§ Mr. Bellenger (Bassetlaw)
I beg to move, in page 13, line 3, at the end, to insert:Proviso regarding grants to local authorities.following proviso shall be added to section eighty-two:'Provided that this section shall not affect the principles upon which any grant of payment from the Exchequer to any local authority depends.'I desire to bring to the notice of the Committee and the Chancellor of the Exchequer something which is, I think, in the nature of an anomaly. The Committee will note that War Damage Contributions are to be treated as being in the nature of capital payments. This is quite clear in the case of private individuals or private trusts or property companies because they have some capital, but when we come to the case of Government Departments we find a somewhat confusing state of affairs. I understand that the Board of Education permits the debiting of these contributions to education accounts, but the Ministry of Health prohibits local authorities from debiting War 837 Damage Contribution, in the case of local authority housing schemes, to the housing account of the local authority concerned. The result is that the payment of War Damage Contribution which has to be met on housing estates belonging to local authorities has to be obtained out of the general rate and in some cases it is conceivable that, in order to pay these heavy amounts, a general rate may have to be increased. I submit that these payments ought to be debited to the housing account in each case and not thrown on the general rate. I hope the right hon. Gentleman has followed my explanation sufficiently to find himself in sympathy with that view.
There is another implication. Where local authorities in heavily blitzed areas are not able to gather in sufficient rates to meet their own requirements and those of the precepting bodies, they come to the Ministry of Health for assistance. The Ministry of Health may, however, get out of the liability for any deficiency on the housing account if the war damage contributions are not debited to that account but are thrown on the general rate. In such circumstances, the housing account would not show the loss or the deficit which it might show if these contributions were debited to that account and if the amount of the contribution went on to the general rate, then, obviously, the ratepayers have to find the money. Therefore, the contention which has been put forward by the Chancellor that this contribution is in the nature of a capital payment, is not borne out in the case of local authorities who will be compelled to find it out of the general rate. The object of my Amendment is to rectify this anomaly. I hope the right hon. Gentleman will appreciate my point and even if he is not prepared to concede it to day will at any rate give it further consideration.
§ Mr. Silkin (Peckham)
I support the plea which has been made by my hon. Friend the Member for Bassetlaw (Mr. Bellenger). This is really a question of local authority finance. When a local education authority pays a contribution in respect of educational buildings, it is allowed to charge that contribution to revenue and it gets the appropriate grant from the Board of Education. But when it comes to dealing with a housing revenue account the Ministry of Health do not 838 take the same view as the Board of Education and do not permit a local authority to charge War Damage Contribution to its housing revenue account. The result, according to the contention of the local authorities, is that their housing revenue accounts become unduly inflated. Under the Housing Act, 1936, at the end, I think, of every quinquennial period, the surpluses on these housing revenue accounts are taken by the Ministry of Health. At any rate the Ministry take a proportion of such surpluses. The point, therefore, is that by not permitting the War Damage Contribution to be charged to the housing revenue account there may arise an artificial surplus, which the Ministry of Health take away. It can only arise if, as the result of not permitting the War Damage Contribution to be charged to the housing revenue account, there is a surplus when otherwise there would be a deficiency. Housing authorities feel that the surplus should not be taken away from them when it is really an artificial surplus, and if the housing revenue account were dealt with in the same way as the educational account, there would be no surplus, and no part of the surplus could be taken away. It is a rather complicated point, but I hope I have made it clear.
§ The Chancellor of the Exchequer (Sir Kingsley Wood)
I am indebted to the two hon. Members who have put the matter forward. I cannot pretend that I can make a complete statement to-day. The Amendment obviously could not be incorporated in the Bill, and I take it that the object is really to bring the matter before the Committee in order that I might make a statement on it. The suggestion to enable local authorities to charge War Damage Contributions on municipal housing property to the housing revenue account is made, I think, under the mistaken impression that such a charge would result in increasing the subsidy payable by the Exchequer in certain cases. If that is so, it is not the case. That impression is mistaken. It is true that Section 82 of the War Damage Act provides that contributions should all be treated for all purposes as outgoings of a capital nature, and it is obvious that such outgoings cannot properly be charged to a revenue account. It may be suggested that if local authorities were to borrow, as they would be entitled to do, to finance these contributions, the loan 839 charges could then properly be charged to the Housing Revenue Account. But this might result in the raising of rents by local authorities which could not finance their contributions without borrowing, and that would produce an anomalous position in relation to private landlords, who are precluded by the Rent Restriction Act from passing on their contributions to their tenants. Municipal houses are excluded from rent restriction for reasons quite unconnected with the present question, and it would be unreasonable that this exclusion should place local authorities as landlords in a specially favourable position in comparison with private landlords, and their tenants in a specially unfavourable position in comparison with that of tenants of private landlords.
The two hon. Members suggested that the Board of Education provided a precedent that they might quote in favour of their proposition. The Board of Education recognise for grants War Damage Contributions in respect of school buildings, and Section 41 of the Act enables grants to be made in respect of highway contributions, but those are both cases in which capital expenditure by a local authority normally attracts percentage grants and cannot therefore be regarded as analogous to housing grants. The matter is somewhat complicated and difficult to explain, but I have endeavoured to give a reply on what we could surmise of the intention of the Amendment. I should like to examine the hon. Members' statements carefully with a view to seeing whether there is more that I can profitably say; and I will communicate with both of them.
§ Mr. Silkin
The right hon. Gentleman appreciates, firstly, that this is not designed to increase the subsidy and, secondly, that charging the contributions to revenue account would not have the effect of putting local authorities at an advantage as against the private landlord but at a disadvantage.
§ Amendment, by leave, withdrawn.
§ Sir Herbert Williams (Croydon, South)
I beg to move, in page 13, line 35, at the end, to insert: 84019. Certain fixtures and fittings to be deemed land and not goods for purposes of principal Act.Any fixtures or fittings which are situate in or upon or are attached to any contributory property and are treated as part of such contributory property for the purpose of the net assessment or net annual value (as the case may be) on which the contribution in respect of such contributory property is calculated in pursuance of the provisions of section nineteen of the principal Act shall be included in the definition of the expression 'land in section ninety-five.'This is a rather curious matter. I was asked to put the Amendment down by friends who are interested in blocks of flats and offices. I understand that frequently in such premises there is a certain amount of furniture which is for the communal use of the people in the buildings, which is taken into account in settling the Schedule A assessment. Therefore, for the purpose of Income Tax, these chattels are deemed to be land, but for the purpose of the War Damage Act they are not. The War Damage Contribution is based on the Schedule A assessment, so that they pay on that, and they are brought in a second time under the business scheme and are called chattels. I am told that flats and offices are equipped with fixtures and fittings and furniture in entrance halls and on staircases, trade lifts for the delivery of goods, refrigerators, electric cooking stoves and fires. I mention those things by way of example. They are deemed to be in the Schedule A category for Income Tax and attract the 2s. in the £. They are also deemed to be chattels and attract another contribution under Part I. This is unfair, it seems to me. As they are already dealt with for Income Tax under Schedule A they ought to be included for the purpose of the Act under Part I.
§ The Attorney-General (Sir Donald Somervell)
My hon. Friend is quite right. There are cases in which the use of furniture and fittings which are not-really part of the house may be reflected in the Schedule A valuation. The actual proposal would be impracticable. For one thing, there may be considerable doubt as to whether a particular article of furniture is included or not. It may be that it has been based on a rent which reflects that there will be certain fittings available, and it would be a difficult position if the Board of Trade always had to be quite certain that a fixture had not become land, and vice versa. What has 841 happened in certain cases, by inadvertence or for mutual convenience, is that instead of having a separate Schedule D assessment in respect of profits derived from the use of furniture, there has been one assessment. It is not as black as it may look, because the result of that is that the person gets a repairs allowance on the total figure, the allowance, of course, being directed to land. If there were a proper assessment under Schedule D, he would get no such allowance. So that to some extent what the man loses on the swings in having to make a War Damage Contribution in respect of movable furniture he gets back on the roundabouts because he gets a repairs allowance.
I saw some figures which were worked out showing that in a case in which there was a definite sum which might reasonably be attributed to furniture the man would not have been better off in the end if he had had a separate Schedule D assessment. In a good many cases of blocks of flats and hotels the assessments in force in September are capable of being reopened and are being reopened, When a case is reopened under that procedure the Revenue are prepared to consider this point and get it put right. If in the case of blocks of flats or hotels it can be shown that the combined tax and contribution charges have been substantially increased by including net profit from letting fixtures and fittings in the Schedule A assessment, the Revenue will be prepared to look into it and see whether it can be put on a proper basis. I hope that my hon. Friend realises the impracticability of the methods he has suggested and will withdraw his Amendment.
§ Sir H. Williams
I realise that administratively there are difficulties, but it is hard on the people paying twice. Although the Attorney-General has rightly told us that where Schedule A assessment is reopened this matter can be adjusted, the trouble is that the Chancellor will not permit an assessment to be reopened for the specific purpose of dealing with war damage matters. It is only if by chance an assessment is reopened for some other reason that this matter can be taken into account. The Attorney-General realises that there is a measure of injustice, and as it might be cleared up administratively if the 842 Chancellor would permit assessments to be reopened on this ground alone, the matter would be cleared up. I shall be glad to know whether the Attorney-General will consider this and let us know if he can solve the problem on those lines.
§ The Attorney-General
I do not think that my hon. Friend quite followed what I said. Let me make a correction. I was wrong in using the word "hotels." We are dealing with blocks of flats and offices, and that is the only category in which we are prepared to consider this problem. The Inland Revenue will be prepared to revise any case of blocks of flats or offices in which it is shown that the combined tax and contribution charges have been substantially increased by including net profits from letting of furniture and fittings in Schedule A assessments.
§ Sir H. Williams
In the light of that statement, I beg to ask leave to withdraw the Amendment. I have no personal knowledge of this matter, but those who are interested will examine the Attorney-General's statement, and if necessary I will raise it on the Report stage.
§ Amendment, by leave, withdrawn.
§ Sir K. Wood
I beg to move, in page 14, line 19, to leave out "and any such order as to costs," and to insert:and may tax or settle the amount of any costs to be paid under any such order or direct in what manner they are to be taxed, and any such order.The Second Schedule to the Act gives power to the referee to make orders as to cost on an appeal, but no provision has been made as to how the amount of costs ordered to be paid is to be determined. This Amendment rectifies the omission and gives the option to the referee either to tax costs item by item or award a lump sum for costs, or to direct the costs to be taxed by a taxing master.
§ Amendment agreed to.
§ Schedule, as amended, agreed to.