§ Increment Value Duty shall not be charged in respect of agricultural land while that land has no higher value than its value for agricultural purposes only.
§ Mr. PRETYMAN
I am glad to see this new Clause inserted in the Bill as far as agricultural land is concerned, but unless the Amendment in the name of my hon. and learned Friend (Mr. Clavell Salter) is accepted, it is quite clear that agricultural land will not really be exempted from Increment Value Duty. My hon. and learned Friend's Amendment is to the effect that increment value shall not be charged on agricultural land "unless such land is situate within the boundary of a city, borough, or urban district, or within one mile of such boundary." I do not know whether the Chancellor of the Exchequer has considered the Amendment.
As far as I know that matter has been settled on Clause 2, to which the hon. and gallant Gentleman (Mr. Pretyman) moved an Amendment to exempt land which had only an agricultural value. I think the Amendment of the hon. Member for Basingstoke (Mr. Salter) raises the same point.
§ Lord WILLOUGHBY de ERESBY
As regards the Reversion Duty, I wish to ask the Chancellor of the Exchequer whether he intends to charge the duty in cases where land is very often leased for 14 or even 21 years.
§ Mr. PRETYMAN
On the point of Order. At the time my Amendment was moved to Clause 2 the principle on which Increment Value Duty was to be levied had not been settled. It was then under discussion, and it was subsequently, as far as I recollect, that this new Clause was promised to exempt agricultural land entirely. It has been repeated all over the country that agricultural land is to be entirely exempt from Increment Value Duty. That statement was made subsequently to the Amendment which I moved, and which was rejected. I think there was no doubt about the intention of the Government not to place this tax on agricultural land. Apparently, they thought they had done so, but it became evident that they had put a tax on agricultural land. [HON. MEMBERS: "No."] Then why is this new Clause proposed?
The Amendment which the hon. and gallant Gentleman moved to Clause 2 raised, I think, exactly the same point as the Amendment standing in the name of the hon. Member for Basingstoke, and, if so, the matter is settled and cannot be reopened.
§ Mr. LLOYD-GEORGE
In answer to the question of the Noble Lord opposite, if he refers to Clause 8 of the Bill he will find that there is no Reversion Duty on leases of 14 and 21 years.
§ Mr. CLAVELL SALTER
I will say nothing now about the Amendment in my name, but I hope it may not be found out of order. This new Clause was eagerly anticipated by the agricultural community. I am not suggesting for a moment that there was any bargain or any promise as to the extent of the exemption which would be given to agriculture, but certainly there was the hope, and I think the expectation, that agriculture would be found to have been really and practically exempted from the burdens of these new taxes on land. We heard a very great deal about the mischiefs they would cause, 1377 but we were assured again and again that the Government had the most benevolent intentions towards agriculture, and had no desire whatever that agriculture should suffer in any way by reason of the burden of this new taxation. I look at this new Clause and it appears to me, from the point of view of agriculture, very, very disappointing. I express gratitude for such exemption as there is, but it appears to go but a very short way. In the first place, there is the exemption from Increment Duty, but there is no exemption from Reversion Duty. I think the Committee will agree, and we are pretty familiar with these matters now, that if agricultural value has any incremental value, any increased selling value, it certainly has an increased letting value. That follows. Now Reversion Duty is not omitted, and, therefore, the whole of the increment will have to be paid. Reversion Duty is the duty which is paid on the increment of values between the beginning and the end of the lease, and as agricultural land is let first to one tenant and then to another, if there is increment, and the desire of the Government was increment on agricultural land would not be taxed, every farthing will be paid for. It will be paid in the name of Reversion Duty, not under the name of Increment Duty.
It appears to me it is on that ground a somewhat illusory concession, and that unless the increment can be franked, both in the case of leases as well as sales, it is very little to release us from Increment Value Duty unless from reversion as well. In regard to exemption from Increment Duty agricultural land is exempt in this way, that agricultural land is exempted, the owner of which can satisfy, as the onus is put on him to prove the negative, the authorities that that land has no element of value that is not purely agricultural. The words are "While that land has no higher value than its value for agricultural purposes." I am addressing a great number of gentlemen who know far more about agricultural land than I do, but I am also speaking on very good advice, and it is my own knowledge also, when I say that there is in this country an enormous area of agricultural land, and I do not know a better illustration of the land I am speaking of than in my own Constituency and throughout the home counties. It is by no means confined to the home counties, and exists to an enormous extent all over England, everywhere in the neighbourhood of great towns, everywhere in favourite residential localities, an area which is being 1378 largely increased by the use of motor cars. I refer to those agricultural districts where all the land is, and is likely to remain, under processes of agriculture, and there is hardly an acre of which a competent and respectable surveyor could be induced to declare there was no contingency of building or accommodation value which added some fraction to the value of the land. That is an enormous and important area of the agricutural land of the country. It is occupied by, shall I say semi-esquires, residential people with fair or moderate means, often business people, who farm more or less for pleasure, less for profit than an ordinary farmer, who are good and generous employers, able to give, and often giving, better wages than the regular farmer can afford to do. It is exceedingly bad policy for the Chancellor of the Exchequer to limit his exemption in this niggardly fashion, so as to exclude all this land which has a small fraction of non-agricultural value. It greatly takes away from the benefit of the concession.
Besides including Reversion Duty in the concession, there are only two ways of giving a substantial exemption to agricultural land. One is the rough and ready, but, in my opinion, the only practical way, of drawing some dividing line, separating urban from rural land, and giving your benefit without limit or restriction to the rural districts. The other way is more precise, but much more intricate, namely, that of distinguishing agricultural from non-agricultural increment. That is a somewhat difficult thing to do, involving a great deal of trouble and expense, but it is the only accurate way in which you can do what the Government express their desire to do, namely, to exempt all agricultural land from this taxation. Let the Committee see what will happen under this Clause. Take purely agricultural land, worth, say, £30 an acre, or any sum you please. Suppose there is a purely agricultural increment of £10 an acre. As the Clause stands, there will be no duty on that. But suppose, owing to the opening of a railway station or some other cause, there attaches to the land a trifling fraction of non-agricultural value, there is just a contingency that it may be wanted for accommodation or building purposes, which adds, say, £2 an acre to its value. Under this Clause, not merely would that £2 non-agricultural increment pay duty, but the whole £12, of which £10 is purely agricultural incre- 1379 ment. Unless the Chancellor of the Exchequer can see his way to deal with this matter, I venture to say, while expressing gratitude for the concession, such as it is, it is a very small and disappointing fulfilment of those large professions of goodwill towards agriculture of which we heard so much in the earlier portions of these Debates.
§ Mr. JOHN DILLON
Although I have not taken any part in this Debate, really I cannot allow the expression of opinion on the Clause of the hon. Member to go by. So far as I understand the Clause I am bound to say that the Chancellor of the Exchequer has amply and fully redeemed his pledge. His pledge was to exempt entirely—and it was only after a long Debate we obtained that pledge—from the Increment Tax all land which had no value beyond its agricultural value. That was all that we asked. That is what we have got in the fullest possible way in this Clause. The hon. Gentleman drew attention to large districts in Great Britain which were increasing and spreading every day. He said, "Where land is acquiring a value outside and beyond its agricultural value, but was still used for agricultural purposes." I understood the purpose—the whole purpose—of these taxes is to reach those lands! If you are going to exempt them you might as well repeal the land taxes altogether. These are the lands which the Government specially desire to reach, and so far as I am concerned, and so far as my colleagues of the Irish Party are concerned, we see no objection to these taxes. On the contrary, we heartily support them.
We are told by the hon. Gentleman that this land is not exempted from the Reversion Duty. Really, I do not see quite why it should be. The Reversion Duty is a very, very different matter from the Increment Tax. If a man lets his land on a long lease, and it falls in, and he comes in for a considerable advantage, or financial profit, it stands in a totally different position from the Increment Duty, because the tax in that case does not fall on the occupier of the land, but upon the man who has let it. I think, therefore, the Reversion Duty is entirely different in its effect upon agricultural land. The only other point made by the hon. Gentleman was that in certain cases where a small value over and above the agricultural value of the land was added to the land by the building of a railway station, the tax 1380 should not be levied. But you must have a building or a site value, because you must, after all, use the land for one purpose or another. [HON. MEMBERS: "Hear, hear," and "No, no."] Certainly you cannot till it and build houses upon it. You must stand on one leg or another. I quite admit that is an arguable case, and that a good deal might be said for that view, but I think it is only fair and just to the Government to say they did not undertake to exempt land from Increment Duty which had a value over and above and apart from agriculture. Whether hon. Members above the Gangway are going to press for further concessions or not I feel bound, in honour, to say that as far as I can judge the Government have fully redeemed their pledge.
§ Mr. LLOYD-GEORGE
I quite agree with what has fallen from my hon. Friend. Not only have I redeemed my pledge, but I actually read the words out at the time I made my pledge. It is not a question of whether it was a general pledge and that words were put down afterwards. I went so far as to read the words, and not only was general satisfaction expressed by hon. Members opposite above the Gangway, but they took credit to themselves afterwards in the country for having won the concession. "We have secured exemption for agriculture," they declared. It was repeated on many platforms, and I am sure it is in the leaflets of the Budget Protest League. It exempted all agricultural land which has not a building value. I made it perfectly clear, in the course of the discussion, that there were two categories of agricultural land, namely, land which is building land, not land, which, as the hon. and learned Member (Mr. Salter) said, had a fraction of building value, but land which has a greater value as building land than it has for agriculture. That land is totally different from agricultural land. We made it perfectly clear we were going to exempt agricultural land, but that we were going to tax land that had a special value owing to its proximity to a town. The words were read in the course of the Debate, and I do not think anyone has any cause of complaint. The very proposition put forward by the hon. and learned Member was debated for three or four hours before I put my Amendment, and the House rejected his proposal and accepted my words unanimously. That is my recollection. I think the hon. Member (Mr. Pretyman) expressed his satisfaction at the time.
§ Mr. PRETYMAN
So far as that goes I did, but I entered this caveat, that they did not entirely exempt, as far as I could see, agricultural value. We did accept the position the Committee created on the suggestion of the right hon. Gentleman. I do not say we agreed, but it was carried in Committee that land should not be exempted except it was being used for Agricultural purposes when it had a value above its agricultural value. The point which I reserved in my criticism was that land might have a very low value now, agriculturally, but that its agricultural value might increase later on, and that it might acquire a building value, and that then the agricultural value would be taxed as well as the building value. That is the point. It is now suggested that land may be taxed upon its additional agricultural value as well as on its additional building value. I do not understand that that point has been discussed.
§ Viscount HELMSLEY
I think the Chancellor of the Exchequer ought not to be surprised if we examine these words rather carefully. It is important that these words should carry out what we believe to be the intention of the Government. I understand that the intention is that there should not be charged any increment value on land except it has some other value which separately has a greater value than its value for agricultural purposes. I do not think that these words mean that. The words are, "While that land has no higher value than its value for agricultural purposes only." Take a piece of land worth £100 for agricultural purposes only. We will assume that the valuer says it is worth that amount. Supposing, in addition to its agricultural value, we surmise it has some prospective building value for a villa residence, and we estimate that value at another £50. The total value of that land is £150, and that is a higher value than it would be for agricultural purposes only. It seems to me that some other words are necessary to show that the prospective value must be higher than the agricultural value. If you lump these two amounts together you will be valuing a certain quantity of agricultural land, which, as far as I can gather, the Chancellor of the Exchequer does not intend should be dragged into this tax. It is clear that, although the Government claim that they have exempted agricultural land, there is still a great deal of agricultural land will come under this tax. There is the case of the land in the im- 1382 mediate neighbourhood of towns and outside villages and small market towns. The general land round that town has no particular building value, but some particular piece of that land might have a building value, and I am afraid it is that sort of land which will come under the tax. If the Chancellor of the Exchequer would not mind commenting on the points I have raised I should be very grateful. I do not think the words put down carry out the intention of the Government.
§ Mr. J. D. REES
I should like the Chancellor of the Exchequer to explain how this proposal will affect the land in certain towns in my Constituency. The area of the town of Welshpool is some 20,000 acres, and it is situated at the junction of three railways. It would be described by anybody as agricultural land, and it is used for agricultural purposes only. It is conceivable that on account of railway accommodation and the proximity of a market town that some of the land might have a potential value other than the agricultural value. I do not think it has, and that is the point I want to clear up. Would that land have a higher value than its value for agricultural purposes only? It is, I think, an extremely difficult question to answer, but, as it is of some importance to us, I venture to put the case. The case of Newtown is similar. The borough includes a great deal of land other than that occupied by the town. I should not like to say all the land, because it is nominally urban, has a value other than for agricultural purposes only, but I am not sure some of it has not. I appeal to the Chancellor of the Exchequer, as he happens to be acquainted with these towns, if he can, to throw some light upon this matter.
§ Mr. LANE-FOX
The Chancellor of the Exchequer has told us that his intention was not to tax agricultural recovery. It is obvious that there are large tracts all over the country with regard to which the question of agricultural recovery will arise. Will the value which arises under that agricultural recovery be vitiated and entirely extinguished in the building value? Will Increment Duty have to be paid upon the total value of the building land and of the agricultural recovery? Will the higher value at the end cover agricultural recovery as well as the new building land? The Chancellor of the Exchequer has distinctly told us he has no wish to tax agricultural recovery. I do not charge him with having broken his 1383 pledge, but we say these words do not absolutely cover the intention of the right hon. Gentleman, and I hope, even now, he will see if he can make the Clause a little clearer.
§ Mr. LLOYD-GEORGE
There can certainly be no broken bargain, because I have refreshed my memory, and I find I read these very words in the Debate. If land is sold as building land I do not see you can claim the privilege and exemption accorded to purely agricultural land. The hon. Member for Montgomery Boroughs (Mr. Rees) would not be protected even by the Amendment of the hon. Member for Basingstoke (Mr. Clavell Salter).
§ Mr. LLOYD-GEORGE
If land is purely agricultural it will receive the treatment of agricultural land, but if it is building land it ought not to receive the special exemption accorded to agricultural land. The position of the Government is perfectly clear. We divide land into two categories: one agricultural land and the other building land. If the real value of the land is attributable to the fact that it is building land, it ought to be treated as building land.
§ Mr. J. A. CLYDE
The intention of this Clause is to exclude altogether from the Increment Value Duty all land except what the right hon. Gentleman has described as building land. I have intervened in the discussion because so far as I can understand them these words will not exempt any agricultural land in this country whatever. I think I can make that good. Take the case of an ordinary agricultural farm, or any ordinary agricultural estate, and ask a valuer to value it for you. I doubt whether the return from its use for agricultural purposes will be the most important, or even the first object of his consideration. First he will decide upon the number of years' purchase—a few years ago that was put at 25 or 26 years. If that were the only thing the valuer were bound to take into consideration the words of the Clause might be quite sufficient. But I do not know of any agricultural land in this country the value of which would be based only on the agricultural rental multiplied by a certain number of years' purchase. There is no single agricultural district of which that would be true. I have never seen a valuation of an 1384 agricultural estate which did not take into consideration certain other elements. One element would certainly be its sporting value. I doubt if any hon. Member ever heard of a farm being valued without taking into consideration the partridges in the turnips, and the additional value accruing therefrom. I challenge any hon. Member to point to a piece of agricultural land, the value of which would be fixed by any valuer without any regard whatever to the sporting opportunities on it. I certainly do not know of any agricultural land valuer who would do such a thing. I am not saying that the amount is large; my point is that that element is present, and must be taken into consideration. I understand that the chief object of the right hon. Gentleman is to put the incidence of this tax on building land only, and I say that these words will not secure that. What are the words of the new Clause? They read:—Increment value shall not be charged in respect of agricultural land while that land has no higher value than its value for agricultural purposes only.So many acres let at a rent of, let us say 15s. to 20s. an acre, there are altogether 500 acres, will there not be in the valuation of that something, it may only be £10 a year, in respect of the sporting value of the land? It is all very well to say "Tax it," we are not talking of taxing it, the question is not measured by the tax, the question is whether this Amendment takes ordinary agricultural land out of the incidence of this tax? I make no excuse at all why I raise this point, I am not under any illusion about it. I know perfectly well that hon. and right hon. Gentlemen are going to get up on every platform in the country and commend these proposals to the country by saying that this is a tax with no incidence on agricultural land. So long as the exemption takes this form that will not be true in fact. There will not be a bit of agricultural land which has not got a higher price than its value for agricultural purposes. It has, in addition, its sporting value for what it may be worth. I pass from the mere sporting value, which I admit is a small thing, and I come to something else which is not a small thing. The fact is again that no agricultural estate known to hon. Gentlemen opposite is valued simply on so many years purchase of its agricultural rent. If that were so one would expect the purchase prices to be a great deal less than they are.
1385 In the case of almost all agricultural land in this country there are elements of value which almost always, I think I may say always, enter into the market price other than the mere value of the year's purchase of agricultural rent, and the result is that in a great many of our agricultural holdings in England and Scotland there are elements of value attributable to agricultural land which are not represented by agricultural rent. They are variously described. They are sometimes called amenities, and sometimes are attributable to the residential qualifications of the country. Is that elementary value to be treated as site value or as building land? If it is, then do not tell us that agricultural land is free from the incidence of this tax because the value of agricultural land is not arrived at in the market by taking 25 or 26 years' purchase of the agricultural rent. If it were land it would pass from hand to hand in this country at a very much cheaper price. There is always, or almost always, an element of value attributable to the rural attractions, or it may be the social attractions attaching to the ownership of land, or to the ownership of land in a particular place. You may say if you like that these ought to be taxed, but the moment you tax them this pretence that this tax is fair upon agricultural property disappears into thin air. These are my two grounds for saying that this class of exemption, which I have no doubt whatever is intended to limit the incidence of the tax to land that has a value for building purposes—these are my reasons for saying this exemption does nothing of the kind. You approach the exemption from the opposite end, so the exemption is to apply to land which has no higher value than its value for agricultural purposes only. You forget that agricultural land, although there is no building value, has a value for other purposes, and that value always, or almost always, enters into its entire capital value. Therefore, I have no doubt that this Clause, which is intended to limit the tax to building land, does nothing of the kind, and renders it impossible to assert that this tax does not apply to the general agricultural land of this country.
§ Mr. LLOYD-GEORGE
The hon. and learned Gentleman advanced his proposition with such a portentous air that I thought there must have been something in it, but I think he has discovered a mare's-nest. His proposition is that if 1386 there is even a sovereign value over the agricultural value for partridges, pheasants, scenery, or amenities, there is no privilege at all. I think the hon. and learned Gentleman cannot have considered the words. Supposing the value for agricultural purposes is £100 and the sporting rights are worth, let us say, £20. The value for agricultural purposes is higher than the value for sporting rights.
§ Mr. PRETYMAN
I thought the words meant exactly what the right hon. Gentleman said, and that that was the meaning intended. It was a clear misunderstanding. Will the right hon. Gentleman make it clear that the meaning is what he now says?
§ Mr. LLOYD-GEORGE
I never thought there was the slightest doubt at all that I had made that absolutely clear. If the value for agricultural purposes is higher than the value for any other purpose it is not taxed. Supposing you sold the land for building purposes and got only £50 for it, and its value for agricultural purposes was £100, it would be exempt, because its value for agricultural purposes is higher than its value for any other purpose.
§ Mr. CLYDE
I think it is a question about words. Take a piece of agricultural land of the value of £120, of which £20 is attributable to amenities. The words of the exemption are:—Increment value shall not be charged in respect of agricultural land while that agricultural land has no higher value than its value for agricultural purposes.Its total value is £120, which is a higher value than its value for agricultural purposes. Surely there can be no difficulty in making the meaning perfectly plain. I think the right hon. Gentleman will agree with me that a higher value than the value for agricultural purposes only must be a value that includes other things than agricultural value only.
§ Mr. LLOYD-GEORGE
I am exceedingly obliged to the hon. and learned Gentleman for the opportunity of making it clear that that is not the intention of the Government. Nor is it the interpretation we put on the words. Our interpretation is that unless land has a higher value for some other purpose than the value it has for agricultural purposes it is exempted altogether from Increment Value Duty. It is purely a question of the interpretation of the words, and if there is any doubt in the mind of a lawyer 1387 of the distinction of the hon. and learned Gentleman opposite (Mr. Clyde) that is enough to justify us in making the Clause even clearer, but, at any rate, I do not want any misunderstanding about this. I shall suppose two cases. Supposing the value for sporting purposes is £50, and the value for agricultural purposes is £100, that land is exempted, because the value for agricultural purposes is higher than that for sporting purposes. Take the case of building land. Supposing that the building value is £80, and the agricultural value is £100, it is still exempted, because its value for agriculture is higher than the building value. But, on the other hand, supposing that the building value is £150, and the value for an agricultural purpose is £100, it is outside the limit. I say also if its value for a sporting purpose is higher than that for an agricultural purpose, there is no reason why we should give special privileges to it as sporting land. If the hon. and learned Gentleman would consider what words are necessary to give clearer expression to that intention, I shall be willing to introduce any form of words to make the matter perfectly clear. We are agreed as to the substance, and the only question is in regard to the words.
§ Mr. ROWLAND HUNT
As showing the probable effect of this Clause I can give the right hon. Gentleman a case that happened to me. I had some land that was wanted for building purposes, and I could not let it for building purposes because it would have displaced small holders who had been there for a great many years. What the Chancellor of the Exchequer does not understand is that under this Clause, in putting an increment value on this agricultural land near small towns and villages, he is bound to drive out many small holders who are around these villages and towns. If you charge increment value on the land which is not built on, the landlord will raise the rent to make up an equal value, or else he has got to get somebody to build on that land. The effect will be to drive the small holder further out. He has to get his new place into the same high state of cultivation as his present place, and he is farther off from his market. Therefore, the Clause does tax agricultural land, and it will have the effect of driving out these small holders, who get more out of the land than people who hold a larger amount of land.
§ Mr. WATSON RUTHERFORD
I have several Amendments to this Clause on the Paper, but if I can ascertain the intention of the Government I may not move them. Supposing a farm building or some other agricultural building stands upon agricultural land, would that land be outside the benefit of this Clause?
§ Mr. LLOYD-GEORGE
Certainly not, if those buildings are used for exclusively agricultural purposes.
§ Mr. WATSON RUTHERFORD
As long as they are used for exclusively agricultural purposes, their being on the land would not matter?
§ Mr. WATSON RUTHERFORD
On that understanding, it will not be necessary for me to move my Amendments to this Clause.
§ Mr. CLAVELL SALTER
In view of what the Chancellor of the Exchequer has said as to the meaning of the Clause itself, and that it will carry out their intention, I do not propose to move either of my Amendments.
§ Committee report Progress; to sit again to-morrow (Thursday).