Stamp Duty Land Tax (Reduction) Bill

Christopher Chope Excerpts

Committee stage
Tuesday 10th January 2023 Commons Chamber

[Victoria Atkins]

I very much understand why my right hon. Friend raises that point. I know he took a great interest in the autumn statement and listened carefully to the submissions and oration of the Chancellor of the Exchequer, my right hon. Friend the Member for South West Surrey (Jeremy Hunt). We had to take some difficult decisions in the course of the autumn statement to ensure that our approach to the economy is fiscally responsible. This is one way in which we hope to stimulate the housing market in the next two years in the difficult economic circumstances we find, but thereafter we are confident that the economy will improve and we will be able to return to the status quo as it was before 23 September. However, the broader picture about reducing the taxation burden on our constituents still stands. Indeed, I hope my right hon. Friend listened with great interest to the Prime Minister’s speech last week in which he made it clear that that is our ultimate goal.

[Sir Christopher Chope (Christchurch) (Con)]

On 17 October, the new Chancellor of the Exchequer told this House that this particular element of the mini-Budget relating to stamp duty land tax would be retained. It was on that basis that the Bill was introduced in the House. It was only a month later that we had the autumn statement when the Chancellor of the Exchequer went back on what had been said earlier.

[Victoria Atkins]

Again, my hon. Friend puts his finger on the point as to the very, very fast-moving economic conditions we have faced in the last few months. He will recall the autumn statement and the great detail the Chancellor went into in terms of ensuring that our approach is fiscally responsible. We had to acknowledge and react to the conditions as we found them then. We are confident that the sunset clause in the Bill will enable us to support our constituents. Indeed, it is happening at this very moment in time, because, of course, we brought in the measures as soon as possible immediately after the original announcement. They are helping, for example, first-time buyers get on to the housing ladder.

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Surely that is the part of the Bill that Ministers must struggle hardest to defend. Even if the Government are determined to retain stamp duty cuts overall, surely they can see that a cut targeted at second home buyers is not the way in which public money should be used. I therefore urge the Government at the very least to support our amendment (a) to Government amendment 1, along with amendment 15, which would prevent a tax cut from applying to buyers of second and additional homes.

[Sir Christopher Chope]

The hon. Lady seems to be obsessed with the issue of second homes. What about the point she made earlier about the number of young people becoming home owners, which has declined so dramatically since 1987? In 1989, 51% of 25 to 34-year-olds owned a home; now about half that number do so. What are the Opposition going to do about it?

[Abena Oppong-Asare]

In fact, the statistics quoted by the hon. Member show that the Bill will not help people. It will not help first-time buyers, and it is not just Labour Members who are saying that: the Resolution Foundation has provided statistical evidence that it will not help them. We want to help first-time buyers as well, but this is not the right solution. It will be mainly second and additional homes that benefit. Our two amendments would amend Government amendment 1 to remove the relief for buyers of additional dwellings, and would remove clause 1 (3), which raises the threshold for them. They would prevent the Bill from giving relief from stamp duty to buyers of second homes. I hope the hon. Member will support our proposals, particularly our amendment to enable first-time buyers to get on to the ladder as he wishes them to do.

As I have made clear, we do not believe that this stamp duty cut is the right or responsible way in which to spend £3.2 billion of public money, but if the Government are not willing to cancel the cut altogether, I urge Conservative Members at the very least to support our amendment to prevent second home buyers from receiving a £2,500 tax cut.

New clause 1, which Labour has also tabled, requires the Chancellor to be up front and transparent about the costs of the partial U-turn on the stamp duty cut, and to set out the measures that the Government will take to mitigate the impact of the abrupt end of the stamp duty relief at the end of March 2025. We know from the Government’s policy paper on this tax change that His Majesty’s Revenue and Customs will have to incur costs in the region of £300,000 to change IT systems, and about £2.4 million in extra staff costs. That is ridiculous. Through new clause 1, we aim to push Ministers further by asking them to set out specifically the costs of implementing their U-turn

“for the Government, the property industry, and homebuyers”,

as well as

“any wider costs and impacts of the change…on the housing market”.

We are also asking them to set out the measures they are

“planning to ease the impact on tax revenues, home purchases and the housing market of the reduction in stamp duty…coming to an abrupt end on 31 March 2025.”

We know from Government amendment 12 that Ministers are introducing measures to ensure that transitions that straddle the end of the temporary relief benefit from the reduction, but the question of the impact of ending the stamp duty relief goes much further than that. In 2016, the Office for Budget Responsibility published a paper on property tax changes and forestalling when transactions are brought forward to benefit from lower tax rates. The OBR found that in each historic case that was analysed, the preannouncement of an upcoming tax increase led to a sizeable forestalling. Forestalling is therefore expected to be an important issue in relation to the end of the temporary stamp duty cut, and we urge the Government to set out the measures they are planning ahead of that. If they are not willing to accept our new clause 1, I urge the Minister to set out the detail that we request, either at the end of the debate or subsequently in writing.

When our country is suffering the consequences of 13 years of low growth and of the Conservatives’ economic chaos at the end of last year, now is not the time to be spending £3.2 billion on this tax cut, particularly when hundreds of millions of pounds will go to the buyers of second homes. We urge Members in all parts of the Committee to support our amendments to remove the tax cut for second-home buyers, and to join us in opposing the Bill on Third Reading.

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[Helen Morgan (North Shropshire) (LD)]

I rise to speak to new clauses 4 and 6, which I tabled, and to support new clauses 2 and 3, which were tabled by my hon. Friend the Member for Westmorland and Lonsdale (Tim Farron).

The housing crisis has been discussed at length today and at many other times in this place, and Members are well aware of the pressure that second and luxury home ownership is placing on communities where existing residents are struggling to buy their first home. In rural parts of Britain, including North Shropshire, our villages are at risk of turning into retirement villages and our tourist hotspots are almost becoming ghost towns at certain times of the year. That is having a hugely negative impact on rural skills and the rural economy, as both pupils and people of working age are in increasingly short supply.

The economic climate has changed, but house prices in rural Britain have risen fast in recent years. Figures from Hamptons, the estate agent, reveal that rural house prices rose by 14.2% in 2021, compared with just 6.8% in urban areas. The property website Property Road estimates that there are 132,000 fewer young homeowners in rural England than in 2010. I do not want to bore the Committee with facts and figures, but eight in 10 respondents to a Country Land and Business Association survey said that the lack of affordable housing had priced out first-time buyers in rural areas.

Although efforts to help first-time buyers in all areas of the country are welcome, the experience of the previous temporary stamp duty reduction in 2020 suggests that there is a risk of distorting the market and achieving the opposite. During that period, rural areas saw soaring house prices, with those trying to sell in Shropshire reporting intense competition and competitive bidding, unseen, for their home. That is all very well for those who were trying to sell, but it was bad news for anyone trying to buy a home at the same time and disastrous for anyone trying to get a foothold on the housing ladder.

Meanwhile, genuinely affordable housing—housing costing less than £250,000—remains in desperately short supply. Market prices have risen so much in recent years that it is putting intense pressure on social housing and the private rented sector, with social housing waiting lists spiralling and thousands of families being forced into temporary bed-and-breakfast accommodation. We all know this is far from ideal for anyone who needs a place to call home, but it is totally unsuitable for families whose children need the security of a stable school and home environment. People who came here under the Ukrainian and Afghan refugee schemes, and whose family sponsorship has come to an end, are now the responsibility of their local authority, and they are also being forced to spend time in unsuitable temporary accommodation.

The potential for an accidental house price distortion makes it much harder for local authorities and housing associations to replace stock sold under the right to buy, because they are unable to retain 100% of the proceeds. I tabled new clause 6 to require the Treasury to consider the impact of these measures on the housing market, and specifically on the availability of private rented and affordable housing, because people who are priced out of those sectors are adding to the ever-increasing waiting lists for social housing.

New clause 4 would require specific consideration of the housing market in rural areas in response to the recent trend of house price growth in these areas outpacing the house price growth in urban areas, which is exacerbating the issues we have seen across the country. We simply cannot ignore the housing crisis any longer. All policy should consider the possibility of unintended consequences and mitigate that risk. These reports would better inform policy, and I urge the Minister to consider their inclusion so that we do not cause an unintended problem.

I briefly turn to second homes, although I cannot improve on the points made by my hon. Friend the Member for Westmorland and Lonsdale. Suffice it to say that second home ownership is hollowing out villages in some parts of the country on weekdays and during the winter, and it is driving up house prices for everyone, meaning that many people cannot afford a first home. In a country with a housing shortage, the Government should strongly discourage empty second homes. The hon. Member for South Thanet (Craig Mackinlay) made an excellent point on that issue.

I support new clauses 2 and 3, which would require the Chancellor to consider the impact of the Bill on the number of first and second home buyers, such that it can be amended if necessary, and specifically to consider the worst-affected areas, which are our national parks and areas of outstanding natural beauty.

I broadly support any measure that encourages home ownership, but I fear that this temporary cut in duty, at a time when the Treasury can ill afford it, will be counterproductive for first-time buyers, particularly in rural Britain. New clauses 4 and 6 would allow the impacts to be fully understood, to confirm whether I am right and to make sure the policy is well informed.

[Sir Christopher Chope]

Happy new year, Sir Roger.

In speaking to my amendment (b) to amendment 1 and my new clause 7, I share with the Committee my dismay at the way in which the Government, with their amendments, are transforming this Bill, which originally introduced a permanent tax reduction. The Bill will now increase tax permanently by about £1 billion a year from April 2025.

On 17 October, the new Chancellor confirmed that the mini-Budget’s provisions on stamp duty land tax were safe, yet in his autumn statement, one month later, he announced:

“I will sunset the measure”.—[Official Report, 17 November 2022; Vol. 722, c. 846.]

That is an extraordinary use of language, because it does not fit the definition of a sunset clause set out on the UK Parliament website:

“A provision in a Bill that gives it an expiry date once it is passed into law. Sunset clauses are included in legislation when it is felt that Parliament should have the chance to decide on its merits again after a fixed period.”

I assumed, wrongly, that by introducing a sunset clause, the Government would give this House an opportunity to reconsider the situation before the advent of that sunset period.

That is why I tabled new clause 7, which states:

“The Chancellor of the Exchequer must, three months before expiry of the temporary relief period, publish an assessment of the impacts of the temporary relief provided by this Act.”

That would meet the concerns raised by the hon. Members for Westmorland and Lonsdale (Tim Farron) and for North Shropshire (Helen Morgan). New clause 7 continues:

“(2) This assessment must include an assessment of the impacts on—

(a) the volume and value of housing transactions on the housing market,

(b) any wider costs for the Government, property industry, housing market and/or homebuyers, and

(c) tax revenues.

(3) The assessment must make a recommendation as to whether the temporary relief period should expire or whether the House of Commons should consult on extending it or making it permanent.”New clause 7 would be a proper sunset provision that enables this House to return to the issue before the change is made permanent, but the Government amendments do not embrace that at all.

How does this Bill fit with what the Prime Minister said on 4 January? In quite a long speech, his only reference to taxation was:

“as soon as we can, the Government will reduce the burden of taxation on working people.”

Today, six days after that speech, the Government are asking us to increase the burden of tax on working people with effect from April 2025.

We have also heard in the interim that the Government will forgo the receipt of about £1 billion from the sale of Channel 4, yet as recently as 18 July 2022, when responding to the consultation on that issue, the Government announced that now is the right time to pursue a change in ownership of Channel 4. Why, one might ask, is now the right time both to increase taxes and to abandon asset sales?

Stamp duty land tax is targeted at homeowners and those who aspire to home ownership. Like my hon. Friend the Member for South Thanet (Craig Mackinlay), I am opposed to stamp duty land tax because it is arbitrary, clunky and unfair in how it applies in different parts of our country.

For example, if someone lives in Christchurch and the average price of a house is £405,000, that does not mean that they are better off. It means they have to spend more money on the borrowing costs in order to buy an average house for themselves and their family. Someone living in the Minister’s constituency, where the average house price is only £200,000, would have lower borrowing costs and would not have to pay any stamp duty land tax.

[Victoria Atkins]

This is precisely why the Government are so committed to levelling up. Although I know how beautiful my hon. Friend’s constituency is, having had the pleasure of visiting it, in my beautiful corner of England, we do not, sadly, have the transport links that other constituencies have. It is precisely this drive for levelling up, which I know Conservative Members are united on, which may help with some of the issues he sets out so eloquently.

[Sir Christopher Chope]

I am grateful to the Minister for that intervention. It comes down to how we define, “levelling up”. The point I am trying to make is that, if somebody is buying an average house in Christchurch, or in her constituency of Louth and Horncastle, it should not make any difference in terms of taxation whether the house is going to cost £405,000 or £200,000. Why should the person buying a house in Christchurch who wants to become a teacher or an NHS employee in the area not only have the burden of having the higher house price—she has referred to some of those issues—but have to pay £10,000 in SDLT for the privilege of moving into the Christchurch constituency to purchase an average-priced house? I do not see any justice in that at all. In levelling up, we should be putting those two categories of person on the same level when it comes to their liability for paying transaction taxes.

My hon. Friend the Member for South Thanet made the suggestion, which I have also made, that we should scrap SDLT. If we want to have a transaction tax, we should introduce one based on, for example, the size of a property, because that would be neutral; it would really be levelling up across the country. Obviously, it would be more popular with some people than with others, but it would certainly be very popular with my constituents and it would meet the criterion of levelling up.

[Mr Peter Bone (Wellingborough) (Con)]

It might be very popular in Christchurch, but it would be very unpopular in Wellingborough and it seems totally unfair to me.

[Sir Christopher Chope]

This is the challenge, because some people think that this would adversely affect them. When we were looking at whether we should change the domestic rating system, we always faced the problem of the people who were going to be worse off, who were always the losers and who were going to complain. I accept that, were this to be implemented in the way I am canvassing, it would create some losers who would be unpleasantly surprised. That leads me to my belief that SDLT and stamp duty should be abolished altogether. [Hon. Members: “Hear, hear.”] That is an issue on which we, as real Conservatives who believe in a homeowning democracy, should be able to agree—and it seems from that response that we can agree on it—rather than dividing again in trying to find an alternative to an already unsatisfactory tax.

Let us remind ourselves that, in the 1980s, when we had the beginnings of the property-owning democracy revolution, with more than 50% of people in the 25 to 34 age group being homeowners, we had a stamp duty regime where the maximum rate to purchase any house was 1%. Since this process started under the Blair Government and continued with the coalition—the Treasury is always seeing this as a cow to be milked for taxpayers’ benefit—the proportion of people able to afford to buy their homes has declined significantly. So the challenge I make to the Government, and I hope the Minister can respond to this, is: if we put stamp duty back to 1% as a maximum, what would that do to increase the number of transactions in the housing market, which, as others have said, is ostensibly the Government’s agenda?

On 23 September, HMRC’s policy paper “Stamp Duty Land Tax Reduction” set out the following policy objective:

“This measure is part of government’s commitment to support homeownership and promote mobility in the housing market, in turn supporting economic growth. Increased property transactions also add to residential investment and spending on durable goods.”

Unfortunately, that was withdrawn on 28 November. It would be interesting to know whether that policy objective has been retained by the Government even though the HMRC policy paper has been withdrawn. Another paper issued on 23 September was “The Growth Plan 2022”, which I thought was great, as did many of my constituents. Paragraph 3.30 of the plan stated that the changes to SDLT would

“take 200,000 homebuyers, including 60,000 first-time buyers, out of SDLT entirely.”

Today, however, we are discussing a proposal by the Government, by way of amendments to the Bill, that would put those 200,000 home buyers, 60,000 of them first-time buyers, back into SDLT. Do we really want to do that? Do we really think it will help to move the housing market, boost growth and help people to have the mobility to get to new jobs?

This is not just about people being able to move to a new job by moving house; we also need to think about the damage to the environment being done by the large number of people who are now, having no alternative, being forced to engage in long-distance commuting. Last week, I visited a school in my constituency. The teacher showing me around has been driving regularly from Wales to do a great teaching job in the Christchurch constituency. Fortunately, she is about to move into the constituency, but that is after many, many months of that long-distance commuting. That is highly undesirable. It is bad for the environment and bad for the people involved, because it means that they are sitting behind the wheel of a car for far too long during the working week.

Stamp duty land tax is targeted against homeowners and it will have an adverse effect on labour mobility. Yet the Prime Minister, in his speech on 4 January, was complaining—I agree with him on this—that a quarter of our country’s labour force is inactive and, in this Bill, he is introducing an additional tax on the very mobility that he should be espousing. As my hon. Friend the Member for South Thanet has said, SDLT is a tax on downsizing: it makes it much more difficult for anyone to receive a significant return by selling a larger house and purchasing a smaller one.

My biggest complaint, though, is that the provision hits hardest those for whom homeownership is least affordable. The latest figures, produced by the House of Commons Library in December, show that, in Christchurch, the average house price is now 11.8 times earnings. The national average in England and Wales of eight times is bad enough, but why are we imposing that extra burden on those buying houses in places such as Christchurch? The latest figures from the 2021 census show that the dream of a homeowning democracy espoused by generations of Conservative politicians since Margaret Thatcher, and first raised in 1975, is not one of this Government’s priorities.

[Mr Toby Perkins (Chesterfield) (Lab)]

Hear, hear.

[Sir Christopher Chope]

I think it is very sad and embarrassing that His Majesty’s loyal Opposition should be crowing at that statement.

[Mr Perkins]

Just to clarify, I am not remotely crowing. I entirely agree with the hon. Gentleman. This Government have hugely failed on allowing people to buy their own homes. It is a national disgrace. I support what he is saying; I am not remotely crowing.

[Sir Christopher Chope]

I accept that I used the wrong expression in suggesting that the hon. Gentleman was crowing. But may I set out the basis on which I have these concerns? In the Prime Minister’s speech on 4 January, there was not one mention of the word “housing”, let alone any mention of the expression “home ownership”. Why is that? We obviously have a real crisis in housing and home ownership on our hands. We are facing a potential fall in house prices this year—predicted by Oxford Economics to be about 12%, but who knows? Having stamp duty land tax, even at temporarily reduced levels, will mean that the burden of the reduction in house prices will be borne by those people trying to sell to a greater extent than would otherwise be necessary, because potential purchasers will have to budget for making SDLT payments to the Government.

You can tell, Mr Evans, that I am very concerned about the Bill. When I see that the Prime Minister has declared that the people’s priorities are the Government’s priorities and that we will rebuild trust in politics through action, all I can say is that I do not believe that the new measures in the Bill accord with the people’s priorities because I think those priorities are for a permanent reduction in stamp duty land tax and even, potentially, the abolition of that tax, rather than reintroducing it at a higher level in 2025.

When I was talking earlier today to a member of the Government’s Treasury team, I was told that one reason why my amendment (b) could not be accepted by the Government was that it had not been cleared by the Office for Budget Responsibility. I ask rhetorically, “Who is in charge?” Are we really saying that the Office for Budget Responsibility is able to forecast things to the extent of £1 billion here or £1 billion there? I do not think it can, and if that is the best that the Government can do in arguing against amendment (b), I hope they will think again about whether to accept it.

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[Anthony Browne]

There may be many reasons.

The capital gains tax regime already distinguishes between homes for investment purposes and homes for living in. People do not pay capital gains tax on the home they live in, but if they do not live in it, they do pay. The reason that people buying homes are overtaxed has been laid out by many colleagues, so I will not overlay that, but clearly we need labour mobility and for people to be able to live in appropriate housing. If we overtax housing, we end up with lots of people living in inappropriate houses, not least the home hoarders at the end of their working lives and the empty nesters whose kids have gone and who live in too big a house and do not want to move. That has a damaging impact on labour mobility, as people want to move around the country. It is the most economically damaging tax.

The reason I say that people buying second homes for whatever purpose or homes for investment are undertaxed is that stamp duty is a transaction tax. All other transaction taxes—we can argue about whether VAT or excise duty on petrol are transaction taxes—are flat-rated. People pay the same rate, whatever the value. We pay 20% VAT whether we are buying something for £10, £100 or £100,000. Stamp duty, however, is a progressive transaction tax, with a lower rate at the bottom end that progressively goes up, as it is designed now. That zero rate and lower rate for lower value properties is for social reasons. It is basically to help first-time buyers get on the property ladder, which is welcome, and to help people get up the property ladder. That is a valid social reason to have progressive stamp duty, but that reason does not apply to people buying second homes or investment properties. There is no reason to have a graduated stamp duty to help property investors get on to the property investment merry-go-round.

[Sir Christopher Chope]

Does my hon. Friend also agree that somebody in Christchurch who is having to buy an average priced house at the cost of £405,000—as compared with someone in Louth and Horncastle, who can buy the same house for £200,000—should not be taxed double, in a sense, in addition to having to pay a higher mortgage?

[Anthony Browne]

I thank my hon. Friend for that intervention. He proposed earlier that stamp duty should be based on the area of the property; I have some reservations about that for economic efficiency reasons. One of the considerations of taxation should be the ability to pay. If someone is buying a house for £400,000, clearly they will be able to pay a bit more tax than if they were buying a house for £200,000. But if the Government follow my proposal to get rid of stamp duty on residential properties altogether as an objective, his constituents will not have to pay any stamp duty whatsoever. They will pay the same stamp duty as the people buying houses in Louth.