Previous SectionIndexHome Page


9.15 pm

Part of the hidden agenda is the fact that the Government took one swipe at pension funds and enjoyed it so much that they want to take another. They took that swipe through changes to corporation tax. By not allowing a tax credit, they in effect introduced a pensions tax. It must alarm some in the Treasury that pension funds can redirect investment into commercial property and thereby increase income and get round part of the problem. The Government told us that they did away with the investment tax credit to encourage companies to keep money in the company rather than give it out in dividends. The hidden agenda behind the increase in stamp duty suggests far more. It is just old-fashioned Labour, seeing a pot of gold and trying to find as many different angles as possible from which it can get its greedy mitts on it.

27 Apr 1998 : Column 107

Even if there is not a derivative market in commercial property, fees for lawyers' advice and accountancy schemes will be paid. That will result in long-term major pension fund investors avoiding the consequences of stamp duty. If the increase is part of a progressive increase in stamp duty, it is fair to say that the Government will find that the amount of revenue attracted will steadily diminish. A law of diminishing returns will apply rapidly to stamp duty. If there are to be high levels of stamp duty, a pension fund will have to think hard before it can justify switching from one commercial property to another in the course of balancing its portfolio.

As my hon. Friend the Member for Runnymede and Weybridge mentioned, the final part of the Government's hidden agenda is convergence in Europe--not just in tax rates and regulation of the economy, but in the very nature of the economy. We have a property-owning democracy, not just for the very rich, but for all levels of society. Many people who have started their own businesses have as their pension fund their company's commercial premises. In order to sell their business, they may intend to retain control of the company's main asset in some form or other and to rent it out. That is a classic way in which businesses change hands. Businesses changing hands is all part of the way in which the economy develops, grows and thrives.

The increase in stamp duty is yet another Labour spanner in the works. It is another way in which attempts to ease the flow of business will be upset by the scale of duty that the Government are imposing--in many ways quite arbitrarily--on those who own commercial property with a value of more than £250,000. It is arbitrary because, in other parts of the Finance Bill, we see a general claim--which we shall examine in more detail later in Committee--that there is an attempt to mitigate the capital taxation of long-term investments. Yet here we have a clear case of the Government imposing a swingeing tax on a long-term capital investment. It shows how far new Labour's actions are divorced from its warm words.

Mr. Gibb: I support the amendment, which seeks to remove from these draconian provisions properties that are subject to the uniform business rate--commercial properties. One of the points that the Chancellor of the Exchequer skated over when announcing the swingeing increase in the rate of stamp duty on high-value properties was that stamp duty also applies to the transfer of commercial property; not just real property, but all assets in a business that are transferred by document. That greatly affects businesses. The notes on clauses make clear that 75 per cent. of the revenue raised will be from sales of businesses and commercial property.

Mr. Hammond: Would I be right in thinking that the measure applies also to transfers of intellectual property, which might be of direct interest to the Paymaster General?

Mr. Gibb: My hon. Friend is right. It applies to all assets of a business, including intellectual property. It can also apply to one's debtors. If a company has any assets transferred by document--cash, even--the stamp duty is applied to the value of those assets.

27 Apr 1998 : Column 108

As my right hon. Friend the Member for Wells(Mr. Heathcoat-Amory) said, a large company that takes legal advice from leading solicitors and accountants can avoid paying duty. If it is made clear in the agreement to sell or buy a business that certain assets--for example, plant and machinery and tools--will be transferred not by document but by delivery, the stamp duty is avoided. That requires a company to take legal advice on the sale of a business, but most small and medium businesses will not have the resources to take advice on stamp duty; they will probably be caught more than large companies. A measure designed to raise revenue for the Government will hit the very businesses they purport to want to encourage.

The Institute of Directors has made clear that it opposes this draconian measure, saying:


The Institute of Chartered Accountants deplores the measures; the tax faculty has said that the


    "further increases in stamp duty for asset transfers as against share transfers may distort business decisions and inhibit sales of assets as against companies."

Here, again, we have a measure designed to hurt medium and small businesses, as against large ones. It will not affect businesses that simply sell shares from one owner to another; they will be subject to a different rate of stamp duty--the rate applying to the transfer of shares--but someone trying to sell a small business because of retirement, for example, will have to pay the very high rates of stamp duty on all the assets transferred.

The IOD makes the valid point that insurance companies, pension funds and property unit trusts will bear the brunt of the direct impact of the increases in stamp duty because most commercial properties are owned by such investors and then leased. Millions of people who invest in insurance, pension funds or unit trusts will suffer.

Mr. Hammond: Will not the measure cause a further distortion--a bias in favour of renting or leasing smaller business premises rather than purchasing them outright and paying the attendant stamp duty?

Mr. Gibb: My hon. Friend is absolutely right. It is wrong that Government measures should have such distortionary effects--the Government should carefully consider the effects of taxes on the market. The distortion of usual commercial transactions is distressing, but it will happen in a variety of areas as a result of the Bill.

The Institute of Directors is concerned that the measure will reduce the value of the investments of millions of innocent investors. That demonstrates a wider point--taxes levied on big business or business generally are always eventually borne by individuals. That has been widely acknowledged, as the Treasury Committee noted. Gavyn Davies said that the brunt of the advance corporation tax credit would be borne by the household sector. Similarly, the brunt of the effects of clause 147 will be borne ultimately by individuals, either as tenants or as purchasers of houses on small estates where the land was bought as a parcel--as my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) rightly pointed out, the 3 per cent. stamp duty would be passed on to the purchaser of the newly built house.

27 Apr 1998 : Column 109

Like my hon. Friends, the Institute of Directors is concerned that nothing has been done to removethe distortions caused by the slab scale. The matter was the subject of an amendment to the Finance Bill in the summer; the Government opposed that amendment, too. As they are doing everything possible to remove distortions in areas such as national insurance, it is odd that they are exacerbating distortions in stamp duty by increasing the rates.

I urge the Government to accept the amendment, which would prevent business from having to face these draconian measures. In his Budget statement, the Chancellor implied that the provisions would apply only to residential property; he made no reference to their effects on commerce and business transactions. For once, let us see legislation living up to the spin and presentation.

Mr. Geoffrey Robinson: Opposition Members have advanced reasoned arguments on the amendment, but I think that they are really saying that they do not like the clause. It would have been much more simple if we had debated the clause as a whole.

The hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) mentioned draft regulations. We have checked what happened--they were placed in Derby Gate, in the House of Commons Library and in the House of Lords Library. We are not sure why they were not there when he looked for them--

Mr. Gibb rose--

Mr. Robinson: I do not doubt that they were not available to him, but I reassure him that we have arranged for additional copies to be deposited--no doubt he will be able to collect them after the Division.

Mr. Gibb: I am grateful for that reassurance, but why were the draft regulations not referred to in the regulations list, in the book that lists all the documents that the Government have presented to the Library, or in today's Order Paper under the list of documents that were placed in the Library on Friday?

Mr. Robinson: I have explained to the hon. Gentleman that the draft regulations were deposited in the Library, although we do not know why they were not available to him. I have assured him that we have made additional copies available. I cannot do more, and I ask him to accept what I have said.

The increased levels of stamp duty will apply to intellectual property, but the amounts will be very small--some tens of millions in the total. I do not think that the matter is significant to our consideration of the amendment--in fact, the amendment would not affect it.

I am sure that the whole House has considerable respect for the professionalism of the hon. Member for Bognor Regis and Littlehampton, but he must find other reference points than the Institute of Directors and Gavyn Davies, much as we respect the latter and much as our relations with the former are improving. I am sure that he can do better than that, even if he has to make frequent reference to his former boss.

We heard about the slice system as against the slab system and the cliff edge. My right hon. Friend the Chief Secretary conceded in the debate on 28 July last year,

27 Apr 1998 : Column 110

when we divided on an amendment, that there were certain deficiencies in the present system, but it is funny that the Conservatives did nothing about it when they were in government.

I hasten to add that rates were lower then, so the problem was slighter, but Conservative Members have made the point today that there was already a bunching. We are prepared to consider the issue, but only in the context of there being no reduction in revenue, so presumably the rates would be spread over a banded system and the results might not be to everyone's liking.


Next Section

IndexHome Page