§ Where in pursuance of any public, general, or local Act any capital sum or any instalment of a capital sum has been paid to any rating authority in respect of the increased or enhanced value of any land due to any improvements made or other action taken by the authority, the amount of that capital sum or instalment shall be deducted from any increment value of the land for the purposes of the collection of Increment Value Duty, and from the site value of the land for the purposes of the collection of Undeveloped Land Duty, and in the case of Increment Value Duty the duty on the amount deducted shall be deemed to have been paid.1456
§ Question proposed, "That the Clause be now read a second time."
§ Mr. CLAVELL SALTER
I wish to ask the Government whether, in connection with this Clause, they have considered the case of the Reversion Duty. The Clause appears to me to deal quite fairly and adequately with the point so far as regards Increment Value Duty and Undeveloped Land Duty. But I wish to ask whether, in the view of the law officers, the question of Reversion Duty does not require to be dealt with, and, if so, in what way they propose to deal with it. Take a case of betterment, such as the making of a road like Kingsway. While land is under a lease extending over 21 years, a sum is exacted in respect of that betterment, and certainly the larger part, probably almost the whole, would be exacted from the reversioner. In due course the lease would come to an end, and if Reversion Duty was payable he would be called upon to pay it. Reversion Duty would be payable if the total 1457 value of the land at the end of the lease was greater than its total value at the beginning, and, having regard to what had happened during the currency of the lease, it is certain that the total value would be greater, and consequently Reversion Duty would be payable. Therefore, the owner would be called upon to pay twice over in respect to the betterment. It appears to me that this case has been omitted, and unless there is something to which my attention has not been called, it is necessary to do in this Clause for the Reversion Duty what is done for Increment Value Duty and Undeveloped Land Duty. I would suggest the insertion of the words "and from the total value of the land for the purposes of the collection of Reversion Duty."
§ Mr. WALTER GUINNESS
I do not agree with my hon. Friend that the Clause goes far enough in the case of Increment Value Duty. The concession is certainly better than nothing, but I think a substantial injustice will still remain in the case of those who hold land liable to betterment charges under private Acts of certain local authorities. I do not think it is enough that the actual capital betterment charge should be deducted. The fact that the betterment charge has been paid should frank the whole increment in respect of which betterment has been paid. If the Town Planning Bill becomes law cases will hardly arise under that Act, because it is laid down in Clause 59 that the local authority is to take the whole of the betterment arising, and there will be nothing for the Exchequer to levy Increment Duty upon at all. The hardship will arise in the case of certain private Acts, I think in Manchester, and certainly in London, where improvements have been carried out, and a betterment charge of one-half of the increased value has been levied, either annually or in a capital sum, on the whole of the property. It is very hard that people who by accident have been made liable to this charge should not only pay half of the increased value to the local authority, but be charged an additional one-fifth of the remainder by the State. I think that is a very real hardship; but, in view of the fact that the Clause is a concession, I shall not ask the Committee to divide against it.
§ Mr. PRETYMAN
Is it necessary to insert the words "provisional order" here? The Clause says, "any public, general, or local Act," while in the next Clause the words "special Act" are used. Possibly the words "provisional order" 1458 are not necessary, but if it is possible that betterment might be levied under a provisional order it seems to be that some provision is required.
§ Sir W. ROBSON
It would hardly be made unless it comes under some public, general, or local Act. The hon. Member for Basingstoke (Mr. Salter) expressed the view that Reversion Duty ought to be comprised within the scope of this exemption. I would remind him that Reversion Duty stands upon a somewhat different footing from and is independent of Increment Value Duty. We do not at all admit that a man may not be called upon to pay Increment Value Duty upon property comprised in a lease upon which he may be called upon to pay a betterment charge. It is the old case which we have had so often, where undoubtedly different burdens are laid upon a man. It is not always making the same payment twice over, although it is undoubtedly making two payments on the same property. The hon. Member for Bury St. Edmunds (Mr. W. Guinness) does not think the Clause goes far enough. Take the case mentioned by the hon. Member, where the municipality takes half the increment. If on a property worth £1,000 the municipality consider that some improvement which they have made has increased its value by £100, they may take £50. The result is that £950 remains. What we have done is to allow for the deduction before we assess the Increment Value, but we do not allow that to be a deduction from the duty. Of course, if we made it a deduction from the duty, we might recover much more than we ought to recover, because, in addition to the £100 increment in connection with the improvement, there might be some other increment of a considerably larger amount. If the property becomes worth £1,200 we should then ask for a duty upon increment of £250, and there is no reason at all why we should not have the duty on that increment. The £50 is deducted from the assessment.
§ Mr. WALTER GUINNESS
It would be quite possible to deduct the capital value of the improvement on which the betterment charge was levied. That would not in any way prevent any further increment due to other local circumstances being made liable to Increment Value Duty.
§ Mr. PRETYMAN
I must enter a protest in connection with the Reversion Duty, although I think such a protest is hardly 1459 needed after the Attorney-General's defence. The very capable way in which the hon. and learned Gentleman makes a defence where there is one is well known; but the defence he has just made really amounted to no defence at all. It was merely a few bewildering sentences, with very little meaning. It is desirable that we should put the case exactly as it will happen. A Reversion Duty is a duty of 10 per cent. on the difference in the capital value of the subject of a lease at the end and at the beginning of the lease. What happens in this case? You have a property leased a long time ago. Subsequently the local authority makes an improvement which increases the value of that property. Under an Act such as one connected with housing and town planning, the local authority claims the whole of the betterment from the owner. It may be the whole, or it may be a half; but the value of the improvement which has been paid for to that extent by the owner to the public inures to the property which is the subject of the lease. The lease then falls in, and the Government say, "We will assess this property again. We find it has increased in value. It is perfectly true that for that increase in value you have already paid the local authority, but we are going to charge 10 per cent. upon it." Is that a defensible proposition? On what possible ground can the Attorney-General defend it? I can see no ground of either equity or justice. It may be right to take unearned increment in any form from any individual; but can it be right to take it twice? We really must have a new defence. Taking increment once has been defended many times, but so far we have had no defence of taking the same increment twice. I hope the Attorney-General will explain the grounds on which in this particular case betterment is first to be taken from the proprietor, and then, when he happens to let the land, he is to be asked to pay it over again.
§ Clause read a second time.
§ Mr. WALTER GUINNESS moved, after the word "paid" ["any capital sum, or any instalment of a capital sum has been paid to any rating authority"], to insert the words "or any charge based on a capital sum is or has been payable."
§ This is intended to meet the case of betterment charges in London. Of course, in drafting this Clause, the Government has apparently chiefly had consideration of cases which, may arise 1460 under the Town Planning Bill. This Clause especially mentions where "in pursuance of any public, general, or local Act, any capital sum or any instalment of a capital sum has been paid to any rating authority." That will arise under Clause 58 of the Town Planning Bill. An Amendment in the direction put down is necessary to meet the case of betterment charges under local Acts, because in general—in fact, in all cases so far as I know—there is no provision in the first case for a capital charge or instalment. The charge is made on the annual basis. In the Tower Bridge Act there is, I think, a provision where, if it is desired to redeem this charge on the annual value it can be done at 33 times the annual charge. But the charge is primary an annual one, and would not come in under this Clause unless the words I have just moved are accepted. I cannot help thinking the Government wish to include these betterment charges, because they are just on the same principle as general betterment charges.
§ Sir W. ROBSON
I think this Section ought to be clear—that annual payments are conducted for the same benefit of the taxpayer as the capital sum. I think that might be done on Report.
§ Amendment, by leave, withdrawn.
§ Mr. CLAVELL SALTER moved, after the word "duty" ["the collection of Undeveloped Land Duty"], to insert the words "and from the total value of the land for the purposes of the collection of the Reversion Duty."
§ I move my Amendment in order to raise a point to which I called the attention of the hon. and learned Gentleman. I am sure if there is a point which ought to be raised, apart from the second reading Clause, it is this. I must say that I think it is a striking commentary on the condition to which we are reduced, and the condition to which the Committee is reduced, after a few months' discussion on this Bill, that an attempt to remedy so plain an injustice as this—an injustice that would never be supported in private conversation for one single moment—by any Liberal Member, any more than by any other Member, dealt with as it has been by my hon. and learned Friend the Attorney-General and calmly put aside. In a few moments we shall be swarming in to the House from the tea room. Hon. Members opposite will answer to the bell. Not only will they know nothing whatever of the point 1461 on which they will Vote, but nine-tenths of them will have no conception as to what Clause we are on. They will be headed off by their drovers into the appropriate pen, counted as they go through the gate, and that will be the end of it. Not one of them, if he were to apply his mind to this point, would attempt for a moment to defend the injustice which this Amendment seeks to remedy.
§ Mr. CLAVELL SALTER
I am much obliged to the hon. Member for mentioning that matter, for I am dealing with a point of great importance. The point is this: Hon. Members will see that this Clause has been introduced to remedy what is an obvious injustice. That injustice is that where a man has paid the betterment on his land to some local authority that he should be charged again in the Land Taxes for that betterment. The Clause recognises the injustice, and it is introduced for the purpose of remedying it. It is not confined to any particular duty. That hon. Members will see from the marginal note which says, "Exemption of land to the extent of sum paid to rating authority in respect of increase in value." Hon. Members will remember that the principle is followed consistently throughout the Bill, because elaborate pains are taken to see that these Land Taxes can never be duplicated—that a man shall never pay twice over. This Clause deals—in my judgment, admirably—with two of these three duties. Under this Clause a man who has paid betterment will not have to pay Increment Duty on the same increase of value, nor will he have to pay Undeveloped Duty. But there is no doubt whatever that he will have to pay Reversion Duty. The definition of that duty was permanently modified in the discussions here by the adoption of an Amendment which I had the honour to bring forward, and which was accepted by the Government. It has, in fact, become merely another form of Increment Duty. The increment now is on the total value instead of on the site value. Now the case I put is this: Suppose betterment to take place through some street improvements in respect of land which is under a current lease for 21 years, so that the freeholder will have to pay probably almost the whole of the betterment money. It is quite right that he should do so. He does it. He has paid for that improvement. A few years 1462 later the lease comes to an end. He will then have to reckon with the Government as to whether Revision Duty has to be paid. It will have to be paid if the land has a bigger value at the end of the lease than at the beginning. He will have to pay Reversion Duty on every fraction of that increased value which he has already paid over to the local authorities. That is a crying injustice. No one here or outside would in private conversation defend it for one moment. It cannot be defended. The point, in my humble judgment, has been overlooked. I do not think the Government remembered the Reversion Duty has been altered, and I think it just possible that when this Clause was prepared that the thing was overlooked.
§ Sir W. ROBSON
I have dealt with this suggestion before. I do not know any case in which the whole of the increment is paid to the local authority. I wish to acknowledge the force with which the hon. and learned Gentleman has put his point. I should have been glad if he had been a little less expansive upon the mechanical weight of the Government majority. It is not a very simple matter adjusting on the spur of the moment the relation of these three taxes. He says that a difficulty has arisen owing to the definition of the Reversion Duty. It is rather owing to the adoption by us of an Amendment of the mode in which the value is to be ascertained at the termination of the lease. The hon. and learned Gentleman says the value of the land on the determination of the lease includes increments which the owner has already paid away. He says that the man ought not at all events to pay Reversion Duty on that increment. He ought not certainly to pay Reversion Duty upon increment that he has paid away. That I think is quite clear. It would only be within the spirit—I am afraid it is not within the letter—indicated in Sub-section (2) Clause 7 of the Bill. In choosing our new statement as to how the duty payable upon the determination of the lease is to be ascertained, what is said there is this: "For the purpose of this Sub-section the value…shall be deemed to be the amount by which the total value of the land at the time of the determination of the lease exceeds that at the creation of the lease, subject to deduction of any part of the value which is attributable to works of a permanent character…executed.…" That shows our intention to try to prevent any undue burden falling upon the lessor, by giving 1463 him credit for so much of the increment as is due to the permanent work executed by himself. I think the same principle would apply to the point raised by the hon. and learned Gentleman. We certainly do not want him to pay on an increment which in truth he has not received. I would rather not frame words at the moment. We need to consider the phraseology to be employed in a case of this sort. I promise him this, we shall certainly reconsider possibly Clause 7, but with the Clause which is now under consideration, and we shall take care to note the particular case he has pointed out.
§ Amendment, by leave, withdrawn.
§ Mr. LLOYD-GEORGE moved, after Clause 25, to insert the following:—