Wednesday 18th January 2023
(1 year, 3 months ago)
Lords ChamberStamp Duty Land Tax (Temporary Relief) Act 2023 View all Stamp Duty Land Tax (Temporary Relief) Act 2023 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 10 January 2023 - (10 Jan 2023)
The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)
My Lords, the aim of the Bill before us today is to support the property market and reduce costs for first-time buyers and home movers during a difficult period for the economy. The Government have a long commitment to supporting home ownership. Since 2010, we have helped more than 800,000 households purchase a home through government-backed schemes such as Help to Buy and the right to buy. We have made sure that the UK is building the high-quality homes that we need. In 2019-20, more than 242,000 homes were built, the highest number of net additional homes in 30 years, but we need to do more, and remain committed to the 300,000 new homes target. We have invested in the affordable homes programme, with an £11.5 billion commitment through this Parliament leading to 180,000 affordable homes, including thousands for social rent. We have removed the housing revenue account cap for local authorities to support them to build more social homes. This Government also supported social renters at the Autumn Statement by limiting social rent increases to 7% in 2023-24, saving the average social renter £200 next year, and we remain committed to abolishing Section 21 evictions.
However, the tax system needs to work for those looking to get on to or move up the housing ladder, and the Government have previously made changes to support their objectives on home ownership and the property market. Stamp duty land tax must work for all. In April 2016, the Government introduced higher rates of stamp duty for purchases of additional dwellings and recognised the impact that buy-to-let investors and purchasers of second homes were having on the ability of first-time buyers to get on the housing ladder. The following year, in the Autumn Budget 2017, the Government permanently introduced first-time buyers’ relief. This increased the threshold before which those buying their first home started paying stamp duty to £300,000. It was under this Government that first-time buyers gained a permanent comparative advantage over other purchasers, and this relief has supported almost 700,000 purchases since its introduction.
The Stamp Duty Land Tax (Temporary Relief) Bill builds upon this context. First, it will increase the nil-rate threshold for stamp duty land tax for all purchases from £125,000 to £250,000 until 31 March 2025. Secondly, it will increase the nil-rate threshold for first-time buyers from £300,000 to £425,000. A first-time buyer couple in the south-east buying an average new-build property worth £490,000 will see their bill reduced from £9,500 to £3,250—a saving of £6,250 which they can put towards their deposit or new furniture. Thirdly, the Bill will raise the maximum purchase value for first-time buyers’ relief from £500,000 to £625,000, something which will help those in places where affordability problems are most acute. Together, these measures mean that around 43% of all purchasers will pay no stamp duty whatever.
As part of this Government’s commitment to fiscal responsibility and to getting debt falling in the medium term, these changes to stamp duty will end on 31 March 2025. The tax cut will remain in place until then to support the property market through difficult times and to continue our support for first-time buyers. Hundreds of thousands of jobs and businesses rely on the property market, and the Government are committed to supporting them with these measures.
The stamp duty cuts will mean that more than half of all transactions in the east Midlands, the north-west, and Yorkshire and the Humber will pay no stamp duty until 31 March 2025, with six in 10 transactions in the north-east having no SDLT liability. A pensioner in the east Midlands downsizing to an average-priced semi-detached house worth around £230,000 will now save £2,100 in stamp duty costs. They will pay nothing because of the Government’s actions.
The Government are lifting families, home movers and first-time buyers out of stamp duty and continuing their record of support for home ownership. They are supporting the market and ensuring that this support remains responsible. This is a significant reduction in the cost of moving home for many in the country and will make getting on the ladder far easier.
Importantly, while it is right that people should be free to invest in or buy a second home, the Government believe it is right that those buyers pay higher rates of stamp duty. The higher rates for additional dwellings introduced in 2016 apply three percentage points above standard residential rates of stamp duty. This 3% surcharge will remain in place. It is important to note that no one purchasing an additional property will be taken out of paying stamp duty.
To conclude, the Government believe that stability is the bedrock on which we build growth. The Bill is a fiscally responsible way to support the property market through challenging times and open up the dream of home ownership to more people, to give them a stake in the success of the British economy. Some 90% of those claiming first-time buyers’ relief will no longer pay any stamp duty until 31 March 2025—a significant and meaningful addition to the Government’s record on home ownership. For those reasons, I beg to move.
Lord Greenhalgh (Con)
My Lords, I thank my noble friend the Minister for that very articulate exposition of government policy around the desire to increase home ownership and how important it is to remove the barriers, not only for first-time buyers but for people who own their homes to be able to move. I thank noble Lords who have remained in the Chamber; it is always nice to have at least a few people here on what I consider a seminal topic.
The herd, if you like, gathered around the Levelling-up and Regeneration Bill—I would have been one of about 75 Back-Bench Peers speaking if I had participated in that Second Reading debate—but the key to housing is often what we would call the second-hand market. Some 90% of transactions in housing are, essentially, as with motor cars, in second-hand homes.
If you tax mobility, as you do through the stamp duty land tax, people tend not to move. My parents’ generation moved every seven years, but now people typically do not move at all. That often means that elderly people reside in homes bigger than they feel comfortable in. They may want to stay in the family home, but as you age it becomes harder to climb the stairs and so forth; even with housing adaptations, it is inappropriate for them, and they might like to downsize. That is often harder than we think because of an absence of retirement community homes. Mobility generally has shrunk over the decades. It is important that we bring about changes to increase mobility so that people can get on to and climb the housing ladder of opportunity.
I went to the House of Lords Library. I had never used it for research before, but I really wanted to see whether the Laffer curve applied—that if you cut stamp duty land tax, your tax take would increase. I thought that maybe it would, but I was absolutely wrong. It is obvious when you think about it; I have about 65 charts I could share with noble Lords but I do not think that would be particularly helpful. Essentially, the housing market is driven by the wider economy, but what you do see from the statistics is this: if you increase stamp duty, as we have done remorselessly in the decades from 2000 to the present day—except for this brief respite, and a previous respite for a period of time under Chancellor George Osborne—you will see a reduction in the number of transactions overall. That comes through very clearly. As soon as the first relief was introduced because of Covid, transaction levels in London rose from 4,800 to 5,300, and in the rest of the United Kingdom transactions also rose dramatically. While the tax take may not have, people were moving more, which I think is a good thing.
My first question to the Minister is: is there a longer- term commitment to reduce this tax on mobility so that we can see people moving and can get closer to the era when people could move more easily—rather than building sideways, upwards and downwards—to homes that are appropriate for their needs, so they have a bigger home when they have a family and then can downsize in their older years?
My next point is the other side of what the noble Baroness said about the north-east. Okay, six out of 10 properties do not pay any stamp duty at all, but this is a tax that falls on London. As a Londoner, I am conscious of the fact that, until recently, two-thirds of stamp duty was raised in London alone. That has dropped a little with the tax reduction to 55%, but we have to be cognisant that jamming up the London market is not necessarily good for our capital city or for the wider economy. We need to be aware that stamp duty is simply much higher than what we were used to. In the first decade of the 2000s, the highest you could pay on a property transaction was 3%, but we have seen that balloon over time.
I am delighted to support the Government on this. As someone who started in a town hall and worked through to City Hall, I know that it is important to create that housing ladder of opportunity: out of public housing into part-owning your own home to fully owning your own home. That is a noble thing to encourage, and I am delighted that the Government are setting forward, with a sense of consistency, the need to reduce stamp duty to land tax levels.
I have one last question, which was raised with me by the noble Baroness, Lady Watkins, about a nurse. We know that nurses struggle, but this nurse got a shared-ownership property, owning 25% of her home and paying rent on the remaining 75%. That tenure is not full-blown home ownership; it is not on the last rung but, if you like, the first rung of the ladder of home ownership. She is now looking to purchase a home further away but to fully own it with a mortgage. Does the relief that has now increased from £500,000 to £625,000 still apply to that move? Will she be seen as a first-time buyer? I ask the Minister to find out the particulars of that.
I congratulate the Government. Whether you are the right honourable Member for Spelthorne or the right honourable Member for, I think, somewhere in Surrey, both Chancellors are absolutely behind the idea that, over time, we must bring down the burden of this tax on the ability to move home.
Baroness Kramer (LD)
My Lords, we shall obviously not oppose the Bill. It extends stamp duty relief until March 2025 to a larger group of first-time buyers and raises the lower-rate threshold for all buyers, helping a limited number either of better-off people or people living in higher-priced regions.
I should note that the Chartered Institute of Taxation has drawn attention to loopholes and anomalies in the drafting of the Bill. While this House can do nothing to tackle that, I hope the Government will follow up what the institute has said because one of our curses is poorly drafted legislation that then has to come back to this House. However, the Bill will do little to achieve its main purpose as outlined by the Government: stimulating the housing market and increasing residential investment and spending on durable goods.
Mortgage interest rates are the issue, alongside the cost of living, as everyone in this House knows. According to Nationwide, UK first-time buyers’ mortgage costs are the highest since 2008—on average, 39% of full-time salary after tax, despite a 2.5% fall in house prices, and the Bank of England is not expected to be done in raising interest rates. A modest change to SDLT does not compensate for the surges in interest rates driven by the Government’s economic mismanagement.
According to the NAO, 1.4 million households face higher interest payments this year as their fixed-rate mortgages expire. The lucky households with good credit will see their mortgage interest more than double, from 2% to more than 4.5%, and the proposals to help—for example, by offering interest-rate-only deals—provide only temporary relief. The Financial Conduct Authority said last week that 200,000 households had fallen behind on their home loans by mid-2022, while another 570,000 households were
“at risk of payment shortfall”
within the next two years because their mortgage costs would be more than 30% of their income.
The housing market requires more housing supply, not short-term temporary fixes. The Government are nowhere near their 300,000 new homes target and affordable homes are in even shorter supply. Shelter reports housing waiting lists of 1.2 million, with over 120,000 children in temporary accommodation. The construction industry is suffering huge workforce shortages and economic uncertainty is discouraging investors.
Members in the Commons, especially my colleagues the Members for Westmorland and Lonsdale and for North Shropshire, argued for amendments that would have provided far greater protection against the unintended consequences of advantaging second home buyers. In areas such as the Lake District and north Shropshire, second home buyers consistently outbid local people and the drop in full-time occupancy is undermining communities. In some areas, purchases of second homes now amount to 80% of total purchases. In rural England, as my colleagues pointed out, there are 132,000 fewer young home owners than there were in 2010. The stamp duty cut of 2020 fuelled a second home boom and house price distortion.
We need a proper housing strategy: one consistent with our net-zero and sustainability goals, so that it really tackles housing inequality for the long term. Research for the Homelessness Monitor report showed that 300,000 households across Britain could be homeless this year. This, together with the cost of living crisis, is the issue that the Government must resolve, and urgently.
Lord Tunnicliffe (Lab)
My Lords, I am grateful to the Minister for introducing today’s money Bill. As the noble Baroness knows, we do not support this legislation but, given its status, we accept that it is destined for the statute book. With that in mind, and with important matters to be discussed on the National Security Bill, I will keep my remarks brief.
The Bill represents the last remaining output of the failed Truss-Kwarteng project. It is now some time since those individuals set fire to the British economy and then retreated to the Back Benches, claiming they had been the victims of global events. They will no doubt attempt to rebuild their reputations in the months and years to come. However, as they seek to rewrite history, the British public will continue paying for their costly mistakes—and for what? A time-limited reduction in stamp duty which, given increasing borrowing costs and the Government’s poor record on housing supply, is most likely to benefit second home owners and landlords rather than first-time buyers. We do not view this policy as a sensible use of taxpayers’ money.
I note the Government’s assertion that stamp duty savings will support the property industry and boost money going elsewhere, such as to removal services and do-it-yourself stores, but believe they are flimsy at best. The current Chancellor’s decision to make this a time-limited measure, rather than the permanent one envisaged by his predecessor, suggests that the latest Administration agree. Households across the country are still dealing with the disastrous consequences of the Truss Government’s failed mini-Budget through higher mortgage payments and rents. That month of madness, coupled with the Conservative Party’s wider mismanagement of the economy over 13 years, means the property market has cooled in recent months. There is no doubt that this presents challenges for many, but there are far bigger housing-related issues for the Government to address than the rate of stamp duty.
Late last year, in an attempt to avoid an embarrassing early defeat at the hands of his Back-Benchers, Rishi Sunak agreed to water down housebuilding targets for local authorities. Nobody wants homes to be built in locations that are not suitable, but we are not going to solve our ever-worsening housing crisis if the Government continually duck challenges around supply. A stamp duty reduction scheme which offers a discount to those buying second, third and fourth properties does not increase supply. Instead, it is likely to have a similar effect to that of the last reduction: pushing up prices and preventing first-time buyers getting on the ladder. We are aware of steps being taken in other legislation, such as the Levelling-up and Regeneration Bill, to discourage ownership of multiple dwellings, but these two policy initiatives appear to be in conflict.
This Bill provides further evidence that the Conservative Party is out of ideas. The last stamp duty cut did not provide as much help to first-time buyers as promised and its overall effect on the market put many starter homes out of their reach. Ministers are seemingly repeating the same failed experiments, desperately hoping the outcome will be different.
Taken alongside other government decisions, this Bill will do nothing to improve the serious issues with our housing market. It will not boost supply or make mortgages more affordable for young people. It does not represent value for money for the taxpayer. People want security, stability and affordability, not costly gimmicks which fail to deliver results. Only the Labour Party has plans to boost housebuilding and support more people into home ownership.
Baroness Penn (Con)
My Lords, I thank all noble Lords for their contributions to this short debate on the Bill today. In particular I thank my noble friend Lord Greenhalgh as the only Back-Bench speaker in the debate. My noble friend asked a number of questions. First, he talked about the need for mobility in the housing market. That is something I agree with him on. That can be delivered in a number of ways. Having better and more suitable homes for people to downsize to is one element of it; supporting Build to Rent and having longer-term tenancies is another. My noble friend is far more of an expert in these areas than I am.
While we support mobility overall, and there are a number of government measures aiming to do that—stamp duty is part of it—we have to balance action in that area against the fact that it is also an important source of government revenue. We think the action we have taken in this Bill strikes the right balance, providing temporary support during a difficult time for the economy, in particular the housing market as we see higher interest rates, with the need for fiscal responsibility too.
We made some other reforms to stamp duty. For example, in 2014 there was the move from slab to slice. This aimed to improve the fairness and efficiency of the tax system, as each new SDLT rate is payable only on the portion of the property value falling within each band. That removes some of the cliff edges from the system.
My noble friend also spoke about the higher property values in London meaning that it disproportionately contributes in terms of stamp duty land tax, and I acknowledge that. In the temporary reforms we have put in place, increasing the threshold at which you can claim first-time buyers’ relief helps first-time buyers in the capital facing those higher rates.
My noble friend also asked a specific question about shared ownership. First-time buyers’ relief is available on shared ownership purchases. Relief would then not be available on subsequent purchases. However, where someone intends to staircase up the shared ownership ladder, the option is available to them to pay 100% of the stamp duty up front and therefore claim the first-time buyers’ relief and not pay it again as they staircase up. I think that is a useful element of the system.
Turning to some of the points made by the Chartered Institute of Taxation and raised by the noble Baroness, Lady Kramer, the Government are aware of those points and the ones raised by the Stamp Taxes Practitioners Group, which relate to the technical detail of the existing first-time buyers’ relief legislation. We have asked officials in HMRC and the Treasury to work with those groups to discuss their comments.
More broadly, both the noble Baroness, Lady Kramer, and the noble Lord, Lord Tunnicliffe, made points about mortgage costs, interest rates and housing supply in general. As a Government, we are doing everything we can to hold increases in mortgage rates down as much as possible, in so far as we have an influence on them through our actions. That is why we have taken very strong steps to demonstrate Government’s commitment to fiscal balance and sound money. There is a longer-term trend of interest rates and mortgage rates rising since last autumn in response to global trends, including the illegal invasion of Ukraine. Interest rates are not rising solely in the UK; the US Federal Reserve has been raising its base rate since March 2022. The pricing of mortgage products is a commercial decision for lenders, and interest rate decisions are taken by the independent Bank of England.
On the noble Baroness’s and the noble Lord’s point about where there are existing mortgage borrowers who may now move on to higher rates, we have more resilience built into the system through the affordability assessments, but the Financial Conduct Authority regulations are already also very clear on the requirement that firms must deal fairly with customers and consider a variety of tailored forbearance options, including measures such as a payment holiday, partial payment or an extension of mortgage terms. Before Christmas, the Chancellor met with, I think, the regulator and banks to discuss the issue around higher mortgage rates and customers who may fall into difficulty as a result.
More broadly on housing, yes, we must do more to build more homes; that has been a consistent theme throughout this Government’s tenure. We have been doing more to build more homes: as I said in my opening speech, the figure for 2019-20 of 243,000 net additional dwellings was the highest in nearly 30 years, but we have a target of 300,000 and need to do more. I talked in my opening speech about some of the measures we took. Other areas are on SME housebuilders, which are an indispensable part of the housebuilding sector, and we have put in place a range of financial measures to support SMEs and to encourage systemic change in the lending environment, including over £2 billion of development finance under the home building fund, which will deliver approximately 60,000 new homes, and the £1 billion ENABLE Build guarantee scheme. I will not go into further detail on what the Government are doing to support further housebuilding, suffice it to say that we are committed in that area and that it will take a number of different initiatives to deliver it.
The noble Baroness, Lady Kramer, also raised the issue of second homes. We have the additional rate of stamp duty for people to pay on any additional homes they buy. We think that that is right, in recognition of some of the issues that she raised, but we also need to be cognisant of the impact that that has—or may have had—on the buy-to-let market and on the availability and affordability of homes to rent. We think that that was the right measure and that it has struck the right balance. We are also taking action in the Levelling-up and Regeneration Bill with the new 100% council tax premium on second homes and by strengthening the existing premium on empty homes.
To conclude, there is a lot to do to support home ownership and housebuilding more generally. We need to support more mobility in the market, as my noble friend pointed out, and the measures before us will support those wishing to buy or to move home in the current economic climate and the housing sector more widely. That is balanced against the need to ensure fiscal responsibility and to acknowledge that stamp duty is a source of revenue for the Government. We have struck the right balance in the measures, so I beg to move.