HC Deb 30 May 1957 vol 571 cc741-55
Mr. Hector Hughes (Aberdeen, North)

I beg to move, in page 12, line 2, to leave out from "1957–58" to "that" in line 4.

The Deputy-Chairman

I think it would he convenient for the Committee to discuss this Amendment together with the following two Amendments, in page 12, line 3.

Mr. Hughes

If you please, Sir Gordon; I think that that would be the convenient course.

My two Amendments are alternative. They both seek to limit the operation of Clause 16 in point of time. The first would limit it to the year of assessment 1957–58 and the second would limit it to the period ending with the year of assessment 1961–62. Both agree in limiting the time in accordance with the earlier law to which I shall refer. The arguments for both are similar.

9.45 p.m.

The objects of my Amendments are threefold: first to co-ordinate the Clause with Section 16 of the Valuation and Rating (Scotland) Act, 1956, on which the Clause depends. The second object is to make the Clause limited in point of time, as the relevant Section in the Valuation and Rating (Scotland) Act, 1956, is limited in point of time. The third object is to remove from the Clause the words which tend to make it, in effect, practically unlimited in point of time unless Parliament in future takes some substantive step to limit it in point of time.

We seek to leave out the objectionable words which would make the Clause operate not only for the year 1957–58, but also for every subsequent year of assessment until Parliament otherwise determines. Either of these Amendments, if carried, would leave intact the opening words of the Clause: In relation to lands and heritages in Scotland, the following provisions shall have effect for the year 1957–58 … Then follow the provisions in a series of sub-paragraphs, with which I need not trouble the Committee.

That limitation in point of time to the year 1957–58 follows exactly the limitation in point of time in Section 16 of the Valuation and Rating (Scotland) Act, 1956, on which the Clause is based. It is manifest to hon. Members that the conflict between the Clause and Section 16 of the Act is something which Parliament should not tolerate.

The Clause as it stands is, therefore, wrong. It exceeds the Act of 1956, on which the Clause is based, and the Amendment is designed to remedy this defect. The wrongness and the need for the Amendment are evident if we look at the words which the Clause seeks to leave out. I have already quoted the initial words of the Clause which we seek to leave in. I quote now the later words of the Clause which we seek to leave out: and every subsequent year of assessment until Parliament otherwise determines. There are several objections to these words, but I shall trouble the Committee with only seven of them. First, they make the Clause unlimited in point of time, which is impractical and wrong in itself. Secondly, as I have said, they conflict with Section 16 of the 1956 Act, which contains the limitation as to time to the year 1957–58. Thirdly, they are an unreasonable interference with recent legislation, as I shall show. Fourthly, they tend to make the administration of the Bill when it becomes an Act difficult. Fifthly, they introduce uncertainty in practice from year to year, which is an important matter from the taxpayer's point of view. Sixthly, they are unnecessary because Parliament has the right anyway to determine otherwise by subsequent legislation. Seventhly, these words do not carry out effectively the purpose for which they are apparently designed.

The words which I propose to leave out seek to link up the provisions of Clause 16 of this Bill with Section 16 of the Valuation and Rating (Scotland) Act, 1956, but the attempt is manifestly incomplete. It is an extension and distortion of the provisions of the earlier Act, and is unjust, improper and wrong.

For these reasons, and for others which I will not trouble the Committee at the moment, I submit that the words— and every subsequent year of assessment until Parliament otherwise determines should be left out. To make clear my argument, it is necessary to appreciate the way in which Clause 16 is interwoven with the earlier Sections of the Acts which are expressly mentioned in the Clause. Clause 16, for its own purposes, refers to many earlier Acts. It refers to the Valuation and Rating (Scotland) Act, 1956, Sections 15 and 16 and the Third Schedule. It refers to the Income Tax Act, 1952, Sections 175 and 176. It refers to the Rating (Scotland) Act, 1926, to the Local Government (Scotland) Act, 1929, Section 45, and it refers actually to the Valuation Acts Amendment Act (Northern Ireland), 1932.

It will not be necessary, happily, for me to go into them, and I will not trouble the Committee by careful, diligent and exhaustive examination of all the Acts of Parliament which are referred to in this Clause of this Bill. I mention them to show the complicated nature of this Clause and to emphasise the importance which it has for owners and occupiers, who will have to construe it, who will be affected by it and whose money will be taken under it, if it passes.

I shall endeavour to limit my argument to the Valuation and Rating (Scotland) Act, 1956, and to that Act only, and of that Act only to Sections 15 and 16. In considering Clause 16 of this Bill, these two Sections of the earlier Act must be construed together. It is necessary to realise what these two Sections do and how the present Clause seeks to deal with them, and that I shall do very shortly, without quoting these earlier Sections at length, but by paraphrasing them briefly.

Section 16 of the Act of 1956 transfers liability for owner's rates assessed on leases of land and heritages from the owner to the occupier and provides for a consequential reduction in rent. The Section is a long one, and I have put it very briefly. Section 15 of the 1956 Act is complementary to Section 16 and freezes the assessment as at a particular period prior to the year 1961–62.

But Clause 16, ill contrast with those two earlier Sections of the earlier Act, makes no reference to this limitation in point of time. In fact, it tends to contradict it. I ask the Minister to explain that and tell us why, when he comes to reply—not at this moment. This is really a remarkable omission from the Bill. It must be looked at very closely in order to appreciate the adverse effect it could have upon the people who will be affected by it, to put it mildly—I almost said its victims.

Let the Committee contrast the two Sections I have mentioned with the present Clause and then the omission is revealed starkly. It becomes apparent in a startling way. Section 15 (1) of the 1956 Act enacts: The assessor for each valuation area shall. in respect of the year first commencing after the passing of this Act and of every subsequent year before the year 1961–62, make up a valuation roll… The Section goes on for many lines, with which I will not trouble the Committee. I quote that part of it to show that it relies on that particular period, before the year 1961–62. That is the limitation. There is the freeze of which I spoke a moment ago, and that is very important for both occupier and owner. There is no such phrase in the present Clause.

The words in Clause 16 which we seek to leave out are …and every subsequent year of assessment until Parliament otherwise determines… This is a very grave extension of the provisions of the earlier Sections. It is a very improper thing that any Government should seek to extend earlier legislation, which has nothing to do with the Finance Bill, by means of a Finance Bill. That is not the purpose of a Finance Bill. If the Government wish to amend earlier and indeed very recent legislation—as recent as 1956—let them do so by bringing in a substantive Bill for that purpose and not endeavour to do it in an underhand way by a side-wind in the Finance Bill.

These words are not accidental. They are found many times in Section 15 and are part of the essence of the 1956 Act. Section 15 (1) contains the words already quoted. Section 15 (2) contains these words: The Assessor of Public Undertakings (Scotland) shall, in respect of the year first commencing after the passing of this Act and of every subsequent year before the year 1961–62, make up a valuation roll in accordance with the Valuation Acts…. I quote that for the purpose of emphasising once again that the words limiting the operation in point of time are not accidental but occur again and again throughout the subsections of Section 15.

Section 15 (3) of the 1956 Act reads as follows: Where for the purpose of making up any valuation roll for the year first commencing after the passing of this Act or any subsequent year before the year 1961–62 it is necessary to value or revalue any lands and heritages… 10.0 p.m.

Once again I draw the attention of the Committee to the fact that this reference to limitation in point of time is not accidental in one subsection, but runs right through Clause 15. We find it in subsections (6) and (8) which refer expressly to the same dates of limitation. Here is a clear limitation to the period before the year 1961–62.

One would expect a corresponding limitation in the Finance Bill which refers expressly to, and relies upon, the 1956 Act, and expressly to Sections 15 and 16 of that Act, with which I have troubled the Committee so much in the course of this short speech. But not only are those words left out, as we seek to have them left out, but there appear the offending words to which we object, namely, …and every subsequent year of assessment until Parliament otherwise determines… It is important to owners and occupiers to know where they stand, and Clause 16 underlines the knowledge of both the owner and the occupier. It is important for them to know from year to year the basis of assessment. That basis was fixed explicitly by Sections 15 and 16 of the 1956 Act. This Bill undermines that basis of assessment by enacting that it may run on until a time to which the memory of man runneth not to the contrary in the future. [Laughter.] We are accustomed in our legal textbooks to realise a time to which the memory of man runneth not to the contrary in the past, especially in connection with the prescription Acts and Statutes of limitations, but here we are invited to look forward to a time to which the memory of man runneth not to the contrary, and it is a new conception for lawyers as well as for those who have the misfortune not to be lawyers.

Mr. Ross

Misfortune?

Mr. Hughes

Misfortune from the point of view of legislation at this time, because people who are not lawyers themselves will have to employ lawyers at considerable expense to construe this Bill and to construe the complexities and contradictions with the earlier legislation. Therefore, I say that those people who are affected by this Bill, and are unable to construe it because they are not lawyers, are in a state of misfortune. However, that is a deviation from my argument.

This Bill, and the words that we seek to leave out, would undermine the basis of assurance in the case of those occupiers and owners. They will not know where they stand. They will not know what are their rights. We on this side of the Committee objected to the Bill in 1956, and we object now, but at least owners and occupiers on reading the earlier Statute know where they stand, whereas under this Clause they will not know, because in every subsequent year of assessment Parliament may otherwise determine. Parliament has already that power to enact new legislation, and it is redundant to put these words into the Bill. They should be left out for that reason, but that is not my main objection, which I have already stated.

These words affect in a very grave way the new situation created by Section 16 of the Act of 1956, which transfers liabilities for owners' rates to the occupier. That Act was passed with the limitation in point of time to which I have referred. This Bill is without the limitation in point of time. There is a clear contradiction. The Government are seeking by this Finance Bill to extend the scope of the 1956 Act by a side wind, most improperly, and contrary to the best traditions of British legislation and Parliamentary practice.

Mr. William Ross (Kilmarnock)

The third Amendment is in the name of my hon Friend the Member for Edinburgh, East (Mr. Willis) and myself, namely, in page 12, line 3, to leave out from "until" to end of line 4, and to insert "the year 1960–61."

This is the first of a series of rather world-shattering Amendments. I am sorry to learn that the others have not been selected. The intention of this Amendment is more or less that of my hon. and learned Friend's first one, but my reasons are different from his. However, if anyone in the Committee thought that our Amendment was at all frivolous, I am sure that after the devastating speech that has been delivered by my hon. and learned Friend the Member for Aberdeen, North (Mr. Hector Hughes) he will have changed his mind. It is very serious indeed.

The purpose of the Amendment is to limit the duration of the Clause. We suggest that this arrangement should go on until 1961. The arrangement in the Clause is a well-intentioned makeshift, but it is not one that we could possibly uphold. My hon. and learned Friend has said that the people will not know where they stand. I would say that without the Clause they would know that they stood to considerable disadvantage. The Clause gives them the assurance of a certain continued benefit because it continues a system of allowances in respect of owners' rates after they have been abolished by Statute, by the Valuation and Rating (Scotland) Act, 1956. This is a muddled way of doing things. We spent hours upon that Act and we now read the words of this Clause and find that we are to deem that it was never passed.

Calculations are to be made upon the basis that people who are no longer paying owners' rates will continue to pay them. After the long and arduous work we did it is hard on hon. Members who were on the Scottish Standing Committee and hon. Members of this Committee. We were told that that Act was for the well-being of Scotland, and for property owners in particular. Now, for the ends of justice, we must forget that it was ever put upon the Statute Book. It may be argued that it is desirable to prolong this state of uncertainty, and of legislative Nelsonian blindness, for the present, but I do not think that this thing should be allowed to continue. It is a muddled way of working, and the sooner we find some permanent solution the better.

The background to the Amendment has been stated fairly clearly. If there are some echoes of our past legislative achievements in this Clause, there is also a low murmur of what will sweep over Scotland in the way of a shock revaluation in four or five years. English and Welsh Members, recollecting what happened in the recent past, will have a preview of what will happen in Scotland in 1961–62. Revaluation has to take place by then. We must remember that whereas, in England and Wales, valuation was related to 1939 values, in Scotland it is at current values, so that the shock will be considerable. Until the revaluation is completed all rateable assessments are frozen.

The second major change is that rates in Scotland have been completely altered Until 15th May of this year rates were divided into two parts—owners' rates and occupiers' rates, paid by owners and occupiers respectively. In the county areas the division was a fifty-fifty one, but in the burghs it was different, with the occupiers paying a greater proportion than the owners. As from 15th May, however, there is no such division. There are only rates, and those rates are paid only by the occupiers of property. The burden of the owners has been passed to the tenants. Although we must confess that there has been the compensation of reduced rents, this also brings forward a new complexity, which is dealt with in the Clause.

10.15 p.m.

The fact is that we are in the position of legislating for an allowance against owners' rates on behalf of the owners who do not pay rates. That is the position and it is crazy. Our objection is that this crazy system has to go on for we do not know how long. No date is fixed. Of course, the obvious thing is that this should be ended as soon as possible, and that time, obviously, is after 1960–61 when the new valuation that was laid down in this Act is complete.

I think that the overall revaluation due to be completed that year is one of the things that will enable us to get rid of this makeshift arrangement and we ought to have that definite period in the Finance Bill. I oppose the unlimited continuance of this present makeshift arrangement for other reasons, because the allowances themselves are supposed, according to Section 95 (1) to afford such relief as is just and reasonable. I do not think that what is set out in this Clause is just and reasonable. It is a measure of justice, I confess, but it is not just and reasonable; and the more we depart from this present year, as we go on year after year, the less just and reasonable it will become.

That is the position on what is contained in the Clause. We consider it essential to limit the injustice of this Clause to that date, in justice, first, to the tenant; in justice to the Treasury—yes, to the Treasury—and in justice to owner-occupiers. We should remedy and completely overhaul, if not abolish, the whole present outlook on Schedule A in respect of owner-occupiership of property; but to develop that theme would be out of order.

Here we have owners who, hitherto, have been allowed to set off the annual payment in respect of Schedule A liability in respect of income or income of the value of the property. If it was a burden it has been passed to someone else. The burden of tax upon which relief was said to be necessary has been passed to the occupier. Surely. in respect of the occupier, there should be some justice. He should have some tax relief for having assumed a burden belonging to someone else. The answer to that will be that there was in his case a reduction of rent.

The Financial Secretary knows that in the case of a good deal of property outside the Rent Restrictions Acts there will be an immediate recovery of that rent reduction. In fact, we have legislated for widening that sphere. That will be an injustice which cannot be remedied while this thing goes on for a limited period. I hope that by that date we suggest the new system will take account of this transfer of the burden which bore a tax allowance on to the shoulders of people who, in regard to it, will get no tax allowance at all.

Even in the case of those who are dealt with only partially, the time will come when the whole of their advantage will be swallowed up and they will be left with this tax burden and no relief. There is the question of property owners. So far as I can see those are the only people to whom this Clause is no unjust. There may well be a case for suggesting that we could let this thing run for as long as we like. But that is based on certain of the interpretations which I am not entirely sure will run in respect of the Clause.

If we take the formula of the calculation of owners' rates, then obviously, since there is no valuation and reducing of rent by the amount the owner paid on rates last year, it is right to limit their allowance to what it was last year. I am not entirely certain of that in all cases where rent increases are available and where their annual value will increase—remember there is only a review every five years on this. It may well be the case that they are getting an increased annual value out of their property and, at the same time, the continued statutory deductions in respect of Schedule A. To that extent, the Treasury will be at a loss.

I shall be happy to be informed that the other aspects of the Clause cover this. I know that they may well do, at least the last two subsections, to a certain extent. But I am not satisfied that it is covered all the way through. I say, therefore, that we cannot let this injustice of the Treasury continue for an undetermined number of years. If the Treasury is injured in this way, it is made up by taxing us all a little bit more.

Now we come to the position of the one class of people in the property range in respect of Schedule A who, I am sure, the Government have most closely in mind, the owner-occupier. In Scotland, the owner-occupier has borne both taxes, both the local rates. He has paid as an owner and an occupier, so obviously any Law that passes the burden of owners' rates to the occupier leaves him exactly where he was. He will pay the same.

Obviously—and I emphasise this—if the Clause were not in the Bill, he would be denied an allowance which presently he gets while he is still liable for more or less the same amount of local rates. It is essential—in fact, we were given a promise during the passing of the Act that something like this would be introduced—but is it just and reasonable? By taking out of the rating pool all other landlords it means that when an increase of rates has to be made in future it must be divided among a smaller number of people, owners who are not occupiers and occupiers. Therefore, the owner-occupier's liability in respect of rates is potentially higher.

All over England, and certainly all over Scotland, rates are rising. If the owner-occupier is paying more in rates, and more under the old calculation of owners' rates, then the formula is not fair and just. As we depart from 1956–57, year by year for an indeterminate number of years, according to the Clause, the injustice will become all the greater. I am sure that no Joint Under-Secretary of State, or the Lord Advocate, would say that rates in Scotland will go down during the next two or three years. Everything points to the very opposite taking place, to rates going up. The allowance which owner-occupiers will be permitted to set off against Schedule A will be based on the rate poundage of last year. We are doing them an injustice which we cannot allow to continue for all that length of time.

I have said that it was a makeshift arrangement that we hoped to see ended satisfactorily as quickly as possible. For these reasons, I sincerely hope that if the Government cannot accept our Amendment as it is, they will indicate how they propose to put this matter right. Obviously, the datum line must be when the plan of revaluation of 1960–61 comes into force in 1961–62.

The Financial Secretary to the Treasury (Mr. J. Enoch Powell)

It will be recognised on both sides of the Committee that the basic requirement for fairness in Schedule A is that the whole United Kingdom must be treated together and in the same way. Schedule A assess- ments should be changed, if at all, simultaneously over the whole kingdom since it is at United Kingdom rates that tax will be imposed on those assessments. The supreme requirement, therefore, is uniformity among the three parts of the kingdom. The simple reason for the provision at which the hon. and learned Member for Aberdeen, North (Mr. Hector Hughes) has taken such offence is to achieve that uniformity.

In the case of Great Britain, the overriding provision in Section 84 of the Income Tax, 1952, is that there shall be a revaluation for such year of assessment as Parliament may hereafter determine. That is the governing definition, at this stage, of the date of the next reassessment in Great Britain as a whole. It would clearly be unwise, and potentially disadvantageous to Scotland, that a definite date should be written into an Act of Parliament with regard to Scottish arrangements while the law of reassessment for Great Britain as a whole is at large, as it is in the principal Act.

It is proposed in the later part of the Clause to make a similar time prescription in regard to Northern Ireland. Thus, for all three parts of the kingdom —for the general revaluation in Great Britain, for the revaluation in Northern Ireland and for the duration of the transitional provisions of Clause 16 (1) in regard to Scotland—we shall have the same time and the same expression in the Statute Book. That is the simple intention which lies behind the phrase.

There is no reason for hon. Members to apprehend that this expression in any way interferes with the significance of the year 1961–62 in the context of rating in the Valuation and Rating (Scotland) Act of last year. What that Act provided in regard to rating will come into force as laid down by that Act in 1961–62, but what the Clause does is in no way contradictory to that. If the arrangements in this Clause were to continue for a year or two after the new valuation arrangements have come into force in Scotland, no injury would be done to taxpayers in Scotland; indeed, what would be happening would be that the slightly preferential position they have in regard to repairs allowances as against taxpayers in England would be preserved for another year or two.

There is no inherent contradiction if it should so happen that the new arrangements come into force in 1961–62 under the Act of last year before the transitional provisions in this Clause expire.

Mr. Ross rose—

Mr. Powell

I noted the points which the hon. Member for Kilmarnock (Mr. Ross) made towards the end of his speech, arid will deal with those in a moment. I am on the general point that there is no contradiction between the fact of the term of Clause 16 being at large in reference to transitional provision, for Schedule A assessment and of there being a specific and definite date in the 1956 Act for the new rating arrangements in Scotland.

On the other hand, it would be a very serious disadvantage for Scottish taxpayers if the year 1960–61 were the last year of the transitional provisions in Clause 16. but if Parliament had failed by then to move in the kingdom at large; for then all the difficulties which Clause 16 (1) is designed to prevent would come into existence. It is really for the security of taxpayers in Scotland that a specific year of termination of these transitional arrangements should not be written into this Bill.

So I hope it will be recognised that not only is there no contradiction to the Act of 1956, but that it would be undesirable that Scottish taxpayers should be exposed to the risk of a definite terminal date for these transitional arrangements.

Mr. Ross

The hon. Gentleman will understand that we recognise that.

Mr. James Mclnnes (Glasgow. Central)

Do I understand the hon. Gentleman to say that in this transitional period the Scottish ratepayer will have the advantage of the repairs increases in that Act instead of having the formula applied as in England and Wales in respect of gross and net values?

Mr. Powell

That is so. These transitional provisions preserve for the Scottish taxpayer his advantage of enjoying a repairs allowance based upon an annual value which includes the whole owners' rates element. They preserve that advantage for him which he at present enjoys until there is a general re-assessment for the whole kingdom.

The hon. Member for Kilmarnock raised the case where a letting might be outwith the Rent Restrictions Acts and, as a result of the transfer of burden, the landlord might secure an actually increased rent: the rent might be reduced under the 1956 Act, but there might be a subsequent rise. In that case, the landlord would not enjoy the benefits of this Clause, because the proviso has the effect in that case of taking him out; for the letting would be at an amount fixed in the circumstances set out in paragraph (a) of the proviso to this subsection.

10.30 p.m.

In that case, the hon. Gentleman quite correctly realised that there would be an injustice in combining that advantage with the advantages of this Clause; and that is the reason for the first paragraph of the proviso. The hon. Gentleman quite rightly said that as time goes on the owner-occupier gains to the loss of the Treasury and, in a sense, to the loss of his fellow taxpayers by the increased beneficial value of his occupation while the Schedule A valuation on which he pays tax is, of course, frozen. That is quite correct, and that brings me to my last point.

Mr. Ross

I cannot recollect that I said any such thing. I said the very opposite. I said that the owner-occupier is penalised as we depart from the year 1956–57 and as the frozen allowance in respect of owners' rates is made the more and more unreal by rising rates for the coming years.

Mr. Powell

Yes, but the position of the owner-occupier to which I was alluding and to which wrongly I thought that.he hon. Gentleman was alluding is that as between a landlord and an owner-occupier: the landlord, who actually receives in money the higher rental value of the premises, has to pay tax on it as excess rent under Case VI of Schedule D. while the owner-occupier, although he enjoys the same enhanced beneficial occupation, continues to be taxed under the existing Schedule A assessment.

It is that position to which I was referring. I do, however, agree with the hon. Gentleman, and I think that the whole Committee will recognise, that it is of the nature of a transitional or makeshift—I accept the word—arrangement of this sort that the longer it goes on, the more unsatisfactory and anachronistic the provisions become. I think that it would, therefore, be recognised that it is desirable that uniformity should again be attained for the United Kingdom as a whole as soon as that is practicable, and nothing in the words written into this Clause is in derogation of the acceptance of that principle.

Amendment negatived.

Clause ordered to stand part of the Bill.

Clause 17 ordered to stand part of the Bill.