. Of course, stamp duty kicks in at £125,000, so it is the range from £125,000 to £300,000 that we would actually be considering in that example.

First-time buyers are typically more cash-constrained than other buyers, and stamp duty requires cash up front, on top of a deposit and conveyancing fees, for purchases over £125,000. The Government think it is right to reduce the up-front costs that first-time buyers need to pay, giving them an advantage over the rest of the market.

[Alison McGovern]

I thank the Minister for giving way, but he simply did not answer the question from my right hon. Friend the Member for Warley (John Spellar), who quite legitimately asked him where the money from this cut is going. The Minister talked about the average gain that will be made. Will he tell us the average benefit to a first-time buyer in the west midlands?

[Mel Stride]

As I say, the average across the piece will be £1,700 per average first-time buyer. I also stated quite clearly that, in every region of the country, there will be those who benefit from this measure.

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[Sandy Martin]

I am concerned about the lack of impact that financial incentives for first-time buyers appear to be having on encouraging housebuilding. The recent pay-offs for Persimmon Homes executives are surely good evidence that a substantial proportion, if not all, of the Government’s money is going into exceptional profits for private housebuilders, rather than genuinely making homes more affordable. We need to know that any money or tax incentives that the Government put into housing will genuinely help people to achieve the housing they need.

The cost of housing for residents is not just about the building itself, but the costs of running the building. New houses are still being built which make short-term savings for the builders at the cost of a long-term expense for their owners or tenants, and also at a long-term cost to the environment. Ipswich Borough Council had a substantial plan to install solar PV panels on all suitable roofs on its substantial council housing estate. It was all set to go in 2013 when the Government moved the goalposts and blew a hole in the business case. The Government seem to be willing to promise vast sums as guarantees for new nuclear powers stations, but they are not willing to use the extensive potential tax powers at their disposal either to incentivise housebuilders to install photovoltaics in original buildings or to adequately incentivise owners to install them on existing buildings.

Increasing the number of solar panels on the roofs of this country would be one of the most cost-effective ways of generating the electricity we need. It would be more beneficial to the residents of those buildings. It would take effect far sooner than waiting for the construction of nuclear power stations and it would predominantly employ working people and small businesses in this country.

Many of us were hoping that the Government would have found further substantial incentives for solar panels in the Bill. I can only hope that a review of the operation of housing finances and an equality impact assessment of the way the Bill will affect low-paid people might encourage the Government to look again at how they can make housing less expensive for those who live in it.

[Alison McGovern]

I want to talk about the cut to stamp duty for first-time buyers, but before I do so I would like to take the opportunity to briefly remind Ministers on the Treasury Bench that in March my constituency suffered a terrible disaster: the gas explosion in New Ferry. The Department for Communities and Local Government currently has Wirral Council’s plan for the rebuild. I trust that, in the context of discussing new housing, Treasury Ministers will look kindly on the plan should it come before them.

I want to argue against the cut to stamp duty and for the Opposition amendment, which calls for a review of the policy, and a review of the place of first-time buyers in the housing market and the supply of housing. My argument against this specific policy is, first, that it looks set to fail against the targets the Government have set themselves; and secondly, that in the current economic context it is simply the wrong policy priority. Perhaps we might consider this policy if we were experiencing the same growth as other countries in Europe or we had dealt with our budget deficit, but even if it was not set to work against what the Government have tried to achieve, it would still be the wrong policy because it is not the country’s priority.

I imagine this policy coming before Treasury Ministers during the Budget preparations and their thinking to themselves, “Well, this might be attractive on the face of it, but ought we not to ask our bevvy of economists here in the Treasury what the likely impact might be?” The hon. Member for Spelthorne (Kwasi Kwarteng) just rolled his eyes at me, and he did so because he knows as well as I do—we have debated it often enough—that the advice from the OBR was entirely predictable.

It was entirely predictable that anyone looking at the policy in the current economic climate would say that we have clear, credible evidence from previous changes to stamp duty that the value of this tax change will accrue not to first-time buyers but to those who already own properties. That is what the OBR says, and it is what advice from the specialists in the Treasury would have told Ministers. I do not know—I have no evidence of this—but I have confidence in the Government Economic Service and I think they would have told Ministers that.

Furthermore, it is very unlikely that the Treasury does not have the full analysis requested by my right hon. Friend the Member for Warley (John Spellar). All Members across the House know in their own minds whether their constituencies will benefit from this, and all members of the Cabinet know whether constituents in their constituencies—which are largely in the south-east of England—will benefit. Those of us who have watched house prices in our constituencies barely grow at all in the past 10 years will know that our constituents will benefit very little from this very expensive tax change.

[Mrs Main]

I am listening carefully to the hon. Lady, because obviously I have a constituency in one of the higher value areas. I am confused. The shadow Minister just said that the stamp duty cut was not appropriate because the right measures were not in place for affordable housing, whereas she seems to be saying that a stamp duty cut is not what she would like to see. Which is it? Does she think that the stamp duty cut should not happen at all? I would like a simple yes or no answer.

[Alison McGovern]

I thank the hon. Lady for that intervention, but I have already answered her question. I said that in better economic circumstances this might be something that we might want to do, but it is not a priority for now. I answered her question before she even asked it.

Given what the OBR has said, I ask Ministers once again to look at that and at the evidence. The value of this tax cut will not go to first-time buyers. That is absolutely clear. If Ministers think that they can come back to this House after having a review and persuading the OBR that the Treasury is correct and the OBR is wrong, then fine, we can look at it, but I see no reason to think that, and here is why. When we asked the Chancellor about this measure in the Treasury Committee, he gave the same line as the Minister just gave at the Dispatch Box. He said, “Ah, yes, but the OBR assessment —their model—doesn’t take into account our reforms, which will make a huge difference to the supply of housing.”

Anybody can look at page 28 of the Budget—at the Budget scorecard. This year, the stamp duty land tax cut will cost us £125 million. How much extra will we spend on the housing infrastructure fund? A big fat zero. Next year, 2018-19, the stamp duty land tax cut will cost us a whopping £560 million. How much extra will we spend on the housing infrastructure fund? A big fat zero. In fact, according to the Budget we will not spend anything on extending the housing infrastructure fund until 2019-20, when we will spend £215 million. In the same year, we will spend £585 million on the tax cut. And so it goes on, and on. We are frontloading a tax cut and pushing back spending on housing infrastructure. How can the Chancellor come to this House and say, “Oh no, the OBR has got it all wrong, because we are going to build all these houses and that will sort out the housing market”? Honestly, Mr Owen, I do not know what he is talking about.

[Sammy Wilson]

Does the hon. Lady not accept that, for a variety of reasons—planning permissions, procurement, or whatever—the capital expenditure cannot be turned on immediately? There is always a delay. It is not a question of “pushing it off”; it is simply a fact of life.

[Alison McGovern]

The hon. Gentleman seems to be arguing that it takes a little bit of time for capital expenditure to get going. That is an argument for us to increase capital expenditure now, and wait until we have increased supply to make the tax cut. It is the front-loading of the tax cut versus pushing off our investment until sometime in the future.

In proposing the stamp duty land tax cut, the Government have admitted that they have no further ambitions to rebalance our economy between the regions, and no further ambitions to tackle the disgraceful inequality between different parts of the country. In the north-west and the north-east, house prices have grown barely at all, whereas in the south-west, for example, they have shot up and wages have been held disgracefully low. This policy gives money to those who already have assets. It is a charter for inequality, and if it is ever to be implemented, it should not be implemented now.

The number of children in poverty is due to increase by nearly half a million: there will be 400,000 more children in poverty over the period of this Budget. The Government may say, “That is unfortunate, but benefits have to be frozen, and we need to focus on investment so that we can build our way out of these difficult economic circumstances.” This tax cut, however, is not investment. It is just a revenue cut—a tax giveaway—at a time when we could be ensuring that child poverty does not increase. The two-child policy that the Government have stuck to is an absolute disgrace. It shames our country that we are saying, “If you are the third child in a family, in poverty, the Government have nothing to say and will do nothing to help you.”

If the Tories who are now in power actually believed their rhetoric of compassionate conservativism, they would agree with me that if there were ever a time for this tax cut, it would not be now. Let me leave them with this comment. They may think that they can get on with this, and that they will have decent headlines on the front pages of the newspapers because newspaper editors might like the idea of first-time buyers being able to buy properties that they, perhaps, own. They may think that they will get a fair wind because tax cuts of this kind are popular.

I will tell you what is really unpopular in our country, Mr Owen. As we heard earlier from my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds), what is really unpopular in our country is having to step over rough sleepers while walking home. What is really unpopular in our country is having to watch other parents taking paper into schools because our schools cannot even afford the basic necessities. And what is deeply unpopular in our country is watching the number of food banks grow because jobs do not pay enough.

People will remember that while all that was going on, the Tories were busy cutting stamp duty for people who could afford to buy houses. I do not think they will ever forget that.

[Mr Kevan Jones]

I agree with the hon. Member for Witney (Robert Courts) and the right hon. Member for Hemel Hempstead (Sir Mike Penning) about the armed forces allowance. In my experience, as in theirs, the modern member of the armed forces, whether male or female, wants choice. I have nothing against that, but I think that this is the wrong way of providing it. As we heard from my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds), the problem now is that much of our military housing stock was locked into what was a terrible deal for the taxpayer during the last year of the Major Government, who sold most of the housing stock in England.