DEVELOPMENT LAND TAX [MONEY]

HC Deb 22 June 1976 vol 913 cc1381-403

Queen's Recommendation having been signified—

4.19 p.m.

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

I beg to move, That, for the purposes of any Act of the present Session to impose a new tax on the realisation of the development value of land, it is expedient to authorise the issue out of the Consolidated Fund of any sums required to enable the Commissioners of Inland Revenue in certain cases to make to a body by whom an interest in land is acquired a payment in respect of the tax paid on an earlier disposal affecting that land. The resolution is needed because of the Government's proposal to include in the Development Land Tax Bill two new clauses which are numbered New Clause 2 and New Clause 3 on the Order Paper, which will in certain circumstances result in a body which is to acquire an interest in land net of development land tax obtaining a benefit which goes beyond receiving the development land tax paid by the vendor in respect of a particular acquisition.

New Clause 2 deals with the case in which an authority's intention of acquiring from the owner an interest in land for development is frustrated by his subsequently selling the land to a third party. That sale could very well cream off any development value, and if the authority later acquired the land from the new owner it would be likely to have to bear the full market cost, because little if any development land tax would be payable. As compensation, the tax paid on the first sale is to be paid over to the local authority.

A similar situation is dealt with in New Clause 3, giving an authority which acquires land developed in contravention of planning permission the benefit of any development land tax paid to the Revenue on the start of the development project.

The implementation of each of the new clauses could involve the Inland Revenue in making payments to the acquiring authority not out of current tax receipts but out of the Consolidated Fund.

The two new clauses do not affect any rights or any sales. They merely mean the paying over to the local authority of a certain sum which the private individual has paid in tax to the DLT office in the two very limited circumstances which I have described. After a notice has been received by an owner of an intention by the local authority to buy his land, if he then sells the land to another private owner the DLT will be paid in the first instance to the Inland Revenue. If the resolution and the new clauses are accepted, the Inland Revenue will be given the power to pay over that money to the local authority.

We are not concerned with extensions of powers in relation to the payment of money to local authorities. The resolution is merely one which will have to be implemented if the House accepts New Clauses 2 and 3.

4.22 p.m.

Mr. Graham Page (Crosby)

The Money Resolution appears on the Order Paper because the Government failed to think out fully the peculiar procedure which now appears in Clause 39 and Schedule 7. We saw in Committee how the Government had failed to think the matter out when drafting the Bill, for a completely new Schedule 7 was presented to us. Then, at the very last moment before Report—I think only on Friday—we saw on the Notice Paper two new clauses supplementing the procedure for payment net of tax, the procedure whereby local authorities can estimate the tax and pocket it for themselves out of the money they pay when acquiring property.

We objected to this procedure as a whole. There are amendments today saying that the first thing to do in such a procedure is to have the tax assessed by the Inland Revenue and not estimated by the local authority. We object to an extension of the procedure.

We shall have an opportunity to debate New Clauses 2 and 3 on their merits. At this stage I merely want to protest at the extension of the principle to the situation in which the local authority acquiring property may have been a little late in doing so, with the result that there may have been a previous process which means that it is unable to deduct all the tax which it might otherwise have been able to deduct. Exempt bodies are not only local authorities. There are the other bodies mentioned in Clause 11. I presume that the resolution gives power to the Board of Inland Revenue to pay over the tax on those occasions to such bodies as the Commission for the New Towns, the Highlands and Islands Development Board, the Lee Valley Regional Park Authority, the Letchworth Garden City Corporation, the North-Eastern Housing Association, the Scottish Development Agency, the Scottish Special Housing Association and the Welsh Development Agency.

It is extraordinary that, instead of accounting to the Exchequer for the tax which it collects, the board will be directed by means of this resolution and the new clauses to pay the tax over to the acquiring authority, whether that is a local authority or one of the bodies in the list in Clause 11. The procedure will be of the utmost inconvenience to those buying and selling property. As it applies to Clause 2, it means that a sword of Damocles will hang over the heads of owners of properties for five years.

I object to the principle that the total tax collected by the board will not go into the Exchequer but will be paid direct to those public authorities, the so-called exempt bodies. Nowhere in the Bill is there a right for those exempt bodies to have the whole benefit of the tax paid. Nowhere in the Bill is the whole benefit of the tax given to local authorities or any other authority providing community services. It is a tax which should go to the Exchequer and be dealt with the normal way, just like any other tax. We object to the extension of the peculiar procedure of purchasing net of tax—that is, an exempt body taking the tax from the purchase money that it pays.

4.27 p.m.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

I have not given the Bill the study which many of my hon. Friends have given it. I am sure that the Minister of State will find occasion to remind me of that. The Bill is so important, however, that it is right for me to seek to acquire a little knowledge of it and make such criticisms as appear to me to be relevant.

Mr. Nick Budgen (Wolverhampton, South-West)

I know that my hon. Friend has tried for a few days to understand some of the complexities of the Bill. Not many of our fellow citizens can apply my hon. Friend's expertise and intelligence in considering detailed tax legislation. It must be with a sense of profound sadness that we contemplate the fact that so many people who have to try to understand the Bill will probably end up making mistakes and perhaps being ruined by their failure to understand this abortion of legislation.

Mr. Ridley

My hon. Friend is absolutely right. It would be better if we had not embarked upon such legislation. It is interesting to reflect on why we ever get into such a position. It would have been much more valuable if the Cabinet minutes dealing with the decision to go ahead with the Bill had been leaked. At least we should have had a glimmer of understanding of why we must be considering it at all.

I turn to the Money Resolution. It is odd that the Minister did not tell us what sums were likely to have to be repaid. I do not even know the likely yield of the tax. We must now debate that by reference to the repayments that might be made under the resolution, which makes the tax less valuable as a revenue earner. Therefore, I as least, am in the position of considering how much we can afford to disburse out of a tax whose yield I do not know.

That is an unsatisfactory position in which to be when we are considering a Money Resolution. After all, the point of a Money Resolution is to enable the House to control the expenditure of the Government. It is now becoming common for which this Government not to include in Money Resolutions the amount of money that is involved. That is a pity. I can understand that probably the amount will not be very much, because what the Minister has outlined to us is really an anti-forestalling procedure. It is designed to prevent people escaping from the mere serving of a local authority notice upon them.

I find pretty obnoxious the suggestion contained in the Bill that by serving a notice on a would-be, or perhaps non-would-be, seller of land a local authority can, so to speak, sterilise all further transactions in that land and acquire it for the value less the tax, keeping the tax, as it were, for itself. This raises a whole series of detailed questions to which I should like the Minister to reply. For instance, if a certain value attaches to the land, both base value and market value, at the time the notice is served, obviously it is from those two values that the amount of tax is to be calculated.

Suppose, however, that through the transaction of selling the land to a third person the base value or the market value is found to be different, upon which set of figures is repayment to be made by the Treasury? Does the Minister follow me? I should like to know whether repayment will be made on the basis of the figures worked out by the local authority when serving the notice or on the basis of the actual figures when the third party transaction is made. If those two figures are different, is it not rather unfair that, the original owner having paid a given amount of tax, on the eventual transfer to the local authority the tax may be found to be something different? The amount may be very much less, and perhaps the original owner paid a lot more than he should have paid. What provision is there in the legislation for dealing with that situation? Clearly, that is a question which should be answered.

Again, suppose that a certain amount of time elapses and it happens that market values change, as the base values could change too, after a certain period. Is the amount of tax already paid by the Treasury to the local authority to take account of the changed values after a certain passage of time, or is it to be strictly confined to the original value when the tax was first levied?

If the two amounts of tax in the computation turn out to be different, is it the intention of the Government that the higher or lower value should be taken, or is the original owner of the land to be recompensed if he is found to have paid too much tax? These are all likely probabilities to occur. We know the speed at which the bureaucratic machine moves, and the time that will be taken in all these calculations and transactions is endless. Therefore, there seems to me to be a great deal of doubt about it all.

All this arises out of the extraordinary way in which the relevant part of the Bill is drafted. Surely, if it is desired to give back to local authorities the tax on sales to them, it would be much easier if the Treasury in all instances collected the tax and then paid it back in such circum- stances as seemed appropriate to the Government. I have grave objection to the whole idea that local authorities should not have to pay what other citizens pay. The whole basis stinks of prejudice. I would mention the word "hybridisation", but I am sure that it would be wrong to mention that delicate subject to Labour Members because they do not like that word.

Mr. Tim Sainsbury (Hove)

On that thought, I wonder whether my hon. Friend has considered the implications of Clause 11 and the authorities to which my right hon. Friend the Member for Crosby (Mr. Page) has referred. The Lee Valley Regional Park Authority is involved in this and it may be that other park authorities are not. It might indeed be appropriate to refer to hybridisation if other park authorities are to be involved.

Mr. Deputy Speaker (Mr. Oscar Murton)

Before the hon. Gentleman continues his speech, I must draw the attention of the House to the fact that we must keep within the confines of the Money Resolution.

Mr. Ridley

I thought I had done so, Mr. Deputy Speaker, with considerable care hitherto. I do not know whether your rebuke was directed towards my hon. Friend the Member for Hove (Mr. Sainsbury) or myself. The Lee Valley Regional Park Authority is just such a body as might receive sums under the Money Resolution repayment, and I should have thought it would be difficult to discuss whether sums should be paid to these bodies without being able to mention them and their suitability for having any such sums paid to them. In my opinion, the Lee Valley Regional Park Authority is a most unsuitable body to have these sums repaid to it. I can think of much more worthy bodies than that authority which should be exempt.

The hybridity point could well have been raised, as it can be on New Clause 1, as to why industry should be treated differently from commerce, but I say that in parenthesis to avoid incurring a further rebuke from you, Mr. Deputy Speaker. I ask the Minister of State, therefore, to justify the Money Resolution, because it is very far from clear what will be the rights of local authorities in the less straightforward cases with which this legislation will abound. There are bound to be many disputed, contentious and difficult cases.

The question of valuation is hard enough, particularly when they are deemed values, as the base value most certainly is. There will be many cases where the tax paid by the original seller is different from the tax as computed at the time the local authority eventually gets the land. We want a considerable dissertation from the Government as to how those cases are to be dealt with. I have referred to only two of them, but clearly we cannot contemplate going ahead with this complicated procedure unless we understand exactly how it is to work, if it is to work at all.

4.40 p.m.

Mr. Michael Latham (Melton)

In the discussion of the Community Land Bill on the Floor of the House—and I am very glad to see the right hon. Gentleman the Minister for Planning and Local Government present—I said that the danger with Report stages and discussion of Lords amendments such as we had all night on the Community Land Bill was that those who were involved in the Committee proceedings reached a stage of talking to themselves and forgetting the wider issues having lived so closely with the Bill. It was for that reason that my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) opened his remarks with his usual percipience by bringing us back to the essential point of the amount of revenue to be made available to local authorities under the procedure already in the Bill, which is now being widened by this Money Resolution to take in the provisions of New Clauses 2 and 3.

I understand from those discussions that we sometimes have privately that I am likely to be able to speak on New Clause 3 and I do not want to anticipate that, but there are a few questions which need to be answered. The first, which seems to be absolutely basic, is what kind of revenue we are discussing. That is essential to any intelligent understanding of the subsequent clauses.

New Clause 3 is concerned basically with a way of getting round the enforcement procedure under the Town and Country Planning Act as it stands. It would be helpful if the Minister of State would say how much revenue the Treasury expects to be in a position to disburse to local authorities from the provisions of New Clauses 2 and 3.

If he is about to say that he cannot do that, perhaps I can give him a slight hint. Can he say what is the current number of enforcement notices which have been served and how many of them have been approved? They are exactly the cases in which New Clause 3 will be involved, where illegal development has taken place and the local authority has sought to stop it. New Clause 3 says that not only shall the illegal development not take place, but that the local authority will claw back any added betterment which may have accrued.

Presumably this will help to swell the coffers of local authorities for the purposes of further land acquisition. As those hon. Members who recall the Community Land Bill will be aware, under Section 44(2) the Secretary of State, with the approval of the Treasury, sticks his hand into any surpluses local authorities may have accrued. If a local authority has made some money on land acquisition and subsequent disposal, or by buying land net of development land tax, that money goes into a big pool which is laughingly called the Community Land Surplus Account. If there is any surplus at the end, under the provisions which the Secretary of State has outlined in various circulars 30 per cent. will be left with the authority concerned and 70 per cent. will go to the Government, who will keep 40 per cent. and redistribute the other 30 per cent. to those local authorities which have been incapable of making any profits or which have wasted them. So Robin Hood will redistribute the money appropriately. The 30 per cent. is available, therefore, for further land acquisition by local authorities.

When we discuss New Clause 15 I for one will seek to point out that in Leicestershire this year for land acquisition for the whole county there is likely to be £450,000 allocated under the community land scheme, of which the Hinckley and Bosworth Borough Council wants £1 million. The revenues likely to be available are so trivial and the amount of money available, therefore, to bring land on to the market so negligible that difficulties for builders in future years in having an adequate flow of land to finance the building programme will be insuperable.

As I say, when we come to New Clause 15 we shall be able to deal with that matter further, and that will be a particularly appropriate time for the Minister for Planning and Local Government to be present, because one of his arguments when we considered the Community Land Bill was that in the first two or three years builders would have enough land and that, at the end of that period, local authorities would be dishing out land to them in accordance with the acquisitions which had already been made. In view of the public resources which will be available—and they are likely to be negligible—the Government's hope that there should be a steady flow of land is likely to be completely nullified by events.

When the Financial Secretary put this Money Resolution on the Order Paper, presumably he had in mind a figure that would swell the coffers, go into the 30 per cent., and get Leicestershire's £450,000 this year up to, say £451,000 with which it could buy another chicken run to help more building in the county. We need to know that figure.

I emphasise that it is wrong for the House to consider and, if necessary, approve Money Resolutions without specific figures being given of forward projections. That is what the purpose of this House is all about. I hope that the Minister of State will be able to give figures of the expected yield and the information for which I asked him about the enforcement notices.

4.45 p.m.

Mr. Tim Sainsbury (Hove)

At the outset of our discussions on this Bill I have to declare an interest in the subject matter since I am a director and a substantial shareholder of companies whose land might be affected by various aspects of the Bill, and, as one who is involved with a significant retailing organisation, I ought perhaps—

Mr. Michael Latham

I am afraid that I forgot to declare my own interest as a director of a house-building company.

Mr. Sainsbury

I am glad that I had the inadvertent opportunity to remind my hon. Friend the Member for Melton (Mr. Latham) about that. I had not quite finished my declaration of my own inter- ests, however. I was about to add that I also have an interest as a farmer whose land, I hope, will never be affected by any of the Bill's provisions.

When he moved the Money Resolution, the Minister said that we were concerned with a resolution relating to two new clauses which arrived before us at a late stage in the lengthy process of our consideration of the Bill. My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) talked about "embarking" on our discussion. We appear, rather, to have been pulled up in order to give the Minister an opportunity to jump on board at the last minute with the Money Resolution and the two new clauses.

Mr. Ridley

Perhaps it is more akin to a journey on the Trans-Siberian Railway and that I have just joined at Omsk.

Mr. Sainsbury

I hope that my hon. Friend will not leave us at Novosibirsk.

Mr right hon. Friend the Member for Crosby (Mr. Page) said that New Cause 2 had been put on the Notice Paper on Friday. My recollection is that it was a "starred" new clause which was put on the Notice Paper yesterday. Therefore, amendments to it are now almost inevitably "starred" amendments and have not so far found favour in the eyes of your selection, Mr. Deputy Speaker. Incidentally, amendment (c) has been incorrectly printed. It should read leave out 'five' and insert 'one'. In any event, in view of the late arrival of the new clause to which that amendment relates, I hope that we shall have an opportunity to consider it.

I support the objections which have been advanced. As other hon. Members have said, this is a very unsatisfactory state of affairs. It is unsatisfactory to the taxpayer. What is more, judging by the terms of the Money Resolution, it must also be rather unsatisfactory to local authorities and other bodies which might at some time receive sums via the Consolidated Fund from the Commissioners of Inland Revenue. I hope that the Minister will be able to say how long the moneys are to be outstanding. When will the local authorities and other bodies which are the eventual recipients get them?

I am sure that the Minister of State is aware from his work in other areas of the very unsatisfactory nature of some company accounts at present. All the provisions of deferred taxation gradually accumulate in a company's accounts and in many cases represent enormous and unreal figures. Here, too, we have sums of money which presumably can accumulate over a period. There is nothing which says that these disbursements have to be made at any particular time.

The economists are familiar with the need to look closely at the velocity of money, and that important factor in the equation has been highlighted again recently. Perhaps we shall have to have a new determinant for the velocity of the movement of tax payments if they are moving in and out of the Consolidated Fund and on to the Lea Valley Regional Park Authority and other local authorities.

Therefore, I support my right hon. Friend in his objection and protest about this matter. I hope that the Minister will say something about how long these sums might be outstanding. It is not only a question of how much money can be outstanding at any one time, but for how long it will remain unaccounted for and how it will be identified.

What provisions is the Minister proposing to make to identify those sums in the Consolidated Fund so that we know that they are owed to somewhere else? How is he proposing that local authorities should identify in their accounts the sums to which they may be entitled in due course and how will they know how much they should expect to receive? In some cases the sums could be quite significant.

All this highlights the very unsatisfactory nature of the proceedings necessary under the Bill to enable local authorities and other bodies to acquire land net of tax. At this early stage in our proceedings I hate to disagree with my hon. Friend the Member for Cirencester and Tewkesbury, but I find merit in the proposal that local authorities should be allowed to buy land net of tax when it is for their own purposes. I am not saying that that is so when the land is bought merely in order to pass it on later. However, I can find little merit in the proceedings by which it is pro- posed that we should enable this to be brought about. We expect to hear rather more from the Minister in justification of the Money Resolution as a first part of our proceedings.

4.52 p.m.

Mr. Nicholas Fairbairn (Kinross and West Perthshire)

I find myself in something of a difficulty, because, while the new clauses are so abstruse as to be incomprehensible, the Money Resolution is so loose as to be meaningless. It is the combination of those two quite improper characteristics of legislation which seems to characterise all modern tax legislation, which spews forh in such abundance from the Government.

The fact that the Government found it necessary to put down so loose a Money Resolution and two such complex new clauses at the end of last week at this stage in this complicated Bill is an indication that no one on their Front Bench understands the proper implications of their legislation. Whatever explanations may be given by Ministers, it seems that the Money Resolution means anything or nothing, because it says—and we should read the terms: That, for the purposes of any Act of the present Session to impose a new tax on the realisation of the development value of land". If we have another supplementary Budget this year and the development of land is taxed, this resolution will apply to an Act which no one has yet even framed.

That is a particularly improper form of legislation. If the Chancellor decides suddenly tomorrow that we need to sell to our creditors not only the Dorchester but the Palace of Westminster and that the land shall be used for another purpose, and if he decides to tax it, no doubt that would be covered by this Money Resolution. It seems quite improper that a Money Resolution should not refer specifically to the Act that it is intended to cover.

The only possible explanation of or justification for those words is that the Government still do not understand their incomprehensible, abstruse and idiotic statute and might in this Session have to introduce another with different clauses and regulations and get it to do what they want it to do and not what they imagine it will do. If that is true, let them say so. Either the resolution should apply to this statute and none other, or the Government should say that they have it in mind to introduce other measures to which it is intended to apply.

Mr. Sainsbury

Would my hon. and learned Friend consider it possible that the total absence from the Chamber of any Labour Members other than those on the Government Front Bench reflects the fact that they are all diligently studying the provisions of the lately introduced new clauses?

Mr. Fairbairn

I hope that they and their legal experts are studying them. I hope that they understand them.

What was absolutely clear—with the greatest of respect to the Minister, whose diligence and application throughout the Committee stage cannot be faulted—was that all present, including the Minister, did not know what was meant. No one on the Benches behind the Minister knew what was meant. If anyone thought that he knew what something meant, that was not what anyone else thought it meant.

We start with Alice in Wonderland. No doubt the development of Wonderland would be subject to this tax. Certainly it should be. It is the only thing that is properly introduced by it.

The Money Resolution goes on: it is expedient to authorise the issue out of the Consolidated Fund of any sums required to enable the Commissioners of Inland Revenue in certain cases to make to a body by whom an interest in land is acquired a payment in respect of the tax paid on an earlier disposal affecting that land". Why should "any sums" be required? Why is it "any" sums? Why is it not "the sum"? Is the Treasury to be authorised to pay out of the Consolidated Fund any sums required to enable the Commissioners to make payments in certain cases? The cases are not specified.

We can have all sorts of explanations from the Government, but if they wish to ensure that the cases are purely those arising under New Clauses 2 and 3, let them specify the sort of cases they intend to cover. If it is intended, however, that the vast errors which regularly occur in Treasury calculations should be made up, let us hear that that is the purpose. If it is the intention to introduce further statutes with other provisions, let us hear about that.

Then we go on to this concept: by whom an interest in land is acquired a payment in respect of the tax paid on an earlier disposal affecting that land". What is a payment in respect of the tax payment? Is it equal to the tax paid, or is it more or less than the tax paid? Is it with interest? If the present rate of inflation continues, as it inevitably will under the present Government, and if the tax paid is to be the same sum as that originally paid, it will have to be inflation-proofed upwards. Is that the intention?

What is the meaning of these words? Do they imply that the payment is with or without interest? If the local authority has to borrow the money in order to fulfil its obligations until the money is paid over, however many years later, will the interest thereon be paid? These are the sorts of specific matters which so vague and irresponsible a Money Resolution leaves unanswered.

This matter merits particular interest in Scotland, where there are very big developments and changes in the use of land, very big sums which are paid for the development of land, and very big turnovers. If the Government's assessment is right and the oil around Scotland will be exhausted in 20 years' time, it will be interesting to know whether local authorities in Shetland, Aberdeen, Fife and other places will have received their money before the oil runs out. Here are vast sums of money, all of which are to be removed intact in order to be spent by a spendthrift Government. It is right that local authorities should know exactly the position in which they are likely to find themselves.

The characteristics of this Money Resolution, if anything, compound the frightfulness of the Bill. I make no criticism whatsoever of the Minister, because he is the unfortunate man who has to pretend that this many-legged rogue monster is an intelligent and domesticated beast. However, it does no credit to Parliament, democracy or anything else to have a pair of new clauses such as those proposed. If the 630 Members of Parliament were to write their opinion on the new clauses, or if those who are legally qualified were to give opinion as to what the new clauses meant, there would be a different answer in every opinion. To have them backed up by so vague and sloppy a Money Resolution is a disgrace to the legislative process.

5.0 p.m.

Mr. Michael Spicer (Worcestershire, South)

I had not intended to intervene in this short debate, but my hon. Friend's have raised so many fundamental issues that I am prompted to underline one. My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) has made the point that we cannot have a Money Resolution of whose outcome we have no idea. We have absolutely no concept of what kind of moneys we are discussing. It is a very new form of Money Resolution that we are contemplating unless the Minister can give us some kind of answer about that.

It is not because I have doubts about the Minister's ability in that respect. Those of us who sat on the Committee had considerable regard for his abilities. but I share the view of my hon. and learned Friend the Member for Kinross and West Perthshire (Mr. Fairbairn) that the resolution is so complex that even the Minister often seemed to be at a loss. That may explain why he seemed in Committee to accept so many of our amendments and why we do not find them reflected in the Bill as re-printed—or maybe it was just the lateness of the hour.

If the Minister is trying to meet us, particularly my hon. Friend the Member for Cirencester and Tewkesbury, we must have some idea of what the yields will be. This is fundamental. Here for the first time we are considering a tax on hypothetical values. That will make it extremely difficult for the Minister to produce any kind of yield estimate. We are not trying to work out the kinds of sales which are contemplated and, by putting a figure for inflation against those sales, thereby coming up with an estimate of yield. We are not talking about a tax on anything real. What we are talking about is often a tax on nothing, a tax on some kind of hypothetical valuation.

The point that we are raising about yield goes to the very root, certainly of my objection, of the opposition to the entire tax. Here we have a tax on a hypothetical value which will make it extremely difficult for the Minister to give any kind of estimate of what kind of moneys we are talking about.

Mr. Michael Latham

Is my hon. Friend aware that under New Clause 3, which the Minister will be moving, the gain is not only hypothetical but also illegal?

Mr. Spicer

That is an extremely interesting point. I have just had a message passed to me by my hon. and learned Friend the Member for Kinross and West Perthshire pointing out that the Scottish National Party is not here. Perhaps it is also studying the details of the Money Resolution.

I do not want to labour this point because we shall come back to it, but it is fundamental to any discussion of this Money Resolution that we should have an estimate of the yield. This is not only appalling but an appalling piece of legislation.

Mr. Stephen Ross (Isle of Wight)

The hon. Gentleman says it is appalling, but would he not agree that there should be a tax on land transactions and that this is a rather better piece of legislation than his own Government brought in, namely, the development gains tax? It has particular advantages, particularly in the opinion of professional circles.

Mr. Spicer

That needs the kind of response which one's own spokesman should make. I can only give the hon. Gentleman my own personal view and I absolutely dispute his view. A tax on gains is a tax on something real. This is a tax on a hypothetical value.

Mr. Sainsbury

My hon. Friend seemed to accept the accusation of the hon. Member for Isle of Wight (Mr. Ross) that the development gains tax was legislation passed by his Government. He can personally disclaim all responsibility because he was not an hon. Member at the time concerned. I remind his that although the legislation was envisaged in the December 1973 Finance Act introduced by Mr. Barber, now Lord Barber, the legislation was in fact enacted by the present Government's predecessors and the process of consultation which would have been undertaken and which would have substantially amended the Bill in respect of observations which had been made by the professional associations to which both the hon. Member for Isle of Wight and myself have the honour to belong would have greatly changed it had we been responsible for the legislation which the hon. Member for Isle of Wight has just criticised.

Mr. Spicer

I accept that absolutely.

Mr. Ridley

Before we have too much razzamatazz on this subject, may I point out that I was a member of the Standing Committee which considered the development gains tax legislation and one of the 10 per cent. of the rivals for the Liberal leadership—the hon. Member for Cornwall, North (Mr. Pardoe)—was also on the Committee and he found considerable fault all the way through with the concept of development gains tax?

Mr. Spicer

I am sure that all that is extremely helpful.

The only point I want to make in response to the hon. Member for Isle of Wight is that the concept of a development gains tax is infinitely preferable because it is a tax on something genuine—on a gain. It is a tax on something which we can identify. In this case we have a tax on something which is totally hypothetical. Once we start to introduce a tax which is based upon some hypothetical valuation, it is often subject to personal and subjective interpretations. One is then faced with the problem of trying to provide some kind of estimate of the tax yield. There are countless problems once we get into the business of taxing hypothetical valuations which no doubt, we shall be discussing later tonight.

However, the one point to which I wish to draw attention that once we have a hypothetical tax, it will be difficult to respond to the probings particularly of my hon. Friend the Member for Cirencester and Tewkesbury who asked, quite rightly, for some kind of estimate. If we cannot have an estimate of the sort of money we are talking about, I for one find this Money Resolution objectionable.

Mr. Fairbairn

Mr. Speaker, I should earlier have declared an interest, which I omitted to do. I am the owner of some 500 acres of land which may be subject to this Bill. Like my hon. Friend the Member for Brighton and Hove I trust that it will never be developed.

Mr. Sainsbury

My constituency is Hove.

Mr. Fairbairn

I meant my hon. Friend the Member for Hove (Mr. Sainsbury). I apologise for enlarging his interests. I trust my land will never be subject to an interest, but, under the provisions of the Bill, even if it is never developed I may have to pay tax on the loss of amenity which a neighbour creates over my land.

Mr. Denzil Davies

Perhaps I may deal first with the main point made by the right hon. Member for Crosby (Mr. Page), who rightly chastised us for putting down the two new clauses and the Money Resolution at such a late stage. I accept what he said. If we had thought of it, we would have put them down earlier, but we did not think of it. We put them down at the first moment we could, but it was late and I apologise. At least the House should give us thanks for enabling hon. Members opposite to raise all these issues again. They have this opportunity at the beginning of the Report stage on a sunny afternoon.

The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) showed a clear grasp of the Bill although he has not read the Cabinet minutes and was not on the Standing Committee. I wish that he had been on the Committee, since he could have assisted us no end.

Mr. Ridley

Why do we not accept the suggestion of the hon. Member for Rugby (Mr. Price) and hold all Cabinet meetings at Hyde Park Corner? Then we could all know what was going on.

Mr. Davies

On a day like this, that is a very attractive idea. Perhaps we could also hold the Report stage of the Bill there.

The hon. Member asked what amount of tax would be paid over to the local authority. It is the amount which would have been payable if the original acquisition had taken place. In other words, three parties are involved. Mr. A has a piece of land and the local authority intimates an intention to acquire it. Mr. A disposes of it to Mr. B at full market value, so when the local authority acquires the land from Mr. B, there is a high base value and the local authority can deduct no tax because there is none to be deducted.

The intention behind both new clauses is basically the same—that the tax which would have been payable by Mr. A—not the tax deducted by the local authority: that might have been different—had the sale gone through to the local authority, presumably with a lower base value, will be paid over to the local authority in the circumstances provided for in New Clause 2. But there is no question of having to pay over more if the values increase between the two sales.

We are concerned with the first potential sale or acquisition and the amount of tax which would have been payable on that acquisition. That is the fixed amount of tax which would be paid back to the local authority if the Money Resolution and the new clauses were accepted.

The hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) reminded us in Committee that he owns 500 acres of burgage property in Scotland. He said that the Money Resolution was drafted vaguely and that we would not know what would be paid out. But the Treasury cannot pay money to anybody in pursuance of the resolution. The resolution merely gives a cloak of authority to statutory authority. If the new clauses are not passed, the Treasury could not pay any money out under the resolution. The ability to pay the money is circumscribed by the two new clauses. Thus, the hon. and learned Gentleman's criticisms of the Money Resolution are not entirely valid because we are not paying money out as a result of the resolution.

In fact, we are not paying money to private bodies. The money is still within the private sector. Again, we are not concerned with the kind of Money Resolution which we sometimes see after Orders late at night when money may be paid out to a private oil company and a Money Resolution is needed to reinforce the Order. We are concerned with money which would otherwise have gone to the Revenue and is then recirculated to the local authorities in the limited number of cases dealt with in the two new clauses.

I was asked how much money would be paid from the Revenue to the local authorities. I cannot give the answer to that, but it would be a very small amount, because we are concerned with a very limited area in which there might be forestalling—it would be rare: in most cases, it would just not happen—and where development might start without authorisation under New Clause 3. The amount of money paid out would be very small, especially bearing in mind the fact that the two new clauses would to some extent deter owners of land from operating in the way in which they would otherwise operate.

I am sorry to disappoint hon. Members but I cannot give a figure, therefore, of how much money would be likely to be paid out, but it is likely to be very small. We are in some difficulty because we are debating the Money Resolution first and will then have to debate the new clauses afterwards. But perhaps the details of the new clauses and the way in which the money is paid will depend on the specific details of the new clauses themselves. The House can reject the new clauses, in which case the Money Resolution falls. The resolution will give procedural effect to the new clauses if they are passed.

The hon. Member for Hove (Mr. Sainsbury) and, more strongly, the hon. Member for the Isle of Wight (Mr. Ross) agreed that it was a good thing for local authorities to acquire land net of tax. The new clauses and the Money Resolution ensure that this shall happen within this legislation. In fact, they are to put that into effect and to prevent the forestalling of that—which purpose some hon. Members approve in a limited number of cases—by sales made between individuals, possibly in order to prevent the local authority from acquiring the land.

Mr. Graham Page

Of course, it is not only to deal with forestalling. Any private transaction can take place quite properly and legally while a compulsory purchase order is hanging over the owner's head. These clauses do not prevent that. This is nothing to do with the owner, whether he sells or not. It is now only between the board and the local authorities.

Mr. Davies

Indeed, but if the owner has entered into an unconditional contract to sell the land, even if the local authority issues a notice, New Clause 2 will not operate. It will operate only where a local authority has intimated by notice that it wants to buy the land and then the owner enters into a contract to dispose of it to another person. But I agree that, at the end of the day, this is a matter between the board and the local authorities. It has nothing to do do with the rights of individuals and private owners and the sales will go through in exactly the same way.

I hope that the House will accept at least that the Money Resolution fortifies the two new clauses, which we shall no doubt debate later.

Mr. Ridley

I am grateful to the Minister for having given—

Mr. Deputy Speaker

Order. I do not know whether the hon. Gentleman is making an intervention, but he has already spoken once on the Money Resolution.

Mr. Ridley

But we are not yet on the Report stage. Is it not in order for me to seek to comment further on the issues before us?

Mr. Deputy Speaker

No, that is not so. One may interrogate by way of an intervention, but one may not make another speech on a Money Resolution.

Mr. Ridley

In that case, may I ask the Minister, before he sits down, what happens if the land is sold when a compulsory purchase order is pending and it is sold quickly to three or four different people, each of whom buys it and sells it on to the next in such a way that at no stage does development land tax arise because there are always the exemptions to take? In that case, the Treasury will repay to the local authority the tax which would have been paid if the local authority had been able to acquire the land in the first instance.

But in fact no tax will be paid to the Treasury. This seems to be an admirable way for local authorities to milk the Treasury. I can see that it would be possible to ensure that there were six or seven private owners all ready to acquire the land and pass it on quickly, thereby entitling the local authority to large sums of tax from the Revenue without any development land tax being paid. As a well-known stopper of loopholes, I am sure that the Minister will be grateful for that point.

Mr. Davies

I am grateful. I am even more sorry now that the hon. Gentle man was not on the Committee. If no tax is to be paid to the Revenue on the first sale—he postulated a sale from one to the next of three or four sellers—there will be no tax to be paid back to the local authority. This provision applies only in a situation where there is tax payable on the first sale, which is paid to the Revenue, but which would have been paid to the local authority if the authority had acquired the land from the first person, Mr. A. There is no question of milking the Revenue.

Mr. Fairbairn

Would the Minister make that absolutely clear? Surely the position would be that if the tax had been payable to the local authority, the Treasury must repay it to the local authority.

Mr. Davies

The tax will be payable either way. If the local authority buys Mr. A's land and tax is payable, that tax will be paid to the local authority. If Mr. A sells to Mr. B, the same amount of tax will be payable because the computation will be the same. But that tax would go to the Revenue, because Mr. A will have sold to a private person instead of to a local authority. All New Clause 2 provides is that the tax would be recycled back to the local authority. If Mr. A sold to Mr. B, there would be no question of any more tax being paid or of any different tax being payable.

Mr. Ridley

But if Mr. A does not sell to a local authority but sells to Mr. B instead, who then sells to Mr. C, who then sells to Mr. D, so that at no stage does a tax liability arise, the local authority can justly claim back from the Revenue the tax which would have been paid if Mr. A had sold to the local authority in the first place.

Mr. Davies

If Mr. A sold to a local authority and the tax payable was £20,000, for example, the tax would be exactly the same if he sold to Mr. B instead. There is no difference as far as assessing the tax is concerned. In these circumstances the local authority would get the benefit of the £20,000. If no tax is payable on that sale, no money would go to anybody, either the Revenue or the local authority.

Question put and agreed to.

Resolved, That, for the purposes of any Act of the present Session to impose a new tax on the realisation of the development value of land, it is expedient to authorise the issue out of the Consolidated Fund of any sums required to enable the Commissioners of Inland Revenue in certain cases to make to a body by whom an interest in land is acquired a payment in respect of the tax paid on an earlier disposal affecting that land.

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