HC Deb 23 June 1953 vol 516 cc1774-99

At the end of section one hundred and one of the Income Tax Act, 1952, the following subsection shall be inserted: — (8) Where the owner of any land or house

  1. (a) would under this section have been entitled to repayment of the amount of income tax upon any sum if the assessments on the land or house, as reduced for 1775 collection, had been sufficient for the purpose; but
  2. (b) is unable under this section to obtain repayment of that amount because the assessments on the land or house are not sufficient for the purpose,
that sum shall be treated as if it were the amount of an allowance falling to be made under this Act by way of discharge or repayment of tax, available primarily against unearned income."—[Mr. Oliver.]

Brought up, and read the First time.

Mr. G. H. Oliver (Ilkeston)

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

This Clause deals with allowances under Schedule A for repairs to property. During the past few years we have discussed not only the need for repairs to many of the houses in the country, but particularly those occupied by members of the working class, many of which are dilapidated and in a state of decay.

I realise that, in the main, it is due to the large volume of houses falling within the purview of the Rent Restrictions Acts. For that type of property, while the rent is restricted expenditure in respect of repairs has increased enormously. To some extent the provisions of this Clause would give relief to the landlord if he spends money on repairs in certain circumstances where he is not at present helped by the Revenue, but, on the contrary, is penalised.

8.15 p.m.

I recognise at once that as the law stands provision is made for a standard allowance in respect of repairs, but I am sure that few hon. Members would attempt to justify the scale in operation today. Where the annual value of a property does not exceed £40 the deduction which may be made is one-fourth part of that annual value. The owner of a property of that value would be entitled to spend £10, on which he would get Income Tax rebate.

On a property exceeding £40, but not exceeding £100, he gets the princely sum of one-fifth of the annual value. If the value exceeds £100 he may claim a deduction of £20 plus one-sixth of the amount by which the annual value exceeds £100. These scales have been in operation for many years. I can vouch for 25 years and the period may well go beyond even that. If they were fair allowances 25 years ago they must be totally inadequate to meet the cost of repairs today.

While we recognise that complete inadequacy, which is shown by the fact of the state of property in this country, we must recognise, also, that the law at present permits, in addition to the allowances to which I have referred, relief to a property owner where he can show that the cost of maintenance and repair of the property over the five preceding years has exceeded the statutory allowance for repair. But that sum must not exceed the net annual value. Tax would have to be paid on any money spent above that figure.

As an illustration, if we consider a property with a net annual value of £30 and the landlord, over the five proceeding years, spends £40 in repairs, he can only re-claim relief on £30. He cannot put the other £10 against some other income, or transfer it to another year. That is definitely penalising anyone wishing to keep his property in a decent state of repair. This Clause seeks to get rid of that penalty. In other words, it does not penalise the landlord; it induces him, if necessary, to spend the money which he deems necessary to keep his property in a decent state of repair.

In 1945, when my right hon. Friend the Member for Bishop Auckland (Mr. Dal-ton) was the Chancellor of the Exchequer, the principle which I am asking the Committee to accept was extended to agricultural land and properties, and I have not the slightest doubt that when that concession was made there was great justification to induce property owners to bring their properties up to date and make them decent. I have no doubt that that has had a very desirable effect.

If that is so, however, in respect of agricultural properties, why is it not applicable to dwelling-houses so as to induce people to spend money to make dwelling-houses habitable and to keep them in the best possible state of repair? It if were possible, in cases where excesses have been spent, to transfer the excess to other incomes or to carry it over to another year, it would be a great concession and would do a little—I do not suggest it would do a lot—to help landlords to get their property back into the condition in which it ought to be.

This proposed concession, in the main, would go to the small man. It does not apply to the large property company. The large property owner, as a rule, is a property owning company which is not affected by these proposals. A large estate, of course, is treated as a unit and, therefore, the concession would not apply to that. This matter deals mainly with residential property. I see that the Solicitor-General is almost straining at the leash to get to the Box to tell us that he is prepared to accept this new Clause, and I hope that we shall have a favourable reply from him.

Mr. Raymond Gower (Barry)

I think hon. Members on both sides of the Committee will agree that the idea behind this Clause is a very good one. Even if it cannot be accepted tonight, it should certainly be very carefully considered.

One of the main problems today is the decay of our older houses, and indeed of our not-so-old houses, as the hon. and learned Member for Ilkeston (Mr. Oliver) has pointed out, due largely to the increased cost of repairs and to the fact that the resources out of which those repairs have to be paid have not increased similarly. The hon. and learned Member for Ilkeston has clearly shown us how inadequate are those resources and the present allowances.

Although the proposed new Clause may not be perfect in form, I imagine that the principle of the new Clause would be of great assistance in the case of very many of the properties concerned. It will not help those whose incomes are very small. The person with perhaps a couple of houses—and we encounter many such people in our constituencies—would not benefit, but it would benefit the vast majority—

Mr. Oliver

If they had another income they would have the surplus transferred.

Mr. Gower

When I say that it would not benefit the person with a couple of houses, I can think at this moment of a widow in my own constituency who has only two or three cottage properties, and derives a very slender income indeed from them, and in many ways she is worse off than a person who has no such resources but who can receive National Assistance. Those persons would not benefit by this new Clause, but nevertheless it would be a first step in the right direction. It would benefit the vast majority of properties concerned.

I disagree with the hon. and learned Member for Ilkeston in one respect. This Clause would also benefit in some degree the property companies to which he referred. As he properly pointed out, the principle behind his Amendment does not penalise the landlord and, what is more, it imposes no new burden on the tenant. That, I imagine, is an additional reason for supporting the principle behind this Clause. I do not know what the principle of this Clause would cost the Treasury, but I submit that whatever the cost, it would be money well invested, because anything we can do to remove or repair that decay which is occuring in our older property is most desirable.

In brief, I imagine that most of us support the idea behind this new Clause. We should like to know from the Minister the estimated cost of putting it into effect. We should like to know whether there is any technical objection to its present form. Even if he is not able to accept this new Clause tonight, I sincerely hope that when we reach the Report stage, he will have given it careful and sympathetic consideration, because I believe that it will be a first and most valuable step towards dealing with the question of decaying house property.

Mr. Gordon Walker (Smethwick)

I certainly hope that the Solicitor-General will be able to agree to this new Clause because it is really demanded by the simple principle of good taxation which, I believe, goes through the entire structure of our system of taxation, with this one exception of the house owner— namely the principle that Income Tax should be paid on actual income after set-off for loss or for proper expenses.

I believe—I cannot think of any other exception—that everybody else pays Income Tax on his actual income after such allowances have been made, but the owner occupier of a house cannot set off proper expenditure against his income before he pays his tax. His isolation in this respect is made all the more striking because, in 1945, agricultural land and buildings were exempted; before that, the owner of such buildings was in the same position as the owner-occupier is in today. In 1945 he was allowed to set off expenses against other income and carry it over to the next year.

Therefore, the discrimination—because that is what it means—against the house-owner is very marked, and I cannot see how, on any principle of good taxation, this new Clause can be resisted. The hon. and learned Gentleman is very ingenious in thinking out principles, but I think he would be hard put to it to find a proper principle to apply to the tax structure which would justify the rejection of this new Clause. It is highly desirable that we should do what we can to encourage the owners to put money back into house property.

8.30 p.m.

My final point is that this concession —it is not really a concession at all but the righting of an injustice—would be completely safeguarded against fraud. First of all, the applicant has to average the amount out over five years, so that one could not by large expenditure in one year obtain an improper exemption, and, more particularly, one can only get these allowances against receipts for actual expenditure. It is absolutely foolproof, and I hope that the Government can tell us that they will accept both the principle and the new Clause.

The Solicitor-General (Sir Reginald Manningham-Buller)

Perhaps I might answer the hon. and learned Member for Ilkeston (Mr. Oliver), who moved the new Clause, at this stage, because we have a great deal of work to do, and I feel sure that, if we can deal shortly with the points at issue, it will meet everyone's desire.

A great deal of what has been said will command the universal support of hon. Members as to the desirability, and indeed the necessity, of securing repairs to houses which so badly need them, but we are not really discussing that matter this evening. We are discussing this new Clause, and, as far as I am aware, it always has been the practice to limit the amount which can be claimed for maintenance to the amount of the assessment under Schedule A; that is to say, I am not aware of any time in the long history of our Income Tax laws when one could claim as maintenance more than the amount of the Schedule A assessment. That arrangement worked all right when the Schedule A assessment was up-to-date, and kept more or less in line with current values.

Of course, this problem, to which the hon. and learned Gentleman has drawn attention, arises at the present moment largely because there has been no revaluation for Schedule A purposes since 1936, and the cost of repairs has appreciated considerably since that time. The answer to the problem which the hon. and learned Gentleman has put forward —and it may be an unpleasant answer— is re-valuation for Schedule A purposes, because that would allow larger claims for maintenance, but the hon. and learned Gentleman will realise that, if there was a revaluation now, and the person paying Schedule A at the present time is not paying what he would have to pay should there be a re-assessment, he gets an advantage in that way at the present moment.

Mr. F. J. Bellenger (Bassetlaw)

Would the hon. and learned Gentleman allow me? He seeks to show that the reason why my hon. and learned Friend's Clause cannot be accepted is because Schedule A assessments are too low, because there has been no re-valuation. Surely, the learned Solicitor-General is aware that the Schedule A assessment is based on the rental income, and that, in addition to Schedule A at present, there can be an additional assessment under Schedule D for excess rent and that any excess repairs could be set off against it?

The Solicitor-General

The right hon. Gentleman is a little wrong in one particular. If one is assessed under Schedule A, according to a case which was decided in the House of Lords, one cannot be assessed under Schedule D in respect of the same property. [HON. MEMBERS: "No."] It was a case in the House of Lords. I have had occasion to look at it quite recently. It is Salisbury House Estates v. Fry, where the Revenue sought to do that very thing, and the House of Lords said that they could not No doubt the right hon. and learned Member for Neepsend (Sir F. Soskice) is familiar with that case.

Sir Frank Soskice (Sheffield, Neepsend)

I know that case very well, but I certainly never regarded it as deciding what the Solicitor-General has just said. Surely you can have a Schedule A assessment on you and an excess rents assessment put on you in addition to the Schedule A. I never thought the Salisbury House case decided anything to the contrary.

The Solicitor-General

If the right hon. and learned Gentleman will look at it again he will see that there was an attempt by the Revenue to get, under Schedule D, an excess which the company was getting over the valuation under Schedule A. That attempt was completely unsuccessful. However that may be, do not let us prolong the matter.

Sir F. Soskice

I am sorry to interrupt the hon. and learned Gentleman again, but I am certain that we must be accurate about this. It so happens that I looked up the Salisbury House case two months ago.

The Solicitor-General

I looked it up yesterday.

Sir F. Soskice

I must look at it again, but my recollection is quite clear. It was a case where there were ordinary trading profits, not excess rents, and it was held that the company could not be assessed under Schedule A, and also under Schedule D to trading profits. That is not an authority for a moment that one cannot be assessed under Schedule A and in addition be assessed in respect of excess rents.

The Solicitor-General

What they were seeking to do was to get an assessment under Schedule D, having assessed under Schedule A, and also to deduct under Schedule D the amount of the Schedule A assessment. Whether the right hon. and learned Gentleman calls it "trading profits" or not, they were in effect profits from rents of premises. I do not think that we can usefully prolong controversy about that case. All I can say is that I had occasion to look at it yesterday.

Mr. Houghton rose

The Solicitor-General

May I carry on with my argument? I will give way to the hon. Gentleman in a moment. The right hon. Member for Bassetlaw (Mr. Bellenger) seems to assume from what I have said that that was the reason why we were not able to accept the proposed new Clause. I was merely seeking to indicate the reason why the difficulty has arisen. It is because of the ceiling which has been fixed for many years. The Schedule A assessment has existed for a long time as the ceiling to the amount which can be claimed for maintenance. That is generally recognised as being the case.

The proposal put forward by the hon. and learned Gentleman opposite would affect all kinds of property owner, including property companies who hold residential property. They have to pay Schedule A tax, and they might be able to set off their maintenance claim against other taxes on the income of that property company. It would be hard to limit the operation to one particular category of property owner.

Then I am asked what would be the cost. I cannot give an answer to that question, as it would depend entirely on how much money was spent in any particular year. It would be hard to estimate that, but there is no doubt that the cost would be very substantial indeed. Hon. Gentlemen may say that the idea is a very good one because it overcomes a difficulty without penalising the landlord or throwing any new burden on the tenant, but it would throw an extra burden on the general body of taxpayers. The problem with regard to the maintenance allowance is, and indeed in relation to Schedule A also is, a complicated and difficult one.

I quite agree that a problem exists. It is a matter which is under the consideration of the Royal Commission and in those circumstances I suggest to the Committee that it would be wisest to await the Royal Commission's Report before making what would be a radical change in the structure of the Income Tax Acts which has existed up to now. While I hope that I have made it clear that I am not in the least unsympathetic towards the object behind this Clause, it is for that reason that I ask the hon. and learned Member for Ilkeston whether, having ventilated the subject very fairly, he would not now be prepared to withdraw this new Clause.

Mr. Gaitskell

When the Solicitor-General rose at such an early stage in the discussion on this new Clause I had hoped that it meant he would accept it, or at least indicate that he agreed with the principle and that the Government would do something about it. We know that the Government are anxious to get on with the Bill and, of course, if they have a concession to make it is a very sound rule to make it early in the discussion, because that saves time. Unfortunately, we find that that is by no means the case. The Solicitor-General has given us a very dusty answer indeed, the usual dusty answer which simply refers everything to the Royal Commission.

I do not want to take up time in going over the arguments again in favour of this Clause. There are some aspects of the Clause with which I am not entirely in agreement. I do not much like the last four words in it. Admittedly, they make no difference to what the effect in law would be, because they simply say, … primarily against unearned income. But they give a rather misleading impression. I realise that no doubt my hon. Friends had in mind that since they were asking for an off-setting of expenditure under Schedule A to some other income it was natural to choose unearned income for that purpose. All the same, if I may say so to them with respect, I should much prefer not to have those words in the Clause.

In passing, I must say that I would not be very much in favour of a Clause which was to assist people who really did not need assistance in this way. That is one point which I thought that the Solicitor-General made. There may be some answer to it, and it may be a matter merely of the drafting of the Clause. But he suggested that it would benefit a wide variety of persons, companies and corporations, and the implication of his argument was that that was not really necessary. That is a really serious point, but it does not in the least dispose of the matter.

If the Solicitor-General had said, "The Government cannot accept this Clause, because it goes too far in providing assistance and permitting off-setting in too many cases, but they recognise that there are a number of small people who need assistance and they will bring in a Clause themselves to deal with the matter," then, for my part—I do not know about my hon. Friends—I would have been fairly well satisfied with the answer. But we have not had that answer at all.

As my hon. and learned Friend the Member for Ilkeston (Mr. Oliver) made perfectly plain, the new Clause, as it stands, is intended principally to benefit small people. If it goes wider than that then perhaps the drafting could be altered. I admit that inevitably the Clause cannot benefit those who have no other income. That is only one illustration of the general point that if one is making a concession in taxation it can only be made to those who pay taxes. We cannot discuss the rights and wrongs of making these sorts of concessions here. In this Finance Bill we are restricted to one field alone. We may regret that we cannot help the widow who has two houses and nothing else, but there it is. It is a pity. But that is no reason for not doing something for those who can be assisted.

8.45 p.m.

I was particularly surprised—indeed, alarmed—by what the Solicitor-General had to say about the reasons for the present situation. He seemed to be warning us that the only way out of the situation was for the Schedule A assessments to go up three times above their present level. Is that really the Government's intention? Is that the way he sees out of this difficulty? It is a most astonishing statement. I understood that even in the new assessments which are being considered in the Bill which is now before the Standing Committee the principle is still to be the rental in 1939. There can surely be no question of any solution to the problem being found by an increase in Schedule A assessments. I do not think it would be a popular suggestion if that really were the Government's intention.

In all the circumstances, although I do not agree with everything in this Clause, my hon. Friends are entitled to press this matter a great deal further. There is no doubt that this is a very serious grievance. There is no particular reason why the ceiling should not be removed in the case of agricultural buildings and maintained on residential dwellings. We have not been told why there should be this discrimination. In quite a number of cases it causes serious hardship and, for my part, I very much hope that my hon. Friends will press the Government further and get a much clearer and more satisfactory statement from them before we leave this Clause.

Mr. John Hay (Henley)

I want to address one plea to the Solicitor-General on this matter. There is a feeling in all quarters of the Committee that there is something behind this Clause which indicates a problem needing attention but, as the right hon. Member for Leeds, South (Mr. Gaitskell) has made clear, there are certain defects in the new Clause as it is drafted.

The purpose behind it is a good one, which was typified by the right hon. Member for Smethwick (Mr. Gordon Walker) when he said that all this new Clause seeks to do is to ensure that if one has a right to a rebate of tax one should be able to apply that right to some other income which would otherwise be taxed at the full rate. From the point of view of pure equity that would be the fair thing to do but, as the right hon. Member for Leeds, South said, the Clause as drafted would take in far too large a group of people, some of whom might not be deserving of this particular concession.

I think the Solicitor-General would agree, however, that it is particularly the small people, about whom several hon. Members have already spoken, who are in need of some assistance. I was delighted to hear the right hon. Member for Leeds, South say that the whole point about taxation is that one cannot give a concession in tax to those who do not pay tax. I am sure the House would have welcomed that remark from the right hon. Gentleman on the Second Reading of this Bill or during the Budget debate which preceded it, when he adopted an entirely different attitude.

Mr. Gaitskell

The hon. Gentleman knows perfectly well that we were then entitled to discuss expenditure as well as taxation. My point then was that it was within the power of the Government to help people below the tax level at that stage, but it is not now possible, at any rate with regard to this Clause.

Mr. Hay

I appreciate the correction. There is a problem here. It would be a pity if the Committee were forced to a Division on this subject. I urge my hon. and learned Friend to say that between now and the next stage of the Bill this matter will be looked at once more. It would be unfortunate if the Committee had to divide on a subject of this kind when there is undoubtedly a feeling that something ought to be done, but I would also ask the hon. and learned Member for Ilkeston (Mr. Oliver) whether, if my hon. and learned Friend were prepared to undertake to look at this matter again, the hon. and learned Member would be prepared to withdraw this Clause, so that we did not have to have a rather unfortunate Division on a subject of this sort. I support the idea behind the Clause; there may be difficulties about it, but it is a good principle and, if possible, we should include it in legislation.

Mr. A. J. Irvine (Liverpool, Edge Hill)

I very much hope that the Solicitor-General will take note of the formidable armament of argument which has been brought to bear from both sides of the Committee. What is unsatisfactory at this stage is that the Solicitor-General has based his reply upon the proposition that the cure for this admitted difficulty is a revaluation of the Schedule A assessment. At any rate, that is the impression that he gave the Committee.

The Solicitor-General

I am sorry if that was the impression that I gave the Committee. It was certainly not what I said or what I wished to imply. I merely sought to indicate how the problem might be said to have risen. I pointed out that the Schedule A assessment was last made in 1936. I then went on to say that if the values had risen so that the Schedule A assessment, if now made, increased, the ceiling would be higher for the maintenance claim, and the problem might not arise.

I said nothing—I am certain that HANSARD will bear this out—to indicate that it was my view that the values would always be put up for Schedule A. I do not know what would be the position. I was merely seeking to indicate how the problem now arose and why the problem was not present in 1936. I am sorry if I failed to make myself clear about that. The position which I took up was to say that, while we are not unsympathetic to the proposal, this is a matter which is being considered by the Royal Commission and that, before altering the position, it would be wiser to await their Report.

Mr. Irvine

I am glad to have from the Solicitor-General that explanation of what he said. No doubt, through a misunderstanding, he gave the impression to some hon. Members that he would regard revaluation of Schedule A assessments as a possible solution. However, I gladly accept his explanation.

It is clear that the consequence of the revaluation of Schedule A assessments upon the taxation injustice with which we are concerned in the proposed Clause might be to reduce the number of persons affected by it, but it would emphasise even more than it is emphasised now the circumstance that it would be the smallest owner-occupier who would be victimised by the restrictions. On both sides of the Committee it is recognised that there is an injustice, one of comparatively small content but of considerable importance particularly affecting small persons. It seems to be the kind of matter which, pat-excellence, could well, and to the satisfaction of all, be corrected during the Committee stage of the Finance Bill.

Our complaint is that the small owner-occupier is the victim of the injustice which exists under the present law. Our proposition is that the Clause deals with the anomaly which bears with particular harshness on such an owner-occupier. He receives his Schedule A assessment. Then he gets his repairs allowance. As my hon. and learned Friend the Member for Ilkeston (Mr. Oliver) said, it is a rather small allowance, but, nevertheless, he gets it. That leaves him with a net assessment. He finds that the relief to which he is entitled—this is the point of which I want the Committee to be seized—based upon the actual expenditure incurred over a period of five years is limited to that net assessment.

The owner-occupier also finds that in that respect he is at a disadvantage compared with the owner of agricultural land and agricultural buildings who is getting relief in respect of the whole of his expenditure. What can justify that distinction? What, in principle or in reason, can be brought forward to justify the advantage which the owner of land or agricultural buildings possesses in that respect?

He finds, in addition, in this respect, contrary to the general principle which is applied in the law of Income Tax, that he cannot set off his loss against other income. So far as I know that principle is one of almost universal application. It is one to which acknowledgment is given even in this Finance Bill which we are considering now in Committee in Clause 13.

These there are two respects in which he finds himself treated, in my submission to the Committee, most unfairly and differentially. The matter which concerns me most, however, is the extent to which the existing law, which we are trying to correct by this new Clause, penalises the smallest owner-occupier. When the restriction is analysed, unless I am mistaken—and I take responsibility for my own figures, because I have worked them out as well as I can—it is the smallest class of owner-occupier who is worst hit.

It is true, of course, that the scale of repair allowance is graded to the advantage of the smaller owner-occupier. That is only fair. He gets one-quarter, on the first £40, one-fifth between £40 and £100 and a rather less proportion if it is higher, and, in consideration of this, the occupier of the lower assessed house, as is right and fair, has an advantage over the owner-occupier of the more highly-rated house. But the effect of this restriction, which the Clause tries to amend, is, as I see it, in exactly the opposite direction, because it seems to me to operate, not like the original proportions to which I have referred, but directly and explicitly against the small owner-occupier.

I would ask the Committee to bear with me while I put before them by way of satisfying them that what I have alleged is true, two cases which, in my submission, are very comparable cases which the Income Tax law ought to treat alike, and which, in fact, it does not treat alike. Let us take, first of all, the case of an owner of a house assessed at £80, spending on an average £60 a year over five years in repairs. Let us put it at £80 gross assessment.

9.0 p.m.

Take the second case of a householder whose home is assessed at £40 gross, spending on the average £40 a year over five years on repairs. I suggest that these are comparable cases which the law ought to treat alike, but, applying the existing law, it works out in this way, if I am not mistaken. The owner of the £80 house gets £16 repairs allowance, a fifth, leaving a net assessment of £64. That means he gets relief on the whole of the £60 that he spends in each of the five years.

Take, now, what I have suggested is the strictly comparable case of the £40 house. The owner gets a £10 repairs allowance, and that leaves a net assessment of £30. So he is not covered for the whole of the £40 which he has expended. It seems to me, therefore, that if one applies the formulae now in effect it has the consequence of bearing much more harshly than appears at first sight on the small owner-occupier, and it is because that consideration is present that I would ask the Government to think again about this, because here in small compass or comparatively small compass is a manifest injustice, and an opportunity like this to correct it is invaluable.

I had the honour earlier in the Committee stage to move an Amendment which was accepted by the Government. I did not have the opportunity then to express my gratitude to the Government for acceptance of the Amendment, and I make good the omission now. Here is another rather similar injustice which one would look to the Government once again with magnanimity to correct.

Mr. Houghton

I shall not detain the Committee more than a moment or two, but really the learned Solicitor-General cannot get away with his complete ignorance of the excess rents provision of the Income Tax Act, 1952. He said that in a recent case in another place it had been found impossible in law to levy both Schedule A and Schedule D in respect of the same rent from the same property. All I can say is that there are literally thousands upon thousands of excess rent assessments levied under Case 6, Schedule D, under Sections 175 and 176 of the Income Tax Act, 1952, which are, apparently, unlawful, and I hope that the Solicitor-General will announce to all those who are paying Income Tax in excess rent assessments that they are paying unlawfully, that they need not pay, and can now ask for their money back.

My right hon. Friend the Member for Bassetlaw (Mr. Bellenger) pointed out what we all knew on this side of the Committee, but apparently the learned Solicitor-General was unaware of the provisions of the 1952 Act, which, I believe, began in the Finance Act, 1942, and were put there to remedy what otherwise would have been a weakness of the Schedule A provisions of the Act.

As the Solicitor-General has pointed out, there has been no re-assessment, no quinquennial revaluation, for Schedule A since before the war, but it was realised that during the war many rents might rise, notwithstanding the provisions of the Rents Restriction Acts, and since it was not possible to revise the Schedule A assessments this supplementary provision to levy a supplementary assessment under Case 6, Schedule D, was introduced into the Finance Act, 1942—I believe it was— in order that rents received should not go untaxed When the Solicitor-General suggests that a revaluation now would to some extent correct this anomaly he loses sight of the fact that Income Tax, so far as income from property is concerned, is charged on the rent received. If that is not fully accounted for by a Schedule A assessment, there is power to raise this additional assessment to which I have referred.

It is true that the owner-occupier has not been subject to a revaluation of the assessment on his property, but there are many reasons for leaving the owner-occupier at present in the relatively favourable position that he holds, having regard to the fact that if Income Tax makes sense at all it should be a tax on income and not a tax on the amenity value of the occupation of an unfurnished house. There is no justification for taxing the amenity value of an unfurnished house any more than for taxing the amenity value of pictures or furniture. But that is a much wider question on the subject of taxation under Schedule A, and I will not pursue it. The learned Solicitor-General failed, I thought inexcusably, to answer the question which was put to him from this side of the Committee.

The other point that he made was that as far as he knew it had always been so that the excess relief was limited to the amount of the Schedule A assessment. I suppose the Front Bench of the Government side of the Committee has become as infected as the Civil Service itself with the vice of precedent, and is subservient to tradition. If the hon. Gentleman wants to know, there was no provision in the 1842 Income Tax Act for any repairs to be allowed against the assessment of property at all, but that did not prevent the Government of the day in 1894 introducing for the first time a statutory repairs allowance against Schedule A assessments.

This provision for an excess repairs allowance was one of the first reforms of the great Liberal Government of 1906. It is true that at that time they limited the annual value of the property to which this concession could apply was to property of £8 per annum. I am glad to say it was increased by the same Liberal Government in 1914 to £12. Liberality had swept through the Government. In 1919 under the Coalition Government the Finance Act then extended the limit for this excess provision to houses of an annual value of £70 in London, £60 in Scotland and £52 elsewhere, which shows that sometimes Coalition Governments are more liberal than Liberal Governments, but only sometimes.

Finally, I want to put this to the Solicitor-General. If the taxpayer goes to the bank to borrow money to pay for these repairs, and he pays bank interest he can then set off the amount of bank interest against any income he is getting for the purpose of Income Tax. He is limited to the amount he can claim under Schedule A assessment to the amount of the net Schedule A assessment. If he is in business and he makes a loss he can carry forward that loss against future profits indefinitely. In last year's Finance Act the Millard Tucker proposals lifted the limit on the carry forward of losses, so that these losses can be carried forward indefinitely.

They can also set off business losses against other income, and here I may say in parenthesis that the reason why the new Clause contains the provision for the excess to be set off against unearned income is primarily that Schedule A income from property is unearned income. It seems to be right that any excess should be set off against any unearned income primarily, and against income if there is not enough unearned income to satisfy the demand. In those circumstances we are entitled to ask the Solicitor-General to make a different kind of speech or it is obvious that we must divide on this new Clause.

In conclusion, may I say that I am glad to see the Financial Secretary has come back? We all know the reasons for his regrettable absence. He has been making up a tiff with his hon. Friend the Member for Farnham (Mr. Nicholson). We had the painful pleasure of watching this personal quarrel, which nearly became the first sign of a split in the Tory Party, before they went outside to finish their reconciliation. Had the hon. Gentleman remained, he would have given us a voluble, a clear and a sympathetic reply on this new Clause but, as it is, he left it in the hands of the hon. and learned Solicitor-General, who never makes his appearance on the Front Bench without putting his foot in it, and whose replies on anything with which I have to do bode ill for the fate of the proposal made. At least we still have the right to divide the Committee and that, I suggest, we do.

Sir F. Soskice

I rose hoping that I would see a movement in the prostrate body of the Solicitor-General. I am not surprised that he was somewhat prostrate, spiritually at any rate, after the speeches made from this side of the Committee on this modest proposal.

As my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) has pointed out, there are in the opinion of a number of us on this side of the Committee matters to criticise in the form of the new Clause on the Order Paper, particularly in the words with which it ends. Surely, however, the Solicitor-General, having listened to the speeches made by my hon. Friends must concede, if he was not aware of it before, that it is now apparent that a real grievance has been brought to light? I think all hon. Members of the Committee will be grateful to my hon. and learned Friend the Member for Ilkeston (Mr. Oliver) for having called attention to it.

How the grievance should be dealt with is a matter on which opinions can differ, and it is obviously one which perhaps will give rise to difficulty. But what can and must be entirely beyond controversy is that a proposal such as has been made, evoking as it did so much sympathetic response on all sides of the Committee, ought not to have met the blunt and unsympathetic response which it met with from the Solicitor-General. The hon. and learned Gentleman kindly gave his views about the interaction of Schedule A and the excess rent provisions. If we felt that we had advantage from the exposition he gave us, perhaps we should have been more friendly towards him, but we were not able to agree with even those views that he expressed. Therefore we are less gratified by the rest of his address, which took the form of saying that when the Schedule A assessments are raised considerably above what they are at present, this grievance will evaporate.

Though I for a long time occupied the position of the hon. and learned Gentleman and felt acutely, as no doubt he does now, the difficulty which that position involves; though I often did with my foot what he has been charged with doing with his foot this evening, I think he has transgressed rather seriously in the direction of trying to brush aside the serious and sincere case put forward. This is an Amendment which, if it were accepted, would bring relief to a large number of persons of limited means who at present have no means of relief. As has been pointed out by my hon. Friend the Member for Sowerby (Mr. Houghton), the position is extremely anomalous. If there is bank interest to pay, that is a general charge upon income available against any source of income which one may have.

9.15 p.m.

Equally, the provisions in regard to the treatment of losses made in enterprises taxable under Schedule D are far more generous than the provisions in respect of maintenance expenses in so far as relief against Schedule A is concerned. We feel that at least the case should be seriously considered for reviewing the strict limitations of these Schedule A relief provisions.

If we had had any indication from the Solicitor-General that he was prepared to take seriously the case advanced from this side of the Committee, I am sure my hon. Friends would have felt more content than at present, but they feel—and I am not surprised—somewhat indignant at the tone and manner of the response of the Solicitor-General. I feel certain they would desire to take the matter further and press it to a Division. I advise them to do so and when we go into the Division Lobby, as I hope we shall, I hope we shall have with us a number of the supporters of the hon. and learned Gentleman who feel as we do the justice of our case and the inadequacy of the reply.

The Solicitor-General

I was about to rise when I saw the right hon. and learned Member for Neepsend (Sir F. Soskice) rising to his feet and, naturally, I awaited his observations. I am surprised that he commented on my failure to move faster. I was criticised for moving too fast earlier in the debate in seeking to give the answer to the points very clearly put by the hon. and learned Member for Ilkeston (Mr. Oliver) in the hope that it might save time.

I am sorry that the right hon. and learned Member thought my observations either blunt or unsympathetic. I tried to express them shortly, and I said in the course of them that I was not at all unsympathetic to the points raised. I indicated—and this was perhaps where the misunderstanding arose—where it might be thought that this difficulty was particularly prominent at present. But I certainly did not suggest, or wish it to be understood, that the solution would be a wholesale increase in Schedule A assessments. What I did desire to emphasise at this stage was that this is a matter which bristles with difficulties. It is a matter, as I said then, which is being considered by the Royal Commission. It was because of the desirability of awaiting the Report of that Royal Commission that I suggested to the Committee that it might be wise to see that Report before making a change.

Mr. Mitchison

Will the hon. and learned Gentleman allow me?

The Solicitor-General

May I conclude the observation? I have been attacked and I am trying to reply quite shortly. I do not in the least want it to appear that I am unsympathetic, or that we are unsympathetic; we certainly are not. I said that we recognised the real problem which exists here and in the course of my observations I fell into one error, which I correct now. I think I am right in the view I took of that particular authority. I have recently looked at the matter, but I forgot the provision in the Finance Act of 1940. The hon. Member for Sowerby (Mr. Houghton) was quite right, but I did not seek to interrupt his very interesting historical speech with humorous aspects in it. I hope I have made it clear that, although my reply was too short, it certainly was not meant to be unsympathetic and the reason I advanced for not accepting the proposed new Clause as present is that the matter is being considered by the Royal Commission and I stressed the desirability of awaiting their Report before making a change in the general law, which has existed for so long.

Mr. Mitchison

Has the hon. and learned Gentleman considered the terms of reference of the Royal Commission? It is true that if one looks through them very carefully one may be able to push this provision in, but it is certainly very far from being a primary or anywhere near a primary object of the Royal Commission.

The Solicitor-General

I am told that it is being considered.

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

The Committee divided: Ayes, 213; Noes, 231.

Division No. 197.] AYES [9.20 p.m.
Acland, Sir Richard Foot, M. M. Mason, Roy
Adams, Richard Fraser, Thomas (Hamilton) Mayhew, C. P.
Albu, A. H. Freeman, John (Watford) Messer, Sir F.
Allen, Scholefield (Crewe) Freeman, Peter (Newport) Mikardo, Ian
Anderson, Frank (Whitehaven) Gaitskell, Rt. Hon. H. T. N. Mitchison, G. R.
Awbery, S. S. Gibson, C. W. Monslow, W.
Baird, J. Glanville, James Moody, A. S.
Barnes, Rt. Hon. A J. Gooch, E. G. Morgan, Dr. H. B. W.
Bartley, P. Gordon-Walker, Rt. Hon. P. C. Morley, R.
Beattie, J. Greenwood, Anthony (Rossendale) Morris, Percy (Swansea, W.)
Bellenger, Rt. Hon. F. J Grenfell, Rt. Hon. D. R. Mort, D. L.
Benn, Hon. Wedgwood Grey, C. F. Moyle, A.
Beswick, F. Griffiths, David (Rother Valley) Mulley, F. W.
Bins, G. H. C. Griffiths, Rt. Hon. James (Llanelly) Murray, J. D.
Blackburn, F. Grimond, J. Nally, W.
Blenkinsop, A. Hale, Leslie Neal, Harold (Bolsover)
Blyton, W. R. Hall, Rt. Hon. Glenvil (Colne Valley) Noel-Baker, Rt. Hon. P. J.
Boardman, H. Hall, John T. (Gateshead, W.) Oldfield, W. H.
Bowen. E. R. Hamilton, W. W. Oliver, G. H.
Bowles, F.G. Hannan, W. Orbach, M.
Braddock, Mrs. Elizabeth Hargreaves, A. Padley, W. E.
Brockway, A. F. Harrison, J. (Nottingham, E.) Paget, R. T.
Brook, Dryden (Halifax) Hastings, S. Paling, Rt. Hon. W. (Dearne Valley)
Broughton, Dr. A. D. D. Hayman, F. H. Palling, Will T. (Dewsbury)
Brown, Thomas (Ince) Henderson, Rt. Hon. A. (Rewley Regis) Palmer, A. M. F.
Burke, W. A. Hobson, C. R. Pannell, Charles
Buton, Miss F. E. Holman, P. Pargiter, G. A.
Butler Herbert (Hackney, S.) Holmes, Horace (Hemsworth) Parker, J.
Callagan, L. J. Holt, A. F. Paton, J.
Castle Mrs. B.A. Houghton, Douglas Peart, T. F.
Champion, A. J. Hudson, James (Ealign, N.) Popplewell, E.
Coldrick, W. Hughes, Cledwyn (Anglesey) Price, Joseph T. (Westhoughton)
Collick, P. H. Irvine, A. J. (Edge Hill) Price, Philips (Gloucestershire, W.)
Craddock, George (Bradford, S.) Irving, W. J. (Wood Green) Proctor, W. T.
Crosland, C. A. R. Isaacs, Rt. Hon. G. A. pursey, Cmdr. H.
Crossman, R.H.S. Janner, B. Reeves, J.
Daines, P. Jay, Rt. Hon. D. P. T. Reid, Thomas (Swindon)
Dalton Rt. Hon.H. Jegger, George (Goole) Rhodes, H.
Darling, George (Hillsborough) Jenkins, R. H. (Stechford) Richards, R.
Davies, Ernest (Enfield, E.) Johnson, James (Rugby) Roberts, Albert (Normanton)
Davis Harold (Leek) Jones, David (Hartlepool) Robinson, Kenneth (St. Pancras, N.)
Davies, Stephen (Merthyr) Jones, Jack (Rotherham) Rogers, George (Kensington, N.)
Deer, G. Jones, T. W. (Merioneth) Royle, C.
Dolargy, H. J. Keenan, W. Shackleton, E. A. A.
Dodds, N.N. Key, Rt. Hon. C. W Shawcross, Rt. Hon. Sir Hartley
Donnelly, D.L. King, Dr. H. M. Shinwell, Rt. Hon. E.
Dugdale, Rt. Hon. John (W. Bromwich) Kinlay, J. Short, E. W.
Ede, Rt. Hon. J. C. Lee, Frederick (Newton) Shurmer, P. L. E.
Edelman, M. Lever, Harold (Cheetham) Silverman, Julius (Erdington)
Edwards, Rt. Hon. John (Brighouse) Lever, Leslie (Ardwick) Simmons, C. J. (Brierley Hill)
Edwards, Rt. Hon. Ness (Caerphilly) Lipton, Lt.-Col. M. Skeffington, A. M.
Edwards, W. J. (Stepney) MacColl, J. E. Slater, Mrs. H. (Stoke-on-Trent)
Evans, Albert (Islington, S.W.) McGhee, H. G. Slater, J. (Durham, Sedgefield)
Evans, Edward (Lowestoft) McKay, John (Wallsend) Smith, Ellis (Stoke, S.)
Evans, Stanley (Wednesbury) McLeavy, F. Smith, Norman (Nottingham, S.)
Fernyhough, E. MacPherson, Malcolm (Stirling) Snow, J. W.
Finch, H. J. Mainwaring, W. H. Soskice, Rt. Hon. Sir Frank
Fletcher, Eric (Islington, E.) Mallalieu, E. L. (Brigg) Sparks, J. A.
Follick, M. Mallalieu, J. P. W. (Huddersfield, E.) Stewart, Michael (Futham, E.)
Stross, Dr. Barnett Ungoed-Thomas, Sir Lynn Williams, David (Neath)
Swingler, S. T. Usborne, H. C. Williams, Rev. Llywelyn (Abertiltery)
Sylvester, G. O. Viant, S. P. Williams, Ronald (Wigan)
Taylor, Bernard (Mansfield) Weitzman, D. Williams, W. B. (Droylsden)
Taylor, John (West Lothian) Wells, Percy (Faversham) Williams, W. T. (Hammersmith, S.)
Taylor, Rt. Hon. Robert (Morpeth) Wells, William (Walsall) Winterbottom, Ian (Nottingham, C.)
Thomas, David (Aberdare) West, D. G. Winterbotlom, Richard (Brightside)
Thomas, George (Cardiff) Wheeldon, W. E. Wyatt, W. L.
Thomas, Iorwerth (Rhondda, W.) White, Henry (Derbyshire, N.E.) Yates, V. F.
Thomas, Ivor Owen (Wrekin) Whiteley, Rt. Hon. W. Younger, Rt. Hon. K.
Thomson, George (Dundee, E.) Wigg, George
Tomney, F. Wilkins, W. A. TELLERS FOR THE AYES:
Turner-Samuels, M. Willey, F. T. Mr. Pearson and Mr. Arthur Allen.
Aitken, W. T. Godber, J. B. Marples, A. E.
Allan, R. A. (Paddington, S.) Gough, C. F. H. Marshall, Douglas (Bodmin)
Alport, C. J. M. Gower, H. R. Maude, Angus
Amory, Heathcoat (Tiverton) Graham, Sir Fergus Maudling, R.
Arbuthnot, John Gridley, Sir Arnold Maydon, Lt.-Comdr. S. L.C.
Ashton, H. (Chelmsford) Grimston, Hon. John (St. Albans) Medlicott, Brig. F.
Assheton, Rt. Hon. R. (Blackburn, W) Grimston, Sir Robert (Westbury) Mellor, Sir John
Astor, Hon. J. J. Hall, John (Wycombe) Malson, A. H. E.
Baldock, Lt.-Cmdr. J. M. Harden, J. R. E. Moore, Lt.-Col. Sir Thomas
Baldwin, A. E. Hare, Hon. J. H. Nabarro, G. D. N.
Banks, Col. C. Harris, Frederic (Croydon, N.) Nicholls, Harmar
Barber, Anthony Harris, Reader (Heston) Nicholson, Godfrey (Farnham)
Baxter, A. B. Harrison, Col. J. H. (Eye) Nicolson, Nigel (Bournemouth, E.)
Beach, Maj. Hicks Harvey, Air Cdre. A. V. (Macelesfield) Nield, Basil (Chester)
Bell, Philip (Bolton, E.) Harvey, Ian (Harrow, E.) Noble, Cmdr. A. H. P.
Bennett, F. M. (Reading, N.) Harvie-Watt, Sir George Nugent, G. R. H.
Bennett, Dr. Reginald (Gosport) Hay, John Nutting, Anthony
Bevins, J. R. (Texteth) Heald, Sir Lionel Oakshott, H. D.
Birch, Nigel Heath, Edward O'Neill, Phelim (Co. Antrim, N.)
Black, C. W. Higgs, J. M. C. Ormsby-Gore, Hon. W. D.
Bossom, Sir A. C. Hill, Dr. Charles (Luton) Orr, Capt. L. P. S.
Boyd-Carpenter, J. A. Hill, Mrs. E. (Wythenshawe) Orr-Ewing, Charles Ian (Hendon, N.)
Boyle, Sir Edward Hinchingbrooke, Viscount Osborne, C.
Braine, B. R. Hirst, Geoffery Partridge, E.
Braithwaite, Sir Albert (Harrow, W.) Holland-Martin, C. J. Peake, Rt. Hon. O.
Braithwaite,Lt.-Cdr. G. (Bristol, N.W.) Holmes, Sir Stanley (Harwich) Perkins, W. R. D.
Bromley-Davenprt, Lt.-Col. W. H. HopkinUn, Rt. Hon. Henry Peto, Brig, C. H. M.
Buchan-Hepburn, Rt. Hon P. G. T. Hornsby-Smith, Miss M. P. Peyton, J. W. W.
Bullard, D. G. Horobin, I. M. Pickthorn, K. W. M.
Bullus, Wing Commander E. E. Horsburg, Rt. Hon. Florence Pilkington, Capt. R. A.
Burden, F. F. A. Howard, Gerald (Cambridgeshire) Pitman, I. J.
Butcher, Sir Herbert Howard, Hon. Greville (St. Ives) Powell, J. Enoch
Campbell, Sir David Hudson, W. R. A. (Hull, N.) Price, Henry (Lewisham, W.)
Carr, Robert Hulbert, Wing Cdr. N. J. Prior-Palmer, Brig. O. L.
Channon, H. Hurd, A. R. Profumo, J. D.
Clarke, Col. Ralph (East Grinstead) Hutchinson Sir Geoffrey (Ilford, N.) Raikes, Sir Victor
Clarke, Brig. Terence (Portsmouth, W.) Hylton- Foster, H. B. H. Rayner, Brig. R.
Cole, Norman Jenkins, Robert (Dulwich) Redmayne, M.
Conant, Maj. R. J. E. Johnson, Eric (Blackley) Rees-Davies, W. R.
Craddock, Beresford (Spelthorne) Johnson Howard (Kemptown) Remnant, Hon. P.
Crookshank, Capt. m. Hon. H. F. C Jones, A. (Hall Green) Renton, D. L. M.
Crosthwaite-Eyre, Col. O. E. Joynson-Hicks Hon L. W. Roberts, Peter (Heeley)
Crouch, R. F. Keeling, Sir Edward Robertson, Sir David
Crowder, Sir John (Finchley) Kerr, H. W. Robinson, Roland (Blackpool, S.)
Crowder, Petre (Ruislip—Northwood) Lambert, Hon. G. Robson-Brown, W.
Davidson, Viscountess Lannaster Col. C. G. Rodgers, John (Sevenoaks)
Deedes, W. F. Law Rt. Hon R. K. Roper, Sir Harold
Digby, S. Wingfield Legge-Bourke, Maj. E. A. H. Ropner, Col. Sir Leonard
Dodds-Parker, A. D. Legh, Hon. Peter (Petersheld) Russell, R. S.
Donner, Sir P. W. Linstead, Sir H. N. Ryder, Capt. R. E. D.
Doughty, C. J. A. Lloyd, Rt. Hon. Selwyn (Wirral) Savory, Prof. Sir Douglas
Drayson G. B. Lockwood, Lt.-Col. J. C. Scott, R. Donald
Drewe, Sir C. Low, A. R. W. Scott-Miller, Cmdr. R.
Dugdale, Rt. Hon. Sir T. (Richmond) Lucas, Sir Jocelyn (Portsmouth, S.) Shepherd, William
Eccles, Rt. Hon. Sir D. M. Lucas, P. B. (Brentford) Simon, J. E. S. (Middlesbrough, W.)
Erroll, F. J. Lucas-Tooth, Sir Hugh Smthers, Sir Waldron (Orpington)
Fell, A. McAdden, S. J. Smyth, Brig, J. G. (Norwood)
Finlay, Graeme McCorquodale, Rt. Hon. M. S. Spearman, A. C. M.
Fisher, Nigel Macdonald, Sir Peter Speir, R. M.
Fleetwood-Hesketh, R. F. Mackie, J. H. (Galloway) Stanley, Capt. Hon. Richard
Fletcher-Cooke, C. Maclean, Fitzroy Stevens, G. P.
Ford, Mrs. Patricia Macleod, Rt. Hon. Iain (Enfield, W.) Steward, W. A. (Woolwich, W.)
Foster, John Macmillan, Rt. Hon. Harold (Bromley) Stoddart-Scott, Col. M.
Fraser, Hon. Hugh (Stone) Macpherson, Niall (Dumfries) Strauss, Henry (Norwich, S.)
Fraser, Sir Ian (Morecambe & Lonsdale) Maitland, Comdr. J. F. W. (Horncastle) Summers, G. S.
Gammans, L. D. Manningham-Buller, Sir R. E. Sutcliffe, Sir Harold
Garner-Evans, E. H. Markham, Major Sir S. F. Taylor, Charles (Eastbourne)
George, Rt. Hon. Maj. G. Lloyd Marlowe, A. A. H. Taylor, William (Bradford, N.)
Thomas, Leslie (Canterbury) Wakefield, Edward (Derbyshire, W.) Williams, Sir Herbert (Croydon, E.)
Thomas, P. J. M. (Conway) Wakefield, Sir Wavell (St. Marylebone) Williams, Paul (Sunderland, S.)
Thompson, Lt.-Cdr. R. (Croydon, W.) Ward, Hon. George (Worcester) Williams, R. Dudley (Exeter)
Thorneycroft, Rt. Hn. Peter (Monmouth) Ward, Miss I. (Tynemouth) Wills, G.
Tilney, John Waterhouse, Capt. Rt, Hon. C. Wilson, Geoffrey (Truro)
Turner, H. F. L. Webbe, Sir H. (London & Westminster) Wood, Hon. R.
Turton, R. H. Wellwood, W. York, C.
Vans, W. M. F. Williams, Rt. Hon. Charles (Torquay)
Vaughan-Morgan, J. K. Williams, Gerald (Tonbridge) TELLERS FOR THE NOES:
Mr. Studholme and Mr. Kaberry.