§ (1) No duty under this Part of this Act shall be charged in respect of any land or interest in land held by a local or rating authority, and any Increment Value Duty in respect of any such land which would have been collected from the authority (whether on the occasion of the transfer on sale of the land, or any interest in the land, or the grant of a lease of the land or on the periodical occasions provided in this Act) shall, for the purposes of the provisions of this Act as to the collection of Increment Value Duty, be deemed to have been paid.
§ (2) For the purposes of this Section the expression "rating authority" means any body who have power to raise a rate or administer money raised by a, rate, and the expression "rate" means a rate, the proceeds of which are applicable to public local purposes, and which is leviable on the basis of an assessment in respect of the yearly value of property, and includes any sum which, though obtained in the first instance by a precept, certificate, or other instrument, requiring payment from some authority or officer, is or can be ultimately raised out of a rate as before defined.
§ Mr. AUSTEN CHAMBERLAIN moved, in Sub-section (1), after the word "authority" 776 ["held by a local or rating authority"], to insert the words "or by any body corporate recognised by the Treasury as working for public utility and not dividing any profit to its members other than a limited rate of interest approved by the Treasury in each case."
§ This Amendment was chosen for the purpose of making one more attempt on behalf of garden cities. I have been asked by various people interested in garden cities to press this Amendment on the attention of the Government. I desire to give the Government one more chance of saving these very beneficent enterprises from the evil effects which attach to the taxes as at present drafted by the Government.
§ Sir W. ROBSONI think if a correct construction is put upon the words of the Clause it will be found that garden cities stand in much less peril than the right hon. Gentleman imagines. We cannot accept this Amendment.
§ Amendment negatived.
§ Amendment made: In the same Sub-section, after the word "authority" ["by a local or rating authority"], to insert the words "or any statutory combination representative of two or more local or rating authorities."—[Mr. Younger.]
§
Mr. WALTER GUINEESS moved, at the end of Sub-section (1), to insert:
(2) No Reversion Duty shall be charged on the determination of a lease granted by a rating authority in respect of the period only while the rating authority retains the freehold interest, and the value of the benefit accruing to the lessor in respect of any such lease shall be deemed to be the amount by which the total value of the land at the time the lease determines exceeds the amount paid to such authority for their interest in the lease.
§ The object of this Amendment is really to effect the exemption from Land Taxes which the Government profess themselves willing to give to local authorities. When I brought the matter forward as a new clause the Government expressed their willingness-to consider the matter, and to accept it on Report, if necessary. It does not embody any new principle, because Clause 35 exempts local authorities from the payment of Land Duties. They are entirely exempt from Increment Value Duty which accrue while the local authority has the land, and that Increment Value Duty is deemed to be paid. The local authority are entirely exempted from Increment Value Duty until they have sold the land. In the case of Reversion 777 Duty they are only partially exempt. In the vast majority of cases where freehold land is held by a local authority, and they grant a lease, the land is disposed of before that lease falls in; and unless the reversion is franked for the whole of the period during which the freehold is held by the local authority, they undoubtedly will pay the tax, by being compelled to accept a lower price from the man who buys the freehold.
§ This is a matter of very considerable financial importance to the local authorities and to municipalities all over the country who hold land for the purpose of carrying out great public improvements, and in most cases they are compelled to sell the freehold either in 60 or 80 years. In London the amount of land that has been bought for this purpose, and which must be sold in 60 or 80 years as surplus land, amounts to £9,000,000. The freehold of all this must be sold before 80 years. Let me take one instance. The freehold of Shaftesbury-avenue is in the possession of the London County Council. The Grand Hotel has a lease of 80 years, on which they pay £10,000 a year. That lease must be sold before it has run for 80 years, because all surplus land must be disposed of within 80 years of the enabling act; that is to say, about five years previous to the expiration of the lease the London County Council will have to sell the freehold of that land. Is it not perfectly certain that anyone who wishes to buy the freehold interest of the Grand Hotel will be willing to pay far less for that interest in view of the fact that in five years, when the lease falls in, he will have to pay Reversion Duty, not only upon the five years since he bought the freehold, but also for the previous 75 years, during which the freehold interest was held by the County Council?
§ I think there is no doubt that in a case like that the local authority will be affected, and if the Government will only accept this Amendment it will be doing away with what is now a very real grievance to the local authorities. I do not think that the Amendment will cause any difficulty whatever, because it will be quite easy to assess the increase in value which accrued at the time the local authority sold the freehold. It is quite easy to compare the price which the local authority received for the lease with which they afterwards realise for the free-bold, and to frank the reversion to that extent—and I feel quite sure that ample justice would be done if this Amendment 778 were accepted. The local authority in many cases bought this land with the expectation of a large increase in value which will requite them to some extent for the money which they have sunk in improvements. There has been the regular system of carrying out these improvements by relying on recoupment instead of a "betterment" charge, and if there is cause for exemption of local authorities from Increment Value Duty and Undeveloped Land Duty, I think there is a far stronger case for making an exemption from Reversion Duty in this instance, because this increase in value has been relied upon by the local authority in framing their estimates of these public improvements, and they relied upon it to defray a large amount of costs when these freeholds are sold. I hope the Government will see their way to accept this Amendment.
§ Sir W. ROBSONThe Government cannot accept this Amendment of the hon. Member. As I understand the hon. Member's Amendment it means this: A rating authority grants a lease and holds it for some substantial period, and they then sell the reversion. What the hon. Member proposes is this: That Reversion Duty should be calculated only on such interest as has accrued in the purchase of the reversion from the time it was sold, so that duty is not to be charged in respect of whatever increment accrued during the time the rating authority held it. I think that is the case which the hon. Member put. The Government, on the other hand, think if a rating authority wants exemption it must keep its land in its own hands.
§ Mr. WALTER GUINNESSBut it cannot in some cases.
§ Sir W. ROBSONThen it cannot get this exemption. The particular operation which would be put upon the valuer by this Amendment would be almost impossible. It would be the usual thing to say at the end of a lease the value of the increment is so and so. There is no doubt about that, because you could test it by the market, but to say what the value of the lease was 10 years ago, and how much of the increment was due in the last 10 years, and how much was due to the previous 70 years, is a kind of apportionment the valuer will not be frequently called upon to make, so the answer of the Government must be what I have said. If the rating authority desire to avail itself of the exemption we have give them, they must 779 keep their property themselves. We are not disposed to extend the concession on the lines suggested in the Amendment.
§ Mr. AUSTEN CHAMBERLAINThere are many cases where a rating authority has no intention of parting with his land, but there are cases where they may be unable to keep the property, and there are cases where it may be unwise for them to do so, and where it might be a much better thing for the local authority and for everybody in the district that they should part with the property. The determination of the Government is that in such a case the local authority must lose the benefit of this exemption, and must bear its share of the tax. The local authority will not, of course, frequently pay the tax in the case of my hon. Friend's Amendment, but that amount will be subtracted from the purchase price, which would otherwise be given to the local authority. That being the position, I cannot help feeling—and I think I saw some indication of it in the Attorney-General's speech—that if he were not oppressed with the difficulty of the valuation and apportionment, he would really be rather glad to give this further slight exemption to the local authorities. I confess I am quite unable to follow him in the difficulties which he attributed to the operations of the valuers. They have to value the property at the time the reversion falls in. They have got, in addition, to value the property as it was when the lease was granted. Take a case of a lease of 99 years. Why is it more difficult to ascertain what is the value of a building lease after 80 years has expired and the freehold is sold, than it is to find the value away back when the lease was first granted? You can find out the consideration paid for it, that is all you want; that being the definite market price. It is on record, and it can be produced for your inspection. You have got there a very much better basis of valuation than you have in a great many cases under this Bill. I really think the Attorney General has altogether exaggerated the difficulties which my hon. Friend supposed. You have a transaction of which the reversion was sold, say, in 1900; the reversion comes up again for value in 1910. Is it to be supposed that the valuer cannot tell what the growth of the value of the property has been? It is really one of the very simplest problems which will be set to valuers under this Bill.
§ Mr. WALTER GUINNESSThe sympathetic answer which the hon. and learned Gentleman has given to this Amendment makes me feel very much disappointed that the Government will not accept it. When the matter was brought up in Committee the Chancellor of the Exchequer promised that he would consider it before the Report stage. I am quite certain that the difficulty of valuation has been overestimated by the Attorney-General. I cannot see that there is any real difficulty. You have not any imaginary valuation at the time that the local authority parted with the interest of the freehold, but the actual sum of money which they received. I think if there is any case where the local authority ought to be exempt it is here, where they obtain this land owing to their own enterprise for the benefit of the local community. I hope the Chancellor of the Exchequer will give some more satisfactory answer than has been given by the Attorney-General.
§ Amendment negatived.