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Dawn Primarolo: I beg the hon. Gentleman's pardon--it has been a long day. The hon. Member for Guildford made his opening remarks on the basis, first, that I misled the House about contracts, and I have demonstrated to him that I did not; and secondly, that I said about the impact of the removal that there was no indication at the present time that people would cancel their insurance, and I stand by that claim. Already insurance companies are doing their best to ensure that they keep the business that they had before the relief and during the relief, and I have no doubt that they will maintain it after the relief is removed.

The measure is fair, removing a privileged position from the few and ensuring that the resources are spent for the benefit of the many. I sincerely hope that the House will accept--

Mr. Loughton: Will the Financial Secretary give way?

Dawn Primarolo: I have already taken lots of interventions.

I sincerely hope that the House will now accept that the proposals in the clause are fair, equitable and just to those who currently have a benefit that they should not have; and that they will enable those people to adjust to changes made to ensure that resources can be used instead for the benefit of the many and of the national health service.

Mr. St. Aubyn: I am grateful to you, Mr. Deputy Speaker, for having allowed, in the debate on amendment No. 1, a much wider debate on clause 17. As a result of that wider debate, it must have been realised by hon. Members on both sides of the House that there is a real difference of opinion about the effect of the clause, not only on those who take out health insurance, but on the availability of the health service to all members of our society.

The numbers involved have been a matter of dispute. Indeed, the hon. Member for Dudley, North (Mr. Cranston) questioned my competence when I was merely quoting an authoritative study from the Economists Advisory Group. The study clearly showed that where a tax relief is costed by the Revenue at £120 million rising to £140 million over the next few years, the amount of tax relief is 23p in the pound and the typical insurance cost is less than £700, it is easy to see how nearly 1 million people will be affected, either directly or indirectly, by the abolition of the relief. Those are the advisory group's figures, not mine; I know that other industry estimates quote smaller numbers.

Mr. Cranston: Will the hon. Gentleman give way?

Mr. St. Aubyn: No--there is so little time.

There is a wide range of estimates, but they all come up with big figures for those affected--upwards of half a million people and perhaps as many as 1 million. We can

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also be quite sure that there will therefore be a knock-on cost, which will be measured in tens of thousands, if not more, as a result of the withdrawal of the relief.

Mr. Gibb: Will my hon. Friend give way?

Mr. St. Aubyn: Yes, I will give way to my hon. Friend.

Hon. Members: There is no time to give way.

Mr. Gibb: I just want to make an important point about the figures that the Inland Revenue has supplied to the Financial Secretary. Given that this is a relief applied at source, is it not the case that there tend to be inaccuracies in the Inland Revenue figures, because there is no necessity for such figures to be reported to it? The figures relating to MIRAS from the Inland Revenue are similarly inaccurate.

Mr. St. Aubyn: That point is well made. The figures involved are speculative. The most speculative part of the project is the theory that there will be no cancellations of policies and no oncost to the health service.

Mr. Geraint Davies rose--

Mr. St. Aubyn: I will deal with the points made by the hon. Member for Croydon, Central (Mr. Davies) later.

The hon. Member for Dudley, North has said that this is a matter of general law, which need not trouble the House. The whole point of our argument has been summed up in the words of the Financial Secretary, who said that there are grey areas in the law. That is why we sought clarification. When we found that there was no such clarification in the clause or in the explanatory notes from the Inland Revenue, we felt let down, at the very least.

9.30 pm

The hon. Member for Redditch (Jacqui Smith) said that we regard the effect of the clause and the lifting of VAT on fuel as regressive, while she tried to argue that it was progressive. They say progressive, we say regressive, let's call the whole thing off. If they will not call the whole thing off, they should at least implement it fairly and squarely.

In that respect, I thank the Financial Secretary for offering clarification on the matters about which we have diligently sought it. We have done so, not because we feel that we should instantly understand such matters--and if we do not, no one else will--but because major companies in the industry, including one that happens to be in my constituency, were genuinely concerned. They felt, according to the hon. Lady's words, that there were genuinely grey areas in the law. They were concerned that they could promote health insurance policies to their customers with the benefit of tax relief, only for those customers to find later in the year, when their tax inspector looked at their returns, that that relief was to be disallowed.

What the Financial Secretary has said has clarified the issue greatly, but I am still concerned about her approach to monthly contracts. The information from the insurance provider in my constituency reveals that if the rules on monthly contracts are not interpreted in the most

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favourable way, upwards of 20,000-odd contracts which it has outstanding will be immediately affected. I note that the Financial Secretary shakes her head. I listened carefully to what she said about monthly contracts; she has assured us that no more than a few thousand at the very most might be inadvertently affected by the way in which the relief is phased out.

The hon. Lady quoted Lord Lawson. It is always a pleasure to hear Labour Members quoting eminent Conservatives, but it is always disappointing that they are so selective in their quotations. I remember from the same book that one of its clarion calls was for clarity in tax legislation. That is what is lacking from clause 17. I fear that the hon. Lady has not read the entire book, but she appears to have gained the spirit from Lord Lawson that such clarity is needed in the clause.

As a result of the process, we are grateful for achieving a measure of clarity. On that basis, I do not believe that it is necessary to put the amendment to a formal vote.

Amendment negatived.

Clause 49

Stamp duty on conveyance or transfer on sale

Mr. Boswell: I beg to move amendment No. 7, in page 47, line 32, after first 'of', insert

'£1 for every £100 or part of £100 of the consideration up to £250,000, and at the rate of'.

Madam Speaker: With this, it will be convenient to discuss the following amendments: No. 8, line 33, after 'consideration;', insert 'in excess of £250,000'.

No. 9, line 34, after 'case', insert--

'(i) the rate of £1 for every £100 or part of £100 of the consideration up to £250,000,
(ii) the rate of £1.50 for every £100 or part of £100 of the consideration over £250,000 but below £500,000, and

No. 10, line 35, after 'consideration', insert 'over £500,000'.

Mr. Boswell: We come now to stamp duty. For a Tory, there is a certain nostalgic affection for a tax introduced 303 years ago, which has been doing its business for the nation ever since with comparatively little fuss and very little scrutiny in this place. There is a certain nostalgia about a tax whose head legislation is the Stamp Duty Act 1891, updated, of course, by electronic systems for data, especially in relation to securities, and the stamp duty reserve tax--also, I believe, introduced by Lord Lawson--which will raise, according to Government proposals, more than £3 billion in the current year, and which, significantly, was last increased in 1974. I wonder which party was in power when stamp duty was last increased.

By way of introduction, I have a short piece of advice for the Financial Secretary. When the Bill is out of the way, perhaps she will spare a little time to go down to Bush house and see the Stamp Office in operation. I had occasion to do so, on re-registering some of my children's securities. There are not many of those securities, but when the children reached the age of 18 the securities

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needed to be upgraded by a 50p stamp to put them in their own name. It was money well spent to see the people marking and stamping those documents. I am not sure that it raised much revenue, but it certainly is an interesting place to visit.

I now come to the substance of our amendments, and of the important changes--so far undiscussed because of the guillotine--that the Government propose. Before the Budget, my attention was drawn to a positive flurry of three economic reports, which were submitted to the Chancellor and may have modestly influenced his thinking for the better. There were Miller and Scott on residential property, Barber and White on commercial property, and the Centre for Economics and Business Research on the overall economic impact. Collectively, they may have stopped in their tracks the slightly sillier ideas that the Government had to increase stamp duty to 6 or 7 per cent. If they did so, I am very pleased.

A strange set of proposals for stamp duty has emerged, however. First, there is very little impact indeed on the residential property market. It seems likely that this proposal will affect 30,000 residential properties in a full year--between 1 and 1.5 per cent. of the residential property market, amounting to a full year yield of about £130 million. Arguably, therefore, the average cost per dwelling of those affected is about £4,000, which is a small impact on a small proportion of residential properties, by definition exceeding £250,000 in value.

Interestingly, today's press reports make it clear that among those who pay the tax will be the Prime Minister, who has recently disposed of his property for rather more than £600,000, and will therefore pay £6,000 extra--but he need not worry too much because he has trousered a capital gain in excess of £200,000 on it anyway, and there is no windfall tax on those capital gains.

At any rate, the Government cannot seriously argue that this set of proposals has a significant impact on the prices of residential property. If there were a boom, if there were over-heating--the evidence for that remains questionable--it would still represent a peashooter approach to tackling it.

On the other hand, the true effect is felt in the commercial property sector. Interestingly, according to the Government's figures, three quarters of the revenue of stamp duty in the property sector is raised on residential property, but three quarters of the increase will affect the commercial property sector--one quarter of the market. Some 20,000 such properties will be affected annually.

This is, therefore, yet another hit on business, and it is entirely consistent with the approach adopted by the Government elsewhere in the Budget. It is the sort of measure which gives rise to the International Monetary Fund saying, in a report which Labour Members have cited as positive for them, that something will have to be done about consumer spending elsewhere because the Government have not had the courage to tackle it now. That is a judgment which the Government need to take.

Estimates in the surveys to which I referred are that, as pension funds and insurance companies own some £60 billion of commercial property in this country, stamp duty is likely to affect the valuation of their funds by an estimated £300 million alone on pension funds and a larger sum on insurance funds. It would therefore chime in nicely with the changes in advance corporation tax, which have seriously damaged those

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interests in the Budget. It is yet another indirect hit on the citizen through the medium of business. For that reason, if for no other, we criticise it severely and will oppose it tonight.

My next point may be smaller, but is, none the less, significant. In their anxiety to shield the residential property sector, the Government have put a burden not merely on the commercial sector and real property but on other kinds of property transfer by document. For example, the Institute of Directors pointed out that stamp duty covers transfers of good will, intellectual property, of which I have some knowledge, and so forth. At any rate, the Financial Secretary may care to offer a figure for the breakdown of the impact between commercial property and the other kinds of property swept up by the clause.

Our main concern and the substance of the amendments is the structure of the duty. It is interesting that the bulk of stamp duty is still raised from marketable securities, which attract--in current circumstances it is reasonable that they should continue to attract--a separate 0.5 per cent. rate of duty. Indeed, if the rate were to rise any higher, it would severely damage London's competitiveness as a financial centre.

May I return to real property, which is the subject of the amendments? We now have an extraordinary situation. Under the old arrangements applicable until the Budget, there was a zero rate for properties under £60,000 and one positive rate of 1 per cent. thereafter. We now have an unchanged zero rate, but three positive rates: 1 per cent. for properties up to £250,000; 1.5 per cent. for properties worth between £250,000 and £500,000; and 2 per cent. for properties worth more than that, which applied to the Prime Minister.

I admit that ever since the 1960s when I first became involved in taxation policy, I have always disliked the way in which the stamp duty system operates. It operates on a "slab" rather than a "slice" system. Tax is charged up to a certain threshold, and the rate is then increased for the whole of the charge thereafter--not for the first tranche with a different rate for the next tranche, but right through on the whole amount. That gives rise to some unsatisfactory effects. It may be another byproduct of the Government's haste in introducing their legislation this summer that they have been unable to redesign the system and come up with a smoother progression.

My objections to the slab system are that, given that the rates are very small--1 to 2 per cent.--there is little progressivity within the slabs. Whatever the figures are between £60,000 and £250,000, whether the house is comparatively small or large, the charge is the same.

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