HC Deb 01 August 1913 vol 56 cc1003-9

"Where the value from which deductions are made for the purpose of arriving at the site value of land on any occasion for the collection of Increment Value Duty does not exceed £500, and it is shown to the satisfaction of the Commissioners that the total income from all sources estimated according to the several rules and directions of the Income Tax Acts, in the year prior to that in which the occasion arises, of the person who is entitled to receive the benefit of the purchase money or rent, where the occasion is a sale or lease, or of the deceased person when the occasion is the death of any person, or of the body corporate or unincorporate where the occasion is a periodical occasion, did not exceed £160, any increment value which would but for this Section be collected by the Commissioners on that occasion shall be remitted, and for the purpose of the provisions of the principal Act as to the collection of the duty, shall be deemed to have been paid."

Mr. CASSEL

I beg to move, to leave out the words "five hundred" ["Increment Value Duty does not exceed five hundred pounds"], and to insert instead thereof the words "two thousand."

The first intention was to exempt a person who pays Income Tax if he invests £500 and no more in house property. That person is not exempt under this Section. I do not think the right hon. Gentleman really appreciates that point.. Supposing he invests £500, or £400, or £300, in leasehold property, and has a ground rent of £10 or £7, he will not be exempt, and for this reason: You look to see whether it is more than £500 or the value of the freehold, and although he might have only paid £300 for leasehold property, with a ground rent of £7 or £10, he would not come within the Section because the value of the freehold would be more than £500. I think this has arisen from cases like the road sweeper's case, where he invested £300 in leasehold property with a ground rent. That case would not be covered in this Clause as it stands, because you would assess his freehold and not his leasehold. You add to the sum which he has invested, the value of the reversion, so if you really wish to exempt persons who have invested £500 or less in a house or landed property, you want to put it at a higher figure. Whether you put it as high as £1,000 or not, you ought to put it at a higher figure than £500.

Mr. LLOYD GEORGE

This Clause is intended to meet the case, I will not say of the small investor, but of the artisan who has built his own house. Five hundred pounds, in my experience, practically covers every case of that kind, and the artisan who builds his house for £2,000 ought, I think, to bear his fair share of taxation. There will be Income Tax limits as well as property limits.

Mr. PRETYMAN

Five hundred pounds is not the property limit here.

Mr. LLOYD GEORGE

I am coming to that point. The hon. and learned Gentleman (Mr. Cassel) said you might have a case of £10 ground rent. These are not cases we intend to meet. I know ground rents are very high, but the case of an artisan paying a ground rent of £7 or £10 upon his own house does not, I think, exist. There are cases of men who build houses for themselves or buy a house, it may be a leasehold house, with a ground rent of 30s. or £2; it very rarely goes beyond that. Even if you take the ground rent and the whole into account, it certainly does not go into anything that would produce £500, and I am certain that if you take the £500 limit, and £160 a year it will practically cover every case of an artisan who builds a house.

Mr. SNOWDEN

I understand the Chancellor of the Exchequer to say that this is intended to meet the case of the artisan who owns his own house. That may be the intention of the Clause, but what will be its effect? As I understand, the value of property in this connection includes the composite value of both site and building. Take the case of an artisan or a person whose income is under the Income Tax limit, and who is the fortunate possessor of a, plot of land worth £400 which appreciates in value. This Clause would exempt that case for two reasons—because the value does not exceed £500, and because the income is less than £160. The Chancellor of the Exchequer said that this Clause was intended for the benefit of the artisan. But it will exempt from Increment Duty every case, no matter how high the percentage of increment may be, provided the income of the individual is less than £160 And the value of the property does not exceed £500. I wonder whether the Chancellor of the Exchequer is aware how many cases that will cover. There are one and three-quarter million of freeholders in the country and the majority would come within this figure. By this proposal the Chancellor of the Exchequer is going to sacrifice an enormous amount of Increment Value Duty. There will probably be little appreciation in urban land. The appreciation of land values will be largely in what are now rural districts. The price of rural land is so low now that it is quite possible for a man with an income of less than £160 a year to become the possessor of a very considerable number of acres of land, which, with the spread of population, may greatly appreciate in value. By this proposal the Chancellor of the Exchequer will lose a very large amount of Increment Value Duty in those cases. But I do not intend to oppose the Clause. There are reasons, not of principle but of expediency, why it should be passed. 'There are 1,750,000 of small freeholders, who have feared that these taxes would hurt them a great deal more than they probably will, and it is for that reason the proposal is made.

Mr. ROYDS

This Clause has nothing whatever to do with relieving the man who owns his own house. As I understand it, the object of the Clause was to relieve or to allay the fears of the small investor in land and cottages and small houses. We have been told that this applies to the artisan who invests £200 in a house that probably is worth £600, on which he borrows the £400. Therefore, if you limit this to £500 you are bringing down the value of that property. It is in order that investments may be continued in connection with the man who has been frightened in consequences of these taxes and valuations that this has been put forward. The object of the Clause was to attract capital back to the land, to relieve cottages of this Increment Duty, and so far as possible encourage the small investor to make investments in the small class of property in the future in the way he has been privileged to make it in the past.

Question, "That the words 'five hundred' stand part of the Clause," put, and negatived.

Words, "two thousand," there inserted.

Mr. CASSEL

had on the Paper an Amendment to insert after the word "Acts" ["Income Tax Acts"] the words "except that the incomes of husband and wife shall be treated as separate."

The CHAIRMAN

It seems to me that if the hon. Member moves at all here, he can only deal with a very limited point, as to whether a difference should be made in the treatment between husband and wife in respect of this particular Clause.

Mr. CASSEL

May I point out that the effect of the Clause as it stands is altogether to exempt the married woman from Increment Duty. If you think I had better not deal with it here, I will not move.

Amendment, by leave, withdrawn.

Mr. ROYDS

I beg to move, to leave out the words "one hundred and sixty" ["did not exceed one hundred and sixty pounds"], and insert instead thereof the words "three hundred."

I do not know whether I should press this Amendment.

Mr. J. WARD

I should think you have done very well!

Mr. ROYDS

Personally, I do not in the least see why, if a man is exempt who has got £160, why the city clerk with £250 or £300 a year, who makes an investment in the same class of property, should not also be exempt. It was for that reason I put down my Amendment.

Amendment, by leave, withdrawn.

Mr. MITCHELL-THOMSON

I beg to move, at end of Clause, to add the words— And no liability shall attach to any such person in respect of any Increment Value Duty which has accrued, but which has not been demanded prior to the passing of this Act, upon occasions, to which this Section applies, between the passing of the principal Act and the passing of this Act. The Committee will see that this is in respect of the particular class of persons to whom the Section applies; that is to say, the small investor that the Chancellor of the Exchequer spoke of just now. It will make the various Clauses retrospective in regard to those occasions in which Increment Duty has been demanded. It is clearly impossible to make it retrospective with regard to occasions on which Increment Duty has been demanded and. paid. I agree that, in equity, that really would be the fair thing, but, as a matter of practical policy, it cannot be done. I think where the money has not been demanded this is a reasonable proposition as otherwise you are going to have two classes, one of which is not to be liable in future, and the other which is to be liable between 29th April, 1910, and whatever date in August this Bill is passed, in respect. of claims which have not been formulated. A number of persons are interested in this, and representations have been made to us with regard to it. I hope, therefore, the Government will agree to it.

Mr. LLOYD GEORGE

I agree with the lion. Gentleman it is a very small point., and if we are not to have another Amendment going further. I would not mind accepting this as it would save a great deal of trouble.

Amendment agreed to.

Question proposed, "That the Clause, as amended, stand part of the Bill."

Mr. SNOWDEN

The Chancellor of the Exchequer in reply to an observation of mine when I asked how much these concessions in this Clause were going to cost shook his head, by which I understood he had no idea.

Mr. LLOYD GEORGE

My hon. Friend made a statement that this would cost an enormous sum of money. I shook my head most emphatically at that. My advice is that it would not, but would save a great deal of trouble and expense to small people and small freeholders who have much greater difficulty in dealing with a matter of this sort than men in a bigger position.

Mr. SNOWDEN

There may not be very much loss in revenue the Chancellor perhaps means, but whether that be a saving or not I think there is no denying that this Clause makes concessions which undermine and take away altogether the principle on which Increment Duty was based. It will be remembered when those Land Taxes were under discussion in 1909 they were recommended as the application of a principle new in British taxation. I think it was the First Lord of the Admiralty who said we were now beginning to look not so much at the man's income—

Mr. T. M. HEALY

Is this in order?

The CHAIRMAN

As far as I follow the argument it is dealing very closely with the question, "That the Clause, as amended, stand part!"

Mr. SNOWDEN

The First Lord of the Admiralty said we were beginning in these Land Taxes to adopt a new principle of British taxation, and that the tax-gatherer was going to say not "How much have you got?" but "Where did you get it?" I think there is something to be said for that principle of taxation. My protest is that that principle is being sacrificed. The Land Taxes were recommended to us because it was intended that they should tax something that was not the creation of any individual, but the creation of the community, and for the time being the Chancellor of the Exchequer said he was content to take 20 per cent. of that for the State. Now he proposes to abandon that principle altogether, and he practically says that it is wrong for a rich man to take something which is the creation of the community, but it is not wrong for the poor man to do so. I remember, when I was a lad at school, a couplet which ran:— It is a sin to steal a pin. Much more to steal a greater thing. The morality which is now to be embodied in our taxation is even much more immoral than that couplet. What we are going to say now is that it is wrong for a man to steal from the community, provided his income is not more than £3 a week, but the moment he gets beyond that point he is a thief. What is the moral of all this? That the Chancellor of the Exchequer has found his land taxation proposals in the Budget to be an utter failure and the machinery set up impracticable. I have always denounced these taxes, which have been put forward with the idea of securing the unearned increment, because I think it passes the wit of man to devise taxes which will do that. May I take the illustration that was cited—and which is by no means a hypothetical case—by the Chancellor of the Exchequer earlier in the Debate where land is wanted for some public purpose? This case can never be met by means of a tax. There is only one way in which it can be done, and that is by giving to the local authorities compulsory powers to acquire the land. I supported the Budget proposals because they promised us a system of land valuation. Undoubtedly the Land Taxes will have to be regarded as being only temporary, and as soon as we have the valuation they will be swept away and the common sense of Parliament will adopt a more effective method.

Mr. PRETYMAN

I cannot help welcoming the speech of the hon. Member who has just sat down as a reinforcement of the very arguments which we put repeatedly before the House on the Second Reading, although the hon. Member has put them in a very much better way. The conclusions we drew are a little more complimentary to the working classes than those which have been drawn by the hon. Member. We did not suggest that the small owner with under £3 a week income who obtained increment was a thief.

Mr. SNOWDEN

That word was put into my mouth.

Mr. PRETYMAN

That was the inference he felt himself obliged to draw from the situation presented by this Clause, put side by side with the original Bill. We drew a different conclusion, and it was that there was no principle whatever in the original Act. Really, under the original Act you are not going to get something which is created by the State and which a private individual has appropriated. What is really happening, as is now confessed by this Clause, is that a special tax is being imposed upon one kind of increment and all other kinds of increment are exempt from it. We now get back to those bare bones with which we started the discussions. It is rather remarkable that the admission of the hon. Member should have come to-day in the form in which it has, and I feel sure that another place will take note of it in view of their rejection of this measure on the very ground urged by the hon. Member.

Mr. SNOWDEN

I put forward those very ideas in the course of the Debates on the Budget in 1909.

Mr. PRETYMAN

I only wish the Government had paid attention to them.

Mr. T. M. HEALY

May I suggest that the hon. Member for Blackburn (Mr. Snowden) is wasting his time in the Labour party. He should apply for election in an Irish agricultural constituency.