HC Deb 29 July 1913 vol 56 cc307-421

Order for Second Reading read.

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


I do not wish to detain the House at any great length, but there are certain matters which I think should be brought to its notice. The first observation that will occur to everybody here is that this is a very remarkable period of the Session which has been chosen for the Second Reading of this Bill. We were told three months ago that this sub-division of the old Finance Bill, covering the whole area of finance, which has to be considered by this House, was not to deprive us of the usual opportunity which the House has had of considering our finance in all its bearings. But we now find ourselves at the fag end of the Session only at the Second Reading stage of this Bill, the Revenue Bill, which is the only opportunity which this House has of considering the whole area of finance for which we are responsible, with the exception merely of Income Tax and Tea Duty. When the Leader of the Opposition raised this point last Tuesday the Prime Minister suggested to the House that we had already had seven days of general debate on finance, and were going to have another day of general debate on the Second Reading of this Bill. But I think that the Prime Minister must have misapprehended the nature of the complaint, because the Second Reading stage of the Revenue Bill is not really the important stage. The important stage of the Revenue Bill is the Committee stage, and it has been the invariable practice of the House that every Member on both sides should on the Committee stage of the Revenue Bill have the opportunity to raise in the form of a new Clause any particular suggestion which he desired to make for the amendment of the finance of the year in any direction, in fact of the whole finance of the country; and the complaint made from this snde of the House was not that we have insufficient time for general debates upon finance, but it was a complaint of the suggestion which was then made by the Prime Minister that unless we were prepared to take this Bill as it stands and treat it as non-controversial, and refrain from moving new Clauses other than to the most limited extent, the Bill would be dropped. The Prime Minister did modify that attitude later and promised us a reasonable opportunity for discussion.

I do not wish to go over that ground again, but I must again remind the Chancellor of the Exchequer that although this particular Bill as it now stands deals only with a very limited area of finance, the Revenue Bill is not limited in any sense to the particular matters in the Bill as now introduced by the Government, but covers the whole area of finance, and it is only on this Bill that hon. Gentlemen on this side of the House will have the opportunity of raising points not only connected with the Land Taxes, but connected with other questions of very great urgency. For instance, I suppose that there is no matter more urgent and more engaging the attention of the country from one end one the other than the relief of the burden of local taxation by Imperial contributions. This is a matter which is germane to a Revenue Bill, but obviously it is impossible to raise it on this particular Bill, and even as regards the Land Taxes and the Licence Duties there is not a single word in this Bill referring to Undeveloped Land Duty, which is one of the most serious grievances in the Land Taxes themselves, and, although we had what I think we might call a pledge on the part of the Chancellor of the Exchequer, or at least if not a pledge an announcement, that this Bill would contain Clauses dealing with grievances under the Licensing Clause of the Budget, there is not a single word about licences in this Bill. There are questions of licences which urgently require the attention of the House, and none of those matters are mentioned, nor any of several other matters which obviously are open and ought to be open for the consideration of the House. The position of this House in regard to dealing with finance is becoming steadily worse. I do not think that anyone will contradict me when I say that never was there more necessity for this House to devote attention to finance than at the present time. The area covered by our finance is greater than ever it has been. The sums with which we deal are larger than ever they were, and the complications which have been introduced, particularly by the present Chancellor of the Exchequer, are of such a character that they require constant consideration. Difficulties and hardships now exist, which were never dreamed of years ago when finance was given a very much more prominent part in our discussion, and I am quite sure that proper control on finance and our responsibility to see that taxation should be just and evenly distributed, is the very first duty of this House. Apparently now it is to be relegated to the very end of the Session, as we find ourselves always of late when legislation is under the control of the Parliament Act. That is our position, and the Finance Bill has been divided on account of the Parliament Act. That was the definite statement of the Government and the reason why this Bill is now being read a second time at this extraordinarily late period of the Session is because the bulk of the Session has been taken up in repassing party measures under the provisions of the Par- liament Act, so that it is on account of the Parliament Act, for which the Government are responsible, that the House finds its control over finance and its opportunity for dealing with finance entirely and most harmfully limited.

I desire to deal with this Bill as it stands for the time being. May I say at once that, for my own part, I welcome the introduction of this Bill as, at any rate, one thing that this Bill clearly does is that it completely gives away the whole principle of the land taxation of the Budget of 1909? I cannot be expected personally to show any grief at that result. Apart from that, it is also clear to everyone who has read the Bill that it contains certain concessions, particularly to builders and small owners, for which many of us on this side have constantly and continuously contended ever since the Budget was passed into law, and those concessions we are very glad to see. They will require some Amendment, and I hope that Amendment may be introduced when we arrive at the Committee stage. It may be for the convenience of the House if I indicate what suggestions we have to make on the Clauses. The Amendments will be very simple and not numerous, but I do wish to make my own attitude perfectly clear, and it is that we desire to accept these concessions which are given to small owners and builders, not as adequate concessions in any shape or form, but as giving some measure of relief to those who are suffering the greatest injury from these taxes. There is one feature which is rather remarkable about the Bill. I do not know whether there is any precedent for a six-page Bill being accompanied by a twelve-page explanatory memorandum. It is really rather difficult to know which is the Bill—whether it is on the White Paper or on the Blue Paper. I think the history which has led up to the introduction of this Bill is rather a peculiar one. It is a very remarkable change of front on the part of the Chancellor of the Exchequer, of which I think both the House and the country are bound to take note.

Taking that part of the Bill, that important part of the Bill, which deals with the taxation of builders' profits as exemplified in the Lumsden case, the House will have it well within its recollection that for the past two years that matter has been constantly brought forward in the House. The White Paper instructions have been in this House again and again compared with the definite assurances given by the Chancellor of the Exchequer that nothing would be taxed but any increase in the value of the bare land. The White Paper instructions, on the other hand, proposed to tax profits entirely outside the value of the bare land, even when it was admitted that the value of the bare land had not increased by one farthing. That matter was brought forward again and again as one of the fulfilment of pledges, and as a matter of ordinary justice and as a matter of the intentions of this House at the time the principal Act was passed. Then it culminated finally with the Lumsden case, and the facts of the Lumsden case focussed public attention to this matter, and on this very point my hon. Friend the Member for Sleaford (Mr. Royds) put a question to the Chancellor of the Exchequer, asking him what his intentions were in dealing with the matter. The Chancellor of the Exchequer, in his reply, said:— The excessive price over value was in the nature of a fortuitous windfall which under the Statute was liable to taxation, and I do not propose to introduce amending legislation. That was his statement on the 22nd January last, and now, six months later, in July, he introduces an Amending Bill to remedy the very injustice of which he then was fully aware, and which he definitely stated on the 22nd January to be according to the Act and which he refused to remedy. What happened after that? I cannot help saying that the Chancellor of the Exchequer appears to regard his office, as one which involves duties to his party but does not involve duty to the country, and I say so on this ground: If he regarded his office as one involving duty to the country, he would look upon a question of this kind as one of right and of justice, and not merely as a question of expediency or a question of votes. The right and justice are the same to-day as they were on the 22nd January last, but the political position is very different from what it was then. We have not been able since the 22nd January to adduce any new fact of any description. The arguments are the same. The injustice is the same, but certain things have happened, certain incidents which have struck the imagination of the country. The country takes note that the Chancellor of the Exchequer says that profits in the nature of fortuitous windfalls are liable to taxation under the Statute, and the country observes that there are other kinds of fortuitous windfalls which are not liable to taxation, and that fact, which "w as very prominent during the months which have intervened between January and now, has struck the imagination of the country, and has forced opinion on this matter until the Chancellor of the Exchequer found that it was a matter, not of justice, but a matter of political danger and political expediency to remedy the wrong created by the Clauses of the principal Act.

4.0 P.M.

Another factor which, I think, must have weighed with him was the Leicester election. The candidate at the Leicester election, having no doubt informed the party authorities opposite that there were many small holders, I believe some 3,000 in the borough of Leicester who were up in arms against the injustice of the Act on the points raised by the Lumsden case, received authority to make a promise, which was given on the platform, no doubt from the party opposite, that some measures were going to be introduced such as these, and probably the same Clauses as those which are contained in this Bill. I do not think it is much to the credit either of the Chancellor of the Exchequer or the party opposite that when we ask for justice here time and again over the floor of the House that we cannot even get civility—I do not say from the Chancellor of the Exchequer, but we have not always had it from the Secretary to the Treasury on these matters, and we get no redress whatever. Certainly we have not, and I feel bound to say that. We get no redress of any sort or description, but as soon as the matter becomes one which attracts the attention of the country and appears to be a matter of votes and not a matter of justice, then the Chancellor of the Exchequer attempts to deal with it. I feel I am bound to make that comment, although I do not want to-do it in any controversial sense. I mean I do not wish in saying that to be taken to be opposing the introduction of this Bill. My criticism is upon the late introduction of the Bill, and not upon the fact of its being introduced. This Bill deals almost entirely with the question of Increment Value Duty Before saying a word on the particular proposals of the Bill, I must point out that the measure leaves very little in the Increment Value Duty. I should be inclined to put it that before this Bill was introduced the Increment Value Duty was a crime, and that if this Bill passes it will become merely a folly. At present great injury is being done and ruin is being caused to people of small means through the Increment Value Duty. If this Bill passes, amended as I hope it will be, relief will be given to these people.

Under present conditions figures given across the floor of the House make it clear that Increment Value Duty is collected in only two cases out of every thousand valuations on the occasion. If this Bill passes I feel sure that the number will be reduced to not more than one in a thousand. The Chancellor of the Exchequer will find himself in a position of putting a thousand people to the trouble of contesting valuations, of having valuers valuing in every direction and spending endless time upon their valuations, and then for every thousand valuations, involving expense, time and trouble, it appears likely that he will collect Increment Value Duty in only one case. Is it reasonabe that the country should be asked to maintain a staff of valuers and to incur this endless expense for such a result? Already the revenue collected bears a ridiculous relation to the cost of collection and valuation. There is a loss of £1,100,000. The figures have been given by the Chancellor of the Exchequer himself, so that he cannot deny them. That disproportion will be even further increased by these concessions. I cannot conceive how it can be considered worth while to value property in order to get Increment Value Duty in one odd case in a thousand. You have to value on the occasion every time that any unit of property, however small, either passes., on death, changes hands on sale, or is leased for more than fourteen years. These cases are occurring by tens of thousands all over the country. They all have to be valued. The worry and trouble are endless. It costs a guinea on every occasion for the delivery of particulars for obtaining the Increment Duty stamp at the Inland Revenue. That has all to be gone through to obtain in these very few cases a certain small sum of Increment Value Duty.

With regard to Clause 1, the only Amendment that I should suggest is with regard to the insertion of the words "proved to the Commissioners." This point will require to be considered on several Clauses. Personally I do not, and I think we on this side do not, understand why the onus of proving to the Commissioners should be necessarily thrown upon the subject. I understand that, the words being there, it will still be open to the subject to carry an appeal to the Courts. Therefore, I do not see any object in their insertion. I do not wish to argue the point now, but it is only fair to indicate the points that are likely to be raised. As to the Clause itself, it certainly increases the deductions, but I do not know that it reduces the complication. When we come to Clause 2 we get into a rather different region. The Clause is obviously intended to deal with the Lumsden case, and what arose out of it. It certainly is a very remarkable Clause. It says that the two valuations enacted by the principal Act, the original valuation and the valuation on the occasion, are to be made in the same way only when the value of the buildings upon the land being valued exceeds the value of the land itself. How many hon. Members had the knowledge that the two valuations were made in wholly different ways? What, is being done in connection with Increment Value Duty to-day is that two valuations are being made in totally different ways; those valuations are being compared, and the subject is being taxed by a comparison between two different valuations producing different results. You are comparing the incomparable and taxing the subject upon the difference.

When the Act was originally passing through Committee that point was raised upon the proposal to transpose two Clauses. As the Bill was originally introduced, the two valuations were to be made in the same way, but two Clauses were transposed, and the then Leader of the Opposition (Mr. Balfour) and others on this side raised the point whether the transposition of those Clauses did not alter the incidence of the tax and make the two valuations different and incomparable. Definite assurances were given by the Attorney-General and the Chancellor of the Exchequer that that result would not be reached, but that the valuations would be the same and comparable. Now in this Clause the Chancellor of the Exchequer definitely admits that the valuations are not the same, and he actually proposes to the House that we shall still allow everybody to be taxed on the difference between two incomparable valuations, except those persons who happen to own land where the buildings exceed the value of the land on which they stand. Is that in itself a reasonable proposal? I am very glad that those who have buildings exceeding the value of the land upon which they stand are to be taxed upon two identical valuations; but I cannot understand on what hypothesis other people who happen to own buildings of rather less value than the land on which they stand should be taxed on two different valuations. I have no doubt the Chancellor of the Exchequer will deal with that point. To my mind it entirely gives away the whole principle of Increment Value Duty, and is a direct admission that the taxes are not upon the basis which was represented to the House. As no doubt the Chancellor of the Exchequer anticipates, we shall propose to omit the words "that the amount of the gross value of the land is more than double the amount of the full site value of the land." That will raise the point to which I have just referred. We shall ask that the valuation be made uniform for all classes of property.

In Clause 3, which is obviously intended for builders, the five years' limitation appears to me to be quite unnecessary. I think the Chancellor of the Exchequer will see that Amendments must obviously be moved to remove that limitation on grounds which can be stated in Committee. The benefit which we hope from this Clause, especially if that restriction is removed, is this. What we want and have asked for again and again is that something should be done to remove the insecurity which has been for some time lying over the building trade. It is not so much the actual burden of the tax itself which has affected the building trade as the uncertainty of the builder in not knowing until he has actually sold the house which he has built what claims are going to be made upon him. If he can get a perfectly clean exemption and knows beforehand that no duty will be charged upon him, that will, I hope, do something to reduce the feeling of insecurity. But the Clause is very indefinite. It affects not only builders but those who although not builders are developing building estates. It is not at all clear what area of land will be affected. There is no definition in the Clause. I hope that that point will be explained in Committee. Clause 4 partially grants a concession in connection with which I personally have moved Amendments to the Finance Bills of the last two or three years. The point is one of great hardship, namely, that the sixty days within which anybody may object to a valuation runs from the date at which the original valuation is served. We have pointed out over and over again that small owners particularly, when they receive the valuation proper, do not understand its effect, and as no tax is actually demanded from them they do nothing. Consequently the valuation becomes fixed on the lapse of sixty days. Later on a claim for duty is made, which claim could obviously have been rebutted if the valuation had been questioned at the proper time. What we have asked for is that the opportunity for objection should be sixty days not from the date of the service of the original valuation, but from the date of the first claim for duty. This Clause does not concede that. It falls short in two directions. It only extends the time for claims for substituted site value, and it does not extend it up to the date of the first claim for duty, but only to the time of the first occasion on which Increment Value Duty is payable. It will be suggested that that provision should be extended in the direction I have indicated.

Clause 5 deals with the small investor. So far as the small investor is concerned, we have consistently fought his battle throughout. Why I myself feel so very strongly on this point is this: The difference between the effect of this legislation of the Finance Act upon the small investor, and upon those who are better off is that to the small investor in many cases it means ruin. The hon. Gentleman opposite, the Member for Sheffield, has pointed out to the Committee again and again, that the immense proportion of the savings of the thrifty working classes of the country are invested in land and house property. The effect of this legislation upon them, through the calling in of mortgages and claims for Increment Value Duty, such as in the Lindsell case—because that is typical of thousands of other cases in the country—has been that immeasurable harm has been done. A man purchases a little bit of land or a house with the whole of his savings. He borrows money upon the purchase. Later he has to sell at a loss; as in the Lindsell case the man sold at a loss of £54. There was just enough to pay off the mortgage. The whole of the man's life-savings were-gone in the £54, whilst he was served with a claim for £4 15s. Increment Value Duty. That ought not to be possible. That means ruin. I may tell the House, and I am quite sure the House will agree with me, that in point of principle there is no shade of difference between the case of the largest landowner and the cases of small owner or investor in house property, because on what ground was this duty recommended to the House and to the country?

We were told again and again that the Increment Value Duty was the resumption by the State of one-fifth of that part of the value of any property which was not in any way due to any action of the owner, but was simply the value created by the community or by the State itself. Is there any other principle on which any hon. Member on the opposite side of the House is prepared to defend the Increment Value Duty. If they are they are on the horns of this dilemma: Either they must defend it on this ground, or say that the Increment Value Duty is a proper duty to impose on all kinds of value, and on all kinds of property—land, investments, and everything else. You cannot have it both ways. If you are prepared to say, and to maintain, that the Increment Value Duty which you are claiming is purely to be raised upon the value created by the community, and by the community only, then I would ask the Chancellor of the Exchequer a question—although I welcome this concession. If hon. Members arc prepared to maintain the position I suggest, I say that it has no principle in it. If followed out, the State makes a present of the value which it has itself created, and to which the owner of any property has no title whatever, whether he be a man with a large income or one with only £160 per year, and why should the State do it? The fact is that the introduction of this Clause is definite proof of our contention—it is no use arguing round the hat—and, as the Chancellor of the Exchequer knows perfectly well, is an admission in the face of the House and the country that the Increment Value Duty is not the resumption merely by the State or by the community of the Increment Value Duty, but that is purely and simply a special tax levied upon one kind of property, from which owners of other kinds of property are exempt altogether. It is nothing less. This Clause cannot possibly be interpreted in any other sense.

My attitude to this Clause is this: That in justice the taxing land owners great and small is absolutely equal. The consequences are very different. The consequence of taxing a large owner of land or of house property may be to annoy him, to put him to trouble, or to put him to expense; but you do not ruin him. At any rate, you have not done so up to the present. So far as the small owner of house property or the small investor is concerned, you are actually ruining him. I certainly would not for a moment stand out for the latter on a matter of abstract principle, or say that because you do not relieve the large land owner therefore you should not relieve the small one. I am very glad to sec that you are relieving the small owner. All I point out is that there is no sort or kind of principle in it, and I conceive it is only a matter of time when Increment Value Duty on the other kinds of property will follow the course which is now being taken with regard to the Increment Value Duty on small owners. I would tell the Chancellor of the Exchequer that we propose on Clause 5 to suggest the extension of the limit—to propose to limit—the exemption to houses, with the land upon which they stand, which does not exceed the value of £500, and where the income of the owner does-not exceed £160. For reasons which can be stated in Committee it will be suggested that that limit should be extended. The Chancellor of the Exchequer, no doubt, will consider that point when the time comes.

When we get to Clause 6 we are in a different region again. Clause 6 is, again, a remarkable Clause Its genesis is peculiar. The House will remember the Minus Values case. The decision of the Scottish Courts was that minus valuations were illegal, and that you could not have a value of less than nothing. That case was carried to the House of Lords. The House of Lords decided that a site value could be less than nothing because it was only to be used as a basis of calculation. But the House of Lords were confronted by those who were against the Crown with the difficulty that in another Clause, Section (3), Sub-section (5), I think it is, of the principal Act, that there was a provision that an allowance was to be made of one-tenth of the assessable site value. It was pointed out to their Lordships that you could not have one-tenth of a minus quantity. That raised a great difficulty in the contention of the Crown that minus valuations were legal. In the judgment which was pronounced in the House of Lords a few weeks ago that point was raised. Lords Moulton and Shaw had this point before them. They only found themselves able to decide in favour of the Crown in the Minus Values case by assuming that this 10 per cent. reduction was not from the assessable site value, but was from the full site value. I need not trouble the House with the words. Hon. Members can read the judgment for themselves. I have it here. On that ground their Lordships felt justified in giving their decision in favour of the Crown. That dictum of the House of Lords that this 10 per cent, reduction was to be from full site value and not from assessable site value creates very great difficulties for the Government, because, up till now, they have apparently been giving this 10 per cent. allowance not upon the full site value but upon the assessable site value. Therefore, all the claims for Increment Value Duty which have been settled are wrong if that judgment is maintained. That dictum was certainly a factor in the judgment—

The CHANCELLOR of the EXCHEQUER (Mr. Lloyd George)

I do not doubt that those are the words of Lord Moulton, but a dictum of one of the judges is not a decision of the Court.


There were two judges, and the words were just the same. The words of Lord Shaw are:— The parenthetical reference in precisely the occasion on which the Increment Duty if to be collected—that is, the occasion set forth in Section 3, Sub-section (5), which is specially for the purpose of collecting the duty. It is accordingly, I think, pretty clear that it is not allowed to treat the reference to the allowance of the 10 per cent. in Section 3, Sub-section (5), as a reference to the assessable site value at all. It is a reference to site value which is different from the assessable site value. Lord Moulton distinctly stated that is should be full site value and not assessable site value. Therefore, the position of the Government is this: Having got their judgment on the minus value case, in which this was a factor, they now turn round and ask the House of Commons to declare that the assessable site value, not the full site value, is to be the basis of deduction. I do not see how the Government can have it both ways. Further than that, if we are to assume that this dictum of the House of Lords is to hold good—I presume by the introduction of this Clause that it does hold good—the passage of this Clause 6 will clearly increase the charge upon the subject, because it will reduce the deduction. I think that rather raises a point of Order, and that I shall have to refer the matter, Mr. Speaker, for your consideration. May I ask you now as to whether this Clause 6, upon which we now decrease the deduction which, under the dictum of the House of Lords, may now be made for the purpose of calculating Increment Value Duty, and that deduction being decreased, increases the charge, and whether that increase will be covered by the Resolution in Committee of Supply, upon which this Bill is based, merely to amend the law of Customs and Excise, and duties of the Inland Revenue?


It is not a very convenient practice to raise a point of Order in the middle of a speech. I thought that the hon. Gentleman was going to raise one or two points of Order when he rose, the effect of which might have been to prevent the Bill proceeding. I gathered he did not really press these points, and that he did not wish to risk my ruling that the Bill should not proceed. If he asks me at this moment to rule in regard to the matter, I must deprecate the point of Order being taken in the middle of a speech. However, in order to oblige the hon. Member, I will say that I think it is very doubtful indeed whether Clause 6 increases the charge. It possibly will be contended by the Chancellor of the Exchequer that it does not, and that this Clause is one for the purpose of diminishing and not for increasing the charge. Supposing, however, it were clear that it increased the charge—and I could only come to that decision after hearing argument on both sides—then it would be necessary, no doubt, that before Clause 6 could be considered in Committee it would be necessary to pass a separate Resolution, as the Resolution on which the Bill has been introduced would not cover this Clause.


That was my point, Mr. Speaker. My hope was that it would not affect the existence of the Bill or the Clause. The only point was as to whether a further Resolution would be needed, and that is the point on which you have just informed us. Perhaps the Chancellor of the Exchequer would like to reply now upon the point of Order, or will he defer till afterwards?


It is not desirable to introduce points of Order like this. It will be better for the right hon. Gentleman to reply to the hon. Gentleman in the course of his later reply.


There is also a point of Order on Clause 11. I do not know whether or not it will be proper to raise it now.


It is more convenient, as I indicated just now, not to have points of Order put in the middle of a speech, but at the beginning. I waited for some little time when the hon. and gallant Gentleman rose to see whether he was going to raise his points, but he did not. Preliminary objections of this sort should be taken before the Debate proceeds.


I thought. Sir, it was better to raise it when I came to the Clause. To come to the Clause which deals with Reversion Duty. They are only small concessions. But they do not in any sense go to the root of the matter, and there has been so much difficulty upon Increment Value Duty and Undeveloped Land Duty that Reversion Duty has rather been lost sight of; but of all the taxes imposed by the Budget of 1909 Reversion Duty is in one sense the most unjust, and for this reason, that the tax is nominally imposed upon a benefit received by the lessor on the determination of the lease. If the taxes were really imposed upon benefits received by the lessor it could be defended upon that ground, but the tax is not imposed upon benefits received by the lessor, and it cannot be pretended that it is. What the Act says is that benefit accruing to the lessor is to be taken to be something which it is not at all. It is deemed to be the difference between the value of the property at the commencement of the lease and the value at the end of the lease, quite regardless whether the lessor takes the benefit or not. May I give the House a simple illustration which will show exactly how the thing stands—that is, the effect of the Reversion Duty as it exists to-day?

It is a common thing for a building lease to be granted with an option of purchase on merely the capital value of the ground rent. Take a piece of land worth £1,000. The owner is willing to sell it for £l,000, but the person who desires to purchase and build upon it does not want the immediate option, and he says to the owner, "I should prefer u ninety-nine years' building lease, with an option within the first ten years to purchase the freehold and to enfranchise by paying £1,000." The owner agrees at £40 ground rent, with a right of purchasing the freehold by paying the original £l,000, which was the then value of the land. Under the Reversion Duty the owner who has agreed to that receives, let us say, five years afterwards notice from the lessee that he proposes to exercise his option under the lease and to enfranchise by paying the £1,000. It must be perfectly clear to the House that in that case the lessor receives no benefit whatever. He simply receives £l,000, the value of the land at the commencement of the lease, but the lessee obtained the lease to build a house upon it worth, let us say, £3,000. When he enfranchised the owner gets £l,000, and no more, but under the Budget of 1909 the benefit to the lessor is to he deemed the difference between the value of the land at the commencement of the lease, which was £l,000, and the value of the land with the house upon it at the determination of the lease, which is £4,000, and therefore 10 per cent. on £3,000, or £300, is the reversion which will be claimed from the lessor, but a deduction is made from that of 2½ per cent. for every year remaining unexpired of the lease with a limit of 50 per cent. That reduces it to £50 and the owner of that property when he took his £1,000 no more or less would be fined £150 because of the enfranchisement of the lease. I take a case which occurred in my own place in which I happened to be concerned where there is a property in a seaport town. It is an institute serving a most beneficent purpose, and it was let upon a ground rent of 1s. a year. It is desired to enfranchise that and make it a freehold. Twenty-five years' purchase amounts to 25s. As I understand this Reversion Duty, a duty will be charged upon the owner of that land amounting to the difference between the original value of the land at the time the lease was granted between the difference of 1s. and the value of the land to-day with the buildings upon it. But as it stands now the 1s. would be treated as if it were the original value of the land and its commercial rent, which, let us suppose, is £40 or £50 a year. Twenty-five years' purchase at £40 would be £1,000 and the value will be treated as if it was £1,000 at the commencement. That will be taken as the value of the premises at the time of enfranchisement and the owner of that property will be charged 10 per cent. between the difference, although he gets no benefit. That stops all enfranchisement, and I am sure one of the things we desire on both sides of the House is as far as possible to get enfranchisement of leaseholds and the creation of freeholds.

If any leaseholder applies for enfranchisement the lessor will say to him, "I should be very glad, but I cannot do it without having this enormous burden of Reversion Duty placed upon me, nominally upon the benefit I received, but which has no relation to benefit whatever, and even if I enfranchised without charging more than a farthing of the capital value of the ground there would still be a heavy Reversion Duty put upon me." May I also point to another vice of this Reversion Duty which does not apply to the other duties—and it applies also to Section 14 of the Act—and it is this: It is a duty that falls with great weight upon one locality and does not fall at all upon another. Take two towns like Ipswich and Grimsby, with almost identical populations and similar rateable values. Grimsby happens to be leasehold, Ipswich is freehold. You have an enormous Reversion Duty levied upon the town of Grimsby and taken away to London by the Chancellor of the Exchequer. Ipswich bears not a farthing of that burden at all. If there is to be any form of Reversion Duty, it is clear that that duty should be solely applied for local purposes in the locality where the duty is raised. In London there are many leaseholds, and there are many towns where there are no leaseholds, but no distinction is made. Surely, national burdens ought to be evenly levied over the country, and not according to the custom which happens to prevail in one locality and not in another, so that one locality should not bear enormous burdens while the other does not bear a farthing. Amendments will be proposed and new Clauses will be proposed to which I hope the Chancellor of the Exchequer will give careful attention for remedying these evils of Reversion Duty. I come now to Clause 11, the last Clause, and the most remarkable Clause of all, dealing with the valuation of agricultural land. I must in the first instance refer to the explanatory statement issued with this Bill. If hon. Members will look at page 9 of the explanatory statement on Clause 11, they will see the first sentence is:— The object of this Clause is to adapt the valuation provisions of the Act of 1910 for the purpose of ascertaining the assessable site value of agricultural land as agricultural land. I think this sentence is very misleading, because there is not a word in the Clause that touches the assessable site value of agricultural land. All the Clause does is to add another column to the valuations which are imposed by the principal Act, but unlike all the valuations which are imposed by the principal Act, that valuation determines the basis for actual or potential duty for Increment Value Duty or Undeveloped Land Duty. That Clause enacts the valuation which is set out in terms in the explanation here. If hon. Members will look at page ten, they will see that the last part of the paragraph referring to this Clause says that— Inasmuch as the separate site value provided by the Clause has no immediate fiscal significance, no hardship is entailed. Was there ever a more remarkable statement placed before this House than the statement made here, and this is a considered statement by the Chancellor of the Exchequer, that he is asking the House to sanction legislation which has no immediate fiscal significance? Did any Minister of the Crown ever ask the House of Commons to legislate for a purpose which he is proposing only at some future time to reveal? [HON. MEMBERS: "Yes."] I do not think in the history of politics any such statement as that could be found. I do not know where the Chancellor of the Exchequer got his precedent from. I think he must have gone to the Stock Exchange for it, because the only precedent I can find is in the history of the Stock Exchange at the time of what was known as the South Sea Bubble, when I believe at the culmination of that period of a Stock Exchange gamble some company promoter issued a prospectus in which he asked the public to subscribe for shares under a project the object of which would hereafterwards be revealed. And I believe he obtained a very large sum of money upon that prospectus, and I think hon. Members opposite will bear mo out in that. The House of Commons, as far as I know, have never previously been asked to pass legislation and authorise expenditure of money for a purpose hereafterwards to be revealed, and it is definitely stated here that it is to have no immediate fiscal significance.

I was going to raise a question of order upon this point as to whether a Clause which enacts no tax and has no relation whatever to any tax existing or proposed in this Bill, or in any other Bill, conies within the title of the Bill, but I am afraid I lost my opportunity. I do not want to destroy the Bill, and therefore perhaps it is just as well the opportunity was lost, but of course, I cannot say what the ruling upon the point might have been. There are other points arising upon this Clause. This Clause does not meet in any way the grievances which agriculture has laid before the Chancellor of the Exchequer. What we ask is, that the assessable sable site value of other kinds of property, ascertained on the same line as the assessable site value of other kinds of property, and what this Clause does is, it leaves the method of the ascertainment, of assessable site value of agricultural land absolutely untouched. It leaves untouched the extraordinary provision by which on arriving at the assessable site value of agricultural land, you allow drains to be deducted which pass through buildings, but not drains which do not pass through buildings. I had a case brought to my notice to-day down in the South-West of England where three farms were being valued. Each had an expensive system of irrigation. One passed through the buildings, the other two did not touch the buildings on the farm. The one was given a deduction because the drains happened to pass through the buildings, the other two were given no deduction at all, because the drains did not pass through the buildings. We know on the principles now in force that deductions are allowed for buildings upon a farm, but no deductions are made for buildings upon somebody else's farm adjoining. Roads are allowed which lead to farm houses or buildings, but not those which lead through the fields. On the other hand, sea walls and river walls and embankments are not allowed. It is of very great importance to the agricultural industry to get those deductions increased, and get them at the lowest possible point upon the assessable site value upon which their duties are being calculated, because the basis proposed is the assessable site value.

This is of infinitely more importance to owners of agricultural land than the Increment Value Duty is. The effect of insufficient allowances in calculating assessable site value directly increases the charges upon them for Undeveloped Land Duty, because it is charged on the differ-once between the agricultural value of the land and the site value of the land when it acquires a building value, Obviously it is to the interest of owners of agricultural land to get the site value down, so that when the comparison comes to be made, the difference between the agricultural value and the site value will be reduced. That grievance remains wholly untouched. All these test cases will apparently still have to go on, and the whole gamut of expense and uncertainty will remain. Further additional valuations have to be made in which abstruse calculations are to be made of how much of the value is due to improvements of any kind. Then we have the absurd restriction and limitation that no improvements are to be deducted if made more than thirty years ago. Does the Chancellor of the Exchequer really intend that? Why has he put that in the Bill? I feel sure that this Clause was introduced with a desire to meet the objections which have been raised on this side of the House; but the question is so difficult and complicated that the whole purport of the Clause appears to have been misunderstood by those who drafted it.

The Chancellor of the Exchequer and his advisers must know that a very large proportion of the agricultural land in this country owes most of its value to drains, river walls, and large undertakings which have created valuable agricultural land out of marshes, and that work has been done, not thirty years, but fifty, one hundred, and even two hundred years ago. Does the Chancellor of the Exchequer really mean to say that whatever this future fiscal purpose may be which is not revealed, he proposes to take this site value of the land with all improvements of every kind deducted from it; and does he suggest that he is going to confiscate and treat it as if it had been made by the State every improvement made by any owner more than thirty years ago? Is that a proposal which can be reasonably made to the House of Commons? Let us have it one way or the other. I want to know on what conceivable principle the House of Commons can be asked, in ascertaining the bare site value of building land, to deduct every improvement that has ever been made that can be claimed as an individual improvement by any previous owner, but when you come to agricultural land—which is the oldest industry in the country, where the improvement has been made for a much longer period with better results than in any oilier trade or industry—you are going to put in this limitation excluding all improvements made more than thirty years ago? Really, that is not a proposal which can commend itself to either side of this House. Hon. Members opposite who represent agricultural constituencies have a duty to perform to their constituents in this matter, and I am sure they are as anxious to serve them as we are on this side of the House, and how can they support a limitation in a Clause that is going to deprive agricultural owners, above all classes in the community, of the whole of the value of any improvements which they may have made more than thirty years ago?

That is a very short period in the development of any country, particularly in regard to agriculture, and I cannot understand on what basis the Chancellor of the Exchequer can have introduced that limitation in a Clause intended to be a concession. The whole Clause will require most careful consideration and consider- able amendment, and while we appreciate the intention with which the Clause was introduced, we cannot see that it can do us any good, and it should either be withdrawn or very largely modified in the form of allowing the assessable site value of agricultural land to be calculated on the same basis as the assessable value of any other land in the country. I apologise for occupying the attention of the Committee so long, but I have been dealing with a very difficult subject, and I did feel that my remarks would clear the ground. I may say that I have no desire whatever to delay the passage of this Bill at any stage, and as far as I know there will be no desire on the part of anybody on this side of the House to move unnecessary new Clauses. The points I have indicated, however, will require to be dealt with and considered, and Clauses dealing with them will be put upon the Paper. I believe it will save the time of the House if we are able to utilise the Second Reading of this Bill for this purpose. We have had six or seven days of general discussion on the finance of the country. I do not desire to continue that discussion. I want, as far as possible, to save time and trouble in Committee by broadly stating on the Second Reading the points which will be raised in Committee, so that the Chancellor of the Exchequer and hon. Members who have done me the honour of listening to me will know in what direction criticism will come. In conclusion, I wish to say that we have every desire to secure the passage of this Bill with the concessions which it contains, and we hope that we may so add to those concessions in Committee as to make them even more acceptable than they appear to us at the present time.


I wish to bring to the notice of the Chancellor of the Exchequer what I regard as a most remarkable omission in this Bill, namely, the absence of any proposal to adjust the Sugar Duty, and equalise the charge upon home-grown beet sugar and imported beet sugar. An Anglo-Dutch company has established a sugar factory in Yorkshire, aid last year they produced some thousands of tons of white sugar, which they sold in this country in opposition to British manufacturers, and upon this they paid no duty whatever. Really the equalisation of the Customs Duty on an imported article by an Excise Duty on the home-grown or home-manufactured article is an elemen- tary and axiomatic principle of Free Trade. I cannot for the life of me find adequate grounds for this omission, and I should like to know what is the reason for this departure from a fundamental rule. The point was brought before the Chancellor of the Exchequer, and in reply to a question by the right hon. Member for West Islington on 9th January, the right hon. Gentleman said:— That the matter would be considered in connection with the Budget for next year. I presume this is next year. This is certainly the next fiscal year. We were extremely surprised to find, in answer to a later question, that the right hon. Gentleman said that it was not his intention to deal with this question in this Budget. I wish to call the attention of the House to the fact that the home producer is enjoying an enormous and prodigious advantage in being exempted from a high Sugar Duty of 1s. l0d. per cwt. I am told that such an amount is more than the whole cost of running a modern sugar refinery in this country. I am also informed that a sugar refinery can be run upon 1s. 6d. per cwt., and so this firm and others who may follow their example is receiving this enormous benefit. I do not think any Protectionist Government would endow their most favoured industry with such an enormous amount of protection. Any industry which requires for its subsistence so violent a stimulation as that would be better dead. If the Government really think that this is an experiment of a scientific or even of a commercial value, and that this industry is of such value to the State that it deserves encouragement, surely a Grant from the Development Fund is the proper way to deal with it.

It seems to me that a Grant of 6d. or 3d. per cwt. ought to be sufficient to enable it to meet, initial expenses and to establish itself on a healthy financial basis. There may be collateral advantages in regard to this industry. We have been told that it will be an advantage to agriculture and the country generally. I have consulted some agriculturists who have tried the growing of beet for the manufacture of sugar, but they have done so without success, and they tell me that they do not consider the introduction of this industry would be a very great advantage to them. I am told that in countries where beet is grown the industry employs extra labour, but it is only seasonal labour, and it is of a low class. I am also told that beet-growing in this country will have to rely upon a similar kind of labour. I have no doubt that any industry managed with even moderate skill would be highly successful so long as it receives this enormous and unfair fiscal advantage, and I would like my right hon. Friend, if he cannot introduce a fresh tax, even at this period of the Session, at least to make it clear to the House and to those engaged in this enterprise that a parasitic and pauper industry will not be allowed to grow up, based on the robbery of the Exchequer and the consumer.

5.0 P.M.


I am glad that the hon. Member opposite has been allowed to say what he has said, because, if it is in order to discuss the Sugar Duty on this Bill, it will also be in order to discuss the Whisky Duty, and it will probably be of value to know that on some future occasion when we are here in reduced numbers. I did not expect this question of the Sugar Duty to be raised, but the Prime Minister, some eighteen months ago in a very remarkable speech, a speech which in my judgment was full of the soundest sense, said that there were exceptional cases—he instituted the very small Grant which we get in Ireland for tobacco, and I am almost positive that he went on to select this very case of beet sugar—in which the Government might under certain circumstances give a bounty, and I heartily agree with him. I almost wish that these Dutch people would come over to Ireland. We would welcome them with open arms. Whatever the hon. and gallant Gentleman (Mr. Pretyman) may say about his speech, I wish to say that in my judgment I have seldom heard a more instructive speech, and although I intend to deal only with one point, namely, Section 13 of the Finance (1909–10) Act, 1910, relating to the Reversion Duty, I can confirm every word he said, despite the fact that I approach the matter from a wholly different point of view. I quite agree than the Clauses the right hon. Gentleman has introduced are in mitigation of the Budget, and to that extent he is entitled to every acknowledgment and consideration. I should be very sorry indeed to see anything done to imperil this Bill which in the main I regard as palliating some of the injustices of the Budget. Let me call his attention to the fact that when he deals with this Reversion Duty in Clauses 8 and 9 he entirely forgets, or he has not had brought to his attention, the great severity of the duty in certain Irish cases, not quite parallel perhaps to the cases the hon. and gallant Gentleman has put, but cases which are equally deserving of attention. He admits by this Bill that where the lease was granted for charitable uses Reversion Duty should not be imposed, and he construes that in a very excellent minute which he issued as a White Paper in this way:— The benefit to the lessor on which Reversion Duty is payable, depends, roughly speaking, under Section 13 of the 1910 Act, on the difference between the rent obtained at the time the lease was granted and the rent obtainable on the determination of the lease. I am not at all surprised to hear of the extraordinary results of this tax in certain English cases, but let me give the appalling results of it in Ireland. The House must remember that until the last thirty or forty years it was almost impossible in many parts of the country to induce tenants to build unless they got a lease. The country had been devastated for centuries by various civil commotions and houses were very badly needed in many places. I will take the county Wexford. A great revolution, which Lord Castlereagh doubted whether he could put down although he created it, had devastated Wexford, and there was practically no such thing as any substantial town of Ennis-corthy. The late Lord Portsmouth—I am glad to say that his successors are carrying on the excellent traditions of the family—issued a statement to his tenants, and if any hon. Member wants to see the substance of it and he will go to the "Contemporary Review" or to the "Nineteenth Century" of 1880, about the month of July or August, he will find that it was to the effect that if they would build he would charge them practically nothing and would give them long leases. Accordingly, the present town of Enniscorthy has been built on the promise of the landlord that the tenants' buildings should be respected, and that they could get tenant right at the end of their leases. The town has been erected by the tenants on the faith of the statement of the late Lord Portsmouth some fifty or sixty years ago. Those leases will all fall in before very long—some of them are already falling in—and Lord Portsmouth will be called upon by the tenants to make good his father's word. No Act binds him, because the Land Acts do not apply in towns. In one case which has already occurred Lord Portsmouth renewed the lease at £6 a year, the old rent being only £4. He could, if he had chosen, have charged a rack rent and have got £100 a year. What did the Government do? They came down and said, "Your duty was to charge a rack rent." Accordingly, the Government fined him £80.

What did Lord Portsmouth do? Naturally—there is not one of us who would not have done the same—he turned round to his tenants and said, "Why should I pay £80 for giving you a lease? The Government have got £80 out of me. You must pay it." I put a question to the right hon. Gentleman about it, and it was not denied that the £80 came out of the tenant's pocket. This is supposed to be a tax on the landlord, a Reversion Duty at the end of the lease! Instead of hitting the landlords, it hits the tenants. I will take another town. At Lismore the Duke of Devonshire practically did the same thing. Similarly, the tenants took leases and built houses, and now, when the leases are falling in, because the duke does not charge a rack rent the Government come down and say, "You ought to charge a rack rent, and it is your own fault if you do not. Because some promise was made 100 years ago, is that any reason why the Government should not extract the money out of your pockets? Is there a landlord who cannot say to his tenant, "This is not my fault. I am not imposing this tax upon you. It is the British Government. Pay your tax like an honest man and support the Navy?" The Government by this Clause admit the grievance, but, while admitting it, they confine it to cases of leases granted for charitable purposes. These are the very cases in which relief ought to be granted. Charities can appeal for subscriptions. Hospitals are supported by voluntary subscribers, and they can at all events melt the public heart. But take some tenant, a carter, or a mason, or a labourer, who is looking forward to the end of his lease, trembling. Nothing has occurred to him except that his lease has dropped out. He is no richer to-day than yesterday; he is the same man to-day as he was yesterday, but suddenly his lease drops out. It is an event of which, as a rule, he is unaware because very often he has not got a copy of the lease. The landlord takes the lease out of his safe and goes to him and says, "My boy, your lease has dropped out. I must grant you a new one as my father promised, but the Government want £80 out of me; please write me out a cheque."

The Chancellor of the Exchequer has never been able to understand the intensity of our feelings with regard to some of the provisions of his Budget. This is the reason: I venture to think that this amending Clause of his was never sent to the Irish Law Officers at all. That question was asked with regard to the Budget recently by a very eminent Irish judge, Lord Chief Baron Palles, a most experienced and learned man, who at one time was Attorney-General for Ireland, lie said that when he was Attorney-General for Ireland the Government never brought in a Bill without sending it to the Irish Law Officers for their opinion. Has this Bill been sent to the Irish Law Officers for their opinion? I do not think that it has.

Let me refer to the case of Ulster. The Ulster custom, as legalised by Mr. Gladstone, does not apply to towns. I was consulted as to whether I could drive a coach-and-four through Clause 13, and I managed to do so. There was some agriculture about the property, and I got the landlord and tenant to agree to fix a fair rent. A fair rent was fixed as an agricultural holding, though it was not an agricultural holding at all, and we thereby saved about £50. I am quite sure that the right hon. Gentleman docs not want to hit the towns, and I hope, therefore, that he will remove this provision. Let me remind the right hon. Gentleman that in all the legislation of the past thirty years that has helped Ireland, very vast and valuable legislation, nothing has been done for the Irish towns. The Town Tenants Act was passed three or four years ago, but it was only a warding-off measure. It only said to the landlords, "Keep off the grass." Where the landlord was going to seize the tenants' improvements in houses it prevented him to some extent from taking that course; but the general body of the towns have practically had no advantage from the legislation of the past thirty years, and certainly they have had none of the benefits that have accrued to agriculture.

The last illustration I would give is the case of the towns of Ulster. Many of these towns—take the towns of Derry and Coleraine—were built with English money by the London Corporation and city companies. Many of these have not charged rack rents to their tenants, and I think that it would be a very sore and unfortunate thing if, when leases fall in and the Irish society, as it is called, the body of the London Corporation, which got charters three centuries ago, gave a lease at less than a rack rent, the Government should insist on getting its full pound of flesh. The only other observation I have to make is to express my regret that the right hon. Gentleman did not carry out his promise with regard to the Licensing Clauses. He has never given us any explanation as to why he did not do so. I will not press the matter further to-day, but I think the right hon. Gentleman will admit that the Clause—which, perhaps, he introduced himself, but, I think, was produced by the hon. Baronet the Member for Ayr Burghs (Sir G. Younger)—while admirable as regards Scotland in the relief it gave to certain landlords in that country, has hit the tenant elsewhere in a very severe way. I think that many persons look forward to this Bill as a means of bringing relief to a class of cases which have been hit hard by the Clause of the right hon. Baronet, and I trust that the right hon. Gentleman will give some indication that he will not leave that grievance unredressed.


The hon. Member for North-East Cork (Mr. T. M. Healy) has referred in his speech chiefly to the effect of the Reversion Duty which the Bill of 1909 imposed. Everybody knew when this Bill was proposed that the effect of the Reversion Duty would fall almost wholly upon the tenants and not upon the land lords. I do not think it is necessary, after the admirable and exhaustive speech made by the right hon. Gentleman who sits below me to go into the details of the various Clauses of the Bill. The few remarks I want to make this afternoon I shall direct to the general principles of the Bill. I think that the whole House and the country must feel that the introduction of this Revenue Bill, as a matter of fact, is a complete confession on the part of the Chancellor of the Exchequer of the failure of the 1909–10 Finance Act in regard to the Land Taxes. The Chancellor of the Exchequer has no doubt very considerable courage of a certain order, and I hope that he will not take it as an impertinence on my part if I suggest to him that he would show very much more courage—having not only ascertained and seen by experience that the legislation is a complete failure— if he acknowledged the fact, and if he did away with those ridiculous taxes and valuations. I only want to refer to two particular parts of this Bill. One is that Clause 5 proposes to exempt small land-owners, that is landowners with small pieces of property which at this present moment are exempt from Income Tax. I am quite prepared to accept that proposal, and, so far as it goes, in exempting these people from the effect of these taxes, I welcome it in the Revenue Bill. But there, again, it is an acknowledgment of the failure of the principle of the Act; because, as the right hon. Gentleman below me said, if it is just to impose these taxes on large landowners it must, on principle, be equally just to impose them on small land owners.

But naturally it will be said, and with a great deal of truth, that there are many people, especially those small landowners, who are incapable of paying these taxes, and it certainly would not be just to impose these burdens upon them. There is a principle entailed in this which I think the right hon. Gentleman opposite will acknowledge is rather a dangerous one to carry to any great extent. There are many hon. Gentlemen opposite who I think only recently have voted for doing away with all indirect taxation. We have a large, a vast majority of the people of this country, who pay no Income Tax at all. Now it is proposed by the right hon. Gentleman to exempt those who are subject to this Land Tax. That is all going in the direction of exempting the vast majority of the people of this country from any taxation at all. It does not want anybody of great financial know ledge to realise that if that principle is proceeded with it spells, very likely, national ruin. For this reason, that certainly the tendency to-day, in what I may call a rather vote-catching age, is to hold out inducements, very often of a monetary nature, to the electors to vote for a particular measure because it is going to do them some good, while there will not in any way fall upon them the burden to pay for it. In other words, you are getting the vast majority of the people to vote for spending other people's money. It is a question of public money, it is true, but that money comes out of the pockets of individuals, the minority of the people, and is voted by the majority of the people who do not pay the taxation. As I understand the suggestion of the right hon. Gentleman, it is dangerous to proceed in this direction, because it must inevitably lead to very greatly increased expenditure, and everybody must acknowledge that at the present time the expenditure is about as high as the nation ought to bear.

There is one other point to which I should like to refer, and it comes under Clause 11, dealing with the valuation of agricultural land. Surely the right hon. Gentleman cannot be in earnest when he proposes that these deductions from the valuation of agricultural land are only to be calculated for thirty years back! Why thirty years? Is there any reason whatever why it should be thirty, thirty-five, or forty years, or any other period? It is a very common phrase among electioneers, especially in industrial towns, where knowledge of the agricultural land in question is not very considerable, that "God gave the land to the people." It is quite certain that God did not give the land to the people with all the drains, fences, buildings, roads, and so forth upon it. And why it should have been given to them thirty years back, and not beyond thirty years, is a thing I do not understand, because it is quite evident that under this new system of valuation which is to be set up that the valuation of a portion of land twenty-nine years ago, with the deductions up to that date taken from the valuation, will be totally different from the valuation of another portion on a different basis, where the deductions cannot be taken because it is dated thirty-one years back. You will get greater inequalities, if possible, than you do under the present system of valuation.

Moreover, as my right hon. Friend asked, what is the object of this Clause which sets up a valuation which, so far as we can know at the present time, is to be used for no purpose on which we are given information? I think it is pretty apparent from which direction this Clause comes—certainly not from the benches on this side of the House—it is quite evident that it is not with a view to any concession to us that this Clause has been framed. I should imagine that it is framed at the instigation of a certain group of Members on the other side of the House who go in for the single tax or taxation of land values. Evidently that group have seen that if the full deductions are made from the valuations of agricultural land there will be practically no basis for taxation. Therefore, the Chancellor of the Exchequer is bound to make another column for them upon which their taxation can be based. Naturally, if in respect of agricultural land during the last thirty years deductions are to be taken from those valuations, there will be a great many in respect of which there will be no sort of basis on which to found their taxes. Therefore, I imagine that it is for their benefit that this particular Clause has been introduced.

I am very glad to hear that the right hon. Gentleman the Chancellor of the Exchequer has, during the last few months, taken a deeper interest in the land of this country. We understand that he is before long going to introduce a new land scheme, and to enter upon a land campaign. I am very glad that he has been gaining information on this subject, and I hope that he has acquired information, because the agricultural interest up till now has suffered from interference by those who do not know anything about the land question. I am glad, therefore, that the right hon. Gentleman has been making himself acquainted with that question. Let me tell him, if he will not think it an impertinence on my part to give him any advice, that what the land really wants is a restoration of confidence, which has been shaken by recent legislation and taxation. Many of the evils which at this present moment are engaging the attention of the country, and this House, such as the housing problem and the deficiency of rural houses, are almost entirely caused by the want of confidence which has been created among those connected with the land, and capital has not been invested in the erection of cottages and so forth. If you can restore confidence you will go a long way towards doing, by that simple process, what you will find it extremely difficult to do by legislation such as is proposed. This Revenue Bill I have no doubt in certain directions is some concession to those who are liable for these taxes; but let me point out to the right hon. Gentleman that of which I am quite sure he is very well aware, namely, that the revenue which has been obtained from these taxes has been extremely small, and therefore, it is not exactly the burden of the taxes to which the people connected with the land object—because they are very small indeed—but it is the want of confidence that has been created, and all the bother and trouble that have been caused to them in order to secure the valuation that has been made. I see in this Revenue Bill that at any rate is not dealt with at all, and no concessions are made with regard to the methods of valuation that are at present in vogue. I sincerely hope that the, right hon. Gentleman, as he has begun, if I may use the term, to climb down from the position he took up, that these taxes were absolutely fair and just, will, before long, climb down still further and remove them from the Statute Book.


I would remind hon. Gentlemen opposite, it does not necessarily follow that a measure is a failure because it requires to be amended. A great deal of the legislation on our Statute Book has gradually grown up by amending legislation, and almost every series of enactments consists of amendments of the original Act. This measure which we are now dealing with amends a Bill which dealt with an extremely complicated question—a new question to a very large extent, and one in connection with which it was obvious that difficulties were bound to arise. It is, indeed, almost impossible to frame any measure in this House that the lawyers cannot twist into a very different shape. This Bill, so far as I understand it, does carry out the original intentions of the Government as expressed by the Chancellor of the Exchequer. It is a perfectly fair comment for hon. Gentlemen opposite to make, that the present difficulties ought to have been foreseen, but we cannot foresee every thing, and, as I have said, the Act does carry out the intentions originally expressed, and does, in practice, do what it was intended to do. Some amendments have been shown by experience to be necessary, and I venture to suggest that, in addition to those which are proposed in this Amending Bill, there are some other amendments which will have to be made to carry out the general intentions of the Government and of the House.

The hon. Gentleman who opened the Debate spoke of the Reversion Duty. Undoubtedly there are anomalies there. I am not at all fond of the Reversion Duty, but, even taking it on the basis on which it stands, there are anomalies in connection with it which work out very curiously. It would also seem there is considerable substance in the contention that if you are to allow for improvements you should not limit it in the improvement created during the last thirty years. There is no justice or principle in that. If it is limited, as in the case where the house is of more value than the land, that surely is based on no sound principle whatever! I have always felt about the great Budget, of which this is an Amendment, that it was far too complicated, and that in many respects the resulting valuation is absurd. We have been told, and we shall be told again and again, that so many thousands of these valuations have been made and that so very few of them have been objected to. I have had some little experience of them. I know of a good many, and I venture to submit that they are not objected to, not because the people agree with them and accept them, but because they do not know what to do with them. They cannot make them out, and in any part of the country where you have the leasehold system nobody connected with that property knows quite what to do with the valuation.

Everyone knows that the ground rent in the majority of cases is an arbitrary amount, but it does not necessarily, and frequently it does not at all, represent the actual value of the land. It is a simple charge on the property, and it may represent double or even three times the value of the land. When you have got the valuation you get in it the value of the land, the value of the buildings, and the value of the total property, but, as it is a leasehold property, there is no single person in existence at the moment who represents any one of these interests. The owner of the ground rent does not know what the value of the land is. The valuation gives the value of the land alone, but his ground rent may represent something double the value of the land. It is quite a common thing where you have two houses, one alongside the other, for the ground rent on one to be five times the amount of the ground rent on the other. It does not affect his ground rent at all, and, therefore, he does not know what to make of the valuation. When the leaseholder gets the valuation he sees that the building on the land is valued, but that building is not his property. All the property he has is what is left over after the ground rent is paid, and, as the ground rent represents more than the value of the ground, his interest is represented by nobody. Therefore you get three valuations that do not represent anything that anybody owns, and, as I have said, the people do not know what to make of it. That is why they do not object.

Another thing is that it is not a very interesting process to come into conflict with the Government. To fight it is a very expensive business, and, therefore, men would rather let the matter slide. That is what occurs. The fact that there are so few appeals does not mean that the valuations are considered satisfactory. I have always felt, in connection with this business, it would have been far better to I have valued the land alone—the site alone —and nothing else. Value the land and do not attempt to value the buildings in connection with it, and then charge the increment on the change in the value of the land. But when you start by valuing the whole property, and then pretend to arrive at the value of the land by deducting the value of the buildings, you are in a quagmire. That is the process of the Act. It is not the process of the officials, and it would have been, in my judgment, far better to have left out the buildings and to have valued the land alone. I feel very strongly that in all this legislation that should have been the policy, and that is why I welcome this Bill because it is an amendment and an improvement. You need to protect the taxpayer against the officials. Once you pass an Act here the officials take no notice of what your intentions may have been, unless those intentions are absolutely expressed in the words of the Act. They are quite right. Their duty is to administer the law and they may know nothing about your intentions. If you tell them that the Chancellor of the Exchequer promised certain things, they politely reply that they know nothing about those promises, and that they have to administer the law embodied in the Act. But being human, like the rest of us, they make the most they can of revenue under the Act, and they are very apt, in every direction, to press it very hardly against the taxpayer and often very unjustly.

I will, if I may venture to do so, give an illustration of how the law works. It is not in connection with land valuation. The Inland Revenue authorities for some years charged Income Tax on annuities granted by insurance companies to persons who had purchased them, and the companies, when they paid out the annuity, deducted Income Tax upon it from the person to whom they paid it. The Inland Revenue authorities made the company pay Income Tax on that annuity. But the annuity in these eases represented the interest on invested capital which had already paid Income Tax. The companies had to pay Income Tax on the interest earned on their invested capital, and when they granted the annuities out of that interest the Inland Revenue authorities made them pay the Income Tax again on the annuity. They thus had to pay twice over, and the Inland Revenue authorities took no notice of their protest. Eventually, however, the case was taken into Court. It is not everybody who can take these cases into Court, because they are usually run up to the House of Lords, and it is a very expensive business. It was, however, done in this case, and it was decided by the Courts that the levying of Income Tax on the annuity was illegal. They asked for their money back! Did they get it? Not a bit of it. The reply was, "It was decided to be illegal to levy it. If you have not paid the tax, we shall not now press for payment. If you paid it under protest, we will refund it. But if you paid it without protest, it was a mistake in law, it was a misunderstanding of the law, and we are precluded from refunding it." What would any honest tradesman have done if he had received money which was not due and which he had no right to? He would have given it back again. He would not have hidden himself behind the devices of the law in order to evade restoring money which he had unjustly and illegally taken. I have given that illustration in order to show the attitude of the officials of the Department towards the taxpayer, and I repeat that in these matters we need to be exceptionally careful to guard the taxpayer.

My general view of the policy of the Act which we are now amending by this Bill is that the Increment Duty on the increased value of land is a perfectly sound, legitimate, and justifiable tax. I have no hesitation in saying that, but I think we might get at it in a simpler way than we do at present. It has been suggested that there is a loss on the valuation. I think that is a futile suggestion or argument. Everybody will admit that if we had begun 50 or 100 years ago with this legislation we should now be deriving a very handsome revenue from the increment which has taken place in the value of the land. But we decided that we could not go back on the past, and, consequently, as we were only going to collect the increment of the future, we had to incur the whole cost of the valuation to begin with. Nobody imagined that there was going to be a great increment in value in twelve months or five years. It is a gradual and slow process. The cost of the valuation is, so to speak, a capital investment. We shall get the benefit of the increment value as the population grows and as the value of the land of the country increases. It is possible that alterations may be made. It may have been suggested some revenue could have been got in much more quickly than has been the case, but that does not matter much. We are getting the valuation which will be the basis of a substantial revenue in the future. With regard to the proposal to exempt small people from this tax, I remember very well that when the Budget of 1909 was first introduced one of the criticisms I ventured to make most strongly upon it was with regard to the extent to which it would harass and worry a very large number of small people with very little result. Therefore, I am very glad indeed to see the smaller people relieved in this way, not so much because of the amount of the relief to them, but because the whole thing is not worth while. The revenue is not worth the harass and worry attending it. It is not a matter of principle but of expediency to relieve them. I should view with a good deal of jealousy the suggestion of hon. Members opposite to extend this. We do not want to extend it very far, or else we soon get into the region where there is revenue to be got which would be well worth while collecting. I therefore hope the exemption will be limited to the small cases and to small people. You may say there is an element of electioneering in it. It is not wise to make taxes unduly oppressive, and unduly objection able. It would be quite as possible to say that there is electioneering in exempting people from Income Tax. This is a matter of general equity and also of expediency, and on that ground I welcome it, but I quite agree that it needs to be carefully watched and carefully guarded, so that you do not get beyond the point where it is a grievance.


The right hon. Gentle man who has just sat down said that he thought the valuation as a capital expenditure was a good investment. He said that at the end of his speech, but in the middle of his speech he described the valuation as absurd. We on this side quite agree that if a really good valuation could be obtained for the expenditure of a reasonable sum of money it would be worth while to spend that money. The point we desire to make and have always made is that the valuation now proceeding is absolutely worthless, there fore the right hon. Gentleman (Sir Thomas Whittaker) was quite right when he characterised it as absurd. He said that he welcomed the Bill, but I should like to point out to him that there is nothing whatever in the Bill which amends the valuation. All the bad effects of the valuation remain, and a new and further valuation of agricultural land is being set up. When we are considering a Bill which authorises this further expenditure, I might recall to the House the position with regard to the expenditure upon this valuation and the revenue produced from this scheme of taxation. This is the fifth year this scheme of taxation has been in operation. After five years, apart from arrears, the Chancellor of the Exchequer has budgeted to receive from all these taxes the sum of only £205,000. Of that sum no less than £100,000 comes from the Reversion Duty, for which purpose the valuation is not needed at all. This valuation is therefore, being proceeded with, and is being extended under this Bill, for the purpose of collecting the sum of only £105,000. Under the provisions of the Bill a new valuation is to be set up. The Financial Secretary to the Treasury stated a few weeks ago that the present valuation would be completed as at 31st March, 1915, when the capital expenditure would come to an end, and he said that by that time we should have spent £2,800,000. Under one of the Clauses of this Bill the new valuation is only to begin as soon as may be after the 31st March, 1915. Therefore, it is quite clear that his estimate of the cost is quite fallacious, and that this valuation will be proceeding for an indefinite period.

Last week I asked the Chancellor of the Exchequer if he had ever made any estimate of what this valuation cost the owners. He replied that he had not taken that matter into consideration, and that he could not make an estimate. An estimate has been made by others, and the cost to the owners is put at, at least, the equivalent to the cost to the State. I do not think that is an overestimate. Therefore, in asking the owners of agricultural land to submit to a further valuation to begin after the 31st March, 1915, the Government are asking owners of agricultural land to submit to a further very heavy burden. There are only two Clauses to which I wish to draw special attention. Clause 2 deals with the Lumsden case. The history of that Clause is something of this sort: claims were or have been made for fortuitous windfalls when property was sold for more than it was worth. Those claims were only made possible in consequence of some White Paper instructions which were issued. Had those White Paper instructions not been issued, these claims could never have been made. The claim arises in this way: property is sold at a given price, say £750; the Government valued came and valued it, and said it was worth only £650, that, therefore, it had been sold for £100 more than it was worth, and that the £100 was in the nature of a fortuitous windfall. Clause 2 of this Bill prohibits, or purports to prohibit claims being made for fortuitous windfalls in respect to composite property—that is houses and land together—when the property is sold for more than it is worth. The principle of the Act was that the IncrementValue on the occasion should be based on the purchase price obtained, and the Act says that the site value is to be calculated on the occasion from the purchase price.

Under Clause 2 of this Bill the purchase price is ignored altogether, and in respect to composite properties the increment is to be calculated between two valuations made by the Government valuer, without regard to the price at all—the difference between the original site value and the value which he places on it upon the occasion of the sale. The value he places on it upon the occasion of the sale may have no relation whatever to and have nothing to do with the purchase price. I should like to ask the Chancellor of the Exchequer whether the effect of that alteration is not this: At the present time you can claim Increment Duty when the property is sold for more than it is worth. The object of this Clause is to prevent that being done in respect to composite property, but if increment can be calculated between two values without any regard to the purchase price, then the Government valuer on the occasion may say that the property has been sold for less than it was worth and place a higher value upon it than that for which it was sold. Increment Value Duty can, therefore, be claimed in that case when a property is sold for less than it is worth. If due consideration is given to the Clause, it will be seen that the effect of it is simply this: Whereas at the present time you can claim Increment Value Duty when the property is sold for more than it is worth, after the Bill has been passed you will be able to claim Increment Value Duty when it is sold for less than it is worth.


The Clause as drafted contains the words:— If the person chargeable with duty so requires. It is not a compulsory substitution of one valuation for another: it is intended as a concession in a case where the person chargeable with the duty desires this to be substituted for the other.


I am obliged to the right hon. Gentleman, but I am quite aware of those words.


I beg your pardon; I thought you were not.


They do not help the matter at all, because the subject, that is the taxpayer, on the occasion of a sale has no idea what value the Government valuer is going to place on the property; whether he is going to value it high or low, or whether he is getting a good price or a bad price in the opinion of the Government valuer. The purchase price has had nothing to do with it in the past. The cause of these claims is that the Government valuer has disregarded the purchase price, and whether the property has been sold for more than it is worth, or whether it has been sold for less than it is worth, does not matter. It is true that the subject may claim either mode of valuation, but he does not in the least know which will suit him. I think he will be in the cart whichever course he adopts. I think the right hon. Gentleman will agree that the Clause requires further consideration. If the subject does take advantage of it, it enables claims to be made for Increment Value Duty when there has been a loss. The object of the Clause is largely to restore confidence, which we are all most desirous of doing. If the object of the Government is to be met as regards composite properties, I think they should with draw their White Paper instructions. Then the objection of the right hon. Gentleman who spoke last will also be met, because he wishes this Clause to apply not only to composite property, but to all forms of land, whether composite property or otherwise. That would be carrying out the representations of the Government when the Act was first introduced into this House.

6.0 P.M.

With regard to the new valuation of agricultural land, I do not know whether the House quite realises that that is not an amendment of the present method of valuing agricultural land. It does not remove any of the grievances we have continually urged from this side of the House, but leaves them in exactly the same position. It leaves recorded against agricultural land two false site values—a false full site value, and a false assessable site value—and it now proposes to add a third false site value. The Clause does not give it any name except site value. I do not know what it in to be called, or for what purpose it is to be used, but, at any rate, you are seeking here to record against agricultural land a third untrue or false site value, the purpose of which we know nothing about. The purpose for which it is going to be used we are not told anything about. I hope the House will pause before they sanction such a course as that. What we want done and what ought to be done is to make the present values which have been authorised as reliable as we can. What is affecting the credit of land and of all forms of property is having recorded against it these false valuations. That is at the bottom of the loss of credit and it is the reason why capital has been withdrawn from the land. All these values are recorded in this Doomsday Book, and no owners or lenders of money know what they mean or how they are going to be used. They are none of them consistent with each other and the result is that this valuation is ridiculous. But beyond that it is most damaging. The valuation and the correcting of the method of valuation is the most important matter to be dealt with, and it is at the root of the whole of the loss of credit of the land. That is one matter which this Bill disregards altogether. The valuation is to proceed on the old bad lines. These untrue values are to be recorded in the Doomsday Book and a third and new site value is to be recorded in addition. I am perfectly satisfied—and I am quite sure that the Chancellor of the Exchequer's ex pert advisers would advise him to the same effect—that it is absolutely impossible to ascertain the true site value of agricultural land under the methods laid down in that Act. By any process of deduction such as those laid down, you arrive at the most absurd results. Here is a valuation of six adjoining pieces of land in Yorkshire. I had the site value valued by the best valuer I could get in Yorkshire in order to test it. He says that all these site values, if they were correctly ascertained, are of precisely the same value, and that opinion was confirmed by another. This is the Government valuer's valuation. NO. 1 is brought out at £10 an acre site value; NO. 2 at £30; NO. 3 at £19; NO. 4 at £48; NO. 5 at £16, and NO. 6 at £48.


Are they all of equal size?


That is per acre. They are all adjoining sites. The valuation was carried out by one Government valuer, and this is a copy of the figures which are taken from the valuation. That is the result which must be arrived at if you follow the method laid down in the Finance Act. You cannot be surprised, that being the state of affairs, that the credit of land has been shaken. No one knows to what purpose these values are going to be put. They do not produce anything, of course. The Chancellor of the Exchequer says that agricultural land is practically exempt from any of the duties imposed by the Finance Act, so that it is not for the purpose of those duties. Then for what purpose is it? People are alarmed; they see these totally false values being recorded throughout the length and breadth of the land. This House is voting £700,000 a year for the purpose of ascertaining these use less site values, which are shaking the credit of the greatest asset we have in this country. It is about time the House of Commons looked into this matter and woke up. Hon. Members opposite do not like, I suppose, to attempt to upset this so-called great scheme of the Chancellor of the Exchequer, but I do not think they ought to commit the country to spending £700,000 a year and to inflicting this damage on land without satisfying themselves that a proper valuation is being made, and every hon. Member who speaks opposite, when he has had occasion to look into his valuations, says it is absurd and worthless, or words to that effect, and yet we tamely and calmly meet week after week and go on supporting this proposal for carrying out this absurd valuation, and by this Bill not only are we asked to continue this valuation, but to extend it for a further period of years and to set up a new valuation which, when it is completed, will be even more worthless than the present one.


I think the provisions of this Bill, when passed into law, will give very great satisfaction in the country. There is no doubt that for the last three or four years an organisation known as the Land Union, of whose operations I do not desire to make the slightest complaint, has been very active in informing the country at large, not on the merits or demerits of the taxes contained in the 1909 Budget, so far as the principle of those taxes is concerned, but with regard to such cases of hardship as could be found, to show that in their actual operation some injustice might be inflicted here and there upon this or that member of the community. The Bill makes no inroad at all upon the principle that it is right and expedient that the State should take for itself a portion at least of any increment in land which is due to social causes, to the expenditure and enterprise of the community at large, and which owes nothing to any expenditure or enterprise on the part of the owner. That might have been a disputable principle in the past when John Stuart Mill laid down that it would be wise and politic for the State to take the whole of such increment, but to-day it is not really seriously contested in any part of the House. It is not the principle of the Budget of 1909 which has been in any way shaken by the criticisms of the Land Union. What we are here to rectify, so far as experience shows it to be necessary, are the methods by which in the Budget of 1909 the technical advisers of the Government thought it would be well to endeavour to carry those principles into effect. The method devised was a very simple one, that if you started by getting a valuation of the land in this country as on 30th April, 1909, as the datum line, then, after making due allowance for any expenditure or works executed on the part of the owner after that date, you might safely take the purchase price upon any future sale as showing what increment there had been in the value of the land between those two dates.

It is not suggested that experience has shown that there is anything very wrong about, that method or that that method does not provide a perfectly safe and workable method of ascertaining the increment in the case of bare land. It is quite easy in the case of land which has not been built upon to make the necessary deductions for any small expenditure made upon it, and it is quite clear in the case of bare land that the price is very apt to correspond with, or furnish a criterion of the value at any given date. What the Budget of 1909 did, however, was to apply the same method of discovering what increment had taken place in the value of bare land, to eases where the Land was covered by buildings which might be many times in excess of the value of the land upon which they stood, and it was in these cases that it has been found that to take the price paid for the composite subject upon the occasion of the sale as a criterion by which you are to determine whether there has been an increase in the site value is a method which in practice results in occasional profits being sometimes swept into the net of the tax collector when there has been no true increment arising from the social causes to which I have referred. That hardship is swept away entirely by Clause 2 of the Bill which provides that in. all cases in future where the land has been developed by houses being built upon it to the extent of the buildings being worth as much as the land, if there is any doubt in the mind of the person who has to pay the tax as to the price which he has received upon the occasion of sale being a fair criterion from his point of view bringing out a fair and just result as to what tax should be paid, he may have a valuation of the land so that there can be no doubt whatever that no claim can be made upon him except in respect of the rise in the value of the bare land which is due neither to any expenditure on his part nor to any rise or recovery in the value of the building.

That is important because it entirely removes the apprehension which is undoubtedly felt by a large class of small owners of freehold and leasehold property in our towns, people who have bought one house or two for their own occupation or as an investment through their building society and who have been told consistently by the Land Union, and I do not say wholly incorrectly, that under the provisions of the 1909 Budget, though there has been no real rise in the value of the land on which those houses stood, still, upon the occasion of the sale, if there was a mistake in the figures of the original valuation, or if there was any cash profit made by them upon the house, they might find themselves liable to a claim for duty which certainly did not fall within the principles upon which the Budget of 1909 had been explained in this House and commended to the country. This Bill will entirely sweep away that cause for apprehension on the part of investors in small house property, shops or buildings. They will, when Clause 2 is carried into effect, have a complete assurance that they need have no apprehension of any claim in respect of increment taxes being made unless there has been a rise in the value of the bare land on which their buildings stand and a profit at least five times the amount of the tax which the Government seeks to impose.

Then there was the other case, the Lumsden case, which disclosed the fact which had been pointed out on this side of the House as well as on the other some years ago, that cases might arise, owing to the method of assessing the tax which was selected by the technical advisers of the Government in 1909, in which not merely a rise in the value of the land but the trade profit of the builder might be made assessable to the tax. It is perfectly clear that such cases have been extremely infrequent. So far as I am concerned, I have only heard of one case, and yet the Lumsden case makes one think that there might have been more cases than there have been. That case revealed the fact that it was possible to tax builders' profits. Clause 2 of this Bill makes a case like that of Mr. Lumsden absolutely impossible in future. Mr. Lumsden was a builder who was so fortunate as to make a profit of 60 per cent. or 70 per cent. out of bricks and mortar, and on that profit the Government made a small claim. Whatever the profits of Mr. Lumsden or others may be in future, no claim can be made by the Government on the ground of the large and fortuitous profits that have been made while there is no rise in the bare value of the land. The Bill provides that so far as builders and land developers are concerned, even although the land be rising in value, due to causes wholly unconnected with the development of an estate, not due to any expenditure or enterprise on the part of the building owner, the parties engaged in developing estates are exempt from claims upon the rise in land from purely social causes during the period of building development. I am glad that this Bill does completely remove, in my judgment, those two very practical and serious grievances—one on the part of investors in small house property and small houses generally, and the other on the part of builders who in some conceivable circum stances might make profits which might be taxed under the guise of the Increment Tax.

I entirely agree with the hon Member for the Spen Valley Division (Sir T. Whittaker) that we are all in favour of the Increment Tax, but we should like to see the tax in a more simple form than it is in the Budget of 1909. Although it is out side the scope of this Bill, find outside of any hope on my part that this is a matter likely to be dealt with on the occasion of this Bill, I hope the Government will not lose sight of the fact that Amendments such as this Bill contains removing anomalies which working experience has shown to exist in the Clauses of the Finance Act of 1909–10, will never be wholly satisfactory as providing a proper basis upon which the increase in the value of land due to social causes may be taxed, not merely to the extent of 20 per cent., but to any extent to which future Chancellors of the Exchequer may deem it reasonable or necessary to resort to. I would point out to the representatives of the Government who are now present that the Act of 1910 contains within itself the outline of a much simpler system both of assessing and collecting this Increment Tax, without irritation to the taxpayer and without uncertainty as to the amount. Undoubtedly the most important kind of lands for the purposes of the Increment Tax are lands which are known as undeveloped lands—lands which have passed, out of the stage of being merely agricultural lands, and which have acquired a value for building purposes, though not yet built upon—in other words, suburban lands of all the great towns of this country. As regards these lands, it is already provided in the Act of 1910 that there shall be a periodic valuation once in five years; and as regards lands in the hands of corporations, a similar valuation is provided for the purpose of assessing Increment Tax. So far as undeveloped land is concerned, as soon as the first quinquennial valuation is arrived at we shall be in this position: We shall have obtained under the original valuation the datum line as to what it was worth in 1909, and we shall learn by the subsequent periodic valuation what the land is worth in 1916, or whatever occasion the House may fix for that valuation. When that is done the true increment will have been ascertained by valuation. I say the true increment, because one can only obtain the true increment, not by valuing an isolated plot, but by valuing the land as you find it in blocks, streets and districts. The increase in the value of the land which is not due to the execution of works by the owner, but due to communal causes, is a thing which is not found in an isolated plot here and there, but it is an increase common to a great number of plots occupying a similar position.

Therefore, the quinquennial valuation will give, really and accurately, the true valuation and the true increase in the value owing to communal causes since the land was last valued, and if at some future day the Increment Tax should be simplified by the ascertainment of the increment being confined to those periods when the quinquennial valuation is made, the taxes to be paid during the next quinquennial period could be then fixed in respect of sales which might arise in the next five years. The great advantage of that would be that the subject would then know when selling or transferring a lease, or otherwise, what tax he had to take into consideration in makng his bargain—a thing which he can never know with accuracy under the present system. The suggestion I have ventured to make for the further simplification of these taxes in future does not in any way, in my view, detract from the merits of the proposals now brought forward as practical proposals which do remedy every genuine case of hardship, for all substantial purposes, which has been brought to my notice during the last three and a half years, during which I have taken an interest in the working of these taxes.


After the strenuous fight the Government put up they are to be congratulated at last upon having climbed down to some extent by means of this Amending Bill, and I suppose we should be thankful for small mercies, although practically the Bill only touches the fringe. Hon. Members on the other side have dwelt this afternoon on the relief to be given to small owners of property, but the relief is not sufficient. There is nothing said in this Bill about relieving people from the hundred and one vexations of administration. Building societies' property has been referred to, and I am reminded that one of the most eminent gentlemen connected with building societies, Mr. E. J. Wood, secretary and managing director of the Temperance Building Society, in addressing a meeting of building societies a short time ago, dealt very fully indeed with the difficulties under which small owners of properly are labouring, and the difficulties particularly which are met with in the building societies. Mr. Wood expressed his intention during his speech of telling the Government what he thought generally of the position as affecting the owners of property taken from building societies. He spoke at some length, and his remarks were so pertinent to the various points raised this afternoon that I shall gove the House some extracts from his very valuable contribution for fear they might be lost. While he appealed to a very large section of the public, yet it is very desirable that his opinions should be placed upon the records of this House. He began by saying that the Act imposes upon owners of property on transfer an expenditure for which the nation is not now obtaining, and never will obtain, an adequate return. He asks, "What are the requrements of administration?" On the sale of a leasehold property the vendor has to supply either an abstract of the lease or a copy of the lease, and an abstract of the assignment, or a copy of the assignment. In the case of freehold similar information is required, and in practice it is easier and cheaper to supply copies than mere abstracts, because abstracting requires experience for the purpose of preparation. It is only he who knows what is important in a deed who can make an abstract. The cost of this generally works out a guinea to a guinea and a half. That occurs in every dealing with property of this class. Mr. Wood says that in connection with this the expenditure incurred by vendors, members of his own society, and others to meet the general requirements of the Board of Inland Revenue in the direction indicated represents no less than £400 a year, and he doubts if the Board of Inland Revenue has received a £10 note during the whole of that time.

Nothing is said in this Bill about relieving small owners of property from these administrative expenses. It is a subject to which I think the Government should pay particular attention. The costs of conveyance are heavy enough on all occasions, but in connection with this Act obligations have been put upon societies to supply abstracts or copies of leases, and they have to incur very considerable expense. I think that in this connection particularly they might under this Act get some relief. I am sorry that there is no proposal in the Bill to repeal, or even amend Section 2 of the Finance Act of 1912. In the early hours of the morning towards the end of last Session, there was passed an Amendment which enabled the holders of untied licensed property to charge their landlords with a proportion of the increased duty. That has worked out in a very extraordinary manner. The holder of premises let at, say, £50 a year, in the sense that he has bought a profit rent of £50 in the open market, finds himself cast in a contribution of perhaps as much as £150 or £160. I ask the House to realise what that means—to buy a profit rent of £50 in the open market and to be asked to pay towards the Licence Duty levied by the Government a contribution to the holder of the licensed house of some thing like £150 or £160. As this seems to be entirely overlooked, because I do not hear of it in any quarter of the House, for the information of the House I might take the following example. Rent paid to lessor £105 a year. Premium paid for lease reduced to annual value £664, total £769, less estimated rental value of property unlicensed £120, total increase of rent paid in respect of licence £649. The amount of additional licence duty is £190, and then the lessor's proportion is 649–769ths or £160, and the immediate lessor of the brewery on whom the claim is made is not the freeholder. He has bought an improved leasehold rent of the house on the same terms as the brewery has it of £50 in 1907. He received from the brewery £105, and they ask him to pay £160.

Surely something must be wrong when a Government Department does not attempt to deal with an anomaly of this kind. It is one of the most pressing things and has been ventilated in the Press I do not know whether it has got into the High Courts yet, but at all events there are several judgments in the County Courts imposing these penalties on the people who did not touch the original premium. They did not receive the premiums which passed when dealing with this licensed property, but they bought perhaps £50 or £60 or £100 a year as profit arising from licensed promises thinking that by so doing they were buying a safe investment. There is a case here recited of a poor widow actually buying £50 a year who would have to pay £50 back to the lessee of the public-house. An extraordinary anomaly of this kind which was created in the early hours of the morning in the latter part of last Session, should be redressed at once, and I cannot conceive the Law Officers knowing what is going on in connection with this anomaly, doing nothing to remedy it. It is a standing disgrace to the administration of the Government that such a state of things has not been attended to. Attempts are made in this Bill somewhat to improve matters in connection with Reversion Duty, but they cannot be improved except by a very simple machinery—only the profit accruing to the individual is to be assessed for duties. At present a perfectly hypothetical valuation is made of what was the value of the property many years ago. To show how grotesque the thing is, instead of having the duty raised on the actual benefit received, on the one hand I can cite a case where I have been asked to pay £90 for selling a lease back to my freeholder, because the Government said I sold it for more than what it was worth, and, on the other hand, I had to pay £90 for letting a property for less than it was worth.

We are dealing with certain property, particulars of which I should like to give to the representative of the Government (Mr. Hobhouse). I am pleased to see him here on an occasion like this, because I remember his strenuous battles when he was connected with the Treasury. Briefly, the valuers said that instead of £205 a year as rent for a property we should have charged the tenant £300, and because we did not do that we had to pay £90 duty. The person I represent was a lessee, not a freeholder, and probably the value of the benefit accruing to him for a surrender and reletting was about £162, and the capital value of his property was not in creased more perhaps than £300, and if the true scale were adopted he would have had to pay, as his leaseholder's proportion, something like £7 10s. only. Instead of that this unfortunate person had to pay £90. Here is a case to which the proposed Amendment dealing with the Section does not apply. It is one of these scandalous anomalies that really should receive proper attention, and it can never be put right unless by a simple method you do really assess the benefit which does accrue to the individual and charge then 10 percent, on the money which he puts in his pocket, and not on the purely hypothetical estimate of what you think he should have put in his pocket. Several speakers have dealt at great length with the injury that has been done to the property market by the Act. I am afraid that the Amendments do not go far enough, but such as they are, they will be accepted with pleasure, perhaps in a spirit of gratitude, which is defined as a hope of further favours to come.


I think that some of the criticisms which have been passed on what is called in this measure the principal Act have not been quite justified. After all, the great Finance Act, which laid the foundations of the land valuation, was, in a sense, a pioneer mea sure, and it was only to be expected that various flaws should be found sooner or later, and the House, on all sides, I think, is very pleased that the Chancellor of the Exchequer should have brought in a measure which, in many ways, will make those provisions better than they have been before. But when I welcome this measure as one who has been associated with the land values movement, I would like to express my regret at not finding some better provision for ascertaining what is known as the full site value of land. If we ever have, as we hope we shall have, an improved rating system, it is common ground, I think, that it must be based on full site value, and, therefore, it is most desirable that we should have the full site value. I sympathise to a considerable extent with some of the criticisms coming from hon. Members on the other side on the present definition of a full site value. You have the gross value, less deductions, deductions for buildings, structures, and various things of that sort, all those things which are distinguishable from the land, but as we have been hearing, there are a, great many other things which are not so physically distinguishable from the land, such as works of reclamation, drain age, and sea walls. These are very important improvements, though it is difficult to distinguish them from the land, and yet there is no allowance made for these in foil value site as a basis. I quite agree that to some extent they come under paragraph 3 of Sub-section (4), which is proposed to be dealt with by the eleventh Clause of this Bill, but my point is they are not dealt with under full site value, and they ought to be dealt with under full site value, if that full site value is ever to be anything like a basis for rating. I myself can draw no economic distinction between improvements like houses and buildings, which are physically distinguishable from the land, and improvements like sea walls and works of reclamation which are merged in the land. The only difference is that they cannot be estimated in quite the same way, and here I come to an extraordinary point which has been made by some hon. Gentlemen opposite. They seem to object to this thirty years' limit, but it seems to me that in ascertaining how much of the present value of the site is due to such improvements as these you must take some time limit. You cannot, for instance, go back to the days of Noah or to the days of the Norman Conquest.

Take, for instance, the case of Westminster. A great part of Westminster was built on land which was more or less reclaimed from a marsh away back in the twelfth or thirteenth centuries. How could one possibly, in attempting to value the site value of a piece of land in Westminster, go into the question of how far that was due to reclamation that was done in the thirteenth century? It could not be done. We have got to take some satisfactory and some practical way, and the practical way is to go back for a certain time. I know that questions may be raised as to the time, but I would like to remind hon. and right hon. Gentlemen on that side of the House that at present all improvements are rated, and if we could go back thirty or even twenty years we would have an improved system of rating and make a very great improvement on the present system, which rates all improvements. When I was a Member of the Select Committee on the Land Values (Scotland) Bill we had evidence from one gentleman who had carried out consider able reclamation along the shore of the Firth of Forth, opposite the proposed site of the Rosyth Docks, and he complained, that when the reclamation was there effected, and as soon as he had reclaimed the land and improved it by reclamation, up went the assessment and the rates; and I put it to hon. and right hon. Gentle men opposite that if we were to exempt even for thirty years, as suggested by that measure, that would encourage improvement in reclamation in a way in which it is not encouraged now. There is another point about this Clause 11 which I would like to mention. It seems to be limited to agricultural land, but from the point of view of those associated with the Land Values movement we wish to draw no hard and fast distinction between agricultural land and other land. It seems to me that whatever is the value of the land the same general principles ought to apply, and those general principles are that we should exempt as far as possible all those improvements which are distinguished from the land, and that in the case of those improvements which merge in the land we should exempt them by going back for a certain time. I do not go into the question of the number of years, though I think that thirty years is sufficient, but we should go back for a certain time and frank all the improvements which have been made since then. I do not say that it is a perfect system, but it is an eminently workable system, and would give good results.

I should like also to point out that under this franking system what you want to encourage is improvements in the future. The economic effect is mainly felt as regards future improvements, and it would seem that for that thirty years would be sufficient. I should like the House in considering these questions which have been raised in connection with full site value, and also in connection with improvements referred to in Section 11, to realise that it is important to bear in mind that we are not merely dealing with the Land Taxes in the Finance Act, but that to a great extent we are laying the foundation for a still wider reform. If we were only dealing with the taxes of the Finance Act there might be some ground for the criticism that the expenditure in pre paring the way for those taxes has been very great. Those who make that criticism should remember that while those valuations are, so to speak, capital expenditure of a permanent character, their use is felt, not only now, but will continue to be felt years after they have been completed. On further consideration we hope, sooner or later, that those valuations may utilised for this form of rating to exempt, as far as possible, improvements, and to rate, as far as possible, improvements on the market value of the land. I put that forward now in no controversial spirit, because, as is well known, there are many hon. Gentlemen opposite who, while they did not approve of the particular proposal of the great Finance Act, nevertheless are pledged to the franking of improvements as far as may be, and also, as far as possible, to a system of rating land on its real unimproved value. Those considerations should be borne in mind in the work which we hope to do in this Revenue Bill, and for the present we certainly hope that this Bill will have the effect of simplifying and improving the working of the land, while at the same time it prepares the way for a still larger measure.


The hon. Member who has just spoken has devoted most of his speech to a consideration of Clause 11,and has expressed his surprise that that Clause should be extended to dealing with agricultural land. Urban land is already dealt with in the great Budget, as he calls it, of 1910, and Clause 11 is designed to put agricultural land in the same position as urban land now occupies in the scheme. The intention, as I understand it, is to put those two values on an identical footing so far as the different deductions are concerned. You get a full site value fixed for both. My complaint about Clause 11 is that it is not going to get the proper valuation of agri- cultural land, and it is not going to place agricultural land on the same footing as urban land. The other day, when we were discussing this matter, I said to the Chancellor of the Exchequer across the floor of the House that he would probably find, in dealing with agricultural land, it would be acceptable to this side of the House if he adopted the Clause as finally settled in the Land Values (Scotland) Act, which was passed in 1907. In that Act, as originally introduced, there was the time limit of twenty years placed on improvements. We riddled that proposal and the Government ran away from their own proposition, and substituted a more reason able and proper form of words. They took out the limitation altogether. The words in the original Clause were, "Where such work has been executed, not more than twenty years preceding." Those words were taken out, and the following "words were substituted in the Act: "Where the benefit thereof is unexhausted at the time of valuation." That is a reasonable and sensible form of words.


Without any time limit.


Certainly, without any time limit. Why should there be any? Who is going to build a sea wall to reclaim two or three hundred acres of land, if the whole cost of building is to be confiscated in twenty or thirty years. Nobody is such a fool as to do that, yet there are thou sands of acres of agricultural land in Scot land whose value depends on the building of that wall. Therefore, in dealing with those particular farms regard would be had to whatever was unexhausted value in that particular wall defending that land for the purpose of agriculture. It is a simple proposition. I have a case in my own country whore there is a particular plot of land extremely difficult to drain. We have enormous arterial drains placed there with 15 or 18-inch iron pipes. Does anyone suggest that the value of those pipes is exhausted in thirty years. Would anyone be foolish enough to put them in if they were only to last thirty years? Some of the smaller subsidiary drains are not even exhausted in the thirty years, let alone those big drains. The whole thing is ridiculous. The Clause has been drafted by somebody who knows nothing about the subject, and who apparently does not understand what the cost of those improvements is and how necessary they are for the purposes of the farm and retaining the land in agriculture. The right hon. Gentleman, if he will take an example from the wisdom of his predecessors, and I am sure he is not above that, will take that Clause as it stands. I remember he once said to me that I regarded it as an extract from a family Bible. However that may be, in this case I think if he would regard it from something like that point of view he would get out of any difficulty with this side of the House and would find the Clause fairly acceptable for defining agricultural land and the agricultural improvements to be dealt with. I would suggest he should look into this matter. I have no doubt I shall myself put an Amendment on the Paper to embody these words or something like them in the Clause as it now stands.

There is then the question of the exemption of the smaller owners under Clause 5. I am very glad to see that exemption and all the other ameliorating proposals which are made in this measure. I would remind those who believe in the principle of the rating of land values that Clause 5 gives away the whole of that principle anyhow. The moral principle, if there is one, involved in the taxation of land values and in the alteration of the present rate from the composite value to land value is knocked to pieces by Clause 5. If it ever gets a resurrection in this House it is not likely to be a glorious one. The last point to which I wish to refer is with regard to Section 2 of the Act of last year. I regret very much I was responsible for putting that Section in the Act of last year. The Chancellor of the Exchequer was good enough to accept it, but it was a very old friend. It appeared on the Paper in the Report stage during the Budget discussion in 1909, and it was intended at that time to embody it in the measure in a somewhat different wording as an addition to Clause 46 of the Finance Act. But Mr. Speaker ruled that as it placed a new charge on certain individuals, it was impossible to introduce it in the Report stage of the Bill. It appeared upon the Order Paper in the subsequent discussions on the succeeding Finance Bills of 1910, 1911, and 1912. Everyone remembers the conditions under which those Bills were discussed, and that no time really was given for a discussion of the new Clauses. It was not until 1912 that there was an opportunity of getting that Section introduced into the measure. It was intended to cover the case, mainly from my point of view, of the free tenant in Scotland, and it has worked admirably there. There has not been a single com plaint about it, so far as I know, there.

It was designed to deal with this case, that whereas in England a brewer whose tithes were made responsible, if he charged a high rent or a high price for beer, for whatever portion of the monopoly value he would receive in respect of rent or profit. By Clause 46 he was held responsible to pay that particular share of the Licence Duty. It was felt that a private owner who exacted monopoly rent in respect of the licence from a free tenant should in that respect and to that extent also pay a portion of the new Licence Duty on the same principle, but the law of Eng land and the Customs of England and the law of Scotland are two very different things. But why the very sharp English lawyers who sit around me and on the other side did not realise how very much further this Clause would go applied to England than to Scotland I am not able to say. I disclaim responsibility for the fact that they did not notice it, but the fact remains that cases of very great hardship have arisen, as my hon. Friend here has just explained, and there is no one more anxious than myself to see an Amendment introduced to put an end to those hard ships. It is quite ridiculous that a person should be asked to contribute a much greater sum in Licence Duty than the rent which he receives—that is an absolute absurdity. The intention was that he should only contribute in respect of such portion of the monopoly value as he received, and which the Government was taking back under the Budget of 1909. I understand it to be extremely difficult to construct an amending Clause, although some hon. Members are at the present moment in consultation about it, but I am quite sure of this, that there is no one more ready or more willing than the Chancellor of the Exchequer to accept a Clause which is quite reasonable on the subject, and which would remove these inequalities, which are unfair and unjust. I entertain the hope that before this Bill passes out of the House some Clause of that kind would be inserted, and no one will be more thankful to see it done and the in justice removed than I will.

7.0 P.M.


The House, or a small part of the House, is considering a very complicated measure which seeks to amend imposts of very considerable complication. I am not sure how many hon. Members who are listening to me would care, apart from reference to this measure, to endeavour to explain them. That, of course, is a criticism of Land Taxes. It is, of course, an attractive idea that by levying upon land values you can obtain for the people of a country a portion of that social value which is the result of the work of the community. The only question is whether in a country like ours, where land has been owned and dealt with in a variety of ways for a very long period, and where all kinds of complicated ownerships and interests exist, you can apply that system of land value taxation without hurting a very large number of people whom you have no desire to injure. The measure we are considering is an admission that faults have been discovered in the original Act. As has been already observed, that is not in itself a severe criticism of an Act of Parliament. It is impossible to pass an Act of any importance without finding it necessary in a very short period to amend it. Therefore the emendations are not in themselves a criticism of the principles of the measure. But surely on such an occasion as this we ought to consider very narrowly indeed the proposals that are made to amend the complications which have arisen, especially when my hon. Friend (Mr. Dundas White) threatens us with more of the same kind of thing! He spoke of rating the market value of land alone. I do not quite know what that means, and it would not be in order to discuss it at any length but I am quite sure that the phrase as it stands represents an impossibility. You cannot secure anything like sufficient money by rating the market value of land alone. Perhaps that is why my hon. Friend is so enamoured of the suggestion of the thirty years' period in Clause 11, My hon. Friend wants something to tax; he wants something to rate, I rather fancy, as he has given a great deal of attention to this subject, that he has come to the conclusion, as I have, that unless you make some time limit of that kind there will not be much to rate or to tax. The hon. Baronet opposite (Sir G. Younger) made a mistake when he referred to confiscating improvements more than thirty years old. There is no suggestion of that kind


All I meant was confiscating them as far as deducting them was concerned.


That is not exactly the same thing. What this Amending Bill seeks to do is to value agricultural land in the same way as urban land is valued under the Finance Act, 1910, Section 25 (4) (b). But it makes this exception: it is to be done in the same way except that there is to be a time limit of thirty years. The hon. Baronet is entitled to argue that if this time limit is set up you will be taxing a portion of such value. That can hardly be termed confiscation. But, at any rate, it would be a legitimate criticism to offer when we turn to Section 25, when we find what it is allowable to deduct in the case of urban land, and when we see that it goes as far as to include expenses of advertisement. What do expenses of advertisement add to the value of land? Nothing so far as any real economic value is concerned. Yet although we solemnly passed an Act allowing the expenses of advertisement to be deducted when we turn to agricultural land, real, sound, and economic expenditure of, say, £10,000, is not to be deducted. I really think that that is indefensible. I shall listen with great interest to what my right hon. Friend has to say about that. I cannot help thinking that those who are enamoured of land taxation have come to the conclusion that prairie land is very difficult to discover in places like the United Kingdom, except on a few mountain tops which are hardly accessible. Therefore, the single tax breaks down. Having made that discovery—it is a gigantic discovery upon which I congratulate them—they must find a taxable subject. How are they finding a taxable subject? Here is a farm which was once a marsh, and which, not owing to the work of nature, but owing to the work of man, has been turned into a farm. Why is it a farm to-day? Simply because, by the expenditure of capital, something which was given to man by the act of God, as Henry George would put it, as a waste product, has been turned, by the intelligence of man, into a farm. And now we are going to say what is untrue—that that farm has a prairie value; and we are going to arrive at that process of untruth by refusing to take into account any expenditure upon that farm except what has been made during the last thirty years. I submit that that is illogical and indefensible.

I pass to Clause 2. I welcome that Clause, but while I recognise, as explained in the Memorandum, that there is a very real danger to be guarded against, and that that is why the right hon. Gentleman proposes to apply the principle of the Clause only to properties where the buildings are worth more than the land, I feel that that will create a fresh class of anomalies. If you set up a purely arbitrary dividing line of that character you will surely find that on or about that dividing line there will be all kinds of hard cases. There must be plenty of cases where works occupy a good deal of land, and the buildings are not worth as much as the land. Why should such cases be cut out from the operation of the Clause? If my right hon. Friend very properly wishes to guard against the danger pointed out in the Memorandum let him suggest some other means. I am perfectly sure that some better means than this purely arbitrary and anomalous distinction could be found. If this distinction is made another amending Clause will surely be required before many years have passed. Why not save that amending Clause by altering the character of the distinction? I pass to a matter on which I addressed the House not long ago—the question of the small investor. I remember saying that when this Bill came on I should put down Amendments exempting small investors under the Income Tax exemption line from the payment of any of the Land Value Duties. Therefore I rejoice unfeignedly to find in this Bill a Clause relieving from Increment Value Duty small investors with incomes not exceeding £160 a year. But I notice there a refinement of which I strongly disapprove. Not all small investors are exempt, but only those whose income is under £160 a year, and whose house is worth not more than £500. If you draw that line you will create more anomalies. For what purpose? What end is served? Is it likely that a man with £150 or £120 a year will possess such a property, such a landed estate, such a large piece of real property, as will make it a proper thing to tax him for Increment Value Duty? It is most improbable; it is almost impossible.

Why should you create a fresh class of anomalies by putting in this restriction? Here are two men, one sells property worth £480, and is let off Increment Value Duty, another sells property worth £520, and has to pay Increment Value Duty. That is an anomaly which we ought not deliberately to manufacture with our eyes open. I plead with my right hon. Friend to take out these words on the ground that they are quite unnecessary. The £150 Increment Tax exemption limit is quite a different matter. Does that create an anomaly? No, it does not. Because if a man has £165 income, he only pays Income Tax on a very small portion of it. He does not pay Income Tax on the whole sum. In the case of Increment Value Duty this anomalous £500 line makes a man pay Increment Value Duty upon the whole amount and not upon a part. There is no sliding scale. There is no merging of the duty at the point where the artificial line of distinction is drawn. I call the attention of my right hon. Friend to that point. It is clearly desired to let off the small investor; there fore I ask him to do it thoroughly.

I submit with great confidence that if it is right to let off the small investor in respect of Increment Value Duty, it is right to let him off in respect of Reversion Duty and Undeveloped Land Duty. In fact, if one is right, the other is more than right. If a man has only £150 a year, and sells a house at a profit, he has at any rate some thing out of which to pay the tax. But when a poor fellow has a little parcel of land which yields him no income, he is called upon, not on a single occasion, but every year, to pay Undeveloped Land Duty.

These cases are not imaginary. I have come across more than one myself. I know a case where a man is landed—that is a very appropriate term in this connection—with a small parcel of land in a small provincial town. This small provincial town was at one time developing rapidly, but now, like many other provincial towns, it is no longer developing rapidly. What is the matter with that poor fellow? He wants to find a buyer. He does not want to hold up the land against the public. If any hon. Member is out to buy I can give him the name and address. I have no doubt the man would be very glad to get rid of the land. [An HON MEMBER: "What is the price?"] I am not the seller. This man who has got this piece of land, and the stock for it would pay, I think, a charge of 10s. per year. Some will say that that is not much; that 10s. is not a large Undeveloped Land Duty. The question is not that. The question is whether it is a just charge. The right hon. Gentleman conceded the point about Increment Value Duty, and I am perfectly sure that when I put down a new Clause, as I intend to do, to deal with this other matter, that he will give it very favourable consideration. The question of whether there is any departure from principle in the matter is one that I do not think need for a moment strain the minds of hon. Members who are single-taxers. Take the Income Tax as an illustration. We in this House—and this is a very remarkable fact, though it was not particularly noticed—we by a Budget of the present Prime Minister, put on the Statute Book the words "unearned income" in relation to the Income Tax. If this House did not do that which was derogatory in recognising that principle, in exactly the same way I contend that the Clause which I propose to put before the House to exempt the small investor from this tax is in no way derogatory to principle.

One final word about valuation. Certainly, much less than justice has been done by hon. Gentlemen opposite to the valuation which has been set up by my right hon. Friend. That valuation may be imperfect. Undoubtedly it is. I myself have the very greatest difficulty in seeing in many cases that the results that have been arrived at can be of any value at all for any purpose. I know myself of a case where a house was built just before the introduction of this Budget and which was sold soon afterwards. Since then it has been changed out of all knowledge, and it has not yet been valued. How valuations in cases of this kind should be made I confess I do not know. I considered my self what, if I were the valuer, I would do under the circumstances, in the case I refer to, and I was gravelled for a solution of the problem. But the valuation can be amended to become of value in the future. Hon. Members opposite do not do it proper justice if they simply compare the valuation up to the present time with the yield of the Land Value Duties up till now. There is no proper comparison between those two items. As to whether the valuation will ever be important does not depend upon my right hon. Friend the Chancellor, and it does not depend upon any Budget that can be introduced into this House. It depends entirely upon what is to be the future development of the United Kingdom. I note that the President of the Board of Education is present and education counts much in this connection. The problem rests with other Departments than those that have control of finance. It depends upon the economic development of the nation. In that connection who can approach this subject without having the greatest apprehension? Take Scotland. The population of Scotland is falling rapidly. The number of children in the Scottish schools is diminishing year by year. That means that the land values of Scotland are falling. The land values of a number of our provincial towns are falling. We know that emigration is proceed at an unprecedented rate. That must mean a check in the advance of the land values. Therefore as to whether valuation is going to be fruitful in the future depends upon efforts far different from any that we are considering in connection with Budget operations. That, I think, is the great lesson which we have to bear in mind in connection with the present discussion.


The discussion to-day has wandered over a good deal of ground. That must necessarily be the case whenever you come to discuss a Revenue Bill. I propose to deal, firstly, with two or three, I will not say minor matters, but matters which have occupied some of the time of the House before I come to the question which has absorbed most of the attention of hon. Members this afternoon. I shall, first of all, deal with what fell from my right hon. Friend the Member for South Shields in reference to sugar. He contended very strongly that it is our duty to introduce into the Revenue Bill a Clause whereby we can impose an Excise Duty upon sugar corresponding to the Customs Duty which is at the present moment levied upon sugar imported into the United Kingdom. The general principles upon which we are proceeding were laid down by the Prime Minister in the speech referred to by the hon. and gallant Gentleman. I will give the present attitude of the Government towards this proposition. As the hon. and learned Gentleman said, those principles were in operation some time in Ireland in reference to another experimental industry, if I may so, that of tobacco. The Prime Minister laid it down very clearly that so long as the industry was purely in an experimental stage, he did not propose to introduce any provisions into any Finance or Revenue Acts which would have the effect of levying an Excise Duty upon it. That certainly is the case in regard to the industry of beet in Norfolk. During last year the total sugar produced was 2,246 tons, or in all a total of 3,000 tons of what might be dutiable-matter under the Excise provisions of this Act. I think it is perfectly absurd in the case of this 3,000 tons, in a purely experimental industry, to attempt to put a duty on. It really looks as if we were rushing the taxes. It would strain the principles of Free Trade to do so. I do not regard it as in the slightest degree against the principles of Free Trade. The Prime Minister laid it down that whilst an industry of this kind was in a purely experimental stage it should be left alone. I am, therefore, prepared to defend it from the point of view of Free Trade. What I have said is by no means saying the same thing as that it will be a success. If it is a success, I have no doubt it will be developed on a very much larger scale, and then will be the time for the Government to give it their attention. If it is an industry suitable for the soil and climate of this country, and I am not expressing any opinion at all upon that—I do not know—but if it is an industry which will be suitable for the soil and climate, I believe we shall be able upon equal terms to build up an industry which will be equal to anything that has been done upon the Continent of Europe. It depends entirely as to whether it is suitable or not, and as at the present moment it is in the experimental stage, I should be very sorry to interfere with it, and I do not think the principles of Free Trade call upon me to do so. I come now to the very difficult question of licences. As the hon. Baronet said, it is perfectly true that when I introduced my Resolution, I did say that it was the intention of the Government to bring in some amending provision in regard to licences, and I had this in my mind. The Clause was introduced on the initiation of the hon. Baronet last year, and I think he will admit it has not been a success.


It has been in Scot land.


Well, it has not been in this country. The hon. Baronet was drawing upon the experience of his own country. There, I believe it is a success, but it has not been a success in its application to this country. It has inflicted injustice that is perfectly in defensible. I really have had two or three cases brought to my knowledge where the facts were very striking. It was a question as to amendment or whether we should not get rid of it altogether. If anyone in this House has an alternative suggestion—because there was a good deal to be said for the proposal of the hon. Baronet—I shall be glad to hear of it, because on the face of it this is a very equitable provision. But this Clause shows how very difficult it is for you to forecast what the effect of an Act of Parliament will be. This Clause was on the Paper for two or three years. It was considered by the Revenue officials and by everybody interested; by the hon. Baronet himself, who really has a great stock of information on the subject, added to which is the experience of his own country; yet in spite, here is a Clause which the whole House considered to be a perfectly fair one, and which the Government accepted and incorporated in an Act of Parliament. It has produced the grossest inequity.


The Clause ought to have worked exactly as I thought it should work.


Here is an Act of Parliament in relation to which I believe the intention of the Government as well as the intentions of the whole House were perfectly clear. Somehow or other, the moment it goes into Court, a totally different interpretation is put upon the Statute. It is not for me to say who is to blame. The issues were contended for by very clever lawyers, and in the case of the kind it depends upon counsel persuading the judge to accept the point of view put forward. It shows how difficulties get into Acts of Parliament. It shows how in the interpretation later on, some word, it may be, of which the effect has not been quite realised, may alter the whole purpose of the Act. This is a case in point. I shall be very sorry to see this provision go, because its intention, I am quite sure, was very fair, and its purpose was upright, but there have been these exceptional cases which have come in, where it has inflicted undoubted hardships. If the hon. Baronet, in consultation with those who advised him on this subject, can find any other way out of the difficulty, I shall be glad to hear. Failing that, I am afraid it must be eliminated out of the Act of Parlament altogether. The reason why I have not carried out the pledge I gave in this matter is because we did not see our way to any amendment, and we thought we would give the hon. Baronet an opportunity of putting for ward an alternative suggestion. Of course, the primary responsibility is upon the Government, but I thought it was a perfectly fair way to give the hon. Baronet an opportunity of suggesting an Amendment. Failing that, I shall certainly not shirk the responsibility. I now come to the speech of the hon. and gallant Gentleman opposite (Mr. Pretyman). I do not know whether he was rejoicing or whether he was not delivering a sort of felicitation to the Committee as to the triumph of the views that he and his friends have been expressing and urging upon the Government. I could not make out the speech of the hon. and gallant Gentleman. I read a speech of his the other day immediately after this Bill was introduced. He was full of joy; he patted himself on the back, in the face of the whole country. There was no triumph like it for the Land Union since the Song of Miriam. Then we had this evening a very able speech from him of an hour and a little more, but for the life of me I could not make out what it was he really meant. Does he want the Bill or does he not? An hon. Gentleman sitting behind him does not want it. The question is whether the Opposition really want the amendment which will arrive at the value of agricultural land after deducting the improvements effected upon it. Whether the period is twenty or thirty years is a matter for Debate in Committee. If I understand the hon. Gentle man's speech aright, he does not want it. He thinks it is a Machiavellian plot on the part of some of my hon. Friends for setting up a single tax. If that is the view of some hon. Gentlemen opposite, it is not the view expressed by the hon. and gallant Gentleman (Mr. Pretyman). I will not say upon the actual terms of the Clause, but upon the general intention, because the terms can be discussed in Committee. I understood that the Government were pressed, and I am sure that they are being pressed by the hon. and gallant Gentle man, and I am not sure that the hon. and gallant Gentleman the Member for Sleaford, did not press for something of this kind. If the Opposition say they do no want it, and that they do not want anything of the kind, then I think it is hardly worth our while considering the matter.

The hon. and gallant Gentleman (Mr. Pretyman) delivered a lecture to the Government on the iniquity of deferring to public opinion. He said you ought to consider the thing really upon its merits. It is either right or it is wrong. In the beginning you were not going to do it, but public feeling manifested itself, and now you are going to do it. He was very angry that we should defer to public opinion. Would he mind delivering that lecture to his right hon. Friend on his right (Mr. Bonar Law), because I have some recollection of his altering his mind in deference to public opinion and in deference even to by-elections. Food Taxes are either right or wrong. What a monstrous thing to alter that because there was an election at Bolton. These little observations might serve to stimulate a little private conversation between the hon. and gallant Gentleman and his leader upon that subject. Let me correct one mistake he made. He said it was in deference to the Leicester election that we took this course. I think if he will look at a speech I made in this House he will find these views with regard to agricultural land, with regard to the Lumsden case and with regard to small holders, and in regard practically to the whole subject of the Revenue Bill were indicated by me weeks and even months before there was an election at Leicester. I outlined these things in a speech in this House long before the election at Leicester. I think the hon. and gallant Gentleman was a little out of date when he referred to that.

Most of the speeches of hon. Gentlemen opposite consisted in criticisms of details. The only general point they made was that the mere fact that we were amending the Act is in itself an admission that the whole thing was a failure. Surely it is very wrong to say that the moment an Act of Parliament dealing with complicated subjects has to be amended, that proves the whole Act was wrong. That has never been contended by this party or any other party, or by any sensible person in the country. The hon. and gallant Gentle man seems to imagine that Clause 5 is such a serious departure from principle that it subverts the whole fundamental idea of the Act. Clause 5 is a Clause which deals with small holders. It is no more a subversion of the principle of the Act than the Income Tax limit is of the principle of the Income Tax. In principle there is no reason why you should not impose Income Tax upon a man earning £120 a year or on a man earning £100 a year. In Germany they impose it on incomes much smaller. In Saxony and Prussia they do it, but even there it might be said, why do not they impose it on incomes of £40 a year, and when my hon. Friend talked about anomalies, I answer that, of course, every limit of this kind is bound to be arbitrary and you are bound to have anomalies out side it. I know men earning £150 a year who are much better able to pay Income Tax than many men earning £200 a year. To that extent it is unjust and anomalous, but you must fix some arbitrary limit of this kind, otherwise you could not carry any Act into operation, and because we think it is fair that certain small holders should be exempted and we have already exempted them in the principal Act, we are told it is anomalous. You will find the principle of exemption of small holders in the original Act of 1909.and this is purely an extension of the principle we there lay down. My hon. Friend suggested it should be extended to Undeveloped Land Duty. That is a matter for consideration. It is purely a matter of expediency whether you set up these exceptions or net.


Will it be retrospective?


That is a different matter and I do not want to enter into details very much until we come to the discussion in Committee. I now come to Clause 11, upon which most of the criticisms centred. The criticisms upon other matters so much better suited to Committee that I would not feel justified in taking up the time of the House upon them now.


What about the Reversion Duty?


Yes, I will deal with that now. The hon. and learned Gentleman referred to some cases at Lismore and Enniscorthy. I think as I heard the facts they were anomalous and sounded unfair, but these are very exceptional cases; these are cases when there is no written document; where the tenants depend upon the honour of the landlord; where they depend upon the owner by mere word of mouth, which was given by his predecessors in title. They are very exceptional eases, but I agree cases that ought to be met. If Amendments are put down dealing with these cases I shall consider whether they can apply to these cases. Perhaps if the hon. and learned Gentleman put down some Amendement dealing with the subject I will consider the matter. I think these are the only points raised upon Reversion Duty. I have already dealt with licences. There is one other observation I have to make: I agree the Town Tenants Act is, in my judgment, an enormous boon.


I mentioned that.


Yes, and I should be very glad to see that Act extended to this country. It would be a protection to business men extending their business, and it would make an enormous difference. But that is by the way. I now come back to Clause 11. We had a discussion, and several discussions, upon it. The hon. Gentleman opposite said, and said quite truly, that the valuation under the Act of 1909 did not ascertain the agricultural value of land after deducting improvements effected by the landlord for agricultural purposes. The reason for that was that we were then endeavouring to ascertain the building value. We were treating agricultural land from the point of view of its possible development as building land. I said so. In fact, we stated over and over again that we had no intention to tax agricultural land. We took every precaution in the Bill to exempt agricultural land. We did not even ascertain the agricultural value after deducting agricultural improvement, and that was the reason. I admit that when you come to discuss the possibility of utilising valuation for any other purpose it would not be fair to the landowner to accept that valuation as a fair basis, and that was the point put by hon. Gentlemen opposite in their criticisms, and I accept it, and I promised to introduce a Clause which would enable the valuers to deduct that value which had been created by the landlord by agricultural improvements. The hon. Gentleman opposite (Mr. Fitzroy) seemed to think it was the same thing as money spent. By no means. It is perfectly true that it is a very different thing in agriculture or in buildings. Money which you spend upon the land may produce a greater value than the money you put into it. Money which you put into land sometimes creates not merely less value, but I have seen it actually spoilt. The hon. Gentleman opposite did me the honour of thinking I did not know very much about agricultural land. I lived in an agricultural district for the first years of my life. I was in an estate agent's office for five years. I acted professionally for a good many farmers and knew far more about their business than the landlords. The landlord would be the last man they would tell about their business. They were bound to tell their own solicitor, and I can assure the hon. Gentleman that I do know something about farmers and farming.


I did not mean that.


I am sure the hon. and gallant Gentleman did not. I am only saying that he rather suggested it. The hon. and gallant Gentleman seems to suggest that the money which you spend upon agricultural land is the same thing as the value you create by that money. That is not so. I agree if you were to take all the money spent upon the land it would be a minus value, but, of course, there is no such thing as a minus value in agriculture. If you take land which has not a building or a drain on it and absolutely no improvements of any sort or kind, surely the hon. and gallant Gentleman opposite does not say that that land has no value at all. I agree that if you deduct the whole of the money spent upon it you would have a minus value, but that is a very different thing. I have seen a few landlords recently upon this very Clause. The hon. and gallant Gentleman criticised the thirty years' limit, and he said there were some ten years' drains which made the land all the worse because those drains are in the wrong place and not properly laid. He also pointed out, on the other hand, that you may have a sixty years' drain which may still be very valuable. The old system of very deep drainage has proved to be an absolute failure. It has been discovered that it was a mistake to sink drains so deeply, because they answered no purpose at all. That discovery was made not very many years ago; therefore, when you are discussing improvements thirty years, forty years, or fifty years ago in regard to drains it is very relevant.

May I point out, however, that the only value you can deduct is the value you create and not the money you spend upon it? I do not go so far as to say the prairie value, but I mean the improved value. After all, when hon. Members criticise this Bill, they should remember that it is a measure dealing with something which is done already in Australia, and, I believe, in New Zealand. I have been asked for what purpose we are adopting this valuation, and it is said that we are just going to get the valuation, but we never reveal what we want it for. I am afraid the hon. and gallant Gentleman opposite put this matter a little offensively, but I take no notice of it. I could retort very severely, but I will not do so for the moment. Now, what is the purpose? When I made a speech upon the subject I stated clearly what the purpose was. I said that we are not committed to any particular method of rating, but I do think it is right when you are valuing that you should value in such a way that the House of Commons, whichever party is in power, should be free to adopt any method. I do not pretend to have a definite view upon the subject, although I may say that I am not a single-tax man. That is the only clear and definite view I have upon the subject, and I am not ashamed to say so after a good many years of consideration. I considered this question very carefully when it was the intention of the Government to bring in a Rating Bill, and I know it is one of the most complex problems which any Government could be faced with. It is no use dogmatising about it. Some people are so emphatic and certain about it that I do not think if you had given the time which I have given to the question you would be quite so sure as to which was the best method. It is an extraordinarily perplexing problem. It is a question whether you are going to tax capital or adhere to the present system of taxing annual values; whether you are going to take it on the basis of capital or annual value, and, if so, what are you going to do with the improvements? You have also to decide whether you are going to tax improvements, excess of improvements or future improvements, and whether you are going to have the existing rates upon improvements and future rates on unimproved property. One thing is quite clear, that the present system does, to a certain extent, discourage improvements. The moment a landlord puts up a good building, a cottage, or sets up a new house, the assessor is there and says to the farmer, "Up go your rates."


I do not think that quite necessarily follows. If a landlord puts up better buildings, the assessment remains the same as long as the rent is not altered.


Not necessarily, and, if it is, it is by ignoring the present law. [HON. MEMBERS:"NO."] We all know what the law of rating is. You are not bound to take the rent, but you are bound to take what is the letting value of the land. To say that by improving your buildings you are not improving the letting value is really an absurdity. If you improve it by the law at the present moment you are bound to put up the assessment.




The right hon. Gentleman may be talking about Scotland, but I am, talking about England and Wales, and, of course, I would not set my opinion against his on Scottish law, but as far as the English law is concerned that is what it undoubtedly is. It is perfectly true that if the rent is not put up, the assessor does not put up the rates, but that is because he overlooks the law on the subject. In most cases what happens is this: If the landlord sets up new buildings there is some sort of addition made to the rent—at any rate, in a very considerable number of cases—by way of interest on the money expended, and then undoubtedly the rates are put up. Is that in itself an undesirable thing? I say it is a discouragement of the improving landlord. The same thing applies to the towns. The moment you begin to set up new machinery and extend premises up go the rates, and it is only the tumbledown cottage, the dilapidated factory, and the bad landlord who never sets up new buildings, who is not treated in this way. I am not dogmatising as to this method, but I do suggest that it is worth while considering whether improvement should not somehow or other become an element in the question of rating to a much larger extent than at the present moment, and the only way in which you can do that is this: You want a valuation that will leave the House of Commons free to take any or either of those two methods or any combination of them. I am sure that whoever comes to deal with the question, whether it is right hon. Gentlemen opposite or right hon. Gentlemen sitting on this side, it will be of use to them to have a valuation of that character, and that is what we are trying to aim at.

Whether we have done it or not is a question to be discussed in Committee, but I suggest that this Clause is an attempt to meet the difficulty. Hon. Members ask, "Why should you stop at thirty years?" It has also been said that "any improvement ever made ought to be deducted." Those are the words which have been used. The hon. Member says, "Why not 200 years?" The only two improvements of that kind which reach back to any length of time are first of all, buildings, and, secondly, embankments for reclamation schemes. It just happens that the only estate office which I was ever in dealt with an estate of that kind, and I believe that almost the whole of it was reclaimed land, and it cost over £100,000. This reclamation was done by a Member of this House who reclaimed thousands of acres. There is now a prosperous town built upon the reclaimed land, and a good deal of it is agricultural land. The whole of that broad area has been reclaimed from the sea, for it used to be covered by the sea. Let me take that case. There, undoubtedly, more money was spent upon it than it is worth at the present moment, and if you deduct the whole of that sum, if you deduct the value which the owner created, there is nothing left. See what that means. I agree that if it is for Imperial purposes and you want to tax unimproved value there is a point in it. There are a few hill farms and other farms and there is a parish church which was once on an island. If you say that you are not going to have any value at all in those cases, what are you going to rate? Therefore, reclamation I take to be in rather a different position to agricultural drains.

8.0 P.M

We have been asked why we take thirty years? Why not make it 100, 200, 400, 500, or 600 years? Take the case of the land reclaimed by the monks in the South of England. I believe the whole of that land was reclaimed in batches by the monks, and the whole of that value was created by the efforts of man. If this is going to be dealt with for rating purposes, are you going to say that no rate shall ever be imposed upon that land because the whole of the value was created by some sort of improvement? I hope that when we come to the Committee stage hon. Members will recognise that there is an essential difference between the kind of agricultural improvement represented by buildings, fences, roads, and agricultural drains, and the value created by those monks 500 or 600 years ago. That is the reason why we feel that you must put some limit of time. Whether thirty years is a fair rate or not I am prepared to consider in Committee, and I am disposed to say that it is not fair in regard to drains which have been laid a long time. We have been told that some of the drains made fifty or sixty years ago are almost as good as some of the drains which were laid down ten or twenty years ago. All that, I agree, ought to be taken into account. My right hon Friend the Member for Spen Valley (Sir T. Whittaker) in a very searching speech, suggested that the valuation and the taxes are too complicated. He forgets that he is dealing with the most complicated laud system in the world. That is the real reason. The complication is not due to us at all. It is inherent to the nature of the land problem of this country. You have your leasehold, your copyhold, your freehold, and your gravel kind. There is every form of tenure. The ingenuity of lawyers, and that is great, especially that of conveyancing lawyers, has been exhausted—[An HON. MEMBERS: "Not exhausted"]—has been, I will not say utilised, because that would not be exactly the word, but has been developed and exercised during hundreds of years to make the land system of this country as complicated as the wit of man could make it. It is the most tangled thread. That is the first thing a law student finds when he takes up his book on the Law of Real Property; and yet, in reading it, he finds out what an extraordinary network of entanglement the Law of Real Property is in this country. I agree that the moment you touch it, unless you cut the cordion knot by some sort of sword and put an end to the entanglement altogether, and that we never professed to do in 1909—Lord Cairns started doing so— you arc bound to be complicated. I am not at all sure whether it would not be worth even the landowner's while to consider whether the system is not far too complicated for any useful purpose. The complexity of the system has prevented and handicapped landowners from making the best out of their possessions. That, however, is another matter. The moment you begin to deal with it, unless you simplify it, you are bound to be complicated.

I remember perfectly well when we came to deal with leaseholds hon. Gentlemen on that bench trying to put a point which they saw, and which I saw and knew—I will not tell the right hon. Gentleman which point it was—and suddenly stopping in the middle of their speeches, and saying, "It has eluded me again." They started afresh, one after the other, and came right up to it, and the Attorney-General (Sir W. Robson) said, "They have got it at last," but they had not. The discussion took the whole evening, and the best brains on that bench were brought to bear on the question. There was the right hon. Gentleman the Member for Dublin University (Sir E. Carson), one of the acutest legal brains this country has ever seen, and there was the right hon. Gentleman the Member for the City of London (Mr. Balfour), who, although he does not know law, has that extraordinary critical mind of his, and, if anybody could have under- stood it, he would have done so. He came right up to it, I think as near as any man could do without actually getting to it. I am not quite sure whether the right hon. Gentleman opposite (Mr. Austen Chamberlain) tried, but I know that hon. Gentlemen opposite failed in dealing with one point in the leasehold system of this country, although we all knew what they meant. We all knew that it was insuperable in theory, but that it would work out all right in practice. You could not theoretically elucidate the point, but it has not even presented the slightest practical difficulty. There have been other points which have, but that one has not. That shows what a tremendous entanglement in your land system is in in this country, and the whole difficulty has arisen from that fact. That is my answer to my right hon. Friend. It is no use complaining that these taxes and this valuation are complicated. It is no fault of ours. I agree with my right hon. Friend that a simple, straight valuation and tax would be better, but, if you have that, you will have to sweep aside all this jungle of legal chicanery woven round our land system; otherwise, you will be utterly unable to do it.


The lawyers will not allow you to do that.


Well, we might set a lawyer to catch a lawyer. That is the only thing I can conceive. I agree with the right hon. Gentleman that there is no more futile argument than to say, "Look at what the valuation has cost you, and what the taxes are producing!" He gave two very good answers to that argument. Hon. Gentlemen opposite, if they were in power, would have to deal with the rating problem, and they would have to get a valuation. I say more than that; they would have to get a national valuation. Local valuations are a hopeless muddle and failure. The hon. Baronet opposite (Sir G. Younger) would be very surprised if he saw a letter I have received from a prominent Unionist in Scotland, complaining of the inequalities there.


That is your own fault. There is no necessity to make a valuation in Scotland.


My correspondent points out that it is something inherent to the system. I asked him for examples, and he gave me some of the most outrageous examples I have ever seen. I received it yesterday morning. That is all I know about it. I am taking this from a gentleman whom I know very well, because he was one of the ablest members of the Advisory Committee of the Board of Trade. A valuation has got to be made, and, if you had set up your valuation, it would have cost you an enormous sum of money, exactly as it has us. I think that you would find that there is material which has been accumulated by the valuers that would fit in even with your notions of valuation, and that you could arrive at what you regard as a fair valuation from the material at our disposal without much expense. It would, in fact, be a pure arithmetical computation. Supposing it did not provide you with such material, it would cost you an enormous sum of money, and it would be grossly unfair to say, "Look at the valuation! It has cost you £2,000,000; what are you getting for it?" You are redressing anomalies and putting the rating system on a better footing. You may say that it is not a right valuation— that is a fair criticism—but to say that the money you spend on it is an annual expenditure is an unbusinesslike proposition. I agree also with what my right hon. Friend said about that. The increment value is bound to be something that will accumulate in the future when the value of land appreciates in this country. Supposing you had had a valuation and had settled the datum line fifty years ago, which is what John Stuart Mill wanted us to do, your Increment Duty would at present be a very fruitful source of income to this country. Of course, you could do what they are doing in Germany. I invite the right hon. Gentleman to consider what they arc doing in Germany. They are now proposing an Increment Tax as an Imperial Tax. The late Chancellor, about five or six years ago, refused to accept it, and went on the old lines of taxing food and commodities of one kind or another, and failed. Now they are going back to a Property Tax and an Increment Tax.


Yes, in lieu of Death Duties.


I am not now discussing Death Duties. What is their Increment Duty? It is a duty which goes back, I forget how many years, but twenty or thirty years. If I had proposed that in 1909, and had said, "We will go back fifty years and take the consideration money paid last time for this land," then it would have been a very fruitful tax to-day. It is not fruitful for the moment, because you are fixing the datum line at the present time, and you are putting a coping of 10 per cent, on top of that to begin with. You are making all sorts of deductions, deductions which were introduced in Committee under pressure from hon. Gentlemen opposite. They have added to the complication enormously. Then your Increment Duty only comes on top of that. Of course, that cannot be fruitful for some time. But it would be a great mistake for the rating authorities to throw this away. I am sure that the value of land is bound to appreciate in this country, not merely because of the increase of population, but also because of the increase in the demand for open spaces and for more room. The man who has been satisfied with a sort of little backyard wants his eighth of an acre now, and the man who has been satisfied with a fair garden wants his two or three acres. It is not merely that there are more houses, but also that the houses are consuming more land than they did in the old time, and they will continue to do so. As wealth increases and as the value of air space and light increases in the eyes of the people, you are bound to get an appreciation in the value of land in this country. I say more than that. As science begins to be applied to agricultural problems, and it is only just at the very beginning, you are bound to get an appreciation. If science had devoted as much time to agriculture as it has done to other industries, the production of agriculture in this country would have been twice or three times greater than it is at this moment. It would at any rate have been very much greater. I am perfectly certain that once that is done the value of agricultural land and building land will go up and then the Increment Tax will be a valuable one. It is then that a harvest will be reaped, but in the meantime there will be difficulties and complications, and there will be temporary burdens, but I hope we shall face them and get through, and I am sure, if we do, we shall reap our reward.


The right hon. Gentleman, I think, would have left anyone who had not known the Orders of the Day, in doubt what we were discussing from the speech he has made. He has invited us to open on this occasion the whole subject of rating. I am not going to do that; I am not going to follow the right hon. Gentleman. I think that I can make the few observa- tions which I propose to make with regard to Clause 11 to which he has devoted the greater part of his speech without dealing with the ultimate problem of rating. The right hon. Gentleman said that the Increment Tax is going to be a very valuable source of revenue to which the local authority will be very unwise to abandon their rights. I observe that the time at which the tax is going to be productive gets steadily postponed the longer the Bill has been in operation. When we were discussing the Budget it was going to be largely productive within a year or two. Now we are told that we do not know what may happen in fifty years. I pass that by. I come to the Chancellor of the Exchequer's observations about the great value which is found so important to the revenue that the local authorities should not part with any of their rights in detail. Why, then, does the Chancellor of the Exchequer propose to deprive them, under Clause 14 of the Bill, of their rights for another year? Surely that is illogical, and, no doubt, the representatives of the ratepayers will be heard in Committee when we come to Clause 14. More important is the closing observation of the Chancellor of the Exchequer. When science, he says, has been applied to agriculture in the same measure as it has to other forms of production, then agricultural land will rise in value, and there will be an increment on it. Dose he mean that then he will tax it? Hitherto, the basis of his argument has been that no agricultural value is to be taxed. Now, he says, Increment Value Duty will soon become a great source of revenue, because, he says, in part building will be increased, and in part the new application of science will increase agricultural value. I thought I detected other confusions of thought in his survey of the proposals of this Bill. He observed in general that he could not understand the attitude of the Opposition or of my hon. and gallant Friend towards this Bill. Is it, he said, to be considered that if you amend a complicated Act, it is a confession of the total failure of that Act. No, certainly not. Of course, the question was stated in such a way that there is but one answer. But the remarkable feature is that the Amendments which you have to make are not to deal with unforeseen difficulties. Everyone of these difficulties was pointed out to the Government in the original discussions of 1909.

Mr. LLOYD GEORGE dissented.


Yes, it was pointed out in the original discussion, of 1909; it was pointed out to the Chancellor of the Exchequer again and again, and it is only now that he consents to deal with it. It is not an oversight that the original Act is what it is. It is his deliberate action, despite warnings addressed to him, and it is a confession of failure that, having all the facts brought to his notice in 1909, he then either would not or could not take the course which he is now obliged to adopt. He would really have saved himself a great deal of trouble, and the House of Commons a great deal of time, if he had been a little more reasonable, or even in the intervening stages if he had been a little more ready to accept the criticisms which have been passed. But the right hon. Gentleman tried to shelter himself under the impossibility of foreseeing the interpretation which the Courts would put upon our work. I know it is very difficult to forecast the proper legal construction of our work. The right hon. Gentleman made that observation on the Clause originally moved by the hon. Baronet the Member for Ayr Burghs (Sir G. Younger). I would observe on that point that perhaps the House of Commons does not express its meaning most clearly, nor is it in quite the best mood to appreciate the consequences of its action when it is discussing a Clause of that sort at 2 o'clock in the morning, at the end of a long and weary Session. If the right hon. Gentleman will give us an opportunity of discussing these things rather earlier in the Session, and at a rather more reasonable hour, perhaps he will have less reason to complain hereafter of the Courts taking a different view of his language than that which he has taken of it himself.

Since I mention that Clause, I would say at once that I am very glad, on the whole, to hear what the Chancellor of the Exchequer said in regard to it. The Clause has worked hardships which none of us foresaw, and which none of us can defend, and if there be no alternative between the original terms of the Budget and the amending Clause as we passed it, then I think our last case is worse than our first, and we had batter go back to the original proposal. But I still hope that the right hon. Gentleman may be able to give some relief to the tenants without causing the hardships that the particular Clause has done. In any case, I would suggest to the right hon. Gentle- man that if it be, as I believe it is, that the Clause works perfectly well in Scotland under the different circumstances of that country, then he need not withdraw the remedy given in that country merely because of those circumstances which produce greater hardships here. That is merely a matter thrown out for the right hon. Gentleman's consideration before he drafts the Amendment for a new Clause, and before my hon. Friend provides one which is satisfactory, too. I had intended to go straight on with the Bill, but I must follow the right hon. Gentleman again outside the Bill, and say one word about beet sugar. I was extremely glad to hear him rebuke the pedantry of some hon. Gentlemen on his side. We no sooner see a new industry endeavouring to get a footing in this country than they are anxious to cut it out by taxation.

No business, by whatever name you call it, ought to justify a procedure of that kind. Though I, no more than he, am competent to speak on the sugar industry of this country, I do most earnestly hope that the experiments which are now being made are going to be a success. I think it is of the greatest importance. It is a crop which requires high cultivation, and a great deal of labour. Those are two great advantages. But it has another that is as great or even greater. On both sides of the House there is some anxiety as to our food supply in time of war, if the ordinary course of commerce were interrupted, as I have heard the Prime Minister express it. I have been informed by one or two gentlemen who are, what I am not, agricultural, that the actual growing of the beet is a profitable operation. One gentleman of large experience said that he knew of no case, where the accounts had been well kept so as to show the actual outgoings and incomings, in which beet had been grown at a loss per se. What caused the loss was the cleaning of the crops; but if you put beet sugar in the place of an unprofitable crop, you might enormously increase the growth of beet in this country. I think that is of great importance. That being so, I can only hope that the Government will do nothing to discourage it. At any rate, for myself and my friends we will go further. We shall be glad to give it active encouragement in order to see it tried out to a conclusion.


The right hon. Gentleman may perhaps like to know that the Development Commissioners are considering this very question.


I see very great difficulty in the way of encouraging Home production by bounties. I think, in principle, there is very little difference between a bounty and a protective duty, and, in fact, a protective duty is preferable to a bounty. But I will not deal further with that on this occasion. This discussion is only so far germane to this Bill because the Chancellor of the Exchequer had to defend himself for not putting into the Bill a Clause which I am very glad is out of it. I want to say one more word on the valuations in Clause 11. My Friends have asked the right hon. Gentleman to substitute one valuation for another. What the Chancellor of the Exchequer proposes is to super-impose a third valuation on the two existing valuations. He will quite understand that the two things are not the same. He thinks this third valuation may be necessary and will be valuable for some future purpose of rating or taxation. I cannot follow, if it be so, the reasoning by which he justified the limitation to improvements made during the last thirty years, or during some fixed period, and the endeavour to distinguish between improvements created by man and the natural value of the soil. Why should I have the benefit of my improvements if they take the form of buildings for all time, and not have the benefit if they take the form of not putting buildings on the land, but of creating the land? The right hon. Gentleman admits that the whole theory that the value of the land, as we know it, is the creation of the community is really rotten to the core. He admits that there is no such value as that, and that practically the whole of it is the creation of man. "Then," he says, "I will value it as the creation of man, but I cannot afford to look back to anything beyond thirty years." That really destroys the principle on which he is working, and it will not give him a true basis for rating, or taxation, or any other possible measure. I turn from that to another subject with which he dealt lightly and with an imperfect perception of how much was involved. He alluded to the Irish cases to which his attention was called by the hon. and learned Member for Cork (Mr. T. M. Healy)—cases of the unjust and undesirable working of the Reversion Act, but he must have forgotten, for he did not allude to them, the English cases which my hon. and gallant Friend {Mr. Pretyman) had given.


Those were the charitable cases.


Not all of them. There were cases of leases with option of purchase. I want to go further. We raised this question in 1909. I have been much struck by one thing. There is no Act of which I know so little as to what was ultimately included within its Clauses between the original introduction of the Bill and its passage, after long discussions, as the Act of 1909. I now find I do not know which of our Amendments were accepted. I confess it was perfect surprise to me when I learnt that we had not got an Amendment into the Bill which would have dealt with this class of cases. I am quite certain that the right hon. Gentleman, in the course of the Debates, promised favourable consideration of the matter and agreed with me as to certain things which he did not want to do, and which would have covered the cases mentioned by the hon. and learned Member for Cork, as well as those cited by my hon. and gallant Friend. I do not know whether I can recall the circumstances to the mind of the right hon. Gentleman by repeating an illustration which I gave at that time. The law, as it stands, is that you are to pay Reversion Duty on the difference in the value of the property at the time you gave the lease and at the time the lease was determined. I took the case of the Cadogan estate. It would have paid Lord Cadogan at the time his leases fell in, and he would have got most money thereby, to relet the property in the condition in which he found it. But he did not do that. He made a great London improvement, and it is one of the advantages of having great landlords that you can sometimes get big town improvements made without any cost to the community. I put that case to the Chancellor of the Exchequer at that time and asked him, "Do you mean that, in a case like that, the Inland Revenue authorities should come down on the man who has sacrificed his private interests in order to make an improvement to the property and to the amenities of the town? Would you say that he should have taken the rack rent which he could have got, and would you have taxed him on the difference between the original value of the ground lease and the rent which he might have got?" The right hon. Gentleman admitted that that was an undesirable thing which he did not want to do. I beg of him, while we are dealing with this Bill, to bring to bear upon the point all the resources of the revenue authority, and the legal advice which he has at his disposal, to see whether he cannot draft a Clause which will say that a man shall only be taxed on the benefits which he receives, provided that the transaction is bonâ fide. I quite agree he is entitled to go behind the face of the transaction if there is reason to suspect evasion, but, where it is a bonâ fide transaction, I do not think he should go behind it. He has a right to tax assuming that the principle of the tax is the Benefit which is received on the lease, and not every penny which a man might wring out of the tenant or out of the community by a disregard of the amenities of the town in which the property is situated, or of the legitimate interests of the sitting tenant who has asked for a renewal of his lease.

I had a case brought to my notice by the master of one of the great city companies. They had a tenant who applied, towards the expiration of his lease, for a renewal, offering to surrender the unexpired portion. The master told me that no member of the Court was allowed to serve any personal interest in dealing with property belonging to the company. Indeed, he said, this particular tenant was not a persona grata so far as he was concerned, and was not a man whom he would have gone out of his way to do an exceptional thing for. But, he said, they had to consider the interests of their sitting tenants. They could not treat them as they would strangers. They gave them the benefit of the buildings which they had put up or bought, and, in accordance with their practice, they gave this particular man a lease on slightly better terms than they would have granted had the property been thrown on their hands without any claim of that kind, and if they had been dealing with a perfect stranger coming to them for the first time. In such a case they would have asked for a little more than they were willing to accept from the sitting tenant. It has been a great complaint frequently made by the Chancellor of the Exchequer that landlords have not sufficiently recognised their obligations to the sitting tenant, and that they have been too much inclined to screw the last penny out of them. But this law puts an inducement on the landlord to do that; it not only does so, but it penalises him if he does not do it, and it makes it possible for the Inland Revenue officer to say, "You must pay, not only on the benefit you receive, but on the rack rent you might have got, if you had been a harsh and unconscionable landlord."


Did they do it in that case?


Yes, they did, and I said to the master of the company, "I am sure we put an Amendment into the Bill to prevent that." He replied that they had taken counsel's advice—the name of the counsel was Mr. Danckwertz—and he had informed them that it was not so. Since then, so sure was I that we had done it, that I searched the Act for the words which I thought would have provided for it. They were not in the Act. I think what I have said will show the Chancellor of the Exchequer that he has something more to deal with than an exceptional Irish case, and that there really is a much wider amendment of the Act needed than he has contemplated. I do not think it is an impossible case to meet, and I hope he will make the best use of his time between now and the Committee stage to see whether he cannot, with his advisers, work out a solution.

There is one other thing I want to mention. It is a comment in regard to the working of the original Act. We are charged under the Act yet another duty, the Undeveloped Land Duty, on the land which has a building value in excess of its agricultural value. I do not know whether the Chancellor of the Exchequer has had his attention called to the effect of that upon the Town Planning Act. For myself, I think that one of the most beneficent measures, if wisely used, as I hope it will be, which this Government has passed, or which has been passed in their time, is the Town Planning Act, but this Undeveloped Land Duty confronts the makers of town-planning schemes with a new and unexpected difficulty. I will take a particular case which was brought to my notice the other day. A certain town-planning scheme has been made for an area in one of our towns. From certain portions of that area all factories are excluded, and certain other portions of the area are allocated to factories and factories only. That is in the interests of the general amenities of the town, in order to secure good quarters for the artisans and others who have to dwell in them. You can see very well that a property owner might say "Yes, but the particular use to which you allocate my land is not the use to which I at first put it. You have allocated it to factories in the interests of the general amenities of the place, but I could put up houses tomorrow and there is no demand for factories. Again, it might be the other way way round. There might be a demand for factory sites, but you have prevented me from letting the land as a factory site and have said I am to let it only for housing." They have, as town planners, interfered with the free use of his land, but the Chancellor of the Exchequer still says, "Oh, you have not let your land. It is not built upon, therefore you must pay Undeveloped Land Duty."

It is more than that. You assess the value of a great deal of this land before there is a town-planning scheme. You assess it without the knowledge of the conditions which the town-planning scheme imposes. If it is assessed after the town-planning scheme is made, I assume that the conditions of the scheme would have to be taken into account just as much as the covenants of a lease. All the land has to be valued as in 1909. As in 1909, the land might have a certain value, say for factory purposes, but he did not build them. It might have a higher value for houses. You assess it on its highest value for Undeveloped Land Duty. Two or three years later the land is still undeveloped. Down comes the corporation with a town-planning scheme and prevents him from ever realising what might be the highest value to which he can put the land, and forces him to use it for less valuable purposes, but he continues to be taxed as if it were used for the most valuable purpose. Not only is that wrong, but it is contrary to the public interest, because anything is contrary to the public interest which tends to make town planning schemes unpopular, or to throw difficulties in the way of local authorities who are trying to administer them. I suggest to the Chancellor of the Exchequer that he should take that matter also into his consideration and see whether he cannot do something, as I think he possibly might, in order to prevent this hardship recurring.

I will only make one further observation. I was delighted to hear the Chancellor of the Exchequer observe to-night that it was a misapprehension to suppose that the improvements for which any landowner might take credit were to be valued at the amount he had spent in creating them. He rightly said the money he had spent in creating them might be too much or too little. The right hon. Gentleman has taken that attitude quite consistently. I wish he could impress it upon his valuers, because so little are they aware of it—I do not like bringing personal affairs before the House of Commons—that I have taken an appeal to a Referee against a valuation because the valuer informed my agent that it was so improbable that the making of a road could have created any value in excess of the money spent upon it that he refused to consider my claim further. My agent advised me not to take the appeal. I only mention this because this is what the right hon. Gentleman forgets when he talks about the small number of objections and appeals. I instructed my agent to take an appeal upon that point and upon another. My agent said he would be delighted to take the appeal as it was a point of great importance to many of his clients, but that he was bound to advise me not to do so, because if I succeeded to the whole extent of my claim I should be better off only to the extent of £3 a year for the time the land remained undeveloped, and would have spent a good deal more than would ever be returned or I should ever save. Having taken an interest in this Act, I said that expense would be no consideration; that I would pay the money and fight it out sooner than this should go through. You cannot expect every aggrieved taxpayer to do that. If the Chancellor of the Exchequer thinks that the great measure of smoothness with which this Act is working and the absence of hardship to the individual is shown by the paucity of appeals, I tell him he is making a great mistake and that it is the expense and the uncertainty of the appeals which cause a great number of people to submit, as I think, in many cases to illegality and hardship rather than to prosecute their claims before the Referees with a possibility, and, indeed, a probability, as was pointed out to me by my agent, that should I be successful, as I hope to be, before the Referee, the Government would not be satisfied until they had taken me to the House of Lords.


The Chancellor of the Exchequer laid particular stress on the fact that under Clause 11 we are going to rectify the valuation of agricultural land in a way which will enable it to be used at some future time, if so desired, for an improvement in our rating system. That will give great gratification to large numbers of those who have taken a special interest in this rating question. We have all along objected to being saddled with responsibility, as land taxers, for difficulties which have arisen out of the various duties found in the Bill of 1909. At that time, land taxers put a very simple proposal before the Chancellor of the Exchequer, to have a Land Tax on the owner's valuation. It would have been perfectly simple to adopt; the revenue would have come in immediately, and could have been used in relief of present methods of taxation. But we have a fairly good idea of what happened at that time. Though the right hon. Gentleman might himself have desired to adopt that course, there was a great deal of opposition on these benches from Members who had got in on the great flood tide of 1906, and the Chancellor of the Exchequer was driven back to the Increment Tax, Reversion Duties, and so-on, which form no part of a scientific method of taxing land values. I welcome the Bill to this extent, that it is making a start in getting rid of part of the Increment Tax, and I hope, when the valuation is secured, it will be swept away together with the Reversion Duty and these other methods of taxation. There is to-day throughout the whole country, on the part of rating authorities a general demand that the great services which now fall upon localities shall be taken off the rates and financed by the Exchequer, and that would moan raising from new sources of taxation a very large sum of money, and at present there is no other proposal in the field whatsoever except that this revenue shall be found by way of a national tax upon land values That tax cannot be imposed until we have a valuation which will give us some basis for that tax throughout the whole area of the Kingdom.

Then, also, we come to the fact that there is an urgent need for the rectification of our method of assessment for local taxation. The Chancellor of the Exchequer mentioned some strange anomalies which arise out of our present method; but there are anomalies in connection with the rating of agricultural land in rural areas which are something more than an anomaly—they amount to an absolute scandal. He said he had been given certain instances, but that he had not got them with him. I propose to give some specific examples of these rating anomalies. I was led to the examintion of one parish from the fact that in a public controversy, the Duke of Norfolk objected to my statement that his Sussex estate was derelict and semi-utilised, and to find out whether I was correct or not, I went down to one of the parishes to find out how the land was rated, as a means of determining whether it was being put to its full use or not. I wish to bring before the House a few cases of rating in the parish of Angmering, in Sussex. I will take three farms. Angmering Park Farm is a farm of 556 acres, and it is assessed at £55, and the buildings at £14—very valuable buildings. There is another great farm of 265 acres, assessed at £15, and the buildings at £5. In 1881 land and buildings were assesed at £335, whereas to-day they are only rated at £21. There is another farm of 315 acres, which is assessed for land at £51 and for buildings at £7. In 1881 the assessment was £125. There is another farm of 249 acres, which is assessed at only £13 for the land and, I think, £13 10s. for the buildings. In 1881 it was assessed at £196. These figures, which I have taken from the rate book, seem almost incredible. I was going to use them at a public meeting, and I sent them to the solicitors of the Duke of Norfolk, with whom I had been corresponding, saying I was going to use them and if they had anything to say they had better say it before I went on the platform. Their reply was:— We are not in a position to check the figures, but we cannot think that they are accurate. The figures are easily capable of verification. I want to put some of these figures together to show what they mean. It means that 1,395 acres there are assessed at only £135, and as they onlypay half the rates, being agricultural land, and the rates being 4s. 8d. in the £, they only pay fifteen guineas to the rates. If you take the gross estimated rental of this land given in the rating book, taking it at twenty-five years' purchase, it gives the capital value of only £5,000, which is an indication of the monstrous underassessment of the land in this parish. The cause is that round these farms there are the woodland and game preserves and pheasant preserves of the Duke of Norfolk. There can be no other cause for the low rental and the under-assessment for rates of these great and valuable farms.

I should like to go to another parish and give two cases from that. There is a farm of 795 acres assessed at £210, and the splendid buildings are asssesed at £20. There is another fairly good farm of 987 acres assessed at £159, and the buildings, also splendid buildings, at £30—that is, 1,782 acres paying £43 a year to the rates. I should have no objection whatever to this type of assessment if it was a fair deal all round. I should have no objection to the Duke of Norfolk almost escaping rates on agricultural land and on his magnificent farm buildings if the small holder or the market gardener or the man in the cottage also escaped, but something very different is taking place. I am going to give the other side of the case—the case of the small man who uses land. I will take the case of a man in the parish of Angmering, who secured in the first place three-quarters of an acre of an old disused quarry site. He got a man whom I know to cart some soil on to the site, and then he erected some glasshouses. He has altogether two acres, and he is assessed at £4 a year, and where he put up glasshouses and other buildings he is assessed at £52 a year. The total assessment is £56 a year, and he pays in rates £13 2s., so that we find a nurseryman on his little plot of land paying £13 2s. a year, and the Duke in the same parish with 1,395 acres paying only £2 more—fifteen guineas a year— and the nurseryman's buildings are assessed at £52 a year. The Duke is assessed on his great farm buildings, one at £14, another at £5, and a third at £7 a year.


Will the hon. Member give the Duke's assessment as to water meadows in Angmering parish?

9.0 P.M.


I am only giving the facts I know with regard to these particular farms. I would be only too pleased to give the Duke's assessment as to water meadows if I had them before me. Someone mentioned that when capital expenditure was made on farm buildings, and so on, and it did not result in an increase of rent, there is no increase of rates. That is very often the case. I am told that in Angmering, £4,000 was spent on farm buildings, and that there was no increase in the assessment. I wish to draw the attention of the Chancellor of the Exchequer to this question of assessment. He indicated that wherever capital expenditure took place, and the rent rose, there was increased assessment. That may be the case with regard to town districts, but there are particular reasons in the country districts why the assessment should not go up. I have pointed out that great farms escape assessment. Who are the assessors? In Angmering, one is a tenant farmer of the Duke of Norfolk, and another is a tenant farmer of another great owner. These two men form the assessment committee of the parish. Under these circumstances, capital expenditure may go forward on great farms, but the assessment will not rise. It is this absolutely unjust state of affairs which allows derelict land almost to escape rates altogether. But there is a burden on the small holders in the district. I say, therefore, it is absolutely essential in order to rectify this state of things to have this new, official, and, we hope, unbiassed valuation for rating in rural areas. It is a matter lying at the root of the whole housing problem. In Angmering an order has been sent to an occupier in the following terms:— I am directed by the council to hereby give you notice under Section 91 of the Public Health Act of 1875, to abate a nuisance existing at the above cottage caused by overcrowding. The twelve occupants should be reduced to two adults and four children, the premises only being capable of holding six persons at the most. The council do hereby request you to abate the same within fourteen days of the date of this notice. The dimension of this cottage which contained twelve occupants were: One bedroom, 9ft. by 11ft., and one large landing, 6 ft. by 8ft., and open to the stairs. In that cottage there were husband and wife, the wife's brother, three sons over twenty, various daughters of all ages, and younger sons. Why do I say that the question of rating lies at the root of the housing problem? If they could get land in Angmering, cottages would appear. There is no housing problem at all; it is really a land problem.

Mr. DEPUTY-SPEAKER (Mr. Whitley)

I would point out to the hon. Member that we are not now dealing with the basis of taxation. I must ask him to make his remarks more relevant to the provisions of the Bill with regard to the valuation of land.


May I point out that the Chancellor of the Exchequer dealt very largely with the question of using this valuation for rectifying the rating system, and he mentioned various ways in which it could be done. I was simply following the lines he had taken. Perhaps I may be permitted to finish what I was saying. The housing problem there is largely a question of inability to get land. There a builder applied to a local landowner for a couple of acres of land, for which he offered £275 per acre. The landowner refused to sell for less than £1,000 per acre. Under the present system that land is not assessed on more than £1 per acre, whereas, when we get this valuation, we will be able to assess it upon £1,000 per acre, and, if rates fall upon it, the land will become available for dealing with the housing problem. With regard to this rectification of the valuation, we are doubtful if it is being accomplished in the right way. We wish a rectification of full site values. The single tax is foreign to our views of taxation. I hope the law will be so amended that we will get a rectification of full site values. At any rate, it will be necessary to urge on this valuation so that it will be possible to make it a basis for rating and taxation reforms, and I certainly think the Government need have no hope of carrying forward in this country a land campaign unless they realise that they have to go to the root of the problem and give the country what it requires, namely, an improvement in the taxation and rating system, which will mean the taxation of land monopolies and the loosening of their grip on the land.


I must enter a protest against the speech which we have just listened to from the hon. Gentleman (Mr. Outhwaite), and the method which he adopted of selecting certain farms and bringing them up in this House from a district which contains both very valuable and absolutely valueless land. I have no special knowledge whatever of the Duke of Norfolk's estate, but I happen to know very intimately the three farms which the hon. Member mentioned. I know neither their rental nor the assessment to rating, and I am prepared to accept the figures which the hon. Member gave as to these matters, but I do know from a certain limited agricultural experience something of their value. The two farms which he mentioned together consist almost exclusively of high downland, almost absolutely valueless, and a very small proportion of those two farms is worth more than 2s. 6d. and 4s. 6d. per acre rental. I am not in the least surprised that the assessment committee should have put them at a very low figure. If, on the other hand, he will take some of the land in that district, such as that which I mentioned when I interrupted the hon. Member, say the water meadows, he will find the state of things absolutely comparable to the figures which he quoted for the small holder.


Will the Duke of Norfolk sell the land at twenty-five years' purchase of the rental value? That is the test.


I am not here to answer any such question.


Do you think it likely?


I am perfectly certain from what I know of Sussex landowners that the Duke of Norfolk would be glad to sell much of his land at twenty-five years' purchase of the rental he can get for it. But I only mention this in order to protest against statements in support of the Land Tax proposals based upon fallacies of which the House in general has no special knowledge, and which from my chance knowledge of this district I know to be grossly unfair, because of the extremes of value, high and low, which this district contains. I turn now for a few minutes to the principal subject on which I wish to say a few words. Early this afternoon a rather strange speech was made by the right hon. Gentleman, who represents South Shields (Mr. Russell Rea) on the subject of the beet-sugar industry, and a strong appeal was made by him to the right hon. Gentleman to place an Excise Duty equal to the Customs Duty, upon the small quantity of beet sugar manufactured in this country, on the ground that either the protection was not required at all or that the beet industry was not worth supporting. I should not have troubled the House with particulars about this industry were it not for the fact that every single one of the statements which I heard the right hon. Gentleman make about this industry is untrue. I could sec no indication in his speech that he had made any attempt to verify them. I am sorry that he is not here. I would much rather pay these things before his face than behind his back, but I must take the opportunity of saying them when I can. I know about these things, because I happen to be the chairman of the so-called Dutch Company—it is not Dutch, but English—on which so much ridicule has been cast. It is a company registered in Eng- land, and the issue was made over here, but probably it was referred to as a Dutch company because, in addition to having the factory in Norfolk, we happened to hold a controlling interest in three Dutch factories.

The first statement of the right hon. Gentleman which attracted my notice in particular was that the value to the English factory of the protection—I am not afraid of the word—was enough to run that factory for a year. I may tell him that the amount on which we are said to have existed, 1s. 10d. per cwt. protection, was insufficient to purchase our raw material for a week, and insufficient to run the factory, exclusive of the purchase of raw material, for a fortnight. That disposes of that allegation. Then, those who heard or might read his speech might be led to believe that the attempt which we are making is of no particular importance and that no particular sum was involved. Unfortunately we are within a few weeks of presenting a balance-sheet, and until that balance-sheet is presented it would be most improper for me to disclose in detail the figures which it contains. I wish that I was able to do so; but I would like to say, as I can do with perfect freedom, that the capital involved in the factory in Norfolk, quite exclusive of the interests in Holland, is nearer to £200,000 than to £150,000, and that the portion of our expenditure on our first year's working, which consists very largely in expenditure on development work, educational and constructional work in the establishment of an industry, expenditure which does not occur once the industry is fairly established, exceeded many times over all the advantage which we received from the fact that there is no Excise Duty, and there is not the smallest doubt that if justification were required for this protection, the facts supplied and verified would probably supply it for some years to come. But I am more concerned to answer an allegation of the right hon. Gentleman, that the industry was probably hardly worth establishing, quite apart from whether it paid or not. Though he admitted that it employed a certain amount of labour, he said that it was labour of a very inferior kind, and that it was far from certain that it was for the national interest that this industry should be supported.

I think that that requires a reply in some detail. It is true that the labour employed on the agricultural side of the beet sugar industry is seasonal. It is required twice each year, but still it is seasonal labour. A great quantity of it is required. Far from being labour of an inferior quality it has to be high class labour. It is possible to employ a certain amount of female labour, but the labour which is unaccustomed to the handling of tools and to the adjusting of accurate work with them is perfectly useless or worse than useless in this industry. But the importance of it from the national point of view does not rest on the amount of labour employed in the cultivation of beet. It rests on the effect which we hope confidently it will have upon rural life and agriculture in general, and we base those hopes not on theory but upon Continental and American experience of the same industry. Whenever this beet industry has been established—and, of course, in ninety-nine cases out of a hundred elsewhere beet is cultivated in rotation—it is found that the district produces an ever-increasing crop per acre of cereals, barley, oats, and wheat, that the district carries an ever-increasing head of stock, because of the ever-increasing production of feeding stuff in the district and that, speaking generally, the fertility of the district is increased wherever this crop is introduced on an extensive scale. The reasons for that are not far to seek. The necessary cultivation for the proper growth of sugar beet is deeper than any cultivation which we are accustomed to make in the arable parts of this country or anywhere else. The deep initial cultivation, as everyone who has any knowledge and experience of agriculture knows, makes for the greater fertility and greater production per acre of the following crops. Secondly, the plant itself sends down extremely deep roots. I have had myself plants growing on my own land seventy-two inches in length. I do not pretend that that depth from the surface is a very big one, but still the plant percolates the soil, and that makes for increased fertilisation in the future. Thirdly, and in conjunction with my first two points—

Mr. DEPUTY-SPEAKER (Mr. Maclean)

I did not hear the speech to which the hon. Member refers, but surely it is not necessary to go into such details on the Second Reading of a Revenue Bill.


I frankly admit I should not have ventured to go into this detail, and I had not intended to do it when I entered the House, but the speech made by the right hon. Gentleman the Member for South Shields attacked this industry, threw doubt on it on this particular point, and said that it was extremely doubtful as to whether it was of national interest that it should be introduced. I find it very difficult, without going into some detail on an industry which is admittedly and must be a strange one, to answer effectively that speech, which, I think, ought to be answered.


I was in the House during the speech and I think it is only fair for me to say that that is not exactly what the right hon. Gentleman said. He said if the industry depended on this 1s. 6d. per cwt. in order to keep it alive, but I do not think he said it was a national injury or not an advantageous industry.


I now gather that in the speech which was made by the right hon. Gentleman there was a general reference to the industry. The hon. Member has referred not only to the general points, but in detail. I think it may be assumed that the answer which the hon. Gentleman has made is a satisfactory one from his point of view, and I really must ask him to leave that point and come to the general merits of the measure we are discussing.


Certainly, but in justification of my own disorder, if I may use the word, may I say that the words which I took down at the time, with all deference to the hon. Member opposite, were that the introduction of this industry would be a doubtful advantage, as although, it was said, it employed additional labour, that labour was of an inferior quality. It was that remark which I took down which led me into perhaps somewhat rambling details, but, as you say, I will certainly leave that moot point now. I wish to impress upon the House that this industry is one which has great justification from a national point of view, far and away greater than the mere effect of its own cultivation, in its indirect effect upon rural life, and that is the motive which has brought me into it, and on that I should be prepared to justify it. The manufactured products of this industry, sugar, which it is sought to subject to an Excise Duty, is unquestionably a food of the people. It is a necessity. The consumption of sugar is rapidly overtaking and promising to pass the world's production. Because of the present low price which maintains, and which everyone who has the interests of the consumer at heart would wish to see maintained, the area of land on the Continent of Europe which can produce a crop at this price is coming to an end and has reached its maximum. You cannot substantially increase the area of the crop in Europe except under the stimulus of a great increase in price. I do not think that the increase which is going on in cane production is ever likely to check the world's demand for beet sugar. It comes down to this, and if you are going to have an increase in beet sugar production, in order to meet the increasing consumption you have got to get that increase in Great Britain.

There is not the smallest doubt we can do it climatically, agriculturally and scientifically, and the needs of the consumer to keep the price down demand an increasing production, and this is the country where that increase of production is possible. So there is a national need from the consumer's point of view for the introduction of this industry, and I maintain that in its initial stages, when enormous difficulties have to be overcome, and when every person has to be taught like a little child from the beginning, the labourer, the farmer, the man who transports it, and when a huge staff has to be kept for instruction and demonstration purposes, it would be folly in the natioanl interests, and I hope the House will believe me that I am considering, not only the interests of the Government, but the nation as a whole, to run the risk of stifling a possibility of this kind by imposing a duty upon it which it is not yet in a position to bear, although I confidently hope it will be in a position in the future to bear it equally with the other producers of sugar.


I am sure that every Member of this House hopes that the growing of beet sugar in this country will be successful. We who sit on this side welcome the latter statement made by the right hon. Gentleman that the particular factory in which he is interested will soon be able to pay the same Excise Duty as is paid by other refineries in this country. In my Constituency there are several sugar refineries, and I simply wish to draw the attention of the Chancellor of the Exchequer to this point and to supplement what has been said by my right hon. Friend the Member for South Shields (Mr. Russell Rea) that this matter may receive attention in a year or so if this industry grows to any extent. We have no desire in any degree to check or retard the growth of beet sugar in this country. We only seek that the firms who to-day are refining sugar should be placed on an equality with those who refine beet sugar grown in this country. Taking the present price of sugar at about 14s. 6d. per hundredweight, firms who do not pay the Excise Duty have an advantage of from 12½ to 15 per cent. I do not think that anyone on this side can justify that preference, which to-day is given to the particular firm which refines beet sugar grown in this country.


Technically it is not a refinery at all. Raw sugar is produced and turned into what is known as granulated—the equivalent of first-class Continental granulated—in the same factory, and it does not go to a refinery. It is not brought into competition with the English refined sugars which are imported in a raw form and refined.


My Constituents unfortunately do not have the same opinion as to the competition between themselves and the factory in which the hon. Member is interested.


I admit the competition.


I hope the Government will take the matter into consideration if this new industry grows to any extent. The industry is in its infancy. Whether it will reach maturity is a matter of opinion. But if it succeeds we sincerely trust that the Government will place an Excise Duty on the refining of sugar. When this question was raised in August, 1912, when the Brussels Convention was under discussion, the Prime Minister, referring to the question of growing beet sugar in this country, said:— I see no reason why this industry—I am expressing no opinion of my own—should not receive assisstance from the Development Fund in its early stages. He went on to say that he was careful to give no pledge in the matter. It is to the Development Fund that we think this particular factory should look for support. We desire to draw the attention of the Chancellor of the Exchequer to this point, hoping that perhaps next year the matter may receive attention in the Revenue Bill.


We heard just now a speech from the hon. Member for Hanley (Mr. Outhwaite), who is a full grown single taxer. That being so, he is not in agreement with the Chancellor of the Exchequer, because we have heard from the right hon. Gentleman a speech in which the statement of most interest to the country was to the effect that he was not a single taxer. He was not in favour of a local Income Tax, and, as far as I could make out, he was not in favour of the taxation of land values. We have been told that Members in all parts of the House welcome this Bill. I can well imagine that hon. Members opposite when addressing their constituents have had awkward questions put to them by those, interested in real property in a small way, and that they are very glad that this Bill has been brought in to redress one or two glaring grievances. One Member told us, however, that the average man wanted this Bill. There I join issue. I believe that when the average man comes to examine this Bill he will be bitterly disappointed. What he wants is simply the abolition of the Land Taxes. All he gets is seventeen more Clauses, which have to be added to the forty-two Clauses of Part I. of the Finance Act, 1909. If he washes for assistance in dealing with them, I dare say the conveyancing lawyers and big surveyors will put him out of his difficulties at a price. This Bill means added perplexity. When these taxes were first introduced, the country was told that they would produce a great and growing revenue, and undoubtedly there was a fear in the mind of the average citizen that he was going to be bled in the shape of hard golden sovereigns. As the years have gone by, he has found, as a matter of fact, that he has had to pay very few sovereigns in the way of taxation; but he has had to undergo a great deal of worry and to pay out a certain amount of money to surveyors and other professional man. When he studies this Bill, he will find that as far as two of the taxes are concerned, Increment Value Duty and Reversion Duty, the yield in future years will be even more insignificant than in the past. It has been calculated that if this Bill becomes an Act, the Increment Value Duty will sink something like £5,000 a year, and that the yield of the Reversion Duty will be very small indeed.

It may be said that if a man takes a certain number of precautions he will be able to escape altogether being taxed for Increment Value Duty or Reversion Duty. But, after all, occasions on which the average man may be taxed for Increment Value Duty or Reversion Duty must come during his life-time. There is no man who owns property to whom on some occasion or other there may not come a claim. Therefore, he will always be on tenter hooks, always in a state of uncertainty, whether he is going to be taxed or not. He will be compelled to wander in the future as in the past amongst the maze of valuation forms which do not bear the ordinary interpretation of the English language. The ambiguity of the language used is to the ordinary man the chief objection to both these taxes. Take what has happened in two notorious cases—the Lumsden case and the minus site value case. In the Lumsden case the counsel for the Government stated that site value was a term which was interpreted in a very special way under the Act, it was not site value as ordinarily understood, but site value as defined by the Act. That is not what the ordinary man in the street can possibly understand. In the minus site value case, you had the decision given by the referee reversed by one set of judges, and reversed again by the Supreme Tribunal in the House of Lords. Eminent judges were befogged and bewildered by these terms. One set of judges put the value on the assessable site value, while another set put it on the full site value. If they were befogged and bewildered, the man in the street will be yet more bewildered. What we want is, if possible, to clear away all the mystification about the word "value." We do not want all these values at all. In the Clause of the 1909 Act, in this Revenue Bill, and in the Clauses that we have under discussion, you will find the word "value"—site value, and full site value, and so on, repeated time after time. If hon. Members care to take the Bill and turn to Clause 10, they will find that it consists of ten lines. In those ten lines they will find the word "value" in some shape or another mentioned ten times. We want to clear all that away. What I mean is, that if you are going to get a valuation of the land of the country made, all that the Government valuer ought to want is simply two values. There ought to be what I should call the market value, something which the property would bring in the ordinary "give-and-take" of a market sale; then you want something like the land value. That is the value of the bare site with the various improvements allowed off from it. Take first of all the market value. That should be, I contend, a "live-and-let-live" valuation. It should endeavour to be for the United Kingdom what Griffiths' valuation was for Ireland fifty years ago—just an ordinary work-a-day valuation; what a man is willing to pay for a farm, and that for which the landlord is willing to let it go. That would be an eminently useful valuation, but it would take time. You could not have such a valuation in a hurry. I do not know whether hon. Members are aware that the valuation made by Sir Richard Griffiths in Ireland took him about forty years. If you are going to have a careful valuation of that kind for this country, you cannot get it through by 31st March, 1915.

Take the second valuation, which I imagine is rather more important to hon. Members opposite, that is the land value, the assessable site value, or whatever you care to call it. In a country like this you are not going to get the value, or that which is supposed to represent the value of the land, untouched by the hands of man. That is an hypothesis. It is an almost impossible thing to get. Discussion This afternoon followed the line as to how far back agricultural improvements should go, 200, 300, or 400 years, or fifteen or twenty years. I contend that if you really are going to get the true land value, you must go back to the days of Queen Boadicea, or even further. The land must be absolutely in its prairie condition. If you could get that you would be all right, but it is almost impossible in this country to get it. You might get it in Australia, New Zealand, the Argentine, or in Canada, but in this country you have the dykes, fences, ditches, Roman roads, other roads, and so forth, and you cannot get the absolute prairie value of the land. It is an hypothesis. I do not know anybody in this House, any Minister on the opposite side, who desires particularly to get the hypothetical value of the land, but I understand that 170 hon. Gentlemen on the benches opposite want to have it. They are the driving power behind the Government. They want this value, and because they want it, I understand they are going to get it. Therefore, as a matter of fact, what we are going to get is this great Doomsday Book which is to be compiled at such a cost to the taxpayer of the country—a Doomsday Book based on an hypothesis. That may be fair or unfair, possible or impossible, wise or foolish; but at any rate it is asked for, and I understand from a statement made today that it is going to be done.

There is one thing for which I give the single-tax party credit. They, at any rate, want a valuation not alone of house property, not alone of urban property, not of taxation, fair or unfair, but of rural land and agricultural land, as well as urban land; and again I think I am not misquoting them when I say they really do not care 2d. about Increment Value Duty or Reversion Duty or some of these other duties. They would like, if they could, to sweep away these taxes. These taxes stand in the way and are making this valuation unpopular. After all, these taxes have had their day: they won an election, and now they may cease to be. The hon. Members do not care particularly about the concession to the small builder or to anybody else. They have one object in view, and they say a greater object. I am sorry that the Lord Advocate is not here. I have a quotation from a speech of his at Blackburn some time ago. In the course of it he said:— The Land Taxes of the Budget were firmly embedded in the constitution of the country as to their economic character. Land reformers … believed that a valuation had been accomplished, a value apart, from the buildings and improvements upon land, by which they would finally be enabled to secure a basis for rating and taxation fairer and more just than the basis upon which our rating and taxation now depends. That is an absolutely frank statement. I do not know; I cannot make out whether or not hon. Members in this House consider that Clause 11 will give them that valuation. The hon. Member opposite, whom I hope will speak after me, and who is the leader of the party, will perhaps explain to us—to me, at any rate—where in his opinion Clause 11, which I understand was inserted especially to aid the views of his party, will do what they want. If they think it does not, why have it in the Bill at all? It will only add to the mystification of the Land Taxes Clauses. It will make one more value. We have twenty-five, and we shall then have twenty-six. Therefore, it is not worth it. I say, speaking from a non-party point of' view, that in this Revenue Bill the Chancellor of the Exchequer and the Government have missed an opportunity of simplifying things so that the ordinary man in the street who has got to pay this duty, and has to study his position, may understand where he is. I do not think that anybody in any part of the House wants these Land Taxes. They have served their day, as I suggested before. Hon. Members on this side of the House would welcome a fair valuation. [Laughter.] Hon. Members may laugh at that and scoff, but we want an ordinary "live-and-let-live" valuation and not what I should describe as a freak valuation, which is wanted by those hon. Members who advocate the single tax. That freak valuation, I am given to understand, will fix a datum line on which, in all other decades and centuries, we are going to have to base our local taxation. That is a very serious matter. I confess I do not myself think that the ordinary voter, the ordinary ratepayer and taxpayer, actually understands what is going to be done. I am sorry that the opportunity has not been taken to make this valuation much simpler, for I, though not a professional man, would like to understand these taxes without having to have recourse to the legal profession.


I desire particularly to call attention to Clause 11 and the new proposals which it contains, or appears to contain, for the valuation of agricultural land. It must be apparent now, whatever may have been the case in the past, that the valuation set up by the famous Finance Act was wholly unsuited for the purpose of valuing agricultural land, and the deductions that were set out under Section 25 of that Act were of such a kind as to have no reference whatever to the improvements which have been carried out upon agricultural land in order to make it more fertile and to maintain its fertility. I am glad the Government have recognised this fact, but whether it is right to take the present course without explaining definitely what is the purpose for which they are now valuing agricultural land and for which they are now proposing to make certain deductions in order to arrive at the true site value of agricultural land, I have very serious doubts. However that may be, I judge, from the statements made by the Chancellor of the Exchequer this afternoon, that the Government have definitely made up their minds to arrive at some site value of agricultural land which can be made the basis in future for either taxation or local rates. If that is so, it is most necessary in settling the terms of this particular Clause that we should so settle the Clause as to secure a deduction of the value of the different factors, which may be regarded as necessary permanent improvements.

As regards the period of thirty years to which these deductions are to be limited, I should like to remind the House what has happened during the thirty years prior to 1909. That covers the whole period of serious agricultural depression from which this country has so bitterly suffered. What has happened within that period? It is no exaggeration to say that during these thirty years there has been a fall of rent values in agricultural land by anything from 60 per cent. to 80 per cent. I do not think any hon. Member will venture to contradict that statement. It is a modest estimate to put it at 60 per cent. depreciation. The fall in the capital value of agricultural land during that same period is variously put at from £400,000,000 up to anything between £800,000,000 or £900,000,000—that is in this period of thirty years. What has happened, in fact, as regards improvements during that period? I do not suppose there is any thirty years period that you could take during the last 200 years, during which so little has been done in the way of permanent improvement to agricultural land owing to the unfortunate fact that landowners have been so impoverished as to be unable to carry out improvements that they otherwise would have executed. During that period the whole of the landowners' available funds were directed towards maintaining their estates as best they could and also in farming land thrown upon their hands in consequence of inability to find tenants. The expenditure on permanent improvements during that period has been simply beggarly, and if that is going to be made the basis of deduction—that limited period of thirty years—a gross injustice is going to be done not merely to the landowners of this country, but to the industry of agriculture.

What is the nature of these improvements? Of course, during the last few years there has been a slight improvement in the condition of agriculture. We have heard a good deal about drainage this afternoon but the drainage has been most inadequate during the great portion of that period. It consisted largely of tiled drains of a most unsatisfactory kind and often the tiled drainage carried out was much too small in gauge. The drains got seriously choked, and will necessitate in the future most drastic alteration in the system of drainage. During the period, we will say of the last sixty years—and I wish particularly to include the period from 1840 or 1850 up to the first year of serious depression, 1879—very considerable improvements were carried out on agricultural land throughout this country, and that period included to a large extent the more recent drainage in parts of the Fen country, and which included a system of making water meadows in various parts of England, particularly in Dorset, Wiltshire, and Berkshire. And may I remind the House in connection with these water meadows, that a good deal of the land now reckoned amongst the richest land in England was of little or no value until a very expensive scheme of irrigation was carried out. Some of these schemes of irrigation we know cost anything from £50 to £100 per acre, considerably more than the whole former value of the land. That was carried out, we will say, some forty or fifty years ago, but a large amount of it was carried out with borrowed money, and this applies to other kinds of permanent agricultural improvements which necessitated mortgages upon agricultural estates which have never been paid off up to this day, with the result that you have, in fact, what has become a permanent charge upon these properties. Where these improvements have been carried out you have a permanent charge in respect of which the owner for the time being is paying the interest upon a heavy loan even where the landowner himself has carried out these improvements.

Many cases, however, exist in England to-day, particularly as regards drainage and embankments, and river banks and sea walls, in which a public authority has carried out at very great expense these works of improvement, and has charged, and is still charging, a rate upon the district which has benefited by those improvements. In various parts of Yorkshire there is a drainage rate charged which in some cases is far in excess of the rent paid for the land, but it is worth the farmer's while to pay that rate in order to enjoy the commercial value to him of the drainage carried out at great expense some forty or fifty years ago. In my own district we have what is known as a Commission of Sewers. In Sussex the same body is known as the Commission of Levels. These various Commissions are responsible for laying out large sums of public money, which is borrowed, I believe, from the Public Works Loan Commissioners, in order to protect low-lying land from the sea or the estuary of the river, as the case may be, and to prevent it from being flooded and rendered unsuitable for agricultural purposes, and having done this a rate is charged upon the whole of the land which benefited from the expenditure on these sea walls or river banks, and this is a continuing charge upon the owners. If you are to say that no possible deduction is to be made in respect of improvements beyond the period of thirty years, you are going to rule out the largest and, commercially, most valuable improvements that have ever yet been carried out in connection with British agricultural land. Surely you cannot have a time limit with regard to all improvements. It is quite conceivable, and I admit it that improvements have been carried out and are being carried out, the life of which is not more than five years On the other hand, improvements of the class to which I have just directed attention may have been carried out from fifty to two hundred years ago, and may result in a continuing charge upon owners, and these I say are just as much entitled to receive the full deduction in arriving at site value as those carried out more recently which may not be of anything like the same value to the owners or the industry. Surely the true basis is whether there continues or does not continue an unexhausted value attached to those improvements. That is the basis upon which alone you can estimate deductions in respect of agricultural land, if you are seeking, as the result of such a valuation and such deductions, to place anything in the nature of a tax or rate upon such land. I want to refer to one absurdity of the existing system which may or may not be removed in consequence of this Bill. Curiously enough, under the present system of arriving at site value, you are in fact making deductions at any rate as regards fences in inverse ratio to the value of the structure. Take the case of walls. Under the present system no allowance, whatever is made for them, although in many parts of the country, like the Cotswold's, they are the invariable kind of fence dividing one field from another. In other parts, you find fields divided one from the other by high banks with a certain amount of fencing on the top in order to bind those banks together. That is the kind of fence you find in Cornwall, and in Devon. It is only that bit of green growing on the top that enables you to make any deduction, and you will not get more than one-fourth in respect of the value of such fences.

Coming to the better class of fence which is a hedge on a bank with a ditch on one side, and possibly on two sides, which constitutes what you regard in agriculture as the best fence you can have, as it is constituted partly of a bank and partly of a fence, you will probably get half its value deducted. Then we come to what you find in the Midlands, that is, a hedge upon level ground without any bank, and for that fence, because it happens to all be growing, you get a full deduction. You get the largest deduction in respect of what has cost the least to erect or produce, and that is clearly an absolutely anomalous system. I desire to ask the Chancellor of the Exchequer with regard to Clause 14 and the promise he made to local authorities of some benefit from the Land Taxes they were told they would ultimately enjoy from them, how long he is going to allow that promise to remain unfulfilled? This Clause puts the period off for another year, although they were promised that they would enjoy half the Land Taxes from the 31st March, 1914, and they are now being put off for a year longer. I do not think the local authorities will put up with much more of this procrastination at their expense. Owing to the Whisky Tax proving so unremunerative, it was found necessary to produce a new fund to enable local authorities to maintain their system of higher education. That was founded upon a most insufficient basis, because a year was chosen when the Whisky Duties produced less than they had done in the ten years preceding, and the local authorities have been considerably handicapped as regards higher education ever since. If the promised support from the Land Taxes is not forthcoming, and the President of the Board of Education is not prepared to make entirely new provision for education other than elementary, I am inclined to think that the local authorities will be unable to carry out with the public money at their disposal the serious duties which have been imposed upon them in this respect.

10.0 P.M.


Many references have been made in this debate to experiences as to the result of the taxes which appeared in the Budget of 1909 in reference to the land. We are not at all surprised at the result of those land taxes. First of all, the Chancellor of the Exchequer made so many concessions to the other side that every day, as the discussion proceeded, we were afraid as to what the next concession was going to be. Our trouble is that the Chancellor of the Exchequer has a heart which is a little bit too big for his body, and when he is listening to the arguments of the hon. Member for Chelmsford we are not surprised at the result. When the 10 per cent. deduction was allowed on the valuation, everybody knew that it would make an enormous difference to the amount that would immediately come into the Treasury. That concession has been a great source of trouble to the Department to work out, and those who have to do the valuation—I am speaking from some inside knowledge—are perfectly certain that it would ease the working of the Act enormously if that 10 per cent. was taken away. I have never seen what reason there was for making that concession, and a good deal of the troubles of the Chancellor of the Exchequer have been caused by the concessions he has made to the hon. Members opposite.

I have been asked whether I am satisfied with Clause 11 or not. I say, quite frankly, that I am not satisfied with it. I do not think we shall get so far as I can see, under the Revenue Bill as it now stands, full site value, minus all the improvements. Until we get that, I do not hope for any alteration of our system of rating. I would rather have one single Clause which enables us to get full site value, with deductions for improvement, than anything else in the Bill, and, unless we get that, I say we shall be greatly disappointed, and I am not sure that the Bill will be worth anything at all to us. When we get into Committee, I shall do everything I can to get paragraph (b) transferred from Clause 4 to Clause 2. If that is done, then you will probably get full site value, and it can be done quite easily. I know any amount of landlords who have property which has never paid a single copper, because they have spent all their money on improvements. I think those men deserve every encouragement. You should have rating upon the full site value, and then you will get the best landlords to improve their property. At the present time, the moment the slightest improvement is made, the assessor comes along and says: "We must raise your assessment." Speaking as a man who owns agricultural land, and various other forms of land, I say that if you will adopt this system, you will give the greatest possible encouragement to the best class of men who hold land. Now I come to another point which has been referred to by the hon. Gentleman the Member for North Hants. The hon. Member is a very great and severe critic of the taxation of land values. I have the advantage of holding different forms of land. I do not know whether he has. He told us that the population of Scotland is decreasing. I know why it is decreasing. I will give him an instance. A farmer in Forfarshire lost two of his best men. Why? Because the landlord could not afford to build cottages, and would not let them have land so that they could build them for themselves. Both these men had to leave that farm and go to Canada in order to get houses in which they could live. Can you conceive anything more appalling? We say that if the landlord holding land in that district was rated at the price he was asking for the land he would very soon part with it.

Let me give the House another case which affects not only agricultural land, but also land in towns. I am not speaking as a single-taxer at all. I am simply here for an alteration in the system of rating. Let me give a case of a contract, I signed myself, in this City of London. The insurance company with which I am connected got a lease in Queen Victoria Street of which there was fourteen years to run. We paid £2,000, and there was a rental of £850. We intended to convert this warehouse into offices. When the manager of the company brought the contract for me to sign, I read it over and I said, "Have you the landlord's permission to alter this property?" He said "What landlord will object to our spending £6,000 on his property when there is only fourteen years to run?" I said, "Well, I will sign, but I want to put it on record that the landlord will not allow you to touch the property." The moment intimation came to him that we intended to convert this warehouse into offices and spend £6,000, the landlord said, "I will not allow you to touch the property." The result was that he forced us to sign a new lease extended to thirty years, and we had to enter upon an obligation to spend £6,000 upon the property. Having spent £6,000 on the property, he immediately forced us to pay an increased rental. The rental was raised from £850 to £1,000 for the first five years; to £1,150 for the next five years, and to £l,300 for the following five years. We took over I the contract entitling us to that property for fourteen years at a rental of £850, and in fifteen years' time he is going to draw £l,300. The next five years the rental is increased to £1,450, and the following five years to £l,600. The landlord has not spent a single copper on the property. We have spent over £6,000 upon it, and in twenty years he gets the rental increased from £850 to £1,600. He is not rated at all and never contributes a single farthing to the rates. Will anyone tell me that is a fair transaction? I say that it is not. I say that a transaction of that kind which can be carried out under the present system is a disgrace to a civilised country.

I am not here to preach a single tax. I am here to see justice done between two individuals, and that you should not have one rate for the man who possesses the land and another for the man who takes it. I could give scores of instances, every one of which I could vouch for, to show that the system is a disgrace to a civilised country. I know a case in the country where there is agricultural land and a colliery. The colliery, I am glad to say, has enormously developed, with the result that they have a day and night shift. Many of the colliers have to travel six miles before they get to the pit, and, when they get there, they have to walk four miles underground to get to their work. These people cannot get houses. They applied to the landlords, and one small landed proprietor said to them, "Why do you not build your own houses?" They said, "We cannot get the land." He replied, "Nonsense, I will let you have the land." He sold these colliers' land at 6d. per square yard, or, roughly, about £120 an acre. He really got about three times what it was worth as agricultural land. The colliers, I am pleased to say, took up the whole of that land, and there was sufficient to allow cottages to be built, with a good kitchen garden at the back and a nice flower garden in the front. They then applied to the landed proprietor on the other side of the street, and said, "We should like to buy land from you." He replied, "I shall be delighted." They said, "What is your price?" and he answered, "Three shillings and sixpence per square yard." He is asking these poor colliers to pay between £800 and £900 per acre for this land. Is that a fair system?

Let me point the moral. If these poor colliers took that land at 3s. 6d. per square yard, they would at once be rated at 3s. 6d. per square yard, but the land- lord keeps the land which he says is worth 3s. 6d. per square yard, and he continues to be rated at 2d. Is that a fair system? Is that morally right? Is there any man anywhere who will say it is right, if a man retains possession of an article worth 3s. 6d., that he should be rated at 2d. whereas if another man took it, he would be rated at the full value. I say "No." A system which allows that to exist is a disgrace to any civilised country. What are these poor colliers doing because they could not afford to pay 3s. 6d. per square yard for this land? They are living Box and Cox. The night men sleep in the beds during the day and the day men sleep in them during the night. I know many men who cannot get married because they cannot get houses, and I know of cases of men who have got married and their wives still continue to live with their mothers and they with their fathers! Is that a system which can be tolerated in this country? I say that it is not. I appeal to any Gentleman on that side of the House. They love their country, and so do we, and we do not want to have one system for one man and another system for another man. We want simple equity and justice, and I defy anyone to point to a system which will give you that unless you have each man rated on the actual value of the land.


I would point out to the hon. Member that this is not a rating Bill, and has nothing to do with rating.


I do not wish, Sir, to contravene the rules of order, and all I have to say is that if this Bill does not help us to get an alteration in this matter, then it will not be of much use.


I am certain that the picture which the hon. Member opposite has drawn of the condition of a colliery district of which I do not know the locality—of course, I do not question the facts—is not common in the life of the colliery districts. I have lived in a colliery district all my life, and I know many other colliery districts, and I know that such facts as the hon. Member speaks to do not obtain in the vast majority of them. I only wish to draw attention to one fact in reference to Clause 14. The local authorities are day by day becoming more in need of the means to carry out the various obligations which have been imposed upon them by the Act, and they feel very sore indeed that the advantage from half the land duties which was to be given to them is to be further withheld from them. In the Memorandum which was circulated with this Bill the matter is alluded to in a very casual way. Right at the end it says "the Clause, therefore, merely substitutes," and dismisses it in that sort of way. In another year or so the local authorities are to get this long-promised assistance. They feel very sore about it, because nearly every Act of Parliament that has been passed has increased their obligations. Every Member of the House knows that the local authorities are passing resolutions calling upon the Government to do something to help them in the work they have to carry on, but the Government, instead of doing that are postponing to a later date the little assistance they expected from the Land Taxes. Hon. Members opposite, as well as on this side, must feel that the local authorities are not receiving proper help to enable them to carry out their most important work of administration throughout the length and breadth of the country. One other point, to which the hon. Member for Wilton referred—the deductions in respect of capital expenditure over a period of thirty years. The hon. Member alluded to the Commissioners of Levels and Sewers. I myself have been on the Commission for a good many years, and I can support to the full what the hon. Member said. If the Clause is to be carried out in respect of a period of thirty years, during which deductions are to be allowed, immense hardships will be caused, and hardships for which no reason can be shown. From the Debate we have had here to-day the Government must realise that they have made a great mistake in not introducing the Bill earlier in the Session. The topics which have been brought up, the vast range of subjects which come under this Bill, and the great importance of them, ought to convince the Government that this Revenue Bill is one of the most important that could have been brought forward, and is therefore deserving of attention much earlier in the Session. I hope the local authorities will take note of the way in which they have been treated under this Bill, and will realise that they have not much hope of help from the Government.


The hon. Member for Central Edinburgh (Mr. Price) told a pathetic story of the position in which an insurance company was placed by reason of the raising of rents. He told us he was engaged in many occupations, and he must have been quite shrewd enough to know they made a good bargain—


What about the landlord?


I was not addressing the hon. Member for Stoke-on-Trent. If he would refrain from the noisy interruptions in which he so often indulges it would be better for the orderly conduct of the Debate. I desire to add this, that the speech of the hon. Member for Central Edinburgh showed a lamentable want of knowledge on the subject—indeed, as you pointed out to him, the Bill does not mainly deal with rating: it does so only incidentally. I desire to add my protest against Clause 11, because, in my view, it is exceedingly important that no valuation should be made which may prove valueless. I desire especially to call attention to the provision in the latter part, which says:— The Commissioners shall, as respects any valuation made or commenced before the commencement of this Act, make such adjustments as are necessary to bring the valuation in accordance with this Section as soon as may be after the 31st day of March, nineteen hundred and fifteen. I protest against the Motion that no matter whose property is valued, or whether a valuation has already been made, the owner or occupier, the lessor or lessee shall not have the fullest and amplest opportunity of presenting his case in regard to the proposed valuation. One finds that such important subjects as seawalls in Kent, the sewers and levels of Romney Marsh, and all the Statutes dealing with them, dating back from the time of Henry VIII., are entirely left out of consideration in arriving at the site value of the land, and I suggest it is exceedingly inappropriate in a Revenue Bill of this kind to make provision for a valuation in regard to agricultural land, without having due regard to existing taxation, and to something which may or may not become the law hereafter. I hope that in Committee we shall give consideration to these points, and discuss whether this Clause shall continue to form part of the Bill.

I want to draw attention to Clause 2 of this Bill. I may be wrong, but I do not understand how the Clause can ever be made to work. So far as I understand the Finance Act, 1909–10, the only occasion on which you ascertain the gross value of a property is for the purpose of arriving at the site value under Section 25. When you have once got the original site value under Section 25, then under the subsequent valuation proposed in Section 2 of the Act, the gross valuation only enters in connection with any subsequent valuation. All you get under Section 25 is the gross value, the full site value, and then the total value, so the total value and the assessable site value becomes the site value for the purpose of your valuation. When you come to the occasion on which Increment Duty is payable you substitute for the site value the consideration for sale. I am taking now the case of the sale of a freehold. You substitute for that the price you get for the freehold. To arrive at the site value for the purpose of comparison with the original site value ascertained under Section 25, all that you do is to make the deductions that have to be made under that Section from the total value. The gross value never enters into it at all. In other words, gross value is the value used for the purpose of ascertaining the original site value, and once used for that purpose it never enters into subsequent calculations of any kind for the purpose of Increment Value Duty. What is proposed in Clause 2 is:— Where it appears to the Commissioners on any occasion for the calculation of Increment Value Duty, which is a transfer on sale…that the amount of the gross value of the land is more than double the amount of the full site value of the land, and so on. Will the Chancellor of the Duchy explain how it is to be made to appear to the Commissioners that the gross value of the land is more than double the full site value? I cannot find any machinery to bring the gross value into account for the purpose of comparison. If there is none, this Clause is absolutely valueless for any purpose. If I am right, and there is no increment as ascertained under Sections 2 or 3 of the Act of 1909–10, how is it to be made to appear to these Commissioners that the gross value is more than double the full site value? To what gross value does it refer? It is not to be ascertained on the occasion at all. All you do on the occasion is to substitute for original site value the consideration for the sale of the property. In my view, this Clause as proposed is wholly illusory, and, when it comes to be construed, it will be found not to work at all. If there is some advantage in it, it should be worked out. I agree with the criticism that it should not be limited to land for which somebody gives what is called the market price. Why should it not apply to all land?

In regard to the White Paper which has been circulated, I notice that the Chancellor of the Exchequer has used the words "market value." I protest against the notion that the use of the words "market value" is correct. It assumes that the value you get under the Finance Act is the market value. It is nothing of the kind. The nearest approach you get to market value in the Finance Act is total value. Nobody here will get up and say that that is the market value of a property. It is arrived at upon a wholly arbitrary basis, after making the deductions and additions and calculating the value of the tithe, the rent charge, easements, rights of way, public footpaths, and things of that kind. Who on earth, when he goes to buy property, could make a calculation as to what would be the cost of redeeming tithe, or the extinction of a public footway, or anything of that kind? The result is, although we are told it is market value, you never get anything like market value under the Finance Act 1909–10. The real fallacy of the Act of 1909–10 is that in my view the whole system of valuation is purely arbitrary. It has no real relation to the market price. No one ever valued a property on that basis and you get a wholly fictitious figure and the gross value, the site value and the total value. Having got these figures you compare them with what really is the nearest approach to the market price that you can possibly get, which is that which the property commands when it is sold. The net result of that is that constant injustice is done, as has been shown in the Lumsden case, and I ask for some explanation as to how Clause 2 will possibly work or be of any value to anyone.

Then I wish to draw attention to Clause 3. I understand the object of the Clause, which is a laudable one, is to induce people to build more cottages and other houses which are really required. I want to understand why the limitations proposed by the Clause are inserted. The benefit intended should not be limited to a case in which you sell the property you develop within two years or to cases limited to a period of five years from the commencement of your work. In other words, there is a great number of people who cannot afford to buy a house, and it seems to me that either the owner, or it may be the builder who develops land and lets his property on lease or by weekly agreement, is equally entitled to the benefit of Clause 3 as any other person. But here the benefit conferred is solely limited, if, in fact, he sells within five years of his commencing the development. What is the object of that? In regard to our industrial class, equally whether they own cottages or houses of higher value, a great many of them, even if they could afford to buy, would find it would not suit their purpose, because they have not got security of employment in the particular district. Could not the Chancellor of the Exchequer see his way to extend the benefits conferred by Clause 3 to anyone who develops his land, even though he does not, in fact, sell his houses?

The real difficulty created by the Finance Act is insecurity in the tenure of property, the uncertainty of this taxation, the proof we have had that this taxation will fall on the man who has developed his land even though the value of the land is not increased by ½d., and that has resulted to a large extent in stagnation. People will not build; they will not invest their capital in land so long as this uncertainty exists. These Amendments have been introduced for this purpose, and the man who, in fact, develops his land by building cottages or other property of that kind should be equally entitled to exemption from these taxes or the chance of them as the man who develops and sells within five years. I can see no good reason for the limitation of that period of time, and I ask the Chancellor of the Exchequer to see whether he cannot do something to meet us on these points. I welcome this Bill because it will to a large extent, though not by any means entirely, remove a just grievance which is felt in regard to the taxation imposed by the Act of 1910. But I further think that it is really the first admission on the part of the Government that these taxes have failed in their purpose. When I heard the hon. Member for Central Edinburgh (Mr. Price), the Chancellor of the Exchequer, and others on the opposite side say that it was premature to regard these taxes as a failure, and that nothing could be expected in the first five years, I did not know how much they expected in the next five years. All I say is that nobody has forgotten the statement of the Chancellor of the Exchequer in which he told us that these taxes were to finance old age pensions and to build "Dreadnoughts." There is no prospect of their doing the one or the other this year, next year, or ever.


I wish to ask the Chancellor of the Exchequer why an express undertaking which he gave me has not been carried out. On 10th July I raised a question with regard to the payment of Income Tax on Members' salaries, and in reply the right hon. Gentleman said:— I propose, too, to go beyond that; also, in order to carry out the recommendation of the Public Accounts Committee I propose to have a Clause inserted in the Revenue Bill which will put in legislative form something that will regularise not merely our proceedings in reference to the £400, but the proceedings of Sir Robert Peel and Mr. Goschen, for, after all, this criticism is directed against these two great financiers. The hon. and learned Gentleman and the Public Accounts Committee seem to take up the attitude of criticism, and in order to put Sir Robert Peel right, we propose to insert a Clause in the Revenue Bill of this year,"—[OFFICIAL REPORT, 10th July,1913,col.754.] I am not going to discuss whether what the right hon. Gentleman has done is similar to what was done by Sir Robert Peel or Mr. Goschen. I do not think it is, but the right hon. Gentleman having given that express undertaking when I moved the Adjournment of the House—


I am not sure whether Amendments regarding Income Tax are relevant to the Finance Bill. If they are germane to the Finance Bill, there are two or three which we mean to move ourselves. I will either move it on the Finance Bill or on this Bill. If I do not move it there, I will certainly move it here.


If the right hon. Gentleman says that if he does not move it on this Bill he will move it on the other, that is satisfactory to me, because I wish to have an opportunity for discussing it when it is moved. As to this Bill, I propose on Clauses 11 and 14 to offer a strenuous opposition in Committee. So far as Clause 11 is concerned, I base my resistance on this: You are here asking people to have an entirely fresh valuation made, or you are to have a new column set up of enormous expense with respect to seven-eighths of the land. Landowners will have to get complicated questions of interpretation decided, and they may have to go to the Court of Appeal or the House of Lords. You will have to reopen every valuation which has been made, and you are going to put everybody to the trouble of raising fresh objections before you have made up your mind whether the valuation is going to be used or not. I hope the House, before we put all these people to this expense and worry, with the possibility of litigation, will say that the Government ought to make up their mind whether we are to have rating on the site value or not. We have been told to-day that it would be out of order to discuss the question whether rating on site value should be adopted. The right hon. Gentleman told us that he has not made up his mind on that or was not prepared on behalf of the Government to put it forward as their proposal. In that state of affairs what right have you to put people to all this expense and trouble, when it is possible that we may continue to go on rating on the basis of income. If it is intended to have a valuation made for the purpose of rating we ought first of all decide that we mean to rate on site values, and it should be done in a proper Valuation Bill for that purpose, and not brought in by a side wind in one of the Clauses of this Bill, where it is entirely misunderstood. The right hon. Gentleman gave us an example of one landowner who, he told us, he thought was a Unionist. I think that some of these landowners entirely misunderstand the effect of this Clause. They all think that it has some effect on the land valuations done as they are under the Finance Act. They have no such effect whatever. What they really want and what we have been asking for from this side of the House is that the Increment Duty should in the ease of agricultural land be assessed on the difference between agricultural land and this site value on the occasion, and not as between original site value and the site value on the occasion. This Clause brings in, in a way which is not understood, for the first time a valuation the avowed purpose of which is the rating of site values. I submit that to put people to the expense and trouble which this involves is unfair to them and exposes them to burdens to which they ought not to be exposed by the Government.

Mr. LLOYD GEORGE rose in his place and claimed to move, "That the question be now put."

Question, "That the Question be now put," put, and agreed to.

Question, "That the Bill be now read a second time," put accordingly, and agreed to.


I beg to move, "That the Bill be committed to a Committee of the Whole House for To-morrow."

Question put, and agreed to.

Bill to be considered in Committee of the Whole House to-morrow (Wednesday).