Standing Committee H
Thursday 25 May 2000
[Mr. Frank Cook in the Chair]
(except clauses 1, 12, 30, 31, 59, 102 and 113)
Employee share ownership plans
Mr. David Heathcoat-Amory (Wells): I beg to move amendment No. 133, in page 34, line 23, after ``effect'' add
`from the day on which stamp duty ceases to be chargeable on the conveyance or transfer of stock or marketable securities (within the meaning of Schedule 13 to the Finance Act 1999)'.
The Financial Secretary to the Treasury (Mr. Stephen Timms): On a point of order, Mr. Cook. Amendment No. 133 seems to be a device to secure a debate on stamp duty under clause 47, which deals with employee share ownership. Clauses 113 to 130 deal specifically with stamp duty and we shall be debating them in future proceedings. To what extent will you allow us to debate stamp duty under this clause, Mr. Cook, given that we have not yet reached the appropriate part of the Bill?
The Chairman: To the extent that stamp duty is referred to in the amendment, reference to it will be in order when we debate amendment No. 133. However, the main focus of the debate should be on the proposal to delay the new employee share scheme. The proper time for debate on the future of stamp duty will be when we reach clauses 113 to 130.
Mr. Oliver Letwin (West Dorset): On a point of order, Mr. Cook. I must convict myself either of more than usual incoherence or of mumbling. In a spare moment, I noted that I was reported as saying in a previous sitting, in relation to the climate change levy, that the Government
were driven away from taxing consumers instead of producers-[Official Report, Standing Committee H, 18 May 2000; c. 297.]
However, I had intended to say that they were driven to taxing consumers, instead of producers. I am not sure whether it was because I was mumbling that the record of our proceedings is incorrect or whether it was because I was incoherent. Either way, I should like to set the record straight.
The Chairman: With regard to that point of order, I am sure that all experienced right hon. and hon. members of the Committee have had cause in the past to regret what they have said and to seek means of altering the record afterwards. I am sure that Hansard will record the hon. Gentleman's statement with great diligence.
Mr. Heathcoat-Amory: We are about to discuss a most important section of the Bill concerned with employee share ownership, something that Conservative Members support strongly in concept, even though we have many quarrels with the way in which the Government are promoting it. They are in danger of doing to share ownership what they did to the mass savings market when they abolished personal equity plans and tax-exempt special savings accounts and replaced them with individual savings accounts. That had an overall detrimental effect under the guise of improvement. We shall be looking carefully at the precise way in which the Government are introducing new schemes and abolishing old ones. The amendment is important because it concerns stamp duty on shares. As the Financial Secretary said in his point of order, we shall have other opportunities to refer to the issue; nevertheless it is important in the context of share ownership. If we want to encourage people to buy or take options on shares, save them and then sell them, the level of tax-or whether there is a tax at all-on any such transactions is important.
Most employers would prefer the London stock exchange to remain the centre for their share dealings and would be dismayed if the Government took action or failed to take action as a result of which a lot of business was transferred to another stock market. That is a real possibility following the projected merger of London and Frankfurt.
The core of the issue is that in Germany, no tax is levied on share transactions, while in this country, we have stamp duty at 0.5 per cent. That is the clearest contrast, but in fact we are unusual in having stamp duty of any significance. France has a 0.3 per cent. share transaction tax, but Italy does not, except for off-exchange transactions, for which it is 0.14 per cent. Although the United States technically has a tax, it is 1/300 of 1 per cent. Japan has no tax.
The clear trend is towards the abolition of share transaction taxes. If we hold out against that trend, we face the familiar problem under this Government of becoming an increasingly less attractive place in which to do business. That will be to the detriment of not only the London stock exchange but the wider shareowning public, and will inhibit development.
Mr. Edward Davey (Kingston and Surbiton): Will the right hon. Gentleman tell me, as I have temporarily forgotten, when the 0.5 per cent. stamp duty on share transactions was introduced?
Mr. Heathcoat-Amory: Of course we can always go back in history; indeed, in the context of taxation, we could go back to measures such as the window tax. However, it is more important to consider modern developments. It is perfectly acceptable and tolerable, and it is not damaging, to tax share transactions when national jurisdictions are involved. The development that may have escaped the Liberal Democrats is that capital is highly mobile, and transactions now take place not on bits of paper on the floor of the stock exchange, as they did when the tax was introduced, but on trading screens, and can therefore take place anywhere. For that reason, today and in future, the existence of differential rates of tax between ourselves and other stock exchanges has become especially important. It does not constitute an especially telling intervention to ask when the taxes were introduced and in what circumstances.
Mr. Howard Flight (Arundel and South Downs): Stamp duty was in fact reduced to 0.5 per cent. by the Conservative Government in 1986, and in 1990 the previous Government expressed the view that it would have to be abolished. Members of the present Government have publicly expressed similar views in the past two years.
Mr. Heathcoat-Amory: I am grateful to my hon. Friend. It is just as well that we did not have a Lib-Lab coalition for those years, as we would be facing not merely a 0.5 per cent. share transaction tax or stamp duty but a much higher rate. The high taxation party-the Liberal Democrats-is in an extremely weak position to contribute to the debate, unless the hon. Gentleman wants to repent of his errors.
The Economic Secretary to the Treasury (Miss Melanie Johnson): Does the right hon. Gentleman accept that the duty paid relates not to where the shares are traded but to where the company is registered? A company that is registered in Germany or France and trades shares on the United Kingdom stock exchanges will pay no stamp duty on its share transactions because what is relevant is where the company is registered. As a consequence, only companies that are registered in the UK pay for trading shares on the London stock exchanges.
The right hon. Gentleman might want to bear in mind how many companies have decided to register in the UK. All the evidence suggests that lots of companies are still choosing for a variety of good reasons to be registered in the UK. They include companies that have recently had obvious other options available, such as Vodafone-Mannesmann, which could have decided not to continue to be registered in the UK. However, it has continued here despite the merger because of the benefits of UK registration. The right hon. Gentleman is completely ignoring clear evidence that the stamp duty on shares is not relevant to the issues that he raised.
Mr. Heathcoat-Amory: We have heard that breathtakingly complacent attitude before. In European terms the United Kingdom is a comparatively low-tax jurisdiction, although that is being rapidly undermined by successive Finance Bills, but that does not mean that we have an unthreatened advantage in world terms. I urge the hon. Lady to lift here eyes a little to further horizons, and to see London and the United Kingdom in the global context in which we are fighting a pitiless day-to-day battle for international competitiveness. Differences between tax levels are an important element of that.
Mr. Edward Davey: The right hon. Gentleman suggested that my party was not keen on reducing taxes. We would consider the case, as it might have merit. Will he explain why, to judge from the intervention by the hon. Member for Arundel and South Downs (Mr. Flight), the Conservatives considered getting rid of the tax in 1990 but still had not done so seven years later?
Mr. Heathcoat-Amory: My hon. Friend the Member for Arundel and South Downs explained that we had a good record in bringing down the taxes, even though we had to contend with the budget deficit. As was evidenced by the intervention by the hon. Member for Kingston and Surbiton (Mr. Davey) and by Ministers' comments, people are blind to future developments. The competitive pressures are increasing, so we need to look ahead at whether it is sustainable for Britain, and in this case its stock exchange, to have a level of duty and tax that is clearly out of line with those of international competitors.
The Economic Secretary complacently said that everything was fine on the London stock exchange, but there is evidence from the turnover figures for 1998 that London lagged behind NASDAQ and the American and Frankfurt stock exchanges in terms of velocity of turnover. We have a strong position, but we cannot rely on it unless the Government actively take account of the question of differential taxation. We are drawing attention to that.
We would like to draw the Government out a little more on their plans on the subject. What representations have been made to them? Will they further outline their views about whether it is irrelevant to have a stamp duty tax on shares when our competitors do not?