§ (a) In subsection (1), for "subsections (2) and (3)" substitute "subsections (1A), (2) and (3)".
(b) After subsection (1) there shall be inserted the following subsection:—
(1A) In any case of the conveyance or transfer on sale of land with a view to its use by the purchaser as his only or main residence, the stamp duty chargeable under the heading 'Conveyance or Transfer on Sale' in Schedule 1 to the Stamp Act 1891 shall be charged by reference to the amount or value of the consideration for the sale at the following rates, that is to say—
§ Brought up, and read the First time.330
§ 7.30 p.m.
§ The Chairman (Mr. Oscar Murton)
We shall consider at the same time Amendment (a) to New Clause No. 2, in new subsection (1A), after 'land', leave out'with a view to its use by the purchaser as his only or main residence'.In addition, we shall take the following two new clauses:
New Clause No. 3—Reduced rates of stamp duty on house purchase—'Section 55 of the Finance Act 1963 (rates of ad valorem duty on conveyance or transfer on sale), as amended by Schedule 11 to the Finance Act 1974, shall be further amended as follows:New Clause No. 6—House purchase: reduction of stamp duty—
- (a) In paragraph (a) of subsection (1), leave out "£15,000" and substitute "£20,000".
- (b) In paragraph (b) of subsection (1), leave out "£20,000" and substitute "£25,000".
- (c) In paragraph (c) of subsection (1), leave out "£25,000" and substitute "£30,000"
- (d) In paragraph (d) of subsection (1), leave out "£30,000" and substitute "£35,000".'In subsection (1) of section 55 of, and in Part I of Schedule 11 to, the Finance Act 1963, as amended, for "£15,000", "£20,000", "£25,000", and "£30,000" wherever occurring, there shall be substituted respectively "£20,000", "£25,000", "£30,000" and "£35,000".'
§ Mr. Rees
New Clause No. 2 is uncontroversial, I venture to say—indeed, so uncontroversial that I hope that Treasury Ministers will accept it as an olive branch and take it as a chance to restore their shaken reputations.
As the Committee knows, 2 per cent. ad valorem stamp duty is charged on conveyances, but there is a relief for conveyances of house properties to a certain value. As so often in our debates, one has to go back to a Liberal Administration to find the origin of this provision. I am sorry to catch the hon. Member for Cornwall, North (Mr. Pardoe) off his guard, but he and the rest of the Committee will recall how in 1910 Mr. Lloyd George doubled the rate of stamp duty and at the same time introduced certain reliefs at the bottom end of the scale. This, I recall, as will the Committee, 331 remained almost unaltered until 1958, when the then Conservative Chancellor introduced the threshold of £3,500, with graduated reliefs up to £6,000.
That provision remained unaltered until 1974. As I recall, this was almost the only bright deed in a summer overshadowed by slag heaps and the imminence of a second General Election. On that occasion—I am happy to give full credit to him for it, although, of course, he was prompted by the Conservative Opposition at that time—the present Chancellor raised the threshold to £15,000, with graduated reliefs up to £30,000. One can only assume—indeed, I think that this can be extracted from our debates in 1974—that it was done in recognition of the rise in house prices, and I assume also, though the Minister of State will, no doubt, correct me if I go a little far here, that it was to demonstrate the Socialist Party's belief in house purchase, other than the purchase of council houses, of course.
Since 1974, there has been an inexorable rise in house prices. I cull these figures from information given by the Building Societies Association, which, I hope, will be taken as incontrovertible. In 1974, the average price of a new dwelling was £11,340, and in the first quarter of 1978 it was £16,190.
It is to take account of that trend and to continue the encouragement to house purchasers, especially first-time house purchasers, that New Clauses Nos. 2, 3 and 6 have been tabled by the Conservative Opposition.
§ Mr. Pardoe
The hon. and learned Gentleman has just given some figures for the average price of a house. Do they apply to all houses, or do they apply only to the price of houses bought by first-time house purchasers? If they apply to all houses, as I think they do, will the hon. and learned Gentleman accept that the likely average price of a house bought by a first-time purchaser will be much lower than £16,000?
§ Mr. Rees
I do not think that the Building Societies Association breaks the figures down between first-time house purchasers and those who may be buying their second or third house or wishing to upgrade their house. I do not necessarily accept the hon. Gentleman's conclusion that the average is likely to be 332 lower in respect of first-time purchasers. Perhaps he can draw certain inferences from the figures as relating to mortgages, on the assumption that a mortgage is likely to be taken out by a first-time purchaser, but it may be equally true that someone wanting to move into a larger or better house will wish to take out a mortgage.
If the hon. Gentleman catches the eye of the Chair, I shall listen to his argument if he puts it on that basis, but so far, as he has expressed it, I do not think that I am prepared to accept his proposition.
One recognises that there are wide regional variations. In Cornwall, North, perhaps the average price of a new dwelling is lower than that in the South-East. I have no doubt that the hon. Member for Ormskirk (Mr. Kilroy-Silk)—I am sorry that he is not taking part in our debates today—would rise with a lump in his throat and tell us that his constituents would be delighted to buy a new house costing £16,000. However, I leave him to make that point.
I gave those figures to the Committee to demonstrate that since 1974 there has been an upward trend in house prices. We have put down these simple and relatively uncontroversial new clauses to take account of that upward trend. I shall now briefly explain New Clause No. 2. Again, to demonstrate our total responsibility in this matter and to assuage the susceptibilities of the Minister of State, it is limited in its scope to property purchases where the property is to be the purchaser's sole or main residence.
The intention is that the threshold should be raised from £15,000 to £20,000 and that there should be graduated relief bands of £1,000 between £20,000 and £25,000, then a band between £25,000 and £30,000, finally a band between £30,000 and £35,000, and beyond that, of course, the full rate of 2 per cent.
§ Mr. Denzil Davies
The hon. and learned Gentleman says that his new clause shall apply to a property being the only or main residence of the purchaser. How is that test to be met? What machinery does he propose?
§ Mr. Tony Newton (Braintree)
I think that I may be able to help my hon. and learned Friend here, since it is my recollection that this phrase is precisely the phrase used by the Government themselves in the Finance Act which limited the relief on mortgage interest to the figure of £25,000 and at the same time limited the relief on mortgage interest to certain houses so that the purchaser would qualify in respect of only one. The phrase "only or main residence" is used for that purpose. May I suggest to my hon. and learned Friend that it is up to the Government to explain why it cannot be used here?
§ Mr. Rees
I am grateful to my hon. Friend, who, I know, has devoted a great deal of thought to this matter. Both the amendment to New Clause No. 2 and New Clause No. 6 stand in his name. I hope that he will make his usual important and helpful contribution.
I remind the Minister of State that not only is this phrase to be found in relation to mortgage interest relief but it is to be found also in capital gains legislation. So the concept is certainly not unknown to the Inland Revenue, and I have no doubt that the Stamp Duty Office will be able to cope with it. Moreover, I remind the Minister of State that one has to certify in respect of certain transactions for stamp duty purposes that a transaction is not part of the complex of another range of transactions. Plainly, the purchaser could be asked to certify that the property was his sole or main residence.
I do not think that the Minister of State need be oppressed by the difficulties. I know that he is deeply conscientious and is worried about the prospects of avoidance and evasion, and such thoughts are always uppermost in his mind. However, he usually takes a broad and tolerant view of these problems. If it is the Committee's wish that the new clause should be passed into law, I have no doubt that it would be relatively easy for the Stamp Duty Office to devise some—I will not say totally, but at any rate relatively, foolproof mechanism to meet this point.
334 The question is whether there is the will. The Minister of State will no doubt demonstrate in a few minutes whether he and his right hon. and hon. Friends have the will. I see sitting behind him one of his hon. Friends who has great knowledge of this matter, both professionally and politically. It may well be that he can make a contribution on this question. I have no doubt that he has dealt with many conveyances and will be able to help us with some of the practical details. His branch of the legal profession is much more adept at these matters than my branch and regards us as dilettantes in this field.
That is the objective of New Clause No. 2. The cost would be relatively small. This, again, has been elicited through the assiduity of my hon. Friend the Member for Braintree (Mr. Newton) in a recent answer to a Parliamentary Question. I understand that if New Clause No. 2 were enacted the cost in this present year would be only £25 million and in a full year would be £30 million. That is without the restriction that we would seek to introduce. If that restriction proved to be workable, it could be—I am sure that the Minister of State will confirm this—that the cost would be much less.
New Clause No. 3 differs, though not in a very marked degree, from New Clause No. 2. It has slightly wider bands. It raises the threshold to £15,000. Then there are bands from £15,000 to £20,000, from £20,000 to £25,000, from £25,000 to £30,000, and from £30,000 to £35,000. Further, there is not a restriction in favour of purchasers whose sole or main residence the house in question is designed to be. I understand—again, the Minister of State can confirm this—that the cost this year would be £25 million and in a full year would be £35 million.
I read on the tapes this afternoon that at a Press luncheon today the Chancellor expressed his concern about the position of house purchasers. He has turned his massive mind to the question of mortgage interest rates, which, of course, are now moving upwards. I think he said that everyone expects things to get better.
§ Mr. Denzil Davies
The hon. and learned Gentleman said that mortgage rates were moving upwards. Will he give an example of this happening? I did not know that they were.
§ Mr. Rees
I think it is very likely. The Minister of State will have had, perhaps, some small hand in the debates on what the minimum lending rate shall be. He cannot be entirely unaware of the facts of life. I know that sometimes Treasury Ministers are cocooned—sheltered—from the outside world by their devoted civil servants. If the right hon. Gentleman tells the Committee that there is no risk of mortgage interest rates rising, that will be a very interesting proposition
As I say, the Chancellor was concerned. I have not been privileged to see the full report of the speech, but he also made the challenging statement that everyone expects things to get better. As I said, I think that people may be disappointed in regard to mortgages. Therefore, at least the Chancellor and his right hon. and hon. Friends might consider a douceur, some balm to home buyers in the form of these new clauses.
The amounts involved for home purchasers may not seem very great. I shall give a few simple calculations which are true either of New Clause No. 2 or of New Clause No. 3. A person buying a house for £16,000 would incur no stamp duty, or perhaps a fixed stamp duty of 50p. A person buying a house for £27,000, whereas previously he would have paid stamp duty of £405, would under these proposals pay stamp duty of £270. A person buying a house for £32,000, whereas previously he would have paid stamp duty of £640, would, if these clauses were accepted, pay stamp duty of £480.
These may seem relatively small amounts to the hon. Member for Luton, West (Mr. Sedgemore), who, I know, in his close acquaintance with Private Eye, is used to considering a rather wider range of transaction with rather bigger sums involved. All the same, for home buyers these are important amounts and I have no doubt that my hon. Friends will be able to draw on their constituency experience and demonstrate that the rates of stamp duty currently in force are having a slightly deterrent effect.
336 7.45 p.m.
These clauses would not bite in favour of those at one end of the range. When the hon. Member for Bristol, North-West (Mr. Thomas)—I am sorry that he is no longer in his seat—bought his council house, presumably with a discount in favour of the sitting tenant, it may well be that he paid less than £16,000. Below that end of the range, obviously no great savings would be achieved.
At the other end of the range the Chancellor, selling his mansion in Hampstead and reinvesting the proceeds in a country house in Sussex, will be outside the scope of the new clause. However, in between there is a wide range of people who cannot by any stretch of the imagination be described as plutocrats, representatives of the capitalist class, paid-up members of the Conservative Party. They are simply ordinary home buyers. It is to benefit them, to help them, that the Opposition have tabled these two new clauses.
We are giving the Government a chance to demonstrate that they believe in the diffusion of wealth, that their morale is unimpaired and that their motives are of the purest and their generosity untarnished. On that basis, I commend these new clauses to the Committee.
§ Mr. Bruce Douglas-Mann (Mitcham and Morden)
I am not particularly concerned whether the new clause as it stands is accepted by the Committee. I should like to ask my right hon. Friend to consider to what extent it is desirable to retain any provision for stamp duty on a conveyance of a private house for residential purposes. Whether the limit is £30,000 or £50,000 seems to me to be relatively immaterial.
We have in many ways an almost excessive contribution to be benefit of the person who is buying or owning his house. The higher rates of tax relief on mortgage interest are a case in point, but that is a separate point from this. I see no reason why there should be a tax of £800 on someone wishing to move from a flat in London which sells at £40,000. That is an average price for a modest three-bedroomed flat in many parts of central London. There is no economic case for this measure of taxation. There is a revenue case for it, of course, but there are many other sources 337 from which we could gain the relatively small amount of revenue involved. In particular, I suggest that there should be some inroad into the level of tax relief on mortgage interest, which is a very highly regressive tax.
If we are to have the tax, however, it would obviously be preferable for there to be regional variations of it. The difference between the quality of accommodation that can be purchased for £30,000 in the area where most of us may need to acquire accommodation and the quality of accommodation that can be obtained for that sum in other parts of the country is so great as to make the differential of a tax of £600 on the one and nil on the other for identical accommodation—except for the area in which it is situated—ludicrous.
It is not in the interests of the country that there should be such a handicap to mobility. It is desirable that people should be able to move from one part of the country to another without paying such a tax. I urge my right hon. Friend to take the earliest opportunity to abolish the stamp duty on the conveyance of a principal residence. The change proposed by the Opposition is merely a palliative to this and may deter its total abolition. It is a matter towards which I feel neutral, though I hope that my right hon. Friend will feel able to accept it. Whether or not he does, I urge him to embark on a more serious and fundamental review of the whole principle of taxing the transaction of a conveyance on the sale of a principal residence.
§ Mr. Michael Shersby (Uxbridge)
I want to speak only briefly in the debate. The imposition of stamp duty has been something against which I have campaigned since I entered the House of Commons. It is a monstrous tax. I agree with the hon. Member for Mitcham and Morden (Mr. Douglas-Mann) that it should be abolished. My only regret is that the new clause does not bring about its abolition. I can only hope that the next Conservative Government will lose no time in abolishing it at the first possible opportunity.
Stamp duty is a burden that faces every prospective house purchaser buying a property in the London area and in many other parts of the country where the rates 338 are becoming acute. It is a factor which every family wishing to move has to take into account. If one calculates the burden of the estate agent's fees and the solicitor's fees for conveyance of the property, plus a removal and all the other hidden expenses of moving home, the addition of stamp duty is often the straw which breaks the camel's back and makes a person decide that it is not worth moving after all.
As was pointed out by the hon. Member for Mitcham and Morden, it discourages mobility, particularly among those who occupy houses in the higher price brackets to which reference is made in the table. The result is that fewer houses come on to the market. People stay where they are and extend their existing houses. Therefore, prices go up considerably, as they have been doing all over the country during the past few months.
I suggest that stamp duty, coupled with the other expenses which a prospective purchaser has to bear, has affected the property market. It is a considerable expense which the Government should take into account in their desire to stabilise the cost of property.
I believe that, with the inflation in house prices that has taken place over the past few years, stamp duty has now become a severe burden and is a tax that can no longer be tolerated. It is a tax that it not so widely known as income tax, corporation tax or value added tax. That is because it hits the average member of the public only when he or she decides to move home. By the time that he or she has found out about it, there is often very little that can be done except to write letters to Members of Parliament urging them to do something about it when the chance comes their way.
I have that chance tonight. Therefore, I propose to vote for the new clause on behalf of my constituents who are burdened by this ridiculous tax. I hope that the Committee will agree to the new clause. If so, it will be a major step towards improving mobility and stabilising the cost of property.
§ Mr. Cronin
I would not go so far as to vote for the new clause, but it is not entirely without merit.
New Clause No. 1 was clearly a facelift for the unacceptable face of capitalism. It showed the Tory Party at 339 its most rapacious in trying to help the higher income groups to a large extent. But New Clause No. 2 seems to be an honest attempt to secure some mitigation for people of moderate incomes who wish to buy new houses. I think that this is in many ways desirable.
When people buy houses they go through a period when they incur severe expenses. Conveyancing fees are becoming more onerous, as I think my hon. Friend the Member for Mitcham and Morden (Mr. Douglas-Mann) would agree. In addition, there are countless expenses associated with moving. Stamp duty is an additional intolerable nuisance. As has been said, it may stop people buying new houses or moving. In any event, even for people who can afford the money for stamp duty, it seems to be an irritating tax. It is a small irritant to some people, but it is a source of real distress and nuisance to others.
Another important point is that stamp duty impairs mobility, particularly among working people who have to move to another district. For instance, miners in Scotland who have been working in mines which have closed and who decide to move, say, to Loughborough to work in an active mine find that they have to pay this additional impost merely to keep their jobs. It cannot be helpful to impair the mobility of labour in that way.
I ask my right hon. Friend the Minister of State to consider this whole question. I should be glad if, when he replies, he would let us know the cost of abolishing stamp duty completely on purchases up to, say, £25,000. I am sure that the cost would be trifling. The hon. and learned Member for Dover and Deal (Mr. Rees) said that the total cost of the new clause would be only £35 million a year. If it were confined to purchases up to £25,000, I am sure that the cost would be negligible. The social and economic benefit of getting rid of stamp duty below that figure would be great indeed.
§ Mr. Newton
Having had something to do with these new clauses—New Clause No. 6 being in my name—I particularly welcome the all-party agreement that seems so far to have pervaded the Committee. However, I suspect that the hon. Member for Mitcham and Morden (Mr. Douglas-Mann), who has spoken so favourably, may not be in the same 340 Division Lobby if it comes to a Division later.
I entirely endorse what has been said by the hon. Member for Mitcham and Morden. That was indeed where I intended to start. It is absurd that we should have a tax on house purchase. We have a whole range of measures designed to encourage people to buy their homes—interest relief, option mortgages, relief from capital gains tax and domestic rates relief. Indeed, there is a Bill before the House of Commons to provide further subsidies to first-time buyers. To have that armoury on one side and then, on the other, to tax people when they buy houses, is the kind of thing that would strike anyone coming fresh to the scene as utterly ludicrous.
The new clauses are essentially the same in their major elements. They would raise the exempt slice from £15,000 to £20,000 and raise all the reduced rate slices by £5,000 each. The only significant difference is that New Clause No. 2 introduces an element of greater subtlety, and sophistication by grading in at the beginning of the reduced rates between £20,000 and £25,000.
I should like to refer to my Amendment (a) to New Clause No. 2. That was designed solely to anticipate the objection with which the Minister of State came forward—that to confine it tohis only or main residencewould be administratively complicated. I thought that, anticipating that argument, we would table that amendment so that the right hon. Gentleman could not resist the new clause on that basis but could accept both the new clause and the amendment if that were to be his line of argument. For once I seem to have anticipated him accurately.
There has been some reference to the effect of the new clause. I shall not attempt to elaborate the figures, but we are not talking about large sums of money. As has been helpfully emphasised by the hon. Member for Loughborough (Mr. Cronin) and my hon. Friend the Member for Uxbridge (Mr. Shersby), although the sums are not large in absolute terms or in relation to the value of a house, they can be very large at the margin, as it were, in increasing the friction of moving and the pain and cost of transfers in the housing market. At the 341 £20,000 level, which under any of these proposals would be exempt, we are talking of stamp duty of £100. If one of the new clauses were carried, no tax would be payable at all. The sum is a little larger further up the scale, but it is that kind of sum about which we are talking.
I calculate that New Clause No. 2 would cost £39 million in a full year and that New Clauses Nos. 3 and 6 would cost £35 million. There is not a great deal of difference between them, therefore, but both figures would be reduced in the present year because we are already part way into the year. Those are not negligible sums. They are certainly not immense, however, in the context of other matters that we have discussed on the Bill.
I turn now to the reasons for the new clauses that have not already been explained. As my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) said, the current levels of exemption were set in May 1974. Studying the Standing Committe debates of July of that year has brought back happy memories of the days when, on my first Standing Committee on the Finance Bill, I had the inestimable privilege of watching the right hon. Gentleman who is now the Minister of State, Ministry of Defence, display his invaluable ability to generate many hours of unnecessary argument.
I recently tabled a series of parliamentary Questions to establish what those 1974 limits would be now if indexed. On the basis of prices or earnings, that £15,000 figure for exemption would be more than £26,000, and the £30,000 figure, which is where the reduced rates run out, would now stand at more than, £50,000. In that context the new clauses are quite modest. I am well aware that Ministers tend to argue that the right index to take for this purpose is not general prices or earnings, but house prices. I asked about that, too. The answer was interesting. It established that if the £15,000 exemption had been increased in line with the rise in house prices it would now stand at £20,100.
The figure that we have proposed in the new clause is almost exactly right for preserving the level set in May 1974. Further 342 up the scale the £30,000 figure should be, on that basis, more than £40,000. We are proposing to raise the figure to £35,000, and we are therefore not going so far as would be justified by indexation based on house price increases.
By no stretch of the imagination, therefore, can Ministers argue that these proposals are wildly generous to the better off, or wildly beyond what would be justified by what has happened in the housing market during that period.
My hon. and learned Friend has already referred to what has happened to average house prices. However, the figure he gave was for new dwellings, not for all dwellings, on which the figure is slightly lower. It is likely that on the average price of new dwellings at March 1978—the figure of £16,556, based on prices approved for new mortgages—significant numbers of young couples buying homes will have to pay stamp duty.
Those average national figures, significant though they are, conceal the fact that the figures for London and the South-East are much higher. The data published by the Department of the Environment for that region is somewhat out of date, but it is clear from the figures for the third quarter of 1977 that, given the rise in prices that we know has taken place in this area since then, the average price of dwellings, judging from completed mortgages in the last month or two, may well be nearer £18,000. We therefore are not talking about a minority of wealthy people but of significant numbers of ordinary people buying average-priced homes. That fact is borne out by the statistic given in a recent issue of Building Society Affairs, which shows that the percentage of houses mortgaged to building societies at a cost of more than £15,000 was only 16 per cent. in 1974 and, by the third quarter of last year, had reached 30 per cent.
There is a yo-yo effect here, as much as there is with tax allowances in the income tax system. If, on an index, average house prices have risen from £15,000 value in 1974 to £20,000 now, virtually all the houses that are now in the bracket that attracts stamp duty are the same houses that were taken out of it in 1974 on the ground that that was needed to assist young couples and others to buy 343 their own homes. The houses that the Government thought should be exempt from stamp duty in 1974 have been made liable to it by inflation. We are doing no more than argue that they should be exempted again, in line with the case that the Government made in 1974.
I appreciate that the Committee is anxious to make progress and I therefore sum up simply by saying that I should like stamp duty on house purchase to be abolished. It is absurd to have an army of measures to encourage home ownership and then put a tax on people when they buy a house. If we cannot abolish the tax altogether because the Government say they need the money, the least we can do is to make sure that the tax is not levied on many young couples, especially in London and the South-East. We can do that by raising the exemption level from £15,000 to £20,000 and making the other modest reductions proposed in the new clauses. That is the central purpose of what we are proposing. I believe that that move commands the support of common sense and of social justice, and I hope that it will command the support of the Committee.
§ Mr. John Moore (Croydon, Central):
I have great pleasure in following up the remarks of my hon. Friend the Member for Braintree (Mr. Newton). He said little with which I disagree. I take particular pleasure in the debate, knowing that we have a semblance of all-party support and interest in the clauses. It is crucial to secure that, because our clauses are an attack on the impact of inflation and on a tax that at the best of times is not an intelligent revenue raiser.
I wish to advance two brief arguments, both of them germane to the debate and both obviously picking up points that are important to those who have constituencies in the London area and the South-East. I know that the hon. Member for Mitcham and Morden (Mr. Douglas-Mann) will understand and recognise the points that I shall make.
I want to be a bit more particular about this tax's impact on individuals. I accept what my hon. Friend the Member for Braintree said about the impact of the tax on young couples buying and selling houses that in 1974 were exempt from the tax.
344 I have checked today with the Nationwide Building Society to get the up-to-date picture on average house price increases throughout the country. The figure is 44 per cent. between the beginning of 1974 and today. But it is worth considering an example from my constituency. There is there an estate known as Forestdale. The houses were built by Wates and they are in most cases three or four years old. They are medium-sized, with three bedrooms. I have had constituents specifically complaining about the implications of the stamp duty tax. I checked on two specific houses. One was a very small three-bedroomed house priced in 1974 at £12,750. Stamp duty in that year on that house was nil. Last week that house was priced at £20,100 and it now carries stamp duty of £210.
I talked to another couple about a similar property on the same estate. It was slightly larger, but nevertheless still quite modest. In 1974 it was priced at £16,500. Stamp duty then was £82.50. Today that house will cost £27,000 and the stamp duty will be £405. That sort of figure has more than marginal implications for most families when they are moving house, and for the question of mobility to which the hon. Member for Mitcham and Morden referred as a key and crucial factor. We must understand the importance that that figure assumes when added to all the other costs, such as conveyancing charges, in providing a marginal disincentive to people to move.
I would prefer to go far beyond the raising of the threshold for stamp duty and to see the complete abolition of the tax, which is unsound. I should like also to consider the implications of the tax for the revenue as a whole.
Whichever party is in office, quite legitimately the question is frequently asked, "All right. There is a revenue loss on your proposal X. Where will the money come from?" We ought to understand the revenue implications in more detail.
Looking at the stamp duty on house transfers as a whole, one sees that the supposed revenue loss would be £80 million if it were abolished in toto. I have looked at that theoretical revenue loss and have tried to analyse it in more detail. I have tried to analyse it by talking, this 345 morning, for example, to the Home Builders Federation, because I wanted to try to work out the degree to which that revenue loss was a static revenue loss, taking no account of the dynamics of how many more houses might be built if we did not have the marked disincentive feature added to by this stamp duty.
We must examine this matter with care. I see in today's edition of the Financial Times a very brief article that refers to the degree to which the loan curbs that the Government have introduced have hit hopes for a housebuilding revival. I am not making a party-political point; I want to illustrate the extraordinary effect, at the margin, that a change can have in housing starts.
Until this activity was taking place there was, happily, a suggested increase of up to 165,000 in private sector housing starts this year—1978. That was very good. We would all be very pleased about that, on whichever side of the House we sit. However, that figure, it is now suggested, has been dropped to 150,000, so we are talking about a loss of about 15,000 in housing starts.
If that sort of factor has that kind of marginal effect, we ought to examine the revenue implications of what 15,000 houses mean to the State. Let us look at the people employed in constructing those houses. Again, I asked the Home Builders Federation this morning what were the average man-years of labour taken in the construction of a new house. I was given an approximate figure, obviously, for the construction of an average house, of two man-years. Five thousand new houses would involve about 10,000 construction jobs.
On the assumptions about which I was talking, of the marginal impact that we see today, let us suppose that we could see an increase of 15,000 private sector housing starts. That would mean 30,000 construction jobs—for 30,000 people currently unemployed. The revenue implications of that are quite profound. They are important and serious implications. Looking at those implications, my assumption is that the cost to the revenue of 30,000 unemployed people—this is all from Treasury statistics, obviously—on the national insurance charge, with revenue loss and benefits paid out, is 346 about £40.5 million for the fiscal year 1978–79.
Supposing those 30,000 people, happily, were back in work constructing those 15,000 houses, excluding, of course, any Finance Bill changes and assuming an average gross weekly wage—I have done it on these figures specifically—for adult male manual workers in the construction industry, including losses through absence, of approximately £76.23 a week, and taking the case of a married man with no children, the loss in taxation revenue would be about £25.5 million.
In toto, therefore, one has a net loss to the revenue—including the losses caused by those people being out of work and forgetting all the implications of getting unemployed people back into work, and all the social implications because of that—of £66 million.
Therefore, the notional costs of the abolition of stamp duty to the revenue—I know that this is a somewhat specious analysis, but it is assuming that the people concerned could have that marginal impact in the creation of 15,000 new homes—is £80 million, which becomes a notional total loss of £14 million only. That, of course, does not take into account from the very beginning all the attractions through the multiplier of the impact of all those new home constructions and the impact right through the economy.
All that I would say, in a very nonpolitical way, is that this is a particular example of a new clause which, frankly, does not go far enough but on which, in a debate, we ought to be able to get beyond merely the supposed loss of revenue and understand the implications for individuals and for the revenue and society as a whole if we could abolish stamp duty on home property—a duty that is really irrelevant.
§ 8.15 p.m.
§ Mr. Roger Moate (Faversham)
I, too, shall be very brief. I endorse the remarks made by my hon. Friends in support of the new clause.
I have long regarded stamp duties generally as a very anachronistic and rather absurd form of taxation. Indeed, I had hoped that we would move to their total abolition. Up to 1974, stamp duties had been reduced, and had been eliminated in some respects—on cheques, for 347 example—to the point at which the revenue yield from them was so little that we could have eliminated them altogether from our taxation system with one further step.
It is a matter of great regret, therefore, that in 1974 stamp duties on properties were raised. They now produce a revenue that is hard to eliminate from our taxation system at one go. I still hope that one day we shall get rid of stamp duties altogether. I do not believe that there is an economic justification for them. I certainly do not think that there is a social argument in their favour in terms of house purchase.
I wish to emphasise particularly the nature of the burden on people buying their homes. It has been argued that stamp duty represents a disincentive for such people. That may be so, but, as often as not, it comes as a rather nasty surprise after people have committed themselves to buying their homes. That applies particularly in the case of first-time buyers. Often they do not stop to think of the extra costs, conveyancing costs, estate agents' fees and the like, and the increased costs of moving in these days, and in addition to that they then get a bill of £100 or £200 for stamp duty. They have usually strained their resources completely to buy the house. Suddenly, they get this other very nasty blow of an extra couple of hundred pounds for stamp duty. This is a great burden on the house purchaser. I cannot see how it can be justified in social terms by the Government.
Briefly, my next point concerns the question of the unfairness of the tax in two particular respects. One is that, despite the fact that we have higher stamp duties on higher value properties, it still seems grossly unfair that the higher rate of duty applies to the whole of the consideration of the property. One could argue for the higher rate to apply to the higher bands of value, but to apply the 1 per cent., 1½ per cent. and 2 per cent. on the whole value, down to nil, is grossly unfair. I have not yet heard any argument in favour of applying it in that way.
The other unfairness lies in the fact that if one were trying to argue that richer people buying more valuable property should pay higher tax, that would be an understandable argument, though one would not necessarily accept it in 348 this context. But, of course, it does not work in that way. A £10,000 house, perhaps in the West Country, might be the sort of home that could be afforded by a young couple, but to get that same sort of house in certain parts of London, that same young couple might have to pay £25,000, £30,000 or even £40,000. Why are we penalising those people in the same sort of income group? In one case, someone buying his or her first home may pay no stamp duty, but the same sort of family in other parts of the country may have to pay £200. It seems to be a grossly unfair tax. I hope that we shall move to its total abolition.
However, as a first very modest step, we have the new clause before us. It has been commended in all the speeches made in the debate so far, from Members in all parts of the Committee. I hope that the Government will feel that this is something that can be accepted as a sign of good intentions. If not, I hope that at least the speeches by my hon. Friends will indicate that it is the long term intention of the Conservative Party to lift this very real burden on home purchasers.
§ Mr. Denzil Davies
We have had an interesting debate on the new clauses plus the amendment to one of them. Perhaps I may deal with cost figures again. Broadly they have been given, and given correctly.
New Clause No. 2 would cost £35 million. New Clause No. 3, which, of course, is not confined to residential property, would cost about £38 million.
My hon. Friend the Member for Loughborough (Mr. Cronin) asked about the costs of abolishing stamp duty on, I think, land and buildings up to £25,000, although that might not be entirely residential property. The cost would be above £20 million. How much above that sum is not clear at present, but it would be in excess of £20 million.
New Clause No. 2 attempts to deal with people who buy their own homes. It does not go further and deal with all property in those bands of value. When I asked the hon. and learned Member for Dover and Deal (Mr. Rees) how he proposed to ensure that a person was buying with a view to use as his only or main residence, I was not trying to 349 be clever or to catch him out or raise simply an administrative problem.
There is a slight problem. The hon. Member for Braintree (Mr. Newton) anticipated that I would use this argument, but it is not used for its own sake. The test for capital gains tax, although it might be difficult in a particular case, is generally easy to determine, as it is in the case of interest. With stamp duty, however, someone may not have moved into the residence, because stamp duty has to be paid within 30 days of the conveyance. The title is not valid unless properly stamped, so a person may not have moved into residence. Presumably, he would have to declare that he intended the house to be his only or main residence, and on that basis he would get a tax exemption which might not turn out to be correct.
There is a difficulty, therefore, in attaching to stamp duty, which is quite different from capital gains tax and interest, a test which would be difficult in practice.
§ Mr. Davies
One must consult the Stamp Duty Office which has to deal with these matters. The point is that this would create problems and introduce into stamp duty some tests which are not suited to it, with very few exceptions. It is not a major point, but it is a factor.
§ Mr. Pardoe
I hope that the Minister has better arguments than that, or he had better sack his advisers. Whoever wrote that nonsense should be sacked. As he knows, one can change one's mind about which is one's private or main residence or one's second home every other year. That affects capital gains tax. One has to tell the Inland Revenue every year which is which. Members of Parliament are constantly changing their main residence from their constituency to London or back again. That argument would apply to capital gains tax and to income tax relief as well.
§ Mr. Davies
The hon. Gentleman is very clever and extremely arrogant. He has got it wrong about capital gains tax. When one sells one's house, it is then that one must determine liability to 350 capital gains tax and the question must be asked whether the house is the person's sole or main residence. What he did in the previous year is another matter, but when the question is asked it can be determined in the case of capital gains tax.
It is not easy to determine it for stamp duty. The hon. Gentleman should not be so arrogant in talking about sacking advisers. When one gets advice from people who have dealt with this area for a long time, he should not make such silly statements. But, then, it is not unusual for him to make silly statements on taxation.
New clause No. 3 would cost £38 million because it would include not only residential accommodation.
The main argument is the argument of cost. The sum of £35 million may not seem very much, although the hon. Member for Braintree accepted that it was not negligible.
§ Mr. Newton
It cannot be as much as that in the present year, given that there is no date in the new clauses and that they would therefore not come into effect until the Finance Bill took effect. The Minister should make clear what year he has in mind.
§ Mr. Davies
I suspect that that is a full-year cost, although the hon. Gentleman is right to point out that the Provisional Collection of Taxes Act does not apply to stamp duty, so the relief would not come into operation until, normally, 1st August, when the Finance Bill becomes law. Nevertheless, putting this into next year, as the Opposition say, the full-year cost would be £35 million.
The question is whether an extra £35 million should be used for this or for some other worthy purpose. Even if the new clauses were rejected, four out of five houses would still be exempt from stamp duty. I accept that a small flat in London can cost £15,000 and a threebedroomed house £20,000 to £25,000. But 80 per cent. of houses would still be exempt. One is therefore concerned with 20 per cent. of houses at present values.
We already have reliefs from capital gains tax and mortgage interest for housing. We do not even have £35 million, but, if we did, is this the best use of scarce resources? The resources from the 351 tax system devoted to housing are considerable at the moment. My hon. Friend the Member for Mitcham and Morden (Mr. Douglas-Mann) made a valid point when he suggested doing away with interest relief on higher rate tax. At least he was addressing his mind to the problem, which is, whether we should devote an extra £35 million to housing or should look at the total sum and perhaps decide that there are other areas where that money could be better spent.
§ Mr. Douglas-Mann
Is my right hon. Friend aware that, under the Home Purchase Assistance and Housing Corporation Guarantee Bill at present going through the House, we should give assistance to house purchasers up to the value of £16,000-odd in London and the South-East, so we should be taking with one hand and giving with the other in the most ludicrous way?
§ Mr. Davies
There are, of course, a couple of "ifs" in that statement. First of all, that Bill is intended to benefit first-time buyers. Secondly, it is not intended to come into operation for some time. If the Bill were law, it would be a different matter, but at the moment we are concerned with 20 per cent. of houses and an extra £35 million.
The present reliefs for housing are very generous, especially compared with other countries. The fact that stamp duty is the one tax which has to be paid does not mean that it has to be done away with.
§ Mr. John Moore
I agree with what the Minister said about generosity, but would he comment on what so many of us have said about mobility and those seeking to get into the housing market for the first time?
§ Mr. Davies
I accept that there are good arguments for the two new clauses, including the mobility argument, but in the end we must decide whether to give this extra priority to housing. We already give it high priority in our tax system. If the Opposition feel that another £35 million is available within the Government's plans, should that go to housing as well? I submit that that would not be right in the present situation. The Government's Budget and their attempt to concentrate all tax reliefs on income was right in the present circumstances. 352 For those reasons, I ask the Committee to reject the new clauses.
§ Mr. Peter Rees
We have had a short, helpful and constructive debate. What has emerged clearly from interventions from both sides of the Committee is that there is almost unanimity on the principles involved. I say "almost" because the Minister of State, concealing his innate generosity, has stuck closely to his administrative brief. The principles have been well ventilated and I shall not repeat them. There have been useful contributions from both sides of the Committee. The discussion has been almost entirely free from partisan bias.
It has been demonstrated beyond argument that, on the figures, the amendments are justified. My hon. Friend the Member for Braintree (Mr. Newton), who made the subject particularly his own, has produced incontrovertible evidence. My hon. Friend the Member for Croydon, Central (Mr. Moore) has demonstrated the absurdity of the present position that a married couple who bought a house in 1974 or 1975 might have been free of stamp duty, yet another couple buying the same house now will have to pay stamp duty. There cannot be any logic or reason in that.
The Minister of State drew attention to certain practical difficulties in New Clause No. 2. May I say, without the self-confidence of the hon. Member for Cornwall, North (Mr. Pardoe)—unlike him, I am not opposed by the practical difficulties, which can be met—that there are examples of other reliefs in stamp duty. I instance Section 55 of the Finance Act 1977, whereby stamp duty can be clawed back if circumstances alter.
If this were the sole argument, the Committee would recognise that it was not a good enough case for rejecting either of the proposals. However, I am always happy to defer to the Minister of State, who does his best to meet a legitimate case. If he feels that New Clause No. 2 is objectionable on that ground, I shall invite my hon. Friends to support New Clause No. 3. By our doing so, the Minister of State would be purchasing administrative simplicity at a cost of £3 million against Government expenditure of £60 billion. If the administrators want simplicity, let them buy it at 353 that very small figure. I see the Minister of State, with his habitual courtesy, nodding. On reconsideration, he is obviously going to accept New Clause No. 3.
If the Minister of State will not accept New Clause No. 3, it means that the Administration do not put house buyers high on their list of priorities. There is continual emphasis in the speeches of Labour Members and in their allocation of public finance that they are not over-concerned with the building industry or employment in the building industry. For those reasons, I invite my hon. Friends and Labour Members to support me in the Lobby tonight in pressing New Clause No. 3.
I am sorry that I have to take the matter to a Division. I had hoped that the Minister of State would have been able to offer some glimmer of hope for these two important sections of our community, but he cannot. I hope that the whole Committee will support New Clause No. 3. On New Clause No. 2, I beg to ask leave to withdraw the motion.
§ Motion and clause, by leave, withdrawn.