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Mr. Simmonds: I shall not be tempted by my hon. Friend. Suffice it to say that the removal of the local authority's ability to recycle the social housing grant via the Housing Corporation is contradictory and bizarre, considering the importance attached to housing in the Budget and the view that supply needs to be increased. The policy could put construction on hold permanently. In the Boston borough council area alone, it could put on hold 52 new units of affordable housing, 28 of which were intended for people with learning disabilities or enduring mental health problems. That is totally unacceptable.
The review of housing supply set out in the Budget could start by thoroughly deconstructing the Government's housing policies. Furthermore, I hope that the Minister for Housing and Planning will propose an amendment to the Finance Bill to resile from the policy on with-debt authorities.
Mr. Love: On housing policy and the local authority housing grant, will not the Government continue the grant for existing schemes so that they can be completed? Has there not been a significant increase in the support given to the Housing Corporation that dwarfs and swallows any reduction in the local authority housing grant?
Mr. Simmonds: That is simply not true. As to the hon. Gentleman's suggestion that the Government are providing funding for schemes that have already started, that is simply not the case either. That is happening where construction has commenced, but not where land has been purchased and building has not started. There are schemes in which the money has gone out, but the funding is not available for constructing the properties that are required to support the vulnerable people who deserve social housing.
I want to refer specifically to the proposals on stamp duty. There seems to be some confusion among Ministers about exactly what the Government are proposing to do. Stamp duty impacts not only on residential transactions but on commercial property, which has become a significant investment sector, especially as the stock market has collapsed. Both individuals and pension funds have used commercial property as an investment vehicle and there is a strong argument that it should be decoupled from the residential market and have the same stamp duty rate as other investment sectors such as stocks and shares. The fact that it does not have the same rate is purely a revenue-raising exercise that is carried out irrespective of its negative impact on the economy. Indeed, some cynics would say that the continued extraction of tax from commercial property businesses, irrespective of the consequences, is intended merely to limit the perceived increases in personal taxation.
The current structure of the commercial property market in respect of special purpose vehicles will be closed, as I understand it, further eroding the value of
pension funds by £200 million. Is this an appropriate time to drive another stake through the heart of pension funds?In addition, the Bill proposes stamp duty on leases with a net asset value of £150,000. That approximates to a rent of between £10,000 and £15,000, which catches most retail properties, except those in tertiary parades. One of the defences that the Government have made of the proposal is that it is supposed to exclude small businesses. However, according to the British Property Federation, no business in London is likely to be exempt, and small business will not be immune. The policy will add £130 million per annum in costs to store opening programmes. Dixons will have a £2 million additional tax bill; B&Q £5 million; and Borders £1 million.
The proposal will represent an increase in stamp duty of between 4 and 8 per cent., and that assumes that it will apply to 10-year leases. In reality, the figures will be far higher. The prime retail tenants do not take 10-year leases, but leases lasting a minimum of 15 years. Indeed, the licensed sector, including pubs, and the out-of-town retail warehouse sector usually take leases of between 20 and 35 years.
Mr. Cameron: My hon. Friend is making a very persuasive point about the dangers of the leasing changes that the Government are introducing. Does he agree that the changes are especially dangerous because the economy in London and the south-east is currently fragile and retailers are reporting relatively poor figures? Will not the impact be especially bad for those retailers?
Mr. Simmonds: My hon. Friend makes a very good point. It is not only the tenancy retail market that is problematic in the south-east: the office market has almost completely collapsed in the west end and the City of London, and that will be exacerbated when the proposals are introduced.
It has been calculated that an incoming tenant with a 20-year lease would pay the equivalent of 14 per cent. of the first year's rent, instead of the current payment of 2 per cent. That will lead to the cancellation of new store proposals, reduce job creation and create uncertainty in relation to lease renewals in marginal sites. The taxation of leases is not about closing tax loopholes; it is a revenue-generating tax that will have a significant impact on the retail sector, which is a major force for blue-collar job creation in the United Kingdom. Indeed, in my constituency alone, 5,000 people or 15 per cent. of the work force are employed in the retail sector.
In addition, such taxation will have a detrimental effect on pension funds' performance, as tenants will use the tax to negotiate lower rents and significantly shorter leases. That will have a negative impact on property values, and hence pension fund performance. That will directly and negatively affect every person in the United Kingdom who has a pension. A substantial tax on leases could lead to unoccupied buildings, depress the value of land, increase building obsolescence and reduce investment by tenants. It could also make it much more difficult to refurbish buildings. It will smother and reduce tenant movement in the property market, and it will not stimulate flexibility as companies grow, but put a stop to companies moving to larger premises.
I can find no mention in the Bill of what will happen when companies enter into sale and leasebacks. Will there be a double hit on stamp duty as companies sell the freehold and take a lease back on the same building? In addition, there is the inevitable side effect of reduction in lease lengths and in the certainty of income, as the Government are potentially removing from the marketplace the individual saver and investor, so it will be left purely to the professionals who are prepared for and understand the high-risk nature of commercial property investment. To my mind, that is a perverse way of encouraging saving and investment.
Part of the justification for stamp duty increases in the past few years has been the exclusion of deprived areas. Oddly, that is based purely on the wealth of residents, rather than the level of business activities. The lack of any decoupling of commercial and residential property has led to some very strange anomalies. The abolition of stamp duty in deprived areas has added £50 million to the value of the Meadowhall shopping centre outside Sheffield—a 1 per cent. or 10p increase on the net asset value per share of the owner, British Land. Others affected in a similar way include the Merryhill shopping centre in Dudley, outside Wolverhampton, Canary Wharf and almost all the retail centres of Birmingham and Manchester. Surely, that cannot have been the Government's intention, and I am intrigued to discover what further consultations there will be, what they will consist of and what structures the Government will put in place to negate this paradox.
In conclusion, this is an imprudent, defective and high-risk Bill that is based on the foundation of imaginative and irresponsible future growth figures that seek to hide inevitable future increases in borrowing and taxation. This is not a good Finance Bill for business, individual taxpayers, pensioners and public services. Sadly, I suspect that far worse is yet to come.
8.18 pm
Ms Meg Munn (Sheffield, Heeley): In particular, I should like to address issues affecting small businesses, which I want to set in the context of regional development proposals and issues affecting regions—issues that have been mentioned by other Labour Members, as we are beginning to see the Government develop a strong regional agenda.
Historically, there have been significant differences between the regions of Britain for many years. Some 20 years ago, I found myself working in the south-east. Indeed, I worked in Wokingham, although I see that the right hon. Member for Wokingham (Mr. Redwood) is not in his place. It was an interesting experience. I ended up working in Wokingham not out of choice—although I should say to the good people of Wokingham that I did not regret my period there—but because it was a time, under another Government, when the country was experiencing high unemployment. A certain gentleman who is now in another place exhorted those of us who were without work to get on our bikes to look for it, and that is indeed what I did. When I applied for the job I did not even know where Wokingham was, so I had to ask for directions to the interview. A huge contrast was evident between the situation of people living in that part of the south-east and that of those living in my home town of Sheffield. When I went back at weekends or for holidays, I saw that contrast very clearly in the
real deprivation that people suffered. The biggest indicator was that a pub in the south-east would have people in it during the week, which would not be the case in the north.We still have regional disparities, but I am pleased to say that deprivation in my part of the world is nowhere near as bad. People have benefited greatly from the stability of the economy and the measures implemented by this Government. Since I was elected nearly two years ago, I have seen a real improvement in the local economy, especially in terms of small businesses starting up. Parades of shops with significant numbers of empty properties are now occupied, because people are confident about starting up a business and operating effectively in the economy. However, earlier on under the Labour Government some parts of the economy did better than my part of the world. We must address that disparity between the regions. I therefore welcome the establishment of the regional development agencies. I particularly welcome the fact that when they were consulted on many of the issues that were dealt with in the Budget, they focused their input on enterprise, innovation, skills and regulatory reform—four aspects that all hon. Members would agree are important to the development of the economy, especially the small business sector.
It is crucial for the Government to encourage enterprise, not just take a laissez-faire approach that lets the market do what it will. In February, I was pleased to note that a survey by Global Entrepreneurship Monitor showed that of women in all the regions, those in Yorkshire are the most entrepreneurial. When I made that point previously in the Chamber, the hon. Member for Lichfield (Michael Fabricant), who is not here, remarked that the technical term was "lasses", so I should perhaps say that Yorkshire lasses are the most entrepreneurial of all women in the UK. However, that masks the fact that women generally are not as entrepreneurial as men: only half as many women as men see themselves as likely to go into business. Moreover, the highest level of entrepreneurial activity by men, which is in the east of England, is more than twice that of entrepreneurial Yorkshire lasses. It is enormously important that the Government do what they can to support small business creation. The same survey showed that job creation by small businesses is strong. It is estimated that 55 per cent. of start-up businesses each create up to 11 jobs. Many more people now believe that they have entrepreneurial skills; 43 per cent. think that they have the appropriate skills to start a business, compared with 40 per cent. in the previous year. In place of the rather bleak picture that was painted by the hon. Member for Boston and Skegness (Mr. Simmonds), we can see a much faster-developing and encouraging picture.
Representing a Yorkshire constituency, in Sheffield, I particularly welcome the focus of resources on deprived areas, where traditionally people have not been so entrepreneurial, have not looked to develop their own businesses and, indeed, have not had the resources behind them in order to do so. As well as containing measures that will benefit all start-up businesses, the Finance Bill specifically identifies ways in which businesses in deprived areas can be supported. The
extension of the Phoenix fund is intended to promote enterprise for disadvantaged groups and areas. That is supplemented by the development of enterprise areas, some of which are in my constituency. My right hon. Friend the Chief Secretary explained how measures such as relief on corporation tax and first-year allowances will help start-up businesses.Once established, small businesses need to develop. I therefore welcome the Government's focus on innovation and their support for research and development. There are many ways in which businesses need to develop, and having met many representatives of small businesses in and around my constituency, I know that they are seeking that help and support, but sometimes feel that it is not so well advanced in our region for businesses of their nature. For example, people from Diva, a public relations company, told me that it was more difficult for them to develop the links and networks that they could build up if they were based in the south-east. That needs to be addressed further, not only through supportive mechanisms such as the business links programme, but through new mechanisms. In south Yorkshire, we have the benefit of objective 1 European funding, and strong developments are taking place as a result. Strong links between the regional development agency, business links and objective 1 are beginning to deliver many more benefits to small businesses.
Also in south Yorkshire, in Doncaster, we have a company called Beta Technology Ltd., which is involved in helping businesses across Britain with technological solutions. Earlier in the debate, we discussed the importance of new technology and of developing, through research and development, different ways of delivering business solutions. When I recently went to visit the company, one of the interesting developments that I heard about was the way in which military technology can be applied in businesses to enable them to develop further. The company is channelling money from the European Union through to many businesses, making them stronger and more competitive and placing them at the cutting edge of the technology in their area of work, helping them to grow and ensuring that more people are employed. It is no surprise that the Budget was welcomed by the regional development agencies, whose involvement in the Budget processes was a new step. The process of dialogue with those agencies, which should be at the heart of the regions, is moving us forward.
Of course, no discussion of small business would be complete without mentioning regulations—I am surprised that no hon. Member has done so. Small businesses in my communities are no different from those elsewhere. If one asked them, "Would you like more red tape or less red tape?", they would say, "Can we have a bit less red tape, please?", because nobody likes having lots of bureaucracy and regulations. We must recognise, however, that it is a matter of balance.
The Government look to simplify company law whenever possible, especially for small businesses. They are making accounting procedures less onerous, but they are also ensuring that regulations that benefit overall business growth continue.
Many regulations exist to make employment better and deal with social issues about which Labour Members care greatly, including the minimum wage, paternity and maternity leave and health and safety. They ensure that the work force is valued and that the people who come to work in a company are fit, healthy and able to have a proper work-life balance.
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