HC Deb 16 May 1963 vol 677 cc1553-98

3.49 p.m.

Mr. G. R. Mitchison (Kettering)

I beg to move, in page 12. line 11, at the end to insert: Provided that in order to limit the effect of this section in the case of an individual who occupies more than one residence, such an occupier in respect of any residence other than his principal residence shall be treated as if he were entitled to rent (hereinafter called "hypothetical rent") and hypothetical rent shall be deemed to be included among the rent; to be charged under the said new Case; so, however, that no person shall pay more tax in consequence of this proviso than he would have paid if this Chapter II had not been enacted. (2) For the purpose of ascertaining the hypothetical rent of a residence subparagraphs (3) (with the omission of all words after "accordingly") and (4) of paragraph 6 of Schedule 4 to this Act, the provisions of that Schedule relating to deductions and Schedule 7 to this Act shall apply to such individual as aforesaid as they apply to the owner mentioned in the said sub-paragraph (3). (3) In this section "principal residence" means the residence which the occupier elects (in such manner and at such time as may be prescribed by the Commissioners of Inland Revenue) to have treated as his principal residence or which, failing such election, has the highest annual value among his residences, or, where there is no election and the annual values are equal, is selected for the purpose by the Commissioners of Inland Revenue.

The Chairman

I think that it would also be convenient to take, at the same time, the Amendment in page 12, line 21, at the end, to insert: (b) hypothetical rents in respect of land in the United Kingdom.

Mr. Mitehison

Clause 14 is the main Clause dealing with the whole question of the abolition of Schedule A and the extension in place of it of provisions of Schedule D. It relates to premises of every kind—not merely to houses in the ordinary sense of the word, but also to multiple shops, and so on. There can be no doubt about that. The Amendment. however, relates only to dwelling-houses or residences. I have taken the term "residence" because it occurs elsewhere in the Bill and it seems convenient for the purpose.

The object of the Amendment, put very shortly, is to provide that the relief afforded by this change shall not go to any one person in respect of more than one house in the year of assessment. The relief is given to the occupier and in respect of his beneficial interest, but I imagine that no one will dispute that, just as a multiple shop firm can occupy premises all over the country, so an individual can occupy more than one residence at the same time.

Take, for instance, a man who has a house in Surrey, perhaps in the part sometimes called the stockbroker belt, and who comes up to a flat in London, exceptionally his own flat, but still his flat, and occupies it during the middle part of the week. He is, as I see it, the owner-occupier of both those residences. I suggest that the Committee—there is very considerable support in the past for this—should not extend this relief to the same person in respect of both those residences at the same time.

The White Paper shows us that the abolition of Schedule A will mean in the current year a concession of £35 million and in a full year a concession of £48 million. It must be recognised, however, that the way in which it is done may well result in some people being rather worse off for the change, although the majority of them obviously will be better off. Therefore, the Amendment takes the precaution of providing, in accordance with the rules of order, and in this instance I should have thought in accordance with the common sense of the matter, that if it is accepted no one will pay any more tax than he would have been liable to pay but for the whole change. By "the whole change" I mean the abolition of Schedule A and its replacement by Case VIII of Schedule D.

I confess that we on this side of the Committee, having in the past found this a comparatively simple matter to put on to paper, because all we asked was for an exemption from an existing Schedule A in favour of owner-occupiers and in favour of a single house, found our task a good deal more difficult when the drafting character or the technical character of the change made by the Government had to be considered. It seemed impossible to keep Schedule A alive for the sole purpose of dealing with people who had more than one residence.

For the reason I will give in a minute, it would have been easy to deal with the commercial or industrial occupier of more than one set of premises, but not so in the case of a resident. It seemed that the only possible way to do it was to treat him in parallel, as it were, as if he had been occupying a rented house, to regard him as paying the rent himself, and to charge that rent or the amount of it under Case VIII of Schedule D.

This rather involved and artificial process I must say filled me, at any rate, with some terror at the beginning of the operations. When I had finally drafted the Amendment, I showed it to a close associate of mine, whose comment was instantaneous and immediate, because what we were producing was a hypothetical rent. The comment raised, it is true, a small question about tents as residences. It ran like this: There once was a man in a tent, Who paid hypothetical rent. It was deemed to include What he thought might be rude, But he never found out what it meant. I appreciate the spirit of that comment as applied to the Amendment, but I must say I was encouraged to find that in another part of the Bill the Government have done exactly the same thing. They have done it in connection with estates. They have set out a whole lot of provisions which seem to me to be as applicable to this hypothetical rent as to the rent mentioned there which, I may say, though it is not called hypothetical, is just as hypothetical as this one.

Accordingly, the Amendment in subsection (2) contains a reference to passages in Schedule 4, on page 71 of the Bill as now printed, which deal with the case of an owner—occupying a residence and being treated as if he were entitled to rent for a period. I need not go into that in detail. I doubt whether the Committee is really concerned with it. The substantial point is the one I have stated, and I mention these matters only to show that what appears at first sight to be a little far-fetched may possibly be the only way of dealing with what hitherto was a fairly simple question, but has become a complicated one by reason of the complete abolition of Schedule A.

I said something about the history of this matter. It is worth having a look at it. It begins for my purpose in 1961–62, when two Amendments appeared on the Notice Paper in the names of a number of Conservative Members, the leading spirit in one case being the hon. Member for Kidderminster (Sir G. Nabarro) and, in the other, another Conservative Member. They were both quite well supported. Both those proposals, which were to exempt owner-occupiers from Schedule A liability, contained an express reservation that the exemption was only to be in respect of one house or residence in the year.

What I think is very interesting about it is that one of the supporters of the new Clause of the hon. Member for Kidderminster was the present Financial Secretary. However, something must have happened in the interval, because when the Amendment came to be debated not only did it receive only a little support in Conservative circles, but I notice that the Financial Secretary voted against it. He must have changed his mind. He had no doubt taken his name off the Amendment in the interval. I think that I can rely on this as showing that intelligent and experienced people like the Financial Secretary thought that it was advisable to restrict the benefit to one house in a year.

I would go a little further. I have looked through the efforts of other parties. We have all been in this. I think that I am right in saying that on every occasion the Liberal Party—I always hesitate to say that, but I think it is on every occasion—has confined the remedy to a single house in a single year.

Mr. Donald Wade (Huddersfield, West) indicated dissent.

Mr. Mitchison

I beg the pardon of the hon. Gentleman. He will agree with me that the Liberal Party did so on some occasions, but there may have been others. Perhaps I have not followed it through far enough.

Mr. Wade

I may have an opportunity to develop this a little. At this point, may I say that we were prepared to take half a loaf on some occasions, but that we have always wanted the whole loaf?

4.0 p.m.

Mr. Mitchison

Be that as it may, the days of Whig lords occupying several houses about the countryside are past, and I think that we shall have to consider this matter in rather different social circumstances. I am interested particularly in the attitude of the Government and their supporters, of whom I expect a mass to come and support us on this Amendment, if on nothing else, when we divide on it. Otherwise, there will be grave inconsistency with what they have said previously.

For our part, the story is the same. We on this side have never hesitated about it. We have always felt that the reasons for the exemption, as it was in those days, were social reasons, into the merits or demerits of which I shall not go now, upon which, though, there may be a good deal to be said about them when we discuss the Clause as a whole. We have regarded this as a relief which should be given to those who occupy and continuously live in one house.

We do not wish to exclude the person who has two or more houses; we wish merely to confine the considerable benefit of the Clause, which is what in most cases it will bring, to one house. Accordingly, we provide that a principal residence should be selected. It sounds rather magnificent. It is quite possible for a man to have two small houses, both, by curious coincidence, of about the same size, and by the Amendment we allow the taxpayer to select which house should be treated as his principal residence. If he does not select, we take the one which is most expensive, the one with the highest assessment and, therefore, the most in his favour, but if, even then, he will not opt, we would allow the Commissioners of Inland Revenue to select.

I imagine that cases of this kind would be rare and, however reluctant the Commissioners might be to accept the duty, it is very doubtful that they would ever be called upon to perform it.

That is the substance of the Amendment. It must be considered partly with the history of the matter in mind and partly with some consideration for what we are trying to do by the change made in the Bill. It looks very different in form, it covers several matters, but it is intended to be the abolition of Schedule A in favour of the owner-occupier. It is significant, when we are considering a question of this sort, that, whatever the half, three-quarters or whole loaf asked for by the Liberal Party may amount to, the general sense of the House has always been that it ought to be confined to one house.

I hope that the Government, having considered the Amendment, will tell us what addition or subtraction it would make to the two figures I have already given, the total cost of the concession in the current year and the cost of the concession in a full year. I call it a concession for simplicity, but, of course, it is a radical change.

We have now to consider what the hypothetical rent, as it is here described, really amounts to. Again, the Bill is quite encouraging to those who want to make things as simple as possible. In Schedule 7, we find the basis on which the hypothetical rent is to be assessed. It is assessed on the ascertainment of annual value. I have looked at the definition of annual value here, and it seems remarkably like annual value as it has been defined and used for other purposes. I hope that I shall be corrected if I am wrong, but there seems to be no great difference, for example, between the annual value as ascertained in this way and the Schedule A valuation as ascertained by the Inland Revenue in the past, subject to questions of Schedule A having had various hypotheses in it which may or may not occur in this case.

Broadly speaking, when we are dealing with annual value and treating it as the Government do in Schedule 4 as the basis for an assumed rent, we are, in effect, coming remarkably close to what the intention of the Committee has always been in the past, that is, to preserve the Schedule A liability, though in a rather different form, in cases where a man occupies more than one house and has already got the benefit of the change in respect of one house out of the two or the bunch which he occupies.

We are, therefore, carrying out what hon. Members have supported enthusiastically in previous years, because the restriction we propose has, for all practical purposes, very nearly always—I put it in that way—been there and clearly represents the view of hon. Members about the social requirements of the concession. What we are trying to do is to consider the case of a man who, to take a very simple example, lives in a single house, does his work from there, and who has felt a sense of grievance in the past because he thought he was being assessed on some money which he had never, in fact, received. I shall not go into the merits of the change as a whole, but I think that that has been the feeling behind it. At least, that is my experience of what the feeling has been, and I imagine that other hon. Members will have found much the same.

If we are now to extend this to someone who has several houses, to his second, third, fourth and nth house, we shall be doing something which has singularly little relation to the true character of the discontent which has been felt or to the feeling that there was a social injustice in having a tax of this kind.

I cannot believe that anyone will get really indignant because he only has a concession, which is made to owner-occupiers, in respect of one out of his plurality of houses. If he is so indignant, I cannot find any corresponding indignation in myself. I cannot feel that he has been hardly done by or that there is any social injustice in preserving for him something remarkably like the existing position in respect of all but his first house, his principal residence, as we call it.

There is always the feeling about the taxation of houses, whether nationally or locally, that there is a sort of imbalance about it—I do not say unfairness—in that one does not pay rates, on, for instance, a Rolls-Royce motor car but one does pay rates on a small house. This has been behind a lot of the feeling about Schedule A. People have noted that those with other property did not pay tax according to what was regarded, rightly or wrongly, as a notional basis, and they have felt that it was rather unfair that their own houses should be selected. On the other hand, when someone has half a dozen houses, there is not the same matter for indignation even on that ground.

I do not wish to delay the Committee unduly. This is quite a simple matter. As I say, it does not raise the various broad questions which we may have to consider when we debate the Clause stand part. It does not say that the amount of the concession should be limited to a small or large sum and I am open to accept the point that some people occupy houses so large that their property might be treated as being a dozen houses under one roof.

There are such cases and we cannot deal with every question of social justice or injustice within the taxation machinery, particularly on an Amendment such as this. There is, after all, another side to this matter. In a good many cases the owners of large houses have had other benefits conferred on them. I am thinking, for example, of historic houses, the owners of which may have had help from public funds. There are other cases, particularly historic or artistic premises, where the owners have benefited from the half-crowns received from visitors and, perhaps, as a result of having sold them tea. These are all matters which may arise in connection with this change and we will have to consider the relation of these activities to other trading activities which are carried on from a house.

In practically every case the owners of multiple shops—which are not touched on in the Amendment—will, no doubt, get out of the Sechdule A assessment, but, in doing so, they may well fail to get the deduction of that assessment which they would otherwise have made in arriving at their profits which are taxable under Schedule D. At first sight, no doubt, it is rather staggering to reflect that the change will relieve some multiple shops—or a bank, for example—of a considerable Schedule A liability in any year. My hon. Friends and I do not think that there is as much in that as appears at first sight because of the consequent result in connection with their Schedule D assessments. That does not arise directly on the Amendment and we shall probably wish to consider it at a later stage.

I repeat that the Amendment is concerned with one point only—the question whether a man should be entitled to the benefit of this change in respect of more than one residence in one year. We say that in a modern country, which is supposed to be civilised, we do not want to stretch ourselves to extend tax concessions in favour of someone's second, third or fourth house. He should, in so many cases, be able to get along with one; and if someone can suggest a case where more than one residence is required and should receive this concession I venture to think that any such case would be highly exceptional.

Having regard to the opinions expressed by all hon. Members in Amendments and proposed new Clauses on previous Finance Bills, to the considerable number of hon. Members who have already indicated their support for the Amendment we are discussing—though in a different form, naturally—I trust that the Amendment will receive the acceptance of the Government. If not, I hope that it will receive the overwhelming support of the Committee.

I think that my hon. Friends should not be particularly reluctant to face a General Election on the question whether someone should get a valuable tax concession not only in respect of one house of which he was the owner-occupier, but in respect of half a dozen. Most people would think that that was, to use a colloquialism, a bit stiff.

4.15 p.m.

Mr. F. J. Bellenger (Bassetlaw)

I sympathise with the purpose of the Amendment and I hope that when the Chief Secretary replies he will not only say whether or not he supports it, but will tell us something about the machinery for operating the change. Many people, some of them hon. Members, have objected to the abolition of Schedule A because of the unfairness which they think would be caused to tenants who pay rent.

As the Committee knows, Schedule A is an assessment which is generally fixed once every five years, a quinquennial reassessment, on hereditaments. I am wondering, therefore, how the Inland Revenue will ascertain who is the beneficial owner-occupier. Hitherto, the assessments have gone with the hereditaments and the only question has been whether or not the occupier was the owner. If we do away with Schedule A and the whole machinery involved in it, then how will the Inland Revenue assess a hypothetical rent, such as that mentioned by my hon. and learned Friend the Member for Kettering (Mr. Mitchison)? Would a not mean, in effect, reintroducing the whole Schedule A machinery by way of the Inland Revenue's valuer regarding the second, third or fourth house?

Under the Schedule A procedure—and my hon. and learned Friend did not refer to this—the hypothetical income is part of the taxpayer's income. If he has two, three or four houses he will, for the purposes of assessing his total income, either for Income Tax or Surtax, have a rent or valuation for each property which he holds. Thus, in doing away with Schedule A we are not only doing away with the tax on the hereditament, but we are also giving, for a certain number of owners who own more than one house, a considerable advantage, because once their Schedule A assessments have gone then for all the houses in question they need not insert in their annual returns the hypothetical or Schedule A value for each property.

It is obvious that while the Government wish to relieve house owners, especially those with mortgages and so on, they are not only giving the relief to these people but are giving to multiple house owners a considerable tax and, perhaps, even Surtax concession. My hon. and learned Friend has inserted in the Amendment a provision to the effect that the tax payable by the multiple property owner or occupier should not be more than what it would have been had he been assessed under Schedule A. Those who own more than one property are well advised by professional people and can eliminate their Schedule A tax by virtue of maintenance claims.

To that extent, even if the Amendment is accepted, it will be possible for those owning more than one house to evade paying tax on their subsidiary residences, if I may call them that, because of maintenance claims for repairs. My hon. and learned Friend told us that he does not want to put them in a worse position than they are under Schedule A. I think that many hon. Members on both sides of the Committee are in sympathy with his purpose, namely, that although we wish to help, as we have urged on successive Chancellors, those who are buying their own houses and who are already burdened with mortgages, we do not want to give an advantage to those who are not in that position and who can well afford to pay tax on their possessions, whether stocks and shares, or other hereditaments.

I should like the Chief Secretary to explain a little more about the machinery of assessment under the new Case VIII once he has eliminated the Schedule A assessment. Whether that arises on this Clause, I am not quite sure, but I think that he should at any rate answer the point that I have put to him as to how he will define the owner-occupier under this Clause.

Mr. Wade

I am inclined to agree with the right hon. Member for Basset-law (Mr. Bellenger) that those who own several houses are the most likely to pay no Schedule A tax owing to the amount that they are able to spend on repairs, thereby cancelling out their Schedule A tax by maintenance claims. Therefore, that somewhat diminishes the merits, if any, of this Amendment.

The Amendment is somewhat complicated, but I think that the issue is fairly simple, namely, whether the Committee is in favour of total abolition of Schedule A Income Tax. The most powerful arguments for retaining Schedule A tax have been made from the Treasury Bench over a number of years. There will certainly be some eating of words from the Treasury Bench during the course of this debate.

Those who are opposed to Schedule A have, in previous debates, put forward three points of view. One is that no Schedule A tax should be paid by the owner-occupier in respect of one house. The second is that no owner-occupier should pay Schedule A tax, but, otherwise, Schedule A tax should remain. The third is that Schedule A tax should be abolished altogether. I have been willing to support the proposal for the abolition of Schedule A tax on one house as the first step, but I have always been in favour of total abolition.

In recent years, the Amendments which I have tabled to Finance Bills have been intended to bring about total abolition, although, as I mentioned on Second Reading, I often puzzled over the whether it could be done by one paragraph or two, and I now find that it requires several pages to do it, but the intention is the same.

I agree that on questions of social justice and social requirements it is the owner-occupier of one house that we are worried about. I have always felt that there are strong reasons for total abolition. I shall mention two. First, take the case of the landlord, that is both the individual landlord and the property-owning company. I do not think that there will be a loss of revenue there, because tax will be paid on the rent received, less such deductions as are allowed, and it may well be that under the existing law some landlords and some property-owning companies may have been paying less tax than they should have done because they have had the advantage of the statutory allowance, whether they spend money on repairs or not.

The landlord who spends nothing on repairs gets the benefit of the statutory allowance, whereas, if Schedule A is abolished, the tax will be calculated in a different way and this whole complicated business of property tax and statutory allowance will, as I understand it, no longer arise. Therefore, concerning the landlord, I can see no objection to total abolition of Schedule A.

The other reason why I have always advocated the abolition of Schedule A is that I think that the whole concept of notional income is too complicated. It gives rise to many anomalies, and it would seem to me that the same kind of arguments which have been deployed against notional income should be deployed against this new idea of a hypothetical rent. For example, under the old Schedule A tax, if I owned two houses, I would pay Schedule A tax on both. If I owned a house and a house-boat, I would pay Schedule A on the house, but not on the house-boat. If I owned a house and a caravan I would pay Schedule A on the house, but not on the caravan. It would seem to me that similar kinds of anomalies would continue here. Would there be a hypothetical rent in respect of the house-boat and the caravan, or would it only apply to the dwelling-house? I do not know the answer. I think that that indicates the kind of difficulties that would arise.

Rates have been mentioned, but they are a different matter. However many houses one owns, one would pay rates if they are furnished. I should be out of order in pursuing it now, but I am in favour of paying some rates on empty properties. However, that is another matter. As to Schedule A tax, I would have thought that having at long last got the Government to do something about it, we should be well advised to go all out for total abolition.

Mr. William Warbey (Ashfield)

I suppose that when the Chief Secretary replies he will make a number of hypothetical rents in the hypothetical tent constructed by my hon. and learned Friend the Member for Kettering (Mr. Mitchison). On the other hand, I shall try, if I can, to defend him in advance from these blows that are being prepared to be struck.

I cannot follow the hon. and learned Gentleman through all the fisco—legal jungle in which he so brilliantly led the Committee in introducing this Amendment, but I should like to take up the point that he made when he asked what we are really trying to do. That is what the layman outside this Committee will ask. He will ask what we are trying to do and whether we have taken the proper steps to achieve it. In general principle, I would say, whatever may later be said from the Government Front Bench, that if it is right to do a certain thing one can find legal and fiscal ways of doing it.

4.30 p.m.

It seems to me that what we are trying to do here is to take one more step in the direction of placing our system of taxation on a basis of social justice. The Treasury has argued for years that it is right to tax under Schedule A because a notional income is derived. Today, we shall be told that this is nonsense and that all along the Treasury has been mistaken in regarding the value received by the occupier of a house from living in a house which he owns as something which should be subjected to tax. We shall be told that he has paid for the income which he is notionally receiving. He pays for it when he buys the house, and the purchase price represents the capitalised value of the rent which otherwise he would be compelled to pay if he were not able to afford to buy. Therefore, there is no real addition to income and, consequently, no additional income to be taxed.

I accept that second view. It seems to me very sensible and reasonable. I accept it on the basis of what seems to me to be an underlying principle of our modern tax law—that we arrange our taxation so that it does not fall upon expenditure on the necessities of life. That is the underlying principle of the adjustments which we make in Income Tax by way of personal and other kinds of relief. We say, in effect, that it is wrong in principle for the State to levy tax on money which people have to use in order to purchase the necessities of life—food, clothing and shelter.

We apply this principle in certain other fields, for example, when we assess people's liability to contribute towards the cost of legal aid. We then assess them on the basis of their disposable income and we exclude from that disposable income, in making that assessment, the money which they have necessarily to pay in the form of rent or of mortgage payments on their house.

It seems to me that that principle should now be applied clearly and logically to our tax law. Therefore, it follows that it is wrong to tax a man on the money which he necessarily spends to provide living accommodation for himself and his wife. I shall be introducing to the Committee later, for that reason, a further Amendment to provide relief of taxation on the payment of rent. I cannot discuss that any further now. What I can discuss further is the question whether, having decided that we relieve a man of taxation on the expenditure which he necessarily has to incur in order to provide living accommodation for himself and his family, we should also relieve him of tax on providing not necessary accommodation, but some additional form of luxury or semi-luxury enjoyment for himself and his family.

There are a great number of people who, in addition to owning a house in town, own a little weekend cottage to which they can go for refreshment and enjoyment. The number of people in that category is increasing, but this is not a necessary expenditure. This is something which people voluntarily choose to do in order to add to their enjoyment of life, just as they voluntarily choose to spend money on alcohol or tobacco. No one for a moment would suggest that they should be relieved of taxation on either of those two items.

Therefore, whilst I would say that it is absolutely right to relieve people of taxation on their necessary expenditure on living accommodation, whether in the form of rent or mortgage payments or of the notional income from a house, it would be utterly wrong to extend that principle to relieving them of taxation on such additional and supplementary facilities as they provide for their own enjoyment.

The Chief Secretary to the Treasury and Paymaster-General (Mr. John Boyd-Carpenter)

It is a practice, and I think a rather bad one, sometimes in this Committee to begin a speech with the observation that one hopes that such and such a Member will forgive one for not following his arguments on a certain subject.

In this case, I must begin by asking the hon. Member for Ashfield (Mr. Warbey) to forgive me if I do not debate the very ingenious argument against the Amendment which, first of all, he established and which later, to his own satisfaction and without undue difficulty, he subsequently demolished. I would prefer not to follow him in an interesting essay in sumptuary taxation, but to give the reason why we do not think that this is a good Amendment.

The hon. Member for Sowerby (Mr. Houghton) obviously recalled, when we came to Second Reading, the fact that in the Budget debate I identified him as the sole mourner beside the coffin of Schedule A. I congratulate him on recruiting another in the guise of his hon. and learned Friend the Member for Kettering (Mr. Mitchison) as, I may say, a mourner rather than a mute. I was interested to note this attempt to maintain just a flicker of life, and perhaps I should say a hypothetical life, in the dying body of Schedule A.

It was an ingenious argument that was put forward, but I thought, with respect, that the hon. and learned Member for Kettering put far more weight than it would bear on the argument that the proposal had been put forward in this shape by other hon. Members, including no less a personage than my hon. Friend the Financial Secretary and even my hon. Friend the Member for Kidderminster (Sir G. Nabarro). The fallacy of that argument, and nobody knows it better than the hon. and learned Member, is that when one is not in office, and one is seeking to obtain an adjustment or concession on taxation one always puts it, for the purposes of argument, as low as possible.

The hon. and learned Gentleman knows that perfectly well. When Schedule A was being maintained, it was understandable—and, I should have thought, extremely sound parliamentary tactics—to put the argument for the abolition of part of it, a very large part of it, as low as one could. That is how one always does things if one is out of office, and as the hon. and learned Gentleman has ahead of him, I hope, a great many years in which he will be in this House but out of office, I hope that he will bear in mind that little bit of very friendly advice—

Mr. Mitchison

I am very much obliged to the right hon. Gentleman. On this side, we meant it; I accept, of course, his proposition that his hon. Friends did not mean it.

Mr. Boyd-Carpenter

I accept the hon. and learned Gentleman's very graceful acknowledgment of the fact that we are very much better parliamentarians than are his hon. Friends. I must welcome, and admit into our company, the hon. Member for Huddersfield, West (Mr. Wade), who, with a realism rare, if not unique, in his party, said that he would rather have the whole loaf than part of it. The hon. Gentleman will do well in his party.

The right hon. Member for Bassetlaw (Mr. Bellenger) raised the very practical question of what this limitation of the abolition of Schedule A would mean in terms of administration and mechanics. He is quite right. Although I do not base my argument on this, there are very serious and practical considerations. The fact, to which the hon. and learned Gentleman referred, that there is a provision in the first paragraph of the Amendment to the effect that the new hypothetical rent shall not involve a higher commitment than Schedule A, had it remained, would have involved for the person concerned was, I thought, put in in an attempt to get round the rules of order.

The hon. Member for Sowerby says that it was, but his hon. and learned Friend says "No—it was also common sense," so I am sorry that we have a split in the party opposite on this issue—

Mr. Douglas Houghton (Sowerby)

Keeping the Amendment within the rules of order is also common sense.

Mr. Boyd-Carpenter

Yes, but the hon. Gentleman's hon. and learned Friend, in a more generous way, said that it was also common sense on the merits of the matter.

If we are to maintain this provision, whether on merits, to please the hon. and learned Gentleman, or as a matter of parliamentary adroitness, to please the hon. Member for Sowerby—and I am anxious to meet all tastes in this respect —and have Schedule A continued then, in order to get at that figure—and here the right hon. Member for Bassetlaw is absolutely right—we would have to preserve the whole machinery of Schedule A of statutory deductions, valuations and allowances for repairs. One would think that for a very small matter, as I understand it, in terms of money, it would not be right to preserve all that administrative machinery, the difficulties and, sometimes, the anomalies of which many of us who have had experience in the matter well know.

I cannot tell the hon. and learned Gentleman what would be saved to the revenue by what he describes as this concession—rather an odd way, in a Finance Bill, of describing a concession—but I am advised that it would inevitably be very small. What is, however, quite certain is that we would have to preserve a good deal of the administrative apparatus of Schedule A. That would be a pity—

Mr. Mitchison

It seems to me, looking at the passages in page 71 of the Bill as now printed—part of Schedule 4 they are referred to in the Amendment—and looking also at the definition in Schedule 7, that the Government themselves are bound to preserve some of the machinery, and no more than the machinery I would wish to preserve, for quite a number of properties.

Mr. Boyd-Carpenter

It is quite clear that if we were to preserve adequate machinery to deal with this point of the hypothetical calculation as to what the Schedule A would have been on the house had Schedule A not been abolished, in respect only of such houses as are owned by someone who also owns another house, quite considerable additional administrative organisation would have to be maintained.

4.45 p.m.

I agree entirely with what the hon. Member for Ashfield, I think, said—that if there was a really serious value and purpose in it, it would have to be done. I agree with him that administration must follow policy and good sense. But what is really the point of this? In the first place, it cuts dead against the policy of the Clause, which is that the enjoyment of property which does not bring in rent shall not attract taxation.

That is a good principle, but that good principle would be eroded in this respect in the case of certain people. As I understand, in the opinion of one or two hon. Members, having a second house is in the nature of a luxury—I think that the hon. Member for Ashfield said so—and, because it is a luxury, the people concerned should pay taxation on it and not be relieved as those are to be relieved who have only one house.

That sounds a plausible argument until one sees how it would work. Is it, in fact, in this day and age, generally proved that the possession of a second dwelling-house is in the nature of a luxury? Hon. Members who are very often faced inescapably with the problem of having a home in their constituency—if far from London—and a home in London, know that it is untrue, and that it is a necessity of their lives. Nor would I say that a country cottage, however humble, is of the nature of such a luxury as specifically to attract taxation which is not attracted by other dwelling-houses.

The hon. and learned Member for Kettering gave away the whole case when he said, Of course, in respect of one house, we will leave the exemption from Schedule A, however big and grand that house is." It may be one of the greatest houses in the land, such as that in which my right hon. Friend the Member for Woodford (Sir W. Churchill)—whom we are all so delighted to see with us this afternoon—was born. On the other hand, someone may possess a country cottage and a small mews cottage in London. That person is, apparently, to be treated by the Amendment as a more suitable vehicle for taxation on sumptuary grounds than is the owner of one mansion, however enormous. I do not think that that makes sense.

I can illustrate this point with a case I know of in my own personal acquaintance. It is that of a man who inherited a substantial house in the country in which, under present conditions, he is unable to afford to live. He moved to a cottage and, as his family grew, took back another cottage into possession and occupied that with his family, too.

That man, had he been rich enough to occupy his ancestral mansion would, as everyone accepts, have been excluded from Schedule A, but because of the reduction in his income, involving his living in two cottages, the Amendment would expose him to the payment of Schedule A on one of them. He would, then, actually pay more tax because he was living, on a relatively limited scale, in two cottages in the park than he would if he were occupying the mansion. I think that illustrates how the idea of using a restriction on withdrawal of Schedule A as a kind of sumptuary taxation would not work.

Even from the point of view of those who put it forward —and I do not accept that there is any necessity for it—this idea would create far more anomalies of just the class and kind to which I have been referring. I do not think that the Committee need worry about the limited number of very rich men who may have several houses. The level of taxation on large incomes remains so very high—so really substantial—that the question of a Schedule A liability—which, in just those cases, is almost always offset by allowances—is really immaterial.

One of the general objections to Schedule A, as we have seen, is that rich and well-advised people have in recent times paid very little. The tax, on the whole, falls on those who have not had the advantage of advice about repairing and maintaining their houses. I therefore suggest that to preserve all the machinery just to make sure that a certain number of those people are liable for hypothetical rent in place of Shedule A in respect of a second house—or a third house—seems to be completely misconceived.

We should involve ourselves in considerable administrative expense, in an attack on the principle of the Clause and in patent unfairnesses and anomalies between man and man for a very small sum of additional revenue. In the circumstances, I must advise the Committee that we should not be wise in putting this addition in the Clause.

Mr. Bellenger

The right hon. Gentleman has not dealt with the point that I put to him about how one will identify the owner-occupier for tax purposes under this Clause.

Mr. Boyd-Carpenter

I followed what the right hon. Gentleman said, but I thought that he directed his question to the exemption of an owner-occupier. If there is to be any discussion on the Question, "That the Clause stand part of the Bill", my hon. Friend the Financial Secretary will be able to deal with that point more conveniently than I could deal with it on an Amendment designed strictly to restrict the scope of the tax.

Mr. John McKay (Wallsend)

I do not wish to introduce a discordant note into the debate. I am sure that all lion. Members are particularly anxious to help the ordinary wage-earner in his struggle to get a house. There is a point here which perhaps has been overlooked. My question is: will the Government's proposal help all the people who are trying to buy their own houses? This is a reduction of taxation, and, of course, everyone likes tax reductions. What will the Government's proposal do for the man who pays no tax and who is having a great struggle to pay the mortgage on his house? It will not help such a man. He will be in the same position after the Clause is passed and implemented as he was before.

This Clause is, in reality, for the better-off people among the working section of the community whom we are all trying to help particularly, but we are not helping those who are worse off and who pay no taxes whatever. There is a very large number of these people, and the question is, knowing that we are helping a large number of owner-occupiers and giving relief to a large number of householders, cannot we do something in future if not at this moment—

The Chairman

I am reluctant to interrupt the hon. Gentleman, but I hope that he appreciates that we are discussing one Amendment and not the whole Clause.

Mr. McKay

I am referring to the general principle of the Clause. If I am out of order—

The Chairman

The hon. Member has just put his finger on the point. He is dealing with the whole Clause, and that is not in order on this Amendment.

Mr. Cyril Bence (Dunbartonshire, East)

I was interested in the point made by the Chief Secretary about the man who took two cottages. I have sympathy with the Clause. I am not so sure about the Amendment. I have been stimulated to enter the discussion because of what the right hon. Gentleman said. I am thinking of a man with a large family who is evicted from a big house. He might have a claim on a local authority to get a subsidised house and yet he might not be able to do that. Suppose that he sells an investment which perhaps brings in £3,000 in income and then acquires two houses for him and his family. It seems unreasonable to me that he should have to pay taxation even on the second house.

Mr. Houghton

May I try to help my hon. Friend? I cannot conceive circumstances in which a man with a large family was evicted from a large house and, to cope with that situation, was able to buy two smaller ones.

Mr. Bence

I was quoting a hypothetical case based on what the Chief Secretary said. His proposition was that suppose a man lived in a very big house but could not afford to keep it and was evicted because he could not keep up the payments or pay the rates on it and that, in trying to keep it up, became bankrupt. He would be thrown out. Because he has got into hopeless debt, someone would throw him out—perhaps the bank manager or the building society. I do not suppose that he would leave it voluntarily. He would be forced to leave by circumstances and would have to find alternative accommodation.

Suppose he finds a three-room cottage and he and his large family are bundled into it, but because it is overcrowded, and because he has a bit of money but not enough to buy a big house, he buys another cottage.

Mr. Houghton

My hon. Friend said only a moment ago that the man about whom he is speaking was "broke" and that is why he had to be thrown out of his larger house. Apparently, he could not pay the rent and rates and was hopelessly on his back financially. Yet now, apparently, this hypothetical father of a hypothetical family is buying two hypothetical houses.

Mr. Boyd-Carpenter

At a hypothetical rent.

Mr. Bence

It is obvious that this hypothetical man with his hypothetical family living in a hypothetical big house could have a hypothetical bank balance of £3,000, but could not afford to keep up a big house. A man can have a few thousand pounds in the bank, but still not be able to afford to run a mansion. We must not assume that because a man cannot afford to run a mansion he has not any money. I can afford to run a small house, but not a big one. Because I cannot afford to live in a 20-room mansion in Berkshire, it does not mean that I have not got two ha'pennies for a penny. I might be able to buy a cottage in the country, or to buy two cottages.

I cannot quite accept all this; I am not yet satisfied. I hope that my hon. Friend the Member for Sowerby (Mr. Houghton) will give us further explanation, because I am sure that my hon. and learned Friend the Member for Kettering (Mr. Mitchison) would not put down such an important Amendment without considering the matter. Doubts have been raised in my mind because of the extraordinary situation presented by the Minister and I hope that we shall have clarification of these very hypothetical situations.

5.0 p.m.

Mr. Mitchison

It is really quite simple. We are considering whether certain persons ought to get a concession by way of taxation, which as a whole will cost the country £48 million in a full year and £35 million in the current year. These are large sums and this is a valuable concession. It was put forward by the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd), not on the ground that the tax was notionally a bad one, but, as he put it, as an act of social justice to encourage home ownership.

That is all very well, but is it an act of social justice in the same way to encourage the ownership of a plurality of homes? Is there the same reason in a case of that sort for giving people a concession which had a particular purpose and, in its present form, is certainly intended to be an act of social justice? Ought it to be applied as a matter of social justice and, in order to encourage home ownership, to the ownership of, say, half a dozen houses all of which some one person occupies? The trouble is that one can occupy half a dozen houses; one can occupy a lot more. That is the question which we have to consider.

The Chief Secretary is a most engaging person. He presents an appearance of complete logic and the confusion in his mind seems to me to be considerable. He came out, quite rightly, with one proposition with which I cordially agree, that administration must follow policy. This was in his best Gibbonian style. I quite agree. Administration must, in-deed, follow policy. Therefore, if this is an act of social justice intended to be done by this Chapter in the Bill, the first thing to consider is whether what is in the Bill, which the Amendment would change, is consonant with that intention and with the social justice which it is desired to further. If it is not, again to quote the right hon. Gentleman, administration must follow policy. I shall show presently, however, that it does not have far to go for the purpose.

I tried to spare the Committee a long excursus into what the Government are doing in the Fourth and Seventh Schedules. The Government are preserving what is virtually Schedule A machinery in a fairly large number of cases—the owners of estates. From the figures we were given by the Chief Secretary, it is clear that the pluralist or multiple owners of houses are also a comparatively small number of cases. It is putting the cart before the horse with a vengeance to produce as one of the serious arguments against the Amendment that what is done on a small scale might become a real objection to the Bill if the scale was slightly extended.

That is doubly so when one begins to look at what is being done in connection with these estate owners. They are charged a hypothetical rent, and the basis of that hypothetical rent, subject to deductions, and so on, which one would apply in this case as in that, is the annual value. The annual value is stated in the Seventh Schedule.

I said to the Committee—the Chief Secretary heard me—that I seemed to have seen this before. This is the ordinary rating formula and nothing else. I did not expect to be told that there was that insuperable difficulty in preserving, at least for the time being, the machinery for rating valuation. Once that has been done, we have ascertained the annual value in accordance with the Seventh Schedule.

It is throwing dust in the eyes of the Committee to raise all these administrative difficulties. I simply do not believe in them. To do it after having just said that administration must follow policy, and after the previous Tory Chancellor of the Exchequer—I know he is dead, but he is not quite buried—had urged this Measure as a matter of social justice—

Mr. Boyd-Carpenter

The hon. and learned Member knows well that getting the annual value is only the beginning of the operation. If we are to do as the hon. and learned Member suggests in his Amendment and impose no higher tax liability than would have been imposed had Schedule A remained, all the machinery of statutory deduction, maintenance claims and everything else has to be maintained. It is misleading the Committee to say that because it is not unduly difficult to maintain a figure for annual value, the problem has been made quite easy. That is not quite up to the hon. and learned Gentleman's normally high standard of debate.

Mr. Mitchison

I am sorry not to be keeping up to the mark, but I will have another try.

All that is happening here is that the Government for their own purposes, with which I am inclined to agree in this case, are preserving a certain part of the Schedule A machinery. What they are doing is applying the annual value as the basis of taxation in the case of estates. All I am asking the Committee to do is to agree to that also being done in the case of multiple house occupiers. That is no wild extension.

If I had had to invent all the machinery, I should have had a busy time and probably by now I would be sitting in a lunatic asylum with a wet towel round my head; but the Government, without necessarily going into a lunatic asylum, have done it all for me, not only as a matter of drafting, but as a matter of machinery to be used. Immediately after saying that administration must follow policy, to put up that argument is not up to the right hon. Gentleman's usually high standard of debate.

It makes one suspicious when we get this kind of case put up—this noise about administrative difficulties, keeping things going, and so on—when one knows perfectly well that this chapter as a whole has been put forward as a supposed measure of social justice and will be supported by right hon. and hon. Members opposite in the coming General Election as something which they have done as a matter of social justice. I enjoin this on them. Whenever they say it, will they kindly point out that they have also provided social justice in the same measure for the fortunate man who both owns and occupies half a dozen houses? They will then have to find out just how popular in the country that bit of social justice will be.

It was the Chief Secretary who started talking about luxury and the rest. I never talk about luxury in connection with taxation if I can possibly avoid it. I am simply considering whether it is right to give out of public funds to this small group of people a share of the considerable total that is being provided for good purposes out of public funds for other people. It is rather surprising that right hon. and hon. Members opposite are prepared to neglect that aspect and to say that this is stigmatised as luxury—I never used the word, and it is not luxury—and to draw a prophetic and, no doubt, up to a point, a true picture of the man who requires a little weekend house.

I doubt whether this will make much difference to him one way or the other. It was the intention of part of the Amendment which I had to put in to comply with the rules of order, something which also seems to me to be quite good sense. But I am not sticking like mad to that. We cannot do anything else in this Committee, since it is right that, given financial control of the Government over expenditure, the Opposition should not be allowed to put down Amendments involving additional charges on the subject. That is the rule. It is simple and one sees the reason for it.

But responsible Treasury Ministers should not try to use the existence of the rule in order to confuse the issue or to dodge responsibility which really lies on them. If some new charge is involved here, it is up to them to make proper provision for what is required. I do not think other things are required. This is largely a matter of what is in principle an important Amendment, although its monetary effect is not a very large one. Surely the Government have a better defence than this.

But then we come to the right hon. Gentleman's real defence and it is a most remarkable one. He said that hon. Gentlemen on his side of the Committee have put this proposal down year after year limited to one house only, as a matter of Parliamentary tactics. What leads them to do that? Why should they not have told the people what they really meant? It is not as if this matter had occurred only once and could be described as a slip. It has happened time and time again and has been argued in that sense from the benches opposite. Are we now to take it that when a matter is constantly advocated by hon. Members opposite it must be assumed that they do not mean what they say? That is the only deduction one can draw from this confession by the right hon. Gentleman.

On this side of the Committee we put down Amendments for the simple reason that we mean them. I find a little difficulty in ascertaining the reasons of the Liberal Party but perhaps they are of less importance on this occasion. They are connected with a loaf of bread, whether half or the whole. But hon. Members opposite are not doing this. It happens in a case of this sort if, in the course of defence, through the mouth of a much respected and senior member of the Government, of their refusal of an Amendment, they have to say that when they put proposals on the Order Paper year after year it was just Parliamentary tactics.

We on this side of the Committee are not as clever as that. We try to put on the Notice Paper what we think to be the right thing to do. That practice seems to have been entirely abandoned in this matter by the party opposite. In talking about Parliamentary tactics the right hon. Gentleman would have been wiser to have concealed the objective of his hon. Friends rather than flaunt it as the main objection to the Amendment.

This is really a childish business. Here is a large change to be made in the tax law in the interests of social justice in order to encourage owner-occupiers. I am not concerned with the merits or demerits of the whole business or the machinery for it. I see the point of it and we have made similar proposals in previous years.

But here is a small part of it which no one can really regard as an act of social justice. If we want to encourage owner-occupation of houses, that is well and good. But are we really going to pay a considerable amount out of public funds in order to encourage someone to occupy as an owner half-a-dozen houses?

Where is the social justice or sense in that? What is the use of doing that kind of thing and then attempting to defend it by saying, "We have always stood for it but we never meant it. It was tactics and, then again, there are administrative difficulties. The principle applies to one group of people and what we want to do is possible for them, but if one goes too far it becomes impossible. In the words of the poet, administration follows policy."

Let it, in this instance, follow policy and let policy for once follow sense and have some relation to the purpose of the various changes it is proposed to introduce.

Question put, That those words be there inserted:—

The Committee divided: Ayes 154, Noes 222.

Division No. 115.] AYES [5.15 p.m.
Ainsley, William Foot, Dingle (Ipswich) Lee, Frederick (Newton)
Allaun, Frank (Salford, E.) Foot, Michael (Ebbw Vale) Lever, L. M. (Ardwick)
Barnett, Guy Forman, J. C. Lewis, Arthur (West Ham, N.)
Beaney, Alan Fraser, Thomas (Hamilton) Mabon, Dr. J. Dickson
Bellenger, Rt. Hon. P. J. Galpern, Sir Myer McCann, John
Bence, Cyril George,LadyMeganLloyd(Crmrthn) MacColl, James
Bennett, J. (Glasgow, Bridgeton) Ginsburg, David McKay, John (Wallsend)
Benson, Sir George Gourlay, Harry McLeavy, Frank
Blyton, William Grey, Charles MacPherson, Malcolm (Stirling)
Boardman, H. Griffiths, Rt. Hon. James (Llanelly) Mallalieu, J.P.W. (Huddersfield, E.)
Bowden, Rt. Hn. H. W.(Leics, S.W.) Griffiths, W. (Exchange) Manuel, Archie
Bowles, Frank Gunter, Ray Mapp, Charles
Boyden, James Hamilton, William (West Fife) Marsh, Richard
Braddock, Mrs. E. M. Harper, Joseph Mayhew, Christopher
Bray, Dr. Jeremy Hart, Mrs. Judith Millan, Bruce
Broughton, Dr. A. D. D. Hayman, F. H. Mitchison, C. R.
Butler, Herbert (Hackney, C.) Healey, Denis Monslow, Walter
Carmichael, Nell Henderson, Rt Hn Arthur (Rwly Regis) Moody, A. S.
Chapman, Donald Herbison, Miss Margaret Morris, John
Cliffe, Michael Hilton, A. V. Moyle, Arthur
Collick, Percy Holman, Percy Mulley, Frederick
Corbet, Mrs. Freda Houghton, Douglas Noel-Baker,Rt.Hn.Philip(Derby, S.)
Crosland, Anthony Hoy, James H. Oliver, G. H.
Grossman, R. H. 8. Hughes, Emrys (S. Ayrshire) O'Malley, B. K.
Cullen, Mrs. Alice Hughes, Hector (Aberdeen, N.) Dram, A. E.
Darling, George Hunter, A. E, Paget, R. T.
Davies, G. Elfed (Rhondda, E.) Hynd, John (Attercilffe) Pannell, Charles (Leeds, W.)
Davies, Ifor (Gower) Irvine, A. J. (Edge Hill) Pargiter, G. A.
Davies, S. O. (Merthyr) Irving, Sydney (Dartford) Parkin, B. T.
Deer, George Jeger, George Paton, John
Dempsey, James Jenkins, Roy (Stechford) Pavitt, Laurence
Diamond, John Johnson, Carol (Lewisham, S.) Peart, Frederick
Dodds, Norman Jones, Dan (Burnley) Popplewell, Ernest
Donnelly, Desmond Jones, Elwyn (West Ham, S.) Prentice, R. E.
Driberg, Tom Jones, T. W. (Merioneth) Price, J. T. (Westhoughton)
Ede, Rt. Hon. C. Kelley, Richard Pursey, Cmdr. Harry
Edwards, Walter (Stepney) Kenyon, Clifford Reid, William
Fernyhough, E. King, Dr. Horace Reynolds, G. W.
Fitch, Alan Ledger, Ron Rhodes, H.
Roberts, Albert (Normanton) Spriggs, Leslie White, Mrs. Eirene
Roberts, Goronwy (Caernarvon) Steele, Thomas Whitlock, William
Robertson, John (Paisley) Stonehouse, John Wilkins, W. A.
Robinson, Kenneth (St. Pancras, N.) Stones, William Willey, Frederick
Rogers, G. H. R. (Kensington, N.) Strauss, At. Hn. G. R. (Vauxhall) Williams, LI. (Abertillery)
Ross, William Stross, Dr.Ba-nett(Stoke-on-Trent,C.) Williams, W. T. (Warrington)
Royle, Charles (Salford, West) Swingler, Stephen Willis, E. C. (Edinburgh, E.)
Shinwell, RI. Hon. E. Taverne, D. Wilson, At. Hon. Harold (Huyton)
Silverman, Julius (Aston) Thomas, torwerth (Rhondda, W.) Woof, Robert
Slater, Joseph (Sedgefield) Thornton, Ernest Yates, Victor (Ladywood)
Small, William Timmons, John Zilliacus, K.
Snow, Julian Warbey, William
Soskice, At. Hon. Slr Frank Weltzman, David TELLERS FOR THE AYES:
Mr. Lawson and Mr. Redhead,
NOES
Allan, Robert (Paddington, S.) Foster, John Marples, At. Hon. Ernest
Arbuthnot, John Freeth, Denzil Mathew, Robert (Honiton)
Ashton, Sir Hubert Gardner, Edward Matthews, Gordon (Meriden)
Atkins, Humphrey Gibson-Watt, David Maudling, At. Hon. Reginald
Awdry, Daniel (Chippenham) Gilmour, Ian (Norfolk, Central) Mawby, Ray
Balniel, Lord Glover, Sir Douglas Maxwell-Hyslop, R. J.
Barber, Anthony Glyn, Sir Richard (Dorset, N.) Maydon, Lt.-Cmdr. S. L. C.
Barlow, Sir John Green, Alan Miscampbell, Norman
Botsford, Brian Gresham Cooke, R. Montgomery, Fergus
Beamish, Col. Sir Tufton Grimond, Rt. Hon. J. More, Jasper (Ludlow)
Biffen, John Grosvenor, Lt.-Col. R. G. Morgan, William
Biggs-Davison, John Harris, Frederic (Croydon, N.W.) Morrison, John
Bingham, R. M. Harris, Reader (Heston) Mott-Radclyffe, Sir Charles
Birch, Rt. Hon. Nigel Harrison, Brian (Maldon) Neave, Airey
Bishop, F. P. Harvey, Sir Arthur Vere (Macclesf'd) Nicholson, Sir Godfrey
Black, Sir Cyril Harvle Anderson, Miss Nugent, Rt. Hon, Sir Richard
Bourne-Arton, A. Hastings, Stephen Oakshott, Sir Hendrie
Bowen, Roderic (Cardigan) Heald, Rt. Hon. Sir Lionel Orr, Capt. L. P. S.
Box, Donald Hendry, Forbes Osborn, John (Hallam)
Boyd-Carpenter, Rt. Hon. John Hiley, Joseph Page, Graham (Crosby)
Brewis, John Hill, Dr. Rt. Hon. Charles (Luton) Pannell, Norman (Kirkdale)
Bromley-Davenport,Lt.-Col.SirWalter Hill, Mrs. Eveline (Wythenshawe) Pearson, Frank (Clitheroe)
Brooman-White, R. Hill, J. E. B. (S. Norfolk) Peel, John
Brown, Alan (Tottenham) Hocking, Philip N. Percival, lan
Browne, Percy (Torrington) Holland, Philip Plckthorn, Sir Kenneth
Bullard, Denys Hollingworth, John Pitt, Dame Edith
Builus, Wing Commander Eric Hoonson, H. E Pott, Percival]
Burden, F A. Hope, Rt. Rt.. Hon. Lord John Price, David (Eastlet)
Carr, Compton (Barons Court) Hornby, R. P. Prior, J. M. L.
Carr, Robert (Mitcham) Hornsby-Smith, Rt. Hon. Dame P. Prior-Palmer, Brig. Sir Otho
Cary, Sir Robert Howard, Hon. G. R. (St. Ives) Pym, Francis
Channon, H. P. G. Hughes, Hallett, Vice-Admiral John Quenneli, Miss J. M.
Chataway, Christopher Hughes-Young, Michael Ramsden, James
Chichester Clark, R. Hutchison, Michael Clark Rawlinson, Sir Peter
Churchill, Rt. Hon. Sir Winston Iremonger, T. L. Redmayne, Rt. Hon. Martin
Clark, Henry (Antrim, N.) Irvine, Bryant Godman (Rye) Rees, Hugh
Clark, William (Nottingham, S.) James, David Rees-Davies, W. R.
Clarke, Brig. Terence (Portsmth, W.) Jenkins, Robert (Dulwich) Ridley, Hon. Nicholas
Cleaver, Leonard Johnson, Eric (Blacktey) Robinson, Rt. Hn. Sir R. (B'pool,S.)
Cole, Norman Johnson Smith, Geoffrey Robson Brown, Sir William
Cooke, Robert Kaberry, Sir Donald Roots, William
Cooper, A. E. Kerens, Cdr. J. S. Scott-Hopkins, James
Cordeaux, Lt.-Col. J. K. Kerby, Capt. Henry Sharpies, Richard
Corfield, F. V. Kerby, Capt Henry Shaw, M.
Costain, A. P. Kerr, Sir Hamilton Skeet, T. H. H.
Coulson, Michael Kimball, Marcus Smith, Dudley (Br'ntf'd & Chiswick)
Craddock, Sir Beresford (Spelthorne) Kirk, Peter Smithers, Peter
Lagden, Godfrey Smyth, Rt. Hon. Brig. Sir John
Crawley, Aidan Lancaster, Col, C. G. Spearman, Sir Alexander
Crosthwaite-Eyre, Col. Sir Oliver Leather, Sir Edwin Spearman, Sir Alexander
Curran, Charles Leavey, J. A. Speir, Rupert
Dalkeith, Earl of Leburn, Gilmour Stevens, Geoffrey
Dance, James Legge-Bourke, Sir Harry Steward, Harold (Stockport, S.)
d'Avigdor-Goldsmid, Sir Henry Lindsay, Sir Marlin Studhoime, Sir Henry
Deedes, Rt. Hon. W. F. Litchfield, Capt. John Summers, Sir Spencer
Digby, Simon Wingfield Longbottom, Charless Tapsell, Peter
Donaldson, Cmdr. C. E. M. Longden, Gilbert Taylor, Sir Charles (Eastbourne)
Doughty, Charles Loveys, Water H. Teeling, Sir William
Drayson, G. B. Lucas- Other Sir Hugh Temple, John M.
du Cann, Edward McAdden, Sir Stephen Thather, Mrs. Margaret
Elliot, Capt. Walter (Carshailon) McLaren, Martin Thomas, Peter (Conway)
Emery, Peter Maelean,SirFitzroy(Bute&N.Ayrs) Thompson, Sir Kenneth (Walton)
Emmet, Hon. Mrs. Evelyn Macleod,Rt. Hn. lain (Enfield, W.) Thompson, Sir Richard (Croydon, S.)
Errington, Sir Eric MacLeod, John (Ross & Cromarty) Thornton-Kemaley, Sir Colin
Farey-Jones, F. W. McMaster, Stanley R. Thorpe, Jeremy
Farr, John Macmillan, Maurice (Halifax) Touche, At. Hon. Sir Gordon
Finlay, Graeme Maddan, Martin Turner, Colin
Fisher, Nigel Maginnis, John E. Tweedsmuir, Lady
Fletcher-Cooke, Charles Maitland, Sir John van Straubenzee, W. R.
vane, W. M. F. Ward, Dame Irene Woodhouse, C. M.
Vaughan-Morgan, Rt. Hon. Sir John Whitelaw, William Woodnutt, Mark
Wade, Donald Williams, Dudley (Exeter) Woollam, John
Warder, David Williams, Paul (Sunderland, S.) Worsley, Marcus
Walker, Peter Wilson, Geoffrey (Truro)
Walker-Smith, Rt. Hon. Sir Derek Wise, A. R. TELLERS FOR THE NOES:
Wall, Patrick W oirlge-Gordon, Patrick Mr. Ian Fraser sad Mr. MacArthur.

Question proposed, That the Clause stand part of the Bill.

Mr. Bellenger

When we were discussing the Amendment, I raised one or two questions of administration which apparently it was not appropriate to discuss on the Amendment. The right hon. Gentleman the Chief Secretary said that his hon. Friend the Economic Secretary would answer my questions later.

The point briefly is that when we have passed the Bill, Schedule A will disappear from our Income Tax law. All owners of property hitherto have had to declare the value of that property in their Income Tax returns and the net annual value under Schedule A was regarded as part of the owner's income. This part of his income will now cease to be assessable if the owner of property is the occupier. What is to be the method of ascertaining who is the owner-occupier?

Hitherto, the assessment of the value of property has been made by the fairly well defined machinery of the Inland Revenue valuer assessing what the property was worth, but now that there is to be no Schedule A, the occupier of the property, if he is the owner and not the tenant, will be relieved from paying tax on that property. What I want to know is what is to be the administrative machinery for ascertaining whether the occupier is the owner.

Different considerations arise if he is a tenant. The owner of the property will then become assessable under a new case, Case No. 8. It would be out of order to discuss Case No. 8 on this Clause, but I can well imagine that the machinery which the Inland Revenue would want to set up in order to get its tax from an owner who was not an occupier would be very intricate. It appears to me that it will be a Schedule D assessment and that the owner of the property will have to render a return, as he now renders a return under Schedule D, showing what his net profits are.

Once the Economic Secretary has cleared my question about the machinery which is to identify the owner-occupier, in later Clauses we can go on to discuss how we are to assess the owner of property under the new Case No. 8. In such a discussion there will be considerations which it would be out of order to discuss now.

5.30 p.m.

In short, what machinery will be adopted by the Inland Revenue to identify the owner-occupier? I hope that the method adopted will not be a cumbrous one. If the owner of a property has to produce the title deeds to the Inland Revenue to prove that he is in fact the owner-occupier, I suggest that the machinery will be extremely cumbrous. If, on the other hand, he merely has to make a declaration such as an Income Tax payer makes on his annual return that he actually owns the property, that will be very much simpler and he will not be troubled with having to seek professional advice to answer the questions which the Inland Revenue will have to put to ascertain whether the occupier is also the owner.

Mr. B. T. Parkin (Paddington, North)

I add myself to the list of mourners identified by the Chief Secretary, but I want to make clear what it is I am mourning.

Two things are happening in the operation of this Clause. First, owner-occupiers are to be relieved of Schedule A because it has been widely held in all parties that this was a desirable thing to do socially, but it is in fact a political intervention in a fiscal matter. Between last year and this the Treasury has decided that from its point of view it would be a tidy thing to do to scrap the machinery altogether because most of those who are owners, but not owner-occupiers, get assessed under Schedule D anyway, so they might as well use the machinery of that Schedule.

What I am regretting is that by throwing away that machinery we are throwing away something which we may well wish to recreate. I think that this is one more blow in the demolition of the notion of stewardship in property which unfortunately, while the idea itself is strengthening in the mind of public opinion, is slowly being removed from the laws of this country. Several of the most important laws have been repealed within the last few years. I do not want to survey the whole ground since the days when, after the departure of King John, the young King Edward was brought to Stepney when Parliament was held in the Great Place there and was compelled to reaffirm not only Magna Carta but De Ordinatio Foreste. which we so regrettably repealed in the course of this Parliament.

The second thing I regret is that we are throwing away a weapon against one of the most serious factors in the housing problem, and one which I regret to say the Chief Secretary in his speech on the last Amendment seemed to brush off as unimportant, as though it could not be cured. He was referring to small owners who could not afford to maintain their properties.

One of the biggest single factors in the dilapidation of houses and the exacerbation of the housing problem has been the habit of bleeding capital by assuming that the whole of the rent constitutes income. The offenders are not so much great corporations, or big landowners, or spivs, or speculators, as the innocent offenders, the elderly ladies who have inherited a couple of houses—on the assumption by the testator that they would thereby be rewarded in their old age—and who leave the management of these properties in the hands of estate agents. The estate agents are never instructed to put on a squeeze for repairs to be done at an early stage when they could be done cheaply, with the result that the property becomes seriously damaged.

There is machinery to correct this kind of thing within the operation of Schedule A, but bit by bit it has become atrophied. There is an assumption that under Schedule A people will spend a fixed amount on repairs, and people who are advised and able to spend more thereby manage to escape a great deal of the rest of the burden of Schedule A. An instrument should be devised to reassert the principle that a person ought not to be allowed to bleed away capital which is social capital and thus reduce the total amount of dwellings available to the community.

Secondly, a taxpayer ought to be allowed to regard as maintenance something which is all too often now treated as an improvement because it means introducing something into a house which ought to have been introduced 50 years ago. In other words, I think we ought to be able to introduce the principle that reconditioning a house to modern notions of amenities should not be treated as an improvement, but as maintenance, and that a way should be found of excusing tax on that kind of expenditure.

It will, of course, occur to hon. Gentlemen that many of these things could be achieved through the rating system, and that I must not argue now. I must argue as if it could be done within the framework of the Treasury and the collection of Schedule A, as indeed it could, but if the Economic Secretary thinks that some of the ideas I am putting forward would be better handled through the rating system, I hope that he will call the attention of his right hon. Friend the Minister of Housing and Local Government to these arguments so that they can be taken note of.

I want to see established the notion that the owner of property should be encouraged in every way to carry out arrears of maintenance which are now misguidedly called improvements. I want a window tax in reverse. One does not assume that an owner has in fact spent a certain percentage per annum on maintenance. I want to make him prove it. If, moreover, one is selective about the kind of improvements needed, one introduces a social responsibility. For instance, what could be sillier than to tax a man locally or nationally because he builds a garage, and to let off a man who clutters up the road? There must be some means of achieving that sort of improvement.

I should like to see a re-establishment of the notion of the difference between gross and net annual value, but not an automatic assumption that tax was payable only on net, and not an automatic granting of exemption from tax on all kinds of expenses on houses such as the building of hard tennis courts or something of that kind. I should like to see a penalty on the absence from the house of any of the things required by local council byelaws or any of the amenities now regarded as standard by the Ministry of Housing and Local Government. In other words, a person would not get his payments reduced to net if there were no inside toilet; so much per cent. extra charged for an outside toilet; so much per cent. extra charged for a shared toilet; so much for the absence of a bath; so much for the different things which at any moment must be regarded as reasonably appropriate to the conditions of living in cities, and so on. These vary from city to city, and from area to area, and one would of course make allowances for this.

In other words, I want to see a flexibility brought back into this, and I want to see some means by which those who are so easily dismissed as being unable to carry out repairs are enabled to do so. It is possible now for local council loans to be granted for this purpose, but nobody puts the pressure on. Yet nobody stands at that Dispatch Box nowadays and pleads that, however impoverished a farmer may be, however unlucky he is with his harvest, however difficult it is to get local labour, he must be allowed to let weeds run riot over his ground and do damage in all directions.

A house which has fallen into avoidable decay or neglect is just as much a menace in a city as is a neglected field, full of weeds, in the countryside. We do not have to re-argue the social aspects of taxation in these days. The Treasury boys always tell us that we ought to do this in another way, but we do not take any notice of them because there are so many examples of the fiscal system being used to encourage developments or improvements which are of social value.

I greatly regret that the Clause embodies so basically the destruction of a piece of machinery which might have been brought up to date and improved, and used as a weapon in the campaign to get old houses restored, improved and maintained. I hope that before we part with the Clause we shall have an assurance from the Treasury that it has not tossed aside any idea of preserving the good things that could have stemmed from a proper implementation of Schedule A, and that those bits of machinery will be reintroduced into our system in some other way, so that the campaign for a social recognition of the importance of maintaining property will be sustained.

Mr. McKay

I have lately acquired the art of getting out of order. On this occasion, I hope that I shall succeed in keeping within the rules of order. Most of us are in favour of the Clause in principle, but we see many weaknesses in it. We are seeking to give relief to people who are buying their own houses. In fact, the agitation for such a Clause as this has been strengthened because so many so-called owner-occupiers are having a great struggle to make ends meet. They are ambitious to have a house of their own, but they nevertheless knew that they were creating for themselves a problem which might overcome them in the end. It was because of the problem facing these people that the Clause was finally brought into the Bill.

Unfortunately, the hardest-hit owner-occupiers, whose situation was responsible for the introduction of the Clause, are getting no real advantage from it, because they are so low in the income scale that they do not have to pay any Income Tax. Other owner-occupiers, living in more comfortable houses of greater value, have up to 10 times the income of the ordinary workers at the lower end of the scale. That means that this is another piece of invidious legislation which is really helping those in the higher income groups.

The Temporary Chairman (Mr. F. Blackburn)

If the hon. Member proceeds with this argument he will become out of order. If he will think over what he has been saying he will realise that he has been introducing a number of matters which are not contained in the Clause.

5.45 p.m.

Mr. McKay

I do not see that. At the same time, I must obey your Ruling, Mr. Blackburn. I understand that the purpose of the Clause is to help various classes of owner-occupier. If it is not being introduced for that purpose, what is it for? My point is that the Clause seeks to provide some relief for those people who are paying off mortgages on their houses, which will eventually become their own property. Surely that is what I have been saying.

But although the Government are seeking to provide this help, in fact many owner-occupiers will receive no relief at all. Furthermore, ought we not to consider the position of another section of the population, which does not consist of owner-occupiers? If we are going to provide some relief for owner-occupiers we ought also to remember those people who are paying rent for their houses. Cannot we do something for them?

The Government ought to take the view that now that owner-occupiers are being helped it is necessary also to be fair to the greater number of householders who pay rent, and to see that in future legislation housing subsidies are increased in order to help those people.

Mr. Graham Page (Crosby)

I ask my hon. Friend to answer two points. Subsection (1,b) provides for the charging of rents and certain other receipts from land under a new Case of Schedule D. Why is it necessary to have a new Case, when, under Case VI, excess rents are at present chargeable? When one reads the following Clauses it appears that Case VIII has been devised in order to deprive the taxpayer of certain rights which he has under Case VI. I will not go into details because the matter arises in later Clauses. But if we had an explanation from my hon. Friend at this stage why it was decided to have a new Case instead of making the rents chargeable under Case VI, it would assist us in understanding and debating the following Clauses.

Is it intended that the returns under this Case shall be made on the ordinary form? In respect of Schedule A we made returns of maintenance, repairs and so on to the inspector of the district in which the property was situated. Under Case VIII is it all to go on the one return? Or are we to make returns of rents and profits from rents to the inspector in the district in which the property is situated? It is a machinery point but an explanation of how Case VIII is to be administered would assist us to understand the later Clauses and Schedules.

Mr. Bence

It has been said that the abolition of Schedule A tax represents a tremendous step forward in devising means to assist potential owner-occu- piers and young people wishing to buy their own home. I always considered that this tax was nonsense. As an owner-occupier, or rather as one who for many years has been paying a mortgage in order eventually to acquire his own house, I have been able to avoid paying any Schedule A tax by reason of the mortgage payments which I have to make and the ground rent and feu duty which I have to pay.

Few occupiers of modest homes are called upon to pay a considerable sum in this form of taxation. It may amount to £1 or £2 a year. But the psychological effect of its abolition will be to encourage owner-occupation, because owner-occupiers will consider that they have been relieved of an iniquitous form of taxation. The tax was levied on a notional rent for which no income was received. In fact, people lost a source of income because, had they invested their money in something other than a house, they would have received a financial return upon which, of course, they would have had to pay tax. I think it desirable that as many people as possible who can afford to do so should own their own homes.

There are a number of owner-occupiers who open their property to visitors and charge visitors half-a-crown each. There is a famous mansion somewhere in Bedfordshire. It is a beautiful home where there are juke boxes, and all the rest of it. There are all sorts of sideshows in the grounds. Does the owner escape the payment of tax, or will he be taxed? I presume that the huge mansion in which he lives is his home. No doubt it is expensive to maintain. It may be an architectural gem—I do not know because I have not visited it. But I think that the owner is doing pretty well. Does he escape the payment of tax on the property which to me has the appearance of being more of a business enterprise than a domestic residence? Do the occupiers of such properties escape the payment of tax?

I support the Clause and I consider that its provisions are desirable. I hope that the burden on owner-occupiers will be still further reduced by more concessions to building societies.

Mr. Houghton

It would, I think, be a pity to dismiss Schedule A "in disgrace", because it has been a perfectly respectable tax. It has been embodied in the Income Tax Acts for over a hundred years. It annoys me to hear Ministers say that Schedule A was a very unsatisfactory tax and that they never believed in it. They are like Stalinists who have become followers of Khrushchev who denounce the deviations of their former chief. It was only on 21st June, 1960. that the then Chancellor of the Exchequer, now Lord Amory said in this House: While the arguments of the Royal Commission are pretty conclusive on the propriety of taxing notional income of this kind and on the relative equity as between a person who owns his own home as against one who rents his I find the argument in favour of special discrimination as an incentive to house ownership an appealing one."—[OFFICIAL REPORT, 21st June, 1960; Vol. 624.] It is on that basis only that the Committee should accept this Clause. It is important that it should be done in this way because, in a subsequent part of his speech in 1960, Lord Amory acknowledged that there were strong arguments both for and against relief from Schedule A tax for owner-occupiers. The proposal has come in Clause 14, after consideration of the social aspects of the tax and its incidence and impact on those trying to buy their own homes, many of whom are handicapped by high prices and high mortgage interest rates.

We must remember, however, that not all owner-occupiers are buying their houses by means of a mortgage. There are nearly 7 million owner-occupiers, and fewer than 2½ million are buying their houses by means of mortgages from building societies. Some are buying their houses by means of insurance policies, but I do not know how many. It is within the knowledge of all of us that a great many owner-occupiers do not have to struggle with problems arising from the payment of mortgage rates and the high interest charges. I do not wish to develop the point further. In saying "Goodbye" to Schedule A, I should like also to say, "Long life to Case VIII", and to acknowledge what I think is the proper basis upon which the Committee should approve this concession.

We must not overlook the large number of people who are buying their houses on mortgage and who have family responsibilities, but whose incomes are so modest that they pay no Income Tax at all. Those people receive no benefit from this Clause, though, to be fair, there are provisions in other Clauses in the Bill which will assist them in other ways.

As my hon. Friend the Member for Wallsend (Mr. McKay) said, millions of people who are paying rent get no relief under Clause 14. We have to remember them because when they have done paying through the nose, as many of them are doing, they will not have a capital asset such as the owner-occupier will have. Still less will they have a capital asset of appreciating value as many owner-occupiers have. When I heard the Chief Secretary referring to some "modest person" who had a small mews cottage, I wondered if the right hon. Gentleman had been looking at property advertisements recently. Does he know what a small mews cottage costs? It costs £25,000—[HON. MEMBERS: "More."]—and many of them of cost more. They were bought for £7,000 a few years ago.

I know that this is distasteful to hon. Members opposite and there is no political capital in it for me, so I do not propose to continue these remarks any longer. I think, however, that in this Committee, whatever the political situation, occasionally the truth should be told.

6.0 p.m.

The Economic Secretary to the Treasury (Mr. Edward du Cann)

We have listened to a most engaging speech on which I am quite sure the hon. Member for Sowerby (Mr. Houghton) will not expect me to comment in detail. Indeed, in view of the fact that we have had a long debate, not only on this Clause but on the Amendments proposed to it and also on the whole subject of Schedule A, I imagine that it would be the wish of the Committee that I should be fairly brief while still attempting to reply to specific questions which hon. Members have asked me.

The purpose of this Clause is to abolish Schedule A on all owner-occupied property and to bring rent within a new Case of Schedule D. As the hon. Member for Sowerby might have said, "Le roi est mort. Vive le roi", although, as my right hon. Friend pointed out, he came here this afternoon to bury Caesar and at the same time to praise him. It may have been to resurrect him, and that would be a cleverer thing to do, I imagine.

There will be a great deal of rejoicing that. Schedule A is to go. This was foreshadowed by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) last year and it has been brought to fruition by my right hon. Friend the Chancellor now. There has been very much pressure for abolition of Schedule A. I am particularly glad to see my hon. Friend the Member for Crosby (Mr. Graham Page) in his place. He has been prominent in that regard, as have other hon. Members, particularly the hon. Member for Westhoughton (Mr. J. T. Price) who is not here at the moment.

The cost of abolition is £35 million this year and £48 million in a full year; expensive but, I am perfectly certain, worth it on social grounds, as the hon. Member has suggested. I was a little confused when listening to the hon. Member for Wallsend (Mr. McKay). I was not quite clear whether he thought the move towards home ownership a desirable or an undesirable thing. I personally think it a thoroughly desirable move which should be encouraged.

I have been looking at the figures. It is very interesting to see the change which has taken place in our social scene in recent years. In 1920 there were 8.9 million dwellings in the United Kingdom of which 1.9 million were occupied by owner-occupiers—21 per cent. By 1939 the figures were respectively 12.6 million in total with 2.9 million owner-occupiers —23 per cent. The figures for 1963, in so far as one can estimate them—and these are all estimates; it has not been possible to get precise figures—are 16.8 million dwellings in the United Kingdom and 6.8 million by owner-occupiers—40 per cent. Here is the trend, which I think thoroughly satisfactory in the national interest.

Mr. Mitchison

Will the hon. Gentleman answer a question which has been puzzling me a little? We have in the White Paper what I presume are the figures resulting from a tax concession by the abolition of Schedule A reduced by a tax gain out of the proceeds of Case VIII. Could the hon. Gentleman give us the figures separately? I hope I have made myself clear.

Mr. du Cann

The hon. and learned Member has made his question entirely clear. I am not in a position, however, to give him accurate figures at this moment, I am sorry to say, nor do I think it would be possible to estimate them accurately at present. Any estimate would involve a very great deal of work. Quite apart from that, I think it would be impossible to get precise figures. I follow what the hon. and learned Member wants, but I regret that it is not possible to get it.

The hon. Member for Sowerby said that we had had this tax for a hundred years and it had worked very well. I suppose it would be accurate to say that one could trace the ancestry of the tax as far back as Tudor times. Whatever the truth of that, I and, I think, all my hon. Friends and many hon. Members opposite believe that we are very well rid of it, even though we do not get rid of it in disgrace—I agree with the hon. Member to that extent.

The hon. Member for Paddington, North (Mr. Parkin), as I understood his argument, was very much in favour of abolishing Schedule A, as are other hon. Members, but he was arguing for greater reform of taxation in general. He instanced several ways in which he would like to see those reforms developed. He asked whether we in the Treasury had closed minds. I think the exact phrase he used was that thinking on further reform of taxation was desirable for social reasons. He hoped that we would not toss aside a good idea. Certainly we do not toss aside any good ideas and we shall pay attention to his remarks. I do not say that we agree with him on all of them, but we are far from being static in these matters in the Treasury.

My hon. Friend the Member for Crosby asked why we had a new Case VIII. I think that the answer would properly be given during debate on Clause 15 and my hon. Friend the Financial Secretary will provide it then. My hon. Friend the Member for Crosby also asked about the machinery. That I suggest would be properly answered in discussion of Clause 16, and again the Financial Secretary will provide the answer. The hon. Member for Dunbartonshire, East (Mr. Bence) asked a question which related to the Fourth Schedule, 11 (2, c). My hon. Friend the Member for Nottingham, South (Mr. W. Clark) has an Amendment on the Notice Paper on that point. Perhaps the hon. Member for Dunbartonshire, East, will await a specific reply until we debate that Amendment.

The right hon. Member for Bassett-law (Mr. Bellenger) asked about several things, in particular if we could define "owner-occupier". We all use the phrase. It appears in the side note to Clause 14 and I have used it already in winding up this discussion. It is not a very good phrase to use. The public understand it and we understand it, but it is extraordinarily difficult to define. The right hon. Member will see that nowhere does that expression appear in the Clause, but we talk about the occupier with a beneficial interest. That can mean either a freeholder or a leaseholder.

The position is that it is the occupier who is assessed for Schedule A and who pays it. He passes it on to his landlord to the extent that he can deduct tax at standard rate from rent. The right hon. Member will know that there are certain limitations on that. A freeholder cannot pass it on at all. The holder of a long lease may be able to pass it on to a limited extent only if his ground rent is small. A leaseholder with a shorter lease may be able to pass it on if his rent is higher. I am reminded of what the Frenchman said—that no one can define an elephant but we all recognise him when we see him. I hope that the right hon. Gentleman will be satisfied with that reply. Even though the definition is not easy to put in layman's language, I think that there is no difficulty, because the position is well understood in law.

Mr. Bellenger

I am not in the least satisfied. I am not concerned with what we know when we see them but with what the tax inspector will know before he exempts the property from Schedule A tax. If the occupier is a tenant, he pays and then passes it on to his landlord, but if he is a beneficial occupier under a lease or a freehold, then he is exempt from tax. How will the Inland Revenue find out whether the property occupied by an hon. Gentleman apposite or myself, for example, is owner-occupied? It may be a well-understood term for lawyers and the Inland Revenue, but how will they know which house is owner-occupied or beneficially occupied?

Mr. du Cann

I very much admire the right hon. Gentleman's persistence. He has tried to screw me down hard on this matter. But he interrupted me just as I was about to develop the matter further. I wanted first to deal with the question of definition and then to turn to the question which he asked—and to which he has now directed extra attention—that of machinery. Again, this would be more appropriately discussed under Clause 16. and this will be done.

I would say to him that, in general, however, we can foresee no difficulty whatever. The Inland Revenue will require returns in the usual way. We are satisfied that the matter will work as smoothly as it did in the old days, even though we are operating a new Case. We can see no problem. But my hon. Friend the Financial Secretary is only too ready to discuss the matter with the right hon. Gentleman when we discuss the Clause which deals with this case.

Mr. Bellenger

The hon. Gentleman has misunderstood me. The Clause which will be discussed later is the Clause under which rents are being received by the occupier or owner. I am concerned with the case of the individual living in a property. The Inland Revenue has hitherto assessed the tax on the hereditament and has gone to the occupier and said "Pay up. Whether you can pass it on or not is nothing to do with us". Had the Revenue wanted to levy distress it would have levied it on the property. What I ask under this Clause is: having abolished Schedule A, how will the Inland Revenue identify who is entitled to that concession?

Mr. du Cann

I do not altogether follow the difficulty which is in the right hon. Gentleman's mind, because if an owner-occupier is not in receipt of income from property he does not have to declare it and there will be no Schedule A for him to pay. It will be as simple as that. We foresee no difficulty. I hope that the right hon. Member will accept it from me that we think that there will be no trouble.

May I pass, very shortly, to more general matters? The proposals con- tained in the chapter, for which this Clause is, so to speak, the starting gun, represent, as the hon. and learned Member for Kettering (Mr. Mitchison) said, a new and far-reaching change in the tax structure. This Clause does not deal with the detail of the matter. Clearly it must follow in an important and complex sector of the tax field such as this that there will be a chain reaction from the major decision to abolish Schedule A tax which is contained in the Clause. It is therefore followed by 19 Clauses and four Schedules, a very substantial amount of legislation to wade through during the rest of the day. But it is these detailed matters, as indicated by the questions of my hon. Friend the Member for Crosby and others, which are of the greatest interest to the Committee. Certainly any substantial move in tax matters obviously merits careful study.

I want to make it plain on behalf of my right hon. Friend that the Government will welcome discussion of the details of these succeeding Clauses and Schedules. The Committee stage, I am sure, will be valuable to us as hon. Members are good enough to give us the benefit of their informed advice. We are ready to give a general undertaking to beat in mind and to consider with care any suggestions which are made for the improvement of any item. I am not, of course, undertaking that my right hon. Friend will accept every or any suggestion which is made to him, but we are very ready to examine the ramifications of the Chapter with care and with the help of the Committee.

6.15 p.m.

The hon. Member for Sowerby the day before yesterday made a suggestion that it might be for the Committee's assistance if a short explanatory statement were sometimes made at the beginning of our discussion of each Clause. We are entirely ready to accept this helpful proposal in respect of the Clauses in Chapter II in appropriate cases. My hon. Friend the Financial Secretary or my hon. and learned Friend the Solicitor-General or I, unlearned, as appropriate, wilt certainly, where the context appears to require it, preface the discussions which we may have on the Clauses in Chapter II by a few short explanatory words. We trust that this arrangement will meet the wishes of hon. and right hon. Members opposite and will be helpful to the Committee in general, as, indeed, is our intention.

Mr. Mitchison

Will the hon. Member extend that undertaking to Schedule 4, which is a most difficult part of the Bill. I personally—and I think that I speak for hon. Members on both sides of the Committee—would be glad if a statement of that sort were made before we discussed it. I observe the hon. Member nodding in agreement.

May I ask him a second question about the cost of this concession following the question which I asked him a moment ago? I appreciate the difficulty of giving the figures, but does he know, or will he ascertain for me, what would have been the yield of Schedule A if it had not been abolished—the figure from which the value of the concessions would be deducted?

Mr. du Cann

The hon. and learned Gentleman appreciates that there are Amendments to Schedule 4 which will have to be dealt with first, but my hon. and learned Friend the Solicitor-General heard the hon. and learned Gentleman's suggestion and he authorised me to say—as no doubt the hon. and learned Gentleman observed—that he will do his best to meet the point.

The hon. and learned Gentleman will understand that I cannot give him now, while I am on my feet, the figures for which he asked, but I will do my best to see whether I can satisfy him before we conclude our discussions on these matters.

We had our legs pulled a little—I do not complain of it; it was done very fairly and, as always, very pleasantly—by the hon. Member for Sowerby, who suggested that perhaps we have not been altogether consistent in this matter of Schedule A. That may or may not be so. But, as I mentioned earlier, personally I am glad to be rid of it, and so are my hon. Friends. It is a step forward in a move towards a property-owning democracy. I know that the vast majority of hon. and right hon. Gentlemen opposite similarly welcome it.

Question put and agreed to.

Clause ordered to stand part of the Bill.