§ Sir Irving Albery (Gravesend)
I beg to move, in page 15, line 16, to leave out from "mortgage," to the end of line 25, and to insert:he shall be entitled to be indemnified by the mortgagee against the same proportion of his nett liability as the amount of the mortgage bears to the value of that interest.I do not think that the object of this Amendment requires much explanation. It raises the whole question of the proportion of the contributions which should be made by the mortgagee and the mortgagor. It seems to me that the provisions already laid down in the Bill are not equitable. As has been pointed out earlier in the Debate, in many cases the mortgagee is likely to be favourably affected and the mortgagor is likely to be very unfavourably affected. It seems only just and reasonable that where the mortgagee is likely to receive the whole of the benefit the contribution ought to be paid by the mortgagee.
§ Major Milner
I think this Amendment bears almost the same point, although it relates to contributions as distinct from payments for war damage, as we discussed on a previous Clause.
I do not wish to interrupt the hon. Member, but I would remind the Committee that anything raised in a previous discussion cannot be repeated on this Clause.
§ Major Milner
It is only the same point in this connection, that it was argued that the payment of war damage should be apportioned as between mortgagor and mortgagee. I understand that the hon. Member who moved the Amendment desires that the contributions should be apportioned as between the mortgagor 884 and mortgagee in the same way. That appears to me a much more satisfactory method, and a much more logical one, than the method proposed in the Bill. According to the Bill, if the amount secured by the mortgage at the relevant date is less than half the value of the property, the mortgagee will pay no proportion whatever of the premium. It seems to me to be very inequitable, if I have a property valued at £1,000 mortgaged on the relevant date to the extent of only £490, that I should hear the whole of the premium in respect of the insurance of that property. I do not know why this provision should have been inserted unless it is to approximate to some rough rule of justice without the necessity for a calculation in each case. But is that end really secured? I doubt it very much. In each case one has to have the figures in order to decide whether the amount secured by the mortgage exceeds one-half or three-quarters of the value of the interest, and it seems to me it would be simpler to decide what proportion one bears to the other at the relevant date and then make a decision once and for all. It would be just as easy to decide in that way as in the way provided under the Bill.
I hope therefore that the Chancellor will see his way to accept this Amendment. We must all recognise that we try to do rough or substantial justice throughout this Bill, but where we can adopt some logical rule and method, surely that should be done. That applies to the question we have already discussed to-day as to the proportions of the payments received from the War Damage Commission, and should equally apply in this case where the contributions are in question. Let us do rough justice where we can find no consistent principle, but when we can find a principle, and clearly there is one to be found here, let us see that contributions are apportioned according to it.
§ Mr. Woodburn
The Clause as it stands says that the amount of the contribution is to be decided according to the value of the interest. I am informed by those who may have to deal with this Bill that there is no practicable way of deciding what the value of the interest is and that the Clause as it stands is therefore quite unworkable in practice. I should be glad to hear from the Chancellor, first of all, 885 whether the Clause is workable, and how it is to be decided, what the value or half the value of an interest is, without finding out what the value of the property is, which if it were done would provide a better basis for the allocation of premiums. I myself tried, by a suggestion to levy one shilling on every £10 of value, to be deducted at the same time as Income Tax, to find a way out of this problem of securing equity as between the mortgagor and the mortgagee. I was told that in the case of a £1,000 house with a £9,000 mortgage the mortgagor, according to that proposal, would have recovered £4 10s., whereas if the house was assessed at £36, he would have to pay £3 12s. At first sight that looks as if the mortgagor was going to make a profit, but since the Bill says that he is only going to be indemnified, he cannot recover more than he has paid out.
In practice, the mortgagee would have paid all the contributions—but, as the mortgagee in these cases is to get the whole payment, I do not see any injustice in that. I support the Amendment on the ground that it will spread the payment on a fairer basis. I see the possibility that in the case of a house where 49[...]9 per cent. of the value is covered by a mortgage, when the value payment is made it will all be required to wipe out the mortgage, so that the owner of the house will receive nothing. Yet not only will he have paid contributions, but he is entitled to go on paying contributions after the value payment has been made. Some solution must be found under which the contribution will cover all those who are going to gain from the payment. But for the Bill, neither the mortgagee nor the mortgagor would get a look in at all. We are legislating to give them some compensation, and their contributions should be proportionate to the compensation they will receive. If the mortgagor is to get no compensation, he should not be asked to pay any contribution.
§ Sir H. Webbe
This Amendment appears to raise the general question of whether the mortgagee should contribute anything only in the limited class of cases specified in Clause 19, or whether mortgagees in general should be called upon to contribute.
§ Sir H. Webbe
I was under the impression that there was to be a general discussion on whether mortgagees in general should be called upon to contribute.
§ Mr. Bellenger (Bassetlaw)
The whole point that arises on this Amendment seems to be, what is the best way of assessing the mortgagee's contribution? Although I am not entirely in agreement with the Amendment, I should be glad of an opportunity to support a manuscript Amendment, which, if it is called, is to be moved by my hon. Friend the Member for Chesterfield (Mr. Benson), and which would bring us nearer to the point that we are trying to reach. I think the Chancellor realises that some proportion of this direct contribution of 2s. in the £ on Schedule A Tax should be borne by one of the chief beneficiaries under the Bill, namely, the mortgagee. The question is how much should he pay. I suggest that the Clause does not really place upon the mortgagee the right proportion. As my hon. Friend the Member for East Stirling (Mr. Woodburn) has said, it is very difficult to assess the value of the interest. To save time, I will limit myself to these remarks on the Amendment. Possibly the Amendment of my hon. Friend the Member for Chesterfield, which I hope will be called, will make clearer to the Committee the assessment which ought to be placed on the mortgage. At present the amount is very indefinite. If we can get some clearer definition of what relation the mortgagee's interest bears to the value of the property—that is the main point—we may be able to arrive at a fair contribution to be paid by the mortgagee. I therefore would like to reserve my remarks to the time when I hope you will call the manuscript Amendment which is being put in by my hon. Friend the Member for Chesterfield (Mr. Benson).
§ Sir K. Wood
We had considerable discussion on the general considerations a short time ago, and I ventured to offer some observations to the Committee; I propose now to direct myself to the proposals which are on the Paper respecting the Amendment which has been moved. I have not seen the manuscript Amendment which my hon. Friend opposite has in mind, and, therefore, I am 887 not aware of what he is proposing. In considering this matter you have to have regard to what can be done from a practical point of view and what can be done quickly. These are the considerations that we have had in mind in Clause 19 (1). It is true, as my hon. Friend has said, that you can take cases on the border line, as he has done, and as I have often done in criticising the Government of the day when I used to sit where he is sitting now. That is usually easy to do, and that is why I used to do it, but when you have the responsibility for a Measure you are rather on a different footing. What we are endeavouring to do here is something which, though perhaps it cannot be completely defended on absolutely logical grounds, gives on the whole rough and ready justice; and it will work.
The reason why we have to adopt this method is because it is impossible to measure precisely the relative interests of mortgagor and mortgagee in the property. The interest of the mortgagor in the property may be greater than the mere difference between its value and the total debt. He is liable to the mortgagee on his personal covenant. My hon. Friend rather disposed of the matter as far as the mortgagor was concerned by saying what he would get out of it in the case he mentioned. The answer is that he will be released to the extent of the payment he has to make in respect of the personal covenant and the undertaking into which he has entered. If he has other assets, as, of course, is frequently the case, the compensation scheme not only protects the capital which is invested in the property but also protects the other assets which he would have to realise to fulfil his personal covenant, if the security of the property were destroyed.
§ Major Milner
Surely, if the amount which comes from the War Damage Commission is insufficient to pay the mortgagee, the mortgagor will be released?
§ Sir K. Wood
He is released to that extent, and in a good many cases it is a very substantial release indeed. If you say that we should waive the value of the personal covenant on one side altogether, it is something of course we cannot do. What is the objection in practice to the 888 proposals which my hon. Friends have made? It is most desirable, if this scheme is to work at all, to avoid as far as possible the necessity for valuations of mortgaged properties. I am advised, in connection with the setting up of the Commission, that we shall be in considerable difficulty, having regard to the scarcity of valuers at the present time. We shall have some difficulty in obtaining the necessary number that we require, and the formula in the Bill does obviate the necessity for such valuations in a large number of cases, where it appears that the proportion between the mortgage debt and the value of the property is less than a half, or is between a half and three quarters, or exceeds three quarters, and it is only in doubtful cases, near the dividing line of the formula, that valuations may be necessary. The Amendment—and this is why I am not able to accept it—would require the value to be fixed in every case, because in every case the share of the contribution to be borne by the mortgagee would be a precise proportion between the debt and the value.
§ Sir K. Wood
The same as in the other Part of the Bill. I have discussed this matter with a number of deputations and individuals, and I put it to them that this is a workable scheme, and that while there are several criticisms that we can make of it, it should be put into operation. I think it achieves substantial justice. On the other hand, the Amendment is quite unworkable, because we cannot contemplate having to fix the value in every case. It is for those reasons—and I am not putting it any higher than I have done—that I must ask the Committee to retain the proposition I have made. In reply to the hon. Member for Bassetlaw (Mr. Bellenger), I would point out that the definition of value can be found on page 16 of the Bill, Subsection (4).
§ Sir K. Wood
It can be found on page 16, Sub-section (4), commencing:In this section the expression 'value' means …
§ Mr. Loftus (Lowestoft)
When I heard my hon. Friend the Member for Gravesend (Sir I. Albery) propose his Amendment, I quite realised that it would mean a great deal of work and the employment of a great many valuers, but I have listened to the Chancellor and it seems to me that the Bill as it stands must also employ a great many valuers—
§ Sir I. Albery
I quite agree, but a great number. I have read the definition of value and have found out that it must be in many cases all the value. The value itself has to be ascertained first, and I feel that my right hon. Friend was rather optimistic in saying that as the Bill now stands it would not mean much work for valuers.
§ Mr. Loftus
I suggest that if we want to avoid work and delay, the simplest thing would be a percentage payment on all mortgages. I feel it is rather unjust that where a mortgage is 50 per cent. of the value it should contribute nothing to this contribution.
§ Sir I. Albery
I should like to refer to one point in connection with values. My right hon. Friend the Chancellor of the Exchequer said that the scheme suggested in the Amendment would perhaps involve some more work, but I cannot see how under the system in the Bill one will get away with so few valuations as he makes out. There is another point which seems to me to be most important. What is this valuation which is to be made? The Clause in question says it is the value which the property would have had in the open market at the end of March, 1939. Does not that in fact mean that the value of the property is to be a bankrupt value? I cannot see any other meaning. If a man has defaulted, and the mortgagor steps in, forecloses on the property and puts it in the market for sale, that is the value of the property in the open market. I do not feel convinced that the present arrangement is an equitable one, and although I agree that the Chancellor has enormous difficulties and that the machinery is very difficult, nevertheless I feel that one can go too far in avoiding difficulties if it is to be at the expense of justice.
890 Question, "That the words proposed to be left out to 'value', in line 20, stand part of the Clause," put, and agreed to.
§ Mr. Woodburn
I should like to move the Amendment in the name of the hon. Member for South Croydon (Sir H Williams)—in page 15, line 16, to leave out from "mortgage," to the end of line 25, and to insert:he shall be entitled to be indemnified by the mortgagee by an amount which bears to his net liability the same proportion as I he amount of interest payable under the mortgage bears to the contributory value of the interest.Provided that in no case shall the indemnity exceed the contribution paid in respect of any contributory property.This Amendment relates to the contributory value of the interest. The Chancellor must find out what is the value of the interest before he can find out what half the value of the interest is. The right hon. Gentleman has not told us how he intends to do that, but assuming that he has some method of discovering the value of the interest, this should go some way to meet the difficulty which has been raised and solve the problem of relating the contribution fairly between the mortgagor and the mortgagee. I shall be glad to know from the Chancellor how he intends to decide the value of the interest, and, if he has a method of doing that, what objection can there be to the Amendment in the name of the hon. Member for South Croydon, which would make the mortgagee bear his contribution according to the relative share of the contributory value of the interest.
§ The Deputy-Chairman
Does the hon. Member wish to move the Amendment? The next Amendment which I shall call will be a manuscript Amendment to be moved by the hon. Member for Chesterfield (Mr. Benson), in page 15, line 20, to leave out the word "value" and to insert "price of acquisition." The Amendment in the name of the hon. Member for South Croydon (Sir H. Williams; might come under that.
§ Mr. Benson
I beg to move, in page 15, line 20, to leave out "value," and to insert "price of the acquisition."
The reason I move this Amendment is that the whole of the machinery of this 891 Clause depends upon the relationship of two figures, the amount of the mortgage and, as the Bill is drafted, the value of the security. The Chancellor has already said that he wants to reduce valuations to a minimum. My Amendment is directed to that end. If the Chancellor considers the type of property which will be mainly affected by this Clause, he will see that it is the small house owned by the owner-occupier, built since 1919 and mortgaged to a building society. There are millions of this class of property, and it is this type of house mainly—I do not say exclusively—which will come under the operations of this Clause. Of the two sums to be considered, one, the amount of the mortgage, is fixed, but the other, the value of the interest, is debateable. A small fluctuation in the value can bring a large number of mortgagors in or outside the three-quarter level. If the Clause is left as it stands, with the one variable figure—the value of the security—this will throw a very great strain upon the machinery of administration. In a vast number of cases we can ascertain concrete figures by substituting the price of the acquisition for value.
Under Sub-section (6) the mortgage dealt with under this Clause is already married to the acquisition of property, so I am not introducing a new principle by substituting the price of acquisition for value. I am quite aware that certain properties have no price of acquisition. But in this Bill we are trying to find a workable scheme and not a Bill to deal with every possible or probable case. I am not suggesting that the wording of my Amendment is correct, but I am merely adumbrating a principle, namely, using the price of acquisition instead of a fluctuating figure based on the value at March, Two. By this means we shall reduce enormously the possibility of appeal by people who have real or fancied rights under this Clause. It may be said that to put in Price of acquisition is inequitable or may be inequitable. But the whole Bill is a mass of injustices. We are only trying to find something which will work, and I think that the rule-of-thumb method that I have suggested is far more likely to be productive of good than harm.
§ Mr. Bellenger (Bassetlaw)
The point at issue is, I think, quite simple. The Chancellor admits, in principle, that where a 892 contribution has to be paid it should be paid by those who are to benefit under this Bill when compensation is made. Every hon. Member in this Committee knows that the mortgagee stands, as far as compensation is concerned, a far better chance of getting compensation than almost any other proprietary interest, except the freeholder. The question is, as the contribution in the first instance is to be paid by the direct contributor, that is to say the person in immediate possession of the property, how far shall these people who have other interests in the property, other than the immediate physical possession of property, pay some of the contributions. The Chancellor has put in some words which seem to me very intangible. Hon. Members have asked how he is to arrive at the value of the interest. I have a good deal of experience of how mortgages are arranged. It makes no difference whether they are building society or bank or insurance mortgages. They generally bear some direct relation to the purchase price of the property. If we say to the mortgagor, "You have an interest in this property, a fiduciary interest, if you like, therefore you must pay a certain proportion of the premiums." What we have to try to arrive at is how much the mortgagee should pay compared with the compensation which he will receive either on a cost-of-works basis or a value basis. In almost every case where a mortgagor lends money, the valuer or surveyor who assesses the value wants to know what price the mortgagor paid for it. If he is bound to disclose the purchase price, the purpose is to enable the building society to decide the value of the property at the time they are asked to lend the money, and building societies have a well-defined rule of lending only a certain proportion of the purchase price.
It is true that certain properties have an addition made to the purchase price when conversions or works of that nature are carried out. The Amendment may not be quite watertight, but, under the Clause, it is the best method of finding what the relation is between the mortgagee and the mortgagor as it affects the amount of insurance contribution to be paid. Even if the Chancellor will not accept the Amendment, will he keep an open mind on the subject, so that if, on Report, we can lay down a better method of assessing the proportion which the mortgagee 893 should pay, it can be inserted? The Clause, as now drawn, will create innumerable complications and the Amendment gets nearer to the ideal method of assessing the value of the property on which the mortgagee has lent money and on which he should be prepared to pay his proper share of the contribution.
§ Mr. Silkin
I think the Debate has shown the same position as was revealed [...] Clause 4, namely, that none of us likes the Clause as it stands, and I think none of us likes very much the Amendments which have been put forward. What we are all trying to get at is a simple way of calculating the contribution [...]at the mortgagee should make. The Clause involves a valuation which is extremely difficult, and a valuation made from time to time, because it refers to re[...]evant dates, and the definition of re[...]evant dates is 1st January each year.
§ The Attorney-General
All you have to [...] on the successive relevant dates is to see how much the debt is. The value is a[...]ways as at 31st March, 1939.
§ Mr. Silkin
The fact is that it is an uncertain and complicated way of arriving at the contribution of the mortgagee. All [...]e Amendments have been directed to avoiding that complication. A second difficulty about the Clause is that many of us feel that the mortgagee should contribute according to his interest in the property, but as the Clause stands he is largely let out in particular circumstances. He is let out entirely if his interest is less than a half. Amendments have been devised, therefore, for the purpose of having contributions from the mortgagee and putting them on a sliding scale. The Amendment of my hon. Friend the Member for South Croydon (Sir H. Williams) was devised with that object, and it gets rid of the two objections to the Clause. It [...]xes the contribution of the mortgagee in relation to two fixed factors. These are the contributory value of the property and the interest which is received by the mortgagee. The contributions of the mortgagee would bear relationship with the interest and the contributory value. That Amendment also provides that if his interest is small, he will pay a small contribution, and if it is large, he will pay a large contribution.
894 The Clause makes too many jumps. It is all very well for the right hon. Gentleman to say that he is used to dealing with border-line cases, but under the Clause there will be three border-line cases. The Clause is based on an uncertain facto[...], namely, value. There is too big a jump between the mortgagee who has a three-quarter interest and less than a three-quarter interest and the mortgagee who has more than a three-quarter interest. In one case he pays one-third of the contribution and in the other two-thirds. Those jumps are too high. The Amendment of my hon. Friend the Member for South Croydon provides a sliding-scale contribution which bears an exact relationship with the interest which the mortgagee is receiving and the contributory value of the property. If the right hon. Gentleman cannot accept any of the Amendments, I hope that he will look at the matter again, because the Clause is certainly unsatisfactory.
§ Sir H. Williams
I think that the Chancellor is in a great difficulty, as we all are on this Clause. The only logical thing for him to do is to leave out Clause 19 because that is a policy wihch can be sustained. I will put his case before I reply to it. The mortgagee has not any interest in the property at all. He is merely the owner of a debt for which the property is a guarantee in reinforcement of a personal guarantee. Suppose I own a house and cannot pay my Income Tax, and I go to somebody and say, "The Chancellor wants £200 out of me. I have not got it, but I have a house. Will you lend me £200 if I give you a piece of paper?" I get the money and pay it to the Chancellor, but that does not make the gentleman who lent it to me part-owner of my house. That is the basis on which the Chancellor ought to have started. He realises, however, that, in practice as distinct from theory, the mortgagees are, in fact, partners in the ownership.
I am buying and, as the lady said to her husband, "When we have paid the last contribution to the doctor, the baby will be really ours." That will be my position next September. I had no money to buy my house outright, and I took out a life policy, and if all goes well in September the house will be entirely mine. There is a case where the insurance company and I are effective partners in 895 ownership. In many cases, however, money was not loaned for the purpose of helping to buy the house, but for some entirely different transaction. A man may borrow the money on a house in order to buy a grand piano. In the long run the Chancellor has got himself—and really I do not blame him—into a position which is illogical. But there is the problem and we have to deal with it. I suggest that there is one simple solution, and that it is to be found in the terms of my Amendment. I could make my Amendment much better if I were sitting on the Treasury Bench, because then I could move a Financial Resolution which would turn the contribution into a tax. If we made the 2s. in the £ into a supplementary Schedule A Property Tax, the mortgagee would have to pay. All we should say was that Income Tax was 8s. 6d. in the £ and Property Tax 10s. 6d. We are really doing that in practice now, but we are calling the extra 2s. a contribution under this Bill.
It is all very difficult and complicated, because in one sense this is a tax. If the State makes you pay something, it is a tax. The man who sticks so many stamps on his insurance card has been subjected to tax, although we do not call it a tax, because we have hypothecated the money for a particular purpose. I am satisfied that whether my own Amendment or any of the others on the subject—they are really alternatives, seeking the same purpose—is accepted the public will be profoundly dissatisfied with Clause 19. So are we, and so is the Chancellor. I suggest that between now and Report stage he and his advisers will have to apply their minds to the problem of solving something which is not easily capable of solution, but which, if the Bill passes into law in its present form, will create the profoundest discontent among great masses of the people irrespective of their political affiliations.
§ The Attorney-General
A remark made by the hon. Member for Peckham (Mr. Silkin) is interesting. He said in effect that he did not think the Committee liked the Clause and he did not think they liked the Amendment. At earlier stages I played a humble part in considering the various proposals which were passed under review in setting this measure. 896 Many Amendments which I have since seen on the Order Paper were rejected by us at an earlier stage because we felt there were greater objections to them than to the principles embodied in the Bill. This is, no doubt one of the Clauses—and there are several—which deal with problems which are incapable of a perfect solution. My hon. Friend the Member for South Croydon (Sir H. Williams) went rather wide of the Amendment and I hope he will think it is no discourtesy to him if I restrict my remarks to the Amendment. One could talk at large about mortgages and what might happen to them. This Amendment accepts the 75 per cent. step, and we are not discussing that now. What it seeks to do is to put in the price of acquisition. The hon. Member who supported the Amendment says that at any rate is definite. It certainly has the advantage of definiteness, but how unjust it is. The house may have been bought 15 years ago, and the 15 year-old value has probably depreciated perhaps by 50 per cent.
You would let the mortgagee out, although in fact, although not in all cases, the mortgage debt may be 75 per cent. or 90 per cent. of the value of the house. You let him out because his debt by that time would be less than half the original purchase price of the house. One can say that the price of acquisition would be very unfair to the mortgagor if the house were purchased a very considerable time ago. If the purchase was at or about March, 1939, a reasonable mortgagor and mortgagee would clearly accept that value for the purpose of the Bill and therefore you would not have great disputes about valuation in such cases. If there is no price of acquisition at all or if that acquisition were substantially before March, 1939, in justice to the mortgagor you have to face the necessity of valuation. I do not think that there will be much dispute in the majority of cases. If one is to do the fair thing by the mortgagor you will not be able, I think, to find a solution which does not contain the possibility of dispute, in the border line cases.
The Amendment which has been moved would, of course, be unworkable in cases where there is no price of acquisition. It would be very unfair to the mortgagor in the case where the house had been bought a considerable time before March, 1939. 897 My right hon. Friend the Chancellor of the Exchequer and myself have an open mind on this matter and we shall certainly consider any suggestions. We have thought a great deal about this problem, and we realise the imperfections of the suggestion which we have put forward, but I believe that the rough machinery suggested in the Bill is as likely to provide a fair solution as any other solution so far suggested.
§ Mr. Benson
The Attorney-General's reply is based on the old principle of citing the hard case, but in the vast majority of cases which will come under the Clause there will be the small owner-occupiers whose houses were bought less than 15 years ago and have not depreciated by so much as 50 per cent. The houses will be practically identical in price with what they were in 1939. I do not propose to press the Amendment, and I was not in any way concerned with the basic principles or with the equity of the proposals. I was concerned only with the simplification of the machinery.
§ Mr. Bellenger
I am very disturbed to hear the example given by the Attorney-General. As I understand it, he is trying to arrive at the same conclusion as we are. The only question is, What is the best machinery to put in this Clause? When the Attorney-General talked about values 15 years ago, I wonder whether he realised that the majority of the mortgage business that has been done in this country, in so far as building societies and insurance companies are concerned, has been mainly in the period since the last war—in other words, in the period when building activity has been at its greatest. Therefore, we always come back to this point, that a mortgage is based on the definite value of the property. The question is, What is the value of the property, not on the basis of words as placed in this Bill, but the value paid by the persons acquiring that property? It makes no difference whether it was 15 years ago or in 1939. I would go so far as to say that the majority of mortgages in this country are based on the purchase price. If a person acquired property r5 years ago and borrowed money in 1939, I rather think that the building society, the insurance company or the bank would still want to know, "What was the price you paid for that property when you did acquire it?" If the prospective mort- 898 gagor says, "I acquired it 15 years ago, and I paid £500 for it," it is not much use the mortgagor saying, "But the value to-day is £1,000."
Insurance companies and building societies are not concerned with enhanced values, generally speaking. Most of the money lent on mortgage is lent on the purchase price of the property. I suggest to the Chancellor of the Exchequer that he ought not to close his mind at this stage. If he is going to reject the Amendment moved by my hon. Friend the Member for Chesterfield (Mr. Benson), he ought to leave a way open for us to put points to him before the Report stage, so that we can get a better definition of the value basis before we pass this Bill.
§ Mr. Woodburn
I would like briefly to put two suggestions which spring to my mind during this discussion. I cannot see that the price of acquisition would be a useful basis, because that might be a matter for antiquarians to find out if the house was bought sufficiently long ago. But it seems to me that if a mortgage was settled, there must have been some settlement for value at the time of the fixing of the mortgage, and therefore it might be possible to deal with the relevant share of the mortgagee and the mortgagor on the basis of the value at the time that the mortgage was fixed on the property. That is the one definite thing that could be assessed. The other suggestion I would make, to revert to my original proposition which I withdrew as an Amendment in order to support the hon. Member for South Croydon (Sir H. Williams), is that we should depart from the idea of the rateable value of the contributions so far as the mortgagee is concerned, treat all mortgages on the same basis, and deduct one shilling per annum for every fro borrowed. That would bring more money to the Chancellor and would be much fairer as between mortgagee and mortgagor.
§ Sir K. Wood
I only want to arrive at a reasonable solution. I will examine carefully in the next few days anything that hon. Members have said.
§ Amendment, by leave, withdrawn.
§ Sir I. Albery
I beg to move in page 15, line 25, at the end, to insert: 899(c) If a valuation payment made to the mortgagee under Clause 10, Section 4, is entirely retained by the mortgagee, no balance payment being left available to the direct or indirect contributor, he shall be entitled to be indemnified by the mortgagee against all contributions made by the said direct or indirect contributor.To put this matter quite briefly, under Clause 10, the moneys are paid to the mortgagee who deals with them in the same way as they would be dealt with if he had foreclosed on a property and taken possession of it. The object of this Amendment is that if, after the mortgagee has satisfied his claims, no money at all is left over for the direct or indirect contributor, the equity holder or the mortgagor, the latter shall at any rate be repaid by the mortgagee the contributions which he may have paid It may not be a very important point in fact, but I think it is an important point in principle; I cannot see that it is equitable or just that the equity holder should have to pay contributions under the War Damage Bill and then, if his house is bombed, see the whole of the compensation passed to the mortgagee, when he has paid most of the contributions.
§ The Attorney-General
Everybody, of course, realises that the owner-occupier, like any occupier, has been placed in circumstances of great hardship by war conditions, not only by bombing, and this large section of the community are entitled to have their position sympathetically considered by this House I am, however, bound to say that this Amendment appears to be based on an entire misconcepton of the position. Suppose a mortgagor has borrowed £1,500 The house is destroyed. As has been said more than once, but for this Bill the mortgagor and the mortgagee, in some places, might be unable to build it up again and the mortgagor would remain liable in law for the £1, 500 which he has borrowed. The value payment does no more than extinguish the debt. It is quite wrong to suggest that, in that case, the mortgagor has nothing for his contribution.
§ The Attorney-General
But the whole debt is wiped off. It is wrong in that case to suggest that he gets nothing. Then, take a case where a mortgagor gets something more than the amount of the debt. It 900 would be equally wrong to suggest that all he gets out of the Bill is the amount over his mortgage debt. The main benefit will be the wiping out of the £1,200 mortgage debt. If he gets £300, over, he will have got £1,500 altogether. The Amendment says that, in that case, he should pay a contribution, and there is no question of an indemnity. The only case where the question of an indemnity arises is where he has got all his benefit by the wiping out of debt. I think it would he unfair to the mortgagee in that case to adopt the Amendment. The fact is that the mortgagor benefits through the payment off of the mortgage debt, but we must not recapitulate now the discussion that we had this morning on payments to the mortgagee.
§ Mr. Bellenger
The Attorney-General seems so hidebound by tradition that he imagines that the mortgagor is concerned with his mortgage. In many cases he has borrowed up to the hilt; and if his house is down, he does not care two hoots whether he pays his mortgage or not. In many cases the house owner is not worth more than the payment he has put into the house. He is a wage-earner, with no more resources. When the Attorney-General says that he is gaining something by extinguishing his debt, the answer is that you cannot get blood out of a stone; and if the mortgagor has lost his house he has lost everything. He is not concerned whether the building society that lent him the money is getting its money back or not. But that man is the direct contributor; he has to pay his 2s. in the £ on Schedule A. You will find that many of those direct contributors will default. They will say, "What are we going to get out of this?" Here is a man whose house is razed to the ground—and probably his wife and children killed as well [Interruption.] Quite so; if his house has gone he will not be liable. But let us take the case of a man whose house is partly razed to the ground. There is one room left, in which he can live. He is told that he is to pay 2s. in the £ on his assessment, in order to provide compensation, which is not going to him, but which will extinguish his mortgage debt. I tell the Government that there will be many defaults among house-owners, and I ask the Attorney-General and the Chancellor of the Exchequer not to look at the matter in the narrow legal way, that a 901 mortgage debt is a debt on the individual's own assets. In many cases it is the entire asset, and if you look at it in that way it is going to affect his own interests and he will not get direct protection.
§ Mr. Woodburn
I apologise for intervening again, but there has been a complete fallacy in the arguments put forward in regard to this matter. On each occasion, when this question has been raised, the point has been made that it is a personal bond that is taken in regard to these funds. If it is a personal bond, why does this Bill not leave it as a personal bond? If the contributor is at liberty to mortgage his personal bond, why has he not the right to enforce his personal rights in regard to Government money paid for the property? That is the legal position, as far as I see it, but I am not a lawyer. Along come the Government with a Bill, and they say that they are not going to allow the owner of the property to have compensation for his property. They step in and say that before he receives anything they must safeguard the position of the mortgagee. That is an entirely arbitrary position on the part of the Government to protect the mortgagee, and they are not taking the same position in protecting the right of the mortgagor. That is the fallacy which has been in this argument about the personal bond. I come back to the important point as far as we are concerned, and not the commercial one to which the hon. Member for South Croydon (Sir H. Williams) referred. That may be a purely money-lending transaction, but in regard to the 4,000,000 people who own property, not so much perhaps because they were out to buy property—
§ Mr. Woodburn
The point is with regard to the contributions. These people actually were very often induced by building societies, as a method of investment, to buy their own house. Supposing the house is wiped out and the owner has no means of meeting his personal bond, if he goes bankrupt the Courts will absolve him, in present circumstances, of any liability to pay the mortgagee at all. Therefore, why do the Government step in and say that he is not to have that legal right in regard to war damage, and that they are going to subsidise the mortgagee, 902 and give no consideration to the relative contributions and payments in regard to the owner of the property itself?
§ Sir K. Wood
I think that my hon. Friend will agree that he cannot very well press this Amendment. I have already said that I will give consideration to this very difficult and troublesome matter. My hon. Friend knows that when a person is made bankrupt, all his assets are taken into account.
§ Sir K. Wood
That may be, but perhaps my hon. Friend will leave the matter as it is at present as being a reasonable way of dealing with it.
§ Amendment negatived.
§ The Attorney-General
I beg to move, in page 15, line 40, to leave out from the beginning, to "is," in line 41, and to insert:Where the interest of a direct or indirect contributor in respect of a contributory property to which this Section applies.This and the three subsequent Amendments look rather complicated, but I hope that the Committee will agree to them. Three of them are, in fact, drafting Amendments, and the other is to correct a mistake which was made in the original Bill. The Clause deals with the right of payment to mortgagees, and the Amendments relate to Sub-sections (2) and (3), which deal with cases where there is more than one mortgage. The first two Amendments and the fourth improve the language of Sub-sections (2) and (3) removing the difficulty which arose under their original wording. As worded you had to look at Sub-sections (2) and (3) to find out what cases were covered by Sub-section (1). This difficulty is now removed. Further, under Sub-section (3) as originally drafted by the time you get to the second mortgage you have deducted the amount of the first mortgage twice over.
§ Amendment agreed to.
§ Further Amendments made:
In page 15, line 42, leave out from "then," to the end of line 7, page 16, and insert:
in considering whether the contributor is entitled to any and, if so, what indemnity against the mortgagee under any such mortgage other than the first mortgage of the in-
terest, Sub-section (1) of this Section shall be construed as if.
§ In page 16, line 9, leave out "shall be," and insert "were."
In line 14, leave out from the beginning to "as," in line 18, and insert:
Where the interest of a direct or indirect contributor in respect of a contributory property to which this Section applies is at the relevant date subject to a mortgage to which this Section applies, but is not the only property subject to that mortgage, then, in considering whether, in accordance with Subsection (1) and Sub-section (2) of this Section, the contributor is entitled to any, and if so what, indemnity against the mortgagee under that mortgage, the said Sub-section (1) shall be construed.
§ In line 21, leave out from "interest," to "bears," in line 23.
§ In line 24, after "property," insert "(whether real or personal)."
§ In line 32, leave out "the," and insert "that."—[The Attorney-General.]
§ Mr. Silkin
I beg to move, in page 16, line 32, at the end, to insert:Any difference arising between the persons concerned as to the value of any property for the purposes of this sub-section shall be referred for determination by the Commission and the provisions of Section seven of this Act shall have effect in relation to any such reference.The Committee will remember the discussion we have had on the question of values. It is obvious that there will be considerable differences of opinion as to the value of property for the purposes of contribution by the mortgagee. These differences will have to be settled, and the Clause at present provides no machinery for settlement. I quite realise that settlement can be obtained by going to court, but that is a very costly matter, and I am sure my right hon. Friend will not wish to go to court to settle a question of whether a contribution should be £2 or £4. Therefore, there ought to be some cheaper way of settling differences of that kind, and the proposal in my Amendment is that it should be settled in the first place by the Commissioners and, failing that, by an appeal to the referees.
§ Sir K. Wood
In a great number of cases there will be settlement. We are afraid to leave the question to the referees, because they might have more work than they want and might well be swamped. I will, however, give consideration to the question of avoiding 904 having to go to court, especially in these days. Perhaps my hon. Friend will leave the matter at that.
§ Amendment, by leave, withdrawn.
§ Sir H. Williams
I beg to move, in page 16, line 33, to leave out Sub-section (5).
There are certain other Amendments to modify Sub-section (5), assuming that it is retained in the Bill, and I take it that you, Colonel Clifton Brown, will put the Amendment in such a form that it will save these others being called. Honestly, I cannot understand the principle underlying Sub-section (5). If Clause 19 is intended to do justice in a certain way, I do not see why justice should stop if the annual value of property is £100, nor do I see why it should stop when it reaches £250 in those cases where it is a growing proportion—
§ It being the hour appointed for the interruption of Business, the CHAIRMAN left the Chair to make his report to the House.
§ Committee report Progress; to sit again upon the next Sitting Day.