HC Deb 26 October 1944 vol 404 cc426-38

Where compensation assessed subject to the rule set out in Sub-section (1) of the Section of this Act (Assessment of compensation) is for the purchase of an interest in land which, after the thirty-first day of March, nineteen hundred and thirty-nine, and before the time of service of the notice to treat, has been improved in the interests of the war effort or under instructions from, or with the licence or permission of, a government department, by the erection thereon of a building or by improvements made to a building or to agricultural land comprised therein, the person entitled to the compensation shall be entitled to receive from the purchasing authority, as a supplement to that compensation, such sum, if any, by way of addition to the value, ascertained by reference to prices current at the said thirty-first day of March, of the purchased interest in the land so far as attributable to the improvements, as may be reasonable having regard to all the circumstances, including in particular the cost of the improvements, any provision which may have been made for the payment of any of the cost thereof out of public moneys, and any recovery of any of the cost thereof by reason of increased returns or increased prices in respect of, or of products of, work done on the improved land.—[The Attorney-General.]

Brought up, and read the First time.

3.15 p.m.

The Attorney-General

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

This new Clause is intended to deal with the following problem. Taking the 1939 standard, as we have decided to do, it of course applies all right, subject to the criticisms, which do not arise here, in respect of property which has been in existence since 1939. The arguments which have been adduced in favour of the 1939 standard clearly do not apply to the same extent if the whole or part of the building has been erected subsequent to 1939, when costs were much higher, or substantially higher. We think that it is fair that if a house was worth £500 in 1939, £500 should be given for it now; but if a similar house has been built or a part has been added at a time when costs were higher, we feel that account ought to be taken of it. Particularly is that so when we come to agricultural land and improvements which may have been ordered by the Minister, such as the setting up of cowsheds, drainage, or something of that sort, at a time when costs were well above those of 1939. We, therefore, thought it right to make provisions whereby that can be taken into account.

The Clause does not attempt to make the cost the criterion, and it would be wrong to do so. The criterion must be the value at the time of the notice to treat, but regard must be had to the fact that the costs exceeded the normal level of costs in 1939. Then we have provided that any subsidy paid out of public funds must be taken into account. In a good many cases there has been a 50 per cent. grant towards agricultural improvements. The arbitrator must also take into account the fact that increased returns may have been received in respect of the work and have to some extent offset the capital expenditure. I would like to say a word about the restrictive words in the Clause, because we are not absolutely happy about them. There is an Amendment down, and we must deal with them in detail on that Amendment. The words to which I refer are: has been improved in the interests of the war effort or under instructions from, or with the licence or permission of, a Government department. We want to exclude the case where the type of work or building or addition is of the kind which we were all asked not to do in wartime because labour and materials were required for other more urgent matters. My right hon. Friend agrees that these words will be difficult to interpret and are a little more restrictive than we intend. There may be work which it was a good thing to do at the time which might be excluded by these words. We shall, therefore, be glad of any help in improving them. We want to exclude the type of expenditure which ought not to have been carried out in wartime and which made no contribution to the public needs.

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

Mr. Manningham-Buller

I beg to move, in line 5, to leave out from "improved" to "by," in line 6.

The Attorney-General has just indicated the purpose of the restrictive words contained in the Clause, that is to say, that it will only be possible to get compensation for improvements effected under a Government licence or under Government direction. The object, as I understand it, is to exclude compensation being paid for the type of improvement which he says ought not to be effected in war-time. I do not think that in war-time things which are not in the public interest could be erected on farms or in connection with buildings without Government licence or direction and if they could I doubt whether they would come into the category of improvements. The point I desire to raise on the restrictive words is with regard to the future and not with regard to the war years. If, in the course of putting the point forward, I should use an expression or an adjective of which the Attorney-General does not approve, I hope that he will pardon it on this occasion and deal with the point of substance.

When the Chancellor of the Exchequer spoke last Friday he said quite clearly that these words were intended to cover improvements effected after the end of the war with Germany, and up to the time of the notice to treat, whenever that might be. It might be three years after the five years which have to run from the appointed day. Throughout all that interval of time improvements will be paid for under this provision. That, I think, represents what the Chancellor said. The point I want to make is that the only improvements effected during that time which will be paid for are those done under Government licence and direction. [AN HON. MEMBER: "Or permission."] Yes, or permission.

I do not know what the future is going to hold. A lot of hon. Members opposite may desire the present controls in agriculture to continue, and it may be they will continue for longer than some hon. Members on this side think is likely. However that may be, how can we possibly justify paying for a pig-sty put up under Government control and refuse to pay for a better pig-sty which a man has erected by using his own employees and without bothering a Government Department? It is another illogical distinction, and the effect of it will be to penalise anyone who tries to improve his holding or his factory by the exercise of his own initiative. I ask that the Amendment should be accepted. I suggest that the type of work which the Attorney-General wants to see excluded will probably not be an improvement justifying any supplemental compensation at all. As the words stand, they seem to be a discrimination—I use again a word that has been used before during the discussions on the Bill—in favour of the farmer who has to be directed to do things and it does not give fair treatment to the others.

Major Studholme (Tavistock)

I support the Amendment. I think it should be made perfectly clear that the com- pensation covers improvements carried out by an owner in the interests of agriculture or of his tenants on his own initiative, because he happens to be a conscientious, good landlord or farmer. Good landlords and good farmers do not necessarily wait to carry out improvements on their property until they are instructed to do so by the local authority or war agricultural committee. When the war is over controls will be much relaxed, and there will be more opportunity for owners to carry out improvements of this kind. We want to encourage the good owner and the good farmer, and therefore I hope that the Minister will consider the Amendment sympathetically. If he cannot accept it as it stands, perhaps he will devise some words which will cover the intention.

Brigadier-General Clifton Brown

I heartily endorse the speeches which have been made on this Amendment. I do not think for a moment that the Government realise how much their proposal may impede agricultural production. I know a case where an electric line passes near a farm, which is in need of power for its milking operations. At present, the line stops short, because of war-time Regulations. In two or three years, if that line cannot be put up by the individual initiative of the landowner, the result will be a great loss of milk production. So far as I can understand this provision as to four nr five years, I think a state of uncertainty will exist. There is no reason at all why this electric line should not be put up, but it may never be allowed, and therefore the production of milk may cease entirely.

The words proposed by the Government, limiting improvements to those done under the orders of the Government or a war agricultural committee, are altogether too drastic. I very much hope that the Government will look at the matter again and see whether they can allow for necessary improvements, recommended, if you like, by the war agricultural committee, but do not stop them altogether.

Mr. Turton

It seems to me that the words proposed by the Government are already fairly wide. They start off by a reference to the interests of the war effort and they go on to give as an alternative: instructions, licence or permission of a Government Department. Is it suggested that the instructions of Government Departments are sometimes not in the interests of the war effort? The words require revision. We might substitute, instead of "interests of the war effort" some such words as "interests of food production." I quite see the point made by the Attorney-General when he moved the new Clause that we do not want to help a man who makes for his own pleasure or amenity improvements that may not be in the interest of the community. The interest of the community in the land is the production of food, and I should like to see introduced some such words as I have suggested, which would help the man on a grade C farm and penalise a man who is on a first grade farm. The words proposed will convey that impression unless they are altered. The man who has to receive constant instructions from a war agricultural committee is a bad farmer. The good farmer who is going ahead with his farm does not receive those instructions because he does not require them. Therefore I hope that the Minister will alter the words.

The Attorney-General

I agree with my hon. Friend the Member for Thirsk and Mahon (Mr. Turton) that the words actually on the Order Paper are a good deal wider than those which my hon. and gallant Friend the Member for Newbury (Brig.-General Clifton Brown) wanted. They are not confined to cases of direction or instruction. I should have thought that almost any agricultural improvement made during the war would come within the words "interests of the war effort." My hon. Friend has just taken up an ingenious point by suggesting that instructions by Government Departments might not be in the interests of the war effort and that is the implication of the words. Of course, that was very far from our thoughts when we put down this form of words. We wanted to find a general form of words to extend to the obvious and proper cases which are covered by the words: under instructions from, or with the licence or permission of a Government Department. As I said when I moved the Clause we want to have another look at them.

3.30 p.m.

My hon. Friend the Member for Daventry (Mr. Manningham-Buller) made the point that there may well be a period within the next five years while these Clauses are operating, when it may not be necessary to get permission for everything one wants to do, and when the war will be over so that the war effort formula can no longer be relied upon. I think that is also a point which requires consideration. The trouble about the words "improved production" is that though it would work all right for agriculture and industry, you may only want to cover improvements to residential property which are perfectly proper in the interests of the community. My right hon. Friend is grateful to those who have raised these points and given us their criticisms of these words. I would not like to agree to their disappearing altogether, but we will undertake to see whether we can arrive at some more satisfactory formula which will exclude what we want to exclude and will include both during the present period and later appropriate cases. We must also consider whether we do not want to have words which will adequately cover the point made by the hon. Member for Daventry.

Mr. Manningham-Buller

In view of what the Attorney-General has said, which goes a long way—I think entirely—towards meeting my own desires and those of my hon. Friends, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. Woodburn

I beg to move, in line 14, after "improvements," insert: due regard being had to any depreciation in the value of the improvements. I do not think it is necessary to argue the Amendment, but it does not seem clear from the wording of the Clause itself as to whether regard would be taken to the depreciation of an improvement which might have been made since the war started. The Attorney-General in his opening remarks seemed to indicate that the compensation would be of the value of the improvements when they were taken over, that is, including depreciation, but we would like to have that point clear. I will not argue it in case the Minister intends to give me a satisfactory answer right away.

Mr. W. S. Morrison

I can give the hon. Member the assurance for which he asks. The point is already covered in the wording of the Bill. I would draw his attention to the words which say that such additional sum, … by way of addition to the value,… as may be reasonable having regard to all the circumstances… It would obviously, in my submission, not be reasonable to ignore the depreciation of the improvements since they were made. Therefore the point is covered.

Mr. Woodburn

I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Major Studholme

I beg to move, in line 15, leave out from "moneys," to end of Clause.

I believe the Attorney-General mentioned something connected with this matter when he moved the Clause, but I did not quite catch what he said. I move this Amendment because it seems to me that the last words of this Clause as it stands make a provision which is of very little practical value, and merely adds another burden to those already borne by the farmer. The farmers already have enough forms to fill up, in all conscience, and they are very often sitting up scratching their heads half the night as it is. In farming, where one is contending with nature, all sorts of factors over which the farmer has no control have to be taken into account. How much profit he makes is largely dependent on the weather and on the seasons, and his returns vary from year to year. Is it really reasonable to ask the farmer to state on a form how much of his profit is due to the fact that he has put up a new pigsty, or built a shippen or drained a field? It might be possible to work this out over a period of years, but farm profits are reckoned on the total farming operations, and what a farmer gains on his pigs he may very likely lose on his corn. The Clause, as worded, may look very tidy on paper to somebody sitting in an office, but in practice I cannot see that it will produce any useful result. The only thing it will do will be to exasperate further the unfortunate farmer. He 'will have to fill up another form asking him questions to which I fail to see how he will be able to give the answers. I hope that the Minister will reconsider this matter, and I would ask him if he will accept this Amendment.

Mr. Molson

I would like to say a word in support of the Amendment. As I understand the purpose of the Clause which my right hon. Friend is moving, it is to make more adequate provision in cases where capital expenditure has been undertaken, either upon agricultural land or any other kind of property. I very much doubt whether it is quite reasonable, when expenditure of that kind has taken place, and where it has been good and wise expenditure, and as a result of that either production on agricultural land or output from the factory has been increased, that when the Government or local authority takes over that land or that property there shall be deducted from the additional capital expenditure the return which the owner of that land or factory may have had in the years since the capital expenditure was incurred. Really the effect of this, carried to its logical conclusion, should be that if a Government Department have made a mistake, and have directed a farmer or landowner to undertake capital expenditure which, in fact, has turned out to be completely unprofitable, the landowner would be entitled to recover in compensation the whole capital expenditure—

The Attorney-General

This is based on value, not on cost.

Mr. Molson

I am sorry, I do not quite follow. The position, as I understand it, is that under the general structure of the Clause ordinary capital expenditure incurred is photographed back to 1939. The purpose of this Clause is to give additional compensation on the basis of the higher cost when capital expenditure has been incurred during the war for a public purpose, or in accordance with a direction. As I understand the words—I hope I am not misunderstanding them—which my hon. and gallant Friend is proposing should be omitted, in assessing the additional compensation that would be payable, account should be taken of any increased return or increased price in respect of the profit on work done on the improved land. If I am wrong the Attorney-General will no doubt correct me. It appears to me there is some confusion here between compensation for capital expenditure and the return which has been received from that capital expenditure.

Commander Galbraith (Glasgow, Pollok)

I support this Amendment. It is very difficult indeed to decide what is to be recovered in this case. It seems to me rather unjust in a way to recover something which may have arisen from the expenditure of this money, together with work which has been applied. It seems to me that the words "or of products of" will have that effect. A certain sum of money may be spent, but if as the result of the manufacture of something the person concerned makes money, he is seemingly going to have some of that taken into account, though that profit may be the direct result of some of his labour. From that point of view, I would suggest that these words might be omitted.

The Attorney-General

I have done my best to follow what has been said, but I am still of opinion that this is a reasonable provision. This applies where a man has an opportunity of getting an increase over and above the normal 30 per cent., based on certain grounds, which I explained just now. I should have thought that you ought to take into account, in deciding what was a fair addendum to give, the fact that for a considerable period a man has had an increased return as a result of his expenditure. This increased return may go on for some time. Take the case of a subsidy, as a result of which a farmer has been able to increase his return several times over. I should have thought that that would have been taken into account, as compared with the case of a man who has incurred expenditure and has not got an increased return.

Take the case of one man who has got land under a lease and has not been able to benefit from the improvements; and of another man who was able to put up the rent at once and get an immediate return in respect of this extra expenditure. I should have thought that you ought to treat these two cases differently, and say, "in the first case the man has expended this money, but has had a substantial return from it over a considerable period, while in the other case the man has not had any return from it." We still think that this is a matter which the arbitrator ought to be able to take into account. He will have to do it on fairly broad lines. I do not think that, in practice, it will involve any great and troublesome filling up of forms. It will be applied only where it is fairly easy to apply, and where it is obvious that the expenditure has resulted in a fairly substantial increased return.

Mr. Manningham,-Buller

I would ask the Attorney-General to look at this matter again. I listened carefully to his argument, and it seems to me quite illogical. You are taking over a capital asset from the owner—the owner-occupier, luckily, does not come into this—and you are going to say, "We will pay you the value of it, but we have to deduct from that value at the present time such sum as this improvement may have brought into your pocket." I am applying my argument to agriculture at present, although it applies equally to industrial undertakings. A man who improves his holding and makes use of that improvement will, in fact, get less for that improvement than the man who makes an improvement which he does not use. The second man will have to be paid more by the local planning authority. If a man, for instance, puts up a pig-sty and does not use it, he will, I understand, get the value of the pig-sty. If he puts up a pig-sty and does use it, he will get the value less the amount that the litters of pigs which have been born in that pig-sty will bring in. The poor farmer, when he makes a claim, will have to make a return showing whether in fact he has had sufficient litters to meet the cost of the improvement. I suggest that it is a somewhat novel thing, when any capital asset is acquired, that one should have a deduction made from the capital value of that asset according to the return in income that that asset has produced in years gone by. I would ask the Attorney-General to look into the matter again very carefully.

Mr. Woodburn

I do not think that the argument of the hon. Member for Daventry (Mr. Manningham-Buller) meets the whole case. It is easy to take an instance like that of the pig-sty, and to make a story round it.

Mr. Manningham-Buller

Take a chicken-coop, then.

3.45 p.m.

Mr. Woodburn

A pig-sty, I think, usually smells like some of the arguments. Suppose that somebody, for the purposes of the war, has spent £100 on a new building in industry, and that that has been used for five years. The Income Tax authorities have already allowed the owner depreciation on that building, free of Income Tax, at the very high rate at which Income Tax is to-day. That would be a free gift to the person if you allowed it to go by default.

Mr. Manningham-Buller

Surely that obsolescence allowance would be taken into account when assessing the value at the time of acquisition.

Mr. Woodburn

Surely that is the point—that you should assess the value at the time of acquisition.

Mr. Manningham-Buller

The hon. Member is evading the argument.

Mr. Woodburn

If a person is allowed to accumulate depreciation, that is a very simple return. Owing to the circumstances of the war, that man may have put up a building that may bring in a very large sum of money; and if you take into account the circumstances of the war for giving him the money, there should be some account taken of whether he has benefited from the building. I appreciate that there may be arguments the other way, but there should be some discretion left to the assessor to take into account what is the return in that respect.

Major Thorneycroft (Stafford)

I hope that we shall have an undertaking from the Attorney-General that he will look into the matter, because I think my hon. and gallant Friend has raised a point of real substance. It is suggested that, in the case of a man who, say, five years ago invested £100 in industry, if the building is taken over, all the return from the investment in that industry should be taken into account against the compensation value. Then the person would have his capital taken away, and rendered useless for five years. That is the effect of the Clause as it stands. Suppose a man spent £100 on improvements two years ago, and he draws £5 a year in profits as a return on that expenditure. Is that to be counted against him? I suppose that, if he is a wise man, he invested that £100 simply to get something on it. It seems to me that the Attorney-General is confused between capital and interest in this matter I think we are entitled to a fuller statement than we have had.

The Attorney-General

I will do my best. I do not think I am confusing capital and interest, but I agree that this is a different matter from compensation. We are dealing here with expenditure which has taken place so far. Take the case where the Government have fixed a contract price at a certain level, having regard to the fact that it has involved considerable capital expenditure by the firm. There are many cases of that kind, and it would be quite wrong to exclude that consideration from the amount you give under this Clause.

Mr. Molson

The right hon. and learned Gentleman has just spoken about a Government contract. Presumably, a Government contract is paid for out of public money, and the previous words, which are not to be omitted from the Clause, say: which may have been made for the payment of any of the cost thereof out of public moneys. Therefore, the example which the right hon. and learned Gentleman has given has no bearing at all on the case.

The Attorney-General

There has been a great fixing of prices. Some things are now cheap, and, though we do not complain, a great many prices have been fixed at a level higher than before, because of extra capital expenditure involved. My hon. Friend shakes his head, but I think it is so.

Major Thorneycroft

I hope the Attorney-General will not argue that price-fixing by the Government, which is, presumably, to keep prices down, has increased the profits.

The Attorney-General

You have to take all sorts of things into account, in some industries, increased wages, and, in others, increased capital expenditure. I do not want to quarrel with my hon. Friends, but I believe that this is an item which ought to be taken into account. I think I appreciate the point they make, and I agree that, in certain circumstances, it is a perfectly fair point. We will certainly look into it in that light. I think there is a point here which ought to be covered, and if my hon. Friends will be content with that—I do not accept their argument at all—we will look at it again.

Major Studholme

On the understanding that the right hon. Gentleman will look into the point again, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause added to the Bill.