HC Deb 22 July 1914 vol 65 cc526-37

The limit under Section sixty-nine of the Finance (1909–10) Act, 1910, on the amount of duty which may be repaid on account of the maintenance, repairs, insurance, and management of land or houses shall be removed as respects Income Tax for the year beginning the sixth day of April, nineteen hundred and fourteen, and any subsequent year.


I beg to propose at the end of the Clause to add the words, and as respects that year, and any subsequent year, twelve pounds shall be substituted for eight pounds in Subsection (2) of the said Section as the annual value limit for houses to which that Section is applied. This is an Amendment which I have promised, to increase the limit of abatement in respect of the repairs and the maintenance of cottages from £8 to £12. That means £12 exclusive of taxes. The £8 would represent the rent of a cottage at 3s. a week, or 4s. a week including rates, and this will mean the rent of a cottage of 4s. 6d. exclusive of rates, and 6s. including rates. That more than covers the cottages in the country. It covers the great bulk of artisans' dwellings in towns as well. I agree that there is a great deal to be said for the extension all round to £15 which I did consider, but a £15 cottage is outside the kind of dwelling-house occupied by the industrial population of the villages. The £15 house in a village is rather a swagger kind as a rule.




In Wiltshire they are rather a higher cut altogether. Down there I suppose that they have more sumptuous dwellings. But taking the country as a whole, the £15 house is a very good house. In the towns I agree that it is a rather different proposition. I should like first to see the experiment tried of increasing from £8 to £12, which is a considerable advance upon the old limit, and the Inland Revenue authorities would like to see that experiment tried before going beyond it. We should like this 50 per cent. advance on the limit first made, and then we will consider two questions: first, the extension of the limit, and then the extension of the flat rate. What I should be rather afraid of is that the bad landlord would do just as well as the good landlord, if you increase the flat rate. But in regard to the other point, there are artisans' dwellings undoubtedly whose rents are above 6s. a week, but 6s. a week would cover the vast majority of these houses. There might be some sort of scale which would discriminate between the town and the country, but I would like time to consider the matter before coming to a conclusion on the subject. I would appeal to the House for the moment to allow us to experiment with this 50 per cent. advance. The two questions which we have to consider afterwards are the increasing of the rating limits, and the raising of the limit of the flat rate. These two things I wish to consider before coming to any conclusion. Therefore I ask the House to accept this proposal for the time being with a view to looking into these two points.


I wish to acknowledge the very reasonable manner in which the Chancellor of the Exchequer has endeavoured to meet our point with regard to the limits in respect of the amount allowed to be abated under the head of repairs, maintenance, insurance, and management, and for my part I will not at all complain if the Chancellor of the Exchequer desires some experimental system during the coming year before adopting, as I think he will have to adopt, a somewhat higher limit. I cannot see any logic in this flat rate. As the Chancellor of the Exchequer says, it puts a premium on negligent landlords, and it becomes wholly impossible for us logically to present our case, as we shall continue to present it, in favour of assessment under Schedule D, if the flat rate limit continues to be part of the Government scheme. I am inclined to think, although the Chancellor says that 4s. or 4s. 6d. would represent, and possibly more than represent in his view the rent on an economic basis of a cottage in the agricultural area—


Without rates.


I am inclined to think that when the Government take to building houses themselves in rural districts, as well as in urban districts, they will find it very difficult, if they have not fully allowed for repairs and outgoings generally, and if they mean to base their scheme on an economic rent with a corresponding wage to the agricultural labourer, to keep the rent down to 4s. or 4s. 6d. In any case where is the logic of the distinction between the urban cottage and the rural cottage? Assuming that the owner of the cottage is entitled, as I suggest he is entitled, to be allowed everything that he expends in order to maintain the rent of the cottage, on the analogy of a man of business who is assessed under Schedule D, it must be equally fair in the case of the urban cottage, as in the case of the rural cottage, that the true economic value should be taken as the basis. I would suggest, if you cease to make any distinction between the two, as I think you will find it absolutely necessary, that the limit of £12 is not sufficient for this purpose. When I appeared to differ from the right hon. Gentleman just now I was not thinking of Wiltshire, I was thinking of the semi-industrial area of Gloucestershire in which I live, and also of the conditions prevailing in South Wales, with which I am only too painfully familiar.


It is a rural district.


I am not talking of rural districts. You cannot logically differentiate in this matter between rural districts and semi-industrial or industrial districts. It is necessary in order to maintain the rent to expend a certain amount upon repairs and maintenance of the cottage, and that is the amount which ought in fairness to be allowed to the owner of the cottage, whether it is urban or whether it is rural. My experience as to the cost of building in a semi-industrial district—and this, of course, does not apply to South Wales, which is more wholly industrial—is that it has gone up by at least 30 per cent. during the last five years. If I may give a personal illustration, I find that I cannot myself build cottages which will satisfy the requirements of miners in my district to-day at less than £300 apiece. Of course, no doubt I could, if I built them in a long and uninteresting row, which is a thing I very much deprecate; but if you have single cottages or semi-detached cottages, the kind of cottage that has at least three bedrooms, which the miner is now demanding, and is quite properly demanding—[An HON. MEMBER: "What about the price of the land?"]—I am not saying anything about the price of the land, and, if I include that, the figure would be still higher—if you have single or semidetached cottages, with three bedrooms, cottages of a kind which will satisfy the mining population, having suitable sanitary outbuildings, a garden, bath, and other luxurious requisites which are coming to be necessities with that class, I say I find it extremely difficult to limit the allowance to £12.

I am not at all sure whether £15 is not a very modest allowance in such cases. I have, after carefully considering the matter, put an Amendment on the Paper suggesting £18, but by way of compromise, and arising out of my own personal experience in a partially rural and semi-industrial district, it occurred to me that £15 was a figure which the right hon. Gentleman might consider. It is not only the high cost of building at the present time which has to be considered; there is also the increased demand as to standard on the part of the local authorities, and there is the demand—in the industrial districts at any rate—for a much better type of cottage, costing a much higher figure than was contemplated when the Act of 1894 was passed. I do not want to press this too far, because I realise that the right hon. Gentleman has not only made some concession, but he has adumbrated further concessions after further examination and experience. I believe the true test of this matter is the test which is applied in commercial circles for the purpose of assessment under Schedule D, in regard to the amount that has necessarily to be expended in order to maintain income, and, if it is found to be reasonably necessary to expend a certain amount of money for the maintenance and repair of cottage property beyond the suggested limit in order to maintain income derived from that property, surely, in fairness, that is the allowance that ought to be made. I think we have a reasonable and logical case for asking for a further extension of the limit; but whilst accepting the endeavour on the part of the Chancellor to meet our view, I think he will act illogically if he differentiates between one class of cottagers and another, and I venture to hope that, bearing that in mind he will see fit to stretch this £12 to the sum of £15, and so effect a compromise, which I think will give satisfaction in every part of the House.


The Chancellor of the Exchequer has not seen fit to extend the £12 to the amount of £15, which is the amount I have suggested in an Amendment that I have put down, but which I do not propose to move, because I fully sympathise with his feelings and views that he wants to gain more experience in regard to the limit which should be fixed. So far as that is concerned, I certainly think that we could have a very much better system than the flat rate. In regard to urban houses, it is perfectly true that, so far as ordinary rural districts are concerned, the £12 limit will probably meet the great bulk of cases; but when you come to the urban district, like my own Constituency, 7s. a week is by no means a high rent for a relatively small cottage, not by any manner of means; and you will get cottage rents running up to 8s. and 9s. a week. If you take London it will probably require special treatment compared with other towns. Undoubtedly what the hon. Gentleman opposite said is quite true, namely, that the price of building has gone up by 25 per cent. to 30 per cent. in a very short number of years. That is one of the difficulties which faces everyone who have any responsibility connected with providing houses in urban or rural districts. I think £300, the figure named by the hon. Gentleman opposite, is very high. I know that very good cottages have been erected by a company with which I am concerned in South Wales, for about £225 each. They fulfil all reasonable requirements, and they have three bedrooms. I know that the price of cottages depends very largely on the locality where they are built, and on the facilities for obtaining material and labour. Undoubtedly there has been so much said recently on the subject of rural housing that urban housing in places like South Wales has been rather overlooked.

I regret that we have not made a little more progress, and undoubtedly we should encourage people to build bigger and better cottages. The limit of 6s. would prevent the building of larger cottages, without penalising by way of taxation those who build cottages that will accommodate large families. I sincerely hope that the Chancellor of the Exchequer before he deals with the next Budget, will go more fully into this question, and that we shall not be limited even by £15, but that we shall get to a limit which would really meet the requirements of the better class artisan, or even the better class clerk. We are only asking for exemption from Income Tax of the cost of repairs, maintenance, and management, in the same way as other businesses and questions of property are dealt with under Schedule D. What we want is that people may provide better housing accommodation without being penalised by taxation, for the two together seem to be rather an illogical proposition. I do not know whether the Committee which is now sitting could not take into its purview the question of doing away with the present artificial definition, and instead of dealing with the subject in this piecemeal manner—so many shillings a week—deal with it in a way which would really encourage the building of better housing accommodation, for that would be a substantial advantage to all who have responsibility in providing decent accommodation for workpeople at something like an economic rent.


I would urge the Government, on the same lines as those followed by the two previous speakers, that they should not differentiate in favour of rural as against urban cottages. I think a very strong argument, which has not hitherto been mentioned, is provided by the Census Returns. If the right hon. Gentleman will give them his attention, he will bear me out when I say that the Census Returns show that the increase in the adequacy of the supply of cottages is far lower in the urban district than in the rural. I do not want in any way to suggest that there is not a great deficiency in many rural districts, but in the last ten years the inadequacy has been much greater in the urban districts than in the rural districts. That is a strong reason why the figure, if it is necessary to fix a limit at all, should be such as to include the ordinary artisan dwelling. Without appearing to look a gift-horse in the mouth—because I am one of those who for a long time have been urging the Government to do something in respect of relief under Schedule A—I do want to protest against this method of meeting an admitted grievance, From year to year, as the Chancellor has admitted, and as the country as a whole admits, the Schedule A Income Tax payer has a substantial grievance, but the methods which have been employed are only a series of palliatives, each one of which is a further admission of the grievance which exists. I would point out that the Government themselves since 1909 have enormously aggravated the grievance of the Schedule A Income Tax payer by the imposition of the Super-tax. The imposition of the Super-tax has extended the effect arising from the amount being assessed upon the gross income, which is very different from the net income, to far beyond the actual sums involved. There is a case within my own knowledge in which the difference between the net and gross income, between the assessment and the net income for Schedule A purposes, brought the owner of the property into the Super-tax limit, and this made a difference to him out of all proportion to the amount of property upon which the tax was imposed.

I would suggest that it would be more convenient to the Government themselves and to their officials who have to administer the Income Tax and the Finance Act, that the original assessment on rural property to Income Tax should be the same figure as that upon which the final payment is intended to be made. Section 69 of the Finance Act of 1910 and this Clause which is proposed are both intended to have the effect that in certain classes of property the assessment and the actual payment of Income Tax on that property should be on the net income rather than on the gross assessment. Yet the payment of Income Tax has to be on the gross assessment itself. A very elaborate process has to be gone through in order that the Schedule A Income Tax payer may recover as much as he is entitled to under Form 99, and in many cases the Super-tax returns must necessarily be hung up, or have to be revised, long after the period, simply in order that the claim upon Form 99 may be received. I maintain that it would be infinitely better and cheaper in every way for the Treasury as well as for the individual if the Government would go to the root of this grievance and deal with it by practically giving the option of assessment under Schedule D, instead of Schedule A, rather than by dealing out palliatives, giving an exemption of £8 one year and £12 this year, and probably £15 or £18 next year. There is an analogous case in existence now. Schedule B Income Tax payers have already the option of being assessed under Schedule D. I have never heard that that has caused any inconvenience whatever to the Income Tax officials or to the individuals who are subject to the assessment. I do not know that a great many have taken advantage of it. I believe, if they would allow owners of real property the right to claim to be assessed originally under Schedule D, instead of Schedule A, although the Treasury might and would lose a certain amount of Income Tax, yet they would gain enormously in convenience and in many other ways.


I think we ought to try to understand in the interest of property owners what is really being conceded by this Clause. We are, as I understand, extending the limit which is in operation under Section 69 of the Act of 1910 with regard to the amount that is allowed for repairs from an £8 house to a £12 house. Under the existing law one-eighth is allowed upon land, and one-sixth upon houses under £8. We understand, according to this Amendment, that that is now extended to £12, and the limit of one-sixth, so far as houses are concerned, is to be abolished under this new Clause. By that provision any property owner with property under £12, in either rural or urban districts, will be able now to obtain a deduction from his Income Tax on the actual amount he has expended upon his property. There is no limit up to the £12. I think that is a very great concession, but, unfortunately, I am afraid, from the discussion which has taken place, that property owners do not understand that concession, because the Income Tax collector docs not explain to them what powers they have. The concession is made by what we regard as law by reference, which will make the matter more complicated than it has been, and what I would suggest is that there should be a circular sent out from the Inland Revenue instructing the Income Tax collectors as to the limits now in operation.

I believe that this concession will be a great relief to good landlords, to the men who repair their property and keep it in a proper state of efficiency, and I am quite certain that they will appreciate the extension from £8 to £12 and the abolition of the one-sixth limit. I should like to call the attention of the Secretary to the Treasury to another grievance which property owners suffer from and to which my attention has been called. I think it is a serious grievance. Formerly an owner was allowed, without regard to limit, to make full deduction of the balance of rent owing by a tenant when he left the property. Thus, if a tenant left owing £5, or £10, or £20 of rent, until two or three years ago the owner of the property concerned was allowed to deduct in full from the Income Tax the amount which was owing, because he had really paid Income Tax upon the rent. Now he is only allowed to deduct two-thirds of the £5, or £10, or £20 due by the tenant when he goes away. That is considered to be a serious grievance, especially on the part of small property owners who are small Income Tax payers. The rent may be carried over for three or four years, and the owners have been paying Income Tax in full upon the value of the property, while they are now allowed only the two-thirds—


That is quite a different subject from the one dealt with in the Clause. We are now only concerned with the question of allowance for repairs.


I quite agree, but it is really part of the subject of grievances of small property owners, and I thought I might refer to the matter. I quite admit I should have done so on Clause 2. I do hope that this other change will be notified by circular from the Inland Revenue Department, and as to the grievance which I have just mentioned, I hope the Secretary to the Treasury will be able to do something to rectify it.


I am sure the House will agree with the Chancellor of the Exchequer's general statement that it is desirable to increase this allowance, although I for one should have strongly urged to do so to £15 now, on the grounds which were stated by my hon. Friend the Member for Wiltshire (Mr. C. Bathurst). I should not personally desire to divide the House on the question, and I do not think my hon. Friend wishes to do so. We quite recognise that this is a concession, and that the Department may wish to feel their way, but I do think that it might be generally agreed that £15 is not too high a limit even now, especially in urban districts where such a house is really no more than the average house occupied by the artisan at present rents. It is very hard on small property owners who try to improve their property and keep it up-to- date and make it really fit for habitation by the working classes not to get full allowance for that in the Income Tax. There was a hardship when the Income Tax was 6d. or 9d., but it is much greater now when the Income Tax is so much higher. There seems to me to be a fatal objection to a flat rate, and to extending the flat rate. The flat rate must, I think, be a minimum. If you are going to give a flat rate you must make it as low as anybody can possibly be expected to spend on the maintenance of his property. The moment you do more and extend your flat rate beyond the minimum, you are giving the same allowance to the man who neglects his property as you do to the man who keeps it in good and habitable repair. That is a position you cannot escape from, 7 quoted figures recently, giving chapter and verse, and I can show them to the Chancellor if he desires, stating the actual cost of maintenance and repair of certain blocks of small property in towns. That showed that the owner at the present rate of Income Tax was really paying an Income Tax of 3s. 6d. in the £ upon the actual income which he received from the property, and that the allowance he received fell so far short of the actual expenditure that on the actual residue he was paying 3s. 6d. in the £. The houses in that case were let at a rent of 7s. 6d. per week, which would just about be covered by the £15 limit suggested.

8.0 P.M.

Another point is that the extension of the limit would have some tendency to keep down rents. There is no doubt that there is a tendency in the case of urban houses for rents to rise in the present congestion of building. The way that small urban house property rents are rising in many large towns is very remarkable. I think it would be in the interest of the tenants of the houses to raise the limit of allowance to £15. The owner in that case would hesitate to raise the rent above the £15 limit, because that would immediately deprive him of his allowance for expenditure upon maintenance and repairs. The Chancellor of the Exchequer said that he thought there might be some way of drawing a distinction between urban and rural houses. I do not believe it is possible, and I do not think it is desirable, for this reason: What I look forward to, and what I hope will be the tendency of building, as communications constantly and steadily improve, is that because a man works in the town there is no longer any necessity for him to live in the town. I believe in as much light and air as possible, and, where it is possible, for every working man to have a little bit of ground available on which he may have a garden, which is one of the most desirable things. I cannot see because a man works in a town why he should not be able to get a house at a small and reasonable rent, not only with brick walls, but also a little plot on which he could grow something for himself and his family. That being so, I am sure that both owners of land and this House ought to do everything possible to encourage that tendency. If that comes about, it must tend constantly to obscure the dividing line between urban and rural districts. Any kind of legislation which attempts to draw a hard and fast line between what is urban and what is rural will be mischievous from that point of view. We want both to enable the town worker to get out into the country where he can get a garden and also to encourage rural industries, so that people in purely rural districts may not be wholly confined to one form of getting a living.

I entirely agree with the hon. Member opposite (Mr. J. Samuel) that it is very desirable that owners who are entitled to this relief should have some official intimation of their right to obtain it. I think that would best be done by a notice on the demand note. It is a common practice of the Department to attach a small slip of paper to the demand note notifying the Income Tax payer that he is entitled to make a claim for certain relief; it is then the fault of the owner if he does not apply. Such a notification is particularly necessary in the case of a small owner. The man with a large amount of house property has professional advisers, who will see that every penny to which he is entitled is claimed. But the small owner, who cannot afford professional advisers, may not have the knowledge enabling him to claim the relief to which he is entitled. I very much regret that the £15 limit is not adopted at once. I do not think there is any valid reason against it, in view of the present high rate of interest and the rents of small urban house property. I entirely accept the statement that the £12 limit will meet the rural case, but the justice of the claim is by no means confined to rural districts. Urban authorities very properly have to be more particular than rural authorities, because anything insanitary in a town is a far greater danger to the public than where the houses are isolated. Consequently, the requirements are very properly more onerous and insistent than in the rural districts. Moreover, as the right hon. Member for Swansea (Sir A. Mond) very properly pointed out, the cost of repairs in urban districts is extremely heavy. But, after the Chancellor of the Exchequer's statement, I am afraid we must accept the £12. It will, however, only touch the fringe of the urban case. It is true that we have the frank admission that this is an experiment which must be extended. We must, therefore, accept the concession with a good grace. I would express my thanks for what the right hon. Gentleman is prepared to do, and my deep regret that he cannot see his way to extend it to £15 at once.


As the hon. Gentleman says, the £12 meets the rural case, and I suggest that it would be better to defer the question of the urban case for a little longer while we examine the figures of particular instances. It is very difficult to say for certain whether £15 or £18 is the right figure. It is worth investigating, anyhow, whether the flat rate could not be extended as between £12 and £20, rather than treat the houses between £12 and £20 in exactly the same way as we treat those under £12. I will carefully consider the suggestion to attach a notice to the demand note, and, unless there are difficulties of which I am not at present aware, I will see that it is done.


Before the question is put, may I make a plea for a possible compromise? It is admitted that £12 is satisfactory for rural property. Could not the Government concede £15 for urban property? The expenditure on urban property of this description is rapidly growing. Wages and the cost of materials have gone up. The requirements of local authorities are much greater and more difficult to cope with. Therefore, there is a most substantial case for making this concession. If you are going to make the experiment, why not differentiate between the two at once? If the Chancellor of the Exchequer were here, I do not think that he would be so stony-hearted. I hope that, even at the last moment, this differentiation can be made.