I remind the Committee that with this we are taking new clause 16—Rate of stamp duty on commercial property—
'.—(1) In Schedule 13 to the Finance Act 1999 (instruments chargeable and rates of duty) after paragraph 3 of that Schedule insert a new paragraph 3A—
''3A In the case of a conveyance or transfer of land which is not residential property within the meaning of section 92A of the Finance Act 2001 the rates of duty are as follows—
1. Where the amount or value of the consideration is £60,000 or under and the instrument is certified at £60,0000Nil
2. Where the amount of the consideration is £250,000 or under and the instrument is certified at £250,0001%
3. Any other case2%''
(2) This section applies to instruments executed on or after 1st August 2002.'.
I have great pleasure in welcoming you back to the Chair, Mr. Gale.
When I was winding up the stand part debate, I felt that the Paymaster General had slightly misrepresented the gist of my points. My first point was that we are not voting against tax incentives of either nil or low stamp duty in deprived areas, but want to point out that such an approach may be positive for deprived areas but negative for their adjacent areas. Even under the terms of clause 108, things can get subjective: the Government have chosen to exempt particular areas, but other equally worthy ones, where exemption would have been in the community's interest, have not been chosen. Such fiscal fine tuning has a habit of producing contrary results. In essence, we merely urge caution.
My second main point concerns the reason for new clause 16, which could candidly have appeared in other clauses that relate to stamp duty; the clause is clearly probing. The figure of 4 per cent. stamp duty on property used by business is significant; it makes for illiquidity and can cause problems, depending on who owns the property, if businesses want to expand or contract.
Bluntly, the reason for subsequent anti-avoidance clauses is that businesses and insurance companies, which are often the owners of commercial property, feel that such a level of stamp is less than acceptable—
hence their great efforts to avoid it. I am told by tax experts that aside from the specifics of the clauses there is a never-ending list of other possible schemes through which businesses seek to avoid stamp duty. The Government will face that problem because, although it may be an easy source of revenue for the Government, to business it is a material tax on economic activity. According to the logic of the clause, one could impose a 4 per cent. tax every time that someone buys a new piece of equipment or new machinery for a factory, but that will not happen because we have capital allowances. For some reason, business premises are seen as ''bad'' and should be out in the open, but machinery and equipment are seen as ''good.'' I do not believe that the Government have thought about the underlying economic issues; the new clause asks them to.
Historically, the Treasury and Government response has been to say that we cannot have different rates of stamp duty for private residences and property because it would be too complicated. However, clause 108 achieves just that for deprived areas. Our main plank of opposition is that the Government are saying that the housing market varies and that it is a bull and bear market so stamp duty is required to go up and down over time, but that a different economic territory exists for the stamp duty that applies to commercial property.
We will not press the new clause. We moved it to make the fundamental point that applying 4 per cent. to all premises owned by businesses is a major economic issue. It creates too convenient a milch cow, which results in major attempts, which will continue, at avoidance. Down the line, particularly in more difficult economic conditions, businesses may have problems with physical illiquidity.
We wish the whole of clause 108 luck because we want to see improvements to run-down areas in inner cities. As I said earlier, some cities have already done very well and for better or worse—this is perhaps a bad thing—virtually every MP has an interest in seeing the scheme succeed.
I began before lunch and have made one or two points, but the main point on which I should like the Paymaster General to comment is why certain areas are given exemption treatment. Why not think about accommodation for nurses, key public sector workers and other potentially more deserving cases than are currently in the specified category of exemptions in the clause?
Good afternoon, Mr. Gale. I shall answer the final point made by the hon. Member for Arundel and South Downs (Mr. Flight) because he has re-established many points made throughout the debate and I do not want to repeat myself. We have had a debate about the difficulty in setting a boundary. We are all agreed on the principle of helping the regeneration of disadvantaged areas, and the deprivation index is as suitable a tool as any; indeed, it is probably the best.
I acknowledged the Government's difficulty in setting the boundary line in the debate. The Revenue have regulatory powers in the clause, and as we
monitor and analyse the use of the relief and whether it is making the contributions about which we have spoken this morning to regeneration, it is important that we have the power to fine-tune the relief.
We have the power and the process, but I acknowledge that that is not necessarily the last word. The hon. Gentleman's hon. Friends have made it clear in the course of debate that the complexity of the issue, on which we are all agreed, will make it necessary to keep an eye on it. Should it require further fine tuning we will have the ability to do that. It is not a closed book. I have taken on board all the hon. Gentleman's points, but at this point in time I thank him for his best wishes for clause 108 and note his comments on new clause 16.
Question put and agreed to.
Clause 108 ordered to stand part of the Bill.