Stamp Duty Land Tax

Mark Reckless Excerpts

Thursday 4th December 2014 Commons Chamber

[Mark Reckless (Rochester and Strood) (UKIP)]

It is a pleasure to follow the hon. Member for St Albans (Mrs Main), who has set a superb example to those on the Treasury Bench of how to extol this policy. She also secured a Westminster Hall debate, which was useful in pressing the arguments for it.

Notwithstanding today’s procedural issues, the Treasury deserves credit for introducing this measure. It has taken four and a half years of this Government, but the previous Government had 13 years and the one before that had 18 years without introducing this overdue but incredibly important and beneficial reform.

The hon. Member for St Albans has done a lot to push the argument forward and so have other Members. I recall having a conversation with the right hon. Member for Welwyn Hatfield (Grant Shapps)—at that stage at least, he was my friend—in which I made the case for reforming this tax, and he said very clearly that, if we were to do it, it would need to be revenue neutral. However attractive the reform might have been, the number of losers would have made it difficult without the £700 million or £800 million a year that the Treasury is putting in, so there has been a change. If that money oils the wheels of a reform that gets rid of substantial distortions, such as those under the previous tax system, that is a good use of it, and I believe that the Treasury has made the right choice.

My constituents will benefit. Much of our housing stock has been around the £250,000 mark, with rather less around the £500,000 mark. At both levels, the fixed charge of £5,000 once people move past those points has been a significant problem for the housing market and, as the hon. Member for St Albans has said, a lot of the subsidiary industries based around it. That has never been more the case than with the mortgage market review and the general reduction in appetite for some of the riskier lending among banks that has made it difficult for young people and those on the early steps of the housing ladder. They are often capital-constrained and having to find the extra money for the stamp duty almost invariably means that it cannot be spent on something else. It actually often leads to those transactions not happening.

I would criticise, not the Treasury, but the Office for Budget Responsibility for the lack of detailed workings and the lack of comprehensiveness in its forecast for the housing market and how that relates to its estimates for the cost of the stamp duty measure. The OBR has estimated that transactions would rise by 1.1% on account of the reform; I am sure that is a great underestimate. Similarly, the OBR has made an assumption—or a forecast—of a 0.2% increase in residential investment relative to GDP, yet it has assumed that that will be offset by reductions elsewhere in the economy, which it fails to particularise or explain.

I am not impressed, in this area or in others, with the three-men-and-a-dog approach that the OBR has often taken. No wonder it cannot be expected to take on the Opposition spending proposals as well, not least because it just looks at parts of them, casts its eye over them, scans them a bit and says, “That sounds reasonable,” and nods them through. On the housing side, it has not come anywhere near to taking into account the positive impact that the stamp duty reform will have on the economy, in freeing up transactions and increasing labour mobility, especially around the £250,000 and £500,000 pinch points.

I think that the reform will be very significant. The cost estimates are £365 million for this year, £760 million for next year and £840 million the following year. An assumption has obviously been made of a rise in transactions that leads to the annualised costs falling off once we get into the next fiscal year, because there will have been time for the lags to work through and we will be witnessing a rise in transactions on account of the reform. My strong suspicion, however, is that that rise in transactions will be quite a lot more than the OBR has stated, and as the hon. Member for St Albans said, there will be significant add-ons to other industries that depend on the housing market. In my view, as a result of getting rid of the significant distortions that we have had, there will be dynamic, positive impacts on the economy, which the OBR and—as so often—the Treasury have not taken into account. Such thinking has held back good reforms of taxes in these areas.

[Mrs Main]

The hon. Gentleman rightly said that labour mobility would increase. People have told me that they were deterred from moving into higher house value areas because they would not only have to take on a higher mortgage but find the tax—almost a tax on their ability to find a job—if they moved to a place where there were more job opportunities but higher house values.

[Mark Reckless]

The hon. Lady is absolutely right, and that requirement comes when people are most capital-constrained, especially in the current mortgage market. So charging the tax in that way restricts mobility, restricts spending on moving home and leads to fewer transactions.

I have had constituents who have moved from St Albans to Rochester and Strood, attracted by our better-value housing stock. The hon. Member for Broxbourne (Mr Walker) made a forecast that my return to the House as the UKIP Member for Rochester and Strood would lead to falls in house prices across my constituency. I am not sure that that will happen, and in any event, I strongly welcome this real supply-side reform. When the Government do the right thing, particularly in an extremely sensible supply-side reform that should free up the market and lead to significantly greater economic activity around the housing market, I am happy to support that reform, for my constituents and for my party.

[Ian Swales (Redcar) (LD)]

It is a pleasure to follow the hon. Member for Rochester and Strood (Mark Reckless), who made some good wider economic points. The key point about this reform is that the Government are making a very large cash input, in effect, to make the housing market more liquid and help people move house when they want or need to.

The Government and the Treasury should look at every system where there are huge slab effects, whether on the tax or the benefits side. Slab systems, by their nature, produce cliff edges; and cliff edges, by their nature, produce strange behaviour. We see that in the current benefits system, where interactions between benefits can produce behaviour that was never intended. In this case, those boundaries have led to elaborate avoidance. Overpricing of carpets and curtains is commonly used to reduce the apparent house price to below a threshold. Smoothing out the profile of stamp duty charging reduces the necessity to engage in such above-board avoidance, or nefarious avoidance, which I am sure has gone on as well, owing to the large sums of money involved.

I very much welcome the changes. I should declare an interest, in that my daughter, who lives in Basingstoke, is likely to benefit from them very soon. The reform could have been carried out in a cash-neutral way, but would have been difficult to implement because of the losers involved, so I welcome the injection of money that has enabled it to be framed in such a way that 98% of people will see no change or a saving.

This progressive reform is another example of how the Government are making the people with the broadest shoulders bear the biggest burden. Houses sold at over £937,000 will incur an increase in stamp duty, and a £5 million house will incur a stamp duty increase from £350,000 to half a million pounds—so an extra £160,000 on a large house.

[Mark Reckless]

May I put on the record a correction in relation to figures that were mentioned earlier in the debate? Purchasers of houses between £937,000 and £1 million lose out. Then there is another quite significant area from £1 million up to, I think, between £1.15 million and £1.2 million that will benefit from the reform.

[Ian Swales]

I thank the hon. Gentleman for that clarification. It is not something that I have examined closely, given the nature of my constituency, which I shall mention.

The reform is yet another example of increasing tax on millionaires, which has happened on so many fronts under this Government, including capital gains and pensions contributions. Also, with the exception of the very last day of the previous Government, income tax is 5% higher than it was in their 13 years. I welcome that; it is important that we make those who are most able to do so pay more, and this is yet another measure by which we are doing that.

There are some oddities. People will gain all the way up the chain, but for those buying at exactly £250,000 and exactly £500,000 there is no gain.

The effect in my constituency of Redcar is pretty good. I do not think that there is a property worth £937,000 in the entire constituency, so every one of my constituents will benefit from the change. I have to welcome it from that point of view. I simply ask the Minister for clarification on the point that we always have to raise on Treasury measures: whether there is any possibility of avoidance. Will these arrangements be applied clearly to overseas buyers? Will they be applied to corporate buyers when the house is being moved through a share transfer—and is that loophole being, or has it been, closed? Will they be applied where the house is being bought to let, either by individual landlords or a corporate structure?

With those few questions on avoidance, I fully support these measures. Making the housing market more liquid will lead to a stronger economy, and the way in which the reform is being implemented leads to a fairer society.

--- Later in debate ---

[Mr Gauke]

It is a pleasure to reply to this debate. I am grateful for the warm support for this measure. I am sometimes so enthusiastic about these changes to SDLT that I am almost breathless, but thankfully on this occasion I am not. A number of points have been raised about this measure. Of course, there will be an opportunity to debate the legislation on Second Reading next Wednesday, when we might pick up some of those points. However, I will attempt to address some of the issues that have been raised in the debate.

The hon. Member for Birmingham, Ladywood (Shabana Mahmood) asked why we are not reforming non-residential SDLT at the same time. The argument I would make is that the market for non-residential property is very different, and the urgency for change is not the same, so I think that a different case needs to be made in that regard. We are not persuaded by the need to change that at present. Of course, all taxes are kept under review and the Government will consider that ahead of future fiscal events.

The hon. Lady also asked about the impact on the housing market. As I have said, our reforms will change the amount of SDLT due for the majority of homes, leading to a cut in the cost of moving home in the vast majority of cases. That will have a small impact on house prices overall, although the size of that effect is expected to be lower than the usual fluctuations in the housing market caused by many factors that occur year on year. I am not denying that there will be an effect, but there are many factors that come into play when it comes to house prices—

[Mark Reckless]

rose—

[Mr Gauke]

And one of those factors, I suppose, could be the selection of an unfortunate party, but I will give way to the hon. Gentleman at that point.

[Mark Reckless]

Was the Minister citing his own view just now, or merely regurgitating that of the OBR, because the major change in its forecast, of course, is that it has just changed its forecasting method from assuming that it will be average earnings in future to employing a model that it had only used in earlier years?

[Mr Gauke]

The hon. Gentleman brings me to his points about the OBR assessment. I was interested to hear what he said about modelling. He argued that the consequence of the changes we are implementing would be more beneficial for the economy than the OBR has set out in its projections. It is right that the OBR is independent and reaches its own conclusions. If the numbers are of a cautious nature, as he argues, then it is better to err on the side of caution. He made an interesting argument. I believe that these changes will have a beneficial effect in terms of labour market mobility and so on, and should therefore be welcomed. In putting the numbers into the public finances, it is right that we follow the independent body.

As I said earlier, my hon. Friend the Member for St Albans (Mrs Main) has been very prominent and persistent in making the case for reform of stamp duty. I am pleased that she welcomed these reforms so enthusiastically. I shall certainly ensure that the Chancellor is made aware of the views of Lori, her constituent, who is putting up a poster of him as a consequence of the reforms. I am very pleased that they have pleased Lori, and, I am sure, many other residents of St Albans. My hon. Friend made an important point about “zombie zones”; I think the hon. Member for Birmingham, Ladywood referred to “bunching”. The OBR statistics on how the pattern of transactions can be distorted are interesting. For example, there are 30 times more transactions in the £5,000 band below the £250,000 threshold than in the £5,000 band above it. That gives an indication of the scale of the distortions in the previous regime.

The hon. Members for Rochester and Strood (Mark Reckless) and for Redcar (Ian Swales) asked whether cash-neutral reform would be possible. It would have been very difficult to make these changes without some cost to the Exchequer in terms of forgone revenue. That might answer the question, “Why do this now?” As a consequence of other measures brought forward in the autumn statement, we can afford to fund these reforms, and it is right that we took that opportunity.

The hon. Member for Redcar referred to avoidance. Stamp duty land tax was being avoided far too often. One of the significant achievements of the Government and HMRC in the past few years is that we have managed to address that in relation to the number of SDLT schemes marketed by tax avoidance advisers, if I may put it that way—promoters of tax avoidance schemes. The amount of that avoidance has reduced very sharply. We have brought in a number of effective measures. For example, the annual tax on enveloped dwellings has played an important role. We have made great progress on this. For that reason, we are able to get the revenue that we will get because of the changes affecting high-end property.

My hon. Friend the Member for Nuneaton (Mr Jones) highlighted the reasons for ensuring that there is no gap between announcement and implementation. That is why this is a PCTA motion. I remember him making that point to me in private some months ago, so he may well have influenced the way in which the Government have proceeded, given the need to move forward.

My hon. Friend the Member for Esher and Walton (Mr Raab) made a very thoughtful speech, and I am grateful for his observations. He is a long-standing critic of the stamp duty regime, and he has been very energetic in highlighting some of the failures in the system. He talked about future uprating. He was also the first speaker to use the expression “long-term economic plan”, so I congratulate him on rectifying a grievous omission from the debate until that point. On future uprating, as I said to my hon. Friend the Member for Newark (Robert Jenrick), we have set out the bands. We have not set out plans for indexation or future uprating, but future Governments will clearly wish to return to that in the long term. As my hon. Friend the Member for Esher and Walton said, we will no doubt have this debate on a number of occasions. I dare say that he will be very energetic in campaigning for uprating in future, and I look forward to receiving his representations.

I thank the House for its support for this measure, and reiterate my apology for not being here at the very beginning of the debate. I hope that the motion will have the support of the House.

Question put and agreed to.

Ordered, That a Bill be brought in upon the foregoing Resolutions relating to Stamp Duty Land Tax (Residential Property Transactions);

That the Chairman of Ways and Means, the Prime Minister, the Deputy Prime Minister, Mr Chancellor of the Exchequer, Danny Alexander, Secretary Eric Pickles, Mr David Gauke, Priti Patel and Andrea Leadsom bring in the Bill.

Stamp Duty Land Tax Bill

Presentation and First Reading

Mr David Gauke accordingly presented a Bill to make provision about stamp duty land tax on residential property transactions; and for connected purposes.

Bill read the First time; to be read a Second time tomorrow, and to be printed (Bill 132) with explanatory notes (Bill 132—EN).