Thank you, Mr Betts, for that latitude.
I congratulate my hon. Friend the Member for St Albans (Mrs Main) on securing an extremely important debate. I come to it as one of the many Members, particularly
Conservative Members, who have worked in the real world before coming to the House; I used to act for people buying and selling residential properties. I have conducted thousands of residential conveyancing transactions, so I have seen at first hand the effect of stamp duty and some of the challenges that it can cause.
Back in the ’90s, the stamp duty level was £30,000, although it was quickly doubled to £60,000 by the Conservative Government of the time. I remember, however, a long period under the Labour Government when the rate was held at £60,000, and right up until 2003 virtually every single transaction was subject to stamp duty. We are getting back to that point now, even in the type of area that I represent in the midlands, where house prices are below the average. When stamp duty was first introduced, it was not envisaged as catching people buying at the bottom end of the market, as it now seems to be. Stamp duty does not affect only the south-east and London. I understand why Members representing those areas, where it is an issue, are present, but it is something that affects the whole country.
I am going to make a few points about how stamp duty is calculated. First, there is the slab rate; as we all know, if people buy a property at £250,000, they have to pay £2,500 in stamp duty for the privilege of that transaction. If they purchase a property for £250,001, the stamp duty goes from £2,500 to £7,500—a massive leap. As my hon. Friend the Member for Esher and Walton (Mr Raab) said, that causes a huge market distortion, particularly for people who are selling properties valued by estate agents at £255,000, £265,000, £270,000 or even £275,000. In such cases, most buyers will say, “That’s fine, but I don’t want to pay £8,000 or £9,000 in stamp duty, so I do not want to pay £270,000 for your property. I want to buy it for £250,000, because the stamp duty is far lower.”
There is also a problem for many second-time movers. At one time, many of them would have been able to take mortgages with a loan-to-value ratio such that they could afford to finance the stamp duty out of the overall transaction, putting it into their mortgage. People might think that that is a good or a bad thing, to put a tax debt over 25 years or whatever the mortgage term is, but that is what a lot of people did to accommodate it. Over the past years, however, with the tightening of mortgage lending, lenders have decided that they no longer want to see that happen, which has made things difficult for second-time movers.
Another thing caused by stamp duty has been, traditionally, the move by some people to commit tax avoidance—on the part of some, even tax evasion. For obvious reasons, I always discouraged people from doing that; in some cases, I said that I would not act for those trying to commit tax evasion. I have heard of all sorts of ideas—carpets and curtains for a couple of thousand pounds being the obvious trick to avoid stamp duty.
I have even heard of someone saying, “This is the price, then x amount on top, and I will throw in a second-hand car.” That type of practice is what people talk about as a way to get around our slab rate system. I do not condone it and I would never do that for people; I hate to think that others have conducted such transactions. When people are buying property and paying stamp duty, we must always remember that it is their personal liability and not that of the adviser advising them.