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Mr. Flight: The word "stealth" has two applications in this context. It applies, first, because the increase is a significant but unexpected tax on business. It applies, secondly, because people do not necessarily think about tax when they have to change houses after changing jobs or relocating, or when their family has grown. The tax therefore sneaks up on them.
The hon. Gentleman dealt with the measure's effect, in the residential sector, on families. I should like to explain how the Government's actions are helping families. In our Budgets since the general election, we have done a huge amount to help families. We have reduced tax on the average family, so that for a single-earner family on average earnings with two children, tax is at the lowest rate since 1972. [Interruption.] The right hon. Member for Wells (Mr. Heathcoat-Amory) can say that he does not believe it, but it is a fact. In these matters, there is nothing as unarguable as a fact.
We also have incredibly low mortgage rates--which are particularly low in comparison with the mortgage rates that applied at their peak in the 1990s. Therefore, on average, people will be paying £300 less per month because of the Labour Government's economic policies and platform, the stability that we have created, and the low inflation and low interest rates that we have managed to generate. Householders are much better off.
We should also consider how many people will pay stamp duty on residential transactions. The fact is that more than one third of transactions incur no stamp duty at all--they never have incurred stamp duty. Moreover, 95 per cent. of sales will be completely unaffected by the Budget's provisions. Those are the facts that the House should consider. The hon. Gentleman gave us scarcely any facts in favour of his hypothesis. There is no evidence that the measures on stamp duty in this or earlier Budgets have had any effect on house prices or the number of transactions carried out in the residential property market.
The same is true of commercial sales. We have a healthy commercial sector, which has enjoyed good growth. A large number of transactions take place and there is no evidence of any problem. In last year's Budget debate, Conservative Members put forward hypotheses that there would be damage as a result of last year's measures. Well, we have this year's figures, and I notice that the hon. Gentleman has not referred to the implications of last year's arguments. It is clear that the problems that Conservative Members referred to then have not materialised, and that the Government have been proved right. Stamp duty presents a fair and progressive system of taxation, which is why we have made these proposals.
The hon. Gentleman referred to loan collateral and the possible harmful effect on business. There is no evidence that a stamp duty increase of 0.5 per cent. reduces property values significantly, if at all. In fact, commercial property is not usually of primary importance as collateral, so on neither count is there evidence of a problem. It was suggested that the measure might have been taken to help stabilise the housing market. That is not its main purpose; its main purpose is to put in place a fair and progressive structure for stamp duty. Our macro-economic framework is the main measure to stabilise the housing market. That is working to the benefit of the economy, businesses and families--people right across the country are benefiting from our management of the economy.
The hon. Member for Truro and St. Austell talked about the loopholes that are being closed. There are a number of such loopholes, some of which we have considered for some time. They include a revised definition of "group" for the purposes of stamp duty relief for transfers of property between associated companies. I hope that the hon. Gentleman will give us his full support on our measures to close those loopholes.
I was distressed to hear that the hon. Member for Arundel and South Downs will not be supporting clause 116. That measure will enable us, when we discover avoidance techniques, to close loopholes in the middle of a year between Finance Bills. People will be able to discuss the way in which that is being done, but the measure will stop off revenue outflows that should be going to the Exchequer because people are finding loopholes in the system.
I cannot comment on the Rover restructuring. There are many issues that are still, unfortunately, unresolved, and although the hon. Gentleman invited me to comment, it would not be appropriate for me to do so.
The hon. Member for Truro and St. Austell remarked on the way in which we might change to what is called a slice basis for stamp duty. The full-year cost would probably approach £1.5 billion, or more than a third of the current yield from the duty. Higher rates of duty would then be needed to maintain the yield. It would be interesting to hear what measure the hon. Gentleman would propose to stop up the gap--the money that would be missing from the Exchequer--as a result of that suggestion.
Mr. Matthew Taylor: I was talking about a revenue-neutral basis. The hon. Lady has suggested how that can be done. Is she aware that under the present system, before the Chancellor started to raise the differentials for more valuable property there was virtually no difference in the number of transactions just above and just below the £250,000 band. After the first increase, 139 properties were sold just under the £250,000 band for every 100 above it. Now, 151 are sold at just under £250,000 for every 100 above it. There is clear evidence of avoidance and of loss of revenue to the Exchequer as a result. Therefore, there is clear evidence that we have created a system that favours the cheat over the honest person.
Miss Johnson: I cannot agree. There are different ways to structure stamp duty, but other methods, in particular the slice basis, cause problems of their own. That method would cause a significant loss to the Exchequer.
The sort of problems that the hon. Gentleman describes are not apparent. We are still collecting the revenue that we have always expected to collect from stamp duty. Indeed, last year, we met the expected target for the collection of stamp duty revenues. The case that he put forward is not borne out by the facts.
Mr. Campbell-Savours: Is it not true that the phenomena that the hon. Member for Truro and St. Austell (Mr. Taylor) mentioned show that the measure is probably having a deflationary effect on house prices?
Miss Johnson: That could indeed be so. There is a danger in changing the basis of something that has always worked well. Stamp duty was introduced in 1694. [Interruption.] I am conscious of the fact that many hon. Member would like to leave the Chamber to go home to their beds.
Stamp duty is an extremely efficient tax. The measures that we are introducing are giving a fairer and more progressive structure to the tax. There is no evidence that we need to change the basis for the duty on commercial or residential property, or indeed shares. It brings revenue into the Exchequer and we are, in fact, in a beneficial position. I urge hon. Members to support the proposal. It is working well and will continue to do so.
Mr. Flight: I shall be brief. First, do the Government intend to continue with their policy of increasing stamp duty by 0.5 per cent. per annum, or do they believe that the level that the duty has reached represents some form of ceiling?
Secondly, the Minister seemed to argue that extra charges on transactions have no economic impact. For the past three years, for a variety of reasons, property prices have been rising continuously. Bank of England studies have found that increased transaction costs have an impact when the market goes down--the increase in volatility and the fall in prices tend to be exaggerated by rising transaction costs. Then, families really suffer if it takes them into negative equity. Independent data show that families are already paying about £670 more in tax per annum, so they are not better off in tax terms. Furthermore, they have lost their mortgage interest relief at source.
I pointed out the objections to clause 116; they were echoed by the hon. Member for Truro and St. Austell (Mr. Taylor). In essence, they are that the clause lacks clarity--if there is a problem to be dealt with, it does not help the marketplace if matters are not clear and certain. It would be better if there were specific clauses to address any problems that the Government believe are outstanding.
I rebut the assertion that 95 per cent. of transactions will not be affected. As I pointed out, those data were produced before the rise in house prices that has taken place over the past year or so; in the south-east, that has certainly been in the order of 20 per cent. The Economic Secretary to the Treasury herself commented--presumably she was including commercial property--that only a third of transactions paid no form of stamp duty.
I repeat that this tax is predominantly levied on business. The Minister did not reply to my points on that issue. Business pays the most stamp duty. It is a tax on businesses that relocate and set up new operations in different parts of the country. It is a tax that will apply in situations such as that of Rover, where major changes must be made in order to survive.