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Mr. Prisk: Will the Financial Secretary give way?
Ruth Kelly: I must make some progress because time is passing.
Earlier, I outlined the five principles against which we would test any measures that were proposed in the consultation process. I do not propose to repeat them. We did not receive a significant representation that fulfilled the tests. The hon. Member for Boston and Skegness mentioned the CBI proposal that received much support from the industry. It was one of several comprehensive proposals that were considered in detail. Although it claimed to be simple, it reintroduced a
stepped duty rate and extended it over 40 years. That is a step backwards from modernisation and reminiscent of the old stamp duty regime.The CBI proposal also used a discount rate of 7 per cent. For short leases, that makes little practical difference to the net present value, which is calculated using a discount rate of 3.5 per cent. The main effect of a 7 per cent. discount rate would be on longer leases, which larger, more mature businesses, rather than start-ups and those with smaller value leases, typically take out. We consider that the longer the term of a lease, the more like a freehold it becomes. Given that the tax is set at a flat rate of 1 per cent.—a quarter of the rate of tax on freeholds—I could see no justification for lowering the discount rate on the longer-term leases.
Earlier, I also explained why 3.5 per cent. represents a risk-free rate.
Mr. Laws: Does the Financial Secretary accept that a specific sector—the leisure and pub sector—has a problem with the proposals? The nature of the business means that members of that sector have long leases. Does the Financial Secretary accept that the vast majority of businesses in that sector will be hit? Will she therefore agree to reconsider the effects on it?
Ruth Kelly: I am sure that the hon. Gentleman will understand that it is not possible to ensure that the measures will impact exactly equally on each sector across the economy, as each sector has its own particular requirements. I am confident, however, that in general the increase in the threshold will mean that, in most sectors, more businesses will be exempt from the tax than were exempt under the old stamp duty regime.
The hon. Member for Hertford and Stortford (Mr. Prisk) mentioned the licensed trade sector. Representations from the licensed trade were made throughout the consultation process, and we are grateful for that input. From the information supplied by a representative body in that sector, we learned that very few leases in the licensed trade were exempt from stamp duty under the current regime. The effect of the increase in the threshold will be that more than 30 times the number of leases in that sector will be exempt from stamp duty land tax as were exempt from stamp duty. The introduction of the slide system will mean that a further 5 per cent. of such leases will pay less stamp duty land tax than they are paying under the current system.
I shall try to address a few of the other points that have been raised today. The hon. Member for Huntingdon (Mr. Djanogly) argued that long-term leases would be penalised and that there would be a move towards short leases with less security. I would argue that our policy encourages flexibility in the lease market. Shorter leases provide a form of flexibility, and should that happen, it would be in line with Government policy. The hon. Gentleman made an important point about the security of businesses, but that is taken into account in the net present value calculation, wherein longer, more secure leases will have a higher net present value, reflecting that security, and will consequently pay more stamp duty land tax.
Several hon. Members mentioned pension funds, and I think that I can lay their fears to rest. When there is a change in the trustees—in other words, when there is a transfer between different pension schemes—there is now no charge imposed by the stamp duty land tax. I hope that I can reassure Members that the measures should not have a direct impact on pension funds.
The hon. Member for Hertford and Stortford asked whether the forms had been distributed, and I promised that I would return to that point during my winding-up speech. I have examined the forms closely, which I believe are currently being issued. Starter packs of forms are currently being dispatched to every relevant firm in the United Kingdom, and bulk orders are being taken by the Inland Revenue forms order line. However, if any solicitor or conveyancer should find themselves without a form, they can, as a fallback, get them from their local stamp office. I am not saying that I expect that to happen, but that facility exists, in case anyone is worried about that before the introduction of the new tax.
I was very impressed by the level of very detailed knowledge that the hon. Member for Hertford and Stortford showed when examining the regulations. I am sure that that derives from his previous experience of working in this field. I could address all those points—or, at least, as many as I managed to write down while he was speaking. He mentioned the complexity of the formula, and we will of course be providing an online calculator. For those firms that do not have access to that, the Inland Revenue will be perfectly willing to help anyone who phones in and asks for the calculation to be made on their behalf. I am sure that the hon. Gentleman need not be too worried about many of the points that he raised. I can write to him in due course to set the record straight. For example, he asked what was meant by "same premises" in relation to sale and lease-back relief, and I can assure him that it means the same area of land, not the same building. He also asked about chain breaking, and why we were excluding sole traders. I can inform him, following the consultation in which we have engaged, that the businesses active in this market are companies, or companies that organise themselves into partnerships, so the relief is targeted at those who need to benefit from it.
The hon. Gentleman's points on chain breaking were also relevant. He mentioned asbestos, and asked whether the threshold was high enough to allow firms to refurbish their properties when dealing with asbestos. I can assure him that the cost of dealing with asbestos does not count as part of ordinary refurbishment costs and would therefore be exempt from that limit.
I remind the House that the regulations that we are laying today will modernise the system. They are fair, and they will ensure that all businesses pay their fair share of lease duty.
They relieve companies in many ways. There is relief for chain-breaking companies and those involved in employee relocation, sale and lease transactions and surrender and re-grant of leases. There are provisions to reduce the compliance burden, and to provide certainty with regard to leases involving uncertain rents.
For those reasons, I commend the regulations to the House.
The House divided: Ayes 313, Noes 189.
AYES
Adams, Irene (Paisley N)
Ainger, Nick
Ainsworth, Bob (Cov'try NE)
Allen, Graham
Anderson, Janet (Rossendale & Darwen)
Armstrong, rh Ms Hilary
Atkins, Charlotte
Bailey, Adrian
Baird, Vera
Barnes, Harry
Barron, rh Kevin
Battle, John
Beard, Nigel
Beckett, rh Margaret
Bennett, Andrew
Benton, Joe (Bootle)
Berry, Roger
Best, Harold
Blackman, Liz
Blizzard, Bob
Boateng, rh Paul
Borrow, David
Bradley, rh Keith (Withington)
Bradley, Peter (The Wrekin)
Bradshaw, Ben
Brennan, Kevin
Brown, rh Nicholas (Newcastle E Wallsend)
Browne, Desmond
Bryant, Chris
Burden, Richard
Burgon, Colin
Burnham, Andy
Byers, rh Stephen
Cairns, David
Campbell, Alan (Tynemouth)
Campbell, Mrs Anne (C'bridge)
Casale, Roger
Caton, Martin
Cawsey, Ian (Brigg)
Challen, Colin
Chapman, Ben (Wirral S)
Chaytor, David
Clark, Dr. Lynda (Edinburgh Pentlands)
Clark, Paul (Gillingham)
Clarke, rh Tom (Coatbridge & Chryston)
Clarke, Tony (Northampton S)
Coaker, Vernon
Coffey, Ms Ann
Coleman, Iain
Colman, Tony
Connarty, Michael
Cook, Frank (Stockton N)
Cook, rh Robin (Livingston)
Cooper, Yvette
Corbyn, Jeremy
Cousins, Jim
Cranston, Ross
Crausby, David
Cruddas, Jon
Cryer, Ann (Keighley)
Cryer, John (Hornchurch)
Cunningham, Tony (Workington)
Dalyell, Tam
Davey, Valerie (Bristol W)
David, Wayne
Davidson, Ian
Davies, rh Denzil (Llanelli)
Davies, Geraint (Croydon C)
Davis, rh Terry (B'ham Hodge H)
Dawson, Hilton
Dean, Mrs Janet
Dhanda, Parmjit
Dismore, Andrew
Dobbin, Jim (Heywood)
Dobson, rh Frank
Donohoe, Brian H.
Doran, Frank
Dowd, Jim (Lewisham W)
Drew, David (Stroud)
Dunwoody, Mrs Gwyneth
Eagle, Angela (Wallasey)
Edwards, Huw
Efford, Clive
Ellman, Mrs Louise
Ennis, Jeff (Barnsley E)
Etherington, Bill
Field, rh Frank (Birkenhead)
Fisher, Mark
Fitzsimons, Mrs Lorna
Flint, Caroline
Flynn, Paul (Newport W)
Follett, Barbara
Foster, rh Derek
Foster, Michael (Worcester)
Foster, Michael Jabez (Hastings & Rye)
Gardiner, Barry
George, rh Bruce (Walsall S)
Gerrard, Neil
Gibson, Dr. Ian
Gilroy, Linda
Goggins, Paul
Griffiths, Nigel (Edinburgh S)
Grogan, John
Hain, rh Peter
Hall, Patrick (Bedford)
Hamilton, David (Midlothian)
Hamilton, Fabian (Leeds NE)
Hanson, David
Harris, Tom (Glasgow Cathcart)
Havard, Dai (Merthyr Tydfil & Rhymney)
Healey, John
Henderson, Doug (Newcastle N)
Henderson, Ivan (Harwich)
Hendrick, Mark
Hepburn, Stephen
Heppell, John
Hesford, Stephen
Heyes, David
Hill, Keith (Streatham)
Hinchliffe, David
Hood, Jimmy (Clydesdale)
Hope, Phil (Corby)
Hopkins, Kelvin
Howarth, rh Alan (Newport E)
Howarth, George (Knowsley N & Sefton E)
Howells, Dr. Kim
Hoyle, Lindsay
Hughes, Beverley (Stretford & Urmston)
Hughes, Kevin (Doncaster N)
Humble, Mrs Joan
Hurst, Alan (Braintree)
Iddon, Dr. Brian
Illsley, Eric
Irranca-Davies, Huw
Jackson, Glenda (Hampstead & Highgate)
Jamieson, David
Johnson, Alan (Hull W)
Jones, Helen (Warrington N)
Jones, Jon Owen (Cardiff C)
Jones, Kevan (N Durham)
Jones, Lynne (Selly Oak)
Jones, Martyn (Clwyd S)
Jowell, rh Tessa
Joyce, Eric (Falkirk W)
Kaufman, rh Gerald
Keen, Alan (Feltham)
Keen, Ann (Brentford)
Kelly, Ruth (Bolton W)
Kemp, Fraser
Khabra, Piara S.
Kidney, David
Kilfoyle, Peter
King, Andy (Rugby)
King, Ms Oona (Bethnal Green & Bow)
Knight, Jim (S Dorset)
Kumar, Dr. Ashok
Ladyman, Dr. Stephen
Lammy, David
Lawrence, Mrs Jackie
Laxton, Bob (Derby N)
Lepper, David
Leslie, Christopher
Levitt, Tom (High Peak)
Liddell, rh Mrs Helen
Linton, Martin
Lloyd, Tony (Manchester C)
Lucas, Ian (Wrexham)
Luke, Iain (Dundee E)
Lyons, John (Strathkelvin)
McAvoy, Thomas
McCafferty, Chris
McCartney, rh Ian
McDonagh, Siobhain
MacDonald, Calum
McDonnell, John
MacDougall, John
McFall, John
McGuire, Mrs Anne
McIsaac, Shona
McKechin, Ann
McKenna, Rosemary
Mackinlay, Andrew
McNamara, Kevin
Mactaggart, Fiona
McWalter, Tony
McWilliam, John
Mahmood, Khalid
Mallaber, Judy
Mandelson, rh Peter
Mann, John (Bassetlaw)
Marsden, Gordon (Blackpool S)
Marshall, David (Glasgow Shettleston)
Marshall, Jim (Leicester S)
Marshall-Andrews, Robert
Martlew, Eric
Meale, Alan (Mansfield)
Merron, Gillian
Michael, rh Alun
Miliband, David
Miller, Andrew
Mitchell, Austin (Gt Grimsby)
Moffatt, Laura
Mole, Chris
Moran, Margaret
Morgan, Julie
Morley, Elliot
Morris, rh Estelle
Mountford, Kali
Mudie, George
Munn, Ms Meg
Murphy, Jim (Eastwood)
Naysmith, Dr. Doug
Norris, Dan (Wansdyke)
O'Brien, Bill (Normanton)
O'Brien, Mike (N Warks)
O'Hara, Edward
O'Neill, Martin
Organ, Diana
Osborne, Sandra (Ayr)
Owen, Albert
Palmer, Dr. Nick
Perham, Linda
Pickthall, Colin
Pike, Peter (Burnley)
Plaskitt, James
Pollard, Kerry
Pond, Chris (Gravesham)
Pope, Greg (Hyndburn)
Pound, Stephen
Prentice, Ms Bridget (Lewisham E)
Prentice, Gordon (Pendle)
Primarolo, rh Dawn
Prosser, Gwyn
Purchase, Ken
Purnell, James
Quin, rh Joyce
Quinn, Lawrie
Rammell, Bill
Rapson, Syd (Portsmouth N)
Raynsford, rh Nick
Reed, Andy (Loughborough)
Reid, rh Dr. John (Hamilton N & Bellshill)
Robertson, John (Glasgow Anniesland)
Robinson, Geoffrey (Coventry NW)
Rooney, Terry
Ross, Ernie (Dundee W)
Ruane, Chris
Ruddock, Joan
Russell, Ms Christine (City of Chester)
Ryan, Joan (Enfield N)
Salter, Martin
Sarwar, Mohammad
Savidge, Malcolm
Sedgemore, Brian
Shaw, Jonathan
Sheerman, Barry
Sheridan, Jim
Shipley, Ms Debra
Short, rh Clare
Simon, Siôn (B'ham Erdington)
Simpson, Alan (Nottingham S)
Singh, Marsha
Skinner, Dennis
Smith, rh Andrew (Oxford E)
Smith, rh Chris (Islington S & Finsbury)
Smith, Geraldine (Morecambe & Lunesdale)
Smith, Jacqui (Redditch)
Smith, Llew (Blaenau Gwent)
Soley, Clive
Spellar, rh John
Squire, Rachel
Starkey, Dr. Phyllis
Stevenson, George
Stewart, David (Inverness E & Lochaber)
Stewart, Ian (Eccles)
Stinchcombe, Paul
Strang, rh Dr. Gavin
Stringer, Graham
Stuart, Ms Gisela
Tami, Mark (Alyn)
Taylor, rh Ann (Dewsbury)
Taylor, Dari (Stockton S)
Taylor, David (NW Leics)
Thomas, Gareth (Clwyd W)
Tipping, Paddy
Todd, Mark (S Derbyshire)
Touhig, Don (Islwyn)
Trickett, Jon
Truswell, Paul
Turner, Dennis (Wolverh'ton SE)
Turner, Neil (Wigan)
Twigg, Stephen (Enfield)
Tynan, Bill (Hamilton S)
Vaz, Keith (Leicester E)
Vis, Dr. Rudi
Walley, Ms Joan
Ward, Claire
Wareing, Robert N.
Watson, Tom (W Bromwich E)
Watts, David
White, Brian
Whitehead, Dr. Alan
Wicks, Malcolm
Williams, rh Alan (Swansea W)
Williams, Betty (Conwy)
Wills, Michael
Winnick, David
Winterton, Ms Rosie (Doncaster C)
Wood, Mike (Batley)
Wright, Anthony D. (Gt Yarmouth)
Wright, David (Telford)
Wright, Tony (Cannock)
Wyatt, Derek
Tellers for the Ayes:
Derek Twigg and
Jim Fitzpatrick
NOES
Ainsworth, Peter (E Surrey)
Allan, Richard
Amess, David
Arbuthnot, rh James
Bacon, Richard
Baker, Norman
Baldry, Tony
Baron, John (Billericay)
Barrett, John
Beggs, Roy (E Antrim)
Bercow, John
Beresford, Sir Paul
Blunt, Crispin
Boswell, Tim
Bottomley, Peter (Worthing W)
Bottomley, rh Virginia (SW Surrey)
Brady, Graham
Brake, Tom (Carshalton)
Brazier, Julian
Breed, Colin
Brooke, Mrs Annette L.
Bruce, Malcolm
Burnett, John
Burns, Simon
Burstow, Paul
Burt, Alistair
Butterfill, John
Cable, Dr. Vincent
Calton, Mrs Patsy
Cameron, David
Campbell, rh Menzies (NE Fife)
Carmichael, Alistair
Cash, William
Chapman, Sir Sydney (Chipping Barnet)
Chidgey, David
Chope, Christopher
Clappison, James
Clifton-Brown, Geoffrey
Cotter, Brian
Cran, James (Beverley)
Curry, rh David
Davey, Edward (Kingston)
Davis, rh David (Haltemprice & Howden)
Djanogly, Jonathan
Dorrell, rh Stephen
Doughty, Sue
Duncan, Alan (Rutland)
Duncan, Peter (Galloway)
Evans, Nigel
Ewing, Annabelle
Fabricant, Michael
Fallon, Michael
Field, Mark (Cities of London & Westminster)
Flight, Howard
Flook, Adrian
Forth, rh Eric
Foster, Don (Bath)
Francois, Mark
Garnier, Edward
George, Andrew (St. Ives)
Gibb, Nick (Bognor Regis)
Gidley, Sandra
Goodman, Paul
Gray, James (N Wilts)
Grayling, Chris
Green, Damian (Ashford)
Green, Matthew (Ludlow)
Greenway, John
Grieve, Dominic
Hague, rh William
Hammond, Philip
Hancock, Mike
Harvey, Nick
Hawkins, Nick
Hayes, John (S Holland)
Heald, Oliver
Heath, David
Heathcoat-Amory, rh David
Hendry, Charles
Hermon, Lady
Hoban, Mark (Fareham)
Hogg, rh Douglas
Horam, John (Orpington)
Howard, rh Michael
Howarth, Gerald (Aldershot)
Hughes, Simon (Southwark N)
Jack, rh Michael
Jackson, Robert (Wantage)
Jenkin, Bernard
Johnson, Boris (Henley)
Jones, Nigel (Cheltenham)
Kennedy, rh Charles (Ross Skye & Inverness)
Key, Robert (Salisbury)
Kirkwood, Sir Archy
Laing, Mrs Eleanor
Lait, Mrs Jacqui
Lamb, Norman
Laws, David (Yeovil)
Leigh, Edward
Letwin, rh Oliver
Lewis, Dr. Julian (New Forest E)
Liddell-Grainger, Ian
Lidington, David
Lilley, rh Peter
Llwyd, Elfyn
Loughton, Tim
Luff, Peter (M-Worcs)
McIntosh, Miss Anne
Mackay, rh Andrew
Maclean, rh David
McLoughlin, Patrick
Malins, Humfrey
Maples, John
Marsden, Paul (Shrewsbury & Atcham)
Mates, Michael
Mawhinney, rh Sir Brian
May, Mrs Theresa
Mercer, Patrick
Mitchell, Andrew (Sutton Coldfield)
Moore, Michael
Moss, Malcolm
Murrison, Dr. Andrew
Norman, Archie
Oaten, Mark (Winchester)
O'Brien, Stephen (Eddisbury)
Öpik, Lembit
Osborne, George (Tatton)
Ottaway, Richard
Page, Richard
Paterson, Owen
Pickles, Eric
Portillo, rh Michael
Price, Adam (E Carmarthen & Dinefwr)
Prisk, Mark (Hertford)
Pugh, Dr. John
Randall, John
Redwood, rh John
Reid, Alan (Argyll & Bute)
Rendel, David
Robathan, Andrew
Robertson, Angus (Moray)
Roe, Mrs Marion
Rosindell, Andrew
Ruffley, David
Russell, Bob (Colchester)
Sanders, Adrian
Sayeed, Jonathan
Selous, Andrew
Shephard, rh Mrs Gillian
Shepherd, Richard
Simmonds, Mark
Simpson, Keith (M-Norfolk)
Smyth, Rev. Martin (Belfast S)
Soames, Nicholas
Spicer, Sir Michael
Spink, Bob (Castle Point)
Spring, Richard
Stanley, rh Sir John
Steen, Anthony
Streeter, Gary
Stunell, Andrew
Swire, Hugo (E Devon)
Syms, Robert
Tapsell, Sir Peter
Taylor, Ian (Esher)
Taylor, John (Solihull)
Taylor, Matthew (Truro)
Teather, Sarah
Thomas, Simon (Ceredigion)
Tredinnick, David
Trend, Michael
Turner, Andrew (Isle of Wight)
Tyler, Paul (N Cornwall)
Tyrie, Andrew
Walter, Robert
Waterson, Nigel
Watkinson, Angela
Webb, Steve (Northavon)
Weir, Michael
Whittingdale, John
Wiggin, Bill
Willetts, David
Williams, Hywel (Caernarfon)
Williams, Roger (Brecon)
Wilshire, David
Winterton, Ann (Congleton)
Winterton, Sir Nicholas (Macclesfield)
Wishart, Pete
Young, rh Sir George
Tellers for the Noes:
Gregory Barker and
Mr. Peter Atkinson
Question accordingly agreed to.
- That the Stamp Duty and Stamp Duty Land Tax (Variation of the Finance Act 2003) (No. 2) Regulations 2003 (S.I., 2003, No. 2816), dated 5th November 2003, a copy of which was laid before this House on 5th November, be approved.
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