Mr Richard Ottaway (Croydon South, Conservative)

I should be grateful if the Paymaster General would assist the Committee on a few points. The schedule relates to the conversion of parts of business premises into flats. Obviously, there will be debate about what sort of business premises and what sort of flats. It would help me if the Paymaster General would answer one or two questions.

First, in chapter 3, ``Qualifying buildings and qualifying flats'', the schedule states:

``the building must have more than 4 storeys above the ground floor''.

Obviously, the figure must be fixed somewhere, but why at four storeys, not six or eight? Why does it specify high rise? There is obviously a strategic objective, which is laudable, to try to get more accommodation. Secondly, the building must have been constructed before 1 January 1980. Why do we need such a limit?

On qualifying flats, proposed new section 393D(1)(c) states:

``the flat must be held for the purpose of short-term letting.''

As I understand it, short-term letting means a lease of fewer than five years—[Interruption.] The Paymaster General says seven years. What happens at the end of the seven years? Must the tenants be changed? The Minister has that at her fingertips, I am glad to say, and I look forward to hearing from her. I have only two further points to make, which she may want to take as a job lot at the end.

I now come to the difficult question of high-value flats. In deciding what is a high-value flat, notional rent is based on a furnished flat. We know that there is growing use of unfurnished flats. What happens if flats are unfurnished? Why do we have to distinguish between the two? Why not include unfurnished flats as well?

My penultimate point is that the valuation does not include other payments. Has the Paymaster General dealt with the question of service charges? In some flats, service charges are a high component of their value; in some they are minimal. None the less, that is an important question. Finally, the notional rent limits table is moderately crude. The Paymaster General represents a Bristol constituency where flats have a certain value; equivalent flats in less salubrious parts of Great Britain attract a lower value. I know that the table distinguishes between flats in Greater London and elsewhere. Would not it be more subtle also to include a regional variation?

Mr Michael Jack (Fylde, Conservative)

In the Budget press releases the measures in the schedule are triumphantly described as

``100 per cent. capital allowances to cover the costs of providing flats over commercial premises for letting to help bring life back in to Britain's high-streets.''

Those are three lines of total clarity, yet what we have in the schedule is pages of nit-picking detail. Will the Paymaster General explain a bit about the thinking that that went into that?

My hon. Friend the Member for Croydon, South made an important point about the number of storeys in buildings. In some older buildings, it is not always easy to identify what constitutes the ground floor. Many older buildings contain a floor, part of which is below ground and part above it, so how shall we determine what the ground floor is? Will a code of guidance be issued, so that those who embark on the labyrinthine reading of the schedule to discover whether they are properly qualified will know in greater detail what the provision is all about?

My eye was then taken by new section 393D, which gives insight into the detail. It states:

``the flat must not have more than 4 rooms''.

That is intriguing because the schedule provides no definition of a room. The census, which the Economic Secretary was responsible for getting to at least some of us on time, contains a definition of what constitutes a room. Moreover, what does not count as a room. Does the Bill work on the census definition or another one? That is the sort of detail that should—or, perhaps more critically, should not—be defined.

We all want this laudable attempt to bring life back to the high streets of Britain to succeed. What an indictment that life has been snuffed out in the high streets of so many Labour-controlled authorities, but I shall not detain the Committee with a long discourse on my experiences in Newcastle upon Tyne.

Why, in all seriousness, must a flat be restricted to no more than four rooms? New section 393D(f) further stipulates:

``the flat must not be a high value flat''.

At least we have some definition in that respect, but if someone is trying to regenerate the inner cities of our country, what is the value of specifying the number of rooms and the worth of the flat? It is unnecessary.

Mr Frank Roy (Motherwell & Wishaw, Labour)

If the right hon. Gentleman looks at the top of page 181 of the Bill, he will find a definition of a room which will help him.

Mr Michael Jack (Fylde, Conservative)

I am always willing to be educated, but there is no definition in the part of the Bill that I am considering. Why is a flat defined as four rooms? I accept that it states that

``any kitchen or bathroom, and . . . any closet, cloakroom . . . not exceeding 5 square metres''

do not count, so we know which rooms are missed out, but we still have no definition of a room.

Mr Harry Barnes (North East Derbyshire, Labour)

It sounds as if it is exactly the same as the definition in the census, which specifies what should be excluded. That is precisely what the right hon. Gentleman asked for.

Mr Michael Jack (Fylde, Conservative)

``It sounds as if'' is a good description. If the Government are trying to encourage the development of properties in the high street, the provisions contain an enormous amount of unnecessary detail.

I was helpfully referred by the hon. Member for Motherwell and Wishaw (Mr. Roy) to the reference to

``any closet, cloakroom or hallway not exceeding 5 square metres'',

but it may be physically impossible for a building that is adequate for regeneration to meet that specific criterion. Why has that figure been adopted? It is another example of unnecessary detail, which will inhibit the work that is required under the proposal.

Why is there no provision in the schedule for allowances to be transferred to subsequent purchasers, by reference either to the price that is paid or to the unrelieved residue of the vendor's expenditure? That is an important technical point but has not been dealt with. Finally, I note that new section 393E(6) says that the tables of notional rents can be amended by Treasury regulations. Will the Minister clarify what the review period will be between the Bill being enacted and the reviews taking place? The property market can be extremely volatile and, for greater certainty, people will want to know when the reviews are likely to occur.

Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)

I implore the right hon. Member for Fylde to read the entire schedule before trying to find problems in it. This is a modest proposal, which fits into the package of measures included in the Bill and, particularly, with the recommendations made by the Rogers report. From 1992 to 1995, the Conservative Government, by way of a grant scheme, followed the same objectives, using many of the same criteria after advice from the relevant Departments. Their scheme was a modest success, but was criticised because it was inflexible and used an annual grant, as opposed to an allowance with the cost benefits of a capital allowance.

I do not know what the make-up of communities is like in the right hon. Gentleman's constituency, so I will give the Committee an example from mine. Several estates, which make up the constituency council estates, are situated toward the edge of the city and have shopping precincts. Over the years, those shopping precincts have declined with the change in shopping habits that we have seen throughout Great Britain. Many of the shops had accommodation over them, which has now fallen into disuse or is used for storage only. Therefore, it will cost to bring the accommodation back into use. With the pressure for land, particularly on greenfield sites, and the desire that more people have to live in their communities, the proposal will assist and encourage those who own such properties to make the conversion and bring the properties back into residential use.

Mr Andrew Bennett (Denton & Reddish, Labour)

The Paymaster General said that the Conservative scheme for giving grants was a modest success. Will she put a figure on that and tell us how many flats the Government's scheme hopes to convert? As shops are no longer viable in many cases, why is it impossible to include ground floor accommodation?

Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)

I do not have figures to hand on the success of the Conservative scheme. I was being generous; I understand that it was modest but successful, and I am not claiming any more for this proposal. We expect that it will help to support the conversion of around 1,300 flats a year. That is obviously a small figure in terms of housing demand, but the package is strong in helping to regenerate areas.To respond to my hon. Friend's point, we wanted the measure specifically to deal with the conversion of properties that have fallen into disrepute—I mean disuse. There are other ways in the tax system of helping conversions generally. The package in the budget responds to many of the Rogers proposals.

Given that a limit had to be picked, we picked four storeys on the advice of the DETR. We are not aiming to help the conversion of high-rise properties, and that limit was considered reasonable, given the kind of buildings that are liable to be converted.

The same is true of the reasoning behind setting the cut-off point at 1980. The background advice to us on the type of conversions that might occur, and the profile of what was likely, suggested that that was a good cut-off point.

The balancing event time limit of seven years was chosen because, under the terms of the schedule, seven years is the duration of a lease for short-term letting. If the property is disposed of within that period, the interest in the property is surrendered, and the question of the allowances comes back into play. After seven years it does not matter. The limit was set to ensure that the accommodation stays in use for a reasonable period.

We are not seeking to subsidise the conversion of high-value, expensive properties that would have been converted anyway. We are trying to use the resources specifically to bring about regeneration in parts of the property market that need encouragement and push, where the financial encouragement for conversion is not as great.

The levels of notional rent considered to denote a flat of high value were again set on the basis of advice. The hon. Member for Croydon, South is right—this is a crude measure. We were advised by the DETR that those were sensible levels, given current market rents. The limits concern only rents, not service charges, because higher service charges tend to apply in properties of a higher value.

In response to the right hon. Member for Fylde, I can say that we need to keep a careful watch on this proposal. We have specific ends to which we hope it will contribute, in terms of the regeneration of rundown areas. It will not achieve that regeneration by itself, but as part of a series of measures.

Mr. Nick St. Aubyn (Guildford) rose—

Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)

I shall just finish my response to the right hon. Member for Fylde. I have forgotten my point now, so I shall give way and hope that I can remember by the time I get back up.

Mr Nick St Aubyn (Guildford, Conservative)

I apologise for interrupting the Minister's train of thought. If I am reading the schedule correctly, it states that a one-bedroom studio, renting for £350 a week, is not high value. Is the hon. Lady saying that a studio flat in London with a value of £250,000 is not, in the Government's view, a high-value flat?

Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)

I repeat to the hon. Gentleman what I said to the Committee, because I would not claim to be an expert on the level of rents in the Greater London area. We are advised by those who collect the information that those are reasonable figures. That is also true of the regional figures.

We are specifically trying to remove the yuppie element—I cannot think of any other way to put it—in regeneration and assistance areas. Yuppie development will happen anyway. We are trying to remove it from specific areas only, so we are not discriminating against yuppies, as the hon. Gentleman might think that I am implying. Development in such areas may not be economic, and may need some encouragement.

I was not surprised by some of the comments made by the right hon. Member for Fylde about what constitutes a ground floor and a basement. People are reasonably sensible, and understand the ground floor to be the level at which one enters the property—unless one has tunnelled one's way in, of course.

Mr Andrew Bennett (Denton & Reddish, Labour)

There is a danger that the Paymaster General is putting too much emphasis on the south of England and not enough on the north of England, where an awful lot of buildings are on hillsides. There might be a ground floor shop at the front, but another ground floor at the back might be entered from the hillside.

Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)

My hon. Friend is right to correct me, as the way in which one enters the property is important. In Bristol, one enters the house in which I live on the ground floor, but that has become the first floor by the time one reaches the back of the house. However, capital allowances and assistance have worked perfectly well in relation to the issue. The Committee is making a meal of the proposition that people who are perfectly capable of understanding and developing regeneration cannot, when looking at a property, determine the ground floor from the first floor. The distinction is clear. I have answered the right hon. Member for Fylde on what counts as a room by referring him to the schedule, which defines that.

We expect people to be sensible. The tax system cannot be absolute and is not designed to be. The schedule gives clear indicators about the type of development that we want. I am delighted that the Committee thought it so important to discuss the matter at some length, and I do not want to give the impression that the schedule is somehow skewed towards London. The reverse is true. Constituencies such as mine and others elsewhere in the country will benefit enormously from a little extra piece of the jigsaw in assisting regeneration packages in our local communities. I sincerely hope that the Committee will now agree to the schedule.

Mr Nick St Aubyn (Guildford, Conservative)

I welcome you to the Chair, Mr. O'Hara, as this is the first opportunity that I have had to address you. I apologise for the fact that my duties as a member of a Select Committee prevented me from attending earlier this afternoon.

I was interested to hear the Paymaster General's views on the fact that a flat that costs around £300,000—that would be the case for one in Greater London with four rooms rented for £480 a week—is not of high value. At £300,000, such flats are subject to inheritance tax and high levels of stamp duty. So that we understand the Government's point of view, will she confirm that they are happy for homes that are not of high value to be subject to inheritance tax and the highest rates of stamp duty?

Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)

That is not relevant to the schedule. The hon. Gentleman should stay focused on our proposals, which are good. We do not make outrageous claims for them, but they will assist regeneration in our local communities. We have taken advice from the Department of the Environment, Transport and the Regions on sensible figures within the schedule, and I would have hoped that the hon. Gentleman would welcome it and not pick holes in it for the sake of it.

I gave an incorrect answer about leases to the hon. Member for Croydon, South. I inadvertently said that a short-term lease was for seven years. The hon. Gentleman said it was five, and he was correct. The seven year period is the time before disposal can occur if the full benefit of the allowances is to be retained. I am sorry to have misled the hon. Gentleman.

Mr Michael Jack (Fylde, Conservative)

The Paymaster General is normally generous when responding to questions. My task in asking questions was not to nit-pick but to ask questions put by the Institute of Chartered Accountants. That responsible body represents the practitioners who will have to deal with the legislation. My remarks were inspired by the representations that we have received. I seem to recall that when the hon. Lady was sitting on the Opposition Benches, she was glad to have the assistance of such bodies to ask questions of the then Government.

Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)

I am delighted that the institute is always on hand to help the Committee. I was not referring to the institute; I was suggesting that the hon. Gentleman would find it an advantage to read the entire schedule before asking questions about it.

Mr Richard Ottaway (Croydon South, Conservative)

Will the hon. Lady explain why a flat must be held for short-term letting? I have lost her reasoning. Secondly, because the hon. Lady was distracted, she inadvertently missed my question about regional variations on the values of flats. For example, a flat that might be rented for £300 in Bristol could be rented for £200 elsewhere. In Bristol, at £301, it would be disqualified; but it would not be disqualified elsewhere. It is a rather crude method. The Minister distinguishes between Greater London and elsewhere. Could not the ``elsewhere'' be regionally subdivided?

Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)

I think that the hon. Gentleman accepts that the rent limits have been set on advice from the Department of the Environment, Transport and the Regions. We did not want an over-complicated set of tables that gave variations across the regions, and we have been advised that the levels set will cover the sort of circumstances suggested by the hon. Gentleman. However, as I said, we would naturally keep an eye on it, and if we received representations from some parts of the country, or it if became clear to us that the advice was frustrating other issues, we would return to it. We have done our best to balance reasonably simple and straightforward provisions with the likely demand. The advice provided to us on rent levels, the availability of properties and the various areas make the table a reasonable proposition.

I think that I understand the point made by the hon. Gentleman about encouraging property back into use. By maintaining the benefit of the allowance, the schedule seeks to ensure that the property remains in use for a reasonable period of time. Those levels are set to achieve that purpose; otherwise we would gain properties only to lose them. If I have not covered exactly the question raised by the hon. Gentleman, I shall scrutinise the record and write to him and his hon. Friends if there is a further point to be made.

Mr Nick St Aubyn (Guildford, Conservative)

May I help the Minister? Did she consider using the council tax bands as the basis of the ruling? After all, council tax banding and values for flats are far more certain than their prospective rents. The banding could then be related by locality to the average council tax band in that area.

Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)

I understand that we considered the council tax bands, but after weighing up the options, decided that the information on market rents was a more accurate marker for what was going on. I would not want to mislead the Committee, and it is some time since I first looked into the matter, so I will check that I have given the hon. Gentleman the correct information. If I have not, I will of course write to him.

Question put and agreed to.

Schedule 19 agreed to.

Clause 68 ordered to stand part of the Bill.