Mr.
Field: That was an interesting contribution from the hon.
Gentleman. I, too, shall be a little more candid than perhaps is
entirely wise. I hope that no one on this side of the Committee will be
too hard on me.
Luckily, some
of us do not have second homes—well, actually, I do have a
second home, but it was paid for entirely out of my own resources
rather than anyone else’s. About eight years after becoming a
Member of Parliament, I have discovered that there are some benefits in
representing an inner-London constituency that were not immediately
apparent when a variety of scams were being operated outside the public
gaze.
I agreed with
much of the hon. Gentleman’s contribution, and if the under-30s
were twice as likely to vote as the over-55s, rather than the other way
round, I would bet that all Governments would do a lot more to tackle
the problems of housing supply. The reality is that it has been a
political issue, as much as anything else, to maintain a relatively
buoyant housing market, not least because those who are twice as likely
to vote—the over-55s, rather than the youngsters—also
tend to be home owners and their wishes have to be considered to a
large degree.
I also agree
with the main thrust of the hon. Gentleman’s argument:
realistically, there is not much that most Governments can do. We have
a ludicrously complicated system of property in this country, and
adding layer upon layer of complication does not make things any
easier. I agree with our new clause 3 and think that it is fine, but it
would work only slightly, at the margins.
We already
have in this country a capital gains tax exemption for main homes. That
ludicrous distortion has a knock-on effect, as the hon. Gentleman
rightly pointed out, in relation to investment for small business, and
it is in great contrast to the regime in many European countries. Many
elements of stamp duty land tax further distort the distortion, and
that is regrettable in many ways. For many people, property has become
the most important asset. I do not want to see peoples’
aspirations cast aside, but let us be absolutely honest about it: home
ownership, given the chaotic lifestyles and earning patterns of many
people, should not necessarily be regarded as a
right.
Mr.
Todd: The hon. Gentleman is making an extremely
interesting speech, which I have to assume does not reflect current
Conservative policy. I am sure that he has read about extraordinarily
advanced societies in western Europe where home ownership is far less
prevalent and less sought after—for example, Germany and
Switzerland—and of very poor societies where home ownership in
is sought after but to no effect. We seem to have an unusual
fixation.
Mr.
Field: We do have that fixation. Let us be honest, home
ownership provides stability and, potentially, collateral for doing
other things—or it has done in the past. The crux of some of the
present financial problems is in the sub-prime market and the idea from
the mid-90s in Clinton Democrat America that home ownership should be
encouraged. The financial services industry in the United States
created products for people who should never have owned property, given
their chaotic earning patterns, and I sense that we risk the same
happening
here. An
Englishman’s home is his castle—a great aspiration. As
someone who bought their first property at the earliest opportunity, at
23, I would not say that people should not aspire to it, but we have to
realise that for many people it can be a mirage. They go down a path to
property ownership and quickly find that it is more of a shackle than a
benefit. Part of the difficulty has been that miss-selling and poor
returns has shattered the savings and pensions industry’s
reputation, so it was logical for many
people—
The
Chairman: Order. I apologise for interrupting the hon.
Gentleman. He is making a very interesting speech, but it is meant to
be about stamp duty land tax.
Mr.
Field: It is fair enough that you pulled me up,
Mr. Atkinson, but the point I was trying to make was that
there has been a herd-like mentality—a logical one, particularly
for those in their 20s and 30s—to aspire to own property. I am
not apportioning blame—this is about the political
establishment, although probably not as far back as the last Liberal
Government. Even the hon. Member for Taunton will acknowledge that
successive Governments have found ways to complicate the system ever
more. I am not suggesting that we can start with a blank sheet of
paper, because that, inevitably, is difficult. We have a crazily
complicated system for housing. The notion that a main home is a
capital gains tax-free investment is not prevalent around the world and
is perhaps peculiar to this country. It has been a huge distortion,
which has, obviously, led to tinkering with stamp duty land
tax. I
wanted to make only a brief contribution. I am comfortable agreeing to
new clause 3, but ideally we, the whole political class, would have the
benefit of a more open and broad debate which considered the
distortions, the public’s aspirations and why our system is
different. I suspect that historical reasons surround the disparity
between the situation here and that which pertains in other European
countries, as the hon. Member for South Derbyshire points
out.
Mr.
Jeremy Browne: The hon. Gentleman is making an interesting
speech about not assuming that owning a house is a right and about
downsides as well as upsides to property ownership. However, I would
not wish anyone to infer from what I said that I was hostile to
people’s aspirations. I observe only that those who say how
desirable it would be for more people to rent rather than own property
almost invariably own property themselves.
Mr.
Field: I agree, and I am not downplaying people’s
aspirations. If one reads The Sunday Times money pages,
as we all do, every week people say that their best investment has been
property, and over a 30 or 40-year period that seemed to be the case.
With lower interest rates and political pressures, which make bringing
supply and demand together difficult, that may not be the case for
years to come. For the first seven of the 20 years that I have owned
property, between 1988 and 1995, there was no capital gain, and of
course since 1995 up until the last year or two, property has been a
terrifically good
investment. 2.30
pm
We are
tinkering at the edges and there needs to be a more sensible debate,
beyond a slanging match between political parties that suggests that
one side does not look to help first-time or aspiring buyers. Such a
slanging match takes out some of the real problems that we all face
with planning applications in our constituencies—well, I
probably do not. Many more properties need to be built, but ideally
some five or 10 miles outside my constituency, from where we will reap
the benefits but not get any of the downside. I hope that we can have
sensible debates on the matter in the future, and that sense will
prevail and new clause 3 will be added to the Bill. However, I suspect
that that will be another hope and aspiration that will not be
fulfilled, at least not
now.
Ian
Pearson: I shall respond briefly and try to focus my
remarks precisely on new clause 3 and clause 10. I do not want to go
over old ground with the hon. Member for South-West Hertfordshire,
regarding some of the comments that appeared in the press last August.
However, I want to emphasise that, although the press speculate daily
on many aspects of Government policy, that does not make them right. As
I said at the time, the press comments were unhelpful. I do not feel
the need to say anything more on the matter, but I would
like to respond to some of the hon. Gentleman
more substantive
points.
I confirm that the estimated impact of the holiday
on the Exchequer is £340 million, which includes the cost of the
extension announced in the Budget. It is right to say that we have looked
closely at the costs. It is not possible to estimate precisely the impact
on transactions because we are dealing with a counter-factual situation—what
would have happened in the absence of a stamp duty land tax holiday.
In the pre-Budget report we said that the figure was £280 million
and we revised that down in the Budget to £250 million plus the
extra £90 million for the September to December 2009 extension.
On the hon. Gentleman’s comments on disadvantaged areas, there
is no need to disapply the £150,000 figure because the £175,000
threshold makes that unnecessary. However, once the holiday ends, policy
will go back to what it was, and the limits will be £125,000 generally
and £150,000 in disadvantaged areas.
The
hon. Gentleman also made some significant play of saying that it was
simple to define first-time buyers in regulation. That is not the
experience in Ireland, where
we have been told that rules defining a first-time buyer run to more
than seven pages. There are some complex issues here, a number of which
were pointed out by the hon. Member for Taunton. There are issues
regarding divorcing couples, there is the overseas example that I gave
in my initial remarks, and there are issues regarding the
administrative burdens of potentially implementing this as a
policy. Mr.
Hands: Has the Economic Secretary looked at the example of
Australia? He mentioned Ireland, but I understand that Australia
successfully introduced a similar
scheme.
Ian
Pearson: My officials are certainly aware of the
Australian scheme and have looked extensively at a number of
issues.
Mr.
Hands: Will the Economic Secretary give
way?
Ian
Pearson: I am not saying that it is impossible to do so,
but I am pointing out that it is not as simple and straightforward as
was perhaps suggested by the hon. Member for South-West Hertfordshire
when he moved the new
clause.
Mr.
Hands: I thank the Economic Secretary for giving way
again; he is being most generous. He says that his officials looked at
the Australian example extensively. Surely after such a considerable
look, they must have come up with some conclusions or lessons that
could be
learned.
Ian
Pearson: We believe that the policy of the holiday that we
introduced on 2 September is targeted, temporary and timely. It was
right in the circumstances not to favour first-time buyers over other
buyers of properties with a value lower than
£175,000. The
hon. Member for Taunton’s interesting speech covered many areas
and not just his concerns over first-time buyers. He spoke of other
factors that people take account of when buying a home. Everybody
recognises that people take many circumstances into account when
considering a house purchase. Even following his lengthy speech, I am
not sure whether he is in favour of the principle of a stamp duty
holiday or even of a stamp duty threshold. The Government have made it
clear that we see this measure as temporary and
targeted. I
will respond briefly to the hon. Member for Cities of London and
Westminster. I do not wish to speak about his comments on capital gains
tax, but I do want to rebut his implied criticism of Government policy.
It has not been an instrument of Government policy, as he seemed to
suggest, to keep house prices high to help over-50s because they are
more likely to vote than under-30s. On the contrary, the Government
have set extremely ambitious house building targets, which have been
alluded to. We want those targets to be met. We want people to be able
to rent or buy the roof over their heads. That is Government
policy.
Mr.
Stuart: I am surprised that the Liberal Democrat spokesman
did not leap to his feet. Just for the elimination of doubt, it was
clear to me from what he said that he
was utterly opposed to special relief for first-time buyers. He thought
that it was impracticable and we seem to be opposed to it in
principle.
Ian
Pearson: The hon. Member for Taunton has put his comments
on the record. I happily give way to
him.
Mr.
Browne: For the avoidance of doubt, if the Conservative
party comes up with coherent, well-researched, thought-through and
practical policies that would be of benefit to my constituents, I will
be sympathetic to them. However, it would be embarrassing for the
Conservative party and the country if policies such as new clause 3
were included in the Finance
Bill.
Ian
Pearson: For the reasons I explained in my introductory
remarks, I do not believe that new clause 3 should be supported. It
would not be effective. If the hon. Member for South-West Hertfordshire
presses it to a vote, I invite my colleagues to oppose it and to
support clause
10.
Mr.
Gauke: I do not intend to go over the debate again. I
appreciate that we will not vote immediately on the new clause. I am
not persuaded by the Minister’s comments. I note he said that it
is not impossible for first-time buyers to be defined. When there is an
opportunity, we will press new clause 3 to a
vote. Question
put and agreed
to. Clause
10 accordingly ordered to stand part of the
Bill.
Clause
12Rates
of tobacco products
duty Question
proposed, That the clause stand part of the
Bill.
Mr.
Hands: May I begin by welcoming you back to the Chair,
Mr.
Atkinson? Clause
12 relates to the levels of tobacco duty, which are superficially not
particularly controversial. We do not oppose the increases in duty.
However, a number of questions need to be asked about the
Government’s approach to the structure of tobacco duty and
I hope the Minister will provide some answers in her response. The
effect of duty increases on illegal supplies is also a concern,
particularly if sterling recovers ground against the euro.
For those
less familiar with the structure of tobacco duty, I will briefly run
through it—partly because it is more complicated than one might
initially expect. I was a smoker for some years and used to await the
announcement of the Budget and the number of pence it put on a packet
of cigarettes. I imagined that the way it was arrived at was very
simplistic; it is actually quite complicated.
There are two
specific parts to tobacco duty. The first is called a specific duty,
which is a set amount of duty. It translates into duty on a per-packet
basis, but is assessed on a number of pounds per 1,000 cigarettes. As
we see in clause 12, that is to rise to £114.31 per 1,000
cigarettes, up from £112.07 prior to 22 April. That is a rise of
two per cent., which translates to the average packet of
cigarettes—an interesting concept that I will come back
to—to approximately £2.29 of specific
duty.
Added to that
is the ad valorem element, which is a percentage of the total price of
the retail price of a packet of cigarettes. That was increased in the
pre-Budget report from 22 per cent. to 24 per cent. That is important
for our considerations, because that percentage is calculated after
that has been applied to a packet.
As with the
alcohol duties that we debated a couple of weeks ago, the context of
clause 12 is last November’s pre-Budget report and the
Government’s late-in-the-day efforts to offset the revenue they
were going to lose through the cut in VAT by increasing tobacco duties.
In the case of tobacco, it raised the ad valorem element of the
duty on cigarettes by 2 per cent. to a total of 24 per
cent.
The two
figures were designed to be roughly equivalent, with the fall in VAT
and the rise in ad valorem more or less offsetting each other when fed
through to a change in the retail price of a packet of cigarettes. The
pre-Budget report left the specific fix element of the duty unaltered
and that change corresponded quite well to the VAT loss. However, like
the alcohol duties when VAT returns to 17.5 per cent. in January 2010,
there will be some important and significant effects on the overall
pricing level of cigarettes.
It
corresponded with the pre-Budget report because the ad valorem duty, as
I have explained, is a proportional tax on the retail price of
cigarettes. However, it has a unique feature: because it is a tax on
the price of a packet of cigarettes, including the margin for the
specific duty under VAT, this is a tax that taxes tax. In other words,
the percentage of ad valorem is applied to VAT and other charges. There
is therefore a consequent multiplier effect on the amount of tax paid
as the cost of a packet of cigarettes increases.
That might
seem esoteric, and perhaps not particularly relevant, but it has
important consequences for the market price of a packet of cigarettes:
the ad valorem duty widens the differential between the tax on cheaper
brands and the tax on premium brands. That was true, of course, well
before the pre-Budget report came along. The price gap between the
cheapest cigarettes and premium brands, such as Marlboro or Rothmans,
has increased from less than a pound to nearly two pounds in the last
six years—a considerable change so far this decade.
The
increasing element to the ad valorem tax has incentivised the new super
low-priced brands that have either been around for many years, or those
that have entered or re-entered the market, such as Pall
Mall.
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