HC Deb 11 July 1938 vol 338 cc1074-81

(1) In any case in which the owner of an estate consisting of or comprising land or other agricultural property on which estate duty is payble on his death has satisfied the Minister of Agriculture and Fisheries, in conjunction with the Treasury, that he has expended, within the previous twelve months, any sum or sums on the permanent improvement of such land or agricultural property and that permanent improvement has been effected, the Treasury may, under regulations made under this Section, issue a certificate (hereinafter in this Section referred to as a permanent improvement certificate) to such person certifying that such sum or sums have been so expended.

(2) On the death of such owner, his legal representative may surrender to the Treasury such permanent improvement certificate in satisfaction of the estate duty payble on the estate to the extent of the amount specified therein and, subject to the provisions of the next succeeding Sub-section, the estate duty shall be deemed to have been satisfied to that extent: Provided that in no case will the relief granted under this Section exceed half the total amount of the estate duty payble on the estate in respect of agricultural property.

(3) (a) In order that the relief specified in the next preceding Sub-section may he obtained, it shall be necessary to prove to the satisfaction of the Minister of Agriculture and Fisheries that the improvement by reason of which the permanent improvement certificate was issued has been reasonably maintained.

(b) If, prior to his death, the owner of the estate shall have sold or otherwise have ceased to be the owner of the whole or part of the estate on which such improvement has been made, any permanent improvement certificates issued to the owner shall, in so far as they were issued on account of permanent improvements to the property disposed of, be deemed to be cancelled.

(4) In this Section the word "land" shall have the meaning assigned to it in Section one hundred and seventeen of the Settled Land Act, 1925, and the words "agricultural property" shall have the meaning assigned to them in Section two of the Finance Act, 1394.

(5) The Minister of Agriculture and Fisheries, after consultation with the Treasury, may make regulations providing for the method of applying for permanent improvement certificates, the issue and registration thereof, and other matters incidental to the carrying out of the provisions of this Section.

(6) Every regulation made under this Section shall be laid before each House of Parliament as soon as may be after it is made, and shall have effect as if enacted in this Act: Provided that if an address is presented to His Majesty by either House within the next subsequent twenty-one days on which that House has sat after the regulation is laid before it, praying that the regulation may be annulled, His Majesty may by Order in Council annul the regulation, but without prejudice to the validity of anything previously done thereunder.—[Sir I. Albery.]

Brought up, and read the First time.

10.59 p.m.

Sir I. Albery

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

This is a very long Clause and I dare say it will be found to have been by no means correctly drafted, although a good deal of trouble has been taken upon it. I hope that in considering it the House and the Chancellor will take account of the clear intention of the Clause rather than its actual drafting. The object of the Clause is not primarily to assist the taxpayer, but to assist the land and the agricultural industry. I do not believe that we shall ever have a successful and prosperous agricultural industry in this country unless it has adequate capital, and, in spite of all the efforts that are made in so many directions to assist agriculture, I do not see much prospect of their ever succeeding if, while all this help is being given, as it were, on the surface, that which is of all things the most necessary to agriculture is being drained away at the roots.

I am not, and never have been, an expert agriculturist, and I have approached this matter merely from a business point of view. The Clause is so drafted that the benefit will accrue only to those who spend their money on improving the land in this country and in assisting agriculture. One part of the Clause provides that, if the property is sold, neither the seller, except in so far as he may get a better price, nor the purchaser, will reap any advantage on account of the permanent improvements which may have been made. The reason is that the main object of the Clause is to ensure that the land shall be improved, that permanent agricultural improvements, shall be made, and, the moment the land is sold, the incentive has to be started afresh in the new buyer to make the necessary improvements in order that he may get any benefit which may accrue under the Clause.

I am aware that many minor concessions are made to agriculture in the matter of Estate Duties and the means of paying them, but I do not think that any of these are sufficient in themselves really to alleviate the serious position to which the land of this country is sinking. From a business point of view, I want the House to look at the position of those who are engaged in the agricultural industry as compared with that of the producers in other kinds of industry. Generally speaking, production in other forms of industry is carried on by limited companies, and, when a shareholder dies and his Death Duties are paid, not the slightest damage is done directly to the business in which he held his shares. With land the case is different. The land is largely hereditary. Even among farmers, one finds that most of them are the sons of farmers, and indeed, the only farmers that we are likely to get in future in this country are the sons of farmers. When a man dies, and the duties exacted by the State have to be paid, the money has to come out of the land; it has to come out of the business, which is thereby impoverished. Personally I do not believe that any of the thousand and one concessions which we are making to agriculture in so many directions will save it as long as we go on draining away that which it needs more than anything else, namely, the capital without which it cannot prosper.

11.5 p.m.

Sir Ernest Shepperson

I beg to second the Motion.

I do so solely in the interests of agriculture. The agricultural industry embraces three classes: the agricultural labourer, the farmer, and the landowner. The labourer has performed his duties well; the farmer has also; but in many cases the landlord is not doing well, and he is unable to perform his share because of the taxation, the Death Duties that are imposed on land. It is to enable the agricultural landlord to carry out the improvement of agricultural land that I support this Clause.

11. 6 p.m.

The Solicitor-General (Sir Terence O'Connor)

The proposal that has been so attractively put before the House is a variant of what we have come to regard as a hardy annual—a method of doing what many of us would wish to see done, and to give some form of assistance to agriculture. Shortly, what is proposed is this. Suppose a man spends in improving his property, say, £500. He is to receive a certificate that that expenditure has been made. I am not absolutely certain, but I think the Clause provides that he may collect certificates. He may collect any number of them, and those certificates, up to the value of half the Estate Duty, are to be accepted in payment of the Estate Duty on that person's death. There are several objections to a scheme of that kind. First, it benefits the wealthy landowner, who can afford to spend these sums on improvements, as some others unfortunately cannot. But there is a more fundamental objection. The principle is unsound, because what you are doing is accepting as a basis for the purposes of duty on an estate, not the market value but the amount of money that a person has chosen to spend on it for a certain period. That opens the door to grave abuse, because, by a suitable adjustment, a man might arrange to spend very heavy sums on the improvement of agricultural land, which would under this scheme escape the burden of Death Duties. You cannot, therefore, depart from the well-known principle of valuing according to market value and substitute the amount of expenditure. Sympathising, as everybody does, with the position of the agricultural landlord, it is true to say that if at any time Parliament did decide to give relief to the agricultural landlord, it ought to be done by some method which did not have the objections which I have been outlining.

Sir l. Albery

If my hon. and learned Friend reads the Clause he will see that it gives complete powers to the Minister of Agriculture and the Treasury to make all necessary restrictions.

The Solicitor-General

I am very much obliged. I had no intention to suggest that there was anything behind this Clause. That was not my suggestion at all, but it must be obvious to the House that every proposal has to be scrutinised to see whether it lends itself ultimately to use as a means of evading tax, and I think it is safer in these instances to say that it certainly affords an opportunity for people not to pay when they hope to get out of the net of Estate Duty and are approaching the end of their career, to put their money into improvements and in that way escape the provisions of Estate Duty. But if Parliament in its wisdom some day decides to deal with the question of Estate Duty on agricultural land, it would not be difficult to discover a method which would bear equally upon the wel-to-do and on the not so well-to-do landlord and which would riot violate the principles I have been referring to, of the assessment of market value for the purpose of Estate Duty. For this purpose I am afraid that my right hon. Friend could not accept this new Clause.

11.12 p.m.

Lord Ansley

I am not at all persuaded by the wisdom and logic of the Solicitor-General's arguments. The question about spending money on land appears to me to be easily settled by whether the money was spent for agricultural purposes, or luxury purposes, or anything of that kind. If it was spent for luxury purposes he would be quite right, but if it was spent for purely agricultural purposes not only would it not be evasion but it would be exactly what the agricultural community of this country are longing for, what they are begging the Government to do, and what is being dragged out of the Government by subsidies for this and that scheme. Therefore, I think the country would not be the loser by the spending of any sums of money lent for agricultural purposes, not, as the Solicitor-General says, for what he calls evasion of taxation.

Finally I would suggest this point: The hon. Member himself lives in Oxfordshire, a county that is well qualified to show the distress that is caused in agriculture by this form of perpetual drain not only of Surtax but by Death Duties. The Chancellor of the Exchequer is, I believe, on the committee of one of the Oxford Colleges which manages an agricultural estate, so he is fully qualified to know the differences of managing an agricultural estate. He knows the expenses and difficulties, with a falling market, to keep an estate properly maintained, and I would ask the right hon. Gentleman, supposing he had to pay every 30 or 40 years the enormous capital sum demanded by Death Duties on the estate run by his college, would he maintain them all in the same way? I wonder if they would be maintained so well as they are to-day? I would apply one more test. There is a considerable acreage of land run by various Government Departments. The War Office, the Office of Works, the Forestry Commission, the Ministry of Agriculture all own a certain amount of land, and all in their estimates bring up to this House the accounts of those estates whether their work is accomplished or not. I would like the Chancellor of the Exchequer and the Treasury, when they are going through those accounts, as they must do every year, to deduct from them a figure comparable to Death Duties and Surtax, which those Government estates obviously evade—to deduct from those figures a sum comparable with the Death Duties and Surtax which should be paid by them, and then say whether those estates are being run at a profit or loss. They might get most instructive figures.

I hope that this will not be the end of this matter. If this Clause—which to my simple mind seems to be very well drafted and probably meets the case, but which perhaps has not been sufficiently considered—does not meet the case, I hope that Parliament will, not next year or the year after, but now, do something, before agriculture has declined to such a state that it is no longer possible to get it back without a vast expenditure of money. I hope that the Government will find some means of avoiding the disaster which I am afraid will occur if this perpetual drain of taxation is allowed to continue.

11.16 p.m.

Sir R. Smith

I am disappointed at the attitude which the Government have taken up towards this new Clause. As the Mover said, it is not a Clause to help individuals but one to help the agricultural industry of this country as a whole. It was rather unfortunate that the learned Solicitor-General should appeal to the House and say that this proposal would help the wealthy man but not the poor man. There are a very large number of landlords in a small way, farmers who have been compelled to buy their farms and have to keep up their farms. They are benefiting agriculture, and it rests with the Ministry of Agriculture to say whether these are really improvements to the land and therefore improvements to agriculture. We ask that these permanent improvements should be scheduled and that they should not be taxed when a man dies. I sincerely hope that if the Government cannot accept the Clause tonight they will consider the question. It is one way by which we can benefit agriculture. Only to-day we have heard that further money will have to be provided by the Treasury for the assistance of agriculture, and here we are suggesting a way which would be a permanent benefit to agriculture.

11.19 p.m.

Mr. Benson

I hope that the Government will take into serious consideration the points which have been raised on this new Clause. One speaker after another has pointed out the enormously heavy taxation which makes it practically impossible for landlords to do their duty to agriculture. It is obvious that landlords cannot expect to be treated differently in the matter of taxation from every other person. The only possible thing on their own showing is that, as they are incapable of running the land and agriculture as it ought to be run the Government should go a step further and not only deal with taxation, but take over the land as well.

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

11.21 p.m.

Sir J. Simon

I beg to move, "That further Consideration of the Bill, as amended, be now adjourned."

We have made good progress on the Report stage of the Finance Bill to-day and I hope that to-morrow we shall dispose of the rest of it.

Mr. Pethick-Lawrence

I think that the right hon. Gentleman has every reason to be satisfied.

Bill, as amended, to be further considered To-morrow.