Finance (No. 2) Bill

Geraint Davies Excerpts

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

[Gareth Bacon (Orpington) (Con)]

As the Committee is aware, this year’s Finance Bill is presented at an unprecedented time in British peacetime history. The pandemic has hit the economy very hard, and the Government have not stood idly by over the past year. Extensive levels of economic interventions have been introduced to protect jobs, businesses and our people in order to help them through this pandemic. The impact of this on the state of the public finances has been drastic, with the budget deficit rising to £355 million in 2020-21 and our national debt rising to £2 trillion.

That is of course not a sustainable position, but, as we know, the tide is turning. The Government’s excellent vaccine planning, procurement and roll-out means that we can now see the end in sight. The economy and society have begun to open up, but we are not there yet. The Budget introduced by my right hon. Friend the Chancellor of the Exchequer in March therefore had to achieve a very delicate balance in maintaining high levels of economic support during the continuing global health crisis while also laying the groundwork to repair the public finances and support our economic recovery.

The part of our economy that is the housing market comes in both property sales and construction. I will address my remarks primarily to the decision to extend the temporary stamp duty land tax holiday. As my right hon. Friend the Minister said, when the pandemic struck and the first lockdown began in March last year, the housing market experienced a sharp decline in sales, falling by 43% in the second quarter of the financial year compared with the same period of the previous year. Historically, a sharp drop in transactions, if left unchecked, has led to a fall in the level of house building. The Government’s action in introducing revised thresholds at the lower end of the market, abolishing stamp duty on the first £500,000 of the purchase price and setting the level at 5% for the next £425,000, has greatly alleviated the problem. In my constituency of Orpington, the average house price is currently £528,000, and the Government’s intervention has reduced the level of stamp duty on an average transaction by 91%, leading directly to a strong recovery in the local housing market.

That recovery is also reflected in the picture nationally. According to HMRC figures, in the third quarter of the most recent financial year, housing sales increased exponentially on the previous quarter, and in the fourth quarter transactions were at their highest level since 2007. In the short term, that is extremely welcome because the Government have achieved their objective of stabilising the housing market and maintaining confidence in the construction market. By introducing an extension of the initial stamp duty holiday, followed by a tapering of relief, the Government have taken steps both to remove the danger of a cliff edge that could have reversed all the good work done in the latter half of last year and to prevent an unsustainable long-term boom in house prices. I believe that is the right approach at this juncture.

In the longer term, though, I urge the Government to take a long, hard look at the structure of stamp duty. Stamp duty thresholds have not kept pace with the rise in house prices, meaning that stamp duty has become a significant barrier to purchasing. That is particularly true in places such as Orpington, and even more so in other areas of south-east England in particular, where housing shortages are most acute. In the light of the strong link between house construction and housing transactions, coupled with the Government’s desire to ramp up house building and level up the country, a review of the wider stamp duty regime would bear consideration. However, that is an argument for another day, once the battle with the pandemic is finally won.

For the moment, I believe that the extension of the stamp duty until the end of June is the right move, and its tapering from the end of June until October is both proportionate and unwelcome. I will support the Government on the issue this evening.

[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.