HC Deb 12 July 1976 vol 915 cc183-221

Order for Third Reading read.

10.23 p.m.

The Minister of State, Treasury (Mr. Denzil Davies)

I beg to move, That the Bill be now read the Third time.

We have had long debates on the Bill in Committee and on the Floor of the House. I think that hon. Members will agree that we have attempted to get the tax as right technically as possible. I am grateful to Opposition Members who have put forward a number of constructive suggestions. We also consulted widely with representative bodies both before and after the Bill was introduced.

Moreover, we have gone to considerable lengths to keep the public informed of our proposals as they evolved. The Inland Revenue issued a statement in February 1975 which described the intended structure of the tax in some detail. The White Paper "Development Land Tax" contained draft clauses with explanatory notes. It is extremely unusual for the introduction of a major new tax to be preceded by the publication of draft clauses, thus enabling interested parties to make representations at what may be called the pre-legislative stage. I believe that the experiment has been a success. Finally, there are the notes which came out with the Bill. All in all, it has been a most effective two-way process of consultation and discussion.

The Bill as published reflected the first fruits of this process. The amount of the exempt slice of development value realised was raised from £5,000 per financial year to £10,000; and for the three years up to 1979 there was to be a reduced rate of 663 per cent. for the next £150,000 slice of development value realised each year. These measures are designed to encourage owners to bring land forward for development.

During Committee stage, a number of changes were made. I shall not mention all of them, but some should be mentioned. For example, in response to representations, we provided a simplified form of special addition to relevant improvements—in the form of a "further addition" to base A. This will be of especial help to industrial estate developers. Provisions were made for company amalgamations and reconstructions, and also for disposals which take place on the incorporation of a business. To deal with amalgamations and reconstructions, what is now Clause 22 provides broadly that where a scheme of amalgamation or reconstruction involves the disposal of an interest in land that disposal will be treated as if it were made for no consideration. This ensures that no liability will arise until the land is developed or disposed of to a third party.

Again, following a commitment given in Committee, we were able on Report to bring forward an amendment providing relief where, as part of the transfer of his business to a company, a person disposes of an interest in land to the company and receives shares as, or as part of, the consideration. In such circumstances, payment of some or all of the DLT may be postponed for up to eight years. DLT will, however, become payable earlier if in the meantime either the original owner disposes of the shares received as consideration or the new corporate owner disposes of the land. This I think is an important concession in an area where it is very difficult to legislate adequately for each individual case.

There were other improvements, too, which I shall mention more briefly. We ensured, for instance, that sale and leaseback transactions do not trigger deferred liability on an industrial development. Again, certain anti-avoidance provisions appeared on closer examination to be too stringent. These were corrected. One instance is, in particular, the change on a company leaving a group. This was modified so that the charge applies only where the interest in land owned by the departing group member was acquired after 12th September 1974.

Many of the amendments made on Report originated from suggestions made in Committee. For example, it had there been argued that as the Bill stood there was a danger of double taxation where a project was commenced on land subject to an incumbrance; where, for example, the land to be developed was subject to a valuable right of way or a restrictive covenant. This was remedied on Report by providing that incumbrance holders are not taxed until they receive some money for giving up their rights. At that time the owner gets a corresponding credit.

There was also discussion of the definition of a major interest in the context of a deemed disposal. The Bill originally provided that a reversion on a lease with 50 years to run at the time of the deemed disposal should be a major interest. Following the Committee stage debates, this period was reduced to 35 years.

So far as private residences are concerned, we extended the exemption to a house occupied by a dependent relative, and brought the area rule into line with that applying for capital gains tax. Thus, the area which may qualify for exemption is now one acre or such larger areas as the Commissioners regard as appropriate. On a rather similar point, the exemption for development of a house for occupation by an adult member of the owner's family was also extended to cover a house for occupation by a dependent relative.

During Committee, we promised to look again at the two-year time limit in Clause 18, and, as a result, we brought forward on Report an amendment increasing it to three years. This means that a developer who paid full value for land will have three years to begin his project with the assurance that no DLT will arise.

The provisions for giving relief where both DLT and another tax are charged were improved and the circumstances in which such relief could be claimed were widened.

We were also able, partly in response to some interesting speeches by the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn), to put the Bill in slightly better shape in relation to Scots property law. I think that he will agree that we have gone a long way to meeting some of the legitimate points which he made about the interaction between Scots property law and English property law.

One change was mentioned in a leader in today's Financial Times, which, as usual, got it wrong. As the Bill stood, the charge on first lettings imposed by the Finance Act 1974 was to be discontinued in respect of first lettings after the appointed day, with the important proviso that the first lettings charge was to be preserved where relevant development had been started before that day. When we discussed this in Committee, I accepted that this could mean that developers might be discouraged from starting work before the appointed day. We dealt with this on Report by providing that the first letting charge would not apply if the relevant development was commenced on or after 18th May 1976—the date of the Committee discussion. This means that developers can feel free to get ahead with their developments in the knowledge that the charge will not bite on a future letting. Various changes designed to help the taxpayer were also made to the administration provisions.

Mr. Michael Latham (Melton)

Before the Minister leaves that point, will he confirm that the appointed day is still to be 1st August? There are rumours about 1st September.

Mr. Davies

I can confirm that, and will deal with it in a moment more fully.

I should like, in particular, to mention here that we have extended the protection given to mortgagees where an authority acquiring an interest in land from a mortgagor makes a DLT deduction from the amount paid to the latter. As the Bill stood, a mortgage taken out on or before 12th September 1974 was protected. Following our Committee discussions, I thought it right to extend that protection to mortgages taken out in the period between 12th September 1974 and lithe May 1976, the date of the Committee debate.

New mortgages, of course, will have to take account of the operation of the tax—we have had quite lengthy debates on this—but I do not believe that the fears which have been expressed in our debate, that normal commercial lending will be inhibited by the arrangements, are well founded.

All this demonstrates at least that we have paid serious attention to suggestions made by hon. Members in debate and by representative bodies outside the House. Where these suggestions would improve the Bill, without running contrary to its basic principles, we have not hesitated to act on them.

I should like briefly to discuss two other issues about which some hon. Gentlemen showed concern in Committee. In the course of the Committee debate on what is now Clause 31, certain Opposition Members suggested that there was insufficient parliamentary control over the contents of Revenue statements of their practice and extra-statutory concessions. This is not peculiar to development land tax but the point was made in Committee.

It might be helpful if I set out the position on this. A statement of practice is a description of the way the Revenue will in the general run of cases interpret and apply particular legal provisions. There is nothing legally binding. The statement is a public statement of the Revenue's understanding of the law and the practical ways it proposes to give effect to that understanding. It is open to any taxpayer, who considers that its application to his own tax liabilities produces a result which cannot be upheld in law, to appeal against the assessment in the usual way.

Extra-statutory concessions, on the other hand, are departures from the strict letter of the law, but obviously always in favour of the taxpayer. Their purpose is to allow relief which is within the spirit of a particular piece of legislation but which, for some reason or other, is not actually given by it.

There is a published list of these extra-statutory concessions which is brought up to date annually. They are all reported to the Comptroller and Auditor General, and are subject to scrutiny by the Public Accounts Committee. They are therefore subject to parliamentary examination and oversight.

The Revenue announced important decisions on tax matters in the form of Press statements. Copies of all their statements are placed in the House Library and so are available to hon. Members.

Mr. Nick Budgen (Wolverhampton, South-West)

Will the Minister not agree that it really is a gross abuse of the English language to pretend that that process amounts to parliamentary control?

Mr. Davies

I disagree with the hon. Gentleman. What I said was that all these concessions are announced and that the Comptroller and Auditor General is informed of them. The Public Accounts Committee looks at them in detail, and the report of the PAC is debated in this House. The hon. Gentleman has his opportunity of partaking in those debates.

The other point concerns the fears that were expressed in Committee and again during the Report stage of the Bill that local authorities and other net-of-tax bodies might use their compulsory purchase powers in such a way as to leave vendors with no option but to suffer an excessive DLT deduction. I understand the concern which is felt about this and I have asked the Inland Revenue to watch carefully for any indication that such abuse is taking place. Although I should be reluctant to introduce further complications into the net of tax arrangements, I shall not hesitate to take action if experience shows that modifications are required for the protection of vendors against the unreasonable use of authorities' powers. Such modifications would be made either by the Board of Inland Revenue under its regulatory powers or, if necessary, by legislation.

With experience of the operation of the tax in practice, no doubt other anomalies will occur, but again I assure the House that we shall keep the operation of the tax under review. My right hon. Friend the then Paymaster General announced to the House during his speech on Second Reading our intention that the appointed day for the tax should be 1st August of this year. I confirm that that is still our intention. But our timetable, of course, is subject to the Bill being enacted before 1st August.

The order specifying the appointed day will be made ifand when the Bill Day will be made if and when the Bill receives its Royal Assent. At the same time, the Inland Revenue will issue a Press notice drawing attention to the new obligations imposed upon the vendors and developers of development land. Also, to ensure a smooth start to the arrangements for net of tax purchase, a memorandum giving detailed guidance to local and other authorities will be issued.

I accept that there is a certain difference of opinion amongst certain members of the Opposition with our view about the best way of taxing betterment or development value. But at least it can be said that the tax which we are proposing is a fair and equitable way of dealing with a very difficult problem. It ensures that the majority of what is a windfall gain at the end of the day is returned to the community which created it, and it is returned to the community mainly through the net of tax arrangements.

It is not a tax on the profits of development as such. The profits of development will be taxed, as they are at the moment, under the normal corporation and income tax provisions. This tax is designed to charge windfall gains—

Mr. Nicholas Fairbairn (Kinross and West Perthshire)

If the hon. Gentleman is determined to put it forward as a principle that a windfall gain created by the community should be taxed, why does the community promote premium bonds and not tax them? That is truly a windfall gain created by the community.

Mr. Davies

I think both sides will agree that windfall gains created by the community should be taxed. That is a principle accepted on both sides of the House. I do not know whether the hon. and learned Gentleman accepts it, but the official Opposition do and a large number of Opposition Back-Benchers do. Most people will agree that such gains should be taxed.

We have tried to isolate such gains and to tax them under this legislation, leaving the normal profits of development free to be taxed in the normal way. We believe that this is a fair and equitable structure. I invite the House to give the Bill a Third Reading.

10.38 p.m.

Mr. Graham Page (Crosby)

First, I thank the Minister for his kind words about the constructive way in which the Opposition tried to deal with the Bill in Committee and on Report, and I thank him, too, for the way in which on many occasions he accepted our efforts in that respect.

I am sorry that the hon. Gentleman had to confirm to my hon. Friend the Member for Melton (Mr. Latham) that the appointed day was to be 1st August. I had hoped that he would say that, because the Government had got themselves into such a mess over the parliamentary programme, they proposed to put this Bill on the shelf for a few years.

The Government have given birth to a twin-headed monster which is named the Labour policy on land or the land policy of the Labour Party. This Development Land Tax Bill is one of the ugly heads. The other is the Community Land Act. The one cannot be considered in isolation from the other. The levy imposed by the Development Land Tax Bill is intended to become the confiscation compelled by the Community Land Act. The Development Land Tax Bill creates for three years a levy of two-thirds of the development value of land when the land is sold or one starts to develop it. After three years, the levy is to go up to four-fifths of the development value and, some time after that, on the second appointed day under the Community Land Act, it is intended that the levy will become 100 per cent. That is what I call confiscation. It never will become 100 per cent. because before that second appointed day there will be a Conservative Government in office and we shall have repealed the Community Land Act.

Having chopped off one ugly head of this twin-headed Labour Party land policy monster, can the body and the other head survive? Indeed, is there any need for it to survive? There can only be one justification for a development land tax at the penal rate provided for in the Bill and that is that the purpose of the tax is to finance the activities of the local authorities and other statutory bodies who, under the Bill, are given exceptional powers and duties to take land and to operate land schemes which will grossly disrupt town and country—I stress "country"—planning.

It will bog down the process of land transfer. It will impede and obstruct the availability of land for development, except under compulsion, and over the years to come it will be a very great deterrent to development. That certainly needs financing by some such extraordinary taxation, or levy system, as the Bill provides.

Soft words have been spoken by Treasury Ministers about the numbers to be employed but the mind boggles at the swelling of the staffs of local authorities, and the massing of the mandarins of Middlesbrough, to deal with the process of compulsory acquisition of net-of-tax purchases. That will drive the potential land vendors out of the open market. It will stop developers from embarking on constructive enterprises.

That is recognised by the Government. The Bill is strewn with little carrots to try to attract land owners and builders to get on with the job which they would have been getting on with very well had it not been for the provisions of the Bill. The Government have provided little carrots such as the special addition to Base A, the exemption of the first £10,000 of tax, the reduced rate on the first £150,000, the builder's stock-in-trade, the deferment of tax for industry and the exemption for projects shortly after acquisition. These are all very little carrots compared with the rate of tax and the administration of the tax.

They are all temporary palliatives. They are a recognition by the Government of the damage that this tax will do to development. They are temporary because they will last only two or three years, but their real significance lies in the fact that the Government, to use another metaphor, have had to put some sugar on the rather bitter pills in the Bill. The Government have realised that sugar coating is necessary in order to make the Bill swallowable.

Let us look at the short periods for which these palliatives will last. The special addition will last for nine months, the reduced rate for 32 months and the projects after acquisition just for three years. Let us look, particularly, at the limited nature of the provisions for deferment of tax—the roll-over provision. It is limited to industry only. That rollover provision. It is limited to industry only. That roll-over provision should not have been so narrow as to exclude business premises in general.

Roll-over provisions are well recognised in taxation law, and quite rightly, because they encourage the ploughing back of investment. However, in so many ways the Bill is breaching normal taxation principles, particularly that part relating to net-of-tax purchases. It is wholly wrong to put in the hands of all sorts of statutory bodies, albeit they include local authorities, the power to assess development land tax payable by the vendor from whom they are acquiring land and then to deduct that estimated amount from the purchase price. The tax should be properly assessed by the Board of the Inland Revenue, paid via the Board of the Treasury, and then allotted to the local councils as the Government may see fit, in accordance with their policies at the time.

The worst innovation in the Bill is the taxation—for first time in centuries—of Churches and charities. I couple with them another community service, pension funds. Apart from the fact that charities, Churches and, to a great extent, pension funds have never been taxed before, the Government have always tried to argue that a justification for the Bill is that the proceeds of the tax should go to organisations which provide services to the community.

By taking money away from, for example, the Churches and giving it to statutory bodies listed in the Bill, the Government have put on record their belief that the Church schools and homes for the elderly and children, the Salvation Army hostels, terminal hospitals and similar services are less worthy than commercial enterprises—undertaken by the Highlands and Islands Development Board or some boating lake built by the Lee Valley Regional Park Authority. It is ideology taken to the extremes of idiocy.

We shall divide against Third Reading. Although a tax upon gains realised from the enhanced value of property resulting solely from the granting of planning permission may be justifiable, the Bill puts the tax at far too high a rate.

This is a transitional measure leading to the 100 per cent. Community Land Act tax which we intend to repeal. The Bill taxes Churches. We shall relieve them of the tax. It taxes value before realisation. We would collect it out of realised gains. It restricts roll-overs to industrial premises. We would extend them to business premises. It allows the tax to be assessed and taken direct by statutory bodies and local authorities. We would require the Treasury to assess, collect and properly allot the proceeds. This is a bad Bill which ought to be rejected.

10.47 p.m.

Mr. Michael Latham (Melton)

I start, as I do in all housing debates, by declaring my interest as a director of a house-building company.

My right hon. Friend the Member for Crosby (Mr. Page), in his very good speech, made it clear that the heart of the Bill appears in Clause 1—the rate of tax of 80 per cent.

Mr. Patrick Cormack (Staffordshire, South-West)

There is no heart in the Bill.

Mr. Latham

I correct myself. I should have said the diseased heart of the Bill is in Clause 1.

Of course, there are easements—the £10,000 exemption in Clause 12, though that is of limited value to housebuilders since it is £10,000 per year and not per site, the 66⅔ per cent. rate for three years in Clause 13, and the special addition provisions in Clause 6.

Ever since Second Reading I have tried to warn that the problem of land supply is not immediate but is likely to become acute in two or three years' time when existing land stocks are exhausted. The market in land at present is artificial. Some vendors are bringing forward land to avoid the 1st August date, but this is obviously a once-and-for-all benefit. Others are so confused by the relative benefits, or otherwise, of being taxed under development gains tax or development land tax that they are holding back altogether. Every housebuilder is finding that. The land is certainly there, but it tends to be land with special circumstances—companies which are closing down, well-advised vendors who reckon they will be better off under development gains tax or secondary sites being released by other builders with cash flow problems. It is not a healthy market, nor one that could support the expansion in the housing programme that we should all like to see.

The Bill, and especially the 80 per cent. rate, represents a grave and drastic threat to the housebuilding programme of the early 1980s—a period which is not very far away. No one in the building world has forgotten that, ultimately, the tax is intended to be 100 per cent. If that day ever comes, private housebuilding in this country is finished. Fortunately, as my right hon. Friend said, wiser counsels should by then prevail.

The Government resist arguments about the Clause 1 rate of tax by pointing to the role of local authorities under the Community Land Act and under Clause 39 and Schedule 7. The Minister for Planning and Local Government has even argued that these procedures will allow local authorities to meet the needs of builders. He has argued that they will be better off under the new system than under the old. For example, on 7th November, in an interview with the magazine Estates Times, which he loves to quote, he said: Under our proposals, builders will have greater assurance of land supply and less need to use a higher proportion of their capital in holding stocks for future use. I have no doubt that the right hon. Gentleman genuinely believes that, but no housebuilder does, although it is possible that some property developers might. It is impossible to try to persuade the private housebuilder that he will be able to rely on local councils to provide him effectively and speedily with his basic raw material of land. To the housebuilder, as a result of bitter practical daily experience, the local authority is often the body which causes delays, often expensive delays. The frequently arise because of a combination of ignorance and prejudice against commercial procedures and practice.

I remember once doing business in France in 1973 before I came to the House and saying to some French architects that the English housebuilding problem could be summed in seven words—namely, everyone wants more houses built somewhere else. That is the whole of the problem. There is the endless struggle to reconcile the views of the developer, who wants to build, with the local residents who want to stop him and the local ratepayer who does not want to pay for the sewers on the rates.

Even if the local authorities were keen to follow the Clause 39 procedures, which many emphatically are not, there are overwhelming resource problems standing in their way. Bristol University's School of Advanced Urban Studies has examined the first few weeks of the operation of the land scheme. It points out that the allocation of resources for land acquisition in England is £25 million this financial year, and that £5 million of that is intended to go on administration. But the staff of the school is quoted in the Estates Times of 4th June as predicting a much higher figure than £5 million. I am sure that they will be right.

For example, take the county of Leicestershire. On 19th May the Planning Officer of the Melton Borough Council wrote to tell me that the total allocation for the county would be about £450,000 this year. The County Secretary confirmed that figure by letter a few days later. The Planning Officer said that £200,000 would go on staff costs, leaving £250,000.

I understand from a further telephone conversation with the Planning Officer only yesterday that the total bids for Leicestershire as a whole are currently £1.5 million. That figure has been reached only after the closest scrutiny. As there are 10 local authorities in Leicestershire, including the county council, no builder will expect much help from that source.

No wonder that the Melton Planning Officer wrote to me to say that the net effect of the stimulation of initial hopes at district level during discussions earlier this year, and the subsequent revaluation of the money likely to be available, has resulted in a considerable amount of time wasted in presenting the intial intentions of the council to the Department of the Environment in December last year, and in particular has resulted in a growing disassociation between districts forced to compete for what now appears to be a pittance.

The whole of the Clause 39 procedure is now increasingly shown to be what we always said it would be—namely, a hollow sham. Even if it were a sensible way to proceed, the idea of placing the local authorities between the land vendor and the builder is that of a sort of sleepy entrepreneur looking for land, with about as much dynamism and experience as displayed by gentle country parson suddenly asked to act as a tooth-and-claw City tycoon. However, there is no money available for it, and thank heavens for that. After all, the idea was half-baked in the first place.

Nor is the profit, if any, likely to be all that impressive. After going through these procedures, the local authority is left with 30 per cent. of any surplus in the land account. In Leicestershire, under the land equalisation and management scheme, half of that 30 per cent. goes to the county council. So the district council will be left with 15 per cent.— some bonanza, especially as 15 per cent. of nothing remains nothing.

There are two points to which I want to refer and which I was prevented from raising on Report because I was in bed with a form of 'flu. Under Clause 16 and Schedule 5, exemption is given for builders' stock in trade provided that the land was owned with planning permission before White Paper day. Paragraph 1(1)(b) of Schedule 5 deals with successful appeals. However, because I was ill, I was unable to deal properly with the question of technical refusals. In our Standing Committee debate on 5th May and again on the Floor of the House on 24th June, reported at col. 1923, the Minister, my hon. Friends and I seemed to be talking about different things. The Minister was concerned with the situation where an applicant sorts out details by negotiating, including the withdrawal of the original application and the submission of another. But there is an important field which has been missed.

Let us suppose that the builder submits an application which the local authority rejects. On appeal, the Secretary of State says that the application should be granted except for one factor. "Put that right", he says, "and the planning permission should be granted." So the builder goes away and submits a new application with the defect corrected, and consent is given. That procedure happens regularly. In my judgment it is not covered by the White Paper day protection in Schedule 5. The only way to solve the problem is by withdrawing the Bill or amending the Finance Bill, since nothing can be done to this Bill in another place.

Again Schedule 1, paragraph 5, makes the provision of gaining an exemption if a start is made before the appointed day depend on the planning permission being authorised. Yet it does not deal with the regular situation whereby a local authority has imposed a condition, perhaps regarding landscaping, that forbids the development until the details are agreed on that condition, which may be of a fairly trivial nature. Despite numerous pleas from the Housebuilders Federation, the Government have chosen to deal with this problem not by amending the Bill but by writing to local planning officers asking them to review and to remove any minor technical conditions from otherwise fully authorised permissions which are preventing developers from making a start before 1st August. That seems to me to be a complete hand washing procedure by the Government. They recognise the injustice but they leave it to local authorities to sort it out.

What happens if they do not? Will the Minister refund the tax to the developer? Of course he will not. hope that the local government Ombudsman will jump on any cases of local authorities not responding to the Government's letter—not that that will help the developer, who will have no effective redress at all.

If this Bill obtains a Third Reading tonight we come to the effective end of a chapter. The Government will have placed on the statute book the two Bills which the Minister for Planning and Local Government, but no one else, regards as the total solution—

Mr. Tim Sainsbury (Hove)

The final solution!

Mr. Latham

"The total solution" were the words the Minister used. They will not work. They are based on fundamentally erroneous assumptions that private housing development can take place by bureaucratic impulse rather than by the private decisions of millions of people and the willingness of business men to provide for them. That will be a black day for the housing programme. In a few years time we shall all be back again on the legislative treadmill putting right the errors of Silkin Mark II, just as Parliament in the 1950s dealt with the errors of Silkin Mark I. Much as I like the right hon. Gentleman, I hope that neither he nor his learned brother have any children who will seek to be elected to this House, for to repeat the errors of the fathers even unto the third generation would be more than the housing programme could bear.

11.0 p.m.

Mr. Douglas Crawford (Perth and East Perthshire)

I shall direct my remarks to the general rather than to the particular. The Scottish National Party is not opposed to a development land tax, but we are opposed to this particular development land tax because in one way it goes too far and in the other it does not go far enough. The hon. Member for Melton (Mr. Latham) said that the development land tax will soon have a severe effect on the availability of land on the periphery of the cities of England and Scotland. That applies to land for council housing as well as for private housing, and the bona fide building company will be hit pretty hard in both Scotland and England.

We all agree that land speculators must be hammered, and hammered hard. [HON. MEMBERS: "Why?"] Members of the Conservative Opposition ask why land speculators should be hammered. They should be hammered because they are making profits out of something which is unacceptable, and which my party find unacceptable.

Mr. Cormack

Unacceptable to whom?

Mr. Crawford

In Committee, I took it that Members of the Conservative Party were in agreement with the Government side that land speculation was ipso facto bad.

Mr. Fairbairn

I do not know that the hon. Gentleman came to that conclusion, but, assuming he did, is he now saying that anybody who is caught by this Bill as a result of developing his garden in Scotland is making something which he ought not to have?

Mr. Crawford

I said nothing of the kind. I said that in my view—I am sure that I have the agreement of the Government side here—land speculators should be hammered, and hammered hard. If the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) says that land speculators should not be hammered, fair enough.

Returning to the middle ground, I say that this Development Land Tax Bill throws the baby out with what is increasingly becoming non-existent bath water. The right hon. Member for Crosby (Mr. Page) referred to charities and Churches, and I agree entirely with him.

My party takes the view that land should be made available for public and private housing in Scotland and that the Bill will not help. However, having said that, I should add that all of us in the Scottish National Party would have liked to see some commitment, even if only in principle, to doing something about the unacceptable face of capitalism as we see it manifested by land ownership in the Highlands, which is hampering development. There are many ways in which what is happening in the Highlands is the worst form of capitalism.

Remembering the parable of the talents, it could be said, perhaps, that Lonhro has converted one talent into 10, but in the Highlands people with one talent have very largely buried that talent in the ground. All too often, the land ownership in the Highlands is bad for the local economy, bad for local culture and bad for the social make-up of the local community. The Bill has very little to say about that. In my view, it does not recognise that there are specific Scottish differences from England.

Mr. Cormack

The tartan dimension.

Mr. Crawford

It uses a sledgehammer to crack a certain nut which has decreased in size over the past few years, and it does not provide a sledgehammer to do something about the socially inequitable ownership of vast tracts of land in Scotland. I say that for two reasons. First, it goes too far as regards land on the periphery of cities, and second, it does not go far enough in dealing with the dreadful socially inequitable ownership of land in the Highlands.

11.4 p.m.

Mr. Tim Sainsbury (Hove)

The hon. Member for Perth and East Perthshire (Mr. Crawford) spoke of this tax as being a tax on land speculators. In that, as in so many other matters, he is totally mistaken. This is not a tax on land speculators, because, apart from anything else, there are very few land speculators around. It is a tax on developers of land. My hon. Friend the Member for Melton (Mr. Latham) has already authoritatively described how adversely it will affect one type of developer, the house-building developer.

Mr. Crawford

I did not say that it was a tax on land speculators. I said that land speculators should be hammered, and hammered hard.

Mr. Sainsbury

I apologise to the hon. Gentleman if I misinterpreted his remarks.

I wish to declare an interest, not as a housebuilder but as a director of a commercial firm. If housebuilders have fears about the effects of the Bill, I can assure the Minister that the fears of those in commerce, particularly in hotel and catering are just as great, if not greater.

Perhaps the criticism we have heard so far goes a little too far. I recall on the occasion of the Third Reading of the Community Land Bill congratulating the Minister for Planning and Local Government on his skill in hiding in that measure the Marxist nature of the proposals in his efforts to get the House to accept them. We have since been assured that neither wing of the Labour Party is Marxist.

Congratulations are also due to the Minister on introducing proposals for this particular gain into a "slimline" 192 pages of legislation. Even the current Finance Bill has only 163 pages. It is no mean achievement to have found so much to say on so little at such length. Not only the length of the Bill but its contents are a delight for lovers of mystery stories. Nothing in it is quite what it seems. Right at the beginning we find on page 1, in Clause 1, that we are talking about a tax on the realisation of the development value of land". Innocent people might be taken in by that and believe what it says. But we are not concerned with the realisation of development value because a substantial criticism of the Bill is that it is not a tax on the realisation of development value. One comes to realise that there is a thing called "deemed disposal", when one is assumed to have realised development value and when in fact one has not actually done so.

Throughout the Bill words are given new meanings. It comes as a relief when one gets to page 112, two-thirds of the way through the Bill, to learn that an "article" means an article. It is one of the few occasions in the Bill when a word actually has its normal meaning.

Even in mystery stories, we do not normally have to concern ourselves with what the murder victim has got up to. But in this particular mystery story—on page 12, Clause 9—we find a description of how we shall treat anything done by the deceased. I find this very disturbing. It would appear that the concept "You can't take it with you" is not entirely believed by the Treasury.

Congratulations are well in place for whoever was responsible for these 192 pages of masterly English. Indeed, the Minister has congratulated himself effusively on the manner in which he has consulted widely on the Bill. He cast White Papers around with lavish abandon, to the joy of the printers, and attempted to get the matter right technically. One had not to listen long to the remarks of my right hon. Friend the Member for Crosby (Mr. Page) or to my hon. Friend the Member for Melton to realise that he had failed dismally in that task. Perhaps his congratulations would have been more well-earned if he had paid serious attention to the representative bodies. He may have done so occasionally on minor technical matters, but on matters of substance as to the rate of tax the Royal Institution of Chartered Surveyors said. We must repeat here with all possible emphasis that an initial rate of 80 per cent. is bound to retard development. That was the Royal Institution of Chartered Surveyors, and every representative body that has commented on the Bill has criticised the rate of tax. The Minister claims credit for the extent to which he has consulted, but every commercial organisation has been bitterly critical of the concession given to industry but denied to retailing and the hotel and catering trades as if they were second-class citizens. The Government appear to believe that the supply of Socialist doctrine is more important than the supply of land for housebuilding, industry and commerce.

Mr. Budgen

My hon. Friend ought to realise that commerce is a second-class citizen. It does not belong to the TUC.

Mr. Sainsbury

Much as I admire my hon. Friend's normal interventions, I refuse to accept that commerce is a second-class citizen, and I suggest that the 12½ per cent. of the labour force employed in distribution would not happily accept that, whether or not they are members of the TUC. It is time that the Government woke up to the realities of the situation, and perhaps they will, because we are getting used to their coming back and claiming credit—the Chancellor of the Exchequer is excellent at it—for trying to put right the mess that they have made. We had the Chancellor of the Exchequer's disastrous 1974 Budget, CTT and the Price Code. We heard him saying "I shall not hesitate to take action". We heard that from the Minister today.

The Minister has been hesitant for long enough. If he stopped hesitating and took the Bill away he would at long last do something effective. As it is, we are being asked to approve a Bill that is fatally defective in its rate of tax and in taxing a gain before it is realised. We are being asked to approve putting Socialist doctrine ahead of the needs of industry and commerce. For that reason I shall oppose the Third Reading of the Bill.

11.12 p.m.

Mr. Walter Clegg (North Fylde)

This is a most interesting debate. There seems to be some interest in it on this side of the House, but the poor Minister does not have even a PPS behind him. The hon. Gentleman has been left on his own to put the Bill through, and he has done a pretty good job. The supporters of this great Socialist Marxist measure prefer to spend their time outside the Chamber rather than in it listening to the debate.

Let me, too, declare an interest. I am a solicitor, and I suppose that I am also one of those who after today's announcement by the Leader of the House must declare another interest in that I am unlikely to get the £6 a week.

My interest in the Bill arises from the fact that I shall have to advise on this measure after it becomes law. I can imagine the situation when somebody asks what is meant by Effect of disposals after a project of material development". I shall say "Let us look at para. 48 of Schedule 8", and sub-para. (3) says: The fraction referred to in sub-paragraph (2) above is that of which—

  1. (a) the numerator is the adjusted net proceeds of the subsequent disposal and
  2. (b) the denominator is the net proceeds of the relevant disposal."
I then look at sub-para. (5) which says: If, in a case falling within sub-paragraph (4) above,—
  1. (a) the subsequent disposal is a part disposal, and
  2. 203
  3. (b) at the time referred to in that subparagraph, any instalments of tax provided for by paragraph 45 above have not yet become payable,
then, notwithstanding anything in sub-paragraph (4) above, paragraph 44(1) above shall apply to that part of the added amount which remains after deducting therefrom the fraction of that amount determined under sub-paragraph (6) below.

Mr. Fairbairn

If my hon. Friend's client can afford it, he can get counsel's opinion. If he has enough counsel, he will get as many opinions.

Mr. Clegg

It will be of great assistance to my hon. and learned Friend. He will get very close to the extra £2,500.

Now I turn to one of the most obnoxious forms of the tax, and that is its connection with the Community Land Act. I am sure that the Treasury does not like this connection but that has been overruled in the Cabinet. This is a Department of the Environment tax which the Treasury has had to administer. What I find sinister about it is the fact that local authorities will have the ability to buy land net of development land tax. As a result they will look upon planning in a very different way.

In the past they looked at the planning problem as a planning problem. Now some local authorities will look upon it as a way of earning money for themselves. They will look for a piece of land with a low base value, step in and buy it cheaply, and then sell it and make a profit. The planners will be overridden by the development part of the authority, and we shall not get planning decisions in future. Instead we shall get decisions which are of financial benefit to the local authority.

Another thing which I find objectionable about this tax is the fact that ordinary people who vote Labour believe that because the values will be taxed, the house they buy will be cheaper. It will be no such thing, because the Government have said that they must have the profits the developers get in order to make the thing work. In this day and age of Government restrictions, the local authorities will borrow money to buy land, then sell it to repay the cost of the land and all the administrative costs as well. For the man in the street this will mean that his house will be more expensive, not less expensive. It is time the country recognised that.

I believe that there should be a tax on betterment, but this one is pitched too high. We shall see the slowing down of development for housing and for industry, in spite of the concessions.

There are a great many things in this legislation which the Treasury will have to watch. The Minister of State said that several matters would be kept under review, but the Treasury will have any amount of trouble from the tax because of the way in which it is formed.

I advise my hon. Friends to vote against the Third Reading because the tax is pitched much too high, because it gives local authorities the ability to make money for themselves, because it will generate more bureaucracy, and at the end of the day it will provide very little relief for our fellow citizens.

11.18 p.m.

Mr. Stephen Ross (Isle of Wight)

I will come to the rescue of the Minister, because I intend to support the Government tonight. Nevertheless, I agree with many of the remarks made by the hon. Member for North Fylde (Mr. Clegg). Like him, I sat on the Community Land Bill Committee, and I opposed that measure as hard as he did. I also voted against its Third Reading. However, I believe that the Government are right to tax betterment, and although I do not think that they have got the right solution, I think that the development land tax is a rather better tax than that which we have at the moment in the development gains tax. If we defeat this Bill tonight we shall have to continue with the present 81 or 82 per cent tax, and no one wants that.

I also believe that the Government have introduced this piece of legislation in a very correct manner. They have given very clear explanations, and they have listened to many of the representations which have been made, including those from the Royal Institution of Chartered Surveyors, of which I happen to be a member. I only wish that they had listened to similar representations made on the Dock Work Regulation Bill.

There are obvious omissions, and I support everything that has been said about the charities. It has been said that charitable resources should remain at the disposal of charity trustees in order to obtain the maximum benefit to the community. This measure will effectively prevent that from happening if it remains unamended, although one accepts that charities will still be free for some years in relation to land owned prior to September 1974. But it will certainly have an adverse effect, if it is unamended, after a short period or if no compensation is offered in return.

I am still dubious about the option proposals. The subject still seems wrapped in mystery, although I accept that in the normal way options will not be liable to development land tax and the Minister is nodding his agreement to that.

I had hoped that, despite our differences of approach, we could have reached a consensus on the land question. I had a fire the other day and most of the documents got burned including, thank goodness, three huge volumes of the Town and Country Planning Act 1947. Since then we had had the Land Commission and the betterment levy. Could we not have got some sort of agreement about the planning and development of land? It is tragic that this has not happened.

The Community Land Act and this Bill are too complicated and will be expensive to operate. But at least some of the leaders of the property world are prepared to accept and to try to make this system work. Many local authorities wish to do so, and we should listen to them, and they are not all Socialist-controlled. The Bill should be given a fair trial. Since I became spokesman for the Liberal Party on the environment, I have tried hard to convince myself that, despite my party's fundamental objections, we should drop some of our own proposals and give these measures a fair trial.

Mr. Sainsbury

Is the hon. Gentleman saying that the Liberal Party approves of a tax rate of 80 per cent.?

Mr. Ross

The Government have accepted, at least for three years, a reduction to 66⅔ per cent. That is a fair gesture and is what the RICS first proposed. Up to a value of £160,000, that is not a low figure, and over that figure people can afford to pay 80 per cent.

The Layfield Report finally convinces me that we are going down a blind alley once again. Layfield refused to look at land value taxation or suggested site value rating as a possible solution for local finances largely because it would be contrary to the provisions already on the statute book in the Community Land Act, so he came up with nothing better than a system based on the capital value of properties, which would be no solution at all.

The real solution is to tax the annual value according to the quality of the land and its development potential. That would encourage the best use of land and ensure the positive use of planning. It would put land on the market, and one could vary the tax upwards according to whether people held the land off the market. This method has been proved in other countries, such as New Zealand and Denmark and in Johannesburg and in parts of the United States. Moreover, it could be comparatively simple, provided the civil servants did not overdo it as they did in 1910 and with this Bill.

The development land tax, however, has merit and should be supported. But there should in the years ahead be a staged change to a system of site value rating borough by borough and valuation officers should be making the necessary preparations now. But I suppose that neither the Government nor the Opposition will make such a proposition, and goodness knows what the Tories will put in place of DLT. But do we really want to go back to the bedlam of 1971 to 1973? I was practising in business at the time and know what the situation was.

If they continue to turn a deaf ear, both sides will continue to make a complete hash of the whole development of property business.

11.25 p.m.

Mr. Robert Adley (Christchurch and Lymington)

I am pleased to see that the hon. Member for Isle of Wight (Mr. Ross) has not joined his lion. Friend the Member for Rochdale (Mr. Smith) on the Liberal Back Benches—wherever they might be. I was surprised that the hon. Member should take such a sanguine approach because of the dependence that his constituency has on tourism, and the adverse effect this Bill will have on hotels and boarding-houses.

I congratulate the Minister on being a most even-tempered, generous and decent Minister because he has sat on the Front Bench listening to constant complaints in virtual isolation from his right hon. and hon. Friends. I am tempted to ask "What is a nice Minister like you doing on such a nasty big Bill like this?".

We are concerned about the affect that the Bill will have on industries and companies who own land which they might consider developing. Presumably, industries and companies wish to develop their own land in order to create new enterprise and thus new jobs. The Bill will give a further kick in the teeth to organisations that might be prepared to make that new investment that everybody is so anxious that they should make.

As someone who is interested in the hotel industry, I resent the constant denigration by the Government of service industries. On Report, I used the phrase "job snobs" and I have no reason to retract that phrase. The Government are discriminating between those who work in manufacturing industries and those who work in the service industries. In answer to the intervention by my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen), I can tell him that I have advised the British Hotels, Restaurants and Catering Association that it might invite Jack Jones to join that organisation's national council. The Government might then take a different attitude towards service industries in general and the hotel industry in particular.

Legislation such as this is driving the entrepreneur abroad. Such measures ensure that golf courses flourish because there is less and less incentive to work. The Bill was born in spite, will be weaned in malice and developed in envy and it will die unloved and unmourned. The best thing that the House can do is to see that it is stillborn by refusing it a Third Reading.

11.28 p.m.

Mr. Nicholas Fairbairn (Kinross and West Perthshire)

I pay tribute to the Minister. He has done "good by stealth" and must not blush to find it fame". He has steered through the House a Bill of immense and totally unnecessary complexity. It is one of the most contortuplicate legislative measures we have seen in the House. It will not be understood by lawyers. It may be understood by nekromancers, coprotomancers, digitomancers or pyromancers, but it will not be understood by the people who will have to apply it—the local authorities—and therefore great injustice will be done. It is part of the general philosophy of aspheterism. I do not suppose that hon. Members opposite will know what that is because they were privileged to undergo that form of education which ensures that no one fails.

Mr. Arthur Lewis (Newham, North-West)

What does it mean?

Mr. Fairbairn

Aspheterism is a situation in which one does not believe in the concept of private property.

Mr. Arthur Lewis

On a point of order, Mr. Deputy Speaker. Like me, you are probably very amused by what the hon. and learned Gentleman is saying, but I always understood that on Third Reading one might discuss only what is in the Bill. When will the hon. and learned Gentleman get to what is in the Bill instead of using these wonderful dictionary words with which he is troubling the House?

Mr. Deputy Speaker (Mr. Oscar Murton)

I think that the hon. and learned Gentleman is coming to the point.

Mr. Fairbairn

With great respect, I would not expect the hon. Gentleman to understand so simple a term, because it means "anathema to private property" I understood that that was part of the hon. Gentleman's philosophy.

Mr. Arthur Lewis

It is not in the Bill.

Mr. Fairbairn

Yes it is. It is the core of the Bill that it is anathema to private property. What I find particularly offensive is that the hon. Gentleman, who will no doubt vote for Third Reading, would not understand one section or subsection if he read it, far less the word "aspheterism". The hypocrisy of Labour Members is shown by the fact that they are about to vote for a meaningless and bad Bill which they could not understand, imposing a burden on local authorities which will try to interpret "deemed disposals" and all sorts of fantasies of that kind.

I am grateful to the Minister for paying me the tribute that I was able to suggest some improvements which bring the Bill closer to the language and principles of the law of Scotland. Needless to say, the hon. Member for Perth and East Perthshire (Mr. Crawford) did not help us in any of those matters. So concerned is the Scottish National Party with Scotland and the law of Scotland that it did not bother about that sort of matter. The hon. Gentleman's only contribution tonight was to say that land speculators should be hammered and the Highlands should belong to somebody else. No doubt the Minister will introduce a Bill to deal with those two important matters, in addition to ensuring that Lonrho does not have its talent.

What I find most dangerous about the Bill is not that it is so complex to achieve a simple result but that it will defeat its own purpose. It will not make land or houses cheaper and it will not make development easier. At the same time it will overburden local authorities with work they do not understand. It will tax people who would develop their land and now will not.

The Bill will ensure that charities and Churches and those who do good for the community without any expense to the community are forced to pay a price that they cannot afford. No charity or church has more money than it needs. The Bill will take away from them some of the money which would otherwise have been available. I do not believe that any Labour Member thinks that any charity, Church or pension fund provides a service at a greater price than that at which the State can provide it. The cost to the community is inevitably lower.

The Minister talks about returning to the community the benefit that the community has allegedly bestowed—a benefit which one has no desire to have, a loss which one has no desire to have, a recompense which one has no desire to have, all of which are taxable. We must remember that the Bill will take away from charitable and beneficial sources of the community finance which it would otherwise be in the interests of the community to leave with them.

This is an immensely complex Bill, an unnecessarily complex Bill. It is bad legislation which is part of the cacotopia of Socialism, the compulsion to do every- thing that is bad. I might even say "cacistotopia", the compulsion to do everything that is worst.

Mr. Ivan Lawrence (Burton)

Floccinaucinhilipilification.

Mr. Fairbairn

That just means that one sets everything at naught. The Bill does not. It sets everything at complexity, and it is a bad Bill for that reason. It pretends to achieve a simple and fair objective, but it is to be by evil, complex, ill-thought-out means. The House should reject it, if for no other reason than that it is legislation of the most disgraceful kind and the most unthought complexity.

11.35 p.m.

Mr. Ioan Evans (Aberdare)

I rise briefly to say how much we on the Government side of the House welcome the Bill. From the Opposition we have heard only the usual chorus of protest that we hear when the Government are righting a wrong.

I should like to compliment my right hon. Friend the Minister on having brought the Bill to its Third Reading. It is a complicated Bill. Those of us who served on the Standing Committee considering the Bill left it largely to the Minister to answer the arguments of the Opposition, which he did very ably.

Mr. Fairbairn

Does the hon. Member understand any of the Bill's provisions?

Mr. Evans

I understand the basic purpose of the Bill. It is complicated, but we have had other complicated legislation. My right hon. Friend dealt with the Bill to establish the Land Commission, another complicated piece of legislation. As the hon. Member for Isle of Wight (Mr. Ross) said, earlier we had the Town and Country Planning Act 1947. Whenever we have attempted to deal with the problem of the price of land, we have been criticised by the Conservative Party, but when Labour came to office in 1974, it had to deal with the problem of rapidly rising land prices, a problem which had faced the previous Government.

Here we have a Bill that deals with the increase in the price of land that is brought about not by an individual but by the efforts of the community. We believe that a large measure of the increase in development value created by the community should be returned to the community.

Lord Barber tried to deal with the problem. When the Tories were in office, they were faced with rapidly increasing land values. It is said by Opposition Members that the price of land has little effect on the price of housing. The price of building land in 1969 was £18,940 per hectare. By 1972 it had risen to £39,490, a rise of 68 per cent. in one year. By 1973, still under the Tory Government, the price had risen to £61,190, a rise of 55 per cent. on top on the earlier 65 per cent., or a rise of well over 100 per cent. in two years.

One of the aims of the present Government is to reduce the cost of land to local authorities. If a local authority decides to extend its boundaries, build more houses, or provide hospitals and schools, why should the individual who sells the authority the necessary land be the only person to benefit? The community generates the spending to provide the services, and the cost to taxpayer and ratepayer is tremendous and highly inflationary. Speculation in land values in 1974 created a crisis in land, especially for local authorities.

We have had a Second Reading debate, we have had the Committee dealing with all the finer points, and now we have the Third Reading. I hope this measure will soon become law, and right the wrong that Lord Barber, when he was Chancellor of the Exchequer, was also trying to tackle. But now the Conservatives are back-tracking on what they said they would do. The Labour Government have had the courage to face up to the problem and to do what is right.

11.40 p.m.

Mr. Nick Budgen (Wolverhampton, South-West)

This is the last battle in the recent campaign by the Labour Party in its perpetual war against private property. There have been two major parts to the campaign. The first was the Community Land Act, and the second is the Development Land Tax Bill.

This division illustrates perhaps best of all the essential dilemma of a Socialist Administration. It is interesting, for those of us who have had the misfortune to fight throughout the whole of the campaign, to reflect upon the differences of style and the differences of content of the two Ministers, who respectively were responsible for the Community Land Act and for the Development Land Tax Bill.

I remember the fanfare with which the Community Land Bill ended. The Minister for Planning and Local Government proudly proclaimed that he had solved the land problem, and he put forward without apology, and without any attempt to mitigate the Socialist doctrine, the view that he was ushering in the promised land. He made it clear that that land would be exclusively developed and owned by the State.

What a very different speech we have had from the Minister of State tonight. He has been intelligent, careful, determined to answer each of the smaller criticisms. He has been determined most of all to explain to the people of this country—especially, I suspect. to the risk takers and the people of wealth—that the Socialist Government do not wish to attack wealth or property. He has been determined to explain that this is not an attempt to usher in the Socialist dream world. He has explained that this is a consensus measure which has been ushered in before by Lord Barber, and which has the support of a wide measure of sensible opinion in the professions and in this House. He has shown a desire, most of all, to be the reconciler and the Socialist by stealth.

But it will not work. This is only an interim measure. What the Government should really be saying is "Yes, you can live for a short time. There will be an interim measure for the first £150,000. The tax will only be two-thirds. But after that we shall belt you with 80 per cent. If you survive that you can wait until the second appointed day. That will be the coming of the Socialist millenium, when all land is confiscated at current use value."

It is as well that we shall recollect that all Governments move towards the centre in the middle of their period of office. It is something that Conservative Members often have to regret when we see our own Government doing it. On the other hand, perhaps we can rejoice when we see a little temporary relief being given to the country by a Socialist Administration as it moves towards the centre.

But do not let us kid ourselves. This is only a temporary phase. This is only a temporary Bill. The second appointed day will be upon us. The left wing of the Labour Party will play its part in the creation of the next programme for Socialist reform. If we have another Socialist Government they will succeed in nationalising and confiscating all land at current use value. That is their declared aim.

11.45 p.m.

Mr. Ian Stewart (Hitchin)

My right hon. Friend the Member for Crosby (Mr. Page) has made a major contribution to this legislation, as the Minister of State recognised, and I want to add my own words of thanks to him. As a novice, it has been a pleasure and an education to me to work with someone so experienced and so wise.

As my right hon. Friend pointed out, there are a number of serious shortcomings in the Bill, and we believe that, dispite the progress that we have made, many of its aspects will be positively harmful. I mention a few of the matters which have arisen in the debate.

The Minister pointed to the need to tax windfall gains. But what are windfall gains for the purpose of this legislation? The development gains tax, which the hon. Member for Aberdare (Mr. Evans) mentioned—if I turn a deaf eye to the hon. Member for Isle of Wight (Mr. Ross), I hope that he will forgive me—applied only to windfall gains realised by private individuals as owners of land and not to companies which invested in property or land, which carried out development or building, and so on. There is a fundamental difference between the two.

How can a trader make windfall gains from his stock-in-trade? By definition, that is a nonsense. We believe that there is a fundamental difference between a "one off" sale by an individual at an obvious profit and a deemed disposal by a company whose business is development or building at the start of a material development.

Development land tax applies both to charities and to pension funds. So our first main area of basic disagreement with this legislation is in the application and the impact of the tax.

Mr. Lawrence

My right hon. Friend the Member for Crosby (Mr. Page) committed the Conservative Party to abolishing the tax in its effect upon Churches. Is that a commitment which also extends to abolishing the tax in its effect upon charities?

Mr. Ian Stewart

My right hon. Friend points out to me that he meant to say both. That is our commitment.

The other point which has been raised is about the position of the exempt bodies—the local authorities—which are permitted to acquire property and land net of tax under these arrangements. As my hon. Friend the Member for North Fylde (Mr. Clegg) reminded us, this will encourage local authorities to go for the acquisition not of urban sites for infilling but of the green fields around the edges because they think that, with a low current use value, these will yield them the greatest profit.

There will be an enormous extension of the power of local authorities. Already they are monopoly granters of planning permission and promoters of development. Now they will be, in addition to being collectors of local rates, tax gatherers in a different way, with powers to bring about the very taxable event itself by the exercise of compulsory purchase orders. If the Government want local authorities to win friends and influence people, this is hardly the right way to go about it.

Alas, as my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) reminded us, in the Government's mind the development land tax is no more than a transitional mechanism in the community land scheme leading on to some Never-Never Land of the second appointed day. In the meantime, whether or not the second appointed day ever comes, an instrument of land policy the development land tax itself will be a disaster, as I am afraid we shall see before very long.

The Minister was generous enough to acknowledge the Opposition's contribution to the improvement of the Bill. But, as my hon. and learned Friend the Member for Kinross and West Perthshire (Mr. Fairbairn) said, it remains a Bill of hair-raising obscurity and complexity. Will it ever work? Possibly it will be understood by the civil servants who designed it or who will operate it. But it will not be comprehensible to the taxpayer. What do the words mean? What is the legal effect of a Bill which is so complex in its interaction?

This year, the Finance Bill contains 30 or 40 new clauses on capital transfer tax, and five schedules, and on the Report stage of the Development Land Tax Bill we had two new Government clauses which had to be dropped because they had not been sufficiently thought out. The Minister promised that they or something like them would be brought back at a later stage. But we should register as a house a further protest against bringing forward half-baked tax legislation which is bundled on to the statute book to gratify the appetites of Government supporters below the Gangway.

My hon. Friend the Member for Hove (Mr. Sainsbury) referred to the structure of this tax and the fact that, because of the deemed disposal, it would fall to be paid, in many cases, before the funds were received either, in the case of a capital investment, before the value was realised or, in the case of a trading operating before the profits accrued.

We believe that this is a fundamental weakness in the tax itself. Development land tax on these proportions reduces the base on other taxes and, with them, their offsets and allowances. It means that advance corporation tax and the roll-over and industrial building allowances will be all that much less useful and valuable than they were meant to be. Only this last weekend the newly appointed Under-Secretary of State for Industry, in talking of priorities for the allocation of national resources, said: We have got to put factories first. Those are the words, but this Bill is what the Government do. Although there is some slight benefit in deferment for industrial companies it does not apply to the service industries and what my hon. Friend the Member for Christchurch and Lymington (Mr. Adley) described as "non-industrial interests" will be severely harmed by the provisions in the Bill. Losses are not offsettable. That means that there will be fewer developments, extra delay and increased cost. Not only that, but resultant scarcity will push up the net cost of the projects and that will mean higher rents and prices for properties.

Finally, and above all, we on this side of the House object to the rate of tax. In this we have with us the hon. Member for Perth and East Perthshire (Mr. Crawford) because he has pointed out that at such a high rate there will be a real deterrent to transactions in land. Even the Government recognise that 80 per cent is too high. That is why they have introduced a rate of 66⅔ per cent. for two and a half years. But two and a half years is hardly sufficient to get the development and building industries out of the slump into which they have now receded.

If the Government want to perpetuate that slump in the construction industry and to put up the price of housing, they could not think of a better way of doing it than imposing development land tax at 80 per cent. and to promise 100 per cent. before very long. These rates are much too high for the real world in which we live. At 80 per cent. it is a penal levy. At 100 per cent. it is political confiscation. Like the levy of 1947, and the Land Commission of 1967, it will fail in practice before long. But in the meantime it is capable of doing a great deal of damage which may take years to restore.

I think there has been some common ground between us about the taxation of betterment. But the Development Land Tax Bill, as it stands, is a sadly lost opportunity of achieving an agreed approach between us or a workable means of doing it. Development land tax is indiscriminate in its application. It constitutes a historic departure on charities and pension funds and is an insight into the Socialist envy against provision of benefits other than by the State.

The new methods of tax collection, and the powers of local authorities, will prove not only invidious for them but repugnant to the taxpayer. The Bill is confusing in detail, incomprehensible in form and surreptitiously deprives a large part of industry and commerce of many of the reliefs and allowances which exist.

Above all, set at a rate of 80 per cent. at onset, which is itself a deterrent to voluntary transactions in land and property, it is only a step towards that total confiscation which hon. Members opposite contemplate with such relish. It will do lots of damage to the building, pro- perty and construction industries in this country and to the future of many people seeking to own their own homes. We do not believe that the House should give passage to such a Bill.

11.54 p.m.

Mr. Denzil Davies

With the leave of the House, Mr. Deputy Speaker, may I reply to the debate. We have heard reiterated again many of the arguments made in Committee and on Report with regard to this Bill. I am sure hon. Members will understand if I do not go into them in detail.

One point which has been made time and again is that the rate of this tax is too high. I would suggest that most people in this country, as the hon. Member for Isle of Wight (Mr. Ross) said, would not consider a tax rate of 80 per cent. on a gain in excess of £160,000—that is what we are talking about—as too high especially when the gain does not arise from productive investment, the application of manufacturing processes or the carrying out of proper development but arises because a line is fortuitously drawn on a planning map and a person happens to have land on the right side of the line.

Hon. Members opposite have been constructive on technical matters, but they have failed to put forward an alternative policy. We have had various suggestions on how to deal with the land problem, but nothing constructive. All the Opposition can do is to vote against Third Reading. They want to return to development gains charge which is, by common consent, a bad tax and which is imposed at a rate of 83 per cent.

The Opposition abolished the betterment levy when they came to power after the 1970 General Election. That levy was charged at 40 per cent. They reverted to the capital gains charge. When the property boom got out of hand because they printed money, they brought in—by Inland Revenue Press notice—a panic measure and a 75 per cent. tax on development land.

The Opposition have still not thought out their policy. They say they want a tax on betterment, but they have been hypocritical in the past, and if they were returned to power they would still have no answer to this problem.

If the House rejects the Third Reading, we shall return to the development gains charge at a rate of 83 per cent. and a completely inadequate framework for taxing this kind of betterment gain. I do not believe that the House will want that.

The Opposition say they want to retain development gains charge because it is better, but perhaps they have not seen the report this week by the chairman of Brixton Estates Ltd., which develops mainly industrial property. The chairman, who may be known to hon. Members opposite, is a banker and financier in the City of London. He said: Development Land Tax is less onerous for investment companies —and we are concerned with proper investment and proper development— and it should be possible for us to resume an active development policy in the U.K. Preparations have, therefore, been made to commence new industrial and warehouse schemes following the proposed change in taxation on the 1st August next. That is the view of the chairman of an important development company. The development gains charge, which the Members opposite wish to retain, has been roundly condemned by people in the development industry in this country.

Mr. Graham Page

Will the Minister quote the next sentence of the report of the chairman of Brixton Estates Ltd.?

Mr. Davies

He said: It is to be regretted that the property industry should continue to be subject to legislation which will hinder commercial and industrial development at a time when an adequate supply of modern buildings to meet the needs of industry is an essential part of the economic recovery of this country. The Conservative Party, by saying that it will repeal parts of this tax, but being unable to put forward any alternatives, is continuing the uncertainty.

This is a good tax which attempts to deal with a particular problem. The tax on development gains and betterment value should be at a proper high rate. It is right that the rate should be 80 per cent. when the amount exceeds £160,000. We believe that the majority of the people of this country believe this to be fair and reasonable and that they support the Bill.

I invite the House to give the Bill a Third Reading.

Question put, That the read Bill be now read the Third time:—

The House divided: Ayes 288, Noes 250.

Skinner, Dennis Tierney, Sydney Willey, Rt Hon Frederick
Small, William Tinn, James Williams, Alan (Swansea W)
Smith, John (N Lanarkshire) Tomlinson, John Williams, Alan Lee (Hornch'ch)
Snape, Peter Tomney, Frank Williams, Rt Hon Shirley (Hertford)
Spearing, Nigel Tuck, Raphael Williams, Sir Thomas
Stallard. A. W. Urwin, T. W. Wilson, Alexander (Hamilton)
Steel, David (Roxburgh) Wainwright, Edwin (Dearne V) Wilson, Sir Harold (Huyton)
Stoddart, David Walden, Brian (B'ham, L'dyw'd) Wilson, William (Coventry SE)
Stott, Roger Walker, Harold (Doncaster) Wise, Mrs Audrey
Strang, Gavin Walker, Terry (Kingswood) Woodall, Alec
Summerskill, Hon Dr Shirley Ward, Michael Woof, Robert
Swain, Thomas Watkins, David Wrigglesworth, Ian
Thomas, Dafydd (Merioneth) Watkinson, John Young, David (Bolton E)
Thomas, Jeffrey (Abertillery) Weetch, Ken
Thomas, Mike (Newcastle E) Weitzman, David TELLERS FOR THE AYES:
Thomas, Ron (Bristol NW) White, Frank R. (Bury) Mr. James Hamilton and
Thorne, Stan (Preston South) White, James (Pollok) Mr. Ted Graham.
Thorpe, Rt Hon Jeremy (N Devon) Wigley, Dafydd
NOES
Adley, Robert Fell, Anthony Knox, David
Aitken, Jonathan Finsberg, Geoffrey Lamont, Norman
Alison, Michael Fisher, Sir Nigel Lane, David
Amery, Rt Hon Julian Fletcher, Alex (Edinburgh N) Langford-Holt, Sir John
Arnold, Tom Forman, Nigel Latham, Michael (Melton)
Atkins, Rt Hon H. (Spelthorne) Fowler, Norman (Sutton C'f'd) Lawrence, Ivan
Awdry, Daniel Fox, Marcus Lawson, Nigel
Baker, Kenneth Fraser, Rt Hon H. (Stafford & St) Lester, Jim (Beeston)
Bell, Ronald Fry, Peter Lewis, Kenneth (Rutland)
Bennett, Sir Frederic (Torbay) Galbraith, Hon. T. G. D. Lloyd, Ian
Bennett, Dr Reginald (Fareham) Gardiner, George (Reigate) Loveridge, John
Benyon, W. Gardner, Edward (S Fylde) Luce, Richard
Berry, Hon Anthony Gilmour, Rt Hon Ian (Chesham) McAdden, Sir Stephen
Biffen, John Gilmour, Sir John (East Fife) McCrindle, Robert
Bigga-Davison, John Glyn, Dr Alan Macfariane, Neil
Blaker, Peter Godber, Rt Hon Joseph MacGregor, John
Body, Richard Goodhart, Philip Macmillan, Rt Hon M. (Farnham)
Boscawen, Hon Robert Goodhew, Victor McNair-Wilson, M. (Newbury)
Bottomley. Peter Goodlad, Alastair McNair-Wilson, P. (New Forest)
Bowden, A. (Brighton, Kemptown) Gorst, John Madel, David
Boyson, Dr Rhodes (Brent) Gow, Ian (Eastbourne) Marshall, Michael (Arundel)
Braine, Sir Bernard Gower, Sir Raymond (Barry) Marten, Nell
Brittan, Leon Grant, Anthony (Harrow, C) Mather, Carol
Brocklebank-Fowler, C. Gray, Hamish Maude, Angus
Brotherton, Michael Griffiths, Eldon Maudling, Rt Hon Reginald
Brown, Sir Edward (Bath) Grist, Ian Mawby, Ray
Bryan, Sir Paul Grylls, Michael Maxwell-Hyslop, Robin
Buchanan-Smith, Alick Hall, Sir John Mayhew, Patrick
Buck, Antony Hall-Davis, A. G. F. Meyer, Sir Anthony
Budgen, Nick Hamilton, Michael (Salisbury) Miller, Hal (Bromsgrove)
Bulmer, Esmond Hampson. Dr Keith Mills, Peter
Burden, F. A. Hannam, John Miscampbell, Norman
Butler, Adam (Bosworth) Harrison, Col Sir Harwood (Eye) Mitchell, David (Basingstoke)
Carlisle, Mark Harvie Anderson, Rt Hon Miss Moate, Roger
Chalker, Mrs Lynda Hastings, Stephen Monro, Hector
Channon, Paul Havers, Sir Michael Moore, John (Croydon C)
Churchill, W. S. Hawkins, Paul More, Jasper (Ludlow)
Clark, Alan (Plymouth, Sutton) Heath, Rt Hon Edward Morgan-Giles, Rear-Admiral
Clark, William (Croydon S) Heseltine, Michael Morris, Michael (Northampton S)
Clarke, Kenneth (Rushcliffe) Hicks, Robert Morrison, Charles (Devizes)
Clegg, Walter Higgins, Terence L. Morrison, Hon Peter (Chester)
Cockcroft, John Holland, Philip Mudd, David
Cooke, Robert (Bristol W) Hordern, Peter Neave, Airey
Cope, John Howe, Rt Hon Sir Geoffrey Nelson, Anthony
Cordle, John H. Howell, David (Guildford) Neubert, Michael
Cormack, Patrick Howell, Ralph (North Norfolk) Newton, Tony
Crawford, Douglas Hunt, David (Wirral) Nott, John
Critchley, Julian Hunt, John Onslow, Cranley
Crouch, David Hurd, Douglas Oppenheim, Mrs Sally
Crowder. F. P. Hutchison, Michael Clark Osborn John
Davies, Rt Hon J. (Knutsford) Irving, Charles (Cheltenham) Page, John (Harrow West)
Dean, Paul (N Somerset) James, David Page, Rt Hon R. Grahamn (Crosby)
Dodsworth, Geoffrey Jenkin, Rt Hon P. (Wanst'd & W'df'd) Percival, Ian
Douglas-Hamilton, Lord James Jessel, Toby Peyton, Rt Hon John
Drayson, Burnaby Johnson Smith, G. (E Grinstead) Pink, R. Bonner
du Cann, Rt Hon Edward Jones, Arthur (Daventry) Powell, Rt Hon J. Enoch
Durant, Tony Jopling, Michael Price, David (Eastleigh)
Eden, Rt Hon Sir John Joseph, Rt Hon Sir Keith Prior, Rt Hon James
Edwards, Nicholas (Pembroke) Kaberry, Sir Donald Pym, Rt Hon Francis
Elliott, Sir William Kellett-Bowman, Mrs Elaine liaison, Timothy
Emery, Peter Kershaw, Anthony Rathbone, Tim
Eyre, Reginald Kimball, Marcus Rawlinson, Rt Hon Sir Peter
Fairbairn, Nicholas King, Evelyn (South Dorset) Rees, Peter (Dover & Deal)
Fairgrieve, Russell King, Tom (Bridgwater) Rees-Davies, W. R.
Farr, John Knight, Mrs Jill Renton, Rt Hon Sir D. (Hunts)
Ranton, Tim (Mid-Sussex) Speed, Keith Trotter, Neville
Ridley, Hon Nicholas Spence, John Tugendhat, Christopher
Ridsdale, Julian Spicer, Jim (W Dorset) Vaughan, Dr Gerard
Rippon, Rt Hon Geoffrey Spicer, Michael (S Worcester) Wakeham, John
Roberts, Michael (Cardiff NW) Sproat, Iain Walder, David (Clitheroe)
Rodgers, Sir John (Sevenoaks) Stainton, Keith Walker, Rt Hon P. (Worcester)
Rossi, Hugh (Hornsey) Stanbrook, Ivor Wall, Patrick
Rost, Peter (SE Derbyshire) Stanley, John Warren, Kenneth
Royle, Sir Anthony Steen, Anthony (Wavertree) Weatherill, Bernard
Sainsbury, Tim Stewart, Ian (Hitchin) Wells, John
Scott, Nicholas Stokes, John Welsh, Andrew
Shaw, Giles (Pudsey) Stradling Thomas, J. Wiggin, Jerry
Shelton, William (Streatham) Tapsell, Peter Winterton, Nicholas
Shepherd, Colin Taylor, R. (Croydon NW) Wood, Rt Hon Richard
Shersby, Michael Taylor, Teddy (Cathcart) Young, Sir G. (Ealing, Acton)
Silvester, Fred Tebbit, Norman
Sims, Roger Temple-Morris, Peter TELLERS FOR THE NOES:
Sinclair, Sir George Thatcher, Rt Hon Margaret Mr. Spencer Le Marchant and
Skeet, T. H. H. Thompson, George Mr. Cecil Parkinson.
Smith, Dudley (Warwick) Townsend, Cyril D.

Question accordingly agreed to.

Bill read the Third time and passed.