HC Deb 01 May 1918 vol 105 cc1634-51

18. "That Income Tax under Schedule B shall be charged for the current year (and for any succeeding year for which Income Tax is charged) in respect of the occupation of lands. tenements, hereditaments,' and heritages chargeable under that Schedule for every twenty shillings of an amount equal to twice the annual value thereof instead of for every twenty shillings of the annual value thereof, and the Acts relating to Income Tax (including any enactments relating to relief from tax) shall have effect accordingly.

And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

Major LANE-FOX

I should like to say one or two things about this "Resolution, but before coming to the main question of the way in which it affects farmers I wish to draw (the right hon. Gentleman's attention to the fact that by the words "occu- pation of lands, tenements, hereditaments," etc., in this Resolution for the first time gardens, woods, plantations, and so on, will be brought under this extra tax. I hope the right hon. Gentleman will consider whether it was really the intention of the Resolution, which is obviously mainly directed to dealing with farmers and the supposed high profits of farmers, to continue as it is at present drafted to deal with gardens and plantations. Of course, where the woods are ripe I admit a considerable profit is being made, but where the woods are unripe there is likely to be great hardship on those who are trying to improve their woods. The main point arising out of this Resolution, of course, is the way in which it affects the farming interest, and I hope very shortly to put one or two considerations in the matter before the House.

I know that the farmer is not a very popular person at this moment, and that it is very easy to throw stones at him. He is supposed to be a great profiteer, but if that is so I would say that he is not as great a profiteer as those in other classes one can think of. Whether it is so or not, I do not think that is any reason why we should not raise the question of taxation, or give it a fair chance of being considered from both sides. The alternatives given to the farmer — I am not quite clear when he has to choose between the alternatives, but I believe by the 5th June — are whether he shall be taxed under Schedule B on the basis of two years' rent, as representing his year's profit, or whether he shall go under Schedule D. As I say, I believe he has the option on or before 5th June. The Chancellor of the Exchequer will correct me if I am wrong, but if the option is later than that date then the point I am making does not arise. If, on the other hand, he has to take his option as early in the year as June I think unfairness will be done. Later he knows what his profit is going to be, and what his general position is. If these alternatives were really genuine I do not think there would be so much to complain of. Everyone will admit that it would be perfectly fair to tax the farmer like everybody else on the profit he has made under Schedule D. In his Budget speech the right hon. Gentleman told us, what is indeed obvious, that farmers cannot come under Schedule D now. They have not the means. Unfortunately, they do not keep books, and this is not the time, when we want them to double their amount of food production, to force them to the preparation of books to which they are not accustomed. I think it is unfortunate that they have not kept books, but you have to face the facts as they are.

Of course, the basis of taking the profits of the year as represented by two years' rent is very unfair. Everyone knows the rents of two farms alongside each other may be very different, and that on some estates the rents are very much lower than on others. The whole basis, as the right hon. Gentleman admitted in his Budget speech, is very unfair, a rough and ready one, and one that may do injustice in many cases. What rather alarmed me about his Budget speech was this: If he had encouraged the idea that farmers should come under Schedule D by some easy means, I should have said there was some chance that fairness would be offered to the farming community. But his whole speech seemed to discourage their coming under Schedule D. He pointed to the difficulties of the matter, the depletion of staffs, and the difficulty of checking all these accounts if the farmers went under Schedule D. If the right hon. Gentleman will give an assurance that everything will be done to make it easy for the farmer to be taxed on the profits he has made, then, I think, there is less to be said against this Resolution. If valuations will be accepted which may not be in very good technical form—because, after all, valuers to make proper valuations are not to be found, and if every farmer has to have a proper valuation the men are simply not there to make them— and if the Treasury is going to be content with what on the face of it seems an honest valuation, although technically in every detail it is not in the form which might be expected, I say the position is a fair one. If on the other hand, farmers are to be discouraged, and accounts are not to be accepted unless they are in a technically correct form, then that will be an unfair and unreal alternative. You are not really giving the farmer a choice of being taxed on two years' rent or under Schedule D, but on what may be a very unfair basis. There is no doubt that a great many farmers have done very well during past years, but some have done much better than others, and some have not done so very well. They run risks, and there must be the chance in a certain number of cases where a man may have done—by ill-luck, perhaps—badly, and yet because others have done well he is not to be taxed on the profits he has made but on the wholly imaginery basis of two years' rent, representing a profit he has not made. I do not think that is fair, and I hope the right hon. Gentleman will consider whether something cannot be done to alleviate that system, or at any rate to enable him to declare the actual profit he has made.

I do not want to keep the House, but this is a moment at which food production is a most important matter, and everything tends to show—I have had a great deal to do with this work lately—that farmers are realising in a great many cases that their methods are antiquated, and they are taking steps to improve them. The policy of a great many farmers I know personally is to use their profits and put them into their farms, increasing their influence, and raising the level of their farms If you are going to give them any sort of grievance, making them think that they are being unfairly taxed, you will stop that process, and I think it will be a disastrous moment at which to do anything that will stop food production this year, or the general developments in the right direction, or that will place anything in the way of farmers putting money into their farms because they have had a good year and have put money into their pockets. I am the last person to say that any farmer would desire to pay less than his fair share. If there are any that do they will not get any sympathy from me, but I think they want to be taxed fairly, and to be given a fair chance of being called on to show what their profits are. I do not think the opportunity afforded is a fair one, and I would suggest to the right hon. Gentleman that he might make it a year and a half, rather than inflict the injustice which may be inflicted under this Resolution. Above all, I do think the House wants to be careful. There is considerable prejudice against the farmer throughout the country. I do not care whether it is right or whether it is wrong, but it does make it necessary for the House to be careful how they inflict a tax which may seem to be representing a popular outcry against a not very popular person. That is what we want to avoid. The tax is not a punitive one or, if it is meant as a punishment, there are a great many people in the country who deserve it more than the farmers, who have made tremendous efforts to meet the demands of the country for increased food production, and who are, I am perfectly certain, doing their utmost in the best way they can to help the country in this time of emergency.

Mr. CURRIE

So far as I understand the proposals of the Chancellor of the Exchequer, I think the farmer is going to have, and is entitled to have, a fair chance of producing his profit and loss account; and, if he does so, he will be taxed like every other citizen. The hon. and gallant Gentleman who has just spoken referred to the new alternative basis as imaginary. In one respect it is fictitious, but not to a greater degree than the basis adopted in 1914. I do not share his fears as to injustice being inflicted on the farmer, but I wish to support him in what he said in regard to woodlands. He sought to draw a distinction between young and old woodlands, but I am not sure that that is a really true distinction. I would rather say the dividing line should be between pleasure woodlands and commercial woodlands.

I think, if things are allowed to drift, a considerable measure of injustice may arise, and new woodlands which do not deserve to be heavily taxed, may be taxed twice over. On the other hand, one does not wish to do anything to encourage owners of land to keep in idleness land which might be in use. I do not think that the Government can be, or ought to be, pressed to give an answer upon this tonight, and I therefore do not want to take up any time in arguing it, but I do give notice that the point will be raised on Committee stage. If an answer could be given now, it would be extremely desirable as Members have been bombarded, certainly in Scotland, by everyone interested in woodlands. Another point I wish to ask the Treasury is this, whether this change from the 20s. to the 40s. basis is intended to work any alteration upon the present position of institutions like bowling clubs or golf clubs? There, again, I confess at once that my motive for putting the question just now, instead of on the Committee stage, is to save the trouble of being bombarded by every member of every bowling club in and near Edinburgh. I do not think that an answer can be given now, but I would like the point dealt with as soon as possible.

Mr. J. HENDERSON

I sympathise very much with my hon. and gallant Friend, who spoke on the question of leniency towards the farmer, and I hope that instructions will be given from the Treasury to the assessors and surveyors in the North and throughout the country that they should give the farmers what assistance they can in shaping their accounts to be submitted under Schedule D, so that they may know where they are. It is quite true that the bulk of them do not keep accounts, and it is not to be wondered at, because they have not been asked for accounts for many years; indeed, I do not believe since 1885. It is quite natural that they have not studied the way of doing it, and therefore, as we are going to cast this upon them, I would back up my hon. and gallant Friend opposite and urge that we should give them all the assistance we can, and afford them as long a time as possible, so that every encouragement should be put in their way. I notice that they are to have the same relief as other people. That makes a very great difference, because a farmer who has a wife and two children pays no Income Tax up to £100 rent— £97 10s. to be exact—and, of course, the relief is applicable in the same way as it goes up. Really, up to £150 or £200 a year there is very little to pay in the case of a man who has a wife and children.

There is this to be said, that the farmer has a little advantage over a man with similar rent, because he gets his food, which is a very important item, at cost price. Further than that, the trader in similar circumstances has to pay the rent of his house out of his profits, whereas that does not apply in the case of a farmer, and there are a good many other things in which the farmer must consider he is very fairly treated under this Resolution. Still, you are putting before him now something he has never had before, and it is up to the Government to give him every help and time, so that he may not consider he is hardly treated. With regard to woodlands, let me say that in my part of the country in six months there were 200,000 tons of timber taken away. The amount of timber which has been cut down through out England and Scotland is appalling when compared with the replanting, which is very small, and unless some strenuous steps arc taken by the Government to re-afforest much faster than they are doing, thousands and thousands of acres which should be afforested in Scotland will be left If you encourage the planting of trees you must really reconsider the position with regard to these plantations under Income Tax and local rates, because it is impossible and hopeless to expect a man to go on planting if every acre he plants renders him liable to rating and taxation on what really brings him little or no revenue at ail. If you want to encourage him, you must deal with him in a generous way, and therefore I hope that these remarks will not be lost sight of by the Chancellor of the Exchequer.

Mr. L. JONES

I want to add only a few words to what the last speaker had to say with regard to woodlands. The form of the Resolution as proposed took me rather by surprise. From the Debate on the Budget the other day I gathered that the Government intended to alter the basis of the farmer's assessment to Income Tax, and only the farmer. Nothing was said about anything else which came under Schedule D, and it was a great surprise to me to find that the whole of Schedule D was to be doubled, with the effect of bringing in the woodlands, as referred to by the previous speakers. I venture to think that it is very undesirable to double the assessment on Income Tax on the whole Schedule, and I cannot see any justification for it in the circumstances which we are in at the present time. If anything is clear, it is that it is most desirable to encourage the planting of woodlands, and this assessment of woodlands at double the Schedule D assessments will really have a direct tendency and be an incentive to owners not to afforest their land.

I know there is a popular impression that very large profits have been made by certain owners of woodlands owing to the high prices to which timber has risen during the War, but I have had occasion to look into the accounts of several woodlands from the time when they were planted, and I am really surprised to find how, even with the present high prices of timber, with practically no competition from outside, and the great demand for timber, there is not at the present moment any advantage to a man to plant his land with timber. It is rather the other way, and it would be a great deal better for the owner if, instead of giving the land up for timber, it had been given up for farming purposes. That is the experience with the high prices. Up to the present time it has been a dead loss to practically everybody in this country to grow timber at all. Therefore, I do think that to bring this in unexpectedly and without warning, in dealing with the farmer's profits, is not quite fair on the part of the Government, and I hope they will reconsider their proposal from the point of view of woodlands.

I do not wish to say anything particularly about the farmer's position, because I have had my say on that during the Budget Debate. I would only say this, that the perpetual alterations of the assessment of the farmer's profits in relation to rent must have proved, I should think, to anyone who has followed their history that there is no real relation between the farmer's rent and his profits. This assessment to the farmer has stood in the last 120 years at various times at three-quarters of the rent, one-half of the rent, and one-third of the rent, and finally at the whole rent, and now it is to be fixed at twice the rent. No doubt changes have occurred in the farmer's profits during that period and so have changes occurred in the rent, and it is impossible to suppose that these different fluctuations do really represent anything like the facts of the case. The truth is there is no such relation between rents and profits as is proposed in this assessment, and it is high time we should get to a real assessment of a farmer's profits in order that he should be taxed on the profits he has really made and not on some fanciful profits somebody thinks he has made. It is true some farmers have made large profits, but some have not, and I do not know whether you are not going to do a great deal of injustice by this. I cannot tell. My own impression is that a large number of people will be hit by doubling their assessment. I do not know, and I do not think anyone knows. Therefore, I am appealing to the Government—perhaps for one year this does not matter—to get the farmer's assessment on his real profits somehow, and every inducement should be made to get the farmer to come in under Schedule D by some easy arrangement.

Sir J. SPEAR

I desire to support the appeal of my hon. and gallant Friend to the Chancellor of the Exchequer and the Financial Secretary to place the basis on which farmers are to pay Income Tax on the sum equivalent to rent and a half, rather than on the sum equivalent to two rents, as proposed in the Budget, and I do that in the interest of what I believe to be justice to the farmer and in the interest of the full development of the food supply of the country. I submit that the proposal of the Government to-day is a step that cannot be justified. Prior to the War, the farmer paid Income Tax on a third of his rent. Two years ago that was raised to a sum equivalent to the full rent. To-day it is proposed to double that basis. Now, that is an increase of the basis six times over, and I venture to say there is no other class of property in this country that has to submit to Income Tax increased to that extent. I would point out that while the farmer did get off easily on his contribution to Income Tax prior to the War, on his contribution to local taxation he was more heavily mulcted than any other section of the community, for he was called upon to pay rates on his raw material out of which he manufactures food for the people. That applies to no other manufacturer in the country. I would like, if I may, to allude to a speech made by the present Prime Minister five years ago, and to my moving an Amendment to the Address in reply to the King's Speech, calling attention to the fact that the Government had not promised to deal with the rearrangement of the basis of local taxation, which had been asked for for twenty years. The Primes Minister came down, and, in reply, said that he admitted the burden on agriculture for local rates was intolerable and must be at once relieved. Nothing has been done in that direction yet, and I do say that when the basis on which the farmer pays Income Tax was altered it was only equitable that the basis on which he makes his contribution to the local rates should be dealt with at the same time, so that both responsibilities should be put on a just, an equal, and a fair level with other sections of the community.

Not only is the- basis on which the farmer pays Income Tax greatly increased, but that carries with it the fact that the poundage on which he has to pay is also greatly increased, and in the case of the larger farmers, who may be occupying land to the extent of perhaps £1,500 a year, that being calculated at £3,000, brings him at once into the position of paying Super-tax to the extent of Cs. 5d. in the £I submit that there is a danger of that driving moneyed men out of the cultivation of the land, and, though we want to see all classes of men engaged in the cultivation of the land, it is very often the bigger man who encourages the production of the best class of cattle, which benefits the whole district, and promotes advance in agriculture, which is of value to the general community. The burden on that man, if the Government adhere to their present proposals, will be intolerable, and will simply drive him out of the business. I claim, too, that it is an unfortunate time for the Government to impose so drastic a change. We all admit there was room for some increase, but just when farmers had revolutionised their system, in response to the appeal of the Government to grow more food, and that often upon uneconomic lines, it is not encouraging the farmers that their contribution to the Income Tax should be doubled, and from the food production point of view I ask the right hon. Gentleman to consider whether he cannot accept the basis of rent and a half rather than two rents.

I am aware that the farmer has the alternative of being assessed under Schedule D, but the difficulties are enormous. Few farmers hitherto have kept accounts, but even for those who do keep accounts it is very difficult, because the farmer takes from the farm, for the maintenance of his family, eggs, butter, milk, vegetables, and other commodities. If he had to keep an account of all those details, he would have almost to keep a clerk. At any rate he would have to devote time to keeping his daily accounts so as to be in a position to claim to be assessed under Schedule D. He would have to devote time every day, which, with the present scarcity of labour, is intense in agriculture, to keeping his books, when he ought to be tilling his land. From that point of view, I admit, the right hon. Gentleman has promised to meet farmers as fairly as he can with reference to their accounts, and I am grateful to him for his answer to my question yesterday, in which he said that if after a bad harvest the farmer finds towards the end of the year his income will not correspond at all to double his rent, he will allow that farmer to present his accounts to the surveyors, and if they pass them he shall make his January payment, which would be immediately after his financial year, on the basis of his actual profits. That was a concession which was of value, but I submit that, looking all round, the intense increase on this basis will have a deterrent effect on food production which will be very unfortunate just at present.

We know the expenses of the farmer are greatly increased. We know that the wages paid are greatly increased—and we rejoice in it. We regret the low pay that the agricultural labourer has had to work for of old, resulting from the depression of the "Eighties" and the "Nineties,'" which made it impossible that a fair and just wage should be paid to the agriculture labourer.

We who champion the cause of the farmer to-day do not do so from any selfish interest in the farmer, but with the desire that this great industry—and, after all, it is the greatest industry!—may be conducted on principles which will yield the largest possible contribution to the common wealth of the country. The proposal of the Government must have a disappointing, and, I think, deterrent effect on this. If I am right—and I think I am right—in saying that the Government proposals will increase the basis on which the farmer will pay Income Tax six times over to what was the case before the War, I think we do make out a case in which we have a right to appeal to the Government to consider whether they cannot put the basis at rental and a half. The Government proposal will have a very serious effect, I consider, on the milk supply. The chief milk supply, of the large towns is from the land adjacent to those towns, and that land very often is rented highly. Doubling the basis of the Income Tax in those cases will make it almost impossible for a dairy to be conducted. I will not say that the business of milk production under present circumstances, in view of those high rents, is quite unremunerative, but with a double basis of Income Tax it will make it almost prohibitive, and the result will be that which we shall all deplore, for it will lead to a considerable falling off in the production of milk.

I should like to say a word or two in reference to the proposal to double the basis on woodlands. When the Agricultural Rates Act was before the House it was proposed to relieve woodlands the same as agricultural land. This suggestion was opposed on the ground that you must not show that consideration to the grower of timber. Within three years we were having in this House appeals to spend £2,000,000 or £3,000,000 of public money in afforestation. I, therefore, submit that anything that prevents natural development, and the skill of men, in the growth of timber is injurious to the country at large. I submit that a double Income Tax on the very expensive process of growing timber, just at this crisis too, when so much timber has been taken away, is a policy against the best interests of the country. I ask the right hon. Gentleman to yield to the suggestion that the basis should be placed at rental and a half, instead of two rents. Having regard to the burden of local taxation on agriculture, it will be only justice that he should do so. If he cannot see his way to accede to that proposal, then I do say it will be only just, that out of the responsibility of the farmer to pay Income Tax he shall have out of the sum he contributes are bate representing the unjust contribution which he makes to local rates, and which the present Prime Minister has admitted is intolerable. Surely, if to-day you double the farmers' Income Tax, you ought, at the same time he makes payment, allow a rebate on his contribution corresponding to the unfair burden that on all hands is recognised as resting upon him, seeing he contributes to the local rates on the basis of his raw material, which is the case with no other industry in the country.

In the interests, therefore, of food production, I would appeal to the right hon. Gentleman. I would not for a moment ask—and farmers do not ask—that we should be relieved from a fair contribution to the cost of the War. Farmers have shown their patriotism by doing all they can, and transforming their system, in response to the request of the Government, to meet the requirements of the country in the matter of the food supply. All we say is, having regard to the fact that part of the difficulty of the food supply to-day has been caused by the inability of farmers, through the depression of the "Eighties" and "Nineties," to develop their land, and thereby contribute properly to the food supply of the country—calamitous as it has been—and seeing that Parliament did not help them much in the matter of agriculture, that Parliament will now take that lesson to heart, and not take action that may have the same effect—of injuring the development of that increased food supply which we are all anxious to see.

Mr. DUNDAS WHITE

On the general question of this Resolution, as regards the taxation of farmers, I submit to the House, and to those who are opposed to the Government proposals, that it is not nearly sufficient that they should show, as can easily be done, that the taxation of the farmer is much higher than it was before the War. What they have to show is that the farmer is being taxed at a rate which is unduly high as compared with other taxpayers—that his taxation is out of proportion to his profits. I submit that they have not as yet succeeded in doing that. Indeed, we all know that profits have been very high. My own impression is that, taking farming as a whole, even if farmers are taxed double under Schedule B, they will in fact be taxed at a rather lower rate than if they were taxed under Schedule D, with books accurately kept. The case has been put by my hon. Friend who has just spoken of a farmer who might farm land whose valuation under Schedule B was £l,500 per year, so that double that valuation would give him a taxable valuation of £3,000 a year, thus making him liable to Super-tax. On that case, which was taken as a case illustrative of hardship, one would like to make two observations. The first is that a farmer farming on that scale in practically every instance will keep books, and if he does not keep books he certainly ought to. Whatever may be said for the small occupier doing without actual accounts, it seems really preposterous to suppose that a man farming on such an enormous scale as to pay £l,500 per year rent should work his farm without books. In the second place, the farmer who carries on. operations on that scale, if he were assessed under Schedule B, can always be assessed under Schedule D if he likes, and would, in fact, generally find that he ought to come within the Super-tax.

Leaving the general question, I would like to say a few words about this question of woodlands, which to me, as to many hon. Members, seems to be of very great importance, particularly now that this country, which never had too much woodlands for a long time, has, to a great extent, been denuded of its timber. The matter has been raised on several previous occasions, and in Section 38 of the Finance Act of 1916 a special provision was made for woodlands, with a view to facilitating the planting of trees, the general line of that provision being that any person occupying woodlands might, instead of being assessed under Schedule B, elect to be assessed under Schedule D, and, if so assessed, should be entitled to the various allowances under that Schedule. The Chancellor of the Exchequer at that time thought this would do a great deal to help planting, and so, I think, it will. In view of the alternative given under Section 8 of the Act of 1916, as well as under the present proposals, I do not think there is very much hardship in a double tax of Schedule B, as it affects woodlands, because the occupier has the option of coming under Schedule D. There is this important point, that the mere increase of the tax, in so far as it relates to woodlands, will itself act as preventing people from planting woodlands. We desire woodlands to be planted, not so much for profit, but because of the effect that the presence of timber has on the adjoining land.

I appeal to the Financial Secretary to the Treasury to institute before this Section of the Bill is reached an inquiry into the case of woodlands under the Act of 1916, in order to find out how far the occupiers have availed themselves of this provision, and exactly how the present arrangement as to woodlands works out. I hope he will see his way to do that before this question comes up again. I appeal to him to see whether, even if he applies the present provisions to woodlands, he may not also see his way to allow an extension of the deductions to which occupiers of woodlands are entitled, in order to lessen the amount of the tax they will have to pay, and in order to facilitate the planting of that timber which we so much desire to see increased.

Mr. BALDWIN

I think this has been a very useful discussion, and I am glad to have this opportunity of saying a few words on these Resolutions in answer to the various points which have been raised. It must be obvious to every hon. Member that, in apportioning an increase of taxation throughout the whole of the community, it is impossible not to place some share of the extra burden on the farmers. It is quite obvious that there has been for some time a feeling among urban Members that the farmers have not been paying a sufficient share of the extra taxation. Unfortunately the only method we have at hand is Schedule B. The Chancellor of the Exchequer explained in his speech on the Budget the difficulties which made it impossible to bring farmers under Schedule D. I hope to see the day before long when everyone engaged in the farming industry will be brought under Schedule D, because, after all, the only fair basis for taxation is the actual basis of profit I hope it will not be considered blasphemous of me if I say that Schedule B seems to me to be an anachronism in these days. I have been carefully studying it, and it seems to me to be a poor kind of engine for the time in which we live. In the first place, you get great variations of rents, so that when you get taxation arbitrarily applied on the rent you are not dealing out even-handed justice between one farmer and another.

In the second place, I suppose there is no industry where there is a greater variation of profits than in farming. It entirely depends whether a man has free access to the markets, upon what he is growing, and even the weather during the season may affect his profits. All these factors have to be taken into account. It is just as unfair for hon. Members representing urban districts here, when they read of some potato grower in Lincolnshire having made enormous profits in one year, to come to the conclusion that all farmers are making the same profits, as it would be for a Member representing a rural constituency to peruse the Report of the Auditor-General in regard to munitions, and then say that everyone engaged in manufacturing munitions was making profits on a huge scale, although it may be the case in some instances, partly due to their own good fortune, and partly owing to an absence of control during the early days of the War. I wish, as far as my voice may be heard, to protest against any general charges being levelled against the farmers as profiteers. As far as my knowledge goes—and I have teen among them all my life—it is a thoroughly unfair and an unjustifiable charge. I do not think farmers ought to be hold up here or anywhere else as a class who have abused (heir position any more than manufacturers or any other class of the community.

With regard to the speech of the hon. Member for Barkston Ash (Major Lane-Fox), I think I shall be able to reassure him to a considerable extent on the points which he raised. I gather from what he said that he considers the fairest thing would be to get farmers under Schedule D. T think he is aware that a distinguished North Country Member as long ago as 1842 urged the same course, but Sir Robert Peel took the view that rents had risen, and always did rise in proportion to profits. From that he argued that a tax based on the rental was a fair one. Events during the last quarter of a century, or rather longer, have vitiated that, and I do not think anyone to-day would contend that rents have risen in proportion to profits.

Mr. L. JONES

Sir Robert Peel reduced the proportion of the rent.

Mr. BALDWIN

Yes, he reduced it by one-quarter. I agree that the concession made to come under Schedule D from Schedule B is not what might be vulgarly called a "soft" option, because it means that he has to make his declaration within a comparatively limited time, and it means also that in being assessed under Schedule D, he is assessed on a three-years' average. That brings us back to the real difficulty of the whole position—that you have not the accurate accounts on which that basis can be ascertained.

I was surprised to notice that neither the hon. Member for Tavistock (Sir J. Spear) nor any other hon. Member made any mention of the third alternative, which seems not only the most valuable option to the farmer, but also the one which in this case is going to be of the greatest value; I mean the option under Section 27 of the Finance Act of 1896, which entitles him at the end of any of his trading years to obtain a reduction to the amount of the profits of the actual year just completed. Let me point out how that works, and what is the effect. In explaining how it works, I think I shall be able to show that my hon. Friend the Member for the College Division of Glasgow (Mr. Watt) was labouring under a misapprehension the other day when he spoke of the farmer having to pay up the whole under Schedule B before he could put in any claim. Imagine a man being assessed under Schedule B for the current financial year 1918–1919. He thinks that the assessment is very heavy, but he does not have to pay the tax until 1919; He then does not have to pay it in one lump sum. I am speaking of a man engaged in husbandry. He pays under Schedule B in two halves, one half on the 1st January, 1919, and the other half on the 1st July, 1919. If his farming year end, as many farming years do, on 30th September, 1918, or on 31st December, 1918, he can claim an adjustment for the year which has just expired, which means, if his claim be verified, that he can get back his rebate, if one be due, and be charged for the other half of his tax under Schedule B by reference to the actual profits. Therefore he is not in the position described by the hon. Member for the College Division of Glasgow of having paid out as large a sum as would be represented by Schedule B before he is able to get back as much as would put him on the basis of his actual profits in sufficient time. I think that is a very considerable and a very valuable concession, and if it is made use of, as I have no doubt that it will be in many cases, we shall do all that we can to see that these cases are dealt with promptly. It is our intention, as soon as the Finance Bill of this year becomes law, that the most careful description of these methods of taxation and the best way of meeting them shall be drawn up by the Board of Agriculture and the Board of Inland Revenue and shall be circulated throughout the country for the benefit of all farmers. I will try and see that the circulars are drawn up so that I can understand them myself, and I am quite sure that there will not be a farmer in the Kingdom who will not enjoy reading them on a Sunday evening.

9.0 P.M.

I should like to say a word about exemptions under Schedule B. It was impossible for us, in introducing this increase, to have done other than to include Schedule B as a whole. But we recognise that there are various items included in Schedule B which will be hit very hard, and, I think I may say, at first sight apparently unjustly. The only undertaking that I can give to the House to-night, which I do with the consent of the Chancellor of the Exchequer, is that between now and the introduction of the Finance Bill—I do not count its formal stage to-night—we will very carefully examine all instances of property included under Schedule B, apart from property used as husbandry. I can give no promise that we will make exemptions, but we will certainly consider the matter, and, if as the result of that consideration we think that there are some forms of property which should be exempted under this new rate, we will take care that provision is made for it in the Finance Bill.

There is one thing of which I would like to remind hon. Members who sit, as I do, for agricultural districts.' I cannot see my way to meet my hon. Friend the Member for the Tavistock Division (Sir J. Spear) in reducing the charge that we put on this year from twice to one and a half times the rent. We must retain twice, with the liberty to them of appealing for another form of assessment. I would remind him that, after all, farming is the one business which has been and is completely exempt from the Excess Profits Duty. I do not say that the Excess Profits Duty would have caught a larger number of farmers—we have not the statistics to enable us to say—but it would have caught a good many.

Sir J. SPEAR

The Excess Profits Duty is not paid on the first £200 above the income prior to the War, and, therefore, most farmers would be exempt.

Mr. BALDWIN

That is perfectly true under the system of taxation which has existed, but it does not alter the fact that it is an impost from which they are free. The principal reason why they are free is that hitherto they have been taxed in such a way as to make it impossible for any datum line to be provided which would bring them within the Act, but it does not alter the fact that they do enjoy that privilege. That being so, I look to the farming community, when they have studied this question, to face twice the rent manfully, and take up their burdens, as all other sections of the community are doing, remembering that they have this right of appeal to other assessments, and bearing in mind that we have no desire in any way to penalise them; but that we mean to be as helpful as we can be in facilitating their appeals, and in instructing them through the Board of Agriculture how to prepare their accounts and to make those accounts as simple as we can make them, provided that we obtain the result we hope to obtain, which is a fair amount of taxation according to the profit made.

Resolution reported,