Stamp duty change passes second reading but Labour suspects policy U-turn coming

The Bill reduces the amount of stamp duty land tax (SDLT) chargeable on the acquisition of residential property. The Government’s changes increase the nil-rate threshold for all purchases of residential property in England and Northern Ireland from £125,000 to £250,000. For first-time buyers, the nil-rate threshold has increased from £300,000 to £425,000, with the maximum property price for which first time buyers’ relief can be claimed increased from £500,000 to £625,000.

SDLT (Reduction) Resolution

Ahead of the second reading debate, the Economic Secretary to the Treasury, Richard Fuller, successfully moved a resolution which was a procedural requirement to allow the Government to introduce a Bill amending SDLT legislation. (The-then Chancellor Kwasi Kwarteng announced these cuts to stamp duty land tax on 23 September, with a motion moved following debate on the economic statement to implement that on a temporary basis. This resolution confirmed the House’s agreement to that motion).

Taking the opportunity to debate SDLT, Lib Dem housing spokesperson Tim Farron spoke of his concern that the cut will apply to all properties, including to people buying their second, third, ‘22nd or 23rd home’, and his particular concern about the rising proportion of second homes in rural communities. Farron bemoaned that the immediate impact of the temporary stamp duty holiday introduced by Sunak when he was Chancellor was that in the first few months of the pandemic 80 per cent of all house sales in his Westmorland and Lonsdale (Lake District) constituency, and in communities like it, were in the second home market, and the pandemic saw the collapse of the long-term private rented market into the Airbnb market – and the resulting robbing of these places’ full-time population.

In general, Farron said, he wants new categories of planning use to control excessive second home ownership and the collapse of the long-term private rented sector into the Airbnb sector. Of relevance to this particular Bill, his amendment would create a separate schedule of rates in the SDLT system for those purchasing an additional property (that would mean that the purchase of additional property would not be included in the scope of the resolution or the ensuing Bill.)

Fuller’s retort was that the Government already has higher rates for additional dwellings, which were introduced in 2016 and which apply a three per cent surcharge to the standard residential rates of stamp duty. That surcharge will continue to apply.

Shadow Financial Secretary James Murray said his Labour Party does not oppose the principle of additional support for homeowners and buyers, and action to stimulate the housing market, but is concerned that the Government is designing a scheme that gives so much help to second homeowners (with Murray claiming the Bill means subsidising second homeowners to the tune of £300 million a year.)

Murray went on to say first-time buyers will not be helped much by this Bill because the Conservatives’ Growth Plan ‘recklessness’ has seen more than 40 per cent of available mortgages withdrawn from the market, lenders begin to price in interest rates of over six per cent for two-year, fixed-rate deals and has led to families facing their mortgage repayments increasing by £500 a month. He said Labour will not support a Bill that intends to spend £1.7 billion a year on this tax cut during an economic crisis.

Farron’s amendment was defeated (293 - 165).

Second reading - Stamp Duty Land Tax (Reduction) Bill

The Exchequer Secretary to the Treasury Felicity Buchan said the Government believes home ownership must remain within reach despite the economic downturn, partly because home ownership ‘remains one of the surest ways to give people a stake in the success of the economy’, and the property market is crucial to the chance of economic growth. Buchan claims more transactions each year will mean that more people can move more easily to find work, and that will boost labour mobility at a time when people do not need barriers to changing jobs.

The minister claimed that in 2019-20, nearly 243,000 net additional dwellings were delivered - the largest number in almost 20 years – and the Government are on track to meet their commitment to deliver one million additional homes during the current Parliament. Under this Bill, she said, no one purchasing a second home or investing in a buy-to-let property will cease paying stamp duty, as the three per cent surcharge on the purchase of additional dwellings will continue to apply.

Shadow Financial Secretary James Murray wondered why MPs are no longer considering all stages of the Bill today, only its Second Reading, speculating that it sends a confused message to the public and puts uncertainty into the housing market about whether the measures in the Bill are being put on ice for a possible U-turn by the new Sunak government.

On the measures, he said: “At a time when our economy is reeling from the long-term damage the Conservatives have done, when current and future homebuyers are facing spiraling and prohibitive mortgage costs and when we are still flying in the dark as the Tories refuse to publish the Office for Budget Responsibility’s forecasts, this is not the time to spend £1.7 billion a year on this tax cut.” The MP suggested alternatives to this Bill such as introducing a mortgage guarantee scheme, raising stamp duty for foreign buyers and giving first-time buyers first dibs on newly built properties. On the increase in people renting, he urged the Government to deliver on their commitment to ban no-fault section 21 evictions.

Labour MP John McDonnell said the Bill is of little help to ordinary people, with wage levels, after 12 years of austerity, meaning that most of his Hayes & Harlington (west London) constituents cannot save up for a deposit, and when they look at mortgage rates, they have no hope of being able to cover mortgage costs. McDonnell complained about a boom in ‘private landlordism’, finding it extraordinary that incorporated landlords can still offset 100 per cent of their mortgage interest against profits.

McDonnell said we could assist first-time buyers to get on the housing ladder through housing supply and reducing overall property costs. If the Government insist on proceeding with this Bill, we could protect the first-time buyer measures by paying for them through an excess profits tax on the landlords and banks that are profiting from the Government’s measures, he said. He added: “We need a new council house programme, a reduction in interest rates and investment in housing on a scale never seen before.”

Lib Dem Tim Farron said the simple fact is that any benefit from this Bill will help, if we are lucky, a fraction of one per cent of people who want to buy a house but are currently unable to do so. The Bill does not seem to be the best use of money, given that the majority of beneficiaries will be wealthy people who do not need a stamp duty cut. He even suggested that it risks fueling a second home boom that is already causing a huge amount of damage to rural communities.

Farron urged the Government to support his bid in Levelling-up and Regeneration Bill Committee to change planning law so that second homes and holiday lets become separate categories of planning use, saying we could then keep a lid on the number of second homes and holiday lets in rural communities. He continued: “It is very hard to support a proposal that is the sole straggling survivor of a disastrous mini-Budget when one suspects that the only reason it has survived is because the people hurt by it are living in communities that the Government think they can take for granted.”

Shadow Treasury Minister Tulip Siddiq, Labour, made a few points, including that very few people will benefit from this Bill, that the link between wages and house prices has completely broken down in recent years, and that average private rents have risen by over an astonishing £4,500 a year compared with the position in 2010.

Siddiq said: “This plan will do little to help people take their first important step on to the housing ladder and that it is just another Government handout for wealthy landlords and second homeowners. Labour is the true party of home ownership, which is why we have committed to a target of 70 per cent home ownership across the UK. We will achieve that by looking at reform of the planning system to increase house building. Because if the Government keep inflating demand without increasing supply, house prices will only rise.” The MP said if this Government were serious about support for first-time buyers, Labour has sensible and costed policies they should also adopt for themselves.

The shadow minister set out Labour’s stall, saying the party will give first-time buyers first dibs on newly built homes. meaning an end to buy-to-let landlords and second homeowners getting in first. We will provide additional help for first-time buyers though our mortgage guarantee scheme and introduce a higher stamp duty for foreign buyers, to prevent overseas investors from buying up property and pricing out British households, she said, adding that ‘we will review planning regulations so that speculators cannot prevent communities from getting shovels in the ground and building the homes they need to thrive’.

Economic Secretary to the Treasury Richard Fuller closed the debate by addressing the prospect of a U-turn, saying that ‘the stamp duty change is already in effect and the Government are continuing with the legislation’. Separately, the Government’s stamp duty cut will ensure that about 43 per cent of purchases each year will pay no SDLT whatever and none of those will be purchases of second homes or buy to lets. He was keen to say that there is a two per cent charge for non-residents (foreign) on SDLT.

The minister closed by saying: “This measure will boost labour mobility, support hundreds of thousands of jobs and businesses, increase transactions to boost the property industry, and continue the Government’s record of supporting people, including younger people, into home ownership.”

The Bill passed its second reading (288 -152). No date has yet been set for committee and further stages.

The session is here.

By Hamant Verma, CIOT Senior External Relations Officer