Finance (No. 2) Bill

Charles Walker Excerpts

Committee stage & Committee of the Whole House (Day 2)
Tuesday 20th April 2021 Commons Chamber

[Geraint Davies (Swansea West) (Lab/Co-op) [V]]

The stamp duty holiday tells us all we need to know about the Government’s priorities. Amid an awful pandemic that has seen the highest death rates in the world, when something like 4 million people have been infected and many of them will face long covid, and when something like 7.6 million people are in hunger, we need investment in the wider economy to get us moving again. In fact, with the stamp duty holiday the Government have spent much of £5 billion, over two years, on second homes. That £5 billion could have paid for 5% increases in nurses’ salaries over 15 years, given that a 5% increase would cost £330 million after allowing for the recovery of the tax on the money given in the first place.

In any case, it is not clear that the stamp duty holiday was at all necessary to stabilise the housing market, because immediately as the pandemic began to hit, the Bank of England reduced interests rates and in so doing reduced mortgage costs, supported prices and increased landlords’ margins at a time when tenants were still required to pay their rents. Given that the Bank of England had already taken action to support the market, the stamp duty holiday simply increased house prices by something like 7% between July and December 2020. That is not the right priority, and it is certainly not the right priority to invest money in second homes for people who are basically making money out of that investment from taxpayers and boosting the prices that first-time buyers face. That is why in Wales, where we have a Labour Government, second homes were not included in the stamp duty holiday, which was quite right. I therefore support amendment 81. Indeed, in Wales, we have made provision so that there are no rough sleepers during this pandemic, whereas in England, of course, there are.

The stamp duty holiday will mean that first-time buyers will find it more difficult to buy a house because deposits will need to be bigger. We are moving to a situation in which young people who want to buy a house will almost always have to depend on their parents to do so, so the distribution of the opportunity to buy a house in Britain is getting worse and worse.

In a nutshell, this Budget should have invested in all our opportunities to raise productivity, increase the number of jobs, focus on the future and keep people healthy. Instead, it has been seen as an opportunity to focus on widening inequality unnecessarily. I very much support the Labour party’s amendments.

[The Temporary Chair (Sir Charles Walker)]

We now go to Christine Jardine, who is joining us virtually.

[Christine Jardine [V]]

[Inaudible.]

[The Temporary Chair]

We will move on to Felicity Buchan.

[Felicity Buchan (Kensington) (Con)]

I speak in support of the Bill and against the amendment. The stamp duty holiday has been an unequivocal success in stimulating the market, and I welcome its extension. Many of my constituents will also welcome the surcharge for non-UK residents. In my constituency, many foreign investors buy flats and houses as financial investments, and often these lie empty; in effect, they are bank balances in the sky. This has real implications for my constituency. It leads to hollowed-out communities, and it makes it very difficult for shops, restaurants and businesses to be viable.

I welcome this Government’s focus on house building. Last year, we built 243,000 houses. That is the most in 33 years. For so many of my constituents, buying a house is almost an unobtainable dream. We need to build more houses, and we need to build more affordable housing. That is especially the case in London, where the Labour Mayor’s record of building housing has been lamentable. In 2016, he was given a budget of £4.62 billion to build 116,000 houses. How many had he done by December? Only 56,000—less than half. It is lamentable.

I also welcome the Government’s new measures on guaranteeing mortgages up to 95%. Again, this will help my young constituents and key workers to get on to the housing ladder. In my borough of Kensington and Chelsea, we have so many private renters. Some 44% of my constituents are private renters, because people cannot afford to get on to the housing ladder. Rent is a huge proportion of my constituents’ incomes. Rent is 26% of the median average income nationally. In my constituency, it is a whopping 75%, so I welcome all the support to get young people in my constituency on to the housing ladder.

I support the measures in the Bill, but like my hon. Friend the Member for Orpington (Gareth Bacon), I encourage Government to be more radical when it comes to stamp duty and to make a fundamental reform. Stamp duty is essentially a tax on social mobility. It prevents people from moving closer to new work opportunities. It prevents young and growing families from moving from one to two-bedroom flats to bigger family houses. It prevents older people from downsizing.

In my constituency, it has led to very perverse consequences. People cannot afford to move, so they start extending their houses. That has led to an onslaught of basement developments. One house in my street went down an extra three storeys below the lower ground floor. That has now been banned by my council, but this causes undue distress to my constituents and intolerable noise and disruption that goes on for prolonged periods. We have to make it easier for people to move.

I would go back to the changes made to stamp duty in 2014, in the autumn statement. It was commendable that we got rid of the slab approach, but we made a mistake on the higher levels of stamp duty, because they are punitive. The average house price in my constituency is £1.25 million. The stamp duty payable, when we do not have the holiday up to £500,000, is £68,750. That is just unaffordable. Average earnings in my constituency are 40% higher than the national average, but property prices are 415% higher, and my constituents simply cannot afford this level of stamp duty. People may well say that this is a specific issue to a few constituencies in central London and ask why this matters to the rest of the country, but I can assure them that it does matter. Transactions over £1 million amounted to only 2.5% of the transactions, but in value they equated to 32% of the transactions. So if we see less activity in the top end of the market, it is bad for the Exchequer, and we have seen that reduction in activity over the past five years, since the 2014 changes. In my constituency, the volume of transactions at the top end is down by 33% and in value they are down by 25%. So this tax is the wrong side of the Laffer curve. In summary, I welcome the Bill and the changes in it, but I ask the Government to go further.

[Sir Charles Walker (The Temporary Chair)]

Christine Jardine, welcome back.

[Christine Jardine]

Thank you, Chair. Apologies, I do not know what happened just then, but it is now a pleasure to take part in this debate.

I will be supporting amendment 81, as will the Liberal Democrats, which would ensure that the stamp duty land tax holiday no longer applies to the purchase of second homes. I will keep my remarks short, in the light of the earlier mishap. Suffice it to say that we believe that the SDLT holiday is not effective in helping first-time buyers on to the housing market. Giving a tax break to people who have already saved money for their property and can already afford a mortgage does not entirely solve the problem. Extending the SDLT holiday would serve only to avoid a cliff edge, depriving the Treasury of much-needed funds at a time when there are many extremely pressing calls on our public finances. Combined with the new lower deposit mortgage scheme launched in the Budget, its only effect is to increase demand for housing without increasing the supply of homes. For me, and for the Liberal Democrats, that is crucial. Members can see where I am going with this: we need to increase the supply of homes.

The Government need to take steps to increase the number of homes being built. They first must make and then keep to their targets, support local authorities that want to build new homes and enforce affordable homes targets. That must include building 100,000 new social homes a year. The Liberal Democrats have proposed a new rent to buy scheme, where people can build up shares in housing association homes through their rent. I ask the Government to examine the merits of that proposal. These steps would be more effective in getting people on to the housing ladder. Therefore, I ask that the amendment be supported and I ask the Government to consider the rent to buy scheme as a way of realistically helping people on to the housing ladder without increasing demand for housing that is not there.

--- Later in debate ---

[The Temporary Chair (Sir Charles Walker)]

With this it will be convenient to discuss the following:

Amendment 64, in clause 93, page 54, line 15, leave out

“substitute for the period for the time being mentioned there such other”

and insert “increase the”.

This amendment would ensure that the Treasury can only increase, and not decrease, the period for which the temporary 12.5% reduced rate of VAT for the hospitality and tourism sectors applies.

Clauses 93 to 96 stand part.

That schedule 18 be the Eighteenth schedule to the Bill.

Clause 97 stand part.

That schedule 19 be the Nineteenth schedule to the Bill.

Clauses 128 to 130 stand part.

New clause 16—Review of changes to VAT—

“(1) The Chancellor of the Exchequer must review the impact on investment in parts of the United Kingdom and regions of England of the changes made to VAT by sections 92 and 93 of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider the effects of the provisions on—

(a) business investment,

(b) employment,

(c) productivity,

(d) GDP growth, and

(e) poverty.

(3) A review under this section must consider the following scenarios—

(a) the extension of temporary 5% reduced rate for hospitality and tourism sectors is continued until 30th September 2021, and

(b) the extension of temporary 5% reduced rate for hospitality and tourism sectors is continued until 31st December 2021.

(4) In this section “parts of the United Kingdom” means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland;

and “regions of England” has the same meaning as that used by the Office for National Statistics.”

This new clause seeks a review comparing (a) the extension of temporary 5% reduced rate for hospitality and tourism sectors being continued until 30 September 2021, and (b) the extension of temporary 5% reduced rate for hospitality and tourism sectors being continued until 31 December on various economic indicators.

New clause 30—Review into the effects of replacement of LIBOR—

“(1) The Chancellor of the Exchequer must undertake a review within six months of the passing of this Act of the effects of sections 128 and 129.

(2) This review must consider—

(a) the implications for tax revenue,

(b) effects on financial stability, and

(c) effects on businesses that use LIBOR as a benchmark, including businesses offering supply chain finance.”

This new clause would require a review into the effects of the provisions of the Bill about replacing LIBOR.