Treasury Policy (Housing)

Part of the debate – in the House of Commons at 10:00 pm on 10 May 2004.

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Photo of Andrew George Andrew George Shadow Minister (Environment, Food and Rural Affairs), Shadow Minister (Environment, Food and Rural Affairs) 10:00, 10 May 2004

I am pleased to secure the opportunity to discuss Treasury policy in respect of housing, partly because the issue has a significant impact on my constituency, which covers west Cornwall and the Isles of Scilly, and partly because I am certain that it also has a significant impact on many constituencies throughout the country.

I am pleased to see the Economic Secretary to the Treasury in his place. I have tried before, in Budget and other debates in which I have had the opportunity to speak about Treasury matters, to catch your eye, Mr. Deputy Speaker, or that of one of your colleagues, to discuss this matter, but without success. I am pleased to have the opportunity now to debate serious material issues, which I hope the Minister will accept I am raising in a spirit of constructive engagement.

Following the theme of constructive engagement, a few years ago, after I was first elected, I raised the subject of the impact that council tax discounts were having on second home ownership in my constituency and in many others. I argued at the time that I was disappointed that a Labour Government had been responsible for giving me such complacent ministerial replies on the subject, both written and otherwise.

I am pleased to say that on 9 February 2000, in a debate that I had called on second homes and council tax, the then Under-Secretary of State for the Environment, Transport and the Regions, Mr. Mullin, who is now a Foreign Office Minister, acknowledged that I had received a rather complacent response from his ministerial colleagues in previous years and months, and then went on to say:

"indeed, I have here a rather complacent response, which I will not read out."—[Hansard, 9 February 2000; Vol. 344, c. 112WH.]

Indeed, he suggested that we discuss the matter later, and we did.

Later that year, in November, the Government proposed to withdraw the council tax discount for second home owners. I was pleased with that outcome, and I was also pleased when, this year, the Government honoured their promise to reduce that discount from 50 per cent. to 10 per cent. That was the result of constructive engagement. I would like the Government to go even further, but what has happened already demonstrates that constructive dialogue can result in what I consider to be a beneficial outcome.

I want to raise with the Minister an issue that was rather hidden away in Treasury papers following the pre-Budget statement in early December last year—the subject of self-invested personal pensions. I shall make a few remarks about the Kate Barker review, and then, as I cannot hand it to him across the Floor of the House, I would like to draw the hon. Gentleman's attention to a briefing from the National Housing Federation outlining its concern about various tax impacts on social landlords.

What I, and other people far more expert than I who work in the industry, are concerned about is the likely impact of the Government's proposed changes to self-invested personal pensions from April 2005. What concerns me is that, having largely closed one tax loophole by removing the council tax discount for second homes, the Government are about to open a new one that could provide even greater encouragement to those wanting to invest in second homes. From April 2005, self-invested personal pensions will enable a pension plan to invest in residential property for the first time. That will have clear implications: 40 per cent. tax relief on money used to purchase property, and exemption from capital gains tax on the sale of property where the proceeds are reinvested in the pension plan.

Although personal use of the asset held by a pension fund will be subject to a tax charge, we all understand—just as local authorities understand—the distinction between council tax and business rates on second homes. Frankly, local authorities are prepared to turn a blind eye to businesses that let out second homes for more than 120 nights a year and that would otherwise be subject to business rates. Similarly, it will be very difficult to police the extent to which second homes are used by those with a beneficial interest in the property and the pension plan.