Don Foster MP*
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Boost for local first-time buyers as Lib Dems force government U-turn

7/12/05 Bath’s MP, Don Foster, has claimed victory for local residents after Gordon Brown performed an astonishing U-turn in the House of Commons on Monday.

Main ImageFollowing pressure from Liberal Democrat MPs, Mr Brown admitted defeat and changed the rules relating to Self Invested Pension Plans (SIPPS) which, if left untouched, could have led to rocketing house prices in Bath as wealthy investors purchased buy-to-let homes with pension tax breaks.

In 2004 the Government relaxed the rules on SIPPS which meant that people could purchase a property, put it into a pension product known as a SIPP, and then receive a generous 40 per cent tax break. The rules were meant to start in April 2006, but have now been scrapped in line with Liberal Democrat proposals tabled in June.

Commenting Don said:

“This is great news for those who are struggling to climb on to the housing ladder. We all know that flats and houses in Bath are an extremely attractive prospect for wealthy investors so I am delighted our campaign has forced the Government’s hand.

“Offering rich investors a 40 per cent tax break to buy a rental home here could have priced ordinary people in Bath out of the market completely. What we need is good quality, affordable housing that is available to those who live and work in the community.

“I am delighted that concerted Liberal Democrat pressure has shown the Government the error of their ways. Of course, this is just the tip of the iceberg when it comes to securing affordable housing, but at least the Chancellor’s U turn offers people in areas like Bath some protection.”

Ends

Notes to Editors

The Liberal Democrat Treasury team has raised the issue in the House of Commons on four separate occasions this year alone, and also tabled an amendment in June to the Finance Bill 2005, rejected by the Government.
On 13 October 2005, Chris Huhne MP raised the SIPPs issue in Treasury questions, and Chief Secretary Des Browne replied stating merely that the changes had been welcomed but would be kept under review.
On the third reading of the Finance Bill 2005 on 6th July 2005, Chris Huhne MP raised the issue but ministers dismissed concerns. Chris Huhne MP also raised the issue in standing committee on 30th June 2005 when he warned that the Treasury could lose more than £500 million a year in revenue, and pointed to the amendment tabled by himself and Liberal Democrat colleagues that would exclude residential property and exotic assets such as vintage cars and wine from Self Invested Pension Plans. Treasury junior minister Ivan Lewis merely stated that the amendment could not be discussed (as it had to be supported by a minister, as a revenue raising measure).
On the 7th June in the second reading debate, Treasury junior minister John Healey dismissed concerns about SIPPs merely saying that they had been legislated in the Finance Bill 2004, implying they should not be reopened.
On 6th June, Lord Oakeshott of Seagrove Bay wrote to the Chancellor highlighting Liberal Democrat concerns about the abuse of the new rules.
Liberal Democrat MPs including Tim Farron, Andrew George and Danny Alexander also raised the issue in questions and an adjournment debate on 27th October 2005.
The Conservatives’ Treasury team did not support the Liberal Democrats in raising the possible abuse of the SIPPs rules.
The Independent’s City editor Jeremy Warner wrote on 7th December 2005: “As 180 degree U-turns go, they don’t come any more vaulting or full on than the Government’s climb-down in the pre-budget report on pension investment in residential property. Better the sinner that repenteth, you might reasonably think, for this was always a wholly misconceived policy initiative. Yet the damage to the Government is more serious than might be imagined, for the industry has already planned and spent on the basic of what the Government originally said it would do as long as three years ago. Since then, the Treasury has been warned in terms by opposition MPs…As recently as last June, the Lib Dems tabled an amendment to the finance bill which would have achieved exactly the same thing as the policy reversal announced on Monday pre-budget report still the Treasury stuck to the line that the dangers had been exaggerated out of all proportion”.
The Guardian’s financial notebook said on 7th December: “Before the chancellor’s climbdown on the great self-invested personal pension giveway passes into folklore, we should pause to remember not just the scale of the cock-up but the Treasury’s refusal to admit anything was amiss until the 11th hour….By this summer, the outcry over this giveaway to the rich had become deafening. The Liberal Democrats, as they noted yesterday, raised the issue in the Commons four times and tabled an amendment to the finance bill, which ministers refused to accept. “Now we have a perfectly executed 180-degree U-turn taking on board everything that we have said” says Chris Huhne, Lib Dem Treasury spokesman, and he’s right”.



This article published: 07/02/2024

Published by Bath Liberal Democrats, 31 James St West, Bath, BA1 2BT. Printed and hosted by JPC Infonet, 2 St Georges Works, Trowbridge, Wiltshire, BA14 8AA. Your Privacy._blank

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