HC Deb 10 July 1973 vol 859 cc1294-301

stamp duties other than estate duty shall not exceed in any one financial year the sum of £10 million'.

Mr. Nott

This new clause and the associated Ways and Means Resolution will provide powers whereby changes in stamp duty may be given effect to by means of a Budget Resolution. I should explain that because the Provisional Collection of Tax Act does not apply to stamp duty, changes in those duties can in the normal course be given effect to only after the relevant Finance Bill becomes law. Suggestions have been made from time to time—and the hon. Member for Islington, South-West (Mr. George Cunningham) has been prominent in this respect—that an extension of the Provisional Collection of Tax Act should be made to cover stamp duty.

There are serious difficulties in the way of any such extension because the essence of the arrangements under the Act is that rates of duty derived from its application are provisional in that their continuance in force depends on a series of contingencies. This gives rise to no problems in relation to taxes because the liability of the tax does not in any case have to be settled immediately and can be readjusted.

Stamp duty must be levied in a final and certain amount on the execution of a document. This is because most dutiable instruments are documents of title which are ineffective unless appropriately stamped and also because of the severe practical difficulties which would arise if a duty once levied upon a document had to be retrospectively amended. We have, therefore, decided that the right way to solve the problem is to introduce a provision which gives a Budget Resolution bearing a stamp duty permanent statutory effect for a limited period. This is what the new clause is intended to achieve.

Mr. Robert Sheldon (Ashton-under-Lyne)

As the Minister of State pointed out, this new clause deals with the extension of the Provisional Collection of Tax Act. I agree with him and pay tribute to my hon. Friend the Member for Islington, South-West (Mr. George Cunningham) who in last year's Finance Bill drew attention to the need for this kind of provision. In the debate in Committee on 27th June my hon. Friend made a valuable contribution to this discussion.

Our problem is that the Minister has embraced the suggestions of my hon. Friend rather too extensively. He has given the Treasury much greater power than might be thought absolutely necessary, providing an unlimited variation or abolition of stamp duties. In considering existing stamp duties my hon. Friend the Member for Islington, South-West was rightly concerned about conveyances on sales which brought in £47 million in 1971–72, but there are many other matters involved in which we would not like quite so large an authority to be given to the Chancellor of the Exchequer to move in this way. Our amendment seeks to limit the figure to £10 million in total.

I am not wedded to the precise wording of the amendment. All that is necessary is that there should be some limitation of the kind which is not present in the new clause. I hope that the Minister, when he replies to this necessarily brief debate, will point out the reasons for so widely drawing the new clause and offer some hope of accepting an amendment of the kind which we suggest.

It is unsatisfactory to introduce new clauses of this kind on Report. I am aware that precedents can be produced for all kinds of abuses of the type discussed a few moments ago, namely, the tacking on of clauses which should never be accepted in a Finance Bill. There has been over a year to discuss the simple point made by my hon. Friend the Member for Islington, South-West. Why, therefore, has it been necessary to bring this new clause forward on Report? The fact that it had to operate at so late a stage on what is substantially a simple matter, is a sign that the Treasury team does not seem to be on top of its job.

Mr. George Cunningham (Islington-South-West)

I feel rather like a dentist who has had to hold the patient down in the chair for some time and after finally managing to get the tooth out is inclined to say, "That did not hurt all that much, did it?" The Treasury Ministers have at least made a proposal which, in substance, takes care of a grievance which I raised last year. But I agree with my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) that the manner in which this is being done, compared with the manner in which I originally suggested it, goes further than is needed to achieve the purpose. It is a pity that the Government have come forward with this on Report. This need not have happened, for it is well over a year since the matter was raised and the Treasury has had plenty of time to find a dozen ways of achieving the objective.

The matter was not merely raised in Committee last year. There has also been correspondence about it between the Minister of State and myself since then. At the time I got an impression that I was having to nag Ministers into doing something. The difficulties they saw seemed to me to be unreal. I thought I had found a simple way of getting round the difficulties than the way which the Government are now proposing, but I am prepared to accept their legal advice.

I was amazed to be told in a letter on 6th April, after I had asked why the Government were not coming forward with a proposal to achieve this objective, that … amid the many serious preoccupations of Treasury Ministers over recent months I hope you will understand me when I suggest that by comparison the stamp duty problem is not of major importance or of immediate urgency. As such, I fear it has had to give way to matters of higher priority. The suggestion was that Ministers were much too busy on other matters to get their heads down to look at this one. There is no need for Ministers to get their heads down to look at it. It is a straightforward administrative problem which could have been dealt with, given proper instructions from Ministers, at an earlier stage. It should have been done in time for it to go to Committee upstairs and to be subjected to the more rigorous procedures which apply in Committee.

5.15 p.m.

However, the matter is being dealt with, and I welcome that. It will mean that in future when the rates of conveyance charges are effectively reduced, people will no longer have to pay £100 or £200 when they know that the Government do not want to collect the money. That was an irritating grievance which people had. Also, the administrative difficulties which that situation created for solicitors will no longer exist. The matter could have been dealt with more simply, and I should have preferred it to have been done, by extending the provisional principle rather than by saying that the resolution will have full statutory permanent effect for the period to which it relates.

The Minister drew a distinction between stamp duty and income tax. But I invite him, as I have invited him before, to consider the comparison with import duty. When one brings whisky into the country—I cannot imagine why one would wish to do so—one pays the tax prevailing at the time. If the tax is later changed, no one chases the importer to charge the amended rate instead of the rate which applied when he imported it.

I should therefore have preferred this device to have been built in to the Provisional Collection of Tax Act on a provisional basis rather than a permanent basis. I recognise that that would mean that whenever a provisional change in conveyance charges was made the House would have to exercise restraint about imposing administratively difficult retrospective changes by means of the Finance Bill on the system which has applied by means of the resolution.

It is right that there should be some limit on the increase in revenue which might derive from this provision. I would go further and say that the provision should be used only for reductions in taxation. Although no amendment has been tabled so to provide, I hope that Governments would use the resolution procedure, at least in respect of conveyance charges, only for reductions and not for increases in the rate of tax.

With those qualifications, I am grateful to the Government for what they have done.

Mr. Martin McLaren (Bristol, North-West)

As one of the Members who supported the Ten-Minute Rule Bill introduced last Session by the hon. Member for Islington, South-West (Mr. George Cunningham), I should like to congratulate him on his success in persuading the Government largely to adopt his sensible suggestion. I am glad that the Government have accepted it and I therefore support the new clause. This is an example of what can be achieved by a pertinacious back-bencher.

I hope, as the hon. Member hoped, that the procedure of the clause will be operated so as to reduce stamp duty and even to get rid of it altogether as an antiquated form of taxation on documents. In particular, now that we have gone into Europe, if we are serious about suggesting that London should be a leading European financial centre, it should be possible to buy securities free of tax, as other financial centres in Europe do. London should not be the only centre where stamp duty must be paid and a Government tax imposed.

Mr. Denzil Davies (Llanelly)

I welcome the new clause.

My hon. Friend the Member for Islington, South-West (Mr. George Cunningham) rightly said that he would have preferred the matter to be dealt with under the Provisional Collection of Tax Act and not by turning the resolution into a semi-statute. Perhaps the Minister will say whether one reason for this is that the European Commission and the Common Market in general are very active in harmonising stamp duties. I assume that in this case the stamp duty includes capital duty and various other duties.

Have the Government sought to introduce the clause in this form because often European directives state that they should become operative from, for instance, 1st January, whereas we could not introduce legislation normally to increase stamp duties or capital duty before a Finance Bill was put into effect and became law?

Apart from the strictures which have been made about the need for a new clause of this kind, perhaps the Minister will say whether the clause was necessary because we are now in the Common Market. The European Communities Act provided that taxes would not be raised by means of the kind of order which it was envisaged would implement the Commission's directives. Possibly the Government could use the resolution or order to raise taxes, following on a directive of the Commission, without going through the parliamentary procedure of introducing a Finance Bill.

Mr. Nott

With permission, I should like to reply to the points which have been made.

I am glad that the hon. Member for Islington, South-West (Mr. George Cunningham) is satisfied with the substance of the new clause, because he was one of the principal promoters of the idea which underlines it. I am sorry that his approval is qualified. It is always disappointing, when we go out of our way to satisfy hon. Members, to find that they do not give unqualified welcomes to proposals which implement the object which they had in mind. However, we shall not hold that against the hon. Gentleman.

On the question of timing, most of the hon. Gentleman's suggestions surrounded a suggested amendment to the Provisional Collection of Tax Act. It was that to which we looked initially as a means of overcoming the problem. I am sorry to say that we did not fully consider the matter and arrive at what we now believe to be the correct solution in time to bring forward a new clause in Committee. However, I hope that the hon. Gentleman will feel that now that we have dealt with it on Report we have met the points which concerned him.

The hon. Member for Ashton-under-Lyne (Mr. Sheldon) raised a number of points about limiting the amount of duty which could be dealt with under a Budget resolution. His amendment would prevent the application of the Budget resolution procedure where the net increase in stamp duty effected by all the changes made by the resolution exceeded £10 million. It would permit a substantial increase to he made under one head of charge of stamp duty provided a reduction was made under another head of charge. However, that is purely a drafting point and I do not make much of it. Under the amendment, it would be possible to net off the amount involved and levy a considerable additional amount.

The principal reason why the proposal to limit the amount is not feasible is that there is no way of telling how much a stamp duty will yield. That is the fundamental problem. Last year when we changed the rate of conveyancing duty we endeavoured to estimate how much the changes would involve, but we were rather far out. We are unable to estimate how much revenue would come in from an increase in duty or how much revenue would be lost from a decrease.

The changes which are likely to be made by Budget resolution will be fairly simple in form, and in practice are unlikely to go beyond comparatively straightforward adjustments in the amount of duty payable. It would hardly be practicable to make a substantial change in the basis of duty or to introduce a new duty by means of a Budget resolution. We are looking to this procedure only to make variations in a duty, not major changes in the principle of a duty.

My hon. Friend the Member for Bristol, North-West (Mr. McLaren) asked why we did not altogether abolish stamp duty. Some of us, when wearing other clothes, have advocated similar moves in the past. I am conscious of having said something along those lines on several occasions in debates on Finance Bills. Stamp duty yields more than £200 million—a considerable amount of revenue—and my right hon. Friend felt, reasonably, that there was no possibility of his forgoing that amount of revenue this year. It is possible to say that no Government would be able to forgo that amount of revenue in any year. I cannot go further than that.

The hon. Member for Lanelly (Mr. Denzil Davies) spoke of the harmonisation of taxes within the Community. He served in Committee on the Finance Bill and he is therefore aware that the Bill contains clauses which bring our company duties into line with those of the Community. There are no proposals to harmonise conveyancing duty on housing. The Budget resolution would enable us to vary stamp duties, but we have already made changes to bring us into line with Community practice. In practical terms, so far as I can foresee, we would not wish to use the Budget resolution for that purpose in future.

I hope that I have answered the questions which have been raised and that the House will agree to the clause.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

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