Stamp Duty Land Tax Bill

John Redwood Excerpts

Monday 12th January 2015 Commons Chamber

[Mr Gauke]

There may be a slight impact on house prices, but we must put that in context. Many factors determine house prices, and on the evidence before us our view is that the changes will not have a significant impact on the overall level of house prices. They are likely to have a bigger impact on removing some of those dead zones and distortions in the housing market, which is beneficial in creating a more efficient and effective housing market.

The reform has been welcomed by right hon. and hon. Members in all parts of the House and by outside bodies, including the Council of Mortgage Lenders, the Institute of Directors and the Institute for Fiscal Studies. Jonathan Isaby, from the TaxPayers Alliance, called it:

“an early Christmas present for young people looking to get on the housing ladder.”

[Mr John Redwood (Wokingham) (Con)]

Will the Minister comment on the impact on revenue? He may collect more revenue where rates have been cut, but lose revenue at the top end.

[Mr Gauke]

That is not our assessment. My right hon. Friend is an eloquent and distinguished advocate of the argument that it is possible to raise more revenue by reducing rates, and he has over many years demonstrated cases where that would apply. I do not believe that we will quite see that dynamic effect to that extent in this case. I think more revenue, and certainly a greater proportion of it, will be raised from properties above £2 million. Undoubtedly, we will see a few more transactions, which will mean additional revenue that would otherwise not come in. On balance, we will see a reduction overall in revenue across the SDLT regime, but we believe that that is none the less the right thing to do to ensure that we deliver a reform that benefits the vast majority of people who pay SDLT.

Under the rules as they applied on 3 December, the amount of tax payable was a percentage of the chargeable consideration—the purchase price—for the acquisition of the property. Different scales of percentages, table A and table B, applied respectively to transactions consisting wholly of residential property and to transactions that consisted of, or included, non-residential property. The clause substitutes a new table A, setting out the new tax rates and bands that apply to a transaction consisting wholly of residential property. It also amends the calculation rules for those transactions, so that each rate of tax applies only to that part of the consideration that falls within the relevant band. The total tax due is then the sum of the amounts of each band.

--- Later in debate ---

[Ian Swales (Redcar) (LD)]

I will keep my remarks brief. I have spoken in each previous debate and do not have a great deal to add. My party very much supports these measures and, as I have said in previous debates, dealing with the slab system that we had and the consequent cliff edges and removing the incentives for strange behaviour and sub-optimal activity has to be the right thing to do.

I have only one point to add, which partly follows on from the remarks of the right hon. Member for Wokingham (Mr Redwood) and the assessments of the Office for Budget Responsibility. I would have thought that the taxation of a fixed asset transfer like this, with the certainty that that implies, would mean this is a very low risk method of changing a tax system, but if the OBR regards it as medium to high risk, and if the right hon. Gentleman is suggesting there may be more complex effects that I have not understood, I would like the Minister to clarify whether I am missing something. I would have thought this was a very straightforward way of raising taxes in a highly certain manner—and certainty is, of course, one of the hallmarks of a good tax system.

I will not detain the Committee any longer. Our party supports these measures. They affect 98% of the population favourably, and, broadly speaking, the other 2% are millionaires, and therefore those with the broadest shoulders. I am pleased that through this Bill this Government have found yet another way to help deliver a small amount of redistribution, with the pain felt by those with the broadest shoulders. The support for it is universal in my constituency, as I think everybody will be a winner. Overall, these measures will lead to a more liquid housing market and therefore a stronger economy, and they also make the system fairer.

[Mr Redwood]

First, may I remind the Committee that, as listed in the register of Members’ interests, I provide advice to an industrial company and an investment company?

The Minister has produced what is on the whole an excellent scheme. I support most of it and was one of those, along with my hon. Friend the Member for St Albans (Mrs Main), who was lobbying hard to get this major reform through. I congratulate the Minister and the Chancellor on dealing with the problems that the slab system created. The peaks and the dead areas were damaging to the property market and made it difficult for some people to buy or sell properties in certain price ranges. The system probably distorted pricing as well, to the benefit of some people and the detriment of others. It is therefore good that we have smoothed it out and introduced a more sensible progression up to £937,000, where most of the transactions lie. The new arrangements will represent a fairer, lower-cost system for practically all transactions, which is wholly admirable.

I want to tease out a little more information about the rather pessimistic forecasts of how much revenue will be lost up to the end of this decade. It is clear from the figures that cutting the higher rate of income tax has produced considerable extra revenue, as it was bound to do, given that the previous rate deterred people or meant that they did not come here at all. It is also clear from the figures that the much higher rate of capital gains tax has been very damaging to revenues, which are still miles below where they were prior to the crash. This is a difficult one to call, and I am not saying to the Minister that the proposals would either damage or increase revenues. I am merely suggesting that the Treasury’s forecasts for that lengthy time period could prove to be inaccurate, and that it would be nice to unpack those forecasts in order to understand what the Treasury thinks is going on.

The problem with trying to forecast the revenues at this juncture is that, on the one hand, we have seen a slowing of the mortgage market in recent months through regulatory intervention, and we would therefore expect fewer transactions because the regulators and the banks are now being much tougher about mortgages. On the other hand, however, we have Government intervention trying to mitigate that effect through the very successful and helpful Help to Buy scheme, which I believe to be necessary. It is certainly helping people in my area to buy their own home. However, the net result of these arrangements seems to be a dampening of transactions, and we must bear that in mind when trying to judge the impact of those policies and to assess the impact of the stamp duty change. All things being equal, we should expect to see an increase in the volume of transactions under the £937,000 level because buying such homes will be a bit cheaper, and in certain price bands we will see activity occurring that would not have occurred at all because of the slab effect.

[Mrs Main]

Does my right hon. Friend share the optimism that I feel, having talked to small businesses in my community, that there could be a knock-on effect from people having a bit more money to carry out home improvements? Those businesses have suffered in recent years because people have not been investing in their own homes.

[Mr Redwood]

Yes, indeed there could.

This is difficult to predict, because all these things need to be modelled. The level of the reduction in some cases is quite large, and it will be difficult to make up for all that lost revenue through increased transactions. That is why it would be interesting to probe the Treasury a little more on its forecasts. I expect it thinks that there will be quite a big revenue gain where the rate has gone up, but that effect might not prove to be as strong as it hopes, because there will definitely be a disincentive effect at the top end following the introduction of the very top rate for the privileged few who can afford those types of properties. Those people are often in the fortunate position of owning more than one property, and of being able to decide whether they wish to buy property in this country or elsewhere. There will be some kind of disincentive effect, and we need to look at relative taxes and relative prices in relation to London and other centres.

It would therefore help if we knew a little more about the Treasury’s numbers at this stage of the debate, so that when we review this policy in a year or two, we can see what was right and what was wrong. For example, does the Treasury think that there will be extra revenue from the higher rate? That has clearly not been the case in relation to the two big taxes that I have mentioned. Does it envisage a loss of revenue despite the effect on transactions at the lower level? It would be good to have more detail, so that we can have some benchmarks as we try to assess the financial impact of the policy.

[Mr Gauke]

I thank all right hon. and hon. Members for their contributions to this short debate on clause 1, and I shall attempt to address as many as possible of their questions. The hon. Member for Birmingham, Ladywood (Shabana Mahmood) raised a number of points about the impact of the changes. First, let me deal with her question about HMRC’s handling of inquiries. I do not have all the detailed numbers available, but, as I mentioned earlier, about 1.25 million hits have been made on the HMRC calculator, which is a substantial number. There have been relatively few queries made over the telephone or in writing. In practice the great majority of those can be dealt with by HMRC’s stamp tax helpline or by reference to ongoing guidance. More complex queries are escalated to HMRC’s technical specialists. As I say, I cannot give the numbers but I do know that the view within HMRC is that this process has gone smoothly, including in respect of the helpline provided on the day of the autumn statement, when, as has been pointed out, a number of transactions were accelerated in order to benefit from the transitional regime. All that has gone smoothly and I am not aware of any particular difficulties in that area.

--- Later in debate ---

[Mr Gauke]

My hon. Friend brings me to an important point, which is that, over the course of this Parliament, the Government have been determined to address stamp duty land tax avoidance. It was a problem in the tax system. One certainly heard both anecdotally, and in the concerns of HMRC, of transactions being made to envelope properties and so on, which is why in 2012 we announced the introduction of the annual tax on envelope dwellings. It is why, over the course of this Parliament, we have taken a number of actions to deal with that avoidance. Had we not done so, it would have been difficult to make the reforms that we have in front of us today in an affordable way, as we would not effectively have been able to raise additional revenue from the top end of the housing market to counteract the reductions in revenue that will occur in the rest of the market.

Increasing rates would not have led to much, if anything, by way of additional revenue, because we would have found that it would have increased avoidance activity and we would not have got in the money that we would otherwise have done. As a consequence, the costs would have been unaffordable.

[Mr Redwood]

Are there not two obvious ways in which certain groups of people in the higher value properties decide not to pay this tax? The first is people who are in a two to three-bedroom flat or a small house in a very expensive part of the UK, normally London, may decide that they do not want to swap properties or downsize or upsize because it is too expensive. The other is that the very rich people at the top end coming in from abroad may decide that this is the straw that breaks the camel’s back on the transaction. Some people might welcome that but it could still be a behavioural impact of this particular provision.

[Mr Gauke]

My right hon. Friend is right to say that there will be behavioural responses. Some people might be dissuaded from entering into a transaction and decide to remain in the same place as a consequence of a higher level of duty. There may also be an impact on the attractiveness of the UK as a place in which to locate, but as he is well aware, that is but one factor among very many. I can think of greater threats to the attractiveness of the UK. I should not get drawn into what those threats may be, but they certainly exist. I am tempted to turn to the Opposition’s mansion tax, but I dare say you would haul me into line, Mrs Riordan, so let me not be drawn into what others might say. There is much I want to say, but it would probably not be in order.

I hope that my remarks are helpful to the Committee, and that the clause will stand part of the Bill.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.



Clause 2

Citation, commencement and transitional provision etc

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Mr Redwood]

I, too, support the Bill because it is a move in the right direction. I strongly welcome the decision to get rid of the slab structure, against which I and others have lobbied strenuously for some time, and it is good that the Government have listened.

However, given that many of us believe in the virtues of home ownership, it is a pity that we still need a tax on home ownership at all. I welcome the fact that it is now lower, but I do not welcome the fact that we still seem to need a tax on home ownership. It is a great pity when we have to tax good aspirations in our community. Many of my constituents are now fortunate enough to own their own home, but there is a new generation who wish to do so, and this is still a high tax on them which they have to find a way of financing.

I hope that in future Budgets, as the long-term economic plan produces its magic and as we get rid of the deficit, we can return to this tax. The rates are still very high and it is a tax on one of the most essential things that families need. They need shelter; they need housing. The preferred type of housing for most people in our country is to own their own home, and this is still quite a large tax on home ownership. I know that the Minister and his colleagues are working away to ease the burden wherever they can in the straitened financial times we live in, and I know that they have a number of schemes to promote home ownership.

I urge my hon. Friend to do everything he can to promote home ownership because owning that first home makes such a difference to people’s lives. It gives them something to be proud of and it means that they can look forward to an old age not facing a rent bill, when they have at last repaid the mortgage and can truly call their home their own. It is very galling for them if a big chunk of the mortgage is paying Government taxes, so I welcome this small step to make home ownership a bit more affordable.

Question put and agreed to.

Bill accordingly read the Third time and passed.

Consumer Rights Bill (Programme) (No. 3)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Consumer Rights Bill for the purpose of supplementing the Order of 28 January 2014 in the last Session of Parliament (Consumer Rights Bill (Programme)), as varied by the Order of 13 May 2014 in that Session (Consumer Rights Bill (Programme) (No. 2)):

Consideration of Lords Amendments

(1) Proceedings on consideration of Lords Amendments shall (so far as not previously concluded) be brought to a conclusion three hours after their commencement at today’s sitting.

(2) The Lords Amendments shall be considered in the following order: Nos. 12, 1 to 11 and 13 to 78.

Subsequent stages

(3) Any further Message from the Lords may be considered forthwith without any Question being put.

(4) The proceedings on any further Message from the Lords shall (so far as not previously concluded) be brought to a conclusion one hour after their commencement.—(Jo Swinson.)

Question agreed to.