HC Deb 08 July 1924 vol 175 cc2134-42

Rule 8 (2) of No. V. of Schedule A of The Income Tax Act, 1918, shall read: "For the purpose of this rule, the term 'maintenance' shall include the replacement or erection of farmhouses, farm buildings, cottages, fences, and other works."—[Lieut.-Colonel Spender-Clay.]

Brought up, and read the First time.

Lieut.-Colonel SPENDER-CLAY

I beg to move, "That the Clause be read a Second time."

I desire to move it chiefly for two reasons. The first reason is that I wish to see better housing conditions for those engaged in the work of agriculture. Anybody who is at all acquainted with housing conditions in rural areas is well aware that the provision in that respect for agricultural labourers is most deplorable at the present time, and that there is a great shortage of accommodation. I think the provisions of this Clause would result in more houses being built, and that, of course, would benefit the workers on the land. I believe, too, that one effect. of the operation of this Clause would be to lead to a more intensive system of farming. There are now many large farms which would be split up into small holdings with good results. If hon. Members on the Front Bench opposite below the Gangway will allow me, I will apologise for interrupting their conversation, but I am anxious to put before the Committee the case for this Clause. I believe one result of its working would be to place more people on the land.

I am well aware that certain objections will be raised to my proposal. The Chancellor of the Exchequer will probably object, in the first place, to the proposal on the ground that it is laid down in the Act that relief of income tax should only be given on maintenance and not on capital expenditure. But I cannot help thinking that when he takes into consideration all the advantages the Chancellor of the Exchequer will be well advised in accepting this proposal. The second objection which the right hon. Gentleman may raise will be, possibly, that the acceptance of the Clause would lead the owner to put up his rents, and that it would mean subsidising the land-owner with taxpayers' money. In regard to that I am prepared, with the consent of the right hon. Gentleman, to add words at the end of the Clause providing that the relief shall only be applied in cases where the rent is not raised by reason of the expenditure on the buildings. That would cover the ground that would ensure that the landowner did not reap the benefit of the concession. The Clause would promote the improvement of housing conditions; it would encourage the creation of small holdings; and it would bring about the erection of more modern farm buildings. Therefore I hope that the right hon. Gentleman will accept it. There is another Amendment down on the Paper, in the name of an hon. and gallant Member, which does not go quite so far as my Clause. At the moment there is great ambiguity regarding the exacting meaning of the word "replacement," and some of the Inspectors of the Government accept, things under the term which others refuse to recognise. For instance, take the case of a cow shed. If a modern concrete floor is laid, and improved fittings are introduced, the work is very often not treated as replacement, and consequently there is no encouragement to replace the old-fashioned style of building and to bring it more in accord with modern requirements. I do hope the right hon. Gentleman, even if he cannot go so far as I propose, will at least do something which will remove existing ambiguities in this matter.

12 M.


The hon. and gallant Member who moved this amendment very largely destroyed the case he sought to make for it by the proviso he himself was going to insert. The Committee will remember that there is already, in the case of lands, including farm-houses and farm buildings, an allowance of one-eighth of the annual value and, in the case of houses and other buildings, a varying allowance for maintenance. I think the hon. and gallant Member and other Members of the Committee are not familiar with the working of this Clause, and have forgotten the additional provision that, where the maintenance has exceeded the limit I have described over a period of five years on the amount of the expenditure, there may be given an addition, in other words, the tax may be remitted from that sum. I venture to suggest to the Committee that the two provisions, taken together, go a long way to meet the situation. But "maintenance," as the hon. and gallant Member himself has suggested, is of course conditional upon the proviso that it must be for the maintenance of existing buildings, so if the additional words he proposes were inserted I have not the least hesitation in saying the position could not be substantially different from what it is now. It has been made plain from the discussions in past years that hon. Members intended to go far beyond the existing allowance and they themselves are not hesitating to put forward in support of that case arguments from the condition of agriculture and the burdens falling upon the agricultural community, but it is perfectly clear it passes well away from ordinary maintenance or anything included under that head. They go right out into the region of capital expenditure. To that extent it would substantially increase the expense to the community as a whole. That is a principle which can never be admitted. For these reasons my right hon. friend feels the existing provision is generous and is unable to accept the Clause the hon. and gallant Gentleman has proposed.


I am exceedingly disappointed at the reply of the Financial Secretary. I do not think he has grasped the point. We want to get exemption for a certain class of case. Suppose you take a farm where a couple of cottages are required. That is a case where we want remission under this Clause. There is the case where we want to keep the farm up to date and in accordance with improved agricultural ideas. Many landlords who are short of capital could go to the additional expense required if they had this concession. It is to meet cases of that kind that we are asking for an alteration in the law. It is not a question of higher rent, but a question which is vital in many parts of the country in regard to homesteads and the appurtenances thereof. Take dairies, It is very essential in the interests of milik production that there should be improved dairies put up if the people of the country are to get pure milk. The owner who wishes to carry out such improvements realises, however, that if he does so he will not get the relief which we are seeking for him. If the Chancellor of the Exchequer wants to encourage such improvements, I ask him to reconsider his position. He will be doing more for agriculture by this means than by giving subsidies to houses and things of that sort.


Although my name is not attached to this particular Amendment, I have on the Paper another Amendment which I had hoped would have been discussed, and accepted by the Chancellor. My object is to try to improve housing conditions! We have spent a great deal of time since the War on housing questions, but all our efforts up to now have been devoted to the building of new houses. A side of the question which has been entirely neglected is the improvement of existing houses. The object of this Amendment is to encourage the owners of property to improve the existing cottages on their estates. The Financial Secretary said that what we intended was to go a great deal further than was at present allowed under the Income Tax rules, and that we wanted to include in maintenance claims all sorts, not only of replacements, but of improvements which could not be called replacements but were in the nature of capital expenditure. We do not seek to include in maintenance claims those items which are admitted by many collectors of taxes, but we do seek to include many items which are rejected by some collectors of taxes. One of the principal grievances which we have now is that this term "replacement" and what it includes and does not include are interpreted differently by different collectors of taxes throughout the country. Another grievance is the narrow interpretation which is put upon the word "replacement" by certain of these collectors. We had a Debate upon this question on the Finance Bill of 1922 and, as a result, the Chancellor of the Exchequer promised that instructions would be issued to collectors of taxes to ensure that all replacements which were necessary in the repair of cottages would be allowed—including repairs to comply with modern requirements. Either those instructions have not been issued or they are not being carried out. At all events there are many collectors of taxes who to-day will not allow to be included as maintenance, repairs which are necessary in order to bring cottages up to the modern standard. As the matter is difficult to explain, I should like to give two instances which have occurred since 1922, when these instructions are supposed to have been issued. The first is the case of two very bad cottages which had no back doors, no sculleries and no bath-rooms. The owner decided to convert these two small bad cottages into one decent cottage, which involved building up one of the front doors, converting two little lobbies into a small bedroom, converting a small back room into a scullery and bathroom, and making a back door. When it was sought to in elude these necessary improvements in the maintenance claim the official reply was that it was not possible to admit allowances beyond those on account of sums necessary for renewing the interior woodwork of the two cottages, and that the expenditure due to, or on account of, the alterations could be eliminated from the maintenance claim. On this basis there would be eliminated the plumber's account for the bathroom and piping which came to £151; a proportion of the basement work due to alterations to doors and windows, and a proportion of the joinery work due to the same alterations, and to alterations in the internal arrangements. This illustrates the obstacles put in the way of a proprietor who wishes to improve housing conditions of the people on his estate. I should add that there was no question of extra rent.

The other case is one which is at present sub judice because it has been referred to the highest authority, but one of the chief inspectors in the country has given an adverse decision with regard to it which indicates the view taken by many of the collectors. It is the case of two very bad semi-detached cottages, the proprietor of which had practically decided to reconstruct them by taking off the roofs, raising the walls and converting them into two four-roomed cottages, each with scullery, pantry and w.c. A representative of the proprietor wrote to the inspector of taxes to inquire if this expenditure would be allowed to rank in full in the maintenance claim. The inspector gave a non-committal answer indicating that it would not be wholly allowed. I subsequently called at his office and discussed the matter with his assistant, who expressed the view that the additional office accommodation would be allowed, but that, if the walls were raised and additional bedrooms provided, that was an improvement that would not be allowed in the maintenance claim. I said that I did not accept that decision, and I asked that it should be referred to the Board of Inland Revenue. If the decision is adverse, it is clearly a discouragement to landowners to provide a better standard of accommodation in farm cottages. Those are the only two instances that I propose to give, but I believe that there are innumerable other instances. I realize the difficulty of the Chancellor of the Exchequer, and I realize that he has to protect himself against extravagant alterations and improvements, which the owner may seek to include in his maintenance claims and which are far beyond what is really necessary to meet modern requirements. I am only out to try and ensure that the real improvements which are necessary to meet modern requirements should be allowed, and I hope the right hon. Gentleman will be able to accept something on the lines of my Amendment which appears later on the Paper.


If a farmer has an old plough which is worn out, it is reasonable that he should get an up-to-date plough for his work, and similarly, I think, it is reasonable that very old farm cottages should be put into a reasonable condition for occupation. I think we ought to do everything we can to encourage better housing in the rural districts, and if, by allowing something off the Income Tax, we can persuade a farmer to build, at his own expense, instead of asking for a Government subsidy with which to build, it seems to me that we are making a very great gain. Personally, I should have preferred this proposed new Clause if there had been the word "necessary" inserted in front of the words "farm houses, farm buildings," &c. I daresay that that would meet the wishes of the movers of the Amendment, and if the Chancellor of the Exchequer would accept that addition, I do not think there would be any difficulty placed in the way by the supporters of the Clause. I would ask the right hon. Gentleman to consider whether he cannot make some concession on this question.


I had hoped that, after the appeals made to the Chancellor of the Exchequer by my hon. and gallant Friends behind me, he would have had something more to say on this proposed new Clause. The answer given by the Financial Secretary did not seem to me to indicate that the question was being regarded with any desire to meet the real grievance represented by the new Clause, and surely, if the Chancellor of the Exchequer desires to do anything to encourage owners, when they are repairing old cottages, to do something to bring them up nearer to modern standards, it is not beyond his power to devise some means which will safeguard him against many of the dangers which the Financial Secretary suggested might occur. I am sure that my hon. Friend has no desire in this proposed Clause to introduce any dangerous principle into our finance. It is not desired to bring capital expenditure into a category that it ought not to be in. The Chancellor may think another form of words more acceptable. I confess I would have preferred different wording. However that may be it should not prevent the Chancellor from giving that relief that would help to improve the standard of housing in the country, and to give better cottages. He ought really to help to do something that would tend to bring the cottages up to more like our modern ideas on the subject.


I am rather surprised that my right hon. Friend should have associated himself with this proposed new Clause, or demand, because, having himself filled the office I now fill, he must see the implications of it. Take the case cited where two cottages had been made into one, and certain modern improvements added. They were really altered not as old but as new property. The landlord generously incurred the expenditure knowing that he would have to meet the charge in connection with the higher assessable value, because capital expenditure had been employed upon the new erection. The right hon. Gentleman knows the fundamental condition of capital expenditure in relation to Income Tax, and this proposed new Clause traverses that fundamental principle. We submit that the allowance now made is sufficiently generous to encourage any landlord to carry out these improvements, the desirability of which we all admit. [HON. MEMBERS: "Speak up!"] Experience shows both in regard to the wording and administration of the Regulations a generous view is better. I should be very sorry to turn down any proposal of this kind without good reasons, but I cannot see my way to make any further concession in this direction.


The right hon. Gentleman has really not faced the situation of the rural landlords, All this is really maintenance expenditure to maintain the farm and the cottages and much of it is made without any return at all. The instances given by the mover of this Clause are frequent cases and there is no increase of rent, and the probability is that the landlord will get no return for his expenditure. It would be different if there was any increase of the rent. The Clause may be too wide but the right hon. Gentleman can do more to assist rural housing by improving old cottages than by subsidies. I have been a warm supporter of this Budget but I hope the Chancellor of the Exchequer will seriously consider whether he cannot increase this maintenance allowance to landlords who improve the farmhouses and cottages on their estates. This cannot be properly called capital expenditure which is going to be accompanied by increased rents and therefore I hope the Chancellor of the Exchequer will face this question. The tax collectors are now very much hampered with this problem and in some cases they are more generous to the landlords than in others. There ought to be more uniformity of practice and the landlord should be encouraged to make this expenditure upon the cottages. This is really an issue which ought to be faced by the Chancellor of the Exchequer, because justice has not been done to the rural dis- tricts and I am afraid that in housing schemes generally there is a tendency to neglect those districts. As a rule it is only in the large towns that we can contemplate any increase of the rates for the building of houses. Personally I do not believe that there is any better way in which the Government could assist in providing more houses than by encouraging rural building by making larger allowances in the direction provided for in this new Clause.


I shall be very sorry to oppose any proposal that would be detrimental to the encouragement and improvement of rural houses, but it must be obvious that this Amendment would not do at all. In the form in which it appears on the Paper I could not possibly accept it. But I will take it ad Avizandum, as the Scottish people say, and if the Committee will agree I will consider it between now and Report and see whether some Amendment of the Rules by a new Clause in the Bill can be devised. That, I think, is the desire of the whole Committee.


Will the right hon. Gentleman take the hon. Members on this side of the House and in other parts of the House into consultation in considering this question?


I shall be most happy to consider any representations.

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