Previous Section | Index | Home Page |
Mr. Breed: Will the hon. Gentleman give way?
Mr. Clifton-Brown: As I have mentioned the hon. Gentleman, I give way.
Mr. Breed: Does the hon. Gentleman suggest that that will continue to happen in the next two or three years?
Mr. Clifton-Brown: It all depends on whether the Government take us into the euro, on long-term and short-term interest rates, and on how rents respond to competition. There are so many unknown factors that it is impossible to predict. I will not give any company generalised advice; I simply caution companies not to assume automatically that it will be cheaper to rent than to own property. That conclusion cannot necessarily be drawn.
Arthur Andersen has estimated that, even on conservative assumptions, an increase in stamp duty from 3 to 4 per cent. would decrease the value of commercial properties by 4 to 7 per cent. That would imply that the total value of commercial property would decline at a stroke, through the imposition of the clause, by between £25 billion and £42 billion. That shows that the clause will have a significant effect on business activity.
The three increases in stamp duty have already had an effect. Commercial property is now valued at about£193 billion, whereas, at the end of the 1980s, it was valued at about £280 billion. That has an effect on liquidity and on the ability of companies to borrow on the basis of the value of the commercial property held in their portfolio.
We should be looking to lower taxes for business. We want to stimulate business activity. We should not allow the cosy assumption that we shall harmonise taxes in Europe to lead us automatically to assume that taxes will be increased. This country should be a beacon in Europe--I hope that my hon. Friend the Member for Maldon and East Chelmsford (Mr. Whittingdale), who is on the Opposition Front Bench, is listening to this, because I am sure that it will be of interest to him--for lowering taxes, not increasing them.
As I said yesterday, if we continue increasing taxes, as we are doing in this instance by raising stamp duty, we shall make more and more people unemployed. Total unemployment in Europe is now 18.5 million; with increased business taxes, it will become even worse. We shall make Europe even more uncompetitive compared with the rest of the world.
I have recently returned from Hong Kong--this is declared in the Register of Members' Interests. It is enshrined in the Basic Law that the maximum level of taxation in Hong Kong is 15 per cent. Every politician and every civil servant should be required to visit Hong Kong to see what a proper deregulated economy could do.
We should examine carefully what an increase in stamp duty will do. By far the largest amount of stamp duty is paid by the commercial sector. My hon. Friend the Member for Maldon and East Chelmsford is right to try to exempt commercial property. If we do not recognise the property investment sector as an important international investment medium, we shall suddenly find that inward investment will decline. The previous Conservative Government were successful in bringing investment into the country. At one point, over a 10-year period, we managed to attract a quarter of all the inward investment into the EU; that probably created 1 million jobs. It would be a tragedy if this Government, with their tax-raising ideas, started to reverse that trend and increased unemployment. I do not want that to happen, and nor do my constituents.
When the Financial Secretary sums up, I hope that she will give us an idea of the effect of the burden on industry of the increase in stamp duty. Much more importantly--
I return to where I started--I ask her to give the property industry an indication of her long-term strategy for stamp duty so that it can plan its investments, which, by their very nature, are long term, and so that investors can plan with certainty on the basis of a degree of known facts.
The Financial Secretary to the Treasury (Mrs. Barbara Roche):
We have had a long, but thorough, debate on the amendment, which would exclude from the increases in the higher rates of duty any transfers of property to which the uniform business rate applies. Clearly, the amendment's purpose is to introduce a stamp duty relief for commercial property. Let me say at the outset that I do not believe that such a relief is called for, and I shall explain why.
The commercial sector of the property market is in sound condition and should be well able to absorb these small increases without serious difficulties. My hon. Friends the Members for Halton (Mr. Twigg) and for St. Helens, South (Mr. Bermingham) pointed that out.
According to the Investment Property Databank, the commercial property market has been strengthening in 1999. Returns from investment in property over the past three years--at 9.4 per cent. a year, adjusted for inflation--have been considerably better than the long-term average of 5.9 per cent. since 1986. Stamp duty is only one of the considerations involved in buying or leasing property; other economic factors, such as long-term interest rates and increases in capital values, are much more important.
The hon. Member for Maldon and East Chelmsford (Mr. Whittingdale) raised a number of issues and I shall deal with them in turn. He asked whether there was a secret agenda to harmonise stamp duty with Europe. The Conservative party knows a great deal about secret agendas, but this evening I shall not dwell--not at length, at any rate--on its misery. United Kingdom rates are moderate; there is no European proposal to harmonise stamp duty, and there is certainly no secret agenda.
The hon. Gentleman then said that rises will wound ordinary home owners in the south-east. May I point out to him that ordinary home owners--on whom we have concentrated this evening--are enjoying the lowest mortgage rates for 33 years? I know that that is very popular in the country. He also spoke about something that is known as the slice system; I say that for the benefit of those Members who have just joined us in the Chamber. This is an example of the Opposition not fully costing their proposals.
Such a proposal would be incredibly expensive--it would cost £890 million--and lead to higher rates and a much more complex system. [Interruption.] The hon. Gentleman protests, but he is one of the people who have argued for simplicity. During our exchanges last week, I told him how much I admired his stance on deregulation. He has criticised Governments for not deregulating enough, but--as I had to point out to him last week, and have to point out to him again--the only problem is that he has been criticising the previous Conservative Government.
Mr. Clifton-Brown:
Will the Financial Secretary give way?
Mrs. Roche:
Let me make some progress, because I want to deal with what the hon. Gentleman said.
The hon. Member for Maldon and East Chelmsford also said that we were weakening the competitiveness of the City of London; that is certainly not its view. The Government are absolutely committed to maintaining a competitive environment in which the City can prosper.
The hon. Member for Guildford (Mr. St. Aubyn) raised a number of issues and, again, I shall deal with them in turn. He argued that a stamp duty increase would prevent local government from increasing taxes and asked whether the Government were carrying out a smash-and-grab raid. I note his enthusiasm for higher local taxes and I am sure that his proposal will be disseminated widely in his constituency. His argument is absolute nonsense.
The hon. Member for Guildford also said that the increase in duty on commercial property reduced the value of the Government's assets, outweighing the increase in tax revenue. The hon. Member for South-East Cornwall (Mr. Breed) rightly said that he could not see the point in that, but I am glad that the hon. Member for Guildford is taking an interest in the public finances. How unlike the record of the Government whom he would have supported, had he been a Member of the House at the time. Under that Government, borrowing reached £50 billion and the national debt doubled. It needed this Government to--
Mr. Jack:
The Financial Secretary has just played back the remark made by my hon. Friend the Member for Guildford (Mr. St. Aubyn) and by me about the estimated drop in the Government property portfolio as a result of these proposals. She went on to make a party political point. May I bring her back to that figure and ask whether she agrees with it? If so, has any adjustment been made for that fact in the resource accounting procedures?
Mrs. Roche:
No, I do not agree with it. I shall go on to discuss some of the points that the right hon. Gentleman made, because the Committee wants to hear about them.
Next Section
| Index | Home Page |