Property Taxes in London

Debate between Mark Field and Kris Hopkins

Tuesday 24th March 2015 Westminster Hall

[The Parliamentary Under-Secretary of State for Communities and Local Government (Kris Hopkins)]

It is a pleasure to serve under your chairmanship, Mr Caton. I welcome the constructive input of my right hon. Friend the Member for Cities of London and Westminster (Mark Field) and his fresh perspective on the topic of council tax. It is clear that a lot of work has gone into developing his ideas, and I commend him for his thoughtful approach. I also commend the London borough of Westminster for having kept council tax levels at the same rate for the past four years. The banding system is set nationally, but council tax levels are set locally, and Westminster’s approach has helped to keep living costs down for hard-working residents.

There are many matters about which my right hon. Friend and I agree. We agree that a mansion tax is not the answer, whatever the question. It would be complex to introduce, involve the re-evaluation of many homes and raise fairness issues about the ability of those liable to pay the tax. We have no intention of introducing a mansion tax.

My right hon. Friend and I also agree about the importance of affordable homes, which is why, despite the fiscal constraints, we have secured capital resources for affordable housing. Almost 217,000 affordable homes have been delivered in England since April 2010. Our affordable homes programme is on track to deliver another 170,000 affordable homes between 2011 and 2015. More than 144,000 homes have already been delivered under the programme.

The Government are now seeking to accelerate the increase in the number of affordable homes. By the end of the next Parliament, we should see 275,000 additional affordable homes built with £38 billion of public and private investment. That means that we will have built more new affordable homes than during the equivalent period in the past 20 years. We have introduced a range of measures to get Britain building again, to fix the broken housing market and to help hard-working people get the homes they want.

We recognise that the process of devolution is positive and necessary, with regard to local government finance. Indeed, the Government have devolved significant responsibility to local authorities, and the reforms are still bedding in. The affordable homes programme, which the Mayor has undertaken, comes with £1 billion of devolved money. There is a real commitment to work with boroughs and councils in London to deliver that package of housing.

My right hon. Friend and I also agree that the re-evaluation process is expensive and complex. However, we differ in that the Government do not support the introduction of a higher council tax band. Council tax is not a wealth tax but a charge for the use of local services. The current banding system reflects the fact that larger homes make a slightly greater use of local services, but it is intentionally not a poll tax or a domestic tax.

[Mark Field]

I accept that Westminster is relatively exceptional, but the £320,000 limit means that more than half the properties are in the same band, which suggests that the banding system is not working well. Although Westminster is an exception in that regard, I suspect that it is not the only area in London or the south-east in which a significantly disproportionate number of properties are in either of the top two bands.

[Kris Hopkins]

I recognise the tensions associated with this, but as a former Housing Minister, I have to respond to the idea of taxing people who live in certain houses. As both my right hon. Friend and my hon. Friend the Member for Wimbledon (Stephen Hammond) have pointed out, the fact that a person lives in a particular house may not mean that they are cash-rich as a consequence. A set of circumstances may have led to their owning the house, and simply placing a greater tax burden on those individuals does not necessarily produce more affordable homes.

[Kris Hopkins]

I respect my hon. Friend’s comments, but as a Conservative who has had many conversations about the word “regional”, I can tell him that that word does not sit comfortably in the Department at this time. I assure him that we will not be having a “regional” conversation about taxation.

The Government have already taken strong action against owners of high-value property who seek to avoid paying their fair share of tax. We have introduced a number of measures, including the 15% rate of stamp duty land tax, the annual tax on enveloped dwellings, and the extensions to capital gains tax, which target those individuals who “envelope” residential properties by owning or purchasing them through certain non-natural persons, such as companies. Those measures are proving effective. For instance, in its first year of operation—2013-14—the annual tax on enveloped dwellings raised about five times more than the original £20 million forecast. It is expected to raise £110 million in 2014-15.

Two important phrases came out of what my right hon. Friend and hon. Friend said: the “politics of envy” and the “class warfare” element. Both the measures that we have introduced to pursue the individuals who are avoiding tax are about making sure that people who have money and should pay tax do so. That argument is different from the one that the Labour party is making, which instils the politics of envy and class warfare against those who have achieved, rather than supporting those who are ambitious and seek to be successful in life. That is at our root as Conservatives: we will support the individual who wants to aspire to own something, rather than punishing somebody who has achieved those goals and ambitions.

The admirable achievements of successful local authorities, such as that of my right hon. Friend the Member for Cities of London and Westminster, demonstrate the effectiveness of the current council tax system. We believe that the implementation of higher bands would unbalance that system and alter the key principles of council tax, which, after all, is not a wealth tax. Extra revenue has been raised, however, by the taxes placed and targeted on owners of high-value property who seek to avoid paying their share of tax, as I have said. Furthermore, our innovative measures and programmes and a range of products that will meet a range of housing needs, with support from councils, housing associations and the private sector, will continue to deliver and build on the affordable homes programme.

My right hon. Friend raised the issue of foreign investment, and I appreciate that a significant number of people come to this great international city and invest. They have done so for many years, but sometimes people can distort the sort of comments that he made. In my time as Housing Minister, I saw many acres of coverage discussing the issue in many supplements. We should recognise that we are open-minded about people wanting to come to this city and invest in our infrastructure and housing.

[Mark Field]

Before the Minister concludes, I would like to put it on the record that I very much support the free movement of capital; it is a positive thing, broadly, for London and for the UK as a whole. That said, there has been controversy about the so-called dark lights in large bits of Kensington, Knightsbridge and Belgravia, although I think that is exaggerated to some extent. Quite a lot of the properties that are purchased are rented out to UK nationals or other London residents. A big sea change would be needed if we were somehow to discourage the free movement of capital, and although that might open up matters a bit in the London property market, it could have a very detrimental effect on much of the rest of the British economy.

[Kris Hopkins]

I completely recognise the huge support for inward investment in the country that my right hon. Friend has promoted and encouraged, and he will continue to, I am sure.

We should put on the record the fact that in 2013, the Bank of England estimated that foreign buyers represented some 3% of the total residential property transactions in London. Savills said, again in 2013, that the current level of sales to overseas buyers is the same proportionately now as it was in 1990. It is important to put things in context, so that individuals do not race away with another idea that some of the issues associated with affordable housing are about foreign people coming to our country. Foreign people are coming to our country and investing in our infrastructure and our housing.

In conclusion, I genuinely appreciate the time taken on this issue by my right hon. Friend and hon. Friend. I am sure that my right hon. Friend the Member for Cities of London and Westminster will make representations to other parts of Government about his ideas. I reassure him that, from my time as Housing Minister I know that the Mayor of London takes the issue of affordable housing extremely seriously. I am sure that through working with partners such as Westminster and through the leadership that my right hon. Friend has taken on this issue, we can begin to address this need—and there is a huge need—for both affordable and private sector quality houses for the people of London.

Question put and agreed to.