Finance (No. 2) Bill

Lloyd Russell-Moyle Excerpts

Committee: 1st sitting: House of Commons
Monday 18th December 2017 Commons Chamber

[Mel Stride]

In addition to what I just said about every region seeing benefits, I can tell the right hon. Gentleman that the average benefit for the average first-time buyer will be around £1,700, which is a significant amount. For people purchasing a property at the £300,000 to £500,000 level, the benefit is no less than £5,000, which is a considerable sum.

[Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)]

Does the Minister disagree then with the Office for Budget Responsibility, which says that the measure will actually increase house prices by 0.3%? Is the OBR wrong?

[Mel Stride]

As the hon. Gentleman may know, the figure of 0.3% takes a static view of this policy and its effect on house prices. It does not take into account the supply side changes that I have mentioned. As we increase supply, prices will inevitably begin to fall. There is no single solution to this challenge and no magic bullet.

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[Mel Stride]

I thank my hon. Friend for those comments, which illustrate the point that there are benefits accruing across all regions of the United Kingdom.

The changes made by this Bill include the largest ever increase in the point at which first-time buyers become liable for stamp duty. This relief will help over 1 million first-time buyers who are taking their first steps on the housing ladder during the next five years. It provides immediate support while our wider housing market reforms take effect.

The changes made by clause 41 ensure that over 95% of first-time buyers who pay stamp duty will benefit by up to £5,000, including 80% of first-time buyers in London. That means that over 80% of first-time buyers will pay no stamp duty at all, and it saves the buyer of an average first property nearly £1,700, as I have said.

In summary, this change to SDLT will help millions of first-time buyers getting on to the housing ladder. Together with the broader housing package we have announced, we are delivering on our pledge to make the dream of home ownership a reality for as many people as possible.

[Lloyd Russell-Moyle]

Will the Minister give way?

[Mel Stride]

I am going to make further progress.

I will now move on to other changes relating to stamp duty. Clause 40 brings forward some minor changes to the higher rates of stamp duty land tax for additional properties, which will improve how the legislation works. The changes help in a number of circumstances, including in relation to those affected by divorce or the dissolution of a civil partnership, where they have had to leave a matrimonial home but are required to retain an interest in it, and in relation to the interests of disabled children, where a court-appointed trustee buys a home for such a child.

We will also close down an avoidance opportunity. The Government have become aware of efforts to avoid the higher rates by disposing of only part of an interest in an old main residence to qualify for relief from the higher rates on the whole of a new main residence. This behaviour is unacceptable, and the Government have acted to stop it with effect from 22 November.

Clause 8 introduces a new income tax exemption for payments made to members of the armed forces to help them to meet accommodation costs in the private market in the UK. The exemption enables them to receive a tax-free allowance for renting accommodation or maintaining their home in the private sector. The allowance will also be free of national insurance contributions. That measure will be introduced through regulations at a later date. By using the private market, the Ministry of Defence will be able to provide access to similar accommodation, but with more flexibility.

Opposition Members have tabled amendments 2 and 3 to the armed forces accommodation clause, and I look forward to hearing about them in the debate. The amendments seek to prevent the Treasury from laying regulations that would increase the liability of a member of the armed forces to income tax. I am happy to reassure the Committee that the Government do not intend to use the power to increase tax liabilities either now or in the future. The regulation-making power is retrospective so that the allowance can be provided tax free before regulations take effect. As a standard safeguard, the Bill expressly provides that the Government would not retrospectively increase tax liabilities. I hope that, in the light of that, hon. Members will not press their amendments.

New clause 5, also tabled by Opposition Members, would require the House to expressly approve any regulations made under the clause. The Bill provides for regulations to be made under the negative procedure. Regulations made under the clause will align the qualifying criteria for the proposed exemption with the Ministry of Defence’s new accommodation model once more details are available. Any future regulations will ensure that the tax exemption reflects changes to the model. It would be a questionable demand on Parliament’s time, particularly over the next two years, for it to be called on to expressly approve regulations in these circumstances. The negative procedure provides an appropriate level of scrutiny. I therefore urge the Committee to reject the new clause.

The stamp duty relief for first-time buyers is a major step to help those getting on to the property ladder, and one that has been widely welcomed. The other changes made by these clauses provide relief from some tax costs associated with housing for several groups that deserve them. The clauses also tackle avoidance. I commend clauses 41, 40 and 8, and schedule 11, to the Committee.

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[Jonathan Reynolds]

I agree with the point my hon. Friend has made. The fact is that we know the impact that a series of Government measures have had, and we can reverse or improve on them. Fundamentally, we can change the availability of housing stock, but we can also create a policy framework that prevents people from being made homeless in the first place, and that is what we need to do.

[Lloyd Russell-Moyle]

Does my hon. Friend agree that some of the wider measures, such as forcing through universal credit and local housing allowance caps, are forcing large numbers of people out on to the streets?

[Jonathan Reynolds]

Absolutely. There have been 13 consecutive cuts to housing association budgets, the cumulative impact of which is exactly as my hon. Friend describes. As constituency MPs, we are left requesting our local housing association simply to try to absorb the costs of this Government policy failure. In many cases, the housing association does so, but there is ultimately a cost. The cost is taking away available resources to build further houses, thus getting us into a situation in which the problem is never truly resolved.

I will return to the armed forces accommodation allowance. The Ministry of Defence has a target in the 2015 national security strategy and strategic defence and security review to sell off 30% of its estate by 2040, but the Conservatives have a track record of making poor decisions on selling off service family housing in the name of short-term savings. Annington Homes bought most of the service family accommodation from the Ministry of Defence for £1.6 billion in 1996. A 999-year lease was granted back to the Ministry of Defence at a discount, with the stipulations that the MOD would be responsible for maintenance and that Annington Homes could terminate individual leases and had the right to include five-yearly rental reviews and a breakpoint at 25 years. The National Audit Office has said that the MOD has therefore not benefited from the rise in house prices since the agreement and, in fact, has paid higher rental costs to Annington Homes. In 2016, Annington’s annual statement estimated its property portfolio to be worth £6.7 billion.

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[John Spellar]

I do not get involved in those arguments.

In essence, we are seeing major transfers of wealth to areas that the Government see as their political homeland. However, let us also look at the big house builders, as they are euphemistically called—really they are land bankers and, as my hon. Friend said, employment agencies. They also indulge in a number of other unsavoury practices. Several of them have now been exposed for their involvement in the racket of escalating leaseholds, which they have now been forced to back down from. They have had to pay considerable sums to buy back those leases from individuals—speculators—who bought them and were then exploiting residents on that basis. Is that not a symptom and a symbol of the dysfunctional nature of our housing market? The Government are not tackling that in any particular way.

Nor are the Government tackling the increasingly oligopolistic nature of the house building industry. There has been a significant decline in medium and small builders, who used to be the backbone of the building industry and of many towns. Building, by its nature, is subject to cycles, and banks have been incredibly reluctant to lend money to small builders, who have steadily either gone out of business, or been absorbed into the big builders. That has flowed into the lack of training that has taken place, because so many of the big house builders are mainly just the name outside a project and are not particularly interested in the small sites—brownfield sites—around our towns. With the breakdown in training, we then have the cry from those same builders that need to bring in more and more builders from abroad because of insufficient supply in this country. That is because over several years, if not decades, they have not been training people.

Nor do the Government have any programme, as far as I can see, that is equivalent to the better homes programme which, as a number of colleagues have said, contributed enormously, not only to bringing many properties back into effective use, but to improving the lives of many of our constituents. Finally, what we see here is figures being plucked out of the air. This is reminiscent not of an efficient market, but very much of Soviet planning, with declarations of 300,000 houses but no visible means by which that will actually be achieved.

[Lloyd Russell-Moyle]

I will try to be brief, because we all want to get to the vote and then move on, but I will say that the measures we are considering are far too little and far too late. Homelessness has doubled in Britain, and in Brighton it has tripled, with 10% of adults now on the housing register. How do these proposals help them? The measures will increase house prices for first-time buyers. I know the Minister says that he has better data than the OBR, but I tend to believe the OBR, which was set up by the Conservative Government to provide independent analysis, over the books that are cooked in the Treasury—[Interruption.] Yes, the books that are cooked in the Treasury. What we need are clear supply-side measures—[Interruption.] The evidence for cooked books is that the OBR does not believe the Government’s figures. The evidence comes from the independent regulator. Let me get back to what I want to say, otherwise I will be distracted and we will be here for longer.

We clearly have a problem with young people and first-time buyers getting into the property market. In my constituency today, only five studio flats are on the market for less than £200,000. With average earnings in Brighton lower than the average for the rest of Britain, the introduction of a stamp duty waiver will make not one jot of difference, because people cannot afford to raise money for a deposit and to go to banks to ask them to lend. What we really need is decent social and council housing so that people can move into secure tenancies. I asked the Prime Minister whether she would lift the housing revenue account cap. We see in the Bill that there will be a lift to the value of £1 billion, if councils apply, but of course £22 billion would be made available, at no direct cost to the Government, if they just lifted the cap completely. Why will they not? Because they are scared—they are chicken—to allow working people to have decent homes. Clearly they want to keep people subjugated and in poor-quality rented private property. That is the only conclusion I can draw from their miserable set of proposals.

Another thing we need is planning regulation that is stronger, not weaker. Until very recently, I sat on my local council’s planning committee. Time and again we were toothless in enforcing the social and affordable housing requirements. We do not need to give councils less power to enforce those requirements; we need to give them more powers to enforce them. The measures in the Bill to try to deregulate the planning sector go in completely the opposite direction.

I could make other points, but I am not going to talk anymore—let us go home. It is quite clear that I will be voting against the Government’s measures, because they are absolutely useless for dealing with homelessness and house building. In fact, they will make matters worse.

[Ruth George (High Peak) (Lab)]

I echo my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) in saying that I am proud of Labour’s record on housing. I am proud of how we invested in 2 million more new homes, increased home ownership by 1 million, and made sure that more than 1 million homes were brought up to a decent standard, fit for human habitation, which is what we need to see now.

Since 2010, we have seen home ownership fall by 200,000 as house prices have risen by an average of 32%. Of those homes that have been built, less than 20% have been affordable, as councils’ rights to impose affordable limits have, as my hon. Friend the Member for Brighton, Kemptown (Lloyd Russell-Moyle) said, been taken away, with the rug pulled out from under their feet. What have we had instead? We have had £10 billion invested in the Help to Buy scheme, which even Morgan Stanley said has almost entirely gone towards raising house prices and increasing the share prices of the biggest house builders.

In my constituency, those house builders are not content with all the assistance from Help to Buy. Almost all their new homes are sold on leasehold—or fleecehold, as it has been called—so people do not feel that they actually own the home in which they live, despite having paid an inflated price for it. They still have to pay ground rent; they are still being fleeced with maintenance charges; and they still have to pay fees to a third party. It does not feel like home ownership any more. This is actually private rental as well as home ownership.

Finance (No. 2) Bill

Lloyd Russell-Moyle Excerpts

Committee: 2nd sitting: House of Commons
Tuesday 19th December 2017 Commons Chamber

Will the Minister inform us today of whose side this Government are on—those who promoted the public interest in revealing how some are profiting from mismatches and secrecy in the international tax system, or those who profit from such obfuscatory arrangements?

[Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)]

Does my hon. Friend agree it is disgraceful that some of those named in the Paradise papers are now threatening court action against those whistleblowers and are trying to scare people into not releasing such information in future?

[Anneliese Dodds]

I absolutely agree with my hon. Friend on that. There is a particular onus on the Government to be steadfast and clear in their rejection of those legal challenges and the problems they potentially pose to our democracy. Of course it is just the BBC and The Guardian that have been threatened with legal action, not any of the other 90 or so media outlets based in other countries. It is UK-based firms and media organisations that have been threatened with that action, so I hope the Minister will make clear to us today whether or not he agrees with Appleby’s threat of legal action against those who revealed the details of the Paradise papers in the public interest.

Many of the measures in the Bill intended to prevent aggressive tax avoidance and evasion do not go far enough. I have already referred in this House to clause 21, which seems to adopt a confusing new approach to measuring profit shifting, rather than aiming to reduce it per se. Yet again, there sadly appears to be deafening silence here concerning the need for tax simplification, with only minor measures that do not meet the required standard of a thoroughgoing, holistic assessment of the overall impacts of tax reliefs, which we desperately need in this country if we are to have proper Government accounting.

Finally, we see in the Bill a number of additional measures that seem intended mainly just to clean up previous mistakes by this Government, many of them following criticism from Labour Members. In clause 35 and schedule 10, for example, we find anti-avoidance provisions in relation to payments and benefits made from offshore trusts, no doubt reflecting the concerns we raised about the potential misuse of offshore trusts by non-doms. Let us be clear, before this issue crops up yet again in this debate: this Government have not abolished long-term, non-dom status. The new measures do not apply to those whose parents are non-doms, as is often the case, and a 15-year window is provided for individuals to get their affairs in order. In another example, clause 28 closes the loophole introduced by the coalition Government in 2011 that allowed foreign companies to hold on to an asset-stripped subsidiary for six years until they were then able to claim loss relief in excess of any genuine economic loss to the group. Again, the measure tidies up a problem that was created previously by those involved with this Administration.

To conclude, this Finance Bill was a chance for strong action against aggressive tax avoidance and evasion, but, sadly, we have here a paltry Bill, which some Conservative Members have praised in some of these debates for being thin. It is not thin because it is concise; it is thin because, sadly, just like this Government, it is lacking in ideas and ambition. We need a change now, more than ever.

[Alex Chalk (Cheltenham) (Con)]

I welcome this Finance Bill, because it does three things so far as taxation is concerned: first, it prioritises increasing the total pot for public services while recognising the common-sense proposition that we must live within our means; secondly, it entrenches and enhances the fundamentally progressive nature of the tax system; and, thirdly, it redoubles our country’s efforts to tackle tax evasion and aggressive tax avoidance. The theme that unites those three strands is a relentless focus on discharging our obligation to the next generation: on ensuring that we are laying the foundations for a better, fairer country; one whose best days are yet to come. In doing so, we are observing our solemn duty to those who will come after us. We must not fail them, not just because history will condemn us if we do not, but because we ought to be able in this House to recognise that moral obligation for ourselves.

On tax avoidance and evasion, there has rightly been a sense that multinational corporations have been seeking to game the taxation system, using their market power to their financial advantage. That sticks in my craw, the craw of my constituents and the craw of Members across this House, because when we talk about the rule of law, that is about ensuring that we are all equal before not only the criminal law, but taxation law. Few things are more corrosive to public confidence in the enterprise economy than the sense that large corporations are wriggling out of their responsibilities to society—these responsibilities provide free healthcare and education, as well as a safe and secure environment to operate in. So I welcome the fact that the tax gap in our country has been driven down significantly, from 8% to 6%. That translates into an additional £12.5 billion per annum, which is more than the entire Ministry of Justice budget and far more than the entire annual spend on the prison system. We have the lowest tax gap in the world.

[Lloyd Russell-Moyle]

Does the hon. Gentleman recognise that that 6% does not take into account profit shifting? It comes from HMRC effectively marking its own homework and patting itself on the back.

[Alex Chalk]

Absolutely not. It is an internationally recognised statistic that shows that this country bears comparison with any other developed nation in the world, and it marks a significant improvement on the situation that prevailed under the previous Labour Government. The fact is that more than £160 billion extra has been received since 2010. To put that into context, it is more than the entire annual NHS budget.

We have addressed egregious loopholes that allowed some foreign nationals not to pay capital gains tax when they sold houses in the UK. That allowed people to live in the UK permanently but claim non-dom status; and it allowed people to avoid paying tax by calling their salary from their own company a loan. Those were abuses and we have closed them down. It is important to note that the UK has spearheaded a groundbreaking initiative to share information on beneficial ownership with more than 50 jurisdictions, including every British overseas territory and Crown dependency with a financial centre.

[Lloyd Russell-Moyle]

Will the hon. Gentleman give way?

[Alex Chalk]

No, because I am going to conclude.

All that I have described shows the UK’s commitment to transparency and that we are at the cutting edge of financial propriety.

It is absolutely right that the Government take further action to raise £4.8 billion by 2022-23. First, we are tackling online VAT evasion by making online marketplaces jointly liable for their sellers’ unpaid VAT; secondly, we are investing an additional £150 million to fund HMRC staff and the latest technology; and thirdly, we are tackling further disguised remuneration schemes, because if people are gaming the system, we should call it out.

In short, the Bill bears down on aggressive tax avoidance and evasion. It sends out the clear message that we in this country believe in innovation, modernisation, investment and employment. We will back businesses that unlock human potential and generate jobs and wages, but we expect businesses to play by the rules, honour their dues to society and respect the next generation. The Bill meets those priorities and lays the foundations for a country that is fit for the future.