BETTERMENT LEVY (SOUTH EAST ESSEX) (Hansard, 21 March 1969)

§ Mr. Bernard Braine (Essex, South-East)
I wish to draw attention to the grievances of certain of my constituents who, as I shall show, have suffered hardship and distress as a consequence of the working of the Land Commission Act. These cases are not unique, and, to my certain knowledge, there are more of them all over the country.
Let me make two comments at the outset. First, whatever any of us may think about the setting up of the Land Commission and the introduction of the so-called betterment levy on all transactions in land, I am referring here only 999 to one category of cases; namely, those where a person has built a home for himself on land which he has received as a gift from a relative, or which has been given on payment of a nominal sum, or where not a penny of profit has been made out of the transaction.
When the Land Commission was set up, we were told that one of its two main purposes was to make land cheaper and, therefore, to make houses cheaper. Yet, for some people, to the cost of building a home there is now added a levy of several hundred £s for the privilege of doing so. The money extracted in this way is a new and oppressive form of taxation which makes houses that much more expensive.
Secondly, the cases which I shall cite are those where the provision of a remedy does not require any Amendment of the law. It requires merely a decision on the part of the Minister to use powers which Parliament has already given to him.
So that the matter may be fairly judged, let me briefly detail the circumstances in each of these three cases.
The first concerns a Mr. and Mrs. Fitzgerald of Canvey Island, a young couple in their early twenties. Mr. Fitzgerald is a bricklayer. I have known his wife since her childhood. Her grandmother, who had brought her up almost from birth, gave the young couple a piece of land next door, without which they could not possibly have afforded to build a house of their own. The land was in fact a wedding present. No money passed in respect of the conveyance and no one made a profit out of it. Yet no sooner was the house completed than the Land Commission sent them a demand for £400, subsequently reduced to £304.
Mrs. Fitzgerald wrote to the Commission last year, saying: John, my husband, is 23 and I am 22 and we were married on Boxing Day. To give us the chance of a home of our own we were given part of a garden upon which John built our bungalow himself, and for which we were lucky enough to obtain a £3,000 mortgage from the local council. John is a bricklayer and myself, until recently, worked as a typist. I say this to give you some idea of our earnings. Out of this money we not only have our mortgage, rates, etc., but we now have £180 for road charges. With what little money that we have left, we are gradually decorating our 1000 bungalow, and hope soon to buy some carpets. I have recently left work, as we will be having a baby in October, and so you see the idea of paying you £304, plus 17s. 6d. plus Is. 3d. a day for something we already own, is rather difficult to say the least. Mrs. Fitzgerald's grandmother, Mrs. Manthorp, put it more bluntly. In a letter to me she said: I am hopping mad…to learn that my granddaughter is to be fleeced by the Government of over £300 because she had the cheek to build a bungalow on land I gave them. It is a swindle. The second case is that of Mr. and Mrs. Dady. The only difference here is that this young couple already had a home of their own, but moved to a new one that they built on land conveyed to them for a nominal sum by Mrs. Dady's elderly mother. The purpose was to enable Mrs. Dady to be more easily to hand to help her mother who lived alone.
In this case the building society advised Mr. Dady, that, if he wanted a mortgage, he would have to acquire the freehold of the land. Accordingly, his mother-in-law sold it to him for the nominal sum of £50.
No sooner was the house built than the Land Commission demanded a levy of £318. Like the Fitzgeralds, the Dadys had exhausted their small savings in building their new home, had taken on a new mortgage, and so to pay the levy caused them acute hardship. The irony of it was that they were told subsequently that, if they had not paid the nominal £50 and the land had been conveyed as a gift, they could have been exempted from payment of the levy. But if this is so, it is difficult to understand why the Fitzgeralds were not exempt from the start.
I raised both these cases with the Minister of Housing and Local Government. I told him that tax was being levied in circumstances which Parliament could never have envisaged when the Land Commission Bill was going through. I said that if I had encountered such cases, there were probably hundreds of others up and down the country where the Commission was making the lives of young married couples utterly miserable. Surely he was going to do something about it.
The only reply I got from his Parliamentary Secretary, the hon. Member for 1001 Hayes and Harlington (Mr. Skeffington), was that if financial hardship was being caused the Commission would be prepared to accept payment by instalments, but that until this had been arranged interest would be charged on the debt. The Parliamentary Secretary had a very short memory, and I will return to his part in this shabby business a little later.
The third case is that of Mrs. Shillum, a 69-year old-widow, who lives with her 83-year-old sister, also on Canvey Island. Their joint income is the princely sum of £9 a week.
Mrs. Shillum sold her home for £6,000 to clear debts due to be met out of her late husband's estate. Out of the residue she had built for herself a small bungalow costing about £2,000. But she had to meet road charges of £600, and so she was left with hardly any capital at all.
The Land Commission was quick off the mark. It promptly presented her with a demand for payment of £1,575. Needless to say, she has no hope whatever of paying this vicious tax and, at her age, is never likely to be able to earn the money to do so. As a consequence, she has been made ill with worry.
I knew her husband quite well. He was a councillor and served the community ably. It is disgraceful that his widow, or for that matter any widow who has worked hard all her life, should have to face a burden and an anxiety of this kind in the autumn of her years.
I raised this case with the right hon. Member for St. Pancras, North (Mr. Robinson) who, in the meantime, had taken over responsibility for these matters. I told him that in causing acute hardship to people who could least afford to bear it, such as these young married couples and elderly widows, the Land Commission was behaving in a way which Parliament was told would not happen. Indeed, it was precisely because the Government were warned during the debates on the Bill that hardship might result that the Minister was given power in section 63 to lay an Order directing that in such cases no levy shall be charged. But the Minister did not say anything about that in his letter to me. All he would say was that he was not prepared to amend the 1002 law, particularly at this early stage in its operation.
"At this stage", when his "In" tray must be overflowing with examples of this kind. He told me that the situation I had revealed was to be found more frequently in my constituency than in most. This was an extraordinary observation, but if it is true there may well be a special reason, for in October, 1965, that is before the Land Commission came into being his Parliamentary Secretary visited my constituency. The hon. Gentleman was reported in the News Review, a local newspaper—and I have sent the right hon. Gentleman a copy—to have given the South East Essex Labour Party a talk on the work of the proposed Land Commission.
A local councillor asked him: whether a plot of land next to a building would escape levy. Mr. Skeffington replied that if someone who owned the land wished to use it for themselves or, say, for their son and daughter there would be no levy. But if it was sold to a builder as a business deal it would then be levied. But these people are not speculators, he said, and we do not wish to catch them. We would allow one house only, but no more. The Fitzgeralds, the Dadys and scores more like them who read the local paper would have been excused for thinking that the hon. Gentleman's words meant that they would not be liable to levy. I told the right hon. Gentleman that there is a strong moral case for taking the necessary action to ensure that the Parliamentary Secretary's clear pledge is honoured, and I repeat that now. In any event, by what moral right does the Minister tax people, not on a profit they have made, but on one that the Commission deem they might make at some unspecified date in the future?
The Minister's suggestion that I have more than my fair share of these cases is not borne out by the facts. It is true that my post yesterday brought me a fresh case from my constituency, that of Mr. Weston of Manor Road, Thundersley, who gave two plots adjoining his house to two daughters. Building has started, and although according to the right hon. Member for Sunderland, North (Mr. Willey) this sort of case would be exempt, the Commission has served notice that levy is payable. However, my attention has been drawn to similar cases all over the country. There is, for example, the 1003 case of the old retired Nottinghamshire miner whose son gave him a piece of land alongside his own home. Now that he is building his retirement cottage the Commission is demanding £400. His wife wrote to me: My husband has been an underground coal miner for over 50 years, we have never been unemployed, we have worked hard all the time. I would not like you to put our names in print as we feel sort of humiliated. We have not the money to meet it at the moment, we shall probably have to change our plans. Do you not think this is a mean and miserable act for old people? Let the Minister also ponder over a letter I received from Major Sir Hereward Wake of Northampton which raises another aspect of this appalling bureaucratic tyranny. He said: Last year, in an effort to assist a local Baptist minister—with extremely limited private means—I gave him a corner of a field adjoining the village on which he was able, with the help of a mortgage, and some help from me, to build himself a modest house. I was shocked to receive a Betterment Levy assessment for £456 16s. which I was advised, under the law, I had to pay—and have done so. Is this the Government's way of encouraging landowners to provide houses for people? Does not the right hon. Gentleman see that his failure to act in these cases is not only causing misery and frustration to people who for the most part ask nothing from the all-powerful State, but is also discouraging generosity and self-help by putting a premium on meanness?
So far the right hon. Gentleman has given no sign that he will take any such action. Indeed, he told me on 21st February that he could not promise any new legislation, and in dismissing my representations put forward an argument of great callousness—which was totally out of character—and which I am sure that on reflection he wished he had not used. In acknowledging that the cases I had cited were causing hardship he said: it must be admitted that the difficulty is really due to the developers having insufficient means both to build their houses and to pay the levy due on the development value. Developers indeed! To some that is a dirty word. Did the Minister mean it as such in reference to my constituents? To Mr. Fitzgerald, the young bricklayer, who had built his house with his own 1004 hands? To Mrs. Shillum, the elderly widow? I bitterly resent his implication, namely, that poorer members of the community who have been fortunate enough to secure a piece of land from a relative or a well-wisher ought not to have the temerity to build themselves a house if they cannot also pay the Levy—this coming from a Minister who said recently that in a few years the housing shortage will be over.
If the Minister chooses, he can put this matter right now without legislation. Even the Land Commission has power to vary the time and manner of payment of levy in an individual case. But—much more to the point—the Minister, by making an order under Section 63 of the Act, can direct that no levy be charged in certain specified circumstances.
The right hon. Member for Sunderland, North, who was the Minister who piloted the Bill through Parliament, is on record as having said in the last few days that the Commission has power to suspend levies and interest indefinitely in cases of hardship. According to the right hon. Gentleman—and he should know— the provision is there but the discretion is not being exercised. It is very much to his credit that he also said that he is disturbed and upset by the situation. This is what we would expect of him. He was also reported in the Press on 10th March as saying that he had interceded on behalf of the Sweeting family who had turned an uncle's barn into a home last year at Danbury. Mr. Sweeting is a £13 a week labourer who spent £500 on the barn and was then served by the Commission with a demand for £900 and interest at the rate of 3s. 9d. a day until the levy was paid. The right hon. Gentleman told the Land Commission that the Sweetings need not pay anything at all and, according to the report, the case was settled.
If this is so, it is quite monstrous that a concession can be made by the Commission in respect of persons for whom the right hon. Gentleman can intercede but not for my constituents who find themselves in the same situation. This is a scandalous state of affairs, and the reason for my raising this matter today is to bring it right out into the open and 1005 demand that the Minister exercises now the powers that he possesses to end this injustice. Surely by now he must realise that Parliament never intended that the law should operate in this heartless way. In the kind of case that I have mentioned, the levy is creating conditions under which some small home owners are being driven to misery and despair. One can even envisage circumstances in which some unfortunate person is driven to desperate measures. If the Minister does not want that on his conscience, let him act quickly. I hope that is what he will tell the House now.

§ Mr. Frederick Willey (Sunderland, North)
I intervene briefly on behalf of two of the hon. Gentleman's constituents. I confine myself to this case because the hon. Gentleman invited me to look at this case. I had indeed the pleasure of meeting Mr. and Mrs. Fitzgerald. As I understand it, the Minister feels unable to do anything in this case because it falls outside the exemption that we provided in the Act for single family dwelling houses. We provided this exemption for an owner building a house for himself or a member of his family on land which he owned at the time of the White Paper. I emphasise that we had the family in mind.
Naturally enough, we have to think only of an adult member of the family when we are thinking of providing a dwelling house. If anyone in Standing Committee had called my attention to the fact that an adult member of the family might be a grandchild I am sure we should have made provision for a grandchild. In fact, we made provision only for sons and daughters, but we construed this as widely as we could. We included adopted children and illegitimate children. I am sure that within the spirit of this exception falls the adult grandchild.
I am delighted that Mrs. Manthorp, the grandmother, in this case is a great-grandmother. I feel that my right hon. Friend should surely look at this case sympathetically and provide for the exceptional case which has arisen. I know of a couple of such cases, and in each case, incidentally, the Minister has suggested that the grandmother should go and live in the house for six months. 1006 I feel that she should not be put to that inconvenience. The simplest thing to do is to say that we are thinking of the family in terms of children and that we include adult grandchildren.
I am surprised that this matter has been under consideration for very nearly a year, and I hope that, now that the hon. Gentleman has raised the question on the Floor of the House, my right hon. Friend will be able to say that he will look sympathetically at it and make provision for the exemption not only of children but of grandchildren, too.

§ The Minister for Planning and Land (Mr. Kenneth Robinson)
I welcome the opportunity to reply to the charge made by the hon. Member for Essex, South-East (Mr. Braine) that the Land Commission Act is causing injustices to people in his constituency and elsewhere. I shall not have time to deal with the glosses which he put on various statements I have made in writing to him and elsewhere, and neither, I think, can I deal with the hyperbole with which he described some of the cases of alleged hardship. But I say at the outset that I am as sensitive as anyone to cases involving genuine financial hardship to individuals. I add only that this is no new phenomenon in taxation matters.
One of my difficulties is in knowing how to deal with the issues raised by the hon. Gentleman and remain within order. I shall try to confine myself to describing once again the job which the Land Commission was established to carry out, a matter which some hon. Members claim they find extremely difficult to understand, despite its basic simplicity.
All land—by which I mean land in the legal sense, including both bare land and land with building on it—has the value of the purpose for which it is at present used. This is the current use value, a term which, though it is taken from the Land Commission Act, is quite explicit and barely qualifies to be called jargon. We all know that when planning permission is granted to put land to a more valuable use, or when the prospect of its being granted can be clearly seen, the value of the land rises. The planning permission is worth something, and often a great deal, in financial terms. It 1007 gives an added value to the land, and that added value—the difference between the current use value and the value with planning permission—is the development value on which the charge to levy is based.
Obviously, not all transactions are as simple as that, and there are a few in which the complications of apportionments and related tenancies, Estate Duty and Capital Gains Tax which the Act so carefully stores up in all its 17 Schedules must be invoked to bring out a just and equitable answer where those factors are involved. But these transactions are a minority, and the complications for which the Act is so widely criticised are seldom, if ever, involved in the type of case of which the hon. Gentleman has spoken today.
At this point, I must express my concern at one of the reasons giving rise to the allegation that the levy is causing hardship and injustice. Most weeks, I receive a number of letters from hon. Members and from the public about the betterment levy, and I am frankly astonished that in so many cases the correspondents claim that they had never heard of the levy till they had spent or decided how to spend the proceeds of their sale. I say that I am astonished and concerned about this because nearly all these people have had some professional advice either on the price they asked for their land or on how to obtain planning permission, or at the time when they conveyed the land. Must one draw the conclusion that all these things go on without levy ever being mentioned? By now, people are entitled to expect to receive advice about the incidence of betterment levy from their professional advisers as a matter of course and should not find themselves taken by surprise when the demand for levy is made. I am, therefore, grateful for the opportunity which this debate gives me to explain the activities of the Land Commission.
There is one other matter on which I should like to put the record straight. That is the much-repeated assertion that the Land Commission Act was not designed to impose a levy in ordinary small transactions but was intended solely as a weapon against unscrupulous land speculators. It is easy to speak in general terms about 1008 unscrupulous land speculators without asking oneself how the Land Commission could decide whether a transaction involves a speculation in land or, on the contrary, is to be regarded as completely meritorious. However, this is hardly relevant since the Land Commission Act was specifically designed to take levy in all cases where there was a realisation of development value. One needs only to look at the six cases of charge to realise that every foreseeable contingency was being taken into account.
Nor is there any mention in the Act that the owner-occupier or any other class of person is exempt from levy. No one reading the debates on the Bill can have any doubt of Parliament's intention, which went far beyond taxing merely the large-scale land speculator.
Not that the Land Commission——

§ Mr. Braine
rose——

§ Mr. Robinson
The hon. Gentleman has not left me much time, and my right hon. Friend also spoke, so I shall not give way.
The Land Commission is not failing to catch the large cases, as one might suppose from some of the comments. Cases where the market value is over £10,000 will bring in half the levy estimated to be raised in 1969–70.

§ Mr. Braine
Will the right hon. Gentleman allow me?

§ Mr. Robinson
I shall not give way. I have a great deal to say.

§ Mr. Braine
Why not answer the debate?

§ Mr. Robinson
I have six minutes left. I am dealing with the suggestion that the hon. Gentleman repeated several times that it it was never Parliament's intention to catch small cases.

§ Mr. Braine
Does the right hon. Gentleman repudiate the Parliamentary Secretary?

§ Mr. Robinson
I shall now deal with what the Parliamentary Secretary said. What he said was perfectly true. Many of the cases the hon. Gentleman quoted came within the context of what he said. Anybody who owned land at the time the Parliamentary Secretary was speaking certainly will not attract levy if he 1009 develops that land for himself of his immediate family. In the two cases the hon. Gentleman quoted the land was not owned at that time. He knows perfectly well that those are the facts of the case, and there is no need for him to distort them.
I should like to examine the claim that the levy causes hardship. If that is true, it is because the person called upon to pay the levy has acted without proper advice, or in some cases has chosen to go ahead with what he or she had in mind to do although aware of the provisions of the Act. Betterment levy is exacted only where there has been either a cash profit or gain in the form of a valuable asset. Thus, if proper advice were taken and followed there would always be some gain from which the levy could be met. A close examination of the chief complaints against levy brings me to the conclusion that it is not so much that hardship is created but that some people are less able to relieve their present burdens because they are called on to return some part of the gain created by planning permission which the community exercises.
If a person buys land to develop and pays full market value for it, he will not be called upon to pay levy when he develops, because the price he paid for the land will be taken into account. Levy will have been paid by the vendor. But if he has been given the land or comes by it cheaply, levy will be due. This is a matter which owners of land must appreciate. They could not build on their own land without incurring liability to levy; they cannot under the Act avoid that liability by giving the land to somebody else.
The second category in which we are told hardship or injustice is brought upon the private individual is where land is sold. It may be the owner's own house, part of his garden, or a small plot of land which he happens to own. Assuming that levy is due, it will be due only if the sale has been made at more than 10 per cent. above the current use value of the land.
But more important is the fact that if the value of the house is its value for continued use as a house and not, for example, as a site for a block of flats, no levy will be payable.

§ Mr. Antony Buck (Colchester)
What about grandchildren?

§ Mr. Robinson
As my right hon. Friend said, the definition of family was considered and very carefully worked out when the Bill was going through the House.

§ Mr. Richard Body (Holland with Boston)
Will the right hon. Gentleman allow me?

§ Mr. Robinson
I shall not give way. I now have 3½ minutes left.
The hon. Gentleman quoted what my right hon. Friend said in an article in The Times a day or two ago. I hope that he has also read the letter in today's issue of The Times from my hon. and learned Friend the Member for Derby, North (Mr. MacDermot), who was responsible for the Land Commission when my right hon. Friend had left the Government. There were statements in his article which I think my right hon. Friend, on reflection, will not wholly agree with.

§ Mr. Willey
Will my right hon. Friend allow me to intervene on this?

§ Mr. Robinson
I am sorry. I want to get on the record——

§ Mr. Willey
My right hon. Friend has referred to me——

§ Mr. Deputy Speaker
Order.

§ Mr. Robinson
My right hon. Friend knows perfectly well that the Land Commission has no discretion to waive interest.

§ Mr. Braine
This is scandalous. The right hon. Gentleman should give way to his right hon. Friend.

§ Mr. Robinson
The main burden of the hon. Gentleman's speech was to ask what the Land Commission proposes to do about the cases of hardship and injustice he quoted. He made great play with what my right hon. Friend had said.
It has always been open to people charged betterment levy, as the hon. Gentleman knows, to apply for permission to pay by instalments. The Commission has always been able to consider such requests. How the Commission takes payment when it comes to 1011 some agreement with the payer is a matter for the Commission. It is a discretion which it exercises, and I believe that it exercises it reasonably. But it payment is made by instalments, and this includes any temporary postponement of payment of the levy—should that be more appropriate than spreading payments out by a series of equal instalments—interest is chargeable. The Commission has no discretion to waive interest.
Where some misunderstanding has arisen is in relation to the quite separate power in the Act under which regulations can be made by the Minister which may provide that in prescribed circumstances interest shall be waived or reduced by a prescribed amount. This is not a discretionary power for the Commission. It is a power under which, subject to the agreement of the House, the Minister can decide that certain defined categories of levy payer should not pay interest on levy outstanding.

§ Mr. Body
On a point of order, Mr. Deputy Speaker. Does not this come within the definition of "tedious repetition"? We have had all this again and again in Standing Committee.

§ Mr. Deputy Speaker
Order. There is very little time left.

§ Mr. Robinson
It is only because there is so much misunderstanding that it is necessary to say these things again.

§ Mr. Braine
rose——

§ Mr. Robinson
An example of the waiver of interest cover which I have mentioned is the building of houses for 1012 agricultural workers, where levy is postponed and interest waived as long as the house is occupied by an agricultural worker.
The question has been raised whether the Government will propose new regulations applying to further classes of levy payer or, indeed, amendment of the Act to exempt certain groups of cases. I should be out of order if I discussed changes of legislation on an Adjournment debate, but, as regards individual cases of alleged hardship——

§ Mr. Braine
rose——

§ Mr. Robinson
Will the hon. Gentleman contain himself if he wants a reply? As regards individual cases of alleged hardship, I said in the House on 6lh February that I would take up with the Commission any cases that hon. Members raise with me. This I have done. My purpose in so doing is to keep under review the operation of the levy. The Commission has been going less than two years. A great part of that period was covered by the so-called "interim" period, and it is only in recent weeks and months that the full operation of the Act could have been seen functioning. I am keeping it under review——