Stamp Duty Land Tax (Temporary Relief) Bill

Jesse Norman Excerpts

2nd reading & 2nd reading: House of Commons
Monday 13th July 2020 Commons Chamber

[Kevin Hollinrake (Thirsk and Malton) (Con)]

It is a pleasure to follow my hon. Friend the Member for Runnymede and Weybridge (Dr Spencer), and I will address one or two of his points, but first I must draw the House’s attention again to my entry in the Register of Members’ Financial Interests, and also apologise to the shadow Minister, the hon. Member for Liverpool, Walton (Dan Carden), as I inadvertently misled the House earlier when I said that Labour did not cut stamp duty in 2008; actually, they did, from a £125,000 threshold to a £175,000 threshold, but they crashed the housing market so badly that it made no difference whatsoever, which is why I cannot remember it. Interestingly, however, at the time, despite what he said in his speech, they made no dispensation in terms of buy-to-let investors—stamp duty was just cut across the board, regardless of what the property was for, so there was not some carve-out only for homeowners. According to the research, one thing that cut did do was boost activity, by 20%. Activity was at a very low level, as transactions were normally at 100,000 a month but they were down to 40,000 a month, so it was a pretty painful time, but the cut boosted activity, from that low level, by about 20%. Labour then withdrew the measure pretty early and activity fell away again, which is one of the reasons why we had such an extended recession from 2008 onwards.

I think certain Members have missed the point of the measure we are debating today. It is not just about helping some people get on to the housing ladder; it is also about activity. We all know that the housing market is a major driver of activity right across the economy. That is why many hon. Members have asked why on earth we are taxing something that is a major driver of activity across the economy. This is a transaction tax, and is therefore bound to slow the market down even in good times, let alone times such as this when we are trying to stimulate the economy.

This is not just about driving activity. Residential stamp duty brings in important revenue—about £8.3 billion every year. When my hon. Friend the Member for Runnymede and Weybridge talked about stamping out stamp duty entirely, I saw the sweat on the Minister’s brows as he was thinking, “Where are we going to find that £8 billion?”

[The Financial Secretary to the Treasury (Jesse Norman)]

My hon. Friend will be pleased to know that actually I remained as implacably calm as I always am. As a test of all colleagues who want to scrap taxes, I invite them to do exactly what he is doing and supply the missing revenue with some other suggestion. I did not notice that in the speech of my hon. Friend the Member for Runnymede and Weybridge (Dr Spencer), but I am still waiting; I look forward to hearing that before we finish.

[Kevin Hollinrake]

The Minister is absolutely right, and I will come to that.

The Conservative Government have improved the system of stamp duty significantly. It used to be a ridiculous slab tax that created distortions all the way through the market, but we made it into a slice tax—perhaps a slam tax—that gets very expensive at the higher levels and deters activity at the top end.

On the Minister’s point about where on earth we are going to get the money from, the reality is that this nation will come under huge tax pressure over the next few decades, not just the next few years. According to the Office for Budget Responsibility, because of the demands of healthcare and social care, if we do not change the tax system and claim more tax, our national debt will grow to three times our GDP—it is one times our GDP today—so we cannot simply scrap taxes without introducing alternative measures.

I am going to propose a measure. I would like the threshold remain at £500,000, as my hon. Friend the Member for South Thanet (Craig Mackinlay) proposed. We have to find that £8.3 billion annually, so we have to look at annual property taxes. The council tax system, under which people pay pretty much the same whether they live in a castle or a cottage, cannot be right. We need to revisit it and have a proper discussion about it. It is controversial. Some people think it is right that people who own bigger houses should pay more, and other people think it is wrong. We should certainly have a conversation about that.

The think-tank Onward recently proposed that there should be a council tax revaluation, and even the Prime Minister suggested back in 2014 that we should look at it. The thing about it is that it is simple. We can scrap stamp duty completely up to £500,000, and keep it at that level. We can also adjust the bands to make it cheaper for people in lower-value homes, to help people on lower incomes, and make it more expensive for people in higher-value homes.

It is simple, but it is not easy. Simple and easy are two completely different things. As Ronald Reagan said, there are simple solutions, but there are no easy solutions. If we are to tackle some of the unfairnesses in society, we must not duck the tough issues; we must look at the things that make the system unfair in the first place. This is an excellent measure, and I will support it tonight if we enter the Lobbies.

[Anthony Browne (South Cambridgeshire) (Con)]

I refer the House to my entry in the Register of Members’ Financial Interests. I am on the advisory council for the Institute for Fiscal Studies, which I am about to quote, and back in 2012 I co-founded the HomeOwners Alliance, Britain’s only consumer group for homeowners, because I was alarmed by the prospects of the home ownership gap—the 5 million aspiring homeowners who cannot own their own home. We have done a lot of work promoting policies to help people get on to the housing ladder.

I was concerned about the home ownership gap because, as Opposition Members said, home ownership levels have declined. What they did not say was that home ownership levels went up almost every year for the past 100 years and stopped in the year 2000—three years after the new Labour Government came in. They then started declining for a decade or so. They are now going back up again. I commend the Government’s policies for increasing home ownership levels.

Various people on both sides of the House have mentioned the deposit barrier. It is a huge barrier for first-time buyers who are trying to save up a deposit. The reason banks have increased the deposit requirement and got rid of 95% loans is that house prices are falling, as the latest data shows. Therefore, if people take out a high-value mortgage, they end up in negative equity. That is why banks are legally required to do only affordable lending. The best way to help homeowners get high loan-to-value mortgages is to have a confidently stable or rising housing market, where there is no risk of negative equity. This measure will do that.

In my time at the HomeOwners Alliance over the past decade, I have done a lot of policy work on stamp duty and written loads of reports on it, including one back in 2012 or 2013 that argued for a differential stamp duty system for second home owners and property investors. There is absolutely no reason why they should benefit from the low stamp duty rates for first-time buyers and so on. I lobbied the Treasury, No. 10 and the Ministry of Housing, Communities and Local Government, and I was delighted when they finally introduced it as the stamp duty premium for additional homes. I would not have introduced it in quite the way they did, but the policy has made a big difference.

Two months ago, I called on the Government to introduce a stamp duty holiday to kick-start the housing market, so naturally I am delighted that the Government have done it.

[Jesse Norman]

It was only you saying it.

--- Later in debate ---

[The Financial Secretary to the Treasury (Jesse Norman)]

I thank all hon. and right hon. Members for what has been a very interesting debate, across the Chamber. I also thank the Labour Members for their support on this measure, because it is wise on their part but also indicates that they share at least this aspect of the Government’s vision for the economy.

This pandemic represents, as the right hon. Member for Wolverhampton South East (Mr McFadden) said, not merely a public health crisis but a profound shock to our economy. That is why, last Wednesday, my right hon. Friend the Chancellor unveiled the Government’s plan for jobs. The purpose of that plan, as he articulated, was to protect, to support and to create jobs across this country.

As we have heard in this debate, the property market has been particularly hard hit, with almost 90% fewer mortgage approvals in May than in February, before the lockdown at began. Not only is this a source of terrible frustration and uncertainty for buyers and sellers who must put their lives on hold in that respect as in so many others, but the reverberations have been felt across the economy. More than 24,000 people are directly employed by house builders, with hundreds of thousands more in the supply chain, and there is a knock-on effect for removal companies, furniture stores, painters and decorators, and many other businesses large or small that benefit when people move—a point nicely made by my hon. Friend the Member for Dudley South (Mike Wood) when he talked about his role as chair of the APPG on the furniture industry, and rightly so.

There are, however, signs that the market is beginning to recover, with some 16% more transactions in May than in April. It is in the interests of both homebuyers and the wider economy that that trend should gather momentum and speed over the coming months. That is why the plan for jobs included a commitment to increase temporarily the nil rate band of residential stamp duty tax from £125,000 to £500,000. Alongside the green homes grant, the aim was to inject momentum back into the housing market so that the economy can start to move forward once again. The Bill today puts that commitment into action and will ensure that the new band can take effect from 8 July—last Wednesday—until 30 March 2021.

Turning to the points raised in the debate, the right hon. Member for Wolverhampton South East asked whether this policy was designed in some way to benefit second home owners. I can reassure him that it is quite untrue to suggest that the measure will disproportionately benefit second home owners. Although those buying second homes or buy-to-let properties will benefit, and make a very important economic contribution in so doing, they will continue to pay an additional 3% on top of the standard stamp duty land tax rates. Let us not forget that it was this Government who introduced the phasing out of finance costs relief, as well as the higher rates of stamp duty land tax for the purchase of additional property—all steps towards a more balanced tax treatment between homeowners and landlords.

The hon. Member for Liverpool, Walton (Dan Carden), in his opening speech, talked about the limited scale of this package of measures. All I can say to him is that his memory is a lot shorter than many others, as £30 billion used to be considered a rather large amount of money. Certainly, it was no slouch of a budget statement to announce that much. It is a measure of how much our times have changed that that should be seen to be the case.

The right hon. Member for Wolverhampton South East raised the question of whether the Government were reacting in some sense to a leak which, nevertheless, would have itself encouraged forestalling. I can tell him that I have dozens of officials across the Treasury thinking about tax strategy who have the concept of avoiding forestalling ingrained, tattooed on their eyebrows and embedded in their heart like the word “Calais” on the heart of Queen Mary in the 16th century. The idea that they would ever have contemplated that is risible. They did not.

Let me turn to some of the other comments that were made in the debate. The hon. Member for Warwick and Leamington (Matt Western) shared with us his concerns about growing wealth inequalities. I understand that. Would he, or maybe the hon. Member for Liverpool, Walton, like to clarify his position on a wealth tax? Would he be in favour of that? What is the Labour party’s position? He is welcome to intervene on me if he has a view on that, as is the hon. Member for Liverpool, Walton, who perhaps could do so in Committee. It is causing us a certain amount of uncertainty and it must be causing voters even more.

The hon. Member for Mitcham and Morden (Siobhain McDonagh), in a very thoughtful speech, invited the Government to build more. I can direct her, if I may, to an article in The Guardian on 14 November last year, which points out that house building in England is at a 30-year high. As colleagues have mentioned, we have a £12.2 billion affordable homes programme in place at the moment, so she can take it as read, I hope, that both sides of the housing market are very well attended to at the moment.

My hon. Friend the Member for Runnymede and Weybridge (Dr Spencer) raised whether we should scrap stamp duty all together. I was perhaps slightly harsh, but I always take it as an additional measure of credibility when colleagues can come forward, as my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) did—and my hon. Friend the Member for South Cambridgeshire (Anthony Browne)—with a specific suggestion for how the gap could be filled. What was charming about my hon. Friend the Member for South Cambridgeshire was that although he believes the abolition of this tax will fire up the market, temporarily at least, he did not seem to think that doubling the additional tax would have any effect on the market. I thought that was an interesting economic contribution and I invite him to raise that possibility with his friends at the Institute for Fiscal Studies, since he is a board member or senior advisor there.

Let me wind up by saying that this is an important measure, which comes at a time when the pandemic has tested our economy to the limit. Through our collective effort, we will bring this virus under control. We have done so and we will continue to do so, and we will support our economy as it reopens in a way that is safe. For those reasons, I commend this Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time; to stand committed to a Committee of the whole House (Order, this day).

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. Before I ask the Clerk to read the title of the Bill, I should explain that, in these exceptional circumstances, although the Chair of the Committee would normally sit in the Clerk’s Chair during Committee stage, in order to comply with social distancing requirements I shall remain in the Speaker’s Chair carrying out the role of Chairman of the Committee. We should be addressed as Chairs of the Committee rather than as Deputy Speakers.

Stamp Duty Land Tax (Temporary Relief) Bill

Jesse Norman Excerpts

Committee stage & 3rd reading & 3rd reading: House of Commons & Committee: 1st sitting & Committee: 1st sitting: House of Commons
Monday 13th July 2020 Commons Chamber

[The Financial Secretary to the Treasury (Jesse Norman)]

This Bill increases the nil rate band of stamp duty land tax from £125,000 to £500,000 from 8 July 2020 and runs until 31 March 2021. If I may, I will speak to clauses 1 and 2, and also to new clause 1 tabled in the name of the Leader of the Opposition.

This Bill contains two clauses. Clause 1 provides for the thresholds at which stamp duty land tax is due on residential property to be increased for a temporary release period, with effect from 8 July 2020 to 31 March 2021. The effect of this is that the first £500,000 of consideration for standard purchases of residential property will be free of tax, whereas previously only the first £125,000 was free of tax. The clause changes the rules in relation to other elements of stamp duty land tax, which are affected by the temporary holiday, such as the higher rate for the purchase of additional properties and first-time buyers’ relief. The higher rate traditional dwellings will continue to apply in addition to the standard rates of stamp duty land tax. This means that for purchase of additional dwellings, the first £500,000 of the consideration will be subject to the higher rates of 3% on top of any existing SDLT rates. Further, the clause ensures that section 57B and schedule 6ZA of the Finance Act 2003, which gives effect to first-time buyers’ relief, is temporarily disregarded until 31 March 2021.

Finally, the clause makes sure that no additional checks will be due when a contract is completed after the temporary relief period has ended, if the transaction was substantially performed within the temporary relief period. This is provided that the only reason for additional tax becoming due is the return to the standard rates of SDLT after the end of the temporary relief period.

Clause 2 provides that the Bill may be cited as the Stamp Duty Land Tax (Temporary Relief) Bill. The Bill comes into force on Royal Assent, but applies in relation to transactions with an effective date on or after 8 July 2020. As a result of the resolutions passed by the House of Commons under the Provisional Collection of Taxes Act 1968, the Bill’s provisions have effectively been in force since the 8 July 2020.

I shall briefly turn to Labour’s new clause 1, which calls for a review of the impact of the Act. To that I would respond that Her Majesty’s Revenue and Customs routinely publishes quarterly and annual statistics and analysis of stamp duty land tax data, including on first-time buyers and those purchasing additional dwellings. The Government also already closely monitor those statistics and keep stamp duty policy under constant review. As part of that, we will continue to examine the effect of the temporary rate change. This is a straightforward Bill to enact the temporary relief to stamp duty land tax announced last week by my right hon. Friend the Chancellor. I therefore commend clauses 1 and 2 to the House and ask the House to reject new clause 1.

[Dan Carden (Liverpool, Walton) (Lab)]

It is a pleasure to speak in the Committee stage of the Bill. The Bill was only published at the beginning of the debate, and it has just two clauses. I will direct my remarks primarily to our new clause 1. We are asking the Government at least to accept the principle behind the new clause. I do not think the Financial Secretary to the Treasury was able to put our minds at rest on the question of which people and groups will benefit from the cut set out in the Bill. He said that it was quite untrue that it would benefit the owners of second homes or multiple homes, but I think we need a review to give us the facts. We need to find out whether first-time buyers, existing owner-occupiers moving home, buy-to-let investors, those buying second homes and overseas buyers are among groups that will benefit from the policy.

The Financial Secretary did not give us a clear response to the fact that £1.3 billion of the cost of this scheme looks likely to benefit those who are already home owners. We want the Government to commit to reviewing the Bill’s impact in an open and transparent way. We want to know whether such a large sum will deliver value for money and what the broader impact of this will be on the housing sector. The Government should want to consider how this, their flagship policy, will contribute to solving the housing crisis and how it will impact on the economy overall. Our new clause will help to achieve that, and the Government should accept it.

[Wera Hobhouse (Bath) (LD)]

Covid-19 has highlighted the deep inequalities that existed long before this pandemic. Many people have been left desperate for support. Hundreds of thousands of people already have less money coming in, and hundreds of thousands have lost, or will lose, their jobs. The Government have thrown an eye-watering amount of money at our economy, but we do not yet know how this increasing mountain of debt will be paid back, or by whom. In the meantime, paying bills, rents and mortgages has become hard for millions of households. We must therefore question whether this tax cut should be a priority for the Government. It is expected to cost £3.8 billion, yet it will mainly benefit the wealthiest. The average earner, including the young generation who are struggling to pay ever-increasing rents, let alone be able to put down enough money to buy a house, will see nothing of it. The discount might provide a tax holiday for the privileged few, but it completely ignores the fact that the majority of people are unable to buy a home of their own now, and are never likely to do so in the future.

In my constituency of Bath, the availability of housing for first-time buyers is limited and house prices are expensive. The average house price in Bath is currently more than £430,000. A first-time buyer would qualify for £10,000 under the new rates, but even that would provide little benefit to a first-time buyer in my constituency who cannot secure a deposit or who faces an unaffordable mortgage. The cut to stamp duty will not solve the real problems at the heart of the housing crisis. Housing is one of the most important sectors for job creation—I agree with the Minister on that—but where is the focus on building social homes for rent? Social homes are the only way to provide secure and affordable housing for everyone, but, most importantly, for those on lower incomes. The private sector has completely failed to build social homes, and only a huge Government infrastructure programme to build social housing, as we saw in the ’50s and ’60s, will bring our social housing stock back to where it needs to be. That would create the jobs we need as well as the homes we need. Surely at this time, genuinely affordable homes are more important than ever, and more important than a stamp duty cut.

Lastly, the climate emergency has not gone away during covid, and we know that emissions from homes account for 30% of UK emissions. Decarbonising homes is therefore crucial to getting to net zero. Improving the energy efficiency of social housing is something that the Government could do straight away. They could also require landlords to achieve minimum levels of energy efficiency in order to be able to rent their homes. We need a Government with a vision to get the economy going, not a tax cut for only the few.

[Jesse Norman]

I thank the hon. Members for Bath (Wera Hobhouse) and for Liverpool, Walton (Dan Carden) for their comments. There may be some slight misapprehension from the hon. Gentleman—I did not actually say what he said I said. I said it is not true that this measure will disproportionately benefit second home owners, and that is because it has a proportionate effect across the whole population of home ownership. However, he should also be reassured that we in the Treasury keep a very careful watch over these taxes. They are monitored and assessed and their impacts are regularly reported on.

As I said, the Bill will help to deliver a Government aim to ensure that people feel confident to move, buy, sell, renovate and improve their homes, and it is a policy that the Labour party has indicated that it supports. On that basis, I commend clauses 1 and 2 to the House and respectfully ask that it does not support new clause 1.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2 ordered to stand part of the Bill.

The Deputy Speaker resumed the Chair.

Bill reported, without amendment.

Third Reading

[Jesse Norman]

I beg to move, That the Bill be now read the Third time.

Mr Deputy Speaker, let me say how gracefully you migrated from being Chairman to Mr Deputy Speaker without any of us really noticing the change—thank you for that brilliant transfiguration. It is extraordinary to think that it is now four months almost to the day since my right hon. Friend the Chancellor of the Exchequer stood before the House to deliver the Government’s first Budget. That proved to be the first in a series of very large economic interventions from this Government, all of which have been designed to buttress our public services and protect the most vulnerable in our society from this virus, while also supporting people’s jobs and livelihoods through the lockdown. Four months on, as he said, a “new phase” has begun in the Government’s economic response to covid-19 with the publication of our plan for jobs.

As the Chancellor made clear when he addressed the House last Wednesday, there is no room for dogma or ideology in this approach. If the first phase of our response focused on protection, this second phase is focused on the need to give everyone the opportunity of good and secure work in the future. However, it is certainly not the last measure that we will enact. The Government have said that they will bring forward both a Budget and a spending review in the autumn, when we will be in a better position to put our public finances on a secure footing and consider the long-term fiscal measures required for a sustained and successful recovery. Nor should we forget that many of the programmes that the Government have introduced to date still have a significant time to run. They include the coronavirus jobs retention scheme, the furlough scheme and the self-employment income support scheme, which will continue through the summer and the early autumn before ending in October.

However, at this moment millions of people are still facing considerable uncertainty and fearing for their jobs right now. They need to know that there is hope for the future, which is why we have acted with a plan for jobs. This Bill—I hope soon it will be an Act—is a very important part of that plan for jobs, and I commend it to the House.