The clause raises stamp duty on residential properties from 5% to 7%. The raise was one of the measures mooted as a “mansion tax” before the Budget, which, it was said, would in part replace the lost 50p rate as a new tax on wealth.
When the Chancellor scrapped the 50p rate in his Budget, he gave the richest 1% of the population a tax cut, but he told us that these clauses would make up the difference. He told us and the public that the 50p rate caused “massive distortions,” a euphemism for the kind of legal tax avoidance that the majority of his party find repugnant. He told us:
“It raises at most a fraction of what we were told, and may raise nothing at all.”
It was on that basis that the 50p rate was cut. In other words, lots of people found ways to get round the 50p rate in its first year, so the Chancellor decided to abolish it. One has to question whether that is a sensible way to run a tax system. If we abolished all the taxes that the rich did not like, did not pay or tried to avoid, we may be left with few taxes.
Clause 211 is in the package that is supposed to raise the money lost through the 50p tax cut. Indeed, the Chancellor told us:
“Thanks to the other new taxes on the rich that I have announced today, we will be getting five times more money each and every year from the wealthiest in our society.”—[Official Report, 21 March 2012; Vol. 542, c. 805-6.]
That claim was later thoroughly debunked by the experts. The Institute for Fiscal Studies stated clearly that it was far too soon to know how much the 50p rate would raise. It said:
“If the future of the 50p rate is to be determined on the basis of evidence... then Budget 2012 will be too soon to form a robust judgment.”
The independent Office for Budget Responsibility later confirmed that,
“the results of the evaluation are highly uncertain”.
If we do not know how much the 50p tax rate would have raised, how can we be sure these stamp duty measures will cover its loss? Even in combination with other schemes, these new charges cannot come close to raising as much as the 50p tax did. Will the Minister tell us if this is a watered down version of a more stringent original measure? This measure would raise much less than a mansion tax or a tax on wealth.
It means only one thing: if it is not avoided, the very rich will pay more tax on their very expensive house purchases than before. However, when one looks at the detail, clause 211 introduces SDLT at 7% on the purchase of residential property, where chargeable consideration is more than £2 million. On the purchase of a residential property with chargeable consideration of £2,000,001 the SDLT charge increases from £100,000 to £140,000. The clause is effective from 22 March 2012.
The hon. Lady asserts, as the basis of her argument, that the 50p tax rate was a money-raising measure. Is she familiar with the numbers released by HMRC in response to one of my parliamentary questions? They showed that in 2009-10, the number of people paying income tax on incomes over £1 million was 16,000 and they paid £13.4 billion in income tax. In 2010-11, when the 50p rate was brought in, that number had fallen to 6,000 and they paid only £6.5 billion in income tax. Therefore, it cost the Treasury money. [Hon. Members: “ Ah!”]
Hon. Members make their “ah” noises, but that is the point I am making. The 50p tax rate was in its infancy. It has been well documented by both the IFS and the OBR that sufficient avoidance measures were put in place to avoid paying at the full rate. It is highly uncertain what the longer-term implications of that tax rate would be.
I gather from the hon. Lady’s tone that she and her colleagues attach great importance to the 50p tax rate which, as she just said, was in its infancy. If it is so important to the Labour party, how come the top rate of tax was 40% for roughly 12 years and 352 days of the 13 years that it was in office, and the 50% tax rate was introduced only when the general election was under way?
I am delighted to answer. The hon. Member for Bristol West overlooks the point that not only was a general election due, but we were in the middle of an extremely deep recession, which has now become a double-dip recession. We were on the way out of it at that point, and the 50p tax rate was put in place to ensure that, as part of the recovery effort—
Order. I remind Members that we are talking about:
“Rate in respect of residential property where consideration over £2m”.
We will finish at 9 o’clock tonight, but we can finish earlier if Members wish.
Thank you, Mr Bone. A discussion on the 50p tax rate is relevant to this clause and in this context, due to the specific assertions that the Chancellor made when he put the changes in place. They are part of a package of taxation measures that he claimed would put the burden more on the shoulders of rich. Our concern, however, is that the burden is falling more on the shoulders of those who can least bear it.
I thank you, Mr Bone, for your indulgence, and the hon. Lady for giving way. She answered my question by saying that that the measure was introduced in the dying days of the previous Labour Government because we were in the middle of a recession at that point. It could have been the middle, because that concedes that it started a lot earlier. We now know that the recession started in 2007. The structural deficit started under the previous Government in the 2001-02 tax year. If the 50p top rate was so important, why was it not introduced much earlier?
We are looking at the past 10 years of taxation policy. We are actually focusing on a change being brought in by the Chancellor and the specific assertion he made that this stamp duty land tax will outweigh the impact of cutting the 50p tax rate. If the hon. Gentleman wants to come back with a relevant point, I would be grateful and will respond.
To focus the hon. Lady’s attention precisely on the clause, which is about a tax that raises money from the wealthy, who are able to buy properties worth more than £2 million: why were effective taxes on the wealthy not introduced from 2001-02 onwards to bridge the structural deficit, and from 2007 to deal with the recession?
I thank the hon. Gentleman for his intervention. He makes a valid point: particularly at this time of recession, it is vital that we put the right taxation policies in place, which take a sufficient amount from those who can afford to pay and ensure that they do pay. That is why we do not oppose, but welcome the measure today. We are trying to probe its impact and whether it sufficiently outweighs the choice to cut the 50p top rate of tax now, given the economic circumstances that the country faces.
Does my hon. Friend agree, first, that the second part of the double-dip recession we face was made in Downing street, and, secondly, that the measures in the Budget let the rich off and punish the poor?
I will not tempt your wrath, Mr Bone, by responding to the question asked by my hon. Friend the Member for Bolton West about how this recession was made in Downing street. Suffice it to say that there are significant concerns.
Previously, a stamp duty land tax of 5% applied to the purchase of expensive residential properties. Since 22 March 2012, SDLT of 5% has applied to the purchase of residential property on chargeable consideration in excess of £1 million, but not more than £2 million. Will the Economic Secretary explain where those figures came from? Why was the level of £2 million chosen? Why was the provision not applied to £1 million properties, which were previously considered expensive enough for the 5% rate? Will she also explain where the figure of 7% came from? What are the evidential bases of the percentages? Where do the costs of the properties to which the rates are being applied derive from? Were other rates considered as part of any consultation? Was an analysis carried out of how those rates might have worked? Has the Economic Secretary considered the fact that 75% of properties worth £2 million or more are in London? Was that a factor in the decision not to apply the 7% rate to £1 million properties, which are more widely distributed? It is clear that a number of questions need to be answered.
The measure will affect not just owner-occupiers; it is likely to affect the whole market, including investors in residential property, which will now be less attractive to them. Institutional investors and commercial landlords have traditionally invested in this market. The increased SDLT will result in a lower yield for investors and might result in higher rents for the tenants of the properties. Investors may now switch to commercial investments and pay SDLT at a rate of 4%. Have those possibilities been modelled and considered?
The Government have called on private landlords to lower their rents for tenants. A large £2 million property split into flats could easily be subdivided into smaller flats to be occupied by non-millionaire tenants. Will the Economic Secretary end up having to give tax incentives back to investors who exit the residential market as a result of the change? It would be reassuring if all of the issues had been considered before the policy was decided.
The main question that I would like the Economic Secretary to answer is whether she believes that the measure is a credible replacement for the removal of the 50p rate of income tax. Unfortunately, I do not think that she will be able to answer that question because, while 300,000 people will benefit from the tax cut, only 4,000 houses are sold each year for more than £2 million, so 99% of those who will gain from this tax cut for the richest will be totally unaffected by the rise in stamp duty. The concern is that that has been the Chancellor’s plan all along. He has reduced the tax on very high incomes across the board, whatever a person’s spending habits, and increased a tax that will affect only people who buy expensive houses. Does the Economic Secretary accept that only 1% of those previously paying the 50% tax will have to pay higher stamp duty?
Will the hon. Lady not at least acknowledge that it is very difficult to avoid paying stamp duty tax on a house? As long as people are selling houses and we know the numbers, it is possible to get the revenue, so it is a good tax in that regard.
I thank the hon. Gentleman for his reasoned and rational contribution, which sits in contrast to some of the previous contributions made by Government members of the Committee. He makes a good point that stamp duty is a difficult tax to avoid and that it is, therefore, a good tax. We do not oppose the measure in itself, as long as all of the issues that I have raised have been well considered and thought through. In itself, it is not something that we oppose, but the concern is whether this is a genuine replacement for the 50p tax rate and whether it sufficiently enables that burden to remain on those who have the ability to pay the higher rates of tax, rather than shift it on to the squeezed middle to whom we often refer. Sometimes there is frustration about exactly who those people are. They know who they are, because they face the difficulty every day of paying their bills and dealing with the cost of living. My argument, which I made at the beginning of the debate on this clause, is that the fact that a tax is easy to avoid, can be avoided or has been avoided is no argument for scrapping it. It is actually an argument for putting better measures in place to make sure that the tax is collected.
I refer again to the IFS and the OBR on the 50p rate. They said clearly that, even though the yield in the first year was not as high as one would have hoped, over the course of this Parliament, for example, it was highly uncertain what future yields would be, as avoidance measures were put in place in its first year of implementation. That could not continue indefinitely, so inevitably it was expected that the yield would be higher over the coming years.
My final question to the Economic Secretary relates to the Chancellor’s assertion that this tax would offset the cut in the 50p rate. How will the other 99%, who will not be hit in any way by the imposition of this tax, pay their fair share? This strikes me as a missed opportunity to contribute to reducing the deficit .
I am slightly confused and perhaps the hon. Lady can clarify the matter. Is she referring to 1% of the 6,000 people who we have heard will pay the top rate of tax? It seems a very small number compared with the number of properties sold each year, either above £1 million or indeed above £2 million. It does not seem to make sense. Can she clarify that for me?
Yes I am referring to the 1% of those who were previously paying the 50p tax rate. As I said, 300,000 people—14,000 millionaires in particular—will benefit every year from the reduction of the 50p tax rate, but only 4,000 houses are sold each year for more than £2 million. So 99% of those who gain from this tax cut for the richest will be unaffected by this increase in stamp duty. How is the higher rate of SDLT going to offset the cut in the 50p tax rate as the Chancellor of the Exchequer, not I, has claimed?
I think I should speak up for my hon. Friend the Member for Chelsea and Fulham, who probably represents more houses in this category than any other Member in Parliament, with the possible exception of the hon. Member for Cities of London and Westminster (Mark Field). He, of course, is not allowed to speak, considering his position. It is important to question what the 7% rate will actually do and its effect on the London property market. The hon. Member for Newcastle upon Tyne North made some excellent points in this regard. I will put aside most of what she said about the 50p tax rate, but she raised some important issues on the knock-on effects.
I declare my own modest interest. The house next door to me has just dug out its basement in London. Will we see people across London not moving house, but digging out their basements? What effect will that have? Will we see people buying two flats in a block and putting them together to avoid the increase in the tax, which is quite substantial? We are talking about £40,000 that is payable as soon as people go over that £2 million level, but not payable at even £1 below that limit, or at £2 million itself. What effect will that have on encouraging people to rent, rather than move property? What effect will there be in London on the mobility of labour, and particularly the international movement of labour, which is very important for the City of London? Is it coincidence that we have discussed clause 210 on stopping anti-avoidance schemes just as the rate of stamp duty land tax has gone up? As the Government have got increasingly greedy with stamp duty—the previous Government started this, of course—has avoidance become more of a problem, leading to a constant effort to plug holes, although the situation is sieve-like, and it is never possible to plug enough of them? When the number of property transactions has been declining, is it sensible to put up taxes on property at all?
The hon. Gentleman quoted a figure of, I think, £40,000. Is he aware that the Government have brought in the community infrastructure levy, which has just begun to take effect in the first few councils? That raises amounts of £20,000 and £30,000 per new property, in the hon. Gentleman’s constituency and everywhere else, and it includes conversions or expansions of existing properties.
I will speak very specifically to the issue before us, because I do not want to take up a lot of time in Committee, and I know we must finish at 9 o’clock. Tempted though I am by the hon. Member for Bassetlaw to move along all sorts of highways and byways, I intend to stick exclusively to the increase in stamp duty land tax, and to caution the Government that there will come a point at which, if we keep on attacking the golden goose, it will stop laying eggs.
We have found stamp duty to be an easy way of raising tax. It was a very good way to get it when the economy was booming. The rates would go up and there was little effect in a rising market. I am not convinced that that is the situation we are now in. The increase will probably be a disincentive to moving house. It will have an effect on planning in London, as people seek to build upwards and downwards, and on neighbourhoods.
We want a very liquid, high-turnover property market, with as few imposts on it as possible, which is one of the advantages that the UK housing market has had over continental housing markets. That contributes to the mobility of labour. The provision is probably not a good way to raise increased tax. To go back briefly to the 50p point, if the Government had been bolder and cut the 50p rate to 40p—bang!—it would have raised more revenue.
The hon. Member for North East Somerset may have shot the Government’s fox, in relation to whether they will derive from the increase the amounts stated. Stamp duty has, over the years, proved to have clear impacts on the property market and people’s behaviour. That is, indeed, precisely why there was a stamp duty holiday, for a period, for first-time buyers.
A lot of property market experts report that ending the holiday and re-imposing stamp duty has led to fewer transactions. The tax affects people’s behaviour. The argument that more money will be levied through stamp duty than through the 50p tax rate is based on certain assumptions. After all, it was the Chancellor who made the comparison, and Conservative Members who in the Budget debate put up their fingers to tell us—because we obviously cannot count to five—that one amount was five times the other.
The provision is an important part of the Chancellor’s Budget policy, so if there is any likelihood that the increased rate of tax will affect people’s behaviour and lead to them not moving or carrying out the relevant transactions, but instead doing various things that might enable them to stay where they are, such as making more space, the expected tax take will be less. Why should we expect people’s behaviour to be affected at the bottom end, and say that people looking for cheaper properties are perhaps more likely to buy when stamp duty has been waived for a period, but not at the top end? It seems that there will be an impact on people’s behaviour.
I think a Government Member suggested that stamp duty was a difficult tax to evade. Well, it may be, provided that a property is actually purchased, but stamp duty does not apply where a property is not purchased. That is the bit about behaviour. If stamp duty is so difficult to avoid, we have to ask why there are so many measures in the Bill to prevent people avoiding it. We discussed that when we considered clause 210, which addresses the avoidance of stamp duty land tax.
We also know—this was part of the big Budget debate—that one of the ways in which people avoided the 5% stamp duty land tax was by creating situations in which a company, rather than the individual, purchased the property. The Government declared that they wanted to take steps both to address such avoidance in future transactions and, through another mechanism, to recoup some of the losses on past transactions. Sadly, people may be able to avoid even that kind of tax.
Such avoidance was not so uncommon in the past, when there were cut-offs at various levels—at one point, a higher rate of stamp duty was levied at £100,000. I recall people offering arrangements such as, “Well, we’ll call it £99,000, and we’ll sell you the furniture for £10,000,” or whatever. The same amount of money was passed, but it came under the stamp duty threshold. I am not defending that practice, but I am aware that it happened at times.
People find ways to get around stamp duty, and perhaps that will be true of £2 million houses, too. There may be different ways of doing so; I am not a tax-avoidance lawyer, so I have not thought of what those ways might be. I would not be surprised if somebody was working out how to make a transaction in such a way that it falls beneath £2 million but that some other service or sale takes places on which the tax is not levied. In all those circumstances, the amount generated by the tax may well be less than anticipated. On that basis, the promise that the measure will plug the gap, and perhaps do even better, may not be met.
I am slightly worried by the glee with which Government Members want to tell us that the 50p tax rate does not raise any money or might even be a money loser, as was suggested earlier, The Government have repeatedly told us that we have to address the deficit and raise money. What annoys so many of our constituents, and so many people up and down the country, is that they do not have the ability to accelerate their income and pull it back into a previous year, as appears to have happened in the first year of the 50p tax rate. Most people cannot go to their employer and say, “Will you pay me next year’s money this year so I can avoid paying tax?”, or “Will you pay me next year, rather than this year?” That is probably what people are doing at the moment; given that there is an exit year, as well as an entry year, they will just delay their income. If the tax had gone on, of course, it would be much harder for people to do that, as has been suggested. It must be understood why people are so angry about some of these matters. It is almost as if we are being told to be delighted that the tax did not raise what it should have done, and that people clearly tried to get out of it.
There is an argument for property taxes such as SDLT. As we have seen over the past week in the big debate about tax avoidance, income taxes are avoidable on lots of levels by many people, particularly by those who are self-employed or have companies. All those mechanisms have been under discussion. There is an issue about how to ensure a reasonable tax take, proportionate to income and wealth, and create a fair and progressive tax system. That is one reason people have suggested that a property tax might achieve that in a way that an income tax might not. That is one argument for continuing with council tax, although a lot of people do not like that either. That is a property tax that it is quite hard to avoid. I suspect it is also the reason why Liberal Democrats, both prior to the election and since, have advocated a mansion tax. They realise that wealth is not being taxed as effectively as it might be, and want to ensure that it is.
It has been spun that the 7% is a mansion tax, but it is a pale shadow of one. The crucial point is that it may not raise the money needed to deal with the problems the country faces. It is significant that we should hear today that public borrowing rose more than expected in May; it has hit £17.9 billion, compared with £15.2 billion the year before. That increase in borrowing was driven by a fall in income tax of just over 7%, and an 11.7% jump in welfare benefits. Sadly, it is hurting, but it is not working.
I shall be quick. I support the clause and will defend and promote it as appropriate. However, I worry in that members of the Committee and the wider public are not aware of how the Government are attacking the entrepreneur and the person who wants to build a small house.
It is appropriate that a large mansion should be taxed in this way as a minimum, if not more. At the same time, this very day across the country, from Somerset to Nottinghamshire, the community infrastructure levy is being introduced. That means that anyone building a small house on a plot of land will, for the first time in this country, be taxed a huge amount by the Government. Converting a small property such as a barn will be taxed for the first time in the same way as the large developer. That is a tax on the aspiration of Britain.
That skewing of the housing market and the attempt to dampen aspiration among those who wish to get up or move on to the housing ladder emphasise the flaws in the Government’s housing and taxation policy. It would be better if the clause imposed a higher mansion tax than that proposed and introduced a cap at the bottom to allow the person who wants a plot of land on which to build their own house for the first time to get on the housing ladder. Anyone wishing to do that should not be taxed between £20,000 and £30,000 extra. The country hardly knows that is going on. It is our duty, therefore, to tell people about the new tax that the Government have brought in on aspiration and home ownership.
Will the Minister consider, over the next few months, whether the tax in the clause could be increased by 1%? A cap could then be created for small, affordable, starter houses, allowing the aspirant entrepreneur to get on to the housing ladder by building a small home, without the burden of the state taxing them, for the first time, £20,000 to £30,000 each. For some people, that would be decisive. Will the Minister give a commitment to the Committee to look at this matter, and see whether a small tweaking would provide an opportunity for entrepreneurship, and not dampen down aspirational home owners in the way that the Government are now doing sneakily?
If I may say so, Mr Bone, with due respect to your chairmanship, this morning’s debate has involved one of the more egregious avoidances of a clause’s point that we have seen.
I apologise, Mr Bone. I meant no disrespect to your chairmanship, but I would like to pay some disrespect to other comments that we have heard today. The point was made about the rich paying more, which is an idea that my constituents certainly welcome. If people are asked, “Should a purchaser of a £2 million home pay more in tax than someone who purchases a £1 million home, and in turn, more than someone who purchases a £100,000 home?”, the answer would be a resounding yes. That is what the clause does in part.
The purchaser of a £2 million home pays more than someone who purchases a £1 million home, or a £100,000 home, even if the rate is the same. It does not require a higher rate for fairness.
Let me go into what the rate does—my hon. Friend will know well the technical terms, “a slab” and “a slice” that apply to this tax, and rather broader reform would be required if we were to fully tackle what he has just asked for.
The new rate is one of a package of measures that is targeted at the wealthy. As the Committee knows—they can check the figures in the Red Book—the package ensures that the Exchequer will gain five times more money each and every year from the wealthiest in our society, compared with how much those people benefit from the Budget. For clarity, the package includes other changes to stamp duty land tax, such as clause 210, the cap on tax reliefs, and measures to address avoidance. Members have asked whether the measures take more from the rich, and those answers can be found in the Red Book.
Clause 211 introduces a new rate of stamp duty land tax for residential properties worth over £2 million from 22 March 2012. SDLT is a tax on land transactions, both residential and commercial. Purchasers are charged a percentage of the price paid for the land or property that they acquire. Before the changes were introduced, the rates of SDLT on residential properties rose from 0% for properties up to £125,000 to 5% for properties over £1 million. The clause introduces an additional 7% rate for residential transactions over £2 million, again with an effective date of on or after 22 March 2012. As the measure applies only to properties costing more than £2 million, it is clearly a charge on the wealthiest individuals.
It is clear to those who listened to this morning’s debate that many of the comments made by Opposition Members have been debunked enough, and I thank some of my hon. Friends for doing that here today. I will add to their comments the point that the Office for Budget Responsibility made in the context of the Budget announcements, which is that the package put forward was based in part on central and reasonable figures.
The Minister wants to debunk, but will she just confirm that, with the community infrastructure levy, the Government are taxing everyone who builds a new home or converts a non-residential dwelling into a new home? They are applying now, for the first time ever, a tax of between £20,000 and £30,000 per property. It is brand new this year; it has never existed before. Will the Minister confirm that that is a fact?
I am grateful to the hon. Gentleman for giving me the chance to deal with that question before moving on to the rest of what I need to say this morning. It is my understanding that Department for Communities and Local Government plans help to ensure that the externalities involved in the very broad community infrastructure levy reforms are properly funded. It is my understanding that if the land is worth less than £125,000, no SDLT is due; nor is it due on the finished house. I am sure that other Ministers would be happy to discuss that with the hon. Gentleman in due course.
Order. This is getting out of order. The hon. Gentleman made the point before. He was asking for the rate to be increased, but he now appears to be debating the actual charge. Unless he wants to rephrase the question, that might be out of order.
Perhaps it would be best if I offer to return to the hon. Gentleman on that topic or, indeed, ask other Ministers to do so. They might be better equipped to discuss the matter, given what this clause allows us to discuss.
I want to deal with other points before making some brief comments about what the clause does. The hon. Member for Newcastle upon Tyne North asked as one of her first questions whether the measure had been watered down. She asked: is it less than a mansion tax? It seems to be less than a tax on the wealthy, she said. The idea of a mansion tax from her and perhaps the idea of a tax on the wealthy from her is the closest we have got, all Finance Bill long, to a statement of what the Opposition’s plans are on tax. If she has an idea of what a mansion tax or, indeed, what a tax on the wealthy would achieve, we are all ears.
I will quote back to the hon. Lady her note that—
Will the Minister clarify something? The points that I have raised today are scrutinising the measure that the Government are implementing and the Government’s intentions with regard to it. I do not recall at any stage setting out any policy proposals with regard to this measure in any of my comments.
Indeed, and that has been one of the difficulties with the hon. Lady’s contributions in proceedings on the Bill. She talks about her concern that measures are falling on the shoulders of those who can least bear it. I just wonder whether she means those—[Interruption.]
I wonder whether the hon. Lady means that she is concerned that those who can least bear it are indeed those who would pay to move to £2 million houses. I suspect not.
I am sorry to take the Minister back a moment, but my understanding of this Committee—you may be able to correct me, Mr Bone—is that we are scrutinising Government legislation. We are not proposing the Opposition’s legislation. I am sure that we would very happily, with your permission, set out in this Committee exactly what we would do if we were in government, but sadly we are not in government and therefore we are scrutinising the Government’s Bill. I am very confused about why the Minister would make those comments—those accusations. Clearly, we have already set out five-point plans and, from these Benches, talked about some of the things that we would do in government.
Let me continue and explain what this Government are doing through the policy under discussion, which is very simple. It is a further tax on wealthy individuals—the wealthiest individuals—who purchase properties worth more than £2 million. Members have asked why the figures of £2 million and 7% were picked. I think that I have already responded to those questions by saying that the previous upper cost limit was £1 million and the previous upper rate of tax was 5%. Clearly, a balance needs to be struck in relation to raising more revenue and against overly punitive rates or thresholds. The central point is that if someone can afford to pay £2 million for a house, they can afford to pay a little tax towards the mammoth deficit in which the previous Government left this country.
On whether the measure will fall more on London and the south-east, it is no great surprise that London and the south-east have a higher graded property market than other parts of the country, so the tax may have an effect in that regard. However, let me reassure the Committee that the business model takes into consideration the considerable capital gains tax anticipated from London properties, and that the initial stakeholder reaction, including responses from high-value London estate agents, suggests that the measures have had a limited impact on investor activity. We expect it to be an effective tax that will, as intended, secure more revenue from the wealthiest, while not acting as a barrier to investment in residential property. It is important that the UK remains a safe haven for high-end property investors.
On avoidance, my hon. Friend the Member for North East Somerset said that a further higher rate would increase already high levels of SDLT. The Budget highlighted the Government’s determination to tackle SDLT avoidance, and the Bill includes a package of measures to put a stop to sub-sale avoidance and to deter enveloping, which my hon. Friend the Exchequer Secretary has already explained, and provides for notification to Her Majesty’s Revenue and Customs of much more serious schemes. The Chancellor has been absolutely clear that we will legislate with retrospective effect, if necessary, to stop any new schemes that emerge in future.
I thank the Economic Secretary for giving way on that particular point, because I am concerned that there is a risk that properties will now be sold for £1,999,999. I am also concerned, as my hon. Friend the Member for Edinburgh East has said, about whether people will be able to take other measures—for instance, sell their house separately from its outbuildings—in order to avoid selling for £2 million. Is that possible and will the Government do something to prevent it from happening?
In brief, and without attempting to give tax advice to anyone wishing to seek out new schemes, the overall package of measures in the clause and a couple of others either side of it makes it clear that this Government will bear down on any avoidance schemes that enable the enveloping of property or creative ways of getting around paying a fair share of tax. I reassure the hon. Lady and the hon. Member for Newcastle upon Tyne North, who first posed the question, that the new 7% rate will raise an estimated £150 million in 2012-13, rising to £300 million by 2016-17. That will help support the Government’s priority of reducing the deficit, and it is clearly more than the £100 million estimated to have been raised by the former 50p tax rate.