Finance Bill

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Dr. Pugh: In rising, I am aware that you know that there are many disadvantaged areas in the country that badly need aid, Mr. Benton. Your constituency is certainly one of them, which has received a good amount of aid over time. No one doubts that many constituencies and areas within constituencies require some Government help to achieve economic and residential development.

The issue is not whether that is a desirable objective but whether the measure will go some way towards achieving it. The Government's intentions are entirely laudable, and I support them. There is a roll-out of benefits, particularly on stamp duty for disadvantaged areas. However, as hon. Members have indicated, there are problems with the definition of a disadvantaged area. Let me read from the memoranda submitted to the Empty Homes inquiry. In discussing property transactions in Britain's most disadvantaged communities and the abolition of stamp duty—precisely the issue dealt with in clause 108—the Council of Mortgage Lenders said in its evidence:

    ''It needs to be recognised that definitions are a problem though. How are 'disadvantaged communities' identified? And does labelling a community 'disadvantaged' create its own problems?''

12.15 pm

A problem that has been highlighted is that of areas at the margins. There was a city challenge project in your constituency, Mr. Benton, many years ago. One of the issues was to get assistance to the right areas rather than only to the areas that were in a tightly drawn geographical map, and much leeway was needed to ensure that the effects of the project were as the Government intended. No one doubts that the alleviation of stamp duty will do no harm; the question is how much good it will do. Obviously, stamp duty alleviation is not the only factor that prompts economic development, which I assume is the Government's intention. Offsetting economic development are the people at the margins who feel that they are in some sense disadvantaged by not being

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classed as disadvantaged. Clearly, there are also problems of administrative cost and loss of revenue. Set against that, there must be some appreciable gain.

I am not entirely certain what new clause 16 would do to improve matters. A typographical feature of the new clause confuses me, perhaps because of my inexperience or inability to understand some arcane phrasing. Paragraph 1 of proposed new paragraph 3A states:

    ''Where the amount or value of the consideration is £60,000 or under and the instrument is certified at £60,0000''.

Should that be £600,000?

Mr. Flight: I thank the hon. Gentleman for giving way. I did not want to interrupt him in midstream. The Chairman, not I, selected new clause 16 for inclusion here. I sought to explain how it related to the clause. It is tangential, but the essential point that clause 108 establishes is that if the Government want to, they can separate commercial and residential property for the purposes of stamp duty. If there is an economic argument much wider than disadvantaged areas for commercial property not paying such high rates of stamp duty—for economic mobility, for example—the old argument for not taking that approach, which was that it could not be done, has been undermined by what the Government are doing.

Dr. Pugh: My question to the hon. Gentleman deals with a typographic, textual and extremely narrow topic. I simply do not recognise the figure consisting of £60 and four noughts. It could be that I am innumerate or that it is an error. If someone assures me that that is the way it ought to be written and that it is common parliamentary practice, I shall be much the wiser. As it stands, it is not a figure that I recognise. Is it a misprint of £600,000 or £60,000?

Mr. Flight: I apologise. It is a typing error.

Dr. Pugh: That is the clarification I sought. It is meant to be £60,000.

Let me conclude by saying that I have no objection to what the Government intend to do. I wish them every success in achieving economic development in disadvantaged areas, as do we all. However, what assessment has been made of what has already been done in the 2001 Budget? What assessment have the Government made of the success of prior initiatives in this direction, and what assessment will they make of this initiative? We can do things, but our efforts must be effective.

Chris Grayling: I rise to address the clause, which strengthens the Government's intention to provide stamp duty reliefs in designated areas. It is a wholly inadequate way in which to generate growth and development in deprived areas. The Government's approach to stamp duty adds to problems rather than solving them, and is not the solution to problems in disadvantaged areas.

The hon. Member for Southport and I both served on the Select Committee that carried out the Empty Homes inquiry, and we know that the measure will have no impact on our most deprived areas because sales of properties in those areas are not subject to stamp duty. It is a fallacy to believe that the measure

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will make a major contribution to the revival of many of those areas. The Government's approach is completely inconsistent in addressing stamp duty while failing to address the fact that VAT is payable in full on renovations in deprived areas. How can we possibly support the regeneration of areas that are beset by empty housing in the north of England, where there are big empty terrace homes that desperately need to be revived and brought back into economic use, while the Government continue to discriminate against renovations through the VAT system? The clause will not address that issue.

It also concerns me that the Government seem to believe that the measure will make a big difference in that area although they have completely failed to deliver a proper GAAP generally accepted accounting practice funding scheme because they caved in to pressure from the European Union, which has prevented GAAP funding being used in a number of areas. My hon. Friend the Member for Arundel and South Downs rightly made the point that many provisions in the clause will be vetted in Europe. Why do we not stand up more robustly to the European Union when it seeks to intervene and take decisions on matters of urban regeneration that are fundamental to the development of this country? That should not happen, but it seems to happen again and again. I am waiting in vain to see the Government take action to solve those matters. They cannot seek to use stamp duty as a major vehicle of urban regeneration while failing completely in other areas.

Mr. Tom Harris (Glasgow, Cathcart): I thank the hon. Gentleman for giving way. Although I agree with his assertion that the measure will not alleviate at a stroke some of the areas of deepest deprivation in the country, does he accept that it is at least part of a larger strategy? In my constituency, which is one of the most deprived parts of Glasgow, the first ever sale of a house costing more than £100,000 took place in the past six months. Surely the measure is having an effect, albeit a modest one, that he should welcome.

Chris Grayling: The point that the hon. Gentleman misses is that we should provide support for regeneration across the housing scale, and not simply for the very small number of houses in his constituency and other areas with problems that fall into the category covered by the clause. Tackling the tax system in other ways would have a far greater impact than the clause, which will have a relatively limited impact on the most deprived areas and will create distortions within the market.

We shall create a Gruyère cheese in which pockets of reliefs are available in major cities and in which the housing market on the fringes of those areas will be distorted. Indeed, that is already happening. It is totally the wrong way in which to use stamp duty. My hon. Friend the Member for Arundel and South Downs rightly pointed out that the Government seem to believe that stamp duty is a cash cow. They believe that, where there are holes in the cheese, they will have a few pockets where they will get rid of stamp duty. They do not seem to understand that the impact of

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using stamp duty as a cash cow will be to generate problems in areas where housing costs are particularly high and it is increasingly difficult for key workers people in public services, manufacturing industry, and bus and train drivers to get on to the housing ladder.

The focus on using stamp duty in the majority of the country as a vehicle for raising tax while providing reliefs in a small number of deprived areas is totally wrong. It places a huge burden on those buying houses for the first time in areas where house prices are high. Young couples, teachers and policemen who are trying to get on to the housing ladder are subject to bills for thousands of pounds. The Government say that, in small areas within the inner cities, a relatively small number of properties can benefit from stamp duty relief. Such a policy is upside down.

Ann McKechin (Glasgow, Maryhill): Does the hon. Gentleman accept that a decrease in stamp duty in areas of high demand is likely to cause prices to go up even higher because of further demand in those areas? The whole point of the strategy is to encourage those in middle-income groups to move into areas of urban deprivation. It is a small, but important, measure. As my hon. Friend the Member for Glasgow, Cathcart (Mr. Harris) said, people are now moving into the areas of Glasgow that we serve, where previously there was no private housing whatever. As a result of the measures, people are being encouraged to consider moving into inner cities that have suffered from depopulation and consequently from a lowering of the tax base. When we lower stamp duty, property prices in the highest-demand areas simply rise further because of greater competition.

Chris Grayling: The point that the hon. Lady misses is that people will not be attracted back into urban or inner-city areas unless the quality of the housing stock is raised. The clause will not do that; it will provide a small distortion in the housing market that will cause problems on the fringes.

If one says that stamp duty will no longer be charged in a deprived area—the Paymaster General said that she intends to scrap stamp duty altogether in such areas—distortions will be created on the fringes so that stamp duty will have to be paid in one street but not in the next. That will also restructure the tax system so that in the more prosperous areas where house prices are higher, the increased burden of stamp duty will make it more difficult for key workers, whom we need in such areas, to get on to the housing ladder. The Government have their priorities completely wrong: stamp duty is being used as a cash cow to fill the Treasury's coffers. That will have a distorting effect on the housing market for those who need to get on to the property ladder and will not deliver real solutions for the problems that undoubtedly exist in inner-city areas. We should take tax steps that encourage the regeneration of the sorts of areas that we saw in the Empty Homes inquiry. The Government's strategy will go no way to achieving that.

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