§ "First-time home buyers shall be exempt from stamp duty on the first £25,000 of the purchase price."—[Mr. Shersby.]
§ Brought up, and read the First time.
§ Mr. Michael Shersby (Uxbridge)
I beg to move, That the clause be read a Second time.
The purpose of the clause is to exempt first-time home buyers from stamp duty on the first £25,000 of the purchase price 1834 of their home, be it a house or flat, freehold or leasehold. If it were accepted it would relieve first-time home buyers of the payment of £250 that exists under the outmoded, antiquated, unacceptable and much-hated duty, and which does much to discourage people from buying their own homes.
I therefore ask my hon. and learned Friend the Minister of State for that concession on behalf of young couples in my constituency of Uxbridge and, indeed, first-time home buyers throughout the country. At present they are faced with the difficult problem of having to find several thousands of pounds before they can even begin to pay off their 1835 mortgages. They have considerable expenses in terms of legal fees, removal costs and furnishing, in addition to stamp duty.
I appreciate that this is not a matter that interests those on the Labour Front Bench—that is presumably why they are paying no attention—but it interests many people in this country who wish to buy their own homes. I therefore hope that the House will take seriously the proposed new clause.
The cost of buying a new home is substantial. Over the past few years we have seen an unprecedented rise in the cost of homes. As I look today at my local newspaper I see a great many three-bedroom semi-detached houses in the price range £25,000 to £30,000, so I have not pulled the figure of £25,000 out of the air. It closely relates to the minimum cost of buying a three-bedroom semi-detached house or a flat in the London borough of Hillingdon and West London generally. I realise that property prices may be lower elsewhere, such as in the constituency of my hon. Friend the Member for Upminster (Mr. Loveridge), on the eastern periphery of Greater London. My intention in moving the new clause is to enable people who wish to buy homes in Hillingdon and other areas, particularly in large cities, to obtain a meaningful exemption.
To illustrate the extent of the relief that could be given, I can do no better than quote the figures that would apply to first-time home buyers in my constituency. If the clause were in operation, they would pay no duty on a house costing up to £25,000. If they bought a house costing over £25,000, they would have to pay stamp duty of £450 under the substantially increased scale of charges introduced by the former Chancellor of the Exchequer in 1974. The increased rates that were fixed by the Labour Government are set out in Hansard in answer to a parliamentary question that I put in April 1974. The then Paymaster General said:Increased duty will generally be payable only in the minority of cases where the cost of the house exceeds £25,000."—[Official Report, 11 April 1974; Vol. 872, c. 256.]If we consider that answer just over five years later when home prices have escalated considerably, we must recognise that there is an urgent need to amend the scale of stamp duty charges 1836 and an overpowering need to abolish the duty altogether. I recognise that politics is the art of the possible, and I am not today proposing the total abolition of the duty. In his Budget, my right hon. and learned Friend has given tax relief across the board, and I know that he cannot satisfy every proposal to abolish every tax that people dislike. Having said that, however, I hope that as part of his review of taxation generally he will pay urgent attention to the need to amend the scale of stamp duty, recognising that in many parts of Britain a modest house can cost between £25,000 and £40,000.
I am sure that my hon. and learned Friend the Minister of State is aware of that need. That is why I believe that the consideration of the total abolition of the duty is for the Government and not for me to raise this afternoon. My proposal is essentially a modest one. It would not be unduly expensive in terms of loss to the Revenue. The calculated loss is about £20 million. My new clause would help home owners by relieving them from a small but significant part of the expense involved in purchasing their first house. It would not affect the rate of stamp duty on more expensive houses, and it is what is needed now in order to encourage home owners, not only in the east-west axis from Uxbridge to Up-minster, but throughout the country.
I accept that the Minister of State will be sympathetic to my case because he is a very sympathetic man. No doubt he will have an excellent Treasury brief setting out all the reasons why he should not accept my new clause. I advise him to put his brief back on the shelf, take his courage in both hands and accept this modest proposal. If that is impossible, I hope that at least he and his right hon. and hon. Friends will give an undertaking to consider this matter further and bring forward at a very early date proposals to give relief to first-time home buyers.
§ Mr. Robin F. Cook (Edinburgh, Central)
The House will be grateful for the opportunity to discuss the effect of fiscal policy on house purchases. The hon. Member for Uxbridge (Mr. Shersby) made a reasonable and moderate speech in support of what he described as a modest 1837 new clause. He referred to the wider costs of house purchase, beyond that of stamp duty, and he must agree that it is fair and proper for the House, in evaluating the appropriateness of his amendment, to refer to the other forms of fiscal support for house buyers.
The cost of that support through the tax system is very substantial. Last week, in answer to a parliamentary question, the Minister of State said that the cost in a full year of mortgage interest relief at 1979–80 income levels was estimated at about £1,400 million. That is a lot of money. It is a significant slice of the tax yield. If we look at the Red Book, we find that £1,400 million is the equivalent of 7 per cent. of the expected revenue from income tax in the current year. To put it another way, £1,400 million would finance a 3p cut in the basic rate of income tax.
Inevitably, such a sum of money must affect the other ways in which income tax operates. Clearly, the net effect of this relief is to shift the burden of taxation from one group of people to another. In this case, it shifts the burden from those who are purchasing homes to those who are not—either because they have completed their purchase or because they are renting homes and cannot claim tax relief on their rents. Moreover, the real inequity, which must be of some concern even to the electors of Uxbridge, is that that tax relief is available to those on the higher rates of taxation. To a person who pays tax at 60 per cent. the value of tax relief on mortgage payments is literally double that to a person who is on the basic rate.
Contrary to popular belief, it is not a particularly small group of people who benefit in this way. I pray in aid the Green Paper entitled "Housing Policy" which was produced two years ago. It contains the following statement:As for the tax relief at the higher rates on mortgage interest, this benefit is no longer confined to a tiny minority—even some first-time house-buyers benefit.The very fact that this form of tax relief is available encourages those who are paying tax at the higher rate to maximise the amount which they spend on the purchase of their homes. In that way, they can diminish the amount which they have to pay in tax. Having heard a considerable number of speeches in this House over the 1838 past few weeks about the importance of this Budget in widening choice, I must point out that this form of tax relief is perverse because it diminishes choice. It discourages choice between different housing tenures because it restricts tax advantage to one particular group—namely, those who buy their own homes.
If we were to put to the electorate an abstract proposition that tax relief should be more valuable to those on the higher rate of taxation, I would be surprised if we got any mandate, even from the electors of Uxbridge. Also, we must consider this in the context of a Budget which has made dramatic inroads in the higher rates of taxation. It is worth recalling the rationale of having tax relief on mortgage repayments. This was because we once had a steeply progressive rate of income tax. I quote the evidence given by a Treasury witness two years ago to the Expenditure Committee. He said that mortgage interest reliefis also in some degree a reflection of capacity to pay in a progressive tax structure ".In this Budget, we witness the dismantling of that progressive structure. We have seen substantial tax benefits given to the wealthy. We are told by the Treasury Bench that these tax cuts do not go as far or as fast as the Government had originally hoped. Therefore, many of us conclude that there will be further reductions in taxation later. This will attack even further the progressive structure of income tax in this country. Therefore, is it justifiable specifically to preserve the mortgage interest relief at the higher rates of taxation? Tory Members cannot have it both ways—
Mr. Deputy Speaker (Mr. Bryant Godman Irvine)
Order. The hon. Member must address himself to the question of stamp duty.
§ Mr. Cook
I am suitably rebuked by the Chair. It is impossible to consider the value of the hon. Member's proposition that we should provide this exemption for home buyers unless we take account of the other ways in which home buyers benefit from our fiscal system. That is what I was trying to show.
Conservative Members cannot have it both ways. Either we have a steeply progressive rate of taxation which demands compensation for those who wish to buy their own homes, and provides it either by 1839 the abolition of stamp duty or by specific provision for mortgage interest relief, or we have a less progressive rate of taxation, as in this Budget, in which case we can no longer justify specific exemptions. If the Government intend to come to the House in future and propose further cuts in the rate of taxation, I would urge them to look at this particular item of stamp duty as a way of recouping the money, rather than piling the agony of indirect taxation even more on the average wage earner who rents his home.
§ Mr. John Loveridge (Upminster)
It gives me great pleasure to support the new clause tabled by my hon. Friend the Member for Uxbridge (Mr. Shersby). The clause asks that first-time home buyers should be exempt from stamp duty on the first £25,000 of the purchase price.
Under the 1972 Finance Act the threshold of £5,00 was raised to £10,000 and it is now at £15,000. I understand that to provide the relief for which we are asking would cost the Exchequer a gross amount of perhaps £20 million, although if administrative costs were subtracted from that the figure would be much less.
This proposition must be near to the heart of the Minister. During the election many Conservative Members stressed the need for help for first-time buyers. There are limits to what the Government can do after years of a Labour Government, but the Minister could give some help to those who hoped for more. Sitting tenants have the advantage of fair though generous discounts, but that is not so for the first-time buyer. They are often young newly-married couples who do not have the advantage of council tenancies and who are affected by rising market prices for houses and high interest rates.
Land prices have risen sharply. They were running at about £43,000 per hectare in the first part of 1977. That figure had risen to £60,000 per hectare by the second half of 1978. It will be some time before the cuts in development tax have any effect on house prices. The young couple ask themselves how much cash they can find when they want to buy for the first time. Apart from the immediate down payment for a mortgage, they face legal charges, surveyors' fees, removal costs, furnishing costs, insurance fees and, 1840 where the purchase price is above £15,000, stamp duty. That may be the last straw that breaks the camel's back.
Stamp duty yields to the Government far more than if it had risen merely with inflation. In 1974–75 the yield was £35 million. The estimated yield for 1978–79, as were told on 5 March, is £120 million. At the same time, the retail price index has risen at about only half that rate. The Government could well give away part of the £120 million raised by this tax for the relief that we ask.
An increasing number of houses are falling into the stamp duty net. In October 1974 the houses sold in Greater London that were liable to stamp duty represented 20.8 per cent. of the total sold in the area. By November 1977 that figure had risen to 36.4 per cent., as the right hon. Member for Llanelli (Mr. Davies) pointed out. No doubt, the proportion has risen much more since that time. The fast rise in house prices is greatly affecting the first-time buyer. Nowhere is that more true than in the Greater London area.
In Upminster one-bedroomed flats fetch between £15,000 and £18,000 and two-bedroomed flats fetch between £20,000 and £25,000. There are few two-bedroomed houses and they are hard to find. A three-bedroomed semi-detached house now fetches £35,000 and a detached property £40,000 depending on its site and condition. Those figures are not much lower than those in Uxbridge, where the first-time buyer is even worse off. However, young couples in Upminster are hard put to it.
Council properties in Upminster also have high valuations. A two-bedroomed house is worth from £14,000 to £22,000, a three-bedroomed house from £15,000 to £26,000, and a four-bedroomed house from £16,000 to £33,000. Where can most young newly married couples raise that sort of money? Far fewer new houses are being bought by first-time buyers. The figure has decreased from 62 per cent. in 1970 to a little over 43 per cent. in 1978.
A substantial regional difference in prices affects young couples. In 1978, under-25-year-olds in London bought 21 per cent. of all the houses that were bought by first-time buyers. In the Northern region the proportion of young 1841 couples was more than twice that figure. There, 45 per cent. of first-time buyers were in that age group. Of course, the figures depend on the total number of houses purchased but, none the less, the percentage figures are a clear indication of a difference between the areas. I cannot believe that it is due to the northerners' desire to settle down sooner into matrimony. The young couple in Greater London cannot afford to buy because the prices are so much higher.
Because stamp duty is charged on a sliding scale, young couples in Greater London are hurt by it most of all. Stamp duty is over £75 on a house which costs £15,050 but where in London can such a house be found? At the price of £20,000 the duty is over £200; the next £10,000 is charged at £15 per thousand pounds and over the price of £30,000 it is charged at £20 per thousand pounds.
Conservatives want to see more home ownership. The young, in particular, are hit by rising prices and, therefore, by stamp duty. We ask for the threshold to be raised by £10,000 only. That seems a reasonable request. The population in the 20 to 25 age group will temporarily grow during the next decade from 3¾ million in 1976 to an estimated 4½ million by 1986. A small relief would not only give great encouragement to first-time buyers now but would encourage the growing number of teenagers who will soon enter marriageable age to look ahead with hope. I hope that the Government will cut back stamp duty now.
In an article in the Estates Gazette on 16th June 1979 about the Budget and property, Mr. W. P. Hogan wrote:One must feel some sympathy for the potential first-time house buyer, generally benefiting less than others.The map of Greater London looks like the outspread wings of a butterfly. Uxbridge and Upminster are the tips of the wings. I hope that the Minister will treat the tips of the butterfly's wings with a gentle hand and give us the relief for the young for which we ask.
§ Mr. Richard Wainwright
Liberal Members warmly support the new clause and the arguments advanced by the hon. Member for Uxbridge (Mr. Shersby). If we have any criticism, it is simply that the new clause is so modest and restricted in its application. But I see the force of 1842 that, and I am sure that with such a modest new clause, if the hon. Member does not get full satisfaction, he will want to obtain an expression of the will of the House as to the new clause.
I have two reasons for intervening in the debate. I shall not attempt to repeat the arguments so eloquently put by the hon. Member. First, as to the special claims of first-time house buyers, whatever hon. Members may think of the recent action of the building societies in defying market forces and acting as King Canute—perhaps in deference to some strange pressure from odd quarters—there is no doubt that what the building societies have done is gravely handicapping to first-time house buyers. It may he all very well for those who are already in possession of a house and who already have a mortgage, but the funds available for first-time buyers will be woefully and artificially limited by the decision taken last week by the building societies. Therefore, anything that can make un to these people some of the injury they are suffering is to be welcomed.
However, much more important than that, the new clause is at least a further attack on the whole iniquitous and outdated concept of the absurd stamp duties. It ill behoves Conservative Members, and it would be monstrously out of character with all the philosophy and promises of the Conservative Party—that the Conservatives are the apostles of market forces and they want free exchange to flourish in an almost Elizabethan fashion—to support these absurd and antiquated clogs on the market. They are the hallmark of petty German princelings before Bismark who sat on the gates to their electorates, their margravates, and so on, saying "Before these goods pass into my little princedom, you shall pay a stamp duty, an excise or some toll"—for which there was no justification except the unlimited greed of Governments to collect money by any squalid devices that they could use.
Anyone who has had the humiliating experience of visiting a stamp office will know that they are one of the most absurd survivals in modern times. In a sort of jungle ritual, one presents one's estimate of the amount that is changing hands. That is solemnly scrutinised, and it is sometimes questioned, but in the end there is an adjudication. Then comes the 1843 primitive moment when one's document is placed under a piece of unrivalled Victorian ironwork and the hand of a civil servant crashes the thing down and one has one's tally. This is done in a manner which would, perhaps, have done credit to the fifteenth-century Exchequer.
All this ought to go. If the proclaimed philosophy of the Conservative Party means anything at all, it will go during the next year or two. I suggest that there is nothing better that the Government could do than to make a start now.
§ Mr. John Wilkinson (Ruislip-Northwood)
I intervene in the debate merely in order to give my wholehearted support to my hon. Friends the Members for Uxbridge (Mr. Shersby) and Upminster (Mr. Loveridge). My hon. Friend the Member for Uxbridge has done the House a great service in moving the new clause.
It is no accident that the outer London boroughs achieved the best swing to the Conservatives at the general election, because they had as candidates people such as my hon. Friends, who clearly showed that they have the interests of their electors at heart. The question of maximising the opportunities for home ownership was at the heart of our programme. The idea of raising the threshold for stamp duty to £25,000 should commend itself not merely to people in the London area but, as has been shown by the intervention of the hon. Member for Colne Valley (Mr. Wainwright), much more widely.
In the London area we face particular problems. The cost of commuting is continually rising. The benefit of luncheon vouchers, when one has reached one's work after a long, hot and tiring journey, is not what it was—as we shall see from the debate which is to follow on a subsequent new clause.
All the time, house prices have been escalating hugely in the London area, and interest rates are at an astronomically high figure. This means that the newly married couple face a very difficult problem. They do not wish to have to go into rented accommodation. It is not as though rented accommodation was easy to come by, particularly in the private sector, after over five years of Socialist Government.
We have been doing everything we can to make it easier for young people, par- 1844 ticularly in Hillingdon, to own their homes for the first time. For example, equity sharing schemes for first-time home buyers are especially attractive. But the would-be home buyer still has to pay stamp duty on that part of the council property which he is seeking to buy.
The intervention of the hon. Member for Edinburgh, Central (Mr. Cook) was especially revealing. It showed the vindictive attitude of the Labour Party to home ownership.
In looking at the new clause, which is a modest proposal, we should bear in mind that over 40 per cent. of mortgages are granted to first-time home buyers. There certainly is the demand, but it is very difficult to meet the demand for home ownership on the part of the would-be home buyers coming into the market for the first time.
This modest proposal should be thoroughly welcomed and supported. I am most grateful to my hon. Friend the Member for Uxbridge for moving the clause.
§ Mr. Dalyell
The attitude of my hon. Friend the Member for Edinburgh, Central (Mr. Cook), which I am bound to say I share, is not vindictive. The whole point is that a great deal of money is involved in this proposal. I do not hide for a moment the fact that it is not only in Uxbridge or Upminster that this is an attractive proposition. No doubt in South Queensferry or any of the areas that my hon. Friend knows there are young couples in a similar financial position who would very much like to take advantage of these proposals. However, the question is, how much do they cost?
It would help the House if at this stage the Minister of State interrupted me to let me know the Treasury estimate of the cost to the Exchequer of these proposals. The hon. Member for Uxbridge (Mr. Shersby) mentioned the sum of £20 million. Is that the sum about which we are talking, or is it more or less? I have a suspicion that it could be a great deal more than £20 million. Has any estimate been made of the cost to the Exchequer?
§ Mr. Dalyell
I was giving the Minister a chance to intervene. However, if he wishes to provide the estimate during his 1845 speech, so be it—although it might have been helpful to have it by now.
What we must bear in mind is that the necessary money could be used for all sorts of other deserving governmental requirements. One really has to ask whether first-time home buyers should be the ultimate priority. That is my first question.
I come to my second question. Here I agree with the hon. Member for Colne Valley (Mr. Wainwright). A great many people wonder whether stamp duty is a sensible form of raising revenue at all, in this day and age. I shall not use the word "Elizabethan" about it. I think that I understand pretty well how it all came about. None the less, in any sensible review of housing finance, should it not at least be considered whether stamp duty is a sensible way of raising money, and whether it might not be better, and certainly a great deal cheaper, to raise it through other forms of taxation? Therefore, I ask the Minister to justify whether stamp duty as such is a sensible way of raising revenue.
Clearly, nothing can be done about the matter this year, but I think that some of us would like to lay down a marker that when discussing next year's Finance Bill we shall be asking the same question.
§ 6.30 p.m.
§ Mr. Paul Hawkins (Norfolk, South-West)
I declare an interest as a chartered surveyor who has an interest in a firm that sells houses. I may disagree with the hon. Member for Edinburgh, Central (Mr. Cook) but he is not vindictive. The hon. Gentleman made a good point, although I believe, like the hon. Member for Colne Valley (Mr. Wainwright), that it is time we got rid of stamp duty. It is an anachronism. It is out of date. I thought that the hon. Member for Colne Valley would go on to talk about wax, candles and sand rather than the Victorian stamping machine that he described.
The hon. Member for Edinburgh, Central said that the majority of wage-earners are council house tenants or that they occupy tenanted accommodation. It is Conservative Party policy to end that situation and give tenants the opportunity to buy their own homes. Before long, certainly around London, it will be found 1846 that council houses are getting up to a figure of £25,000—
§ Mr. Hawkins
—or over, although it has not yet happened in my area. Stamp duty represents a deterrent to those seeking to buy council houses—a major step for a family that has always gone from council house to council house. To put another £200 on top of the cost is a major disincentive to their buying the property.
In my constituency, there is practically no rented accommodation. The accommodation that did exist is now taken over by American Service men from bases in the area. A young couple who want to marry and move into a home of their own, after living in a couple of rooms in the home of one set of parents or the other, have to go out and buy. In another one or two years, in my opinion, the £25,000 mark, even in my area, will be surpassed as the price of a modest home that a young couple may want to buy. Even if the Minister of State cannot say anything of great joy today, I hope he will be able to hint that in the next Budget this disincentive to purchasers will be removed.
§ Mr. Vivian Bendall (Ilford, North)
I declare an interest as an estate agent and surveyor and principal in a firm that disposes of houses. I would like to support the new clause put forward by my hon. Friend the Member for Uxbridge (Mr. Shersby), supported ably by my hon. Friend the Member for Upminster (Mr. Loveridge). This is a serious and important issue for a number of reasons. I spoke in the main Budget debate about the problem. I am well aware of it. When young people are negotiating the purchase of a property, my staff have been instructed to make them aware of the amount that they will have to pay in stamp duty. We found that negotiations had reached almost the stage of contracts being exchanged before young people realised the amount they would have to pay. On numerous occasions they had to withdraw from the sale.
This problem particularly applies to young first-time buyers. They have saved the deposit but are operating on a tight budget. The price of removals and furnishings can be costly when setting 1847 up a home for the first time. These buyers constitute the area of greatest concern. But it is not the only area where stamp duty causes a problem. Many people who would have sold their houses and moved somewhere better now think twice about moving house. This has slowed down the availability of property coming on to the market in the past few months or the past year and has produced an explosion in prices in the residential property market. The question of stamp duty must be studied across the board.
§ Mr. Dalyell
The hon. Gentleman, who has professional experience, says that stamp duty makes what is obviously more than a marginal difference and that it constitutes a considerable amount in decision-making. Are the Government, if he is right, not being let in for a good deal of expenditure? Are we not talking about considerable sums?
§ Mr. Bendall
I am suggesting that stamp duty slows down to some degree the availability of property. I hope that my experience outside the House enables the hon. Gentleman to understand what I am driving at. Hon. Members are not suggesting that stamp duty should be abolished immediately. They are saying, as I said in the main Budget debate, that the matter has not been examined since 1974 but that the inflationary spiral in property has continued and more money is being collected. This sector has been unfairly singled out. It should have been treated in a more just and fair way.
I support what my hon. Friends have said. I am concerned for the young and the first-time buyers. I see them in my own constituency in part of the London conurbation where a modest semidetached house costs £30,000 to £35,000 and sometimes £40,000. I support remarks related to the cost of council property that is being sold. The market value of some council property in the London area is already approaching £30,000. With a 50 per cent. discount, this brings the cost to £15,000—the exact figure at which stamp duty starts. I make a plea for the Minister of State to examine this matter. If he feels that nothing can be done on this occasion, I ask that it is examined in the future and some relief given, certainly to first-time buyers.
§ Mr. Dalyell
Some hon. Members find it difficult to define a first-time buyer. One partner, who is divorced, may marry someone who has not been divorced. What is the definition of a first-time buyer? Some of us suspect, from our constituency experience, that resentment arises over the definition.
§ Mr. Bendall
First-time buyers are invariably people who would go for a mortgage. Anyone who can afford to buy a property without a mortgage could probably well afford to pay the stamp duty. I think that it would therefore be fairly easy to run a scheme related to first-time buyers by reference to it being the first application to a building society.
§ Mr. Robert Adley (Christchurch and Lymington)
I do not know whether my hon. Friends the Members, for Uxbridge (Mr. Shersby) and for Upminster (Mr. Loveridge) intend to push this matter to a Division. I must tell them that if they do I shall not be with them, simply because I think that it would be extremely unfair on the Government, after being in office for such a short time, to have to face a Back Bench revolt on this issue.
Various of my hon. Friends have made important points which I support, although I hope that they will not press the matter to a Division. I hope, however, that my hon. and learned Friend the Minister of State will recognise that many of us in various parts of the country feel that the principle behind the new clause is of importance.
I noted what was said by the hon. Member for Colne Valley (Mr. Wainwright), but I see that he is not now present in the Chamber. The speed with which he goes after making a speech would leave even Sebastian Coe breathless. I felt that he was a little unfair in his snide comment about pushing the question to a Division, and I can only say that many of us feel that there is some justification for the clause. I wish to make two brief points on it.
Many people come to my constituency to acquire second homes—what local people tend to call "weekend grockles". Weekend grockles are usually well breeched people who come down and buy small houses which are particularly appealing to local people, especially young people, born and brought up in such a constituency as mine and who find 1849 it difficult to compete in the weekend grockle market. I hope, therefore, that my hon. and learned Friend will note that it is not just the surburbs of London which suffer from this problem.
Moreover, because young people in such areas as mine find it difficult to buy their first homes, there develops a growing imbalance in the age of population, and this has a serious adverse effect on the whole socio-economic structure of the area.
Finally, although I recognise that this is not my hon. and learned Friend's responsibility, I ask him to bear something else in mind when he is looking at this matter, perhaps in the context of next year's Finance Bill. I have in mind here the problems of young people in such constituencies as mine wanting to buy their first home. Perhaps my hon. and learned Friend will have a word with the Department of the Environment about another iniquitous piece of legislation, the Housing (Homeless Persons) Act, which also has helped to push local people out of the housing market. If he can get rid of that piece of legislation as well, we shall be extremely grateful.
§ Mr. Peter Rees
I know that the whole House will join me in congratulating my hon. Friends the Members for Uxbridge (Mr. Shersby) and Upminster (Mr. Love-ridge) on initiating an extremely interesting, worthwhile and important debate. If I may pick up one of the metaphors used, I think, by my hon. Friend the Member for Upminster, I am sure that we were carried away on the wings of my hon. Friends' eloquence—though whether on the wings of a dove, a butterfly or a hawk I know not.
I cannot say the same for the eloquence of the hon. Member for Colne Valley (Mr. Wainwright). I rather lost him when we got into the realm of German princes—
§ Mr. Rees
I think that my hon. Friend the Member for Christchurch and Lymington (Mr. Adley) made the point rather more effectively. Obviously, the hon. Gentleman, having inherited the mantle of Mr. John Pardoe, feels that he must assume his eloquence, too. As I say, he lost me, and I think that he lost 1850 other hon. Members as his speech proceeded.
I think that what characterised the debate was the wealth of constituency and professional experience upon which hon. Members were able to draw. Indeed, I join the hon. Member for West Lothian (Mr. Dalyell) and acknowledge at once that this problem is not confined to the Greater London area. It is felt in West Lothian, and we feel it down in Dover and Deal. It is a problem which touches many hon. Members and many of their constituents.
I can assure my hon. Friend the Member for Ilford, North (Mr. Bendall) that although the last time the limit was altered was in 1974—when it was done by the previous Government, although of course, under pressure from the then Conservative Opposition—the question has been debated over the intervening years. I recall that I myself initiated a debate in May 1978, perhaps not precisely on this point but at least on the general question of stamp duty and houses. Therefore, one of the two themes which ran through the debate is very much in my consciousness and, I am sure, that of my right hon. Friend the Chief Secretary and other Treasury Ministers who have to consider the problem.
There are two themes—first, the increase in house prices which has affected the whole country, and, secondly, the particular problem of first-time home buyers. We are sensitive to the problem of first-time home buyers, but I do not wish—indeed, I should probably be out of order to do so—to be drawn too deeply into general questions of housing. Although hon. Members may well say that it is difficult to disentangle the present question from housing problems, I am sensitive to the stern eye of the Chair and I hope that I shall be forgiven if I go no further in that direction.
I am always diffident about advancing technical objections. I have in the past been conscious of the powerful arguments which the right hon. Member for Llanelli (Mr. Davies) used to advance whenever I had a new clause or amendment down for debate, when I was invariably told that it was technically defective unless perhaps one figure was altered. So I have never liked that argument, but I must make 1851 the point in the present context, and here I take up something said by the hon. Member for West Lothian.
There would be certain practical difficulties in identifying first-time home buyers. I hope that my hon. Friend the Member for Ilford, North will not mind my saying that I was not entirely persuaded by him on this matter. There would be all sorts of delicate questions: for example, if the husband had bought the home in the first place and next time the wife was the nominal purchaser, or, indeed, on a third occasion—perhaps only a limited class of case but possible none the less—if the trustee of a settlement were the buyer.
How would one apply the rules in such circumstances? There would be technical difficulties. However, I appreciate that my hon. Friends are concerned to debate the principle now and they would not wish me to enmesh the House too closely in those rather fine and—dare I say?—lawyer's points.
On the more general question, the theme running through the speeches of one or two of my hon. Friends was that this is an antiquated and much-hated tax. It is certainly an old tax. I do not know that I go all the way with the proposition attributed, I think, to Adam Smith—I am not sure whether it was he or someone else—that an old tax is a good tax, but it is certainly true that by the time a country has lived for a couple of centuries with a tax one knows its imperfections, and some of them may well have been smoothed away by the intervention of the House.
§ Mr. Dalyell
The cost of collection per £1,000 of yield is a fair criterion, and one's suspicion is that it is extremely high.
§ Mr. Rees
That is a shrewd thrust. I had already anticipated the point, since I, too, have been concerned during the past weeks to consider that aspect of the stamp duty. It is an antiquated tax. I do not believe that it is any the worse for that, and I cannot believe that the House was over-impressed by the affront to the delicate susceptibilities of the hon. Member for Colne Valley. I do not know how many of us have shared his experiences in stamp offices. I suspect that he is more sensitive than the ordinary, 1852 and we need not worry too much about that.
Looking at the matter with the eye—I hope not the jaundiced eye—of a recently appointed Treasury Minister, I have to tell the House that stamp duty raises £550 million, and the yield from the stamp duty on the purchase of residential property is £120 million. I think that the hon. Member for West Lothian was keen to know that figure. Those are not inconsiderable sums, and the cost of collection is about 1 per cent. of the yield. I am glad to see a nod of assent by the right hon. Member for Llanelli.
§ Mr. Rees
A good brief—so be it. The House will see that the cost of collection is relatively low. In fact, cost-effectively it is possibly in this field the best tax, apart from the petroleum revenue tax, which exhibits quite different characteristics. These are, as I say, considerable sums of money.
Several hon. Members asked how much the new clause would cost. I have to say with all candour that I do not think that one can give that figure. The stamp offices are not prone to keep records such as will identify the persons presenting documents. They have no records as to whether they would be first-time transactions or not.
All I can say to my hon. Friends is that if the lower limit were adjusted upwards to £25,000 and all the subsequent bands were adjusted—one could do it on various bases—then, leaving aside any built-in preferences or reliefs for first-time home buyers, the cost would be between £85 million and £95 million. In the straitened circumstances of today those, too, are fairly considerable sums of money.
§ Mr. Shersby
Is my hon. and learned Friend aware that the housing and construction statistics for 1978 show that about 47 per cent. of all new mortgages were granted to previous non-owner-occupiers? That is an interesting statistic. With a little more probing it might be possible to get a more exact figure. 1853 Certainly my information is that the cost would be less than the Minister believes it to be.
§ Mr. Rees
All that I am saying is that we do not have precise figures. There are ways in which we could approach the problem, but there are no figures that I could put to the House with utter confidence.
I raised earlier the practical difficulties of limiting that sort of relief to first-time home buyers, however one defines that category. I suspect that if one advances down that course one will be led to altering the existing limit and the subsequent bands. I emphasise that that would be an expensive exercise, and certainly not one which I would be disposed to recommend to the House in this year, when there have been considerable financial constraints on the Government. I may not carry Labour Members with me, but I am sure that my hon. Friends will recognise the constraints under which the Government are operating and the extreme difficulties that we have had to face in order to make substantial decreases in the levels of taxation.
The hon. Member for Edinburgh, Central (Mr. Cook) made a more general speech. To follow the hon. Gentleman exactly in all the points that he made would lead me to fall foul of the Chair, as I am sure the hon. Gentleman will recognise. However, I take up his more general point. Of course, there is a question for debate on how far we should go for a considerably lower level of taxation and to sweep away or diminish the various special reliefs—not only in the area of income tax but in other areas. That is a legitimate matter for debate and one which the House will no doubt wish to consider, even if not this year.
I would not join my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) in accusing the hon. Gentleman of being vindictive. The matter is a legitimate area for debate, but I hope that I shall be forgiven by the House for not following the hon. Gentleman down that route today. If I did that I might be out of order, as technically we are debating the level of stamp duty. However, I recognise the point that he makes, and it may be that we shall wish to consider it on another occasion.
1854 The hon. Gentleman made another point, and I hope that it is fair to take it up. I do not think that we can be said to have dismantled totally the higher rates of income tax. All that we have done is to bring down the highest rate for earned income from 83 per cent. to 60 per cent., and for investment income from 98 per cent. to 75 per cent. Nor do I think it right that we should attempt to distinguish higher rate tax and basic, or lower than basic, rates of tax in considering existing reliefs. The essence of having amalgamated surtax and income tax was that this sort of refined distinction should no longer obtain in our tax system.
§ Mr. Rees
Relief on life assurance premiums is now given on a different basis—one pays a net sum. There is a further point that the hon. Gentleman could put to me. I agree that the relief for covenants in favour of charities is only at the basic rate. Without laying down policy, I regard these points, especially that relating to charities, as not particularly defensible anomalies. But there it is. We shall wish to look at the Goodman report and all its ramifications in due course.
The hon. Gentleman is quite right. There are one or two anomalies left over from the days when surtax and income tax were regarded as slightly different taxes. I do not feel that nowadays one would wish to build into the system a distinction and to give reliefs at varying rates. Perhaps I am slightly out of order to debate that point, but I recognise the point that the hon. Gentleman is making. I do not find it a sympathetic one.
I return to the main themes that ran through the contributions, mostly from my hon. Friends and founded on deep constituency and professional experience. They were appreciated by the Government Front Bench. I hope that my hon. Friends will recognise the technical difficulties and the cost factor that has been very difficult for the Government to sustain in this year. I am, however, conscious of remarks that I made when the Conservative Party was in Opposition 1855 recently, and we shall wish to return to the point another year.
I hope that my hon. Friends will feel that the debate has been a worthwhile exercise. We extend congratulations to my hon. Friends the Members for Uxbridge and Upminster on giving us the opportunity to debate the issue. I hope that my hon. Friends will not feel it necessary to press the new clause to a Division. Indeed, I hope that they will withdraw it, feeling that substantial justice has been done to the issue on this occasion and recognising that we shall, I hope, return to the matter in a subsequent year.
§ Mr. Shersby
I am grateful to my hon. and learned Friend the Minister for his comprehensive and sympathetic reply to an interesting dabate. He clearly recognises the difficulties that face first-time home buyers, but he draws attention, quite rightly, to the difficulties that I had expected him to pinpoint—namely those of identifying first-time home buyers. I do not think that the problems are insuperable, but they do present some difficulty.
I was heartened to hear my hon. and learned Friend's words "not this year, but we shall look again next year". I accept that in the Budget proposals both the Minister and his fellow Treasury Ministers have made substantial contributions towards the ability of people to own their own homes. On the basis that the Government are willing to consider the matter in looking at the future of taxation and stamp duty, I beg to ask leave to withdraw the motion.
§ Motion and clause, by leave, withdrawn.