Draft Stamp Duty Land Tax Regulations 2007

Brooks Newmark challenges the detail and cost of the Government's proposals for tax relief on zero-carbon homes

Mr. Brooks Newmark (Braintree) (Con): I welcome the Economic Secretary's contribution to the debate on this subject. As the hon. Member for Falmouth and Camborne said, it was one of the liveliest debates of the last Finance Bill Committee, on which the Minister also served before her well deserved promotion. I am sure that she is grateful for the Government's amendment, which has allowed that lively debate to continue a little longer by requiring the draft regulations to be considered under the affirmative procedure.

As my hon. Friend the Member for Putney has said, we are wholeheartedly in favour of stamp duty relief for the purchase of new homes, albeit our own policy is somewhat broader and would provide many more first-time buyers with assistance. Nevertheless, we supported a tax relief on zero-carbon homes in this year's Finance Bill, because we recognised that the policy would, in all probability, help at least some eco-homes to be built.

At the time, however, there was little certainty from Ministers on how the relief would operate, or how much it would cost. No matter how many opportunities the then Economic Secretary had to rehearse his lines, he somehow still managed to fluff them. Now that we have a definition of a zero-carbon home in the draft regulations, will the Minister do what her predecessor could not and give us the Treasury's best guess of how many zero-carbon homes are expected to make use of the relief in each of the next five years that the regulations are in force?

The cost of the relief given in the Red Book is projected to be £15 million by 2012. Now that the Economic Secretary has had a long summer to look into the details of the projection, can she tell the committee how many zero-carbon homes per annum that figure represents? She will remember that I gave the Finance Bill Committee a back-of-the-envelope calculation of 7,500 new homes, based on an average house price of £200,000 and consequent relief of £2,000. Admittedly, however, that figure is very rough. If all the homes qualify for just the minimum £1,250 relief, the £15 million would pay for relief on 12,000 new homes; but it would pay for only 1,000 homes which qualify for the maximum relief. A detailed analysis of the mix must have been produced by the Treasury. Will she release it to the Committee or write to me?

The standard assessment procedure for the energy rating of dwellings used by assessors will require them to apply a margin of error of approximately 4 per cent. Presumably that is what the former Economic Secretary meant when he defined the desired standard for a zero-carbon home as "zero, or thereabouts." Now that we have a definition of a zero-carbon home in the regulations, complete with a margin of error, perhaps the present Economic Secretary will be able to answer another dated question: how many zero-carbon homes already exist and what is her best estimate for how many have already qualified for the relief since the 1 October 2007?

The summary of consultation responses from HMRC admits to changes in the draft regulations to remove explicit references to the standard assessment procedure, on the grounds that it is a living document, and replacing it under regulation 7 with an open-ended approval of methodology by the Secretary of State. But if the SAP is a living document, I think that it is presently in hibernation. Version 9-the latest-was published in 2005. We now face basing a tax relief that offers only a five-year window of opportunity for developers in a field of fast-moving technology on guidance that is already two years out of date. I gather that an SAP update is intended to make provision for the energy consumption of appliances and to take account of wind power. When will this revision take place? Is the Economic Secretary able to give some commitments on when the next version will be published and what the next steps will be? Will she also provide me with some information about departmental responsibility for the guidance and any future revision of the present regulations?

The Economic Secretary's statement on 18 October noted that the

"zero-carbon standard for stamp duty"-

is-

"closely aligned with the zero-carbon requirements set out in Department for Communities and Local Government's Code for Sustainable for Homes."-[Official Report, 18 October 2007; Vol. 464, c. 55WS.]

However, the Government's standard assessment procedure for the energy rating of dwellings was published under the auspices of the Department for Environment, Food and Rural Affairs.

Further, the Treasury's consultation response to the draft regulations, which was published in October, referred to an aspiration that micro-generation technology would have to comply with the Department of Business, Enterprise and Regulatory Reform's certification scheme in future versions of the regulations, and that discussions about how to achieve that aspiration were continuing. However, in March, Budget note 26 anticipated the launch of the scheme later in the year, and paragraph 19 unequivocally stated:

"Use of approved equipment will be a requirement of the exemption."

What happened to that strong commitment to the certification scheme? Will the Economic Secretary update the Committee on the progress of her continuing discussions with DBERR about the incorporation of micro-generation certification in future?

Under the Economic Secretary's predecessor, relations between the Treasury and DCLG were completely harmonious, providing a model of constructive marriage between Departments. I am sure that the relationship is still close, but will she confirm whether it will be HMRC, DCLG, DEFRA or DBERR that takes ownership of any future revisions to the regulations, since all four presently have a piece of the pie, or whether developers will continue to be condemned to death by acronym?

Moving on to practical issues, the Treasury's summary of consultation responses expressed concerns about the number and qualification of accredited assessors.

Nevertheless, the Government's response was confident about both the number and qualification of assessors. I am curious about some of the time scales, so perhaps the Economic Secretary will give me some reassurance about her close relationship with DCLG.

The energy assessor accreditation standards and minimum requirements were published by DCLG only on 26 October-well after the regulations under consideration will be deemed to have been in force. DCLG gave the deadline for the first tranche applicants as 23 November, and the evaluation panel for applicants convened yesterday, with a view to giving approval to the first applicants by next Monday. Has the Economic Secretary had any recent discussions with ministerial colleagues about the issue, and is she still confident that the process is on track and that sufficient assessors will soon be available?The cost to the vendor of the assessment process is related to the availability of assessors.

Will the Economic Secretary estimate the cost of obtaining an energy performance certificate, particularly given that the minimum available relief is just £1,250? I also want to pick up on something that appears in the explanatory memorandum but to which I could not find an explicit reference in the regulations. I am sorry that the hon. Member for Wolverhampton, South-West (Rob Marris) is not present. If I have missed any reference, I hope that the Economic Secretary will correct me. At paragraph 3.2, the memorandum says that the regulations will apply to a house, but that maisonettes and flats do not qualify for SDLT relief. Just as not every house is a home, not every home is a house, and I do not see the rationale behind the distinction.I am intrigued that the Treasury admits in its consultation response that it has allowed for district heating in order not to prejudice

"urban houses which...do not have the space"

for on-site generation. The Treasury seems to make an argument for the benefit of high-density housing, but not to make the relief available to much of that same high-density housing. Will the Economic Secretary admit that there are likely to be many more new urban flats and maisonettes than new homes, and that they should all be included in the relief?

Will the Economic Secretary also reassure the Committee about HMRC's powers under regulation 4(5), whereby the Revenue can refuse relief

"if they have reasonable grounds to think that a dwelling is not a zero-carbon home within the meaning of these Regulations, notwithstanding that a zero-carbon home certificate has been issued in relation to that dwelling"?

Could the Economic Secretary elaborate on what will constitute reasonable grounds for ignoring an EPC that has been produced by an accredited assessor in compliance with the published guidance?

Budget note 26 speaks of the relief applying to

"the vast majority of new zero-carbon homes in the UK",

but it is silent as to which homes it anticipates will be excluded. Again, does it mean flats and maisonettes? Likewise, the Treasury's publication of consultation responses states that:

"HMRC expect to use this power only in unusual circumstances."The only unusual circumstance given is the production of fraudulent certificates. But are any of the circumstances envisaged? The regulatory impact assessment regards this relief as essentially self-policing. But does that confidence in self-policing stand up to the anticipation that there will, inevitably, be some fraudulent claims. What level of fraud is anticipated and what sanctions are available to HMRC beyond the refusal of an EPC and the contingent SDLT relief?

Finally, point 6 of the DCLG's document "Approval of Energy Assessors Accreditation Schemes for Newly Constructed Dwellings" mandates that operators have a complaints resolution scheme in place; with customers having recourse to an independent third party if they are not satisfied. But I would be interested to know what happens where the HMRC will not accept an EPC that has already been issued by an accredited assessor. Will customers have a right of appeal against the Revenue's decision and, if so, to whom?

I am conscious that I have spoken at some length and raised a number of issues that the Economic Secretary may not have time to deal with, but this is an issue that I am pleased to be able to follow up from our deliberations on the Finance Bill earlier this year. I would be very grateful if she could write to me in due course if there is anything that she cannot address now.