INLAND REVENUE (VOTE 2).

HC Deb 25 July 1911 vol 28 cc1522-91

Motion made, and Question proposed, "That a sum, not exceeding £964,000, be granted to His Majesty, to complete the sum necessary to defray the Charge which will come in course of payment during the year ending on the 31st day of March, 1912, for the Salaries and Expenses of the Inland Revenue Department." [NOTE.— £750,000 has been voted on account.]

Mr. PRETYMAN

I regret that the Chancellor of the Exchequer is not able to-be present at the commencement of this. Debate, but I understand he will be here shortly, I am quite aware that notice of this Debate being taken to-day was rather short, and the Chancellor of the Exchequer has other engagements which have been of some long standing. Therefore, I do not wish to complain, but I do think I have matters to raise which command serious attention, which are occasioning very strong feeling in the country, and which are connected with the administration of the Revenue Department. I do not wish to cover a large area or to confuse the issue; I wish to make a plain statement of facts. I think I shall be justified in drawing certain deductions from those facts, and in asking for a clear answer from the representatives of the Government as to how the Finance Act of 1909–10 is being administered, how certain calculations are being made, upon what basis they are being made, and what legal authority there is for the methods which are now being adopted by the Valuation Department. May I enter one caveat. Practically all the matters which I shall raise have already been referred to in this House either by question and answer across the floor or in Debate, and we have never yet had an answer. Either the questions have been scamped or answers have been given that investigations are necessary and that a reply will be given later. The investigations may have taken place, but the replies have never been given. There has therefore been ample notice, and I do enter a caveat against any of the points I am going to raise being put off to a future occasion which may never come. I will preface my statement by quoting an answer given by the Financial Secretary to the Treasury (Mr. Hobhouse) when asked by the right hon. Member for Hertford whether he would lay on the Table of the House a copy of the instructions which were given to the official valuers as to how they were to carry out their valuations. The answer he gave was:— He gave the House his assurance that the principle adopted is to make every valuation on a lair and reasonable basis. That was the assurance which the right hon. Gentleman gave to the House. I propose to quote chapter and verse, showing how these valuations are being carried out, and to ask the House to decide for itself whether that assurance then given was justified, and whether the valuations are or are not being carried out on a fair and reasonable basis. I will first of all take a case which has been printed by newspapers throughout the country, but it is rather remarkable it has received no notice whatever from newspapers supporting the party opposite, either by way of narrative or comment. I wrote a letter to the Press last Saturday week giving full particulars of this case, and I stated all the facts. I must restate them shortly and the point which arises out of them. I do not bring it forward in any sense as an isolated case. The strength of the position is that the precise way this case differs from thousands of other cases is simply that the whole procedure from start to finish is actually completed in this case. The valuation has taken place, and the claim for duty has been made. Here is a small property in Richmond, Yorkshire, which belonged—there is no objection even to mentioning the names of the persons concerned —to a Mr. Walker, who purchased it in 1887 for £500, who spent £100 in adding a shop-front to it, and who made other improvements. He died and left the house to his widow, with remainder to his two daughters. The widow died in 1910. The property was valued for Death Duties at £500, and duty was paid upon that figure. The property then passed to the two daughters, who sold it for £500. We therefore have the property purchased for £500, and £100 spent upon it, valued for Death Duties at £500 in 1910, and sold for £500 in the same year. I have here in this envelope the real documents in the whole of the case. The different Government forms, Form IV., and the valuation claims that have been made—they are all available, and can be quoted if desirable. Form IV. was served in the same month that the property had been sold. The ladies in their return informed the Inland Revenue Department that they had sold the property for £500, which they claimed to be its value. They were then served with a valuation, and the valuation officer, instead of accepting the value of £500, at which the property had been in turn purchased and sold, and upon which amount Death Duties had been paid, placed a value upon it on 11th April, 1909—rather more than twelve months prior to the sale, and valuation for Death Duties—of £380, £321 being the value of the buildings and £58 the value of the site. The ladies, having parted with the property, naturally assumed that they had nothing to do with any duty on a property in the possession of a third person, and they, therefore, passed the valuation on to the purchaser. The sixty days allowed by the Act having lapsed, a further form was served upon them, and that stated that the value on the occasion was £500. The value of the buildings remained the same—£321; so that the value of the site had increased from £58 to £178; consequently there was an increment of £120 on which duty would have to be paid. The ladies were naturally alarmed. This £500 was practically the whole of the property which they possessed; they had in fact no other property, and their annual income from it was about £22. They were, I repeat, naturally alarmed at the prospect of losing a whole year's income in this way, and they felt that the claim was so obviously unjust that they had only to represent the matter to the valuer to get the matter instantly adjusted. Their solicitor accordingly communicated with the valuer, but ho, saying he had no power, referred them to the superintending valuer for the northern district, who, in turn, referred them to Somerset House. The facts were all placed before the Commissioners of Inland Revenue, and the reply received was:— I am directed by the Commissioners of Inland Revenue to acquaint yon that they are unable to accede to your application for an extension of time in which to prepare objections to the valuation in question. The answer takes that form because the only way in which that outrageous provisional valuation could be amended was for the Commissioners of Inland Revenue to exercise the power which they possessed under the Act to give these ladies an extension of the period of sixty days in which to appeal. It was a quite excusable oversight on the part of the ladies that they had allowed the sixty days to elapse, because the property no longer belonged to them, and they imagined that they had nothing to do with any duty that might be levied upon it. The Commissioners were asked not to remit the duty, but merely to allow the facts to be placed before the referee in order that the real value of the property might be fixed according to the Act. But in this curt letter which I have read they refused even to exercise this power and to allow a reasonable extension of time for a review of the valuation. The next stage is the official demand upon these ladies for £22 Increment Duty. That is the history of that particular case.

In order to show that it is not an isolated case, perhaps I may be allowed to read a letter which I received from Mr. S. Elliott, of Nottingham. The writer says in it:— My wife bought, over twenty years ago, two free-hold houses for £550, and spent more money on them. Some years ago she advertised them for sale for £525. She was offered £500, but refused it. She died last December. For estate duty purposes the value of the property was put at £150. On June 28th. 1911, I received a valuation form in which the original total value was put at £300. I have tried to get it increased to £400, but the valuer will not do it." Here you have officials of the Department actually accepting duty on £450, and then subsequently putting the original value of property at £300 and claiming duty on the difference. This is going on all over the country. I may state still another case, which I think is even worse. On this, I submit, we are entitled to an answer, as I raised it in this House so long ago as the 29th March last, and invited the Department to make inquiry into. It was the case of a nursing home at Plymouth, or, rather, at Stonehouse. The property was purchased for £1,000 on 29th September, 1910. The total gross value placed on it on 30th April, 1909, was £750. The value of the buildings was fixed at £560, and, deducting that from the sum of £1,000 which the property fetched when sold, a site value of £440 was arrived at, and Increment Value Duty claimed on it. The matter has been the subject of considerable correspondence. The solicitors for the nursing home took the matter up, and so did the Land Union. The latest stage is one which will astonish even hon. Gentlemen opposite, if they have any faculty of surprise left in them. This claim is so obviously unjust that the officials have informed the solicitors that if they will withdraw their notice of objection and pay the Increment Value Duty the Commissioners will be advised to return one-half of the duty as an act of grace; and, further, they say they are prepared to make this offer openly, so as to remove any suggestion of conspiracy! I do not know how much further it is possible for a Government Department to go. I would put it to the Committee that if any private individual carried on business transactions with another private individual on the lines on which this Government Department is carrying on its transactions with the taxpayers he would soon find himself in a criminal court, and probably in gaol.

Look at the position which the Government take up. Look at the state of the bench usually occupied by Ministers. We have only one right hon. Gentleman on that bench. He was not responsible for this Act, and I think I may fairly say he has not thoroughly mastered its intricacies. We have no Law Officer of the Crown present, the Chancellor of the Exchequer is not here, and we have to state our case to the Financial Secretary to the Treasury on a matter of vital importance to thousands of small owners. What kind of reply are we likely to get? I have stated my three cases. They are typical of hundreds of thousands of other cases. There are hundreds of thousands of small houses which have been undervalued all over the country. There is no limit to the number of cases where this undervaluation has taken place. Where the difference comes in is that it is in comparatively few cases that the actual claim has arisen because the occasion has not yet arrived. The undervaluation will in every case lead to claims. What is the position which the Valuation Department take up? Let us go back to this typical Richmond case. Here you have a piece of land with a house upon it; it is valued as on 30th April, 1909, at £380, with a full knowledge that it has just been sold for £500. The site value is fixed at £58. The occasion arises before the original valuation was made and there fore these two valuations are served practically simultaneously; in one case the total value is fixed at £380 and in the other at £500. The whole difference in the other case is credited to the site value which is placed at £178, the allegation being that in twelve months this small piece of land has increased in value threefold. I have had careful local inquiries made and there has been no increment of value. It would be a very extraordinary increase if it took place in a frontier town in Canada, but to say that in Richmond in Yorkshire, the value of a piece of land can have legitimately increased from £58 to £178, and therefore the unfortunate owner is to be mulct in a whole year's income to the State, is a travesty of justice.

The next point that arises upon that is what is this site value? The so-called site value is a legislative Mrs. Harris; it does not exist. It is like the ink which the cuttlefish puts out to conceal its retreat. It is to fog the issue. We are told that site value is being taxed. You would therefore think it would make some difference what site value is. Site value is a pure myth, and, whatever site value you put upon the property by the procedure which has been adopted, the tax will remain absolutely the same whether the site value was called £l or £200. Here you have this property valued on one occasion at £380 and on the other at £500. The buildings are valued at £321 and the site value at £58. The whole value must consist of these units and can consist of no other, the land and buildings. On the other occasion the value of £321 stands, and the whole difference goes to site value. That sounds a very complicated and difficult proceeding and fogs the issue. Now let us reverse it for the sake of argument. Instead of saying the land is worth £321 and the site £58, reverse it, and let us suppose the buildings are worth £58 and the site worth £321. What would have happened? When the property is revalued at £500, the buildings remain at £58, £58 is taken from £500 and you get exactly the same difference between it and £321 that there was between £58 and £178, and the duty will be just the same. Let us put it at £100 for the site value, the property valued at £380, the buildings put at £280 and the site value at £100. The property is sold for £500, the buildings are left at the same figure of £280, £280 is deducted from £500, which will leave £220. The £100 is deducted from £220, which leaves £120 site value, the exact figure which was arrived at in this case on the other figures. Therefore the whole myth of site value is absolutely exploded. There is no such thing as site value. It is merely a dummy which is set up in order to enable the Treasury to extract, on every occasion of sale, 20 per cent. of the entire difference between the guesswork figure at which they have valued the property and the entire value which the property fetches in the market. There is. no other interpretation. That brings me to the position of the valuation on the occasion. There have been important questions asked upon that point. My hon. Friend (Mr. Royds) asked the Chancellor of the Exchequer how and on what principle the valuation on the occasion was going to be made, and whether there was to be a valuation at all. The Chancellor of the Exchequer answered:— The deductions directed to be made on the occasion of sale under Section 2 of the Finance Act are those specified in Section 25 (4) of the Act. and are calculated by reference to the circumstances existing at the time of the sale. The first of these deductions is the same amount as has to be deducted for the purpose of arriving at the full site value from gross value. This necessitates a fresh computation of the gross value and additional site value at the time of the sale. The gross value will be completed in the manner prescribed by Section 25. If that meant anything it meant that there was to be another valuation, but no-second valuation is made in any of these cases, and that is the really important point upon which I want a very clear answer. Do the Government claim that the way to arrive at the site value on the occasion is invariably, as is now being done in practice, to simply deduct the same value, whether real or imaginary, of the building which was fixed upon on the original valuation, and then to debit the whole difference to site value? I am sorry to see there is no law officer in his place, because I am raising a matter of which I have given due notice to the law officers.

Dr. CHAPPLE

Does the hon. Gentleman mean the original value of the house or the present value?

4.0 P.M.

Mr. PRETYMAN

The original value. It is the procedure adopted in all these three cases, and so far as I am aware in all other cases, that no new valuation is made and it it assumed that because on the original date of the valuation the house had a certain value, the value remains the same on the occasion, and on the occasion when the duty is levied it is assumed that the house is of the same value, and because the property was sold at £500 the £321 is deducted, and the entire difference is treated as site value and is liable to site value duty. There is another point which arises on this matter which is of some interest from more than one point of view. It has always been claimed for this remarkable piece of legislation that it was to encourage building and to prevent people from holding up land and not using it for the purpose of development. Now we see the effect of the 10 per cent. deduction in this particular way of calculation. What happens is this. There is an allowance made of 10 per cent., not on the total original value, but on the site value. Let us suppose that you have two properties each worth £300. One is bare land, and the other is land and a building worth £300. Let us suppose that both properties increase in value to £400. In the case of the bare land you have an original site value of £300, and when it increases to £400 there is an increment of £100. There is an allowance in that case of 10 per cent. on the whole of the £300 of original site value. On the whole property, in other words, £30 is deducted, and the increment for which duty is payable is on £70. The Other property goes up to £400 and is sold. Duty is levied on the principle followed in all these cases. You have an increment of £100, but as the building is valued at £350 there is a deduction not on £300, but only £50. Is that the way in which building is encouraged, and the way in which the owners of small house property obtain an advantage? I should have added another case, which is a most striking one. It was referred to in a letter to "The Times" by Mr. Ivory, a well-known writer to the signet in Edinburgh. He pointed out how a particular property belonging to a client had been valued at £20,000, and how, notwithstanding protests which were made, he failed to obtain any amendment of that figure. He intimated his intention of appealing, and he got an eminent valuer of high repute to go and meet the Government valuer on the ground. He told how within a week that valuation was amended to £45,000. If the original valuation of £20,000 had been allowed to stand there would have been a claim for Increment Value Duty of about £5,000. Obviously that is pure robbery, but it is not more so in that case than in other cases.

That throws some little light upon the value which the Chancellor of the Exchequer attaches to this valuation as giving to the Government and the country an accurate knowledge of the value of the property which we possess. Here we have a case of a property of £45,000 valued at £20,000. There was another case in Edinburgh which I quoted here not long ago of a property which was valued in 1908 at £l,000, and which was valued under this Act a few months afterwards at £450. These cases are piling up innumerably, and this is becoming a matter which is arousing great indignation in the country among the owners of small properties. It is a matter upon which a serious answer is necessary. I wish to ask the law officers with regard to the right of appeal. It is quite clear that the owners have the right of appeal within sixty days against the original valuation from the time of that valuation, but what is not clear, and what I am unable to find out is whether there is an appeal under the Act against a valuation on the occasion. I may say this is not my own point. It has arisen in consultation with one or two eminent counsel at the Bar, one being Mr. Danckwerts. So far as we can discover, there is no means provided under the Act for an appeal against a valuation on the occasion, and we do not even know whether what occurs on the occasion is a valuation at all. By Section 33 of the Act which deals with appeals, I find that appeals are allowed against the first or any subsequent valuation of the total value or site value of any land. The words of the Act are extraordinarily tricky, and one reading it would think you could appeal against the first or all subsequent valuations. Section 33 says that appeals are allowed against the first or any subsequent valuations "except as expressly provided." Then you come to paragraph (b) of that section, and you find that "the original total value and the original site value, and the site value as ascertained under any subsequent valuation shall be questioned only by means of an appeal against the determination by the Commissioners of that value where there is an appeal under this Act, and shall not be questioned in any case on an appeal against an assessment of duty." An appeal is allowed first of all generally except as expressly provided. Then it is expressly barred again, except on valuation where there is an appeal under this Act. There appears to be no means of appeal provided for against a valuation on the occasion.

I wish to ask the hon. and learned Gentleman to say whether under the Act there is an opportunity for appeal. By Section 27 there is an appeal against the valuation on the periodic occasion, but I am referring to the valuation on the occasion referred to in this particular case. I ask how and when the Act provides for an appeal in that case. If there is no appeal, what happens? You have the whole thing hanging upon a provisional valuation. I admit that it may appear to be unnecessary, because the valuation on the occasion is fixed by the sale. Now the small owner, for the first time, becomes aware that he is liable to a heavy duty. A small owner is served with an original valuation, which is less than what he believes to be the value of his property. He cannot afford to employ a skilled professional adviser, and he is glad to accept an undervaluation because he believes it will involve a light tax. The sixty days are allowed to expire, and his opportunity for appeal is barred. Then the occasion arises when he sells the property at its real value. This process of valuation is gone through, and a heavy and obviously unjust, and I believe illegal, claim is made against him. But he has absolutely no opportunity for appeal as far as I can see. The Act is extraordinarily and very cunningly drawn so as to deprive the taxpayer of any opportunity of getting the case reviewed. I should have thought this was due to accident, but what makes me think it is not accident is the studied policy of the Valuation Department in not bringing doubtful points before the referee.

I asked a question on the subject the other day in the House of Commons. I think I have a right to complain of the manner in which ques- tions are answered. I received from one of the most eminent valuers in the country a letter, in which he asked me to ascertain the opinion of the Department on certain points of obviously general importance. I think the Committee will allow me to state what the points were. I asked whether there is to be another computation for deduction of time, whether there was or was not to be a deduction for Land Tax, whether there was or was not to be. a deduction for roads, because a deduction had been refused on the ground that the soil of the road still belongs to the owner. That is a point I will not make any comment upon. The valuer also-pointed out in regard to the total value in the case of agricultural land, apart from buildings, that the authorities had one method of calculating site value, and exactly an opposite method in the case of land with buildings. I desired an answer upon all these points. The answer I received was that Commissioners of Inland Revenue have neither the wish nor the power to interfere when an occasion. arises in connection with the valuation of land in the decision of the referee or other legal tribunal under the provisions of the Finance Act. There was not even a word explaining on the part of the Department how it was necessary in the public interest that these points should be settled. I know for a fact that very long ago this particular valuer has on these very points appealed, and desired that the matter should be brought before the referee. But the Department hung up the question. None of these cases have been brought before the Referee, and the inference is quite obvious that the Commissioners are allowing the sixty days to run before anything is done. If you want any further proof of the policy of the Land Valuation Department we find it in the case to which I have referred just now. They are actually offering in order to keep a troublesome person quiet that they will refund the duty if he will accept the claim. They cannot go much further than that.

What is the object of that? It is that there should be no public knowledge of the law, that the law should be kept obscure, and that the man who is taxed should not have any knowledge of what his real liability is, and that the large majority of people who are unable to take professional advice or who, for any other reason, are unable to fight all the details of this complicated legislation, by which they stand to suffer so much, should have these valuations fixed upon them upon a system which the Land Valuation Department have devised for themselves, and which I do not believe exists in the Act at all. I am sure that the House of Commons as regards these doubtful points, and they are many, which must arise under this Act, would agree that they should be at once referred by the Department to the Referees, and further that the right hon. Gentleman should give an undertaking now when these points of law are decided that they should apply to all valuations, whether those valuations were nominally completed before the decision was given or whether they were not completed. It is obvious the real difficulty arises on the provisional valuation, and that the sixty days' limit within which the appeal against the original valuation is permissible is wholly insufficient. I know that the right hon. Gentleman cannot give me an answer on that point now as to the sixty days, but I can raise it again on the Second Reading of the Finance Bill, when that happy day comes. But I hope before that day that he will represent to the Chancellor of the Exchequer the gross hardship which is being imposed upon all property owners by that hard and fast sixty days' limit, after which no appeal is possible against an original valuation.

You cannot really have a stronger case than that with which I opened my statement where you have what is obviously an inaccurate original valuation. I cannot really suppose that the right hon. Gentleman thinks that you can have a value of £58 on a piece of land in 1909, and that within twelve months that value has grown to £178, with no alteration in the circumstances whatever. It is, therefore, obvious what the Department require for this particular case, and it refers to thousands of other cases, is the removal of that bar of the sixty days to the review of an obviously inaccurate valuation. I come now to that question of the minus valuation in Scotland. How is the 10 per cent. allowed which is calculated upon a minus quantity? I have here a concrete case, in which the site value is fixed at minus £400. The Chancellor of the Exchequer, in answer to a question from me, stated that if an increment was revealed, Increment Value Duty would be charged. Let us, therefore, suppose that when the property passes the site value appears to be minus £200. Apparently there would be an increment of £200, for which the owner would be entitled to a reduction of 10 per cent. of minus £400. Perhaps the right hon. Gentleman will explain how he will take off the 10 per cent. of minus £400. With reference to the number of valuations-taken which are now hung up, the right hon. Gentleman has undertaken to give me to-morrow an answer to the question which I asked yesterday. I had hoped it might be available for the Debate to-day. The information I have got is that there are 17,000 cases of valuation at this moment awaiting adjudication.

Mr. HOBHOUSE

Do I understand that the hon. Gentleman means valuations of real property?

Mr. PRETYMAN

Real property, freehold and leasehold.

Mr. HOBHOUSE

Passing under the Bill itself?

Mr. PRETYMAN

Yes, that is my information. There are 17,000 cases where, owing to the passing of property at death, a valuation of freehold or leasehold realty is required. Seventeen thousand of such cases are awaiting adjudication at this moment. An enormous inconvenience is being caused to the public, and the estates cannot be cleared. This matter has been referred to, attention has been called to it, and questions have been asked about it for a long time in this House, and I hope now that we shall be able to obtain from the Department a clear answer of how Increment Value Duty is going to be calculated on the occasion. I ask the Government to treat this matter seriously, because it is affecting the daily lives of large numbers of people, not only dukes, and not principally rich people; it is the poor man who is really affected by this tax. There is plenty of opportunity for those who have large incomes to get advice. So far as my experience goes, from what I have heard from others, I do not think that this Act has hit large landowners very hard, because it is rather difficult to do ft. You make a bad shot at the big landowners and you kill half a dozen of the little ones. That is exactly the policy which this Act is carrying out. On behalf of a very large number of small landowners who are vitally concerned in this matter, I would ask that this House-should carry out its responsibility, because this House has a responsibility, for its legislation, and that it should be made perfectly clear how these valuations are being levied, and that they should be levied on a fair basis and not on a fantastic basis, as was done in the cases which I have brought before the Committee.

The SOLICITOR-GENERAL (Sir John Simon)

I must apologise to the hon. and gallant Gentleman because I was not present at the opening of his observations, as he was so good as to give an intimation to the Attorney-General, which was passed on to me, that he proposed to raise matters which it might be proper for a law officer to go into in debate. So far as the remarks of the hon. and gallant Gentleman relate to matters of administration, I will leave them to my right hon. Friend (Mr. Hobhouse) to deal with when he comes to take part in the Debate, but I am anxious in the plainest terms, and at once, to deal with the legal difficulties which he has suggested. First of fill, as to the right of appeal. When the hon. and gallant Gentleman tells us of the opinion of the great and distinguished lawyer to whom he has referred, it is with more than usual fear and trembling that I venture to offer an opinion to a different effect.

Mr. PRETYMAN

We have not got a written opinion from that eminent counsel on this point, but only arising in consultation with him, that so far as he is able to discover there is no method of appeal.

Sir J. SIMON

There is, at all events, a locus penitentiœ. As I understand, the point raised by the hon. and gallant Gentleman is this; Although when the Budget was being discussed in this House, considerable time was given and considerable care was taken to providing machinery for appeal, the hon. Member thinks that there is a gap in the Act as regards the taxpayer desiring to challenge a provisional valuation of a site on the occasion.

Mr. PRETYMAN

That is quite right.

Sir J. SIMON

If this is so, it undoubtedly is not a case of deliberate omission, and it is one of those objections which so far as the Government are concerned we have no wish to leave uncorrected. But let us first see whether the difficulty really arises. I agree entirely with the hon. and gallant Gentleman when he says that the language of these Sections in many cases is difficult and sometimes leads to genuine differences of opinion, and therefore I do not advance the view which I have formed in a dogmatic way. I suggest it for the consideration of the hon. Member. The Section under which this matter arises is Section 33. There can be no doubt that when one looks at the first words of that Section, the substantial object and intention of the Section is to give a man a chance of appeal to a referee before he is fixed with the duty which the authorities think would be right and fair. What I understand the hon. Gentleman to suggest is that, though there is a general provision in the first words of the Section, he fears, and that the suggestion made by those who advise him is, that a man who challenges the site value which is put upon his land on an occasion is tied completely to this site value; and he thinks so, because of the proviso (b), that the original total value and the original site value and the site value as ascertained under any subsequent valuation shall be questioned only in the limited way set out in that proviso. The first two have nothing to do with it. The question is whether the third one is rightly construed as covering the case of site value on an occasion. I suggest to the hon. Gentleman my sincere view, although it is one that needs examination, that that may not be the necessary or indeed the proper construction of those words. I suggest so for two reasons. The first is that there is no difficulty in finding in the Act something else to which those words perfectly naturally refer. Section 28—

Mr. PRETYMAN

That deals with quinquennial valuations.

Sir J. SIMON

With quinquennial valuation for the purpose of Undeveloped Land Duty. Nobody will doubt that site value as ascertained under any subsequent valuation will cover that case. Of course that does not prove it does not cover something else as well; but I do not think it does. I do not think if the true sense is given to the phrase "site value" in Section 33, that it does so. If you will turn to Section 25, which is a long section, almost the last words in that section contain the provision—

"Any reference to site value (other than the reference to the site value of land on an occasion on which increment duty is to be collected) shall be deemed to be a reference to the assessable site value."

This shows that assessable site value is the true meaning of the words "site value" in proviso (b) of Section 33. If owing to some mistake, there is no right of appeal in a case of that sort, no one will question that this was not intended or contemplated by those who framed the Act, nor was it contemplated or intended by those who criticised the Act. Consequently one would not wish to strain the construction in that respect. I do suggest that if those who take an interest in this matter will be so good as to refer to Section 28, they will find words which are "very properly applicable, and if they refer to Section 25, they will see there is good reason for supposing that it is really intended that there ought to be a right of appeal in this case where it is obviously needed. No doubt there are many cases in the Act of Parliament of great difficulty, and which offer very legitimate ground of dispute between lawyers on one side and the other, but I think I have at any rate shown that there is some right of appeal. I recognise that the hon. and gallant Gentleman (Captain Pretyman) had a real desire to elucidate the matter, and I assure him that in my observations I have acted in exactly the same spirit.

With the other matters to which reference has been made my right hon. Friend the Secretary to the Treasury will deal. I, however, will venture to make one observation in regard to the question raised by the hon. and gallant Gentleman as to the distinction which arises in working out the 10 per cent. rule on the increment value. The difficulty was put by the hon. and gallant Gentleman in a broad way. He put the case of two properties side by side, each of them worth originally £300. Each of them, as the result of the lapse of so many years, becomes worth £400. The hon. and gallant Gentleman criticised the working of the Act in the case of each of those properties starting at the same lower value and each of them ending at the same higher value. He pointed out that a deduction of 10 per cent. is allowed in the one case to a different amount from that which is allowed in the other. The hon. and gallant Gentleman is much too clear-headed not to see why. He is perfectly entitled to criticise the method of making the allowance by percentage, but if you are going to adopt the percentage method it is a perfectly reasonable thing that there should be a difference in the result between the two cases, for this reason: The first case he puts is one where there are no buildings at all. It is simply a piece of land without buildings. He says, "Here is a piece of land which, when the Finance Act comes into force, is worth £300 site value; £300 represents the whole value, and, after five years, it is worth £400, the difference being £100. You do not exact the Increment Tax on the £100, because you first allow the tax- payer 10 per cent. Ten per cent. on what? Ten per cent. on £300, and that is £500. The reason we tax him on £70 is because the property was land as opposed to land covered with buildings to start with. The whole of the value of that land to start with was due to the land itself as opposed to any structure put upon it. We allow 10 per cent. on the £300 and we tax him on £70 because he starts with land worth £300, and is a recipient of £100 unearned increment, and we think it is fair to tax him on the £70. In the other case which the hon. and gallant Gentleman put, the owner does not start with land worth £300; he starts with land worth £50, and, in five years, it increases to £150. We apply exactly the same rule to that. We do not tax the buildings upon that land; what we tax is increment in the land itself, whether it carries buildings or whether it does not, and we apply exactly the same principle in allowing 10 per cent. in regard to the increment value of the land, but not the increment value connected with the houses. Even though we tax the increment value of the land we do not proceed to tax it the moment it begins to grow, but we allow a certain percentage of growth before we begin to tax at all. It is surely quite right that the percentage should be applied in each case, not to the total of land and buildings, but to the value of the land. I am quite conscious that other points have been fairly raised by the hon. and gallant Gentleman, but I do not think I need deal with them, as they more properly come, being matters of administration, within the province of my right hon. Friend.

Mr. CASSEL

I should like to say at once that I entirely agree with the view of the Solicitor-General on the question of appeal, but I think the hon. and learned Gentleman should go one step further, so that at all events, when this lady comes co make her appeal, neither he nor the Attorney-General will raise the argument in court that she has no right of appeal. I am not without justification in saying that, because in the case of the King v. Wrigglesworth a certain interpretation was put upon the Act by the Solicitor-General, but the Inland Revenue Department proceeded to exact the duty.

Sir J. SIMON

I am not the Solicitor-General referred to, but the Law Officer who gave the interpretation did so as one of the Ministers endeavouring to give his bonâ fide judgment as to what certain words, not in the Act of Parliament, but in the Bill which was under discussion at the time would accomplish. For that very reason when the mistake was discovered, care was taken in a practical way to see that it was corrected, and it was corrected by my right hon. Friend in the last Revenue Act.

Mr. CASSEL

I agree it was not the present Solicitor-General who interpreted the Bill, but the House was guided in its adoption of the particular Clause by the view of the construction of the words raised by the Attorney-General upon that appeal. On that construction the Inland Revenue authorities at once proceeded and claimed duty. On this occasion, the Solicitor-General having informed us that there is a right of appeal, I ask that when this lady comes before the court she shall not be met by the technical objection that no appeal lies. I think it is fair to ask that no such objection should be taken on behalf of the Government.

Sir J. SIMON

I would point out that what I stated was in reply to the hon. and gallant Gentleman. I suggested that an appeal would lie, and certainly, if the true view of the Statute was that there was no appeal, I think there would be the strongest possible case for having that corrected. If I am asked to express the view whether there is a right of appeal, I say yes, and to that view I hold until reason is shown that I should alter my opinion. If there should be any obstacle to this lady's right of appeal of course that would be a proper case to be met and dealt with.

Mr. CASSEL

I agree that the argument of the Solicitor-General cannot of itself affect the matter, but I do say that this lady, after his interpretation of the Act, should not be allowed to go into court only to be met with the objection that she has not the right of appeal. She would be mulcted in the costs, after having been encouraged to proceed by the interpretation which has been given by the Solicitor-General. I wish to say a word upon the general question. We must assume to-day that it is right to tax increment in land. Starting upon that proposition, I must say that even the most extreme land-taxer— I mean those who would tax the land to the last ditch—would not wish that the Act should become a mere trap for the unwary, and that people should become subject to taxation simply because they do not know their rights. As a rule they would be poor people who had not the opportunity of taking advice on all the intricacies of the statute, and who would not know that they had incurred duties for increment where there had been no increment, but actually a decrement. If we are all agreed on that view, I think we shall be all agreed that this is an extremely hard case, and one which ought to be set right if it can possibly be set right. Let me recall to the right hon. Gentleman what the case really means. At the very time that the valuers were making their valuation of this property they had before them the statement that it had been sold in September, 1910,. for £500, and that in May, 1910, it had been valued at £500 for Estate Duty. Thus we have the valuation of 1910 of £500,. and an actual sale in 1910 for £500. Having both those facts before them they proceeded for some unknown reason to value the property at £380, knowing that the result of that must be to place an increment on £120 upon these ladies, on their own basis. Where the injustice of this comes in is that they knew at the moment they made the valuation of £380 that in May, 1910, it had been sold for £500. They sent it in to those ladies, who thought, having sold their property, that it did not matter to them. It was not an unnatural' mistake for ladies to make, or for a layman to make, and they did not bother themselves any more about it. They sent it to the purchaser, thinking it concerned him. The Inland Revenue authorities waited their sixty days, or exactly sixty-three days, until the opportunity for appealing against the original valuation was gone, and they sent in their claim as upon an increment of £120.

If those ladies had not been ladies in poor circumstances, and if they had been solicitors or lawyers, it is inconceivable that they would have allowed that valuation to pass. If you are going to take advantage of a mistake, an obvious mistake, of that character, then I say it is a gross and monstrous injustice. If there are any possible means of putting it right, even if it necessitated a special Clause in the Finance Bill, I think the Inland Revenue Authority and the Government ought to put it right, or ought to refund' the amount to those ladies. What is the result? They have valued for the site value at £58, and the duty which becomes payable, simply by a mistake, is £22, or 40 per cent. of the capital of the whole site value. That produces the absurd result that this property has trebled in value in the course of the year, while there is not a vestage of reason shown for any increase in value at all. I appeal to hon. Gentlemen who hold even the most extreme views as to Land Value Taxation. I am sure those Gentlemen do not wish the Revenue to profit by the mistake of those ladies, and that they do not wish to get a tax upon a supposed increment where obviously there has been no increment. So far as I can see the only way you could remedy the matter, and I am doubtful if it could be done in that way, is to extend the sixty days. I am not quite sure whether you could extend the sixty days after the occasion has arisen. If there is a means of doing so surely the very least the Government can do is to give the ladies the fullest opportunity of testing the valuation. That is only one instance, and the fact is that this Act is full of traps and pitfalls for the unwary. What you are going to do is to tax not only real increment but all sorts of artificial increment which you manufacture by algebraical formula which leads you to minus quantities. Those minus quantities show the absurdity of this hopeless business of acting upon algebraical formula.

Mr. WEDGWOOD

made an observation which was inaudible.

Mr. CASSEL

Minus quantities have arisen in very large numbers indeed, and the very fact that they do arise shows the absurdity of the principle of mere algebraical formula which leads you to a minus quantity for the value of land which everybody knows is worth something. The idea, as was pointed out by my hon. and gallant Friend (Mr. Pretyman), that you are going to tax a man on the difference between minus 400 and minus 200 and then arrive at 10 per cent. on that minus quantity is an absolute reductio ad absurdum of the principle by which you arrive at these results. Let me give one other case generally on the question of principle. You are going to manufacture any amount of artificial increment by comparing unlikely units. Take the case, and it is a constantly occurring case, of a plot of land which the owner contemplates developing, and which he may develop in the course of ten, or twenty, or thirty years. He divides it into plots for the purpose of valuation. Those plots are valued separately so that the back portions are valued as back lands without any access by road at all. The value of the plots separately gives you a much lower valuation than if you valued as a whole. Then, having the separate valuation, suppose the man dies. You then have an assessment for Estate Duty of the whole plot, and you get an increment on property which has remained exactly the same, which is the most ludicrous and absurd result. I am not dealing with the case which was met by the Revenue Act, which disposed of a certain hardship, but of the case where you begin the valuation in separate plots and then as a whole on the occasion of either death or sale. It makes all the difference in the valuation by the unit on which it is based. Why should a man have to pay a tax because a different unit has been taken and when you are not comparing like with like?

Let me refer to the extraordinary way in which the Department have thought themselves at liberty to depart from the words of the Statute itself, and to make upon the subjects all sorts of claims, threatening pains and penalties, and the claims which are absolutely unfounded by the Statute, and let me refer to the means which they have taken and the devices to which they have resorted in order to prevent these questions being decided in the courts. Take the case of Form No. IV. A large number of people thought that that Form was altogether illegal, and, according to most recent decisions, inferentially it is. It was absolutely unwarranted under the Statute which the Government themselves passed in making demands upon millions and millions of subjects and threatening them with pains and penalties all over the country. Certain landowners thought it was fair to have this question decided for the people, and that the people generally should be guided by a declaration of the courts. They go to the courts for a declaration. What do the Government do? One would have thought that as this was an advantageous thing for the country to have decided that the Government would have been glad to have accepted a means of testing whether their action was legitimate or not. Not a bit of it. They set up the plea that you could not have a declaration against the Crown, and they went to the Court of Appeal, which consisted of the present Master of the Rolls, Lord Justice Fletcher Moulton, and Lord Justice Farwell. All those judges concurred in giving a strong decision that the course which the Government was taking in trying to prevent a decision from being given was absolutely unjustifiable, and that they ought to allow the matter to be decided. Lord Justice Far-well said:— There was no substance in the apprehension, but if inconvenience was a legitimate consideration at all, the convenience in the public interest was all in favour of providing a speedy and easy access to the courts for any of His Majesty's subjects who had any real cause of complaint against the exercise of statutory powers by Government Departments and Government officials, having regard to their growing tendency to claim the right to act without regard to legal principle and without appeal to any court. They did not resist a declaration any longer, and it was held on Form VIII. that it was illegal and that they were asking all sorts of things which they had no right to demand from the subject. I do say to the House that this is becoming a serious matter. I think it is a matter on which the whole House can agree and that is that this is a sort of intricate statute which ought not to be made a trap for ignorant and unwary people, and also that the Government Department ought not to exceed the functions which are given to it under the statute, and ought not to threaten people, unless they comply with their requirements, with all sorts of penalties, and then when the question comes before the court use every technicality in their power to prevent the courts giving a decision on that particular point.

Mr. RAFFAN

I rise because of the appeal of the hon. Member to hon. Members on this side who are more particularly interested in the taxation of land values. The hon. Gentleman correctly interpreted our feelings when he says we agree with him and those with whom he is associated in so far that we have no desire that any person under this Act should pay anything except upon land value, and in so far as under any wrong administration it can be shown that any person is paying on. improvement or buildings of any sort or on increment otherwise than land value then we are perfectly prepared to associate ourselves with the hon. Gentleman to secure reform. The hon. and gallant Member for Chelmsford (Mr. Pretyman) has stated this afternoon, and, indeed, has consistently stated throughout these Debates, that in his view no alteration in administration can put this matter right, and that as a matter of fact in his view no alteration by Statute which recognises the existence of land value would put this matter right. His view is that land value is a myth. I took the words of the hon. and gallant Gentleman, who stated that "land value was a Mrs. Harris."

Mr. PRETYMAN

I said site value as referred to in this Act.

5.0 P.M.

Mr. RAFFAN

The hon. and gallant Gentleman draws some distinction between land value and site value, but it does not appear to me very material. In the hon. and gallant Gentleman's view site value is a pure myth, and does not exist. He has stated so, and his illustrations are illustrations to show that when you are dealing with a composite value, of land and buildings together, it passes the wit of man to discover what value appertains to the buildings and what value appertains to the site. I believe the position of the hon. and gallant Gentleman is that nothing will be satisfactory, except the total and immediate repeal of the Land Taxes. I am sorry the right hon. Gentleman for East Worcestershire (Mr. Austen Chamberlain) is not here now, because I intended to make an appeal to the responsible Leaders of the Opposition, and to ask them whether they associate themselves with the view of the hon. and gallant Gentleman.

The CHAIRMAN

I am afraid that is what the hon. Member is not entitled to do. He is only entitled to deal with the administration, and not with the wisdom or unwisdom of legislation on this subject.

Mr. RAFFAN

I defer to your ruling. But I may be permitted to say that I was at any rate addressing myself to arguments which were adduced by the hon. and gallant Gentleman. I am sure you will allow me to say that so far as those with whom I am associated are concerned we speak for the rank and file of the Liberal and Labour parties on this question. I say this because I judge by the response we received for the memorial we recently presented to the Prime Minister and the Chancellor of the Exchequer, which was signed by 173 Members on this side of the House. The appeal which we made was that the Government ought to endeavour to deal not merely with the grievances of a few persons, but that the Government ought to expedite the valuation so far as possible. It will be most satisfactory if we secure the reforms necessary after the valuation has been expedited. I take it that it will not be in order to show that the hon. and gallant Member's statement makes out that the administration of this Act is falling almost entirely upon the poorer people, and is not hitting the large landowners of this country. I am glad to have that admission, but what a lurid light this statement throws upon the action of the 5,000 men who own half of the land in this country; who in the House of Lords declared they would be brought to absolute ruin if the Budget passed; who have been discharging their gamekeepers and giving as an excuse this Land Tax; who have been denying old age pensions to their workpeople; and who have been refusing to subscribe for the purpose—

The CHAIRMAN

This is quite beyond all that is permissible in this Debate.

Mr. RAFFAN

I thought I was addressing myself directly to the arguments which have been laid before us by the hon. and gallant Gentleman. At any rate I desire, on behalf of those with whom I am associated, to say, that our view is that the action of the Government is open only to this criticism: that the valuation is proceeding far too slowly, and that it is desirable it should be expedited as far as possible. I do make an appeal to the Government to do all that in them lies to expedite the valuation. So far as these hard cases are concerned, I have only to say that since I have been a Member of this House I have listened, on every opportunity, to the hon. and gallant Gentleman who has brought these cases before us. They have, as a rule, been a stage army. We had the case from Aberdare brought before us four times. There was another similar case which was a matter of Debate in this House. Half-a-dozen cases were brought before us by the hon. and gallant Gentleman one after another. It was shown there was no basis for any reasonable complaint with regard to these cases, and they have vanished like the baseless fabric of a dream and left not a wrack behind. We have these new cases this afternoon, and I have again listened with interest to what the Secretary of the Treasury has to say regarding them. They will probably be found equally as easy of explanation as the cases which have preceded them. I do think what afflicts the hon. and gallant Gentleman is not the wrongs of these few people. He is a determined opponent, in the interests of the great landowners, of the liability which this Act places upon them. I think it is a small beginning, and which I hope we will be able to carry it forward.

Mr. NEWMAN

The Chancellor of the Exchequer in his Budget statement dealt shortly with the Land Value Duties. One of the few sentences he did say has caused a little anxiety up and down this country. This year he told us he hoped to complete the valuation of most of the urban sites, and to collect the Land Duty, which would produce £200,000 this year. Let me give an example in the Division I represent. I suppose there is not a single acre there which has not got a value apart from agricultural value, but I do not wish to suggest it is built over. Twelve miles from where I stand to-day there is land which is hunted over during the winter. I was standing watching a cricket match. I spoke to the owner of the land. I said, "You have got this cricket pitch; you will not be charged duty on it. What about the land all around? It has got a building value." The owner said, "I gave £115 an acre for this land, and if I were willing to sell for £115 an acre I could not get it." That gentleman has got to pay Undeveloped Land Duty. I wish also to deal with another class—the market gardeners. In the majority of instances these men own their own land. If I can make anything of what the Chancellor of the Exchequer said, these men are going to be charged in the near future a tax of 4s. an acre in the year. Are they going to be served not only with the taxation for this year, but last year and the year before. The gardeners asked me, and I am asking the House, is it fair that these men should have to bear this extra taxation at all? These market gardeners have not a monopoly, or something in the nature of a trust, and they do not hold up the price of bread. If they did, it might be right to tax these men. Or, again, suppose they were concerned in getting extra large prices for land by holding up land and preventing building on it. It might then be right to tax them. But they are not.

The CHAIRMAN

The hon. Member is talking about legislation. He must confine himself to administration.

Mr. NEWMAN

At any rate, here we have an industry skilfully conducted by men, the bulk of whom have bought their land at more than agricultural value. If they have to sell, they will sell at a loss. Let me go on to another question. I desire to ask His Majesty's Government a few questions about the simplest Clause in this great Land Act—Section 26. It announces that all land shall be valued. As far as England goes, and Scotland, and Wales, the Chancellor of the Exchequer said his great work had been completed. I asked the Secretary of the Treasury how many Form IV.'s had been issued in respect of England, and the answer was something over 10,000,000, and that 91 per cent. had been filled up by the owners. We are also aware that a great number of provisional valuations have been served on owners as the result of filling up Form IV. In many cases those provisional valuations have been accepted, and in others they have been disagreed to. At any rate, the first stage of the valuation is completed. But what about Ireland?

The FINANCIAL SECRETARY

to the TREASURY (Mr. Hobhouse): I submit that there is nothing in this Vote to cover valuation in Ireland.

The CHAIRMAN

If that is so that question cannot be discussed.

Mr. CASSEL

Cannot the whole question of land valuation be discussed on this Vote?

Mr. HOBHOUSE

There is a separate item for land valuation in the general Irish Vote.

Mr. PRETYMAN

Would not my hon. Friend be justified in calling attention to the method of valuation in England, and, without going into detail, contrasting it with what is occurring in Ireland? It is desirable that such a comparison should be made.

The CHAIRMAN

A contrast between the two methods, if not carried into too great detail, would not be out of order.

Mr. HOBHOUSE

I submit that, although a comparison might not be out of order, I am clearly precluded from replying to any question as to what is happening in Ireland, because of the absence of any provision for Ireland in this Vote.

The CHAIRMAN

Can the right hon. Gentleman tell me under what Vote Irish valuation comes?

Mr. HOBHOUSE

In the general Irish Vote there is a separate item, for the chief valuer and his staff in Ireland. That item is under the control, not of the Inland Revenue Department, but of the Treasury.

Mr. NEWMAN

Surely I might discuss shortly the difference between the methods of valuation in Ireland and in England.

Mr. HOBHOUSE

I submit that the hon. Member cannot go in detail into the question of valuation in Ireland on this Vote.

The CHAIRMAN

I see that there is a separate item for "Valuation under the Finance Act, 1909–10" in the Irish Vote. If the right hon. Gentleman assures me that he is not responsible on this Vote for valuation in Ireland, I must rule the question out of order.

Mr. NEWMAN

It is a fact that offices have been opened in Dublin, Cork, and Belfast to start the valuation under this particular Act.

Mr. CASSEL

If it is not possible to make a comparison between the Irish and English methods on the English Vote, it will also be impossible to do so on the Irish Vote; so that apparently there will never be an opportunity to make such a comparison.

The CHAIRMAN

I am not dealing with the mere question of comparison. If the Irish valuation is paid for under another Vote, it must be discussed there.

Mr. PRETYMAN

I understood you to rule that the question might be referred to by way of comparison, although the details could not be gone into. It seems very desirable for purposes of comparison that it should be in order to mention that the Irish valuation is carried out on a different principle from that which obtains in England, in order to justify the criticism of the procedure of the Inland Revenue authorities here.

The CHAIRMAN

A passing reference as matter of argument is certainly not out of order.

Mr. NEWMAN

In Ireland the Act came into force on 30th April, 1909. It is impossible for anybody to say that since 1909 no houses or land have changed hands in Ireland. They have changed hands freely, and at fairly good prices. Has any Increment Duty or Reversion Duty been collected in respect of those sales or changes? The other day I received a letter from a solicitor in Dublin, in which he said:— I know as a matter of fact the valuer has been engaged in Dublin and district, as he was with me in relation to several estates I am concerned in, but I have not received any official valuation yet. I have had several cases in Dublin and its vicinity where property has changed hands in the last two years. I have had transactions of that description at least once a month, and in no case has the valuation been made respecting Increment or Reversion Duty. Of course, in all these cases the particulars required by Form IV. have been required to be given, but as I have said no assessment for Increment or Reversion Duty has been issued. In reply to a question of mine a few weeks ago, the Secretary to the Treasury stated that 20,000 Irish Form IV.'s have been issued, but that none had been issued in respect to agricultural districts.

The CHAIRMAN

This seems to be going into the Irish case, which is not in order on this Vote.

Mr. NEWMAN

Then I will raise the question on the Second Reading of the Finance Bill, when I daresay I shall be in order. I must apologise for the trouble I have given you.

Mr. WEDGWOOD

We in this quarter of the House sympathise to some extent with the hon. Member for Chelmsford (Mr. Pretyman) in the hard cases he brings forward. I would point out to him, however, that all these difficulties have arisen simply and solely because he induced the Government to make the valuation a Government valuation instead of a landlord's valuation. If the Budget of 1909 had gone through as it was originally introduced, the valuation being made by the landlords, as it is in Australia and other civilised countries, the hon. Member would not have had all these grievances to bring forward. We would judge him far more leniently than we do at present if we believed he was really anxious to do away with these anomalies and hard cases. I have a proposition to make to the hon. Member, with which I should like the Government to fall into line. The Budget of 1909–10 passed under circumstances of great difficulty, and in the form in which it emerged from those long Debates, it undoubtedly puts before the country an extremely complicated valuation. Original site value, assessable site value, total value—all these different values undoubtedly complicate very seriously what ought to be a perfectly simple matter. Would it not be possible in next year's Finance Bill to introduce Clauses revising the valuation under the Budget of 1909–10, so as to make that valuation far more simple and efficacious, so far as both sides are concerned? We hate these hard cases just as much as the Opposition do, and we can put them right if we are allowed to get the valuation on a sound basis. I know that the hon. Member opposite (Mr. Pretyman) is as earnest on this question as I am. What I would like to do would be to meet him, with some other Members from that side, and some of my hon. Friends, and with the Treasury officials go through the Budget of 1909–10—

The CHAIRMAN

That question can hardly be dealt with now, as it is a matter for legislation.

Mr. WEDGWOOD

I am merely pointing out that the difficult cases which have been brought forward could be put right to the perfect satisfaction of hon. Gentlemen opposite, of hon. Members on this side, of the Government, and of the country at large. I would ask the Secretary to the Treasury whether some such small sub-committee could not be formed, with the honest intention of improving the present state of affairs and of drafting Clauses which might obviate our having this constant procession of really hard cases. I agree that they are hard cases. I should like the Land Union and my hon. Friends to meet together to deal with the matter.

The next point I wish to deal with in the administration of the Act is that we really must have the valuation made more quickly. It was said, I believe by the Chancellor of the Exchequer, that the valuation would take five years. Five years is an intolerably long time for us to wait. I am afraid that the Government are not really in earnest in trying to get the valuation done more quickly. I have been told over and over again by the Chancellor of the Exchequer and the Secretary to the Treasury that they have all the valuers in the country, and that they could not do it more quickly if they wanted to. That is absolutely not true; they could get more valuers if they wanted them. It may have been true a year ago, but now it is perfectly possible to increase the staff and to get the valuation done far more quickly. We want this valuation, but I am afraid the Government do not. They know perfectly well that, when the valuation is made, we shall force them to tax and rate land values whether they like it or not. Our business now is to see that the valuation is done as quickly as possible, and that the Government do not invent difficulties and put them in its way. As far as I can see the valuation is being done extremely well. It may be necessary to take sample acres of agricultural land and to find the average number of trees, but I am convinced that there are far more difficulties introduced simply through the unnecessary complication of the Finance Act of 1909–10. All these questions of stripping agricultural land of fruit trees and things growing on the land are quite unnecessary complications which we can eliminate in next year's Finance Bill. By that means and by enlarging the staff of valuers we can hasten the valuation and do something to bring Liberalism in this House more into line with Liberalism in the country.

Mr. BOYTON

Hon. Members opposite who have spoken seem to lament that the valuation has not proceeded more quickly. I think they make a charge against the administration, but the administration are doing their very best to deal with a very great and very complex question.

Mr. WEDGWOOD

I never said they were not. I said we wanted more valuers.

Mr. BOYTON

Those whom the Government have seen fit to appoint must have had their hands very full, for they have not only to deal with Increment Duty and Reversion Duty, but also with the Death Duties and valuations under the Licensing Act, so that they have their hands exceedingly full. Of course their task must be a difficult one, because as has been brought out this afternoon by the hon. and gallant Gentleman the Member for Chelmsford, the valuation of site values is a very difficult thing. It is putting up hypothetical cases. There is a very prominent London official who gave evidence a few years ago before the Royal Commission on the Taxation of Land Values. In that evidence he said:— On the lines proposed for the new street—from the Strand to Holborn —the first time I went over that property for the purpose of making an estimate of the cost for acquiring the property we required for the street, it took me between four and five days. The last time I revised my figures I was able to do it almost within the day. I only had to go on the second morning for a couple of hours, I am afraid the officers entrusted with the administration of the Act have found that their work is very difficult indeed. If we go back to that section of the metropolis with which the official that I referred to was then dealing what do we find? There is a building called the Gaiety Restaurant, which was leased for £6,000 ground rent not long ago. Over £100,000 has been spent upon the building. As an example of how difficult it must be, how very hypothetical it must be, to put a value upon any site in particular, you can now have that building for the amount of the ground rent. The London County Council, to whom the building has gone back—they being the owners of the land—would willingly let you the building and the site for about £6,000. That shows the difficulty of making an actual site valuation. These site valuations are hypothetical; they are based on one's experience, and on market value, but they should not be a basis for taxation.

In this London of ours there are in single streets different values. In one case, in one particular house, the ground rent is 6d. per foot. A few yards further on the ground rent is 5s. The differences are thus enormous, and does entitle to the consideration of the House anyone engaged in working out this very complex question. I am surprised at the impatience of some hon. Members of this House at the speed with which the valuation is proceeding. There must be many millions of valuations to make. Some six weeks ago the right hon. Gentleman the Financial Secretary to the Treasury (Mr. Hobhouse) said that up to that date 380,000 valuations had been made. I do not suppose that in the six weeks ensuing they have gone on at a faster rate. Suppose the total is now between 400,000 and 500,000, it is very evident that the total valuations of this country cannot be made within the five years foreshadowed. If they could be made within the five years it would be a very wonderful work. I do not think the hon. Gentleman opposite should be so impatient. If he wants to get a valuation to entitle him to another basis of taxation he will not get it for a long time. He must possess his soul in patience. The officers are doing their duty. They are getting through a difficult job as quickly as possible.

Mr. LANE-FOX

I think everyone who has had any experience of the working of this Act must agree that it is not altogether fair, not indeed at all fair, that the valuers should be blamed for their work, because everybody must see that they must be intensely overworked. I remember a gentleman who was appointed, and who, although appointed, subsequently declined to take up the job, because, as he told me, it was pointed out to him that he would be expected to make hundreds of valuations a week. Everyone knows that work at that pace does not lead to good work, and is not likely to give satisfactory results. I quite agree with the hon. Gentleman the Member for Newcastle-under-Lyme that the valuers are doing their best, and are struggling as best they may with a very difficult situation. They are being asked to do an impossible thing. It is not fair to ask a man to do an impossible thing and then to blame him if he cannot carry it out. I do not propose to deal with the cases which have been freely dealt with as to under-valuation. I hope in this matter that when the Finan- cial Secretary replies that he will be able to give us some explanation. I hope also that he will deal with the case in which the Government raises the valuation from £20,000 to £40,000. I would like to deal with another case. I can give the right hon. Gentleman the names and other particulars if he wants them, but the question is one of interpretation of the Act. In this case four cottages were left by a man who died intestate. He intended, it appears, to leave them to four different persons, to two brothers and two sisters—nephews and nieces. It was desired by the heir, one of the nephews, who was only a poor labourer and in weak health, to pass on the property, so as to carry out the original intention of his uncle. The cottages were valued at from £60 to £48 each. A conveyance was made, and the Stamp Duty calculated at 10s. in each case, or Stamp Duty on a value of £100 was paid, so as to be absolutely clear and cover the amount. This was paid at the local post office.

The post office returned the document, and stated that an adjudication fee of 5s. was required. Complaint was made. The solicitors concerned inquired whether Section 74 Sub-section (2) of the Finance Act, which is presumably the only applicable Section, was the Section relied upon by the Inland Revenue officials. It was pointed out that in this particular case not only was the property subject to Death Duties, full ad valorem Stamp Duty, but also the additional adjudication fee of 5s. They pointed out. that they could not think that what had been done was the intention of the Act, but the words—

"No such conveyance or transfer shall be deemed to be duly stamped unless the Commissioners have expressed their opinion thereon in accordance with that Section…. "—

appeared to make it obligatory; but they suggested that any such adjudication should be carried out by the authorities without any fee.

The extraordinary answer they got was this:— The Board cannot waive the fee of 6s. if the documents are forwarded through the post. But I am to point out that no fee would be charged if the documents were submitted for adjudication through a London agent on your behalf. The local solicitor sent to the London agents, who happened to be able to attend to this matter. There has been much correspondence—this matter began in February—but up to now no decision has been arrived at, and this conveyance cannot be carried out. I think the right hon. Gentleman will agree with me that it is a hard case, and one that ought to be put right. We ought to know whether, under that Section of the Act, the Board are justified in demanding a fee of that kind.

One more point, and that is in reference to a question which I asked in this House not very long ago. I refer to the payment of Undeveloped Land Duty. In cases where the owner has not had time to give notice to the tenant he is not liable for Undeveloped Land Duty. But I have come across cases in which this has been demanded, and I asked in this House in how many cases such demands for Undeveloped Land Duty have been made, and in how many cases the demand has been withdrawn! In a particular case which I know about the demand was made for the years 1909–10 and 1910–11. As a matter of fact, the owner, aware that it was not due till the year 1911–12, wrote and pointed out in reply to a peremptory demand for payment by the Commissioners, that he was not liable under the Act. The Commissioners promptly withdrew the demand. In how many cases, I asked, had this been done? The answer of the Chancellor of the Exchequer was that in no less than 153 cases such demands had been withdrawn. That means that in no less than 153 cases, and I do not know how many others, 153 actually proved cases, a, totally illegal demand has been made, and because the owner happened to know enough about the law to withstand the demand, it was withdrawn. I asked a question as to what happened in the cases where payment has been made, what the Chancellor intended to do with the matter, and the reply was that upon the true facts being established satisfactorily, the money thus paid will be refunded. But the position rests this way: that if the Commissioners make a distinctly illegal demand it rests upon the owner to prove to their satisfaction that it is illegal. Surely that is putting the cart before the horse, putting things the wrong way round, for the party not in fault to prove to the party who has sinned that he has been unfairly treated, and that no expense should be cast upon the Commissioners, in view of the actual mistake they themselves have made? In view of the fact that so very many holders of property are not aware of the operation and details, or the effects of the various provisions of the Act, I think it must be obvious to everybody that 153 is not the total number of cases which have occurred. It is perfectly obvious there must be a great many more, and although I welcome the assurance which the Chancellor gave that in cases where it was proved that an unfair demand was made the money would be repaid, I think it is very unsatisfactory that such methods should be pursued, and I think great care ought to be exercised in making these demands, some of which have been proved to be absolutely illegal. I hope the right hon. Gentleman will give us further assurance in the matter of minus valuation. He knows what it is, and I hope he will give a full explanation for the benefit especially of the hon. Gentleman the Member for Newcastle-under-Lyme.

Mr. WEDGWOOD

I know all about it.

Mr. LANE-FOX

The hon. Gentleman, by his interruption of a previous speaker, implied that he did not know anything about it, and I hope the right hon. Gentleman the Secretary to the Treasury will point out that it is a real and distinct class of case, and that it will have to be dealt with, and that these cases of actual minus valuation, which must occur, will be dealt with when they arise.

Mr. HOBHOUSE

In answering the questions addressed to me in the course of this Debate I hope to show to the satisfaction of the Committee that the statements made by hon. Gentlemen opposite have been somewhat exaggerated. I think in the working of any new Act, especially such a large and complex one as the Finance Act of 1909–10, there must always arise some misunderstanding and mistakes. These misunderstandings and mistakes on the part of the Department dealing with the Act should, of course, be as few as possible; but I think it is only natural that some should be made by persons who are carrying on new duties, and it is not unnatural that complaints should be made and letters written to hon. Members of this House with a view to getting rid of these mistakes in order to remove all unnecessary hardship. The hon. and gallant Gentleman opposite brought a specific case, which he dealt with at great length, to the notice of the House at the beginning of the year. He told the House then as he told the House to-day, that there were thousands of cases exactly similar to the one which he mentioned.

Mr. PRETYMAN

What I said was there were thousands and tens of thousands of cases under valuation. I said in these cases the claim was made. I said in thousands of cases the same issue was raised.

Mr. HOBHOUSE

I do not think I misrepresented the hon. and gallant Gentleman. He suggested that there were tens of thousands of cases in which the Inland Revenue had acted in such a way as to prejudicially affect the taxpayer; that was his general statement. We have had 800,000 valuations, and there have been but 100 appeals. There may, of course, be some more before all these provisional valuations become final, and I must frankly say to the Committee, I cannot at the present moment say how many of these 800,000 provisional valuations have actually become final.

Mr. LYTTELTON

In how many cases have refunds taken place?

Mr. HOBHOUSE

I cannot say offhand, but I will make inquiry.

Mr. BOYTON

The right hon. Gentleman said something like 800,000 valuations had taken place. It will be within the memory of the Committee that the Chancellor of the Exchequer said some weeks ago there were 380,000 valuations. That implies that 50,000 per week have taken place since then.

Mr. HOBHOUSE

I noticed the figure quoted by the hon. Gentleman and I referred to my expert advisers, and they can trace no record of any such figure as that which the hon. Gentleman quoted.

Mr. BOYTON

I understood the Chancellor of the Exchequer to say so.

Mr. HOBHOUSE

Hon. Members behind me rather suggested that the Government ought to expedite the valuation of land at a greater pace than at the present moment. In the course of the present year we have increased the staff of valuers by 187, and we have increased the clerical staff by 360 clerks. That is a very large addition to the valuation staff, and it will enable us to fulfil the promise, about which a great many Members on both sides of the House are very sceptical, of getting the valuation through in five years.

Mr. WEDGWOOD

Is that three-and-a-half years from now?

Mr. HOBHOUSE

Yes, in five years from the time when the Act came into operation. That will enable us to redeem that promise, and that period of five years will also bring us into the quinquennial period, when a re-valuation is to take place. I hope, therefore, that the whole Committee will be satisfied that the Government are keeping their pledges in that matter, and that the promise we made to the House as to the ultimate total valuation in this country will be completed in the time which we stated. There is only one other point to which I might refer on this particular question, and that is the question raised by the hon. Member for one of the divisions of Yorkshire when he said that the cost of valuation was swamping the result. That is not so, for not only can the valuation staff of the Inland Revenue Department be used for the purposes of the Land Taxes, but that staff can also be used for the purpose of valuing for Death Duties, and the result is that in one particular case mentioned in this House a week or a fortnight ago an estate that was valued for Death Duties was found to be, and was admitted to be by the trustees of the estate, twice, or nearly twice, what it was as put in by the executors of the estate first of all, and a substantial sum has been realised by the Treasury for Death Duties, quite apart from these Land Taxes, which would justify the appointment of very much more experts on the staff than we had in times past.

The hon. and gallant Gentleman the Member for Essex began by asking how the Finance Act of 1909–10 was being administered; and he went on to ask us whether he could have an assurance that the valuation should be conducted by official valuers on fair and reasonable terms. Well, in order that we may reassure him upon that point I promise to give the Committee a copy of the instructions which were given to the valuers of the Department when the cases arise in which they are called upon to act. I hope that will satisfy the demand of the Committee that while we do desire to exact all the Act entitles us to legally and rightly we do not desire to go beyond that by one single halfpenny. The hon. and gallant Gentleman went on to deal more particularly with the Richmond case, and as that was the case upon which he based the greater part of his criticisms of the Inland Revenue perhaps the Committee will forgive me if I refer to it in detail. Quite apart from the question of site value, which is under appeal at the present moment, I think I can satisfy hon. Gentlemen that the Department have acted fairly in their valuation.

I think we are on common ground that the property in question was Richmond, Yorkshire. The gross annual value of the property, which was stated on Form IV., was rendered by one of the vendors as £22 a year. The deduction made for rates and insurance came to £2 10s. There was rent paid to an adjacent landlord for the right of way through a back yard £1, and the total deduction, therefore, was £3 10s., and the net annual value £18 10s. That was capitalised at 5 per cent. on twenty years valuation' which brought the amount to £370. In addition, there was a stretch of the property, which I think in that part of the world is called a moor, and that was valued at £10, bringing the total value of the property to £380. That is the sum of which the hon. and gallant Gentleman complains. I do not think that, looking at these items of the valuation, that it can be claimed that they were unfairly valued.

Mr. CASSEL

Did he appeal?

6.0 P.M.

Mr. HOBHOUSE

I would suggest to hon. Gentlemen opposite if injustice is done we are not going to stand at this box and defend it. I am desirous of getting the full value for the Government and nothing more. We arrive, therefore, at the total value of £380; It is perfectly true that this property was sold for £500. There is no question about that. The district valuer has not only stated what, in his opinion, the value of the property was, but I am informed that, subsequent to the valuation by him of the property, the person who bought it for £500 had an independent valuation made for the purpose of raising a mortgage upon it, and that that independent valuation also worked out at £380. What is the explanation of the difference between the £500 and the £380? I am informed that the difference between these two sums—£120—is due to the fact that the person who bought for the sum of £500 was tenant of the business which was being carried on there. To that person, for the purpose of his particular business, there was the difference between the valuation which was arrived at by an independent valuation for other purposes.

Mr. CAVE

But that is not increment.

Mr. HOBHOUSE

I am explaining the reasons why this took place, and inasmuch as the question of what is the site value is still sub judice, I do not propose to deal with it.

Mr. PRETYMAN

The question of the site value on the 30th April, 1909, is not sub judice, neither is it subject to appeal. The only matter which can be the subject of an appeal is the question of the value on the occasion. That has been appealed against. The matter of the original valuation is the subject of free debate and is not under appeal at all.

Mr. HOBHOUSE

I quite agree. I am sorry I made a mistake. I am informed that the reason of the difference between £58 on the 30th April and the present £178 is that having regard to the dilapidated condition of the premises and other inconvenient circumstances, there was a far less value on that date, that is on the 30th April, 1909, than may be attributed to the site at the present time.

Mr. PRETYMAN

That was for the Death Duties.

Mr. HOBHOUSE

The valuation of land for the purpose of land tax valuation and the Death Duties are done by different Departments, and they are not always cognisant of the multitude of cases arising. [Laughter.] The hon. Member for Chelmsford (Mr. Pretyman) laughs and appears very much amused at my statement. I said this had been used for certain purposes in the case of the Death Duties, but it does not follow that every case is known in each of the two Departments. There has been a valuation of £380; £500 was based upon the Death Duties and was accepted for this purpose. We are quite willing to refund anything to the person who paid £500 if the £380 valuation stands good. We are prepared to accept the same valuation as that which was put upon it for other purposes. I do not know whether that is satisfactory to the hon. Gentleman opposite, but I think it is an act of justice which ought to be done, and therefore we propose to carry it out. With regard to the Scotch case which the hon. Gentleman brought to the notice of the Committee, he omitted to say that in the case of the valuation of £25,000 and the valuation for £45,000 they applied to different areas and have reference to different circumstances. I am informed that there was an additional area brought in for the £45,000 valuation. If the hon. Member wishes I can give him some details on the subject. It appears that the amounts inserted in the amended valuation are not comparable because the original valuation was in respect of a net area estimated at 500 square yards, whereas for the purpose of the amended valuation a further area was taken into account which substantially altered the value of the property. The inclusion of this area—which was at the back and to the north of the main building which had been formally excluded—completely altered the character of the site and made a most important addition to the value of the building. The valuation of this particular property was made by a valuer who has undertaken valuation for the Department to the extent of many millions sterling, and so far as I know, he has never had his decisions questioned before. With regard to the question raised by the hon. Member for Barkston Ash (Mr. Lane-Fox), I have not got the facts before me, but if he will send them on to me I will communicate with him as soon as I have had time to make the necessary inquiries.

Mr. LANE-FOX

I especially said that I did not ask the right hon. Gentleman to verify the details. All I wanted was an interpretation of the Act, and I wish to know whether the Act justified the fee being charged

Mr. HOBHOUSE

I do not really know the facts of the case. I certainly cannot, and will not, give an answer until I have had time to examine the case put before us from the other side. I have been asked a question as to the number of valuation cases which are outstanding, and the hon. Member who raised the point placed the number at 17,000. Approximately the hon. Member is correct, and I do not propose to challenge his figures. That, of course, is a very large number of cases, and the hon. Gentleman is rather derisive as to the number of outstanding cases. I regret it is so, but one of the factors which has made us increase the staff of the Valuation Department is that we desire to overtake the delay which exists in regard to these cases. We have now reduced that number, and, as far as we can see, we shall be able to work the number down to the ordinary average which existed before the Finance Act came into operation, which in the time when the right hon. Gentleman opposite (Mr. Austen Chamberlain) was Chancellor of the Exchequer, numbered something like 1,500 or 1,600 cases. I hope we may be able to get down to that figure without much delay. When you are working a new Act and creating a new staff, when you have to obtain a staff of experts in valuation which does not necessarily exist when the Act comes into operation; when you have to wait in this way, delay must occur which is regrettable, but which I agree it is the duty of the Department to overcome at the earliest possible moment.

If we find it is necessary to employ more valuers for the purpose of expediting the work of valuation that will be done in the future. We have given a pledge as to the time in which the valuation shall be accomplished, and both on that account and on account of getting rid of the delay, I think it is better to be perfectly frank with the House, although it may cause a little laughter on the other side of the House, and state that we have endeavoured to overcome the difficulties which exist. Another hon. Member asked me a question with regard to site value. An hon. Member below the Gangway said these difficulties occur when there has been a fixed charge, such as a Feu Duty and a minus quantity. May I give a case which I hope will put clearly to the House how it is that a minus quantity can arise. Suppose you take a piece of land worth £100 and you erect upon it a building worth £500. I will assume that the fee farm rent or the Feu Duty is £10 a year. At twenty-five years' purchase that comes to £250. Now, if the fee farm rent was in existence before 30th April, 1909, its value has to be deducted in arriving at the total value. You have got a total value of £600, that is, £500 for the building and £100 for the land. From that you have to deduct the £250 I have mentioned.

Mr. AUSTEN CHAMBERLAIN

Then the supposition is that somebody is renting a piece of land of the value of £100 at £10 a year.

Mr. HOBHOUSE

The value of the land is £100.

Mr. AUSTEN CHAMBERLAIN

And the assumption is that somebody is paying a Feu Duty of £10 a year for it.

Mr. HOBHOUSE

Yes. I am taking an actual case, which I am informed has occurred.

Mr. AUSTEN CHAMBERLAIN

I am trying to understand the right hon. Gentleman's illustration. Does he mean that the value of the land subject to the duty, after allowing for the Feu Duty, is £100; or does he mean a piece of land, the total value of which is £100, and that he is able to find somebody willing to pay a Feu Duty of £10 for it?

Mr. HOBHOUSE

Yes. The total therefore, is £600, the total value of the land is £100, and the value of the building £500. The right hon. Gentleman opposite is perfectly entitled to criticise rue, but perhaps for the purpose of my argument, he will accept my figure. I am endeavouring to explain how a minus value arises. If the right hon. Gentleman disagrees with my method, he has a perfect right to criticise me, but perhaps he will now allow me to explain how it arises. £600 is the total value. You have to deduct £250 from that, and that leaves £350. In arriving at the assessable site value, the difference between the gross and the full site value has to be taken into consideration, and has to be deducted. The deduction made for this purpose, the assessable site value, is equivalent to the value of the building, which is £500. You then get an assessable site value of £350, and this gives a minus value of £150. It may seem difficult to understand, but that is how you arrive at it. That being so, the hon. and gallant Gentleman asks me how you deduct 10 per cent. from a minus value. You do not deduct it. You cannot deduct something from nothing. Therefore you do not deduct it at all, and the conundrum propounded by the hon. and gallant Gentleman, never, in fact, need be answered, because it never arises.

Mr. PRETYMAN

That was not my conundrum. My conundrum was: How do you arrive at 10 per cent. of a minus quantity?

Mr. HOBHOUSE

I have just explained you do not arrive at it.

Mr. PRETYMAN

Then there is no allowance at all?

Mr. HOBHOUSE

There is no deduction at all. I listened to all the hon. Gentleman's propositions. He may think some of my views are not sound, but perhaps he will permit me to add I think none of his are sound.

An HON. MEMBER: It is all nothing but sound.

Mr. HOBHOUSE

Somebody raised a question with regard to road surfaces. Let me say, if hereafter an appeal which has been raised, I think by the Ecclesiastical Commissioners, goes against the view which the Department take, it would be to the disadvantage of persons in whose property road surfaces had been included that the effect of the judgment should be retrospective, because it would unques- tionably, I think, lower the value or would inflict an alteration upon them in respect of Increment Duty which they would not be willing to see done. Therefore, I think from their point of view the retrospective action of the judgment would not be desired. I hope I have dealt with all the points which have been raised, but, if I have not, another opportunity will occur, and I will then endeavour to do so.

Mr. AUSTEN CHAMBERLAIN

I think the right hon. Gentleman has the sincere commiseration of the House, and, if I may be permitted to go further and speculate on the state of his own mind, I think he feels he deserves it. No one who listened to him could help feeling he had a case he did not much like. He did his best for it, but the more he dealt with it the less good it seemed. I will not deal with the material with which the right hon. Gentleman has been supplied in order to illustrate the case of the minus value, but I venture to say the canny Scot who will deliberately undertake to pay a Feu Duty of £10 on land valued at £100 is only to be found in the valuation offices of the Treasury. What is of importance is not that very fantastical and absurd illustration, if I may say so without discourtesy to the right hon. Gentleman, but the effect of these minus values and the position of the Treasury in regard to them upon the statutory rights of the taxpayer. It was clearly laid down in the Statute that when this tax was to be levied it should not be levied on the full amount of the increment, but that in each case an allowance of 10 per cent. should be made to the taxpayer free of the tax. Ten per cent. of the increment value was to go free of tax. We have it now that he and his advisers are unable to arrive at 10 per cent. of a minus value, and the taxpayer is to have no allowance made, in spite of the plain words of the Statute. Accordingly, if a taxpayer has land the site value of which, divested of its buildings, is worth less than nothing, in the terms of the Statute, and if it becomes thereafter slightly less unvaluable, still without having any positive value at all, not only is the unfortunate owner to pay an Increment Duty upon property which is worthless as shown by the Government valuation, and more than worthless, but he is not to have even that modicum of allowance made which Parliament intended to provide in all cases, and which would be his beyond the right of the Treasury to question if it was a valuable and not a worthless property that was being taxed. I really wish the right hon. Gentleman had not merely to explain his case to us in the House, but had to explain to enthusiastic audiences to whom at other times and in other places he expounded its virtues of what the Budget is like in its practical application to the affairs of poor people.

The really serious question we have to discuss to-day is not anything that requires legislative action. It is the administrative action which has followed from the passing of the Budget. It would not be in order to discuss anything that requires legislative action, and, indeed, that is not now the most pressing matter. The Finance Act has become law, and the Budget is at work, and what is pressing is the way in which the interests of the individual taxpayer very largely—and especially poor people—are being dealt with under this Act. Anybody who listened to the specific cases brought forward by my hon. and gallant Friend and then listened to the defence of the Secretary to the Treasury would know a man is no longer being taxed according to what he has or according to-the nature of his property, even bad as such a proposal as that would be; he is being taxed on a valuation, and that valuation has no relation at all either to the one or to the other. It is a purely arbitrary judgment of an official doing his best; it may be—doing his best certainly for his employers—which settles what is the tax which the individual taxpayer has to pay. Let us contrast the methods in the cases with which the right hon. Gentleman has dealt. It seems to me the procedure which the valuers follow is the old rule, "Heads I win, tails you lose." The right hon. Gentleman submits to us a. defence of what is known as the Richmond case in Yorkshire. There you have a property valued for Death Duties and taxed for Death Duties at £500, and sold in the market at £500, both of those occasions being close to the original date for finding the gross value of the property for the purposes of the Finance Act. The Department, with the knowledge in their possession that they had taxed the estate as worth £500, deliberately put the valuation back to £380 in order to make another taxable value, and the right hon. Gentleman says this happens because one division of the Board of Inland Revenue does not know what the other division is doing. So upright, so honourable, and so careful are these people that their right hand does not know what their left hand does. The moment before the right hon. Gentleman was boasting that these land valuations, though they brought very little Land Tax, were exceedingly useful for Death Duties, because they enabled you to screw up the Death Duty valuation. Why docs not the branch of the Department which communicates this valuation for land purposes in order that Death Duty valuations may be checked carry out the opposite procedure as well. Why is this communication between different branches of the Department only possible when it is to the disadvantage of the taxpayer and not when it is in his favour.

Mr. HOBHOUSE

I must, in justice to the Department, point out a fallacy which, I think, underlies the right hon. Gentleman's remarks. What I intended to convey to the Committee, and what I hope I did convey, was that where the Department had reason to suppose a property was not valued up to its proper value for Death Duty purposes it had a Land Valuation Department, which it could send down, and which it did send down, to what I may call suspicious cases, with the result I have described to the Committee. But in cases where no attention had been drawn to the idea that there was any difference between the real value and the supposed value, there was no communication between the two Departments. I do not think that is an unreasonable attitude for the two Departments to maintain.

Mr. AUSTEN CHAMBERLAIN

I do not think the right hon. Gentleman has greatly affected my case. I do not wish to defend the man who is under suspicion of making too low a valuation. I do not criticise the Department for examining his return closely, but I do say it is intolerable that two branches of one Department should communicate information from the one to the other when they think they can get more taxation out of somebody and not disclose information which is in their possession when it is a question, not of taxing anyone, but of protecting a man against unfair taxation demanded by one of those two Departments. Departments are run as a whole, and they have no right, having this information in their possession and having their attention called to it again and again, to act as though they did not know anything of the facts. They have no right to make a high valuation in one case and then in another case when their tax is dependent upon it to make a low valuation. What is the final explanation of the right hon. Gentleman of the difference between the price paid for the property, the price at which the property was taxed for Death Duties, and the price at which the Department have now valued it as on 30th April, 1909? His explanation is that, owing to the dilapidated condition of the buildings at that time, the site was actually worth; less than it was at the later date. The site value is the value of the land divested of buildings. If you have valuable buildings on it you divest the site of those buildings in order to arrive at the value of the site. Here the right hon. Gentleman gravely tells us the value of the site, denuded and divested of the buildings, is lowered by the fact that the buildings are in a dilapidated condition. It is nonsense, and whoever supplied him with that answer is not fit to be entrusted with the administration of these valuations or with the carrying into effect of the Finance Act, 1909–10.

Let me go one step further. Observe that in that case, according to the right hon. Gentleman, in order to get the gross value, they do not inquire what the land had been sold for, and although they may know what it has been sold for they do not take it into account. In this case they went behind that information; they found out the rent paid, and worked out their figures accordingly. But they do not do it in every case, for when the right hon. Gentleman came to deal with the Scotch case, he admitted that they paid absolutely no attention to the rent. I must confess I cannot recognise the Scotch case as supplied to the right hon. Gentleman. I wish we could cross-examine the valuation officer who supplied him with the brief from which he spoke. There were two properties situated within a few yards of each other in a leading street in one of the largest towns in Scotland. The site covered by buildings in each case was about the same area—in the case of one property it was 567 square yards, and in the case of the other 586 square yards. The cost of the buildings on the land was in one case about £9,000, and in the other about £11,000. One property was much more valuable than the other because it was a corner block with a large double frontage. The less valuable property had a small frontage running far back. The value of the corner block, including the buildings, was estimated at £65,000. The value of the other block was about £46,000. The rent in one case was about £3,500, and in the other about £2,500. Had the valuers on that occasion inquired about the rent and proceeded to make their estimate upon that basis they would not have fallen into the gross error they did. The two properties were valued by separate officers, and the result was that the higher figure was put upon the less valuable instead of upon the more valuable property. This is proof that these valuations are not matters of fact; they are imaginations, they are speculations; they are vagaries and fancies. The fate and fortune of the individual depends not on the property, but on the valuer whom the Government sends down to value it. One may get a fair valuation, but there are officers less skilled perhaps, and included in the several hundreds that the Government got together in haste and are going to discharge at leisure when it suits their purpose, who make a most unfair valuation. I say it is monstrous. Whatever be the intentions of Parliament with regard to the Finance Act of 1909-10, it certainly was not intended that the fate of any individual should be at the mercy of a valuation conducted in this manner. It really is a scandal that the right hon. Gentleman should have to stand at that table and give us these flimsy excuses. I should say no more if these valuations were merely grossly careless, but there is the fact that the error is always in favour of the Government. I do not observe that these errors occur against the Government and in favour of the individual; they are always in favour of the Government and against the individual. There is method in the madness of the valuation officers employed by the Government.

The right hon. Gentleman said he hoped he had answered all the questions put to him. I am afraid he has not. There was the question of the adjudication fee, raised by the hon. Member for one of the Divisions of Yorkshire, which I confess seemed to me unintelligible, because in the case of some of these very small properties, fees amounting to double the Stamp Duty are to be paid if the documents are sent to the Inland Revenue through the post and are to be remitted if presented by an agent in London. That, I say, is an incomprehensible idea. But there was another very serious case—a Plymouth valuation affecting a nursing home, a charitable institution, which has no funds to enable it to fight law cases, and certainly should not be expected to waste its money on law expenses at all. What is the position in regard to that case dis- closed by the letter read by my hon. and gallant Friend (Mr. Pretyman)? It so happens that owing to a bargain between the parties two people are interested in the amount of the increment. The solicitor for one of the parties has written that the officials have more than once offered, if the notice of objection were withdrawn and the Increment Value Duty paid, to advise the Commissioners to return to them their half of the duty as an act of grace. What does that mean? It means, if anything, an admission that the duty is not in equity payable; otherwise they would not offer to return it. But they do offer to return it if the appellants will consent not to go into court. Under those circumstances they would be allowed to get their half back, so that the Treasury might be allowed to retain the other half of the duty payable by somebody else. Thus the Commissioners are endeavouring to extract a duty which is not equitably due. The right hon. Gentleman did not give any reply on that case.

Mr. HOBHOUSE

I am sorry I missed it. The omission was not intentional.

Mr. AUSTEN CHAMBERLAIN

It was brought to the notice of the Government some months ago. It is a most serious case. All these things force one to the conclusion that this Act is being worked in a perfectly arbitrary way, that you are not being taxed by the law, but by officials; that you are not being treated according to a common standard which, whether it is a just one or not, has been established by Parliament, but that you are being taxed or not taxed at the arbitrary will of officials who interpret the Act as they please and dispense with it as they please. I think the Government ought, in the interests of the Department itself, to give an inquiry into the working of the Act, and allow a Committee of this House to examine the men engaged in carrying it out. Let us have an opportunity of finding out what are their methods, and let us cross-examine them upon them. The right hon. Gentleman tells the House, as if the mere mention of the fact would set the consciences of hon. Members at rest, that out of some 800,000 valuations there have only been 100 appeals, and therefore it is apparent there are not many who are suffering injustice. But how many people are there like the poor ladies of Richmond, with a total property of £500, and an annual income of £22 only between them, who get a notice relating to the property which they have already parted with, and who, being unskilled in the wiles of the lax collector, believe the demand must be met by the present owner of the property and so forego their right of appeal. We who are familiar with valuations know that as a general rule the lower the valuation the better, but under this Act for the first time the lower the valuation the more one will be hit when the moment comes for collecting the tax. That is a thing which poor people do not know. Rich men who can afford to employ advice do know it, and are protected by their legal advisers, and they also have a purse which will enable them to take the Inland Revenue authorities into court—where they are so reluctant to go. The poor man neither has the knowledge nor the money which will enable him to employ skilled advice, and, therefore, because there have only been 100 appeals in 800,000 valuations it does not necessarily follow that no injustice is being done. You cannot measure the amount of injustice which is being done by that means, especially as the injustice will only ripen gradually in years to come.

How do the Inland Revenue authorities meet cases of injustice when brought before them? The right hon. Gentleman said to-day that the Treasury was willing to refund the excess Death Duty in the Richmond case if the new valuation were upheld. Yes, but they had, and I believe they still have the power, to give these ladies or their representative an opportunity of appealing against the original valuation which was allowed to go through by default, in ignorance of what it meant, and in ignorance on the part of the ladies of the fact that they were concerned in it at all. The Inland Revenue authorities definitely refuse to allow that opportunity to appeal, and, therefore, it is no good saying that they are behaving fairly under these circumstances, seeing that they are taking an unfair, harsh, and unconscionable advantage of the ignorance and helplessness of these poor women. We certainly ought to have an inquiry into the action of a Department in which such things are not only alleged but are proved to be true.

Mr. HOBHOUSE

I should like to say a word about the Plymouth case. I find with regard to the offer supposed to have been made by the Commissioners that it is quite new not only to me and to my advisers, and they only heard of it about one o'clock today. I have already directed inquiry to be made into the facts. It has, of course, been quite impossible to ascertain them up to the present time, and, until the facts are disclosed, I do not see I can accept the statement made by the hon. and gallant Gentleman, although I am quite sure it was made in good faith.

Mr. AUSTEN CHAMBERLAIN

That is exactly the kind of answer we get. We bring forward cases in the course of debate, and are told that they will be inquired into. When the inquiry is made, and it is found that the facts stated are true, nothing happens, except that, perhaps, an attempt is made to justify them.

Mr. PRETYMAN

I would like to ask whether any inquiry has been made at all by the right hon. Gentleman's Department into this Plymouth case, which I brought before the House on the 29th March last.

Mr. HOBHOUSE

The case is entirely new to me, and I can only speak for myself in this matter. I have already given instructions that inquiry shall be made into it, and, until it is made, I think it is only fair to the Department that I should reserve my own judgment upon the facts.

Mr. BOYTON

May I say, I have looked at the records of the House, and I find the Chancellor of the Exchequer stated the number of valuations at 381,000.

Mr. HOBHOUSE

They are provisional valuations. Since then they have gone up to the number I have stated.

Mr. J. M. HENDERSON

I am a great supporter of the Increment Tax, but I do not think it is free from criticism if, as I understand, the Treasury propose to make the datum line a minus quantity. If they do that they are departing from the principle of an Increment Tax altogether. The basis of an Increment Tax is increment. The basis of this tax is decrement if you take the datum line as a minus quantity. I do not think my right hon. Friend quite understood the Scotch valuations. I have several of them here, and I will tell him exactly how it arises that there is a minus quantity. Ten or fifteen years ago a man. took a feu for which he paid, say, £10. Today the adjoining land, equally good, is only worth £5. The value of the land has gone down. If you add to that—and this is an extraordinary thing—the amount that he had expended on improvements you then get a minus quantity. I do not join with the hon. Gentleman (Mr. Pretyman) in blaming the valuers. They cannot help themselves. They must proceed according to the formula given in the Act, and this is the formula. Gross value, minus divested value, equals full site value. Then you have gross value minus deduction for fixed charges equals total value. Total value minus works executed equals assessable site value. The consequence is that if as I admit, it is the community that raises the value of any land, if my feu which I paid £10 for fifteen years ago is only worth £5 now, the community has not been busy enough except in knocking down my value. But to say to me that because I have lost that value you are going to make the datum line a minus quantity is a most unjust, a most unscientific, and an unheard of thing. Here is property which is not worth anything—which is worth £25 less than nothing—and if you sell it in the future for £10 or £100, more tax will be payable, not on the increment, but on the increment minus the decrement. That is a preposterous thing. Either my property is worth something, or it is worth nothing. It cannot be worth a minus quantity, and to deal with this justly you must begin at nothing. No one will complain if you begin at nothing.

I am a good sound supporter of the Government, but I want things done honestly and justly. There is a case in Glasgow of a site value of a minus quantity of £400. The community has deteriorated it by £400—not the house, but the land. I sell it two or three years hence at a little rise—for £200 more than the present valuation. You come to me and say "you have made £200." I say "I have done nothing of the kind. I am still worth £200 less than nothing, and you are going to ask me to pay 20 per cent. upon that sum which is only getting me half-way to nothing." How can you say that man is earning increment when the assessable site value is still £200 less than nothing? Of course it is monstrous. With regard to valuation, I know what happens. Any amount of people came to me who feared that their valuation would be raised. I said, "Do not make any mistake, you must prevent them from making it too low." If the Government will say they will disregard minus quantities and start from a value of nothing I am content. That is what must have been meant when the Bill was before the House. I feel quite certain in my own mind that the intention was that any purchase within twenty years would be regarded, so much so, that in Form IV. you are asked to state whether the property has been bought or sold during the last twenty years. They do not take the slightest notice of that in the valuation. The right hon. Gentleman has said there were 800,000 valuations and only 100 appeals. But will he tell us how many of these provisional assessments were taken by the people to the assessor and complained of and adjusted and an addition agreed to? I believe there are very great numbers of cases of that kind. There must be any number of these minus valuations in England. In the whole of the suburbs of London twenty years ago ground leases were let at figures that cannot be got to-day, and there are houses by the thousand in nearly all the London suburbs which you can purchase at less money than the mortgage money, which does away with the site value altogether. It seems a very hard thing, and I press upon the Government to consider that it is a most unjust thing to say to a man, in effect, "You have lost on this property; the property is absolutely worthless. Nay more, it is a minus quantity. Nevertheless, we will start from the minus quantity, and on every penny that goes to make it up to zero we are going to charge you a duty." It cannot be right.

Mr. EDGAR HORNE

I think there can be no doubt that a blunder has been made in this Richmond case. The valuation there was certainly a wrong one, and I hope that the blunder will be acknowledged and the matter put right. I think you can see that the valuer here has been rushed in his work. The great pressure which is put upon the valuers to get through their work in a great hurry does not make for accuracy nor good work. Here he apparently had given to him the values of the properties, and without considering each particular case he takes a valuation of twenty years' purchase of the rentals. It is a rule that, I think, every valuer knows that rent may be a useful guide, but it is never an evidence of value itself; and if it was to be taken alone most serious errors would arise in consequence. I should be sorry to endorse the indictment which has been made on these valuers, because I know myself that it is possible to make serious mistakes perfectly innocently, but I feel that the Department of Inland Revenue ought to protect their valuers by making good any blunder which the valuers may have made innocently. It is making it very hard for these valuation officers to do their work.

7.0 P.M.

There is another point I wish to put forward. In these provisional valuations the figures which are put forward by the Government valuers are in many cases informal in character. If the valuer comes in and is referred to a surveyor, if the property belongs to a rich man or is a big property, the owner has the wisdom to refer it to someone who is skilled in the matter, the Government figures are examined, and the surveyor acting for the owner will see the Government valuer and discuss the matter with him. It is a very usual course with surveyors to discuss figures informally in the first place, and, in doing it in this particular way they are doing nothing more than what is the best way to do their work. But when they find that their figures do not agree and when there are questions of principle which arise between them it is found, I am afraid, that the Government valuers will say "we will talk about this another day, and I will see you again on this particular point," but these further days of meeting do not arrive, and these difficult points which have arisen between the Government valuers and the other surveyors have not been settled in the way they should. There is no question of the sixty days and of forcing an appeal because the valuations very often are of an informal character, and at the present time, although the Act has been in force, I believe, for a year and a-half, there are still questions outstanding, with regard to agricultural land, the way in which the redemption of tithe is to be met and also the question of allowance for roads.

It does not matter to the wealthy and wise men who have put their affairs in the hands of surveyors. They will see that they pay no more than they ought to pay and that their valuations are properly drawn up, but in the meantime there is an enormous number of poor people who have not had the assistance of those who understand the Act to help them, and in those cases valuations are being made very often, and I am afraid allowance has not been properly made, and they will suffer because they will have no opportunity of reopening the matter. I think we ought to have some assurance from the Treasury that in all these matters of principle which are outstanding between the parties on either side directions should be given that the matter should be adjudicated upon in some manner. We hear of 17,000 cases outstanding at the present time. I do not know in how many of them questions of principle are involved, but there need not be 17,000 cases if all these questions of principle had been adjudicated upon and we understood how we should go on in future. However much we may dislike particular measures, when once they have become Acts I believe it is the duty of every Englishman to try to carry them out to the best of his power. I think if we have proper assistance from the Government Department, we shall be able to make it not only easier in cases where those who are well off come to settle down, but we will be able to see that a large number of poorer people will not suffer because of ignorance of the steps they ought to take.

Mr. PRETYMAN

I rise to move a reduction of the Vote by £100, because I cannot accept the reply of the right hon. Gentleman as satisfactory. I propose this Amendment, not as a personal reflection on himself, but because I think there are hon. Members who would desire to have an opportunity of expressing their opinion on the Richmond case by a vote.

Sir JOHN SPEAR

I think every person who wishes to become the owner of the house in which he lives, as well as every lover of justice and fair play in regard to valuation for taxation purposes, must be deeply indebted to the hon. and gallant Member for Chelmsford (Mr. Pretyman) for bringing this question before the Committee. I venture to say that while I have been a Member of this House there has not been a heavier indictment brought against a Department than that which has been not only brought but proved up to the hilt, with reference to the injustice, or at least the carelessness, of the system of valuation which is being carried on. It seems to me that the valuers with the evidence that this Richmond property had recently been bought at £500, and that a valuation for Death Duty has been fixed at the same sum, should claim the original site value as £380, must show great ignorance, or it must show that they put this low valuation on the property in order that they might, when it was resold, or when it changed hands, be in a position to claim an increment value, not on any real increased value, but simply because of the low figure at which the original value was placed. It seems to me that that state of things must cause consternation and a spirit of uneasiness throughout the country among small owners who have lately become possessed of houses and gardens. I thank the hon. and gallant Member for bringing this case before the Committee. There are many people in my own Constituency at Tavistock and in the surrounding districts who have bought cottages at £120 or £130, more or less. If this system of valuation which has been exposed in the Richmond case prevails, we shall find the original value fixed perhaps at £100, and that when the owners die, or if they sell the property they have recently acquired, there will be charged an Increment Duty, not because there has been an increment, but because the original value was placed at so low a value. Most people wish to see a greater number owning the houses in which they live, but if there is this injustice it will be a deterrent from buying houses, and from the national point of view that will be an injurious as well as an unjust state of things. We were told by the Financial Secretary to the Treasury that there have been eight hundred thousand cases of valuation and only one hundred cases of appeal. That is easily accounted for. It is because people do not easily understand how to proceed. We all know that when valuations are put on property which are lower than the owners know the property is worth, they are inclined to think that they will have to pay so much less taxation, never realising that the abnormal and unfair valuation which is put on as the original value will mean when they die, or when the property is transferred, that it will enhance the duty payable. It is not an actual increment of value, but an apparent increment which arises because of the low and unjust valuation which was first put on it.

I feel sure that there would have been a large number of appeals if people had realised that the putting of the valuation at a low figure was detrimental to their interests and to the spirit of justice. We want a fair valuation. We thought when the Act was passed that we were starting an immensely expensive system of valuation. Some of us were of opinion that it would have been better to have utilised the old system of assessment committees with increased representation, but since it has been decided that this system of valuation should go on, we do appeal to the Members of the Government to see that it is conducted on fair, just, and equitable lines. I think the demand that an inquiry should be made into this matter is one which the Government cannot refuse. It would be a serious matter if this feeling of uneasiness were to continue, and I am bound to say that the right hon. Gentleman in his reply to the hon. Member for Chelmsford has offered no real criticism or explanation of the charges which have been brought before the Committee. Consequently there is a feeling of alarm and unrest, and, though it is probably not the intention, it looks at least as if the principle of this valuation is to put the original value at a low figure so that when there is an exchange of the property there may be a demand made for increment, which has not really been created and which does not exist, but which simply arises from the fact that originally an unfair valuation was put on the property by the valuer. I do not know the valuers personally, but I say that they ought to be men who have not only knowledge but can be relied on to deal fairly with all interests, and who will not approve of doing anything to trap people. The hon. and gallant Member for Chelmsford has done a great service to all who aspire to own the houses in which they live. Many in my Constituency are in that position, and I thank him most sincerely on their behalf, and in the interest of what I believe we all want to see, namely, the encouragement of the system of men owning the houses in which they live. We shall insist upon the valuation of that property being of an equitable kind, and not of a kind which will trap the owners into paying Increment Duty when property changes hands.

Mr. WATSON RUTHERFORD

I venture to think that the whole business community have not got really so much to complain of as regards the work of the valuers, having regard to the circumstances, because these valuers have done an immense amount of work in an incredibly short space of time. But what I think the Department ought to recognise, and I believe the right hon. Gentlemen representing the Treasury will be open to recognise, is that in every case where it is suggested that owing to the rapidity and the immense amount of work that has to be done, the matter has not been fairly considered, these questions of days with regard to appeal ought to be put right by order of Parliament. I know myself of a very considerable number of cases where the valuations are clearly wrong, and where the time for appeal has gone. The attention of the parties has not been called to the operation of this new statute and the dangers and difficulties which it involves, and now they are liable to be met with the same answer as was made to the ladies at Richmond in Yorkshire—that the valuation was formally served upon them, and that the number of days for appeal had gone, and probably some trifle would be thrown to them in the way of compensation such as had been offered to these ladies to-day, but which does not meet the merits of the case at all.

I rise for the purpose of supporting the appeal which is made in the interests of fair play and justice for the inquiry into the actual working at this stage of these valuations and the taxes that arise out of them, so that if possible, with the authority of the Department of the Treasury, something may be done to avoid these difficulties which have arisen. In thousands of these cases the injustice which these people will suffer in the amount of tax which they may have to pay improperly, which they ought not to pay on the merits, has not yet arisen, and in thousands of cases they will only be called on to do so when somebody dies, and duty is payable, or when the property happens to change hands. In this Richmond case there is one fact which has not yet been referred to. The property itself was bought for £500. That, I understand, appears upon the deeds. It was sold for £500. When a property is bought for £500 and sold for £500 where is the increment? This was the kind of thing that we argued at great length when the Finance Act was being proposed. An imaginary increment has arisen in this particular case, and it has arisen because the valuer going down to value a few months ago has valued it back to 31st March, 1909, a date when probably he did not know the property, and had never seen it; and it was very difficult to imagine what the property was at a back period when he did not know anything about it. And, moreover, he seemed to be ignorant of the fact that there had been a death, and that for the purpose of Death Duty it had been valued by the owners very properly at £500. They had given £500 for it, and they negotiated to sell it for £500; but when they sold the property for £500 and were conveying it a few weeks later down comes the Inland Revenue on them for increment, and makes out that because owing to this gentleman's ideal value it was only £380 these ladies should pay Increment Duty.

That is a hard case. I do not think it is met by the right hon. Gentleman the representative of the Treasury saying, "We will refund the Death Duty if you will pay us some Increment Duty." It seems to me that it ought to be exactly the opposite, that there clearly was Death Duty on the value at £500, but as for Increment Duty in my opinion it is perfectly clear that it was not payable at all. In the Scotch case that has been referred to the right hon. Gentleman representing the Treasury said, "There was a difference between these two valuations, because we found out there was a big piece of land which had not been included in the first valuation and which added a considerable area." One Gentleman on the Front Bench went to consult some authority with a view to telling the Committee what that additional piece of land was. Needless to say, we never found it out. I believe the facts to be as stated in the solicitor's letter which has been published, namely, that a Government valuer valued that piece of land at £20,000, and within a week—his conversion was somewhat rapid—he found out that the value was £45,000, or more than twice the first amount. The importance of these valuations being correct cannot be exaggerated, because if they are too low the unfortunate person has got to pay the Increment Duty upon making a profit when the property is subsequently sold, and if they are too high the unfortunate owner is now or will be liable at a very early date to pay all kinds of taxes and all existing taxes on property which the Government are imposing on that new valuation, so that the owner, as regards the valuation, is between the devil and the deep sea.

The subject of minus valuations has been referred to. It has been shown in the clearest possible manner in the explanation of the right hon. Gentleman the representative of the Treasury that the astonishing fact arises of a property being worth minus something. Of course it is obvious that when there is a ground rent, or feu, as in Scotland, and the property has gone down to less than the ground rent represents as the value of the site, then when you come to look at the value of the property subsequently you do arrive at a minus value when you take into account the ground rent or feu. This is exactly the point that was explained to the representatives of the Government in the course of the Debates as a difficulty that would arise. I pointed it out myself. The right hon. Gentleman in charge of the Bill got up and said it was ridiculous to suppose that under any system of valuation there could ever be a minus value, and he said it in such a way that a shout of derisive laughter arose from the benches opposite. Within a couple of years we find that these cases have arisen. It is absolutely indefensible that they should occur, and steps should be taken to prevent them. The hon. Member for Aberdeen went on to argue that in all future cases when you have a minus value you should at once start from zero. But the speech that he made was not conclusive on that point, because suppose the property has gone down to minus £500 and it goes up again to minus £200, that is, £300 better, it is quite clear that there ought to be due allowance for the rise in value of £300, and it seems to me when an Amendment Bill comes before the House with a view of getting rid of the injustice and difficulties of the minus values and the other points in the Act these questions should be dealt with.

There is one other point that was referred to by my hon. Friend the Member for Yorkshire. It was not dealt with by the right hon. Gentleman representing the Treasury, and I beg very respectfully to ask attention to it. In Sub-section (6) of Section 3 of the Finance. Act of 1909-10 "Increment Duty shall be a Stamp Duty collected and recovered in accordance with the provisions of this Act," and in Subsection (3) of Section 4 there are elaborate provisions importing Section 14 of the Stamp Act of 1891 into the procedure with reference to increment value, and also the point as to whether the necessary particulars have been delivered or the point that there is no Increment Duty payable. Then if you refer to Section 74 of the Valuation Act you find that there are in addition a number of cases both in Subsections (2) and (5) in which adjudication stamps are necessary. I desire to point out with regard to all these stamps upon ordinary deeds such as conveyances and leases it used to be the practice, and is still in a large number of cases, to have the stamp adjudicated wherever there is the slightest doubt with regard to the amount of the stamp being sufficient. The practice is to submit the document to the authorities at Somerset House and have them adjudicate upon the stamp as to whether it is correct or not. This has been immensely increased by the Finance Act of 1909–10. Practically now in every case in order to get rid of the difficulty that there might be some Increment Duty charged on property or some other duty not paid formerly it is now necessary in almost every case to have an adjudication.

It was the practice in Lancashire to have only about 5 per cent. of the deeds that were stamped adjudicated prior to this Act. Now it is necessary in 100 per cent. The consequence is that in every transaction relating to land or the conveyance of property an adjudication stamp has become necessary. That involves delay and expense. Both these things are exceedingly objectionable, and they are a great hardship upon small owners and upon small purchasers. If the parties reside in London they can take the deed to Somerset House and it is adjudicated free and within twenty-four hours, and the work at Somerset House is done remarkably well, quickly and correctly. But a difficulty arises in such places as Sheffield, Manchester, and Liverpool, where there are stamp offices. These stamp offices were opened to meet the convenience of a large number of people buying and selling property in the Provinces, and in order to provide facilities for deeds being stamped. What now happens is this. In every one of the cases of leases and conveyances these local stamp offices cannot deal with the question of adjudication. The documents have to come to London in every case to be adjudicated, and a fee is charged. I am not quite certain for the moment whether they have to give 2s. 6d. or 5s. I believe it is 5s.; but that fee is required at all local stamp offices, and there is also the delay of some days before we can get the document through. Is that right? This seems to me to be another means of raising money for the purpose of paying these surveying people. It is very objectionable to have to send all these documents from Manchester to London to be adjudicated.

If these places are stamp offices, and are authorised to impress stamps for very large sums, there should be in connection with them responsible officers of experience and ability. Why not give them the right to adjudicate stamps, at all events to a certain amount, say, £5, or £10, or something of that kind, so that all the small transactions can be carried through without the exaction of the fee and without delay. I know that the local law societies in all these places have been in communication with the Inland Revenue Department, and have urged this point upon them, but so far without result. These fees are still exacted, and these delays still take place. I hope the right hon. Gentleman representing the Treasury, or the hon. and learned Gentleman the Solicitor-General, will give their attention to this matter, as I am sure they will, or at all events give it some reasonable attention, with a view to seeing whether it is not possible that equity and justice shall be done. For the reasons I have endeavoured to express, I join in the very earnest appeal to the Government to allow an inquiry to take place, and they can make their own appointment of those who are to make the inquiries into the working of this Act. I beg to assure the Government and the Committee that there are thousands of cases of hardship as to which the Government ought in all fairness to afford reasonable facilities for inquiry.

MARQUESS of TULLIBARDINE

We have heard a good many criticisms in regard to the question of the minus valuation. I wish to ask the Solicitor-General a perfectly straight question which occurred to mo during the Debate on the subject of the minus valuation. The question is whether minus valuations are legal or not under the Act. It is a perfectly straight question. I cannot find a single part of the Act which refers to minus valuations. Section 25 of the Statute in so many words says that the assessable site value of the land means the total value after making deductions. Where those deductions are greater than the total value, obviously the latter has been wiped out entirely, and consequently there is nothing left to represent the site value. I cannot see in the Act where it is possible to go below zero. I simply ask the Solicitor-General whether minus valuations are legal or not. A good deal depends upon the answer. I have never yet seen the question answered, and I should like a direct reply to it. A good many legal decisions are depending upon the answer, whether a minus valuation is legal or not; and, if it is, in what part of the Act does it appear.

Mr. CHARLES BATHURST

In supporting the reduction of this Vote, I have only to emphasise one point, upon which, in my opinion, sufficient emphasis has not yet been laid, and that is that there are at least four important questions upon which a judicial decision is necessary before it is possible to determine whether valuations made upon certain bases are legal or not. These particular questions are, first, the manner in which the land given up for roads shall be dealt with under Section 25; second, whether deductions in respect of tithe shall be calculated on the apportioned or present value; third, the exact meaning of the term "value for agricultural purposes"; and, fourth, the proper method of dealing with arrears of rent under Section 20, Sub-section (2). It must be unfair to make a provisional valuation until there has been a judicial decision upon these questions. At present, as I understand, what happens in the case of the poor person who is not in the habit of consulting a solicitor, is that he is informed by the Inland Revenue officials that the Commissioners' ruling on this particular matter, about which he has his doubts, is so and so, as if the Commissioners' ruling had any particular legal value. It operates a great injustice in the case of those persons to whom I refer, because they accept the Commissioners' ruling as though it had a legal value, and they do not further contest the provisional valuation. If, when these matters are brought before the proper judicial tribunal, established under the Act, for decision, if the decisions are in a certain direction and against the view upon the basis of which a provisional valuation has been made, it should be possible for that provisional valuation to be revised, so that persons shall not suffer in consequence of the so-called rulings, which are not legal rulings, of the Commissioners. I wish to refer to two other matters which come within the purview of the Inland Revenue. About three months ago an attempt was made in the county of Hertford to levy an entirely new Income Tax upon the dairy farmers in certain parts of that county. A certain form was sent to them, and they were asked to make a complete return upon that form of the profits which they derived from the sale of milk as distinguished from any other farm produce. It puzzled a good many of these gentlemen to know why they had this unusual demand made upon them, and at their request, I asked the Chancellor of the Exchequer on the 29th March why this new form was sent to them, and why it was restricted to certain localities only, and, in fact, what was the object of issuing so unusual a form. The answer I received from the Chancellor of the Exchequer was that he was not aware himself of the actual form, but at the same time he referred mo to the provisions of the third rule of Case III. of Schedule D, 5 and 6 Vic., Cap. 35, Section 100, under which the ordinary printed form of return under Schedule D is issued were necessary. On referring to the Income Tax Act I found that the rule to which the Chancellor of the Exchequer referred was as follows:—

"Whenever the Commissioners shall, on examination, find that any lands occupied by a dealer in or seller of milk (which lands shall have been estimated and charged on the rent or annual value) are not sufficient for the keep and sustenance of the cattle brought on the said lands so that the rent or annual value of the said lands cannot afford a just estimate of the profits of such dealer, it shall be lawful for the said Commissioners to require a return of such profits and to charge such further sum thereon as together with the charge in respect of the occupation of the said lands shall make up the full sum wherewith such trader ought to be charged in respect of the like amount of profits charged according to the first rule in this case."

The last words of the rule refer to the ordinary traders' Income Tax return under Schedule D. What exactly was being done in this case was this. As the Committee is, no doubt, aware, the farmer is charged Income Tax under Schedule B on one-third of the rent he pays, and there is no doubt whatever that this rule to which the Chancellor of the Exchequer referred me was intended to apply to those persons who got a considerably larger income out of their business than would be represented by the rent they paid and in order that they might be made to pay adequate Income Tax. It may be that the farmer is occupying just outside a large town a very small area of land, packed with cattle which he feeds to a large extent with produce grown upon other farms. This rule, which has been in existence for many years past, is now brought to the front in order to obtain an additional tax out of the ordinary dairy farmer, because he happens to use, and very properly uses, concentrated feeding-stuffs, such as cattle-cake, to feed his cattle, in order, not merely to maintain the flow of milk from his cattle, 'but, what is very much more important, to maintain in that way the quality of his land. The object is to provide the owners of the cattle with milk, which they can sell as whole milk, instead of converting it into either butter or cheese.

I daresay even the non-agricultural Members of this Committee are aware that in producing butter and cheese the manurial residues which are left on the farm are very considerable; and, in fact, the production of such articles does not detract to any great extent from what is called, though I think improperly called "the inherent value of the land." The milk being sold, and there being no residues, leads to a serious deterioration of the land, and that deterioration, I am sorry to say, is going on in very many parts of the country, where whole milk is being sold from, the farm. The one way to stop this is to use concentrated foodstuffs for the cattle. As every scientific agriculturist knows, and as every agricultural chemist confirms, it is good farming, and in the interest of the land, when concentrated food-stuffs are given to milch cattle. Because these gentlemen who are carrying on farming in a scientific manner, according to the most approved methods, use concentrated food-stuffs for their cattle, the Inland Revenue pounces upon them and asks them under this ancient rule to pay additional Income Tax. They are asked to fill up this form, because they are taking substances from outside their farms to feed the cattle upon their farms in order to make a profit out of the sale of the milk; whereas, in fact, this rule was intended for no such purpose as that to which it is being applied. In 1842, when this Act was passed, such things as linseed-cake and cotton-cake were absolutely unknown, so that it cannot have been contemplated at that time that this additional Income Tax should be charged on the dairy farmers in consequence of their use of such foods. I have to acknowledge, in fairness to the Inland Revenue, that when the matter was strongly represented in this House to the Chancellor of the Exchequer the obnoxious form was withdrawn. It is only an indication of the methods which the Inland Revenue are prepared to adopt in order to squeeze a little extra tax out of possibly ignorant people who have not got an accurate knowledge of the law, and who may be induced to pay the extra Income Tax demanded.

I want to draw the attention of the representative of the Government to another form which has not yet been referred to, Form No. 99. The object of that Form is to enable agricultural landowners who pay Income Tax under Schedule A to obtain a rebate by the allowance of anything up to 25 per cent. in respect of insurance, management, maintenance, and repairs, provided for under Section 69 of the Finance Act of 1909–10. The Chancellor of the Exchequer at the time when he made this very valuable concession pointed out repeatedly that the landowner who chose to fill up the necessary form and make application for this rebate of Income Tax would be entitled to anything up to 25 per cent. in respect of those various outgoings as regards his property as a whole, save such part as that upon which he lives or which is occupied by himself. Nothing was said at that time to the effect that cottages on the one hand and farm buildings and farm land on the other would be treated under separate categories, and so deprive the landowner of the full benefit of the allowances which he was supposed to get. The form which has been issued under this Section does so separate out the two headings under which allowance is to be made, and, in fact, although the agricultural landowner may have paid considerably more than 25 per cent. on the repairs and on the maintenance of his agricultural property generally, he may be unable to obtain anything like that amount. It is perfectly true that under Section 35 of the Finance Act of 1894, different allowances are made in respect on the one hand of cottages, and in respect on the other hand of farm buildings and farm land. I imagine it is in consequence of that distinction that it has been found necessary or advisable for the Inland Revenue officials to draw up the form which still stereotype the old method of separating the one class of property from the other and merely adds to the allowance which was made under the former Act the new allowance in each case which is provided by the Act of 1909–10.

On the first page of this Form the owner is required or asked to fill up particulars of claim. In filling up these particulars he cannot avoid putting into two different categories the two different classes of property, possibly to his own detriment. Under the heading "Particulars of Claim," he has to set out the average cost, maintenance, etc. "as set forth in the First Schedule to this claim." When you refer to the First Schedule you find on one side of the page expenditure on land and farm houses, and on the other side of the page, expenditure on houses not exceeding £8 annual value, those of course being the cottages. Then we find a further item in the same summary, "maximum further sum allowed," which is in the case of lands one-eighth and in the case of houses one twelfth of the annual value. It must be common knowledge that a far larger amount is spent, and properly spent, on the maintenance and repair of cottages than is spent on agricultural property. But it is quite possible if this form is filled in in the way in which it is drawn up that a landowner who spends, say, up to 40 per cent. on his cottages, and at the same time spends from 10 to 15 per cent. upon his farm land and farm buildings, although the aggre- gate is considerably in excess of 25 percent, he will be wholly unable to obtain the maximum which he is supposed to be able to obtain under Section 69. I am perfectly conscious of the fact that the Inland Revenue Commissioners are very tender with regard to the way in which those forms are filled up. But if the form is not in accordance with the repeated assurances of the Chancellor of the Exchequer as to the extent to which relief was to be given why should this form continue to be issued, and not a form which carries out the express intentions of the Government, and which affords the relief to the agricultural land owners which they may reasonably claim under Section 69. I sincerely regret that no representative of the Treasury is in his place on the Government Bench, because these are matters that I have been asked on behalf of a large section of the agricultural community to bring to the attention of the Chancellor of the Exchequer. It is very difficult to get them properly attended to in the absence of the representatives of the Department which is now under criticism.

Sir JOHN SIMON

I am sorry to intervene, but I do so in order to reply to a question put to me by the Noble Lord the Member for Perthshire. He asks whether in the view of the Government it is possible that there should be such a thing as a minus valuation or, as I understand the question, are minus valuations legal or not? I do not myself entertain any doubt that the view which the Department has hitherto taken on this point is the right view, that is to say that if you subtract £600 from £400 the answer is, not nothing, but is minus £200. That really does not depend upon this or that Government, or this or that Department, but depends on nothing more than the rules of arithmetic. If the Noble Lord will examine the Act he will see that valuations are arrived at by taking a figure representing an element and by subtracting from that figure another figure. If the figure which is to be subtracted is a bigger figure I conceive it follows necessarily that you get a minus quantity. May I say, as the matter has caused some amusement, that though that may not be the most convenient way to measure a rise in value it is a perfectly possible way. There is nothing absurd in that way of measuring a rise in value at all. What we are aiming at is by a suitable valuation to arrive at the amount of increment and to measure the increment from one level to another level. The measure or scale by which you measure that increase is equally well applied and equally scientifically applied whether the zero point comes higher or lower in the scale.

Let me take an illustration, not from the subject of land taxation, but from the subject of temperature. Some people have thermometers which are so arranged that when it begins to freeze they mark 32. Supposing it is freezing hard and that it marks under 22, then if anybody wants to say that the temperature rises from 22 to 32 he can say so. Other people have Centigrade thermometers where the freezing point is represented by nought and where, if the temperature gets lower, the figure is found to be minus ten or minus fifteen. There again if you want to measure the increased temperature you do so quite naturally by saying that the temperature has risen from minus fifteen to nought. That is not a subject of merriment or ridicule. It is a plain and simple way of measuring increment, and depends on a simple proposition. All you need to observe is the change in relative values, and it is perfectly immaterial whether the measure is a minus or positive figure. Let me say quite frankly I quite recognise that this justifies some criticism and inquiry as to the application of the 10 per cent. That is perfectly true, and nothing that I say is intended to skate over or avoid that criticism. All I am concerned in saying for the moment is that in the view of the Department it is possible, though I do not think it is likely often to happen, to measure from a value which is represented by a minus quantity if there is an increase from that original site value to a smaller minus quantity, that is to say, a rise by the addition of some positive element of value. May I point out if that is not so the object of the Finance Act in this regard would be defeated in the case which he is putting to me. Suppose we were dealing with the case where the original site value might be arrived at by subtracting £600 from £400. I conceive that that is a possible but very rare case. If you subtract £600 from £400 you get minus £200, and according to the other view you get nothing. Let me suppose that the land in process of time had an unearned increment which it had not previously possessed, and suppose that amount to be £100.

MARQUESS of TULLIBARDINE

You tax a decrement.

8.0 P.M.

Sir JOHN SIMON

It is not a question of decrement. It is a question of arithmetic, and very elementary arithmetic. If you move from minus 200 to minus 100, the Noble Lord will agree that that is an increase and not a decrease from the figure from which you started. I suggest that involves an increase of £100. If it involves an increase of £100 it is a subject for taxation. The Noble Lord says if you arrive at a minus quantity you write it down as nought. When the minus is decreased by £100 its value would still be put by him at nought, and the result would be, there would be no increment. But whatever scale we use, I think he can see that it involves a rise from a large negative quantity to a small negative quantity. I do submit that is a right view of the matter, and any other view would be to let some people off paying taxes when they enjoy an increment, although other people in the same situation would have to pay the taxes.

Mr. PRETYMAN

I do thank the Solicitor-General for his courageous and very ingenious speech. It was very useful to my argument when he admitted in his last few sentences that the Government are taxing a negative quantity and that a negative quantity ought to be taxed equally with a positive quantity.

Sir JOHN SIMON

I said nothing of the sort. I said a rise from a larger negative quantity to a smaller negative quantity should be taxed. The rise from a negative quantity should be taxed, for the rise would not be a minus quantity; it would be a plus quantity; that is a matter of arithmetic.

Mr. PRETYMAN

I may point out that I have not mentioned any arithmetic. What the Solicitor-General has just admitted is that he is proposing to tax a negative quantity.

Sir JOHN SIMON

I am going to tax a positive increment.

Mr. PRETYMAN

You are not taxing a value. You cannot say a minus quantity is a value. It is not a value, it is a liability. What you are proposing to tax is not increment value but increment. I will not say the hon. Gentleman is trying to bamboozle the House, but the fact is, he is confusing the issues between increment and increment value. It is an arithmetical calculation and nothing else. By that arithmetical calculation you arrive at a figure, but it is not a value. My hon. Friend asks, can you tax as increment value something which is not a value? Though the Solicitor-General is extremely ingenious, I think his legal ingenuity would be puzzled to prove to the Committee that a minus quantity is a value.

Sir JOHN SIMON

It does not require any ingenuity at all. What I venture to suggest is that, if you want to know whether a property is increasing in value, you can measure that by a scale which involves comparison of two minus quantities. It is just as easy as by a scale which has two positive quantities. If we were both catching a train, and I were five minutes late and the hon. and gallant Member ten minutes late, the fact that we were both late would not prevent me from saying I was five minutes in front of him.

Mr. PRETYMAN

It is obvious that before you proceed to tax increment value you must prove that there is value. You start with an assumption which is unjustified. You can prove there is an increment in the sense that there is less liability, but less liability does not mean more value. How can a minus quantity be a value? You cannot pay over a minus quantity. There is no such thing as a minus value in existence. It is arithmetical.

Sir JOHN SIMON

Will you make me a present of any land on your estates which works out at having a total value which is minus?

Mr. PRETYMAN

The hon. Gentleman asks me to present him with land having a total value which, he assumes, has no site value. I will present him with the site value if he can see it. This is a purely imaginary value. The Solicitor-General becomes confused with his own argument, and does not know the difference between site and total value. I never said total value could be a minus quantity. You produce a minus quantity and call it a value. You propose to put a tax upon it; then the Solicitor-General gets up and tries to defend it by all kinds of analogies—by his punctuality and my unpunctuality, and questions about thermometers. But he has not made plain to me or any Member of this Committee how a minus quantity can have a value. What he has proved is what you might call a reduction of liability, but what the Act taxes is not increment but increment in value. That point the hon. and learned Gentleman has not dealt with.

MARQUESS of TULLIBARDINE

The hon. and learned Gentleman means, I understand, that, practically, a liability is a minus asset. I understood this Act was passed to catch people who were making increment on their land. I did not know before, but now I understand that it is intended to fine those who are running their concerns at a loss. I started from the normal, he wants to start from a minus. He does not tell us where that minus is. I ask him if it is the legal opinion of the law officers of the Crown that minus values are legally assessable as site values. I understand total value is a plus quantity, and the Act says site value is part of the total value.

Mr. CASSEL

I want to express a difference of opinion from the Solicitor-General. What we are trying to get at is assessable site value. You cannot say a minus value is not a contradiction in terms. If you were to put a tax on assets and deduct from these assets the liabilities, would you then call these liabilities minus assets? It is as absurd to speak of minus value as to speak of minus assets. There are other points which make it clear that the taxation of minus values was not intended by the Act. Gifts are not taxed. By the arguments used one would have expected to find a tax on these. Does not the Solicitor-General think that the person who is fortunate enough to give away a liability ought to be taxed on that minus quantity. Another point is the 10 per cent. which the Solicitor-General has not attempted to deal with.

Mr. HAROLD SMITH

I wish to put one point and to ask whether, if we discuss the matter again this evening, the Solicitor-General could give us a little more lengthy and detailed answers. It does seem to me that the hon. and learned Gentleman is assuming an impossible position if he is prepared to argue that negative value is increment value. Suppose I carry on a business where I lose £1,000 one year and only £500 next year, ought I to have to pay Increment Tax, and ought the Income Tax authorities to come in and say, "You have not lost by £500 what you lost in the previous year and therefore you must pay Increment Tax?" It is increment if it is looked at from the Solicitor-General's point of view. It is increment in that sense if I lose £l,000 in 1909 and in 1910 only lose £500. What would hon. Gentlemen opposite say if under these circumstances the Income Tax authorities came down and demanded payment of a tax upon the money which they have not lost? I hope the hon. Gentleman will himself, or through the Attorney-General, see his way to deal fully with the subject of this interesting discussion later in the evening. This Committee is indebted to the hon. Gentleman, who is always most courteous—

And, it being a Quarter past Eight of the Clock, and there being Private Business set down by direction of the Chairman of Ways and Means, under Standing Order No. 8, further proceedings were postponed without Question put.