The Economy
Anne Main Excerpts(8 years, 10 months ago)
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John McDonnell
We have to explain again: the deficit did not cause the crisis; the crisis caused the deficit. When Gordon Brown was Chancellor of the Exchequer and intervened with quantitative easing and by reducing interest rates, he was supported across the House, because that was the way to save what was left of the financial system in this country.
There is an alternative to the cuts. The Chancellor could, within the five-year timeframe of the spending review, lay out a long-term vision for the economy and how the Government can help to deliver it. He says he wants a high-wage, low-tax and low-welfare economy. We all want people in secure high-paid work, because it is the surest way to bring down the deficit—that is what we have been arguing all these months—but the Chancellor has no proposals on where the high-wage jobs are to come from. All he has had to offer in recent months is the national living wage, but it is set below the official living wage, so it is a national living wage that no one can live on, and it is nowhere near high enough to compensate for the proposed cuts to tax credits.
The Chancellor cannot deliver high wages unless he delivers investment. Investment is the fuel of future growth. Spending today on new equipment, new technology and infrastructure will deliver well-paid, secure jobs in the future. Yet investment in the UK is still below its pre-crash level as a share of GDP, and that level of investment is itself far below that in France, Germany and the US. Failure to invest has a dramatic impact. Every hour worked in Germany is, on average, a third more productive than every hour worked here. Productivity has flatlined for years in this country. Instead of investing in capital, too many businesses have relied on cheap labour. Our flexible labour market has made it too easy for employers to rely on low pay, and the Chancellor’s response has been woeful.
Mrs Anne Main (St Albans) (Con)
I am listening carefully to the hon. Gentleman’s speech. If he is so set against any form of welfare reform, why did he and his party not vote against the Second Reading of the Welfare Reform and Work Bill? Why the road to Damascus now?
John McDonnell
Some of us did vote against it. As we argued in that debate, there is a way to reform welfare while making sure people do not lose out. For example, we have proposed reducing housing benefit by building the homes people need to make sure they have roofs over their heads. In that way, we reduce rent levels as well.
Instead of investing in the future, using the Government’s powers to borrow carefully and invest wisely, the Chancellor has allowed Government spending on our vital infrastructure to fall from 3.3% of GDP in the last year of the last Labour Government to just 1.6% today. It is set to fall further to 1.4% over the next few years—less than half what the OECD thinks is necessary in a developed economy to sustain a decent standard of living. A lack of investment is why National Grid is warning of electricity shortages this winter and why too many businesses suffer from poor broadband connections and transport delays. His response to growing calls from business has been to run to the Chinese Government and hope they will get him out of this mess. We have been presented with the extraordinary sight of a British Chancellor refusing to use his own Government’s powers of investment but more than happy to exploit those of the Chinese.
While every other major developed country is pushing up its research and development spending, recognising the future value of science and technology, our Government have cut spending by £l billion in real terms.
Harriett Baldwin
The hon. Gentleman knows that productivity has been a long-term issue for the British economy, and I shall be talking in more detail about our productivity plans in a moment.
Harriett Baldwin
My hon. Friend is right. The bottomless pit of money from the magic money tree has been brought into service a lot over recent days, and we should focus instead on the good news about the UK economy. The employment rate has reached a record high—
Finance Bill
Anne Main Excerpts(8 years, 11 months ago)
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Rob Marris
It is pleasure, almost 15 years after I was first elected to this place, finally to make it to the Dispatch Box—albeit, for the moment, the Opposition Dispatch Box, but never fear, comrades, we are working on it!
New clause 9 and amendment 89 deal with inheritance tax. They are twins, and I shall address my remarks to those two provisions before going on to address the many somewhat disparate amendments and new clauses in this large group.
New clause 9 is designed to make the Chancellor of the Exchequer undertake, within one year of achieving a Budget surplus, a comprehensive review of the inheritance tax regime. I have to say that it is a somewhat optimistic new clause, given that five years ago, the same Chancellor of the Exchequer was forecasting a surplus any day now. We have now arrived at any day now, and he is forecasting a surplus for the financial year 2019-20. We will see whether that happens. If the Government accept the spirit of the new clause, as I hope they will, they could have a review of the inheritance tax regime now, rather than wait at least five years until the Chancellor achieves a surplus—if he ever does.
Amendment 89 would remove the inheritance tax provisions in the Bill. Inheritance tax is a somewhat unusual tax. It is the least painful tax any of us will ever face, “because you only pay it when you’re dead.” We need to bear that in mind when we talk about this tax. Most estates on which inheritance tax is levied cross the threshold, whatever it might be, either because people have inherited wealth themselves or because they have had a windfall gain from the increase in the price of the house in which they live. There are, of course, those who start out in disadvantaged backgrounds and make a lot of money in their lifetimes; inheritance tax would then be payable on their estates. But one can say with confidence that that does not apply to a great number. At the moment, very few estates pay inheritance tax.
Mrs Anne Main (St Albans) (Con)
I am sure the hon. Gentleman will want to qualify what he said by region. In some areas, such as my St Albans constituency, a large number of people pay inheritance tax. In fact, London is particularly disproportionately affected. He needs to qualify his remarks in that respect.
Rob Marris
The hon. Lady is right, of course, that it varies around the country and that there is a much greater tendency to pay it in London and the south-east—the area she represents—but I stand by my remarks that for many of those people, the liability of their estate to inheritance tax is occasioned by a windfall increase in the value of the home in which they live. Some people improve the houses in which they live, but in the last 20 or 30 years, the great driver for estates falling into inheritance tax liability has been a secular rise in house prices. That is not as a result of people doing up their houses, although of course that happens. And good luck to them. Many hon. Members, including myself—and my wife—own the house in which they live. I, along with others, will have a windfall—and it is a windfall—from the secular increase in house prices.
Paula Sherriff
I am not sure whether the hon. Gentleman is suggesting that we should do absolutely nothing about this huge inequality that affects more than half the population. We have an opportunity to take a significant step forward for women and families this evening. We turned our clocks back on Sunday. Let us not turn them back even further tonight, period.
Mrs Main
I am pleased to have an opportunity to discuss this matter, because we need to examine why we cannot do something about it—if we really cannot. I know that I would not be in your good books, Mr Deputy Speaker, if I brought in some props to illustrate my argument, so I will have to ask you to use your imagination, which I am sure is prodigious. Imagine that I have laid out on the Bench beside me a selection of products, including pantyliners, maternity pads, mild bladder weakness pads and incontinence pads. They would all look fairly similar and would be made from similar materials, but some would have a designed difference. In other words, they would be taxed.
I call that tax a femi-tax. I know that there has been a lot of alliteration, with references to a “tampon tax”, but it is somewhat perverse that in a selection of products that look pretty similar, and that are perhaps interchangeable, some should incur tax simply because they are associated with a woman’s bodily function. To me that seems unreasonable and totally illogical.
When I looked into the matter, I found that incontinence aids do not attract tax because they come under a different tax regime. It is assumed that they are intended for use by people who have illnesses, who are elderly or who are disabled. However, those of us who watch too much television—I am probably in that category—will have seen plenty of adverts for products for those “Oops” moments, as they have been described, and they do not show geriatric, disabled or elderly people; they show sassy young ladies and women of a certain age who are still attractive to members of the opposite sex. Therefore, let us assume that this is some sort of contrivance. Those products, should a woman choose to use them to ensure that she does not have an embarrassing “Oops” moment, do not attract VAT. I cannot see why the products a woman might choose to use, even if they might also be used by the elderly, the infirm and the disabled, are not regarded for tax purposes as the same as any other product she might choose to use. That is the illogicality we must tackle today.
I understand the alliteration of the “tampon tax”, but I think that phrase is misleading. If those products were laid out, most people would struggle to identify which ones incur VAT. This contrivance, because this only affects a woman’s bodily function, whether she has had a baby or her normal monthly period, means that it is that function that is taxed. I think that it is unreasonable that we cannot at least appear to deal with the matter.
I want this to be discussed tonight because I want to understand why we cannot deal with the matter. I would like to say that we could go to Europe and make all sorts of bluster and noise, but I would like the Minister to tell us tonight whether he agrees about that illogicality and whether he agrees that this is indeed a femi-tax—a tax on women’s bodily functions, but not on other bodily functions. If he has sympathy with that view, I would like him to explain to the public why we cannot look at these products and say, “They all look pretty similar and they all have similar functions in absorbing fluids, so why has someone somewhere decided that we cannot choose to make them all exempt?” It seems ridiculous that a woman could buy an “Oops” moment product—I do not want to advertise any particular brand—and use it for sanitary protection and that that would be cheaper. It might not be quite as effective, but it would be cheaper. I think that it is absolutely ridiculous that a similar-looking product intended for personal hygiene, such as a pantyliner, would be taxed differently. I do not understand it.
I would like the Minister to explain why we as a country would want to persist with that illogicality in taxation. If he has a reason—I suspect that my hon. Friend the Member for Stone (Sir William Cash) has hinted at this, but I want to hear it from the Minister—that is associated with us being bossed around and told what to do by a conglomeration of countries that I have never voted for, then we need to start raising these issues. If Europe insists on taxing women through a femi-tax, I would like them to explain why.
Wes Streeting
Perhaps this will help the Minister. Does the hon. Lady agree with the point the Chancellor made to the Treasury Committee last week that there needs to be a debate within Europe about the tax regimes affecting eurozone countries and those affecting non-eurozone countries? Will she therefore support the Chancellor in those discussions, and will she support negotiations that are about a sensible conversation with our European partners and allies, rather than bluster?
Mrs Main
I agree, and I am pleased that there are hon. Gentlemen who are not too cowed to take part in this debate. I am old enough to have read Ms Greer’s “The Female Eunuch” in the ’70s, when this was a hot topic. It was about how women can face up to the fact that this is just part of being a woman, not something shameful to be hidden away. Therefore, we need to have a discussion, without bluster or embarrassment, about why we cannot take back control and have fairness in our society in this country.
Mrs Main
The Minister may well explain that to the hon. Gentleman, but I personally do not want to have to go cap in hand asking for derogations. I would like this country to decide that it is a ridiculous illogicality to have different tax rates on similar-looking pads that could be used for interchangeable purposes. I would not wish to have to go and ask, “Please, European Union, can you allow us to do what we would like to do, which is to free up our women from this taxation that only affects them: a femi-tax?” I would like us to have the ability to do it.
I hope that the Minister will explain to all hon. Members here and to all the women out there in the country why, if they go and buy a mild incontinence, bladder weakness or “Oops moment” pad—call it what you like—and use it as a sanitary towel, they will not be taxed, because they do not understand it, and nor do I. It is time that we stood up to the European Union. If it does not like us doing that and having to ask, “Please can we have permission for a derogation?” then perhaps we need to consider this matter when we are deciding whether we wish to stay in the European Union.
Alison Thewliss (Glasgow Central) (SNP)
Members may have seen the images circulating on the internet of groups of world leaders with the men photoshopped out, where Angela Merkel and Hillary Clinton cut lonely figures. A version has even been done of the House of Commons. I imagine that some of these Benches would look pretty bare this evening if we took away the men.
That is a stark reminder that despite much progress, we still have a long way to go before gender equality is realised. That is desirable not just for its own sake but because without women the issues that disproportionately affect women do not get resolved. VAT on essential women’s sanitary products is one such issue: it affects only women. I dare say that if it did affect men, it would have been resolved long before now. Every month when I purchase a box of tampons or towels, the Chancellor benefits. Women, on average, begin menstruating at age 12 and continue until age 52. That represents a significant sum of money spent by every woman in the country over their lifetime. This seems particularly unfair for younger women who may not even be old enough to work. That is why our new clause mentions women under 25, who will most likely be in lower-paid jobs or not yet working at all.
I do not know of any woman who exclaims on a monthly basis, “I have my period—what a luxury!” For women, these items are not treats, and they are certainly not optional. Any number of female colleagues here today may have their period and nobody knows, and that is quite right. But people would certainly know all about it if, like the brave London marathon runner, Kiran Gandi, we came into this House deliberately forgoing sanitary protection. That is no doubt an uncomfortable prospect for male Members of this House, but I would say, “Good. I did not come here today, or any day, to make you feel comfortable but to challenge any status quo that I feel is unjust, and I am not done yet.”
I want to highlight the particular case of maternity pads. As the hon. Member for St Albans (Mrs Main) said, it is illogical that incontinence pads are zero rated but maternity pads are not. Such pads are essential for women who have just had a baby; they are absolutely essential for post-birth lochia for up to 10 days after birth. I do not understand why these items are not treated as medical items and similarly zero rated.
Mr Jenkin
That is absolutely correct. Having observed the history of 40 years of membership of the European Union, as it is now called, we know that it is not going to stay like this. The European Union will continue to develop. The trend of taking more taxation powers away from the member states, in the name of the single market, is enshrined in article 113, so it will continue to do so. Yes, we have a veto, but the European Court of Justice tends to accelerate the pace of tax harmonisation just when we do not expect it to do so. It is the ECJ that extended VAT to certain items and categories of goods when we did not expect it to do so.
The group of amendments also addresses the renewables obligation incentives and seeks to adjust the feed-in tariff regime. Why are we able to reduce taxation on renewable energy products to only 5%? It is because of the European Union. Why could the previous Labour Government not abolish VAT on fuel, which they said they wanted to do after it had been applied by the Major Administration? It is because of the European Union.
Mr Baker
Indeed. That is precisely the point. It is not because we are spinning-eyed nutcases that we wish to get excited about Europe; it is because we find, again and again, that the European Union obstructs us from solving real problems in people’s lives.
On this occasion, it so happens that the hon. Member for Dewsbury (Paula Sherriff) deserves all our congratulations on forcing the issue. I am very glad that my name appears on new clause 7. I must say that those who are attacking us for signing the new clause are probably going some way to diminishing the support they will receive. We are all in the House because we wish not to send messages but to take action that serves our constituents. I would like to break the news to some Members of the House that approximately half the electors of Wycombe are in fact women, and I am very happy to do the best I can to represent them in this place.
It seems to me that there are five courses of action available to the Government. The first is to do nothing. That is clearly untenable. We are in the House today because doing nothing is untenable. Some course of action must be taken to resolve the problem.
Mr Gauke
My hon. Friend is right. Whereas the previous Labour Government doubled the 10p rate of income tax, this Government and the coalition Government increased the personal allowance very substantially from below £6,500 to the levels I have set out this evening.
I turn now to the support that the Bill will provide to business. We want to provide certainty to businesses, increase investment and improve our infrastructure, because that will drive growth and job creation in the coming years. First, it is clear that we need a business tax regime that is stable, competitive and fair. This is essential to make the UK more competitive and to support growth. In the previous Parliament, the main rate of corporation tax was cut from 28% to 20%, which led to more businesses coming to the UK to carry out their activity. Given the global competition that the UK faces, we must go further. This Bill cuts the corporation tax rate to 19% in 2017 and to 18% in 2020, saving businesses more than £6 billion in 2021 and giving the UK the lowest rate of corporation tax in the G20. The Bill also sets the annual investment allowance at the permanent higher level of £200,000. This will provide long-term certainty to businesses and encourage them to invest in plant and machinery.
Finally, I would like to turn to the measures in the Bill that tackle tax avoidance and evasion, tax planning, compliance and imbalances in our tax system. Hon. Members will recall that the summer Budget announced a raft of measures to tackle those who do not pay their fair share of tax. The measures will collectively raise £5 billion a year by 2019-20. I am proud to say that the Bill will implement a number of those measures and will make an important contribution to the further £37 billion in fiscal consolidation that is required over the course of this Parliament to run a budget surplus by the end of this Parliament.
Scotland Bill
Anne Main Excerpts(9 years, 3 months ago)
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Mrs Anne Main (St Albans) (Con)
Last week, I supported the SNP on full fiscal autonomy and scrapping the Barnett formula, although I know the hon. Gentleman did not. The SNP Members all trooped through the Lobby to vote for that, so does he share my surprise that they have come back today with amendments that do not include it?
Ian Murray
Nothing ever surprises me, although I was a little surprised last week that the 56 SNP MPs went through the Lobby with the Thatcherite arm of the Conservative party. That was because full fiscal autonomy would deliver something that would be fundamentally damaging to Scotland. The hon. Lady is absolutely correct. [Interruption.] I thank her for waking up all the SNP MPs with her intervention.
The Smith agreement said:
“Income Tax will remain a shared tax and both the UK and Scottish Parliaments will share control of Income Tax. MPs representing constituencies across the whole of the UK will continue to decide the UK’s Budget, including Income Tax…Within this framework, the Scottish Parliament will have the power to set the rates of Income Tax and the thresholds at which these are paid for the non-savings and non-dividend income of Scottish taxpayers”.
That is exactly what the Bill does, and it is important to highlight two aspects of that quotation.
First, maintaining income tax as a UK-wide tax is critical to the continued pooling and sharing of resources. That facilitates UK-wide redistribution on the basis of need, which underlines the welfare state and the state pension system. The Church of Scotland expressed the same view when it argued for
“a degree of solidarity across the United Kingdom, where prosperity is shared and those with broadest shoulders can carry the extra weight of supporting those less fortunate.”
Secondly, the Smith agreement explicitly mentions the continuing right of Scottish MPs to vote on the Budget within the framework that it sets out. That is equally important, particularly given the Government’s proposals on English votes for English laws. Devolving income tax in its entirety, which the hon. Members for Dundee East and for Gainsborough are advocating, would place that right in doubt and create two classes of MP in this place. That risk was the subject of considerable debate in the Smith commission. As long as one believes in the pooling and sharing of resources, which we certainly do, Smith’s recommendation to retain income tax as a shared tax is critical. That is why we reject amendment 124 and new clause 54, which was tabled by the hon. Member for Dundee East.
New clause 32 concentrates on the implementation of the powers being transferred and, as I have said a number of times in this Committee, the use of those powers. What we are trying to achieve chimes with much of what the hon. Member for Dundee East said, when he laid out the concerns about how the proposals would be monitored, how the number of income tax payers would be determined, the “no detriment” policies across the United Kingdom and the complicated nature of the fiscal framework.
The report under new clause 32 would include
“a review of the revised fiscal framework”,
given its complicated nature. It would also include
“the tax year to which sections 12 and 13 of this Act will apply, and the day on which they are due to come into force”
so that businesses are able to plan. It would include details of the number of staff that both Governments would assign to the implementation of the new Scottish rate of income tax to ensure that adequate resources were deployed to make it happen. It would be useful if the Secretary of State responded to the particular concern that the staffing level to determine the Scottish rate of income tax might be deficient.
Greece
Anne Main Excerpts(9 years, 3 months ago)
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Mr Osborne
I thank the hon. Gentleman for his questions. I should say that this afternoon we have been in touch with the devolved Administrations in the United Kingdom to ensure that they are aware of the plans and to work with them on any issues faced by them and by citizens and businesses in Scotland, Wales and Northern Ireland.
The Bank of England and the Prudential Regulation Authority are, of course, monitoring extremely closely the situation with the four Greek branches in the UK and the subsidiary, although, as I have said, the subsidiary is protected by our compensation scheme and supervised by the Bank of England. There is, of course, advice available to businesses with export links to Greece, but there are capital controls in place so there are restrictions on the settlement of payments being transferred out of the Greek banking system. Businesses should be aware of that. Cash flow problems can be addressed by contacting HMRC.
As for the IMF, I do not want to prejudge the decisions of the managing director or the board. We will just have to wait and see what unfolds in the coming days. It is fair to say that the space for substantive negotiations before the referendum is pretty limited. Of course, we shall see what the outcome of the referendum is. I would merely observe that many of the senior figures in the eurozone have said that if Greece were to vote yes, negotiations would begin to try to find a satisfactory outcome for the Greek financial situation.
Mrs Anne Main (St Albans) (Con)
Greece, a small country of 5 million people, swept in with Syriza a Government promising to abolish austerity. Does my right hon. Friend think that there are any lessons to learn for a country much nearer to home with a population of about 5 million people that swept in a Government promising to abolish austerity?
Mr Osborne
The public will draw their own conclusions about that. Different countries are obviously different, but western democracies need to ensure that their welfare systems are affordable, their economies are competitive and their businesses can export and create jobs. That is a challenge for every single western democracy.
European Union Referendum Bill
Anne Main Excerpts(9 years, 3 months ago)
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Mrs Anne Main (St Albans) (Con)
I am listening to the right hon. Gentleman’s comments with interest. Is he aware of any other election when purdah has been suspended?
Mr McFadden
I am not aware of any other occasions.
When my right hon. and learned Friend the Member for Camberwell and Peckham asked the Prime Minister, he gave two justifications. First, he said that,
“because the European issue is so pervasive, I do not want a situation where, in the four weeks before a referendum, Ministers cannot talk about the European budget, make statements about European Court judgments, respond to European Councils and all the rest of it.”
He then said the second issue was a bigger one:
“When the negotiation is complete and the Government have taken a clear view, I do not want us to be neutral on this issue; I want us to speak clearly and frankly.”—[Official Report, 10 June 2015; Vol. 596, c. 1179.]
On Second Reading, my right hon. Friend the Member for Leeds Central (Hilary Benn) said:
“Everybody in the House would agree that the referendum must be fair and must be seen to be fair, but at the same time the Government—any Government—are entitled to argue their case.”
He had said a few moments earlier:
“It would not be sensible for any Government to find themselves constrained from explaining to the people the Government’s view, because the people are entitled to hear from the Government of the day”.—[Official Report, 9 June 2015; Vol. 596, c. 1059.]
The Foreign Secretary sought to reassure the House, telling a fellow Member that if his concern
“is that the Government are thinking of spending public money to deliver doorstep mailshots in the last four weeks of the campaign, I can assure him that the Government have no such intention. The Government will exercise proper restraint”.—[Official Report, 9 June 2015; Vol. 596, c. 1055.]
We read overnight that the Government would have more to say on the issue, and we wait with interest to hear it. How will they reassure the House that there will not be abuse of the lifting of the purdah provisions, and that there should be the legal framework that has been called for by the Leader of the Opposition? Our amendment does not seek to reinstate the purdah provisions in full, but it does seek clarity on what exactly the Government intend to do or to publish during the referendum period. More clarity is needed than has so far been made available in ministerial statements. What form will expressing a view take, and what form will it not take? The Government need to provide more information, more clarity and more reassurance.
Mr Grieve
Yes, but my experience in this House is that it is quite frequent in Committee for a Bill to be criticised, for the Government to give assurances that they will remedy it, and for hon. Members to accept those assurances. That is why I have no difficulty in proceeding along the usual established route.
I look forward to hearing from my right hon. Friend the Minister a proper response from the Government. On that basis, I would like to allow others the chance to speak.
Mr Rees-Mogg
The hon. Gentleman had the opportunity to listen to an excellent debate on that very subject yesterday, led by my hon. Friend the Member for Gainsborough (Sir Edward Leigh), but I think I would be in trouble if I went through the question of full fiscal autonomy for Scotland in relation to amendment 10 to the European Union Referendum Bill, so I want to stick to the subject at hand.
The European Union has a budget for this. Indeed, we passed a Bill in 2013 that allows for the European Union to engage in political activity and the promotion of the cause and objectives of the European Union. That money flows to institutions within the United Kingdom and that money comes with strings attached. It is money that is given on the basis that the institutions receiving that money support the objectives of the European Union.
Mr Rees-Mogg
My hon. Friend is absolutely right. It would be against the conditions of receipt of that money to use the money to campaign for a member state to leave the European Union.
Some very influential bodies in this country receive money from the European Union. My hon. Friend the Member for Harwich and North Essex (Mr Jenkin) said that the CBI receives money from the European Union. We know that the CBI is in part funded by Europe. It is therefore under an obligation either to return that money or to support the objectives of the European Union. When the director-general of the BBC came before the European Scrutiny Committee, he was asked about the money the BBC received from the European Union and the strings that that may have attached. Even the most impartial and highly regarded bodies in our establishment receive money from the European Union, and they take on certain obligations in return.
My hon. Friend the Member for Sherwood (Mark Spencer) made a very good point about what happens to farmers in receipt of subsidies that have come from the European Union. Are they then prohibited from giving money to the Conservative party to campaign in the referendum? No, of course not. He may well be right that the amendment needs improving to ensure that people are not captured by mistake.
Mrs Main
The stakes are very high. If a Government have nailed their colours to a mast when it comes to a particular vote—in or out—and that vote does not go their way, a Government will then be in power for two or three years with a vote that they do not wish to live with, because it was contrary to the colours that they nailed to the mast.
Mr Rees-Mogg
That is a very important point, which may be worth discussing when we debate other amendments. Ultimately, the Government must accept the will of the people—that is what we all believe in, and that is why we are all here—but they must deal with that fairly.
There is also the question of where the Government should proceed from here. There seems to be a wide consensus that paragraph 15 of schedule 1 is deeply unsatisfactory, and that the removal of the issue of purdah was simply a mistake. I am willing to trust the Government, so I accept that it was an honest mistake, and not a mistake that was made in an attempt to fiddle the referendum result. I believe that partly because I am a simple fellow who is very trusting of the Government, but also because trying to fiddle the result will damage whichever side wishes to do it.
The British electorate will not have the wool pulled over their eyes. If little bits of legislation are squirreled away into the Bill to make things easier for one side or the other, those of us who are on the other side will campaign on that basis. We will say, “Look, we need to act against this, because people are trying to fiddle us over what is happening.” There is a wonderfully contrary spirit among the British people, who will not be cowed by those who try to trick them.
Future Government Spending
Anne Main Excerpts(9 years, 7 months ago)
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Mr Newmark
It is interesting that the hon. Gentleman should talk about our welfare policies as his side wants to increase spending, whereas we are trying to cap it at a reasonable state—£26,000, which is £35,000 pre-tax, which is higher than the average wage of most people.
Labour was financially reckless in government and, it seems, is even more financially reckless in opposition. Already it has £20.7 billion of unfunded spending commitments for 2015-16, which is £1,200 per household. HM Treasury estimates Labour now has £32 billion of borrowing for 2020-21 and £166 billion over the next Parliament—the next five years—or £10,000 extra per household. I hope voters are listening to that. That is £10,000 extra per household; they should remember that before they go into the ballot box. We have learned today that Labour’s new great tax policy is to increase the cost of a gun licence. So Labour’s policy going forward is, as always, tax more and borrow more.
Mrs Anne Main (St Albans) (Con)
This motion refers to
“sensible reductions in public spending”.
Does my hon. Friend know what these reductions are and how much they might raise, because there is no mention of that whatever? They are just a blank canvas.
Mr Newmark
I know, and I suspect Labour will be going into the election with a blank canvas, and no doubt voters will make their judgment on that.
Going forward, the Government are committed to raising the personal allowance once again—up from £10,500 to £12,500. That is a tax cut for 30 million people and removes 1 million of the lowest paid out of tax altogether. The Conservative Government are committed to balancing the books by the end of the Parliament, which the Opposition party is not, and a Conservative Government are committed to reducing Government spending to 35.2% by 2020, as the hon. Member for Nottingham East (Chris Leslie) pointed out. I remind him that when the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) was Chancellor he had borrowing at 35.9%, so we are not talking about a huge difference between the 35.2%, which is apparently an absolute crisis, and the 35.9% in 2000.
To conclude, the Government have a track record to be proud of: reducing spending; reducing the deficit; reducing taxes; and reducing unemployment. Here are the words of Christine Lagarde of the International Monetary Fund—although I will not say this in a French accent. She said:
“Certainly from a global perspective this is exactly the sort of result that we would like to see…More growth, less unemployment, a growth that is more”—
wait for it—
“inclusive, that is better shared, and a growth that is also sustainable and more balanced.”
These are the words of Christine Lagarde this year, on 15 January 2015, at an IMF round-table discussion in Washington.
The Government’s long-term economic plan is working, and hopefully on 7 May the British people will not give the keys back to the guys who crashed the car.
Stewart Hosie
That is precisely why the Government should have taken a flexible approach to deficit consolidation, rather than a fixed-term approach. I will say more about that in a moment.
It is useful today to identify precisely what is on offer, other than the £30 billion of extra cuts that were promised by the Government in January. That is, of course, no more than a continuation of the existing failed policy of fixed-term deficit consolidation and a plan for further attacks on the welfare budget. It is a plan to balance the books on the backs of the poor, which we now understand means taking levels of public expenditure back to those of the 1930s.
Today’s motion calls for a
“different, fairer and more balanced approach”
and I agree with that. The key thing that needs to be changed is the fixed-term approach to cutting the deficit. Instead of that approach, which has self-evidently failed so far, we should have a more flexible, medium-term strategy whose first principle should be about reducing debt to a “prudent” level. It is important that the Government of the day should specify what is or is not prudent, depending on the real circumstances that they face, precisely to deal with the kind of external shocks that the hon. Member for Plymouth, Sutton and Devonport (Oliver Colvile) has just mentioned.
Stewart Hosie
It is a Labour motion, and I might not even support it. I am merely pointing out that the Tory party told us that the current account would be back in the black, but it is not. We are borrowing almost £80 billion this year. The Tories’ austerity programme has failed.
We need to reduce debt to a prudent level, with the Government of the day specifying what is or is not prudent, depending on the circumstances. A second principle should be that, once debt is reduced, the Government should maintain a balanced budget on average over the medium to long term, not in a way that would prevent them from implementing the steps they believed necessary to achieve their long-term objective, but in order to afford them the flexibility to deal with external shocks over the medium term.
A third principle is that the Government should achieve and maintain a level of net worth that provides a buffer against unforeseen factors. A fourth calls on the Government to manage fiscal risks prudently. A fifth principle is that the Government should pursue policies consistent with a reasonable degree of predictability about the level and stability of tax rates. That is incredibly important, because the tax system, tax rates and tax certainty form a vital component of fiscal stability and fiscal responsibility.
Mr Stewart Jackson (Peterborough) (Con)
What a pathetic, facile motion the Opposition have brought forward for their last Opposition day debate during this Government. They could have introduced a proper costed programme. As my hon. Friend the Member for Wolverhampton South West (Paul Uppal) has said, they could have apologised for the huge number of errors they made in government. All elections, including the one in 63 days’ time, are about hope versus fear. From them we hear fear and smear, but we have a policy of hope, because we have turned around the economy following the disastrous economic legacy left by the Labour party.
Mr Jackson
Absolutely. In more than two hours, we have not heard anything, except in relation to gun licences and, of course, the recycled bankers’ bonuses.
What a contrast between the Opposition and the Labour party on the cusp of the election on 1 May 1997, when I was a candidate and lost by the not inconsiderable majority of 19,500 in Brent South. No wonder Labour MPs are depressed when they are sober and catatonic when drunk, quite frankly, because they know there is an acute contrast between that historic election and now. The Labour Government led by Tony Blair was ambitious, and their programme was thoughtful, forward looking, positive, generous and optimistic. Tony Blair is now persona non grata in the Labour party, and it now has a core vote strategy, with a mean-spirited, peevish, insular, dreary collection of bungs to special interest groups, and smears and caricatures aimed at the Conservative party.
What is more, Labour policy does not stand up to any form of scrutiny. We have heard about the utilities price freeze—a disastrous policy that has damaged the industry and, perversely, will damage the interests of consumers. Wither Labour’s cost of living crisis? Today, the IFS says that prices are being outstripped by wages for the first time since 2007. There is no more cost of living crisis because wages are growing at 2.1% against a retail prices index of 0.9%. On fuel, council tax, food, beer duty and children’s air passenger duty, the Government have made efforts to reduce the cost of living of ordinary families. We have driven up the personal allowance, and we are committed to drive it up to £12,500 in the next Parliament.
Charter for Budget Responsibility
Anne Main Excerpts(9 years, 8 months ago)
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Paul Uppal (Wolverhampton South West) (Con)
I welcome the proposals today that enshrine into law sustainable public finances and aim for public sector net debt as a percentage of GDP to be falling in 2016-17. The argument today revolves around not whether we need to deal with the deficit but how to deal with it. Within that, we must remember that we live in a global market where capital, companies and people can choose where to live and where to be taxed, something that the Government are acutely aware of and have acted upon.
If we are to continue to reduce the deficit in line with the fiscal rules laid out today, aiming for public sector net debt to be falling in 2016-17, and the current budget to be balanced by 2017-18, we need to ensure that our tax system remains competitive. Tax competition and competitive tax rates need not be viewed as dirty words; they are an end to a stronger economy, higher employment and better public services. The problem is that the Labour party believes in two things: first, that higher taxes, corporate or personal, lead automatically to higher revenues; and, more worryingly, that taxation is not just a tool for raising money, but a punishment to be levied on success.
Instead of trying to tax more and more out of people and businesses already sitting around the table, we should be trying to attract more to the table itself, and subsequently ensure that they pay their taxes to the Treasury. Large multinationals choose where to pay tax. This is not the 1930s, where capital was difficult to relocate, although I secretly think that Opposition Members would like to take us back there.
On Sunday, the Leader of the Opposition said that there would be tax rises under a Labour Government. I hope that Labour will come clean about what tax rises it will impose on Britain. My fear, and, I suspect, the fear among Britain’s businesses, is that its first target will be corporation tax, undoing the hard work that we have done in the past four years and turning away companies that wish to be based here.
Mrs Anne Main (St Albans) (Con)
The other tax that my hon. Friend might like to mention is the redistributive mansion tax being proposed to send money north of the border to shore up the Labour party’s support there.
Paul Uppal
My hon. Friend makes a valuable point. In the current modern economy we need to encourage success. As Abraham Lincoln always said, no one is given a hand up by others being pushed down.
Stamp Duty Land Tax Bill
Anne Main Excerpts(9 years, 8 months ago)
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Mr Gauke
That is not our assessment. My right hon. Friend is an eloquent and distinguished advocate of the argument that it is possible to raise more revenue by reducing rates, and he has over many years demonstrated cases where that would apply. I do not believe that we will quite see that dynamic effect to that extent in this case. I think more revenue, and certainly a greater proportion of it, will be raised from properties above £2 million. Undoubtedly, we will see a few more transactions, which will mean additional revenue that would otherwise not come in. On balance, we will see a reduction overall in revenue across the SDLT regime, but we believe that that is none the less the right thing to do to ensure that we deliver a reform that benefits the vast majority of people who pay SDLT.
Under the rules as they applied on 3 December, the amount of tax payable was a percentage of the chargeable consideration—the purchase price—for the acquisition of the property. Different scales of percentages, table A and table B, applied respectively to transactions consisting wholly of residential property and to transactions that consisted of, or included, non-residential property. The clause substitutes a new table A, setting out the new tax rates and bands that apply to a transaction consisting wholly of residential property. It also amends the calculation rules for those transactions, so that each rate of tax applies only to that part of the consideration that falls within the relevant band. The total tax due is then the sum of the amounts of each band.
Mrs Anne Main (St Albans) (Con)
I stress again how welcome the change has been for residents in St Albans, particularly at the lower end of the market where there have been big savings. Has consideration been given to expanding the scheme to commercial properties, and not just keeping it to wholly or partly residential properties?
Mr Gauke
All these matters are kept under review. My hon. Friend has been a consistent and doughty campaigner for reform in this area. If we had exactly the same system in place for commercial property, with the same thresholds and so on, we would be imposing a much greater burden on commercial property transactions, because by their nature they tend to be of a more substantial size. There is a higher level of consideration in place than for most residential property transactions. The argument for reform for residential property was particularly strong, which is why we took these steps. Consideration of whether there is a strong and persuasive case for reform for commercial property is perhaps a matter for another day.
Mr Redwood
First, may I remind the Committee that, as listed in the register of Members’ interests, I provide advice to an industrial company and an investment company?
The Minister has produced what is on the whole an excellent scheme. I support most of it and was one of those, along with my hon. Friend the Member for St Albans (Mrs Main), who was lobbying hard to get this major reform through. I congratulate the Minister and the Chancellor on dealing with the problems that the slab system created. The peaks and the dead areas were damaging to the property market and made it difficult for some people to buy or sell properties in certain price ranges. The system probably distorted pricing as well, to the benefit of some people and the detriment of others. It is therefore good that we have smoothed it out and introduced a more sensible progression up to £937,000, where most of the transactions lie. The new arrangements will represent a fairer, lower-cost system for practically all transactions, which is wholly admirable.
I want to tease out a little more information about the rather pessimistic forecasts of how much revenue will be lost up to the end of this decade. It is clear from the figures that cutting the higher rate of income tax has produced considerable extra revenue, as it was bound to do, given that the previous rate deterred people or meant that they did not come here at all. It is also clear from the figures that the much higher rate of capital gains tax has been very damaging to revenues, which are still miles below where they were prior to the crash. This is a difficult one to call, and I am not saying to the Minister that the proposals would either damage or increase revenues. I am merely suggesting that the Treasury’s forecasts for that lengthy time period could prove to be inaccurate, and that it would be nice to unpack those forecasts in order to understand what the Treasury thinks is going on.
The problem with trying to forecast the revenues at this juncture is that, on the one hand, we have seen a slowing of the mortgage market in recent months through regulatory intervention, and we would therefore expect fewer transactions because the regulators and the banks are now being much tougher about mortgages. On the other hand, however, we have Government intervention trying to mitigate that effect through the very successful and helpful Help to Buy scheme, which I believe to be necessary. It is certainly helping people in my area to buy their own home. However, the net result of these arrangements seems to be a dampening of transactions, and we must bear that in mind when trying to judge the impact of those policies and to assess the impact of the stamp duty change. All things being equal, we should expect to see an increase in the volume of transactions under the £937,000 level because buying such homes will be a bit cheaper, and in certain price bands we will see activity occurring that would not have occurred at all because of the slab effect.
Mrs Main
Does my right hon. Friend share the optimism that I feel, having talked to small businesses in my community, that there could be a knock-on effect from people having a bit more money to carry out home improvements? Those businesses have suffered in recent years because people have not been investing in their own homes.
Mr Redwood
Yes, indeed there could.
This is difficult to predict, because all these things need to be modelled. The level of the reduction in some cases is quite large, and it will be difficult to make up for all that lost revenue through increased transactions. That is why it would be interesting to probe the Treasury a little more on its forecasts. I expect it thinks that there will be quite a big revenue gain where the rate has gone up, but that effect might not prove to be as strong as it hopes, because there will definitely be a disincentive effect at the top end following the introduction of the very top rate for the privileged few who can afford those types of properties. Those people are often in the fortunate position of owning more than one property, and of being able to decide whether they wish to buy property in this country or elsewhere. There will be some kind of disincentive effect, and we need to look at relative taxes and relative prices in relation to London and other centres.
It would therefore help if we knew a little more about the Treasury’s numbers at this stage of the debate, so that when we review this policy in a year or two, we can see what was right and what was wrong. For example, does the Treasury think that there will be extra revenue from the higher rate? That has clearly not been the case in relation to the two big taxes that I have mentioned. Does it envisage a loss of revenue despite the effect on transactions at the lower level? It would be good to have more detail, so that we can have some benchmarks as we try to assess the financial impact of the policy.
Stamp Duty Land Tax Bill
Anne Main Excerpts(9 years, 9 months ago)
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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.
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.
Stamp Duty Land Tax
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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.
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.
Mrs Anne Main (St Albans) (Con)
I am delighted to speak in this debate and am pleased that the Treasury has been persuaded of the need to do this and to find a way of doing it, which was the crucial point. I know that there is no great pot of money out there to throw around, but this measure is vital for young people struggling to get on the housing ladder and for people across the country. Having looked at the average house price in the UK, I know that it will help many families in many constituencies, including my own. If I was being very greedy, I would have said that I would have liked the bands to have been moved up, but I shall rest happy with the fact that we have now got rid of the hated slab structure that caused what I called zombie prices, which no family ever paid. Nobody paid £251,000 for a property, because it incurred an enormous jump in the tax they had to pay.
I believe that one of the reasons why the Help to Buy scheme was not taken up well inside St Albans was that our average house price is so high compared with that in the rest of the country. I found one property at the time that was under £125,000, and that was a studio. Barely any properties came under £250,000. If people cannot save up a deposit, how on earth will they afford to save the tax as well?
This measure is hugely welcome. I am sorry to say to my hon. Friend the Financial Secretary that Lori, who served me my coffee this morning in Lori’s Café, said that her new pin-up is now the Chancellor, because he will save her thousands of pounds when she moves into her retirement bungalow early next year. I said that I would give Lori’s good wishes to the Chancellor, because she has had a happy Christmas present from him.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
I share the hon. Lady’s sentiment that this seems to be a very progressive measure, but is she not slightly concerned that the result might be increased house price inflation?
Mrs Main
I think that house prices will even out. If there are more transactions and people put house prices up, there will be house price inflation, but I believe that the Government are trying to tackle that by having a big house building programme. The measure will stop the pressure on people who fall around the bands. People have been told that they cannot charge a certain amount for their house, even if they have put a conservatory on it or improved their kitchen. Some have not made those improvements because they would have been pressed into a different band that would have incurred a large amount of tax.
One point that has not been mentioned so far is the possible knock-on effect on other industries. People were telling me that they were reluctant to put in double glazing, to build conservatories or to do any improvements to their houses, that they were struggling to find enough money to buy furniture as well as to pay the deposit because they had to save for the tax, which they could not roll up into their mortgage if they were first-time buyers, and that they were struggling with the multiples. People were telling me that they were struggling with the concept of the high fees that they would have to pay and worrying how on earth they would buy anything else to do with their property. I think that people selling home improvements, bathrooms, kitchens, carpets and so on will suddenly find that people who were expecting to pay a large tax bill have a little bit extra in their pocket, thanks to the Treasury, that they can afford to use to improve their house. They will say that it is worth their moving house, as they will not have the deterrent. This will free up the market and there will be a lot of knock-on benefits.
We have to be mindful of house price inflation, because it excludes a lot of people from the market, but I am absolutely certain that in my area the majority of people who will benefit will be young first-time buyers who are desperately trying to save that awful combination of a very large deposit, solicitors’ legal fees and a large bung to the taxman. I am truly grateful that the Treasury was persuaded of that argument.
I have crunched a few numbers, and I know that somebody asked whether the Treasury would do this. In St Albans, a young couple buying their first flat would have paid an average of £8,132 in the stamp duty levy and they will now pay £4,597. That is a large chunk of money when people are starting out in life. Similarly, in a terraced property they would save just over £2,000, in a semi-detached property nearly £5,000 and in a detached four-bedroom property nearly £2,500. At every level of average house prices, people will save thousands of pounds. Many young people, unfortunately, are having to try to rely on the bank of mum and dad. There will be quite a lot of relieved mums and dads who have been digging deep and helping with these heavy burdens who will be grateful about the measure.
I raised this issue with the Prime Minister in April and asked whether he would use his good offices to influence the Treasury on the question of places like St Albans, with barely one house worth less than £250,000. I thank the Prime Minister if he did that.
I accept that people higher up the ladder will not find this good news. In a high-value area such as mine, people will say that if they were to move up from their £1.5 million house or even to move down to a £1 million house, they will pay higher stamp duty. As I said, there is no golden pot of money out there to throw around. I hope that coming in to the next general election we as a party will say that we are acting responsibly and that we have looked at where help is most needed, which is where it is being delivered. Unfortunately, there must be a bit of give in the system somewhere and, unfortunately for the people affected, the give in this case is at the higher end of the market.
I would like to think that stamp duty was originally meant to target higher-value houses and was never meant to catch the people it is catching, including, in my constituency, young people starting out on the ladder and people on the lower income scales. Although I regret that some people will find the measure not to their liking, especially just before Christmas, the majority of people trying to get on the housing ladder—in my constituency, the figure is something like 97%—will find it a huge bonus. The people who sell double glazing, carpets or kitchen and bathroom improvements whose small businesses have been struggling as people have not been making the investments that would push them over the threshold will, I hope, find that people are now making those investments.
I wholeheartedly welcome the measure and the only Scrooge-like bit that I would add at the end is, as colleagues have mentioned, to ask that we keep an eye on the drag. I would not like to think that other people would soon be sucked in to the wrong bands. I say the wrong bands, because I think at the heart of the Treasury’s proposal is a wish to deliver home ownership to lower income families, young families and people starting out while expecting those with the broadest shoulders to pay a bit more. I welcome these changes.
Mark Reckless (Rochester and Strood) (UKIP)
It is a pleasure to follow the hon. Member for St Albans (Mrs Main), who has set a superb example to those on the Treasury Bench of how to extol this policy. She also secured a Westminster Hall debate, which was useful in pressing the arguments for it.
Notwithstanding today’s procedural issues, the Treasury deserves credit for introducing this measure. It has taken four and a half years of this Government, but the previous Government had 13 years and the one before that had 18 years without introducing this overdue but incredibly important and beneficial reform.
The hon. Member for St Albans has done a lot to push the argument forward and so have other Members. I recall having a conversation with the right hon. Member for Welwyn Hatfield (Grant Shapps)—at that stage at least, he was my friend—in which I made the case for reforming this tax, and he said very clearly that, if we were to do it, it would need to be revenue neutral. However attractive the reform might have been, the number of losers would have made it difficult without the £700 million or £800 million a year that the Treasury is putting in, so there has been a change. If that money oils the wheels of a reform that gets rid of substantial distortions, such as those under the previous tax system, that is a good use of it, and I believe that the Treasury has made the right choice.
My constituents will benefit. Much of our housing stock has been around the £250,000 mark, with rather less around the £500,000 mark. At both levels, the fixed charge of £5,000 once people move past those points has been a significant problem for the housing market and, as the hon. Member for St Albans has said, a lot of the subsidiary industries based around it. That has never been more the case than with the mortgage market review and the general reduction in appetite for some of the riskier lending among banks that has made it difficult for young people and those on the early steps of the housing ladder. They are often capital-constrained and having to find the extra money for the stamp duty almost invariably means that it cannot be spent on something else. It actually often leads to those transactions not happening.
I would criticise, not the Treasury, but the Office for Budget Responsibility for the lack of detailed workings and the lack of comprehensiveness in its forecast for the housing market and how that relates to its estimates for the cost of the stamp duty measure. The OBR has estimated that transactions would rise by 1.1% on account of the reform; I am sure that is a great underestimate. Similarly, the OBR has made an assumption—or a forecast—of a 0.2% increase in residential investment relative to GDP, yet it has assumed that that will be offset by reductions elsewhere in the economy, which it fails to particularise or explain.
I am not impressed, in this area or in others, with the three-men-and-a-dog approach that the OBR has often taken. No wonder it cannot be expected to take on the Opposition spending proposals as well, not least because it just looks at parts of them, casts its eye over them, scans them a bit and says, “That sounds reasonable,” and nods them through. On the housing side, it has not come anywhere near to taking into account the positive impact that the stamp duty reform will have on the economy, in freeing up transactions and increasing labour mobility, especially around the £250,000 and £500,000 pinch points.
I think that the reform will be very significant. The cost estimates are £365 million for this year, £760 million for next year and £840 million the following year. An assumption has obviously been made of a rise in transactions that leads to the annualised costs falling off once we get into the next fiscal year, because there will have been time for the lags to work through and we will be witnessing a rise in transactions on account of the reform. My strong suspicion, however, is that that rise in transactions will be quite a lot more than the OBR has stated, and as the hon. Member for St Albans said, there will be significant add-ons to other industries that depend on the housing market. In my view, as a result of getting rid of the significant distortions that we have had, there will be dynamic, positive impacts on the economy, which the OBR and—as so often—the Treasury have not taken into account. Such thinking has held back good reforms of taxes in these areas.
Mrs Main
The hon. Gentleman rightly said that labour mobility would increase. People have told me that they were deterred from moving into higher house value areas because they would not only have to take on a higher mortgage but find the tax—almost a tax on their ability to find a job—if they moved to a place where there were more job opportunities but higher house values.
Mark Reckless
The hon. Lady is absolutely right, and that requirement comes when people are most capital-constrained, especially in the current mortgage market. So charging the tax in that way restricts mobility, restricts spending on moving home and leads to fewer transactions.
I have had constituents who have moved from St Albans to Rochester and Strood, attracted by our better-value housing stock. The hon. Member for Broxbourne (Mr Walker) made a forecast that my return to the House as the UKIP Member for Rochester and Strood would lead to falls in house prices across my constituency. I am not sure that that will happen, and in any event, I strongly welcome this real supply-side reform. When the Government do the right thing, particularly in an extremely sensible supply-side reform that should free up the market and lead to significantly greater economic activity around the housing market, I am happy to support that reform, for my constituents and for my party.
Mr Jones
Again, I agree. The old system created nothing but distortion in the property market. What will happen now—as I said, I am glad it is going to happen straight away—is that people buying at £250,000, although that is not a realistic price, will pay just 1%, the same £2,500 as before, and 5% only on any amount above that, which will make a massive difference.
Mr Jones
My hon. Friend is right and that was the fair thing to do. We must have sympathy, though, for people who completed transactions before yesterday. The new system cannot be made retrospective, which is a great shame for them, but it is a bonus for people in the process of buying property and for future buyers, especially as it will allow some people to free up some money so that they can go ahead and buy things that they will need for their new home or undertake improvements.
I have many buyers in my constituency who are buying at a price between £125,000 and £250,000, and the reform will make a massive difference to them too. They will not have to pay the full slab rate of 1% on the whole purchase price. The measure will have a major effect not just in the south-east, but in the midlands and the north of the country. Over the years many people, especially those selling and buying on, have added the stamp duty cost to their new mortgage, so they were paying the stamp duty to the Government at whatever rate, and paying that money back over 25 years or for however long their mortgage ran. On a large scale, that would cause a massive cost. The new system should reduce that burden too.
I draw the Minister’s attention to the way in which the stamp duty land tax is administered. From the Finance Act 2004 onwards, a very simple process became extremely time-consuming and convoluted, which increased the cost of conveyancing to many buyers. My hon. Friend the Minister may want to consider examining how Her Majesty’s Revenue and Customs deals with these matters, to see whether some simplification may reduce the administration costs for buyers.
I thank members of the Treasury team for the action that is being taken. It will be a great help for first-time buyers and for people who want to move on. It is a policy for people who work hard and have aspiration. I welcome it in its entirety.
Mr Dominic Raab (Esher and Walton) (Con)
It is a pleasure, as always, to follow my hon. Friend the Member for Nuneaton (Mr Jones), who made a range of important points in typically common-sense language.
I, like others, welcome the Chancellor’s autumn statement. Like business rates reform, which is another aspect I wholeheartedly welcome, a major overhaul of stamp duty is long overdue. I pay tribute to my hon. Friend the Member for St Albans (Mrs Main), who has conducted a tenacious campaign for major substantive reform of stamp duty. If the experience of our hon. Friend the Member for Harlow (Robert Halfon) is anything to go by, she will shortly be elevated to a senior rank. I am sure she will be thrilled by that.
I am delighted that the Chancellor is taking action against what was one of Labour’s most arbitrary stealth taxes. The way it operated was a pretty vindictive assault on aspirational low and middle-income savers. The point has been made that, economically, a well functioning housing market should enable people to engage in mutually beneficial transactions, and make efficient use of housing stock. That is extremely important. A family in a small house should be able to move to a larger one, if they need to do so because of a growing family or if someone is earning more following a promotion. Older couples should be free to downsize when they want, not least to free up cash for other needs. Stamp duty has been a poorly designed tax that has undercut social mobility upwards and downwards.
In my constituency, we have felt that burden disproportionately. Of course, there are many families living in Elmbridge who are on very high incomes, but that does not mean that across the board it is some kind of land of milk and honey. For many of the residents whom I come across, their home is a nest egg built up after many years of saving. They may be asset-rich but income-poor. They may want to downsize to release cash for income or even the costs of care. Stamp duty has had a totally arbitrary impact on them. We also have a problem with key workers, who are vital for the delivery of local public services. They find it unaffordable to live locally and stamp duty has exacerbated that problem.
Above all, we have a wide range and large number of middle-income families, working hard, saving and facing very high cost of living pressures, and affordable housing is a major factor. As of the second quarter of last year, the median house price in Elmbridge was £445,000. That price has almost certainly risen substantially since then, but it does not buy a mansion. I can say that as someone who lives in my constituency. Typically that price would buy a two-bedroom home, which under the old regime would land the buyer with a massive stamp duty bill of over £13,000. According to the most recent market data, a family in a small home looking to buy a larger one would be left facing a bill of £13,000 or more for the average two-bedroom property, and £23,000 or more for the average three-bedroom home.
The cumulative bill is staggering. In 2012-13 my constituents paid £56 million to the Exchequer in stamp duty on residential property, which is more than the total paid in the whole of the north-east of England and a third of the figure for the whole of Scotland. Of course, Esher and Walton is just one area, and there are obviously geographic differences in incomes as well as house prices, but they do not necessarily match up, and they certainly do not tally neatly or consistently in my constituency. Elmbridge is just one example of stamp duty’s geographical unevenness. London accounted for 41% of residential stamp duty in 2012-13, and the south-east of England accounted for a further 22%. England as a whole accounted for 94% of UK stamp duty. It therefore has a very particular geographical burden, and it is not filtered according to income.
Stamp duty is not an economically efficient tax, as we have heard time and again. Stamp duty on residential property distorts the whole structure of the housing market. In particular, the slab structure, under which the relevant rates apply to the full sale price, not just the part above the relevant threshold, has created huge cliff edges, as we have heard this afternoon. It is worth dwelling on the impact of the slab structure. I think that the Chancellor made the point exceptionally well yesterday. A £1 increase in the price of a home, from £249,999 to £250,000, triggers an extra £5,000 tax liability. That cliff edge has been shown to be harmful to home owners and would-be buyers. It is worth remembering that stamp duty is a tax on transactions, so it impacts on the purchaser and the seller.
Property experts London Central Portfolio, together with the Cass business school, have put together an analysis that estimates that close to 14,000 home owners a year are forced to reduce the asking price for their home in order to get under a stamp duty threshold. Other would-be sellers are either unable or unwilling to reduce their prices to below the nearest threshold. That causes bottlenecks in the market and a drought of available properties in certain price ranges in certain areas, which is very harmful to the market and has important social as well as economic impacts.
It is little wonder that the Institute for Fiscal Studies has described stamp duty as
“a strong contender for the UK’s worst-designed tax”,
with a “perverse” and “absurd” structure. The director of the IFS argued earlier this year that in the modern era of broadly based taxation, the case for maintaining stamp duty at all is “very weak indeed”.
Mrs Main
I pay tribute to my hon. Friend, who along with me secured the stamp duty debate in September and who has raised these matters on numerous occasions in the media. Does he share my concern that that debate was very poorly attended by the other parties? Indeed, it was very much Members on the Government side who were concerned about the matter.
Mr Raab
My hon. Friend, as usual, makes her point powerfully. As is so often the case, the real democratic debate and scrutiny is taking place on this side of the House, but at least the Labour party accepts these changes. I hope that in due course it will reflect and put paid to some of its ridiculous notions about a mansions tax, which is really about the politics of envy, rather than sensible economics or social fairness.
I want to move on to the impact of stamp duty, because it has also proved socially unfair. When the additional 3% and 4% rates were introduced in 2000, they were designed for the wealthy. Had the threshold risen in line with house price inflation, only properties worth £1.3 million would attract 3% stamp duty today. The Chancellor’s reforms will make a vital difference and I fully support the direction of travel. The move from the slab structure to marginal rates is far more economically efficient. It will unblock bottlenecks in the market, which also have a negative effect on housing supply and stock. I wholeheartedly welcome this move.
Likewise, I recognise that the vast majority of home buyers, and as a result sellers, will benefit. The tipping point at which buyers will pay more as a result of the reform kicks in at just under £940,000. I have two points to make about that. First—this relates to my earlier point about house prices varying dramatically across the country—there are plenty of three-bedroom homes in my constituency, as I am sure there are in London and in other constituencies, that will already be caught by the new system and will end up paying significantly more. They are not mansions owned by the super-rich; many are owned by people who have saved and so are asset-rich but income-poor. Again, London and the south-east will feel the burden. I do not think that we can always assume that it will hit only those with the broadest shoulders; it will also hit those who have saved and planned their finances over the long term, and it will have a significant impact.
Secondly—this is the missing piece of the jigsaw—given the forecasts for house price inflation, buyers of average-priced homes in many parts of London and the south-east will in a relatively short time find themselves paying substantially more. Over time, the higher rates will, by stealth, hit more and more middle-class buyers and sellers. In London and the south-east, median home buyers could be caught by the new 10% rate within 10 years, depending on how the forecasts for house prices turn out. To be clear, that means that within a decade—more or less—average home buyers could be hit by the 10% rate. Recent experience with the 3% and 4% rates of stamp duty under Labour shows that what starts as a tax aimed at the rich, within a relatively short period of time if we are not very careful ends up clobbering the middle classes. I hope that in the immediate or not too distant future Ministers will address that point square on by indexing the thresholds for all rates to house price inflation. That way, we can learn the lessons and avoid the mistakes of previous Labour Governments.
If we do not address fiscal drag now, and instead kick it into the long grass, we risk ending up over time robbing middle-class Peter to pay working-class Paul, and I do not think that we should be engaged in that, as a matter of sound economics, social fairness, or indeed long-term sustainable politics. Instead, we should be ensuring, as part of our long-term economic plan, that over the long term all low and middle-income aspirational savers and home buyers benefit from these important and welcome reforms.