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Clause 99
7.30 pm
Mr. John Whittingdale (Maldon and East Chelmsford): I beg to move amendment No. 3, in clause 99, page 71, line 5, at end insert--
'(4A) This section shall not apply to properties which are subject to uniform business rate'.
The context of the amendment is the increase in the rate of stamp duty from 2 to 2.5 per cent. on transactions valued at between £250,000 and £500,000, and from 3 to 3.5 per cent. on transactions valued at more than £500,000. Since the Labour Government came to power, there have been three tax-raising Budgets, and in each of those Budgets one of the taxes that has been increased is stamp duty.
In his first Budget, the Chancellor raised stamp duty by 50 per cent., from 1 to 1.5 per cent., on property sales valued at more than £250,000, and by 100 per cent., to 2 per cent., on property sales valued at more than £500,000. On that occasion, he tried to justify the increases by claiming that the measure was necessary to reduce volatility in the housing market. The reason he gave in his Budget speech was:
There is a strong suspicion that this year's will not be the last increase, for in the rest of Europe stamp duty or its equivalent is payable at much higher rates.
Mr. Campbell-Savours:
Quite right.
Mr. Whittingdale:
I am grateful to the hon. Gentleman for confirming that. I understand that the average rate that now applies in Europe is now about 7 per cent., whereas in France, on certain classes of property, it is as high as 18 per cent. Many people believe that the Chancellor is trying to harmonise by stealth. There have been reports that he wanted to put up the rate of stamp duty in this year's Budget by a full 1 per cent., instead of only 0.5 per cent., but that he was dissuaded at the last minute by those who said that it would be too great a blow at one time. There is now a widespread belief that each future Budget will introduce further increases and that the Chancellor has now indicated to our European partners that he intends to increase the rates steadily until they reach the rates of our competitors.
Mr. Clifton-Brown:
Is my hon. Friend aware that France recently cut its transaction costs from 18.5 per cent. to 4.5 per cent., because it felt that it was so out of line with the rest of its European partners? Would it not be folly if the UK Government were to increase stamp duty any further, given that we already have the highest property taxation of any country in the European Union?
Mr. Whittingdale:
I am grateful to my hon. Friend for that intervention, because I had not known that. It may indeed confirm that there is a general movement throughout Europe to bring rates closer together, and that there is in operation an agenda to harmonise rates of stamp duty. It is even possible that that commitment has already been given by the Chancellor to the Paymaster General, in her capacity as the chairman of the committee on the code of conduct on business taxation.
I am sorry that the Paymaster General is not in her place, but I ask the Financial Secretary to make it clear in her reply that such speculation--which is considerable--is without foundation. Despite the fact that the hon.
Member for Workington (Mr. Campbell-Savours) would like that harmonisation to happen, I suspect that few people in this country share his view and that there would be considerable alarm if the Government did intend to continue to increase stamp duty in each future Budget.
Mr. Campbell-Savours:
Can the hon. Gentleman explain why it seems to him so wrong that someone who purchases a property for £500,000 should pay £15,000 to the state, when that tax is the lowest in Europe?
Mr. Whittingdale:
That very point is the crux of the amendment, because, overwhelmingly, transactions over £500,000 are not conducted by people buying large houses, but by businesses, so the tax is a tax on business. The Chancellor does not like to admit that.
Mr. Derek Twigg (Halton):
Can we take it from that remark that the Conservatives are not opposed to the increase in stamp duty on domestic property sales?
Mr. Whittingdale:
I am sorry to disappointment the hon. Gentleman, but the Opposition are completely opposed to that tax increase, because it is a stealth tax increase which is especially damaging to business. Our amendment is designed to highlight that damage.
Mr. Twigg:
I do not want to pre-empt the hon. Gentleman's remarks and I apologise if I am doing so, but I want to be clear. Will Conservative Members be voting against the measure?
Mr. Whittingdale:
I am happy to confirm that we shall vote in favour of our amendment and against clause stand part.
As I said, when the Chancellor ever mentions the increases, he speaks of them in terms of house sales. Like the hon. Member for Workington, the right hon. Gentleman has tried to give the impression that the tax affects only those who can afford to buy expensive houses. It is worth pointing out that, in many parts of the south-east, £250,000 will not buy an especially large house. Many of those who will have to pay the increases are not fat cats, but, in the main, families who aspire to move to a larger house. Indeed, I am hoping to move house in the near future--
Mr. Love:
Declare an interest!
Mr. Whittingdale:
That is exactly what I was just doing. If I do move, it is possible that, like a large number of my constituents, I shall be affected by the increases.
Mr. Whittingdale:
I should like to point out to the hon. Gentleman that the clause increases the rate of stamp duty on all transactions of more than £250,000. In my constituency, £250,000 does not buy a mansion; it buys a reasonably sized property of the sort in which I suspect the majority of my constituents aspire to live one day.
Mr. Love:
Is the hon. Gentleman saying that the majority of his constituents would fall within the category of those buying houses valued in excess of £250,000,
Mr. Whittingdale:
I said that the majority of my constituents would aspire to live in such houses. In the area that I represent--and certainly in the areas represented by several of my hon. Friends--the proportion of transactions over that threshold would be considerably in excess of 4 per cent.
There is another equally important point about the way in which the increases will affect people involved in home purchases. Many house sales involve the purchase of new houses--
The Temporary Chairman (Mr. John Butterfill):
Order. The hon. Gentleman is straying from the amendment. I am sure that he will wish to address those issues in the clause stand part debate, but I hope that, for the time being, he will confine his attention to the amendment under discussion.
Mr. Whittingdale:
I am grateful for your guidance, Mr. Butterfill. I will certainly concentrate on the amendment before us. I was tempted to divert slightly.
However much the Chancellor may pretend otherwise, stamp duty is not payable only on house purchases; it is payable on all transactions that require the transfer of a document. That includes sales and leases of commercial property, goodwill, book debts and intellectual property, such as patents and trademarks. When we debated the Budget initially, I was grateful to the hon. Member for Cambridge (Mrs. Campbell) for highlighting the effect of the increases on the high-technology firms in her constituency that will be severely affected by the rising cost of the transfer of intellectual property in which they specialise.
According to the Government's figures, of all transactions over £250,000, 65 per cent. of the receipts from stamp duty come from commercial property and land transactions. For transactions over £500,000, 80 per cent. of receipts come from commercial property and land transactions. As I said earlier, this is overwhelmingly a business tax and businesses will have to pay the majority of the extra £270 million that the increases will raise.
In his Budget speech, the Chancellor made much of the fact that our future depends on enterprise. However, in practice, he is clobbering enterprise through increased taxation. Last year, several organisations representing the commercial property industry commissioned independent research by Arthur Andersen and the London business school on the impact of increased stamp duty rates on the commercial property sector. That research showed that commercial property is a hugely important component of our economy and contributes about 10 per cent. of our gross domestic product. It is valued at about £500 billion in the private sector and a further £110 billion in the public sector.
"I will not allow house prices to get out of control and put at risk the sustainability of the recovery. I have therefore decided that it is right to take . . . measures aimed at stability in the housing market."--[Official Report, 2 July 1997; Vol. 297, c. 313.]
28 Apr 1999 : Column 404
In fact, the increases had far less to do with stability in the housing market than with increasing tax revenue.
That became clearer when the Chancellor put up stamp duty again in his second Budget. That time, it went up to 2 per cent. on transactions over £250,000 and to 3 per cent. on sales of more than £500,000. There was no mention in his Budget speech of the importance of stability in the housing market; the right hon. Gentleman said only that 98 per cent. of house transactions would be unaffected by the increases. In this year's Budget, the Chancellor has raised the rates for a third time, to 2.5 per cent. on sales over £250,000 and to 3.5 per cent. on sales over £500,000. However, his only attempt to justify the increase in his Budget speech was to say that 96 per cent., rather than the previous 98 per cent., of home sales would be unaffected. The effect of those three Labour Budgets taken together is clear: on transactions of more than £250,000, there has been a tax increase of 150 per cent. and on transactions of more than £500,000, there has been a tax increase of 250 per cent. So much for the Government saying that they have no intention of putting up taxes.
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