§ (1) If the owner of any land or houses to which this Section applies shows that the cost to him of maintenance, repairs, 1499 insurance, and management, according to the average of the preceding three years, has exceeded, in the case of land, one-eighth part of the annual value of the land as adopted for the purpose of Income Tax under Schedule A, and in the case of houses one-sixth part of that value, he shall be entitled, in addition to any reduction of the assessment under Section thirty-five of The Finance Act, 1894, on making a claim for the purpose, to repayment of the amount of the duty on the excess, not exceeding in the case of land one-eighth part and in the case of houses one-twelfth part of the duty on an amount equal to the annual value.
§ (2) This Section shall apply to any land (inclusive of farmhouses and other buildings, if any) the assessment on which is, for the purpose of collection, reduced under Section thirty-five of The Finance Act, 1894, and to any houses the annual value of which, as adopted for the purpose of Income Tax under Schedule A, does not exceed eight pounds, the assessment on which is so reduced.
§ (3) In comparing the cost of maintenance, repairs, insurance, and management of any land or houses for the purpose of this Section with the annual value of the land or houses, the total cost of the maintenance, repairs, insurance, and management on any land managed as one estate, or of any houses on any such land, shall be compared with the total annual value of the land or houses as the case may be.
§ (4) All the provisions of the Income Tax Acts which relate to claims for exemption, relief, or abatement, or the proof to be given with respect to those claims, shall apply to claims for repayment under this Section and the proof to be given with respect to those claims.
§ Provided that if the owner of any land or house makes and delivers to the surveyor of taxes of any district in which the land or house is wholly or partly situate a declaration as to the cost to him of maintenance, repairs, insurance, and management, and the surveyor is satisfied as to the correctness of the declaration, the amount of the allowance to which the owner is entitled under this Section shall be certified by the surveyor, and repayment shall thereupon be made in accordance with his certificate.
§ (5) In computing the three-year average for the purposes of this Section, the year shall be taken to be the year ending on the thirty-first day of March, or such other 1500 date as may be adopted by the owner of the land or houses with the consent of the surveyor of taxes of the district, and the three preceding years shall be taken to be those preceding the commencement of the year for which the duty in respect of which a claim for repayment is made is charged.
§ Clause read a second time.
§ Mr. PRETYMAN
We have already had a discussion on this Clause which is a valuable concession, and I do not mean to repeat the remarks which have been made in Committee. I would just say this, however, that when this Clause was last mentioned in Debate it was discussed whether it was to apply all over the country, and now I see the Chancellor of the Exchequer has inserted words providing that it only applies to houses of less value than £8 a year. I agree that that value will mainly confine it to agricultural property, because there are very few houses, in urban districts at any rate, which are valued at less than £8 a year, equivalent to a rent of something like 3s. a week. I take it that rent is hardly ever paid in towns for houses. Perhaps the Chancellor of the Exchequer has in the meantime considered the point which I referred to, and which is now embodied in the Amendment, as to the effect and meaning of the word "repairs." The Chancellor of the Exchequer undertook to consider that question, and I think he agreed with the point which I raised, and of which I gave an example, that what are technically known as repairs cannot properly include renewals, so far as those renewals do not involve any increase of rent. That is the general principle which, I think, is followed on estates. Where a pair of cottages or a set of farm buildings are very old and past repair, and are reconstructed and no additional rent is received by the owner in consequence of that reconstruction, they should be dealt with as repairs. It is obvious, and I think the remark which the Chancellor of the Exchequer made upon that was that there should be a term of years—
§ 8.0 P.M.
§ Mr. PRETYMAN
The Chancellor of the Exchequer will correct me if I am wrong, but the remark which I think he made was that it would involve spreading the expenditure over a period of years. With that I entirely agree. It is quite obvious that it would be impossible to allow a deduction over the whole estate 1501 for one year only on the scale which is suggested here, and which might amount, in the case of a large estate, to a considerable sum. It is obvious, where you have to rebuild one pair of cottages or one set of farm buildings; that it would be clearly unfair that that should be treated as a deduction for a particular year covering the whole estate. With that I entirely concur. The owner of the land may find that the estate is in bad order, and he may also find that for a considerable number of years a large proportion of the income of the estate, in some cases nearly the whole of it, will have to be spent in repairs and renewals—I am not speaking of entirely new works—and it is quite clear, therefore, that if the thing is to be fairly measured from that point of view, and the two others I have named—limiting the occupation and spreading it over a number of years—a considerable number of years will be required to average out the cost in order to give fair treatment to the owner and lessee, and fair treatment to the State. The Amendments on the Paper suggest that the relief shall be spread over a period of years—seven or ten years. I should be perfectly satisfied with a 10 years' average. I think that would be a reasonable period, fair to the owner and fair to the State. These, so far as I am aware, are the principal points. What I cannot follow is why this relief would have to cost the State such a very large sum. It seems to me that half a million would go a very long way if this relief is confined to purely agricultural value. If you take Income Tax at 1s., where there is a relief of expenditure, if you multiply that by 20, or, say, about 19, for the Income Tax is rather more than 1s. in the £, the relief being half a million, the actual reduction of the tax can only be obtained by an extra outlay of maintenance and repairs roughly speaking of ten millions, but not a total outlay of ten millions, but an additional outlay of ten millions over and above that allowed already. I understand it was mentioned to a deputation that to transfer from Schedule A to Schedule D would cost three millions, but that would mean an expenditure of sixty millions in order to get three millions relief from the State. Our original proposal was to transfer to Schedule D, but at the same time we are glad to accept the Chancellor's proposal. I do not think the proposal from this side would have been so expensive, 1502 or so very different from this proposal as the Treasury officials seem to think.
§ Mr. COURTENAY WARNER
I want to warn the Chancellor of the Exchequer against taking so long a period as ten years. I quite agree with the extension of it to the whole property, but to extend the period to ten years would cause a very great deal of trouble as to the account keeping. It would be a very considerable difficulty even for five years.
§ Mr. LLOYD-GEORGE
The computation of two or three millions means the transfer of all property under Schedule A to Schedule D. It referred to the whole of Schedule A.
§ Mr. LLOYD-GEORGE
Yes. Of course I agree if it referred to agricultural property it would have been absurd. If we began to abolish part of Schedule A we have to abolish the whole of it. We could not have Schedule A for town property if we had taken the country property away. Therefore I was advised against the taking of it out of Schedule A. If we did we could not possibly resist the demand for town property to be taken also. Therefore we were bound to stand by it altogether or abolish it. For that reason we proceeded on these lines.
The hon. and gallant Member (Mr. Pretyman) wants to know, and has expressed doubts as to whether £500,000 would go with this concession. It is very difficult to tell. It all depends on the declarations of the landowners. There are cases in which over 25 per cent. is spent, and, on the other hand, there are many cases in which it is perfectly well known that the landowners are not spending 25 per cent. In many cases the property is not of a character that demands all that expenditure on it. I have no doubt those cases will be checked. It is, as I have pointed out, difficult to say how the thing will turn out, but we say we are prepared to set aside £500,000 for this purpose. Suppose we find £500,000 does not go this year, we are perfectly prepared to extend the concession next year, so as to give more to the landlords who are spending more upon the improvement of their property. I think it is very desirable to encourage agricultural improvements. I think it is a real bonâ fide encouragement to agriculture this £500,000 given in respect of 1503 money spent on cottages and generally improving estates and making it more fruitful and not only in the interests of agriculture but in the interests of the whole community that it should be done. Therefore I am very pleased to take part in doing so. The way I calculate it is this, and I am speaking from memory as to the figures: I take the gross upon which you base your tax as from 50 to 52 millions. Take 12½ per cent. of that, and then take 1s. 2d. upon that, which will give about £375,000. The cottage property—and here again I am speaking from memory—would add from £80,000 to £100,000 running the amount up to £450,000. Then we come to the very speculative question as to the extent to which these deductions will affect the Super-tax, because they will affect the Super-tax in two ways. First of all, they will take some landowners completely out of the range of the Super-tax. Supposing a landlord has a rental of £5,500. Then the 12½ per cent. will take him outside of it. You cannot say at present how many there are, nor how many landlords who will be paying the Super-tax who will claim the 12½ per cent. in respect of the additional sixpence. That is a speculative element. Therefore, taking all these things into account, I think on the whole it will probably cover the Super-tax cases, but it must for the first year be experimental. Next year we may have something to spare, and we may increase the allowance, maybe to 30 per cent., if the £500,000 runs to that extent, to the improving landlord. Then as to the number of years, I am afraid of taking a period of ten years as it is so difficult to examine the accounts. I am not sure that the accounts will be kept. I know great landowners keep their accounts.
§ Mr. LLOYD-GEORGE
It must be either five or ten, and I am very much disturbed as to which of the two would be preferable. I would rather keep it to five, and if it does not meet the case we shall be prepared to consider an extension later on.
With regard to the hon. Gentleman's suggestion as to repairs, I think there is a strong objection on principle. It might be given to cottage property, but I do not think it could be given all round. If capital expenditure of this kind were deducted it would wreck Schedule A altogether, 1504 and have a serious effect on Schedule D as well. The suggestion I would make is that the proposal should be confined to repairs to cottages. I should then be disposed to accept the hon. Gentleman's Amendment, because it is very desirable that every encouragement should be given to landowners to look after their cottages. After all, they are not a paying property. Landlords build them really for the accommodation of their labourers, and not because they will get 2 per cent. Therefore, if the Amendment is limited, say, to houses of under £8, instead of applying to the whole of the farm buildings, I shall be disposed to accept it. When cottages, although reconstructed and renovated simply let at the same rent, I think the landlord ought to be entitled to deduct the amount, taken over a number of years.
§ Mr. COURTHOPE
While I am glad the Chancellor of the Exchequer agrees, that three years is too short a period, I do not feel quite satisfied that a five years period is enough. The expenditure on an agricultural estate is apt for various reasons to be spasmodic. After an estate has paid Death Duties, substantial repairs practically cease for five, six, or eight years, or an even longer period, until the burden of the Death Duties is cleared off and then the repairs begin with redoubled vigour. That is a reason for having a; longer period than three or even five years. With regard to the Amendment on the matter of repairs, I hope the Chancellor of the Exchequer will give the question further consideration before he makes up his mind that it must be confined to small cottages. What we have in mind is not really capital expenditure at all, in the proper sense of the word.
§ Mr. COURTHOPE
But is that perfectly clear? Repairs to maintain rent often involve rebuilding or the conversion of the building into a building of a totally different kind. For instance, in my part of the country a very large proportion of the farms have been hop-farms. If hops are grubbed, in order to maintain anything approaching the rent, it is necessary entirely to transform the buildings on the 1505 farm. That may be done on an estate on farm after farm, spread over a number of years. But the expenditure is not charged to capital account. It is charged to the annual expenditure, and unless some words such as my hon. Friend proposes are inserted, I do not think that such expenditure would come within the clause. I do not for a moment ask that anything which is really capital expenditure should be put in. Take another case. On an estate there are certain dairy farms. Owing to the adoption of a dairy and cowsheds Order, in order to maintain the rents at all, it is necessary to alter the cowsheds, from considerations of air space or sanitation, to comply with the Order. That is not capital expenditure in any real sense of the word. It is simply current expenditure necessary to maintain rent. Is it clear that that is included in the Clause at present?
§ Mr. COURTHOPE
Then would not the Government consider whether it should be put in? I think that all expenses of this kind should be clearly included within the repairs and maintenance covered by the Clause.
§ Mr. HART-DAVIES
I am very sorry to disturb the harmonious conversation which has been going on across the Table, but I strongly object to this Clause altogether on many grounds. In the first place, I think we cannot afford it; £500,000 a year is a very serious matter. The Chancellor of the Exchequer has been obliged to meet many appeals with the answer, "We want the money; we must have it; and we cannot afford to do what is asked." Here at the same time, with both hands, we are simply handing over half a million every year to the landowners of England. I also object to it because I think it is a part of our general stupid policy in dealing with all reforms of local taxation and rating. We all know that our system of, rating and local taxation is about as bad and complicated as anything can be. It is a matter of a certain amount of surprise to me that the Government have been in four years and have not made any attempt to reform it. This concession will only add to the complication and difficulty when the whole question of reform is taken up. When the late Government were in power their simple solution of dealing with these matters was to give a dole of half the rates to the landlords. We objected very strongly at the time to that. We came in. We did not remedy that. We did not alter 1506 it in the least. We add a further concession of half a million a year. The Conservatives and hon. Members opposite were in power for about ten years. Although they gave these doles of half the rates, even they never thought of altering the basis of the Income Tax. It was therefore left to us to do it. I, for my part, do not understand why we should have given this concession. It was not asked for. I have no doubt hon. Members interested in land are very glad to get it. There is no doubt about that. It was a voluntary concession, and why so I have never been able to understand. It may help this Bill in another place, but I think it is rather a large sum of money to pay for that. I think the smooth passage of the Finance Bill in another place is hardly worth half a million a year to us. I venture to think that what I said expresses the views of a good many hon. Members on this side of the House. Although I may in this matter be vox clamantis in deserto, what I have said is, I think, in accordance with the views of many Members of the party. The concession is a thing which will not be appreciated in the country. I do not know whether there will be a Division on this Clause, or whether my views will receive much support. At all events, I have made my protest, and I hope the right hon. Gentleman the Chancellor of the Exchequer will take this matter into consideration. I do not approve of this concession, and I wish he had not seen his way to give it. I am extremely reluctant to disturb the harmony of the proceedings, but I feel it necessary to say what I have done.
§ Lord WILLOUGHBY de ERESBY
I am thankful to the Government—and I am sure all owners of agricultural land who wish to keep their houses and buildings in order are thankful—for this concession. At the same time, I wish the concession had been under Schedule D. If the concession had been given to landowners, like it would have been given to manufacturers, that is under Schedule D, there could have been nothing thrown either in the teeth of the Government or in the teeth of the landowners, to the effect that this was a dole and a present out of the pocket of the people. But the chief reason that I have risen is on an important point that ought to be settled. The hon. and gallant Member for Chelmsford (Mr. Pretyman) has raised it by his Amendment. The Chancellor of the Exchequer hinted that he would accept 1507 that Amendment with the word "cottagers" instead of "buildings." In my opinion, this important matter entirely turns upon the interpretation of the word "maintenance." An ordinary individual reading "maintenance" would imagine that "maintenance" was any money spent on maintaining the business or rent at its present position. One class of expenditure may be "maintenance," and another, hardly distinguishable from it, "capital expenditure." If, in the word "maintenance," new buildings are not to be included, the concession will not amount to anything at all. To do repairs, as everybody knows, in certain cases is throwing away money. There comes a moment, whether it be a large or small farm, say, in the case of a small holding, where the landlord has to spend 10 or 20 years' rent. The small holder pays £10 a year rent. He goes to his landlord and says: "My cottage is absolutely done." Very likely it is. The landlord says: "Very well, you will have to have a new cottage." He spends £200—that is, 20 years' rent on a cottage. To my mind, that is maintenance. Of course, if he had said to the small holder: "You must pay some pounds extra per year for a holding," that would not be maintenance. But, if the cottage is put up and no extra rent is charged, that is maintenance.
§ Mr. R. L. EVERETT
The hon. Member for Hackney (Mr. Hart-Davies) objects to this concession being made because he says it has not been asked for. I can bear witness that it was asked for. It was asked by the hon. and gallant Gentleman the Member for Chelmsford on the ground that landowners were now paying on income which they did not receive. The Chancellor of the Exchequer acknowledged that that was so. This alteration being made now is not made as a favour in any sense, but it is made that the taxation under Schedule A upon agricultural property shall be fair and equitable. I am very glad to think that the Chancellor has given ear and listened to the complaints made, and acknowledged the justice of that complaint and the equity of it, and expressed his willingness on the part of the Government to make the necessary alterations. In my opinion to complete what he has done, renewal of the premises should be included. All who are engaged in the dairy industry which is a growing one, know the changes that have to be made, and the alterations in structures in 1508 order that that industry may be properly carried out. It is better to be able to build new accommodation for cattle than to repair old and almost useless ones. I think the demands which have been made in the interests of agriculture are perfectly reasonable and just, and I am glad we had a Chancellor of the Exchequer so sympathetic, and so desirous to act fairly and equitably to all parties, and I only hops that he will enlarge the Clause so that the renewal of old buildings, and the necessary alterations to fit them up to modem requirements shall come in also. That would make the concession fair and equitable.
§ Mr. GEORGE YOUNGER
I think the Chancellor of the Exchequer is to be congratulated on having been the first Minister to tackle this burning question which has been neglected for such a long time. I agree with the Noble Lord the Member for Horncastle (Lord Willoughby de Eresby) that the grant is too small, that it is made in an unfortunate form, and that it would have been better in some sort of way to have these interests placed under Schedule D. I quite agree it is a pity that the Chancellor was not able to go the full length. I am sure, however, those who own agricultural land and who carry it on under adverse circumstances, will gratefully thank him for what he has done. His courage is exemplified by the unfortunate speech of the hon. Member for Hackney (Mr. Hart-Davies), and I think it a pity that that discordant note should be introduced into the Debate. I am sure the hon. Member has not been engaged in business that will have brought him in under Schedule A and Schedule D. I have been engaged in both, and I have experienced the burden of both Schedule A and Schedule D. I know an estate in which the landlord has not received a shilling for the last five years, every penny having beer, spent upon it. That man has had to pay his full Income Tax all the time. He would have been called upon to pay very little Income Tax if he had been carrying on ordinary business having spent his money in that way. I think it is a little ungenerous, and I believe it arises from ignorance that the hon. Member should have made the attack he did, and should have introduced this discordant note into our discussion. I am sure if he knew the circumstances, and felt the pressure, and realised the hardships, he would agree that this is not a full measure of justice by 1509 any means, and that it is only an instalment, and I hope some day or other the Chancellor of the Exchequer—preferably a Liberal Chancellor—will put agriculture under Schedule D, as other businesses are, because any proposal made by a Chancellor who belongs to the Unionist Party would be received not as a concession to justice, but would be regarded by many Gentleman merely as a dole. I was a little sorry that the Chancellor has not seen his way to extend the period of years longer than five years. We have 19-year leases in Scotland—a system which works well—which, I hope, will continue for a long time. We have very often most substantial repairs made at the beginning which run over the whole period of the lease. To take an average of three years in a case of that kind is not fair, and I do not think it is much fairer to take only five years. I accept the Clause merely as an instalment due to agricultural owners, but I thank the Chancellor of the Exchequer very cordially for having recognised the necessity for doing something in the matter, and I hope that in the near future it will be further extended.
§ Mr. T. G. ASHTON
May I appeal to the Secretary to the Treasury to give us some little hope that he is going to extend the provision to buildings as well as to cottages. We admit it is a very important matter that there should be good cottages on estates, but I think it will also be admitted that it is equally important to have good farm buildings, and that they should be kept in good repair. It is admitted that the cottages should be good with a view to preserving the health of the labourers. It is almost equally important that farm buildings should be good in order that the animals should be kept in good condition. Reference was made by an hon. Member opposite to the question of cow houses. It is of enormous importance that cow houses should be kept in a thoroughly good and healthy condition. Everybody knows that one of the main causes of tuberculosis in cattle arises from defective cow houses. People demand non-tuberculose cattle and non-tuberculose milk. You cannot have them unless you have good buildings in which to house the cattle, and it is only fair and just that we should be allowed to put up buildings and that they should rank as part of the repairs to the farm just as well as the putting up of cottages.
§ Clause read a second time.1510
§ Viscount DALRYMPLE moved, in Subsection (1), to leave out the word "three" ["according to the average of the preceding three years"], and to insert instead thereof the word "nineteen."
§ In Scotland the usual custom is for leases to run for 19 years, and the greater part of the expenditure on improvements would run through the whole of the lease. When a lease is granted it is generally on condition that certain repairs and improvements are made, and they are made to cover the whole of the lease. Although the farmer will feel the benefit of those improvements, the landlord will get no deduction after the first three years, and for these reasons I move my Amendment.
§ The FINANCIAL SECRETARY to the TREASURY (Mr. Hobhouse)
The Noble Lord has referred to the case of farming in the South of Scotland, and he has alluded to the fact that they are generally 19 years' leases. He appears to have forgotten that the words of the Clause are: "In comparing the cost of maintenance, repairs, insurance, and management of any land or houses for the purpose of this Section with the annual value of the land or houses, the total cost of the maintenance, repairs, insurance, and management on any land managed as one estate." It is quite clear that the leases of the farms will overlap one another, and, therefore, the repairs upon one farm will be merged in the repairs of the whole estate. Therefore it will not be necessary to consider the returns of Farm A because they will be taken with the repairs of Farm B, which will be in its seventh year, and they would take also Farm C, which may be in its eleventh or twelfth year. Therefore you cannot insist upon the point that leases are for 19 years. The repairs will be determined in the first three years and not in the last 16 years.
§ Viscount DALRYMPLE
If the right hon. Gentleman works out the difference of deduction, averaging it for three years, between one farm where all the expenditure is incurred one year in 19, and another where the same expenditure is spread over the 19, he will find that the former is allowed much less deduction.
§ Mr. HOBHOUSE
That is not my own experience. May I remind the Noble Lord that in the West of England, which I know best, often there is no lease at all and no written document. The farms are held on verbal agreements in a number of 1511 cases I know of. I do not think we can accept the Amendment to change the period from three to 19 years, because that would be very inconvenient. I may state, however, that the Chancellor of the Exchequer will be willing to accept an alteration from three years to five years, and if the hon. Member will withdraw his proposal I will move an Amendment to insert five years.
§ Mr. YOUNGER
The right hon. Gentleman who has just spoken instanced the case of the West of England and the annual tenancies there. That is exactly where the case differs from ours. I have in mind a farm rented at £200 and the lease is just about to expire, and the new tenant is coming in at the same rent. The sum of £1,000 is going to be spent upon buildings, and that is equivalent to an expenditure of five years' rent to be spent straight away. That is being done because it is a 19 years' lease, and that is what is generally done in Scotland, because it is important that a farm should be properly equipped to start with. The repairs during the currency of the lease are made by the tenant, for which no claim will be, made in regard to this question of the Income Tax. It would be the tenant's duty to do that. If you want to be fair you should spread this large expenditure over the period of 19 years. If the right hon. Gentleman figures it out he will find that, spreading it over five years, you will not get full allowance, because you must not assume that these are all large estates. Some of them have a couple of farms upon them, and if you spend £1,000 upon such estates how is it possible to get it back in three years? It is no use talking about dukes here, because they are not in point. The dukes will come out all right, but the small proprietor will not. I think we owe the Chancellor of the Exchequer a debt of gratitude for what he has done in regard to this question.
§ Viscount DALRYMPLE
After the explanation which has been given, I ask leave to withdraw my Amendment.
§ Amendment, by leave, withdrawn.
§ Mr. HOBHOUSE moved, in Sub-section (1), to leave out the word "three" ["according to the average of the preceding three years"] and to insert instead thereof the word "five."1512
§ Mr. PRETYMAN
We agree to this Amendment, although most of us prefer a longer period. If it is a tentative proposal we accept it as such, on the understanding that the Chancellor of the Exchequer will reconsider the matter on Report.
§ Mr. LLOYD-GEORGE
I will cause the question of the present tenure to be examined, and my suggestion may be regarded as purely tentative.
§ Amendment agreed to.
§ Mr. COURTHOPE moved, in Sub-section (2), to leave out the words "is, for the purpose of collection, reduced under Section thirty-five of the Finance Act, 1894, and to any houses the annual value of which, as adopted." The Sub-section will then read: "(2) This Section shall apply to any land (inclusive of farmhouses and other buildings, if any) the assessment on which, for the purpose of Income Tax under Schedule A, does not exceed eight pounds, the assessment on which is so reduced." I do not move this Amendment in any spirit of hostility to this Clause, but quite the reverse. I only want to remove an objection which I hold to the Clause itself. It is quite possible that the words I suggest are not in the best form, but my objection to the Clause as it stands is that in the case of cottages the relief is confined to those who adopt the compounding system, and I think that is a mistake. I hardly need to point out that the compounding system has been condemned by every Commission and Committee of recent years which has considered the question.
§ Mr. LLOYD-GEORGE
Does the hon. Member object to the £8 limit? There is nothing about compound in it at all.
§ Mr. COURTHOPE
It is not very easy to find out what it means, but, as I read Subjection (2), it confines this matter to cottages to which the compounding system applies.
§ Mr. HOBHOUSE
No. It confines the operation to cottages whose rent is £8 a year or under. It is quite true cottages of £8 or under come under the compounding system, but that is not the object with which the limitation is placed upon the rent. It is a pure accident that the rent of £8 per year and the compounding system coincide. The maximum rent, as a rule, of agricultural cottages used for 1513 labourers is 3s. per week, or £7 16s. per year. It is better to put it £8 than £7 16s., which is a very inconvenient sum.
§ Mr. COURTHOPE
If the right hon. Gentleman assures me that is so, it makes my Amendment unnecessary. I wish to avoid any direct encouragement being given to the extension of the compounding system.
§ Mr. HOBHOUSE
It is intended to apply to agricultural cottages, and it has nothing to do with the compounding system.
§ Amendment, by leave, withdrawn.
§ Amendments made: In Sub-section (5), to leave out the word "three" ["in computing the three-year average"], and to insert instead thereof the word "five."
§ In Sub-section (5), to leave out the word "three" ["and the three preceding years"], and to insert instead thereof the word "five."—[Mr. Hobhouse.]
§ 9.0 P.M.
§ Mr. PRETYMAN moved, at the end of the Clause, to insert the words: "The expression 'repairs' shall for the purposes of this Section be taken so include the enlargement, reconstruction, or conversion of buildings so far as is proved to be reasonably necessary for their beneficial occupation and to be unproductive of any additional rent."
§ It would be quite ridiculous for me to criticise points on which the right hon. Gentleman has been advised by his Treasury advisers as to what the effect of this Clause might be with regard to other assessments under Schedule B. I know he will between now and Report further consider the matter, and I do not propose to deal with it. May I, however, give a case I have in mind? It is a case where a 40 acre farm is let for £25 a year. When the present owner purchased it both the farm buildings and cottages were in a shocking state of repair. He has completely rebuilt both the house and the set of buildings at a cost of £450, and he has left the rent at £25 a year. There are considerable outgoings in the matter of tithe, land taxes, and other necessary outgoings, 1514 and the net result is that there is only about £15 rent received. If that expenditure is to be barred, it really nullifies the concession to an extent that, although something might be obtained, it would be extremely small.
§ Mr. LLOYD-GEORGE
I suggest the hon. Member should not move his Amendment, and that we should consider the matter before the Report stage. The last thing in the world I wish is to limit the scope of the Amendment as far as cottages are concerned.
§ Mr. PRETYMAN
I was going to make that suggestion to the Chancellor of the Exchequer, but I will move my Amendment pro formâ in order to allow any other Members to say anything they may wish to say. I think the Chancellor of the Ex chequer will see that it might do so. We shall have to take our chance at present of the legal interpretation of maintenance and repairs, which might include a considerable proportion of reconstruction. If it is to be accepted in the case of a cottage it might also be taken as an instruction in the case of farm buildings, and we might lose more in one direction than we gain in another. Although I appreciate the spirit in which the suggestion has been met, I am afraid that the actual words hardly meet our case. I quite agree, however, that the matters may be considered between this and Report.
§ Viscount HELMSLEY
I wish to support what has fallen from my hon. and gallant Friend, and I hope the Chancellor of the Exchequer will really see, on further consideration, even if he cannot accept the Amendment as it stands, that there are grounds for the objections which have been urged, and that it would be a much more valuable concession if this Amendment were included. No fresh principle would be involved. The right hon. Gentleman has told us he wishes to include cottages, and I would like to point out that there are buildings which closely approximate to the nature of cottages in some parts of the country which would be excluded unless we have these additional words. There are a great many very poor holdings at a rental of, perhaps, £20 per year, and consisting of from 40 to 50 acres. The Chancellor of the Exchequer will readily recognise that it is a very serious expense having regard to the rental when one of these houses has to be rebuilt. I am afraid if he only mentions cottages that these buildings 1515 will be excluded from the benefit of this concession. I do not think, having regard to the general feeling on both sides of the House in respect of small holdings, it would be advisable to eliminate those other classes to which I have referred. If they are included in the benefit of this concession it would enable the owner of land who has to make these very expensive repairs, amounting almost to rebuilding, to do so without the present temptation to charge something in the way of interest to the tenant. It is a thing commonly done not so much on rebuilding as in adding to old buildings. It is frequently felt to be necessary to charge something in the way of interest on the amount expended. I think if this exemption were further extended, as suggested, the tendency would be to prevent that and to enlarge these very beneficent rebuilding operations by landlords.
§ Mr. PRETYMAN
As it stands now there would be great practical difficulties as between the landlord and the Treasury in settling where repairs ended and this kind of work began. That would be a practical difficulty, but if something in the nature of this Amendment were accepted it would be obviated. It would be extremely difficult for the Treasury officials to check the statement furnished by landlords if they were obliged to investigate whether any particular item of expenditure consisted merely of repairs or amounted to reconstruction.
§ Mr. LLOYD-GEORGE
I trust that the Amendment will not be pressed at the present stage. I do not want to be forced now to enter into an argument. Undoubtedly there are real administrative difficulties, and I should like to go into the matter more carefully than, so far, I have been able to do, before I express an opinion one way or another. I do not want to disorganise the present machinery. This Amendment involves an extension in principle, as well as in fact, of the concession already made, and before I express a final opinion I want further time. I therefore hope the hon. and gallant Gentleman will withdraw his Amendment and not force the Government to prematurely declare its views. I will consider, before Report stage, if the Government can make this concession.
§ Mr. PRETYMAN
I only desire to put my case before the Chancellor of the Exchequer, and if he will undertake to consider 1516 it I am quite prepared to withdraw my Amendment.
§ Mr. J. S. AINSWORTH
May I suggest that the words at the beginning of the Clause might be amplified so as to cover the buildings which are proposed to be dealt with by this Amendment.
§ Amendment, by leave, withdrawn.
§ Question proposed, "That the Clause, as amended, be added to the Bill."
§ Mr. PHILIP SNOWDEN
It seems tome that this concession is one of a very long line of similar concessions which have been made, and which have had the result of relieving the landed interest of this country of a very considerable part of the taxation which it ought to bear for local and national objects. There was a time when land had to bear the entire cost of the defence of the country and of the judiciary, as well as other national and local expenditure. In his Budget 15 years ago Sir William Harcourt gave a concession somewhat similar to this, and he estimated at the time that it involved a sacrifice of revenue to the extent of £800,000 a year. It seems to me rather singular that another concession of this character should have to be made by another Liberal Chancellor of the Exchequer. Before Sir William Harcourt made his concession the Tories had been in office seven or eight years, and they had made no attempt whatever to deal with the alleged grievance. After the last Liberal Government the Tories again came into office, and were in power for something like eight years. This grievance was in existence during the whole of that time, and, again, a Liberal Chancellor of the Exchequer, at a period when he is hard up for money, and hardly knows where to turn for it, listens to the importunities of rich landowners and makes a further concession which he admits is going to cost half a million of money. I do not say that I am so much opposed to this concession on principle as I am to the time selected for giving effect to it. But I think it cannot altogether be regarded without taking into consideration other concessions which have been made to the landed interest since this Finance Bill first came before this House. When the Prime Minister was speaking at Birmingham recently he said the owners of agricultural land would be better off after the passing of this Finance 1517 Bill than they are at present. I believe that statement has been disputed. I cannot charge my memory, however, with recapitulating all the concessions which the Chancellor of the Exchequer has made to landowners during the passage of this Bill through Committee. That, I think, has a very pertinent bearing upon the matter before the Committee. I refer to the proposal—again I do not object to it—the proposal to give half of the revenues of the Land Taxes to the municipalities and the public bodies of the country. It will not be disputed, I think, that if that money be given to the local authorities without being earmarked for some special purpose that it will go to the relief of rates, and if it goes to the relief of rates it will go into the pockets of the landowners. We have the authority of the right hon. Gentleman who, I think, represents Wimbledon (Mr. Chaplin) for that, because I think when he was introducing the Agricultural Bating Act under the last Tory Government he stated very definitely that any remission of rates or taxes will go ultimately into the pockets of the landowner in the form of increased rent. I assume that we are going to give Land Taxes to the local authority amounting to £300,000, and that capitalised at 25 years' purchase means a gift to the landowners of between seven and eight million pounds. Suppose that we also capitalise this gift that we are now considering of £500,000 a year at 25 years' purchase, it would amount to 12½ millions, and, adding these two concessions together, you get a gift to the landowner of £20,000,000. I want to ask who are the landowners that they should receive the special consideration of this House, especially at the hands of this Government. Why, these landowners are the men who made up a deputation to the Chancellor and presented this request. I gather from what the right hon. Gentleman said last week they were headed by the Earl of Onslow. Well, who is the Earl of Onslow?
There is no objection to stating that as a fact in general terms, but it is not in order to go into the details which the hon. Member is giving.
§ Mr. SNOWDEN
My point is this, that the class who are going to benefit from this concession are not the most needy, and if the Chancellor of the Exchequer has half a million of money which he does not know what to do with he might have put it to a much better purpose than give it to the relief of the landowner. I put before him the other day an appeal, from a class who are often in want of food, in regard to the Tea Duty. He is in the same position there. He did not object to the reduction of the Tea Duty in principle, and he would have been very glad indeed to reduce it, but he could not afford to do so. If he cannot afford to reduce the Tea Duty, which bears hardly upon the poorest part of the population, he certainly cannot afford to give such a gift as this to a class many of whose rent rolls reach into the tens of thousands a year. He should not do that without at the same time doing something to remove the scandalous injustice, from the taxpayers' point of view, of the assessments for Income Tax in regard to farmers under Schedule B. I will show you the connection between the landowner and the farmer in a moment. Under Schedule B the farmer is not required to return his profits which he makes, and his profits are taken at one-third of his rental. The absurdity of this was very often borne in upon me in my native village. It is a farming district, and the farmers used to come to me and ask me to assist them in filling up their Income Tax returns, and all I had to ask them was what rent they were paying. Supposing a man was paying £30 a year, I knew that he was keeping himself and his family out of the farm, and yet under the law I had to return his profits as being £10. Take the case of a farmer whose rental is over £400. He does not pay Income Tax at all under Schedule B, as a matter of fact, but the farmer who is paying a rent of £400 a year and upwards is living in the style of a country gentleman, and lives in a mansion house and keeps many domestic servants. Yet he does not pay a single penny to the Income Tax, and what is the result? The result of that is that he pays more rent, and, therefore, this method of assessment under Schedule B is simply an inducement to landlords to keep the rents high. It has been given as a reason for supporting this concession that the landowning class has to bear many other burdens, but I really think that the advantage which they get under Schedule B is far more than any disadvantage under which they may be placed in comparison with the 1519 commercial classes. These are some of the objections that I have to this Clause. My main objection is that the time is not opportune, and that the Chancellor of the Exchequer might have devoted this money to a far better purpose. He is proposing under the Development Bill to give a sum which is equal to that which he is giving away to the landlords, and I certainly object to the landlords being endowed as much as Social Reform is going to be endowed by that measure.
§ Mr. LLOYD-GEORGE
The hon. Member rather complains that it is left to a Liberal Chancellor of the Exchequer to do something towards redressing a grievance which he himself admits, because he does not challenge the grievance, but only the right of a Liberal Chancellor of the Exchequer to redress a grievance which is cast upon landlords. I understand from that that the hon. Gentleman is not aware of what Liberalism means. One of the principles of Liberalism is to redress grievances wherever they are to be found. The hon. Gentleman's notion of reform is pure class legislation. The Liberal idea of reform is that which will benefit all classes, and not merely one section of the people. I am sure the hon. Gentleman will recognise that by-and-bye, but at present he does not understand that it is a tradition of Liberal Ministers to reform a grievance whatever section or class of the community suffer from it.
The better the landlord the worse he is treated under the present system. Let the hon. Gentleman go to a rural district and tell an audience there that under the old system if a good landlord spends money in improving cottages and making them fit for habitation the State makes a charge on him, and the fitter they are for habitation the heavier is the charge. That is the good old system the hon. Gentleman is here to defend. The hon. Gentleman thinks he is a Socialist, but he is an out and out Tory. He is a man who believes in uninhabitable houses, pigstyes not fit for people to live in, and if a landlord tries to improve them he is fined 1s. in the £ for doing so. The hon. Member is the one solitary remnant of Toryism in this House. Then let the hon. Member go on and tell this audience of agricultural labourers what the Liberals have done. "They have actually said that if a landlord spends money on improving cottages they will allow 1s. in respect of every £. Monstrous! No more Liberal candidates. 1520 Send Tories like me to the House of Commons." We bring in a Development Bill, and we raise £500,000 a year for this purpose. If the landlord does it we at any rate do not discourage him by making him pay 1s. or 1s. 2d., or a Super-tax of 1s. 8d., not upon his income, but upon what he actually spends in developing the resources of the country. I am not ashamed to defend that before any audience, either Liberal, Conservative, or even Socialist. It seems to me to be thoroughly in the interest of the country itself, and not merely of the landlords. The hon. Gentleman seems to attack landlords merely because they are landlords. That is not my view at all. I am very glad to say that even the hon. Member's own colleagues do not quite agree with his exceedingly narrow, limited, bigoted views of the situation. I have a requisition here which was presented to me inviting me to do this, and among the signatures to it I am pleased to see Members of his own party—comrades of his, including the chairman of his party. Where the landlord does his duty the State recognises it, and where he spends money on improving his property the State is not going to penalise him. I have stood by the taxes on landlords, and I am prepared to stand by this concession to landlords because it is just.
§ Mr. REES
I think the hon. Member (Mr. Snowden) has done extremely good service in eliciting from the Chancellor of the Exchequer a speech to which I listened with the utmost satisfaction. I should like to know in what capacity the hon. Member went about to collect these facts, and how he could have brought himself to collect them from these landowners and to gain information from them. It seems to me that the hon. Member has placed himself in a most unfortunate position. On this occasion, as on former occasions, he has frankly adopted the position that property is theft, though I will do him the justice to say he has expressed his opinion that it is not necessary to levy from those who committed this theft the arrears of the rents that they have received from their properties since the Deluge. We must be grateful to him for that moderation. I should like to offer the hon. Gentleman some information as to these thieves from Montgomeryshire. Only a few days back the Small Holdings Committee reported that the chief feature of their operations was the generous support they had 1521 received from the landowners of the county, one of whom, I am proud to say, is my hon. colleague the Member for the county. I protest against the kind of speech to which the Committee has been treated, and as the Chancellor of the Exchequer has already made mincemeat of the hon. Member, I do not think it is necessary to follow the speech which he delivered, though I think it desirable that someone else sitting on the same side as the Chancellor should follow upon the same lines. I ask the Committee to consider the utter impropriety of the spirit which inspired the hon. Member's speech. He treated the whole property of the inhabitants of this country as if it was taxable material at the disposal of the Chancellor of the Exchequer, and he said, "If the Chancellor of the Exchequer has any money to dispose he might dispose of it for some purpose in which I, the hon. Member for Blackburn, am interested." I ask the Committee if that is a responsible and serious manner in which to deal with the very serious subject before the House. When the hon. Member says, "Who are the landowners?" they might rejoin, "Who are the Socialists?" and when it comes to defining these different classes I am really not so sure, or rather I am quite sure, which would come off second best. I also wish to enter the strongest protest which is permissible under the Rules of the House against the manner in which the hon. Gentleman incites one class against another.
Mr. DUNDAS WHITE
I should like to express my very great satisfaction at this Clause and the principles on which the Chancellor of the Exchequer has justified it. It seems to me to mark a third and a very important stage in the progress of land legislation. The first stage was marked in the proposal for valuation, the second by the proposal that the community as a whole should get some larger share in the actual land value than at present, and this third stage is one which I, in common with many of those with whom I have been working for some time, have pressed, namely, that while there should 1522 be more taxation of land, there should be less taxation of improvements, and greater scope given for buildings and improvements of every kind. On these lines I welcome this Clause, and I hope that the principles which have been laid down by the Chancellor of the Exchequer, and which I hope will be carried in the legislation of this Budget, will have future and rapid development in the direction of adopting more and more as our standard of taxation the value of the land, and doing what we can to relieve buildings, improvements, and industry of the burden of realising taxation.
§ Mr. HOBHOUSE moved, after Clause 49, to insert the following:—