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Nicky Morgan: I am glad that the hon. Gentleman has accepted my challenge to be positive, and I think the tenor of his remarks fulfilled that criterion, so I welcome them. I intend and hope that the company will be a community interest company, but that will be a matter for the new chair, in particular, to take forward. The hon. Gentleman is right, of course, that we need better-skilled people, but that is what the former careers service failed absolutely to deliver, which is why we have a skills shortage now. We do not have people inspired by the options and careers available. Working with schools, which know their students best, is what the company will do. It is right, therefore, that schools have a duty to procure good and excellent careers advice and guidance, and this company will play an important part in ensuring that all kinds of employers can get into schools and inspire young people for the future.

Chris Skidmore (Kingswood) (Con): I welcome today’s statement. One of the Government’s flagship policies for preparing young people for the world of work is the studio schools initiative, and recently I campaigned successfully for a £3 million studio school on the site of the Grange school in Warmley, but today South Gloucestershire councillors are voting on whether to close the existing Grange school. I fought hard for the studio school so that pupils at the Grange could continue their education at the new school. Will the Secretary of State meet me to ensure that pupils at the Grange who wish to continue their education at the studio school will be given the opportunity to do so and have the place in the new school they deserve?

Nicky Morgan: My hon. Friend is absolutely right that the diversity of schools in our system is fundamental to the driving up of standards we have seen. As I said in my statement, for example, more students are taking EBacc subjects, which are leading to higher academic standards, and I am a great supporter of studio schools. I heard what he said, and I will try to meet him, but if I cannot one of my Ministers will do so urgently.

Debbie Abrahams (Oldham East and Saddleworth) (Lab): I share the concerns of my hon. Friends about the status of the new company. Is it a private company? It is being set up with public money. Given the Public Accounts Committee’s report this morning, which suggests that public money given to private companies is often not spent well, how will we ensure that public money is held to account, and what specifically will it be doing?

Nicky Morgan: The hon. Lady got to the nub of the issue at the end of her question—what the company will actually be doing on the ground. When Labour has nothing else to say about a proposal, it obsesses about process. I have already mentioned that the company will be a community interest company, and it will of course explain to Parliament what it has done with the public money it receives. It will be doing a variety of different things, but one thing I do not want it to do is to quash the good practice already out there. There are already many excellent schemes involving the brightest and best schools linking to employers. We want to build on that and spread it across the country, including to schools in her constituency. I think the young people in her constituency will welcome these opportunities.

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Geoffrey Clifton-Brown (The Cotswolds) (Con): I congratulate my right hon. Friend on her announcement; it is a great step forward. Does she agree that we need to match the skills that schools teach to those that employers require? In that respect, would she encourage employers, LEPs and local authorities to carry out accurate skills audits so that schools know what those skills are?

Nicky Morgan: My hon. Friend is absolutely right. We must ensure that our young people have the skills to prepare them for life in modern Britain, which means, for most of them, getting jobs and knowing what jobs are out there. He is right to say that skills audits are critical, which is where the LEPs will come in, and that it is a partnership between different organisations, including local authorities, LEPs and employers.

Nic Dakin (Scunthorpe) (Lab): Unfortunately, mistakes the Government made early in this Parliament have left work experience and careers information, advice and guidance in the worst state it has been in during my lifetime. I welcome the Secretary of State’s statement and her personal commitment to putting this right, but the devil will be in the detail. Are there any guarantees for young people in relation to access to work experience and face-to-face information, advice and guidance, which is at the heart of a good system?

Nicky Morgan: I welcome the hon. Gentleman’s support, which I know is heartfelt, and I know he has a lot of experience, from before he entered the House, in the further education sector. Schools and colleges already have a duty to offer impartial advice and guidance, which can include one-to-one, face-to-face interviews, as well as work experience. The purpose of the company is to support schools and colleges in order to fulfil our commitments. From conversations I have had around the country, I know that many busy teachers, heads and leaders in education welcome the opportunity and support the company will provide in terms of employers coming in and talking to students. I suspect we will want to see work experience opportunities, job interviews and all sorts of other things as well. On the changes made this Parliament, the point is that having an external service was not the right way to go. It is right for the schools, which know their students, to identify and support them in making those choices.

Mr Nigel Evans (Ribble Valley) (Con): It would appear that hyperbolic nonsense is not just the preserve of BBC “Today” journalists, but shared by the shadow Secretary of State for Education. I think this is a great statement. As the Secretary of State knows, I represent a rural constituency with a diverse range of schools, from grammar to comprehensive, from denominational to non-denominational. Will she guarantee that the exciting services being offered today will be offered with rurality and diversity in mind?

Nicky Morgan: My hon. Friend is absolutely right. We want all schools to participate in this scheme, supported by employers. What we have already seen as a result of the educational changes that this Government have brought in is more collaboration and partnership between schools of all different kinds. This company will serve many different schools. One point captured in my hon. Friend’s question is that we see some of this good

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practice in some parts of the country, but we do not see it everywhere. I think that every child in this country is entitled to be inspired about their future.

Pamela Nash (Airdrie and Shotts) (Lab): I agree that every young person in this country deserves to be inspired about their future, and I am happy to hear the Secretary of State saying that and expressing her opinions on giving good quality careers advice. Unfortunately, that does not match with the recent record of this Government. While I welcome any investment in careers advice, £20 million is equivalent to around only £3 a head for every young person. Does she really think that this will fix the problems caused by this Government?

Nicky Morgan: In going around talking to organisations and schools across the country, I have found that it is not so much a matter of financial issues as of the lack of contacts. That is what the company is all about—brokering links between employers and businesses and schools. Yes, I am absolutely confident that this will make a difference. It is part of the careers landscape and I welcome the hon. Lady’s support.

Andrew Percy (Brigg and Goole) (Con): I cannot claim to be the daughter of a skilled worker, as the hon. Member for Lewisham East (Heidi Alexander) did, but I can claim to be the son of a skilled manual worker and to be someone who attended a pretty bog standard and quite poor comprehensive school. Is not the truth that poor-performing comprehensives cannot possibly offer the sort of links to employers that posh private schools, such as those attended by various Members, can? How will this announcement ensure that those who attend what have been called “bog standard” comprehensives get access to proper workplace experience?

Nicky Morgan: I know that my hon. Friend had direct teaching experience in colleges before he came here. Returning to my previous answer, we know that the good links, as my hon. Friend says, happen in some schools in some parts of the country. What this company will do through a network of enterprise and employment advisers is to make sure that the links between schools and businesses and employers happen right across the country. Some schools are very fortunate in having a large successful company down the road that offers an excellent scheme, but many schools are not in that position. Yet there are some fantastic businesses out there, often perhaps in the supply chain or in the service sector, looking for the next great generation of employees—and I am absolutely convinced that they are in the schools that my hon. Friend mentions.

Dame Angela Watkinson (Hornchurch and Upminster) (Con): May I commend to the Secretary of State the excellent schools, colleges and academies in Hornchurch and Upminster, and the pre-apprenticeship and skills training organisations there? They all recognise the importance of employability skills—having good oral, social and interpersonal skills, good timekeeping and good manners. Does she agree that, without those skills, no matter how good a pupil’s qualifications, they are unlikely to compete very well at interview? Will the new organisation take that into consideration?

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Nicky Morgan: My hon. Friend is absolutely right. Organisations, employers and businesses up and down the country talk about that. As I said in the statement, rigorous academic standards are, of course, important, but so are the employability skills that she mentions. That is why I have also focused since my appointment on the importance of character education—the resilience, the grit, the persistence, the self-confidence, the self-esteem—that we want to see developed in our young people. I think that having employers and businesses involved in schools will help to shape those employability skills that she rightly mentions.

Justin Tomlinson (North Swindon) (Con): My careers advice teacher assured me I had no chance of becoming an MP when I was older. What role do we see for the National Citizen Service providers and organisations such as the scouts and guides?

Nicky Morgan: I am not sure that my careers adviser even told me about the option of becoming a Member of Parliament. I discovered that via a roundabout route. My hon. Friend is right to say that the £5 million investment fund that we are going to launch via the company will allow organisations such as the scouts, guides, the National Employer Service and others—including Young Chamber, to which I have spoken recently—to make a bid either to fund new activities or to scale up existing activities so that they are spread around the country, offering the opportunity to acquire employability skills.

Margot James (Stourbridge) (Con): I welcome the additional support for careers guidance in schools and colleges. Will my right hon. Friend consider using a proportion of this money, or asking the new company to use a proportion of this money, to tackle the outdated images of industries such as manufacturing and construction, which put so many young people off considering a career in these vital and growing sectors of our economy?

Nicky Morgan: My hon. Friend is absolutely right. This is about inspiring our young people to consider all the different careers out there. Various sectors have changed over the years. For example, we see much more advanced high-tech manufacturing nowadays. I am passionate about ensuring that our girls and young women are inspired to go into sectors that they might not traditionally have considered. That is why I am so passionate, too, about backing campaigns such as Your Life.

Mr Robin Walker (Worcester) (Con): I congratulate my right hon. Friend on this announcement, and particularly on the appointment of Christine Hodgson, who is an inspirational business leader. Does my right hon. Friend agree that getting role models into schools—whether they are business leaders or successful apprentices—is vital, and can she explain how this company will be able to support that move?

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Nicky Morgan: I echo my hon. Friend’s words about Christine Hodgson. Christine champions the Work Inspiration initiative, which is a national employer-led campaign targeting young people to make their first experience in the workplace meaningful. She is also involved in business and the community. My hon. Friend is absolutely right to say that she is a great role model for all young people, but particularly for young women, encouraging them to see the senior roles they could play in companies. I mentioned the idea of having more apprentices going back to their former schools to talk about the opportunities open to them. Seeing employers working in exciting sectors will open up eyes and inspire the next generation.

Sarah Newton (Truro and Falmouth) (Con): I very much welcome today’s statement, but bearing in mind the very low proportion of girls participating, can the Secretary of State assure me that girls and their families will be encouraged to overcome stereotypes and to consider careers and apprenticeships in engineering and technology?

Nicky Morgan: My hon. Friend is absolutely right. This is about ensuring that all our young people are inspired about the career options, including a wide number of new careers, open to them. As I said, I am passionate about making sure that more girls are studying science and maths for longer, which is why we are backing the Your Life campaign and working with organisations such as the Institution of Engineering and Technology. She mentioned families, and this is very important too. For many families, it is easier to give advice about careers that are known about, but much harder to inspire young people to take up careers they know little about, which is where this company will come in.

Andrew Stephenson (Pendle) (Con): In Pendle we have seen a big reduction in the number of young people not in education, employment or training. We have also seen the number of young people undertaking an apprenticeship double. However, some of our local apprenticeships providers such as the Nelson and Colne college are now struggling to find young people to fill the apprenticeship vacancies available with local employers. How will today’s proposals increase the awareness of apprenticeships and vocational routes for our young people?

Nicky Morgan: My hon. Friend mentioned employers in his constituency that are looking for apprentices and appreciate the vocational and technical route through to careers. Because the company is employer led, it will be able to go into and work with schools and colleges to identify those for whom apprenticeships might never have been suggested, but who might be interested once the high-quality apprenticeships available in the 21st century are explained to them. I suspect that many young people will decide that those opportunities provide the right career path for them.

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Points of Order

2.8 pm

Mr Andy Slaughter (Hammersmith) (Lab): On a point of order, Madam Deputy Speaker. In a debate on consideration of Lords amendments to the Criminal Justice and Courts Bill on 1 December, the Lord Chancellor, while addressing the judicial review clauses in the Bill, misled this House—a matter that he corrected in a letter dated 4 December to the hon. and learned Member for Torridge and West Devon (Mr Cox), a copy of which was subsequently placed in the Libraries of both Houses.

In that letter, the Lord Chancellor wrote:

“As we discussed, during what was a complicated debate, I inadvertently suggested to you that clause 64 contains a provision for the court to grant permission to proceed with a judicial review where conduct is highly likely to have not made a difference if it considered there were exceptional circumstances to do so. I would like to take this opportunity to clarify that that is not the case. No such exceptional circumstances provision exists in this clause.”

Given that this misrepresentation goes to the heart of the Government’s proposals for judicial review in the Bill, I seek your guidance, Madam Deputy Speaker, on whether it is sufficient by way of correction to write to only one Member who took part in the debate and then to place a copy of that letter in the Libraries. Would it not be more appropriate for the Lord Chancellor to correct the record? I ask that particularly because it was clear from the debate in the other place yesterday on this House’s disagreements with the Lords amendments that the noble Lords taking part were unaware of the Lord Chancellor’s correction.

Madam Deputy Speaker (Mrs Eleanor Laing): The hon. Gentleman has made a perfectly reasonable point of order. It is certainly the case that, when a Minister has inadvertently misled the House, it is essential for that Minister to put the matter straight. In this instance, it appears that the Minister has written to the Member concerned, and has, with all honesty and courtesy, sought to put the matter straight. The hon. Gentleman has suggested that that is not adequate. Whether it is adequate or not is a matter of judgment, particularly for the Minister concerned.

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I understand why the hon. Gentleman wishes to draw the matter to wider attention, and, by making his point of order, he has done so. I think that he has done so effectively, because I see that Ministers are taking note of what he has said and of what I am saying, and I have no doubt that the matter will be drawn to the attention of the Lord Chancellor. I should add that, although the hon. Gentleman mentioned the debate that took place in another place yesterday, there will of course be another opportunity for this House to debate the substantive matters in the near future, and I have every confidence that the Lord Chancellor will take that opportunity to set the record straight. I also have every confidence that if he does not do so, the hon. Gentleman will insist that he does. The Chair will also keep an eye on the matter.

Mr Stewart Jackson (Peterborough) (Con): On a point of order, Madam Deputy Speaker. You will know that, in the wake of Prime Minister’s Questions, the right hon. Member for Leigh (Andy Burnham), the former Health Secretary, attempted to rebut what the Deputy Prime Minister had said about the facts of the franchise agreement for Hinchingbrooke hospital—the first privatisation of an acute district hospital in the NHS. He used words to the effect of “I did not sign off the privatisation.” However, on 27 March 2010, The Times recorded that he had signed the agreement to restrict the number of providers to just three, in the private sector. I fear that he may therefore have inadvertently misled the House with a slightly disingenuous response. I wonder whether you have been given notice that he will come to the House in the next few days to correct the record.

Madam Deputy Speaker: The fact that we have heard one genuine point of order does not mean that it should be assumed that all other points of order are anything more than attempts to extend the debate. However, I appreciate the point that the hon. Gentleman has made, and, again, I am sure that Ministers—and, in this instance, the colleagues of the right hon. Member for Leigh (Andy Burnham)—have taken note of what he has said.

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Planning Consent Applications (Contracts)

Motion for leave to bring in a Bill (Standing Order No. 23)

2.12 pm

Mr Nigel Evans (Ribble Valley) (Con): I beg to move,

That leave be given to bring in a Bill to require applicants for planning consent to enter into a contract with the relevant planning authority setting out certain undertakings relating to the application for planning consent; to provide that failure to meet those undertakings would result in withdrawal of any planning consent granted; and for connected purposes.

Planning is one of the issues that can dominate the lives of Members of Parliament. Passions run high, and rightly so. We have no power over the local authority when a planning application is received, but we can receive many e-mails and letters from constituents who are animated by the application to build. We have the ability to write to the chairman of planning and the other committee members, and to officers, and hopefully the local authority will recognise that we have a legitimate right to express a view on our own behalf and on behalf of our constituents. However, we do not have a vote at planning meetings. On more than one occasion I have expressed opposition to an application which has then been approved, but it has been far worse for me when I have opposed an application—such as the one in Barrow, a small village in my constituency—and the local authority has listened to my representations and those of the local councillor and residents.

In the Barrow case, what was worse was that, as the authority was deliberating, the landowner claimed non-determination after 13 weeks. His planning lawyer stated that the homes in question needed to be built, and that they would start to be built in 2015. We are now at the end of the current year. Approval was given in February 2014, 10 months ago. Reserved matters have not been claimed for any part of the land, which was originally for sale at £23 million. So much for the urgency of building those houses.

Let us consider the specifics of the Barrow case. A resident who came to see me after the inspector had approved the application said, barely restraining his anger, “Mr Evans, you know and I know that with all the building that is going on at the moment in the area, this site is not going to be developed any time soon.” I agreed with him. Building is already going on in the village. Hundreds more houses are actually being built a short distance away, in Whalley. In Calderstones, a bit further away, more houses have been and are being built. A development of well over 100 houses off Mitton road has been allowed on appeal. In Accrington road, Whalley, 87 houses were approved two years ago. You have guessed it: not a single brick has been laid, and no reserved matters have been sought.

Some of these developments have been built, and others have not. The uncertainty is awful, and it does not help local authorities to plan for new schools, roads or other infrastructure improvements. One of the Whalley developments of 80 houses has not been started, although three years have elapsed since permission was given, but a reserved matters application has just been received by the local authority. All those applications have infrastructure implications.

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My Barrow resident believed that many years would pass before the development of 504 houses was built, and that, in the meantime, his own house and those of everyone else in the area who wished to sell would be blighted. Uncertainty about when building will start, when it will be completed, and whether changes will be made in the initial outline application—the five-year land supply figures could be altered, so developers might argue that the land supply figure for the area was no longer being met—has caused an enormous headache for local authorities generally.

Small local authorities find it even more difficult to cope, because, during this crazy period between the adoption and full approval of core strategies, developers are trying it on all over the place. Fortunately, Ribble Valley is close to having its core strategy fully approved—it is in its final stages—but developers have worked overtime putting in applications left, right and centre, and appealing against virtually every one that is turned down by the local authority. The cost to the council has been prohibitive, and has led it to question whether it can afford to appeal in the case of some applications. There will be a further problem if some of the approvals simply do not materialise if work starts, and other developers point the finger at the authority and accuse it of falling below its five-year supply. The chairman of planning at Ribble Valley council, Terry Hill, has said that, in this case,

”the Local Authority is not responsible for the under supply”.

The uncertainty has been created by the very industry that could profit from the approval of more applications directly by the council or on appeal by an inspector. It has left residents angry and their properties blighted, and they must reduce the asking prices of their properties dramatically if they need to move quickly.

I am grateful to the House of Commons Library for supplying me with information on the existing powers of local authorities, and on unimplemented permissions and land banking. Conditions may be imposed by a local authority, but the criteria are open to interpretation, which means more uncertainty. One of the conditions may be that the development should be carried out in its entirety, but no mention is made of time scale. Completion notices are therefore seldom used as a local authority power. Indeed, a local authority does not have the power to require a developer to complete the development.

My Bill will rebalance the position, so that, at the outset of an application, far more thought is given by developers to what they are requesting. They will need to bring forward to the inception of the application matters that they normally leave until much later. They will need to make clear the start and completion dates of the development via a contract. Land banking and the blighting of people’s homes will no longer be acceptable.

The Library paper—admittedly, using historic figures—states that at the end of 2011, there were 399,816 unbuilt homes with planning permission, and building work had yet to start on 52% of the uncompleted developments. One development was completed last year, eight and three quarter years after planning permission was granted. The Government should look at fining powers for unstarted permissions or powers of direction to ensure developments are completed, or possibly removing the permissions with no chance of reapplication by that developer or associated developers of that particular land. If the houses are deemed necessary in certain areas—in my patch, I must say, I have strong reservations

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about that or total opposition to it—I cannot do better than quote the former housing Minister, my hon. Friend the Member for Grantham and Stamford (Nick Boles), who, during Committee stage of the Growth and Infrastructure Act 2013, said:

“We want homes built. We want them built now”.––[Official Report, Growth and Infrastructure Public Bill Committee, 27 November 2012; c. 267.]

Let us give local authorities the power they need to ensure land banking and uncertainty is gone and homes and infrastructure improvements are made, and made on time.

Question put and agreed to.


That Mr Nigel Evans, Bob Stewart, Martin Vickers, John Mann, Austin Mitchell, Philip Davies, Chris Heaton-Harris, Crispin Blunt, Mr Brooks Newmark, Steve Rotheram, Mr John Leech and John Pugh present the Bill.

Mr Nigel Evans accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 6 March 2015, and to be printed (Bill 135).

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Stamp Duty Land Tax Bill

Second Reading

2.21 pm

The Financial Secretary to the Treasury (Mr David Gauke): I beg to move, That the Bill be now read a Second time.

My right hon. Friend the Chancellor announced in last week’s autumn statement an important and comprehensive reform to stamp duty land tax—SDLT—on residential property. Many Members made their views known on the SDLT changes in last week’s debate on the provisional collection of taxes motion. Today is an opportunity for others to raise their voices, although looking around the Chamber, it appears possible that the House’s appetite for debating this matter was sated last week.

With effect from 4 December, the structure, rates and thresholds of stamp duty land tax have changed, and stamp duty has moved from a slab to a slice arrangement.

Alok Sharma (Reading West) (Con): Of course I, like many colleagues, welcome the measure. My constituents are some of the most aspirational people in the country, and they think that this is a great move by the Government. What assessment has my hon. Friend, or perhaps the Office for Budget Responsibility, made of likely increases in the volume of property transactions as a result of this change to stamp duty?

Mr Gauke: This is likely to have an impact, with more transactions for properties on which the stamp duty bill has fallen—some 98% or so—and slightly fewer transactions when a larger stamp duty bill will apply. Although there will be an element of behavioural change as a consequence of the measure, property transaction numbers and house prices will be affected by a whole range of factors, so it can be difficult to ascribe any particular changes to one particular reason. However, it is likely that there will be more transactions, and that has certain advantages, such as for labour market mobility, and if it means that people are living in the homes that they want to live in as opposed to feeling trapped in their property to a certain extent. I think that the measure will have a beneficial impact on the housing market.

Each new SDLT rate is now payable only on the portion of the property value that falls within each band. That is in contrast to the old system, under which tax was due at one rate for the entire property value. Moving from a slab to a slice arrangement is right in terms of fairness and economic efficiency. The new arrangement will cut SDLT for 98% of people who pay the tax, and no one who is buying a home worth up to £937,500 will pay more.

This Government believe in aspiration. The aspiration to own our own house is one of the elements of human nature. It is something that, for generations, has been totemic for people in this country. This is a Government who will help people to achieve that ambition, and do so in a fair and equitable way.

The previous stamp duty system was flawed. It had been criticised by hon. Members on both sides of the House, industry and think-tanks. It was

“one of the worst designed and most damaging of all taxes”,

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according to the director of the Institute for Fiscal Studies, and “unfair” according to the Building Societies Association. According to the Royal Institution of Chartered Surveyors, it did not

“work as it stands and creates large distortions”.

The problem with the previous system was simple. The slab approach created an enormous hike in taxes at certain thresholds. If someone paid £250,000 for a house, they would pay £2,500 in stamp duty. If they paid £250,001, however, they would pay £7,500—three times as much. In reality, of course, nobody did; they would have been crazy to. What happened was that there were dead zones—in this case a little above £250,000—in which almost no transactions actually took place.

To return to the intervention made by my hon. Friend the Member for Reading West (Alok Sharma), this change is likely to result in a substantial increase in the number of transactions in those dead zones because of the ending of the bunching effect, which should help us to have a more efficient market. Let me again give an example that I cited in last week’s debate: in 2013-14, there were over 30 times as many sales between £245,000 and £250,000 as there were between £250,000 and £255,000. Given that the average UK house price is around £275,000, this was a big distortion affecting a significant number of properties.

What also happened was that people owning properties a little under the threshold were reluctant to improve them for fear that that would be money thrown away if they came to put the property on the market. Also, people wishing to move up the property ladder as their families grew, but who found themselves on the wrong side of the step upwards, had to find a significant—and arbitrarily imposed—lump sum precisely at a time when there are hundreds of other one-off expenses to worry about. We have got rid of the inefficient and distortive old system, and replaced it with a fairer new system that cuts SDLT for 98% of people who pay it.

Under the new structure, no buyer purchasing a property will pay anything at all up to the first £125,000. Buyers will be charged 2% for the portion from £125,000 to £250,000, and 3% for the portion from £250,000 to £925,000. Those individuals buying a house worth more than £925,000 will be charged 10% for the portion of the price between £925,000 and £1.5 million, and buyers will pay 12% tax for any portion of the price above the £1.5 million threshold.

I stress that the tax will be paid once, and once only, at the point when the purchaser has the cash to do so. Once it has been paid, that is it, because we do not believe in introducing a system that would require homes to be revalued every year, or in imposing a large liability on people who may be asset-rich but cash-poor.

Ian Swales (Redcar) (LD): I welcome the rate profile that my hon. Friend has put into the Bill. Does he agree that the measure is another example of this Government increasing taxes for the wealthy and making those with the broadest shoulders bear the biggest burden?

Mr Gauke: It is an example of that. In yesterday’s Treasury questions, in the context of the reduction of the 50p rate of tax to 45p, I pointed out that the

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proportion of income tax paid by the top 1% has been higher—and is projected to be higher—in the years since that cut than it was when the 50p rate was in place. There is a similar point to be made here. For properties, we estimate that the top 1% will be paying just under 40% of all stamp duty yields, whereas in 2010, under the old system, the top 1% were paying only 19% of all yields. Stamp duty has become more progressive as a consequence of our changes.

Mr Jim Cunningham (Coventry South) (Lab): How does that affect the shrinking tax base? This is a genuine question, by the way. The tax base seems to be shrinking at the moment, so will this change have an impact on the tax base, or will it be neutral?

Mr Gauke: I do not know whether the hon. Gentleman is referring to the fact that there has been a deliberate shrinkage of the tax base, in that we have taken 3.4 million people out of income tax. Perhaps that was not what he meant, but I am happy to draw the House’s attention to that policy none the less. The Government have, on a number of occasions, made the tax system more progressive. At a time when the public finances are in a difficult position and we need to consolidate them, we have ensured that the wealthiest in society bear a significant burden, and this measure is an example of that. We have made stamp duty land tax more progressive by reducing the burden on ordinary households and collecting more tax from the top end, where there has been a significant appreciation in values in recent years.

Alok Sharma: My hon. Friend talked about the yearly property tax that others have proposed, but irrespective of whether such a tax were introduced, is it not the case that it would not help those who want to buy their own house? Does he agree that the Government are introducing aspiration into home buying, which is something that we should all be encouraging?

Mr Gauke: Indeed; that is right. These measures will be helpful for those who want to get into the housing market and who often face significant challenges in putting together a deposit and meeting the transactional costs involved. I believe that it will be helpful that we have been able to reduce the transactional costs. I return to the point I made a few moments ago: this measure will help households up and down the country and we, as a Government, believe in aspiration.

Let me stress that in every city, town and county in the United Kingdom, a large majority of people will benefit from the new system. No buyer of a property under £937,000 will pay more tax than under the previous system, and there will be a tax cut for 98% of home buyers who currently pay SDLT. In London, 91% of home buyers who pay SDLT will see their tax bill cut. In Scotland, Wales and Northern Ireland, over 99% of those paying SDLT will see the rewards in their pockets. A buyer of the average Help to Buy home priced at £185,000 will be £650 better off as a result of these reforms.

The reforms came into force at midnight on 4 December to avoid creating undue distortions in the market, meaning that a stand-alone Bill was necessary. The Bill was introduced in Parliament on 4 December, following a provisional collection of taxes motion at the end of the

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autumn statement. If a person had exchanged contracts before 4 December but completes on or after that date, our transitional arrangements mean that they can choose whether to use the old or the new rates and structure. We have provided a calculator on the Her Majesty’s Revenue and Customs website so that people can work out how much tax they would be paying, and I am happy to confirm that it has been used more than 880,000 times since it was put in place on Wednesday.

It is a bit of a standing joke that the UK is a country obsessed with house prices, but for most of us, buying a home involves the biggest amount of money we will ever spend. Stamp duty land tax is an important source of Government revenue. It raised £6.5 billion in 2013-14 to pay for the essential services that the Government provide and support. However, it is only reasonable that the tax should be imposed fairly and equitably. As a result of difficult decisions that we have taken elsewhere, we are now able to forgo £800 million of revenue to introduce these changes.

The changes have been warmly welcomed. They are

“great news for those buying a home or considering a move”,

according to Nationwide. They are particularly good for

“first time buyers and second steppers”,

according to Savills, and

“a shot in the arm for families and growing firms”,

according to the CBI. My particular favourite came from a Mr Tom Whipple—a science correspondent for The Times—on Twitter, who wrote:

“We are moving home next week. Osborne just saved us £400. I’m calling our new fridge freezer George.”

That is how to become a household name in politics!

On a more serious note, I would like to touch on how the change affects Scotland. From 1 April 2015, the land and buildings transactions tax—LBTT—will replace stamp duty land tax in Scotland. Up until that point, these reforms will apply to all residential property transactions in the UK, including Scotland. This will ensure that home buyers in Scotland do not miss out on a potential tax cut before the LBTT comes into operation.

I am aware that there are some in the UK who will be unaffected by this change. As housing has become less affordable, the rate of home ownership has fallen from its 2003 peak of 70% to around 65%. Many are wondering whether they will ever get on to the housing ladder. Our reforms to SDLT will assist those households by reducing the amount of cash needed at the point of purchase. It should be stressed that SDLT is part of a much wider set of reforms designed to get Britain building, to increase radically the supply of housing units, and to release some of the pressure on our housing market.

Alok Sharma: The Minister cites the schemes that the Government have implemented to help people to buy their own homes. Will he tell us how many people have benefited from the Help to Buy scheme? Will not these changes give a further boost to the scheme?

Mr Gauke: My hon. Friend raises an important point. Indeed, I am about to mention some of the measures that we have taken in respect of helping the housing market, including Help to Buy.

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We are investing billions of pounds of public money to provide affordable new homes, including £4.5 billion during this spending review period to provide 170,000 new units, and a further £3.3 billion to deliver 165,000 more units over three years from 2015. As announced in the autumn statement, there will be another £1.9 billion between 2018 and 2020 to continue delivering homes at the same rate. We are also reforming planning laws. The autumn statement package contains commitments on releasing land with capacity for up to 150,000 homes and new measures to support up to 133,000 homes.

Mr Jim Cunningham: Will the Minister give way?

Mr Gauke: I should like to make some progress, as I want to answer the question asked by my hon. Friend the Member for Reading West.

In September, we introduced a new £400 million rent to buy programme, boosting the building of new rental homes to help people to upgrade into home ownership. The programme allows people to rent affordably and to save for a deposit, and then to buy that home or another one. To answer my hon. Friend’s question, more than 66,000 households have benefited from the Help to Buy equity loan and mortgage guarantee schemes, four fifths of whom were first-time buyers.

Mr Cunningham: Obviously we want people to be able to own their homes, but there is another facet to this: social housing, either through local authorities or housing associations. What element of the money that the Government are putting into these schemes is going to that end of the market? The drop from 70% to 65% that the Minister mentioned earlier probably relates to people going into the rental market.

Mr Gauke: The hon. Gentleman should bear in mind that almost 217,000 affordable homes have been delivered since April 2010. Between 2011 and 2015, some £19.5 billion of public and private investment is going into affordable homes, and we are on track for the highest rate of affordable house building in at least two decades. The Government are delivering on all aspects of how we ensure that we give people the opportunity to have decent housing. These SDLT reforms will give another boost to people wishing to fulfil their aspirations to own the place they live in.

Jake Berry (Rossendale and Darwen) (Con): I apologise to the House for not being here for the start of the debate. I am sure that the Minister will be aware that when the previous Government introduced a new SDLT regime, there were several avoidance schemes, most of which involved sub-selling at below the market value. I applaud the Bill and look forward to its passage through the House. Will he confirm that the anti-avoidance measures under the previous regime will be read over to this Bill to stop the abuse of the tax system?

Mr Gauke: I am grateful to my hon. Friend for raising that point, because the Government have addressed this issue fully during this Parliament. A few years ago, SDLT was starting to develop a reputation as a tax that was easily abused—he mentioned one means by which that was done—but this Government have introduced several measures to deal with that. We have seen a substantial decline in the marketing of SDLT avoidance

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schemes, and the introduction of the annual tax on enveloped dwellings has been successful in discouraging avoidance. He is right to highlight the issue, but we are making changes in the context of an SDLT that is perhaps less leaky than when we came into office a few years ago. That enables us to make our changes, which benefit properties in a way that is, none the less, affordable for the Exchequer. As the Chancellor made clear last week, the policy will deliver a tax bill cut for 98% of people who pay SDLT, and the previous economic distortions in the system have been removed, which benefits the housing market generally.

John Stevenson (Carlisle) (Con): First, I apologise for being late, as I was serving on a Delegated Legislation Committee. I welcome the reforms for the residential market, but do the Government have any intention to introduce similar provisions for the commercial market?

Mr Gauke: I am grateful to my hon. Friend for raising that point, which we debated briefly last week. Particular issues with the residential market meant that we needed to address that quickly, and some of the pressures to reform the system applied particularly to the residential market. Clearly, any Government will want to keep this matter under review, so I would not want to rule out looking at the commercial market. However, the imperative was to press on for the residential market, and no doubt commercial property and SDLT is a matter to which the Government will wish to return in the future. I know that he welcomes these reforms, and I should point out that more than 99% of transactions in his constituency will benefit from our changes.

Jake Berry: What will be the SDLT position when there is a mixture of residential and commercial property? How will a shop with a flat above it, for example, be treated under the new SDLT regime?

Mr Gauke: The residential property would be considered under the new residential regime, and an evaluation would be needed to distinguish between the commercial and the residential premises.

This reform will improve the fairness and efficiency of the tax system. It will make a real, tangible, positive difference to the lives of people up and down the country, and I hope that hon. Members will think fit to give the Bill a Second Reading.

2.45 pm

Shabana Mahmood (Birmingham, Ladywood) (Lab): I am grateful to the Minister for his introduction to this Bill—I am only sorry he was not breathless with excitement today as he was last week when we first debated the stamp duty changes. He is, however, right not to spoil us with a repeat performance, and I was amused to see that we all arrived super-early for this afternoon’s debate.

I wish to indicate, as I did at the outset of last week’s debate, that we support these measures, and will be supporting the Bill on Second Reading and during its remaining stages. The Minister mentioned the procedural mechanism adopted to give effect to these changes: the Government moved a resolution under the Provisional Collection of Taxes Act 1968, which was passed last

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week in order to give immediate effect to the stamp duty measures unveiled in the autumn statement. We debated that motion the day after the autumn statement and today we move on to the Bill’s Second Reading. The Government have proceeded with a stand-alone Bill rather than await the next Finance Bill in order to give immediate effect to the stamp duty changes and thereby prevent distortions within the housing market. We recognise the importance of that and support the mechanisms adopted to give effect to this measure.

As the Minister said, stamp duty has been charged at a single rate on the whole purchase price of a property, with different rates for different value bands. When a property exceeds the threshold for a higher rate of duty, tax is charged at the higher rate on the whole value of the sale—this is the so-called ‘slab basis’—rather than on the part of the price above the threshold, which is the so-called ‘slice basis’. The tax has been charged on the slab basis for more than 40 years, and the slab basis design has caused much consternation and complaint, with regular calls for reform.

In recent years, stamp duty has come under the spotlight much more because of the increasing burden the tax has placed on home buyers, especially first-time buyers, as a result of the huge increases in house prices. Between 1997 and 2005, house price inflation averaged more than 10% a year, and the proportion of property transactions attracting stamp duty rose from about half to more than three quarters during roughly the same period. In order to assist buyers, and first-time buyers in particular, we have seen a number of measures designed to alleviate some of the burden caused by stamp duty under its previous structure. They focused primarily on thresholds and stamp duty holidays: the threshold was doubled in 2005; it was temporarily increased by £50,000 for one year in 2008; and it was doubled again for first-time buyers for three years from March 2010.

The burden of stamp duty, however, has continued to be significant, increasing by 30% between 2009-10 and 2013-14. The continued growth in the housing market has been the reason for the increasing stamp duty burden. In that context, today’s reform is sensible and has attracted support from across the House. SDLT rates will now only apply to the part of the property’s selling price that falls within each value band, and new rates and thresholds have been introduced.

I have a number of questions on specific elements of the changes, and I hope that the Exchequer Secretary will deal with them when she responds to the debate. The changes came in with immediate effect on 4 December. The Government have explained that those who had exchanged contracts before 4 December but who were completing on or after that date will be able to choose whether the old or the new rules apply. Will the Minister update us on how many people she anticipates will opt for one or other of those options, and what impact the changes have had on property transactions in the period immediately following the autumn statement?

The Financial Secretary to the Treasury made it clear both last week and this afternoon how Her Majesty’s Revenue and Customs has been giving advice on the implications of this reform. I think he said that the calculator on the Government website had been used 500,000 times last week. That figure has now gone up to 880,000. He also told us that the HMRC call centre was manned until midnight on 3 December when the changes

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took effect, and that HMRC specialists responded to 250 inquiries by telephone, and all but 3% of them were resolved immediately. Will the Minister update us on whether the remaining handful of inquiries have been followed up, and on what points were members of the public or their advisers seeking clarification? It would be helpful for the House to understand how the public are responding to these changes.

I also wish to press the Minister on the revenue implications of the measures. It is estimated that, in 2014-15, the reform will cost £395 million, which rises to around £760 million in 2015-16. That is a significant amount of money at a time when the public finances remain challenging to say the least. How certain is the Minister that the other measures in the autumn statement, which the Government say will raise enough revenue to offset the cost of this measure, will in fact raise the amounts that they hope? Today, the Government have published the draft Bill for the new diverted profits tax, which they say will raise £1.3 billion over the scorecard period. However, the Office for Budget Responsibility says that those numbers are uncertain, and, in its fiscal outlook, gives a new rating system to reflect the degrees of uncertainty over some of the figures in the autumn statement. For the diverted profits tax and the SDLT numbers, for example, it gives a medium to high uncertainty rating. What impact will that have, and how confident is the Minister that we will not have future debates on the failure of some of these measures to live up to the Government’s claims?

We have just heard how these changes will apply only to residential properties. The Institute for Fiscal Studies and others have queried why the changes have not been extended to cover commercial property, too. When I raised that point last week, the Minister said that the Government were not persuaded of the case, but it does seem odd to be running two different systems for the same tax, especially when the Government have acknowledged, as we all have, that the slab structure has a very distorting effect.

The Government say that the slab stamp duty system had a negative impact on labour mobility. Why do they think that the same will not happen in relation to business mobility? Perhaps the Exchequer Secretary can give us some more detail on the Government’s thinking in that regard. Has any assessment been done on the impact of retaining the slab system for commercial property, and on how competitive a place this country is in which to do business? Are there any plans to look at this matter again ahead of the general election?

Last week, the Minister said that the changes will have a positive effect on labour mobility and productivity, but the OBR says that the effect will be limited and highly uncertain, because while

“higher rates of stamp duty reduce households’ propensity to move, the adverse effect was confined to short-distance and non-job related moves—an impact less likely to have direct implications for GDP.”

Why do Ministers think slightly differently on the matter of labour mobility?

As the Minister has explained, the measures apply to Scotland only until April next year, as responsibility for this tax was devolved to the Scottish Government in the Scotland Act 2012. The Scottish Government have announced details of their land and buildings transaction tax, which also has a slice structure. The Scottish LBTT

10 Dec 2014 : Column 916

will apply to both residential and commercial properties. I want to press the Minister on what impact that will have on the rest of the UK when it comes to the question of where businesses choose to buy commercial properties. Is there a risk that England may be disadvantaged? The more favourable regime in Scotland, with the slice structure for commercial property, might mean that businesses avoid buying commercial property in England where the less favourable slab structure applies. What impact will that differential treatment of commercial property have on business mobility? Although devolution is an important process, as it puts decision making closer to the people whom it affects, we all want to avoid unhealthy tax competition among the nations of the UK. Has any assessment been carried out to consider the implications of such competition?

Of course none of the measures that we are debating today deals with the main cause of the biggest housing crisis for a generation, which is the lack of supply. Last week, I asked the Minister about how the stamp duty changes will impact on house prices. He said that there would be some impact, but that house prices are affected by a number of factors. I wish to press him and the Exchequer Secretary on the assumptions that the Government have made, and what outcome they would like to see when it comes to the interaction between the stamp duty changes and house prices. It looks like we are seeing a 1.4% increase in prices against a 1% reduction in stamp duty at the lower end, and it seems also that the tax take from stamp duty will rely on a 5% annual increase in property prices.

The OBR says that house prices will continue to rise faster than incomes, which will risk pushing home ownership further out of reach for many more people. Have the Government assessed how many more people might be priced out of the property market?

Measures to alleviate the burden on buyers are welcome, but we are experiencing the worst housing crisis for a generation and need much more action on housing supply if we are to get our housing market into better shape and help more young people and families to realise their dream of home ownership. I note the comments that the Financial Secretary to the Treasury made in his opening speech, but the truth is that we need to build many more homes than this Government have managed in their term of office. At the moment, the Government are primarily focusing on the demand side of the housing equation, whereas we, on the Opposition Benches, think that they should have taken the opportunity to balance things up on the supply side, too.

However, the measures before us today are reasonable and sensible. We support them, and I look forward to further debate in Committee.

2.58 pm

Mrs Anne Main (St Albans) (Con): I am delighted with the changes to stamp duty; I have been campaigning for them for a significant period of time. It is worth observing the old adage that success has many parents, but failure is an orphan, as it could be relevant to the campaign. When I was claiming a bit of a victory on this, having campaigned for it for so long, I was amazed to read that the Liberal Democrats had campaigned equally long for the change. Surprisingly, though, not a single Liberal Democrat turned up to the Back-Bench

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business debate that I secured on the matter on 4 September. Perhaps lobbying is more in the mind than in the actuality.

Let us not be bitter today, as I welcome the proposals. It was good to follow the shadow Minister, as she was raising some of the concerns that I have about a differential tax system. It will have to be addressed, because altering the designation of a property from commercial to residential, or residential to commercial, could provide a way of avoiding tax, as one situation may be seen as more beneficial than the other. To have a dual system running may well cause problems.

I also worry that in areas where it is hard to keep small commercial operations going, the temptation to flip a property’s designation to residential, rather than trying to maintain it as a commercial property, will be even higher if there is also a tax advantage in doing so. I urge the Government to keep that under review, because if the slab system was hated—and it was—it was hated not just for its effect on homes.

John Stevenson: Does my hon. Friend therefore suggest that commercial and residential properties should have the same rates and thresholds?

Mrs Main: I do suggest that. I am sure that budgetary constraint is the reason that has not been done, but I am concerned that that slice system, which will not apply in Scotland and will apply in England only to residential properties, could result in complicated reasons why commercial properties might end up being vehicles for tax avoidance, which would not be good. The slab system was roundly denounced by all parties and all commercial commentators, so I think that is something we should look at.

I welcome the moves to get more young people on the property ladder. In St Albans, the Help to Buy scheme was not utilised at all because, as has been widely observed, if people cannot save up a deposit in a very expensive area, how on earth can they save for the tax to be paid to the Chancellor? The reform is therefore very helpful in that regard. However, we must ensure that we do not allow the properties that we are trying to help—those targeted by lower and middle-income buyers—to be dragged further into the higher levels. In 2003 only 10% of properties were caught by the 3% rate, but just prior to these reforms the figure had risen to 25%. It is important that the Government do not sit back and wait for too long following these reforms, because too many of the families that they have sought to help will be dragged into the higher rates.

According to Savills, which I was talking to today, people in St Albans have already benefited. The amount paid under the previous regime was, on average, £17,273 per transaction. Under the new regime it will be £16,020. That is still very high, but of course that is an average, and the average house price in St Albans is over £500,000, but there are still many houses that fall well below those transaction levels. My constituents are hugely grateful that they can at least start trying to get on to the property ladder without having to pay such an enormous burden to the Treasury. That is welcome.

There are two points that I would like some clarity on. Why have we decided to keep a dual system going when the previous regime was agreed to be so demonstrably

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flawed? It might be unaffordable, but I think that is almost indefensible. If it is a bad scheme, it is a bad scheme. I do not want business owners and people who wish to aspire to own their own business feeling that they are labouring under a bad scheme that has been roundly denounced, and quite rightly so, by all parties in the House.

3.3 pm

Ian Swales (Redcar) (LD): I will not detain the House for long but I want to register the Liberal Democrats’ support for these proposals. They are important measures that relate to the liquidity of the housing market. The point at which people pay a lot of money is generally a good point at which to raise taxes, but if they are levied in a way that causes the market to be less liquid, that is a bad thing.

I said in my speech last week that slab systems in general need to be looked at, on both the tax and benefits side, because by definition they produce cliff edges and cause sub-optimal behaviour at the boundaries. For that very reason I will join the chorus of people who have said that it is also time to look at the commercial SDLT arrangements. I think that all slab systems should be reviewed, because we can be sure on the income side that tax is avoided near those boundaries, and on the benefits side people are encouraged or discouraged in their behaviour because of the cliff edges.

I understand the need to introduce these measures quickly, and therefore why the Minister might not want to review all such systems with this kind of speed, but I urge him to initiate reviews to see what other changes might be needed on the commercial side and in any other slab systems. I think that the system proposed is very good. It is progressive. I take the point made by the hon. Member for St Albans (Mrs Main) and ask the Minister what inflation arrangements he is considering for the boundaries of the new system. The fact that the budget document shows an increasing take from stamp duty rather suggests the fiscal drag that the hon. Lady fears. I would appreciate it if the Minister responded to that point.

As I said in an intervention, this reform joins the long list of measures that the Government have introduced to increase taxes on those who can best afford it, such as the large increase in capital gains tax and in tax on pension contributions and, indeed, the fact that the top rate of income tax is now 5% higher than it was for the entire period of the previous Government, except for their very last day in office. I welcome the progressive nature of those changes. Very wealthy home buyers will be paying a lot more to the Treasury, which I welcome. The Minister talked about the percentage effects in various parts of the country. I can report that, to the best of my knowledge, the figure for those benefiting in Redcar is 100%, so I thank him for that. I believe that this change is an important matter of fairness, and my party will support it.

3.6 pm

The Exchequer Secretary to the Treasury (Priti Patel): It is a pleasure to respond to this efficient debate, and I welcome the consensus on it across the House. The measure has been debated over the past week, so it is not surprising that we have reached a conclusion quickly today. We have had an effective debate today. This is a

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landmark reform, as my hon. Friend the Financial Secretary has said. The Government announced it in the autumn statement. It is the most radical restructuring of stamp duty we have seen. It cuts stamp duty for 98% of people who pay it. It eliminates damaging distortions in the housing market, where someone buying a house for £250,001 pays three times as much tax as someone buying a house for just £1 less.

Mrs Main: Will my hon. Friend clarify whether that is 98% of all transactions or 98% of all domestic transactions?

Priti Patel: The reform cuts stamp duty for 98% of people who pay it. That is the point I was making.

The reform reduces the tax bill for first-time buyers. As my hon. Friend the Financial Secretary highlighted, this is about aspiration. Everything about the debate we have had is about supporting home owners, first-time buyers and the principle of aspiration.

In a moment I will move on to the points that have been raised by my hon. Friend the Member for St Albans (Mrs Main). The Labour party made a number of points about how many people have benefited from some of the advice that Her Majesty’s Revenue and Customs provided last week on the transitional support. The Government do not have the current figures on how many home buyers have benefited from the transitional reviews. As with most cases where stamp duty is paid, we get the information only after a transaction has been fully completed. However, we expect that as many as 35,000 transactions will benefit from the transitional rules, which is a substantial number.

My hon. Friend the Member for St Albans and the hon. Member for Redcar (Ian Swales) mentioned stamp duty on commercial properties. They will not be surprised to hear that the Government rightly keep all taxes under review. We have taken swift action on the residential front, as my hon. Friend the Financial Secretary has highlighted, and that was debated in the House last week. That swift action has obviously removed the distortions that acted as a break on aspiration and made it harder for first-time home owners.

The market for commercial property is different and, as I said, we will keep all taxes under review. My hon. Friend the Member for Rossendale and Darwen (Jake Berry) asked about mixed-use buildings. Those are subject to the commercial rules, not the residential rules, as my hon. Friend the Financial Secretary highlighted. The Government keep all taxes under review and will give consideration to mixed-use buildings ahead of future events as part of our normal review process.

My hon. Friend the Member for St Albans touched on Government forecasts. Forecasts of house prices and stamp duty land tax revenues have been verified by the Office for Budget Responsibility. My hon. Friend has been an assiduous campaigner on these issues and had a debate on the subject in the House not long ago. She referred to flipping between commercial and residential rates for avoidance purposes. We are clear that the reform is not an opportunity for avoidance.

Ian Swales: Can the Minister clarify the situation where buy-to-let residential property might be owned within a corporate envelope? Is that treated as a commercial business or does it still fall within the residential arrangements?

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Priti Patel: Property in the buy-to-let framework would be treated as residential.

Jake Berry: I refer to the point about flipping between commercial and residential arrangements. My hon. Friend will be aware that one of the welcome reforms of this Government has been to give automatic planning permission for vacant commercial office buildings to become residential property. The substantive implementation of a change of use and planning permission between a commercial office building and a residential property would be minimal and could involve, for example, just bringing in desks and putting in more male and female lavatories. There is concern about avoidance, and where two systems exist, there is greater opportunity for avoidance by those who seek not to pay their tax. Will she commit from the Dispatch Box to keep this matter under review and ensure that as the Government take the Bill through the House, they will review it and seek opportunities to tighten up the law to ensure that everyone pays their fair share of tax?

Priti Patel: My hon. Friend makes a valid point about keeping the arrangements under review. We want to ensure that people pay not just their fair share, but the right amount. The Government keep all taxes under review.

Sir Greg Knight (East Yorkshire) (Con): Clause 2 refers to the purchaser being able to elect that the new calculations do not apply, and the explanatory notes that my hon. Friend has helpfully supplied state:

“An election must be made in a land transaction return . . . and must meet any requirements specified by the Commissioners for Her Majesty’s Revenue and Customs.”

Will any terms so imposed be subject to ministerial scrutiny and approval?

Priti Patel: Absolutely. Ministers are involved in the process and will be consulted. That is right and proper. The point that my right hon. Friend makes is about the transitional rules, which we touched on earlier.

The hon. Member for Birmingham, Ladywood (Shabana Mahmood) mentioned Scotland and the changes to stamp duty land tax, which has been devolved to Scotland. The Government will monitor how stamp duty land tax receipts change in the light of that. That is part of the usual policy-making process.

Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op): Was discussion with the Scottish Government held in advance of the announcement? Will there be additional discussions during the coming weeks and months to ensure that there are no adverse consequences?

Priti Patel: This is a commercially sensitive area so specific discussions were not held. I reiterate that as part of the usual policy-making process there will be ongoing reviews of how the system works between Scotland and England. Now that the change has been made, discussions will take place when necessary.

Cathy Jamieson: The Minister refers to the normal policy-making process. However, given that the changes in Scotland are due to be introduced in April, there is a very short opportunity for discussion, particularly about any adverse impact that there might be on the market. Does the Minister have plans to meet her counterparts in Scotland for discussions?

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Priti Patel: These are now devolved matters, as the hon. Lady knows. As part of not only the devolution process but future policy formation, I have no doubt that discussions will take place.

John Stevenson: I am grateful for the earlier clarification about the Government’s position on commercial property. Can the Minister clarify the position on agricultural property?

Priti Patel: Agricultural property would be treated in the same way as commercial property. I hope that answers my hon. Friend’s question.

On housing supply and affordable housing—a point made today and last week from the Opposition Front Bench—all the work that the Government have put in place in relation to the stamp duty land tax measure has been about supporting aspirational home ownership and making home ownership a reality for as many households as possible. This Government support more home ownership, and stamp duty reform is part of that. We are investing billions of pounds to provide affordable homes including, as my hon. Friend the Financial Secretary mentioned, £4.5 billion during the spending review period to provide more than 170,000 new units, and a further £3.3 billion to deliver more than 165,000 more homes over three years from 2015. We have also speeded up reforms to planning. Housing starts in England are at their highest level since 2007, which we all welcome. In the autumn statement last week we announced a package to do even more, by introducing measures to support more than 133,000 new homes. My hon. Friend the Financial Secretary touched on rent-to-buy and help-to-buy schemes.

In conclusion, our long-term economic plan has supported home ownership through stamp duty land tax reform and increased supply through the measures that I have just outlined. Importantly, the economy is growing, the deficit is falling, and employment is at a record high. These are all economic measures that should be welcomed across the country. We are building a stronger, sustainable and healthier economy. The autumn statement set out a modest fiscal tightening and does not shy away from the challenges that remain.

Against that backdrop, we believe that aspiration should be supported. For centuries it has spurred people on. The Bill backs those who aspire. I am proud to be part of a Government who stand by aspiration and advocate it. This Bill reforms a fundamentally flawed system and will help make the dream of owning a home a reality, while cutting the tax bill for the overwhelming majority of people affected by it. There is consensus on this, as we heard this afternoon, and I hope the House will give the Bill a Second Reading.

Question put and agreed to.

Bill accordingly read a Second time.

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Stamp Duty Land Tax Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Stamp Duty Land Tax Bill:


(1) The Bill shall be committed to a Committee of the whole House.

Proceedings in Committee, on consideration and on Third Reading

(2) Notwithstanding the practice of the House as to the intervals between stages of Bills brought in on Ways and Means Resolutions, proceedings in Committee, any proceedings on consideration and proceedings on Third Reading shall be completed at one day’s sitting.

(3) Proceedings in Committee and any proceedings on consideration shall (so far as not previously concluded) be brought to a conclusion, on the day on which proceedings in Committee are commenced, two hours after the commencement of proceedings in Committee.

(4) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion, on the day on which proceedings in Committee are commenced, three hours after the commencement of proceedings in Committee.

(5) Standing Order No. 83B (Programming committees) shall not apply to proceedings in Committee, to any proceedings on consideration or to proceedings on Third Reading.

Other proceedings

(6) Any other proceedings on the Bill (including any proceedings on consideration of any Message from the Lords) may be programmed.—(Gavin Barwell.)

Question agreed to.

Wales Bill (Programme) (No.3)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Wales Bill for the purpose of supplementing the Order of 31 March 2014 in the last Session of Parliament (Wales Bill (Programme)), as varied by the Order of 30 April 2014 in that Session (Wales Bill (Programme) (No. 2)):

Consideration of Lords Amendments

1. Proceedings on consideration of Lords Amendments shall (so far as not previously concluded) be brought to a conclusion three hours after their commencement at today’s sitting.

2. The Lords Amendments shall be considered in the following order: Nos. 1 to 13, 17 and 14 to 16.

Subsequent stages

3. Any further Message from the Lords may be considered forthwith without any Question being put.

4. The proceedings on any further Message from the Lords shall (so far as not previously concluded) be brought to a conclusion one hour after their commencement.—(Gavin Barwell.)

Question agreed to.

10 Dec 2014 : Column 923

Wales Bill

Consideration of Lords amendments

Madam Deputy Speaker (Dame Dawn Primarolo): I must draw the House’s attention to the fact that financial privilege is involved in Lords amendments 1 to 17. If the House agrees to any of them, I shall ensure that the appropriate entry is made in the Journal.

Clause 8

Welsh rates of income tax

3.21 pm

The Secretary of State for Wales (Stephen Crabb): I beg to move, That this House agrees with Lords amendment 1.

Madam Deputy Speaker (Dame Dawn Primarolo): With this we may take Lords amendments 2 to 13 and 17.

Stephen Crabb: Taken together, these amendments remove the so-called lockstep mechanism from the income tax provisions. By removing that mechanism so that the Bill reflects the Silk commission’s recommendation in its part I report, the National Assembly for Wales will be able to set separate Welsh rates of income tax for each band. Subject to a referendum, all three income tax rates would be reduced by 10p, and the Assembly would decide a separate Welsh rate for each band. Those Welsh rates would be added to the reduced UK rates.

The lockstep is probably second only to dual candidacy as the most debated aspect of the Bill; it has been debated at great length in both this House and the other place. I have been clear throughout the passage of the Bill that I have been prepared to listen to all the arguments and perspectives and, if necessary, to take a different approach on the lockstep. That is exactly what I have done. Before I go any further, I would like again to place on the record my thanks to my right hon. Friend the Member for Clwyd West (Mr Jones) for his hard work and perseverance as Secretary of State for Wales in guiding the Bill through its early stages.

On Second Reading, the hon. Member for Rhondda (Chris Bryant) made a point of counting the number of times my right hon. Friend used the word “accountability” in describing the Bill; I believe that he stopped at 15. Frankly, though, my right hon. Friend could have used it 15 times more because the Bill was, and is, all about accountability. By being made responsible for raising a proportion of the money that they spend, and allowing the people of Wales to judge them on how they spend it, the Assembly and the Welsh Government will become more accountable to the electorate.

In removing the lockstep, we are removing what was widely seen to be a deterrent to the Welsh Government’s accepting the devolution of income tax in Wales. Given the other financial provisions in the Bill and the full devolution of business rates, which, as my right hon. Friend the Chancellor confirmed last week, will be implemented as planned next April, the Assembly would become responsible for raising around a quarter of the money that it spends.

Hon. Members will be aware that last week the Office for Budget Responsibility published a forecast of devolved tax revenues for Wales alongside the autumn statement.

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That showed that revenue from the 10p of income tax that would be devolved to Wales would net the Welsh Government almost £2 billion in 2014-15—about nine times as much as stamp duty land tax and landfill tax combined. The figures show, in black and white, that through the Bill we are providing the Assembly and the Welsh Government the tools to help grow the Welsh economy and take responsibility for raising a significant portion of the money that they spend. The removal of the lockstep makes it even easier for them to do that.

I welcome the First Minister’s statement in the Senedd last week in which he confirmed for the first time that he would accept income tax devolution. That is indeed progress. But—and there is always a “but”—once again he hid behind the self-imposed “barrier” of funding. I have always said that the powers in the Bill should be as far-reaching and flexible as possible, to provide the Welsh Government with the tools to grow the Welsh economy. Where we have committed to removing obstacles, however, the First Minister continues to erect them. He seems intent on denying the people of Wales their rightful say on whether income tax powers should be devolved, rejecting the opportunity to make the Welsh Government more accountable to those who elect them and refusing to accept responsibility for raising more of the money that they spend.

Sammy Wilson (East Antrim) (DUP): The Secretary of State has outlined the advantages of the devolution of those additional powers. Does he accept that giving more tax-raising powers, and hence reducing other income from central Government, exposes the Welsh Government to greater fluctuations in revenue and makes the long-term planning of services much more difficult?

Stephen Crabb: Part of devolving any tax—income tax or any other fiscal power—is the creation of an incentive for the devolved Government. They get an extra tool and an incentive, which they never had before, to grow that portion of their own tax base.

Crucially, the devolution of income tax in Wales will be done in line with what the Holtham commission proposed for Scotland: the indexed deduction mechanism. That would effectively shield the Welsh Government from UK-wide economic shocks but give them the incentive of holding on to the extra Welsh revenue that they were able to generate. That works both ways: if Welsh income tax grows at a slower pace than that of the rest of the UK generally, there will be a loss, but that is exactly what provides the incentive for the Welsh Government to seek to grow the tax base. The issue is about economic development.

Jonathan Edwards (Carmarthen East and Dinefwr) (PC): My reading of the Office for Budget Responsibility figures, published last week, was that the Welsh devolved tax take is projected to increase by half a billion pounds over the next Parliament. If the powers are not fully adopted by the Welsh Government, what would be the increase in the Welsh block during that period?

Stephen Crabb: I cannot provide a specific analysis in line with the question, but I agree with the general thrust of the hon. Gentleman’s point. There are distinct advantages, not only for the Welsh Government, but for businesses in Wales, which want the Welsh economy to grow through the devolution of these taxes.

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Jonathan Evans (Cardiff North) (Con): Let me be the first to congratulate my right hon. Friend on his recognition overnight as the Welsh politician of the year.

Does this debate not highlight one of the difficulties with devolution? People only really want half of it—they want the powers, but do not want the responsibilities. There is a statistic showing that a minority of people in Wales recognise that health policy is decided in Cardiff. Does that not illustrate the importance of giving responsibility as well as devolving the powers themselves?

Stephen Crabb: My hon. Friend is exactly right and characteristically articulates his point better than anybody else in the House could. Devolution got stuck. The settlement meant that the Welsh Government were essentially a spending Department with no real responsibility for raising money—in fact, local authorities or parish councils probably had more ability to raise revenue than the Welsh Government. The Bill is all about letting Welsh devolution take the next step forward, which is about fiscal devolution, giving responsibility and enhancing accountability to create a more meaningful relationship between the Welsh Government and the people who elect Assembly Members and Welsh Ministers.

Owen Smith (Pontypridd) (Lab): The Secretary of State speaks of the incentives that these powers would give to the Welsh Government. Will he be clear, as his predecessor was, as to how they ought to deploy those incentives? His predecessor thought that they should cut taxes in Wales to lower rates than in England. Does he agree?

3.30 pm

Stephen Crabb: It is entirely up to Welsh Ministers how they choose to use these tools. I am surprised by what the hon. Gentleman says, as I would expect him to be the last person to suggest that the Secretary of State should be directing how these powers are used. I am a Conservative, and, to my core, my aspiration is always to see lower taxes rather than higher taxes. That is a difference in values between Government and Opposition Members. We understand that lower taxes generally create the right circumstances for business growth and for growing wealth in an economy—and all Members, on both sides of the House, should be ambitious to see more of that in Wales.

Sammy Wilson: Does the Secretary of State accept, though, that unless we have the correct formula for deciding what are national impacts and what are local impacts on the tax revenue raised, there is a great danger that Wales could suffer as a result of the fact that fluctuations in income over the economic cycle tend to be much greater in the regions of the United Kingdom than in the United Kingdom as a whole?

Stephen Crabb: I do not dismiss the risk that the hon. Gentleman has outlined, but I think he exaggerates its impact on Wales. Alongside any perception of risk in relation to such fluctuations, there is a powerful opportunity for Wales to take greater control over wealth creation inside the nation of Wales. That is an exciting opportunity for the Welsh people, and it represents the next stage of devolution.

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This is all about accountability. The former US President Harry Truman famously had on his desk a card that said, “The buck stops here.” I want to see a Welsh Government who stand up proudly and say, “The buck stops here” rather than “The buck is passed there.” That is what this Bill is all about: it creates that enhanced accountability and enhanced responsibility. I repeat my challenge to the First Minister and the Welsh Government: as soon as this Bill receives Royal Assent, take steps to call the referendum and do it as soon as possible. Let us seize the new tools and powers in this Bill with both hands and move forward.

Owen Smith: May I be the second Member of this House to congratulate the Secretary of State on becoming Welsh politician of the year? I think the whole House would agree that anybody who can move from describing devolution as “constitutional vandalism” to being its most ardent supporter on the Government Benches deserves to have his political footwork duly recognised.

These amendments to the Wales Bill best exemplify the damascene conversion that the Secretary of State and his party have undergone on the devolution cause, because they relate to the devolution of income tax varying powers. Just as the Secretary of State used to denounce devolution and has now changed his mind, the Government have performed—he understated the extent of this—a handbrake U-turn on the lockstep.

Stephen Crabb: For clarification, the shadow Secretary of State has accurately reported a quote of mine that appeared in an article in 2007, but he should do full justice to the article by adding that in it I set out exactly the same case for fiscal devolution that I have set out today. I have been entirely consistent over a long period as to how fiscal devolution would enhance the devolution settlement for Wales.

Owen Smith: I am happy to agree that that is how the article went on, but it did indeed describe devolution as “constitutional vandalism”. I shall not forget that, and nor should the country of Wales, for which the right hon. Gentleman is now Secretary of State.

The Government have undertaken a U-turn on this. Let me refresh the House’s memory. Just a few months ago, the Secretary of State’s party wholly opposed the removal of the lockstep. In fact, his Department and the Treasury produced a substantive Command Paper, Cmd 14, which said:

“The Government is firm in its view that the income tax structure is a key mechanism to redistribute wealth across the whole of the UK, which is why the ‘progressivity’—

a word I think they made up—

“of this system is properly determined at the UK level.

The inclusion of the lock-step is also consistent with the principle that fiscal devolution should not benefit one part of the UK to the detriment of another—this could occur if the Welsh Government is able to set a substantially lower rate for higher/additional taxpayers without needing to change the basic rate”.

That is what the Secretary of State seems to be suggesting —that we set lower rates in Wales than in England.

We do not demur from the sentiment expressed in the Command Paper, but nor do we greatly object to the Government changing their mind on this issue. That is partly because they are reflecting the views of all parties in the National Assembly—it is appropriate and good

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that the Secretary of State has listened to them on this —and partly in the light of the Smith commission findings, which have shifted the debate significantly by proposing 100% devolution of income tax to Scotland. In fact, it could be argued that there is now a case for going further than is proposed in the Bill. It seems unlikely to me that the people of Wales would find it acceptable to be asked in a referendum about having lesser tax varying powers than those on offer in Scotland.

Many of us in the House now recognise that perhaps one of the mistakes of the previous Government was to allow asymmetry to develop between different parts of the UK in earlier rounds of devolution. That has driven pressure for greater change in Wales to reflect changes in other parts of the country. In fact, the case has now clearly been made for a constitutional convention to consider all the issues in the round and to try to derive a lasting settlement acceptable to all parts of the UK.

The Government have not yet agreed to a constitutional convention, and in its absence we must still consider the Welsh Government’s rationale for taking up powers to raise taxes, if those powers were accepted at a referendum.

Jonathan Edwards: Labour’s policy is to have a constitutional convention. Is the hon. Gentleman saying that, in the event that we have a Labour UK Government, there will be a constitutional convention, and if so, would it halt the Smith process and the proposed Bill for Scotland?

Owen Smith: No. I am saying that if there were a Labour Government, we would have a constitutional convention to look at the whole of the UK. Therefore, wherever we were in the Smith commission proposals, which will continue on their course, that would need to be fed into the convention. A constitutional convention would not need to slow down or stop further devolution to Scotland, but it would have to take cognisance of what was happening in Scotland.

Whatever further changes are made in Wales should reflect what happens in Scotland, because the willingness to accept asymmetry has diminished in Wales and elsewhere. Many of us feel that such asymmetry inherently leads, over time, to instability in the existing settlement.

In the absence of a convention, we must consider why the Government think that Wales should take up the new powers. I want to start not with Labour, but with the current Government. Why do they now feel that the Labour Welsh Government should have an unfettered ability to raise taxes or to lower them to levels below those in England? The Secretary of State has made a couple of soundbites or comments today to illustrate why he thinks we should do so—he talked repeatedly about accountability and responsibility—but I must say that none of them was quite as blunt and honest as the rationale he gave to the Institute of Welsh Affairs a few weeks ago. He said clearly that his objective in providing the tax varying powers was to

“end the politics of the begging bowl in Wales”—

[Interruption.] The Secretary of State says, “Absolutely,” but I find that quite an offensive position for him to take. He should not describe Wales as, in effect, a supplicant, and nor should he suggest that we are a scrounger or a shirker asking for handouts. It is not for him to suggest that the cure for the

“politics of the begging bowl”,

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as he injudiciously puts it, is to force the Welsh people to raise taxes within their own borders. I do not espouse such a dog-eat-dog, race-to-the-bottom version of Britain, and nor should he.

The Parliamentary Under-Secretary of State for Wales (Alun Cairns): The phrase “begging bowl”, as used in this context, originated with former First Minister Rhodri Morgan. Does the shadow Secretary of State completely dissociate himself from that?

Owen Smith: It was deployed in an entirely different context. The implication of the Secretary of State’s pejorative use of the phrase was—I am paraphrasing, but this was broadly what he said in the rest of his speech —that the Welsh Government have not been responsible or accountable, but that they would become so for the first time if tax powers were afforded to them. I have never accepted that the Welsh Government are unaccountable —they are as accountable as any elected Government—and I certainly do not subscribe to the view that Wales has ever held out a begging bowl.

Stephen Crabb: I think that the shadow Secretary of State is getting slightly bogged down and has now resorted to what he calls “paraphrasing” the speech I made to the IWA, although he is actually misrepresenting it entirely. My strong and clear point is that we have had 15 years of devolution in which the dominant theme of Welsh politics has been discussing how much money handed down through the block grant can be spent in Wales. The Bill and the new shift in devolution are about changing the nature of the debate so that it is not just about how much money we have handed down from London, but about raising money within Wales, growing the economy in Wales and seeing Wales stand on its own two feet.

Owen Smith: The Secretary of State makes my point for me because I do not for a minute subscribe to the notion that Wales has money handed down to it from Westminster. That money reflects the taxes paid by Welsh people, and more importantly, in a Union that is meant to be about our ability to share resources, pool risk and redistribute from wealthier to less wealthy parts, it reflects the morality and values of our country. Unfortunately, that morality and that set of values are being undermined by the Secretary of State’s description of the Union as one in which one part is a supplicant and another is handing down money.

Ian Lucas (Wrexham) (Lab): Does my hon. Friend agree that we need to be wary of the politics of the hospital pass in Wales? I am always suspicious of Tories bearing gifts, to mix my metaphors, and I do not trust the Conservative party to defend the interests of my constituents.

Owen Smith: Nor do I and, more importantly, nor do the people of Wales—that is why they do not elect Tories in Wales. The very least we owe the Welsh people is that we consider extremely carefully the likely impact of these radical changes to such a cornerstone of the redistributive Union as taxation. They will have an impact on the potential prosperity and well-being of the Welsh people, which is why, although Labour will not oppose the Lords amendments, as we have not opposed the Bill at

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other stages, we will continue to be clear that we want far more explanation from the Government about how and why they think the powers in question might be deployed in Wales, and what the benefits will be for the Welsh people.

Sammy Wilson: In light of the language about money given to the devolved Administrations being “handed down”, rather than the result of tax revenues, and, as the hon. Gentleman said, the redistributive nature of some fiscal policy, does he accept that the danger of the devolution of income tax is that it is an underhand attempt to ensure that less money goes to the devolved Administrations, who will then be forced to raise money through higher taxation in their own jurisdictions?

Owen Smith: In a nutshell, the hon. Gentleman, who is expert in this matter, having been the Finance Minister for his own devolved Administration, explains why we are so concerned about the change. We are worried that the Tories are eager to legislate in haste to foist on the Welsh people the power to raise taxes in Wales.

Our concerns are not just obstacles that the First Minister has placed in the way of the change, as the Secretary of State suggested. They are reasoned questions about the nature of the powers that might be deployed and what their impact will be. We have been clear and consistent in saying that the Government need to meet three tests. It is not really for the Opposition to meet them, because we cannot. It is for the Government proposing the changes to meet them, but it is disappointing that they have not done so. The first test, as the First Minister made clear, is on the baseline for funding and the Barnett formula. That will need to be addressed before the changes can ever be accepted in Wales, because we will not recommend the devolution of income tax varying powers to Wales until we know that we will not be locking in a degree of underfunding. Secondly, we want to be clear that even if the Barnett question is resolved, Wales will be better off.

Mr Mark Williams (Ceredigion) (LD): Although I share the Secretary of State’s impatience for the Assembly Government to be speedy in addressing the issue once the Bill is passed, does the shadow Secretary of State agree that the Government need to assess the funding shortfall? One way that could be done would be if the Government here and the Assembly Government again commissioned Gerald Holtham, for example, to assess the level of underfunding before we move forward, which I agree with the Secretary of State that we should.

Owen Smith: That is not a bad idea. We have recently heard Government statements about the reduction in the Barnett gap, and one can imagine that there would be such a reduction because public spending in England has been curtailed so dramatically under this Government, although we do not know that for certain. It is beholden on the Treasury to provide evidence of the current gap, and it would be sensible for it to consider making the process independent, not least because I do not think that we would fully trust what it might produce on its own.

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3.45 pm

Jonathan Evans: The hon. Gentleman should be a bit cautious in his dismissal of the Conservative party, given this week’s opinion polls. His argument is the complete antithesis of the position adopted by the Labour party in Scotland—late in the day, it must be said—which is to agree to the devolution of all tax raising powers to Scotland. Against that background, how is his argument in any way consistent with the position adopted north of the border?

Owen Smith: To paraphrase the infamous, notorious entry in the Encyclopaedia Britannica, it is not a question of “For Wales, see England”, “For Scotland, see Wales”, or “For Wales, see Scotland”. We have different countries with different demographics, histories and relative tax takes, and on behalf of the Welsh people, we should sensibly take a position that reflects their best interest, rather than talking an ideological perspective across the board. On the prospects of the Tory party in Wales, I would be a little more hopeful that it might do well were it not for those such as the hon. Gentleman not fighting their seats at the next election. We can read into that what we will.

Jonathan Evans: It is the same as the right hon. Member for Neath (Mr Hain)

Owen Smith: Indeed, but I do not suggest for a minute that there is any prospect of my right hon. Friend being replaced by a Tory. Not now, not tomorrow, not ever. [Interruption.] It will be a cold day in hell before Neath turns Tory, and ditto Pontypridd.

Let me return to my point about whether Wales will be better off with these tax powers. As the hon. Member for East Antrim (Sammy Wilson) said, we can look to last week’s autumn statement to demonstrate that Welsh tax receipts are now £2 billion less than what was planned by the Chancellor in 2010. That is our proportion of the £66 billion shortfall in tax receipts that is a result of our underperforming economy under this Conservative Government. Had these measures applied in 2010, they would have devolved to Wales about £1 billion of that shortfall. That decline makes a mockery of the notion that such powers make the Welsh Government more accountable, because a poor performance across the board by the UK economy would not have been down to the actions of the Welsh Government. That performance would have been wholly down to a Tory Government in Westminster, and there is little that a smaller economy and country such as Wales could have done to mitigate that effect.

The other thing that those numbers illustrate—again, the hon. Member for East Antrim effectively made this point—concerns the volatility of tax receipts across the UK. That volatility has led to a £66 billion shortfall, and traditionally there are greater fluctuations in peripheral and regional parts of the UK economy than at the centre, and especially in London and the south-east. It is difficult to imagine how a country such as Wales with a small economy could manage the risk associated with that greater volatility. That shows some of the benefit of our being part of a wider Union, and it makes clear the dangers and risks associated with disaggregating that Union.

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Jonathan Edwards: I watched with great interest the hon. Gentleman’s prophecy of doom on “Sunday Politics”. I have also read the OBR report and looked at all the tables on the Welsh devolved figures, and they do not reflect his claims about a £1 billion loss. Indeed, the only table on this issue in the report suggests that the Welsh devolved tax base will increase over the next five years by £500 million. The shortfall that he mentions might be as a result of the raising of income tax personal allowances that has been announced by the UK Government, but the Silk commission made it clear that the indexed deduction method for the partial tax raising arrangement in the Bill means that that would not come into effect. Is not the hon. Gentleman guilty of scaremongering? Project fear is alive and well in Wales once again.

Owen Smith: No, it is project reasoned analysis of the numbers, and that project shows clearly a £66 billion shortfall over the past five years and a projected further shortfall across the UK over the next five years. We will see a worse performance in terms of corporate and income tax receipts across the UK as a result of the low- wage, deeply insecure, second-rate economy that the Tory Government are building. Wales has been particularly ill served by what has happened because of the additional fragilities of our economy due to our industrial heritage and the preponderance of low-wage jobs in Wales.

The reality is that—[Interruption.] The Secretary of State shakes his head, but he should think about this. He said earlier that the indexed method cited in Holtham means that Wales would effectively be incentivised to grow its tax base at a faster rate than England’s to enjoy uplifts under these powers. The truth is that over the past five years the Welsh tax base has declined at a faster rate than that of England, as the figure is 4.8% in Wales whereas the UK average is 4.2%. That means that Wales would have been worse off under the indexation had the provisions applied in the last five years, which is a further illustration of the need for the Government to undertake some proper, detailed analysis to let the Welsh people know whether we would be better or worse off.

Ian Lucas: In support of that point, is my hon. Friend aware that in Wrexham median wages fell by 7.4% in the last year under this Government? What encouragement does that give for increasing the tax base?

Owen Smith: My hon. Friend reinforces my point. We know that the Welsh economy has historic weaknesses because of the decline in heavy industry, and its distance from London and the powerhouse of the south-east. Those are well understood, but they are not reflected in the debate that we are having, which is largely politically motivated.

Some in Wales argue that we do not need a referendum to decide this matter, but we think that the Welsh people should have a debate and ultimately take the decision on what would be a radical change. The debate cannot be driven by the Tory party’s desire to insulate itself against the charge that it has reduced Welsh budgets by 10%, which it has; or by the need to support the Tory objective of reducing public spending to levels we have not seen since the 1930s, as was manifest last week; or even by the wish to sustain a partisan argument of English votes for English laws. All three of those rationales feature as part of the Government’s motivation for this

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debate, and we are disappointed that they have not provided any real response to these questions throughout the passage of the Bill.

It will now be for the Welsh Labour Government to consider what is best for the Welsh people. I have no doubt that they will do so using Welsh Labour values and thinking about the benefits for the Welsh people, as well as about how we deliver equality and improvements to the lot of working people across the UK.

Glyn Davies (Montgomeryshire) (Con): I am grateful for the opportunity to speak on the occasion of the Bill’s return from the House of Lords in much improved form, if I may say so. In general, I welcome the Bill although I am concerned about some elements. Perhaps it is a Welsh trait that we can never completely agree on things, and I want to touch on one issue where I am not in agreement.

What I welcome in particular is the new reality of the Conservative and Liberal Democrat coalition shaping the process and future of devolution and driving forward, leaving—if I may say so to the shadow Secretary of State—Labour languishing in its wake. He may describe that as a U-turn, but that is the reality today. I want to make just one important point, which is very much a personal view. I disagree with one specific aspect of the Bill, but I would like to emphasise my overall support: it is a very good and welcome Bill.

I would like to put my point in context by painting some background to my personal journey in the devolution debate. I was not in favour of the form of devolution on offer in the referendum on 18 September 1997. It seemed to me to be creating a permanently unstable constitutional settlement. A settlement is the last thing it was. I attended the count in Llandrindod Wells leisure centre, watching the TV coverage as the decision of the voters of Wales came through and they decided in favour of establishing a national assembly for Wales. I drove home knowing that there was no going back. The people had spoken, albeit by a tiny margin of 0.6%. We were now facing an entirely new question: how would devolution work in practice? I concluded immediately that the new Welsh Assembly would eventually become a law-making, tax-raising Parliament based in Wales. That has influenced my thinking on the issue ever since. I did not want to be dragged, kicking and screaming, and trying to refight the 1997 devolution referendum. I preferred to get ahead of the curve and identify where we were going to get to, and move towards that in a positive and smooth way. That was not a change of mind, but a recognition of a new reality.

Jonathan Evans: My hon. Friend, through his service in the Assembly, has been one of the individuals who has encapsulated the position adopted by the Conservative party. Although the party battled against establishing the Assembly in the first place, and although the margin was only 4,000 in a million, nobody could claim other than that my hon. Friend and the party in Wales have not been dragged back to the previous debate, but have moved forward and sought to make a success of the devolution settlement.

Glyn Davies: Nowhere has that been more obvious than in the contribution from those on the Front Bench when we started today’s debate.

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The Government of Wales Act 2006, introduced by the Labour party, moved things forward quite a lot, as did the 2011 referendum in relation to tax-raising powers. The Wales Bill takes us further down the road to what I consider to be the inevitable conclusion, but not far enough for me on tax levying responsibility. I will be blunt about my view: it is a mistake that the Bill requires a referendum before devolving responsibility for levying part of income tax collection to the Welsh Government. That is properly an issue for a general election. The Welsh Government are not financially accountable to the people of Wales until they are responsible for levying a degree of income tax. It is also my personal view that financial accountability through responsibility for income tax is so fundamental to a proper, grown-up National Assembly for Wales and Welsh Government that we should not devolve extra responsibility until this principle is accepted—no financial accountability, no new powers.

The First Minister, and perhaps Labour Members here on the Opposition Benches, do not want financial accountability. How convenient it is to bask in the credit of every spend that the people of Wales approve of and blame the UK Government for every difficult decision needed to bring order to the United Kingdom’s finances. We see the First Minister in Wales scrabbling around for any reason he can come up with to avoid committing to a referendum. First, it was lockstep, which is removed by the Bill. Then it was the Barnett deficit, until it became clear that it is a rather smaller Barnett deficit than we thought. I hear now that air passenger duty might be another reason, and if that is resolved, there will be another one. The reality is that Welsh Labour in Cardiff is desperate to avoid financial accountability. It does not want to be properly financially accountable to the Welsh people.

4 pm

Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC): I am following the hon. Gentleman’s argument and thinking about what the Labour spokesman said. When the Silk proposals were being discussed, the First Minister of Wales was adamant he did not want air passenger duty devolved, but suddenly he has woken up and is desperately keen on it. It depends what day of the week we are in.

Glyn Davies: I would be more encouraged if I thought the day of the week was the reason. I think it is a desperate attempt to find one more hurdle to prevent us from moving towards financial accountability.

During the passage of the Bill, I accepted it would include a commitment to a referendum on devolution of income tax levying powers. It was a recommendation of the all-party Silk commission, and in 1997 there was a referendum on this issue in Scotland. In my view, however, the Silk commission was wrong, and weak in its recommendation on this point. Devolving income tax powers is not as big a change as is being made out, and it is entirely appropriate that it be decided at a general election; it does not need a referendum. If a Welsh Labour Government acted irresponsibly, which they might well do, they would quickly be turfed out of office. It is much easier to sit in blissful impotence, complaining.

I would like to see manifesto commitments by my party, the Liberal Democrats and Plaid Cymru to revisit this issue, perhaps in a Wales Bill early next Parliament

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and before the Assembly elections in 2016, and to devolve income tax. We should put an end to Labour’s easy ride in Wales and make the Welsh Government properly fiscally accountable to the Welsh people. Only then will devolution grow up and reach its inevitable, logical conclusion.

Jonathan Edwards: It is a pleasure to make a short contribution to this debate, primarily to welcome these Lords amendments, which mirror amendments that were tabled by Plaid Cymru when the Bill passed through the Commons and which conveniently the three Westminster parties voted against at the time—they say a week is a long time in politics, but we are only a few months down the line and there has been a complete change of position. In that regard, I congratulate the new Secretary of State on being far more progressive than his predecessor.

Mr Mark Williams: The hon. Gentleman will remember that there were exceptions. I was pleased to support Plaid Cymru’s lockstep amendment. I would not profess to be Mystic Meg or a trailblazer, but people listened to the message put forward by him and others, and to their credit, the Government changed their mind.

Jonathan Edwards: I stand corrected. To be fair to the hon. Gentleman, he has voted with us several times and broken his party Whip.

The lockstep, of course, was a handcuff measure that would have made the powers in the Bill unusable—the only plus side was the extra borrowing capacity it would have given to the Welsh Government—and removing it creates greater flexibility, which is obviously to be welcomed. When we were debating the Bill in the Commons, however, I warned the Government that events in Scotland would supersede it, and that has indeed been the case. The Union survived by a thread, and even then only following the famous vow promising home rule, devolution max or something as close to federalism as possible. In that regard, the Smith commission was extremely disappointing.

Westminster has one chance left to save the Union, or the British state as it is currently constituted, but the Smith commission is playing into the hands of pro-independence campaigners in Scotland. It nowhere near delivers the powers promised in the vow, but it is far in advance of what the UK Government are offering to Wales in the Bill. The signature policy of the Smith commission is 100% income tax devolution and the ability of the Scottish Executive to set as many bands as they want at whatever level they want. Indeed, my party put forward such an amendment during proceedings on the Wales Bill in the spring.

Ian Lucas: If the Smith commission is not in accordance with the vow that was given, why did the Scottish National party agree to it?

Jonathan Edwards: The commission’s remit is not one of its own choosing, but the SNP decided to act in the best interests of the country and move the process forward. Making out that the Smith commission proposals are what were included in the vow is not right. It was essentially home rule or devolution max, and on any definition of devo max, it means the full devolution of all powers apart from defence, foreign affairs, the monarchy and military policy. That is not included in the Smith

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commission proposals, which were less significant than what was promised to the people of Scotland on the eve of the referendum.

As I was saying, the Smith commission is vastly more progressive in its trajectory of travel, offering 100% of income tax in comparison with the Wales Bill offer of only a paltry income tax sharing arrangement—and even then, only following a referendum many years down the line.

Geraint Davies (Swansea West) (Lab/Co-op): Does the hon. Gentleman accept that if Wales has its own powers to set both a higher and a lower rate of tax and it chooses to reduce the higher rate so that a lot of millionaires move to Monmouthshire, the overall tax take to the United Kingdom would be dramatically reduced because those people would all evade tax by moving to Wales? Does he think that is a good thing to set in motion, and does he have any idea whether the Government have calculated the cost of that possibility?

Jonathan Edwards: I am interested in this line of tax harmony across the UK being put forward by the Labour party. In Wales, of course, we had at the last count 22 local authorities all setting different rates of council tax, and we are a key part of a single market across the European Union with its different members setting different tax rates. If Labour Members’ arguments were to hold water, surely they would argue for tax harmonisation across the whole of local government in Wales and across all member states of the European Union. It does not make much sense to me.

Geraint Davies: Will the hon. Gentleman give way again?

Jonathan Edwards: I think I have answered the hon. Gentleman’s point.

In conclusion, the general election is fast approaching, and I can assure this House and the people of Wales that Plaid Cymru will fight that election on the basis that we will not allow our country to be treated as a second-class nation by the Westminster establishment.

Geraint Davies: I come here with an open mind about these tax issues, but I must confess that I have major concerns because I fear that the incentive for the Government to devolve tax powers is not one of freeing the nation of Wales to make its own decisions, but one of distracting attention from the fact that Wales is grossly underfunded both in revenue under the Barnett formula by some £300 million and in capital receipts. If we had our fair share of HS2, for instance, we would have an extra £2 billion.

Jonathan Edwards: The hon. Gentleman and I are both Swansea city supporters and I am grateful that he has been kind enough to allow me to intervene.

Geraint Davies: I can see that the hon. Gentleman is wearing black and white.

Jonathan Edwards: This is my wedding suit, or rather the suit I had with my wedding suit. It has led to much comment. [Interruption.]

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Madam Deputy Speaker (Dame Dawn Primarolo): Order. I have no idea what is being talked about here. We are not discussing Swansea football club and we are not discussing suits or weddings. The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) is supposed to be making an intervention on the tax-raising powers in the Wales Bill. Perhaps he could face me, so I could hear him; and, secondly, he could make sure that his intervention is in order.

Jonathan Edwards: I am grateful to you, Madam Deputy Speaker, for saving me because my good friend was distracting me on the basis of some spurious points. Is it the position of the Labour party, should it form the next UK Government, that HS2 will be seen as an England-only project and not a UK-wide project, thus giving Wales its rightful consequentials of £2 billion, which the hon. Gentleman mentioned?

Geraint Davies rose—

Madam Deputy Speaker: Order. The hon. Member for Carmarthen East and Dinefwr is now trying to tempt his friend—having claimed that his friend was tempting him—to go down a route that we are not discussing today. We are debating Lords amendments on the tax-raising powers in the Wales Bill. Geraint Davies now has the Floor.

Geraint Davies: Let me publicly assure Mrs Edwards that the wedding was not spurious. I congratulate the hon. Gentleman on both his point and his suit. It is a very nice suit, in black and white.

As I mentioned earlier, the differential rates pose a real problem. There is a presumption that Wales will not lower the higher rate, but a very small number of people in Wales earn more than £150,000 a year. They currently pay 45%, and will pay 50% under a new Labour Government. In theory, if a new Labour Government in Cardiff or Westminster—or any other Government, for that matter—reduced the top rate and a large number of people simply slipped across the border, they would be evading large amounts of tax. Obviously Wales would benefit, because more money would be coming in, but for the overall tax-paying community, the amount would go down, and that is of legitimate concern.

I should like to hear from Ministers what evaluation the Office for Budget Responsibility has made, producing different forecasts with different scenarios. My guess is that it has made none, and that this legislation is being rushed through in the hurried aftermath of what happened in Scotland, so that Wales can be given something comparable to the quick settlement that was made following electoral concerns in Scotland as we move towards a general election. That is not the way in which to establish a new constitutional settlement and a settled financial regime. It is all very well the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) saying “You want harmony, we have difference, so it does not matter what happens.” Such changes and differences bring pressures that are not settled, and which will be replicated in the future.

Air passenger duty has been mentioned. Other things being equal, if someone says, “Can I set my own air passenger duty?”, the response might be, “That’s brilliant: we can raise some money.” But what if Boris Johnson in London says, “Hold on, there is a precedent here,

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I want the money for Heathrow, and I am going to lower air passenger duty”, which is what he has said about stamp duty? We are talking about major shifts in the financial powers across the Union, which will unsettle the Union itself. Obviously we want a devolved settlement that is stable rather than ever-changing, rather than the setting in motion—by means of a quickstep to avoid short-term political advantage—of a system that will unravel into chaos.

I know that there seems to be consensus across the Floor of the House today. It is a case of “Don’t worry; we will have a referendum, and hopefully it will be all right on the night.” What I have just described will probably not happen in Wales, because what prospect is there of our suddenly having five UKIP Assembly Members and a regional list? Oh, there is such a prospect; well there we are. What prospect is there of a newly emerging rainbow alliance—perhaps a very unfortunate rainbow with not a crock of gold but a crock of something much more unpleasant at the bottom of it, which will generate a cynical, unfair tax proposition that will lead us back into the dark ages? That is possible. [Interruption.] Obviously there is agreement, as laughter leads the room.

Sammy Wilson: I am glad to learn that the hon. Gentleman has now joined the Unionists in his heart, but does he accept that once we start to disaggregate the fiscal arrangements for the United Kingdom, real constitutional issues become involved? The danger is that the more fiscal powers are devolved to regional administrations, the looser the Union will become. [Interruption.]

Madam Deputy Speaker (Dame Dawn Primarolo): Order. This is ridiculous. The debate is degenerating into some sort of Christmas party. Members are just shouting at each other. This is a proper debate on Lords amendments. Members who have been in the House for a long time know that heckling, or comments from a sedentary position, are not acceptable. Mr Davies, I should be really grateful if you would now focus on the points in the Bill, so that we can hear the rest of your comments, followed by the Secretary of State’s conclusion. I shall do my best to ensure that you are not interrupted, or tempted to answer questions that are not asked formally in the Chamber.

4.15 pm

Geraint Davies: Thank you for that clarification, Madam Deputy Speaker.

The focus of this debate is the differential between the lower and the higher rates—how that moves up and down and squeezes in and out, and what the implications of it are. In terms of the last intervention, the implications are that if that gives rise to great differences between the two rates across the border—or, indeed, across the Scottish or Northern Ireland border—it will generate distortions, not just on the border itself, but in terms of investment decisions, where people choose to live and work, and social security arrangements, whether they are devolved or not. It will extend beyond personal taxation because corporations coming in will bear in mind what they think their workers are going to be paying. As has been mentioned, therefore, corporation tax is part of that broader conversation.

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The Government are looking to give corporation tax flexibility for Northern Ireland because Ireland has got it. We could then follow through and say that perhaps Scotland should have it or perhaps somewhere else, and we would end up again with a bidding war downwards where—as I have just mentioned for income tax—the overall corporation tax-take for the UK would go down. At a time when corporations are migrating based on research and development and access to Europe as opposed to corporation tax rates, maybe this is the wrong route to follow, when taken together with income tax.

Mr Llwyd rose—

Geraint Davies: Please do not draw me on to anything wide of the mark.

Mr Llwyd: I have no intention of drawing the hon. Gentleman wide of the mark. Experience shows that when corporation tax is lowered, it increases the take because of increased inward investment.

Geraint Davies: That is an interesting point, but it does intrinsically depend on the elasticity of demand. At a time when corporation tax is already the lowest in the G8, I suggest that inward investors are not looking to Britain to lower its corporation tax and making a marginal decision to invest. They are looking at the level of research and development and the prospects of being part of Europe. One issue for inward investors is the uncertainty of a referendum ending up with us as a sort of chip shop England floating out into obscurity with UKIP and the Tories.

In my view, if we cut corporation tax again there will be a net reduction in corporation tax revenues. On the income tax issue, I have an open mind. I am just throwing forward some of the scenarios whereby we can lose out in England and in Wales and making a point, which I ask the Minister to respond to in his summing up. I want to know what analysis has been done of the potential downside to the Exchequer of Wales reducing the top rate of tax and people migrating to Monmouth? What are those numbers and what consideration has he made? My guess is that he has made no consideration, and if so we should not be hurtling ahead in this way.

Stephen Crabb: I will be very brief as there is another set of Lords amendments that we need to debate.

We spent most of this debate not debating the specifics of the Lords amendments about the removal of the lockstep. Most of the time has been spent listening to the weight of arguments, largely from Labour Members, against fiscal devolution full-stop. So we end the parliamentary passage of the Wales Bill exactly where we started: with three parties in this Chamber recognising the potential benefits to Wales of devolving a portion of fiscal powers—we are not talking about a full step down the road of full fiscal devolution, but a strong step forward —and one party resolutely digging in, trying to pretend that there is some kind of plot or conspiracy; we have had all those words and that language used before.

Mr Llwyd: Will the right hon. Gentleman give way?

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Stephen Crabb: I will give way to the right hon. Gentleman, who was rightly recognised last year as the MP of the year.

Mr Llwyd: And I am intervening on a Member of even higher status.

Is it not interesting that the excuse being put forward by those on the Labour Front Bench is that they need to sort out Barnett? For the last 20 years or so I have been arguing about the need to sort out Barnett when the Labour party denied that there was a problem.

Stephen Crabb: The right hon. Gentleman is absolutely right. We end the parliamentary passage of the Bill exactly as we began it, with Labour trying to place even more hurdles in the way of devolving a portion of income tax. You would have to be Colin Jackson to clear all the hurdles that the Opposition are trying to set up.

Ian Lucas: Will the Minister give way?

Stephen Crabb: I will not, because there is another group of Lords amendments to discuss.

I should like to finish by paying particular tribute to the contribution made by my hon. Friend the Member for Montgomeryshire (Glyn Davies). He set out some powerful arguments, and has done so from a position of real credibility, having been an Assembly Member. He has been ahead of the curve on many occasions in recognising the strategic direction that Welsh devolution needs to go in and the benefits that can be accrued to Wales by taking sensible, moderate and pragmatic steps forward. On that note, I shall bring my remarks to a close.

Lords amendment 1 agreed to, with Commons financial privilege waived.

Lords amendments 2 to 13 and 17 agreed to, with Commons financial privilege waived.

Clause 13