4 Dec 2014 : Column 447

Steve Webb: Yes, my hon. Friend is right that the measures we have applied to those with spare rooms in social housing do not apply to pensioners. We have specifically prioritised the poorest pensioners. Under the law, the link to earnings would have meant relatively small cash increases. We did not feel that a rise of less than £1 a week was acceptable and that is why we have passed through the full value of the cash increase in the basic state pension to the poorest pensioners—those only on the guaranteed credit.

Richard Graham (Gloucester) (Con): I absolutely welcome what the Minister has had to say about the increase in the basic state pension: £950 more than in 2010 is a remarkable achievement by the Government. As he points out, it is £7 a week more than Labour policy would have paid.

In terms of some of the other remarkable comments made by the shadow Minister, the Minister might be interested to know that I was in Hammersmith Jobcentre Plus this morning. Paul, who has worked in benefits for 27 years, told me that this is the real deal. Dawn, who works there, says that what is happening is a revolution—it is the best thing happening. Does the Minister agree that there is a wonderful opportunity for the shadow Minister and all four of his Back-Bench colleagues present to visit Hammersmith Jobcentre Plus and learn for themselves what universal credit is doing for the country?

Steve Webb: My hon. Friend is highly expert in these matters, and he will know that the Hammersmith jobcentre has become something of a tourist attraction in demonstrating the excellence of universal credit. What is so exciting is that in previous years we would talk about something hypothetical, whereas now we are talking about something real that thousands of people are already receiving. We are rolling it out more extensively as the months and years go by. It is a very profound change in our welfare state—one that we can all be proud of.

Steve McCabe (Birmingham, Selly Oak) (Lab) rose—

Mr Speaker: Order. The hon. Gentleman did not appear to be in the Chamber at the start of the statement. Was he present then?

Steve McCabe: I think I was 25 seconds late, Mr Speaker.

Mr Speaker: If the hon. Gentleman was not in the Chamber at the start of the statement, it is not seemly for him to seek to participate. I would not want him to behave in an unseemly manner—wittingly or unwittingly. I am in a sense saving the hon. Gentleman from himself in saying that he should not participate on this occasion. We will store him up and look forward to his words of wisdom subsequently.

Ian Swales (Redcar) (LD): I congratulate my right hon. Friend on today’s pension announcement and on getting the Liberal Democrat policy of a triple lock increase into this Government’s programme. Does he agree that with a safety net of 2.5%, the minimum pension increase that people can look forward to in the future is nearly £3 a week and that they will have no more insulting 75p a week increases?

4 Dec 2014 : Column 448

Steve Webb: My hon. Friend is quite right that when the previous Government paid 75p, they were sufficiently embarrassed that they had to put the pension up by £5 the following year—almost to apologise. That is no way to treat pensioners. My hon. Friend is right about the triple lock, too. This morning, I did one of the many radio phone-ins I have been doing, and people have been asking me why the pension is not more. I pointed out that we had 30 years of decline to reverse from when the earnings link was broken in 1980 through to 2010, and that we are now starting to restore the real value of the pension to give pensioners some dignity and security.

Mr Philip Hollobone (Kettering) (Con): There was so much good news in the Minister’s statement that I was struggling to write it all down. So that I get it right for my Kettering constituents, will he confirm that what he has just announced is a 2.5% increase in the basic state pension, which is equivalent to an increase of £2.85 a week for a single person; that the basic state pension is now 18% of average earnings, the highest comparative level for 20 years; and that since the start of this Parliament, pensions have gone up by £950 a year, which is £560 a year more than if they had simply been increased in line with inflation?

Steve Webb: Indeed. My hon. Friend obviously writes very quickly, and he was correct in every particular. The increase in the pension rate for a single person is £2.85 a week and it is £4.55 a week for those on what we loosely call the couples rate. I can confirm that all the figures he gave were correct.

Henry Smith (Crawley) (Con): Pensioners in Crawley will very much welcome what is a generous and fair increase in the state pension. What is my hon. Friend’s observation on the fact that barely more than half a dozen Labour Members have attended this statement, particularly given the fact that this is clearly good news for pensioners up and down the country?

Steve Webb: My hon. Friend puts his finger on it. The Opposition have struggled to find anything to criticise in the statement. So few of them have turned up because it is a positive measure both for pensioners and for vulnerable people in our society.

Roger Williams (Brecon and Radnorshire) (LD): I, too, congratulate my right hon. Friend on his statement, which will be warmly received by pensioners in my constituency and throughout the country. Some time ago, my right hon. Friend was kind enough to meet representatives of the community from Coelbren, who were concerned that they rarely qualified for the severe weather payment. The Minister explained that it was due to the postcode, but I think he realised that qualifying for that payment was a fairly rough and ready matter. Has he been able to reflect further on that, and can I give the people of Coelbren some good news?

Steve Webb: I well remember our meeting, poring over maps of the Welsh valleys with my hon. Friend and his constituents. As he knows, the trigger for the cold weather payment of £25 a week—let me confirm that we are retaining that payment, not the cut to £8.50 a week that Labour had planned—is linked to postcode

4 Dec 2014 : Column 449

sectors. We use just under 100 of those. We review the scheme each year, and where there are fresh representations from hon. Members, we look at them afresh. Although the system is up and running for this year, if my hon. Friend wanted to make further representations, we would of course continue to look at them.

4 Dec 2014 : Column 450

Stamp Duty Land Tax

Mr Speaker: I call the Minister to move the motion.

Is the Minister not present? [Hon. Members: “No.”] In that case, I call the Minister for Pensions to move the motion.

Motion made, and Question proposed,

That, pursuant to section 5 of the Provisional Collection of Taxes Act 1968, provisional statutory effect shall be given to the following motion:

Stamp duty land tax (residential property transactions)


(1) Part 4 of the Finance Act 2003 (stamp duty land tax) is amended as follows.

(2) Section 55 (general rules on calculating the amount of stamp duty land tax chargeable) is amended as follows.

(3) In subsection (1) for “a percentage of the chargeable consideration for the transaction” substitute “determined in accordance with subsections (IB), (1C) and (2)”.

(4) After subsection (1A) insert—

“(IB) If the relevant land consists entirely of residential property and the transaction is not one of a number of linked transactions, the amount of tax chargeable is determined as follows—

Step 1

Apply the rates specified in the second column of Table A below to the parts of the relevant consideration specified in the first column of that Table.

Step 2

Add together the amounts calculated at Step 1 (if there are two or more such amounts).

Table A: Residential

Part of relevant consideration


So much as does not exceed £125,000


So much as exceeds £125,000 but does not exceed £250,000


So much as exceeds £250,000 but does not exceed £925,000


So much as exceeds £925,000 but does not exceed £1,500,000


The remainder (if any)


(1C) If the relevant land consists entirely of residential property and the transaction is one of a number of linked transactions, the amount of tax chargeable in respect of the particular transaction under consideration is determined as follows—

Step 1

Apply the rates specified in the second column of Table A in subsection (IB) to the parts of the relevant consideration specified in the first column of that Table.

Step 2

Add together the amounts calculated at Step 1 (if there are two or more such amounts).

Step 3

Multiply the amount given by Step 1 or Step 2, as the case may be, by—


C is the chargeable consideration for the transaction, and

R is the relevant consideration.”

(5) In subsection (2) for the words from the beginning of that subsection to the end of Table A substitute—

4 Dec 2014 : Column 451

“If the relevant land consists of or includes land that is not residential property, the amount of tax chargeable is the percentage of the chargeable consideration for the transaction determined in accordance with Table B below by reference to the amount of the relevant consideration.”

(6) In subsection (3) for “subsection (2)” substitute “subsections (IB) and (2)”.

(7) In subsection (4) at the beginning insert “For the purposes of subsections (1C) and (2),”.

(8) Omit subsection (7).

(9) Section 74 (exercise of collective rights by tenants of flats) is amended as follows.

(10) In subsection (1A)—

(a) in the opening words, for “rate” substitute “amount”,

(b) in Step 2—

(i) for “rate of tax and the” substitute “amount of', and

(ii) for “subsections (2) and (3)” substitute “subsection (IB)”,

(c) in Step 3—

(i) for “rate of tax and the” substitute “amount of”, and

(ii) for “subsections (2) and (3)” substitute “subsection (IB)”, and

(d) in Step 4 for “subsections (2) and (3) do” substitute “subsection (IB) does”.

(11) For subsections (2) and (3) substitute—

“(IB) Where step 2 or 3 of subsection (1A) requires the amount of tax chargeable to be determined in accordance with this subsection, it is determined as follows.

Step 1

Determine the amount of tax chargeable under section 55 as if the relevant consideration for the chargeable transaction were the fraction of the relevant consideration calculated under step 1 of subsection (1A).

Step 2

Multiply the amount determined at step 1 by the number of qualifying flats contained in the premises.”

(12) In section 75 (crofting community right to buy) for subsections (2) and (3) substitute—

“(1A) In that case, the amount of tax is determined as follows—

Step 1

Determine the amount of tax chargeable under section 55 as if the relevant consideration for the chargeable transaction were the fraction of the relevant consideration produced by dividing the total amount of that consideration by the number of crofts being bought.

Step 2

Multiply the amount determined at step 1 by the number of crofts being bought under that transaction.”

(13) In section 77(l)(b) (notifiable transactions) for “which tax is chargeable at a rate of 1 % or higher” substitute “any part of which tax is chargeable at a rate of more than 0%”.

(14) In section 77A(2)(a) (notifiable transactions: exception of certain acquisitions of major interests in land: interpretation) for “1% or higher” substitute “more than 0%”.

(15) In section 80(2) (requirement to make return where contingency ceases, or consideration is ascertained, and tax or additional tax is payable etc)—

(a) in the opening words, after “before” insert “(calculated in either case according to the effective date of the transaction)”, and

(b) omit paragraph (c), but not the “and” at the end.

(16) In section 80(4) (cases where less tax payable) after “in respect of a transaction” insert “(calculated according to its effective date)”.

4 Dec 2014 : Column 452

(17) In section 81ZA(l)(c) (alternative finance arrangements: additional tax where reliefs withdrawn to be calculated by reference to effective date) for “by reference to the rates in force at” substitute “according to”.

(18) In section 81A(1) (requirement to make return in consequence of later linked transactions where tax or additional tax is payable etc)—

(a) in the opening words, after “before” insert “(calculated in either case according to the effective date of the earlier transaction)”, and

(b) omit paragraph (c), but not the “and” at the end.

(19) In section 109(2)(b) (general power to vary Part 4 of the 2003 Act: power to alter descriptions of transaction chargeable at any existing rate or amount) after “amount” insert “, or in respect of which tax is calculated in accordance with any particular provision”.

(20) In section 122 omit the entry for “rate of tax”.

(21) In paragraph 3(l)(b) of Schedule 4A (certain high-value transactions not linked to other transactions for purposes of section 55(4)) for “55(4)” substitute “55(1B), (1C) and (4)”.

(22) Schedule 6B (transfers involving multiple dwellings) is amended as follows.

(23) For paragraph 4(1) substitute—

“(1) If relief under this Schedule is claimed for a relevant transaction, the amount of tax chargeable in respect of the transaction is the sum of—

(a) the tax related to the consideration attributable to dwellings (see paragraph 5(1) and (2)), and

(b) the tax related to the remaining consideration (if any) (see paragraph 5(7)).”

(24) Omit paragraph 4(4).

(25) For the italic heading before paragraph 5 substitute “The amount of tax chargeable”.

(26) For paragraph 5(1) and (2) substitute—

“(1) For the purposes of paragraph 4(l)(a), “the tax related to the consideration attributable to dwellings” is determined as follows—

Step 1

Determine the amount of tax that would be chargeable under section 55 on the assumption that—

(a) the relevant land consisted entirely of residential property, and

(b) the relevant consideration were the fraction produced by dividing total dwellings consideration by total dwellings.

Step 2

Multiply the amount determined at Step 1 by total dwellings.

Step 3

If the relevant transaction is one of a number of linked transactions, go to Step 4.

Otherwise, the amount found at Step 2 is the tax related to the consideration attributable to dwellings.

Step 4

Multiply the amount found at Step 2 by—


“CD” is the consideration attributable to dwellings for the relevant transaction, and “TDC” is total dwellings consideration.

(2) But if the amount found at Step 2 of sub-paragraph (1) is less than 1% of total dwellings consideration, for the purposes of paragraph 4(l)(a) “the tax related to the consideration attributable to dwellings” is an amount equal to 1% of the consideration attributable to dwellings.”

(27) For paragraph 5(7) substitute—

“(7) For the purposes of paragraph 4(l)(b), “the tax related to the remaining consideration” is the appropriate fraction of the amount of tax which (but for this Schedule) would be due in respect of the relevant transaction.

4 Dec 2014 : Column 453

(8) In subsection (7) “the appropriate fraction” means—


“RC” is the remaining consideration for the relevant transaction,

“TDC” is total dwellings consideration, and

“TRC” is total remaining consideration.

(9) For a transaction that is not one of a number of linked transactions, “total remaining consideration” is the remaining consideration for that transaction (see paragraph 4(3)).

(10) For one of a number of linked transactions, “total remaining consideration” is—

(a) the total of the chargeable consideration for all those transactions, less

(b) total dwellings consideration.”

(28) In paragraph 6(1) (change of circumstances after relief given) for paragraph (c) substitute—

“(c) had the event occurred immediately before the effective date of the transaction, more tax (calculated according to the effective date of the transaction) would have been payable, whether because the transaction would not have been a relevant transaction or otherwise.”

(29) In paragraph 6(3) (requirement to make return where more tax payable than was paid) omit paragraph (c), but not the “and” at the end.

(30) In paragraph 8(1) of Schedule 7 (acquisition relief)—

(a) for “rate” substitute “amount”, and

(b) for “0.5%” substitute “an amount equal to 0.5% of the chargeable consideration for the transaction”.

(31) In paragraph 4B(1) of Schedule 9 (shared ownership transactions) for “rate” substitute “amount”.

(32) In paragraph 12 of Schedule 9 (shared ownership trusts) for “rate” substitute “amount”.

(33) In paragraph 30(2) of Schedule 15 (partnerships) in paragraph (a) for “rate of tax chargeable under that section is 1% or higher” substitute “amount of tax chargeable under that section is not zero”.

(34) In paragraph 3(3) of Schedule 17A (leases that continue after a fixed term: additional tax to be calculated by reference to effective date)—

(a) in the opening words, after “before” insert “(calculated in either case according to the effective date of the transaction)”, and

(b) omit paragraph (c), but not the “and” at the end.

(35) In paragraph 4(3) of Schedule 17A (treatment of leases for indefinite term: additional tax to be calculated by reference to effective date)—

(a) in the opening words, after “before” insert “(calculated in either case according to the effective date of the transaction)”, and

(b) omit paragraph (c), but not the “and” at the end.

(36) In paragraph 7(1) of Schedule 19 (old linked transactions relevant to rate of tax) for “rate” substitute “amount”.

(37) In paragraph 9(4) of Schedule 19 (exercise of option or right of pre-emption acquired before implementation date) for “rate” substitute “amount”.

(38) In consequence of amendments made by preceding provisions of this Resolution—

(a) in the Finance Act 2006, omit section 162(1),

(b) in the Finance Act 2010, omit section 7(1), and

(c) in the Finance Act 2012—

(d) omit section 213(1), and

(e) in Schedule 35, omit paragraphs 2(4) and (6) and 5(3).

4 Dec 2014 : Column 454

(39) The amendments made by this Resolution have effect in relation to any land transaction of which the effective date is, or is after, 4 December 2014.

(40) But those amendments do not have effect in relation to a transaction if the purchaser so elects and either—

(a) the transaction is effected in pursuance of a contract entered into and substantially performed before 4 December 2014, or

(b) the transaction is effected in pursuance of a contract entered into before that date and is not excluded by paragraph (42).

(41) An election under paragraph (40)—

(a) must be included in the land transaction return made in respect of the transaction or in an amendment of that return, and

(b) must comply with any requirements specified by the Commissioners for Her Majesty's Revenue and Customs as to its form or the manner of its inclusion.

(42) A transaction effected in pursuance of a contract entered into before 4 December 2014 is excluded by this paragraph if—

(a) there is any variation of the contract, or assignment (or assignation) of rights under the contract, on or after 4 December 2014,

(b) the transaction is effected in consequence of the exercise on or after that date of any option, right of pre-emption or similar right, or

(c) on or after that date there is an assignment (or assignation), subsale or other transaction relating to the whole or part of the subject-matter of the contract as a result of which a person other than the purchaser under the contract becomes entitled to call for a conveyance.

(43) In paragraphs (40) to (42)—

“land transaction return”, in relation to a transaction, means the return under section 76 of the Finance Act 2003 in respect of that transaction;

“purchaser” has the same meaning as in Part 4 of that Act (see section 43(4) of that Act);

“substantially performed”, in relation to a contract, has the same meaning as in that Part (see section 44(5) of that Act).

And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—(Steve Webb.)

Mr Speaker: I am sure that the Minister who should be here is exceptionally grateful to the Minister for Pensions. I now call Shabana Mahmood.

11.50 am

Shabana Mahmood (Birmingham, Ladywood) (Lab): I am, frankly, stunned. I am not entirely sure what is meant to happen in the House of Commons when a Minister is not present. However, I am sure that the Minister would have spoken in favour of the proposals that were introduced in yesterday’s autumn statement—

Thomas Docherty (Dunfermline and West Fife) (Lab): On a point of order, Mr Speaker. As far as I can see, no Minister is present. [Interruption.] I mean that no Treasury Minister is present. Is this normal practice? How can my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood) proceed with her speech when there is no Treasury Minister here to respond?

Mr Speaker: Let me say to the hon. Gentleman, on the strength of having been in the House for 17 years, that I have from time to time observed quite a lot of things that do not constitute normal practice. Let me also say to him, for the avoidance of doubt, that government is seamless in procedural terms, and any Minister can move the motion on the Order Paper.

4 Dec 2014 : Column 455

Is it commonplace for the Minister who has direct responsibility to be absent at the material moment? It is not, although, in fairness, it having happened now under this Government, I should point out that it did happen on one occasion under the last. It is an irregular state of affairs, but the Minister who should be here will, as I have said, be immensely grateful to the Minister for Pensions, both for his presence and for his quickness of mind and fleetness of foot in taking to the Dispatch Box. I think that we will leave it there for now.

It must be said that this sort of thing is to be deprecated—very strongly deprecated—but it does not happen very often, and I hope that it will not happen again. No doubt words can be had. It is everyone’s responsibility to keep an eye on the Annunciator. The Minister has a duty to be present at the appointed moment, and the appointed moment can be a movable feast. It is the responsibility of the Minister and the Whips to make sure that the Minister is present. He or she was not present, but the Minister for Pensions has helped out.

Steve McCabe (Birmingham, Selly Oak) (Lab): On a point of order, Mr Speaker. I just want to clarify something. If the Minister eventually manages to turn up, will it be seemly for him to take part in the debate, having not been here at the beginning?

Mr Speaker: The point about being here at the start relates to statements. I hope that the hon. Gentleman does not feel too sore about that.

Steve McCabe: Not at all.

Mr Speaker: I am grateful to the hon. Gentleman for his rather adroit piece of time-wasting.

Mr Alan Reid (Argyll and Bute) (LD): On a point of order, Mr Speaker. This is indeed a day on which we are witnessing parliamentary events that are not very common.

One possible reason for the Minister’s not being here on time is that he was caught unexpectedly—surprised—by the fact that only one Member of the Opposition asked a question in response to the statement by the Minister for Pensions. It is the first time in all my years in the House that I have been present when Opposition Members—apart from the Front-Bench spokesman—have had absolutely nothing to say in response to a statement. Is it not possible that the Minister was held up because he expected the statement to last for the normal length of time?

Mr Speaker: The hon. Gentleman is not only dexterous in parliamentary terms, but he is, in my experience, an unfailingly loyal man, and he has done his best to rescue those on the Treasury Bench in the current circumstances. All that I will say is that Ministers, in any Government, should not be surprised. They must not allow themselves to be put in a position in which they are surprised, and therefore not present. The Minister has not spoken, and therefore if the Minister turns up—and we are grateful to him or her if he or she does—the Minister will have an opportunity to speak.

4 Dec 2014 : Column 456

The Secretary of State for Work and Pensions (Mr Iain Duncan Smith) rose—

Mr Speaker: I will take a point of order from the Secretary of State for Work and Pensions, but then we must proceed with Shabana Mahmood’s speech.

Mr Duncan Smith: On a point of order, Mr Speaker. May I, on behalf of the Government, unreservedly apologise to you if any indiscretion has been performed or any bad opinion has been made? This is not intentional. My Ministers and I will see this debate through to its conclusion on behalf of the Government.

Mr Speaker: I am very grateful to the Secretary of State. We will see whether the Treasury Minister turns up, but the willingness to help of the Secretary of State for Work and Pensions is noted and appreciated, and I thank him for his typical courtesy in what he has just said. Let us now proceed in a pragmatic way and listen to Shabana Mahmood.

Shabana Mahmood: Thank you, Mr Speaker. I am not sure that I can respond to an opening speech that I have not heard. [Interruption.] Well, the case has not been made by the Government—the motion has only been made formally—so may I take some guidance from you, Mr Speaker, on how best to proceed?

Mr Speaker: Yes, the hon. Lady is welcome to take guidance from me, and it is this: the hon. Lady’s responsibility is to speak to the motion on the Order Paper rather than to any particular speech that might be made, so while I understand that this is an unusual state of affairs, the responsibility is to speak to the motion. The hon. Lady knows what the purport of the motion is, so she should not unduly trouble herself by trying to anticipate what the Minister might say if he were here—because he can’t, because he isn’t.

Sir Oliver Heald (North East Hertfordshire) (Con): On a point of order, Mr Speaker. Yesterday we heard from the Chancellor of the Exchequer about a change to stamp duty land tax on residential property transactions, and I notice that the information he gave yesterday is set out at step 2 of the motion before the House. Would it therefore be in order for the hon. Member for Birmingham, Ladywood (Shabana Mahmood), in making her speech and her remarks, to go through those points which are already clearly on the record and are contained in the motion?

Mr Speaker: It would be. It would be perfectly orderly, and it is good of the hon. and learned Gentleman to offer to help, but I think we can get by without his assistance for now.

I hope my guidance to the hon. Lady is clear. I realise this is an unusual situation for her to face, but if I remember rightly she is a product of Lincoln college, Oxford, so she is what they call prodigiously bright, and I am sure she can cope with the situation.

Shabana Mahmood: Thank you, Mr Speaker, and forgive me for seeking clarification on just one further point: I wonder whether it might be more helpful and

4 Dec 2014 : Column 457

conducive to bringing the debate along if I come in later, once the Minister has been able to present himself in the Chamber.

Mr Speaker: The answer is that the hon. Lady would need the leave of the House to proceed in that way, but my strong sense is that the leave of the House would be forthcoming. [Interruption.] I am in receipt of intelligence on this matter—[Interruption.] The Minister is here! I was just about to say he was a minute away. The Minister is with us and we are grateful to the Minister. [Interruption.] Order.

Thomas Docherty: Good afternoon!

Mr Speaker: Mr Docherty, calm yourself. You are aspiring to be a statesman, but you have got some distance to travel.

If the Minister is content, he can now speak to his motion and the hon. Member for Birmingham, Ladywood (Shabana Mahmood), the shadow Minister, can then respond. I think that will be the most orderly way to proceed. I am trying to give the Minister, who has rushed to the Chamber, a chance to recover his breath. In fairness to the Minister, I should say that he came to see me about these matters the other day, displaying his usual courtesy, which was much appreciated by the Chair, and I know that it is inadvertent on his part that he is late. These things happen. We do not need to dwell on it. The Minister is here, and I thank him for that, and in the hope he has now recovered his breath, I look forward to him opening the debate on his own motion.

11.59 am

The Financial Secretary to the Treasury (Mr David Gauke): Inadvertent though it may have been, may I begin by apologising to you, Mr Speaker, and to the House for my late arrival for this debate? May I also thank my right hon. Friend the Minister for Pensions for moving the motion and the hon. Member for Birmingham, Ladywood (Shabana Mahmood) for permitting me the opportunity to address the House on this important matter? May I also thank you, Mr Speaker, for your encouragement and support on delivering this important reform and for having the opportunity to discuss the parliamentary procedure in advance?

Yesterday, as we have heard, the Chancellor, in his autumn statement, announced an important reform to stamp duty land tax. Moving from a slab to a slice arrangement is right in terms of fairness and economic efficiency. As the Chancellor set out, 98% of people who pay the tax will benefit, and the previous economic distortions in the system have been removed, benefiting the housing market generally.

Sir Oliver Heald: The Minister will be aware that in north Hertfordshire house prices are challenging for first-time buyers. I believe that 91%-plus of people will benefit from this reform and that the relief for the purchaser of an average house costing £275,000 is as much as £4,500. I do not know whether he can confirm that, but I just wish to pay tribute to the reform, which will help a lot of people to get on to the housing ladder.

Mr Gauke: I thank my hon. and learned Friend for his thoughtful and timely intervention. He raises an important point and is exactly right in saying that the

4 Dec 2014 : Column 458

purchaser of a house worth £275,000, which is the average house price in the UK, will pay £4,500 less in stamp duty land tax than they would have done under the old system. The purchaser of a property worth the London average of £510,000 will pay £4,900 less SDLT, and in every region, nation or city of the UK people will pay less in the vast majority of transactions.

Mrs Anne Main (St Albans) (Con): I am delighted that the Treasury has been persuaded of the argument I have been making for some time. I recall saying to the Minister that this would be on my Christmas wish list for my constituents, and I have already received e-mails congratulating the Chancellor and his Department on doing this. It is going to save a lot of young people a lot of money when they are trying to get on in the difficult housing market.

Mr Gauke: I am keen that this does not become a Hertfordshire-dominated debate, but let me thank my hon. Friend, who has been tireless in campaigning on this issue. Indeed, she attracted attention to it in an Adjournment debate earlier this year, expressing her views clearly. In particular, she made the case for helping those who want to get on to the housing ladder, and I know that is a big issue in her constituency, as it is in mine, where house prices are above the average. She has made some important points in this area.

Richard Graham (Gloucester) (Con) rose

Mr Gauke: In an attempt not to keep this debate restricted to Hertfordshire MPs, let me give way to my hon. Friend.

Richard Graham: I stand to speak on behalf of my constituents of Gloucester, providing the geographical diversity the Minister was seeking, where the average house price is about £165,000—considerably less than the national average of £275,000. So the vast majority of my constituents buying houses will benefit from either a zero rate of SDLT or the 2% rate he has mentioned. Does he agree that it would be helpful if the Treasury were able to provide information to all of us as to what the savings will be for our constituents, based on the average house price?

Mr Gauke: My hon. Friend raises an interesting and important point, and we could provide information on the basis of local authorities figures. What I can tell him is that in the Gloucester local authority area—I am not sure whether it is coterminous with his seat—more than 99% of those who pay SDLT will pay less as a consequence of these changes.

It is striking to note the diversity of commentators who have been positive. Estate agents, professional bodies and others have all shown support. The Royal Institution of Chartered Surveyors has called it a “long overdue” reform. The director-general of the Council of Mortgage Lenders said:

“This fundamental reform has been a long time coming...the vast majority of mortgaged transactions will benefit from lower tax as a result of this move.”

The Building Societies Association has welcomed the announcement. It said:

4 Dec 2014 : Column 459

“It will help individuals and families buy their own home, and smooth out the crazy tax jumps buyers have suffered around the top of each band.”

This is a principled reform that exemplifies the Government’s commitment to a fairer and more efficient tax system.

The previous SDLT regime created distortions in the housing market, imposed perverse incentives and made it harder to get on and move up the property ladder, or indeed move down the property ladder for those wishing to downsize. This major and, as some have argued, overdue reform demonstrates that even in the past six months of this Parliament, we are a Government who are continuing to make radical change for the benefit of the British people.

We realise that this is a big change, even for those who will benefit at such a significant moment in their lives. We have ensured that the changes have been properly explained. Her Majesty’s Revenue and Customs has produced full guidance on the Government website, including a calculator that compares the old and the new systems. As of 9 am this morning, that calculator had been used almost 500,000 times, with no significant delays reported, showing the level of interest in this reform among the public. Critically, HMRC’s specialist call centre was manned until midnight last night when the changes took effect, and is open now. HMRC specialists responded to around 250 inquiries by telephone and all but 3% were resolved immediately, and the remaining handful are being followed up.

Steve McCabe: Will the Minister confirm that, under the Labour party’s mansion tax proposals, it would take more than five years for a person in a £2 million property to pay the same amount of tax that they will pay on a single transaction under these proposals? Is that a recognition that people in those properties are simply not paying enough tax?

Mr Gauke: The point I would make, as the hon. Gentleman draws me into that issue, is that it is better to collect this tax at the point at which people are entering into transactions, the revenue is available, and there are not the same cash-flow difficulties and problems with the asset-rich cash poor. This is a much better policy than a mansion tax, which would create very significant difficulties—a point that was repeatedly made by a number of Opposition Members who represent London seats.

Sir Oliver Heald: My hon. Friend talks about Opposition Members, but they are not here in the Chamber. The hon. Member for Birmingham, Selly Oak (Steve McCabe) is the only one and he has come in to moan about a policy that will help 98% of homebuyers. What sort of party is that?

Mr Gauke: Again, my hon. and learned Friend makes a valuable point. Just on percentages, in Birmingham, more than 99% will benefit from this change. I am sure that the hon. Gentleman’s constituents will welcome these matters.

Mrs Main: The other point that the hon. Gentleman fails to realise is that the mansion tax that Labour proposes would be on top of this measure, so therefore

4 Dec 2014 : Column 460

he is doubly worried about the millionaires whom he wishes to protect. On top of that, Labour would roll up the mansion tax into a death tax for millionaires.

Mr Gauke: As my hon. Friend has raised that point, I will make this observation. Labour says that more money should be raised from properties worth more than £2 million. In 2015-16, this measure will raise more than £300 million from such properties. Obviously, that is a useful sum for the Exchequer, but if the view is that Labour wants to raise £1.2 billion from the mansion tax on those properties, will it drop that figure down to £900 million? That is a question that the hon. Gentleman will no doubt be seeking to respond to later.

Robert Jenrick (Newark) (Con): This policy was hugely welcomed in my constituency—Newark and Bingham, two of the fastest-growing towns in the east midlands, have lots of first-time buyers—but will the Minister provide some reassurance over rates? Will the rates, which are very high at the top, keep pace with rising house prices? We do not want reasonably affluent people on middle incomes being drawn into these rates in five, 10 or 20 years.

Mr Gauke: We have set out the rates as they stand. If there is to be any uprating, it will be a matter for future Budgets and autumn statements, but I stress that across the country 98% of transactions where stamp duty is paid will see a reduction in SDLT. My hon. Friend raises a matter that might be an issue in the future, but in every city, town and county the majority will benefit.

So far, I have touched on the administrative transitional steps for the major reforms introduced yesterday and on HMRC’s support. We have also put in place arrangements for individuals who have exchanged contracts but not yet completed. When the new system came into force, transitional rules ensured they would not lose out compared with what they expected to pay in SDLT. In those cases, people have the choice to choose the lesser of the tax rates under the old and new systems. That is only fair.

I look forward to debating the reforms in full as the stamp duty land tax Bill progresses. As my right hon. Friend the Leader of the House made clear earlier, that discussion will begin on Second Reading next Wednesday. However, today, I would like briefly to explain our rationale for introducing the measures via two motions under the Provisional Collection of Taxes Act 1968. First, it was important to act quickly, because reform to SDLT was long overdue. Usually, the measures would have formed part of the annual Finance Bill following a Budget, which is why the stand-alone Bill I am introducing today is premised on the same financial motions as those that would follow a Budget. The first motion, which the Chancellor moved yesterday at the end of his statement, gave effect to the changes from midnight. That was important to give people certainty and to avoid forestalling.

Secondly, hon. Members will understand that the measure was subject to strict confidentiality. Given the potential impacts on the housing market of a tax change of this significance, it was right that the measure was announced first by the Chancellor to the House. We ensured that the motion passed yesterday was available in the Vote Office immediately the Chancellor sat down after his main speech and then voted on at the end of

4 Dec 2014 : Column 461

questions and answers. The motion is effectively the Bill I hope to introduce in a few moments. For the reasons I set out, it was necessary to have two motions under the Provisional Collection of Taxes Act and today to allow for a fuller discussion.

I look forward to discussing the Bill in greater depth next Wednesday, but today is also an opportunity for the House to debate the matter, and I commend the motion to the House.

12.13 pm

Shabana Mahmood: With the leave of the House, I wish to respond to the Minister’s speech. I thank him for eventually making it to the Chamber to move his motion and introduce the debate—just when I thought I had this place sussed out, something else happens to remind me of the many different ways of interpreting parliamentary procedure and rules. I have learned something new today, for which I am grateful.

As we indicated yesterday, once the Chancellor had made the autumn statement, we will support the measures today and the Bill next week. I have seen the draft clauses and explanatory notes—there are only two clauses and one schedule—and we will consider the technical detail ahead of the debate next week, but in the meantime I have a few questions for the Minister. If he cannot answer them today, I hope he will give us further details in time to inform our debate next week.

The reforms to SDLT apply only to residential properties; the previous stamp duty system—the so-called slab system—remains in place for commercial properties. Beyond mere electioneering, what is the Government’s reason for focusing the proposals on the residential market? As he knows, in Scotland, where the Scottish Government will take control of stamp duty next April, the land and buildings transactions tax will apply to both commercial and residential properties, meaning that Scotland will have the system for both types of property, whereas we will retain two different systems. It would be helpful to understand the Government’s thinking and any assessments the Treasury has done on having two different systems.

In the context of corporation tax possibly being devolved to Northern Ireland, where different circumstances apply, have the Government done any modelling on the potential for unhealthy tax competition if we have this differential in the way in which stamp duty operates on commercial property in Scotland and England? It would be helpful to know how much work the Government have done on that point and whether they plan to introduce further proposals.

What assumptions have the Government made regarding house price increases as a result of the stamp duty changes? It looks like we are seeing a 1.4% increase in prices against a 1% reduction in stamp duty at the lower end, and it seems also that the tax take from stamp duty will rely on a 5% annual increase in property prices. Have the Government assessed whether that might price more people out of the property market? As the Minister will be aware, the OBR’s assessment accompanying the autumn statement states that house prices will continue to rise faster than incomes, which will risk pushing home ownership further out of reach for many people. Will he share with us the Treasury’s assessment and modelling in relation to the stamp duty changes and the impact on home ownership and prices?

4 Dec 2014 : Column 462

The last time the Minister and I debated stamp duty—in a debate introduced by the hon. Member for St Albans (Mrs Main) in Westminster Hall—it was one of the only debates the House has had on stamp duty in recent times. It was a good opportunity for Members to raise issues of concern, and we discussed at length the difficulties with the system of stamp duty that the Government have now changed—the slab structure and so-called cliff edges, which no doubt created significant price distortions around the thresholds.

Many Members from all parties, housing specialists and commentators have long complained about the structure of stamp duty. The Institute for Fiscal Studies, the Mirrlees reviews and others all agreed that the tax was badly designed. Furthermore, it has undoubtedly been an increasing burden on buyers. From 1997 to 2005, house price inflation averaged more than 10% a year, and the proportion of property transactions attracting stamp duty rose from about half to more than three quarters over roughly the same period.

Measures to alleviate the burden focused primarily on thresholds and stamp duty holidays: the threshold was doubled in 2005; temporarily increased by £50,000 for one year in 2008; and doubled again for first-time buyers for three years from March 2010. Stamp duty has continued to be a significant burden, however. It has increased by 30% between 2009-10 and 2013-14. We have seen continued growth in the housing market and more people have been brought within the higher tax bracket, all of which have increased the burden significantly. This is therefore a sensible measure, and we will support it.

Measures to alleviate the burden on buyers are welcome, but we are experiencing the worst housing crisis for a generation, and we need much more action on housing supply if we are to get our housing market into better shape and help more young people and families to realise their dream of home ownership. I made this point to the Minister in the Westminster Hall debate as well. I am sure the Government will say that they are taking action on supply through the measures in the autumn statement and in their national infrastructure plan, but most of the announcements made in the flurry of activity over the past couple of days were in fact reannouncements of existing schemes and money, and many of the projects are already in the planning system.

The truth is that this Government have presided over the lowest levels of house building in peacetime since the 1920s. We are not even building half the homes we need to keep up with demand. We also know that home ownership is at its lowest level for 30 years and that, in the next few years, the average deposit is going to rise to £72,000, a sum that is far beyond the reach of many of our constituents, and certainly of my constituents in Birmingham, Ladywood. We needed to see much more action from the Government yesterday on getting homes built as well as on dealing with the issues on the demand side. We have set out our proposals, including a policy of getting 200,000 homes a year built by 2020. It would have been good if the Government could have taken a similarly ambitious approach to house building in their autumn statement yesterday. We also need to deal with the underlying causes of the housing crisis.

4 Dec 2014 : Column 463

Sir Oliver Heald: The hon. Lady seems to have forgotten about the great recession that her party visited on this country. It is not surprising that, in those circumstances, fewer houses were built during that period.

Shabana Mahmood: I find it interesting that Government Members are happy to plead global circumstances to explain their failures in Government yet conveniently forget that we had a global financial crisis in 2008. I think the hon. and learned Gentleman made that point in a slightly petty way.

Steve McCabe: If we are supposed to have recovered from the recession, why is house building now at its lowest level since the 1920s? To me, that sounds like a failure rather than a success.

Shabana Mahmood: My hon. Friend is absolutely right. The Government said in their autumn statement that everything was on course. If the finances are in such a good state, why will they not adopt an ambitious programme of house building? Until we have action on the supply side, we will not be able to get to grips with this lop-sided housing market.

We need to get more homes built, and we also need to deal with the underlying causes of the crisis. For example, we know that too much land is being held as a speculative investment even though local people need homes, and that the trickle of new developments that are being built are snapped up long before people from the area can benefit from them. We also know that our country’s capacity to build homes has shrunk drastically. Fifty years ago, the public and private sectors between them built more than 300,000 homes a year; now we rely on a small number of volume house builders and, as a result, we build far fewer homes.

A number of measures are needed to deal with the underlying causes of the housing crisis and to get the number of homes built that this country needs. We have proposed new powers for local authorities, as well as a help to build scheme to run alongside the Government’s Help to Buy scheme, which we support. We particularly want to see an increase in the role of small and medium-sized construction firms, because the resulting diversity in the market would help to get more homes built and deal with the underlying causes of the crisis. As I have said, we need to see supply-side measures in conjunction with the proposals on stamp duty and the Help to Buy scheme. That would help us to get to grips with the crisis and arrive at a position where the dream of home ownership was not so far out of the reach of our constituents across the country.

I also want to mention our proposal for a tax on high-value properties—the so-called mansion tax. We believe that that is a necessary measure to get an annual sum of money into our national health service, which is in crisis and in desperate need of further, stable funding. It is interesting that the Chancellor has accepted, in his stamp duty proposals, the principle that very high-value properties in this country are under-taxed. Earlier in this Parliament, he introduced the annual tax on envelope dwellings—the ATED—which is described as a kind of mansion tax for high-value properties held by companies in a corporate envelope. Now, the Government are characterising the new stamp duty changes as their version of a mansion tax. I wonder why, as they creep towards an actual mansion tax, they will not make that

4 Dec 2014 : Column 464

final leap and simply adopt our proposal, thereby guaranteeing an annual sum for our national health service.

The Prime Minister is reported to have remarked some time ago that the Government could never introduce a mansion tax because the Conservative party’s donors would not accept it. I wonder whether that is the only thing holding the Government back. The truth is that they should go further and adopt our proposal. There is a difference between what they are doing today and our proposal. Stamp duty is a transaction tax, but our tax on high-value properties would be an annual charge that would provide a stable source of revenue for the national health service.

One of the Government’s regular criticisms of our proposal is that it would hit those who were asset rich but income poor. However, we have already set out how that could be dealt with through a system of deferral for anyone with an income of less than £42,000 a year—in other words, a basic rate taxpayer. That would be a perfectly sensible and adequate way of helping those people. We could then fairly and progressively introduce a tax that would help to get the national health service’s finances back on track.

Mr Gauke: I should like to ask the hon. Lady a practical question about her policy of excluding from the mansion tax those with an income below £42,000. She will be aware that some of the richest people in this country live off their capital rather than their income. Does she acknowledge that such people could conceivably fall within the proposed exemption?

Mr Deputy Speaker (Mr Lindsay Hoyle): Order. We need to be a bit careful here. We should not really be discussing the policies of the Opposition. The debate is about stamp duty. We have already had a difficult start, and I do not want things to get any more difficult.

Shabana Mahmood: Thank you, Mr Deputy Speaker. I would be happy to discuss those technical details with the Minister on another occasion when we would not fall out of order.

I reiterate that we expect our policy to raise the £1.2 billion that, according to the Chief Secretary to the Treasury, internal Treasury modelling has shown it could raise. We have seen nothing to change our assessment of those figures. As I was saying, the NHS is in dire straits. There is a crisis in accident and emergency, and it is getting harder to see a GP. This Government have made things worse with their £3 billion top-down reorganisation of the NHS. If that money was available at the beginning of this Parliament, it should have gone into front-line services. We therefore need an annual source of revenue to help to deal with those issues, and a tax on the highest-value homes—the so-called mansion tax—will help the next Labour Government to do that. As I said at the outset, we believe that the proposed changes to stamp duty represent a sensible measure, and they will have our support today and next week when the proposed legislation is formally brought forward.

12.29 pm

Mrs Anne Main (St Albans) (Con): I am delighted to speak in this debate and am pleased that the Treasury has been persuaded of the need to do this and to find a

4 Dec 2014 : Column 465

way of doing it, which was the crucial point. I know that there is no great pot of money out there to throw around, but this measure is vital for young people struggling to get on the housing ladder and for people across the country. Having looked at the average house price in the UK, I know that it will help many families in many constituencies, including my own. If I was being very greedy, I would have said that I would have liked the bands to have been moved up, but I shall rest happy with the fact that we have now got rid of the hated slab structure that caused what I called zombie prices, which no family ever paid. Nobody paid £251,000 for a property, because it incurred an enormous jump in the tax they had to pay.

I believe that one of the reasons why the Help to Buy scheme was not taken up well inside St Albans was that our average house price is so high compared with that in the rest of the country. I found one property at the time that was under £125,000, and that was a studio. Barely any properties came under £250,000. If people cannot save up a deposit, how on earth will they afford to save the tax as well?

This measure is hugely welcome. I am sorry to say to my hon. Friend the Financial Secretary that Lori, who served me my coffee this morning in Lori’s Café, said that her new pin-up is now the Chancellor, because he will save her thousands of pounds when she moves into her retirement bungalow early next year. I said that I would give Lori’s good wishes to the Chancellor, because she has had a happy Christmas present from him.

Jonathan Edwards (Carmarthen East and Dinefwr) (PC): I share the hon. Lady’s sentiment that this seems to be a very progressive measure, but is she not slightly concerned that the result might be increased house price inflation?

Mrs Main: I think that house prices will even out. If there are more transactions and people put house prices up, there will be house price inflation, but I believe that the Government are trying to tackle that by having a big house building programme. The measure will stop the pressure on people who fall around the bands. People have been told that they cannot charge a certain amount for their house, even if they have put a conservatory on it or improved their kitchen. Some have not made those improvements because they would have been pressed into a different band that would have incurred a large amount of tax.

One point that has not been mentioned so far is the possible knock-on effect on other industries. People were telling me that they were reluctant to put in double glazing, to build conservatories or to do any improvements to their houses, that they were struggling to find enough money to buy furniture as well as to pay the deposit because they had to save for the tax, which they could not roll up into their mortgage if they were first-time buyers, and that they were struggling with the multiples. People were telling me that they were struggling with the concept of the high fees that they would have to pay and worrying how on earth they would buy anything else to do with their property. I think that people selling home improvements, bathrooms, kitchens, carpets and so on will suddenly find that people who were expecting to pay a large tax bill have a little bit extra in their pocket, thanks to the Treasury, that they can afford to

4 Dec 2014 : Column 466

use to improve their house. They will say that it is worth their moving house, as they will not have the deterrent. This will free up the market and there will be a lot of knock-on benefits.

We have to be mindful of house price inflation, because it excludes a lot of people from the market, but I am absolutely certain that in my area the majority of people who will benefit will be young first-time buyers who are desperately trying to save that awful combination of a very large deposit, solicitors’ legal fees and a large bung to the taxman. I am truly grateful that the Treasury was persuaded of that argument.

I have crunched a few numbers, and I know that somebody asked whether the Treasury would do this. In St Albans, a young couple buying their first flat would have paid an average of £8,132 in the stamp duty levy and they will now pay £4,597. That is a large chunk of money when people are starting out in life. Similarly, in a terraced property they would save just over £2,000, in a semi-detached property nearly £5,000 and in a detached four-bedroom property nearly £2,500. At every level of average house prices, people will save thousands of pounds. Many young people, unfortunately, are having to try to rely on the bank of mum and dad. There will be quite a lot of relieved mums and dads who have been digging deep and helping with these heavy burdens who will be grateful about the measure.

I raised this issue with the Prime Minister in April and asked whether he would use his good offices to influence the Treasury on the question of places like St Albans, with barely one house worth less than £250,000. I thank the Prime Minister if he did that.

I accept that people higher up the ladder will not find this good news. In a high-value area such as mine, people will say that if they were to move up from their £1.5 million house or even to move down to a £1 million house, they will pay higher stamp duty. As I said, there is no golden pot of money out there to throw around. I hope that coming in to the next general election we as a party will say that we are acting responsibly and that we have looked at where help is most needed, which is where it is being delivered. Unfortunately, there must be a bit of give in the system somewhere and, unfortunately for the people affected, the give in this case is at the higher end of the market.

I would like to think that stamp duty was originally meant to target higher-value houses and was never meant to catch the people it is catching, including, in my constituency, young people starting out on the ladder and people on the lower income scales. Although I regret that some people will find the measure not to their liking, especially just before Christmas, the majority of people trying to get on the housing ladder—in my constituency, the figure is something like 97%—will find it a huge bonus. The people who sell double glazing, carpets or kitchen and bathroom improvements whose small businesses have been struggling as people have not been making the investments that would push them over the threshold will, I hope, find that people are now making those investments.

I wholeheartedly welcome the measure and the only Scrooge-like bit that I would add at the end is, as colleagues have mentioned, to ask that we keep an eye on the drag. I would not like to think that other people would soon be sucked in to the wrong bands. I say the wrong bands, because I think at the heart of the Treasury’s

4 Dec 2014 : Column 467

proposal is a wish to deliver home ownership to lower income families, young families and people starting out while expecting those with the broadest shoulders to pay a bit more. I welcome these changes.

12.36 pm

Mark Reckless (Rochester and Strood) (UKIP): It is a pleasure to follow the hon. Member for St Albans (Mrs Main), who has set a superb example to those on the Treasury Bench of how to extol this policy. She also secured a Westminster Hall debate, which was useful in pressing the arguments for it.

Notwithstanding today’s procedural issues, the Treasury deserves credit for introducing this measure. It has taken four and a half years of this Government, but the previous Government had 13 years and the one before that had 18 years without introducing this overdue but incredibly important and beneficial reform.

The hon. Member for St Albans has done a lot to push the argument forward and so have other Members. I recall having a conversation with the right hon. Member for Welwyn Hatfield (Grant Shapps)—at that stage at least, he was my friend—in which I made the case for reforming this tax, and he said very clearly that, if we were to do it, it would need to be revenue neutral. However attractive the reform might have been, the number of losers would have made it difficult without the £700 million or £800 million a year that the Treasury is putting in, so there has been a change. If that money oils the wheels of a reform that gets rid of substantial distortions, such as those under the previous tax system, that is a good use of it, and I believe that the Treasury has made the right choice.

My constituents will benefit. Much of our housing stock has been around the £250,000 mark, with rather less around the £500,000 mark. At both levels, the fixed charge of £5,000 once people move past those points has been a significant problem for the housing market and, as the hon. Member for St Albans has said, a lot of the subsidiary industries based around it. That has never been more the case than with the mortgage market review and the general reduction in appetite for some of the riskier lending among banks that has made it difficult for young people and those on the early steps of the housing ladder. They are often capital-constrained and having to find the extra money for the stamp duty almost invariably means that it cannot be spent on something else. It actually often leads to those transactions not happening.

I would criticise, not the Treasury, but the Office for Budget Responsibility for the lack of detailed workings and the lack of comprehensiveness in its forecast for the housing market and how that relates to its estimates for the cost of the stamp duty measure. The OBR has estimated that transactions would rise by 1.1% on account of the reform; I am sure that is a great underestimate. Similarly, the OBR has made an assumption—or a forecast—of a 0.2% increase in residential investment relative to GDP, yet it has assumed that that will be offset by reductions elsewhere in the economy, which it fails to particularise or explain.

I am not impressed, in this area or in others, with the three-men-and-a-dog approach that the OBR has often taken. No wonder it cannot be expected to take on the

4 Dec 2014 : Column 468

Opposition spending proposals as well, not least because it just looks at parts of them, casts its eye over them, scans them a bit and says, “That sounds reasonable,” and nods them through. On the housing side, it has not come anywhere near to taking into account the positive impact that the stamp duty reform will have on the economy, in freeing up transactions and increasing labour mobility, especially around the £250,000 and £500,000 pinch points.

I think that the reform will be very significant. The cost estimates are £365 million for this year, £760 million for next year and £840 million the following year. An assumption has obviously been made of a rise in transactions that leads to the annualised costs falling off once we get into the next fiscal year, because there will have been time for the lags to work through and we will be witnessing a rise in transactions on account of the reform. My strong suspicion, however, is that that rise in transactions will be quite a lot more than the OBR has stated, and as the hon. Member for St Albans said, there will be significant add-ons to other industries that depend on the housing market. In my view, as a result of getting rid of the significant distortions that we have had, there will be dynamic, positive impacts on the economy, which the OBR and—as so often—the Treasury have not taken into account. Such thinking has held back good reforms of taxes in these areas.

Mrs Main: The hon. Gentleman rightly said that labour mobility would increase. People have told me that they were deterred from moving into higher house value areas because they would not only have to take on a higher mortgage but find the tax—almost a tax on their ability to find a job—if they moved to a place where there were more job opportunities but higher house values.

Mark Reckless: The hon. Lady is absolutely right, and that requirement comes when people are most capital-constrained, especially in the current mortgage market. So charging the tax in that way restricts mobility, restricts spending on moving home and leads to fewer transactions.

I have had constituents who have moved from St Albans to Rochester and Strood, attracted by our better-value housing stock. The hon. Member for Broxbourne (Mr Walker) made a forecast that my return to the House as the UKIP Member for Rochester and Strood would lead to falls in house prices across my constituency. I am not sure that that will happen, and in any event, I strongly welcome this real supply-side reform. When the Government do the right thing, particularly in an extremely sensible supply-side reform that should free up the market and lead to significantly greater economic activity around the housing market, I am happy to support that reform, for my constituents and for my party.

12.43 pm

Ian Swales (Redcar) (LD): It is a pleasure to follow the hon. Member for Rochester and Strood (Mark Reckless), who made some good wider economic points. The key point about this reform is that the Government are making a very large cash input, in effect, to make the housing market more liquid and help people move house when they want or need to.

4 Dec 2014 : Column 469

The Government and the Treasury should look at every system where there are huge slab effects, whether on the tax or the benefits side. Slab systems, by their nature, produce cliff edges; and cliff edges, by their nature, produce strange behaviour. We see that in the current benefits system, where interactions between benefits can produce behaviour that was never intended. In this case, those boundaries have led to elaborate avoidance. Overpricing of carpets and curtains is commonly used to reduce the apparent house price to below a threshold. Smoothing out the profile of stamp duty charging reduces the necessity to engage in such above-board avoidance, or nefarious avoidance, which I am sure has gone on as well, owing to the large sums of money involved.

I very much welcome the changes. I should declare an interest, in that my daughter, who lives in Basingstoke, is likely to benefit from them very soon. The reform could have been carried out in a cash-neutral way, but would have been difficult to implement because of the losers involved, so I welcome the injection of money that has enabled it to be framed in such a way that 98% of people will see no change or a saving.

This progressive reform is another example of how the Government are making the people with the broadest shoulders bear the biggest burden. Houses sold at over £937,000 will incur an increase in stamp duty, and a £5 million house will incur a stamp duty increase from £350,000 to half a million pounds—so an extra £160,000 on a large house.

Mark Reckless: May I put on the record a correction in relation to figures that were mentioned earlier in the debate? Purchasers of houses between £937,000 and £1 million lose out. Then there is another quite significant area from £1 million up to, I think, between £1.15 million and £1.2 million that will benefit from the reform.

Ian Swales: I thank the hon. Gentleman for that clarification. It is not something that I have examined closely, given the nature of my constituency, which I shall mention.

The reform is yet another example of increasing tax on millionaires, which has happened on so many fronts under this Government, including capital gains and pensions contributions. Also, with the exception of the very last day of the previous Government, income tax is 5% higher than it was in their 13 years. I welcome that; it is important that we make those who are most able to do so pay more, and this is yet another measure by which we are doing that.

There are some oddities. People will gain all the way up the chain, but for those buying at exactly £250,000 and exactly £500,000 there is no gain.

The effect in my constituency of Redcar is pretty good. I do not think that there is a property worth £937,000 in the entire constituency, so every one of my constituents will benefit from the change. I have to welcome it from that point of view. I simply ask the Minister for clarification on the point that we always have to raise on Treasury measures: whether there is any possibility of avoidance. Will these arrangements be applied clearly to overseas buyers? Will they be applied to corporate buyers when the house is being moved through a share transfer—and is that loophole being, or

4 Dec 2014 : Column 470

has it been, closed? Will they be applied where the house is being bought to let, either by individual landlords or a corporate structure?

With those few questions on avoidance, I fully support these measures. Making the housing market more liquid will lead to a stronger economy, and the way in which the reform is being implemented leads to a fairer society.

12.48 pm

Mr Marcus Jones (Nuneaton) (Con): I warmly welcome the motion. I congratulate the Financial Secretary to the Treasury and the Chancellor on the help that they are giving to home buyers. I thank the Financial Secretary for listening, not just to the concerns of Members, particularly on the Government Benches, about stamp duty, but about how the Government may implement the policy. The Government have done absolutely the right thing to effect this policy immediately.

Back in the dark days of the great recession under Labour in 2009, when I was conveyancing residential property, the property market was on its knees. The Government of the day brought in a very welcome stamp duty holiday. That said, there were six or seven weeks between its announcement—at the Budget, I believe—and its implementation, depressing further an already very depressed property market. So I welcome what the Government have done and my hon. Friend’s taking on board those points.

The Government have taken the right approach to dealing with the problems associated with stamp duty. The major problem was the slab rate and the effect that it had, not just for people buying property who have to pay the stamp duty, but for people selling property. Those selling property at an asking price of £255,000, £265,000 or £275,000 have for some time been faced with the prospect of either having to do some dodgy deal involving carpets, curtains and other chattels, in which after the Finance Act 2004 and changes to stamp duty legislation most firms of solicitors were not willing to participate, or changing their price, often having to reduce it considerably, below the £250,000 mark, where 1% stamp duty would be payable and the buyer would have to pay £2,500 rather than £7,500. The reform will make a massive difference to people selling property.

Mr John Redwood (Wokingham) (Con): One of the most persuasive points that we were able to make to the Chancellor when we lobbied him was that there were bands in the market where there were effectively no transactions at all because people could not get buyers to pay that little bit extra. That was distorting the value of their homes.

Mr Jones: I agree. Some of the people in that position will probably have enough equity now to move on and buy second and third homes. The measure will be extremely valuable to such people.

Sir Oliver Heald: Does my hon. Friend agree that one of the other aspects was that some property prices were pitched that little bit higher so that people were not right next to the line? That created a gap in the market pricing structure in both directions.

Mr Jones: Again, I agree. The old system created nothing but distortion in the property market. What will happen now—as I said, I am glad it is going to

4 Dec 2014 : Column 471

happen straight away—is that people buying at £250,000, although that is not a realistic price, will pay just 1%, the same £2,500 as before, and 5% only on any amount above that, which will make a massive difference.

Mrs Main: As I understood it yesterday, if contracts have already been exchanged, the purchaser can choose which system to use, to allow fairness in the system. Does my hon. Friend agree that although the measure takes effect immediately, there is still flexibility?

Mr Jones: My hon. Friend is right and that was the fair thing to do. We must have sympathy, though, for people who completed transactions before yesterday. The new system cannot be made retrospective, which is a great shame for them, but it is a bonus for people in the process of buying property and for future buyers, especially as it will allow some people to free up some money so that they can go ahead and buy things that they will need for their new home or undertake improvements.

I have many buyers in my constituency who are buying at a price between £125,000 and £250,000, and the reform will make a massive difference to them too. They will not have to pay the full slab rate of 1% on the whole purchase price. The measure will have a major effect not just in the south-east, but in the midlands and the north of the country. Over the years many people, especially those selling and buying on, have added the stamp duty cost to their new mortgage, so they were paying the stamp duty to the Government at whatever rate, and paying that money back over 25 years or for however long their mortgage ran. On a large scale, that would cause a massive cost. The new system should reduce that burden too.

I draw the Minister’s attention to the way in which the stamp duty land tax is administered. From the Finance Act 2004 onwards, a very simple process became extremely time-consuming and convoluted, which increased the cost of conveyancing to many buyers. My hon. Friend the Minister may want to consider examining how Her Majesty’s Revenue and Customs deals with these matters, to see whether some simplification may reduce the administration costs for buyers.

I thank members of the Treasury team for the action that is being taken. It will be a great help for first-time buyers and for people who want to move on. It is a policy for people who work hard and have aspiration. I welcome it in its entirety.

12.56 pm

Mr Dominic Raab (Esher and Walton) (Con): It is a pleasure, as always, to follow my hon. Friend the Member for Nuneaton (Mr Jones), who made a range of important points in typically common-sense language.

I, like others, welcome the Chancellor’s autumn statement. Like business rates reform, which is another aspect I wholeheartedly welcome, a major overhaul of stamp duty is long overdue. I pay tribute to my hon. Friend the Member for St Albans (Mrs Main), who has conducted a tenacious campaign for major substantive reform of stamp duty. If the experience of our hon. Friend the Member for Harlow (Robert Halfon) is anything to go by, she will shortly be elevated to a senior rank. I am sure she will be thrilled by that.

4 Dec 2014 : Column 472

I am delighted that the Chancellor is taking action against what was one of Labour’s most arbitrary stealth taxes. The way it operated was a pretty vindictive assault on aspirational low and middle-income savers. The point has been made that, economically, a well functioning housing market should enable people to engage in mutually beneficial transactions, and make efficient use of housing stock. That is extremely important. A family in a small house should be able to move to a larger one, if they need to do so because of a growing family or if someone is earning more following a promotion. Older couples should be free to downsize when they want, not least to free up cash for other needs. Stamp duty has been a poorly designed tax that has undercut social mobility upwards and downwards.

In my constituency, we have felt that burden disproportionately. Of course, there are many families living in Elmbridge who are on very high incomes, but that does not mean that across the board it is some kind of land of milk and honey. For many of the residents whom I come across, their home is a nest egg built up after many years of saving. They may be asset-rich but income-poor. They may want to downsize to release cash for income or even the costs of care. Stamp duty has had a totally arbitrary impact on them. We also have a problem with key workers, who are vital for the delivery of local public services. They find it unaffordable to live locally and stamp duty has exacerbated that problem.

Above all, we have a wide range and large number of middle-income families, working hard, saving and facing very high cost of living pressures, and affordable housing is a major factor. As of the second quarter of last year, the median house price in Elmbridge was £445,000. That price has almost certainly risen substantially since then, but it does not buy a mansion. I can say that as someone who lives in my constituency. Typically that price would buy a two-bedroom home, which under the old regime would land the buyer with a massive stamp duty bill of over £13,000. According to the most recent market data, a family in a small home looking to buy a larger one would be left facing a bill of £13,000 or more for the average two-bedroom property, and £23,000 or more for the average three-bedroom home.

The cumulative bill is staggering. In 2012-13 my constituents paid £56 million to the Exchequer in stamp duty on residential property, which is more than the total paid in the whole of the north-east of England and a third of the figure for the whole of Scotland. Of course, Esher and Walton is just one area, and there are obviously geographic differences in incomes as well as house prices, but they do not necessarily match up, and they certainly do not tally neatly or consistently in my constituency. Elmbridge is just one example of stamp duty’s geographical unevenness. London accounted for 41% of residential stamp duty in 2012-13, and the south-east of England accounted for a further 22%. England as a whole accounted for 94% of UK stamp duty. It therefore has a very particular geographical burden, and it is not filtered according to income.

Stamp duty is not an economically efficient tax, as we have heard time and again. Stamp duty on residential property distorts the whole structure of the housing market. In particular, the slab structure, under which the relevant rates apply to the full sale price, not just the part above the relevant threshold, has created huge cliff

4 Dec 2014 : Column 473

edges, as we have heard this afternoon. It is worth dwelling on the impact of the slab structure. I think that the Chancellor made the point exceptionally well yesterday. A £1 increase in the price of a home, from £249,999 to £250,000, triggers an extra £5,000 tax liability. That cliff edge has been shown to be harmful to home owners and would-be buyers. It is worth remembering that stamp duty is a tax on transactions, so it impacts on the purchaser and the seller.

Property experts London Central Portfolio, together with the Cass business school, have put together an analysis that estimates that close to 14,000 home owners a year are forced to reduce the asking price for their home in order to get under a stamp duty threshold. Other would-be sellers are either unable or unwilling to reduce their prices to below the nearest threshold. That causes bottlenecks in the market and a drought of available properties in certain price ranges in certain areas, which is very harmful to the market and has important social as well as economic impacts.

It is little wonder that the Institute for Fiscal Studies has described stamp duty as

“a strong contender for the UK’s worst-designed tax”,

with a “perverse” and “absurd” structure. The director of the IFS argued earlier this year that in the modern era of broadly based taxation, the case for maintaining stamp duty at all is “very weak indeed”.

Mrs Main: I pay tribute to my hon. Friend, who along with me secured the stamp duty debate in September and who has raised these matters on numerous occasions in the media. Does he share my concern that that debate was very poorly attended by the other parties? Indeed, it was very much Members on the Government side who were concerned about the matter.

Mr Raab: My hon. Friend, as usual, makes her point powerfully. As is so often the case, the real democratic debate and scrutiny is taking place on this side of the House, but at least the Labour party accepts these changes. I hope that in due course it will reflect and put paid to some of its ridiculous notions about a mansions tax, which is really about the politics of envy, rather than sensible economics or social fairness.

I want to move on to the impact of stamp duty, because it has also proved socially unfair. When the additional 3% and 4% rates were introduced in 2000, they were designed for the wealthy. Had the threshold risen in line with house price inflation, only properties worth £1.3 million would attract 3% stamp duty today. The Chancellor’s reforms will make a vital difference and I fully support the direction of travel. The move from the slab structure to marginal rates is far more economically efficient. It will unblock bottlenecks in the market, which also have a negative effect on housing supply and stock. I wholeheartedly welcome this move.

Likewise, I recognise that the vast majority of home buyers, and as a result sellers, will benefit. The tipping point at which buyers will pay more as a result of the reform kicks in at just under £940,000. I have two points to make about that. First—this relates to my earlier point about house prices varying dramatically across the country—there are plenty of three-bedroom homes in my constituency, as I am sure there are in London and in other constituencies, that will already be caught by the new system and will end up paying significantly

4 Dec 2014 : Column 474

more. They are not mansions owned by the super-rich; many are owned by people who have saved and so are asset-rich but income-poor. Again, London and the south-east will feel the burden. I do not think that we can always assume that it will hit only those with the broadest shoulders; it will also hit those who have saved and planned their finances over the long term, and it will have a significant impact.

Secondly—this is the missing piece of the jigsaw—given the forecasts for house price inflation, buyers of average-priced homes in many parts of London and the south-east will in a relatively short time find themselves paying substantially more. Over time, the higher rates will, by stealth, hit more and more middle-class buyers and sellers. In London and the south-east, median home buyers could be caught by the new 10% rate within 10 years, depending on how the forecasts for house prices turn out. To be clear, that means that within a decade—more or less—average home buyers could be hit by the 10% rate. Recent experience with the 3% and 4% rates of stamp duty under Labour shows that what starts as a tax aimed at the rich, within a relatively short period of time if we are not very careful ends up clobbering the middle classes. I hope that in the immediate or not too distant future Ministers will address that point square on by indexing the thresholds for all rates to house price inflation. That way, we can learn the lessons and avoid the mistakes of previous Labour Governments.

If we do not address fiscal drag now, and instead kick it into the long grass, we risk ending up over time robbing middle-class Peter to pay working-class Paul, and I do not think that we should be engaged in that, as a matter of sound economics, social fairness, or indeed long-term sustainable politics. Instead, we should be ensuring, as part of our long-term economic plan, that over the long term all low and middle-income aspirational savers and home buyers benefit from these important and welcome reforms.

1.7 pm

Mr Gauke: It is a pleasure to reply to this debate. I am grateful for the warm support for this measure. I am sometimes so enthusiastic about these changes to SDLT that I am almost breathless, but thankfully on this occasion I am not. A number of points have been raised about this measure. Of course, there will be an opportunity to debate the legislation on Second Reading next Wednesday, when we might pick up some of those points. However, I will attempt to address some of the issues that have been raised in the debate.

The hon. Member for Birmingham, Ladywood (Shabana Mahmood) asked why we are not reforming non-residential SDLT at the same time. The argument I would make is that the market for non-residential property is very different, and the urgency for change is not the same, so I think that a different case needs to be made in that regard. We are not persuaded by the need to change that at present. Of course, all taxes are kept under review and the Government will consider that ahead of future fiscal events.

The hon. Lady also asked about the impact on the housing market. As I have said, our reforms will change the amount of SDLT due for the majority of homes, leading to a cut in the cost of moving home in the vast

4 Dec 2014 : Column 475

majority of cases. That will have a small impact on house prices overall, although the size of that effect is expected to be lower than the usual fluctuations in the housing market caused by many factors that occur year on year. I am not denying that there will be an effect, but there are many factors that come into play when it comes to house prices—

Mark Reckless rose

Mr Gauke: And one of those factors, I suppose, could be the selection of an unfortunate party, but I will give way to the hon. Gentleman at that point.

Mark Reckless: Was the Minister citing his own view just now, or merely regurgitating that of the OBR, because the major change in its forecast, of course, is that it has just changed its forecasting method from assuming that it will be average earnings in future to employing a model that it had only used in earlier years?

Mr Gauke: The hon. Gentleman brings me to his points about the OBR assessment. I was interested to hear what he said about modelling. He argued that the consequence of the changes we are implementing would be more beneficial for the economy than the OBR has set out in its projections. It is right that the OBR is independent and reaches its own conclusions. If the numbers are of a cautious nature, as he argues, then it is better to err on the side of caution. He made an interesting argument. I believe that these changes will have a beneficial effect in terms of labour market mobility and so on, and should therefore be welcomed. In putting the numbers into the public finances, it is right that we follow the independent body.

As I said earlier, my hon. Friend the Member for St Albans (Mrs Main) has been very prominent and persistent in making the case for reform of stamp duty. I am pleased that she welcomed these reforms so enthusiastically. I shall certainly ensure that the Chancellor is made aware of the views of Lori, her constituent, who is putting up a poster of him as a consequence of the reforms. I am very pleased that they have pleased Lori, and, I am sure, many other residents of St Albans. My hon. Friend made an important point about “zombie zones”; I think the hon. Member for Birmingham, Ladywood referred to “bunching”. The OBR statistics on how the pattern of transactions can be distorted are interesting. For example, there are 30 times more transactions in the £5,000 band below the £250,000 threshold than in the £5,000 band above it. That gives an indication of the scale of the distortions in the previous regime.

The hon. Members for Rochester and Strood (Mark Reckless) and for Redcar (Ian Swales) asked whether cash-neutral reform would be possible. It would have been very difficult to make these changes without some cost to the Exchequer in terms of forgone revenue. That might answer the question, “Why do this now?” As a consequence of other measures brought forward in the autumn statement, we can afford to fund these reforms, and it is right that we took that opportunity.

The hon. Member for Redcar referred to avoidance. Stamp duty land tax was being avoided far too often.

4 Dec 2014 : Column 476

One of the significant achievements of the Government and HMRC in the past few years is that we have managed to address that in relation to the number of SDLT schemes marketed by tax avoidance advisers, if I may put it that way—promoters of tax avoidance schemes. The amount of that avoidance has reduced very sharply. We have brought in a number of effective measures. For example, the annual tax on enveloped dwellings has played an important role. We have made great progress on this. For that reason, we are able to get the revenue that we will get because of the changes affecting high-end property.

My hon. Friend the Member for Nuneaton (Mr Jones) highlighted the reasons for ensuring that there is no gap between announcement and implementation. That is why this is a PCTA motion. I remember him making that point to me in private some months ago, so he may well have influenced the way in which the Government have proceeded, given the need to move forward.

My hon. Friend the Member for Esher and Walton (Mr Raab) made a very thoughtful speech, and I am grateful for his observations. He is a long-standing critic of the stamp duty regime, and he has been very energetic in highlighting some of the failures in the system. He talked about future uprating. He was also the first speaker to use the expression “long-term economic plan”, so I congratulate him on rectifying a grievous omission from the debate until that point. On future uprating, as I said to my hon. Friend the Member for Newark (Robert Jenrick), we have set out the bands. We have not set out plans for indexation or future uprating, but future Governments will clearly wish to return to that in the long term. As my hon. Friend the Member for Esher and Walton said, we will no doubt have this debate on a number of occasions. I dare say that he will be very energetic in campaigning for uprating in future, and I look forward to receiving his representations.

I thank the House for its support for this measure, and reiterate my apology for not being here at the very beginning of the debate. I hope that the motion will have the support of the House.

Question put and agreed to.

Ordered, That a Bill be brought in upon the foregoing Resolutions relating to Stamp Duty Land Tax (Residential Property Transactions);

That the Chairman of Ways and Means, the Prime Minister, the Deputy Prime Minister, Mr Chancellor of the Exchequer, Danny Alexander, Secretary Eric Pickles, Mr David Gauke, Priti Patel and Andrea Leadsom bring in the Bill.

Stamp Duty Land Tax Bill

Presentation and First Reading

Mr David Gauke accordingly presented a Bill to make provision about stamp duty land tax on residential property transactions; and for connected purposes.

Bill read the First time; to be read a Second time tomorrow, and to be printed (Bill 132) with explanatory notes (Bill 132—EN).

4 Dec 2014 : Column 477

Backbench Business

Financial Conduct Authority Redress Scheme

1.17 pm

Guto Bebb (Aberconwy) (Con): I beg to move,

That this House has considered the Financial Conduct Authority’s redress scheme, adopted as a result of the mis-selling of complex interest rate derivatives to small and medium sized businesses, and has found the scheme’s implementation to be lacking in consistency and basic fairness; considers such failures to be unacceptable; is concerned about lack of transparency of arrangements between the regulator and the banks; is concerned about the longer than expected time scale for implementation; calls for a prompt resolution of these matters; and asks for the Government to consider appointing an independent inquiry to explore both these failings and to expedite compensation for victims.

This is the third debate that I have led on interest rate mis-selling. I wish to express my gratitude to the Backbench Business Committee for allowing further time to debate this important issue in the main Chamber of the House.

The fact that we have a third debate is a good thing and a bad thing. It is clearly a good thing because hon. Members are still taking an interest in the issue. It is a bad thing because three years after the first debate, hundreds, if not thousands of businesses still feel that they have not been dealt with fairly or adequately by the redress scheme that was put in place by the Financial Conduct Authority. It is therefore important to explore their concerns.

We are coming to the end of the redress scheme, so it is appropriate that we examine its successes and failures at this point. I am, in general, an individual who sees the world in a “glass half full” rather than a “glass half empty” manner—some of my colleagues would perhaps dispute that—and I think it important to highlight some of the successes. First, 91% of all the sales examined within the scheme have been found to be non-compliant. That fact alone justifies all the effort that has been put in by Members from across the Chamber in ensuring that this issue was addressed by the banking system. Similarly, 99% of all redress determinations have been communicated to customers. A total of 14,000 redress offers have been made to date, 10,500 of which have been accepted. Some £1.5 billion in redress has been paid out. Some £1 billion—perhaps even £1.1 billion—of cancelled swaps have been hugely beneficial to the businesses that were affected. Most importantly, as a result of the successes that I mentioned, businesses and individual lives have been put back on track. We should, as a House, acknowledge those successes. However, when this Chamber called for the establishment of a redress scheme, we wanted a scheme that would be fair and equitable to all the businesses affected.

Bill Wiggin (North Herefordshire) (Con): I agree with my hon. Friend, but my constituent John Kidd has so far spent 74 weeks battling the FCA when ideally it should take 12 weeks. My hon. Friend must not be too kind to the FCA.

Guto Bebb: I agree entirely. The time scales of some of the redress offers have been completely unacceptable. Indeed, at the scheme’s outset there was a six-month

4 Dec 2014 : Column 478

delay in order to ensure a consistency of approach across the 11 banks that volunteered to be part of it. One of the concerns I wish to highlight is that that six-month delay has not resulted in the consistency demanded by the FCA, so I accept entirely my hon. Friend’s point.

I will summarise my concerns about the FCA scheme. There has been a lack of consistency in the scheme despite it being established with a view to having consistency. There has also been a tremendous lack of transparency, which I will deal with in detail.

Alok Sharma (Reading West) (Con): This is, of course, a voluntary arrangement that has been entered into. Does my hon. Friend think it would have been better if it had been a statutory agreement, which would have led to much more transparency?

Guto Bebb: My hon. Friend makes a very important and interesting point. There was a need at the outset to ensure that the issue of redress was addressed as quickly as possible and it was felt that a voluntary scheme would do that without the need for a fully judicial process. However, in view of the lack of transparency in the scheme as it stands, I sympathise with my hon. Friend’s point.

My third concern is that the redress scheme lacks an appeal process. That issue could be dealt with very simply without creating any further confusion, and I will go on to talk about that in due course. There is also a serious concern about the issue of consequential losses in the redress scheme as it stands.

Sir Oliver Heald (North East Hertfordshire) (Con): On consistency, it is hard to see exactly what the difference is between an embedded swap and a separate swap that is tied to a loan agreement. Is that an issue of concern to my hon. Friend, and what does he think could be done to improve it?

Guto Bebb: I am sure my hon. and learned Friend’s point will be supported by thousands of businesses that feel they have been excluded from the scheme. They might not think that it is working properly, but they do feel that they should have been included. That exclusion has not been explained to the satisfaction of either the businesses affected or the all-party group on interest rate swap mis-selling. Indeed, that is one of the issues I will touch on when I address the scheme’s lack of transparency.

Michael Moore (Berwickshire, Roxburgh and Selkirk) (LD): I pay tribute to my hon. Friend for all the work he has been doing on this issue with others across the House. One of my constituents, Heather Buchanan, and her husband have, happily, got redress, but they are now in a major battle about consequential losses. Does my hon. Friend have a view on how we can help collectively focus attention on bad issues so that they are not lost in the murk of commercial negotiations in the banks?

Guto Bebb: I am grateful for that intervention. The issue of consequential losses is of significant concern, because when the FCA redress scheme was established it clearly said that consequential losses would be dealt

4 Dec 2014 : Column 479

with on the basis of accepted legal principles, and yet of the £310 million-worth of consequential losses that have been paid out, £305 million relates only to interest at 8%. In other words, claims for other consequential losses have been derisory under the scheme thus far.

I want to highlight two other concerns. Tax treatment of redress payments is a real concern that can be dealt with by the Government and, as I have said, I will also touch on the exclusion of those businesses sold embedded swaps.

I will be quick, because I am aware that many hon. Members want to speak. I have a simple first example of the lack of consistency. When the scheme was established, it was decided that consequential losses and the redress would be paid in one instalment. Many businesses argued that that was unreasonable and unfair, and as a result of the second Backbench Business debate on this issue, nine of the 11 banks that are in the scheme agreed that they would split those payments. The FCA, however, despite saying that it wanted a consistent scheme, has allowed two banks to continue to insist on a single payment. That is a clear example of a lack of consistency.

The evidence I have gathered also shows that there is a lack of consistency on outcomes within individual banks, which clearly raises a question about how the work of independent reviewers is being overseen. If they are coming up with conclusions and recommendations for redress that are significantly different for businesses with very similar problems, there is a question as to whether the work of those independent reviewers is being monitored properly.

Mr Marcus Jones (Nuneaton) (Con): My hon. Friend has been a stalwart campaigner on this issue and deserves great credit. On transparency, is there not a question about whether those reviewers, the review process and the reports they provide are truly independent? Constituents of mine who have been caught up in this have not received any of that information.

Guto Bebb: I am grateful to my hon. Friend for his intervention and agree with his rather depressing analysis, because my second point is that there is a concern about the significant lack of consistency on redress among the banks. We have to draw the attention of the House to the accusation published in The Times this morning that some banks have been putting pressure on their independent reviewers to make recommendations for redress that are acceptable to the banks rather than to the business in question. The allegation is made by a whistleblower who worked for KPMG on the independent review of RBS cases. It reflects anecdotal evidence from Bully-Banks, the campaigning organisation, that RBS customers have a 12% chance of getting a full tear-up, which is significantly less than the 65% at Barclays, 89% at Lloyds Banking Group and 64% at HSBC. If this is a consistent scheme, it is difficult to understand how the outcomes for individual businesses in one bank are so significantly different from those in other banks.

One of my concerns about transparency is that the FCA is not making available figures that highlight the outcomes on a bank-by-bank basis. It is simply giving us global figures. I accept that my concerns are based on anecdotal evidence, but it does seem to match evidence

4 Dec 2014 : Column 480

from other sources, including that provided to me by an independent reviewer working for HSBC who claims that HSBC feels that RBS is taking advantage, and that from the whistleblower from KPMG who worked on the RBS redress scheme who claims that RBS is challenging any claim over £750,000. The evidence is stacking up that this is not a consistent scheme.

Mr Marcus Jones: I thank my hon. Friend for giving way again—he is being very generous. Does he agree that the FCA should look for consistency rather than simply come to us as constituency MPs when we raise issues and tell us, in effect, that it agrees with a bank’s independent reviewer without explaining why?

Guto Bebb: I could not agree more. Put simply, the regulator should be regulating its own redress scheme. It is simply not good enough for the FCA consistently to say that the decision has been approved by the independent reviewer if there are doubts about their behaviour.

Steve Rotheram (Liverpool, Walton) (Lab): I, too, congratulate the hon. Gentleman on bringing this issue to the House’s attention. The only thing that is consistent and transparent is that the banks that caused the financial crash are profiting from selling products such as interest rate hedging products, which were bought by a company in my constituency, the Flanagan Group, and have caused it great difficulty. Does the hon. Gentleman think it is right that the banks should be profiting as a result of mis-selling products?

Guto Bebb: Of course not. The whole reason behind establishing the redress scheme is to try to deal with the wrongdoing of the banks. My concern is that the scheme has not succeeded as expected.

Paul Farrelly (Newcastle-under-Lyme) (Lab) rose—

Guto Bebb: I will take one final intervention; otherwise I will be told off by Mr Deputy Speaker.

Paul Farrelly: Does the hon. Gentleman agree that the level of provisioning in the banks suggests that there is inconsistency? For instance, in RBS there were 7,300 cases and £1.4 billion of provisions, while in Barclays there were 2,900 cases and £1.5 billion of provisions.

Guto Bebb: The hon. Gentleman makes an important point. There have been concerns throughout the process about the level of provision within banks. In view of some of the information provided by the KPMG whistleblower, RBS’s confidence in having a very low level of provision probably justifies its attitude to the review.

Another point about the lack of consistency relates again, unfortunately, to the behaviour of RBS. It has been argued that a good result for a business from the redress scheme is to have a full tear-up of the agreement or to implement a cap rather than a swap. Indeed, it has been argued that a cap would in many cases have been a much better original product. From the detail of many of the caps offered to RBS customers, it transpires that most of them are for 10 years. I do not claim to be an expert, but experts in the field of derivatives and interest rate protection tell me that there is no demand in the

4 Dec 2014 : Column 481

marketplace for a 10-year cap. They have challenged RBS to give one example of a 10-year cap that it has sold commercially in the past 10 years, but as yet RBS has not come back with such an example. Yet, time and again when businesses are offered a cap as an alternative product, the cap is for 10 years. It will not surprise hon. Members to learn that a 10-year cap is significantly more expensive than a five-year one. That added cost comes out of the redress made available to the relevant businesses. There are therefore questions to be asked about the behaviour of some banks, including RBS, and those questions raise doubts about the consistency of the scheme.

On transparency, I am concerned that the agreement between the banks has not been disclosed. That means that it is very difficult to assess the success or otherwise of an outcome, because we do not know what to measure it against. The agreement has not been made available to the all-party group or the Treasury Committee, but I must ask why, because when the FCA says that it is robustly ensuring that the agreement is maintained, we cannot assess whether that is the case.

Mark Garnier (Wyre Forest) (Con): Will my hon. Friend give way?

Guto Bebb: I will of course give way to a member of the Treasury Committee.

Mark Garnier: I, too, congratulate my hon. Friend on all the work he has done so far. Given that this is the first time that a voluntary scheme has been used, does he agree that full transparency of the whole system is absolutely crucial in ensuring that the scheme can safely be used again in future? Otherwise, there will be long-term fundamental doubt about whether it should ever be used again.

Guto Bebb: I could not agree more. I am concerned that some of the banks involved in the scheme now fear that they have played by the rules, while others have not. If there is no transparency on that issue, banks may go into future schemes with the same attitude as RBS’s attitude to this scheme.

We do not have bank-by-bank details on outcomes, so it is very difficult to measure whether they are appropriate. In the same way, there is real concern that the FCA has not fully shared its legal opinion on excluding businesses with embedded swaps from the whole review process. In the briefing that the FCA provided for this debate, it implies that it has fully shared its information on that with the Treasury Committee, but my understanding is that it was willing only to allow a QC acting on the Treasury Committee’s behalf, not its members, to see the information. I do not consider that to be full accountability to Parliament.

I said that I would call on the FCA to consider an appeal process. In view of the revelations about the possible activities of the KPMG reviewers of RBS, there is merit in a proposal made by the all-party group a year and a half ago. All the independent reviewers have been trained to the FCA’s satisfaction, so if an RBS client is unhappy with its outcome it would surely be appropriate to ask another independent reviewer—for example, Deloitte, which acts in relation to HSBC—to review the case. That would not unduly complicate the situation, because the reviewers have been trained by

4 Dec 2014 : Column 482

the FCA and have satisfied it as to their expertise. It would give clients a degree of independence if those unhappy with the redress outcome could have all the case notes reviewed by a third party that is independent of the original bank and of its independent reviewer. Will the Economic Secretary consider that request?

Zac Goldsmith (Richmond Park) (Con): Eight or nine of my constituents have asked me to put on record their enormous gratitude to my hon. Friend for his extraordinary work in leading this campaign, and I am very pleased to do so. What arguments has he heard against his proposed appeal system so far, because it is very hard to imagine any deal-breaking arguments against such a logical solution?

Guto Bebb: I entirely agree. The argument has been that as the reviewers are independent the FCA can have full trust in them, but in view of the inequitable outcomes reported to us and the information provided by the whistleblower who used to work in the independent review team on RBS, there is clearly much merit in the appeal process that I have identified as a way forward. I cannot think of any arguments against such a simple way forward.

Guy Opperman (Hexham) (Con): I suggest that there is middle ground on that point. Ministers would probably be nervous of encouraging excessive litigation and the escalation of legal costs, but it is not beyond the wit of man for an independent mediator to be brought in to address key cases, as is tried in other parts of the dispute resolution system.

Guto Bebb: I accept that point, but I stress that if an independent reviewer of another bank has been approved by the FCA—the scheme is a voluntary, not a judicial one—I seriously do not think that going down such an avenue would create cost. The FCA’s current view is that if a client is not happy with a decision made by a bank and its independent reviewer, then it can resort to law, but the whole reason for establishing the redress scheme was to save small businesses that cannot afford to go to law.

I want to talk in detail about consequential losses. When the redress scheme was announced back in 2013, it was made very clear that the scheme was for consequential losses and interest payable. The Financial Services Authority, as the FCA then was, highlighted that consequential losses would be determined by reference to the general legal principles relevant to claims in tort or for breach of statutory duties.

I have already given the figures. It is more than acceptable and very welcome that £305 million has been paid out in relation to interest at 8%, but only £5 million has been paid out in consequential loss claims. Part of the redress scheme has therefore completely fallen down. I have seen case after case of well-argued and reasonable claims for consequential losses from businesses acknowledged to have been mis-sold and as a result to have lost millions of pounds in turnover, but when a detailed claim that will have cost a significant amount is made the response from the banks is a simple no.

Christopher Pincher (Tamworth) (Con): I congratulate my hon. Friend on securing this debate. Does he not agree that the loss to companies is much larger than simple consequential losses? We are talking about small

4 Dec 2014 : Column 483

firms, with just a few employees, who are grappling with the banks and the redress system. In my constituency, a three-man outfit has been grappling with Lloyds for nearly two years. Whenever they correspond with Lloyds it takes perhaps half a month to get through all the paperwork, which has a real impact on their ability to develop and build their business.

Guto Bebb: I agree. The scheme was described as one in which businesses would not need professional advice. Yet when a consequential loss claim is made, either by a business or by a business with the support of legal or professional advisers, banks time and again respond with the support of legal and accountancy firms. The process for consequential losses is therefore very unequal.

Martin Horwood (Cheltenham) (LD): Will the hon. Gentleman give way?

Guto Bebb: I will take one final intervention on this point; if I took any more I would be in trouble with Madam Deputy Speaker.

Martin Horwood: I am grateful to the hon. Gentleman for the campaign he has fought and for his support for the Bully-Banks campaign, which also deserves credit. One of my constituents, who thinks that his business has suffered hundreds of thousands of pounds of consequential losses, has told me that 90% of consequential loss claims have been rejected. Does the hon. Gentleman agree that that does not truly reflect the real situation?

Guto Bebb: I agree entirely, and that is why we need a review of the current redress scheme.

My final point, which the Government could respond to positively, concerns the decision by HMRC to tax redress received by businesses. HMRC has decided to treat any redress received as income generated in the year in question, which means that many small businesses will pay tax on that redress at their marginal tax rate. Has HMRC taken seriously the possibility of using extra statutory concession D33, paragraph 11, which states:

“A right of action may be acquired in a situation where it is not possible to identify a separate underlying asset. For example, where a professional adviser has given misleading advice on a tax or other financial matter, or in relation to private or domestic matters…Broadly, when we are looking at capital sums without an underlying asset which fall within paragraph 11 of ESC D33 we are looking at a financial loss, for example compensation for poor professional advice or for mis-selling of financial products.”?

In effect, that means that when the compensation is for bad financial advice or mis-selling a financial product, it should be treated not as income but as a gain for capital gains tax purposes, which would be a fairer resolution. Currently, banks are able to offset any redress paid for their tax purposes, although businesses end up paying tax on any redress they receive. It is unacceptable that the wrongdoers get tax relief while the wronged have to pay tax on their compensation, and I ask the Minister to consider that point.

I wanted to touch on businesses sold in embedded swaps. If the advice from the FCA is comprehensive, I appeal to it to make it public. Those businesses are in limbo. They believe they have a right to be in the redress

4 Dec 2014 : Column 484

scheme and are told that legal advice is clear. I call on the FCA to make that advice available so that those businesses know what possibilities they have when trying to resolve their situation.




The hon. Member for Wyre Forest (Mark Garnier) seems to want to intervene.

Mark Garnier: I am grateful for that prompted intervention. My hon. Friend refers to legal advice given to the FCA, but it is clear that these are unregulated products and therefore the FCA is not addressing them. It could be argued that selling an unregulated product to a non-professional customer is a regulated activity and should be covered by regulated activity rules. There is a lot of confusion about that.

Guto Bebb: I am grateful to my hon. Friend for that intervention.

It is fair and right to acknowledge that the redress scheme has been better than no action whatsoever, but concerns clearly remain. Action is required on consequential losses, and there is no justification for refusing an internal appeals process within the review process. The lack of transparency allows people to make assumptions about the behaviour of banks and the FCA, which is damaging to the financial system, and more transparency would give greater confidence in the way the scheme works. HMRC needs to address the issue of taxing redress paid to businesses with a degree of sympathy that has not so far been shown.

Crucially, allegations about the behaviour of some banks in the scheme should be a cause for concern not just to Members of the House but to those on the Government and Opposition Front Benches. The issue must be considered carefully, which is why the motion asks for consideration to be given to the establishment of a review of the current redress scheme. If the regulator is unable to regulate the scheme it has established and make right the wrongs committed by the banks, it is important for the Government to take responsibility.

Several hon. Members rose

Madam Deputy Speaker (Mrs Eleanor Laing): Order. Several Members are trying to catch my eye and we have limited time available. I am therefore obliged to introduce a 10-minute time limit on Back-Bench speeches.

1.44 pm

Paul Farrelly (Newcastle-under-Lyme) (Lab): I want to talk about one of my local businesses, DK Motorcycles, which has been badly let down not only by its former bank, the Royal Bank of Scotland, but by the Financial Conduct Authority and the partial scheme of redress over the mis-selling of interest rate products. Having finally escaped the clutches of RBS, this is the first time that the firm has felt confident enough to allow me to talk about its experiences in public, and its general manager, Ewan MacDonald, is sitting in the Gallery today, alongside many people from small businesses who feel bullied by their banks and let down by regulators.

DK Motorcycles entered into a 10-year LIBOR swap with RBS in August 2008, but there was nothing voluntary about it. The swap was an express condition of refinancing, but as interest rates fell, it later became clear how the enforced sale had exposed DK, like many other businesses,

4 Dec 2014 : Column 485

to a penal interest burden. By the time DK had extricated itself from RBS’s clutches at the end of last year, it had shelled out in interest and penalty charges more than a third of the original loan of just over £2.4 million.

In May last year, I wrote to the chief executive of the FCA with concerns about the grounds on which DK had been excluded from the redress scheme. At that time, the company was in the hands of the now infamous global restructuring—for which read “destruction”—group at RBS and was staving off a scenario where RBS would put in one of its pet consultancies, which was, as so often, an insolvency firm, and for which DK would inevitably pay to watch the vultures feast.

On the redress scheme, my concerns were about the so-called sophistication tests and the limited lessons that the FCA had learned in findings from its pilot review. The redress scheme has excluded 10,500 of the 30,000 sales of so-called hedging products, on the grounds that such firms were sophisticated and therefore either knew or should have known what they were doing, or that they would have the wherewithal to go to court if the banks failed to deal properly with their complaints. None of that, sadly, applies to a business like DK Motorcycles.

Steve Baker (Wycombe) (Con): I congratulate my hon. Friend the Member for Aberconwy (Guto Bebb) on securing this debate. On the point raised by the hon. Member for Newcastle-under-Lyme (Paul Farrelly), businesses in my constituency have still not had explained to them how the charges are calculated. Does he agree that that is another area where the banks have failed, because it is clear that they have sold a product that even now is not well understood?

Paul Farrelly: Indeed, not only have the banks failed but the regulators have failed to show their teeth. Indeed, in the recent judgment on Crestsign the courts have only added to the uncertainty, and it behoves the Government to try to clear that up.

DK Motorcycles runs the largest motorcycle showroom in the country, selling high-value items from a single premises. It is a partnership, owned by father and son Derek and Kevin Neesam—hence the DK. At the time of the refinancing in 2008, it had a bookkeeper but not a specialist finance director. Ewan, the general manager, joined later and now looks after finance, as well as running the showroom. By no stretch of imagination could DK be called “financially sophisticated” in a world of complex derivative products. However, by dint of employing up to 75 people—both full and part time—and having a business turnover of £20 million, it failed two of the FCA’s tests. In response to the pilot, the FCA admittedly amended some of its tests, but no flexibility was applied to the turnover test. As I pointed out to the FCA, that caught different types of businesses indiscriminately and left businesses such as DK bracketed together with the likes of BP or BT as so-called sophisticated, and therefore with no help against predatory banks such as RBS.