Finance (No. 2) Bill

Sajid Javid Excerpts

Wednesday 17th April 2013 Commons Chamber

[Mark Lazarowicz]

As time is limited, I take this opportunity to pursue with the Minister some of the issues raised earlier by colleagues on the Opposition Benches about how the schemes will operate in Scotland and Wales—outside England. I hope the Minister can answer these questions.

Will the Minister confirm that the mortgage guarantee scheme will apply to Scotland, Wales and Northern Ireland as well as to England? If that is the case, will he indicate which Department will operate it for Scotland and the other devolved areas? If it is to be the Department for Communities and Local Government, I suggest that it would be more appropriate for the scheme to be operated by the Scottish Government or the relevant devolved Administrations.

Would it be possible for the Scottish Government and the other devolved Administrations to amend the scheme to take account of the objections raised, which will no doubt be shared by all of them, that it would benefit the buyers of second homes and people on relatively high incomes? In most parts of Scotland, Wales and Northern Ireland, prices of £600,000 are very much at the higher end of the housing market.

If someone in one of the devolved areas defaulted under the mortgage guarantee, would the cost be borne by the Treasury or the devolved Administration? I appreciate that these are technical questions but I am sure that, as the Minister has thought through the policy in great detail, he will be able to answer them.

[The Economic Secretary to the Treasury (Sajid Javid)]

I thank all Members for their contributions. This has been a thoughtful and engaging debate.

Both new clauses are about housing. New clause 1 would require the Government, within three months of Royal Assent, to provide a report to Parliament on how the tax system supports those seeking to purchase a second new home and how the Government plan to prevent it. New clause 5 suggests introducing a mansion tax on properties worth more than £2 million, with a view to using the revenue to fund a tax cut for those on low or middle incomes.

The Government oppose both new clauses. I will elaborate on the reasons, but first allow me to make a few points about the significant steps the Government have already taken and about our overall housing strategy, as many issues relating to it were raised this afternoon. I shall also respond to some of the other issues that were raised.

The new clauses centre on the housing measures in the Budget. The Government announced a major new package to support new development and affordable housing, alongside reforms to the planning system. The measures included the Help to Buy equity loan scheme and the Help to Buy mortgage guarantee scheme. They will give a much needed boost to housing supply, and equip those who aspire to own their home with the tools to do so.

[John Mann]

Would the Minister accept that, with the affordable housing levy the Government have brought in on single properties, those who build their own home now face a minimum £40,000 tax per property? In Hertfordshire, it is £187,000. That will kill off aspiration for those who wish to build their own home.

[Sajid Javid]

What the Minister will accept is that this Government have done more than any other in recent times to help those who aspire to purchase their own home. The Budget announced financial support of £5.4 billion for housing, which builds on the £11 billion of support already committed during the spending review period. The Government are also taking significant action through our build to rent and affordable homes guarantees programme.

Alongside those measures, the Government are reforming the planning system to ensure that reforms will increase housing supply. Planning constraints have depressed the supply of new homes. The Budget announced that the Government will take further steps to make the vital planning reforms that are needed to ensure that we have a regime that is simple to access, supports growth and is responsive to housing need. As hon. Members will see, this Government have a comprehensive strategy for housing, we have taken significant action, and those measures will give a much needed boost to both the demand and the supply side of housing.

I shall now discuss the new clauses. New clause 1 proposes that the Government provide a report to Parliament, three months after the passing of the Bill, to ensure that the tax measures do not benefit those who are purchasing a second home. The Government have already taken steps, through the tax system, on the issue of second homes. We have changed the discounts on council tax for second homes, through the Local Government Finance Act 2012. From 1 April 2013, billing authorities in England will be able to charge up to 100% council tax, instead of between 50% and 90%, on properties that they consider to be second homes. That corrects an imbalance permitted by the previous Government, which allowed second home owners to pay less than those with a single property.

The report suggested is wholly unnecessary, but in today’s debate issues have been raised about the Help to Buy scheme, particularly whether it will support those who wish to purchase a second home. We have already made it very clear that second homes will not be eligible for the Help to Buy equity loan scheme. The scheme builds on the existing successful First Buy scheme, and is able to use existing processes. In the new scheme the Government, through the Homes and Communities Agency, have a more direct relationship with the purchaser, and require a legal declaration by the purchaser’s solicitor that the property will be the purchaser’s only and main residence. The Chancellor has also been very clear that the intention of the Help to Buy mortgage guarantee scheme is to help people buy their first home, or to move up the property ladder as their family grows. But the mortgage guarantee scheme represents a major new intervention, and we must ensure that we get it right.

[Chris Leslie]

May I clarify the announcement that I think the Minister is making? Is he saying that there will be a requirement, as a covenant within the mortgage deed arrangements, to exclude the use of any equity from remortgages and so on for second home purposes? That, essentially, is what he has announced.

[Sajid Javid]

What I am saying is that, at the Budget, we set out a scheme outline. Now we need to work, with lenders and other stakeholders, on the detail. We want to ensure that we avoid any unexpected adverse consequences of the scheme, such as attempts to use it to purchase second homes. We want to look at this carefully, and we want to ensure that we discuss the details with industry. We have already started this process, and we will report back to Parliament in due course. Therefore the report suggested by new clause 1 is wholly unnecessary.

[Bill Esterson]

This is a really important point. What the Minister has not announced is that, if somebody is moving up to a second home, they must sell their first home. Can he confirm that they will not be able to keep that first home, because otherwise it will mean that people will be able to get a second home by using the scheme?

[Sajid Javid]

The hon. Gentleman raises a good point, which is that it is the Government’s duty to carefully consider what is meant by a second home. He has given as an example the situation in which someone has no intention of owning two homes, but is in the process of moving home. Let me share another example. There are couples who unfortunately get divorced, and there may be a need for another home as the family splits. The question then arises, is that a second home or not? It is sensible for the Government to examine such issues carefully as we flesh out the details.

[Stewart Hosie]

rose—

[Sajid Javid]

In the interests of time, I must press on and answer some of the questions that were raised, including by the hon. Gentleman.

The hon. Member for Edinburgh North and Leith (Mark Lazarowicz) and others asked about the devolved authorities, in particular Scotland. The mortgage guarantee scheme is a UK-wide scheme and will be available to all UK residents, including of course those in Scotland and other devolved areas. The mortgage equity scheme is an England-only scheme as housing is a reserved issue among the devolved authorities.

[Mr Hanson]

For clarity, under that second scheme, could a resident of England purchase a property in Wales, Scotland or Northern Ireland?

[Sajid Javid]

The right hon. Gentleman asks a good question. Those are some of the details that we will flesh out. If he will allow me, I will look into the question further. I hope it is clear to him that the intention is that the mortgage guarantee scheme is a UK-wide scheme.

In the time that I have left, I shall turn to new clause 5. We have always been clear that the proposed mansion tax is an issue on which the two parties of the coalition have differing views. Our Liberal Democrat colleagues have supported the principle for some time, as we heard today so eloquently from my hon. Friend the Member for Bristol West (Stephen Williams). In contrast, Conservative Ministers have very real concerns about such a proposal.

We have concerns that a third of properties in London worth more than £2 million have been in the same ownership for 10 years, and that a mansion tax could hit asset-rich but potentially income-poor households. We have concerns that a family could live in a £2 million house, but have a very large mortgage. That would mean that their net wealth was a lot lower than the actual value of the home. We have concerns that any mansion tax would be administratively burdensome for HMRC to operate, not to mention intrusive for the person having their home inspected. But Opposition Members should be aware that we are taxing anyone purchasing a new home at this high value through the stamp duty land tax of 7% on residential properties costing £2 million or more. That is a policy that is easy to administer and it will not impact on existing home owners.

The Opposition have proposed that a mansion tax could pay for a tax cut for millions of people on low and middle incomes. The Government have already introduced tax cuts for those who need it most. We are increasing the personal allowance to £9,440 from April—the largest ever cash increase. That will be increased by a further £560 to reach £10,000 in 2014-15, meeting the Government’s commitment a whole year early. That is a tax cut for 24 million people and together takes 2.7 million people out of income taxation altogether.

Budget 2013 also announced that the fuel duty increase planned for September will be cancelled. The Finance Bill keeps fuel duty frozen at current levels, resulting in the longest freeze in fuel duty for 20 years, helping households and businesses with the cost of motoring.

Meanwhile, those with the highest incomes continue to contribute the most. This year the top 1% of taxpayers—those with an income of more than £150,000 a year—will pay approximately a quarter of all income tax. The top 5% of taxpayers—those on incomes of £68,000 or more—will pay nearly half of total income tax. As part of the Government’s commitment to create a fairer tax system, since 2010 the Government have raised taxes on the rich in every Budget. Budget 2010 introduced a higher rate of capital gains tax, Budget 2011 tackled avoidance through disguised remuneration, and Budget 2012 raised stamp duty land tax on high value homes and announced a cap on income tax reliefs. The autumn statement of 2012 took action to reduce the cost of pensions tax relief.

In Budget 2013 we announced further significant measures to tackle aggressive tax avoidance and offshore tax evasion by high earners. The richest now pay a higher percentage of income tax than they did under the previous Government. No doubt those on the Opposition Benches think a better approach would be to introduce a new starting rate of income tax, but let us not forget that the 10% rate is a policy that they introduced and then scrapped once before, to the cost of many further down the income scale—the people whom they claim they want to help. Fortunately, the Government have a more coherent income tax policy, as we heard from my hon. Friends the Members for Stevenage (Stephen McPartland) and for Bristol West. Our increases to the personal allowance have replaced the 10p rate, which Labour doubled; there have been successive increases to the tax free personal allowance. Effectively, we have introduced a 0% band.

[Geraint Davies (Swansea West) (Lab/Co-op)]

On a point of order, Mr Amess. The Minister is not addressing new clause 5. Surely this is not in order.

--- Later in debate ---

[Sajid Javid]

I do think that it is relevant because the issue came up during the debate, but I take your guidance, Mr Amess.

The Government are committed to making the aspiration of home ownership a reality for as many households as possible. The housing measures introduced in this Budget will tackle long-term problems in the housing market, giving a much needed boost to housing supply and supporting those who want to get on or move up the housing ladder. Introducing a mansion tax would create real fairness issues by hitting asset rich but potentially income-poor households. It would serve to create only complexity and uncertainty. The Government have already made huge strides towards a fairer society and a stronger economy, and new clause 5 will not further that. I ask hon. Members not to press the new clauses.

[Chris Leslie]

Given the constrained time available under the Government’s programme motion and the need to move on to other issues, I do not wish to press new clause 1 to a vote, but it is important that we continue to press Ministers for some firmer answers on their Help to Buy scheme, which gives the impression of having been written on the back of an envelope without much thought and without looking in sufficient detail at some of the questions that have arisen in the course of the last few hours, whether with regard to devolved Administrations or second home purchases. Therefore, it is necessary to consider this further during the Bill’s passage.

However, it is important to test the view of the House on new clause 5, particularly given the speech of the hon. Member for Bristol West (Stephen Williams), who, in an acrobatic display of contortions that tests even the most adept of Liberal Democrats, managed to find a way to oppose a policy that he has supposedly advocated for a long time. Even when we agreed that the policy was the same, raising £2 billion on mansions worth over £2 million and using that money for a tax cut for low and middle-income households, he could not bring himself to abstain on the issue but will vote against the new clause. Therefore, we must test the view of the Committee.