STAMP DUTY ON CONVEYANCE OR TRANSFER ON SALE

HC Deb 28 April 1999 vol 330 cc403-48 7.30 pm

Mr. John Whittingdale (Maldon and East Chelmsford)

I beg to move amendment No. 3, in clause 99, page 71, line 5, at end insert— '(4A) This section shall not apply to properties which are subject to uniform business rate'.

The context of the amendment is the increase in the rate of stamp duty from 2 to 2.5 per cent. on transactions valued at between £250,000 and £500,000, and from 3 to 3.5 per cent. on transactions valued at more than £500,000. Since the Labour Government came to power, there have been three tax-raising Budgets, and in each of those Budgets one of the taxes that has been increased is stamp duty.

In his first Budget, the Chancellor raised stamp duty by 50 per cent., from 1 to 1.5 per cent., on property sales valued at more than £250,000, and by 100 per cent., to 2 per cent., on property sales valued at more than £500,000. On that occasion, he tried to justify the increases by claiming that the measure was necessary to reduce volatility in the housing market. The reason he gave in his Budget speech was: I will not allow house prices to get out of control and put at risk the sustainability of the recovery. I have therefore decided that it is right to take…. measures aimed at stability in the housing market."— [Official Report, 2 July 1997; Vol. 297, c. 313.] In fact, the increases had far less to do with stability in the housing market than with increasing tax revenue.

That became clearer when the Chancellor put up stamp duty again in his second Budget. That time, it went up to 2 per cent. on transactions over £250,000 and to 3 per cent. on sales of more than £500,000. There was no mention in his Budget speech of the importance of stability in the housing market; the right hon. Gentleman said only that 98 per cent. of house transactions would be unaffected by the increases. In this year's Budget, the Chancellor has raised the rates for a third time, to 2.5 per cent. on sales over £250,000 and to 3.5 per cent. on sales over £500,000. However, his only attempt to justify the increase in his Budget speech was to say that 96 per cent., rather than the previous 98 per cent., of home sales would be unaffected. The effect of those three Labour Budgets taken together is clear: on transactions of more than £250,000, there has been a tax increase of 150 per cent. and on transactions of more than £500,000, there has been a tax increase of 250 per cent. So much for the Government saying that they have no intention of putting up taxes.

There is a strong suspicion that this year's will not be the last increase, for in the rest of Europe stamp duty or its equivalent is payable at much higher rates.

Mr. Campbell-Savours

Quite right.

Mr. Whittingdale

I am grateful to the hon. Gentleman for confirming that. I understand that the average rate that now applies in Europe is now about 7 per cent., whereas in France, on certain classes of property, it is as high as 18 per cent. Many people believe that the Chancellor is trying to harmonise by stealth. There have been reports that he wanted to put up the rate of stamp duty in this year's Budget by a full 1 per cent., instead of only 0.5 per cent., but that he was dissuaded at the last minute by those who said that it would be too great a blow at one time. There is now a widespread belief that each future Budget will introduce further increases and that the Chancellor has now indicated to our European partners that he intends to increase the rates steadily until they reach the rates of our competitors.

Mr. Clifton-Brown

Is my hon. Friend aware that France recently cut its transaction costs from 18.5 per cent. to 4.5 per cent., because it felt that it was so out of line with the rest of its European partners? Would it not be folly if the UK Government were to increase stamp duty any further, given that we already have the highest property taxation of any country in the European Union?

Mr. Whittingdale

I am grateful to my hon. Friend for that intervention, because I had not known that. It may indeed confirm that there is a general movement throughout Europe to bring rates closer together, and that there is in operation an agenda to harmonise rates of stamp duty. It is even possible that that commitment has already been given by the Chancellor to the Paymaster General, in her capacity as the chairman of the committee on the code of conduct on business taxation.

I am sorry that the Paymaster General is not in her place, but I ask the Financial Secretary to make it clear in her reply that such speculation—which is considerable—is without foundation. Despite the fact that the hon. Member for Workington (Mr. Campbell-Savours) would like that harmonisation to happen, I suspect that few people in this country share his view and that there would be considerable alarm if the Government did intend to continue to increase stamp duty in each future Budget.

Mr. Campbell-Savours

Can the hon. Gentleman explain why it seems to him so wrong that someone who purchases a property for £500,000 should pay £15,000 to the state, when that tax is the lowest in Europe?

Mr. Whittingdale

That very point is the crux of the amendment, because, overwhelmingly, transactions over £500,000 are not conducted by people buying large houses, but by businesses, so the tax is a tax on business. The Chancellor does not like to admit that.

Mr. Derek Twigg (Halton)

Can we take it from that remark that the Conservatives are not opposed to the increase in stamp duty on domestic property sales?

Mr. Whittingdale

I am sorry to disappointment the hon. Gentleman, but the Opposition are completely opposed to that tax increase, because it is a stealth tax increase which is especially damaging to business. Our amendment is designed to highlight that damage.

Mr. Twigg

I do not want to pre-empt the hon. Gentleman's remarks and I apologise if I am doing so, but I want to be clear. Will Conservative Members be voting against the measure?

Mr. Whittingdale

I am happy to confirm that we shall vote in favour of our amendment and against clause stand part.

As I said, when the Chancellor ever mentions the increases, he speaks of them in terms of house sales. Like the hon. Member for Workington, the right hon. Gentleman has tried to give the impression that the tax affects only those who can afford to buy expensive houses. It is worth pointing out that, in many parts of the south-east, £250,000 will not buy an especially large house. Many of those who will have to pay the increases are not fat cats, but, in the main, families who aspire to move to a larger house. Indeed, I am hoping to move house in the near future—

Mr. Love

Declare an interest!

Mr. Whittingdale

That is exactly what I was just doing. If I do move, it is possible that, like a large number of my constituents, I shall be affected by the increases.

Mr. Leslie

Half a million?

Mr. Whittingdale

I should like to point out to the hon. Gentleman that the clause increases the rate of stamp duty on all transactions of more than £250,000. In my constituency, £250,000 does not buy a mansion; it buys a reasonably sized property of the sort in which I suspect the majority of my constituents aspire to live one day.

Mr. Love

Is the hon. Gentleman saying that the majority of his constituents would fall within the category of those buying houses valued in excess of £250,000, despite the fact that, earlier in his speech, he confirmed that my right hon. Friend the Chancellor has said that between 4 and 6 per cent. of house purchases are affected by the increases?

Mr. Whittingdale

I said that the majority of my constituents would aspire to live in such houses. In the area that I represent—and certainly in the areas represented by several of my hon. Friends—the proportion of transactions over that threshold would be considerably in excess of 4 per cent.

There is another equally important point about the way in which the increases will affect people involved in home purchases. Many house sales involve the purchase of new houses—

The Temporary Chairman (Mr. John Butterfill)

Order. The hon. Gentleman is straying from the amendment. I am sure that he will wish to address those issues in the clause stand part debate, but I hope that, for the time being, he will confine his attention to the amendment under discussion.

Mr. Whittingdale

I am grateful for your guidance, Mr. Butterfill. I will certainly concentrate on the amendment before us. I was tempted to divert slightly.

However much the Chancellor may pretend otherwise, stamp duty is not payable only on house purchases; it is payable on all transactions that require the transfer of a document. That includes sales and leases of commercial property, goodwill, book debts and intellectual property, such as patents and trademarks. When we debated the Budget initially, I was grateful to the hon. Member for Cambridge (Mrs. Campbell) for highlighting the effect of the increases on the high-technology firms in her constituency that will be severely affected by the rising cost of the transfer of intellectual property in which they specialise.

According to the Government's figures, of all transactions over £250,000, 65 per cent. of the receipts from stamp duty come from commercial property and land transactions. For transactions over £500,000, 80 per cent. of receipts come from commercial property and land transactions. As I said earlier, this is overwhelmingly a business tax and businesses will have to pay the majority of the extra £270 million that the increases will raise.

In his Budget speech, the Chancellor made much of the fact that our future depends on enterprise. However, in practice, he is clobbering enterprise through increased taxation. Last year, several organisations representing the commercial property industry commissioned independent research by Arthur Andersen and the London business school on the impact of increased stamp duty rates on the commercial property sector. That research showed that commercial property is a hugely important component of our economy and contributes about 10 per cent. of our gross domestic product. It is valued at about £500 billion in the private sector and a further £110 billion in the public sector.

Moreover, the analysis also revealed that there is a multiplier effect and that changes in the level of stamp duty have a disproportionate impact on commercial property prices. As a result, it is estimated that a 1 per cent. increase in stamp duty will wipe £25.6 billion from the capital value of commercial property. If a real rate of growth in rents of 2.5 per cent. is assumed, the figure increases to a —43 billion decline in the total value.

That is particularly serious as many industrial and commercial companies use the value of their commercial property assets as collateral for debt finance. It is difficult to estimate the precise value of the total amount of loans secured on commercial property assets, but research suggests that it is something like 50 per cent. Therefore, a significant drop in commercial property values is likely to have a measurable effect on the ability of firms to raise loan finance. That may be particularly significant for small and medium-sized enterprises.

Mr. Campbell-Savours

Does it not mean also that the tax will cut into the spiralling commercial rents that are the subject of many protests to Members of Parliament from small shopkeepers throughout the country who simply cannot afford to pay rents in the commercial sector? Therefore, the tax is extremely helpful in that sense.

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Mr. Whittingdale

I am interested to see the hon. Gentleman defending these increases—but perhaps it fits in with his earlier suggestion that the rates should continue to increase in future Budgets. Perhaps the Minister will confirm whether she also believes that it is desirable to tax the commercial property sector even more. However, the Government have not offered that justification so far.

Mr. Shaun Woodward (Witney)

The hon. Member for Workington (Mr. Campbell-Savours) would like to see lower property rents, but the measure will have completely the opposite effect. The cost will force rents up because, effectively, it is an additional tax on those rents.

Mr. Whittingdale

My hon. Friend is right: stamp duty is payable on leases as well as on sales, and therefore it will have the effect of increasing costs. There will also be a corresponding effect, to which I have referred, on the overall value of commercial property. I fear that it would take a great deal of economic research by experts considerably more knowledgeable than me to work out the overall impact of the changes. However, I am sure that it could be modelled, and it would be interesting to conduct such an analysis.

In talking about the research by professional economists into the impact of these changes, it is worth drawing the Committee's attention to the Arthur Andersen report's conclusion that the public sector will be a net financial loser from a stamp duty increase. The public sector holds a large property portfolio—I said earlier that the total value of commercial property owned by the public sector is £110 billion—and it is estimated that it will suffer a capital loss of between £5 billion and £11 billion as a result of a 1 per cent. rise in stamp duty. That capital loss vastly exceeds the additional revenue. If one applies a reasonable discount rate to the future stream of revenue that will result from increasing stamp duty and compares that with the reduction in the overall value, one can see that there is a substantial net loss to the public sector.

Mr. Leslie

The hon. Gentleman has surely calculated the effect on Exchequer yields if his amendment were to be carried. What would the cost be?

Mr. Whittingdale

I am not sure of the exact revenue implications because there was some dispute about that figure when we debated a similar amendment to last year's Finance Bill. I shall be interested to hear the Minister's view. However, for the reasons that I have given, I suspect that the cost might be rather less than some would suggest.

Other important aspects of this tax show why it is so damaging. We have raised these matters in previous debates about stamp duty. Stamp duty operates according to what is known colloquially as a "slab" system rather than a "slice" system. That means that, if a transaction is valued at just £1 over the threshold of £250,000 or £500,000, the higher rate of stamp duty will apply not just to the amount above the threshold but to the entire value of the transaction.

Mr. Campbell-Savours

That is good.

Mr. Whittingdale

The hon. Gentleman said that that is good, but it creates potential marginal rates of taxation of 3,750 per cent., which is patently absurd. The consequence of operating the system in that way is that many purchasers will seek to avoid incurring the higher rate by paying a reduced amount on the value of the property while agreeing an artificial price for items such as fixtures and fittings, thereby ensuring that the headline price that is paid is below the threshold, whereas the total amount that they are handing over is above it. That applies equally to businesses and to residential sales. There is considerable incentive to make such arrangements to avoid extra cost. By creating the differential, the Government are encouraging the continuation of that practice.

Mr. Campbell-Savours

Is the hon. Gentleman suggesting that, to overcome that problem we should include fixtures and fittings in the price of properties?

Mr. Whittingdale

No, I am not suggesting that at all. We should not have introduced those thresholds and we should not be increasing the rates, but one method of dealing with that problem would be to change the way in which stamp duty is levied from a slab system to a slice system. We made that suggestion in the debates on last year's Finance Bill, and in his reply, the then Paymaster General, the hon. Member for Coventry, North-West (Mr. Robinson), said that he could see the attractions of slicing rather than slabbing and that he was happy to consider our suggestion. Although we do not regret his passing from the Government, it would be a pity if his acceptance of that point was also lost. I am disappointed that the Government have made no attempt to correct the distortion that the system creates.

Mr. Gerald Bermingham (St. Helens, South)

I have been listening with interest to the hon. Gentleman's remarks. I first qualified as a solicitor in 1967—I declare an interest as an ex-solicitor—and became a barrister in 1985. When I ran a large firm of solicitors, it was common practice in property sales to avoid the stamp duty margin simply by valuing fixtures and fittings that went with the sale. In the domestic system, that applied to curtains and carpets, and in the commercial system, it was power lines and fixtures for shop processes. The hon. Gentleman's point is a nonsense. No one has ever thought of having a slice system; we have always agreed on a slab system, but we have always been careful to advise our clients how to achieve the correct slab. Why did not the Conservative Government do anything about the system in all their years in power?

The Temporary Chairman

Order. The hon. Gentleman's intervention is too long.

Mr. Whittingdale

As I was explaining at the beginning of my remarks—I am sorry that the hon. Gentleman was not present—this Government have made the problem far worse by introducing three successive, huge increases in stamp duty in three Labour Budgets. That has increased the incentive for people to seek to avoid the tax in the ways that I have described.

Furthermore, it would be sensible to consider levying the duty by a different method not only because of the point about fixtures and fittings but because it is a very strange tax. One has to pay a huge amount extra just because the price of the transaction goes over the threshold. As I said earlier, that produces ridiculous marginal rates of taxation.

Mr. Derek Twigg

If, as you say, there is a problem for householders and not only for purchasers of commercial property, and if, by some miracle, your amendment were accepted, would you vote for clause 99—

The Temporary Chairman

Order. It is not my amendment.

Mr. Twigg

I apologise, Mr. Butterfill. Would the hon. Gentleman then vote for clause 99?

Mr. Whittingdale

I have already said to the hon. Gentleman that Conservative Members totally oppose the increases because they will affect householders and businesses. We realise that they will be particularly damaging to businesses, and that is the subject of our amendment, but, even if our amendment were carried, and my powers of persuasion caused the Financial Secretary to accept it, I regret that we would still vote against the clause.

As I said earlier, I welcomed the fact that our arguments for changing the way in which the tax was levied had been recognised, at least in part, by the former Paymaster General, the hon. Member for Coventry, North-West. I am sorry that our case has not been recognised in the Finance Bill. Does the Financial Secretary accept that the issue at least needs to be addressed, and will she examine the possibility of making a change? That change need cost nothing. It would be possible to devise a more progressive tax, levied according to a slice system, which was also revenue neutral.

Most transactions affected by the increase are VAT exempt, but that is not true of them all. In some cases, commercial property owners may exercise what is known as the option to tax, whereby they choose to waive their VAT exemption and charge VAT on rents or sales. That may seem a rather curious course, but it has advantages because they are then able to recover VAT on, for example, their input costs for construction. If a company pursues that course, it may well find that, in the event of a sale, it pays stamp duty not only on the sale value but on the VAT charge as well. In such cases, stamp duty is a straightforward tax on a tax. In the case of a building that costs £1 million, the VAT charge would be £175,000. The total stamp duty paid on that transaction would be over £41,000, of which over £6,000 would be double taxation.

The same problem could well arise in the transfer of going concerns. If a business is transferred as a going concern, it is an exempt supply and no VAT is payable. However, Customs and Excise no longer gives advance clearance on the application of relief, and it is left to the parties to take a view on the VAT status of any transaction. It is not always easy to define a going concern, and there are cases where VAT is not charged, but it is subsequently demonstrated that it should have been charged. In those circumstances, the purchaser not has to pay not only VAT but the extra amount of stamp duty on the VAT charge.

Given the steeply progressive nature of the stamp duty regime and the slab system that I have described, it is not impossible that the additional VAT charge could take the value of the transaction over a threshold, so that a higher rate of stamp duty becomes payable on the entire value of the transaction. In the particular cases that I have described, the additional amount of stamp duty may be greater than the duty that was originally payable. I fully accept that such an outcome is not likely to be a common occurrence, but it is certainly possible and accentuates the point that stamp duty can be extremely unfair, as it is double taxation.

Stamp duty increases are distorting the operation of the market. Under the previous Government, stamp duty was charged at a flat rate of 1 per cent., with the duty on shares set at 0.5 per cent. That 0.5 per cent. differential between the level of duty for shares and that for all other transactions was not then regarded as particularly significant, and it had little effect on behaviour.

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However, as a result of the three Budgets, the difference in the duty rates between that applicable on assets and that applicable on shares has been increased to 3 per cent. That is a significant cost, and it is likely to distort market decisions when companies choose whether to raise finance from asset sales or from the issue of shares.

That distortion will be increased even further if the Government decide to abolish stamp duty on shares. Although, as far as 1 am aware, there has been no hint that that will happen, the Minister will be very much aware of the huge concern about the effect of stamp duty on the competitiveness of the City of London.

The alliance between the London and Frankfurt stock exchanges is just the first step towards the creation of a pan-European stock exchange. The Minister knows that, in Germany, no stamp duty is payable on share transfers. There is a real danger that business will be lost if the differential between the rate applicable in this country and that applicable abroad continues.

The issue is very serious. Those in the City regard the increase as a considerable threat. I hope that the Minister will carefully consider what help might be given to ensure that the City of London remains the greatest financial centre in the world.

The cumulative effect of all those increases will be to encourage the avoidance of duty altogether. A rate of 2.5 or 3.5 per cent. obviously makes it far more worth while to execute documents offshore, so that no duty is payable. I am aware that clause 97 attempts to address that, by increasing the penalties and interest payable if documents are stamped late. However, for most transactions, there will never be cause to bring documents back to the United Kingdom. The one time when it might be necessary would be if one of the parties wished to take legal action under the terms of the contract. However, the £300 penalty that the Bill introduces seems a relatively small price to pay, given the likelihood of that happening.

Two senior managers at KPMG, the Government's favourite accountancy firm, writing in The Tax Journal, say: Provided that the interest rate charged on late paid stamp duty is not considered penal, it may still be attractive to leave documents off-shore and unstamped. Provided the document doesn't subsequently need to be brought onshore, the stamp duty charge is deferred permanently"— so, by increasing duty rates to such a level, the Government are encouraging tax avoidance, and it seems to me inevitable that that practice will increase.

I have stated many reasons why I feel that the increases will be especially damaging to business. They are, of course, punitive on numerous people and I certainly would not wish them to be introduced to affect those involved in residential property transactions either. That is why I told the hon. Member for Halton (Mr. Twigg) that we would vote against clause stand part. However, I believe that the increases impact especially heavily on businesses. It is for that reason that we have tabled the amendment, the aim of which is to exempt business properties from the increase.

Mr. Leslie

Will the hon. Gentleman give way?

Mr. Whittingdale

I am just about to finish—well, all right.

Mr. Leslie

The amendment would exempt commercial businesses from stamp duty. Does the hon. Gentleman want to exempt just the increase? If he could, would he exempt businesses from all stamp duty, or perhaps just the increases above 1 per cent?

Mr. Whittingdale

The hon. Gentleman will recall, because I believe that he was present, that, last year, we moved an amendment to the Finance Bill which would have prevented the increases imposed in that Budget from affecting businesses. I can assure him that if, as we fear, the Government continue to introduce further increases in stamp duty in future Budgets, we shall oppose those, too.

I tell the Minister that, if the Government's rhetoric about wanting to help business means anything at all, they should accept the amendment.

Mr. Derek Twigg

I was very interested in the speech of the hon. Member for Maldon and East Chelmsford (Mr. Whittingdale). I pursued the line of intervention questioning that I did because I thought that the Conservative party's approach tonight was interesting. Conservative Members have decided that they want to exempt business and commercial properties from the operation of the clause, and that such properties are more important than domestic properties. They have made it all too clear that they do not really care about the domestic side of this tax.

The Conservatives say, "We want to do this because it is very important and we want to ensure that something happens," and they try to identify themselves as friends of business and commercial property; but, when they are asked what they would do if the amendment were passed, they say that they would vote against the clause anyway. That means that they would vote against the clause as amended by their amendment.

Mr. Whittingdale

Given the size of the Government's majority, I suspect that we shall not succeed in carrying the amendment or in persuading the Government that they should not proceed with the clause. If, by some chance, we had persuaded the Government to accept our amendment, exempting business, then, for the reasons that I have explained, we would still have objections to the clause. However, given the size of the Government's majority, I think that we may assume that the clause will probably be passed, and we might at least have distinctly improved it by removing from businesses the obligation to pay the increase.

Mr. Twigg

I simply gained the impression that perhaps the Conservatives had not thought this one through enough, and that, instead, they were going to waste our time by speaking and voting against clause stand part. Perhaps they were a bit stung by previous accusations that they were not going to table amendments because there might be a difference of opinion among them, given the latest state of affairs.

The debate went from the sublime to the ridiculous. I am happy to be corrected if I misheard, but I thought that the hon. Member for Maldon and East Chelmsford said that the stamp duty increases were a threat to the future of the City of London as the premier financial place in the world.

Mr. Whittingdale

I am grateful to the hon. Gentleman for giving me the chance to correct him on that point. On the issue of the future of the City of London, I was highlighting the danger—which the City believes is extremely real—that arises from the fact that, in this country, we charge 0.5 per cent. on share transactions, whereas in Germany there is no stamp duty on share transactions. Because of the technological developments that are leading to the integration of stock exchanges across Europe, there is a significant danger that business will move to where costs are lowest; in that case, it would mean Frankfurt, not London. Therefore, to protect the City of London's position, the City believes that it is important that this issue should be addressed.

Mr. Twigg

That reply is very interesting in the context of the amendment.

There is some suggestion that the stamp duty increases will cause bankruptcies throughout the country, that businesses will collapse and that stamp duty is the single most important factor in people's considerations when setting up businesses, continuing them or buying larger premises. That is nonsense. There is no evidence to support that contention. I cannot recall from any discussions that I have had with business men in my area that they have seen stamp duty as a major problem. The hon. Member for Maldon and East Chelmsford may quote any figures that he wants, but 1 am talking about my conversations with business men and women in my constituency, and I have never found stamp duty to be a major issue. It is interesting that the Conservatives are trying to make an issue of it tonight.

Mr. Michael Jack (Fylde)

In the hon. Gentleman's extensive preparation on the amendment, has he had time to read the report produced by Arthur Andersen and written on its behalf by David Currie and Andrew Scott of the London business school?

Mr. Twigg

I will be open and honest: I have not—but just because Arthur Andersen says something does not mean that it is right. In fact, given some of the work that Arthur Andersen has done on information technology systems around the country, I wonder about its competence and success.

Mr. Woodward

rose—

Mr. Twigg

Let me continue. I am pleased that people find my contribution interesting.

Obviously, one may quote whatever example or avenue one wants and use it for whatever purpose one wants, but I am saying that, in my constituency, the issue has never been raised with me as a concern. Among the issues that were continually raised were the policies by which the previous Government clobbered small business, and the various policies that created a difficult economic environment. We cannot separate the issue of stamp duty from that of the general economic climate and economic stability. However, it seems to be suggested that this issue is out on a limb and is the main cause of problems.

Mr. Woodward

Even though the hon. Gentleman has not read the Arthur Andersen report, can he tell the Committee what value to a company its loans represent in terms of its borrowing money against the value of its property? I think that this information is generally known. What percentage of the outstanding loans of an average company is based on commercial property?

Mr. Twigg

I expected better than that from the hon. Gentleman. Companies have to make commercial and business decisions. The hon. Gentleman's intervention does not take us any further than the contribution of the hon. Member for Maldon and East Chelmsford from the Opposition Front Bench. The hon. Gentleman made a nonsensical point.

Mr. Woodward

It is crucial.

Mr. Twigg

I have talked to business men in my locality and they appear not to rate this issue as one of the greatest importance. It could be that Halton is somewhat different from other areas. I do not know. However, I have talked to many small business men and it seems that the general thrust of policies—

Mr. Woodward

They do not understand.

Mr. Twigg

That is interesting. The hon. Gentleman says that business men in my constituency do not understand.

Mr. Bermingham

First, does my hon. Friend agree that there have been major suits of negligence against major accountancy firms over the past few years, thus leading most of us to accept that they do not always get things right? Secondly, as someone who, on behalf of clients or others, has bought and sold shares for the past 30 years or so, I have always paid stamp duty personally or for clients. I have never experienced an objection to stamp duty and I have not seen all the City of London business transferred to Zurich or anywhere else. My hon. Friend may just agree with me.

Mr. Twigg

My hon. Friend makes an interesting and telling point. It is clear that the Opposition decided not to deal with it. I am grateful to my hon. Friend.

We have not been told how, if the amendment were carried, the gap in the Budget would be filled. That is normally the position. The Opposition like to oppose, but they have nothing to put in the place of Government policies. Basically, they are playing games. That was made clear when the hon. Member for Maldon and East Chelmsford talked about what would happen if the amendment were agreed to. Opposition Members are in an almost incredible situation.

Mr. Gibb

Will the hon. Gentleman give way?

Mr. Twigg

I shall give way for the last time, because I am sure that the Committee would like me to make progress.

Mr. Gibb

At the general election, did the hon. Gentleman stand on a platform of no increases in taxation? Is the Government proposal not an increase in taxation?

Mr. Twigg

The hon. Gentleman is becoming rather robotic on this issue. He is not getting an answer to his question because its basis is incorrect. I am sorry that he cannot think more widely on this issue. He seems to be transfixed.

A wide range of measures are set out in the Budget, which the Government put forward to help and promote business. We have heard nothing this evening about many of them. Many measures have been welcomed by business and the Opposition have taken up the issue of stamp duty because they think that they can have some fun with it. The fact is that, generally, business welcomes the Budget. I am confident that what the Government have set out in the Bill will be in the country's best interests.

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Mr. Nick St. Aubyn (Guildford)

I fully support the amendment. I suggest to the hon. Member for Halton (Mr. Twigg) that there may be revenue-neutral effects from reducing the rate of duty on commercial property. The report cited by my right hon. and hon. Friends makes it clear that, such is the devastating effect of rises in stamp duty, they damage the value of commercial property owned by pension funds and other forms of saving for people throughout the country, and the value of the Government's property holdings. Based on their figures, a 0.5 per cent. increase in stamp duty reduces the value of the Government's holdings of commercial property by £2.5 billion, whereas the revenue to be raised from the increment in stamp duty will be not more than £100 million a year. In plain language, it will take the Government 25 years to recover the loss in the capital value of their stock of commercial property if they go ahead with the proposed measures.

This is not merely a mathematical exercise. We know that account has been taken of all the property holdings of Government Departments and that there is an on-going programme to rationalise Government property holdings. Properties are being sold by the Government year after year. Because of savage increases in stamp duty, there will be far less money coming in.

Through the amendment, we are protecting public finances. I draw the attention of the hon. Member for Halton to the code for fiscal stability. One of its purposes is to improve the public financial balance sheet. However, we are seeing an attack on the strength and probity of that balance sheet. At the same time, as my hon. Friend the Member for Maldon and East Chelmsford (Mr. Whittingdale) has already mentioned, increases in stamp duty, far from creating a more stable environment, create a more volatile one. That is in direct conflict with the code for fiscal stability.

According to the research that has been carried out, there is a 50 per cent. increase in the volatility of property prices as a result of the increases in stamp duty. That is a major increase. Why does it happen? If the transaction costs of buying and selling property increase, the incidence of such transactions will decrease. Where there are property transactions, there will be much greater increases in prices. That is shown clearly by research, and it stands to reason. As we have found in so many markets—securities and elsewhere—if transaction costs are reduced, the volume of transactions increases, and vice versa.

There is another reason why there may be revenue-neutral consequences that relate to tax avoidance and the use of offshore vehicles. We should not be surprised if, as a result of this latest rise in stamp duty, and if there are further rises in the pipeline, commercial property is dealt with increasingly through derivative instruments. If that route is taken, there will be no stamp duty take for the Government. Again, their revenue will decrease.

There will be an impact on business. When we talk about the cost of buying and selling property, we are always talking about a business cost. I know that we are focusing deliberately on commercial property, but business will feel the effect of the increases in stamp duty on homes. Whenever a senior and important executive in a company has moved home, the cost of that move has been radically increased by the rises in stamp duty over the past few years.

In Guildford, 7,000 of my constituents and I—I am happy to declare an interest—are directly affected by the proposed increase in stamp duty. Many of the 7,000 are senior executives. They are important people working in local firms. It is a highly competitive world and many of the businesses in my constituency are competing in Europe, the far east and America. Their local costs are a critical factor in their ability to win more business. The effect of these rises in stamp duty will be to harm their competitiveness and reduce the amount of revenue going to the Exchequer from the profits of their trade. This is, yet again, a self-defeating exercise by the Government.

We should remind ourselves that the Labour party came to power promising an end to boom and bust, but the increase in stamp duty will accentuate the danger of boom and bust. The research carried out by Scott and Currie says that in 1996 the value of loans that could be secured against the industrial and commercial sectors' holdings of property was below their actual borrowing. In other words, even before the Government came to power, companies, in aggregate, were borrowing to the very limit of their borrowing powers against the value of their commercial property holdings.

If greater volatility in the value of commercial property results from these changes, there will be a greater chance that those values will fall below the level acceptable to the banks that are lending to those companies and a greater chance of some of those companies being forced into receivership or bankruptcy.

Mr. Bermingham

Is that not economic madness? Investment in property is tax deductible and allowable in a business sense and interest rates have fallen considerably since the Labour party came to power. If one is offset against the other in accountancy terms, the rise in stamp duty is a minor matter compared with the benefits of interest rate reduction and other tax reliefs since granted.

Mr. St. Aubyn

I entirely agree that economic madness is at work here. The economic madness is that every 1 per cent. increase in stamp duty leads to a loss of between 3 and 5 per cent. in the capital value of all commercial property. All other things being equal, that is its effect. If the commercial sector has borrowed against property, in aggregate, as far as is prudent, the measure will push borrowing to imprudent levels. A greater danger of boom and bust is being created.

Mr. Bermingham

If its value is pushed down, commercial property is made more readily available to more investors. That is not a loss to the investing world at large. Interest rates have tumbled and people can borrow at cheaper rates, which seems to me to be an economic gain for the long term.

Mr. St. Aubyn

I am grateful to the hon. Gentleman for pointing out that, if his Government create a busting economy with lots of people going under, there will be a lot of cheap properties around for others to pick up on the off-chance. That is not the sort of economy that the Government inherited or that they promised to create, but they will create such an economy if they carry on down this blind alley in which tax increases are more than offset by the damage to wealth across the country and, more importantly, by the damage to wealth creation.

We have touched on other issues. Stamp duty has an effect on goodwill and on patents, and the measure is a wholesale attack on many things that the Government say that they are in favour of. They want to create an enterprise economy and say that they support innovation, but brand names and new inventions will be taxed at a higher rate as a result of the increase in stamp duty. I cannot see how that fits in with any serious wish to achieve a more vibrant economy.

Many of the companies that will be hardest hit by the increase in stamp duty turn over between £500,000 and £5 million a year. Under the previous Conservative Government, the most significant growth in the number of companies took place in that part of the economy, which is also where the most significant increase in the vitality and job-creating power of our economy occurred.

Interestingly, it has been estimated that even a 0.5 per cent. increase in stamp duty will lead, over a few years, to the loss of more than 5,000 jobs throughout the economy; more significantly, it has an opportunity cost for the firms that have created the most jobs in recent years. The firms trading between those turnover levels are most typically dependent on bank borrowing set against their property holdings. Across the board, property can typically amount to about half the net book value of such businesses and it is an important asset that will be considered by the banks.

We all know that, in an ideal world, banks should look at the business plan, cash flow and prospects of the companies to which they lend money, but the reality is that, although banks check that the figures add up, they do not have the time or the expertise to assess how realistic those plans are. As well as trusting the judgment of the businesses and the business managers to whom they lend, they very much trust to the security of the assets against which they lend.

Taxation that damages the value of those assets way beyond the amount of tax revenue yielded damages the ability of those businesses to expand. Yet again, the economy is being led up a blind alley. Comments from Labour Members have shown that old Labour is rearing its head in an avaricious attack on wealth in this country. That is what the measure is really about. I tell Labour Members that 10 per cent. of my constituents are directly affected by it—we might as well go back to the days of surtax. They promised in the election campaign that they would not raise taxes, but they are indeed doing so, and targeting taxes in a way that will certainly affect the incentives in our economy.

It is also worth bearing it in mind that the cost of stamp duty will be spread across all businesses and all levels of society. If people who are buying large properties have to pay more in stamp duty, they will have less to spend on improvements and other work on their properties that they might want to undertake. Therefore, they will be less able to carry out those improvements and one of the ways in which there is synergy between different sectors of the economy will be lost.

There will clearly be a knock-on effect. [Interruption.] That seems to be a matter of amusement for Labour Members, but I have calculated that, for my constituents, the increase in stamp duty is equivalent to a tax of £100 per household per year. That is the extent of the damage that will be caused by what the Government are doing.

We have already heard that property taxes in this country are the highest in Europe, but, in fact, they are among the highest in the world. Only in the economic area of north America does the level of property taxes, in aggregate, begin to match that which we now have in this country. Far from an increase in stamp duty achieving harmonisation with the rest of Europe, it will put us way out of line.

In this country, the proportion of taxation on property as a percentage of national income is twice the European average. The total amount taken in property taxes in this country is 10 per cent. of all taxes, which is higher than the proportion taken in property taxes in any other EU country.

The implications are serious. We had a thriving commercial property market, but we may end up with a dead market. We had a commercial property market that attracted a significant amount of inward investment in Europe—building bridges between our economy and the economies of our European partners, something that I thought that Labour Members favoured—but we are putting up a sign saying, "Not for sale; do not come here—the taxes are far too high."

There is an even greater concern. If we are already at the peak of the taxation, in aggregate, that property can bear—that is the message we are getting from around the world—what will be the effect of the measure on local property taxes? A significant part of property taxes are raised through rates. The increase in stamp duty will mean that it will simply not be possible to increase rates as well. There will therefore be an effect on local government. The measure is a tax grab by central Government—the Treasury—at the long-term expense of local government revenue. That is where we are heading by going down this route. Whatever the pros and cons of taxing property through rates, it is better to have a known and, since the previous Government, stable level of taxation year in, year out, than a level of taxation that is affected by the incidence of businesses moving.

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There are many reasons why businesses move, but one of the most significant is that they outgrow their premises and want to move to more modern premises. That is a very important part of the process by which we protect the green belt, as brown-field sites become available. If businesses find that the cost of moving has become prohibitive, they will stay put and give up the opportunity for extra growth and employment, and the Government will lose the extra revenue that would have resulted from that. As a direct consequence, there will be an increasing shortage of brown-field sites. If it is a Government priority—it is one that we feel they have not pushed far enough—to have more brown-field sites developed, they will find that that is simply not possible, or the cost of brown-field sites will get out of kilter.

All those reasons show why stamp duties are wrong. I leave the Committee with one final thought, which I hope that the Financial Secretary will bear in mind. She and her colleagues may think that stamp duty is some kind of economic regulator and that, because they inherited such a strong economy, increasing it will be a crude means of restraining increases in property prices. That may work well, but, when it comes to a slowdown or a recession—no economy is immune from recessions—the correct thing to do is to reduce stamp duty. However, to do that at that stage would be entirely counter-intuitive for the Government because, in a recession, all Government revenues are under pressure. A Labour Cabinet would simply not agree to cut stamp duty when budgets for schools and hospitals were under pressure.

In other words, this is a one-way street. Stamp duty is going up—we need to know how far—but it will not come down. Far from being an economic regulator, it is a mechanism for creating boom and bust in the economy. That is a fundamental reason why the measure should be opposed tonight.

Mr. Colin Breed (South-East Cornwall)

I understand that we shall debate the clause stand part a little later, so I shall confine my remarks purely to the uniform business rate. First, I declare an interest, which is in the Register of Members' Interests. The business concerned is under offer and may therefore incur stamp duty.

I have always wondered why trading businesses have had such a desire to buy property. Whether they are manufacturing or commercial businesses, so many of them want to lock up a considerable amount of resources in the almost dead asset of the building from which they operate. As a former bank manager, I have always suspected that that practice has been driven by the banks, which promote loans to companies and businesses for the bricks and mortar over which they can then obtain a mortgage and security.

Many businesses in the past, and some even today, have undertaken long, fixed-term borrowing on rates well in excess of the current rate and cannot extricate themselves from that borrowing agreement. They find their cash flow locked up in significant interest and capital repayments to pay for the very premises from which they operate, rather than having that cash flow available to expand their businesses and to invest in equipment.

Mr. Jack

Can the hon. Gentleman confirm, given his position as a former bank manager, whether he would advise his customers that the proposals that we are considering tonight apply also to leases?

Mr. Breed

Yes, they apply to most property leases.

An enormous amount of productive capacity is locked up in the dead asset of property and buildings. The Government and the business community have not recognised sufficiently the fact that an enormous number of successful businesses, particularly in America, own virtually nothing and lease virtually everything. They use their profit streams to expand at a greater rate.

It has been estimated that some 50 per cent. of all the borrowing currently undertaken by businesses is somehow connected with property purchases. That shows what an enormous amount of money is tied up in buildings. It may make some people think twice about what they should be doing.

On interest rates, the money that is locked up is often considered as fixed-term borrowing. When rates are volatile, that can sometimes be advantageous, but, at present, there is no doubt that it is very disadvantageous. I could not quite follow the argument about the Government's property portfolio. I had hoped that the Government would dispose of some of their property by putting the money to productive use and releasing the capital in some way. Although it may theoretically have a reduced book value, while it is still on the books it is not necessarily doing anything. We should like to see the funds from such property assets released and put into other areas. I therefore do not quite follow the logic of reducing the book value, although there may be less revenue coming from it. We want a real release of property, which would then provide the means by which the Government could improve public services without increasing taxes.

Most business men would like to get rid of the uniform business rate. They do not want it used as a measure of whether they pay stamp duty or not. The businesses that I know do not sell their property voluntarily; regretfully, the property is sold beneath them. They are worried not about expanding their business but about retaining it. It can be argued that, if stamp duty goes much higher, it will affect the commercial property market. However, the rises proposed by the Government will not cause such a scenario.

There is a long way to go yet. Most of the small businesses that I come across in Cornwall would love to have potential assets of £250,000 or £500,000. We are essentially talking about relatively small businesses, which do not tend to change their premises regularly. Indeed, they often struggle to retain them.

I broadly support the measures. The suggested rates and thresholds in the current proposals do not signal the dire events that have been predicted by the official Opposition, who want to exempt properties subject to the uniform business rate. The Liberal Democrats are prepared to follow the Government on this, and we shall not support the amendment.

Mr. Leslie

I was interested to hear the Liberal Democrat spokesman, and I agree with his acceptance of the need to increase stamp duty. Listening to the hon. Member for Guildford (Mr. St. Aubyn), one would have thought that the end of the world was nigh. My violin was ready to play a sad song. The tears were streaming down my face at the thought of the terribly poor people who would be affected by this wicked, nasty tax. It was nostalgic to hear again the trickle down theory of economics from the hon. Member for Guildford. He said that this imposition of a half percentage point increase in the rate of stamp duty on properties costing £250,000 or more would make every household in Britain £100 worse off. To hear him talking, it was as though the whole economy hinged on the increase.

The amendment is a typical example of the Conservative party representing the privileged few and not the many, as it has always done and will continue to do, despite the statements of the right hon. Member for Hitchin and Harpenden (Mr. Lilley).

Mr. Gibb

Is the hon. Gentleman aware that, when a new housing development is built, the house builder purchases a large slab of land that costs more than £500,000? He will pay 3.5 per cent. stamp duty on that purchase, which he will then pass on to the purchasers of the houses on that development. Those houses may be very small.

Mr. Leslie

The trickle down theory continues to expand. It is amazing to watch that happen. The hon. Gentleman's intervention enables us to talk about the impact on residential areas. He argues that, at some level, there will be a charge on commercial transactions. That opens up a gamut of possibilities for us to underline the fact that 96 per cent. of residential properties are completely unaffected by this change in the Budget.

Mr. St. Aubyn

Does the hon. Gentleman realise that, after the increase in stamp duty last year, the property sector of the quoted sector of the market fell by 20 per cent? Does he realise that most commercial property is owned by savings institutions, such as insurance companies and pension funds, which represent the interests of the very people for whom he claims to speak, but whom we are speaking for tonight.

Mr. Leslie

Commerce is a wonderful thing but, as my hon. Friend the Member for Halton (Mr. Twigg) said, if this were such a dreadful imposition, businesses in our constituencies would be queueing at our surgery doors to complain about it. I certainly have not had any correspondence about the issue. I notice that Arthur Andersen has sent a briefing to Conservative Members: I have not received it, but it would be nice to see it.

Mr. Bermingham

I have just done a little calculation to test Conservative Members' lack of knowledge. A developer would probably pay about £1 million for five acres. He would pay about £33,500 in stamp duty and build 28 houses to an acre, which is about 140 houses. That is around £200 per house.

Mr. Leslie

That is an interesting calculation, and there are plenty more to be made. I was interested in getting some information from the Conservative Front-Bench spokesmen about the effect of passing the amendment on Exchequer revenue yields. They had not even bothered to think that through. They were not particularly concerned about how much would be lost to the Exchequer should their amendment be passed. By the sounds of it, as my hon. Friend the Member for Halton said, they were not concerned about whether their amendment was passed because they intended to vote against the clause in any case, whatever happened.

There are varying views about how much money would be lost if the amendment were passed. The hon. Member for Guildford came up with the interesting wheeze that no money would be lost to the Exchequer, because if we increase stamp duty, the revenue for the Exchequer would be increased. Thank goodness he is not in charge of the economy, although who knows what is happening in the Conservative party these days. He could well be shadow Chancellor before too long. What a day that would be. We look forward to such changes as they emerge in the coming hours.

8.45 pm

An interesting aspect of the amendment is the relationship that it would create by linking any exemption to the uniform business rate. I am rather curious about that. Would certification be necessary to prove that a person was liable for the uniform business rate? How much would it cost to administer the system, who would administer it, and how would it be paid for? The Conservatives have not explained how the system would be administered, and they did not implement it when they were in office.

I am interested to note that the Conservatives have stuck to at least one principle in opposing any change in stamp duty from the present 1 per cent. level. As a result, the revenue to be gained from all the income generated by such a change would be lost to vital public services. There are a number of views about how much would be raised by the application of the clause, but I understand that it is around £370 million. That would pay for about 100 schools, 15 hospitals or seven bypasses, the Bingley relief road being an example. The Red Book mentions a figure of about £220 million in relation to the upgrade of child benefit to £15—

The Temporary Chairman

Order. The hon. Gentleman is straying rather wide of the amendment.

Mr. Leslie

Thank you for the prompt, Mr. Butterfill. I was merely trying to prove that, if the amendment is carried, the revenue that would be lost would make it impossible to pay for the increase in child benefit, for example. We know from experience that, when the Conservatives oppose revenue yield measures, they want to cut welfare.

Mr. Jack

Why does the hon. Gentleman favour raising—particularly from business—additional revenue by raising stamp duty?

Mr. Leslie

I think that stamp duty is a very progressive way of raising revenue. It is a fair tax, in that those with significant assets pay proportionately more. A strong principle underlies that philosophy of progressive taxation.

Mr. Geraint Davies

Unfortunately, I had to leave the Chamber briefly, so I may have missed something. Have the Opposition given us any idea how much the amendment would cost when combined with the earlier amendments, which would have cost billions of pounds, and the abolition of the fuel duty escalator, which we discussed yesterday? How much would it cost in terms of value added tax on domestic fuel, cutting services and so on?

Mr. Leslie

An Adjournment debate may well be called for. The country will be clamouring to know just how the Conservatives intend to fill the black hole that would result from the passing of amendment No. 3. Where will the money come from to pay for vital public services?

Mr. Gibb

Are not Labour Members merely reciting a list of stealth tax rises implemented by their Government? Are they not doing our job for us?

Mr. Leslie

It is possible to view the situation from the perspective of a responsible Government who are seeking to pay for vital public services. If we could not raise revenue, we would not be able to spend it on schools and hospitals. I thought that the right hon. Member for Hitchin and Harpenden was saying that the Conservatives wanted an extra £40 billion for schools and hospitals, but they clearly do not. Amendment No. 3 would chip away at the money that they would have to spend on those vital public services.

I know that the Conservatives are in turmoil this evening, and I realise that the Leader of the Opposition is making a very important speech that is essential to the future of the Conservative party, but I think that we should sort out how the Conservatives are to secure the revenue base of the nation's finances before we can ever expect the return of a Conservative Administration.

There are other reasons why I think that the stamp duty changes are worth not only considering but supporting, not least because of the current state of the property market across the United Kingdom, and the increased property values that have been reported in recent weeks in very many studies and newspapers. We should focus on the stamp duty's regulating effect in preventing a return to boom and bust in the property market, in attaining market stability and in capping the large speculative exchanges that were symptomatic of the 1980s. The Chancellor, in proposing the measure, has taken early action to prevent a worse fate later. The stamp duty changes will help to prevent that fate.

The hon. Member for Guildford also made the interesting point that stamp duty rates are so much lower across Europe, and that the United Kingdom Government are imposing a very heavy burden.

Mr. St. Aubyn

I know that this is a very difficult subject for the hon. Gentleman, but I was referring to the total of taxes on property, of which stamp duty is a part. The total tax take on property is much higher in the United Kingdom than in the rest of Europe.

Mr. Leslie

I am grateful for that implicit recognition of the fact that the United Kingdom stamp duty rate is very competitive. Compared with stamp duty rates of 9 per cent. in Ireland, 8 per cent. in Italy and 6 per cent. in Spain, we have a very competitive rate, of which we have much to be proud. We have a prudent Chancellor who proposed in his Budget only a minor change—a mere 0.5 per cent. increase—in the stamp duty rate. The context in which the decision was made included the factors that I have described, and the need to keep an eye on the United Kingdom's economic stability and to be prudent with its finances.

The debate has highlighted the contrast between the Government, who are concerned with achieving stability in the property market and securing the tax base, and Conservative Members, who clearly stand only for the few and not the many. I believe that the measure should be supported, and that amendment No. 3 should be thrown out.

Sir Peter Lloyd (Fareham)

It is very interesting to follow the speech of the hon. Member for Shipley (Mr. Leslie). However, I should correct him on one or two of the assumptions that he made about Conservative Members' motives. We are criticising the Government's proposed tax not because of the effect that it will have on rich people, as he describes them, but because we believe that it will detrimentally affect growth and jobs. The hon. Gentleman laughs. I am surprised at that, as I should have thought that he would at least know that one may increase economic activity by reducing taxes, so that the take from the lower taxes is higher than it was before they were reduced.

Mr. Leslie

rose—

Sir Peter Lloyd

If the hon. Gentleman will tell me that he knows that, I shall happily give way.

Mr. Leslie

I hope that the right hon. Gentleman will welcome the reduction in the corporation tax rate and the imposition of a new, lower l Op starting rate of corporation tax.

Sir Peter Lloyd

I certainly applaud reduction in corporation tax, but am not so impressed with the lop rate, which I should have preferred to be wrapped up in the lower standard tax rate—so that the tax threshold started later, and some more small companies would not have to pay any tax. I think that that would be a much better use of the time of the Inland Revenue and of Customs and Excise and much better for small businesses. The rate that the hon. Gentleman mentioned is really rather gimmicky, as is so much of the Budget. However, I should return to the amendment, to which I know that the Chairman would like me to speak.

Today will be the third time that the Government have raised stamp duty. It went up in 1997, again in 1998, and will undoubtedly go up again today, when the Government's large majority moves through the Lobby. I can appreciate why the Government have followed this course—they want the money, and there are plenty of good things on which Governments spend money. Although I do not always agree with the Government's spending choices, I do understand why they try to maximise the revenue that they take.

Increasing stamp duty is a way of raising extra money that the general public do not notice. It does not affect most people directly and they will not connect it with the malign impact that it may have further down the line. They certainly do not make the connection in the constituency of the hon. Member for Halton (Mr. Twigg) and I doubt whether many people do in my constituency. They have other more immediate worries. Nevertheless, it will have an effect that should concern us on behalf of our constituents.

Stamp duty on commercial property is such a soft option in respect of the average voter—and some hon. Members—that, no doubt, the Government will find it impossible to resist the temptation to raise it still higher in future years, not just because it is easy, but because the Government intend to join the economic and monetary union. One way of hastening harmonisation would be to increase stamp duty to the higher average of continental countries with the minimum fuss. If that is their objective, the Government should remember, as some of my hon. Friends have reminded us this evening, that, although stamp duty or its equivalent is generally higher in Europe than it is here, that is not the case in all EU countries. So, unless the Government accept that tax harmonisation must be at the highest rates, they should be careful about imposing increases.

Even more to the point, as my hon. Friend the Member for Guildford (Mr. St. Aubyn) pointed out a couple of times and again in an intervention, taxes on property are much higher in the UK than they are in the rest of the EU. If the Government seek a level playing field with Europe, they should cut total taxes on property instead of raising them.

I hope that, in her reply to the debate, the Minister will confirm that she recognises that property taxes are higher in the UK and let us know whether the Government intend to call a halt to increases in future years. I do not expect her to do so as a personal favour or in the cause of cross-party co-operation. Of course I realise that Governments can save themselves a great deal of trouble if they keep open as many options as possible. However, I am allowing myself a little hope because I assume that the Minister will want to observe the requirements of the Government's code of fiscal stability, which was also mentioned by my hon. Friend the Member for Guildford.

The code commits the Government to operating fiscal policy in a way that is predictable and consistent with high and stable levels of growth and employment. I know that the Minister can talk and listen at the same time, although not all her colleagues can do that. Will she make clear, in the spirit of the code, what the Government's medium-term intentions are in respect of stamp duty? Whether or not she tells us, I fear that the effect of increasing stamp duty will distort that part of the economy.

I am talking particularly about commercial property and the analysis of Arthur Andersen and the London business school. I was not sent a copy directly; I acquired it from one of my hon. Friends, so I am very happy to pass my copy over to the hon. Member for Shipley, who badly needs to read it. I hope that, in another debate, he will tell us why he has converted or his real reasons for disagreeing with it.

My hon. Friend the Member for Maldon and East Chelmsford (Mr. Whittingdale) mentioned the study, as have several of my hon. Friends. The analysis makes it clear that increases in stamp duty have a surprisingly strong negative effect which is then multiplied through the economy. The Government have already increased stamp duty on commercial property worth more than £500,000 from 1 to 3 per cent.

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If the Government have their way, the level will rise to 3.5 per cent. Arthur Andersen calculated that an increase of 1 per cent. in stamp duty will lead to a fall in property values of 4.5 per cent. or more, compared with what they would have been. So the effect of stamp duty increases is to reduce the value of the Government's stock of property—worth about £100 billion or £110 billion—by about £5 billion, or more.

That will produce a negative impact on the national balance sheet, but it will have a broader effect on the rest of the economy. The borrowing of the industrial and commercial sector totals about £200 billion, which is roughly equivalent to the value of the property that it holds. Therefore, on the same basis, a 1 per cent. increase in stamp duty reduces the value of property in the commercial sector by £10 billion or more from what it would have been.

That will make it difficult for some commercial organisations to borrow. At best, it ensures that their capacity for borrowing does not expand as it could have done, and that they are unable to make the investments or take on the extra staff that they otherwise would. The main effect of increased stamp duty is to reduce growth and employment levels below what they would have been.

That is true especially of small and medium-sized businesses, which generally do not have access to independent finance and so must rely on the banks for loans. As we have heard—from a former bank manager—the bank's aim is to secure loans on property. In addition, an increase in stamp duty has an effect on the readiness of proprietors and managers to make property purchases and move to better and more suitable premises. Acquisitions are therefore postponed, and the Government get less tax, as my hon. Friend the Member for Guildford explained.

When some such firms are obliged to make a move, they are bunched together, which compounds the cyclical character of the commercial property market, and thus of the economy as a whole. That is surely the last effect that a Government who constantly claim to want to put an end to boom and bust should want to achieve.

The Minister may have a view of the analysis by Arthur Andersen and the London business school. If so, Conservative Members will listen with interest. However, if the analysis is only half or a quarter right—or if it applies only for one tenth of a per cent., in Halton—the Government should still accept the amendment.

If they do not, it will be clear that their vaunted code for fiscal stability is infinitely elastic, and that they prefer a politically easy tax that will reduce growth and jobs to levels lower than they might have been to the political pain of raising the money by another means or of holding down rises in public expenditure. Despite all the concern expressed for small and medium-sized enterprises, it will be clear, too, that the Government are prepared to allow that sector once again to bear a disproportionate share of the burden.

Finally, although the Government claim to be putting an end to boom and bust, it will be clear, if they reject the amendment, that that claim is more of a slogan than a serious objective.

Mr. Bermingham

When I came into the Chamber during the opening speech by the hon. Member for Maldon and East Chelmsford (Mr. Whittingdale), I thought that we were talking about window taxes, so archaic were the arguments and so ancient the principles involved. It gradually dawned on me, thanks to a few probing questions, that the Opposition had reached the beginning of the 20th century, although not the latter part. Opposition Members seem signally to have failed to understand what stamp duty is all about. I declared my interest as a former solicitor a long time ago, Mr. Martin.

We may divide the problem into two sections, private and commercial, and I shall deal first with the private section. Stamp duty in the private section is singularly low. If, as has been claimed, we seek to harmonise with Europe, we have an awful long way to go to reach Ireland's rate of 8 per cent. And Ireland is certainly not in harmony with Germany, France or Denmark, although all but the last are part of EMU. That argument faces a small hurdle.

Who is affected by high rates of stamp duty? Clearly, it is those who buy posh houses. My constituency is not very rich and there are not many houses that cost more than £200,000. A little area, Eccleston, has some such houses, but £28,000 is nearer the mark for most of the constituency.

Mr. Jack

On a point of order, Mr. Martin. The amendment deals with the effect of stamp duty on business. I have listened for some moments to a discourse on estate agency and big houses. Is the hon. Gentleman in order?

The First Deputy Chairman of Ways and Means (Mr. Michael J. Martin)

The right hon. Gentleman is quite right. We are discussing business duties. However, a little leeway is sometimes given so that hon. Members may lead in to their case.

Mr. Bermingham

Thank you, Mr. Martin. I have listened to so much about the private housing sector and the 7,000 people who will be affected in Guildford that I thought that I was quite in order in making a few preliminary remarks.

I pointed out in an earlier intervention that, if one bought £1 million worth of commercial land for redevelopment, the total duty would be roughly £35,500, assuming that the purchase price was around £200,000 an acre, giving £200 per house on a five-acre purchase. In my part of the world, ordinary building land costs about £30,000 an acre, and the figure drops to about £20 for each property. That shows the fallacious stupidity of the Opposition's arguments.

Let me turn to commercial matters. I missed a golden opportunity tonight and I shall be kicking myself into next week. We heard a bank manager speak, and I was desperate to ask whether he considers the banks' 4 per cent. over base to be profit. That question falls outwith the remit of the debate, but I almost succumbed to the temptation, and I shall ask again in future.

What will be the effect on commercial property of increasing stamp duty? People who build commercial property do so for one of two purposes—to sell, or to let. If they build to let, there is, of course, stamp duty on the lease. Everyone knows that. The total cost at which they will lease in a competitive market depends, however, on the amount of property available and the number of lessees.

If property is built for sale, the costs of stamp duty on the purchase of the land will naturally be incorporated. Just as with private homes, the amount involved is pretty insignificant and does not affect the market. However, it begins to drive prices down in both the private and commercial sectors.

What has been wrong with British industry for the past 30 years is that it has looked on commercial properties as capital assets that exist for gain or—by lease back or other means—disposal and retention. That creates an artificial profit that in turn drives up prices in both the commercial and private housing sectors, and that disadvantages everyone.

We need to regulate the commercial sector and educate banks. In particular, we need to educate accountants—the destroyers of British industry over the years—to realise that items on the balance sheet should work for the business, as in the American economy, and not act as a bulk, a safety net or a caution point. What is the use of owning £1 million worth of factory floor space if throughput of £10,000 a month is needed to create a viable business? Renting property rather than buying leaves capital available to be used. If we could only educate the banks and accountants—the death knell of British industry—we might achieve something.

The measure will be cost effective. It will not create a great deal of wealth, but it may drive down private sector housing prices and commercial property costs, both for buying and leasing, a little. If it does that, the economy will benefit.

If ever there were an example of investing to accumulate, it is here. One does not invest in buying, one invests in renting, to give one the space to manufacture. In the end, it is manufacturing, not property, that makes money. Property represents an illusory gain—an illusion that has cost this country dear.

The Opposition have already said that, even if they win the vote on their amendment, they will vote against the clause, which is totally illogical. I ask them to justify the insanity of the position that they have adopted.

Mr. Jack

One is always deeply suspicious about the motives of the Treasury when the Government make a tax change but do not justify it. We are talking about the impact of the changes in stamp duty on business which would result from the amendment that we have tabled suggesting that those who pay the unified business rate should be exempt from the increases in stamp duty.

If the Government had a positive story to tell about why businesses should be subject to higher rates of stamp duty, one would have thought that some mention would have been made of it in the "Financial Statement and Budget Report" before page 99. One has to wait until then to find the simple announcement of the changes in stamp duty rates.

One can conclude by a sort of reverse logic that, as the section of the report that deals with raising productivity and improving the prospects of business does not contain any mention of the changes in stamp duty, they must be bad—QED. Therefore the Government's explanation in their own publication is that the changes do not represent a business-friendly tax. If they did, the Government would have said so.

I shall talk about the impact of the tax shortly, but first I refer the Financial Secretary to paragraph 3.19, on page 37 of the "Budget 99" document—the Red Book. She might find it interesting, because it is the paragraph that eulogises the effect on businesses of the reduction in corporation tax to 10 per cent. on the first £10,000 of profit.

Intriguingly, if the same business that was looking forward to the reduction in corporation tax sold a building worth £250,000 as part of its expansion programme, the increase in stamp duty would negate the additional profits that the Government had allowed it by virtue of the changes in corporation tax.

That simple example illustrates clearly what many hon. Members who have spoken so far seem to have missed: this is not, as the hon. Member for St. Helens, South (Mr. Bermingham) seems to think, a discussion about big houses. It is about the impact on small and medium-sized enterprises.

The hon. Member for Shipley (Mr. Leslie) seemed to say that, because we were dealing with the sale of property in business terms and there were big numbers involved, in some magical way that made the tax affordable. The hon. Gentleman missed the fact that the assets and capital value of a company, if it has decided to purchase a building—or its major operating costs, if it has decided to lease a building—may be tied up in that building. If the firm moves to expand its premises by sale, or by ending one lease and buying a new one, it will not be able to afford to lose out of its balance sheet the money represented by the increase in stamp duty. That money has to come from somewhere. If the Government increase their take at the point of sale or change of lease under the circumstances that I have described, it will effectively come off the company's bottom line.

Mr. Breed

When a company or business moves, it is an enormous event in its lifetime. A great range of costs is incurred—not only removal, but stationery and so on. What percentage of the total costs does the stamp duty represent?

Mr. Jack

With respect, the hon. Gentleman misses the point. The percentage that it represents is irrelevant. It represents an additional expense, and there would no need for it to be incurred if our amendment was accepted.

I would appreciate it if the Financial Secretary were to respond to my next point. It is instructive briefly to consider the history of stamp duty because it is important that the Government should justify why they change rates and increase the taxes that they impose on business. Interestingly, stamp duty arose in the Netherlands in 1624 as a result of a competition to find a new form of tax. It strikes me that there has been a competition in the Treasury to find novel ways of raising money. When the tax first came to this country in 1694, it was levied on the materials of business of the day—vellum, parchment and paper. Not much has changed in the past 300 years.

I embarked on that historic voyage to make the point that stamp duty's original purpose was to extract tax revenue from company income when there was no corporation tax, uniform business rate or other business tax by taxing capital transactions. The hon. Member for Shipley asked why we should deny ourselves the extra revenue. Given that there are now other means of taxation, can the Financial Secretary say why the Government have chosen to raise additional money from business via stamp duty? I accept the criticism that we did not tackle the question of whether stamp duty was a valid tax but, as the Government have embarked on what I would call exploiting a nice little earner, they should publicly justify why this tax and not others has been chosen.

Labour Members have played down the impact of the changes on the burden on business. I asked the Library to produce a table examining the impact of the stamp duty increase and a commentary on its effect on business. In the financial year that we have just entered, the effect of the changes is £1.3 billion. That rises, in cumulative terms, in the next financial year-taking into account the previous stamp duty changes-to £1.4 billion, with £1.4 billion estimated for the year 2001–02. The total effect of the Government's changes to stamp duty rates will be a cumulative extra tax take of £5.2 billion. It would have been interesting had the Chancellor had the courage when he came into office to say that he proposed to increase business taxes over the next four years by £5.2 billion. He did not have the nerve.

9.15 pm

However, we can see what the effect would have been had the Chancellor done that. I should point out that the amount would be £5.2 billion overall. According to the Library, it is estimated that 60 per cent.—that is £3 billion—will fall on business. That is in addition to the extra taxes that business is already having to bear through the corporation tax changes introduced by the Government. That shows why my right hon. and hon. Friends on the Front Bench described that operation as a stealth tax. It may not occur often in individual businesses, but the cumulative effect shows that the tax has turned into a nice little earner for the Treasury.

It is evidently an uneven tax in its impacts on different parts of the country. In areas where property and land values are higher—London and the south-east—there will be a disproportionate tax burden to bear. However, if we consider the problems of east London and business development there, we find that that area is in almost as much in need as some of the so-called derelict parts of regions such as the north-east and the north-west, which are traditionally seen as difficult. This measure comes from a Government who are supposed to be business friendly.

When we look across the net receipts of Inland Revenue taxes, an interesting pattern emerges, which explains why business is now being asked to pick up the tab for this extra stamp duty. At the beginning of this century, stamp duty was hardly noticeable—it raised only £8 million. However, the total effect of the Government's proposals for the current financial year is that £5.7 billion is written into the Government's estimates. If, as a starting point, we compare the levels of stamp duty that will be raised in the current financial year with the levels in the financial year in which the Labour Government took office, it is clear that stamp duty has risen by plus 65 per cent. in their estimated receipts. If we bear in mind the finding that 60 per cent. of the burden will fall on industry, business and commerce, we begin to see what the Government are about.

I suspect that the Financial Secretary will have received analyses from the Inland Revenue showing that receipts from another business-based tax—petroleum revenue tax—were rapidly dropping and that capital gains tax and inheritance tax were of limited value. She would have been told that stamp duty had magically become the No. 3 earner among Inland Revenue taxes. She would have been told: "What a good idea it would be, Financial Secretary, if you visited this rather neglected area, because it is a nice easy tax. You will not get too many queues of complaining people at your door. Let's have a go". My God, she took the bait in full measure.

However, we must not lose sight of another stealthy bit of Government activity. My hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb) will recall tabling a parliamentary question in which he attempted to elicit the facts about how the tax burden between residential and commercial property would change over time as a result of the changes in stamp duty. Interestingly enough, in the financial year 1997–98, 60 per cent. of stamp duty was raised from residential property and 40 per cent. from commercial property. However, the Treasury's own estimate for the year 1999–2000 is that that burden will be evenly shared between business and residential property. There is an element of politics creeping into this issue; it is clear that the Government think that business is a soft touch, and that no one will complain too much, so there is an element of burden shifting.

The burden of stamp duty is rising for business—hence the earlier remarks of my hon. Friends who drew the attention of the Committee to the problems that would arise in the property market. The Financial Secretary should give the Committee some economic analysis—or lay the information in the Library, if she does not have it with her—if it is necessary to repudiate the arguments made by Conservative Members this evening.

The British Federation, whose report by the London business school has been quoted, has spent a lot of money justifying its point of view. Perhaps the Financial Secretary would like to produce her own analysis to reassure, if she feels it necessary, the business community that it will not be adversely affected, as my hon. Friends have predicted.

Without doubt, there are long-term implications. It has been reported that the Government's measures will reduce liquidity in the business sector and inhibit the ability of industry to take on new space. Mr. Angus McIntosh, a director of commercial property consultants Richard Ellis, and therefore someone who is in the front line of business lettings and activities, says that the higher duty could threaten more marginal office and industrial schemes, but adds that the retail market might well find a way around the problems. I thought that the Government wanted to encourage the sort of office and industrial schemes that typify many areas of industrial renaissance. Can the Financial Secretary really be promoting a policy that appears to act against the objectives expressed in other parts of the Budget statement?

One of the Trojan horse arguments that has been advanced in respect of the Government's aims is that their proposals on stamp duty on business are a staging post on the way to higher business taxes, on a par with those of Europe. I join my hon. Friends in asking the Financial Secretary to give us some indication of the Government's policy in that specific area of tax. I know that she cannot stand up and say, "There will be no change in tax rates", because, even though the Government said that, they did not mean it. Instead, I should like her to concentrate on words that she does mean.

The Government find it easy to spend a great deal of time justifying and explaining their actions—for example, in respect of environmental taxes, they explained at length why some of the changes in vehicle excise duty and fuel tax had occurred; and they gave lengthy explanations of what they think are the likely effects on business of some of their changes to corporation tax. The Government clearly know the effect of what they want to do and they can plot the development of that effect in future. Therefore, if the burden on industry of stamp duty is to increase, we can be sure that the Financial Secretary received from the Inland Revenue and the Treasury an analysis of the economic effects of that. She will be doing industry, business, commerce and the Committee a service if she shares those projections with us.

In the interests of stability and forward planning, the Government have been happy to offer their prognostications on the level of certain taxes at the end of this Parliament. If they can do that in respect of income tax or business tax, it is logical to assume that they can do the same in respect of stamp duty. If the Financial Secretary is unable to supply that information, she should tell us why not. A lack of figures would appear to reveal a degree of inconsistency in the Government's approach to projecting the effects of taxes, and the Government should be consistent in their approach to such matters.

9.30 pm

We are not talking about sums of money that are insignificant to the businesses concerned. My hon. Friend the Member for Maldon and East Chelmsford (Mr. Whittingdale) spoke of the slab-slice dilemma, and it is interesting to convert slab-slice into money. The new proposals leave stamp duty on £249,000 deals at £2,490, whereas paying £2,000 more puts another £3,785 on the stamp duty bill. The Financial Secretary should explain why that sort of cliff-edge philosophy still finds a place in the Treasury.

It is sad that the contributions from the Government Benches have lacked any imagination. If the Government propose to use stamp duty as a creative tool, they should offer some imaginative suggestions as to its application. For example, why have the Government not considered relieving businesses in objective 1 or 2 areas of the stamp duty changes? That would be a positive way of encouraging new business development. By contrast, the Government have adopted a uniform approach. Why is there no regional differentiation? Why is the Treasury not using some imagination? As was mentioned earlier, why do the Government not encourage developments on brown-field sites by relieving them of stamp duty increases as a way of encouraging the use of such sites?

It seems that the Government are using stamp duty as a blunt instrument. They have not thought about it creatively—and it is time that they did. As a result of the Government's proposals, stamp duty on a £500,000 deal will rise to £17,500 per transaction. Stamp duty on a £3 million deal—which is modest by industrial standards—will increase from £90,000 to £105,000. An increase of £15,000 is not insubstantial.

Will the Financial Secretary comment on the findings that these proposals will reduce property values? A 1 per cent. increase in stamp duty will reduce property values by £25.6 billion. Several of my hon. Friends have said that Government stock will be reduced by £5 billion. Does the Financial Secretary agree with that figure? Has the resource accounting mechanism—which will be introduced shortly—made any allowances for that loss in value to business?

Does the Financial Secretary agree that the changes will amplify the fact that tax rates are rising in this country? Taxes on property in the United Kingdom are already twice the European Union average when expressed in gross domestic product terms. Tax equals 3.7 per cent. of GDP. Why is it necessary to raise business taxes further as a result of these proposals? Has the Financial Secretary given any thought to introducing into this country the types of stamp duty exemptions that exist in other European regimes? For example, in Portugal, public bodies, social housing and business reorganisations are exempt from stamp duty, full stop—never mind any increases. I dwell on this point because, if the Government are anxious to develop stamp duty as a tax, it would be useful to know whether they will apply it creatively. If they do not, they will have to contend with a large avoidance industry.

It is unusual for tax avoidance practitioners to declare their hand. However, the Financial Secretary will find that, as businesses seek ways around the tax increases, the avoidance industry will limber up, ready to turn property and land into companies with share capital—bearing in mind that there is only 0.5 per cent. stamp duty on share transfers—that can be bought and sold. The higher rate will be 3 per cent. under the Government's proposals. Is that not a sure-fire way of relinquishing income in terms of business tax?

Mr. Bermingham

Is the right hon. Gentleman trying to tell the Committee that if Jack Investments Ltd.—I use the right hon. Gentleman's name as an example—has among its assets a factory and a green-field site, it will create a new company to take those two items from Jack Investments Ltd. so that the new company can be sold, and the factory and the green-field site can therefore be sold as shares in that company rather than as assets? That is totally ridiculous.

Mr. Jack

The hon. Gentleman says that it is totally ridiculous, but perhaps he would like to explain that degree of ridicule to the authors of the London business school report, who advance the view that I have just explained. The hon. Gentleman is entitled to his view, but I am certain that, in transactions of sufficient size, that type of avoidance mechanism will be used, particularly if the Government continue to increase the rate of stamp duty. Why should people pay tax unnecessarily if, to put it bluntly, there is a cheap way round it?

Mr. Bermingham

In such a mechanism, property would be assets bought by a company. If they were then sold on to a new company, there would be a capital gains tax liability, which would be a cost on the company, so to save a few pounds companies might create a tax loss of many thousands of pounds. To respond to the right hon. Gentleman's earlier point, I shall willingly take on the authors of that report—they do not seem to know what they are talking about.

Mr. Jack

The hon. Gentleman did not consider the roll-over mechanisms in capital gains tax. I am absolutely certain that people would take those into account.

Conservative Members have performed sufficiently well in the debate to demonstrate that the Government must clearly answer many questions to justify their proposal. The amendment would try to relieve business from that unnecessary tax.

Before I end my remarks, may I apologise to you, Mr. Martin, and the Committee for not at the outset declaring my registrable business interests, which are in the Register of Members' Interests, in case anybody is concerned that they might have influenced what I had to say.

Mr. Clifton-Brown

Many points have already been made, so, in view of the hour, I shall keep my remarks brief. Before I begin, I should declare that I have property interests that could possibly be affected by the amendment and the clause. They are declared in the Register of Members' Interests.

Clause 99 increases stamp duty on the transfer of property valued at over £250,000 but less than £500,000 from 2 to 2.5 per cent., and on property valued at over £500,000 from 3 to 3.5 per cent. It is worth noting that this is the third time in two years that the Government have increased stamp duty. It is worth noting also that, for the bulk of the 18 years of Conservative government, stamp duty was fixed at 1 per cent. All objections to the tax have been multiplied many times because of its increase from 1 per cent. to a top rate of 3 per cent. I point that out in reply to the repeated interventions from the hon. Member sitting below the Gangway, who, I think represents Birmingham—

Dr. Lynne Jones (Birmingham, Selly Oak)

I am sitting below the Gangway, but the hon. Gentleman is confusing the name of the Member to whom he refers with that Member's constituency. I am a Member who represents Birmingham, but the hon. Gentleman who spoke is my hon. Friend the Member for St. Helens, South (Mr. Bermingham).

Mr. Clifton-Brown

The hon. Lady has made a stupid, cheap point. She knows perfectly well to whom I was referring.

Mr. McKee of the British Property Federation has said that we shall hear a wide variety of debate in industry about whether a 3 per cent. stamp duty is too much or whether it is not yet too much, but the real question is, "What are the Chancellor's plans for stamp duty?" That is the real question in this debate. The property industry and all the institutions connected with that industry are entitled to ask the Government what their long-term strategy is for stamp duty. Unless they have some answers to those questions, they will draw their own conclusions.

Like my hon. Friends, I shall quote a few facts and statistics from the Arthur Andersen report, compiled jointly with the London business school. One of its most startling predictions was that, in the short term, a 1 per cent. increase in stamp duty would lead to a decline in gross domestic product of 0.02 per cent. in year 1 and a 0.06 per cent. in year 3, and that this would be accompanied by a reduction of 11,300 people in work by year 4. In the longer term, additional factors would increase the reduction in GDP to some 0.05 to 0.1 per cent. I am pretty certain that not even the Government can tell the Committee tonight that the increase in stamp duty will have anything other than a deleterious economic effect.

It is worth noting how important the commercial property sector, which will he affected by this tax, is to the economy. It is worth approximately twice the entire gilt market. Although, in the mid-1980s, the value of United Kingdom equities was about 50 per cent. greater than that of commercial property, it is now three times that of the commercial property sector. That illustrates the relative decline in commercial property as an investment medium. There is no doubt about it: in an increasingly international world, our investing institutions that invest in properties will carefully monitor transaction costs and, if they find that transaction costs on property are significantly higher in the UK than those not just in the rest of Europe but in the rest of the world—as is the case even now, when total property transaction costs amount to about 10 per cent.—they will vote with their feet and invest elsewhere, and that inward investment and our own domestic investment will be invested elsewhere.

It may be worth considering how we compare with some other European countries. As I pointed out in an intervention, the UK has the highest property transaction costs in the European Union, amounting to some 10.5 per cent.—higher than those in Luxembourg, our nearest rival, whose costs are about 8 per cent. In Austria, such costs are about 1.5 per cent., so UK costs are significantly higher.

As I also said in my intervention, France has become so worried about the effect of high property transaction costs that it has cut its transaction tax drastically, from a huge 18.5 per cent. to 4.5 per cent. The rate in Germany—perhaps our nearest major rival—is only 3.5 per cent.

Therefore, I would severely caution the Government, if they have it in mind to increase stamp duty significantly in future years. Although, on the surface, it might appear to be a cheap tax to collect and a soft option—indeed, a very good candidate for Labour's stealth tax—the longer-term effect on business activity in the UK is likely to be significant.

There are other aspects in which stamp duty is significant. As hon. Friends have mentioned, it has a big effect on company liquidity, reflected in balance sheets. It has been argued tonight that it is wrong for companies to own their commercial property, but I believe that that is pretty dangerous advice coming from a bank manager who is talking and not even listening to my speech, because he knows that many companies—including some of our best companies, such as Marks and Spencer—own virtually all their shops, and they have found that, in the longer term, that benefited them greatly.

Mr. Breed

Will the hon. Gentleman give way?

Mr. Clifton-Brown

As I have mentioned the hon. Gentleman, I give way.

Mr. Breed

Does the hon. Gentleman suggest that that will continue to happen in the next two or three years?

Mr. Clifton-Brown

It all depends on whether the Government take us into the euro, on long-term and short-term interest rates, and on how rents respond to competition. There are so many unknown factors that it is impossible to predict. I will not give any company generalised advice; I simply caution companies not to assume automatically that it will be cheaper to rent than to own property. That conclusion cannot necessarily be drawn.

I recall that, last year, commercial property shares took a real hammering after the Government increased stamp duty, and I would expect the same thing to happen this year. I would also expect the value of commercial property immediately to be written down in the balance sheets of most firms' property portfolios. Any investing company will require a high yield, and that will have to he reflected in either commercial property transaction prices or higher rents for trading companies. We cannot necessarily draw any particular conclusions.

9.45 pm

Arthur Andersen has estimated that, even on conservative assumptions, an increase in stamp duty from 3 to 4 per cent. would decrease the value of commercial properties by 4 to 7 per cent. That would imply that the total value of commercial property would decline at a stroke, through the imposition of the clause, by between £25 billion and £42 billion. That shows that the clause will have a significant effect on business activity.

The three increases in stamp duty have already had an effect. Commercial property is now valued at about £193 billion, whereas, at the end of the 1980s, it was valued at about £280 billion. That has an effect on liquidity and on the ability of companies to borrow on the basis of the value of the commercial property held in their portfolio.

We should be looking to lower taxes for business. We want to stimulate business activity. We should not allow the cosy assumption that we shall harmonise taxes in Europe to lead us automatically to assume that taxes will be increased. This country should be a beacon in Europe—I hope that my hon. Friend the Member for Maldon and East Chelmsford (Mr. Whittingdale), who is on the Opposition Front Bench, is listening to this, because I am sure that it will be of interest to him—for lowering taxes, not increasing them.

As I said yesterday, if we continue increasing taxes, as we are doing in this instance by raising stamp duty, we shall make more and more people unemployed. Total unemployment in Europe is now 18.5 million; with increased business taxes, it will become even worse. We shall make Europe even more uncompetitive compared with the rest of the world.

I have recently returned from Hong Kong—this is declared in the Register of Members' Interests. It is enshrined in the Basic Law that the maximum level of taxation in Hong Kong is 15 per cent. Every politician and every civil servant should be required to visit Hong Kong to see what a proper deregulated economy could do.

We should examine carefully what an increase in stamp duty will do. By far the largest amount of stamp duty is paid by the commercial sector. My hon. Friend the Member for Maldon and East Chelmsford is right to try to exempt commercial property. If we do not recognise the property investment sector as an important international investment medium, we shall suddenly find that inward investment will decline. The previous Conservative Government were successful in bringing investment into the country. At one point, over a 10-year period, we managed to attract a quarter of all the inward investment into the EU; that probably created 1 million jobs. It would be a tragedy if this Government, with their tax-raising ideas, started to reverse that trend and increased unemployment. I do not want that to happen, and nor do my constituents.

When the Financial Secretary sums up, I hope that she will give us an idea of the effect of the burden on industry of the increase in stamp duty. Much more importantly— I return to where I started—I ask her to give the property industry an indication of her long-term strategy for stamp duty so that it can plan its investments, which, by their very nature, are long term, and so that investors can plan with certainty on the basis of a degree of known facts.

The Financial Secretary to the Treasury (Mrs. Barbara Roche)

We have had a long, but thorough, debate on the amendment, which would exclude from the increases in the higher rates of duty any transfers of property to which the uniform business rate applies. Clearly, the amendment's purpose is to introduce a stamp duty relief for commercial property. Let me say at the outset that I do not believe that such a relief is called for, and I shall explain why.

The commercial sector of the property market is in sound condition and should be well able to absorb these small increases without serious difficulties. My hon. Friends the Members for Halton (Mr. Twigg) and for St. Helens, South (Mr. Bermingham) pointed that out.

According to the Investment Property Databank, the commercial property market has been strengthening in 1999. Returns from investment in property over the past three years—at 9.4 per cent. a year, adjusted for inflation—have been considerably better than the long-term average of 5.9 per cent. since 1986. Stamp duty is only one of the considerations involved in buying or leasing property; other economic factors, such as long-term interest rates and increases in capital values, are much more important.

The hon. Member for Maldon and East Chelmsford (Mr. Whittingdale) raised a number of issues and I shall deal with them in turn. He asked whether there was a secret agenda to harmonise stamp duty with Europe. The Conservative party knows a great deal about secret agendas, but this evening I shall not dwell—not at length, at any rate—on its misery. United Kingdom rates are moderate; there is no European proposal to harmonise stamp duty, and there is certainly no secret agenda.

The hon. Gentleman then said that rises will wound ordinary home owners in the south-east. May I point out to him that ordinary home owners—on whom we have concentrated this evening—are enjoying the lowest mortgage rates for 33 years? I know that that is very popular in the country. He also spoke about something that is known as the slice system; I say that for the benefit of those Members who have just joined us in the Chamber. This is an example of the Opposition not fully costing their proposals.

Such a proposal would be incredibly expensive—it would cost £890 million—and lead to higher rates and a much more complex system. [Interruption.] The hon. Gentleman protests, but he is one of the people who have argued for simplicity. During our exchanges last week, I told him how much I admired his stance on deregulation. He has criticised Governments for not deregulating enough, but—as I had to point out to him last week, and have to point out to him again—the only problem is that he has been criticising the previous Conservative Government.

Mr. Clifton-Brown

Will the Financial Secretary give way?

Mrs. Roche

Let me make some progress, because I want to deal with what the hon. Gentleman said.

The hon. Member for Maldon and East Chelmsford also said that we were weakening the competitiveness of the City of London; that is certainly not its view. The Government are absolutely committed to maintaining a competitive environment in which the City can prosper.

The hon. Member for Guildford (Mr. St. Aubyn) raised a number of issues and, again, I shall deal with them in turn. He argued that a stamp duty increase would prevent local government from increasing taxes and asked whether the Government were carrying out a smash-and-grab raid. I note his enthusiasm for higher local taxes and I am sure that his proposal will be disseminated widely in his constituency. His argument is absolute nonsense.

The hon. Member for Guildford also said that the increase in duty on commercial property reduced the value of the Government's assets, outweighing the increase in tax revenue. The hon. Member for South-East Cornwall (Mr. Breed) rightly said that he could not see the point in that, but I am glad that the hon. Member for Guildford is taking an interest in the public finances. How unlike the record of the Government whom he would have supported, had he been a Member of the House at the time. Under that Government, borrowing reached £50 billion and the national debt doubled. It needed this Government to—

Mr. Jack

The Financial Secretary has just played back the remark made by my hon. Friend the Member for Guildford (Mr. St. Aubyn) and by me about the estimated drop in the Government property portfolio as a result of these proposals. She went on to make a party political point. May I bring her back to that figure and ask whether she agrees with it? If so, has any adjustment been made for that fact in the resource accounting procedures?

Mrs. Roche

No, I do not agree with it. I shall go on to discuss some of the points that the right hon. Gentleman made, because the Committee wants to hear about them.

The right hon. Member for Fareham (Sir P. Lloyd) and various others mentioned some of the points that were made in the report sponsored by the British Property Federation. It was a technical report and there is always great scope for different opinions, forecasts and analyses. I do not agree with all the conclusions reached in it.

Mr. Clifton-Brown

I think that I heard the Financial Secretary say that the cost of our amendment would be a staggering £800 million. Will she explain where she gets that figure, given that the Red Book shows that implementing the entire clause will raise only £270 million this year, £310 million next year and £340 million in 2001–02?

Mrs. Roche

Certainly. It is getting rather late for some hon. Members, but I say with the greatest respect—as I used to say ins another capacity—that the hon. Gentleman should listen to what I say. I was talking about his proposals for slab and slice, not the proposals in the amendment. I shall come a little later to the costs of that.

The right hon. Member for Fylde (Mr. Jack) said that, in his view, the Government had shifted the burden on to business. Both residential and commercial property deals will face exactly the same tax rate, which is why it is fair. He also mentioned exemptions. The Conservative party has been going on for weeks and weeks about the Government introducing complexity in the tax system; yet Conservatives seek to introduce further complexity. The right hon. Gentleman gave us an interesting history lesson on how stamp duty was introduced. His speech amounted to an attack on stamp duty, but I note that, when he was a Treasury Minister—he held my post—he did nothing to abolish it. It is no good the right hon. Gentleman telling the Chamber, "It was nothing to do with me, guy; I was only the Financial Secretary."

Mr. Jack

Will the hon. Lady give way?

Mrs. Roche

No, I have already given way and I must make progress. [Interruption.]

The First Deputy Chairman

Order. Perhaps we could have less noise from the Treasury Bench. The only sound that I want to hear is from the Minister.

10 pm

Mrs. Roche

Thank you, Mr. Martin. That is the nicest thing that anyone has said to me all evening.

What would the amendment do? As I said, it would introduce considerable complexity into the administration of what is essentially a straightforward tax, the efficiency of which depends on a rapid turnover by the stamp office of a large number of documents. That was well pointed out in an excellent contribution by my hon. Friend the Member for Shipley (Mr. Leslie).

Once again, the Opposition have proposed a measure that would lead to greater complexity, and has not been costed. In answer to the hon. Member for Cotswold (Mr. Clifton-Brown), I say that the amendment would have a revenue cost of about £175 million. During the debate, the hon. Member for Maldon and East Chelmsford was asked whether he had costed the amendment, and he could not give an answer. The Opposition owe a duty to the Committee to say from where the money would come. No wonder they completely mismanaged the public finances.

Why should the voters listen to a party that no longer seems to know what it believes in on finance? Last summer, the shadow Chancellor denounced as "reckless" my right hon. Friend the Chancellor's £40 billion spending plans for health and education. This week, the shadow Chancellor promised that a Conservative Government "would adopt them". Those are not my words: I was quoting from the Daily Mail, so the Conservatives seem to have lost the confidence of another section of the press.

The amendment is neither desirable nor necessary. For the reasons I have given, I ask the Committee to reject it.

Mr. Gibb

Clause 99 introduces yet another rise in stamp duty rates in what the Prime Minister pretends is a tax-cutting Budget. It will raise £270 million this year, £310 million next year and £340 million the year after. That follows two previous Labour Budgets which increased stamp duty rates. The March 1998 Budget increases raised some £500 million a year in extra stamp duty revenues, and Labour's first Budget in July 1997 also raised £500 million a year in extra stamp duty revenues. That is £1.3 billion of yearly extra stamp duty to be paid by the British people and British business as a result of electing a Labour Government to power in May 1997. The Government were elected on a clear pledge not to raise taxes. [Interruption.]

The First Deputy Chairman

Order. The Committee should come to order. It is bad manners. The hon. Gentleman should be heard.

Mr. Gibb

Thank you, Mr. Martin.

When the Chancellor first introduced his stamp duty escalator in July 1997, he gave house price stability as his reason for doing so. He said: I will not allow house prices to get out of control".—[Official Report, 2 July 1997; Vol. 297, c. 313.] However, house prices in the residential sector are rising, and the stamp duty increases are having little or no effect on prices. That is the view of residential property estate agents. Simon Tyler of Chase de Vere was quoted in The Sunday Times on 14 March. [Interruption.]

The First Deputy Chairman

Order. Hon. Members at the Bar should be quiet.

Mr. Gibb

I am grateful to you, Mr. Martin. Simon Tyler of Chase de Vere said: Most people will add the cost to their mortgages so I shouldn't think it will affect the property market too much.

When the Chancellor introduced this latest tax hike, he said that 96 per cent. of home sales would be unaffected, implying that only richer households will be affected. However, it will affect a much wider section of society, because it will affect business—small business in particular. As the Association of British Insurers has said, the recent stamp duty increase has been presented as affecting those in more expensive housing. It also applies to commercial and industrial property where it bites at a low level. The effect is to increase costs for many start-up businesses discouraging would-be entrepreneurs and investors backing them.

The Institute of Directors has also criticised the rise. It says: We deplore the increase in stamp duty on property transactions of over £250,000. It will affect only a small proportion of domestic properties, but a much larger proportion of business properties. The institute goes on to make the important point that transfers of goodwill and patents will also be affected. Moreover, a written answer from the Economic Secretary to the Treasury, referred to by my right hon. Friend the Member for Fylde (Mr. Jack)—[Interruption.]

The First Deputy Chairman

Order. It is not good that the Chair should have to keep bringing the Committee to order; it is not fair on the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb).

Mr. Gibb

Thank you, Mr. Martin.

The answer from the Financial Secretary's colleague, the Economic Secretary, reveals that three quarters of the tax revenue from the 3.5 per cent. rate of stamp duty comes from commercial properties, while only a quarter comes from residential properties—a point that was omitted from the Chancellor's speech and, incidentally, from this year's notes on clauses, although it was clearly set out in last year's. The candle burns late into the night at the Treasury so that people can excise such unhelpful paragraphs.

My hon. Friend the Member for Guildford (Mr. St. Aubyn) was right to point out that the 0.5 per cent. increase in stamp duty will knock billions of pounds off the value of Government property, while raising only a few hundred million pounds. That will be crucial when the Government introduced resource accounting. It will not just mean a paper transaction; it will determine tax and spending plans. My hon. Friend was also right to point out that the increase in stamp duty is a tax on mobility.

The hon. Member for Halton (Mr. Twigg) made a marvellous attack on the competence of Arthur Andersen, in connection with a report that he has not even read. Perhaps Arthur Andersen should consult the hon. Gentleman and take advantage of his expertise when it next produces a report. The hon. Member for South-East Cornwall (Mr. Breed), a former bank manager, expressed concern about the amount of secured borrowing: he thinks that business should reduce it. Well, he would, wouldn't he, being a former bank manager.

My right hon. Friend the Member for Fareham (Sir P. Lloyd) is right to demand clarity on the Government's medium-term intentions on the rate of stamp duty, and my right hon. Friend the Member for Fylde is right to be suspicious of Governments who change taxes without saying why. As my right hon. Friend pointed out, that must mean that the Government themselves believe the tax rise involved to be bad, and to be particularly bad for small businesses.

Firms are genuinely concerned about the extra cost that the clause will impose on dynamic business. It is yet another burden to add to the catalogue of additional burdens on business introduced by the Government since May 1997. What worries businesses particularly—as my hon. Friend the Member for Cotswold (Mr. Clifton-Brown) and others have said—is where the future lies. What future stamp duty increases can we expect? Will McKee, director-general of the British Property Federation, said last year: the real question is: where is the Chancellor going with stamp duty. Steve Mallen, head of research at Knight Frank, said: the shrewd investor"— and there are shrewd investors sitting opposite me— should assume stamp duty will continue to rise towards continental levels. So what are the Government's intentions? The Minister should have given business some certainty and stability. She should have spelt out the Government's policy with regard to future stamp duty rates. Will the rates continue to rise, and, if so, to what level? Will they rise to the 12.5 per cent. to which they have risen in Belgium, to the 6 or 4.5 per cent. to which they have risen in France, to the 9 per cent. level reached in Greece, to the 6 per cent. level reached in Luxembourg, the Netherlands and Spain or to the 10 per cent. level reached in Portugal? If stamp duty rates are not to continue to rise, why has not the Minister given the same guarantee that the Chancellor has given regarding corporation tax rates—that there will be no further increases for the remainder of this Parliament?

In Labour's first three Budgets, we have seen three stamp duty rises. We have seen the rate increased from 1 to 2.5 and 3.5 per cent. As with all stealth tax rises, the effects of this are capricious and unplanned. The impact on residential properties is more severe—[Interruption.]

The First Deputy Chairman

Order. Again, I appeal to the Committee to come to order.

Mr. Gibb

Thank you, Mr. Martin.

Like all stealth taxes, the increase's effects will be capricious and unplanned. It will have a more severe impact on residential property in the south-east than elsewhere in the United Kingdom, and will hurt small businesses disproportionately more than large ones. If the Government are true to their rhetoric that the stamp duty increase is only about "cooling" the housing market, they should feel perfectly happy about accepting amendment No. 3, which would disapply the increase to business property. If they cannot accept the amendment, I urge the Committee to demonstrate its opposition to just another stealth tax by voting for the amendment.

Question put, That the amendment be made:—

The Committee divided: Ayes 126, Noes 308.

Division No. 156]	[10.10 pm
AYES
Amess, David	Gorman, Mrs Teresa
Ancram, Rt Hon Michael	Gray, James
Arbuthnot, Rt Hon James	Green, Damian
Atkinson, Peter (Hexham)	Greenway, John
Baldry, Tony	Grieve, Dominic
Beggs, Roy	Gummer, Rt Hon John
Bercow, John	Hamilton, Rt Hon Sir Archie
Beresford, Sir Paul	Hammond, Philip
Bottomley, Rt Hon Mrs Virginia	Hawkins, Nick
Brady, Graham	Hayes, John
Brazier, Julian	Heald, Oliver
Browning, Mrs Angela	Heathcoat-Amory, Rt Hon David
Bruce, Ian (S Dorset)	Heseltine, Rt Hon Michael
Burns, Simon	Hogg, Rt Hon Douglas
Cash, William	Horam, John
Chope, Christopher	Howard, Rt Hon Michael
Clappison, James	Howarth, Gerald (Aldershot)
Clark, Dr Michael (Rayleigh)	Jack, Rt Hon Michael
Clarke, Rt Hon Kenneth	Jackson, Robert (Wantage)
(Rushcliffe)	Jenkin, Bernard
Clifton-Brown, Geoffrey	Key, Robert
Collins, Tim	Kirkbride, Miss Julie
Cormack, Sir Patrick	Laing, Mrs Eleanor
Cran, James	Lait, Mrs Jacqui
Davies, Quentin (Grantham)	Lansley, Andrew
Davis, Rt Hon David (Haltemprice	Leigh, Edward
& Howden)	Letwin, Oliver
Donaldson, Jeffrey	Lewis, Dr Julian (New Forest E)
Dorrell, Rt Hon Stephen	Lilley, Rt Hon Peter
Duncan, Alan	Lloyd, Rt Hon Sir Peter (Fareham)
Duncan Smith, Iain	Lyell, Rt Hon Sir Nicholas
Emery, Rt Hon Sir Peter	MacGregor, Rt Hon John
Evans, Nigel	McIntosh, Miss Anne
Fabricant, Michael	MacKay, Rt Hon Andrew
Fallon, Michael	McLoughlin, Patrick
Flight, Howard	Maples, John
Forsythe, Clifford	Mates, Michael
Forth, Rt Hon Eric	Mawhinney, Rt Hon Sir Brian
Fraser, Christopher	May, Mrs Theresa
Gale, Roger	Moss, Malcolm
Garnier, Edward	Nicholls, Patrick
Gibb, Nick	Norman, Archie
Gill, Christopher	Ottaway, Richard

Paice, James	Tapsell, Sir Peter
Paterson, Owen	Taylor, John M(Solihull)
Pickles, Eric	Taylor, Sir Teddy
Prior, David	Thompson, William
Randall, John	Tredinnick, David
Redwood, Rt Hon John	Trend, Michael
Roberston, Laurence (Tewk'b'ry)	Viggers, Peter
Roe, Mrs Marion Broxbourne)	Walter, Robert
Ross, William (E Lond'y)	Wardle, Charles
Ruffley, David	Waterson, Nigel
St Aubyn, Nick	Whitney, Sir Raymond
Sayeed, Jonathan	Whittingdale, John
Shepherd, Richard	Wilkinson, John
Simpson, Keith (Mid-Norfolk)	Willetts, David
Smyth, Rev Martin (Belfast S)	Winterton, Mrs Ann (Congleton)
Soames, Nicholas	Winterton, Nicholas (Macclesfield)
Spicer, Sir Michael	Woodward, Shaun
Spring, Richard	Yeo, Tim
Stanley, Rt Hon Sir John	Young, Rt Hon Sir George
Steen, Anthony
Streeter, Gary	Tellers for the Ayes:
Swayne, Desmond	Mrs. Caroline Spelman and
Syms, Robert	Sir David Madel.

NOES
Adams, Mrs Irene (Paisley N)	Chaytor, David
Ainsworth, Robert (Cov'try NE)	Chidgey, David
Allan, Richard	Clapham, Michael
Allen, Graham	Clark, Rt Hon Dr David (S Shields)
Anderson, Donald (Swansea E)	Clark, Paul (Gillingham)
Armstrong, Rt Hon Ms Hilary	Clarke, Eric (Midlothain)
Ashdown, Rt Hon Paddy	Clarke, Rt Hon Tom (Coatbrige)
Ashton, Joe	Clarke, Tony (Northampton S)
Atkins, Charlotte	Clelland, David
Austin, John	Cohen, Harry
Baker, Norman	Coleman, Iain
Ballard, Jackie	Connarty, Michael
Barnes, Harry	Corbett, Robin
Battle, John	Corbyn, Jeremy
Beard, Nigel	Corston, Ms Jean
Beckett, Rt Hon Mrs Margaret	Cotter, Brain
Begg, Miss Anne	Cousins, Jim
Bell, Staurt (Middlesbrough)	Crausby, David
Benn, Rt Hon Tony	Cryer, John (Hornchurch)
Bennett, Andrew F	Cummings, John
Benton, Joe	Cunningham, Rt Hon Dr Jack
Bermingham, Gerald	(Copeland)
Best, Harold	Cunnigham, Jim (Cov'try S)
Betts, Clive	Curtis-Thomas, Mrs Claire
Blears, Ms Hazel	Dalyell, Tam
Blizzard, Bob	Darvill, Keith
Blunkett, Rt Hon David	Davey, Edward (Kingston)
Boateng, Paul	Davey, Valerie (Bristol W)
Borrow, David	Davidson, Ian
Bradley, Keith (Withington)	Davies, Rt Hon Denzil (Llanelli)
Bradley, Peter (The Wrekin)	Davies, Geraint (Croydon C)
Bradshaw, Ben	Dawson, Hilton
Breed, Colin	Dean, Mrs Janet
Brinton, Mrs Helen	Dismore, Andrew
Buck, Ms Karen	Dobbin, Jim
Burgon, Colin	Dobson, Rt Hon Frank
Burnett, John	Donohoe, Brain H
Butler, Mrs Christine	Doran, Frank
Caborn, Rt Hon Richard	Dowd, Jim
Campbell, Alan (Tynemouth)	Drown, Ms Julia
Campbell, Mrs Anne (C'bridge)	Dunwoody, Mrs Gwyneth
Campbell, Rt Hon Menzies	Eagle, Angela (Wallasey)
(Ne Fife)	Eagle, Maria (L'Pool Garston)
Campbell, Ronnie (Blyth V)	Edwards, Huw
Campbell-Savours, Dale	Efford, Clive
Cann, Jamie	Ennis, Jeff
Caplin, Ivor	Fearn, Ronnie
Casale, Roger	Field, Rt Hon Frank
Caton, Martin	Fitzsimons, Lorna
Cawsey, Ian	Foster, Rt Hon Derek
Chapman, Ben (Wirral S)	Foster, Don (Bath)

Foster, Michael Jabez (Hastings)	Levitt, Tom
Galloway, George	Lewis, Ivan (Bury S)
Gapes, Mike	Lewis, Terry (Worsley)
Gardiner, Barry	Linton, Martin
George, Bruce(Walsall S)	Livingstone, Ken
Gerrard, Neil	Lloyd, Tony (Manchester C)
Gibson, Dr Ian	Llwyd, Elfyn
Gilroy, Mrs Linda	Lock, David
Godsiff, Roger	Love, Andrew
Goggins, Paul	McAvoy, Thomas
Golding, Mrs Llin	McCartney, Rt Hon Ian
Gordon, Mrs Eileen	(Makerfield)
Griffiths, Jane (Reading E)	McDonagh, Siobhain
Griffiths, Nigel (Edinburgh S)	McDonnell, John
Griffiths, Win (Bridgend)	McFall, John
Grocott, Bruce	McIsaac, Shona
Gunnell, John	McKenna, Mrs Rosemary
Hall, Mike (Weaver Vale)	Mackinlay, Andrew
Hall, Patrick (Bedford)	MacShane, Denis
Harman, Rt Hon Ms Harriet	Mactaggart, Fiona
Harris, Dr Evan	McWalter, Tony
Harvey, Nick	Mahon, Mrs Alice
Heal, Mrs Sylvia	Mallaber, Judy
Healey, John	Mandelson, Rt Hon Peter
Health, David (Somerton & Frome)	Marsden, Gordon (Blackpool S)
Henderson, Doug (Newcastle N)	Marsden, Paul (Shrewsbury)
Henderson, Ivan (Harwich)	Marshall, David (Shettleston)
Hepburn, Stephen	Marshall-Andrews, Robert
Heppell, John	Martlew, Eric
Hesford, Stephen	Maxton, John
Hewitt, Ms Patricia	Meacher, Rt Hon Michael
Hinchliffe, David	Meale, Alan
Hodge, Ms Margaret	Merron, Gillian
Hood, Jimmy	Michie, Bill (Shef'ld Heeley)
Hoon, Geoffrey	Milburn, Rt Hon Alan
Hope, Phil	Miller, Andrew
Hopkins, Kelvin	Moffatt, Laura
Howarth, Alan (Newport E)	Moonie, Dr Lewis
Howarth, George (Knowsley N)	Moran, Ms Margaret
Howells, Dr Kim	Morley, Elliot
Hoyle, Lindsay	Morris, Ms Estelle (B'ham Yardley)
Humble, Mrs Joan	Mountford, Kali
Hurst, Alan	Mudie, George
Hutton, John	Mullin, Chris
Iddon, Dr Brain	Murphy, Denis (Wansbeck)
Illsley, Eric	Murphy, Rt Hon Paul (Torfaen)
Ingram, Rt Hon Adam	Naysmith, Dr Doug
Jackson, Ms Glenda (Hampstead)	Oaten, Mark
Jackson, Helen (Hillsborough)	O'Brein, Bill (Normanton)
Jamieson, David	O'Neill, Martin
Jenkins, Brain	Öpik, Lembit
Johnson, Alan (Hull W & Hessle)	Palmer, Dr Nick
Johnson, Miss Melanie	Pearson, Ian
(Welwyn Hatfield)	Pendry, Tom
Jones, Barry (Alyn & Deeside)	Pertham, Ms Linda
Jones, Helen (Warrington N)	Pickthall, Colin
Jones, Dr Lynne (Selly Oak)	Pike, Peter L
Jones, Martyn (Clwyd S)	Plaskitt, James
Jowell, Rt Hon Ms Tessa	Pollard, Kerry
Keen, Alan (Feltham & Heston)	Pond, Chris
Keen, Ann (Brentford & Isleworth)	Pope, Greg
Keetch, Paul	Pound, Stephen
Kelly, Ms Ruth	Powell, Sir Raymond
Kemp, Fraser	Prentice, Ms Bridget (Lewisham E)
Kennedy, Jane (Wavertree)	Prentice, Gordon (Pendle)
Kidney, David	Prescott, Rt Hon John
Kilfoyle, Peter	Primarolo, Dawn
King, Andy (Rugby & Kenilworth)	Purchase, Ken
King, Ms Oona (Bethnal Green)	Quin, Rt Hon Ms Joyce
Kirkwood, Archy	Quinn, Lawrie
Kumar, Dr Ashok	Radice, Giles
Ladyman, Dr Stephen	Reed, Andrew (Loughborough)
Lawrence, Ms Jackie	Reid, Rt Hon Dr John (Hamilton N)
Laxton, Bob	Rendel, David
Lepper, David	Roche, Mrs Barbara
Leslie, Christopher	Ross, Ernie (Dundee W)

Rowlands, Ted	Temple-Morris, Peter
Roy, Frank	Thomas, Gareth (Clwyd W)
Ruddock, Joan	Thomas, Gareth R (Harrow W)
Russell, Bob (Colchester)	Timms, Stephen
Ryan, Ms Joan	Tipping, Paddy
Salter, Martin	Trickett, Jon
Sarwar, Mohammad	Turner, Dennis (Wolverh'ton SE)
Savidge, Malcolm	Turner, Dr Desmond (Kemptown)
Sedgemore, Brian	Turner, Dr George (NW Norfolk)
Shaw, Jonathan	Twigg, Derek (Halton)
Sheldon, Rt Hon Robert	Twigg, Stephen (Enfield)
Shipley, Ms Debra	Tyler, Paul
Simpson, Alan (Nottingham S)	Walley, Ms Joan
Singh, Marsha	Ward, Ms Claire
Smith, Rt Hon Andrew (Oxford E)	Wareing, Robert N
Smith, Angela (Basildon)	Webb, Steve
Smith, Jacqui (Redditch)	Whitehead, Dr Alan
Soley, Clive	Wicks, Malcolm
Spellar, John	Williams, Rt Hon Alan
Squire, Ms Rachel	(Swansea W)
Steinberg, Gerry	Williams, Alan W (E Carmarthen)
Stevenson, George	Williams, Mrs Betty (Convey)
Stott, Roger	Willis, Phil
Strang, Rt Hon Dr Gavin	Wills, Michael
Stringer, Graham	Winnick, David
Stuart, Ms Gisela	Wise, Audrey
Stunell, Andrew	Wood, Mike
Sutcliffe, Gerry	Wright, Anthony D (Gt Yarmouth)
Taylor, Rt Hon Mrs Ann
(Dewsbury)	Tellers for the Noes:
Taylor, Ms Dart (Stockton S)	Mr. Keith Hill and
Taylor, Matthew (Truro)	Mr. Kevin Hughes.

Question accordingly negatived.

Question put, That the clause stand part of the Bill.

The Committee divided: Ayes 305, Noes 127.

Division No.157]	[10.26 pm
AYES
Adams, Mrs Irene (Paisley N)	Burgon, Colin
Ainsworth, Robert(Cov'try NE)	Burnett, John
Allan, Richard	Butler, Mrs Christine
Allen, Graham	Cable, Dr Vincent
Anderson, Donald (Swansea E)	Campbell, Alan (Tynemouth)
Anderson, Janet (Rossendale)	Campbell, Mrs Anne (C'bridge)
Armstrong, Rt Hon Ms Hilary	Campbell, Rt Hon Menzies
Ashdown, Rt Hon Paddy	(NE Fife)
Ashton, Joe	Campbell, Ronnie (Blyth V)
Atkins, Charlotte	Campbell-Savours, Dale
Austin, John	Cann, Jamie
Ballard, Jackie	Caplin, Ivor
Barnes, Harry	Casale, Roger
Battle, John	Caton, Martin
Beard, Nigel	Cawsey, Ian
Beckett, Rt Hon Mrs Margaret	Chapman, Ben (Wirral S)
Begg, Miss Anne	Chaytor, David
Bell, Stuart(Middlesbrough)	Chidgey, David
Benn, Rt Hon Tony	Clapham, Michael
Bennett, Andrew F	Clark, Rt Hon Dr David (S Shields)
Benton, Joe	Clark, Paul (Gillingham)
Bermingham, Gerald	Clarke, Eric (Midlothain)
Best, Harold	Clarke, Rt Hon Tom (Coatbridge)
Betts, Clive	Clarke, Tony (Northampton S)
Blears, Ms Hazel	Clelland, David
Blizzard, Bob	Cohen, Harry
Boateng, Paul	Coleman, Iain
Borrow, David	Connarty, Michael
Bradley, Keith (Withington)	Corbett, Robin
Bradley, Peter (The Wrekin)	Corbyn, Jeremy
Bradshaw, Ben	Corston, Ms Jean
Breed, Colin	Cotter, Brain
Brinton, Mrs Helen	Cousins, Jim
Buck, Ms Karen	Crausby, David

Cryer, John (Hornchurch)	Hutton, John
Cummings, John	Iddon, Dr Brain
Cunningham, Rt Hon Dr Jack	Illsley, Eric
(Copeland)	Ingram, Rt Hon Adam
Cunningham, Jim (Cov'try S)	Jackson, Ms Glenda (Hampstead)
Curtis-Thomas, Mrs Claire	Jackson, Helen (Hillsborough)
Dalyell, Tam	Jamieson, David
Darvill, Keith	Jenkins, Brian
Davey, Edward (Kingston)	Johnson, Alan (Hull W & Hessle)
Davey, Valerie(Bristol W)	Johnson, Miss Melanie
Davidson, Ian	(Welwyn Hatfield)
Davies, Rt Hon Denzil (Llanelli)	Jones, Barry (Alyn & Deeside)
Davies, Geraint (Croydon C)	Jones, Helen (Warrington N)
Dawson, Hilton	Jones, Dr Lynne (Selly Oak)
Dean, Ms Janet	Jones, Martyn (Clwyd S)
Dismore, Andrew	Jowell, Rt Hon Ms Tessa
Dobbin, Jim	Keen, Alan (Feltham & Heston)
Dobson, Rt Hon Frank	Keen, Ann (Brentford & Isleworth)
Donohoe, Brain H	Keetch, Paul
Doran, Frank	Kelly, Ms Ruth
Dowd, Jim	Kemp, Fraser
Drown, Ms Julia	Kennedy, Jane (Wavertree)
Dunwoody, Mrs Gwyneth	Kidney, David
Eagle, Angela (Wallasey)	Kilfoyle, Peter
Eagle, Maria(L'Pool Garston)	King, Andy (Rugby & Kenilworth)
Edwards, Huw	King, Ms Oona (Bethnal Green)
Efford, Clive	Kirkwood, Archy
Ennis, Jeff	Kumar, Dr Ashok
Fearn, Ronnie	Ladyman, Dr Stephen
Field, Rt Hon Frank	Lawrence, Ms Jackie
Fitzsimons, Lorna	Laxton, Bob
Foster, Rt Hon Derek	Lepper, David
Foster, Don (Bath)	Leslie, Christopher
Foster, Michael Jabez (Hastings)	Levitt, Tom
Galloway, George	Lewis, Ivan (Bury S)
Gapes, Mike	Lewis, Terry (Worsley)
Gardiner, Barry	Linton, Martin
George, Bruce (Walsall S)	Livingstone, Ken
Gerrard, Neil	Lloyd, Tony (Manchester C)
Gibson, Dr Ian	Llwyd, Elfyn
Gilroy, Mrs Linda	Lock, David
Godsiff, Roger	Love, Andrew
Goggins, Paul	McAvoy, Thomas
Golding, Mrs Llin	McCartney, Rt Hon Ian
Gordon, Mrs Eileen	(Makerfield)
Griffiths, Jane (Reading E)	McDonagh, Siobhain
Griffiths, Nigel (Edinburgh S)	McDonnell, John
Griffiths, Win (Bridgend)	McFall, John
Grocott, Bruce	McIsaac, Shona
Gunnell, John	McKenna, Mrs Rosemary
Hall, Mike (Weaver Vale)	Mackinlay, Andrew
Hall, Patrick (Bedford)	MacShane, Denis
Harman, Rt Hon Ms Harriet	Mactaggart, Fiona
Harris, Dr Evan	McWalter, Tony
Harvey, Nick	Mahon, Mrs Alice
Heal, Mrs Sylvia	Mallaber, Judy
Healey, John	Mandelson, Rt Hon Peter
Heath, David (Somerton & Frome)	Marsden, Gordon (Blackpool S)
Henderson, Doug (Newcastle N)	Marsden, Paul (Shrewsbury)
Henderson, Ivan (Harwich)	Marshall, David (Shettleston)
Hepburn, Stephen	Marshall-Andrews, Robert
Heppell, John	Martlew, Eric
Hesford, Stephen	Maxton, John
Hewitt, Ms Patricia	Meacher, Rt Hon Michael
Hinchliffe, David	Meale, Alan
Hodge, Ms Margaret	Merron, Gillian
Hood, Jimmy	Michie, Bill (Shef'ld Heeley)
Hoon, Geoffrey	Milburn, Rt Hon Alan
Hope, Phil	Miller, Andrew
Hopkins, Kelvin	Moffatt, Laura
Howarth, Alan (Newport E)	Moonie, Dr Lewis
Howells, Dr Kim	Morley, Elliot
Hoyle, Lindsay	Morris, Ms Estelle (B'ham Yardley)
Humble, Mrs Joan	Mountford, Kali
Hurst, Alan	Mudie, George

Mullin, Chris	Smith, Jacqui (Redditch)
Murphy, Denis (Wansbeck)	Soley, Clive
Murphy, Rt Hon Paul (Torfaen)	Spellar, John
Naysmith, Dr Doug	Squire, Ms Rachel
Oaten, Mark	Steinberg, Gerry
O'Brien, Bill (Normanton)	Stevenson, George
O'Neill, Martin	Stott, Roger
Öpik, Lembit	Strang, Rt Hon Dr Gavin
Palmer, Dr Nick	Stringer, Graham
Pearson, Ian	Stuart, Ms Gisela
Pendry, Tom	Stunell, Andrew
Perham, Ms Linda	Sutcliffe, Gerry
Pickthall, Colin	Taylor, Rt Hon Mrs Ann
Pike, Peter L	(Dewsbury)
Plaskitt, James	Taylor, Ms Dari (Stockton S)
Pollard, Kerry	Taylor, Matthew (Truro)
Pond, Chris	Temple-Morris, Peter
Pope, Greg	Thomas, Gareth (Clwyd W)
Pound, Stephen	Thomas, Gareth R (Harrow W)
Powell, Sir Raymond	Timms, Stephen
Prentice, Ms Bridget (Lewisham E)	Tipping, Paddy
Prentice, Gordon (Pendle)	Trickett, Jon
Prescott, Rt Hon John	Turner, Dennis (Wolverh'ton SE)
Primarolo, Dawn	Turner, Dr Desmond (Kemptown)
Purchase, Ken	Turner, Dr George (NW Norfolk)
Quin, Rt Hon Ms Joyce	Twigg, Derek (Halton)
Quinn, Lawrie	Twigg, Stephen (Enfield)
Radice, Giles	Tyler, Paul
Reed, Andrew(Loughborough)	Vaz, Keith
Reid, Rt Hon Dr John (Hamilton N)	Walley, Ms Joan
Rendel, David	Ward, Ms Claire
Roche, Mrs Barbara	Wareing, Robert N
Ross, Ernie (Dundee W)	Whitehead, Dr Alan
Rowlands, Ted	Wicks, Malcolm
Roy, Frank	Williams, Rt Hon Alan
Ruddock, Joan	(Swansea W)
Russell, Bob (Colchester)	Williams, Alan W (E Carmarthen)
Ryan, Ms Joan	Williams, Mrs Betty (Conwy)
Salter, Martin	Willis, Phil
Savidge, Malcolm	Wills, Michael
Sedgemore, Brian	Winnick, David
Shaw, Jonathan	Wise, Audrey
Shipley, Ms Debra	Wood, Mike
Simpson, Alan (Nottingham S)	Wright, Anthony D (Gt Yarmouth)
Singh, Marsha	Tellers for the Ayes:
Smith, Rt Hon Andrew (Oxford E)	Mr. Keith Hill and
Smith, Angela (Basildon)	Mr. Kevin Hughes.

NOES
Amess, David	Cash, William
Ancram, Rt Hon Michael	Chope, Christopher
Arbuthnot, Rt Hon James	Clappison, James
Atkinson, Peter(Hexham)	Clark, Dr Michael(Rayleigh)
Baldry, Tony	Clarke, Rt Hon Kenneth
Beggs, Roy	(Rushcliffe)
Bercow, John	Clifton-Brown,Geoffrey
Beresford, Sir Paul	Collins, Tim
Bottomley, Rt Hon Mrs Virginia	Cormack, Sir Patrick
Brady, Graham	Cran, James
Brazier, Julian	Davies, Quentin (Grantham)
Browning, Mrs Angela	Davis, Rt Hon David (Haltemprice
Bruce, Ian (S Dorset)	& Howden)
Burns, Simon	Donaldson, Jeffery

Dorrell, Rt Hon Stephen	Maude, Rt Hon Francis
Duncan, Alan	Mawhinney, Rt Hon sir Brian
Duncan Smith, Iain	May, Mrs Theresa
Emery, Rt Hon Sir Peter	Moss, Malcolm
Evans, Nigel	Nicholls, Patrick
Fabricant, Michael	Norman, Archie
Fallon, Michael	Ottaway, Richard
Flight, Howard	Paice, James
Forsythe, Clifford	Paterson, Owen
Forth, Rt Hon Eric	Pickles, Eric
Fraser, Christopher	Prior, David
Gale, Roger	Randall, John
Garnier, Edward	Redwood, Rt Hon John
Gibb, Nick	Robertson, Laurence (Tewk'b'ry)
Gill, Christopher	Roe, Mrs Marion (Broxbourne)
Gorman, Mrs Teresa	Ross, William (E Lond'y)
Gray, James	Ruffley, David
Green, Damian	St Aubyn, Nick
Greenway, John	Sayeed, Jonathan
Grieve, Dominic	Shepherd, Richard
Gummer, Rt Hon John	Simpson, Keith (Mid-Norfolk)
Hamilton, Rt Hon Sir Archie	Smyth, Rev Martin (Belfast S)
Hammond, Philip	Soames, Nicholas
Hawkins, Nick	Spicer, Sir Michael
Hayes, John	Spring, Richard
Heald, Oliver	Stanley, Rt Hon Sir John
Heathcoat-Amory, Rt Hon David	Steen, Anthony
Heseltine, Rt Hon Michael	Streeter, Gary
Hogg, Rt Hon Douglas	Swayne, Desmond
Horam, John	Syms, Robert
Howard, Rt Hon Michael	Tapsell, Sir Peter
Howarth, Gerald (Aldershot)	Taylor, John M (Solihull)
Jack, Rt Hon Michael	Taylor, Sir Teddy
Jackson, Robert (Wantage)	Thompson, William
Jenkin, Bernard	Trend, Michael
Key, Robert	Viggers, Peter
Kirkbride, Miss Julie	Walter, Robert
Laing, Mrs Eleanor	Wardle, Charles
Lait, Mrs Jacqui	Waterson, Nigel
Lansley, Andrew	Whitney, Sir Raymond
Leigh, Edward	Whittingdale, John
Letwin, Oliver	Wilkinson, John
Lewis, Dr Julian (New Forest E)	Willetts, David
Lilley, Rt Hon Peter	Winterton, Mrs Ann (Congleton
Lloyd, Rt Hon Sir Peter (Fareham)	Winterton, Nicholas (Macclesfield)
Lyell, Rt Hon Sir Nicholas	Woodward, Shaun
MacGregor, Rt Hon John	Yeo, Tim
McIntosh, Miss Anne	Young, Rt Hon Sir George
MacKay, Rt Hon Andrew
McLoughlin, Patrick	Tellers for the Noes:
Maples, John	Mrs. Caroline Spelman and
Mates, Michael	Sir David Madel.

Question accordingly agreed to.

Clause 99 ordered to stand part of the Bill.

Bill (Clauses 2, 28 and 99) reported, without amendment; to lie upon the Table.

Ordered,

That, during the proceedings on the Finance Bill, the Standing Committee on the Bill shall have leave to sit twice on the first day on which it shall meet.—[Mr. Robert Ainsworth.]