§ Mr. Baker
I beg to move Amendment No. 190, in page 31, fine 11, after "rate" to insert:(not exceeding twenty-five per cent. of the net development value or other amount upon which the levy is chargeable)".One of the many disadvantages of the Bill is that it applies to dwelling houses, shops, offices, factories and, in fact, universities. We might liken it, therefore, to an umbrella. Not only does it take in all types of property and development, but ipso facto it takes in all sorts of types of people. These people are all hit by the levy, whether they be millionaires or small owner-occupiers. 1239 from people with a tremendous amount of money, who are few and far between nowadays, to those who have very little cash and a lot of family responsibilities.
We on this side take the view that the levy is another form of taxation. Generally speaking, taxation, particularly when it affects the family man, is graduated. There is no graduation in the levy. We ask the House to accept the Amendment. We seek to keep the levy, or the tax as I prefer to call it, at a reasonable level, within the context of what I consider to be an unreasoned and a thoroughly unreasonable Bill.
What are the Government afraid of? Why are they being specific about the amount of levy? We had long discussions on the subject in Committee but we did not get a satisfactory answer. It is true that another object of the Amendment is to try to get the Government to show their hand, because when the Bill becomes law it will be possible to use the levy as a deliberate means of disincentive.
The Minister estimated that the levy would give a gross yield of £80 million per annum if it was set at 40 per cent. We have since learned that this is a gross, and not a net, figure. The White Paper stated that it was proposed that the levy should start at 40 per cent. If we assume that a 40 per cent. levy will yield £80 million gross per annum, what is the outgoing which will compensate or balance this figure? If the levy goes up, as the White Paper promises, it will progressively go to 45 per cent., to 50 per cent., and possibly even higher. Will the yield be commensurate with this higher rate? As the Commission gets going and grows more ramifications, I do not think this will apply.
The White Paper goes on to say:The question of increasing the rate further will be examined as acquisitions by the Commission, and thus their ability to provide for land development, increase.Therefore, as I see it, as the Land Commission's activities of compulsory acquisition of land increase, the levy must become more and more confiscatory in nature.
That is quite different from, and quite against, our political philosophy on this side of the House, and that is yet another reason why we aim to fix the levy at the 1240 limit proposed in the Amendment. As my hon. Friend the Member for Crosby (Mr. Graham Page) said, when we get back we shall repeal this Measure, and we shall wind up the Land Commission. We do not like very much about the Bill, but, as I said before, what we seek to do by the Amendment is to keep the levy at a reasonable level. Somebody said once—I have no idea who it was—that there should be no taxation without demonstration. This is so; this is a form of taxation; we seek to put a limit on it. We have put our terms in the Amendment, and we put our terms to the House.
§ Mr. Willey
It is quite clear that the hon. Gentleman did not expect the Government to accept this Amendment. He complained that the Government did not disclose their hand. Of course they have, as he later went on to show. In the White Paper we said quite explicitly what our intentions are about the rate of levy. The hon. Gentleman has shown, apparently, the intentions of his hon. Friends. They are that the levy shall run well below the Capital Gains and Corporation Tax. In other words, if there is discrimination, it is in favour of land, as against other things; development value is to be treated differently from other capital gains.
§ Mr. Graham Page
The Minister says that if we fix it at 25 per cent. it must be less than Capital Gains Tax. When this Bill comes into operation as an Act there will be a clear distinction of that part of the value of property on which capital gains will be charged and that part on which the levy will be charged. As I understand it, Capital Gains Tax will be charged on the increase in capital use value, the levy will be charged starting with the base of the current use value so as to make it the base value as described in the Schedules to the Bill. But these are two entirely different sections of the value of the property, and why should not the levy be at a different rate from the Capital Gains Tax?
The point about the levy, of course, is that it is a levy. It is not related to a person's income as Income Tax is, and Capital Gains Tax is a form of income tax. Here the unfortunate victim of this has to pay whatever his means may be. We are told he will have to pay 40 per cent. on whatever net development value 1241 there is on disposal or development of the property.
We wish to limit it to 25 per cent. I do not see what Capital Gains Tax has to do with it except that it is a different form of tax altogether and a much fairer form. This is the unfair form of charging a fixed figure on a person whatever his means to pay, and that alone would be justification for restricting it to a certain figure.
If the Bill is passed, it will be an open cheque to the Government to charge whatever levy they choose. The rate of levy is not mentioned in the Bill. The Minister mentioned that it is intended to be 40 per cent., but goodness knows what the intention may be by the time it comes to fixing that figure. The intentions of the present Government change so rapidly from day to day and from night to night. Before we know where we are, the levy may be 100 per cent. It can be under the Bill. In fact, it can be more than 100 per cent. It can be worked out on the Schedules as more than the net development value that a man has obtained out of a transaction over property. On this basis, it is fair and reasonable that there should be a figure in the Bill limiting the amount of the levy.
I should have thought that that was the only reasonable thing to do when a Bill of this sort was brought before the House with no statement of what it means to the individual from the money point of view and no statement about how much will be taken from the individual. When we seek to put a figure in, there is no question of the Government saying "You have limited it at too low a figure." The suggestion is just rejected. They do not say "All right. We will give an undertaking not to charge more than such-and-such a percentage levy."
This is one of the most open cheques that Parliament has ever been asked to give a Government. We are not even asked to do this in the Finance Bill. There we are told the rates of tax. From time to time we give a Minister power to increase them by Order, but this is exceptional. Normally we know in the Finance Bill exactly the rate of tax that is intended. But here we are not given 1242 a clue beyond a statement by the Minister that it is his intention that the tax shall start at 40 per cent. and then go to 45 per cent., the bait being that it will first be 40 per cent. in order to encourage people to bring land forward early in case they are charged a higher rate in future. Our Amendment to limit it to a certain percentage at least makes sense out of the legislation before the House.
§ Mr. Farr
I strongly support what my hon. Friends have said. The rate of levy is the axis upon which the Land Commission, if it ever gets going, will revolve.
It makes nonsense of Parliament's intention to simplify its procedure so that ordinary people can understand it when in a Bill like this we have a Clause dealing with the rate of levy and when we read it through we find that the rate is not mentioned. It makes the proceedings rather ludicrous. It is all very well for the Minister to indicate in a rather confidential manner that we can expect a rate of levy on the lines laid down in the White Paper. White Papers are not sacrosanct. The National Plan is a White Paper, and it is in ribbons.
I strongly support my hon. Friends. If we are to get anywhere, let us have something simple put in the Bill. Perhaps 25 per cent. is rather lower than what the Government have in mind, but let us have a maximum figure in the Bill so that there will be some firm ground for developers and sellers of land to walk upon rather than this awful quagmire for them to plough through.
§ Amendment negatived.
§ The Amendment is proposed to Clause 28 which provides that the rate of levy shall be ordered by the Minister with the consent of the Treasury. The Clause also prescribes the point of time in any transaction between private citizens at which that transaction is caught by the levy. The Amendment accepts that the Minister may by order vary the levy from time to time. It is directed to altering the date when it is suggested that a transaction is caught by the levy.1243
§ As matters stand, it the Clause remained unamended and if one took the example of a sale of land between parties, the date of the conveyance or the actual transfer of the land would be the point of time at which that transaction would be caught, and the rate of levy in force on that date would be the rate applicable to the transaction. Similarly, with a lease, it is the date on which the lease is signed. In the case of a builder, under a building contract, it is the date on which he starts his development.
§ We suggest that it is a matter of far greater importance to private citizens that the date on which the levy be fixed is the date on which they strike their bargain. For the sale of land, we suggest that it is the date on which they sign their contract for the sale, and not the date on which the final legal formalities are tied up, because it is the date on which the contract is signed that both parties want to know what their respective financial obligations are. One can envisage a situation where a contract for the sale of land or for the granting of a lease is signed on a date when the levy is fixed at a certain percentage, and then, when the final formal completion comes, the rate is changed. That could create great difficulties for the parties who have already struck their bargain.
§ The situation is even more serious for a building developer, who may enter into a building contract months and, in some cases, years before he is able to commence his development. One knows that where a building developer goes into a development scheme, he has to cost the whole development very carefully and often very competitively, and he cannot afford to have an unknown factor in the shape of a levy that may be quite different when he begins his development. It is something which he ought to know when he signs his contract.
§ That is essentially the object of the Amendment. We put it forward on the basis that it is the avowed intention, or one of the avowed intentions, of the Government in introducing this Bill to bring forward a steady supply of land. This can be done only if there is certainty about the financial implications of what is involved in a dealing in land. This certainty must be fixed at the date of the contract, otherwise we will have very much the kind of situation with which 1244 marriage registrars have to contend with before Budget day. There is a sudden rush of marriages at a certain time of the year to get the maximum Income Tax concession, and then there is a gap in the statistics. This kind of thing is bound to happen with land if the Clause is not amended.
§ If the levy is to be fixed annually with the Budget, there will be a great flurry of contracts being signed round about the new year, and then there will be a gap, a standstill, a wait and see period, while everybody concerned tries to discover whether the levy is to go up, and if it goes up in April there will be a further standstill while people get over the shock, just as the sale of cigarettes falls off when the tax goes up after Budget day.
§ This stop-go, stop-go, is not what the Government want, or what they say they do not want, with regard to land. They want a steady supply of land coming on to the market for development so that they can solve the difficult housing problem. This is one of the things which the Commission is supposed to do. It will not be able to do it if there is uncertainty, and I ask the Minister seriously to consider the Amendment.
§ We are not trying to affect his discretion in having the rate altered by Order. We are not putting any limit on what the rate should be. All that we are asking the right hon. Gentleman to do is to have regard to the bargain being struck between the parties, the private citizens concerned, and to put them in the position of knowing exactly what their financial obligations are at the time when the bargain is being struck, and not at some later date when the legal formalities and red tape are being tied up and attended to.
§ Mr. Willey
I have two technical reasons for not accepting the Amendment. The wordsto ensure the occurrence ofwould not have the effect of applying to Case D. I say that because in any case I would not be prepared to accept the Amendment. It would—and this arises from what the hon. Gentleman said—introduce an element which could be the opportunity for evasion.
The hon. Gentleman has rested his case on the fact that we are concerned with 1245 the possibility of a change in the levy. If that be so, if we accepted the Amendment the possibility of evasion would be far greater.
§ 3.0 a.m.
§ Mr. Graham Page
Surely the right hon. Gentleman realises that this is a form of retrospective legislation. If the levy rate is changed after a man has signed an enforceable contract he can do nothing about it. He has entered into a contract to buy or sell land at a certain price, assuming that the levy was at such-and-such a rate. He cannot then alter his contract unless, in bringing in the Order introducing the new rate, the Minister allows a breach of contract in order to adjust the matter. It is a form of retrospective legislation applying a new rate to a contract which cannot be altered by the parties to it.
I thought that when we brought this matter to the attention of the Minister, even if the Amendment was not worded correctly, he would say, "I see the unfairness of this as it stands, and I will try to introduce the correct wording". It is grossly unfair to the parties to an enforceable contract that the circumstances under which they entered into that contract should be changed by law without their being able to change the terms of the contract. I ask the Minister to think about this again.
§ Mr. Eyre
The Minister will remember that I referred to him two letters in respect of companies which had entered into binding contracts to sell property and where the Minister had subsequently confirmed that in both cases, although there was a delay in completion for very good reasons, the levy would be collected. The Minister will recall that again in both cases the companies had entered into these binding contracts before the publication of the White Paper, and in one case even before the 1964 General Election. On the facts of these two cases the situation is extremely unfair, because taxation will now be levied by retrospective legislation. This will be deeply resented. It is unfair. These are examples of inequity, and I press the Minister to reconsider this matter and to substitute the date of contract for the relevant date as provided in the Bill.
§ Amendment negatived.