§ Mr. LLOYD-GEORGE moved after Clause 6, to insert the following Clause:—
§ (1) Increment Value Duty shall not be charged on the increment value of any land, being the site of a dwelling-house, where immediately before the occasion on which the duty is to be collected the house was, and had been for twelve months previously, used by the owner thereof as his residence, and the annual value of the house, as adopted for the purpose of Income Tax under Schedule A, does not exceed—
- (a) in the case of a house situated in the administrative county of London, forty pounds; and
- (b) in the case of a house situated in a borough or urban district with a population according to the last published Census for the time being of fifty thousand or upwards, twenty-six pounds; and
- (c) in the case of a house situated elsewhere, sixteen pounds.
§ (2) Increment Value Duty shall not be charged on the increment value of any agricultural land where, immediately before the occasion on which the duty is to be collected, the land was, and had been for twelve months previously, occupied and cultivated by the owner thereof, and the total amount of that land together with any other land belonging to the same owner does not exceed fifty acres, and the average total value of the land does not exceed seventy-five pounds per acre.
§ Provided that the exemption under this provision shall not apply to any land occupied together with a dwelling-house the annual value of which, as adopted for Income Tax under Schedule A, exceeds thirty pounds.
§ (3) For the purposes of this Section—
- (a) the expression "owner" includes a person who holds land under a lease which was originally granted for a term of fifty years or more; but in such a case nothing in this Section shall prevent the collection of Increment Value Duty so far as it is payable in respect of any other interest in the land other than that leasehold interest; and
- (b) the site of a dwelling-house shall include any land valued together with the house for the purposes of Inhabited House Duty.
§ (4) Any Increment Value Duty which would, but for this section, be charged shall, for the purpose of the provisions of this Act as to the collection of the duty, be deemed to have been paid."
§ Question proposed, "That the Clause be read a second time."
§ Mr. LLOYD-GEORGE
I have explained it several times already. I do not think there is a Clause to which I have referred oftener, but if there is any particular part which the Noble Lord does not understand I shall be glad to assist him.
I should like to have some explanation as to the principle on which the Government exempt pro- 1367 perties because they are small. Let us, for the take of argument, accept the view that the Government put forward of the investigation they have made into these different kinds of property. Having determined in their own mind to specially tax them, why do they make this exception? I think the right hon. Gentleman, in some of his earlier speeches, said that the tax was hardly worth collecting on small properties, or that the cost of collecting was beyond any gain to the Exchequer which might result from its imposition. But in respect of all these taxes the ratio between what the Exchequer gets and what it costs the Exchequer is not a matter that affects the Government. Therefore, that cannot be the real meaning of their action. I am most anxious to know what the real meaning is. I believe there are uninstructed persons in the country who say that in the one case—in the case of the owners of the larger plots—it is that they are rich, and that these others are poor. Of course that is not, as everybody knows, the real reason, and, indeed, we cannot get at the real reason, because a man may be the owner in law and a subject open to taxation—who will tome under taxation—but who has got practically no property at all. He may have mortgaged the property beyond its value. He may be worth nothing or less than nothing; nevertheless he has to pay the tax. I understand the Government have expressed their full views as regards valuation, partly in the Increment Tax and partly in the Death Duties. We are reduced for the ground of the taxation to the character of the property—whether the property a man is holding is £500 and under or £500 and over. Therefore if that be the sole ground on which the taxation is levied, I should very much like to know from the Chancellor of the Exchequer why he makes this special exception? I am pleased that anybody is exempted from the tax, which, it seems to me, is quite arbitrary in its character. Still, as a theorist in these subjects—one who takes an interest in the principles of taxation—I should very much like to know what is the theory, the principle, upon which the Government are putting on the tax and then making exemptions from it.
§ Mr. LLOYD-GEORGE
This is one of those concessions which have been clamoured for night after night, and have been made the burden of every song, but which the moment it is conceded is con- 1368 trary to every principle that was ever advanced and to every canon of taxation. I remember perfectly well the first few nights of the discussion in Committee of this Bill that we were always told, "Well, now is not the case of the poor small holder hard, that he should be worried in this way?" It was all very well for the large holder. There was no sympathy for him. He could afford it. He had agents, surveyors, architects, and they could always furnish valuations—in fact, they had them already. But what about the poor man? After hon. Gentlemen opposite had gone on this way for a fortnight or three weeks my hard heart was softened by the tearful entreaties of the hon. and gallant Member for Chelmsford, and I have given in to his supplications on the understanding that it was the poor, humble, little man he was thinking about. Having given way in a weak moment, I am told now I am trampling upon every canon of taxation. Verily they cannot have it both ways. Is it contrary to every canon of taxation, as the Leader of the Opposition said?
§ Mr. LLOYD-GEORGE
I think it is not. Take the House Duty. There you put a tax not upon persons, but upon houses, and although a small house is a house and a large house is a house, and although both are made of bricks and mortar, or stone and mortar, and are built upon land, still you draw a distinction between a house under £20 and a house over £20, and you draw a distinction when it is over £50 and over £100. That is really the principle of the taxation upon which we are proceeding here. It has its precedents, which you will find if you look at New Zealand and Australia, where you will find exemption of small holdings. Here we exempt the small holdings, and we have exempted the small men, and the right hon. Gentleman set the reasons out very fairly. They are, as he said, the enormous trouble, the great expenditure to the Exchequer, and in the vast majority of cases the sum collected would be very trivial. He tells we are acting on the hypothesis that £500,000 is the total sum we are going to get out of these Land Taxes. That is not the amount we are going to get out of these taxes. It is simply the beginning of great things. The right hon. Gentleman has prophesied that we should get something like £65,000,000 out of minerals alone. I never contemplated that, but I agree we are going to get a 1369 very considerable sum. The same thing will apply to increment, which is going to be a very fruitful source of revenue, and I have no doubt the right hon. Gentleman himself will some day be proud to make use of the millions of money derived from these taxes. I have no doubt be will be very proud of these sources of revenue. The Undeveloped Land Duty, I agree, will be more or less stationary, and will not swell as the others will. But all we do here is to follow the precedents of the Colonies and that set by our predecessors in the case of the House Duty. I think on the whole we are following a very wise course.
§ Mr. PRETYMAN
I congratulate the right hon. Gentleman upon the zeal with which he now defends arguments which he opposed so vigorously when this Bill was first introduced. It is so long since this Bill was introduced that the right hon. Gentleman has forgotten its original form. These considerations are so obvious and govern his policy so much that I think he would have saved a great deal of time, and his own credit, as well as the credit of the Government, if he had in the first instance introduced the Bill in its present form. I think that in all the right hon. Gentleman has said it is clear that the real cause of these alterations in favour of the small owners, both of agricultural land and of houses, is due to the action of the Opposition in pointing out all these defects, and in pointing out all those hardships. If I have taken any small part in softening the heart of the right hon. Gentleman I am extremely glad, and I am pleased that these small owners have escaped. I do not think that the burden upon the large owners will be heavier in consequence of this exemption, and the only possible objection there can be to it is that when you impose a tax of this character upon a few people only the question of the justice of the tax will always be merged in its expediency, because you will get a few people paying the tax and a large number benefiting. The danger is that it will be gradually imposed upon a few people, and the temptation of the State will be to constantly exhaust this source of revenue, because it can be done at the expense of losing comparatively a few votes. [Cries of "Oh, oh."] There can be no doubt about that. Any Chancellor of the Exchequer, when he is considering new taxation or the increase of the old taxes, is bound to consider its political effect. ["No, no."] Does anyone suggest 1370 that that consideration would not be present in the mind of any Chancellor of the Exchequer? It is, therefore, obvious that a tax of this character, which may be largely increased or added to with comparatively little political danger to the party in power, is likely to be used not only to the detriment of the persons who pay the tax, but also to the detriment of the State which will be tempted to dry up this source of revenue in order to avoid a political difficulty. With regard to the concession to small owners I am glad that we have had a part in it. The change has been made not at the instance of the Government—although it has been so ably defended by the Chancellor of the Exchequer—but it is due to the action of the Opposition.
§ Lord ROBERT CECIL
The right hon. Gentleman has made one statement which, I think, ought to be corrected. He said that the Opposition presented a very strong case—and I was glad to hear him say so—on behalf of the small owners; and he alluded especially to the great burden of the valuation and the cost it would have been to owners of that description. It will still be a hardship, and will cause a great deal of justifiable discontent, because the burden has not been removed, and it will remain as strong as ever. The Chancellor of the Exchequer appears to think that in this Clause he has freed the small owner from the grievance of the valuation, but that is not so. That valuation remains as part of the scheme, and every small owner will be valued under the same conditions except one, as when the Bill was introduced. [An HON. MEMBER: "It is to be a State valuation."] Yes, that is the one point. The returns will have to be made, and the inquisition will go on. I do not see that, as far as the valuation is concerned, the small owner is in any better position than he was when the Bill was introduced. You have, by freeing him and rendering him still liable to valuation, one of the greatest anomalies of the whole scheme of taxation you have presented.
§ Viscount HELMSLEY
I do not, for one moment, wish to oppose this Clause, because I am only too glad to see anybody exempted from what I regard as an unjust and unfair tax; and it seems to me obvious from the fact that the Government have found it necessary to exempt the small owner and those who have votes to express their disapproval that the tax is unjust and unfair. Why is it, however, a 1371 man who owns and cultivates a small plot of land is to be exempt, and not the man who owns and lets a small plot of land? The two people may be in exactly the same position as regards wealth or the absence of it. I cannot for the life of me see why the exemption should not apply to people who own a small plot of land and let it out. I do not understand the last Subsection, nor what the situation would be in a case where a small plot of land is sold by a small owner to a larger owner.
§ Mr. LLOYD-GEORGE
The cultivating small owner is in quite a different category, and that is the reason we want to exempt him. His case was presented, not merely by the party opposite, but also by hon. Members on this side of the House. The Noble Lord says it makes no difference at all now the small owner does not pay the tax or for valuation. That is a most extraordinary statement.
§ Lord WILLOUGHBY de ERESBY
There appears to be some difficulty about this valuation. The Chancellor of the Exchequer first of all told us that one of the great objections of this side of the House was that the tax would fall especially hard upon the small man, because he would have to make a valuation of his property. It was not so hard upon the large owner, because his agent or architect would make the valuation. I am bound to say that I took that line. It would naturally be more expensive to the small man, who would not have any expert adviser in his ordinary employ, to take up a valuation and satisfy the demand of the Government, than to the large owner. I understand the Government have now provided that the valuation is to be made by the State. The whole of that argument therefore falls to the ground. Like other speakers, I should be only too glad to be exempt from the Increment Duty. But if the tax is a right tax, why exempt one man and not another? Why do you not say plainly you wish to tax a man because he is a rich man; it should not matter whether a man has a large or a small estate. If you are introducing in this Land Tax the principle that you are taxing a man because he is rich, then why not propose at once a Super-tax upon the wealthy?
§ Mr. LANE-FOX
I do not think we ought to allow to pass unchallenged the statement of the Chancellor of the Ex- 1372 chequer that the small man will be exempt from all trouble and cost of valuation. The State has the first shot, and I think it will be found that the beginning of the trouble will come when the valuation made comes to be discussed.
§ Mr. WATSON RUTHERFORD moved in Sub-section (1) to leave out the word "for" ["for twelve months previously"], and to insert instead thereof the words "substantially during the."
§ I have other Amendments prior to this down in my own name which I do not propose to move. The Amendment I wish to move provides that instead of the house being used by the owner "for twelve months previously," it shall, to obtain the exemption, be used "substantially during the twelve months." This is an exemption in favour of the small owner, and I think it would be a very great pity if, because a man entitled to the exemption under the Clause happened to have been away for a fortnight during the twelve months, he should lose his right to the exemption of this duty. What I wish to make clear is that if he has substantially during the twelve months occupied it, this must not be construed strictly, and that he must be in occupation for the whole twelve months without residing anywhere else. I think that is a reasonable suggestion, and I do not think the Chancellor of the Exchequer would like in this Clause to deprive any small-holder of the exemption which it gives because he happens to be away for a few days. Supposing he were a Member of Parliament and obliged to have been at Westminster for the last eight months almost without intermission, and supposing his house happened to be in Scotland or somewhere of that kind and he could not get home, it would be perfectly clear that he had not used the house "for" twelve months. I think that illustration as to Parliament ought to soften the hard heart of the Chancellor of the Exchequer.
§ Sir SAMUEL EVANS
I think some limit is necessary in order to secure that there should be bonâ fide occupation or user, and, therefore, we must have some definite term. A definite term is not a vague term like "substantially during the twelve months." That would bring in what is the meaning of the word "substantially." You have twelve months prescribed, and that period may be too long or too short, or the right period, but 1373 I do ask the Committee to say that it is right that a definite period should be prescribed, and it would not be a wise thing to change a definite period for a vague period represented by the word "substantially." The hon. Member referred to the case of a man who is away—a Member of Parliament—who occupied or used a house Under £500 in value. He clearly would not lose the benefit of the exemption, if there is such a person, by reason of being away. He would still use or occupy the house.
§ Amendment, by leave, withdrawn.
§ Mr. WATSON RUTHERFORD moved, in Sub-section (2), to leave out the word "not" ["the exemption under this provision shall not apply"].
The way I want this proviso to read is this:—
Provided that the exemption under this provision shall apply to any land occupied together with a dwelling-house the annual value of which, as adopted for Income Tax under Schedule A, exceeds thirty pounds.
§ It is very important to put a clause of that kind in the affirmative, and to make the exception an affirmative exception.
§ Sir SAMUEL EVANS
This is really like the case of the difference between tweedledum and tweedledee, only that in this particular case tweedledum is better than tweedledee.
§ Amendment, by leave, withdrawn.
Mr. WATSON RUTHERFORD moved, at the end of Sub-section (3), to add the following paragraph:—
(c) A house shall be deemed to be used by the owner, and agricultural land with a dwelling-house shall be deemed to be occupied by the owner, if such owner usually resides there, and notwithstanding that a part may be sublet, or that some trade, business, or profession is carried on there, or that the whole house has been sublet for not exceeding two months out of the twelve months.
§ This new Clause contains a very valuable concession to small owners. It is intended to meet the case which was put to the Chancellor from this and other sides of the House, and which he promised to consider. But the benefits of this exemption from taxation are restricted to the strict wording of the Clause, and they are that in the case of a dwelling-house it must be absolutely occupied by the man 1374 himself, and in the case of agricultural land it must be occupied and cultivated by the man himself. The consequence is that if a tenant should sublet a part of the premises, even for a few weeks, so that they will cease to be in his own occupation, or if a fanner should let his house for a few weeks in the middle of the summer, he is deprived of the advantage of the exemption. It would be a very great pity if, because he should happen to let a small outhouse, or should happen to carry on on the premises, as is very customary in the rural districts, the business of butcher or some other trade, he did not come within the scope of this exemption. I submit that it would be hard if in each or any of the cases I have mentioned a man should be made liable to this tax. Take the case of two homesteads adjoining each other. One man has an outhouse and he sublets it, and the other man has no outhouse to let. Simply because of having let the outhouse, and the entire premises not being in his own occupation, one of the men would be cut out of the benefit of the Clause. In those circumstances I think I have made out a case for appealing to the Government to favourably consider, if not the exact words of this Amendment, something of the sort. My object is to include in the benefit of the Clause a considerable number of cases which I know of myself, and which would be shut out if the Government does not see its way to an Amendment in this or some other shape.
§ Sir SAMUEL EVANS
I agree entirely with the hon. Member that if even in the cases which he has quoted the owner of a small dwelling-house or of a small plot of land would be deprived of exemption it would be a hard case which ought to be met. But on further consideration he will agree with me that the subletting of part of a house or carrying on business in any part of the house, or the subletting of part of the land for portion of the twelve months would not take the case of the owner outside the exemption. The house would none the less be used as a residence of the owner of the house because he sublets portion of it. If the words suggested were accepted you would limit the period to two months, during which the subletting may take place, whereas as the Clause now stands, even if the owner in addition to subletting for, say, July and August, also sublet for, say, portion of June and September, he would still be entitled to exemption. If I thought that in any of the cases put to me or in any 1375 analogous case exemption would not be allowed, I would have words inserted to meet it, but I assure the hon. Member that the exemption would still apply in the cases he has mentioned.
§ Mr. WATSON RUTHERFORD
The argument of the hon. Gentleman is not that he does not agree with my object, but that the words suggested would be so much surplusage because the whole of the cases referred to are provided for by the words of the Section. I do not agree with that view. I am afraid that the Clause will lead to the difficulties that I have described. If the Government wished to put the matter beyond all question they would adopt the words suggested, but as I have made my protest, if the Government do not see their way to do anything, I will not waste the time of the Committee by carrying the matter further.
§ Amendment, by leave, withdrawn.
§ Mr. LLOYD GEORGE moved to insert after Clause 6 the following:—