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Jane Kennedy:
I am grateful for this opportunity to consider the subject. The developments occurred after I considered the proposals for the Bill and after Parliament debated the subject in relation to the Greater London Authority Act 2007. The changes that are being proposed came after our original consideration of the subject. If we are to keep everything in line, the developments will clearly affect other assemblies and Parliaments. It is
therefore very sensible that the Senior Salaries Review Body recommendations should be given further consideration and should be considered on their merits. I have my own views and shall be making them known to the Speaker’s review as a result of the fact that the hon. Gentleman has brought the subject to the attention of the Committee—I am grateful that he did so. The proposals in the clause, not those in the amendment, will present no cost to the Exchequer. The costs will be met from the existing GLA settlement.
Mr. Hammond: I ask the Financial Secretary to clarify that statement. Surely we are extending a statutory tax privilege to such payments that would not be available but for this measure; otherwise, there would be no point in clause 49. HMRC would have to test the payment against the usual criteria that it applies, and the Mayor would have to convince it that he had not received the payment as of right and that it was an ex gratia payment. That would be difficult to do when the GLA has made a scheme that makes the payment available to him.
Jane Kennedy: The hon. Gentleman is, of course, right. However, the proposals have been known of for some time, and the settlement for the GLA would therefore necessarily take account of the fact that the proposals were made. Therefore, it would be accepted in the normal course of events that the GLA should budget for such an eventuality.
Mr. Hammond: I am sorry; the Financial Secretary has misunderstood my point, which is that there will be a cost to the Exchequer. If the measure is passed, the payments made by the GLA will not be taxable, and that will be a cost to the Exchequer.
Jane Kennedy: I probably should have that detail with me. I have not got it, but I will write to the hon. Gentleman. Not a great deal of money is involved, but it is a fair question, and I will provide that information to him—the first of many times, I hope, that I will share information with him during the next few weeks.
I believe that there is no comparison with local government. Unlike the London Mayor and assembly members, MPs and Members of the devolved Assemblies, the expectation is that councillors can pursue their duties alongside their normal professions. We do not see councillors as full-time councillors in local government—certainly in England, although things may be different elsewhere. Executive mayors are slightly different, but I do not want to get drawn too far into comparisons with them, because they are not in place everywhere. We are dealing today with an extension to the London assembly of the same provisions that apply to the Welsh Assembly, the Scottish Parliament and, indeed, to Members of Parliament.
Mr. Jeremy Browne: I wonder whether the Financial Secretary follows the Conservative spokesman’s argument, which appears to be that, if people want to reduce the overall tax burden to the Exchequer, they should not vote for the Conservative alternative on Thursday, because of the severance payment cost of getting rid of Mr. Livingstone as Mayor of London. [ Interruption. ]
Jane Kennedy: My hon. Friend the Exchequer Secretary says from a sedentary position that the hon. Gentleman makes a fair point. I will not be drawn down that route.
It is important to make it clear that the proposal does not apply to all those who face a sudden and unexpected interruption of their employment. Tax exemption was first introduced in relation to redundancy or severance payments in 1960, when the limit was set at £5,000. The tax exempt limit was increased to £10,000 in 1978. It was increased again to £25,000 in 1981, and then to its present level of £30,000 in 1988. We keep that limit under review, but we have no current plans to change it.
I am grateful to the hon. Member for Runnymede and Weybridge for moving the amendment. Its sole purpose is to delay the coming into effect of the clause until 6 April 2009. I cannot agree to its enactment. We are bound by an earlier Act of Parliament to introduce the measure. The GLA severance pay scheme took effect from 1 March 2008 and follows the implementation of the power that the GLA was given under the 2007 Act to set up and administer such a scheme. The scheme is based on the same model as the severance pay schemes that affect hon. Members and Members of the devolved Assemblies, and the purpose of the clause is to put the tax treatment of payments under the new scheme on the same footing, as I have said, as those that are made under the longer-established schemes.
Mr. Philip Hammond: The Financial Secretary has just said that we are bound by previous legislation to introduce the measure. Can she explain that? I was not aware that the 2007 Act bound Parliament to introduce the measure today.
Jane Kennedy: The severance scheme was set up under the GLA Act. Extending tax exemption to the scheme in the way that is envisaged would keep the scheme in line with others that we have mentioned. That was always the intention of the Act. The hon. Gentleman picks me up on a slightly loose use of the word “bound”, and I take his point.
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The hon. Gentleman asked about the cost to the Exchequer. The cost is so small that, under usual budgetary cost accounting procedures, it is counted as zero in the Finance Bill, hence my earlier point. The total cost this year for six members standing down is about £151,700. My hon. Friend the Member for Wolverhampton, South-West asked whether I had details of the budget; I do not have those details to hand, but I will write to him on the subject when I have had the chance to consider his comments in detail in Hansard.
The clause is designed to settle the tax treatment of the resettlement grants that may be paid to the Mayor or members of the London assembly if they cease to hold office at the time of an election. The amendment would mean that the clause could have no practical effect until the 2012 elections. It would also mean that the first payments under the scheme were wholly taxable as earnings, rather than treated as termination payments, the first £30,000 of which are tax-exempt. That would be unfair and churlish, given the treatment of Westminster MPs and Members of the devolved Assemblies. I hope that the current Mayor of London continues in his post for many years and has no need to
avail himself of the measures, but I do believe that the Committee should put the measures in place. I therefore ask the hon. Member for Runnymede and Weybridge to withdraw his amendment.
Mr. Hammond: If the Minister really believed that the current Mayor would stay in post for many years, she would not have any problem accepting the amendment. She said that she wanted to depersonalise the discussion; the point of the amendment, which delays implementation until 2009, is to depersonalise it. It would mean that that discussion was not about Ken Livingstone, but about the principle of the tax treatment of severance payments for Mayors of London.
The central point that has come out of the discussion—from the Minister’s remarks about the parliamentary scheme, I think that it is a point in which she is interested—is that we have a curious arrangement whereby there are payments that, in the hands of any person other than a Member of Parliament, a Member of the devolved Assemblies, or a member of the GLA, would have to be defended against the Revenue. The tax treatment on the first £30,000 would have to be earned by demonstrating to the Revenue that the money was not an entitlement, but an ex gratia payment. What we have done in the case of Members of Parliament, and what we are about to do in the case of members of the Greater London authority and London Mayors, is define such a payment, in statute, as non-contractual, even though it is made under statute, and so will certainly be received by the holder of the office in question.
Any payment that someone in the private sector was certain to get when they relinquished office would certainly be taxable in full, and the Revenue would rightly argue that case, so we are creating an anomaly for a very small class of people, all of whom happen to be politicians.
Rob Marris: May I point out to the hon. Gentleman that elected representatives who lose their income as a result of the wish of the electorate, and not after voluntarily standing down, are in a rather odd position? Any other employee who is made redundant can claim redundancy and could succeed in getting up to £30,000, tax-free. Clearly, a Member of Parliament who loses at an election is not redundant, because there is someone else doing the job; someone else takes over. That is the anomalous position, which I suspect does not exist elsewhere in the economy.
Mr. Hammond: The hon. Gentleman makes a good point and draws attention to the need to distinguish between office holders who relinquish their positions voluntarily, which is more akin to voluntary retirement or quitting a job, and those who are involuntarily retired by their employer, in the private sector, or by the electorate, in the case of elected officers. There is clearly a much stronger case for generous treatment of those who, through no volition of their own—I will not say no fault of their own—find themselves turned out of office.
Mr. Redwood:
There would need to be careful drafting of such provisions. An unscrupulous person—I trust that there are none present—could decide on retirement and then put up as the “Don’t elect me” candidate in a seat where they had no chance of being elected and qualify for the full severance payments. The ruling would have to include the introduction of party into
British law and would have to state that the person had to stand again for the same party in the same seat, or it would not be sensible.
Mr. Hammond: My right hon. Friend makes a good point. I will not test the patience of the Chair by going any further down that route, other than to say that equally, there would be the problem that Members in seats with large majorities would be unlikely to find an opportunity to retire by offering themselves for election and failing. Other Members might, at some point in their career, expect to face that problem. I fully accept that there are difficulties.
Rob Marris: May I caution the hon. Gentleman about the use of the adjective “generous” in the present context? One can have a debate about the generosity of the amounts that an elected representative would receive under such a statutory scheme, but one should not apply the adjective “generous” to the concept that a sum up to the first £30,000 of any such payment is particularly generous or favourable to elected representatives, because that is the case for everyone else in the population under redundancy schemes.
Mr. Hammond: We do not want to go round the course again, but my understanding is that that is the case for everyone else in the population only if the payment is received ex gratia, rather than as a contractual provision.
Mr. Hammond: Well, perhaps the hon. Gentleman and I can continue the debate outside the Chamber. That is not central to the point at issue.
In her reply, the Minister did not answer the question whether the logic of the Government’s intentions is that elected executive mayors more generally will be afforded similar treatment, both in terms of the ability to receive payments and in terms of the tax treatment of those payments. She made it clear that she does not believe that there is a case for extending such payments to councillors, and she gave a coherent explanation—they are not full-time and they are expected to have other employment—but elected executive mayors, as I understand it, are expected to be full-time. We did not get to the bottom of whether we shall see a further extension of the provision to executive mayors.
On reflection, after listening to the arguments, I have decided that I agree with the tax expert whom I quoted earlier that £30,000 of taxpayers’ money would probably be a price well worth paying to see the back of the spiralling expenditure of the Livingstone regime in city hall. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 49 ordered to stand part of the Bill.
Justine Greening (Putney) (Con): I beg to move amendment No. 21, in page 51, line 11, leave out from ‘acquisition”’ to end of line 12 and insert
‘means the acquisition of a dwelling when it has not been previously acquired by a buyer’.
The Chairman of Ways and Means (Sir Alan Haselhurst): With this it will be convenient to discuss the following amendments: No. 13, page 51, line 12, leave out from ‘acquisition’ to end and insert ‘as a zero-carbon home.’.
No. 4, page 51, line 12, leave out ‘occupied’ and insert ‘acquired by a buyer’.
No. 14, page 51, line 12, at end insert—
‘(2A) In section 58B omit subsection (6).’.
No. 20, page 51, line 26, at end add—
‘(8) The Treasury shall, by regulations, define a “zero-carbon home”.
(9) Regulations under subsection (8) must have regard to the desirability of ensuring that all new homes should be zero carbon by 2016.
(10) Regulations under subsection (8) shall be made by statutory instrument.
(11) A statutory instrument containing regulations under subsection (8) may not be made unless a draft of it has been laid before and approved by resolution of the House of Commons.
(12) Regulations under subsection (8) shall be laid not later than 31st December 2008.
(13) On the coming into operation of regulations under subsection (8), regulation 5 of the Stamp Duty Land Tax (Zero-Carbon Homes Relief) Regulations 2007 (SI 2007/3437) shall cease to have effect.’.
Justine Greening: Amendment No. 21 replaces amendment No. 4, which should have been withdrawn from the Order Paper.
The Government and the Chancellor claim to be concerned about the environment. In this year’s Budget statement, the Chancellor said:
“our greatest obligation to the future must be to tackle climate change.”—[ Official Report, 12 March 2008; Vol. 473, c. 295.]
The Government claim that they want a meaningful reduction in the UK’s carbon emissions and that their zero-carbon homes initiative will kick-start the market for new, highly efficient technologies in homes. They talk about how the policy will set a gold standard for green homes.
I do not think that we are quite there yet, so my amendments are a helpful start. They try to explore and challenge whether the Government’s zero-carbon policy, as it stands, can ever be truly fit for purpose. Amendment No. 21 aims to clarify what could be an ambiguity in the current drafting of the policy. Amendment No. 20 aims to prevent a likely problem from occurring, which, if not stopped, could really damage the Government’s chances of meeting their already challenging ambition of ensuring that all new domestic homes are zero-carbon by 2016. We Conservatives also support that target.
Let us not forget that the zero-carbon homes policy was enacted by regulation only eight months ago, in October 2007. Even so, Treasury Ministers are already changing their own policy, less than a year after it went through Committee. In October 2007, the original statutory instrument specifically excluded flats and maisonettes from being eligible for the relief. At the time, my hon. Friends and I questioned the sense of that exclusion; we now know from later statistics that nearly half of all new homes built in Britain are flats.
Just months later, by the time of the Budget, the Chancellor was already announcing that, after all that, the zero-carbon homes policy would be extended to include flats as well as houses. We very much welcome
yet another adoption of a Conservative proposal and I hope that my amendments today will, similarly, be adopted—although without the eight-month delay. I have no doubt that the Government’s ambition, which we support, for zero-carbon homes by 2016 will be better achieved if the amendments are adopted.
Amendment No. 21 is a redrafting of new subsection (2)(b). It aims to define better and more carefully what constitutes a first acquisition. My understanding is that the provision is drafted to ensure that stamp duty relief may be claimed only the first time a home is bought. During our debate on the statutory instrument in Committee, the Minister responding said that extending the relief to second and subsequent sales would provide no value to the taxpayer. However, the proposed Government definition in the Bill covers a dwelling that
“has not previously been occupied.”
In practice, that could allow for multiple stamp duty land tax relief claims on the same property, if that property were sold again but never occupied in the meantime. For example, somebody could buy a newly built zero-carbon dwelling from a developer for their elderly parent to live in. They would gain stamp duty relief from the developer because their parent would not yet have moved in, although they were planning to; the residence would never have been occupied. Under clause 90, if, unfortunately, the elderly parent died prior to occupying the dwelling, the next purchaser would presumably also be allowed to claim stamp duty relief, as the home would still not have been occupied. The amendment would clarify the definition of a dwelling in respect of providing stamp duty relief to mean one that has not previously been acquired. It would remove the ambiguity of the current drafting and would deliver the Bill as the Government intend it.
I can imagine no objection from the Minister to amendment No. 20. It simply provides an insurance policy—that there will be a clear definition of a zero-carbon home by the end of the year, just as the Chancellor promised in the Budget. Crucially, amendment No. 20 would also require the Government to use a consistent definition of what constitutes a zero-carbon home across Departments, in a joined-up way. That definition would have to be approved by the House, and any anomalies between the definition arrived at after the summer’s consultation and the existing definition in the relevant Treasury statutory instrument would have to be identified. Those differences could then be debated and voted on, so that a single, workable definition could be achieved.
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The lack of joined-up government between the Treasury and the Department for Communities and Local Government is a critical failure, as it means that we still have no clear definition of what a zero-carbon home is—even though the Government first announced their policy on such homes in December 2006. That means that, by the time a single policy is arrived at, it will have taken more than two years to get the definition that we need.
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