Scepticism about winners of flagship property policy
The Stamp Duty Land Tax (Temporary Relief) Bill passed through the House of Commons on Monday of this week. The Bill ensures that anyone buying a main home for under £500,000 before the end of March next year will pay no stamp duty.
The Bill was not opposed, though Labour said it was inadequate and the Lib Dems thought the £3.8 billion could have been better spent. Labour tabled a new clause calling for a review of the decision three months after the Bill becomes an Act, but did not press it to the vote.
Second reading debate – frontbench speeches
A thriving housing market is critical for growth and jobs in this country said Economic Secretary to the Treasury John Glen. HMRC data shows that residential property transactions in May were about 50 per cent lower than the same month last year. For the first time in eight years, house prices have fallen. But transactions in May were 16 per cent higher than in April and it is crucial we maintain this momentum, he said. Glen went on to say cutting stamp duty land tax will mean that nine out of 10 people buying their main home will pay no stamp duty at all, and buyers can save up to £15,000. He even claimed this Bill will take most properties outside of London and the south-east out of stamp duty entirely.
This tax cut is one of several measures in the Government’s plan for jobs that will benefit families and businesses, he claimed. From September, homeowners and landlords will be able to apply for a green homes grant of up to £5,000 to make their homes more energy efficient. For low-income households, ‘we will go even further, with vouchers covering the full cost up to £10,000’.
Dan Carden, Labour’s Shadow Financial Secretary, does not think the Government has given careful consideration to the Bill or its impact on the housing market. Carden has serious questions about why the Bill includes significant support for second homeowners (which he describes as ‘a huge bung to second homeowners, landlords and holiday-home buyers while millions of people are desperate for support’). As the stamp duty threshold for first-time buyers is already set higher—at £300,000—raising the threshold to £500,000 is worth comparatively less for first-time buyers outside London, he said. Rightmove estimates that the average saving in the north-east will be just £646, compared with £15,000 in London. Once again, the Government seem to be prioritising the needs of London and the south-east, said the MP.
The Bill may remove a disincentive to move home and temporarily increase transaction volumes, but house sales are currently depressed for other reasons, such as the difficulty of getting a mortgage, people not thinking that their job is secure and huge uncertainty about future house prices, he added.
Although the history of temporary cuts in stamp duty rates tells us that, over the longer term, they might make little difference to the volume of transactions, they can serve to bring forward demand when a market has been hit for one reason or another, said Shadow Economic Secretary Pat McFadden, winding up the debate for Labour.
Closing the second reading debate, Financial Secretary to the Treasury Jesse Norman said it is quite untrue to suggest that the measure will disproportionately benefit second home owners because they will continue to pay an additional three per cent on top of the standard stamp duty land tax rates.
Second reading debate – Conservative backbench speeches
Craig Mackinlay welcomed the simplification from six rates to just four. Unfairness in SDLT across the country is simply due to what could be called national and local planning failure over many decades, he said. The MP encouraged the Chancellor in his Budget later this year, to ensure that job mobility forms part of the tax system. Someone may have to rent a property elsewhere to test the area and the market, and they may have to rent out the old property that they leave elsewhere. Surely, there should be a tax relief on that new rent that they pay, against the rental income on the property that they had to leave to seek employment elsewhere. That could certainly be used elsewhere to help to nudge behaviour.
Mackinlay also suggested ‘downsizing relief for the elderly’. The new rates for SDLT should become permanent, for regional fairness, for job flexibility and to encourage property transactions, he added. (He had earlier worried that the 31 March date would end up being a cliff edge, as the date approaches.)
The UK is a creditable eighth in the world for the competitiveness of our tax rates, but a rather less competitive 27th for ease of understanding and paying taxes, said Andrew Griffith. He said there was no better time to start a crusade for fairer, flatter and simpler taxes.
Cutting stamp duty is not a bung for homeowners, as Opposition MPs say; it is about the hundreds of thousands of jobs that rely on a thriving housing market, said Jacob Young.
Miriam Cates said the measure will provide a welcome short-term reduction to the cost of moving, but it will also encourage older people to downsize, releasing larger properties for growing families.
Saqib Bhatti urged a review of the positive impacts of the stamp duty holiday on the economy and to consider the benefits of maintaining the cut for longer.
Mike Wood cannot see the evidence locally that the housing market is instantly bouncing back without further intervention and support.
Greg Smith noted that most property transactions currently take an average of 16 weeks, which is much longer than it needs to be. We are only 38 weeks from the end of this temporary stamp duty cut, so time is of the essence to make the most of it, he added.
Laura Farris welcomes the focus on millennials, on jobs and on freelancers.
Felicity Buchan said stamp duty, ultimately, is a tax on social mobility and aspiration.
James Sunderland urged the cut in stamp duty to be backdated to the beginning of the pandemic and for the consideration of tax measures that encourage rather than hinder social mobility. Increasing the threshold further or spreading payments out over a longer period may be beneficial. He also called for further refinement for those who are resident in the UK as UK citizens, as opposed to overseas investors or those purchasing second homes.
Kevin Hollinrake wants the £500,000 threshold to remain, paid for by reform of council tax.
Anthony Browne said if we increased second home surcharge from three per cent to six per cent, there may be a slight decline in transactions, but it would raise another £3.8 billion, enough to keep the £500,000 threshold.
Second reading debate – other opposition speeches
Matt Western (Labour) said capital wealth and growth should have no advantage, in the form of a lower taxation regime, over income earned through labour. Western points out that in the last 12 months, 34 per cent of all purchases were made by second home owners. That has to be a concern, because it affects the market to the detriment of first-time buyers. The stamp duty threshold for first-time buyers is currently £300,000, whereas the average price of a property is just £208,000 across the country. That means that most are unlikely to gain from the hike in the threshold from £300,000 to £500,000, he said.
Sarah Olney (Lib Dem) is not entirely certain that the housing market is the sector we really need to be supporting with our tax revenue at this time; even without the stamp duty cut announced last week, we were already starting to see the revival of the housing market and associated industries. Stamp duty is a bad and wrong tax and the £3.8 billion could have been better spent at this time, she said.
Tim Farron (Lib Dem) wants to see developers forced to deliver not just zero-carbon homes but homes that are genuinely affordable. Some 18 months ago, the Government concluded a consultation on whether they should close the loophole that allows second home owners effectively to pretend that the home is a business and therefore avoid paying any tax whatsoever – but ‘naff all has happened’, he complains. The Welsh Assembly Government closed that loophole and did so effectively, he points out.
Only one new clause and no amendments were tabled for discussion at the Bill’s committee stage.
Tax Minister Jesse Norman spoke in reference to Labour’s new clause which calls for a review of the impact of the Act on (a) first-time buyers, (b) existing owner-occupiers moving home, (c) buy-to-let investors, (d) those buying second homes, and (e) overseas buyers. Norman said HMRC publishes routinely quarterly and annual statistics and analysis of stamp duty land tax data, including on first-time buyers and those purchasing additional dwellings. The Government already closely monitor those statistics and keep stamp duty policy under constant review. He called on MPs to reject the clause.
Dan Carden, Labour, said Norman did not give Labour a clear response to the fact that £1.3 billion of the cost of this scheme looks likely to benefit those who are already home owners. Carden wants a review of the Bill’s impact in an open and transparent way. He said: “We want to know whether such a large sum will deliver value for money and what the broader impact of this will be on the housing sector.”
Wera Hobhouse, Lib Dem, said the discount might provide a tax holiday for the privileged few, but it completely ignores the fact that the majority of people are unable to buy a home of their own now, and are never likely to do so in the future.
Third reading debate
There was a brief third reading debate to which the Financial Secretary Jesse Norman and his Labour shadow Dan Carden contributed.
Norman said the Bill was a very important part of the Government’s Plan for Jobs. Carden said the Opposition would not be opposing the Bill but ‘we have concerns about who will benefit most from [it]’.
The Bill passed its third reading and has moved to the Lords where it will be debated on Friday 17 July.
The debate can be read in full here.
By Hamant Verma