HC Deb 12 December 1911 vol 32 cc2195-225

It is hereby declared that for the purposes of Section sixty, Sub-section (1), of the Finance (1909–10) Act, 1910, the words "Provided that the principal value of any part of an estate which consists of agricultural land, which has no higher value for building purposes than its market value at the time for agricultural purposes only shall be estimated on its rental as assessed to Income Tax under Schedule A, and there shall be no separate valuation of each piece of land under separate occupation, or of any houses or buildings occupied solely for agricultural purposes or by persons engaged solely in the cultivation of the land" shall be added to this Sub-section and this Section shall be amended accordingly.

I am glad to see the Chancellor of the Exchequer here, because the Amendment raises a question of some importance; really rather a matter of the interpretation of the law, and of a definite pledge and undertaking given by the right hon. Gentleman on a former occasion. It will be within the recollection of the House that when the Finance Act of 1909–10 was under discussion, one Clause——

Mr. LLOYD GEORGE

May I ask the right hon. Gentleman the date of the pledge which I gave? I want to see exactly.

Mr. PRETYMAN

September 14th, 1909.

Mr. LLOYD GEORGE

Not more recent than that?

Mr. PRETYMAN

Oh, no, this is a definite pledge. The matter possibly had been referred to in some casual way before. This is an absolutely definite pledge on which I rely. It was given in so many words. I will hand over to the right hon. Gentleman the copy of the report, if by the end of my speech he has not been able to obtain a copy. The point at issue was a question of the method of the valuation of agricultural land. It will be within the recollection of the House that by the Finance Act of 1894 there was a limit placed upon the value for Death Duties. I refer to the valuation for the Death Duties. It has nothing to do with the Land Taxes. Perhaps I should have made that point perfectly clear. It is purely a question of the Death Duties on agricultural land. Under the Finance Act of 1894 a limit of twenty-five years' purchase of rental was placed upon the value of agricultural land. By what is now Section 60 of the Finance Act of 1909–10, the Chancellor of the Exchequer removed that limit. So far as that limit was concerned he placed agricultural land upon the same basis as property of other kinds. We were alarmed and anxious lest the removal of that limit of twenty-five years should affect the method of valuation, and we asked the Chancellor at that time to make it perfectly clear, to give us an assurance, that he did not intend to alter the method of valuation; that agricultural land would continue to be valued at so many years' purchase of rental, and would not be valued like other property upon the separate units of agricultural value. I have in my hand a copy of the report of the Debate which took place on 14th September, 1909. My right hon. Friend the Member for East Worcestershire (Mr. Austen Chamberlain) said:— Mr. Austen Chamberlain: I should like to ask the right hon. Gentleman a question, and I rather hope that his answer may avoid the necessity for a Division. I understand him to say that the only change he wishes to make in the valuation is the removal of the arbitrary limit of twenty-five years. If that is the case, then I do not think there is any difference between the two sides. What my hon. Friends behind me were afraid of was that under cover of removing an arbitrary limit, the right hon. Gentleman was in fact contemplating a change in the system on which the valuation had been made. Of course, if an estate would have been valued at more than twenty-five years, and if yon take off that arbitrary bar, it will make a change to that extent, but it will not make a change in the method. The reason why this proposal has caused so much anxiety in the minds of many of those who are interested in the matter outside, and of many of my hon. Friends here, is that certain phrases have fallen on occasion, I think, both from the Chancellor of the Exchequer and the Prime Minister as to very large new revenue which the Government expected to get from this proposal. What I want the right hon. Gentleman to tell me is whether I am right in gathering from what he has said that the only effect of the change he proposes is to remove this arbitrary bar, and that there will be no change in the method or character of the valuation."—[OFFICIAL REPORT, 14th September, 1909, Vol. X., col. 2113.] That was a perfectly plain question, and the answer was quite plain. The report says:— Mr. Lloyd George: I have no difficulty at all in giving that assurance to the right hon. Gentleman.

Mr. PRETYMAN

Nothing could be plainer than that! If he will compare the operative words of the Act of 1894 with the operative words of my Clause he will see that they are exactly the same. I do not think that either the Prime Minister or myself have said that the Government anticipated any large increase in revenue from this proposal."—[OFFICIAL REPORT, 14th Sept., 1909, Vol. X., col. 2113.] The hon. Gentleman the Member for Tewkesbury (Mr. Hicks Beach)—he will recall it—even then was not quite satisfied, and he said:— I must confess I am not quite satisfied. Surely this is, according to the Bill, a different basis of valuation."—[OFFICIAL REPORT, 14th Sept., 1909, Vol. X., col. 2114.] The report continues:— Mr. Lloyd George: There is no change in the fundamental basis of valuation. The Only difference is that with regard to the limitation of twenty-five years."—[OFFICIAL REPORT, 14th Sept., 1909, Vol. X., col. 2114.] Nothing could be plainer than that! There are two definite pledges given in one Debate. I was, however, doubtful from information which reached me as to whether that pledge was being carried out, and I was also doubtful as to the interpretation in the matter of the valuation of timber which is being dealt with in the next Amendment. I wrote to the right hon. Gentleman, and asked his authority to go to the Treasury and to ascertain there, because the point was that it was impossible——

Mr. LLOYD GEORGE

May I interrupt. I want first of all to grasp the point which the right hon. Gentleman is putting to me. Is this his grievance: That these cottages are valued now separately as though they were not part and parcel of the agricultural estate, and as if they had no reference at all to agricultural usage? Is it his suggestion that they ought to be valued as part and parcel of the estate? I only really want to be clear.

Mr. PRETYMAN

Nothing whatever is said about cottages in this Amendment. The question is not one of cottages. The cottages were a mere illustration of the simple unit. The cottages were merely a small unit quoted in the Debate at the time. The question is one of the valuation of agricultural property as a whole, and that was the matter on which the pledge was given. It was not a matter of cottages. The right hon. Gentleman can look at the matter himself. It is in the Debate. Where does the word "cottages" occur in it? This was a matter of the valuation of agricultural land. I desire to pin the right hon. Gentleman very closely to his actual pledge. The whole question was the entire valuation of agricultural land. The matter of the cottages was merely an illustration given by me of the extreme hardship that would occur in that particular case as part of the whole case, for we had not time to cover the whole ground.

I continue my narrative. I wrote to the right hon. Gentleman and asked him if he would give me authority to go to Somerset House in order that we might get a proper basis for debating this question, and so that I might ascertain in what way the valuation was being made. The right hon. Gentleman did not answer my letter. I have no doubt he was too busy. I waited for six weeks. Then I wrote to the Secretary to the Treasury, and he gave me the authority I desired. I went to Somerset House. I was there, on the authority of the Secretary to the Treasury, very courteously met by two officials—Mr. Percy Thompson, the Assistant-Secretary, and Mr. Howell Thomas, Deputy Chief Valuer. I asked them as to what alteration, if any, had taken place since the passing of this Clause, on which this Debate took place, in the method of valuing land—because I may say here that the right hon. Gentleman said it was entirely in connection with building land in the neighbourhood of towns that he looked for the increase. That is in the same speech. What the House was led to believe, and what no doubt the right hon. Gentleman believed himself, was that this Amendment only affected building land, and that the method of assessing agricultural land was not touched at all. The two officials, whose names I have given, told me this: "By that Clause the method of valuing building land remains exactly as it was; there is no alteration at all. The method of valuing agricultural land, which until that Clause was passed, had been a multiple of the rental"—that is, so many years' purchase—"has ceased; and the valuation of agricultural land has now been entirely altered, and has been exactly assimilated to the valuation of urban land." [An HON. MEMBER: "Hear, hear."] Yes, but that is exactly the contrary of the pledge given by the right hon. Gentleman! I am not asking now what the hon. Gentleman's opinion is who interrupted. We all know what he wants. I am claiming this Amendment as the fulfilment of a definite pledge given across the floor of this House. This Amendment never ought to have been required at all. I think I have a right to complain that the right hon. Gentleman did not see that his pledge was given effect to. He gives a definite pledge in this House that the method of valuation of agricultural land will not be departed from. I go to Somerset House on behalf of my hon. Friends only to find that the method has been departed from, that the apprehensions of my hon. Friend behind me were fully justified, and that this valuation is now being carried out on a different basis. All that this Amendment does—and I do not need to elaborate it any further—is, in so many words, to give effect to the Chancellor of the Exchequer's pledge. I call upon the Chancellor of the Exchequer, without arguing the point further—because we are under very severe difficulties in respect to the limitation of the Debate owing to the Government's conduct of business—and because after his answer I should like an opportunity of reply. I prefer to leave the matter as I have put it after my direct narrative. There are other hon. Members on this side who are quite competent to deal with the rights and wrongs of the matter. I could put a good many arguments forward in favour of my Amendment, and if I were appealing to the Chancellor to make a change in the law I might do so. I am not so appealing to him. I confine myself to a mere statement of the pledge which he gave, and I request him to give effect to it.

There are two more points which I wish to make. The one is that this does not exhaust quite the matter of the valuation of agricultural land raised upon the Amendment. I wish to challenge and to contradict the claims made by hon. Gentlemen opposite, and acknowledged or encouraged by the Front Bench, as to the additional value which has been obtained in Death Duties by means of the valuation under the Finance Act of 1909–10, Part I. It is said that that valuation has been the means of increasing the revenue. That I dispute. On 29th October, 1909, the Chancellor of the Exchequer stated "that there had then been an increase in the yield from the Death Duties." He said it was attributed partly to the cause pointed out by the Prime Minister, namely, improvement already effected in valuation. He went on to say:— The mere fact that we have not accepted too freely some of the accounts submitted to us has had a very appreciable effect and in the course of a single week it has added £100,000 to the duties. That fact shows that there is a great deal in the criticism of the Prime Minister, namely, that a revaluation would make a very substantial difference even in the Death Duties. Land which has been taxed as agricultural land we have discovered is valuable building land, and that has made a difference in the Death Duties, and a very substantial portion of this £1,300,000 is attributable—— And this is the point I myself want particularly to call the attention of the House to— is attributable to the fact that we have got an efficient valuation department."—[OFFICIAL REPORT, 29th October, 1909, Vol. XH., col. 1361.] Therefore, what the right hon. Gentleman had then done was that he had taken advantage of the powers given, or existing, in the Act of 1894, wherein land was to be valued as agricultural land, except land on which there was any expectation of future increase of income. Therefore, any building land where there was any expectation of a future increase of income, coming under the Act of 1904, without any Amendment of the law, it was valued by the Government valuer and its full value obtained. Not only was that possible, but it was actually done. The Chancellor of the Exchequer told the House he had appointed a special body of valuers who did obtain the value and were obtaining it before the Finance Act became law, and therefore the full Death Duties value of all land was obtainable before the Act was passed, and not a penny of that could be attributable to the new valuation under Part I. of the Finance Act. Therefore, that claim is absolutely untenable. The only further point is that the right hon. Gentleman has been good enough to frame an Amendment which, I understand, he has accepted and will propose in regard to cottages, but I think that does not cover the ground and does not fulfil the pledge.

Mr. LLOYD GEORGE

I think it does.

Mr. PRETYMAN

No. The last words, "workmen in the locality," are not satisfactory. Perhaps I had better read the Amendment, In estimating for the purposes of Sub-section (5) of Section 7 of the Finance Act of 1904, the principal value of any agricultural property which comprises any cottages occupied by persons employed solely for agricultural purposes in connection with the property, no account shall be taken of any value attributable to the fact that the cottage is suitable for residential purposes by any persons other than agricultural labourers or workmen in the locality. The words "workmen in the locality" would destroy the value of the whole Clause. There are few agricultural properties which are not within a few miles of populous centres where workmen would be only too glad to obtain an agricultural cottage and to pay perhaps 6s. a week for it, though they are let to agricultural labourers with a quarter of an acre of land for 1s. 6d. a week. The Amendment is really no value if these words "or work- men in the locality" are included. It does not cover the ground. You may have an agricultural estate and cottages upon it, and it may be necessary to be able to let them to woodmen and others working upon the estate. I understand the right hon. Gentleman is prepared to accept the words "working upon the estate," instead of the words "workmen in the locality." That would be better certainly and would do I think. I felt bound to say a word about that Amendment. The real reason why this Amendment is moved is to give effect to the definite pledge given by the Chancellor of the Exchequer which I have read.

Mr. LLOYD GEORGE

I have looked into this question of the pledge given in 1909, and if any pledge had been given I certainly should redeem it. I think I shall satisfy, not merely the House, but the hon. Gentleman opposite, that if a pledge was given the pledge was redeemed. There was no actual pledge, but a statement was made as to the intentions of the Government, which was, of course, equivalent to a pledge. What was the statement I made. I will just summarise the effect. The hon. Gentleman asked me then if there was any change proposed in the method of valuation. I said the change was a change in the limit of maximum. Where a valuation was proposed we got rid of the maximum, but there was no change in the method of valuation, and no change has been made. What was the method of valuation? Under the law of 1894 the value of agricultural land was the market value, and it was not to exceed twenty-five years' purchase. If the hon. Gentleman will look at the tables during the last twenty years he will find that the average market value is something like 17.90 or about 18 years' purchase. What does that mean? It means wherever years' purchase are put in it is cub down to twenty-five years. On the other hand, if the years' purchase which you can get in market value only amount to fifteen, the maximum of twenty-five was not fixed. There you have a valuation which is supposed to be the market value, and if the market value was fifteen years' purchase the tenant got the benefit, but the Crown never got the benefit beyond twenty-five years, and if the hon. Gentleman will look at my speech which I made then he will find that I was pointing out that you would get in certain parts of the country thirty or forty years' purchase.

I was taking purely agricultural land, and you will get that figure in many parts of Wales. Land which had no other value would fetch a very high number of years' purchase. In this case I pointed out the Crown could only assess upon the basis of twenty-five years' purchase. I pointed out in that very speech that it was unfair as between one class of agricultural property and another, and that the poorest class of agricultural property paid up to its full value, because if it was only worth fifteen years' purchase it would have to pay upon fifteen years' purchase, whereas rich agricultural land, which might be worth thirty or forty years' purchase, only paid upon 50 or 60 per cent. of its value. That was my case, and the right hon. Gentleman (Mr. Austen Chamberlain), who possibly will reply, will find it at page 2106. That was what I based my case upon. What did Clause 60 of the Act of 1909 do? The only change it made was this: It got rid of that limit. The basis of valuation was exactly the same. We just adopted the methods in this case to which I am referring, that the value of agricultural land is the market value. We have got rid of the limit of twenty-five years. Where the market value exceeds twenty-five years then the Crown gets the benefit. That is the only change affected at all. That was my impression, and I made inquiries since, and I am assured there has been no change at all in the valuation. On 9th August last the hon. Gentleman (Mr. Pretyman) called my attention to the fact that although, nominally, there was no change in the method of valuation, there was a real change so far as cottage property was concerned. The hon. Gentleman said it does not pay a landlord to set up these cottages. That is perfectly true. The landowner may only get 1 or 2 per cent. He sets these cottages up not in order to get a dividend, as it were, upon his expenditure, but because they are necessary for the purpose of inducing labourers to remain in the district, for the purpose of cultivating his property there.

Then the hon. Gentleman said a man may come down from London and take a fancy to one of these cottages. It may be a very pretty cottage, with woodbine and clematis, and a gentleman might be prepared to give £20 a year for it, and come down and spend his summer holidays there, and it would be very unfair to charge Death Duties upon a basis of that kind. I said I agreed that it would be unfair. I have got the words I used, and I am prepared to stand by them, and if the hon. Gentleman can point out to me that that pledge has not been carried out I am prepared to carry it out in the spirit and in the letter, and if my words which I submit do not do so, I shall be quite willing to accept words that will do so. I said:— I think it is undesirable that cottages user for the housing of labourers and the business of the estate should be treated as a sort of separate property if it was put to the highest bidder and sold to a man who came down to spend his summer holidays in it and not be treated as a part of the estate. That I think is very undesirable. I will look into the matter very carefully. The hon. Gentleman mentioned it to me last night. I have made enquiries but he will not expect me to answer at the present moment. I think the financial arrangements may tend rather to increase the building of rural cottages than to diminish them. I promised to look into the matter. I have looked into the matter, and I have framed an Amendment to carry out my promise. I do not think that a fancy value ought to be placed upon these cottages because, as a rule, they are built at a loss by the landlord. It is exceedingly desirable that every encouragement should be given to the building of these cottages, and that landowners should know when cottages are built that they need not fear that Death Duties can be levied on this class of property on account of any fancy value that might be given to it by people coming down from town to reside in them. If the suggestion which I am putting to the hon. Gentleman be accepted I shall move this Amendment to carry it out:— In estimating for the purposes of Subsection (5) of Section 7 of the Finance Act of 1904, the principal value of any agricultural property which comprises any cottages occupied by persons employed solely for agricultural purposes in connection with the property, no account can be taken of any value attributable to the fact that the cottage is suitable for residential purposes for any person other than agricultural labourers or workmen in the locality. The hon. Gentleman opposite says, the words "workmen in the locality" adds a kind of artificial value to that property. I am rather disposed to accept that view, and to insert instead of them the words "or workmen on the estate," because the Amendment must refer not only to agricultural labourers but to workmen on the property. I am assured there is no difference made in the valuation at all. If the market value is found to be over twenty-five years' purchase you simply use a multiple of twenty-five years. If it was under twenty-five years the landlord gets the benefit on the basis of market value, which is the basis at the present moment.

Mr. PRETYMAN

Is the property treated as one unit, or is it broken up into units of occupation?

Mr. LLOYD GEORGE

I am sure there is no difference at all in that respect.

Mr. PRETYMAN

It is treated as one unit?

Mr. LLOYD GEORGE

Exactly the same as before the Act of 1909.

Mr. PRETYMAN

The exact opposite!

Mr. LLOYD GEORGE

I think the hon. Gentleman is wrong. I am assured that they made no difference at all in their methods of valuation. They only considered the Act of 1909 as an Instruction except in respect to the multiple of 25, which is the only difference it makes. At any rate it is not so now. The right hon. Gentleman assumes that under the Act of 1909 there was some difference in that respect, but I am assured that there was not. The method was in force under the old Act, except where the value was more than twenty-five years' purchase, and I am suggesting this as an alternative.

Mr. AUSTEN CHAMBERLAIN

Perhaps the Chancellor of the Exchequer will excuse me for not saying anything about his proposed new Clauses with regard to cottages. I think we had better keep these questions quite distinct. He is right in saying that he gave a specific pledge, and the only question is whether his words fulfil that pledge or not. I do not wish to go into the early part of the right hon. Gentleman's speech as to the treatment before the Act of 1909–10 of properties worth more than twenty-five years' purchase. I was astonished then, and I am still surprised to hear that in regard to purely agricultural properties no building value in Wales or elsewhere is worth more than thirty years' purchase. I accept the statement, of course, coming from the right hon. Gentleman, because he has means of knowing. In any case there is no dispute, and there was no dispute between the two sides of the House as to the propriety of valuing them on the number of years' purchase they were worth and not at a less number of years. The immediate question before us is a very much narrower one, and it turns upon the pledge given by the Chancellor of the Exchequer in the Debate of 14th September, 1909, and on the methods of valuation actually employed. What are the true facts as to the valuation actually employed before the passing of that Act? I am very much interested in this matter, because I have a vivid recollection of that discussion and the grave suspicion that many of my hon. Friends regarded the change which the Chancellor of the Exchequer was making. At the time I asked for a clear definition from him, and, after getting it, I remember persuading my hon. Friends not to divide the House on this matter. They were good enough to act on my advice, and no Division was taken. The Chancellor of the Exchequer does not dispute the pledge that was given, but he asserts that the pledge has been kept and that there has been no change in the method of valuation. Really I think we are placed in a position of great difficulty. With the authority of the Secretary to the Treasury, my hon. and gallant Friend (Mr. Pretyman) went to the Inland Revenue Office to ascertain what was their practice in this matter. He saw two officials and he has given us his account of what they told him. From his statement it appears that they started in unmistakable terms that the method of valuation on agricultural land had been totally changed, that formerly they valued the estate as a unit and now they valued it as separate occupation. That is exactly what my hon. Friend feared when the change was made. Our whole protest was directed against that, and it was in order to guard against that and make certain that that was not going to happen that I put to the Chancellor of the Exchequer in plain terms the following question:— Whether I am right in gathering from what he has stated that the only effect of the changes he proposes is to remove the arbitrary power, and that there would be, no change in the method of alternative valuation? The right hon. Gentleman replied:— I have no difficulty at all in giving that assurance to the right hon. Gentleman. What has happened is that, on the authority of the Inland Revenue, we have now two accounts of how they formerly valued these agricultural properties. I do not know whether the right hon. Gentleman has been able to consult the officials.

Mr. LLOYD GEORGE

Yes, I have.

Mr. AUSTEN CHAMBERLAIN

I think we must have their account of the conversations. At any rate they differ from the account given by my hon. and gallant Friend, and I am sure the House, under these circumstances, would permit my hon. and gallant Friend to make any further statement if he thinks it is necessary. The dispute is not as to the pledge, but as to the practice of the Inland Revenue before the passage of this Act. According to the account given by my hon. and gallant Friend the official admitted to him that there had been a complete change. Unless it be conclusively proved that this is not so the Chancellor of the Exchequer is bound to act in the spirit of the words he has spoken. I do not think I can say anything more while there is this conflict of evidence which took place at an interview at which I was not present. I want the Government and the House to realise that we are not so much concerned with the twenty-five years' purchase or the Chancellor of the Exchequer's Amendment, but we are concerned with the methods of valuation and with the allegation that there has been a change.

Mr. LLOYD GEORGE

I understand the hon. and gallant Gentleman's point is that prior to the Act of 1909 there was no separate valuation, say, of farms——

Mr. PRETYMAN

Yes, of farms, but not of every unit of occupation. The rent of each farm was taken and no doubt added together to the rent. Each farm was treated as a single unit, but now a separate valuation is made of every occupation, whereas the whole rental of the estate was previously taken and multiplied by so many years' purchase.

Mr. LLOYD GEORGE

That is rather a different statement from what I understood the hon. and gallant Gentleman made. I understood his contention was that the estate was taken as a whole. I am assured by the very official who was seen by the hon. and gallant Gentleman that there must have been some misunderstanding as to what took place at a private conversation.

Mr. PRETYMAN

It was not a private conversation, because the interview took place in the presence of two witnesses, and I did not give any reason for my inquiry. I asked, is the valuation on the same basis as under the Act of 1909, and I gave an account of what took place to the House. I was told that the valuation of agricultural land was now altered.

Mr. LLOYD GEORGE

At any rate, it was a private interview between the hon. and gallant Gentleman and the officials. This is always what happens when you have to depend upon conversations. I do not know how long ago it was, but the very official that was present says the hon. and gallant Gentleman is under a misapprehension, and he says that he did not say that there had been a change, because there has been no change whatever in the method of valuation. It is true that there has been a quickening up. The passages which have been quoted refer not to a change in the method of valuation, but rather to a much severer check upon the valuations submitted to the Treasury. Prior to that date there was a disposition rather to haggle and bargain with the officials and those who presented the accounts, but the principles and the methods of valuation have not been altered at all, and the official in question assures me that the hon. and gallant Member must be under a complete misapprehension if he thinks that he accepted the interpretation which the hon. and gallant Member has put upon that conversation, because there has been no change at all. This can be ascertained by looking up the old papers, and I shall certainly look into the matter. My inquiry does not affect the conversation, because the point depends upon the documents. I am afraid, therefore, I shall have to look into the documents, because it is a question of redeeming pledges given, and that is a very important matter to a Minister.

Mr. HICKS BEACH

As I was one of those who took some part in the Debate which has been referred to, perhaps I may be allowed to say a word or two. Obviously it is clear that there has been a difference in the method of valuation since the Budget was passed, because before the Budget of 1909 the valuation for Estate Duty on agricultural estates was based on Schedule A assessment. What I imagine was done was that the Government official took the Schedule A assessment on separate estates, and not altogether, and now he does not do that; but goes into all the details of the separate farms, and so there must be a difference in the method of valuation of agricultural estates.

Mr. LLOYD GEORGE

Of course there is a change in cases where the value of the property is more than twenty-five years' purchase. In those cases Schedule A was the basis. In values below twenty-five years' purchase there has been no change.

Mr. HICKS BEACH

That is a point, because Schedule A assessment was the basis.

Mr. LLOYD GEORGE

For the maximum.

Mr. HICKS BEACH

Yes, and for the minimum too. Really, I think that is the case. I remember the Debate very well, and I am pretty certain that it was admitted that Schedule A was the basis. What was our contention on that occasion? Under Schedule A you are allowed certain deductions from the gross rental. You are allowed one-sixth in the case of houses and one-eighth in the case of land. There were one or two other deductions under the Succession Duty Act of 1853. The Section of the Act of 1894 says:— The principal value shall not exceed twenty-five times the annual value as assessed under Schedule A of the Income Tax Acts, after making such deductions as have not been allowed in that assessment and are allowed under the Succession Duty Act, 1853, and making a deduction for expenses of management not exceeding 5 per cent. of the annual value so assessed. 7.0 P.M.

That is to say, besides deductions of one-sixth and one-eighth under Schedule A, there were also other deductions allowed. If you do away with the Schedule A assessment, you take the gross capital value of the estate and make allowance for the necessary outgoings and management. I made a definite point to the Chancellor of the Exchequer about it. I said I was not quite satisfied with his reply on that occasion. What I said was this:— All he intends to do is to remove the twenty-five years' limit. He does not intend to remove the basis of valuation. That is to say, agricultural land is still to be valued in the future on the Income Tax assessment of Schedule A, with certain deductions for management and maintenance. Are these deductions still to be allowed? The twenty-five years' limit is by no means of much importance. The really important matter is the basis of assessment. Is agricultural land to be valued on the capital value of the gross income or the capital value of the net income? That is the material point. The Chancellor of the Exchequer very courteously replied and said:— Certainly; deductions of the kind mentioned must, necessarily be taken into account, and where the deductions are very heavy I should have thought that, on the whole, agricultural land would rather benefit by the methods I have adopted here, because the deductions which are made under Schedule A do not represent the total deductions which can be made from the gross income."—[OFFICIAL REPORT, 14th September, 1909, Vol. X., col. 2110.] The Chancellor of the Exchequer by that speech led us to believe the whole basis of valuation would be rather more lenient in the average number of cases than it had been before for the simple reason that all expenses of management would be allowed, whereas all that had been allowed were the deductions under Schedule A. I think it is therefore really essential the Chancellor of the Exchequer should give us now some definite assurance he will make very careful inquiries into the whole system of the valuation of agricultural land in the future. We were led to believe by the definite undertaking he gave across the floor of the House that the idea of removing the twenty-five years' limit was not to raise the total assessment of agricultural land, and that the change he was making would, in fact, be some relief to agricultural land.

Mr. WEDGWOOD

The hon. Member assumes that a special allowance is to be made from the market price in order to take into account the outgoings on the estate when the market price includes all the outgoings. That is one of the advantages of taking the market value as the basis of your assessment for Estate Duties. It takes into account all outgoings, and is thereby an improvement on Schedule A assessment. The hon. and gallant Member for Chelmsford (Mr. Pretyman) appeared to believe he had a grievance against the Chancellor of the Exchequer. I believe it was a disingenuous plea, and I think I can show it was so from the speech of the hon. and gallant Member himself. He made a point against us that we were claiming that the large increase in the Death Duties was due simply and solely to the valuation of the land taking place under the 1009–10 Budget, but he showed by quotations that increased return from the Death Duties took place before the Budget was passed. He knows perfectly well that increase was due to the more strict following of and the more rigid adherence to the 1894 Act, and that the change took place before the Budget of 1909–10 was passed.

Mr. PRETYMAN

I said so.

Mr. WEDGWOOD

There was, as a matter of fact, no change of principle on the passage of the Budget. The Chancellor of the Exchequer maintained in my hearing that there was no change of principle due to the passage of the Budget, and that all that happened was the taking off of the twenty-five years' limit. Of course, the change took place when the Liberal Government came into power. We know what happened previous to that. An estate was valued at about fifteen years' purchase of the net rental. That was accepted as the proper value of the estate, and on that Death Duties were paid. When the Liberal Government came into power they brought it up wherever possible to the full value, tied, of course, as before, by the twenty-five years' purchase limit, and if the officials in Somerset House gave the hon. and gallant Member to understand a change had taken place, in the method of valuing, that change took place before the passage of the Budget, and not on the passage of the Budget. All the Budget did was to remove the twenty-five years' purchase limit, and thereby secure a proper valuation in all cases, and not only in some cases. The question raised by the hon. and gallant Member is a perfectly simple one. It is only another dodge of the landlords to cut down their assessments for Death Duty purposes. Ever since the Budget was passed they have been bringing in Amendments and trying to persuade the Chancellor of the Exchequer he has given pledges. They have been seeing him behind the back of the Chair in order to get any sort of concession and some sort of alteration in the idea that capital value is to be the basis of Death Duty taxation.

This claim brought forward to-day is going back to the condition of affairs before the Budget. It is doing away with the capital value basis and going back to the annual value basis. I am quite certain Members on this side of the House are not prepared to go back to the annual value basis and give up all we got under the 1909–10 Budget. Of course, the capital value basis is the best for reasons too obvious to state. It is easier to arrive at. It is perfectly easy to arrive at the total value. It is obviously for other other purposes to the advantage of the State the basis should be on the capital value instead of on the annual value. If a landlord does not make good use of his land and does not get good rent for it, but lets it go to seed, he escapes Death Duties, but now that the capital value is taken the bad landlord pays as much as the good landlord, and they are all screwed up to make the best possible value of their land. I want to say a word or two about the Amendment the Chancellor of the Exchequer is proposing to concede to the hon. and gallant Member for Chelmsford. The worst of the hon. and gallant Member is that he persuades the whole House he is really anxious for something very big, and then looks very happy when he gets something not quite so big, but something fairly substantial. I am quite certain this is much too substantial to be very pleasant to us on these benches.

What is the concession the hon. and gallant Member has got? He is again complicating the issue. Instead of taking the ordinary market value of the estate, our valuers, for Death Duty purposes, have to make a special deduction. They have to consider whether a cottage is let at 1s. 6d. a week, because the landlord wants to get labour at a very cheap rent, or whether it is let to an artisan going on a bicycle to a neighbouring town and coming home at night, or whether it is let to some professional man who goes down there in the summer. All sorts of complications are introduced, making the valuation for Death Duty purposes more difficult. The object is to encourage apparently landlords to let cottages at charity rents. We do not want cottages let at charity rents. We want them let at economic rents, and the only way to do that is to pay the labourers decent wages. So long as you pay them 16s. and 17s. a week, you will have to let them cottages at 1s. or 1s. 6d. a week. Pay your men decent wages, and they will be able to pay proper and economic rents and not merely charity rents. The best way to improve the condition of the agricultural labourer is not to provide a cottage for him at a rent at which you would not let a cottage to any other labourer, but to get his wages up to that level at which he can pay an economic rent. When agricultural labourers are paid decent wages, you will have a large increase in the building of cottages in the country. You cannot expect people to build cottages and let them at 1s. 6d. a week, and I do not think having some sort of problematical reduction in the Death Duties will be any inducement to landlords to put up cottages and supply this crying want of the country. If you want to have cottages increased in the country, the best way is to take the burden of the rates off cottages and leave the rates on land values altogether.

Mr. SPEAKER

The hon. Gentleman is travelling very wide of the Amendment.

Mr. WEDGWOOD

I am sorry if I have gone outside the Amendment, but the issue raised is of considerable dimensions. The question is whether we are doing our best to encourage the building of cottage property by omitting part of the value of that cottage from the assessment for Death Duties, and I must say the method adopted by the Chancellor of the Exchequer to meet the difficulty of housing is not the right one. It is merely making it more difficult to have a correct valuation made of the estate at death, and I hope he will not go on with the concession promised.

Viscount HELMSLEY

I do not propose to enter into the arguments of the hon. Member who has just sat down, because we all know his views on the subject. He regards it purely from the theoretical, and not at all upon the practical, standpoint; otherwise he would find the results are exactly contrary to that which he says. He entirely differs from the Chancellor of the Exchequer. The Chancellor of the Exchequer says the valuation now is exactly the same as it was previous to the passing of the Budget. The hon. Member has been glorifying in what he says they got out of the Budget.

Mr. WEDGWOOD

I said particularly there had been no change in the method of valuation at the passage of the Budget; the change took place before the passage of the Budget.

Viscount HELMSLEY

Then I am at a loss to know what the hon. Member meant when he said they had got the basis of capital valuation out of the Budget.

Mr. WEDGWOOD

Twenty-five years' purchase.

Viscount HELMSLEY

I cannot reconcile those two things. It does not, however, matter; the point is what is actually being done. I might recall to the Chancellor of the Exchequer an answer given to the hon. and gallant Member for Chelmsford to a question on 14th November. Perhaps it will throw some light on the subject. My hon. and gallant Friend asked the Secretary to the Treasury:— Whether it is with his knowledge and sanction that the Land Valuation Department are refusing to report agreed figures of valuation of real estate for probate until their provisional valuations for Land Value Duties have been agreed to by executors? And the answer was:— It is considered of great importance that the original value, where there has been no alteration since the 20th April, 1909, should be recorded at the same amount as the value for Estate Duty purposes, and for this reason instructions have been issued to valuers that valuations for both purposes are to be completed at one and the same time."—[OFFICIAL REPORT, 14th Nov., 1911, col. 189.] I think that throws a little light on the subject, because that means, where possible, the values are to agree and to be completed at the same time. What is the result? It seems to me there is a great difference in valuing for Estate Duty purposes and for the new Land Duties. It is obvious that in valuing for the new land duties the owner must in self-protection, put upon those hereditaments valued the highest commercial value in the market. It is in his own interest and he must do so unless he is to be charged Increment Duty in the future. If a man includes farm buildings, enlarges them, and makes them more suitable, and yet does not raise the rent he gets no more out of the property annually, and therefore should not be called on to pay any more Estate Duty. But, on the other hand, if these improvements are to be valued separately for Land Value Duties, it is necessary to take into account the money spent on bricks and mortar, although producing no interest on that money, and therefore the whole tendency of taking the land valuation for Estate Duty is to discourage estate owners from improving their property while not getting full interest. That has been done in a great many cases. Many good landlords have spent a lot of money on improving their property without increasing their incomes by so doing, and there could be no better way of stopping that process than by valuing bricks and mortar for Estate Duty purposes, as they are valued for increment purposes. I entirely contradict the argument of the hon. Member who last spoke. His desire was to impose a heavy tax on the owner who did not make the best use of his property, but that very owner is being let off taxation, while the man who makes the best use is having it imposed upon him. If this owner making improvements also charges for them in rent, thereby increasing his income, and setting aside a sinking fund, he will pay the Estate Duty. On the other hand, if a man, instead of improving his property, lets it run down, the Increment Value Duty will suit him better because the value of the property is lower. Therefore, if the valuation for the purpose of Land Value Duty is taken, and not the valuation for estate purposes duty, you are benefiting the man who allows his property to run down, and you are imposing an extra duty on the man who improves his property.

I submit that the rental assessment is the right assessment for Estate Duty purposes. There is no inconsistency consequently between there being two different valuations for two different purposes: there is no inconsistency in this sense when the Death Duty and the Estate Duty valuation is lower than the valuation for Increment Duty purposes. Where the position is reversed, and where the Death Duty valuation is higher than the increment valuation, there is, of course, an inconsistency. It is only when the full income which might be derived from the property is not being derived from it that the lower valuation for Death Duty purposes is perfectly permissible. I hope the Chancellor of the Exchequer will see that agricultural properties shall be valued on the same basis as before 1909, and that is on a rental basis.

Mr. ELLIS DAVIES

There seems to be some inconsistency on the part of hon. Members opposite. It has been argued, in one instance, that the valuation has been put too low, and now they are arguing that it is being put too high. What is meant by the Amendment which has been moved? The Amendment itself proposes two things: that there shall be no separate unit for the purposes of valuation, and, secondly, that the amount assessed under the Income Tax Schedule shall be the basis of calculation. I notice that the right hon. Gentleman the Member for East Worcestershire emphasised the fact that, for the purposes of this valuation, it was not proposed to take a specific number of years. May I ask the hon. Member who moved the Amendment what is the object of that Amendment? As it stands now it proposes to lay down, as a basis of valuation, the Income Tax assessment, and, if the Income Tax assessment is taken as the basis of valuation, and if no particular number of years is to be taken, then I am wondering why the hon. Member is pressing his Amendment. I conclude the only possible reason is that he knows that the assessment for Income Tax of agricultural land in this country——

Mr. PRETYMAN

May I interpose. I do not desire to press the Amendment after what the Chancellor of the Exchequer has said. He has undertaken to make inquiry, and, pending that inquiry, it is quite obvious that this matter cannot be decided. Under the circumstances I shall ask leave to withdraw the Amendment.

Mr. ELLIS DAVIES

The only obvious reason for pressing the Amendment at all, is making the Income Tax assessment valuation applicable to cases where the assessment of agricultural land is really lower than agricultural values. That must be the object of the Amendment. If the valuation of agricultural land in future is to depend on Income Tax assessment, and not upon its real annual value, the result will be that the estate will be undervalued and the Government will lose.

Mr. PRETYMAN

I ask leave to withdraw the Amendment, and to substitute for it the words which have been read out by the Chancellor of the Exchequer and myself.

Mr. SPEAKER

I think those words would constitute a new Clause.

Mr. PRETYMAN

The original Amendment which I moved covers the Amendment which it is now proposed to substitute for it.

Mr. SPEAKER

Does the hon. Gentleman desire to withdraw his new Clause?

Mr. PRETYMAN

No. I desire to amend it rather than to withdraw it.

Mr. SPEAKER

Then it will be necessary first to put the new Clause.

Question put, "That the Clause be read a second time."

The House divided: Ayes, 283; Noes, 31.

Division No. 445.] AYES. [7.28 p.m.
Abraham, William (Dublin Harbour) Clough, William Harvey, T. E. (Leeds, W.)
Acland, Francis Dyke Coates, Major Sir Edward Feetham Haslam, James (Derbyshire)
Addison, Dr. C. Compton-Rickett, Rt. Hon. Sir J. Haslam, Lewis (Monmouth)
Allen, Charles P. (Stroud) Condon, Thomas Joseph Havelock-Allan, Sir Henry
Anson, Rt. Hon. Sir William R. Cornwall, Sir Edwin A. Haworth, Sir Arthur A.
Anstruther-Gray, Major William Cotton, William Francis Hayden, John Patrick
Astor, Waldorf Craig, Norman (Kent, Thanet) Hayward, Evan
Baird, J. L. Crawshay-Williams, Eliot Helme, Norval Watson
Baker, H. T. (Accrington) Croft, H. P. Helmsley, Viscount
Baker, Joseph A. (Finsbury, E.) Crumley, Patrick Henderson, Major H. (Berks, Abingdon)
Baldwin, Stanley Davies, E. William (Eifion) Henderson, J. M. (Aberdeen, W.)
Banbury, Sir Frederick George Dawes, J. A. Henry, Sir Charles
Banner, John S. Harmood- De Forest, Baron Higham, John Sharp
Barlow, Sir John Emmott (Somerset) Denniss, E. R. B. Hills, John Waller (Durham)
Barlow, Montague (Salford, South) Dixon, Charles Harvey Hinds, John
Barran, Sir J. (Hawick) Doris, W. Hobhouse, Rt. Hon. Charles E. H.
Barrie, H. T. (Londonderry, N.) Doughty, Sir George Hodge, John
Bathurst, Hon. A. B. (Glouc., E.) Du Cros, Arthur Philip Hope, Harry (Bute)
Bathurst, Charles (Wilton) Duke, Henry Edward Howard, Hon. Geoffrey
Beach, Hon. Michael Hugh Hicks Edwards, Clement (Glamorgan, E.) Hughes, S. L.
Beauchamp, Sir Edward Edwards, Enoch (Hanley) Hume-Williams, William Ellis
Beck, Arthur Cecil Elibank, Rt. Hon. Master of Ingieby, Holcombe
Benn, Ion Hamilton (Greenwich) Essex, Richard Walter Isaacs, Rt. Hon. Sir Rufus
Benn, W. W. (T. H'mts., St. George) Esslemont, George Birnie Jardine, E. (Somerset, E.)
Bentham, George Jackson Eyres-Monsell, B. M. Jones, Edgar (Merthyr Tydvil)
Bentinck, Lord H. Cavendish- Falconer, J. Jones, H. Haydn (Merioneth)
Beresford, Lord C. Fell, Arthur Jones, Leif Stratten (Notts, Rushcliffe)
Bethell, Sir John Henry Ferens, T. R. Jones, William (Carnarvonshire)
Bigland, Alfred Fiennes, Hon. Eustace Edward Jones, W. S. Glyn- (T. H'mts., Stepney)
Bird, A. Finlay, Rt. Hon. Sir Robert Keating, M.
Black, Arthur W. Fletcher, John Samuel (Hampstead) Kellaway, Frederick George
Boyle, W. Lewis (Norfolk, Mid.) Foster, Philip Staveley Kennedy, Vincent Paul
Boyton, James Gardner, Ernest Kerry, Earl of
Brassey, H. Leonard Campbell Gelder, Sir William Alfred Kirkwood, J. H. M.
Bridgeman, W. Clive George, Rt. Hon. D. Lloyd Knight, Captain E. A.
Brunner, J. F. L. Gibbs, G. A. Lambert, George (Devon, S. Molton)
Bryce, J. Annan Gibson, Sir James Puckering Larmor, Sir J.
Bull, Sir William James Gill, A. H. Law, Hugh A. (Donegal, West)
Burke, E. Haviland- Gilmour, Captain J. Lawson, Sir W. (Cumb'rld, Cockerm'th)
Burn, Col. C. R. Gladstone, W. G. C. Levy, Sir Maurice
Burns, Rt. Hon. John Goldman, C. S. Lloyd, George Ambrose
Burt, Rt. Hon. Thomas Goldsmith, Frank Locker-Lampson, G. (Salisbury)
Butcher, J. G. Gordon, Hon. John Edward (Brighton) Lonsdale, Sir John Brownlee
Buxton, Rt. Hon. S. C. (Poplar) Goulding, E. A. Lowther, Claude (Cumberland, Eskdale)
Eyles, Sir William Pollard Greene, Walter Raymond Lundon, T.
Cameron, Robert Greig, Colonel J. W. Lynch, Arthur Alfred
Campion, W. R. Gretton, John Lyttelton, Rt. Hon. A. (S. Geo., Han. S.)
Carlile, Sir Edward Hildred Grey, Rt. Hon. Sir Edward MacCaw, William J. MacGeagh
Carr-Gomm, H. W. Griffith, Ellis Jones Macdonald, J. M. (Falkirk, Burghs)
Cassel, Felix Guest, Hon. Frederick E. (Dorset, E.) Mackinder, Halford J.
Castlereagh, Viscount Guinness, Hon. Walter Edward Macpherson, James Ian
Cave, George Hackett, J. M'Callum, John M.
Cawley, Sir Frederick (Prestwich) Haddock, George B. M'Curdy, C. A.
Cawley, Harold T. (Heywood) Hamersley, A. St. George McKenna, Rt. Hon. Reginald
Cecil, Lord R. (Herts, Hitchin) Hancock, J. G. M'Laren, Hon. H. D. (Leics.)
Chaloner, Col. R. G. W. Harcourt, Rt. Hon. L. (Rossendale) M'Laren, Hon. F. W. S. (Lincs., Spalding)
Chamberlain, Rt. Hon. J. A. (Worc'r.) Harcourt, Robert V. (Montrose) M'Micking, Major Gilbert
Chaplin, Rt. Hon. Henry Harris, Henry Percy Magnus, Sir Philip
Chapple, Dr. W. A. Harvey, A. G. C. (Rochdale) Malcolm, Ian
Markham, Sir Arthur Basil Radford, G. H. Swift, Rigby
Marks, Sir George Croydon Rawlinson, John Frederick Peel Sykes, Alan John (Ches., Knutsford)
Marshall, Arthur Harold Rea, Walter Russell (Scarborough) Sykes, Mark (Hull, Central)
Mason, James F. (Windsor) Reddy, Michael Talbot, Lord Edmund
Masterman, C. F. G. Redmond, John E. (Waterford) Terrell, George (Wilts, N. W.)
Meehan, Francis E. (Leitrim, N.) Remnant, James Farquharson Thompson, Robert (Belfast, North)
Meehan, Patrick A. (Queen's Co.) Rendall, Athelstan Thomson, W. Mitchell- (Down, N.)
Menzies, Sir Walter Richardson, Albion (Peckham) Thorne, G. R. (Wolverhampton)
Montagu, Hon. E. S. Roberts, Charles H. (Lincoln) Thynne, Lord Alexander
Morrison-Bell, Major A. C. (Honiton) Robertson, Sir C. Scott (Bradford) Tobin, Alfred Aspinall
Munro, R. Robertson, John M. (Tyneside) Toulmin, Sir George
Murray, Captain Hon. A. C. Roch, Walter F. (Pembroke) Trevelyan, Charles Philips
Needham, Christopher T. Roe, Sir Thomas Tryon, Captain George Clement
Newman, John R. P. Rolleston, Sir John Tullibardine, Marquess of
Nicholson, Wm, G. (Petersfield) Rothschild, Lionel de Valentia, Viscount
Nolan, Joseph Rowlands, James Walker, Colonel William Hall
Norton, Capt. Cecil W. Rowntree, Arnold Walters, John Tudor
O'Brien, Patrick (Kilkenny) Royds, Edmund Ward, Arnold (Herts, Watford)
O'Connor, John (Kildare, N.) Rutherford, John (Lancs., Darwen) Ward, W. Dudley (Southampton)
O'Connor, T. P. (Liverpool) Salter, Arthur Clavell Wardle, George J.
O'Dowd, John Samuel, Sir Harry (Norwood) Wason, Rt. Hon. E. (Clackmannan)
Ogden, Fred Samuel, Rt. Hon. H. L. (Cleveland) Wason, John Cathcart (Orkney)
O'Malley, William Sanders, Robert A. Webb, H.
Orde-Powlett, Hon. W. G. A. Sanderson, Lancelot White, Patrick (Meath, North)
O'Shee, James John Sandys, G. J. (Somerset, Wells) Williams, Penry (Middlesbrough)
Palmer, Godfrey Mark Scanlan, Thomas Willoughby, Major Hon. Claud
Pearson, Hon. Weetman H. M. Sherwell, Arthur James Wood, Rt. Hon. T. McKinnon (Glas.)
Pease, Herbert Pike (Darlington) Shortt, Edward Worthington-Evans, L.
Pease, Rt. Hon. Joseph A. (Rotherham) Smith, Harold (Warrington) Yate, Colonel C. E.
Peel, Capt. R. F. (Woodbridge) Spicer, Sir Albert Young, William (Perth, East)
Peel, Hon. W. R. W. (Taunton) Stanier, Beville Younger, Sir George
Ponsonby, Arthur A. W. H. Starkey, John Ralph Yoxall, Sir James Henry
Power, Patrick Joseph Staveley-Hill, Henry
Pretyman, E. G. Stewart, Gershom
Priestley, Sir W. E. B. (Bradford, E.) Strauss, Arthur (Paddington, North) TELLERS FOR THE AYES.—Mr. Illingworth and Mr. Gulland.
Primrose, Hon. Neil James Strauss, Edward A. (Southwark, West)
Pryce-Jones, Colonel E. Summers, James Woolley
NOES.
Adamson, William Johnson, W. Taylor, John W. (Durham)
Barton, William Jowett, F. W. Thomas, J. H. (Derby)
Bowerman, C. W. King, J. Wadsworth, J.
Chancellor, Henry G. Macdonald, J. R. (Leicester) Ward, John (Stoke-upon-Trent)
Clynes, John R. Morrell, Philip White, J. Dundas (Glasgow, Tradeston)
Dalziel, Sir James H. (Kirkcaldy) O'Grady, James Williams, J. (Glamorgan)
Duncan, C. (Barrow-in-Furness) Parker, James (Halifax) Wilson, W. T. (Westhoughton)
Glanville, H. J. Price, C. E. (Edinburgh, Central)
Hall, Frederick (Normanton) Raffan, Peter Wilson
Harvey, W. E. (Derbyshire, N. E.) Richardson, Thomas (Whitehaven) TELLERS FOR THE NOES.—Mr. Wedgwood and Mr. Watt.
Henderson, Arthur (Durham) Smith, Albert (Lancs., Clitheroe)
Hudson, Walter Sutton, J. E.
Mr. PRETYMAN

I beg to move, in the proposed new Clause, to leave out all the words after the word "that" ["It is hereby declared that"], and to insert instead thereof the words "in estimating for the purposes of Sub-section (5) of Section seven of the Finance Act, 1894, the principal value of any agricultural property which comprises cottages occupied by persons employed solely for agricultural purposes in connection with the property, no account shall be taken of any value attributable to the fact that the cottage is suitable for the residential purposes of any persons other than agricultural labourers or workmen on the estate."

Mr. JOHN WARD

I think that these words are very dangerous, and I venture to suggest to my hon. Friends who voted not quite in accordance with their usual principles by a mistake in the last Division —otherwise the numbers would have been considerably more than thirty-one—that they should have an opportunity of knowing what this proposition amounts to. It amounts to this: That if a landlord who manages a great estate has a number of cottages on that estate, and if he lets those cottages or a certain number of them to the labourers employed on the estate, paying them considerably less wages than he ought to do, and giving them practically a portion of the rent in wages, that reduces the cottages that ought to be let to other workmen at 5s. down to 2s. 6d. a week, or to 1s. as the case may be, for the men who are working on the estate—in that case in regard to the Death Duties the value of the cottages is to be based upon the price that is paid by the men actually working on the estate. Any number of cottages may be let to workmen living in the locality who are not employed on the estate but in some other work. If the Amendment is carried the majority of the cottages on the estate may be let at 5s. a week to workmen who do not happen to be employed on the estate and the cottages that are let to the workmen employed on the estate may be paying only 1s. a week, yet the value of the whole of these cottages is to be taken at the price paid by the men actually working on the estate. That is grossly unfair. I am quite prepared to let the hon. and gallant Gentleman opposite (Mr. Pretyman) convince me to the contrary, but if I understand the words which have been read out—I confess I have not seen them, but I have heard them read out three or four times—I venture to say that the last words of this Amendment amount to nothing less than what I have suggested. It says, that "no account shall be taken of any value attributable to the fact that the cottage is suitable for the residential purposes of any persons other than agricultural labourers or workmen in the locality."

Mr. PRETYMAN

On the estate.

Mr. J. WARD

It has been altered to "on the estate." If it had been left with the words "in the locality" I could have understood it. You have got another bit of flesh since the Clause was read a second time. If it were to remain "workmen in the locality" instead of "on the estate," then the proposition I am attempting to make would apply. If the English language means anything, and the Clause says that the value of the cottages is to be fixed in accordance with the rent paid by the labourers working on the estate holding those cottages—if I am to understand that, a great deal of my opposition evaporates at once. I understood that the case made by the hon. Gentleman was this: That he did not want the value of a cottage increased simply because someone had taken a fancy to it, and was prepared to pay a big price in rent every year. One can imagine an estate with some hundreds of cottages on it. Not more than ten or a dozen of them would be actually let to workmen on the estate, while some seventy or eighty might be let to other workmen at three times the rent charged to those working on the estate. The right to live in a cottage is part of the wages paid to the labourer on an estate. It would be grossly unfair, when all the cottages might possibly be let at 5s., if the men did not happen to be working on the estate, in the case of a valuation, to decide that the value of the whole of the cottages was the value paid in the particular case of the men who happened to work on the estate. It would be robbing the Revenue. In view of the fact that the hon. Gentleman opposite is so anxious to propose it, and the fact that every time this subject has come up he has nibbled first at one corner of the Chancellor of the Exchequer's proposal and then at another, I think the ease with which the Chancellor gives way to his opponents on one point and then another is remarkable. I have always looked upon the Chancellor of the Exchequer as one who stood to his guns in the face of opposition. So he does until he gets his opponents down. Then he gives them back what he has been fighting for. That is what is happening on this occasion.

Mr. PRETYMAN

I am afraid the hon. Gentleman does not understand the Amendment. Under the first part of the Amendment the cottages can be let merely to labourers working on the estate.

Mr. J. WARD

Even then my argument holds good, for the simple reason that if there are two cottages side by side, one occupied by a man working on the estate at a rent of 2s., and the other let to another person not working on the estate for 6s. a week, it is not right that these cottages should be valued differently one from the other. The first cottage would be equally valuable. What has happened is that the man engaged on the estate has agreed to take 4s. a week less wages to make up for the advantage that he gets in his cottage. The landlords are really trying to get an advantage over the rest of the community by the proposal now before the House. Most certainly if it is put to a Division I shall vote against it.

Mr. T. RICHARDSON

I want to associate myself with the protest made by my hon. Friend against the proposal which, as a matter of fact, is inspired by the Government itself. I believe the effect of the Amendment would be to keep down the wages of employés working on small and large estates alike. I want to register my protest against this premium that is being paid to the wealthy landowners of this country to exploit the labourers employed upon their estates. I wish to call attention to the very different treatment meted out to the wealthy as compared with the unfortunate poor. I have known numbers of cases where aged people have been housed by their relatives, but even in those cases an official of the Government insists upon adding as an item of income, not the cottage rents, which would be charged on estates referred to in this Amendment, but the average rates paid in the village or town in which the applicant lives. Consciously or unconsciously, the Government is being led by the representatives of the landed and vested interests to make a concession which, in my judgment, is not only unjust, but inflicts a very grave injustice, not only upon the Exchequer and the State, but more particularly upon the employés engaged on small and large estates alike, and I shall certainly join with my Friends and vote against this proposal.

Mr. LLOYD GEORGE

I think my hon. Friends have completely misconceived both the purport and the effect of the Amendment. With regard to its purport, the correction, which was interpolated by the hon. Gentleman (Mr. Pretyman), completely disposed of a good deal of the powerful rhetoric of the hon. Member (Mr. John Ward), but when it is suggested that this is an oppression of the poor cottager and labourer it really surpasses my poor Celtic imagination to find out on what ground that is based. It is exactly the opposite. Anyone who knows anything about cottage property in country districts would not embark upon it as a sort of speculation. The theory that rich landlords build cottage property in order to plunder workmen and make huge fortunes out of it, has absolutely nothing to do with the facts of the case. Everyone knows that cottage property is not a speculation. It is a bad investment from the point of view of anyone who tries to secure a percentage on the money which he puts into it. You cannot get good houses. It does not pay the landlords to set them up. It is a distinct loss to the landlord from a pecuniary point of view to do so, and it is really the business of the State not to discourage the landlord who does it, but I go beyond that, and say it is the business of the State to encourage the landlord. If I had my way, I would go far beyond a mere small concession of this kind in the way of encouragement. It will be one of the great problems of the future how the State is to encourage landlords and others, municipal authorities and county councils, to see that there is proper housing accommodation in the villages. I read to a Committee of the House of Commons a short time ago a Report upon some district in Essex as to the conditions of the workman's cottages. That is because very often the landlord cannot afford to set up these cottages, and if you are to say to him that not merely is he to lose money on the transaction but that the better the cottage is the more money he loses and the more you tax him, that is exactly the way to oppress the workman. The greatest oppression of all is to be a workman, not merely at a low wage, but living in a bad house which will inflict physical injury upon him and destroy the health of his family. I am not exaggerating the value of the Amendment, but it has some value. It is some encouragement to the landlord to erect cottages. Talk about encouraging rich landlords, it is an encouragement not to the rich but to the good landlords. The worse a landlord is the less he will get out of this. The better he is the more he will get out of it.

Mr. WEDGWOOD

I think the Chancellor of the Exchequer has got rather far away from the actual Amendment. The Amendment is that where a landlord lets a 5s. house for 1s. 6d. he shall benefit. I do not think that man ought to benefit, and I do not believe any Liberal economist would say the State ought to give an advantage to people who let 5s. houses at charity rents. See what the first result will be. Take any landlord who knows that the Amendment has been carried and understands how far-reaching it is. He has, at present, houses on his estate let at 4s. or 5s. a week to the people who work on the estate, who are paid 20s. a week. That man, if he desires to get the benefit of the Act, will immediately reduce the rent of his houses to his own men from 5s. to 1s. and reduce their wages from 20s. to 16s. The men will be exactly as well off after the change as before. The landlord will have the advantage that when Death Duties are levied lower duties will be levied upon him. Further than that, the very fact that he is able to reduce the wages of his labourers from 20s. to 16s., without hurting the labourers, it is true, has a bad effect on wages throughout the district, and they are cut down. The way to get houses for the people at reasonable rents is not to give an inducement to the landlord to let houses at charity rents to their own employés. This Amendment is confined to agricultural labourers and those employed upon the estate. If he chooses to let his houses at charity rents he will have smaller Death Duties to pay. I do not think anybody who knows what the difficulty is of getting houses in our country districts wants to encourage landlords to let houses at 1s. or 1s. 6d. a week. We want to have full living wages and economic rents, and I protest against the Amendment being carried.

Question, "That the words proposed to be left out stand part of the Clause," put, and negatived.

Question put, "That those words be there inserted."

The House divided: Ayes, 236; Noes, 42.

Division No. 446.] AYES. [7.55 p.m.
Abraham, William (Dublin Harbour) Furness, Stephen W. Magnus, Sir Philip
Acland, Francis Dyke Gardner, Ernest Malcolm, Ian
Addison, Dr. Christopher Gelder, Sir W. A. Markham, Sir Arthur Basil
Allen, A. A. (Dumbartonshire) George, Rt. Hon. D. Lloyd Marks, Sir George Croydon
Allen, Charles Peter (Stroud) Gibbs, George Abraham Marshall, Arthur Harold
Astor, Waldorf Gibson, Sir James Puckering Mason, James F. (Windsor)
Baker, H. T. (Accrington) Gilmour, Captain John Masterman, C. F. G.
Baker, Joseph Allen (Finsbury, E.) Gladstone, W. G. C. Meehan, Francis E. (Leitrim, N.)
Baldwin, Stanley Goldman, C. S. Meehan, Patrick A. (Queen's Co.)
Barlow, Sir John Emmott (Somerset) Goldsmith, Frank Menzies, Sir Walter
Barlow, Montague (Salford, South) Gordon, Hon. John Edward (Brighton) Montagu, Hon. E. S.
Barran, Sir J. N. (Hawick) Goulding, Edward Alfred Murray, Captain Hon. Arthur C.
Barrie, H. T. (Londonderry, N.) Greene, Walter Raymond Newdegate, F. A.
Barton, W. Grey, Rt. Hon. Sir Edward Newman, John R. P.
Bathurst, Charles (Wilts, Wilton) Griffith, Ellis J. Nicholson, William G. (Petersfield)
Beach, Hon. Michael Hugh Hicks Guest, Hon. Frederick E. (Dorset, E.) Nolan, Joseph
Benn, W. (Tower Hamlets, St. Geo.) Guinness, Hon. Walter Edward Norton, Captain Cecil W.
Bentham, G. J. Hackett, J. O'Brien, Patrick (Kilkenny)
Bigland, Alfred Hamersley, Alfred St. George O'Connor, John (Kildare, N.)
Black, Arthur W. Harcourt, Rt. Hon. L. (Rossendale) O'Connor, T. P. (Liverpool)
Boyle, W. Lewis (Norfolk, Mid.) Harcourt, Robert V. (Montrose) O'Doherty, Philip
Boyton, James Harris, Henry Percy Ogden, Fred
Bridgeman, W. Clive Harvey, A. G. C. (Rochdale) O'Malley, William
Brunner, John F. L. Harvey T. E. (Leeds, W.) Orde-Powlett, Hon. William
Bryce, J. Annan Haslam, Lewis (Monmouth) O'Shee, James John
Bull, Sir William James Havelock-Allan, Sir Henry Pease, Herbert Pike (Darlington)
Burke, E. Haviland- Haworth, Sir Arthur A. Pease, Rt. Hon. Joseph A. (Rotherham)
Burn, Colonel C. R. Hayward, Evan Peel, Hon. W. R. W. (Taunton)
Burns, Rt. Hon. John Helme, Norval Watson Ponsonby, Arthur A. W. H.
Burt, Rt. Hon. Thomas Helmsley, Viscount Power, Patrick Joseph
Buxton, Rt. Hon. S. C. (Poplar) Henderson, Major H. (Berkshire) Pretyman, Ernest George
Cameron, Robert Henderson, J. M. (Aberdeen, W.) Priestley, Sir W. E. B. (Bradford, E.)
Campion, W. R. Henry, Sir Charles S. Pryce-Jones, Col. E.
Carlile, Sir Edward Hildred Hobhouse, Rt. Hon. Charles E. H. Radford, George Heynes
Cassel, Felix Holt, Richard Durning Rawlinson, John Frederick Peel
Cave, George Hope, Harry (Bute) Rea, Walter Russell (Scarborough)
Cawley, Sir Frederick (Prestwich) Horne, C. Silvester (Ipswich) Reddy, Michael
Cawley, H. T. (Lancs., Heywood) Howard, Hon. Geoffrey Redmond, John E. (Waterford)
Cecil, Lord R. (Herts, Hitchin) Hughes, Spencer Leigh Remnant, James Farquharson
Chaloner, Colonel R. G. W. Hunt, Rowland Richardson, Albion (Peckham)
Chamberlain, Rt. Hon. J. A. (Worc'r) Ingleby, Holcombe Robertson, Sir G. Scott (Bradford)
Chapple, Dr. William Allen Isaacs, Rt. Hon. Sir Rufus Robertson, J. M. (Tyneside)
Clough, William Jardine, Ernest (Somerset, E.) Roch, Walter F. (Pembroke)
Coates, Major Sir Edward Feetham Jones, Edgar R. (Merthyr Tydvil) Roe, Sir Thomas
Compton-Rickett, Rt. Hon. Sir J. Jones, H. Haydn (Merioneth) Rolleston, Sir John
Condon, Thomas Joseph Jones, Leif Stratten (Notts, Rushcliffe) Rothschild, Lionel de
Cornwall, Sir Edwin A. Jones, William (Carnarvonshire) Royds, Edmund
Cotton, William Francis Keating, Matthew Rutherford, John (Lancs., Darwen)
Craig, Norman (Kent, Thanet) Kellaway, Frederick George Salter, Arthur Clavell
Crawshay-William, Eliot Kerry, Earl of Samuel, Rt. Hon. H. L. (Cleveland)
Crumley, Patrick King, Joseph (Somerset, North) Sanders, Robert A.
Davies, Ellis William (Eifion) Kirkwood, John H. M. Sanderson, Lancelot
Dawes, J. A. Knight, Captain Eric Ayshford Sandys, G. J. (Somerset, Wells)
Denniss, E. R. B. Lambert, George (Devon, Molton) Scanlan, Thomas
Dixon, Charles Harvey Larmor, Sir J. Seely, Colonel Rt. Hon. J. E. B.
Doris, William Law, Hugh A. (Donegal, West) Sherwell, Arthur James
Doughty, Sir George Levy, Sir Maurice Shortt, Edward
Du Cros, Arthur Philip Lonsdale, Sir John Brownice Smith, Harold (Warrington)
Duke, Henry Edward Lundon, Thomas Spicer, Sir Albert
Edwards, Clement (Glamorgan, E.) Lynch, Arthur Alfred Stanier, Beville
Elibank, Rt. Hon. Master of Lyttelton, Rt. Hon. A. (S. Geo. Han. S.) Starkey, John Ralph
Elverston, Sir Harold MacCaw, William J. MacGeagh Staveley-Hill, Henry
Essex, Richard Walter Macdonald, J. M. (Falkirk Burghs) Stewart, Gershom
Esslemont, George Birnie Mackinder, Halford J. Strauss, Arthur (Paddington, North)
Eyres-Monsell, Bolton M. Macmaster, Donald Summers, James Woolley
Falconer, J. Macpherson, James Ian Swift, Rigby
Fell, Arthur M'Callum, John M. Sykes, Alan John (Ches., Knutsford)
Ferens, Thomas Robinson M'Curdy, Charles Albert Talbot, Lord Edmund
Ffrench, Peter McKenna, Rt. Hon. Reginald Tennant, Harold John
Fiennes, Hon. Eustace Edward M'Laren, Hon. H. D. (Leics.) Terrell, George (Wilts, N. W.)
Fletcher, John Samuel (Hampstead) M'Laren, Hon. F. W. S. (Lincs., Spalding) Thompson, Robert (Belfast, North)
Foster, Philip Staveley M'Micking, Major Gilbert Thorne, G. R. (Wolverhampton)
Thynne, Lord Alexander Webb, H. Yate, Col. C. E.
Tobin, Alfred Aspinall White, Major G. D. (Lancs, Southport) Young, William (Perth, East)
Toulmin, Sir George White, Patrick (Meath, North) Younger, Sir George
Tullibardine, Marquess of Williams, Penry (Middlesbrough) Yoxall, Sir James Henry
Valentia, Viscount Willoughby, Major Hon. Claud
Walker, Colonel William Hall Wilson, Hon. G. G. (Hull, W.) TELLERS FOR THE AYES.—Mr. Illingworth and Mr. Gulland.
Ward, Arnold (Herts, Watford) Wood, Rt. Hon. T. McKinnon (Glas.)
Ward, W. Dudley (Southampton) Worthington-Evans, L.
NOES.
Adamson, William Hinds, John Rowlands, James
Bowerman, C. W. Hodge, John Smith, Albert (Lancs., Clitheroe)
Byles, Sir William Pollard Hudson, Walter Sutton, John E.
Chancellor, Henry George Johnson, W. Taylor, John W. (Durham)
Clynes, John R. Jowett, Frederick William Thomas, J. H. (Derby)
Duncan, C. (Barrow-in-Furness) Lansbury, George Wadsworth, John
Edwards, Enoch (Hanley) Lawson, Sir W. (Cumb'rld., Cockerm'th) Ward, John (Stoke-upon-Trent)
Gill, A. H. Macdonald, J. Ramsay (Leicester) Wardle, George J.
Glanville, H. J. Morrell, Philip Wedgwood, Josiah C.
Hall, Frederick (Normanton) Needham, Christopher T. White, J. Dundas (Glasgow, Tradeston)
Hancock, John G. O'Grady, James Williams, John (Glamorgan)
Harvey, W. E. (Derbyshire, N. E.) Parker, James (Halifax) Wilson, W. T. (Westhoughton)
Haslam, James (Derbyshire) Price, C. E. (Edinburgh, Central)
Henderson, Arthur (Durham) Raffan, Peter Wilson TELLERS FOR THE NOES.—Mr. T. Richardson and Mr. Watt.
Higham, John Sharp Rendall, Athelstan

Question, "That the Clause, as amended, stand part of the Bill," put, and agreed to.

Mr. PRETYMAN

I beg to move that the following new Clause be read a second time:—

Forward to