George Freeman
Main Page: George Freeman (Conservative - Mid Norfolk)
Greg Hands
The hon. Gentleman is recalling a little bit of ancient history, but if he looked at the debate within the Conservative party around the time of the party conference in 2006, he would find some interesting submissions to the debate within the party at that time.
We are still borrowing, and it is worth recalling that. Debt is peaking now, at 80% of GDP. Of course, for the years that debt has increased, we see that the maths make that an inevitability if we are running a deficit. Although reducing debt as a percentage of GDP to 74% by 2023 is progress, I worry whether that figure will be too high in terms of our stated mission of fixing the roof while the sun is shining. Labour Members say that debt is too high and that we have not done a good enough job on cutting the deficit. So what do they think we should have cut more? It is worth recalling that Alistair Darling’s pledge in 2015 was to only halve the deficit, which would of course have led to much higher debt.
Other successes of those years are, first, the increase in capital expenditure, which has not featured so far in the reactions to this Budget. It is increasing by a healthy 4% per annum over the next four years—that is a case of building for the future. So we have been fixing the roof while the sun is shining, but the job is not yet done. We need to bring debt down below the 74%—and not through tax rises. This country is already sufficiently taxed. I warmly welcome our meeting the 2015 manifesto commitments on the personal allowance and on the £50,000 higher rate threshold. Meeting those one year early is very encouraging.
I also welcome measures to encourage the conversion of surplus retail to residential properties, which is incredibly important in constituencies such as mine, where we have a lot of retail space that has been dead since even before Amazon came along—that has simply been unable to be converted to residential. That move is very welcome. The extra Brexit resources are sensible, and I hope that they will include money for the Department for International Trade to take advantage of future trading opportunities, although the £2 billion increase in UK Export Finance capital is also welcome. I am disappointed that there are no specific further funds for the Royal Borough of Kensington and Chelsea for dealing with the Grenfell tragedy.
I want to speak about something that was not in the Budget but which may have to be in due course—stamp duty land tax, which goes back to my point about crofters, lairds and the leader of the SNP. I have been a keen observer over the years of these changes, and I am glad the Financial Secretary is in his place. I was not part of the Treasury team in autumn 2014 that made those important reforms, and I would have urged caution at that time, but there must be a question as to whether stamp duty land tax is too high, including at the top of the market. I ask the Treasury to consider this in good time. There is no point coming to a fast conclusion on SDLT.
Many of the principles of the reforms were sound. Home purchases were made cheaper for 90% of properties and the SDLT slab system was removed. Subsequent reforms have meant that people pay more for second-home ownership, which is reasonably correct, and there is no SDLT at all for many first-time buyers, which is beneficial. There has to be a question, though, as to whether the overall yield from SDLT can be improved. If I understand it, to date the receipts are down by 10% a year. In August, only 79,000 homes throughout the UK were sold at all. That is down 4% year on year. If I read the numbers correctly, there is a £1 billion shortfall compared with the OBR estimate.
The increase in stamp duty land tax on homes worth more than £937,500—
Greg Hands
I will not take any more interventions as I will not get any more time.
It may seem bizarre to speak about people in such homes, but in large parts of inner London, £937,500 does not buy an astronomically sized home. That is the cost of a typical large flat or small house in many parts of inner London. The average buyer in my constituency now pays £43,000 in stamp duty land tax. For many Members, £1.5 million may sound like a huge amount, and it is, but that is the average price for a three-bedroom house in my constituency. If someone wished to trade up to a four-bedroom house because their family had increased, they would have to pay £153,750 in stamp duty alone. That is increased from £53,750—three times as much.
What are the effects of the change? First is the question of whether revenue is being maximised at a time when we need revenue. Secondly, it is a serious tax on home ownership in general. Thirdly, it heavily penalises downsizers. If someone is in a larger house and looking to move to a smaller house, which is a socially beneficial activity, they are heavily penalised by the SDLT consideration on their new house, as well as the buyer of their previous house having to fork out more than £150,000 or £200,000, in some cases.
Fourthly, it encourages the over-development of homes, which is to be seen all day, every day around my constituency and in much of inner London, as people are tax-incentivised to extend their homes rather than buy and sell to move to a larger or, indeed, smaller house. The amount of building work has skyrocketed. I did a poll of my local estate agents and residents and got some very interesting frontline responses about the effects.
Fifthly, it encourages over-conservativism in property moves. People think, “It is so expensive to move. I have to make sure I’ve got it right.” That can cause a delay in a property move that may be unbeneficial to the economy. Sixthly, it cuts labour mobility and, as such, social mobility. If someone gets a new job in a more expensive part of the country, it will cost them a huge amount to make the move in order to take the job.
I welcome the Budget, the tax cuts being introduced and the extra money for the NHS. We have to keep a close eye on debt. I support the Budget.