NEW CLAUSE.—(Amendment of s. 2 (3) of the Principal Act.)

HC Deb 29 March 1911 vol 23 cc1342-78

"Sub-section (3) of Section two of the principal Act (which relates to the definition of increment value) shall apply to the case of any transfer on sale of the fee simple of the land or of any interest in the land which took place twenty years or more before the thirtieth day of April, nineteen hundred and nine, and which was a transfer to the person who is the owner of the land or any interest in the land at the time when an application is made under that provision, as it applies to the case of a transfer on sale which took place within twenty years before the thirtieth day of April, nineteen hundred and nine.

"In the cases where the original site value has been finally settled before the passing of this Act, an application may be made, notwithstanding anything in Subsection (3) of Section two of the principal Act, under that Sub-section, for the purpose of giving effect to this provision within three months after the date of the passing of this Act, and the Commissioners shall in such a case alter the original site value as finally settled in such manner (if any) as may be necessary to give effect to the Amendment made by this provision, and in cases where any amount has been paid on account of duty, the Commissioners shall make such repayment as may be necessary to adjust the amount paid to any alteration of value made in pursuance of this provision."—[Mr. Hobhouse.]

Motion made, and Question proposed, "That the Clause be read a second time."

Viscount HELMSLEY

I rather hoped the Secretary to the Treasury would have given us some explanation even if he did not fully explain the Clause.

The SOLICITOR-GENERAL (Sir John Simon)

I only rise to offer an explanation now because I think it will save time if some explanation is given. The House will remember that under the Finance Act of 1909–10, when the original site value comes to be determined, it is determined by reference to 30th April, 1909. But there is a provision in the Act that if within three months of the date when the original site value is determined an application is made and the facts proved it is possible to get a substituted site value to put in the place of the original site value, and that substituted site value is a site value ascertained by a reference to an earlier date, so long as it is a date when the transfer on sale of the fee simple of the land took place not further back than twenty years. That is commonly called the twenty years' Clause, and what the Government now propose under this new Clause is to offer an extension of that twenty years in cases which may be further than twenty years back, where the transfer takes place to the owner or to any person interested in the land who is making an application for a substituted site value. The position, therefore, will be this, that whereas under the existing law if a man acquired a freehold more than twenty years ago he would not be able to get a site value put upon the register by reference to that transaction, but he must be content with the original site value of 1909, we propose to give him an opportunity of calling in aid a transfer which is more than twenty years back as long as, of course, it is a transfer in which he or some other person interested in the land is concerned. That is done because when this difficulty was brought to the attention of the Government it was conceded that some arrangement should be made. The proposal which we make is, we think, a fair one, carried out in the spirit of what we then understood to be the promise we made, and if the Clause is read in connection with the existing clauses of the Finance Act the effect will be that a man who feels aggrieved because the original site value is a site value at a time when his property was depressed in value will be able to take advantage of any recovery in the site value, not only up to the site value of twenty years back, but up to that further period when he or anybody interested in the land acquired by transfer the interest, or some interest, in the land which is being dealt with. That is the extent of this proposal, and I hope it will commend itself to the House at large as one which will be regarded as a substantial concession. It is not an offer made, however, with any hope of gratitude, but with a view of carrying out an undertaking given.

Viscount HELMSLEY

I quite recognise this Clause, which has been put down by the Government, is something in the nature of a concession, and does go some way to meet one of the points connected with the concession of twenty years back. But I may point out it is very far from fulfilling what we understood as the pledge given by the Chancellor of the Exchequer, and, if I may be allowed, I will just refer to what was said on this subject in speeches. The point was raised at a Conference which the Chancellor of the Exchequer had on 14th September with the experts, surveyors, and valuers, and so forth, and in which the Chancellor of the Exchequer put the whole case. I do not want to quote the whole speech at length because I did so on a previous occasion, but this is the effect of what the Chancellor of the Exchequer said. Supposing a man bought property for say £2,000 and there was a slump in the value of property in the neighbourhood and down it goes to a £1,000 and it now is a £1,000; supposing also it goes up in five years to £1,500, there would be an increment of £500 on it. Then we say you can go back twenty years and if within twenty years he paid more for it there is no increment. That is the effect of the words in the speech of the Chancellor of the Exchequer on 14th September, 1910. Then there was a further speech of the Chancellor of the Exchequer to a deputation of building societies, co-operators, and trade unionists. I have the quotation in a paper called "Land Values." A certain Mr. Wood had raised the point and he said:— For instance if a man, twenty-five years ago, gave £2,000 for a property which had shrunk in value until to-day it was only worth a £1,000, and which in ten years had appreciated again to £1,500 or £2,000, he would have to pay Increment Duty. The Chancellor of the Exchequer then said he would make a note of the point. Later on, when he came to reply, he said:— With reference to the point urged by Mr. Wood with regard to the twenty years' purchase, he would be happy to accept any Amendment and he would consider whether a provision could not be drafted to alter it. It was clearly unfair that in the case which had been mentioned, a man should have to pay Increment Duty on what really was no increment. He, of course, could not say what form such an Amendment would take, hut they would find that the letter would not fall short of the spirit of the pledge. That is pretty explicit. I have also the pledge which the Chancellor of the Exchequer gave in this House in reply to the hon. and gallant Gentleman (Mr. Pretyman). He said on 20th February:— As far as I can see that is a different thing from the answer I gave to the deputation. I will look into it, and I promise that whatever I said to the deputation (that is the deputation of surveyors), I will as far as possible carry it out in the Act of Parliament."—[OFFICIAL REPORT, February 20th, 1911, col. 1639.] That pledge was repeated by the Secretary to the Treasury. He said:— My right hon. Friend the Chancellor of the Exchequer, dealt with that particular case under the twenty years' Clause, and he gave an undertaking to this House. I repeat that pledge on his behalf, and I think if it is carried out in the spirit in which it was offered, it probably meets the whole of the case which was so well put by the hon. Member in the House this afternoon."—[OFFICIAL REPORT, 23rd February, 1911, col. 2137.] The point at which I am sure the Government will realise was raised on this twenty years' Clause is not alone whether it should go back beyond twenty years if the property is still in the hands of the same owner who purchased it more than twenty years ago. That was not the only point, yet it is the only point met by the Clause. The point was whether, if there had been an actual loss to the person owning the property, there could, under any circumstances, be Increment Duty payable. That is particularly what the Chancellor of the Exchequer said in answer to the deputation, and that is what he repeated, and what was repeated again by the Secretary to the Treasury. The point is that the Clause, to meet the promise, as I hold, of the Government, should expressly say that no Increment Duty should be payable under any circumstances if, as a matter of fact, the total value at the time is less than the total value when the property was bought, if it was bought within twenty years. I do not see how there can be any other explanation of the statement of the Government on that point. I was very surprised not to see a Clause down on behalf of the Government dealing with it before to-day. I think the Clause appears on the Paper only to-day, though for some time there have been Clauses dealing with this matter on the Paper in the names of the hon. and learned Member (Mr. Cave) and myself. There is one which comes on very shortly, and I had hoped the Government would accept it, and I hope even now they will accept it, because it only carries but strictly what the Chancellor of the Exchequer and the Government have promised. The Government may say that circumstances might arise where you can substitute the original site value according to the price of the property twenty years ago where Increment Duty is payable, if there has been a loss on the total value to the owner. But that is not so, and if the right hon. Gentleman will consider a possible case for a moment he will realise that the point of the grievance is not met by his own Clause. Take a property the site of which was valued at £500 and on which a house or building or a factory worth £1,500 was built, the total value being £2,000. That is twenty years ago. Then say that on 30th April, 1909, the total value of the property had gone down to £1,000; it might very conceivably do so, from the fact that the factory was no longer in demand, or possibly it might be a building like a skating rink, which has lost its value for the particular purpose for which it was built. Then say that in 1909 the site value remains the same as it was twenty years ago—£500—but the valuers hold that the building has depreciated to £500, therefore the total value of the building and site together is £1,000. Then contemplate that in 1914 there is a recovery of the value of the total to £1,500. The valuers will say that the building five years ago was only worth £500. Buildings cannot appreciate in value, and therefore there must be an increment on the Bite of £500. What advantage in that case has a man in substituting the previous site value twenty years ago for the original site value as settled on 30th April, 1909? He gets nothing out of the concession at all, because, although ho has made a total loss of £500 on the whole thing, yet there is an alleged increment on the site of £500. He would have to pay on that, and the grievance which we have urged is not met by the Clause which is put down by the Secretary to the Treasury. He has met a grievance, that is, if a man has bought property more than twenty years ago, and the same owner is still in possession he is allowed to go back more than twenty years, practically for the lifetime of the present owner. That is a concession, but I emphatically say it is not the concession which, as I read these pledges, and as I think everyone must read them, we expected from the Government, nor the concession which we have a distinct right to ask for.

Mr. ELLIS DAVIES

I understand the point taken by the Noble Lord opposite is that though the value of the property may have gone down since the purchase the site value has not gone down. It seems to me that the real difficulty is whether or not the Increment Duty is payable on the increase which takes place in site value alone. I should rather like to know whether I am right in assuming that the Increment Duty is payable only on the increase which may take place in the site value. I rather think that was the answer given by the Chancellor some time ago, but I am not quite so sure that it is the practice of the Government officials at present. Take, for instance, a case where the house was bought five years ago for £1,000. The original site value was £200. That house to-day realises in the market £1,300. Am I to take it for granted that the Increment Duty is to be assessed on one-fifth of the £300, and is the whole increase of the value of the property to be attributed to an increase in the site value I think that is a fair way of putting it. May I put the converse case, which may answer the Noble Lord's point, that buildings do not vary in price. I am giving a case where the original site value was £400, a house was built upon it and ultimately the property was sold for £1,550. The house recently changed hands at less than £1,200. That is a loss of £350 to the owner. Am I to understand that, under the present Act, the site value of that property will be £50? If it stands on one side it must stand on the other. If the increase in the total value of the property is the increase of the site value, a reduction on the total value of the property must also be a reduction in the site value. If the increase is deemed to affect site value alone, why should not a reduction of the value be equally attributed to the site value? The site value really does not change in a short time, but if anything it deteriorates. Take land which has been covered with small houses occupied by the lower classes in towns, which are rented at £20 to £30. In ninety-nine cases out of a hundred the site value does not increase but, if anything, it rather tends to depreciate. On the other hand, the value of large houses in small towns does not depend so much upon site value as upon the personal factor, on the question of whether or not at the time the property is submitted for sale there is in the market a purchaser for it. If you put up a house that is worth £2,000 in a small town the number of possible purchasers is very limited, and, if there does not happen to be in the market at that time a purchaser who can afford to give £2,000 for the house, the price is reduced. On the other hand, if you strip that land of the buildings contemplated in ascertaining the site value, the value of the site for any other purpose will remain the same. The real difficulty is the difficulty which I pointed out in the beginning, and that is where the Increment Tax is going to be levied on the actual increase in the site value alone or where, as I believe, one of the Treasury officials, eighteen months ago, said the Increment Value is to be assessed on the increase which has taken place in the total value of the property.

Mr. PRETYMAN

I do not think any speech could have been more opportune than that of the hon. Gentleman, because he has asked a question which goes to the root of the matter. I should like to reecho what was said by the Noble Lord (Viscount Helmsley) that we are glad to accept this new Clause as a concession, but I should like to echo his statement that it is not the concession which was promised by the Chancellor of the Exchequer. We are glad to have it, but it is a totally different concession which does not touch the point of the concession made by the Chancellor. I do not say that without being able to prove my words. To enable me to do that, I must go over the ground. I wish to make good three points. First of all, I have to make it clear what the pledge was. That has been done already by the Noble Lord. Next, I have to make it perfectly clear, not by imaginary cases, but by actual concrete cases of claims which are being made by the Treasury, that this promise is not being fulfilled. Next, I have to show that the Clause which is proposed by the Government does not meet the point, and then, finally, I have to ask that the pledge shall be fulfilled, and that clauses should be introduced giving the concession which was promised. That is my position. What I have to do first is merely to emphasise and make perfectly clear to the House what the pledge was, and in order to do that I have here the original shorthand notes taken at the Conference referred to by my Noble Friend (Viscount Helmsley). Anything plainer than the words used by the Chancellor of the Exchequer on that occasion could not possibly be used. This statement was made at the first of the three Conferences, which was held on Wednes- day, 14th September, 1910, at 10, Downing Street. The Chancellor of the Exchequer said:— Supposing a man buys a property at one price; it afterwards goes down to a lower price, and afterwards goes up and there is an increment.

Sir J. SIMON

Being the difference between the two prices.

Mr. PRETYMAN

The Chancellor of the Exchequer proceeded:— A man buys property at say £2,000. That property may be houses and land, or only land. There is a slump of property in the neighbourhood, and down it goes to £1,000, and its value now is £1,000. That is a statement for practical men to read and understand, and it was on this statement that the election very largely turned. This statement of the Chancellor of the Exchequer was used all over the country at election times, and it was taken literally. The Chancellor of the Exchequer said nothing about site value. What he said was:— Down it goes to £1,000, and its value now is £1,000. Supposing it goes up in, say, five years to £1,500, there would be an increment of £500. Had it not been for this——

Sir J. SIMON

There would be no increment of £500, unless you are to subtract a site value from a site value. The £1,000 is assumed to be original site value, and the £1,500 is assumed to be the site value on the occasion. If you subtract the one from the other there is an increment of £500.

Mr. PRETYMAN

I am sorry that the learned Solicitor-General should have interrupted me, for I think it is an attempt to fog the issue. The whole defence of these taxes from beginning to end is to fog the issue. Their only defence is their obscurity. Here is a plain and definite pledge given by the Chancellor of the Exchequer. Site value is not named.

Sir J. SIMON

Increment is named.

Mr. PRETYMAN

A man buys property for £2,000; down it goes to £1,000 at the date of the original valuation. It afterwards goes up to £1,500. That would be an increment of £500 had it not been for the provision with respect to property bought within twenty years before the passing of the Act. The right hon. Gentleman said you can go back twenty years, and if within that period he paid more for the property there is no increment. These are his words. Who ever bought a site value? There never was such a thing bought or sold, and there never can be. It cannot exist except in the imagination of the land taxers. The Chancellor of the Exchequer afterwards emphasised the words which I have quoted by saying that the fulfilment of that pledge in the letter would not fall short of the spirit of the pledge. He reiterated the undertaking, and pledged himself to carry out the promise to the full. I think I have made it perfectly clear to the House that the pledge was a definite and plain one. Where twenty years prior to the passing of the Act a man had bought a certain amount of property, unless he sold it at a price higher than he paid for it, there was to be no increment. That is a clear and definite pledge given in plain words to plain people.

I have now to make good my second point that the pledge is not being kept. There are numerous cases of claims being made on people for Increment Value Duty, though they are selling at considerably less than the price they paid within twenty years of the passing of the Act. I have here a number of concrete cases. A working carpenter writes to the Land Union:— I am sorry to trouble you again, but I thought I had come to a settlement in regard to the provisional valuation of my cottages. As I told you in previous correspondence, the district valuer called upon me and promised to rectify it. He now falls back on the provisional valuation, and says that I placed the rent of the cottages at £16 18s. in Form IV. I told him I could produce the deeds which prove that I gave £520 for the two cottages, and that I am clearing six per cent. I think it is a shameful way to treat a working man like myself. The provisional valuation had been put down at £420. This is what the valuer wrote to him:— With further reference to your letter of the 14th inst., objecting to my provisional valuation of these houses, I have to point out that you are not entitled to substitute the price paid from the total value. The valuer says that you are not entitled to do exactly what the Chancellor of the Exchequer said he would do. The very words used by the Solicitor-General in regard to this Amendment were that the substituted site value was ascertained from the price on the previous value. What was promised was the substituted value. That was clearly promised, and the valuer now says:— You have sold the house for more than my valuation. The increment would not necessarily be such an excess, although it would probably be something near it if you sold in the immediate future. There is a definite statement by the valuer. The pledge given by the Chancellor of the Exchequer is not being carried out now. A man purchases property at a certain price within twenty years of the passing of the Act, and he sells it at a less price, and he is now being charged Increment Duty. That is what is being done, and the mere extension of that privilege to twenty years, the lifetime of the owner, does not really meet the difficulty at all. It merely extends the present insufficient exemption. The Solicitor-General said that site value ascertained from the price on the previous transfer is to be substituted for the present site value. He did not tell the House, and we have never been told, how that substituted site value is to be ascertained; there is no suggestion how it is to be ascertained. It is a perfect myth. How are you to ascertain the site value of a bit of land sold twenty years ago? I do not wonder that the Solicitor-General looks thoughtful. I think it would puzzle his ability to discover some method intelligible to ordinary men by which site value twenty years ago is to be ascertained. I will answer the question asked by the hon. Member opposite as to how site value is ascertained. It is not ascertained at all. I can answer for hon. Members on this side of the House that the claim is being made on the entire increment. I ask the House to note that the Solicitor-General takes refuge in the argument that site value is something different, and that it does not depend on total value. What are the facts? The answer to the question is this. The Government claim that the whole of any increase in price is to be attributed to the site. I have here a concrete case which proves that fact. It is the case of a property at Plymouth. The original total value was £750, of which £560 was attributed to the building upon it, and £190 was attributed to the site. That particular house was afterwards sold for £1,000. A notice was thereupon served upon the owner by the local valuer substituting for £750, which was the total value, the consideration money of £1,000, making an identical reduction of £560 for the building, and claiming that the site value, was £440. Anything plainer than that it is impossible to find.

Sir RUFUS ISAACS

It is a case where the building has not changed in value.

Mr. PRETYMAN

Then will the Attorney-General explain how he will get at the site value in the case of a similar house, which, let us suppose, is in the same street and next to the one referred to. That similar house is valued at £750, and the deduction of £560 is made for the building, the site value being therefore £190. Let us suppose that that house, by the occasinal chance of the market, is sold for £800. In that case also the building remains apparently of identical value. What happens in that case is that the site value is not £440, but £240, and yet you have two pieces of land of identical shape and size, and similar in every respect, obviously of equal value, the one having a site value of £440 and the other a site value of £240.

It is obvious when you sell a composite subject, such as a site and buildings, the person who buys that composite property has regard to the suitability of the site for his purpose, and also to the suitability of the building, and I cannot imagine it possible that in any particular case the whole of the consideration, the whole of the rise or fall, in the value of any property of that kind, or of the change in price can be attributed altogether to the house or the building. I am glad to see the hon. Member for the Brightside Division of Sheffield (Mr. Walters) as he has a practical business knowledge of these questions. I ask him to say whether he considers that this method, of which I have given a concrete example, that is now being adopted, of attributing the whole increase in value of property to the site is a practicable method, or is in his professional opinion a possible method of carrying out business, and whether you will not have by the chance of the market identical properties with absolutely different values fixed upon them, upon which value future rates and taxes are to be based? Nobody can deny that the building affects the value of the composite property. The result of this principle of attributing the whole of the increase to the site is directly to penalise the expenditure of capital upon building, because the larger the proportion that the value of the house bears to the value of the land upon which it is erected the heavier will be the fine which will fall upon the owner. The allowance of 10 per cent., for instance, which is popularly supposed to attach to the whole of the original total value, only touches the original site value.

Supposing there is a site with the value of only £100, and you erect on it a building worth £10,000, there you have a site value of £100 and a total value of £10,100. That property is afterwards sold for what would not represent a very big rise in the value of buildings, say £12,000. You have there got an increment of £1,900. According to this principle the whole of this is to accrue to the site value of £100, and your allowance on that is 10 per cent., not of the original £10,100 total value, but of the £100, which is the value of the site, that is £10 only. That is the only allowance you get in any shape or form. Let us take the other end, where you have bare land, upon which there is no building, which is to have the increment that you profess to tax most heavily. There the total value and the site value are identical. Therefore in that case all that you tax or can tax is the real increase in the value of the land, and the 10 per cent. is really given there upon the total value. But the moment you build a house on the land the whole of any increase in price which you may get for the house is tacked on to the increment that is supposed to belong to the land. The right hon. Gentleman (Sir Rufus Isaacs) opposite may shake his head but that is the claim that is being made. Taking this piece of land that I have referred to, £190 was fixed as the site value. I am certain that no Gentleman on that Bench would got up and say that if there had been no house built on the land it would have been sold for £440. If that is not so is not that £440 a fine on a man for building a house on it? If he had built no house, if he had kept the land bare, and held it out of the market, it is obvious to the least intelligent that that land would have no site value increase. It would be just as worth £190 to-day as yesterday, and would be worth only £190 to-morrow. The increase is a fictitious increase, solely because a house is built on it. That is what you call encouraging building. We have now these claims. You told us you were not going to make them. They are now being made, and made on poor men.

The UNDER-SECRETARY for the HOME DEPARTMENT (Mr. Masterman)

The whole of the hon. Gentleman's rhetoric depends on a perfectly incorrect assumption of how we put the value on the land.

Mr. PRETYMAN

I have given definite figures of a claim made on the owner of a house.

Mr. MASTERMAN

The hon. and gallant Gentleman is assuming that in no circumstance do the valuers take into account any increase that may take place in the value of the building. That is not correct. That is not the method by which the valuation is carried on.

Mr. PRETYMAN

I have been asking for months to find out what that method is, and I have been in the region of conjecture for so many months that I revel in bringing in concrete facts here, and when the right hon. Gentleman answers me, as I hope he will, on the principles and methods which they have adopted, and which we are most anxious should be illustrated and explained, I trust he will show how on that principle they have arrived at a valuation, and how have they made a claim that a site value of £190 has within six months risen to £440, and why have they made the identical deduction of £560 for the building that they made in the first instance when the property was valued at £750. They deducted £560 for the building, and then when the property is sold for £1,000 they again deduct £560. [An HON. MEMBER: "Quite right."] We know what the principles of the hon. Members are, but what we want to know is how this Act is going to be administered.

Will the right hon. Gentleman explain to us on what principle the identical deduction is made when the site value rises from £190 to £440, except on the principle which I have assumed, and I claim that I am entitled to assume? Here we have the identical deduction, and we have the apparent increase from £190 to £440, and on what other principle it is done except that which I have assumed, namely, that the whole of the value is credited to the site and none to the building, I am absolutely at a loss to understand. We have heard a great deal about building. I have an exactly similar case here of a builder. The Chancellor of the Exchequer gave an additional pledge that no profit due to the brains, skill, or intelligence of a builder should be taxed. Here is a case where a builder bought a piece of land at Elstree for £40. It is a concrete case, and all the names can be given. It lay idle for two years. Then he built a small house thereon at a cost of £337 10s. This includes no profit of any kind to himself, nor does it include conveyancing expenses. He was out of pocket to the total of £377 10s. The provisional valuation fixed the original total value at £360: a deduction was made, leaving the original site value £40. The builder sold the house on the 31st May for £375, and the transaction of selling that house for £375 involved a loss to him, taking out of pocket expenses of £2, including the cost of conveyancing. There is a claim now upon him for Increment Value Duty upon an increment of £17 although he made an actual loss.

Mr. MASTERMAN

Give us the figures of the increment of the site value.

Mr. PRETYMAN

I have them here. The value of the land, calculated in accordance with Section 2 of the Finance Act, is £375. The difference between the gross value and the value of the fee simple of the land divested is £318. The assessable site value is £370. The original site value, as I have stated, was £40. They deduct the £40 from the £57. That brings it down to £17, which is claimed as the taxable increment upon this building transaction.

Sir J. SIMON

This is a case where the site was bought for £40, and, consequently, when you compare the price at which the site was bought with the value of the site on the occasion you do not compare unlike things, you compare like things.

Mr. PRETYMAN

The comparison is between the £40 and the £57. That is exactly the point. How is that £57 arrived at? It is arrived at by taking what the house has sold for and crediting the whole of the assumed rise in value to the site. That is the way it is done. It is exactly the same point as the other. The whole profit is really fictitious, because nothing is allowed for legal expenses beyond the 10 per cent. on the £40, and the whole of the profit is debited to site, and therefore that is treated as a taxable site value of £17. This is merely another case of emphasising the point which I made on a former occasion.

Dr. CHAPPLE

What period elapsed between the purchase of the site and the sale?

Mr. PRETYMAN

In 1904 he purchased the land for £40, and the house has just been sold.

Dr. CHAPPLE

Was there any depreciation in the house?

5.0 P.M.

Mr. PRETYMAN

No. It was not long built. The site lay idle for two years, and the building began in 1906. There is not much depreciation possible in that time. It is a negligible quantity, and a very small matter. I will only quote one further instance to show the absurdities to which these valuations give rise, and that is a case in Scotland. The owner of that property died, and the property was valued for Death Duties at £1,000, and the duties were paid on that amount. It has now been valued, for the original total value for the purpose of increment, at £450. The Death Duties were paid by the executors in April, 1908, on £1,000. Yet on 13th April, 1909, within twelve months, that property, identical in appearance, is valued for Increment Duty at £450; so that if the owner of it sells at £1,000, the very sum on which Death Duties have been paid, then the Increment Value Duty payable is £173. [An HON. MEMBER: "Subject to appeal."] I am glad of the hon. Member's interruption. It is a pleasing position for a subject of the Crown to be put in. I should have thought that the best appeal against charges of that description is to see to securing fair taxation as one of our primary duties. It is an indication of the condition to which our minds have been brought that it is considered to be a defence against the cases I have mentioned under this method of taxation that the owner can appeal. The only defence, apparently, of owners of property for some years to come is that they are to spend the whole of their time in the Law Courts in fighting cases under this Act. I take a different ground. I say it is the duty of this House to do everything it can to keep the subjects of the Crown out of the Law Courts. I hope I am not transgressing on the opinions of members of the legal profession when I say that we are here to make the law so fair in the first instance that nobody would desire to appeal against it; and, secondly, so clear that there will be no necessity for appeal. I think I have clearly shown to the House that a definite pledge has been given, and I am glad to know that in the course of an hour or so there will be an opportunity for you, Sir, to put an Amendment from the Chair which stands in the name of my hon. Friend dealing definitely and clearly with the fulfilment of the pledge of the Chancellor of the Exchequer. That pledge has been reiterated by the Under-Secretary to the Treasury. The present Debate will have had the effect of shortening the Debate on the Amendment, and I hope that when the Attorney-General comes to deal with it he will further shorten Debate by fulfilling the definite pledge given by the Chancellor of the Exchequer.

Mr. TUDOR WALTERS

I think we are liable to arrive at some confusion in dealing with questions of this kind if we do not clearly discriminate between the principles laid down in the Act and mistakes which may or may not have been made by particular district valuers who apply those principles. I never hesitated during the discussion of these taxes before this House to state that, in my humble judgment, it was a difficult task to arrive at a fair value of the landed property of the country. I believe it is possible in process of time to get a fair basis of value, but I foresaw then, and I am quite certain now, that in any process of getting the value and in getting those portions of the Act into smooth and effective working there will undoubtedly be many cases presenting difficulty and in some cases actual hardship. It has been said a great many times during the discussion of these Land Taxes in this House that district valuers are systematically under-valuing landed properties. I do not believe that to be the case. I have a good deal to do with a large number of district valuers in settling values in different parts of the country, and I have found cases of under-valuing and in other cases over-valuing; but this shows that these values should be arrived at by careful selection and careful consideration. I have found that people who own the property valued always put too high a price upon it, and that is especially the case with the owners of small properties. A man has, perhaps, bought a house at a top price, and he has spent some £30 or £40 for his own convenience on matters which may not add to the value of the property; yet he expects at any given moment to get all that he has paid for it and spent upon it when ho comes to sell it. In investigating particular cases you generally find that a man at the beginning has paid too much for the house, and that he has spent money upon it in a manner which has not added to its value. And yet when he comes to sell he hopes to get back both what he gave for the house and what he spent upon it. In my own experience, in dealing with district valuers, I find them extremely anxious to arrive at a fair value. I have found them not only willing, but very anxious, to have data presented to them on which they can arrive at a fair value.

I now come to the point raised by the hon. and gallant Gentleman (Mr. Pretyman) on the concrete cases which he gave. In reference to those cases, I think that any district valuer who has adopted the method which the hon. and gallant Member has described to the House has interpreted the Act incorrectly, and has presented what is an unfair claim. If I understand the Act at all it is that the increment is only payable on the increase of site value. The particular method of starting with a total value and taking, as a deduction, the value of the building, and then applying that same deduction to the increased amount for which the entire property is sold, may or not be a correct method. It is only a correct method if the value of the building remains unaltered. If the value of the building is changed then it is an incorrect method. It has been said, in the course of these discussions, that buildings never increase in value. But buildings do increase in value, and there are conditions which cause the increase of value. Supposing you had a certain number of houses in a given district let each at £40 a year, and supposing there is an ample supply of that kind of house, although £40 a year is a low price, it is the only price that at can be obtained for such houses. But supposing, again, the population increases, then it is a pure question of supply and demand, and the bricks and mortar of that class of house may increase from £40 to £50 or £60 a year. So when the district valuer comes to deal with these cases I contend that it is his business, before he deducts from it the value of the house, to see whether that value has increased or decreased in the meantime. It may have decreased by dilapidation or by a lessened demand; and, therefore, on that particular claim, submitted by the hon. and gallant Gentleman, if no change has taken place in the value of the building, then the method was bad. If any change has taken place then the method was grotesquely unjust. I hope the Treasury and the chief valuer will give most explicit and definite instruction to the district valuers that they are not to adopt that rough-and-ready method of arithmetic; it is not a fair process. They are not to assume, in all cases where there is a sale at an increased price, that it is necessarily an increment, because they are only entitled to charge on the increment in land value. To that extent I agree with the hon. and gallant Gentleman.

But he will not think me disrespectful when I say that the figures which he quoted, though, of course, not intentionally, misled the House, because it is suggested that the unfair increment is made payable by reason of the Act passed by this House. That certainly is not the case. I contend that the Act does not in any way authorise the charge, and if it were a client of mine who was called upon to pay it, I would advise him to resist it to the last. Although I have been all through a supporter of the general principle contained in the Land Taxes, I must say that I do think experience has already shown that there are a great many administrative details in which a change is urgently required. Is it to be wondered at, in dealing with such a huge interest as the land interest, in connection with which methods are so diverse and so complicated, and as to which lawyers have been spending their ingenuity in creating difficulties for centuries? I do not know what would have become of our landed system if surveyors had not been doing their best to simplify it. I submit that when you introduce new legislation of the kind that has been introduced it is absolutely impossible for anybody, unless he was absolutely inspired—I do not suppose that even the Chancellor of the Exchequer would claim verbal inspiration for the Land Clauses; he might have general inspiration, but certainly not detailed verbal inspiration for the Clauses—I say it is not at all to be wondered at that, even after a few months' experience, it has been shown that in many respects changes are needed.

I believe those changes ought to be made and can be made; if we use a little intelligence, in dealing with Amendments that are necessary, the Land Taxes can be made to work quite smoothly and quite fairly. I take exception to the use of concrete cases of that kind to controvert the general principle. I am a little bit distressed by these four different methods that the Act provides for ascertaining the increment. Those four different methods are very clever and very ingenious, but I think it would be very much better if, instead of them, we had one simple method of valuation to be employed as occasion arises. I do not think we can fairly and properly arrive at increment by going through an elaborate process of addition and deduction. I think the proper way to do, having valued for original site value, when occasion again arises for increment, to value it on that occasion by comparison with the previous valuation, and in that way you have a chance of arriving at a correct result. No such difficulty as that suggested in these particular claims would have arisen if a new valuation on the occasion of increment is adopted instead of the elaborate process I have mentioned. I firmly believe that, with the necessary administrative changes, that the Land Taxes can be made to work efficiently, smoothly, and justly.

Sir JOHN ROLLESTON

I do not wish to examine the intricacies and complexities of this Act, with which the public are becoming familiar, neither do I want to go into these concrete cases which have been so very well put by the hon. Member for Chelmsford (Mr. Pretyman), and which go to show that this Amendment is insufficient and incomplete. I merely wish to emphasise that where there is no increment but loss, and where, without regard to time or other circumstances, it can be shown to the Commissioner that there is no increment on the occasion of transfer, that nothing should be charged by the State which could not possibly be entitled to it under those circumstances. With reference to the valuation I heard the hon. Gentleman the Under-Secretary of State for the Home Department last night refer to increment by instalments, and say that competent valuers were brought in who would say what land would be built on in five or ten or fifteen years. I beg to offer my opinion, founded on experience, that no valuer in this country, not even the hon. Member for the Brightside Division of Sheffield (Mr. Tudor Walters), is able to say what land will be built on in fifteen years, or even in five years. To take increment from a man who has no increment on the same scale as the man who has cannot be defended by logic, reason, or justice. I never heard that defended by any hon. Member on the opposite side in this House, and I have never heard it defended or excused outside the House. Indeed, the man in the street is beginning to understand this matter, and to apply to it a word which it would not be Parliamentary for me to use. I do not think that hon. Members who represent large towns and urban or semi-urban constituencies will like it to be counted to them in those constituencies that they refused to support the repeal of this brazen and acknowledged injustice when it was in their power to prevent it being imposed on a large number of their injured and suffering Constituents. I can assure the Government that if, with their eyes open, they refuse to erase, completely erase, this blot upon their Act, that they will create perennial irritation and soreness, which must operate against the fruition of most of the objects for which the Act was originally framed and introduced, and if they do not do so, they will also cause to be made the most invincible arguments in favour of its early repeal.

Mr. EDGAR JONES

I was very glad that the hon. Gentleman (Mr. Tudor Walters) uttered his protest against the shovelling over the Table by the hon. and gallant Member for Chelmsford of those concrete cases upon which he laid so much emphasis in the course of his charge today. The hon. Member has done that three or four times already this Session, and on those occasions he was dealing more particularly with a case from Mountain Ash in my Constituency on, as the hon. Member admitted just now, very much the same point as he speaks of at the present time, and that is that the valuers were taking into consideration, when making their assessment, the houses on the site, and that they were doing it in such a way that when, as he assumes there will be, another automatic consideration of the house site, then these so-called working men, for whom the hon. Member is so much concerned, will be made to pay Increment Duty on the houses as distinct from the site value. I shall deal with the particular point on its merits, and explain to the hon. Gentleman that the particular case in Mountain Ash, in spite of difficulties and ambiguities in the mind of the hon. Member, is a case which illustrates quite clearly that there are some valuers in the country who understand their business, and that they are doing it very well indeed. Before I come to that definite point I want to illustrate to the House the valine of these concrete cases which the hon. and gallant Member is bringing forward in order that the Government shall not be misled any further to whittle away the substantial part of this valuation and of these taxes by constant amendments, granted as concessions for the hard cases, so-called, which have been produced with such emphasis on the word "concrete" and on the word "fact" by the hon. and gallant Member for Chelmsford.

This case of Mountain Ash has occupied a very considerable time of the Land Value discussions of Parliament on the point we have been discussing this afternoon about the methods of ascertaining site value as between buildings and site. The hon. Member for Chelmsford began the business in the Debates on the Address on 14th February when he quoted a letter and gave an example of a valuation, if we are to believe him, held at Mountain Ash. He followed that up on 24th February, when the Chancellor of the Exchequer was in his place. He got the Chancellor of the Exchequer, unfortunately, to admit that he thought there was something in the case. Then, after the Chancellor of the Exchequer made some remarks, the hon. Member for Chelmsford brought up a new set of letters on the Second Reading of the Revenue Bill on 7th March and quoted, as he has quoted to-day, details that have been supplied about architects' fees, cost of the lease, and so forth, and so forth. He wound up by quoting a letter that he had received from some gentleman, attributing certain statements to me in contradiction of the hon. Member's statements made to a deputation that was pleased to come up here. That is the story as I have roughly outlined it of this case which has occupied the time of the House so much. I am sure the House will be very chary about accepting many of the cases that have been brought forward for the first time to-day by the hon. Member after this one case which I have been able to bring to the test of fact and of local knowledge. The hon. Member for Chelmsford brought the case forward on 14th February with these significant words:— I have a case here which will illustrate my point and it is in a letter which I received this morning from total strangers to me in Wales."—[OFFICIAL REPORT, 14th February, 1911, col. 924.] That is the pretext that the hon. Member thinks sufficient, that he receives this letter from total strangers, and he knew so little about it that ho called me on that occasion "the Member for Mountain Ash," so that apparently he did not know whether it is a city or whether it is a village of trees like the Dyak villages of Borneo. Nevertheless, it is sufficient for the hon. Member to come down, quote the case, and make a long speech upon it and use it as material for his accusation against the Government and against the valuers. As I have said, on the 24th February he dealt with the Chancellor of the Exchequer and returned to the subject on 7th March, when he accused the Chancellor of, having misled the House. The hon. and gallant Member on that occasion said:— After that I received, unsolicited, from the Secretary of the Club at Mountain Ash, the following letter. Having given the letter, he proceeded:— This shows that the interruption of the Chancellor of the Exchequer was absolutely wrong and that my own statement was absolutely correct. Here you have the fact that one hundred workmen built 130 houses which actually cost £270. They are valued at £213 and if they sell any of them again at what they cost to build there will be Increment Duty charged upon them, not because they have increased in value but because they have been undervalued and subsequently sold at their proper value."—[OFFICIAL REPORT, 7th March, 1911, col. 1094.] It would not be in order to deal with the letter, referring to my statement, but by the leave of the House may I say that I never made the statements in the letter, because the deputation came here about Reversion Duty and not Increment Duty at all, as the Secretary to the Treasury knows. The hon. Member takes that case and makes it a basis for very serious arguments, and proceeds to make a lot of very definite assertions, and very emphatic, as he has been to-day, about concrete cases and facts. He said he hoped I would deem it my duty to deny the statement that was contained in the letter. I have done that. He stated "The hon. Member for Mountain Ash received a deputation from the Members of this Club." I did not receive a deputation. I never heard the name of that club until the hon. Member began to use the time of the House with random letters received from total strangers. He said that the secretary of the club sent me a report of what they were told, and that he informed me——

Mr. SPEAKER

What has this got to do with the Clause we are now discussing? It seems to me to be a very long way from anything now before the House.

Mr. EDGAR JONES

I was illustrating how unreliable these concrete facts are. All that I want to say is that the hon. Member did not receive those facts from the secretary of the club, and the secretary of the club has never written him a single line.

Mr. SPEAKER

This is an old story, and what the secretary of the club wrote and what the deputation said has nothing to do with what is before us

Mr. EDGAR JONES

The statement was that these houses had cost £270 to build, and that they were valued at £213. The hon. Member gave that case to show, as he has been saying to-day, that the valuers have not been doing their duty, and do not understand the whole question of site value. In reply to that I have made my denial of the correctness of the whole thing, and the very fact that the valuers valued those houses at £213 is to me an indication that the valuers have been doing their work very well and very intelligently. I know the local facts, and the hon. Member did not know and did not trouble to investigate them. The local facts are that these houses are built on the side of a steep hill, and that the local landlord who leased the land for the houses would not make any roads, in accordance with the practice, unfortunately, of many landlords down in our mining valleys. So that the workmen themselves had to go I to the expense of making roads and sewers and street works, which were included in the amount the hon Gentleman quoted from the letter, and which belong to the site and not to the houses as such. Therefore, the local valuers, in valuing the houses at £213, were doing their duty, and, I think, arriving at a very fair value in accordance with the value of property of the kind in the neighbourhood. I will conclude by protesting against the hon. Member's bringing facts of this kind which neither the Government nor anybody else can verify as to their details, and, assuming that he, in the House of Commons, knows better than the local valuers the relation of the cottages to the land and to the prices paid by architects, builders, and others. All I hope is that the Government will not make any more of these detailed concessions, by which the tax is whittled down, or take the hon. Member's concrete cases so seriously as he would have the House take them.

Dr. CHAPPLE

I wish to examine the concrete case put forward by the hon. Member opposite (Mr. Pretyman), in the light of the Colonial method of valuing land. I fail to see the grievance of which he complains. The method which has been followed for the last seventeen years has been for the land valuer to arrive at a figure representing, first of all, the total or capital value of the property; that is, the figure it would realise in the open market. In the concrete case brought forward by the hon. Gentleman opposite that value is £375. The next figure to be arrived at is the value of the improvements. The value of the improvements might be the total cost. If the building had just been erected, and, being quite new, had suffered no depreciation, the value of the building would be what it cost to erect. If, on the other hand, it had been built for several years, depreciation would certainly have taken place. Buildings never appreciate in value unless there has been a rise in the price of labour, or in the price of materials. Those are the only two elements that can ever appreciate the value of a perishable building. A building is a dying institution from the time you erect it. You must constantly keep it in repair. Examining this building in the light of the fact that it had been erected for five years, you have to inquire what you could re-erect it for at the moment of valuation, assuming that the cost of labour and the cost of materials are exactly what they were at the time of its original erection.

In the instance given by the hon. Member, the house had been built five years. If the valuer wanted to arrive at his second figure—that is, the cost of improvements—he would have to ascertain what it would cost to erect that building now. Obviously if there had been no change in the cost of labour and the cost of material it would cost the same to erect it now as it cost five years ago. That is £337. Therefore we have our second figure. From the £337, on the assumption that the cost of materials and of labour is the same, we have to deduct the depreciation in the house for five years' use in order to arrive at its existing value. Obviously if you can get a new house for £337 it cannot be worth £337 now. You have to deduct something for the five years' use of the house. A Colonial valuer, with his seventeen years' experience, would have deducted, say, a small 5 per cent. That gives a depreciation of £16. Therefore, the improvement on the land—that is what has been put on the land by industry and labour—would be £337 less £16, so that you have your first two figures—the total value of the land and the value of the improvements — and the site value is the difference between the two. In the concrete case given by the hon. Gentleman opposite, deducting the present value of the house from its original value minus depreciation, you get a site value of £54, allowing only 5 per cent. for five years' depreciation. In the instance given by the hon. Gentleman, the site value is £57, against an original value of £40, so that there is a difference of only £3. The unearned increment is £17; on the Colonial method it would have been put at £14.

Mr. PRETYMAN

I should have said that an adjoining site obviously of equal value is now on sale at £40. Therefore, I do not see how the site can have appreciated.

Dr. CHAPPLE

I have taken the figures given by the hon. Member. Obviously the vendor got £375. What did he get it for? For the house and land and nothing else. The house originally cost £337. Can a new house be erected for £337 or not? If the cost of materials and the cost of labour are the same as they were five years ago, obviously you could get a new house for £337. Are you going to exchange an old house for a new house? Are they both of the same value, or are they not? Obviously a house that has been used for five years is now a second-hand article. Are you going to exchange a second-hand article for a new article, or are you not? There must be a difference in the value. The old house is of less value than a new one. How much less? £21 is all that the valuer has shown for depreciation. He says that the house having been erected five years, and having undergone all the wear and tear of that period is worth £21 less than it was when new. Surely that is a small amount of depreciation. Thus you arrive at an unearned increment of £17. It is a most reasonable case, and all the crocodile tears shed by the hon. Gentleman evaporate in the light of an examination of the facts.

The ATTORNEY-GENERAL (Sir Rufus Isaacs)

We have, I think, travelled a little far in the discussion, but I do not complain of that if in the end it shortens the discussion on subsequent Amendments which are somewhat relevant to the Clause now before the House. I shall endeavour to deal with such of the facts that have been brought forward as are relevant to the present proposal. The Noble Lord opposite (Viscount Helmsley) has an Amendment on the paper which introduces other matters, particularly in reference to the substitution of the total value, which may be more properly dealt with when that Amendment comes up for discussion. The hon. Member for Chelmsford (Mr. Pretyman) made what appeared to me to be a kind of second reading speech, which travelled over much of the old ground, and would have been a very good argument to have addressed against passing into law Sub-section (3) of Section 2 of the principal Act. What we are at present discussing is a concession proposed in order to carry out the view, wishes, and words of the Chancellor of the Exchequer. I know that the Noble Lord does not think that it carries out those words, but I say that that is the object. We are not in any way changing Sub-section (3). We are simply extending its operations to meet certain objections raised by hon. Members opposite.

Mr. PRETYMAN

That is my complaint.

Sir RUFUS ISAACS

If that is the complaint, I should have thought it was not quite relevant to the present discussion. It would have been a very good point to have brought forward if we had been introducing this particular Sub-section now instead of extending it as we are doing to meet the views of the hon. Member. He says that we do not go to the full extent. It is open to him to move such Amendments as he thinks proper. The only point I shall deal with at the moment is whether or not we are carrying out what the Chancellor of the Exchequer promised. There has been a good deal of criticism with reference to that, I noticed particularly that both the Noble Lord and the hon. Member for Chelmsford referred to what they called definite pledges made by the Chancellor of the Exchequer, which they said were not being carried out. I am in a position to state quite clearly that in the view of the Chancellor of the Exchequer—that is in the opinion of the man who made the statements and knows best what was in his mind—these words do carry out what he said he intended to carry out. The Clause not only quite plainly, as it seems to me, but also in terms, carries out the Chancellor of the Exchequer's view of what he promised. I know very well that there has been criticism directed against the words used by my right hon. Friend; but if his statement is referred to it will be seen that the Chancellor of the Exchequer was referring to increment, and that he had in his mind the increment which is defined in Section 2 of the principal Act, and it is to carry out what he then said we have introduced this further extension. What the Noble Lord is seeking to do under the criticisms which he has directed against this Clause and in the Amendment which he has put down later on is to substitute the total value for the original site value, and not to substitute the site value for the original site value.

Viscount HELMSLEY

No. If the Attorney-General will look at my Clause he will sec that it asks to substitute for the total value as on 30th April, 1909, the total value at the time that it was purchased, not the site value.

Sir RUFUS ISAACS

I do not want to get into a discussion of that particular proposal at present. The important point is, what is the value which he proposes to deduct, and on what date does he propose to value the buildings for the purpose of arriving at his substituted value? If, as the Noble Lord says, what he intends to do is to deduct the value of the building at the time of the original site value, that is one thing. If, on the other hand, what he wants to do for the purpose of arriving at his substituted value is to take the value of the building on 30th April, 1909, that would be a totally different matter. As far as I understand, what he is attempting to do is to raise the original site value by the deduction of the value of the super-structure at a wrong date. I think we shall hear more from him later, but my impression is that this Amendment carries out what he and his friends wish. The result of the Debate to-day, following what the hon. and gallant Gentleman opposite said, seems to me entirely in that direction. That justifies us that this is the right view, and that we are taking a course in which hon. Gentlemen opposite will not be able to say that the provision is not carrying out the principle of the Increment Value Duty provided for in the principal Act. I only want to make one or two other observations, particularly bearing in mind what will succeed this discussion on this Clause in reference to valuation. I want to make this quite clear. The hon. and gallant Gentleman, in the instances he has given, and in observations that he has made, assumes it as absolutely clear—if I follow him both in this and many other Debates—that the valuers always take it into account for the purpose of arriving at the site value that the building cannot have risen, and that there will only be a rise in site value. That is the effect of what the hon. and gallant Gentleman said. He said that the value is not changed.

Mr. PRETYMAN

Unless there has been some structural alteration, I assume that the building has not changed.

Sir RUFUS ISAACS

That in substance is what I understood the hon. and gallant Gentleman to say. There is no doubt that that is entirely wrong. It is not in accordance with the Act. It is not in accordance with the principles that are set out in the Act. Neither is it, in fact, what the valuers are now doing. There have been discussions upon this, and we have had regard to the system of valuation which is now wholly in vogue. In order that there may be no doubt about it instructions have been given so that the valuers may know that they have to value the buildings in order that they may arrive at the value of the site for the purposes of Increment Duty. There may be isolated instances selected by the hon. and gallant Gentleman the Member for Chelmsford and others, but he must see that in order to form any opinion, or at least in order to deduce any general principle, you must have more knowledge of the facts than have been given to us by him. Doubtless he has given the facts as they have been given to him. But the misfortune is that the facts as stated only give us half of what you need to really arrive at what the true valuation is. So I only want to say, in reference to this particular instance, that if the facts are as the hon. and gallant Gentleman stated, and there is nothing in any way to alter those facts, that the result must be that it is the site value which has risen, and there has been no change in the value of the building.

I do not know because I do not know the particular facts, but I think I have made the position clear to the House, whatever doubt there might have been in the minds of some hon. Gentlemen opposite and of some hon. Friends on this side; whatever the criticism that may have been directed to the system which has been practised and to particular instances that may have come before them. I can allay any anxiety upon this by telling them that the clearest, most definite instructions have been given to the valuers in this respect. Therefore we may know, whenever the occasion arises for claiming the Increment Value Duty, that there will be a valuation of the building at the time in order to arrive at what is to be deducted from the consideration which has been given as the price of the transaction. I hope, therefore, so far as the valuation goes, we shall not hear any further instances such as we have heard, and that it will not be necessary to give any further instances, because it will be found in point of fact that the valuers are carrying out exactly the principle which is, as I understand, contended for by both sides.

Mr. BUTCHER

I have listened with blank amazement to the address given to the House by the Attorney-General. The question before us on this occasion is not at all a complicated or difficult one to understand. It is one of the plainest questions that any collection of men have ever been called upon to deal with. The main question is, what was the pledge given by the Chancellor of the Exchequer in September last, and has that pledge been carried out by the Clause now on the Paper? The question of what the pledge was depends upon what language was used, and what meaning it would convey to any ordinarily intelligent person. The learned Attorney-General told us that that is not really the question at all. The real question, he said, is what was in the mind of the Chancellor of the Exchequer? Then he went on to tell us what was in the Chancellor's mind. I say a more impossible construction to put upon the meaning of a pledge it is inconceivable to imagine. When a pledge is given, no one asks what is in your mind. What is asked is, what language did you use and what meaning that would convey to an intelligent person. Therefore, when the Attorney-General told us what was in the mind of the Chancellor of the Exchequer, I venture to think he introduced a principle into the interpretation on pledges which has never been introduced by any intelligent body of men before, and never put forward by a Law Officer of the Crown. When you have a written document placed before you the Attorney-General seems to suggest that you are to ask, what is in the mind of the man who wrote that document. Of course, you do not do that! You ask, what the document says, what meaning it conveys to an intelligent person. The Chancellor of the Exchequer did give this clear and definite pledge, which bears but one meaning to every intelligent person. It is idle to tell me what he meant. I say, what did he say? That is the true and only principle upon which we can interpret this pledge.

Before I come to the pledge, let me put forward what I venture to think is the justification by which the Government claim to justify this Increment Value Duty. I think it is this: that if the owner of land makes a profit on selling his land or dealing in it, a profit, not from his own intelligence, exertions, or expenditure, but due in some way to the action of the community, then the community or the State shall share in that profit. I think that is a fair statement. A deputation waited upon the Chancellor of the Exchequer in September last. That deputation consisted of business men—surveyors, land agents, and others accustomed to deal With land. This was shortly before the General Election, and the time of this deputation is exceedingly important. There was a pledge given, and the language of it is so plain that really it does not need a Law Officer or anyone else learned in the law to say what it means. The Chancellor gave a specific illustration. He said:— If a man buys a property not a site value—— for £2,000 and it goes down to £1,000 in 1909, and then goes up in fire years to £1,500, there will be no Increment Duty charged. And for a very plain and intelligible reason. The man has made no profit; he has made a loss.

Sir RUFUS ISAACS

Are those the Chancellor's words?

Mr. BUTCHER

As near as possible. I put down the words:— If a man buys a property at £2,000 and it goes down to £1,000, its value now—— not the site value, mark you, but the property— is £1,000 and then goes up in five years to £1,500 there would be an increment of £500. A payment of increment of £500 on the value of the property, not in the site value, in the five years after the passing of the Act over and above what it was in 1909.

There can be no mistake so far. There would be that payment of increment. Then the Chancellor went on:— There would be an increment of £500 had it not been for this. We then say 'No'; in that case you can go back twenty years, and if within twenty years he had paid more for it there is no increment. Therefore he would be charged no increment. Could anything be more plain and clear to the simplest intelligence? The Chancellor went on to say, as if to emphasise his words:— The letter will not fall short of the spirit of the pledge. There is a pledge, and that pledge was repeated no longer ago than February last when the Chancellor of the Exchequer, referring to the terms of his pledge, said:— I promise that whatever I say to the deputation I will, as far as possible, carry out in the Act of Parliament."—[OFFICIAL REPORT, 20th February, 1911, col. 1640.] He does not say, "whatever I had in my mind." He says, "Whatever I said to the deputation." If that be the case, I venture to think that no man who looks at the matter fairly will deny that the only question was that simple, fair, and definite pledge given in language of astonishing unambiguity. Is that carried out by the Clause on the Paper? Will the learned Attorney-General pretend that it is? He does not contend that it is. What he contends is that something in the mind of the Chancellor of the Exchequer is carried out by the Clause.

Sir RUFUS ISAACS

What I pointed out was that the Clause, in conjunction with the instructions given to the valuers, carries out the intention of the Chancellor of the Exchequer.

Mr. BUTCHER

That does not make it any better to my mind. It is not a question of what the Chancellor's intention was. The question is what he said. Any man in this House who reads the words that the Chancellor of the Exchequer used will put only one meaning upon them. That was that if a man bought property twenty years ago, and it went down in value and then went up again, and he sold it for less five years hence than what he paid for it originally, then he was not to pay any Increment Duty.

Let me ask the learned Attorney-General this: Does he contend that the Clause as put down on the Paper would meet a case of that sort? That is the real question. I do not care in the least whether or not it carries out the intention of the Chancellor of the Exchequer. What I do want to know is this: Does it carry out the facts as I put them, and which are the only interpretation which it is possible to put on the Chancellor's speech? If that is the simple case, then I do ask the Attorney-General or his subordinates to make good the promise. You cannot give a promise before the General Election to persons who come to you asking for assurances upon specific points, and then, after the General Election, throw those pledges over. I do urge that the Government in this matter must give effect to the words as used, and not the intention of the Chancellor of the Exchequer. If they desire to give effect to the words as used I do put it to the House on both sides fairly that what is on the Paper will have to receive very large amendment in order to carry out their only intelligible, clear, and precise meaning.

6.0 P.M.

Mr. W. E. HORNE

I should be glad to know whether the transcript of the shorthand writer's notes of what occurred at this deputation are accurate. Speaking for myself I can quite understand that the Surveyors who talked this matter over with the Chancellor of the Exchequer would be only too glad to have it confined to a question of total value. I can quite understand the case of the £2,000 being mentioned as an instance of total value, that is the value of the site, and the buildings upon it. No surveyor would willingly go into the highly technical mathematical performance of breaking up the values and taking the site value divested of what is upon it if he could avoid it. The matter is not really a very big one. It is much smaller than would appear if a property within twenty years sold for £2,000 afterwards goes down in value to £1,000, the depreciation is not only on the building, but must to some degree be on the site value also. It is a very difficult operation to say what the decrease would be in both values, and it would be a very much simpler thing for the valuer if they could take the total value instead of separating the site value from the building. The question whether there may have been a temporary rise in the twenty years seems to me a minor part of the argument. The question is, if a man has given a large sum of money for a property, and within twenty years sells it for a lower sum, it should be accepted as a fact that the value of the site, has decreased to some extent, and not, at any rate, increased. You will find this the case 999 times out of 1,000 in practice. So that if the Government will give effect to that which was in the minds of everybody who read the report of the deputation they would be doing no harm, and they would be making very much easier what is a very difficult operation, namely, to decide the difference between the values of a site and of the structure.

With regard to the argument put forward that the value of a building is never greater than when it is put up, and that it is always decreasing in value after that. If that were a fact it would be a very bad thing indeed for the speculative builder, because he would never get any profit from any buildings he put up, and any increased value there was when sold would go on to the site value. As a matter of fact buildings in many places increase in value after they have been put up. There are certain styles of buildings and houses which builders put up which command very much higher prices in the course of time. Again, buildings may be put up at a time when the cost of materials and labour are low, and therefore these buildings become worth more later on; there are buildings in this country which are worth many times over that which they cost when put up. I know old houses built by Inigo Jones which if they could be obtained at prices four or five times as much as they cost would be snapped up by a great many people who wished to obtain them.

This question of the division of site value from total value is one which it is impossible for valuers correctly to determine. The hon. Gentleman the Member for Sheffield (Mr. Tudor Walters) admitted himself how greatly valuers welcome any help from outside people to enable them to arrive at true value. The fact of the matter is it is impossible for valuers to estimate it with any great degree of accuracy. I had a case of some twenty sites on which provisional valuations were made. I have had to do with that property for the last seven or eight years, and every sale in that property has been approved by me. I went through the values, and I found the provisional valuations were wrong by about 50 or 60 per cent. in many cases. There was no wish on the part of the valuer who made these mistakes to put on a low valuation. It was pure ignorance on his part, because when I totalled up his figures for the twenty valuations and compared them with my figures for the valuation the totals were only less than 3 per cent. different. He did his best, the only difference being that he did not know the property as well as I did, and so I was able to correct his figures. And when these valuers come to value property in the heart of London there is nothing to guide them as to the proper value to put upon site when divorced from building.

I have the honour to know, I think, nearly every member of the referees under the Act, and I do not think they will be angry with me when I say, if you took every one of these referees into a separate room and gave each the same property to value and ask them to calculate the site value without previous consultation among themselves, it would be a very rare case where these referees would arrive at the same site values. There are a number of considerations to be given effect to—the knowledge every valuer has as to the property—and as each valuer's knowledge of the property differs, so will the estimate of the site value differ. Therefore I feel quite sure if the Government would accept this Amendment and agree that this allowance ought to be made on the total value of the property, which I know was in the mind of the people who had anything to do with that deputation, it would be of great value to the community, and I do not believe the interests of the Treasury would suffer in any appreciable way.

Mr. J. H. THOMAS

I am anxious to give a vote upon this question. I have listened very carefully to the Debate, but I am not satisfied at the present moment what is the actual position. I therefore propose to put a simple question to the Government in order that I may get an answer which will determine my vote and the votes of some hon. Members beside me as well. If I understand the argument advanced on the other side, it is this. A certain property is bought for £2,000. In April, 1909, it was valued at £1,000. Then it is sold at £1,500. What I want to know is, is Increment Duty charged upon that £500? If it is, I am perfectly satisfied that it is an injustice. If not, I am prepared to vote for the Government. Of course, I keep clearly in my mind there has been a certain amount of depreciation, but if in the main in the instance I have given Increment Value Duty has to be paid upon the £500, it is an injustice, and I shall certainly not support it.

Mr. MASTERMAN

My hon. Friend has put a definite question, and I propose to give him a definite answer. He has made an inquiry about a matter which does not come into this Clause at all. It will be raised, and we are quite prepared to meet it, when it is raised later. If the hon. Member votes against this Clause he will be voting against the concession promised and now being given, but which has nothing whatever to do with the point he raised. The concession made by this Clause is an extension of the time we go back as to the original site value.

Mr. CASSEL

I entirely acquiesce with what the Under-Secretary has said. This Clause has nothing to do with the point raised by the hon. Member for Derby (Mr. Thomas), and, therefore, it also follows that this Clause has nothing to do with the carrying out of the pledge given by the Chancellor of the Exchequer, as the Under-Secretary has admitted.

Mr. MASTERMAN

The words of the hon. and gallant Member opposite admit that we carry out in his own view, a portion of the pledge. We carry out the extension back beyond the twenty years.

Mr. CASSEL

I was fully aware that this Clause was a concession, but it is a concession upon an entirely different point from that which was promised by the Chancellor of the Exchequer. I think the Government will realise, on reflection, that they are misinterpreting the pledge given by the Chancellor of the Exchequer, and when they do realise this, I hope they will put down a Clause to carry out the pledge which has been given. If the Chancellor of the Exchequer had simply meant to refer to the increase or the decrease in site value or to a slump, no new Clause was necessary at all, because that is already provided for by the Act. If that was the pledge of the Chancellor of the Exchequer no new Clause was necessary, and there is no new Clause dealing with it. The pledge was given upon an entirely different point. The question this Clause deals with is an extension of the time over which the twenty years' Clause operates. So far as the question dealt with by the Chancellor of the Exchequer is concerned, this Clause does not affect it one iota. When the Chancellor of the Exchequer met the deputation on this question he never said a word about extending the time.

Mr. MASTERMAN

Yes, he did.

Mr. CASSEL

Then it was certainly in a different part of the speech to that which the hon. Member for York (Mr. Butcher) read out. That quotation assumed the twenty years' time throughout, and the whole of it was based upon the time not being altered, because it was based on the twenty years' period. So far as this Clause is concerned, I think the Under-Secretary to the Home Office will agree with me that it does not touch the question raised in the sentences read out. For that reason I think the hon. Member's question, although it was very apposite on the point as to whether there ought to be another Clause or not, is really not apposite on the point of the Vote we ought to give on this Clause. We accept this Clause willingly, but we say it does not carry out the Chancellor of the Exchequer's pledge, and we ask for another Clause.

Mr. BOYTON

I will read to the House what the Chancellor of the Exchequer said in his reply:— This was a great business country, and no Ministry had a right to devise any machinery which interfered with the proper working of the commercial and industrial system of the land. The expert gentleman who had attended before hint that morning, had made suggestions to facilitate the smooth working of the Act, all of which were in conformity with its spirit, and would improve its workmanship. With reference to the point urged by Mr. Wood with regard to the twenty years' purchase, he would be happy to accept any Amendment, and he would consider whether a provision could not be drafted to alter it. It was clearly unfair that in a case such as bad been mentioned, a man should have to pay increment on what was really no increment.

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

Mr. CASSEL

I beg to move, as an Amendment, in the first paragraph of the Clause, after the word "land" ["or of any interest in the land"], to insert the words "or of any lease of the land for a term of years exceeding fourteen years."

This is a very modest Amendment. I was successful yesterday in inducing the Attorney-General to accede to an Amendment which I put forward. This is a proposal intended to meet a case which was really omitted in drafting the Section. I know it is extremely difficult to draft sections to meet all cases. This Amendment enables you to go back to the twenty years. In the case of the assignment of a lease, you are enabled under this Clause to go back for twenty years, but in the case of a grant of a lease you are not able to go back twenty years. The object of this Amendment is to place the grant of the lease and the assignment of the lease on the same footing. Let me assume that I have purchased a lease, or the assignment of a lease, for £10,000. I can go back to twenty years and claim the benefit of this Clause. Assuming that the lease has been granted to me for the first time for £10,000, then I cannot get the benefit of this Clause. I submit there could be no possible reasonable distinction between those two cases. This is a complicated Clause, but perhaps I can make my point clearer by an illustration. Mr. A. buys a lease which has already been previously granted at a certain rent with certain covenants for £10,000, and he gets the benefit of this Clause. Mr. B. gets a grant of a similar lease, for which he pays £10,000, but he cannot get the benefit of this Clause. I put it to the Attorney-General and to the Solicitor-General that there is no reasonable distinction between the two cases, and they ought to be treated alike. If the Government do not accept this Amendment, I ask the Attorney-General to explain what distinction there is between the two cases, which to me appear to be so obviously on the same footing.

Mr. CARLILE

I beg leave to second the Amendment.

Sir RUFUS ISAACS

I know the hon. and learned Member is a very good draftsman, and I am sure he would not have proposed an Amendment which produces a very anomalous position, if it had been possible to deal with the point in any other way.

Mr. CASSEL

I quite agree that there may be some consequential Amendments necessary, and I have some down on the Paper. All I ask is, whether, as a matter of substance, the Government recognise that there is no distincton between the two cases I have put. If so, I am willing to accept any form of words the Attorney-General can suggest.

Sir RUFUS ISAACS

The difficulty is one of substance, because when this matter was discussed on the principal Act the words which were adopted related to the grant of a lease. Originally I find, by reference, the concession which was made applied only to the owner at the time of any transfer or sale of the fee simple of the land, and then the words were introduced, "or of any interest in the land." The question of the lease was not accepted then. The effect of introducing this Amendment upon the concession we have made would be to create a most anomalous state of things even according to the view put forward by the Mover of this Amendment. The consequential Amendments which have been referred to by the hon. Member do not alter the sense of what has already been made clear by the first Amendment we have been discussing. It is impossible for us to carry this concession any further than we have said we will do. We are going now as far as we think we ought to go, and the effect of this Amendment would be to go much further, and really alter the whole matter upon which no controversy has arisen, and upon which no promise has been made by the Chancellor of the Exchequer. I am sure the Chancellor of the Exchequer has never said that he would agree to the Amendment which has been proposed by the hon. and learned Member opposite.

Mr. CASSEL

I do not suggest that.

Sir RUFUS ISAACS

The Clause we have introduced is a concession, and I submit we ought not to go any further.

Amendment negatived.

Question, "That the Clause be added to the Bill," put, and agreed to.