Finance Bill

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Mr. Iain Luke (Dundee, East): My hon. Friend the Paymaster General gave examples of English redevelopment. Will she accept from me that in Scotland changes in areas such as Dundee and Glasgow, which was mentioned earlier, have made a significant difference to the most deprived areas? In both the inner cities and on the periphery, areas have been created in which people are happy and proud to live. That new step will take those areas of redevelopment further. Places such as Ardler in Dundee, West and Whitfield in Dundee, East are deprived areas that have seen significant changes. Whitfield is still changing, and some time ago it received a United Nations award for urban settlement as part of that policy. Hopefully my hon. Friend will acknowledge the changes both north and south of the border.

Dawn Primarolo: Indeed. I hope that my hon. Friend will forgive me because the two examples that I read from the top of the pile came from England. Because we are using a deprivation index that provides a national comparison between Scotland, England, Wales and Northern Ireland, all those communities are benefiting. My hon. Friend made another important point that measuring economic regeneration in disadvantaged areas concerns more than whether or not houses have been purchased. Each purchaser at the time of purchase will have another £1,500 to assist with their family's budget at a time at which it will be stretched, and they will spend that money in the local area. The policy will not only help people on to the housing ladder, but improve quality of life and have a knock-on effect.

That leads me to the next point made by Opposition Members—that the measure will displace economic activity. With respect, it is just as likely that the exemption will have a beneficial effect across neighbouring and non-qualifying areas as areas are improved and investment continues. As I have said, we have used the national index of deprivation. Of course, such measures are never perfect because a line must be drawn somewhere, but it is the most accurate and up-to-date information that we have.

Chris Grayling: Will the Paymaster General give way?

Dawn Primarolo: I was just about to answer one of the hon. Gentleman's points, but I shall gave way first in case there is another one.

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Chris Grayling: The Paymaster General keeps referring to the national index of deprivation and has made several references to Hither Green hospital. I doubt that there is a single polluted brownfield site in the whole of Greater London for which there would be a shortage of willing developers. Does the hon. Lady accept that in many parts of the country there are real problems in the housing market that simply will not be touched by the measure?

Dawn Primarolo: No, I do not accept the hon. Gentleman's central proposition. For instance, if we look at the activity in Liverpool, Manchester and other areas that equally need investment, we see the same levels of activity. The problem with the hon. Gentleman's approach is that instead of looking at the breadth of Government support and intervention in areas of deprivation, he tries to look at each initiative on its own and then undermine the general principle. That goes back to the point that I made to the hon. Member for Fareham about the difficulty in but, none the less, importance of trying to measure the effectiveness of the policy in the economic regeneration of those areas and in narrowing the gap. Of course, several policies are already in place.

12.45 pm

A further argument made by the hon. Member for Epsom and Ewell was that the poorest areas would not be helped, because house prices in those areas were below £60,000. I do not know what poorest areas in the United Kingdom the hon. Gentleman has recently visited, but I assure him that all parts of the country contain a broad range of residential and commercial property types and prices. Any extra incentive to invest in a disadvantaged area to encourage and help regeneration seems to draw wide agreement, except from Conservative Members.

Chris Grayling: As the hon. Lady does not know what areas of deprivation I visited with the Select Committee, I may tell her that we visited a number in Burnley, Manchester and Liverpool. The areas that we visited would in no way fall within the ambit of the measure. I commend the report to her.

Dawn Primarolo: I live in Bristol, a city that has a wide range of property prices. Several areas—some in my constituency—are in wards that meet the deprivation indices used for absolute poverty. I am sure that if the hon. Gentleman had visited Bristol on his varied trip, he would have understood my point about properties ranging dramatically in price, particularly in inner-city areas where people would prefer to live, given the proximity to other regeneration projects that are in place in cities, but cannot because of shortage of accommodation. The hon. Gentleman and I will simply have to disagree on whether the mechanism is suitable but, being generous to him, I presume that he is not suggesting for a minute that there should be no action to deal with regeneration of the housing stock and commercial activities in such areas.

I was also asked about state aid approval. We are progressing matters with the Commission and confidently expect a satisfactory outcome. We believe that careful targeting of the measure on the most

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disadvantaged areas of the country will not adversely affect trading conditions to the extent that they are contrary to the common interest. When Conservative Members ask why we allowed the situation, I reply that it was for the same reason that the Conservative Government did: the state aid rules are in the treaty—a treaty agreed by the Conservative Government—and Commission agreements contain long-standing considerations.

The hon. Member for Arundel and South Downs also asked why we do not use the VAT definition. We had a debate on the previous amendment concerning how complex it is to resolve the dividing line between residential and non-residential property. We are trying to do slightly different things in the two arrangements. Our intention is to afford more favourable treatment to the purchase of non-residential property, whereas for VAT purposes it is the residential property that is viewed as receiving the more beneficial treatment. That is why we cannot take one from the other. We aim to be consistent while applying underlying principles.

The final thrust of the contributions of the hon. Member for Arundel and South Downs settled on the wider issue of what the correct rate of stamp duty should be for commercial and residential property. He put that in isolation without considering the wider question of whether it was time to examine the structure of stamp duty. I agree that there are wider economic interests to consider, such as issues of fairness. Recognition of the current levels of avoidance of stamp duty and the overwhelming need to modernise and reform the tax is the way forward. We do not believe that it is the right time to consider decoupling the rates. We want to look at structure and consider the rates.

There are further reasons for rejecting new clause 16. It cuts the top rate of stamp duty to 2 per cent. on purchases of commercial property. It would cost £740 million in a full year. The hon. Gentleman has not suggested how the Government would make up the shortfall, or what they should not invest in. His party continues to argue that public services should be extended, but it has not suggested which should be cut. It is widely acknowledged that some purchasers—I put this delicately, I do not know why—of commercial property are actively avoiding stamp duty. Estimates of value vary tremendously, but we believe that about £10 billion of property value is currently escaping the charge due to such activity. It seems the right approach to look first at the structure and then consider the rates, not throw away the revenue and be left with a system underpinning it that is not working. Against that background, are the Opposition seriously suggesting that we should sanction a tax cut of £740 million to commercial properties? Surely that is not the right way to reform stamp duty and stop avoidance.

The Government have announced the intention to fundamentally reform and modernise stamp duty on UK land and buildings from late 2003–04, and we are now consulting on stamp duty modernisation. We are currently consulting the industry and various Departments, taking forward discussion on how the regime can best be introduced and implemented. To table proposals at this stage to dramatically reduce the

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income from stamp duty without dealing with what has been clearly said by all those concerned—the need for underlying reform—would be folly, to put it mildly.

I hope that the hon. Gentlemen feel that they have had a good debate on why they do not agree with the Government's proposals to invest in disadvantaged areas to encourage that regeneration, even though the Government do not accept their points, and that they have had a good debate on the question of rates of stamp duty but will not press the matter to a vote. Perhaps they will return to it when the review and the reform have been completed. If they do, I shall ask my hon. Friends to oppose it on the basis that it is nothing more than a tax cut for those who do not need one, paid for by disadvantaged areas that desperately need the investment.

Ann McKechin: I rise to support the Government on the measure. Following some 18 years' experience in the property market in Scotland as a solicitor, the old adage ''Location, location, location'' springs to mind for today's debate. It is ironic that we have been speaking today about Glasgow house prices but that Thorntonhall, just outside Glasgow, has now been declared the wealthiest suburb in the United Kingdom. Average house prices there are in the region of £500,000.

That information shows the vast range of land values in the United Kingdom and, in particular, the range in rates of increase in land value on a year-by-year basis. In certain parts of the city that I represent, residential and commercial property prices are increasing by only 2 per cent. per annum and in many cases the increase is below the rate of inflation. In other parts of the country—in the south-east of England, as we well know, but also in hotspots such as Edinburgh, as was pointed out earlier—house and commercial property price increases can run at 20 per cent. plus per annum.

The measure is a modest one that must be seen as part of a package of ways in which we are trying to regenerate our urban communities. Its aim is to achieve a better mix of social and private housing in many areas and to encourage a better quality of private housing in certain areas that suffer from a severe lack of it.

The problems mentioned today about overheating in the London market are perfectly understandable but any decrease in stamp duty simply fuels price increases in areas already undergoing a rapid rate of

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increase. I recall that the previous Administration, the Conservative Government, actually increased exemption from stamp duty, over a period of time, to try to alleviate the problems that occurred because of the collapse of prices in the south-east of England. However, that problem was unique to that part of the country and was not occurring in other areas. We could perhaps argue that the exemption should have been targeted at one area only, rather than applied to every postcode in the United Kingdom.

The lack of affordable housing must also be related to the quality and availability of social and rented housing. The problems raised must be seen in that context. If there is poor quality private property, the question is raised of whether improvement and repair grants should be made available to deal with that, rather than using the blunt instrument of stamp duty.

The measure is useful but, as my hon. Friend the Paymaster General correctly pointed out, we require a longer time scale to discover the real benefits. Property turnover is not exactly rapid in areas of slower growth. It will take a little time for the measure to get going, but it is very welcome. As I have said before, I am seeing in parts of Glasgow where I would never have anticipated it—in areas of multiple deprivation—private housing now being built at prices of more than £60,000, and selling quickly. As a result, those areas are being regenerated much more quickly than previously.

Mr. Flight: First, I feel that the Paymaster General slightly misrepresented what I was seeking to say. We all support and want to see the regeneration of deprived urban areas. Leeds, Bristol and parts of London have been a marked success. I made the point that almost every MP has a deprived area in their constituency, so there is widespread support for that. I was just saying that using very focused engineering measures such as this can present problems. The Government must think about what those problems might be.

I specifically raised an issue to which the Minister did not reply—that in the list in clause 108 that chooses to define certain categories as not residential, I could find other equally deserving categories in the inner cities that should be given exemptions. Once we start trying to fine tune, issues and problems are created that need to be solved.

It being One o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at half-past Four o'clock.

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The following Members attended the Committee:
Benton, Mr. Joe (Chairman)
Casale, Roger
Chope, Mr.
Cruddas, Jon
Cunningham, Mr. Jim
Davey, Mr. Edward
Field, Mr. Mark
Flight, Mr.
Grayling, Chris
Harris, Mr. Tom
Hoban, Mr.

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Luff, Mr.
Luke, Mr.
McKechin, Ann
Pond, Mr.
Primarolo, Dawn
Pugh, Dr.
Ryan, Joan
Smith, Angela
Southworth, Helen
Sutcliffe, Mr.
Wright, David

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