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Sir George Young: The hon. Gentleman has misunderstood the argument that I was trying to make. I believe that there is a shortage of good quality accommodation and I want to see more investment in it. I was trying to take the House through the original thinking behind housing investment trusts. The argument that I was developing was that what had been perceived initially as a vehicle for investment in residential property has now become a vehicle for investment in commercial property, where the underpinning argument of the need to increase supply is not so strong.
There was a warning signal two years ago when the then Financial Secretary, speaking about REITs, said:
"As I understand it, most of the underlying assets in the trusts will be commercial property rather than domestic housing, thus to the extent that REITS are successful and they promote the construction and development of commercial property, the impact on residential housing may be negative".
That was a rather worrying speech. She went on to refer to the comments of the British Property Federation, which said:
"The introduction of a UK REIT would provide a suitable, stable, relatively high-yielding savings and pensions orientated product enabling private investors to access the attraction of commercial property on a diversified basis".
The discussion paper on REITs, which was published a year ago, states:
"The Government is committed to reforms of the property market where they support the objective of raising productivity in the UK economy".
Housing hardly gets a mention in the post-Budget comment on REITs. The Deloitte's Budget report states:
"The regime now proposed is significantly more flexible than the original proposals. It is likely to mean that the major listed UK property companies will convert to REIT status".
Those are not companies that happen to invest in housing. Googling away, I came across a comment from Property Secrets, which states that the Budget was
It states that shares in property companies soared after fresh proposals on REITs.
I want the Government to tell me that they do not see the measure as simply a vehicle for investment in commercial property, with existing companies reversing into a new vehicle. I hope that they share my hope—and that it is shared by the hon. Member for Wirral, West
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(Stephen Hesford)—that the measure will unlock serious, respectable, long-term money for investment in quality accommodation for rent.
I want to make one final point on REITs. When the concept was originally considered, there was concern that it should not simply be a new vehicle for existing property. Consideration was given to a requirement that, in order to qualify for a REIT, one would have to add to supply. Within the property market, there is a real risk that if one acts solely on the demand side, without doing anything about supply, one just pushes up the prices. The removal of double interest tax relief is a good example. I would be interested to know whether the Government have thought of there being a requirement to act on the supply side, as well as introducing this new vehicle on the demand side.
I just want to touch briefly on other subjects, including inheritance tax. I suspect that we have all had e-mails from constituents who are concerned at what they have read. The Sunday Times yesterday estimated that families will be forced to spend £340 million to rewrite their wills, even though the Government will raise only £15 million. I worked out that the Government will get more money from the VAT on the solicitors' fees from the people who have found out that they do not have to change their wills, than the £15 million that they will get from those who are caught by the measure.
Most people may not be affected, but they have to check. Indeed, before speaking in this debate, I had to contact my solicitor to see whether the modest arrangements that I have made for Lady Young were affected and whether I had an interest. Talking about the change, my solicitor said
"it was a bolt out of the blue, particularly as there had been lengthy consultations on other (minor) changes to the trust legislation. Many of the wills I have drafted will require review in the light of the law as is proposed, despite the Treasury claiming that a very small percentage of people are affected. I do not think that you are directly affected by the proposed changes."
We need to spend more time in Committee on that, but it appears to have caused a disproportionate amount of grief and ill will for a small amount of revenue. I thought that the Select Committee dealt with the matter rather tactfully in the report that came out today when it said:
"We are concerned that a legitimate measure designed to reduce tax avoidance may penalise trusts established to protect family members and consider that the issue merits further consideration."
It rightly says that the Government should provide more information.
The Chief Secretary said in his speech that it was an anomaly that 18-year-olds were not entitled to access trust money when they were 18. That might be his view, but many other people have a slightly different view about handing large sums to people when they are 18. The Government are basically saying that the Chief Secretary's interpretation of the responsibility of adolescence is that which should prevail and that anyone with a different view will be penalised for it.
Let me say a word on clause 13, which is on vehicle excise duty. The vehicle that brings me to the House each day is powered by an alternative fuel, but in
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addition to my bicycle, I own a band B car that will incur a reduced VED of £30. I share an interest in cycling with the hon. Member for Wolverhampton, South-West, whom I occasionally see at the bicycle shed.
If there is to be the administrative complication of a multi-rate VED, the differentials should be wider than they are at present. Clause 13(3) sets out three new rates for band G vehicles of £200, £210 and £215. Given that the total annual cost of running a band G car is presumably a five-figure sum, it is frankly absurd to have a VED rate with calibrations of £5. The market is not that sensitive, and the calibrations should be more widely spaced to justify the complication.
There is also an issue for farmers, and I say that as a rural Member. Some farmers in my constituency have to navigate unmade roads and need a band G car not to drive their children to school in west London, but to earn a living. If we are to have multiple grades and give out signals to deter unnecessary use, we need to think about farmers.
My hon. Friend the Member for Chipping Barnet (Mrs. Villiers) made a point about complexity in her excellent speech from the Front Bench. I disagree with the hon. Member for Wolverhampton, South-West because I think that the system is now so complicated that it is unstable. It is unsustainable to go on year after year with Finance Bills such as this, and we need a simpler system. I was interested to read what the Institute for Chartered Accountants said about our system:
"The UK tax system is spiralling out of democratic control . . . This compounds the complexity of a system which has developed in such a way that even highly numerate taxpayers are struggling to understand the tax implications of their actions."
My party has a clear strategy on that. We have set up a commission to introduce not only lower taxes, hopefully, but simpler, fairer and flatter taxes.
I did not hear from the Chief Secretary any vision of how to get out of the mess that we are in. When the Paymaster General winds up the debate, I hope that she will be able to say something about where the Government are going on this. Do they see no exit route from this series of Finance Bills and a bewildering system whereby not just the very rich and devious, but ordinary people, get caught up in the machinations of the tax system? It would be helpful if she would share with the House her thinking on the long-term strategy of how we introduce into this country a more sustainable, simpler and more comprehensible tax system than that which we are debating today.
7.23 pm
Stephen Hesford (Wirral, West) (Lab):
I should make a declaration to the House: this is the second Finance Bill on which I have spoken. I spoke on Second Reading of the Finance Bill last year, and a rude awakening came my way as a result of my speech. I thought that if one made a Second Reading speech on such a Bill, the normal course of things was that one went on to the Standing Committee, but I did not. What I said on that occasion clearly did not entirely meet with the House's approval. However, "If at first you don't succeed, try, try again," so this is my second attempt at speaking on a Finance Bill.
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I said last year, as did the right hon. Member for North Antrim (Rev. Ian Paisley)—I do not know whether he served on the Standing Committee either—that I was not an expert on these matters. I certainly give the same caution today. I spoke on measures in the Budget during the Budget debate. However, as that speech is on record I will not trespass on the House's attention by talking about those measures tonight. Instead I shall try, within order, to talk about the complex issues before us.
The shadow Chief Secretary, the hon. Member for Chipping Barnet (Mrs. Villiers), made an interesting speech similar to that made by her hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) on last year's Finance Bill.
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