HC Deb 29 March 1911 vol 23 cc1451-63

(1) Notwithstanding anything contained in Section thirty-five of the Finance Act, 1894, in respect of Income Tax imposed under Schedule A, the amount of the assessment shall, for the purposes of collection, be reduced by a sum equal to one-fourth part thereof—

  1. (a) in the case of an assessment on lands inclusive of the farmhouse and other buildings, if any; and
  2. 1452
  3. (b) in the case of an assessment on any house, the annual value of which, as adopted for the purpose of Income Tax under Schedule A, does not exceed twelve pounds.

(2) Section sixty-nine of the principal Act is hereby repealed.—[Mr. Courthope.]

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


The effect of the Clause is to repeal Section (69) of the Finance Act of 1910 and put in its place what I may call a flat rate of 25 per cent. as the statutory deduction for Schedule A assessments in the case of land and labourers' cottages. It may be necessary to explain what led up last year to Section (69) of the Finance Act. An influential deputation from the Central Land Association and other organisations interested in agriculture and land generally waited upon the Chancellor of the Exchequer and succeeded in convincing him, as indeed any reasonable man could not fail to be convinced, that Schedule A inflicted a grave hardship upon owners of property in rural districts, in other words that the statutory deductions for land and cottages respectively did not in any way represent the cost of repairs and maintenance which occurred on these estates. The Chancellor of the Exchequer undertook to go as far as he could to meet that grievance. He stated frankly that it was impossible in the position in which he found himself to meet it entirely, but he would go as far as possible to meet the grievance, and the result was that the admittedly experimental Clause (69) was inserted whereby those who have to pay Schedule A Income Tax might claim a rebate from the Treasury if they could prove from their books that their expenditure on repairs and maintenance of land and of labourers' cottages amounted to 25 per cent. of the gross assessment.

The effect of that Clause was to enable owners who have to pay Schedule A to claim a rebate up to 25 per cent. for repairs and maintenance if they could prove by their books that at least 25 per cent. was expended under those circumstances. I think it will be admitted by the Secretary to the Treasury that in all cases in which Form 99 was presented ample proof was shown that at least 25 per cent. was expended—in other words, that the experimental part of the Clause had done its work, and that 25 per cent. was well within the mark. Therefore it would be perfectly safe for the Government to give a 25 per cent. rebate in all the cases. I do not rest my argument on the very incomplete statement which I have made at present. I want to draw the the attention of the Government to two great drawbacks in the method set up by Clause (69) of the Act of last year. In the first place a very great difficulty is placed upon landowners in filling up this form properly. They have to divide their estates into three sections, and they have also to divide the expenditure upon their estates into three sections. First of all there is agricultural land and the buildings which are connected with it. Secondly, there are houses of a value not exceeding £8 a year—in other words labourers' cottages. Thirdly, there are shops, houses, and cottages, which are assessed on amounts more than £8 a year.

The Financial Secretary to the Treasury knows well how difficult it is even on estates where most accurate books are kept to divide expenditure, into three parts. In the case of labour a time sheet or labour book is kept, and it is comparatively easy to divide the direct expenditure on labour into the three necessary headings, but when we come to material it is very difficult indeed. Take an estate of some thousands of acres which employs a considerable staff in its workshops. It probably fells its own timber. That timber is sawn by the estate sawyers into the sizes most suitable for estate repairs, and it is stacked and stored. It is practically impossible four years after the trees were felled to tell the exact cost of any piece of timber which goes to the repair of a cottage, or any piece which goes to the repair of a farmhouse. In the same way and in the same work such matters as glass, nails, paint, varnish, and a score of others things are bought in bulk. Nails, for instance, are bought by the ton. It is quite impossible unless you have a very large staff constantly on the spot to tell the value or even the weight of nails or the value of paint, varnish, putty, cement, and so forth that go into these three different categories of farm buildings, labourers' cottages, shops, and so on. Of course it might be possible to divide bricks and matters like that which are bought in quantity and measured out in certain work, but in the other matters to which I have referred it is impossible to make this division. I might multiply these cases indefinitely. Take another very common case, shooting and water pipes. It is the commonest thing on these large rural estates that some large building or farmhouse has got into a state of disrepair. If the shooting is replaced it is not always destroyed. Part of it is broken and goes on the scrap heap as old metal, but there may be a great deal of it of sufficient use for repairing small buildings, taking the water off the roof of a pig sty or a cow-house, and it is subsequently used for that purpose, and it is quite impossible for anyone, however carefully he goes into it, to account for every item of that kind of material which comes within the three categories required by Form 99. The result is a certain amount of guess work has to take place, and in fact a certain amount of guess work has been practically sanctioned by the Board of Inland Revenue, because I think it is a matter of common knowledge that instructions have been given to those who are concerned with Form 99 that a certain amount of guess work in these matters should be allowed.

A very strong point might be made of the difficulties which the officials have in dealing with these matters. The details required by Form 99 are not and cannot be in the possession of the owner or his tenants, and are not even in the possession of the local collector of taxes. The result is that the Form has either to be returned in blank, in which case it has to be filled in by the District Supervisor or by some higher official at Somerset House, or else the owner has to apply beforehand to the District Supervisor to obtain the information which will enable him to fill up the Form. The result is that an immense amount of extra work is thrown upon the officials who have to deal with these matters. That does not end it. There must be an enormous accumulation of these Forms waiting at Somerset House to be checked, and how the staff are to proceed with the work of checking passes the wit of man. They cannot do it. But directly it becomes known that the staff cannot check these accounts, there will immediately be a premium on dishonesty. Surely it is better to obviate all these difficulties by doing away with the necessity for making and allowing a claim in that way. I prefaced my remarks by showing, and it is not denied, that whenever a claim is made the owner has to prove his claim for a flat rate of 25 per cent. Why not give it him straight away instead of putting a premium on fraudulent returns, and so save an immense amount of work to the official staff who have to deal with this matter. I do not pretend for a moment that the Clause which I now move for a flat rate of 25 per cent. is a counsel of perfection.

To reach the ideal you want a system which will allow the good landlord to deduct all expenditure on repairs and maintenance of the estate—I do not say on improvements of the estate, or raising the rents, or anything like that—while pre- venting the bad landlord from deducting more than he has actually expended. It is a very difficult thing to devise. I understand the Treasury point of view is that it is impossible to allow these assessments for Income Tax to come under the Schedule D, which would at once meet the difficulty. To allow them under Schedule A would be very difficult indeed. This Clause now proposed is a great improvement on Clause (69) passed last year. It would cost the Treasury nothing at all; in fact, it would possibly affect a saving by enabling them to reduce the very heavy staff required to deal with this matter, while it would remove a great difficulty from the landowner as well as prevent a premium from being put upon fraudulent returns, and fraudulent returns can be made with perfect impunity under the present system, I should say. I have made one small alteration in detail in the Clause I propose as compared with Section (69) of the Act of last year. The scale in that Act for labourers' cottages was £8, but as the right hon. Gentleman knows a great many bonâ fide, labourers' cottages exceed £8 in assessable value. The intention of the Chancellor of the Exchequer was to give this benefit to labourers' cottages, and I have put in £12 as the limit, which will include all bonâ fide labourers' cottages, and which I do not think will include anything else. I have made careful inquiries and I find that no village shop or weekend house or anything of that kind will get the benefit of this Clause. I hope the Government will see their way to give a sympathetic answer to this matter which I have endeavoured to present in as concise a form as possible.


I beg to second the Motion.

We on this side freely recognise that Section 69 of the Finance Act was, to a certain extent, a concession given by the Government, and we are very grateful to them for having met us in a certain way in answer to the claim we put before them. I agree with my hon. Friend that neither Section 69 nor the Clause he saw proposes is an adequate solution for dealing with a very great hardship. I believe the only fair and just thing is to allow the landowners to be assessed under Schedule D in the same way as any other persons in the country. Surely the fairest thing is to allow to be put on one side the actual money he received for rents and on the other side the ordinary annual expenditure upon the upkeep of his estate, not including capital expenditure, and to be allowed to take an average on three years of the money received. The Chancellor of the Exchequer told us last year that he could not give us that concession because it would cost the Treasury something over three million pounds per year. We were rather glad to have that admission, because it showed us that even a Liberal Chancellor of the Exchequer was bound to admit that landowners in the past have been unjustly taxed every year to the extent of three million pounds. This Clause only asks that the landowners of this country should be relieved from a very great deal of trouble in filling up this particular form, and also that the Treasury officials should be relieved from a great deal of worry and work in trying to carry out the provision I know it will be asked, "Why should not landowners fill us these forms? They have large estate staffs, and their obvious business is to fill up forms sent them by the Government."

Landowners who have estate staffs do not keep them for the sole purpose of filling up forms for the benefit or amusement of the Government, but for keeping the ordinary accounts of the estate. But there are a large number of landowners throughout the country who do not keep any clerical staff at all, but keep their accounts themselves, and a great deal of their time during the last twelve months has been occupied in filling up Form IV. and other missives sent them by the Government. It may possibly be said by the Financial Secretary to the Treasury that it would not be much use granting this concession, because comparatively few people have troubled to send in returns. The answer to that is that it requires a great deal of labour to fill in the returns accurately. I suggest that the Inland Revenue will be flooded with these returns in a short time. In the interests of the Inland Revenue, quite as much as in the interests of the landowners themselves, I submit that a good case has been made out for granting a flat rate under Schedule A instead of forcing landowners to make out the very difficult return now required. I beg to Second the proposed new Clause.


The Mover of the Clause was quite right in thinking that we should not be able to accept his proposal, and for the very reason that he himself gave. He pointed out, with force, that the giving of a flat rate would result in the inefficient and bad landlord getting the whole of the reduction intended for the good landlord who keeps up his estate to the best of his ability, and in a condition which is not merely a credit to himself, but a source of satisfaction to his tenants. The relief given under Section (69) of the principal Act, which I am glad to hear gratefully acknowledged by the Seconder of the new Clause, was a very substantial concession. It was an addition to the only relief given to landlords in this respect, and given by a Liberal Government. The only complaint against it is that it takes a certain amount of time to fill up the necessary form. The Seconder said that if only they had had time the Inland Revenue would have been flooded with a, very large number of returns which, owing to lack of time, they had not had the opportunity of receiving, and that shortly they would be flooded with applications.

I myself, partly out of curiosity and partly in the hope of getting relief, have filled up one of these forms, and I confess it took a certain amount of time. Why? Because it is necessary to produce a five years' average. But in every succeeding year he will not have to compute five years' averages; he will only have to compute one. He will have behind him four years on which to base his calculations, and he will have a basis in the future on which to calculate the particular year extra on which he claims relief. Any trouble that may have been occasioned in the past will in the future be only one-fifth. Therefore I do not think that the hon. Gentleman will have any real difficulty in arriving at what the relief ought to be. He asks that it shall be one-fourth of the income receivable in respect of the land and houses not exceeding £12 in value. A very good reason for fixing upon £8 which we did in Clause (69) was that £8 is the limit of the compounding householder and is, I think, the outside price of an ordinary agricultural labourer's cottage, at all events in the West of England. I think that the hon. Gentlemen who moved and seconded this Amendment are under the impression that the expenses of a great number of landlords in keeping up their property exceeds 25 per cent.

I informed the House on the Debates on the principal Act that we had accurate knowledge of the expenses of a very great number of estates submitted to us, in confidence, of course, by landowners from every part of the country. The result of our examination was that after all the deductions were made which fell to be deducted under the principal Act, there was really an astonishingly small number of landowners whose legitimate expenses upon the maintenance of their estates exceeded 25 per cent. If there was an apparent increase in excess of the 25 per cent.—as a great number of accounts showed—there were in them all sorts of items which could not be legitimately described as expenses in the maintenance of the estate. But 25 per cent. as a rule is a fair deduction to be allowed if you wish to keep up your estate in a condition of efficiency. For the reasons which I have given the Government cannot accept the Clause proposed. I hope the House may be moved, not merely by party considerations, to accept the view which I have put, by the fact that our position is based upon reason and argument.


I can assure the right hon. Gentleman nobody on this side of the House is actuated by party motives in pressing the views we have pressed upon the House. The right hon. Gentleman has told us that from inquiries which the Government made as to expenditure on estates they came to the conclusion that 25 per cent. is the legitimate charge that should be allowed for upkeep. That is what my hon. Friends ask should be made permanent and not temporary. When the Chancellor of the Exchequer was dealing with this matter he made this proposal as a temporary, and he certainly made it in a very generous manner at the time. I acknowledged then, as I do now, that it was the first concession made to the owners of land in regard to the upkeep of their estates. What surprises me in connection with this matter is the attitude of the Labour party in regard to the upkeep of landed estates and for this reason. It is a question of very great importance, not really so much to the owners of estates as to those connected with the estates. The right hon. Gentleman in telling the House that 25 per cent. of the income from agricultural estates represents a fair proportion of the income which the owner has to expend in order to keep his property in a satisfactory condition is grossly below the real expenditure. I go further and say that nearly 50 or 60 per cent. of the gross incomes goes back in one form or another into the estate before the owner, for the time being, can touch one single penny for any purpose of his own.

Maintenance means the ordinary annual repairs necessary to keep buildings, cottages, etc., in good order, and those normal improvements which every reasonable landlord makes every year upon his estate. And where does the rest of the money go? I say, before the owner can touch any of it, at least 85 per cent. of it goes in labour. It goes in the maintenance of works, roads, surroundings, and a variety of things, and anybody who takes the trouble to really examine the accounts of any estate—and if anybody is curious about the subject they are perfectly welcome to examine mine if they choose—they will find that the great bulk of the money, amounting to something like 50 per cent. of the income, goes in payment of labour. In other words, the owner for the time being is not the owner of income represented by half the gross figures in the rentbooks, but is trustee for the money for those who look to it as a source of their wages for labour. My hon. Friends who moved this Clause have not done so because they believe that the adoption of the Clause means justice, but only because they believe it is a more definite step in the direction of justice than yet taken. What objection have hon. Gentlemen to the suggestion of my hon. Friends that the owners of land should be put in the same position as all other payers of Income Tax. They should pay under the rules of Schedule D. That is what all owners of, land always ask for, and for my part I have never understood why it cannot be conceded. Nobody objects to pay their fair share of the taxation of the day required to keep the estate going. [An HON. MEMBER: "Oh, oh!"]. That is my belief. The hon. Member opposite who interrupts may disbelieve me because he may object to pay his share.


I object to paying yours.


I believe there is no objection on the part of anybody to pay his fair share of taxation, but what people are entitled to ask is that they should be assessed upon a fair basis, and that all should be assessed upon a similar basis. This principle does not apply to landed estates, and the answer of the Government on this point has not been satisfactory. On the other hand I recognise that there has been a real concession to the owners of property. I wish the Government could see their way to make the concession they have made permanent instead of temporary. I am not at all sure but I think it was quite obvious that the Secretary to the Treasury could not go further than he has done. I regret that the Chancellor of the Exchequer is not able to be here to take part in this Debate because, in view of the impressions made upon him by previous Debates, I think he would have been ready to give us some indication of hope for the future. I for one should be very unwilling by my vote to appear ungrateful to the Government for what has been a real concession, although it is inadequate.

I think my hon. Friend who moved this Clause has rendered a very real service not only to the owners of land but also to the cause of just taxation. For my part I hope my hon. Friend will be content with the discussion and not think it necessary to press his proposal to a Division, because I am afraid that a Division may prejudice the further consideration of this question, and tend to make the Government feel that any overtures which they make are not met with a spirit of good will. I believe, if we can have an opportunity of putting our case in a more complete form, the justice of it will be felt more especially amongst those who represent the labour interests in this House, and it will be realised that this is a question which affects not merely the owners of land and the occupiers of large farms, but also those who are dependent upon the income derived from land for the wages which enable them to get a living for themselves and their wives and families. It is a much bigger question than those who look upon it as a mere landlord's question seem to realise. I hope this discussion will not be the end but only the beginning or continuation of the consideration of this very important subject by the House, and that in the end we shall receive a greater measure of justice than we have been able to obtain up to the present.


As one connected with the Association which collected the estate balance-sheets to which the right hon. Gentleman has referred, I should like to have heard from him what was the average amount, as shown by official figures, after deducting all unnecessary charges, expended upon the maintenance of estates throughout England and Wales. As a matter of fact I looked very carefully through the balance-sheets which have been mentioned in conjunction with the secretaries of the Land Agents' Society and the Surveyors' Institute, and we eliminated those in which any improper charges appeared so that the Treasury could not take exception to the inclusion of family charges and other unusual expenses which appeared upon certain balance-sheets: these we discarded and never sent to the Treasury at all. According to my figures, those balance-sheets which were duly submitted to an auditor, showed a permissible expenditure upon maintenance, repairs, insurance, and management on typical estates of varying character of considerably over 30 per cent. in England and Wales and considerably over 40 per cent. in Scotland. Although the Chancellor of the Exchequer promised that up to 25 per cent. would be allowed in respect of any expenses referred to in this Section, the Section is so framed that it is impossible to obtain anything like 25 per cent. on most estates, although this amount, and more, may have been actually expended.

Section 69, Sub-section (3) of the principal Act has been submitted to many learned counsel, and they have given very diverse views, but the majority of them hold the view that it is impossible to aggregate farm premises and cottages in order to find out whether the expenditure upon them in the aggregate has exceeded the 25 per cent. or has approximated to that limit of deduction. The Section appears to divide an estate into three different Sections: first of all, farm premises, including farm buildings; secondly, cottages; and, finally, those parts of an estate to which the Section affords no relief at all. As regards the first two categories, because an allowance in the Act of 1894 was limited, in the case of farm premises, to one-eighth, and, in the case of cottages, to one-sixth, the form which has been promulgated under this Section insists upon putting the farm premises and cottages into different categories with the result that an owner who may expend more than 25 per cent. on his cottages and less than 25 per cent. on his farm premises is wholly unable to get the full benefit of the 25 per cent. which the Chancellor of the Exchequer assured him he would get on the estate as a whole. I want to ask the right hon. Gentleman so to alter Sub-section (3) as to enable the full benefit of that 25 per cent. being obtained in every case where it has actually been expended for the purposes of maintenance, management, insurance, and repairs, whether in respect of cottages or in respect of farm premises. It is a very reasonable request, and only in accordance with the assurance given by the Chancellor of the Exchequer.

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

Motion made, and Question proposed, "That further consideration of the Bill, as amended, be now adjourned."


The right hon. Gentleman might give us another quarter of an hour, in order to discuss the next Amendment which is regarded with great interest by many hon. Members.


I do not anticipate any difficulty in dealing with that tomorrow. There are hon. Members on the other side of the House who desire to raise a question of general interest and it is really to meet their convenience that I have moved the adjournment of the Debate at this hour.


I am quite satisfied.


I rise to express a hope that the right hon. Gentleman will not find it necessary, on behalf of the Government, to place any new clauses on the Paper which would take precedence of those of which notice has been given. It would be manifestly unfair to hon. Members if their opportunities of the discussion are curtailed in that way.


I do not think any new clauses are to be put down. There are one or two new Amendments, but I understand that these will be taken as the different clauses to which they are attached are reached.


I take it that they are new Amendments to old clauses in the original Bill and not Amendments to new clauses.


There is one Amendment to a new clause and it is rather a curious case. It has arisen with regard to what was originally Clause 6 and has reference to gamekeepers. I had to leave out a new clause we put in in order to meet a technical difficulty that has been pointed out. But I do not think it will take more than five minutes.

Question, "That further consideration of the Bill, as amended, be now adjourned," put, and agreed to.