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Mr. Heathcoat-Amory: I do not know whether the hon. Gentleman is trying to be witty or to ask a genuine question. If he sticks around for the next two days, he will hear more of our amendments, which I hope he will support because we have in mind not only the United Kingdom, but improvements to the economy of Scotland, which is dear to the hon. Gentleman's heart.

The amendment was tabled, at least partly, because we judged, following the Chancellor's Budget statement, that it could well meet his intention. The Chancellor referred only to increasing stamp duty on householders and we know from last year's Finance Bill that the Government--or, at least, those on the Treasury Bench--did not always understand their legislation. The fiasco of the withdrawal of dividend tax credits made it clear that they certainly did not understand their own Bill. Those of my hon. Friends who served on the Standing Committee will remember that Ministers simply did not understand foreign income dividends. Eventually, rather than withdrawing the relevant clause, they said that it was inoperative and that they would return to it later.

It is possible that, in the rush of preparing a Budget, the Chancellor genuinely thought that stamp duty did not apply to commercial properties. No one had gone into the point in great detail and the Chancellor himself has no commercial background. Perhaps that was a mistake, and we have sought to help him by giving effect to what may have been his intention; otherwise, the Bill will have a very damaging effect on commercial properties. We hope that there will be time for a short debate on clause stand part so that we can make a few more general points about the clause's wider effect on the economy.

I must complain that the Paymaster General was dismissive of my innocent inquiry about whether this might not be the opportunity to move from what I called a slab system to a slice system. I think it was my hon. Friend the Member for Runnymede and Weybridge who picked that up as an important potential reform. All the Paymaster General said was that we should have done it. My point was that it is not so important to have such reforms when the rates are low, but, when the upper rate of stamp duty is increased by 50 per cent., as is proposed, it becomes important to try to avoid such gross distortions.

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There is also the code of conduct for business taxation. Again, the Paymaster General was dismissive and said that, as far as he knew, there was no connection; that is his opinion, but the Government appear to have an agenda to harmonise--upwards, of course--business taxation to fit a European pattern. He challenged my figures on the effective rates of stamp duty in other member states. I defer to his greater knowledge, or at least to his easier access to specialist advice. I had to refer to the Library at short notice and it did a very good job for me, but I may not have got its figures right. However, it is clear, and he confirmed this, that the average rate of property transaction taxes is between 6 and 10 per cent. He confirms my point that we have a comparative advantage. That is one of the reasons why firms transfer to Britain and why we act as a magnet for overseas investment. That is much criticised by members of the European Commission, who regard that as terribly unfair. They are itching to harmonise it all upwards to the higher continental rates. It was not right for the Paymaster General to be so dismissive of my point.

The Paymaster General ignored my question about which sorts of businesses would be hit by the increased stamp duty. I noted--again, this was echoed by several of my hon. Friends--that large, well-advised companies can and do avoid stamp duty by various means. The Paymaster General did not mention that. He knows a great deal about tax avoidance and how to counter it. The Committee would have expected some reference to how he will ensure that the burden of the higher rate of stamp duty is spread evenly through the commercial world rather than, as often happens, being loaded on to the weaker shoulders of small companies that cannot afford professional advice on the scale necessary.

The Paymaster General's responses were inadequate. We may seek answers to some wider questions in the debate that will shortly follow on clause stand part, if it is allowed.

Amendment negatived.

Question proposed, That the clause stand part of the Bill.

Mr. Heathcoat-Amory: The transfer of property is not a luxury but a sign of a dynamic and successful economy, so any tax that inhibits it strikes at the root of productive investment and business activity. In an earlier speech, the Paymaster General suggested that the tax was to bring stability--that it would somehow even out the ebbs and flows of the property market and ensure that we do not have a boom followed by a bust. I do not think that it has anything at all to do with that.

I should believe the hon. Gentleman more if there were some indication that he would lower the rates of stamp duty at another stage in the economic cycle, but, as has been said, it is a ratchet--the direction is ever upward, with no chance whatsoever of the £500 million impost on the commercial sector ever being reversed.

The truth is that the measure is not about stability, but about extra taxation. That sits oddly with the Government's professed desire for a dynamic economy--presumably one in which both foreign and domestic

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businesses locate, relocate and start up in or transfer to the United Kingdom. The vigour of the property market is a healthy sign, so to tax property transfers is a retrograde step. What is the reason for the clause? Why are the Government increasing taxes on property and, therefore, on commerce at this time?

Mr. Geraint Davies: Does the right hon. Gentleman accept that, given that the rate of increase in commercial sector property prices is more than twice the rate of inflation, any simple understanding of market systems brings one to the conclusion that there is excess demand in the market and that the rate of increase is far in excess of the marginal increase in tax, which will surely be absorbed in containing the rate of increase in prices? There is no way that the increase will harm the economy--far from it. It will have a stabilising impact.

Mr. Heathcoat-Amory: There are two responses to that interesting intervention. The first is that the increased prices in the commercial sector mean that, even at existing rates of stamp duty, the yield is extremely buoyant. It will increase precisely because of the higher taxes; therefore, the Chancellor did not need to increase the rate in order to increase the yield. The second point follows on from my remarks a few minutes ago, which is that I would only accept such an argument if there were any evidence that the Government would cut the rate again if the commercial property market turned down.

That logically follows on from the hon. Gentleman's point. If the hon. Gentleman indicates that that is indeed his policy in the debate we are about to have--however short it may be--I shall regard his interventions with considerable respect in future. Incidentally, I hope that he is on the Standing Committee on this Bill. He was happily on the Committee on last year's Finance Bill and, having finally got the hang of the different between you and they--the first person and the third person--he was an excellent member of that Committee.

Before that intervention, I was asking the Paymaster General about the reason for the tax. There is no environmental reason; as my hon. Friend the Member for Guildford emphasised, it has nothing to do with the difference between building on green-field or on brown-field sites. There is no apparent reason from a European perspective--the Paymaster General has denied that there is a hidden convergence agenda. Finally, the Government do not need the money, because we are in surplus. A budget surplus was nearly achieved in the financial year just ended and there will be a substantial surplus in the financial year on which we have just embarked. Given that there is already to be a £20 billion tax burden on the commercial sector in the lifetime of this Parliament, why is the Chancellor adding to that unnecessarily by increasing rates of stamp duty that disproportionately hit the business sector?

I conclude with those few questions and comments, hoping to allow one or two of my hon. Friends to make a contribution in time for an early end to the debate.

Mr. St. Aubyn: I begin by applauding the Paymaster General's altruism in proposing the clause. We are near neighbours in Surrey, where he is my constituent.

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Whereas I occupy a humble labourer's cottage, he occupies the mansion of the village--very nice it is, too--and I know that, in this case, the tax rate will hurt him a great deal more than it will hurt me. Nevertheless, one is bound to ask, in what spirit is that altruism being proposed?

The Paymaster General says that he is anxious to prevent boom and bust. Well, we do have a boom. In the past two years, the stock market has increased by about 50 per cent., as measured by the increase in the FTSE index. To help us understand the Government's long-term policy, will the Paymaster General clarify why his Government are happy to preside over a boom in financial assets as represented by shares, but have an engrained hostility to any increase in the value of bricks and mortar in so far as they, too--especially on the commercial property side--represent a financial asset?

We need to know the answer to that question, when the Paymaster General has told us that he believes that3 per cent. is about right, and has pretty well implied tonight that stamp duty should not go higher than that, and yet he stops short of giving the House any reassurance that he and the Government recognise that if they try to push this boat out any further, the harmful effects--which we have identified this evening--on the property market, especially the commercial property market, will become very marked.

The property-owning democracy is a decent society--there is nothing to be ashamed of in it--but I believe that we have isolated all the possible motives that the Government have for introducing clause 147, and in the end we must conclude that the motivation for the clause comes back to old Labour. It comes back to an old-fashioned attack on property. That is what will drive Labour Members through the Aye Lobby tonight.


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