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8.30 pm
There are many reasons why businesses move, but one of the most significant is that they outgrow their premises and want to move to more modern premises. That is a very important part of the process by which we protect the green belt, as brown-field sites become available. If businesses find that the cost of moving has become prohibitive, they will stay put and give up the opportunity for extra growth and employment, and the Government will lose the extra revenue that would have resulted from that. As a direct consequence, there will be an increasing shortage of brown-field sites. If it is a Government priority--it is one that we feel they have not pushed far enough--to have more brown-field sites developed, they will find that that is simply not possible, or the cost of brown-field sites will get out of kilter.
All those reasons show why stamp duties are wrong. I leave the Committee with one final thought, which I hope that the Financial Secretary will bear in mind.
She and her colleagues may think that stamp duty is some kind of economic regulator and that, because they inherited such a strong economy, increasing it will be a crude means of restraining increases in property prices. That may work well, but, when it comes to a slowdown or a recession--no economy is immune from recessions--the correct thing to do is to reduce stamp duty. However, to do that at that stage would be entirely counter-intuitive for the Government because, in a recession, all Government revenues are under pressure. A Labour Cabinet would simply not agree to cut stamp duty when budgets for schools and hospitals were under pressure.
In other words, this is a one-way street. Stamp duty is going up--we need to know how far--but it will not come down. Far from being an economic regulator, it is a mechanism for creating boom and bust in the economy. That is a fundamental reason why the measure should be opposed tonight.
Mr. Colin Breed (South-East Cornwall):
I understand that we shall debate the clause stand part a little later, so I shall confine my remarks purely to the uniform business rate. First, I declare an interest, which is in the Register of Members' Interests. The business concerned is under offer and may therefore incur stamp duty.
I have always wondered why trading businesses have had such a desire to buy property. Whether they are manufacturing or commercial businesses, so many of them want to lock up a considerable amount of resources in the almost dead asset of the building from which they operate. As a former bank manager, I have always suspected that that practice has been driven by the banks, which promote loans to companies and businesses for the bricks and mortar over which they can then obtain a mortgage and security.
Many businesses in the past, and some even today, have undertaken long, fixed-term borrowing on rates well in excess of the current rate and cannot extricate themselves from that borrowing agreement. They find their cash flow locked up in significant interest and capital repayments to pay for the very premises from which they operate, rather than having that cash flow available to expand their businesses and to invest in equipment.
Mr. Jack:
Can the hon. Gentleman confirm, given his position as a former bank manager, whether he would advise his customers that the proposals that we are considering tonight apply also to leases?
Mr. Breed:
Yes, they apply to most property leases.
An enormous amount of productive capacity is locked up in the dead asset of property and buildings. The Government and the business community have not recognised sufficiently the fact that an enormous number of successful businesses, particularly in America, own virtually nothing and lease virtually everything. They use their profit streams to expand at a greater rate.
It has been estimated that some 50 per cent. of all the borrowing currently undertaken by businesses is somehow connected with property purchases. That shows what an enormous amount of money is tied up in buildings. It may make some people think twice about what they should be doing.
On interest rates, the money that is locked up is often considered as fixed-term borrowing. When rates are volatile, that can sometimes be advantageous, but, at present, there is no doubt that it is very disadvantageous. I could not quite follow the argument about the Government's property portfolio. I had hoped that the Government would dispose of some of their property by putting the money to productive use and releasing the capital in some way. Although it may theoretically have a reduced book value, while it is still on the books it is not necessarily doing anything. We should like to see the funds from such property assets released and put into other areas. I therefore do not quite follow the logic of reducing the book value, although there may be less revenue coming from it. We want a real release of property, which would then provide the means by which the Government could improve public services without increasing taxes.
Most business men would like to get rid of the uniform business rate. They do not want it used as a measure of whether they pay stamp duty or not. The businesses that I know do not sell their property voluntarily; regretfully, the property is sold beneath them. They are worried not about expanding their business but about retaining it. It can be argued that, if stamp duty goes much higher, it will affect the commercial property market. However, the rises proposed by the Government will not cause such a scenario.
There is a long way to go yet. Most of the small businesses that I come across in Cornwall would love to have potential assets of £250,000 or £500,000. We are essentially talking about relatively small businesses, which do not tend to change their premises regularly. Indeed, they often struggle to retain them.
I broadly support the measures. The suggested rates and thresholds in the current proposals do not signal the dire events that have been predicted by the official Opposition, who want to exempt properties subject to the uniform business rate. The Liberal Democrats are prepared to follow the Government on this, and we shall not support the amendment.
Mr. Leslie:
I was interested to hear the Liberal Democrat spokesman, and I agree with his acceptance of the need to increase stamp duty. Listening to the hon. Member for Guildford (Mr. St. Aubyn), one would have thought that the end of the world was nigh. My violin was ready to play a sad song. The tears were streaming down my face at the thought of the terribly poor people who would be affected by this wicked, nasty tax. It was nostalgic to hear again the trickle down theory of economics from the hon. Member for Guildford. He said that this imposition of a half percentage point increase in the rate of stamp duty on properties costing £250,000 or more would make every household in Britain £100 worse off. To hear him talking, it was as though the whole economy hinged on the increase.
The amendment is a typical example of the Conservative party representing the privileged few and not the many, as it has always done and will continue to do, despite the statements of the right hon. Member for Hitchin and Harpenden (Mr. Lilley).
Mr. Gibb:
Is the hon. Gentleman aware that, when a new housing development is built, the house builder purchases a large slab of land that costs more than £500,000? He will
Mr. Leslie:
The trickle down theory continues to expand. It is amazing to watch that happen. The hon. Gentleman's intervention enables us to talk about the impact on residential areas. He argues that, at some level, there will be a charge on commercial transactions. That opens up a gamut of possibilities for us to underline the fact that 96 per cent. of residential properties are completely unaffected by this change in the Budget.
Mr. St. Aubyn:
Does the hon. Gentleman realise that, after the increase in stamp duty last year, the property sector of the quoted sector of the market fell by 20 per cent? Does he realise that most commercial property is owned by savings institutions, such as insurance companies and pension funds, which represent the interests of the very people for whom he claims to speak, but whom we are speaking for tonight.
Mr. Leslie:
Commerce is a wonderful thing but, as my hon. Friend the Member for Halton (Mr. Twigg) said, if this were such a dreadful imposition, businesses in our constituencies would be queueing at our surgery doors to complain about it. I certainly have not had any correspondence about the issue. I notice that Arthur Andersen has sent a briefing to Conservative Members: I have not received it, but it would be nice to see it.
Mr. Bermingham:
I have just done a little calculation to test Conservative Members' lack of knowledge. A developer would probably pay about £1 million for five acres. He would pay about £33,500 in stamp duty and build 28 houses to an acre, which is about 140 houses. That is around £200 per house.
Mr. Leslie:
That is an interesting calculation, and there are plenty more to be made. I was interested in getting some information from the Conservative Front-Bench spokesmen about the effect of passing the amendment on Exchequer revenue yields. They had not even bothered to think that through. They were not particularly concerned about how much would be lost to the Exchequer should their amendment be passed. By the sounds of it, as my hon. Friend the Member for Halton said, they were not concerned about whether their amendment was passed because they intended to vote against the clause in any case, whatever happened.
There are varying views about how much money would be lost if the amendment were passed. The hon. Member for Guildford came up with the interesting wheeze that no money would be lost to the Exchequer, because if we increase stamp duty, the revenue for the Exchequer would be increased. Thank goodness he is not in charge of the economy, although who knows what is happening in the Conservative party these days. He could well be shadow Chancellor before too long. What a day that would be. We look forward to such changes as they emerge in the coming hours.
8.45 pm
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