Stamp Duty (Housing Market)

Shabana Mahmood Excerpts

Thursday 4th September 2014 Westminster Hall

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Betts. I congratulate the hon. Member for St Albans (Mrs Main) on securing this important debate. She was right that the matter of stamp duty has not been debated very much from a principled position; we have had a number of debates in proceedings on Finance Bills about technical changes that the Government have introduced to stamp duty, particularly on the annual tax on enveloped dwellings, but we have only rarely discussed the issue in the manner that we have today. Her securing of this debate has allowed some important issues to be raised.

The hon. Lady said that she hoped that we could move away from politics. I am not sure about that, as taxation and tax issues are perhaps politics in its purest form, but I accept her point about partisanship in our approach to this debate. People across the country, in constituencies of Conservative, Labour and Liberal Democrat Members alike, are all affected in various ways by stamp duty and the rising cost of housing. Her argument about the impact in London and the south-east on people on more modest incomes was particularly well made.

The hon. Member for Esher and Walton (Mr Raab) and other Members discussed the slab structure that is a particularly problematic feature of this tax. Many commentators have called for reform of that structure. He also raised our mansion tax policy, so I hope you will forgive me, Mr Betts, if I take a moment to clarify the details of our proposals.

I make no apology for our policy to levy a mansion tax on properties worth £2 million or more. Let me be clear: only properties worth over £2 million would be affected by our proposals and that limit would be raised each year, either in line with the overall rate of inflation or—and there is a strong case for this—in line with the rise in house prices, to make sure that more modest properties were not brought into the scope of the tax.

[Mr Raab]

I thank the hon. Lady for that clarification, although there are serious questions about the amount of revenue that a Labour Government would be able to raise. Will the indexation be linked to local house prices or overall house prices? Although the threshold for the tax would rise superficially, there would still be a real risk of the arbitrary geographical unevenness that hon. Members have talked about.

[Shabana Mahmood]

I am grateful to the hon. Gentleman for his intervention. I have received submissions from various experts on the matter and we are looking at it very closely. We are clear about our start position. We do not want more modest properties to be brought into the mansion tax regime, and we are looking carefully at the details of our ultimate policy to ensure that that does not happen. I have had conversations with people about the issue, but I cannot tell him today what we will ultimately be able to take forward.

[Mrs Main]

For clarification, before the hon. Lady moved on to her mansion tax, she mentioned the slab structure, which was introduced by a Labour Government. Do the Opposition have any plans in their manifesto to tackle the slab structure at the same time as introducing the mansion tax? I am sure that she has received representations on that.

[Shabana Mahmood]

I am grateful to the hon. Lady for her intervention. She is right. I have received representations about the slab structure, as, I am sure, has the Minister. It is one feature of stamp duty that causes particular consternation, as we have heard from all hon. Members who have spoken in the debate today. I cannot make a manifesto commitment today, but I will make it clear later in my speech that we are alive to the issues raised today and that we are looking at them carefully.

I was pleased that the right hon. Member for Wokingham (Mr Redwood) made a customary reference to the Laffer curve. I feel that these debates are not quite what they should be if there is not at least one reference to the Laffer curve. I was pleased that he was able to make that point.

I acknowledge the passionate views of hon. Members in this debate. There has been a vigorous campaign on the issue. I suspect that many hon. Members are less concerned about what I have to say about Labour policy and more concerned about what the Minister might do ahead of the autumn statement on 3 December. We saw a similar vigorous campaign ahead of the Budget earlier this year. In the lead up to that Budget, the expectation was that there might be a doubling of the threshold to £250,000 and the introduction of a stamp duty tax credit system, but the Government did not ultimately go down that path. I suspect we are seeing a similar build-up of lobbying for the Government to do something in the autumn statement.

[Mr Raab]

Does the hon. Lady agree with the comments by the deputy Labour leader that the middle classes should pay more tax, and is that something that will feed into Labour policies on the mansion tax and stamp duty?

[Shabana Mahmood]

I am grateful to the hon. Gentleman for his intervention. I think the point that the deputy leader was making was about progressive taxation and the argument that those who are wealthier should pay more. That is the thinking behind our mansion tax policy. His Government have presided over more people being brought into the 40p tax band, for example, and he could ask his Minister about that today.

Stamp duty is a matter of growing concern to the public and a significant burden on people wanting to buy a new home, particularly first-time buyers. I acknowledge the strength of feeling among hon. Members and throughout the country, but I am not in a position to make a spending commitment via this debate. Stamp duty brings in a large and growing amount of revenue, and any policy change in this area would have to be fully funded. Our start point as an incoming Labour Government in 2015 would be the current Government’s spending plans for 2015-16 and any change to that spending round would have to be fully funded. That has been the thinking behind the policies we have unveiled. They are all fully funded and primarily involve switching from one area of spend to another to deal with some of our child care priorities and other measures.

The difficult financial position that an incoming Labour Government in 2015 would inherit means that we would have to make some difficult choices. Given that, our focus has been wider reform of the housing market and how it might stimulate greater home ownership. In particular, the problem of housing supply has become acute in the past few years and is causing many problems, such as people having to rely on the bank of mum and dad and home ownership occurring much later in life. The hon. Member for St Albans made a point about that, and it is true.

We are seeing the biggest housing crisis in a generation and we are not building even half the homes we need to keep up with demand. The shortage of decent homes has much wider social and economic costs and we heard about some of those relating to inflexibility in the labour market, as well as the impact on people in overcrowded homes and the impact on children’s health and educational outcomes.

What can we do to build more homes? That must be the centre point of getting more sense and fairness into our housing market. We supported the Help to Buy scheme, but we would have preferred a scheme that focused more on first-time buyers. Our policy shows that the Government have simply not understood that boosting demand without boosting supply risks putting prices out of reach of the very families and young people we particularly want to help to get on the housing ladder. That is why we have committed ourselves to building 200,000 homes a year by 2020. That is probably not enough, and we should build many more than that, but it is an ambitious start point. We currently have a housing commission, led by Sir Michael Lyons, which is looking at a detailed road map, so that we may be able to deliver our vision.

[Mrs Main]

Does the hon. Lady share my concern about the Help to Buy scheme? It has proved to be a good scheme in the north by helping people, but has not worked in the south because people must save the stamp duty as well as being helped with the mortgage deposit. We cannot get past that with the current Help to Buy scheme. Stamp duty is the barrier, especially in the south, no matter how many houses are built.

[Shabana Mahmood]

I take on board the hon. Lady’s point. She is certainly right about the interplay between the Help to Buy policy and the burden that remains with stamp duty. As I have said, in constrained financial circumstances, difficult choices must be made and we have preferred at this stage to look at how we might do the one central thing that we know can reform the housing market and get more homes within the reach of more people: build more homes. That must be the start point, and that is the key issue with the Help to Buy scheme. It is not a bad policy and we should be helping people to buy homes, but we must boost supply, and we are failing to do that at the moment.

[Zac Goldsmith]

Every Government whom I have heard discussing this issue and every party in opposition have promised to build endless new homes, but how will the hon. Lady’s party, if it achieves government, deliver those new homes? What will make her future Government different from previous ones?

[Shabana Mahmood]

I am grateful to the hon. Gentleman for his intervention. We have made it clear that that is a central commitment of our party. We acknowledge that we simply did not build enough homes when we were in government. No Government for 20-odd years have built enough homes. We recognise that without boosting supply we will simply not have fairness and sense in our housing market. That is why we set up the Lyons commission. We want to ensure that we have a detailed road map. We will unveil it in our manifesto ahead of the general election and it will show exactly how we will realise our ambition in government.

[Mrs Main]

I fail to see how, in a high land value area, any Government can promise to build at expensive house prices. It is simply impossible without making the whole market collapse around it. Perhaps the hon. Lady will explain.

[Shabana Mahmood]

I disagree with the hon. Lady. I think that it is right to set targets and ambitions, and it is right that we look to such experts to help us to get to that position. We are looking partly at the expense of land and the housing market in different parts of the country. We will discuss those issues in greater detail as we get closer to producing our manifesto.

[Mr Raab]

I understand the shadow Minister’s caution, but she slated the coalition’s record even though if we compare the average number of affordable homes built each year, we see that it was some 31,000 under Labour and it jumped to 48,000 under the coalition. She slated that record, despite its being so much better than Labour’s, yet when asked a number of times what a Labour Government would do to spur the supply of housing, there is absolutely nothing that can be said within a year of an election. Does she understand that that totally undermines her criticism of the current Government’s supply-side record, but also any confidence that anyone could have that a Labour Government would make any difference in this area?

[Shabana Mahmood]

I make this point about the last Labour Government as well as the current Government. No Government have built anywhere near enough homes to ensure that supply keeps up with demand. That is why we are in this position with the housing market. I cannot pre-empt some of the proposals under discussion in the Lyons commission, but I am sure that we will return to the debate when we unveil what our road map towards the pledge of 200,000 homes a year looks like.

As I have said, given the very constrained financial circumstances and the difficult choices that have to be made, we have focused our energies on measures to increase supply. We did also put forward to the Government back in 2012—I am sure that the Minister remembers—a proposal for the Government to implement immediately. It was about using the sums raised by the sale of the 4G spectrum towards getting more homes built and towards a stamp duty holiday of two years for first-time buyers. That measure could have been taken forward by the Government. It might not have helped the constituency of the hon. Member for St Albans, but it would have helped first-time buyers looking at properties below the £250,000 threshold.

Changing the thresholds and providing holidays was something that we looked at and implemented towards the end of our term in office as we sought to stimulate the market post the financial crash. These are issues that we have considered, in the context of a stamp duty holiday for first-time buyers, in this Parliament. They are issues that we continue to receive representations on and continue to look at very closely. As I have said, I am not in a position to make any commitments today, but I suspect that the commitment that Government Members are looking for is from the Minister, who may or may not indulge them when he responds.

--- Later in debate ---

[Mr Gauke]

I recognise that that is not a third of transactions in Hertfordshire, which I suspect is the point that my hon. Friend is itching to make. In 2013, a further 42% paid the 1% rate, which meant that 75% of all residential property transactions resulted in the payment of less than £2,500. Even the proportion of residential transactions involving the 3% rate has remained broadly stable. In 2007, 18% of transactions were affected by the 3% rate; in 2013, the figure was 19%. I argue that SDLT is progressive, because those who purchase higher-value property pay a higher share of tax.

We must also consider who ultimately bears the burden of SDLT. The hon. Member for Birmingham, Ladywood referred to the Labour party’s policy announcement of an SDLT holiday for first-time buyers. We implemented such a policy for properties worth up to £250,000 from March 2010 until March 2012. HMRC analysis of the impact of that relief indicated that the majority of the saving was incorporated into higher property prices, which made the relief largely ineffective and poor value for money; what buyers did not pay in stamp duty, they paid in higher property prices.

My hon. Friend the Member for Nuneaton made the point that the situation can be complicated by the fact that it is easier to get a mortgage that covers the purchase price rather than one that covers the purchase price and the SDLT, but we must bear in mind that the impact of changes in SDLT can result in benefits to the seller, rather than to the buyer.

[Shabana Mahmood]

On a point of clarification, I should say that my point about a stamp duty holiday concerned a proposal that we made in 2012 about the sale of the 4G spectrum. I acknowledge that the Government proceeded with our proposal in March 2010 for a stamp duty holiday.

[Mr Gauke]

I am grateful for that clarification. If I maligned the hon. Lady, I will certainly withdraw those remarks.

Nearly everybody who contributed to the debate mentioned the fact that SDLT has a slab structure rather than a slice structure. I will make two points in response to that. If we wanted to raise the same level of revenue under a different structure, it would be necessary to increase the applicable rates. That would not mean that people would pay more, but it would mean that rates would increase. We would need to think about that.

My hon. Friend the Member for Nuneaton spoke from his experience of life before he entered the House about difficulties that arose in terms of reforms to stamp duty and their impact on the housing market. Before changing the slab system, which predates 2003—in fact, it goes back to the 17th century—we would have to think carefully about the potential impact on the housing market.