HL Deb 15 June 1992 vol 538 cc9-10

3 p.m.

The Earl of Kinnoull asked Her Majesty's Government:

What is the estimated cost to the Treasury of suspending stamp duty on house purchase up to 19th August and whether such an effort to restore confidence in the house market should not be continued.

Lord Strathclyde

My Lords, the cost of the increase in the stamp duty threshold will be about £400 million. The Chancellor made clear at the outset that that was intended as a temporary measure and the moratorium is not to be extended.

The Earl of Kinnoull

My Lords, I thank my noble friend for that Answer. Bearing in mind the relatively small cost that is involved and the vital importance of restoring confidence in the housing market, and indeed to our economy, will not my noble friend reconsider reducing the basis of the scheme and concentrating on first-time buyers rather than abandoning completely the scheme, which has been recognised and accepted by professional bodies and estate agents as being helpful?

Lord Strathclyde

My Lords, I am glad that my noble friend considers that the scheme has been a success, which is what we had hoped for. I am glad that in a press release on 21st May the Royal Institution of Chartered Surveyors reported a tentative increase in confidence and activity. When we announced the scheme in December, we made clear the fact that the moratorium would be temporary. My noble friend suggested helping first-time buyers in particular. There already is a threshold of £30,000, which is considered every year by the Chancellor in his Budget. It is believed that special provision for first-time buyers would be over-bureaucratic and complex and would make an administratively simple tax more costly.

Lord Stoddart of Swindon

My Lords, is the Minister aware that many Members on all sides of the House agree with his noble friend that the imposition of stamp duty and the whole taxation of housing is absurd and should be reviewed? Is not the real answer to the Question and to getting the housing market going to reduce interest rates soon and substantially?

Lord Strathclyde

My Lords, we have increased the threshold on stamp duty and have halved the rate. During the past 18 months we have in addition reduced interest rates by more than 5 per cent. Those changes have been welcome to many householders throughout the country.

Lord Barnett

My Lords, given the low level of housing sales at the present time, will the Minister tell us his assumptions for arriving at a figure of £400 million?

Lord Strathclyde

My Lords, Treasury economists must estimate the likely cost of such a scheme. We shall be able to give a definitive figure after 19th August; but it is understood that the figure will be about £400 million.

Lord Peston

My Lords, I take it that those are the same Treasury economists who for the past two years have forecast an upturn in the economy. Did the Minister say that the scheme has cost £400 million? Can he say what we have obtained for that £400 million? The housing market has continued to decline. Have we obtained anything for that money or is it a good example of why political panic should not dominate economic policy and should never have happened in the first place?

Lord Strathclyde

My Lords, no. I call confirm that our estimated cost of the increase in the threshold from £30,000 to £250,000 will be about £400 million. We did not expect an immediate or dramatic effect in the fortunes of the housing market. We believe that we have shown confidence in the housing market and that view has been supported by the Royal Institution of Chartered Surveyors.

Lord Tordoff

My Lords, is the Minister saying that the scheme is being withdrawn because it is too expensive or because it is not working?

Lord Strathclyde

My Lords, in December we decided to introduce a short, sharp boost to the housing sector and said that that would end on 19th August. We are sticking to that line.

Lord Stoddart of Swindon

My Lords, in reply to my question, the Minister said that interest rates had been cut during the past two years. Does he agree that the real rate of interest has risen from 4.5 per cent. in 1981 to 5.7 per cent. today?

Lord Strathclyde

My Lords, of course I accept what the noble Lord says about the real interest rate. I also know that many lending institutions such as building societies are offering special deals to new buyers of mortgages on the basis that interest rates may drop in future.

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