| Previous Section | Index | Home Page |
Mr. George Osborne : My hon. Friend is making a powerful speech. I have a constituency interest in Marks and Spencer, as one of the largest and most successful branches in the country is in my constituency. The head of its tax group has said:
- "The new lease duty regime . . . will increase our anticipated leasehold transaction costs by a factor of 8 over the next six years. This type of increase, which is standard for the sector, will inevitably have adverse economic effects".
I must say, to be fair, that the regulations have managed one significant achievement: they have brought businesses together as never before. This morning the shadow Chancellor and I hosted a press conference jointly with seven leading business organisations, including the main consultees who met Inland Revenue representatives and the Chief Secretary over the summer. We did so because the regulations have united businesses in opposition to the Government's plans. Miraculously, they have brought together landlords, tenants and professional advisers, who have joined the Conservative party—the official Opposition—to challenge this stealth tax, not just because of the extreme rises such as that mentioned by Marks and Spencer, but because of the impact it will have on business mobility, business investment and jobs.
The Minister spoke of the consultation that preceded the order. Let me tell her the views of the consultees whom I met this morning. All reject the Government's plans. They believe that the consultation itself was a sham. On behalf of Business in Sport and Leisure, Hugh Siegle said:
- "We have fallen over ourselves this summer to work with officials from the Treasury and Inland Revenue, to try and find a solution. They just have not listened and see Stamp Duty as a revenue raising measure."
In practical terms, this regulation will restrain business investment and severely distort the property market by favouring short leases. Information from property experts such as the Royal Institution of Chartered Surveyors shows that longer leases of 15 to 35 years will be taxed the most. A typical 25-year lease faces a possible sevenfold increase, and a 35-year lease faces an almost ninefold increase. And as was pointed out earlier, Marks & Spencer expects an eightfold rise in its tax bill. Gary Grant, managing director of The Entertainer toy stores group, told me that for just one planned store expansion in south Wales his tax bill will rise sixfold to £6,000.
The licensed trade faces a similar problem. Because of high set-up and fitting-out costs, the average leasehold pub has a lease length of about 14 years and an annual rent of about £30,000. Such a lease will be subject to a duty of £1,776—almost 300 per cent. more than the current rate. Indeed, the British Beer and Pub Association has reported that almost a quarter of all leases in the pub sector are currently of 30 years in length. The average rent for those leases is £39,000 per annum. Current lease duty is £800, but to renew a lease
on the same terms under stamp duty land tax will now cost £5,673. That is £4,873 more—or in excess of a 700 per cent. increase.Nick Bish, head of the Association of Licensed Multiple Retailers, said to me today:
- "As they stand at present, the proposals would create major distortions in the market for leasing, dramatically increase the costs faced by businesses dependent upon leasehold property, threatening ongoing investment, business expansion and jobs. Moreover, stamp duty"—
- "would become a major capital cost when setting up a business, creating a . . . real barrier to entry for individual tenants and small pub companies."
The regulations before us represent not, as the Financial Secretary said in her written statement, another step forward in modernising stamp duty, but two steps back for business. First, they impose a fourfold tax hike that is unfair to businesses and sectors alike. Secondly, this is a bad, ill-conceived and ill-considered tax that is being rushed through Parliament expressly against all independent advice.
I am aware that these regulations are temporary and may have to be rewritten back into the next Finance Bill. I therefore ask the Financial Secretary to listen to the complaints and concerns expressed, and now to commit herself to revising her plans for next year's Bill. Both business and my party will continue to campaign for a fair deal on this issue. It is now time that the Government responded.
4.13 pm
Mr. David Laws (Yeovil): I join the hon. Member for Hertford and Stortford (Mr. Prisk) in welcoming back the Financial Secretary, although I appreciate that she has been back at her desk for some time now. She must have hoped when she was away, however, that by the time that she returned to her desk to deal with the outcome of the consultation, some of the heat would have gone out of this subject, which was the cause of great concern when the Finance Bill was debated earlier this year. She will be aware that, as the hon. Gentleman has just said, she and the Government have not succeeded in satisfying the professional, business and other groups that expressed concern at the Government's proposals earlier this year. Indeed, the chairman of the Institute of Indirect Taxation's stamp taxes committee said the following in a letter to her of 24 October:
- "We note that this consultation has generated vigorous differences of opinion and approach between the Government, on the one hand, and the professional and commercial bodies who participated in the consultation, on the other."
The impression was created in the Financial Secretary's speech a few moments ago that the Government were seeking to deal with several anomalies and unfairnesses in the existing system for dealing with leases and their taxation. However, as has been pointed out, the net effect of the measures that the Government are pressing through will be a significant increase in the tax burden on business. Although the Financial Secretary rather rattled off the numbers in the same way that the Chancellor of the Exchequer is inclined to do when revealing to the House increases in borrowing figures, I thought that I detected the admission that in the coming financial year the measures that we are debating today will raise some £170 million, even after the Government's concessions. The full-year cost of £230 million was mentioned earlier. If I have those figures wrong, I would appreciate the Financial Secretary's clarification later.
Mr. Simmonds: Is the hon. Gentleman aware that the British Retail Consortium has assessed that the cost to its retail members will be £200 million alone, so the estimates provided by the Chief Secretary and the Financial Secretary grossly underestimate the real cost to businesses in this country?
Mr. Laws: The hon. Gentleman is right that that is the assessment of business bodies. We will have to deal with that serious underestimate in the next few months. I hope therefore that the Government will eventually change their minds on the proposals.
Mr. Djanogly: Is the hon. Gentleman aware that there are implications for sectors other than business? The pensions industry is now only just cottoning on to the fact that transfers between members' retirement benefit schemes will also be caught, so pensions will be affected.
Mr. Laws: The hon. Gentleman is right that the proposals will be another blow to pension funds, which are already struggling as a consequence of recent changes in asset prices.
Without straying off the specific issue before us today, the background to the debate is obviously the concern among business about the overall level of business taxation in this country. The Financial Secretary will be aware of the report issued by the CBI recently, which compared business taxes in several different countries. The Government reacted in a robust and agitated manner to that report, but it was useful for highlighting the fact that, although our corporate tax levels and rates—and, to some extent, the social costs on businesses—are lower than in many of our European competitor countries, we have much higher taxes on property and transport costs, for example, which must be taken into account. The net increase in business taxation contained within the measures before us is highly unwelcome to business.
The Financial Secretary will be aware of the strong comments that the CBI made about the amended proposals that the Government have brought forward.
A couple of weeks ago its press release talked about the "mass opposition" of companies in this country and complained about the Government pressing ahead despite that opposition. It said that the Government's decision
- "would drive up prices, cost jobs and damage regeneration".
- "understating how many leases will be affected and overestimating the present value of leases."
The director general of the CBI commented on the Government's latest proposals:
- "It's extremely disappointing that the government, in its inexorable search for new areas to tax, is targeting the one sector that has kept the economy afloat: the high street . . . The majority of business premises are leased and duty increases on this scale will be damaging. This tax hike could easily swing the balance against marginal projects . . . Long term investment will be hit as firms look for shorter leases."
The hon. Lady must also address the fact that the measures hit particular sectors extremely hard. We have already heard examples of the effects on the leisure industry in particular constituencies, and reference has been made to Business in Sport and Leisure, an umbrella organisation that represents more than 100 private sector companies in the sport, leisure and hospitality industry. That organisation has pointed out that many parts of the leisure industry face an eightfold increase in stamp duty under these proposals. It cannot be the Government's intention to increase business taxes in such a penal way for some parts of the business sector. Business in Sport and Leisure stresses that there has been no suggestion from the Inland Revenue that the sector is involved in any avoidance of tax, so it cannot be the case that the Government designed the measures simply to capture tax avoidance.
The impact of the measures will be especially acute in those sectors where there are long leaseholds. Obviously, that is relatively common in the leisure sector, where there are leases of between 20 and 25 years due to the high cost of investment in leisure properties and the need to refurbish them regularly. For that reason, there is concern about the unfairness embedded in the measures. The tax increases will fall especially hard on some sectors and the Financial Secretary seems to have done nothing to address that concern. I hope that she will attempt to amend the proposals in future so that those hard-hit sectors will not be so severely affected. Although the hon. Lady said that about 60 per cent. of businesses will be exempt from the increase, she will be aware that in the leisure sector the figure will be 30 per cent. or less, as a consequence of the thresholds that the Government have set.
We must also consider fairness between different parts of the country. Earlier, the hon. Members for Taunton (Mr. Flook) and for Bridgwater (Mr. Liddell-Grainger) were in the Chamber. Their presence made me realise that there was a Somerset phenomenon in terms of unfairness, although the phenomenon goes well beyond Somerset. Can the Financial Secretary confirm that a leisure business—for example, one in the eastern part of my Yeovil constituency, quite a deprived area—which is above the threshold and affected by the totality of the Government's proposals on stamp duty land tax on leases, will pay increased taxation; yet for businesses in other parts of the country, such as a pub in Canary Wharf or Harvey Nichols in Leeds, there will be no increase in taxation because deprived area relief will interact with the measures?
| Next Section
| Index | Home Page |