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Standing Committee Debates
Finance Bill

Finance Bill

Column Number: 403

Standing Committee B

Tuesday 10 June 2003


[Mr. John McWilliam in the Chair]

Finance Bill

(Except clauses 1, 4, 5, 9, 14, 22, 42, 56, 57, 124, 130 to 135, 138, 139, 148 and 184 and schedules 5, 6, 19 and 25, and any new clauses and schedules tabled by Friday 9th May 2003 relating to excise duty on spirits or R&D tax credits for oil exploration.)

8.55 am

Mr. Gerry Sutcliffe (Bradford, South): I beg to move,

That the Programming Order of 15 May, as amended by the Order of 5 June, be further amended by the substitution for the Table in paragraph (2) of the following Table:—

    Proceedings Time for conclusion of proceedings
    Clauses 2, 3, 6 to 8, 10 to 13 and 15 to 19, Schedule 1, Clauses 20, 21 and 23, Schedule 2, Clauses 24 to 41, 147 and 149 to 151, Schedule 26, Clauses 152 to 154, Schedule 27, Clauses 155 and 163 to 166, Schedule 30, Clause 167, Schedule 31, Clause 168, Schedule 32, Clause 169, Schedule 33, Clause 170, Schedule 34, Clauses 171 and 172, Schedule 35, Clause 173, Schedules 21 and 22 5 pm on Thursday 22nd May
    Clauses 43 to 49, Schedule 3, Clause 50, Schedule 4, Clauses 51 to 55 and 58 to 62, Schedule 7, Clauses 63 to 68, Schedule 8, Clauses 69 and 70, Schedule 9, Clauses 71 to 78, Schedule 10, Clause 79, Schedule 11, Clauses 80 to 91, Schedule 12, Clauses 92 and 93, Schedule 13, Clauses 94 to 99, Schedule 14, Clauses 100 to 104, Schedule 15, Clause 105, Schedule 16, Clauses 106 to 115, Schedule 17, Clauses 116 to 123, Schedule 18, Clause 125, Schedule 20, Clauses 126 to 129 5 pm on Tuesday 10th June
    Clauses 136, 137 and 140, Schedule 23, Clauses 141 and 142, Schedule 24, Clauses 143 to 146 and 156 to 158, Schedule 28, Clauses 159 to 162, Schedule 29, Clauses 174 and 175, Schedule 36, Clauses 176 and 177, Schedule 37, Clauses 178 to 180, Schedule 38, Clause 181, Schedule 39, Clauses 182, 183 and 200, Clauses 185 to 192, Schedule 40, Clause 193, Schedule 41, Clauses 194 to 197, Schedule 42, Clauses 198, 199 and 201 to 213, Schedule 43, Clause 214, new Clauses, new Schedules, any remaining proceedings on the Bill.5.00 pm on Tuesday 17th June

Mr. David Wilshire (Spelthorne): Our objections in principle to the programming of this and all other Committees still stand. That said, I am grateful that it has been possible to take a pragmatic approach in order to work within the programming. On that basis, I fully support the motion proposed by the Programming Sub-Committee.

Question put and agreed to.

The Chairman: With the knife moving, I will have to change the selection list.

Column Number: 404

Clause 55

Amount of tax chargeable: general

Question proposed [5 June], That the clause stand part of the Bill.

Question again proposed.

The Chief Secretary to the Treasury (Mr. Paul Boateng): At the end of the previous sitting, I had begun to address the wide range of points made by hon. Members on clause 55. As I said, the clause sets out the main rate of charge for stamp duty land tax, which will apply from implementation. In all respects, it is the same as existing charge under stamp duty, except that we propose to increase the zero-rated threshold for commercial and mixed-use property from £60,000 to £150,000.

I know that some Members were incredulous that a modernised tax could incorporate the existing slab system for charging stamp duty. Since consultation for a modernised stamp duty was first announced in the Budget 2002, we have always made it clear that changes to the main rate structure should be outside the scope of the consultation. That was a deliberate decision in order to focus discussion on fundamental issues such as scope and administration. In addition, we have held rates at a stable level since March 2000. Once we have implemented a regime that addresses the current level of avoidance in the commercial sector, and once the new system has generally begun to bed down, it may be appropriate to examine the structure of the main charge.

There is a further important point, which is that rates for stamp duty, as for other taxes, are announced in the Budget, with any changes being implemented straight away. As we always planned for the new regime to be implemented at the end of this year, we were concerned about the impact of announcing a change too far in advance. I am far from convinced that continuing with the existing structure is as much at odds with the modernised regime as has been suggested.

I shall consider the charge, which is entirely wrong, that the modernised regime promotes avoidance, which we are trying to tackle. The hon. Member for Hertford and Stortford (Mr. Prisk) referred to

    ''stories of people who have transferred curtains and carpets for large amounts of money unrelated to their genuine value.''—[Official Report, Standing Committee B, 5 June 2003; c. 391.]

Let me make it plain—hon. Members will appreciate this—that the hon. Gentleman described not avoidance but evasion, which is entirely unacceptable under the current regime, and it will continue to be unacceptable under the new one. The avoidance that we are tackling almost entirely involves transactions for consideration way in excess of the £500,000 top threshold. For such transactions, the choice between a slab, slice or some other system with thresholds no higher than £500,000 would have very little impact.

Mr. Mark Prisk (Hertford and Stortford): The Chief Secretary raises an aspect that I mentioned when the Committee last met. What does he say to the many outside bodies, particularly the Council of Mortgage

Column Number: 405

Lenders, which states categorically that the existing slab effect creates incentives for tax avoidance?

Mr. Boateng: I hear what that organisation says but I am unable to accept its argument, because the slab system was also charged with distorting relative house prices and thus influencing the mobility of labour. That is a weighty burden for stamp duty on its own. Many other factors determine relative house prices, both within the same market and across regions throughout the country. Wealthy areas with more expensive properties sit side by side with those with less expensive properties. London and the south-east do not have a monopoly on higher price properties.

To respond to a point made by the hon. Member for Huntingdon (Mr. Djanogly), who is not present—[Interruption.] Oh, there he is. He had his head down. I give him a warm welcome. How could I possibly have overlooked him? He made the interesting point that London has many wards that qualify for disadvantaged area relief—indeed, the whole of Newham and all but one ward in Hackney. Furthermore, since the relief began in November 2001, some 20 per cent. of claims for disadvantaged area relief relate to property in London and the south-east. I do not want to try your patience, Mr. McWilliam, by straying into clause 57, which already stands part of the Bill. Nevertheless, the Committee will take the point.

Mr. John Burnett (Torridge and West Devon): The Chief Secretary must concede that the slab system distorts prices when you reach a fresh band. He is right to deprecate evasion, as we all do. However, when you get to the first band of £60,000, chattels may be passed to make good what vendors perceive as price losses. Distortion in the housing market is evidenced by the fact that the stamp duty office calls in certain transactions at band levels just to monitor the evasion that probably takes place, which would be eliminated if we had a different system.

The Chairman: Order. Before I call the right hon. Gentleman to respond to that intervention, may I remind hon. Members that if they refer to ''you'' they refer to me? I assure the hon. Gentleman that I paid considerably more than £60,000 for the last house that I bought. I should add that I did not pay the top rate of stamp duty.

I also take this opportunity to remind hon. Members that we have a great deal of work to do today. Therefore, can we crack on and try to get through it?

Mr. Boateng: It cannot be denied that the cliff edge that is inherent in the slab system can be somewhat discretionary. I do not wish to dwell on the point. I understand it and shall come back to it later.

The mobility of labour is influenced by many factors, but the actual house price differential is likely to be much more of an influence than the cost of moving. Indeed, a survey in The Economist only last week concluded that the UK has extremely low costs for buying and selling houses of some 4 to 5 per cent.

Column Number: 406

for estate agents, lawyers and duty, whereas in most of Europe and America the costs are at least 10 per cent.

Even so, in order to ensure that stamp duty does not inhibit an employer from moving key employees, we propose in clause 59 an entirely new relief to eliminate any intermediate charge when the employer facilitates a house sale. I accept the point made by the hon. Member for Torridge and West Devon (Mr. Burnett) that cliff edges inherent in the system can be somewhat discretionary. Our ultimate aim is to reduce such distortions, so we will continue to consider the issue, but that cannot be done before the new system has bedded down.

We have also indicated that we are willing to examine in detail the scope for differential rate structures for the commercial and residential markets, and we have already shown our commitment to supporting smaller businesses investing in commercial premises with our proposal to raise the zero-rate threshold to £150,000 for commercial property and mixed-use property such as live-work units. I am grateful for the welcome given by the hon. Member for Hertford and Stortford. Not surprisingly, the British Property Federation and others echo his support. However, a radical change from the slab system must necessarily result in a dramatic reduction in yield, or in higher rates, hence the silence on that issue from some Members—


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