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Mr. Prisk rose—
Mr. Boateng: I do not mean to provoke. Surely my point is taken. I want to crack on.
Under the slab system, the stamp duty on a purchase of a £200,000 house is £2,000. Under the first proposal of the Council of Mortgage Lenders it would be £4,250, and under the second proposal it would be £2,800. Clearly, there is some interesting arithmetic. However, before the British Property Federation and the Royal Institution of Chartered Surveyors jump up to protest about a 5 per cent. top rate, let me say that that serves only to emphasise that it is entirely sensible for us to put off consideration of a new structure until the new system has bedded down, avoidance has been addressed and we are ready and able to consider differential structures.
Hon. Members have mentioned the report by the Council of Mortgage Lenders. I appreciate the argument contained in that report, which acknowledges a conflict between maintaining revenues and not increasing rates if the stamp system is done away with. It makes a number of proposals, such as a revenue-neutral change of structure including a zero-rate band of £115,000 and a 5 per cent. rate on amounts in excess of that. All those proposals are interesting.
I want to make a number of brief points arising from last Thursday's debate. There was an accusation that people selling their homes would not be interested in the introduction of e-business one way or the other. I really cannot accept that. There is a great deal of interest in the proposal and the benefits that it might bring.
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I have also been asked several times about the predicted yield for the new regime. That is set out in the Red Book. For the current year, we forecast a yield of £140 million. That is primarily from the anti-avoidance measures in last year's Finance Bill. For the next year, which is the first full year of the new regime, we forecast a yield of £350 million, of which £210 million will arise from anti-avoidance measures. The remaining £140 million is the net effect of additional yield on leases and the cost of new reliefs in the Bill. In 2005–06, we forecast a yield of £450 million, of which £290 million will arise from anti-avoidance measures.
It has also been suggested that, far from being about modernising, the new regime is about raising revenue. We make no apology for that. We have always stressed that we intend to achieve fairness by addressing avoidance. However, by its very nature, addressing avoidance creates a yield. My right hon. Friend the Paymaster General has made that point time and time again to Committees over many years. I would have thought that the truth should have begun to sink in by now.
I was also asked about the number of businesses benefiting from the differential zero-rate band threshold and the increase from £60,000 to £150,000 for non-residential property. Our estimates are that 18 per cent. of non-residential purchases—about 20,000 annually—and 60 per cent. of non-residential leases—about 15,000 annually—will benefit from the change. I note what has been said about the threshold still not being high enough, but my right hon. Friend the Chancellor noted in his Budget speech that he would continue to consider the proposal of the new threshold. I hope that what I have said about examining structure serves only to support that.
The hon. Member for Hertford and Stortford asked about the number of commercial transactions that will be worse off under stamp duty land tax. Since we are, as I have said, keeping the main rate structure the same, the only freehold transactions that will be worse off will be those that currently avoid paying any stamp duty. Even some of those will not be worse off because business investors in property in any of the 2,000 enterprise areas will benefit, thanks to the change introduced on Budget day of a complete exemption from stamp duty, together with a whole host of other schemes to support enterprise that the Government have introduced. Of course, as the hon. Gentleman has said, the lease duty structure creates higher bills for larger businesses with long and valuable leases, although that is beyond the scope of this clause, within which I am anxious to remain. Even allowing for those paying more in lease duty, in total, gainers outnumber losers by two to one.
All in all, to continue with the existing rates through the implementation period is an entirely sensible proposal. I know that there were some probing questions on lease duty last Thursday. Perhaps those arise more naturally in relation to clause 56 and schedule 5, which have already been ordered to stand part of the Bill, so I do not want to go there, especially given the necessarily lengthy response on clause 50. I hope that, with those assurances and the clarification
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that I have been able to give, the clause will find favour with the Committee.
Mr. Prisk: I am aware of time, so I shall respond briefly to the Chief Secretary. As I said at the beginning, I welcome the fact that the Government have recognised the distinction between the residential and non-residential markets. However, from this debate we now have the admission, despite what was said in the early consultation document, that the Government make no apology for raising additional revenue, although we were told that the measure was all about reform, not raising revenue. That is an important admission.
We have had from the Chief Secretary a rather vague promise that when the measure has settled down, in due course, at some point in the distant future when he has moved on—to higher things, of course—we will reconsider it. If I may say so, that is rather feeble. After all, the professional bodies in all the submissions that I have seen have said that their feeling is that this is the most antiquated and unfair aspect of the whole duty, which the Chief Secretary claims to seek to reform and modernise, yet there it is, set out in clause 55, unchanged, unmodernised and unreformed. As all professional outside bodies recognise and as the Chief Secretary himself has said, this aspect not only promotes tax avoidance but encourages tax evasion, which my party strongly opposes. We were therefore hoping that the Government would reform it. For those reasons we are deeply disappointed by the structure set out in the clause, and we will oppose it.
Question put, That the clause stand part of the Bill:—
The Committee divided: Ayes 17, Noes 6.
Division No. 20]
AYES
Boateng, Mr. Paul
Cruddas, Jon
Cunningham, Tony
Farrelly, Paul
Healey, John
Lucas, Ian
McKechin, Ann
Mallaber, Judy
Marris, Rob
Merron, Gillian
Mountford, Kali
Munn, Ms Meg
Price, Adam
Quinn, Lawrie
Southworth, Helen
Sutcliffe, Mr. Gerry
Trickett, Jon
NOES
Burnett, Mr. John
Djanogly, Mr. Jonathan
Jack, Mr. Michael
Laws, Mr. David
Prisk, Mr. Mark
Wilshire, Mr. David
Question accordingly agreed to.
Clause 55 ordered to stand part of the Bill.
The Chairman: May I ask hon. Members to remain quiet when we are taking the call for the vote because we would not want to do an injustice by getting it wrong unnecessarily. Clause 58
PART-EXCHANGE OF RESIDENTIAL PROPERTY
Mr. Prisk: I beg to move amendment No. 199, in
clause 58, page 38, line 11, leave out paragraph (a).
The Chairman: With this it will be convenient to discuss the following:
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Amendment No. 190, in
9.15 am
Mr. Prisk: I was remiss in not welcoming you to the Chair this morning, Mr. McWilliam. Please accept my apologies. It is a great pleasure to serve under your leadership.
The amendments relate to subsection (1). Clause 58 provides specific rules for house-building companies to acquire dwellings in part-exchange for the disposal of a newly constructed dwelling. Subsection (1) spells that out and states:
''Where a dwelling . . . is acquired from an individual (whether alone or with other individuals) by a house-building company or a company connected with a house-building company, the chargeable consideration for the acquisition is taken to be nil if . . . ''
It then sets out five conditions. The first is that
''the individual . . . acquires from the house-building company a new dwelling that has a market value in excess of the market value of the old dwelling''.
That is a peculiar value judgment. An elderly couple who wanted to move to a smaller, more easily maintained home would be specifically excluded from the relief, but a wealthy family building a mansion would have the transaction exempted. Why are the Government against trading down? Do they not recognise that that would unfairly disadvantage the sheltered housing market? Older people trade down in size and value, and release a larger family home for those with a growing family. What is the logic of exempting one form of part-exchange and not another? How is that fair?
The purpose of the amendments is to question the Government's logic and to ask the Chief Secretary to explain briefly the thinking behind the provision. If he can provide a satisfactory answer that suggests that the Government are aware of the problem and willing to address it, we shall consider withdrawing the amendment, but we wait to hear his reply.
The Chairman: Order. I caution hon. Members that if they intend to withdraw an amendment, they should do so only after the Minister has replied because, strictly according to the Standing Orders, I should put the question to the Committee immediately.
Mr. Boateng: Amendment No. 190 would remove part of subsection (1)(a), which requires that the new dwelling has a higher market value than the old dwelling. Clause 58 currently preserves the benefits that house builders enjoy under stamp duty by using the single sale route. Under stamp duty, the acquisition by the builder will be free of stamp duty only if it is of lesser value than the property being exchanged. However, it will bring some comfort to the hon. Gentleman to know that we have received a number of representations asking for the requirement on market value to be dropped. It has been said that the change, which amounts to a new relief, would help companies that provide part-exchange arrangements to older people, as the hon. Gentleman outlined. It is
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not uncommon for older people to downsize their housing arrangements later in life. People may move into retirement properties that are smaller and less valuable than their existing homes. If a builder is willing to take the existing home in part-exchange, we are sympathetic to the proposition that the relief should still be available.
If an ageing couple wanted to move from a £400,000 property to a £200,000 property and the builders were willing to take their existing property and make an equality payment of £200,000, that situation would not qualify for the relief under the clause. We believe that it should. Unfortunately, the drafting of the amendment may be defective, because it has been proposed without a consequential amendment to subsection 1(d). That subsection requires other consideration to be given by the individual for the acquisition of the new dwelling. If the new dwelling were less valuable than the old one, that would not be the case. The house builder would be expected to supply other consideration, presumably a cash equality payment representing the shortfall between the value of the old dwelling and the new one.
I therefore ask the hon. Gentleman to withdraw amendment No. 190. In return I can confirm to the Committee that we shall table an amendment on Report to ensure that downsizing qualifies for the relief. That will make it a more generous relief than is currently obtainable under stamp duty, which is another part of the modernising process. In the example just given, the chargeable consideration would be £200,000, so the charge would be £2,000. Under stamp duty, even using the single sale route, a situation would exist in which a consideration could not fall below £400,000, leading to a charge of £12,000.
That generous relief shows that the Government have listened and will continue to listen to representations such as we have had in relation to the relief. Of course, not all builders are in a position to conclude exchange deals with downsizers, because a builder will have to pay the difference in values. Not all builders have the necessary funds, so they may ask a third party relocation company to buy the old dwelling instead. That is not an exchange, so it does not naturally fit into the clause: it is more a matter for clause 59, which deals with relocations and which we will come to in due course. Suffice to say, at this stage, the expansion of the relief in clause 59 may also be necessary to assist relocation companies that deal with older people. We will consult on that and bring forward amendments before implementation.
Amendment No. 199 to clause 58 goes further than amendment No. 190. It would remove altogether the requirement for a new dwelling to be given in exchange for the old one. That would entirely change the character of clause 58, so it would become a blanket relief for house builders acquiring land that is currently used for dwelling. The amendment would not leave the relief particularly well targeted, which does not speak well of it, and does not attract us to it.
Clause 58 is intended to mitigate the reform of the treatment of exchanges. If the amendment were to be accepted, there would not need to be an exchange for the relief to be available. I do not think that was the
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intention of the amendment. Apart from the policy argument, the amendment would leave the clause deficient, as I am sure the hon. Member for Hertford and Stortford appreciates. I am not able to accept that amendment for the reasons given, but I am sympathetic to the aims of amendment No. 190.
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