Finance Bill

Mark Field Excerpts

Tuesday 2nd July 2013 Commons Chamber

[Chris Leslie (Nottingham East) (Lab/Co-op)]

I beg to move, That the clause be read a Second time.

Hon. Members might not have spotted the announcement on this matter in the Chancellor’s Budget in March. It is a little-noticed provision that was buried on page 64 of the Red Book in the table that sets out whether individual policy decisions will mean a gain or a loss to the Exchequer. This decision did not hit the headlines and very few people spotted it. I should look back and see whether the Chancellor even referenced it in his Budget speech.

This little-known provision is the abolition of something called the stamp duty reserve tax. It is not quite the same as the stamp duty on share transactions that many hon. Members are familiar with. That is, for want of a better term, a financial transaction tax of 50 basis points or 0.5% on share transactions. The stamp duty reserve tax is the equivalent change that was introduced in schedule 19 to the Finance Act 1999. It is essentially a proxy for stamp duty on the return of units in unit trusts to the investment managers who deal in those transactions. If individuals buy units in unit trusts and then surrender or sell them back to the investment manager, a stamp duty of 0.5% has not unreasonably been paid.

The Chancellor, in his wisdom, has decided that that must go. He has decided to forgo the princely sum of £150 million in every financial year henceforth. I am afraid to tell hon. Members that there is a lot of this story to be told. The abolition of stamp duty reserve tax is essentially a decision by the Chancellor to give a tax cut to investment managers.

The new clause calls on the Chancellor, within six months of Royal Assent, to publish and lay before the House of Commons a report on the distributional impact of the change detailing who has benefited—whether it is the lower and middle-income households and families in all our constituencies or the privileged and wealthy investment managers.

[Mark Field (Cities of London and Westminster) (Con)]

Does the shadow Minister not recognise that the abolition of the reserve tax will be a great enhancement to the UK unit trust industry, which has been losing a lot of business to Switzerland, Singapore and elsewhere? Although he has characterised the beneficiaries as being very wealthy, this change will ensure that jobs are retained in this important industry, especially back-office and middle-office jobs, as it goes from strength to strength in the decades ahead.

[Chris Leslie]

I commend the hon. Gentleman for doing his duty to his constituents in the City of London. I confess that they probably will be right up there among the beneficiaries of this change. He is assiduous in speaking up for his constituents, but I am sure he would concede that they are not exactly typical of people in the rest of the country. The people who engage in investment trust transactions and unit trust arrangements may well benefit from this £150 million tax cut.

The Chancellor of the Exchequer was supposedly faced with difficult choices and cuts in the Budget. That he has chosen to give a tax cut of this order at this time is a reflection of his priorities, which are beyond understanding for many Opposition Members.

[Mark Field]

Would the shadow Minister be willing to extend his new clause to ensure that it takes into account what has happened since 1999 when the tax was instituted under the previous Labour Administration? More importantly, would that reflect Britain’s place in the world and what proportion of the global asset management industry was in Britain in 1999 and is still here today, compared with other countries? That may have a direct impact on why the Chancellor acted as he did in the Budget.

[Chris Leslie]

Times are tough, and for most people in the country life is getting harder. I confess, however, that I have not been lobbied by or seen those poor, unfortunate City investment managers knocking at my door, coming to my surgeries, or writing e-mails and saying, “Please, the one thing we need is the abolition of the stamp duty reserve tax. There is massive hardship among investment managers at this time, which demands a £150 million tax giveaway.” Frankly, I think the investment management community is doing reasonably well relative to the rest of the country. Moreover, I do not think that the City of London is uncompetitive. Indeed, all the evidence suggests the opposite and that the City continues to thrive and do exceptionally well—something like £5 trillion in funds is under the management of those investment managers affected by this tax change, and a tax cut of 150 million quid is small change to that community.

We are having this debate because we need to know why the Chancellor decided on this priority—cui bono would be the Latin adage. In whose interest is this? Who benefits from this change? I doubt it is my constituents in Nottingham East, and Government Members must forgive me if I am left with a slightly bitter taste in my mouth when we see the hardship caused by cuts to tax credits, the increase in VAT and the bedroom tax. The Chancellor says that individuals affected by those things must feel the pain and the squeeze, but when it comes to the City and the investment management community, I do not see how they are all in it together or sharing that anxiety.