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Mr. Clifton-Brown: Will my hon. Friend not also press the Government on the following fact? If there were a greater market in commercial propertyundoubtedly there would be a more flexible market if REITs were introducedthe Government would also gain more in tax through increased business activity generated thereby, because leases would be granted more flexibly.
We are fortunate in this country to have a hugely successful and internationally recognised financial services industry, with a skills and knowledge base that is incomparably successful by international standards. We can be grateful that it exists, because as we all recognise, our manufacturing capabilities do not match our success in the financial services industryand REITs represent an area of investment that the investment community wants to see on the statute book.
The Government have accepted in principle that this is the right thing to do, but for reasons that are difficult to understand, they have been unable to come to a firm conclusion. I simply say to the Paymaster General that there is no substantive disagreement on the principle, but we must accept that at this stage we need to fix a date
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for the introduction of REITs. That is exactly what the new clause is all about, and I hope that the Minister's response will clarify how we can move the process forward as rapidly as possible.
Rob Marris (Wolverhampton, South-West) (Lab): I have three questions to ask the hon. Gentleman. As background, he cited the figures and the research from Canada, but as the House will know, Canada is 32 times the size of the United Kingdom and has twice as much house building per capita per annum as this country does. What evidence does he have of the effect that REITs would have on house prices in this country, the availability of houses for home owners to buy, and the levels of rents, both commercial and domestic?
Susan Kramer: Despite the comments of the hon. Member for Wolverhampton, South-West (Rob Marris), REITs are a largely non-controversial issue; indeed, there is consensus across the House that they are a desirable instrument. For the ordinary consumerthe retail investorREITs are important because they are easy low-cost mechanisms for entering and exiting the property market. They would allow people to diversify their investment portfolios, which is what we want, to enable people to manage risk better within their investments.
For the Government, there is a desire to achieve a closer alignment between the taxation of direct and indirect property investments. I fully recognise that there are issues that the Government must tacklesuch as definition, legal issues, issues of withholding and foreign investors, and the ring-fencing of ownership and management versus the actual activities that take place on property. Surely, as we look around the globe, not least at Australia and the USA, there are plenty of examples of how all those issues have been tackled. The new clause is, from the perspective of the Liberal Democrats, essentially a wake-up call. It is about saying to the Government that they should please get a spur into Treasury officials, of whom we see so many in and out of the Box day after day, and get something sorted so that REITs can be made properly available to people in the UK.
The Economic Secretary to the Treasury (Mr. Ivan Lewis): May I first welcome the new attachment of the Opposition parties to the concept of REITs? It was, in fact, this Government who introduced the potential benefits of a REIT system and we never heard any proposal to that effect from Opposition parties.
New clause 9 follows a simple pattern. Opposition Members have said that they want to focus the Government's mind on making more rapid progress in solving the problems associated with REITs. The problem with the new clause is that it invites the Government to introduce regulations before 31 October, irrespective of whether, before that date, we have resolved all the difficulties and concerns that hon. Members have accepted as authentic and legitimate. How can a particular date be specified for a set of proposals when there is no way of being certain that it is possible to resolve the outstanding problems relating to them? Doing so would be entirely irresponsible.
What we have said throughout is that it is our objective and desire, if we can resolve the problems, to introduce proposals for the next Finance Billand that
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remains our position, but we cannot guarantee it. If, in the course of our discussion and consideration of the issues, it continues to become apparent that the principles necessary to underpin a REIT scheme cannot be secured, we will have to take that into account before taking any final decisions. The message about the need to make rapid progress on REITs is, frankly, one that the Opposition have no need to keep telling the Government.
Ed Balls: I fully accept the Minister's point that REITs were originally a Treasury proposal rather than one suggested by Opposition Front Benchers. Given the earlier comments of Conservative Front-Bench Members about the importance of having simplicity and stability in the tax system, does my hon. Friend find it rather strange to hear them arguing that we should rush ahead with legislation before we have had enough time to sort out the technical details? Surely it is in the interests of stability and transparency that we get the legislation right before we put proposals before the House.
Mr. Lewis: I entirely agree with my hon. Friend that consistency is not a trademark of the Opposition, as we have seen throughout our debate on the Finance Bill. Conservative Members are telling interested parties outside that they are aware of the importance of REITs, but the Government have already made that clear on several occasions. We have also placed on the record, in the context of the Budget and the Finance Bill, our belief in the importance of REITs and the fact that we support them in principle. We have also acknowledged that, if at all possible, we need to make speedy progress with them.
As I have said, the problem with the new clause is that it confines the necessary debate, discussions and consideration of the genuine difficulties that we face in reaching a decision to a period before the end of October this year. It is easy for the Opposition to propose such amendments, but it would be entirely irresponsible for the Government to accept a time scale that we have no way of being absolutely certain of meeting.
There is no need for Opposition Members to continue to reiterate that we all support the concept of REITs in principle. Nor is there any need for those Members to tell us that it needs to be done as quickly as possible. We differ in that we are not prepared to compromise on the fundamental principles that we have outlined time and again. We have talked about the desirability of REITs, but also about some of the genuine obstacles and barriers to achieving them.
I say to those who have a genuine interest in putting a sensible and credible REITs framework in place that the credible thing to do is to work with the Treasury and the Government to ensure that the obstacles and difficulties are resolved. If that happens, we can put REITs on the statute book very quickly. On that basis, I ask the hon. Member for West Suffolk (Mr. Spring) to withdraw the motion.
It is a real joy to have the presence of the hon. Member for Wolverhampton, South-West (Rob Marris). Something was lacking in our proceedings until, as I came to the Dispatch Box, there he was; the whole atmosphere in the Chamber suddenly lifted. I am delighted to see him, but I should point out that his
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questions could more appropriately have been put to his own Front Benchers, who have had a number of years in which to resolve these issues. I cited the experience of the United States in respect of residential, rather than commercial, investment, and gave the hon. Gentleman the relevant figures. So the experience of the United States has been specified and spelled out, and I dare say that it might be comparable in this country.
I should point out to the Economic Secretary that he doth protest too much. The idea seems to be that our suggestion is appalling, irresponsible and gratuitously offensive. The argument is that we are suggesting that this process, about which we have heard in three successive Budgets, should suddenly become terribly quick, and that it is quite wrong to deal with it rapidly. The Government have had a number of years in which to consider this issue. There have been representations from the investment community[Interruption.] I thank the Economic Secretary for that sedentary intervention. I am not sure whether I heard him correctly, but he seemed to suggest that he wants us to participate in this process. We would be more than delighted to do so, and so would the investment community. Perhaps we could then persuade him to reach some form of conclusion.
The idea is that 31 October is in some way a blood-curdling date, but all that the inclusion of such a date is designed to do, as the Economic Secretary well knows, is to bring this issue to a rapid conclusion. As he will know from the industry, because this issue has not been resolved, money is going offshore instead of coming into this country. However, it has been resolved perfectly satisfactorily in a number of foreign jurisdictions. I should point out that it is not a case of officials doing an outstanding job and the Treasury being at fault; it is Ministers themselves who are procrastinating and who cannot get their act together. [Interruption.] The same point applies to the hon. Member for Normanton (Ed Balls).
We have tabled this new clause in order to raise this issue yet again. I am afraid that those out there who are watching this particular Government performance will be extremely disappointed by the Economic Secretary's response. We do not wish to press the matter any further, other than to make the perfectly valid point that it should be brought to a proper conclusion. I hope that it will be dealt with very rapidly, and that we can stop the endless procrastination that is so damaging for our businesses. That said, I beg to ask leave to withdraw the motion.
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