Examination of witness (Questions 700
- 719)
WEDNESDAY 12 APRIL 2000
MR STEPHEN
TIMMS
700. The other proposal that Lord Rogers goes
on about is the possibility of some kind of greenfield levy, a
tax of some kind on building houses on greenfield sites. Would
that help to regenerate the inner cities? Do you think it would
or would it merely put up the prices of houses on greenfield sites?
(Mr Timms) I do not think that he proposes a tax on
greenfield development. He talks about VAT, but my understanding
of his conclusions is that apart from the VAT measures, an additional
tax on greenfield development would not be appropriate.
701. Leaving aside Lord Rogers, many people
are talking about putting some kind of tax—whether VAT or
a levy—on building houses on a greenfield site. Some people
say that would not help to discourage building on greenfield sites.
Are you in favour of such a tax or not?
(Mr Timms) There are two separate approaches. In answering,
I want to be clear which one we are talking about. I have said
that we are looking at all the proposals made about VAT, including
the greenfield element of that, but my understanding of the conclusions,
apart from VAT, is that it would not be appropriate to introduce
a tax on greenfield development and I concur with that view.
702. VAT of 17.5 per cent would be an extra
cost if you build a house on a greenfield site. The question I
am asking you is, do you think that some kind of tax on a house
built on a greenfield site would help urban regeneration?
(Mr Timms) We are looking at all Lord Rogers' VAT
proposals, including what he has proposed—
703. You could send us a letter stating that.
We are asking a specific question about specific proposals and
for you constantly to say that you are looking at them—
(Mr Timms) We are looking at them all. I do not want
to mislead the Committee.
Mr Olner: The previous administration put VAT
up to 17.5 per cent.
Chairman: Let us move on.
Mr Benn
704. When do you expect the review of stamp
duty to be completed?
(Mr Timms) We shall move fairly swiftly to put the
consultation in hand. The Paymaster General will take that forward.
Chairman: The phrase "we shall move fairly
swiftly" needs to be defined by Ministers.
Mrs Dunwoody
705. Is that in Treasury terms or in everybody
else's terms?
(Mr Timms) In common parlance.
706. That is not the same as European time and
African time?
(Mr Timms) No. I do not think that there is any reason
for hanging around on this. I am not sure what the Paymaster General's
precise timetable is for it, but we shall move fairly quickly.
I do not imagine that it needs to be a very lengthy process. Certainly
by the time that we get to the pre-Budget report in November,
I would expect the consultation to have been completed and a conclusion
to have been drawn.
Chairman
707. Presumably that may mean that there will
still a question mark over it when the Urban White Paper
is published.
(Mr Timms) Yes, I think it might be over ambitious
to expect everything to have been concluded in time for the Urban
White Paper, but certainly by the pre-Budget report.
Mr Benn
708. Do you know whether those involved in property
development will be consulted as part of this review?
(Mr Timms) Yes. Our intention is that the Inland Revenue
will approach the appropriate representative bodies, including
those with interests in property development. Of course, anybody
who wants to express a view should not hesitate to put their view
forward and all submissions that we receive will be carefully
considered.
709. Looking at the issue that we are discussing
this morning, is the Treasury concerned about the low rate of
return that there is on property compared with equities and other
investments? We have had quite a bit of evidence that has expressed
concern about that.
(Mr Timms) On the whole, I think our view is that
the property market is in quite good shape at the moment. There
has been good growth in the value of commercial property in the
UK in the past couple of years. I think there is a good stream
of investment in property in hand at the moment. We do not have
any great misgivings about the state of the property market at
the moment.
Chairman: Are you sure about that? The phrase
"as safe as houses" used to be used. When the Select
Committee was in Yorkshire last week, it saw that 50 per cent
of the shops in Heckmondwike were empty which meant they were
not producing much of a return. There are also substantial numbers
of houses that people have bought in parts of Leeds that are almost
unsaleable.
Mr Benn
710. Therefore, that makes regeneration of inner
cities rather difficult, hence the question.
(Mr Timms) What I said about the state of the property
market is right, but it clearly is the case that there are pockets
across the country where there are serious problems. I think that
is the concern at the heart of the document that is being published
today, arising from the work of the Social Exclusion Unit and
the various policy action teams, which have looked very specifically
at the problems of shops, for example, in disadvantaged areas.
There certainly are serious localised problems in this area and
in a number of others and they need to be addressed in a joined-up
way by the Government's strategy. I do not see a general problem
of weakness in the property market.
711. In the light of what you have just said,
do you think that there may be a case for having a different rate
of stamp duty in those areas that are under particular stress,
where property values are a problem?
(Mr Timms) Yes. I think there would be some difficulty
in having different rates of stamp duty. I would not entirely
rule it out, but there are administrative difficulties in introducing
that arrangement. It is a one-off tax, so it is not as though
there is a system of tax being paid every year in the way that
council tax and business rates are.
712. If you draw a ring around an area, it would
be easy to identify which properties would qualify and which would
not. I am not clear what the administrative problems are.
(Mr Timms) It is a further complexity in the tax system.
I am not ruling it out. If the Committee wants to recommend that
there should be an arrangement of that sort, we would certainly
consider it. Given that the tax falls only when a property is
for sale, rather than on an annual basis as rates do, I remain
to be convinced that that change would be one that is worth making.
Chairman
713. I am not sure whether you want to look
at the piece of paper that has been passed to you.
(Mr Timms) I think what I have said stands.
Mrs Dunwoody
714. What concerns the Royal Institution of
Chartered Surveyors is the fact that changes in stamp duty may
not be the way to encourage people to regenerate property. For
example, they said that if they received capital gains tax relief
on polluted sites, or if they received changes that would encourage
people to put in money, that may be more useful, and that stamp
duty may, in effect, wipe off a lot from the value of properties
without necessarily encouraging the result that you want.
(Mr Timms) I know that the RICS expressed concerned
about the impact of the change to stamp duty in the Budget. I
was surprised by the figure. I think they suggested that there
would be a fall of £13 billion from the capital value of
commercial property arising from that change. I was surprised
by that, given that commercial property prices have risen by nearly
7 per cent since the half a per cent rate increase in the Budget
last year. I do not share the RICS's view of the impact on the
commercial property market of stamp duty changes. However, we
shall certainly want to take full account of the views of the
RICS and others in the consultation process that the Paymaster
General is leading on, about whether and if so how, we should
implement the exemption from stamp duty for brownfield developments.
715. I think they were making the point that
property investment could be risky and that is one point that
the Urban Task Force picked up. Would you support 100 per cent
capital allowance on the cost of refurbishing flats above shops?
(Mr Timms) Again, that is one of the proposals that
Lord Rogers has suggested in one of his lists. It is one that
we are looking at. It is not one about which we have reached a
conclusion yet. From my experience in Newham, in East London,
from time to time we tried quite hard to bring back into use flats
over shops. It is an under-used resource. There are lots of unused
residential accommodation across the country in flats above shops.
If we could find a way of bringing those into use, that could
be extremely helpful. Whether Lord Rogers' suggestion is the way
to do that, I am not sure. There have been disappointing results,
in my experience, in trying to do that in the past, but we shall
look at what he has said.
716. In that case, which of the Government's
measures do you think would be most helpful in supporting venture
capital where it seeks to carry out developments in difficult
locations?
(Mr Timms) On the venture capital front, we are taking
a wide range of measures. Stop me if this is not the point on
which you wanted me to elaborate. The Chancellor announced in
the Budget a substantial increase in public support for venture
capital funding, with the £1 billion target umbrella fund
for investment over the next three to five years, using government
resources, using resources from the European investment bank,
which is a new element in the equation, and leveraging in private
sector resources as well. We want at least one venture capital
fund to benefit from that in each of the nine English regions.
717. Would that have a special remit that said
that that money would be particularly helpful in developing unpopular
or run-down locations?
(Mr Timms) The remit to be given to each of the funds
will be a matter for each of the RDAs to determine.
718. I understand that, but the Treasury must
have to take a general overall view of which of the measures they
think will begin to bring into operation some of Lord Rogers'
recommendations.
(Mr Timms) We are not going to be very prescriptive
about the objectives that the RDAs should set for their funds.
It is important that there is maximum flexibility for each of
the agencies about the terms that they set for the funds. Of course,
it is important that the funds should secure commercial returns
and be managed in a normal commercial way. However, my expectation
would be that the RDA would see that as an opportunity to achieve
new investment that otherwise would not take place in the areas
that Lord Rogers is concerned about.
Mrs Ellman
719. Does the Treasury agree with the principle
of a revolving land assembly fund?
(Mr Timms) Perhaps you can tell me what the principle
of a revolving land assembly fund is.
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