11.15 pm

Lord Tunnicliffe (Lab): My Lords, I thank the Minister for introducing this Bill, which, as he says, turns the “slab” system into a “slice” system. I will not dwell further on that. The old system created anomalies and distortions, particularly around the thresholds. The OBR carefully avoids saying too much about what the behavioural changes will be. There will certainly be significant behavioural changes around those thresholds, but what the overall effect will be is less clear. Nevertheless, the old system was in need of reform. I welcome these measures, and we are happy to support them.

I also welcome the fact that, through these stamp duty reforms, the Government are accepting that high-value properties are undertaxed. Labour would, in office, go further and introduce a mansion tax, which would raise around £1.2 billion—an estimate with which the Chief Secretary to the Treasury agrees. Labour’s mansion tax will apply only to homes worth £2 million or more. The vast majority of houses, even in London, are worth far less than this: the tax will apply to less than 0.5% of the homes in the country.

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The £2 million threshold will rise in line with the average rise in prices of high-value properties worth more than £2 million, so the number of properties paying the tax will not increase. If prime property prices continue to rise, by the time we are able to introduce the tax the starting point will be higher than £2 million.

Labour’s mansion tax will also protect those who are asset rich but cash poor. People in high-value homes who do not have high incomes—those who do not pay the higher or top rate of tax, and earn less than £42,000 a year—will have the right to defer the mansion tax until their property changes hands. Labour’s mansion tax will be progressive. Those owning properties worth £2 million to £3 million will pay only an extra £250 a month through this new tax—the same as the average top band of council tax. We think that owners of and investors in properties worth tens of millions of pounds should make a much bigger contribution.

In office, we will look at asking overseas owners of second homes in the UK to make a larger contribution than people living in their only home. It cannot be right that the foreign buyer who bought a £140 million flat in Westminster earlier this year will pay just £26 a week in council tax—the same as the average-value property in that council area.

Labour’s mansion tax will use a simple banded system. Valuations will not be needed for most properties: it will be clear which band they fall into. The Government’s new tax on properties bought through companies relies on owners submitting self- valuations to HMRC; so will the mansion tax.

We have a housing crisis in this country, and it can be addressed only if many more homes are built than are being built now. Labour will give our communities the powers they need to get Britain building again, ensuring that there will be at least 200,000 new homes a year by 2020—almost double the current number. We will also tackle land banking, so that developers with planning permission have to use it, and we will give local authorities powers to ensure that local first-time buyers can take advantage of new homes that are built in their area.

This Bill reforms a bad tax. We welcome that, but we urge the Government to go further and introduce a mansion tax, as we propose to do.

11.19 pm

Lord Newby: My Lords, I am grateful to noble Lords who have taken part in this debate.

The noble Lord, Lord Northbrook, asked me several questions. He started by asking whether this change would have the effect of increasing foreign ownership at the top end of the market. It is far too early to tell how it will affect the market more generally. A number of suggestions have been made but we must see how things turn out before we can draw any firm conclusions about that. The noble Lord asked why we had not adopted the same approach to non-residential property. The Government think that the market for non-residential property is very different from that for residential property. For example, the data show that the current non-residential SDLT structure has less of a distortive effect around the rate thresholds than the old residential

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SDLT rules, non-residential properties also have a higher value on average and many have large leases and small premiums, which is rare for residential properties. Because of these differences, we do not think it follows that a reform to non-residential SDLT should accompany the reform that we are talking about today.

The noble Lord raised the Swiss system of dealing with under-occupied properties. I will, of course, happily pass that on to my colleagues in the Treasury. He suggested that we should insert more council tax bands at the top end. I thought for a moment that he was advocating Liberal Democrat policy, but then I discovered that he wanted to do that instead of the changes proposed in the Bill rather than in addition to them. We feel that, through the Bill, we are dealing with a system that has widely distorted the market over a long period and have replaced it with something which is more progressive and less distorting.

The noble Lord, Lord Tunnicliffe, pressed on the House the Labour Party’s proposal for a mansion tax and the need to build more houses. The election will include much debate on the mansion tax and I do not think I would serve a very useful purpose by entering into it this evening. On the noble Lord’s second point, while I agree, and the Government definitely agree, that we need to build more houses, I would point out

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that the Government have taken significant steps to support housing supply, including introducing the new National Planning Policy Framework, investing £7.8 billion to deliver 335,000 new affordable homes between 2011 and 2018, which is the most ambitious affordable housing programme for 20 years and being done in very difficult economic times, and providing £3.6 billion to facilitate access to finance for SME builders. The Autumn Statement includes a raft of further measures which will substantially boost housebuilding.

I am extremely grateful to noble Lords who have spoken in favour of the principles of the Bill and therefore I ask that it be given a Second Reading.

Bill read a second time. Committee negatived. Standing Order 46 having been dispensed with, the Bill was read a third time and passed.

Counter-Terrorism and Security Bill

Returned from the Commons

The Bill was returned from the Commons agreed to.

House adjourned at 11.24 pm.