RATE OF TAX

HC Deb 23 June 1976 vol 913 cc1641-77

'(1) Subject to section 13 below, the rate of development land tax shall be such percentage between thirty and sixty as the Treasury may prescribe by statutory instrument a draft of which has been laid before and approved by a resolution of the Commons House of Parliament.

(2) The percentage so prescribed may vary in respect of the situation of the land and the kind of development.

(3) The Treasury shall not so prescribe any increases in such percentage more than once in any fiscal year'.—[Mr. Raison.]

Brought up, and read the First time.

Mr. Timothy Raison (Aylesbury)

I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Mr. Oscar Murton)

With this we are to discuss the following:

Amendment No. 1, in Clause 1, page 2, line 4, leave out subsection (3).

Amendment No. 242, in Clause 13, page 19, line 39, leave out '66⅔ per cent.' and insert: 'one-half of the percentage rate currently prescribed under section (Rate of Tax)'.

Amendment No. 243, in page 19, line 43, leave out '66⅔ per cent.' and insert: 'one-half of the percentage rate currently prescribed under section (Rate of Tax)'.

Mr. Raison

The aim of the clause is, first and above all, to provide for a realistic rate of taxation instead of the utterly deterrent rate proposed in the Bill. Secondly, the clause is designed to recognise the fairly wide variety of circumstances in which development can occur—a matter to which I shall return in a moment. Thirdly, it is, as a consequence of this, to limit the changes in tax which are permitted under the clause to once a year, because, although we argue that a greater degree of flexibility is desirable than is allowed at present, we recognise that, if the clause were to lead to constant chopping and changing in the rate, that would be adverse because, obviously, people want as much stability as possible in these matters, although that has to be coupled with some kind of sensitivity to market conditions.

Amendment No. 1, which is part of the package that we are debating, would have the effect of deleting the present subsection in Clause 1 which defines the rate of 80 per cent., with the consequence that the whole of the tax rate would be dealt with in our new clause rather than, as at present, in Clause 1.

There are also two subsequent amendments, Nos. 242 and 243, which would have the effect of altering the present reduced rate for the smaller sizes of development, which stands at 66⅔ per cent. over the interim period up to March 1979, to half the level of the ordinary rate which we are now proposing. Obviously, it would be absurd to have a level of main tax of between 30 and 60 per cent. and to have the reduced tax standing at 66⅔ per cent. The House will recognise that this is a sensible consequence of what we are proposing.

On Second Reading I made it clear that the Opposition had a number of major objections to and doubts about the Bill and the clause that it embodied. Ever since 1973 we have accepted the principle of a tax on betterment. The then. Chancellor of the Exchequer, now Lord Barber, decided that this was right, and we still accept that principle. We also want to avoid further upheavals, if possible. Although we shall unquestionably repeal the Community Land Act, we do not want to repeal this tax if—it is a big "if"—it can be made acceptable as a structure. Looking at the tax as a vehicle, we are not necessarily committed to its repeal. We shall judge it on its merits as it stands at the end of its passage through Parliament.

As the Bill stands at present, however, there are still a number of grave objections to the development land tax which it proposes to introduce. First, there is the objection, which has had a very full airing already, of the really absurd treatment given to charities and pension funds. I believe that my right hon. Friends and hon. Friends made an overwhelming case on this matter last night, and I cannot understand why the Minister ever resisted it. Then there is the sheer difficulty of valuation which I think is a very important part of the problems which this tax poses. There is also the fact that a person may have to pay tax before his money comes in. Looking at the Committee stage report on this point, I think that the Minister was misleading when he tried to argue that there was nothing essentially different in the provisions of Clause 1 and the way in which tax is generally charged in our tax system.

It is certainly true that tax is charged before one's final income is known. I do not quarrel with that. But if one is overcharged, the money is refunded in due course. However, with development land tax we are talking about a fixed levy that does not depend on what gains are made. This is a very serious problem of the tax as it stands.

There are other objections also which have a lot to do with Clause 1. There is the fact that the cost and complexity of the scheme are enormous. There is the fact that builders who use land as stock-in-trade could receive very tough treatment, because they in a different category from the person who makes a windfall gain. Above all, the penal rate of tax of 80 per cent. for larger developments and 66⅔ per cent. for smaller developments will have disastrous consequences.

Not only will the 80 per cent. rate have disastrous consequences; as I should remind the House, this penal rate is only the first step in the progress towards a 100 per cent. rate of tax. Let us never forget that the essence of the Government's scheme is, in due course, that there should be no development gain at all to the person who brings land on to the market for the constructive purpose of helping to provide houses, factories, offices and shops. This is the first step on the Gadarene slide to tyranny that lies behind the whole of the Government's community land scheme. Our objections are very strong, because we are talking here about a starting point and not a final point of 80 per cent. Our new clause is designed to show that we reject the whole malign progress of this scheme. The proposed rate of 80 per cent. inevitably will be seriously damaging in its effect.

It is true that there may be land available for building today. I do not dispute that the great difficulties the house building industry has faced in the last year or two, allied with bankruptcies and land being on the market, has meant that there is not a land famine at the moment. But among those who know the market best there is no question at all that in a year or two there could be a great danger of a famine. The House Building Federation, which speaks with great authority, believes that around 1978–79 we can expect the really alarming prospect of building land drying up, which will have a disastrous effect on house building. I know that this point has been referred to in Committee upstairs and on a number of other occasions in this Chamber by my hon. Friends. However, over and over again the Government have been thoroughly obtuse in brushing the matter to one side.

I suppose the Government could say that they could meet this situation by compulsory purchase. That is, indeed, the essence of the Government's land scheme. But compulsory purchase is not the way to hurry things along. It is not the quickest way of getting land on to the market; it is just the most odious and tyrannical way. Compulsory purchase cannot do the job, even if one accepts the moral or political aspect of it.

5.45 p.m.

We are faced here with a practical point, as well as a political one. The point has been made with great authority and force by the Royal Institution of Chartered Surveyors in its memorandum on development land tax. The institution speaks with authority, and it has always taken a very impartial view of this question. It is not aligned with any one political party and it represents people in both the public and private sectors. This is what the Institution had to say about the 80 per cent. rate of tax: We must repeat here, with all possible emphasis, that a tax at an initial rate of 80 per cent. as now proposed by the Government, is bound to retard development and to prolong the present damaging hiatus in the building of houses, factories, shops and offices. This is to be deprecated, especially at a time when the Government's land scheme will be in its early stages. It is not irrelevant to note that the first attempt to recover 100 per cent. of development value, under the Town and Country Planning Act 1947, failed. This lesson was not lost on the authors of the Land Commission Act 1967, which introduced a levy at an initial rate of only 40 per cent. of development value. We fear that the latest legislation in its proposed form will encounter the same difficulties as the 1947 Act. Those are the words of great authority and I am amazed if the Minister can repudiate them in any way.

On the point about the community land scheme, even if it went ahead as a mechanism for buying land for development, the public expenditure situation would not allow the Government to spend the large sums of public money which would be needed to operate the scheme. In fact, the Government must be embarrassed by the cost according to the public expenditure White Paper. I beg the Minister to recognise this point and to realise that the 80 per cent. will be a deterrent.

What is the answer? What is the right way to approach this problem? We have put forward a way in our new clause. We may be asked what we shall do about it when we come to power. This is a fair question, but it would be foolish to answer it at this stage and say what tax rate we would operate, because no one can know the circumstances that will prevail. That is why we have produced a flexible system and applied commonsense practicality to the situation. We are setting up a broad pragmatic framework within which the Government can operate.

In Committee we put forward one approach in which we argued for a rate of 60 per cent. tax or less, subject to Statutory Instrument. There was a lot to be said for that approach. But one cannot repeat that on the Floor of the House. The approach that we are putting forward today has a great deal of merit and it will provide a viable system. We are putting forward a scheme that allows considerable flexibility and considerable opportunity for the Government to make a judgment about the existing state of the market and its revenue needs.

There is a substantial sum of money at stake in the Bill. On Second Reading the Minister told us that the likely revenue from the Bill would be between £200 million and £300 million. I am not sure whether the Minister has elucidated this since, or whether he still sticks to those figures, but he must admit that this is quite a sum of money. Nevertheless, it is the land market about which we must be most concerned, and the market for housing and other forms of productive investment.

The clause would allow the Government to propose by Statutory Instrument, which would have to be approved by the House, whatever level of taxation they believed to be right within the range between 30 per cent. and 60 per cent. That is a wide range for a tax, but it allows a sensitive approach. It allows us to consider the balance between supply and demand in the land market which is a volatile market and is subject to all sorts of extraneous factors. We say that the rate should not go above 60 per cent. because there is now a fairly strong body of opinion which says that 60 per cent. is the upper limit at which the tax could operate before beginning to deter people from putting land on the market.

I shall not fix the precise figure for the tax, because that is the Government's job. Initially, however, it might be between 50 per cent. and 60 per cent., but I am not putting that forward specifically. It might be related to the level of corporation tax. All I am asking is for the Government to recognise that they have landed themselves in an impossibly rigid situation. The Government have never explained why they plumped for 80 per cent. Throughout, they have been very coy on that point, and the only explanation seems to be that they are aiming ultimately for 100 per cent. and therefore they have to pitch the rate high so that the final jump is not too great.

Mr. Denzil Davies

Will the hon. Member make one point clear to the House? Am I right in assuming that he is asking us to approve the clause and to include it in the Bill? Is he saying that, because so far he has made a Second Reading Speech?

Mr. Raison

Yes, I am asking the House to approve the clause and to include it in the Bill. It embodies a sensible approach, which is very much better than the approach adopted by the Government. There is a range of tax levels that we believe to be right. All the evidence points to the need for a far lower rate than the 80 per cent. proposed by the Government.

The clause makes it possible to meet another objection to the Bill concerning the insensitivity of the Government's approach to the fact that there are quite different forms of development. The clause would make it possible to vary the tax in respect of the particular situation of the land and the kind of development proposed. That will allow a response to different circumstances, and it will give a chance to stimulate the market as a whole, or just one part of it, if necessary. There are different geographical circumstances. It may be that in one part of the country things are tight and that in another part the situation is completely different. It may be that one would apply the flexibility not just to geographical variations but to variations between different forms of development. For example, one could draw a distinction between house building and other development, or between commercial and industrial development. It is quite clear that at any given time the house building sector might be thriving while there is a slump in commercial and industrial development.

Mr. Fairbairn

Lest the Government should burst too many blood vessels, perhaps I should explain to my hon. Friend that we have been at pains to abolish the distinction between commercial and industrial.

Mr. Raison

I am simply putting forward the kind of possibilities that would be permitted. The proposal might help different parts of the country It might make sense to provide a lower rate of tax to encourage land on to the market for development in the urban areas. The Government are probably concerned about the prospects for development in some of our urban areas, and I would have thought that the Minister for Planning and Local Government, who is now with us, would be sympathetic and responsive to proposals that would make it possible to stimulate development in areas which at the moment look as though they will be ignored under present trends.

I believe that the clause will achieve a desirable flexibility, which will take proper account of the variations in the market and the variations of different parts of the country. Of course, one would have to use that flexibility carefully. I do not want to end up in a position of arguing that legislation should have an endless variety of provisions to cover special conditions. Here, however, we are talking about wide categories of development which might be treated under our proposals rather than by the preferential interventionism which is characteristic of the Government's policy.

Mr. Budgen

If the clause became law, what would happen in the event of a political hue and cry about one kind of development or one developer? Would it be possible to introduce, by way of Statutory Instrument, a penal rate of tax to demonstrate the political dislike of one type of development, or even one developer?

Mr. Raison

That is something that we shall have to think about. One cannot discriminate against one developer, because that would land us in hybrid Bill difficulties, and we have been there before.

Mr. Budgen

But would it be possible?

Mr. Raison

It would require the approval of the House of Commons. We are talking about the affirmative resolution procedure. If the House thought that that suggestion was inappropriate it could throw it out.

Mr. Denzil Davies

There is nothing in the clause about the affirmative resolution procedure applying to a specific situation or particular kind of development. That would be entirely a matter for executive action, which would be taken under guidelines set out by the Treasury. The matter would be left totally to the Executive, as to how to deal with certain types of development.

Mr. Raison

Everything that was done would be done under a resolution or order of the House, and the House would be able to approve a scheme.

I believe that our package as a whole provides a basis for pragmatic and sensible approach to a very difficult question. The Government's proposals will never work, as has been widely accepted for the last few months. If I were the Minister I would welcome the scheme that we are putting forward. It gives some chance of making the unworkable work. But, above all, I tell the Government that they must get away from the notion of an 80 per cent. tax rising to 100 per cent., because that is doomed to failure.

6 p.m.

Mr. Clegg

I wish to support the new clause. I think that there should be a tax on profits made out of land, but I dislike intensely the way the Bill has gone through the House and its close connection with the Community Land Act. Had the Treasury been left to introduce a tax on development without it having to be tied to the Act, we should have had a much more palatable Bill.

I am concerned at the effect that a rate as high as 80 per cent. will have on house building. One must listen to the views of the Royal Institution of Chartered Surveyors with respect. Its members deal with these matters daily, and they feel that a tax at that rate will harm the provision of houses and industrial and other buildings. Their case is borne out by the fact that there are exemptions for the first three years and provision for a tax rate of 66⅔ per cent. It is obvious that the Government and particularly the Department of the Environment are frightened of the effect that an 80 per cent. tax would have if it were applied from the beginning.

Developers with land banks, which are exempt, will obviously continue to develop them, but we are concerned about what will happen when the land banks run out. Builders will have to go to local authorities, who will be controlling all the land banks, and buy land at a very high price.

Some builders and developers have made what the Minister has described as windfall gains by buying land and then getting planning permission for it. It is right that they should pay tax on part of the increased value, but we must consider the effect of an 80 per cent. rate. There must be something in it for the builder and the developer. Many outside bodies have argued that if a person goes into a risk-taking operation he should be allowed to keep a little more than 20 per cent. of the increased value of the land. Eventually, he may have to pay 100 per cent. in tax.

These rates will obviously discourage developers from taking risks. There is a risk in every development, whether it is carried out by a local authority, a developer, or by the two together. I assume it will happen increasingly under the Community Land Act. If one does not allow the developer to keep part of the profits there will be less development and fewer houses. I think the country wants a tax of this sort, but people believe that it should be at a moderate rate. Otherwise the people themselves will suffer in the end.

The rates have been fixed at 80 per cent. and 100 per cent., not for taxation, in the sense that it is generally understood by the Treasury, but in order to fund the operation of the Community Land Act. The Government are relying on high profits to pay for the 14,000 extra civil servants and the running of the scheme. This money must be raised to repay the formidable borrowing which will be needed, but there are grave and serious dangers in doing it this way.

Mr. Michael Spicer (Worcestershire, South)

I support the new clause, but only as a poor second best to a commitment to repeal the tax. I must make that point in the discussion of a proposition that the tax should be lowered. My hon. Friend the Member for Aylesbury (Mr. Raison) was quite right to make general points in this context and the Minister was wrong to cast aspersions on them.

I do not support all the wording of the new clause. I cannot go along with the argument that the tax should be written into a Bill which has the power to discriminate between different sectors. I argued passionately yesterday against the Government's intention to discriminate between different sectors. I said that the discriminatory powers in the Bill were a bad thing. Therefore I cannot go along with the whole of the new clause, but I support it because it makes the important point that, at the very least, we should be considering a much lower level of tax, even though that is a poor alternative to replacing it with a different tax.

The Government's aim is to raise the rate to 100 per cent. and then to nationalise all development land. In their mind, this is just a transitory process. A figure of 80 per cent. is as good as any other and it is only 20 per cent. off the final objective.

As my hon. Friend the Member for Aylesbury said, we have here not only a swingeing tax, but a totally new form of taxation. It is the combination of these elements which is objectionable and to which the new clause is addressed. The fundamental difference between this tax and any other is that it is a tax upon hypothetical values. In certain respects it is a tax upon nothing, and this leads proponents of the tax into very difficult paths.

Mr. Fairbairn

Is my hon. Friend aware that it is worse than a tax on nothing? It is frequently a tax on a loss of benefit which a person did not wish to lose in the first place.

Mr. Spicer

That is a fair and important point which underlines the seriousness of this new form of taxation.

There are a number of problems associated with a tax based upon hypothetical values. Because these factors exist, I believe that we must seek to bring down the rate of the tax. The first point is a simple one, namely, that since the Government have introduced the tax on a somewhat hypothetical calculation of betterment they have not been able, as with other taxes, to permit it to be made possible within the legislation for the taxpayer to deduct or allow for situations where there is a loss in terms of value. Unlike every other kind of tax, where one taxes genuine gains and can identify gains and losses, the balance of loss against gain is something which a hypothetical tax of the kind envisaged in the Bill is unable to accommodate. This is a reason why we must consider very carefully the question of the rate at which the tax is to be assessed.

Secondly, because we have this set of hypothetical notion based on hypothetical calculations, it is far more difficult than with other forms of tax to allow for the pace of inflation. Inflation in the last 20 years has run at a rate of 227 per cent. Therefore, we are talking about a tax whose calculations go well back into history.

If we try to assess the basis of the tax we see that it is a tax not only for chartered surveyors and lawyers but for chartered historians. Because of its complexity, and because it is based on totally notional values, it will make a great deal of money for those people whose business it is to assist the taxpayer and to compute what it is all about.

Since it is a tax based on a hypothesis, no doubt later this evening, when we come to the subject of inflation, the Government will argue that, because of all the notional values associated with the assessment of tax, it is impossible in this case to allow for inflation in the assessment of the tax and of the original costs incurred by the taxpayer. That is the second reason why, in these highly inflationary times, a tax based on notional concepts of value is particularly pernicious.

The third factor which must be allowed for in the rate at which the tax is assessed is the sheer complexity of the matter. Obviously we have a Minister who is extremely able in pushing through this Bill, but it must be said that, despite his ability and great knowledge of tax matters, in Committee he occasionally resorted to the honourable tactic of falling back on the formula "I shall take advice on the matter." Obviously, even the Minister of State has not a total comprehension of the Bill. How much more difficult will it be in the world outside for the taxpayer, the man who will be clobbered by the Bill, to understand what it is all about? Because of this situation there may be certain dangerous effects. We have in this Bill a complex piece of legislation that will result in a mass of circulars being issued after the Bill is enacted merely to explain its provisions.

I do not wish to pursue that point, but I wish to emphasise that because of the complexity of this measure the taxpayer will face a mass of costs, most of which are not allowable, in trying to work out what on earth this piece of legislation means for him. Since it will be an extremely expensive matter for the taxpayer to assess his liability to tax—and in many cases this will affect not large corporations but individuals—taxpayers will want to work out whether they fall within the exemption.

6.15 p.m.

Therefore, it would seem reasonable, if the objective is to be reasonable, that a rate of tax should be set well below that which we are now contemplating. We must consider the costs to the taxpayer of working out notional values in this totally new fiscal environment. Surely for that reason alone the rates should be reduced. I repeat that with this tax we are entering a totally new world, a world of unknown values, where the gains have not been made. Indeed, we are entering a new Socialist world.

Mr. Denzil Davies

The hon. Gentleman says that we are entering a new Socialist world, but does he not realise that if the clause were accepted we should go even further into the new Socialist world which he describes?

Mr. Spicer

I do not like the discriminatory element in the Bill. I believe that the tax should be set at a considerably lower level. Obviously, the Government like this new world. It is a world into which they are heading with great rapidity, and consciously as part of their legislation towards a total State control of all development land. Therefore, to the Government a figure of 80 per cent. is generous and 60 per cent. is even more generous because it is that much less than 100 per cent.

That is not how we see the matter. We see it as preventing the development in a free society, of the free use of land. What is worse is that the tax is based on concepts that are unknown in previous tax law. If we are not to repeal this tax, we must at least ensure that it is at a level that will not forever stifle private initiative.

Mr. Durant

I intervene in this debate because I was involved in the passage of the Community Land Bill. During that hot summer a year ago we were discussing the same type of legislation as that contained in the present Bill, and indeed this is a follow-on to those provisions. Incidentally, I am surprised to see so few Labour Members present for these debates. After all, the Chamber is the coolest place in the Palace of Westminster. At least hon. Members can come in and take the fresh air.

I support the general principles behind the clause because I believe that the rate of tax as laid down in the Bill is too high. It will stifle the bringing forward of development land. In the end, the only step that will be taken will be that of compulsory purchase, involving as it does, many inquiries, time factors and other considerations affecting development. I ask the Minister whether these considerations could form part of the budgetary procedure on an annual basis, in order to give people a regular basis on which to operate.

Mr. Denzil Davies

Does the hon. Gentleman agree that the new clause spells out different rates for different developments in different parts of the country?

Mr. Durant

I think I do in general terms. There are different situations in different parts of the country. My hon. Friend the Member for Aylesbury (Mr. Raison) mentioned the fact that land will dry up. In my part of the country a shortage is already beginning to appear, because there has been an expansion of house building in the South. A shortage is beginning to appear in that part of the country which might not have appeared elsewhere. I do not think it is necessarily wrong to have different rates in different areas. After all, we do this in respect of housing in general and I do not see anything wrong with it.

I think what will happen if the Bill goes through as it stands is that owners will tend to wait and sit on their land, in the hope that prices will rise so that they will virtually be able to cover the tax. They may take the attitude that if they wait for another year they will get what they originally expected. Once again we shall have a time lag, delay and lack of development. That is what worries me about the Bill.

In respect of the builders themselves, many small builders with plots of land which have accumulated may well be told, when asking for planning permission, that the individual plots are not a good development. The planning authority may suggest that it would be better to make a more comprehensive development by acquiring more land. But there may be problems in doing that. The builder may not want to start the whole scheme. Again, there will be delay and the land will lie dormant. We have seen many examples of this. There are many areas in which there is dormant land, and that is another deterrent to getting on with development, improvements and the building of houses and factories, and so on.

We have already had debates on charities and pension funds. I was involved with the Community Land Bill, and when I heard the debates in respect of this Bill it sounded as if we were going through the whole thing again. Almost the same arguments were put forward but at least, in respect of the Com- munity Land Act, we were discussing something slightly different. However, in respect of charities and pensions, I would make the point that if there were a lower rate of tax it would at least soften the blow. A lower rate of tax would not hit people as hard as would an 80 per cent. rate. We must remember that ordinary people are involved. In the end we are left with more compulsory purchase, with all the rigmarole that involves.

It is typical of the thinking of the Labour Party that it will introduce a tax to gather money from the community in order to spend that money to do the very things that the private sector could do anyway. The only problem is that a little bit of the money is lost on the way in administration. All of it is not put into development. Somewhere along the line there are administrative expenses and, as a result, the community does not get the full benefit.

I think that the rate of 80 per cent. is too high. I honestly believe that it will result in a shortage of land. We shall have to use compulsory purchase to get that land in order to have it developed. There will be a lack of availability of land, and builders will have difficulties in acquiring land. The whole thing will result in a slowing down of home building and of town centre development. The effect will be to create a tremendous deterrent to the very thing which all of us want to see, and that is a better society.

Mr. Fairbairn

The question of the rate of the tax raises the whole principle upon which the Bill is founded. It arises from the fallacy on which the Minister has had to rely in trying to defend the concept of the Bill—that the community has bestowed upon members of the public something to which they are un-entitled and that it is the duty of the community, whoever they are, in the form of the bureaucracy, to take back from the individual what belongs to the generality. This inevitably has happened in all situations where bureaucracies have removed something from the individual to bestow it on the generality.

We are running into that difficulty in one of the most complicated measures that this House has ever been stupid enough to conceive of passing. We are running into the difficulty, perhaps, of misusing the word "tax". It is a simple word, three letters ending in "x". There are, Mr. Speaker, other three-letter words ending in "x", which are also simple words, and of which you may or may not have heard. I think it was Benjamin Franklin who said that nothing can be said to be certain, except death and taxes. We are considering a tax rate of 80 per cent. which, in fact, slips decently into a tax rate of 100 per cent. I think it is a misuse of the word "tax" to call it taxation. It is confiscation. It is the removal of the whole. Let us be absolutely clear when we are considering this matter that we are doing so with all the generous Socialist principles which the Minister has so reluctantly advanced, such as "The community gives and the community takes away".

However, this tax applies to people who receive a disadvantage from the community. If they live in a house and all around there are built coal mines, oil wells and office blocks and they spend their life's income in public inquiries objecting to each one and failing, nevertheless they will have to pay 80 per cent. and then 100 per cent. for the great benefit of having all those wretched things around them which have resulted in what is called an improvement in their property.

Far from the community bestowing a benefit, it is a tax on disadvantage. If, for instance, a road is put through someone's garden which he does not want and he is paid compensation, that is subject to tax. He is compensated, and then the compensation is removed as if it were a benefit. That is the iniquity of this tax. It is 80 per cent., but let it never be forgotten that it is sliding into 100 per cent. That is its purpose. It is total confiscation. That is the concept, which is somehow founded on the Socialist philosophy that profit, benefit or improvement is all wrong. It is so wrong that it must be removed from individuals and squandered in public.

I was interested in the Minister, who is an honest man—

Mr. Budgen

He was.

Mr. Fairbairn

No, he is a Welshman and, therefore, he is an honest man. I was very interested when he said to my hon. Friend the Member for Worcester- shire, South (Mr. Spicer) that the new clause would take us into an even more Socialist world. I was interested that he used the word "Socialist" as a derogatory adjective. What he said was that we would make the world "even more" Socialist, with more bureaucrats and more complications. That was the argument.

Mr. Michael Spicer

Is not the point that there has been a certain growing defensiveness from Labour Members about their principles? When we were discussing charities and saying that they were something which fitted in with the Socialist principles of nationalisation, they seemed to show a lack of confidence in their principles.

6.30 p.m.

Mr. Fairbairn

I am obliged. I did not want to say anything which would cause the Minister to lose the job he is doing so well, but throughout our debates today and in Committee I have felt that he is not committed to the principles of Socialism and certainly not to the frightfulness of the Bill. But he is doing his job as we would expect every member of such a learned profession and so pure a race to do it.

What I find particularly disturbing about the rate of the tax is that it is a rate on a piece of speculative arithmetic. People have to work out a long and complicated formula about what would allegedly have been the case if something had happened and now will be the case if something else happens in future. It is the fact that so high a rate is based on a fiction which makes it so improper.

This Government have presided—I know they believe that it is entirely the fault of the opposition—over a rate of inflation of about 25 per cent. I regret to say that the Chancellor of the Exchequer—he is not a Welshman, although he sits for a Welsh seat—has not persuaded me that it is likely that inflation will disappear under his charm—

Mr. Speaker

Order. I was so grateful for all the earlier complimentary remarks about Welshmen that I would not like a mistake to creep in. One would not say that the Chancellor had nothing to do with Wales, but he does not directly represent it.

Mr. Fairbairn

I apologise. I was thinking that he sat for Leek when, of course, he sits for Leeds.

I think that the inflation rate will continue at a high level. I do not see how, on any of the calculations in the Bill, the house owner, the property owner, the small business man or the shopkeeper can sensibly be protected against inflation if we leave him only 20 per cent., over however many years it may have developed, of what is said in Clause 1 to be the development value of the land. That is a spurious concept which may have been created by one's neighbours or by authorities or even against one's will. Yet one is to be taxed at this absurd rate for the privilege.

It is a dangerous innovation to introduce a standard fixed high rate of tax in a Bill which would require to be amended or repealed if the rate were to be changed. There is no provision for any change in the tax apart from the fact that it will become 100 per cent. on that wonderful deemed day, no doubt in 1984, when we shall all live happily ever after on Animal Farm. It seems to me to be infinitely more sensible—I ask the Minister to consider this as he has considered previous new clauses—to regulate this matter in the Finance Bill from year to year. It is arrogant of us to assume that we comprehend what the property market, the development of land and the effect of the Bill will be so far ahead that we can base a statute on a particular rate for all time.

The 80 per cent. rate is simply a figure picked from the air. No one said that 79 would be too low and 81 would be too high, or that 60, 63 or 66 would not be good. It is purely a rate picked from the air with no sensible consideration, argument or justification—except that it is nearer to 100 per cent. than any figure below it.

Mr. Denzil Davies

The hon. and learned Gentleman, as usual, is making an interesting speech. Will he now tell us whether he supports the new clause?

Mr. Fairbairn

I am disturbed to think that the Minister should be worried about whether I support the new clause. Indeed I support it, because it makes it possible to vary, though not to raise, the tax more than once a year, according to circumstances. It could be put down more than once a year. That is a habit that Treasury Ministers might adopt to advantage. It is not a new idea, but, if the Minister is willing to take it up, the idea of putting tax down more than once a year and never raising it more than once a year might even commend itself to the electors. One might run into difficulties if one made different selections of land, but I am happy that the Minister should have a nil rate in Wales if he is willing to acknowledge a nil rate in Scotland.

The rate of tax was won by the Government in Committee on only one vote, in the magnificent absence of the hon Member for Perth and East Perthshire (Mr. Crawford), who once again is so concerned for the fate of the rate which is to be paid in his constituency, which consists of little other than land, that he is not here today. He is away with all his colleagues concerning himself with all the matters which constantly keep them out of Committee and out of this Chamber. Devoted to their diligence, we are reluctant to have to note their absence.

It is not sensible to have the same rate for Tottenham Court Road as in the wilds of my constituency. We are taxing totally different concepts. I hope that the local authority in my area will have as much difficulty as I have in understanding any part of the Bill and that, therefore, the tax will never be collected.

This is a bad and incomprehensible Bill, based on a bad and bogus principle in which the Minister does not believe. I give him credit for pretending to do so occasionally. I hope he will ensure that the rate is reduced or varied.

Mr. Stephen Ross (Isle of Wight)

We seem to have had some peculiar speeches from this side of the House, both yesterday and while I have been here today—particularly that of the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn). We are now hearing from the Opposition a suggestion for a further variation of the rate of tax which should be applied.

Originally, I understand, the Opposition went along with the figure fixed by the chartered surveyors of 66 per cent. in their publication, which has been recognised as a worthy contribution to the land problem. Later they reduced it to 60 per cent. On Second Reading the percentage was suddenly reduced by them to 52. Now, it is varying between 30 and 60. We are entitled to know the Tory solution to the problem of betterment in land.

Mr. Budgen

What is the Liberal one?

Mr. Ross

I will give that with pleasure in a moment.

Do the Tories really want to return to the situation of three years ago? Do they believe that the public would accept similar massive gains on land transactions? During that period, clients were coming to me with queries about land transactions. One had had an offer of £280,000 for a five-acre plot in the New Forest. When I said that he would be taxed at £70,000, he said he would not sell it. I pointed out that he would make a clear gain of over £200,000, which was surely enough to be going on with, but he did not agree.

Mr. Fairbairn

Does not the hon. Gentleman appreciate that the purport of the Bill is to put an 80 per cent. tax on development in Mrs. MacGregor's garden, and that of anyone else, to prevent any abuse?

Mr. Ross

That is not correct. The hon. and learned Gentleman obviously does not understand all the provisions of the Bill. There are exemptions. There is a £10,000 exemption on gains, which are not taxed. There are exemptions in respect of small builders. There is a 66⅔ per cent. rate for three years on gains of up to £150,000. I suggest that £150,000 is a big gain. The hon. and learned Gentleman may not agree. I do not understand why there should be a variable tax. How would a professional person face up to a client who had just sold a parcel of land which it was known would be subject to the 66⅔ per cent. rate and who found that the Government had suddenly reduced the rate to 35 per cent.? I would be indignant if I found myself in that position. There will be all kinds of gambles and swindles to try to change the date of the transaction.

Mr. Durant

I accept the underlying view on the matter of the change in rate It is not unknown for Governments to change tax rates. That occurred with VAT.

Mr. Ross

I could not agree more. But surely all Members of Parliament agree that we want stability. People want to know where they stand—especially those in property development.

I think that people are beginning to accept the concept of the Community Land Act. However, I was sad to hear the hon. Member for Aylesbury (Mr. Raison) say that the Conservatives would repeal that Act. If we are to go over all this again, that is a dismal prospect. The hon. Gentleman said that the Conservative Party might be able to go along with the development land tax, but with some amendments. I welcome that. However, if it is intended to repeal the Community Land Act, the future is grim. I do not agree with some aspects of the Community Land Act, although I think that the Act may work in a regional context. It would be possible to have a variable tax if there were a regional government structure in this country. Presumably there might be a variable tax if there were Scottish or Welsh Assemblies.

Mr. Fairbairn

No, Sir.

Mr. Ross

The hon. and learned Gentleman appears to be against a Scottish Parliament—although there might be a different rate of taxation in Scotland. I am all for giving a further choice in these matters to local areas.

Mr. Michael Spicer

Is the hon. Gentleman saying that the Liberal Party is in favour of the nationalisation of all development land? If not, will he say what the Liberal Party is in favour of doing?

Mr. Ross

The policy of the Liberal Party has been known for more than 50 years. We advocate site value taxation.

I said in my speech on the Community Land Act that the right way to solve this problem was to impose a site value tax immediately planning consent was given. That would have the desirable effect of bringing the land on to the market. The tax might be levied at a variable rate according to the time the and was left undeveloped. There might be delays in its imposition according to whether the services were available or whether there was a slump in land sales. There would be an appeals procedure. The tax could be levied at the rate of 30 per cent. on the annual value, and the local authorities would receive the money. That would be a far better solution. Neither of the two principal parties has ever been prepared to accept that.

The Community Land Act is now on the statute book and we are faced with this problem. I do not think that we can turn the whole matter upside down. Therefore, I accept this measure.

I think that the Government would be better off to stick to the rate of 66⅔ per cent. all the way through, for as far ahead as we can see. I think that 80 per cent. is probably too high a rate, but I do not deny the Government's view that land ultimately should change hands at existing use value.

6.45 p.m.

Mr. Raison

Will the spokesman for the Liberal Party place on record whether he accepts the principle that local authorities should have a duty to acquire development land?

Mr. Ross

I made clear in the debate on the Community Land Act that I did not like the situation whereby local authorities were planners, purchasers and vendors. I accept that the proposals may work in a regional context. It is known that the Liberal Party believes in a regional government structure.

Mr. Fairbairn

The hon. Gentleman suggested that I was not in favour of a Scottish Parliament. I do not know what he meant by that. I am president of the Bangla Fife political party which believes in independence if the regional policies ever get off the ground.

Mr. Ross

If the hon. and learned Member ever becomes Prime Minister, I shall join the Vectis National Party, as I would be all for independence for the Isle of Wight.

The arguments adduced by Conservative Members of Parliament do not stand water. We are entitled to know a great deal more about what the Opposition, if they ever become the Government, will do about taxing betterment. Their proposal for a variable tax is about the worst proposition that has come forward so far.

Mr. Budgen

I have listened with great interest to the debate. The Opposition's approach to the new clauses and amendments is based on two points. I entirely agree with the first. It is one to which I have always given my consistent and wholehearted support. It is based on the proposition that a rate of tax of 80 per cent. is a nonsense. My support is based on the proper Tory belief that we should attempt to work with people, not against people. It is based on the belief that people act according to their selfinterest—not their narrow self-Merest, but their long-term self-interest. If people discover that 80 per cent. of the development value of their land will be taken away from them, they simply will not sell the land.

It is not for us to argue whether 50 per cent. or 60 per cent. is the right tax rate. However, there is no doubt that 80 per cent. is too high a rate. It is so high that no normal person would be likely to sell his land unless it were extracted from him by the force of compulsory acquisition.

My hon. Friend the Member for Aylesbury (Mr. Raison) put the matter very well when in his speech on Second Reading he referred with his customary erudition to the works of Adam Smith. He said: Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it. The second of Adam Smith's precepts quoted by my hon. Friend was the following: High taxes, sometimes by diminishing the consumption of the taxed commodities, and sometimes by encouraging smuggling, frequently afford a smaller revenue to Government than what might be drawn from more moderate taxes. When the diminution of revenue is the effect of the diminution of consumption there can be but one remedy, and that is the lowering of the tax."—[Official Report, 15th March 1976; Vol. 907, c. 967.] In that Second Reading debate I expressed my admiration for the works of Adam Smith. I reminded my hon. Friend of some of the other precepts of Adam Smith about the levying of taxation. When I heard him make his second point. I felt obliged to look at those precepts again. With the greatest reluctance I found myself in less than wholehearted agreement because Adam Smith said: The tax which each individual is bound to pay ought to be certain, and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person. Where it is otherwise, every person subject to the tax is put more or less in the power of the tax-gatherer, who can either aggravate the tax upon any obnoxious contributor"— think of that, Harry Hyams— or extort by the terror of such aggravation, some present or perquisite to himself. The uncertainty of taxation encourages the insolence and favours the corruption of an order of men who are naturally unpopular, even where they are neither insolent nor corrupt. The certainty of what every individual ought to pay is, in taxation, a matter of so great importance, that a very considerable degree of inequality, it appears, I believe, from the experience of all nations, is not near so great an evil as a very small degree of uncertainty. Unhappily, however, I must concede that when I look at New Clause 7 an extraordinary degree of uncertainty seems to be proposed. I am grateful to my right hon. and hon. Friends for the procedural device upon which they have hit in raising this proposal for a variable tax as a means of bringing before the nation our deep distaste for this high and punitive rate of taxation. None the less, if we succeeded tonight this proposal would go on to the statute book and we should be left with what I call the 1972 Industry Act argument—"But it would be used only by people like us." The sad fact is that the insolence and the insolent power of the Government is something from which we should all attempt to protect the citizen.

I am against pragmatism in taxation. I am against flexibility in taxation. I am against a variable rate of tax which could be changed for than once in a fiscal year in relation to an industry with a production cycle of over five years.

For those reasons, though I agree wholeheartedly with all that my right hon. and hon. Friends have said about the rate of tax, I regret the procedural necessities that have obliged them to support a variable rate of tax. Therefore, I shall be unable to support my right hon. and hon. Friends in the Lobby.

Mr. Denzil Davies

I welcome the hon. Member for Aylesbury (Mr. Raison) to our debates again. He appeared at some time on Second Reading, or perhaps it was on the Ways and Means Resolution—I cannot remember—but he was not to be seen in Committee. Now he has come back, but he has brought with him a very strange animal. Perhaps if he had the benefit of studying our Committee deliberations he would not have brought the new clause before us.

I should like to put on record what the new clause stands for, because I gather that this is official Opposition policy and that the hon. Member for Aylesbury and his right hon. and hon. Friends will vote upon it, since I cannot possibly accept it. It is only right that those who read our debates should clearly see the present policy of the Opposition—it may not last very long—on the problem of taxing betterment.

I disagree with anybody who suggests that 80 per cent. is too high a rate, but we can sensibly argue about that. The new clause not only argues about the rate but now fixes different rates for different parts of the country and for different kinds of development.

I should remind the House how the Opposition seem to have moved regarding rates of taxation during the last four or five years. Originally it was 30 per cent. in the capital gains tax legislation. Lord Barber proposed a top rate of 75 per cent. for development gains tax. In the debate on Second Reading—or was it the Ways and Means Resolution?—it went down to 52 per cent. It was then 52 per cent. plus an infrastructure charge. It went up to 60 per cent. and again it went down. Now it is apparently between 30 per cent. and 60 per cent. The Opposition still have not made up their mind. Although the rate will have to vary from year to year, according to economic circumstances, the rate is important because to some extent it indicates the kind of tax that we want on the statute book to deal with the situation. It is not purely academic. It is bound up with the framework of the kind of tax that we believe to be right.

The Opposition now want a variable rate between 30 per cent. and 60 per cent. They also seem to want to change that rate by Statutory Instrument. Normally we tax individuals through the legislative process. Now, however, the 90-minute debate on an affirmative resolution will be sufficient, according to the Opposition. Such 90-minute debates will be late at night. The official policy of the Opposition is to change the tax on development land up or down from 30 per cent. to 60 per cent. or from 60 per cent. to 30 per cent. or an intervening rate.

The affirmative resolution would contain not only a change of rate but other things. It would designate the rate for Aylesbury. Apparently it will be 30 per cent. for Aylesbury and 40 per cent. for Wolverhampton, South-West. The hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) is not in his place. I was going to say that the rate would be 60 per cent. on burgage property in that area. Land in Wales will carry a rate of 30 per cent. [Interruption.] I assure the Opposition that I am being serious. This is the new clause upon which the Opposition will vote in a few minutes' time. This is the kind of tax that has been proposed. The rate could be varied for different parts of the country.

I can imagine the lobbying that would go on. There would be queues of Members outside the Treasury. They would all suggest that, for example, 40 per cent. should be changed to 30 per cent. A great deal of bargaining would go on between representatives of pressure groups and the Executive about the rate of tax that should apply to development land in particular areas. Apart from the constitutional implications, which are enormous, great uncertainty would be created if there was flexibility regarding the betterment of land in this country. I cannot think of anything more disastrous.

Mr. Fairbairn

I am not sure that I understand the logic of this argument. The Treasury has differential taxation rates in different parts of the country for regional policies and so on. Therefore, it seems a little odd that the Minister should say that the Treasury's policy has always been against regional variations.

Mr. Davies

We are talking not about regional variations but about the ability, by affirmative resolution, to change the rate of tax between different areas. How would bids for burgage property in Kinross and West Perthshire be resolved? The hon. and learned Gentleman would no doubt endeavour to bring pressure on the Treasury to get the rate down to 40 per cent. That is the kind of situation we should face if we gave the Executive, albeit by affirmative resolution, power to fix different rates of tax.

Subsection (2) refers to "the kind of development,". The hon. Member for Aylesbury honestly said that we could draw a distinction between industrial and commercial development. I should not disagree too much about drawing a distinction between industrial and commercial development, but I do not think that it can be done by affirmative resolution.

Yesterday hon. Gentlemen on the Front and Back Benches argued that our differential between industrial and commercial development discriminated against commercial property. That is a small difference. The hon. Member for Aylesbury is now saying that we can have 30 per cent. for commercial development in the City of London and 60 per cent. for industrial development in Manchester, or vice versa. That is the kind of situation that he wishes the House to accept.

The hon. Gentleman said that a change could be made only once a year. According to the new clause, it could be increased only once a year. However, there is nothing to prevent it being decreased more than once a year. Therefore, within a particular fiscal year the rate could be changed from 60 per cent. to 50 per cent., for example, on burgage property in Scotland.

That is the kind of constitutional monstrosity that the Opposition now have as their official policy. This is not a Back Bench proposal. Back Benchers are meant to be irresponsible, and they should be irresponsible. But hon. Gentlemen who are seeking office and the confidence of the country are now putting forward a constitutional monstrosity. The new clause, if accepted, would irretrievably damage the property market by creating uncertainty and difficulty for anybody who wished to plan the development of land in a sane and rational manner.

I could go on about the lack of virtue of the new clause. I have been accused of standing at this Dispatch Box trying to defend the indefensible. Whatever I have had to defend has not been half as bad as what the hon. Member for Aylesbury tried to defend when he came into the debate at a late stage.

It is clear that the Opposition do not know where they stand on the taxing of betterment. Some hon. Gentlemen honestly and forthrightly said that they did not want this kind of betterment tax. I respect that view. But the Opposition Front Bench wants a betterment tax. Hon. Gentlemen do not know what rate they want or how they intend to operate the tax. I suggest that acceptance of the new clause would give massive power to the Executive to determine the taxation of individuals.

Mr. Raison

Before the hon. Gentleman sits down, will he try to justify the 80 per cent. rate? One feature of Second Reading and, indeed, of the Committee stage was that the Minister never seriously tried to justify the 80 per cent. The essence of our argument is that 80 per cent. is wrong. Will the hon. Gentleman tell us why he believes it to be right?

Mr. Davies

The hon. Gentleman must not seek to regain some of the initiative he has so disastrously lost by putting this new clause on the Notice Paper. We are debating his new clause and he asks me to justify 80 per cent. But he has to justify this monstrosity of a new clause that he has put down, which would cause a great deal of damage. This is not an academic debate. The new clause would cause more damage to property development than would anything under DLT. I ask the House to treat the new clause with the scorn and derision that it deserves.

7.0 p.m.

Mr. Hugh Rossi (Hornsey)

As my hon. Friend the Member for North Fylde (Mr. Clegg) has mentioned, this tax is closely linked with the land scheme under the Community Land Act. Most of us who were concerned with that Act formed the impression that the tax that was to be introduced by this Bill was more an instrument of land policy than primarily a fiscal measure for the purpose of raising revenue. It is in the context of this tax as an instrument of land policy that we must regard it.

As I understand it, the object of this tax, in a sense, is twofold. First, there is the intention to enable local authorities to buy land more cheaply than they otherwise would, because they will be buying, certainly up to the second appointed day, net of whatever the DLT will be. Secondly, there is the intention to tax what are considered to be unconscionable gains through betterment of land as a result of planning permission.

The Government have formed the view, with which we profoundly disagree, that the right level of tax necessary to attain this object is 80 per cent. upon the development value of the land in question. However, from the representations that we on the Opposition side of the House have received, and also from the representations that we know the Minister has received, 80 per cent. is far too high. It will cause a drying up of the availability of land for development purposes. The Government have themselves conceded this, because at the last minute, just before the introduction of this Bill, after speaking for many months of a rate of 80 per cent. rising to 100 per cent., the Paymaster General, in answer to a parliamentary Question that I tabled asking him what representations he had received on this topic, announced the lesser rate of 66⅔ per cent. for an initial period of three years on a first tranche of development value. The representations that the Government received were the same as those that we had received from the construction industry, and from house builders in particular.

The situation has changed. As my hon. Friend the Member for Aylesbury (Mr. Raison) said, we are still faced with the prospect that in about two years' time no land will be available for essential and necessary development. We are advised that at the moment there are between 18 months' and two years' stock of land in the hands of house builders, and no more; and they are not getting any more because, since the inception of this legislation, people have not been selling land for development purposes. They have not been applying for planning permissions either, because they realise that mere application for planning permission, certainly since the enactment of the Community Land Act, results in local authorities immediately having power to acquire that land for themselves. Therefore, once the existing stocks, which will last for between 18 months and two years, are used there will be virtually no land for development unless local authorities exercise the Draconian powers of compulsory purchase that the Community Land Act has given them.

That again depends, however, upon local authorities having, first, the manpower resources to go out and identify for themselves land suitable for development. It also needs resources in terms of money—public sector borrowing—to bring that land in for this purpose. We feel that this measure, with this tax pitched at the rate of 80 per cent., is absolutely disastrous for this country and for the needs and ambitions of our people for better homes. The Minister has sought to make great play of the fact that the Opposition have tried at various stages to propose to the Government different rates of tax that we know would be acceptable. On Second Reading I believe I suggested 52 per cent. in line with corporation tax for closed companies. We are advised that a tax at that rate would achieve the objectives of the hon. Gentleman in relation to the acquisition of land cheaply by local authorities, and would avoid unconscionable profits being made from windfall gains, and yet at the same time would leave sufficient incentive to land owners to bring their land forward for development voluntarily, instead of under compulsion.

We did not succeed in persuading the Government to accept that, and so another attempt was made in Committee. There the proposal for a rate of 60 per cent. was made, and again the same arguments were adduced. Again the Government closed their ears completely and rejected the proposal. Therefore, today we are left with this question: how can we bring forward a proposal that could possibly be accepted by the Government which will produce a situation in which scarcity of land for development purposes will not be created? The two levels of tax, in the area of 52 per cent. to 60 per cent., which we believe to be right in the present economic circumstances, are totally unacceptable to the Government. Obviously, we cannot repeat those proposals on the Floor of the House today. Indeed, it is questionable whether such a proposal would be selected for debate today.

Mr. Denzil Davies

Is the hon. Gentleman saying that he would like the Government now to accept what is in the new clause as a flexible rate of tax between 30 per cent. and 60 per cent., determined by affirmative resolution of the House, varying between different areas of the country and between industrial and commercial development, a tax that could be decreased more than once a year? Is he now asking the Government to accept that as official Opposition policy?

Mr. Rossi

We are putting it forward merely on the basis of faute de mieux and for no other reason whatsoever. We are doing it on the basis of giving the Government a certain amount of flexibility of opportunity without the need for further legislation once they discover—as they will discover, as surely as night follows day—that they are disastrously wrong about the level they have pitched the tax. At least we are giving them an opportunity.

Although the new clause does not endear itself to me, it is a last resort to stop damage being done, because it will enable the hon. Gentleman, when he learns his mistake, as he surely will, by a simple device to adjust tax in appropriate circumstances. It would enable him for example—and this is why is is posited in this flexible way—if he finds that no housing land is coming forward at all because of that rate, to come to the House with an order and to say "We have made a mistake. Rates of 80 per cent. and 66⅔ per cent. are driving land off the market. The level of house building is collapsing. Let us try now to put on a lower rate of, say, 52 per cent." The Minister could do that for housing, even on a regional basis if he finds that the problems exist in some areas more than others, if he finds it necessary to reduce the disincentive on the part of land owners to bring forward land for development purposes.

This is an instrument of flexibility that does not attract me terribly, but in the circumstances it is the best possible alternative to the Government's proposals. It is on that basis that I recommend it to my right hon. and hon. Friends to save the disaster that the present Government would otherwise bring about. It has the disadvtantage of creating a degree of uncertainty. However, if it is known in the construction industry that the objective of the new clause is to bring in relief, either to a particular section of the construction or development industry or to a particular region of the country where that relief seems to be necessary because otherwise development will not take place, I am sure that on that basis it would be welcomed.

I hope, therefore, that the House will accept this proposition, although we would rather see at this stage an amendment, acceptable to the Government, which would put the rate at, say, 52 per cent. to 60 per cent., and no higher, because we feel that that is right.

As regards our views on this tax generally, we accept that there should be a tax upon windfall gains made out of the grant of planning permission, but it should be levied at a rate which leaves, as I have suggested, the incentive to the owner voluntarily to allow his land to come forward for development purposes, and not a rate that acts as a disincentive.

We should also like to see—we are going over old ground by mentioning it, although the Minister has asked us to spell it out again—the tax utilised for the benefit of the local authorities so that they can set it off against the infrastructure

ture costs which they invariably incur when they grant planning permission, certainly for sizeable developments. It is that element of infrastructure costs which acts as a disincentive again on the part of the local authorities giving planning permissions readily, because they are fearful of the impact upon their rate base of the infrastructure costs if they give too many planning permissions too readily and too easily. Therefore, that objection must be made. That is where we should like to see a fair tax diverted.

I should have thought that the Opposition's view on these matters had been spelled out sufficiently in debates, on Second Reading of this Bill and throughout the proceedings on the Community Land Act, without the Minister seeking to make rather silly debating points in answer to this matter, when he knows that what he is doing, and what we are making him do, is defending this appalling rate of 80 per cent. It is on the basis of voting against that rate that I ask my right hon. and hon. Friends to support the new clause.

Question put, That the clause be read a Second time:—

The House divided: Ayes 264, Noes 292.

Division No. 193.]	AYES	[7.16 p.m.
Adley, Robert	Channon, Paul	Fookes, Miss Janet
Aitken, Jonathan	Churchill, W. S.	Forman, Nigel
Alison, Michael	Clark, Alan (Plymouth, Sutton)	Fox, Marcus
Amery, Rt Hon Julian	Clark, William (Croydon S)	Fraser, Rt Hon H. (Stafford & St)
Arnold, Tom	Clarke, Kenneth (Rushcliffe)	Fry, Peter
Atkins, Rt Hon H. (Spelthorne)	Clegg, Walter	Galbraith, Hon. T. G. D.
Awdry, Daniel	Cockcroft, John	Gardiner, George (Reigate)
Bain, Mrs Margaret	Cooke, Robert (Bristol W)	Gardner, Edward (S Fylde)
Baker, Kenneth	Cope, John	Gilmour, Rt Hon Ian (Chesham)
Banks, Robert	Cordle, John H.	Gilmour, Sir John (East Fife)
Bell, Ronald	Cormack, Patrick	Glyn, Dr Alan
Bennett, Dr Reginald (Fareham)	Corrie, John	Goodhart, Philip
Benyon, W.	Crawford, Douglas	Goodhew, Victor
Berry, Hon Anthony	Critchley, Julian	Goodlad, Alastair
Biffen, John	Crouch, David	Gorst, John
Biggs-Davison, John	Crowder, F. P.	Gow, Ian (Eastbourne)
Blaker, Peter	Davies, Rt Hon J. (Knutsford)	Gower, Sir Raymond (Barry)
Body, Richard	Dean, Paul (N Somerset)	Grant, Anthony (Harrow C)
Boscawen, Hon Robert	Dodsworth, Geoffrey	Gray, Hamish
Bottomley, Peter	Douglas-Hamilton, Lord James	Griffiths, Eldon
Bowden, A. (Brighton, Kemptown)	Drayson, Burnaby	Grist, Ian
Boyson, Dr Rhodes (Brent)	du Cann, Rt Hon Edward	Grylls, Michael
Bradford, Rev Robert	Dunlop, John	Hall, Sir John
Braine, Sir Bernard	Durant, Tony	Hall-Davis, A. G. F.
Brittan, Leon	Dykes, Hugh	Hamilton, Michael (Salisbury)
Brocklebank-Fowler, C.	Edwards, Nicholas (Pembroke)	Hampson, Dr Keith
Brotherton, Michael	Elliott, Sir William	Hannam, John
Bryan, Sir Paul	Emery, Peter	Harvie Anderson, Rt Hon Miss
Buchanan-Smith, Alick	Evans, Gwynfor (Carmarthen)	Hastings, Stephen
Buck, Antony	Ewing, Mrs Winifred (Moray)	Havers, Sir Michael
Bulmer, Esmond	Eyre, Reginald	Hawkins, Paul
Burden, F. A.	Fairbairn, Nicholas	Hayhoe, Barney
Butler, Adam (Bosworth)	Fairgrieve, Russell	Heseltine, Michael
Carlisle, Mark	Farr, John	Hicks, Robert
Carson, John	Fisher, Sir Nigel	Higgins, Terence L.
Chalker, Mrs Lynda	Fletcher-Cooke, Charles	Holland, Philip
Hordern, Peter	Miller, Hal (Bromsgrove)	St. John-Stevas, Norman
Howe, Rt Hon Sir Geoffrey	Mills, Peter	Scott, Nicholas
Howell, David (Guildford)	Miscampbell, Norman	Scott-Hopkins, James
Howell, Ralph (North Norfolk)	Mitchell, David (Basingstoke)	Shaw, Giles (Pudsey)
Hunt, David (Wirral)	Moate, Roger	Shelton, William (Streatham)
Hunt, John	Molyneaux, James	Shepherd, Colin
Hurd, Douglas	Monro, Hector	Shersby, Michael
Hutchison, Michael Clark	Moore, John (Croydon C)	Sims, Roger
Irving, Charles (Cheltenham)	More, Jasper (Ludlow)	Sinclair, Sir George
James, David	Morgan, Geraint	Skeet, T. H. H.
Jenkin, Rt Hon P. (Wanst'd & W'df'd)	Morgan-Giles, Rear-Admiral	Smith, Dudley (Warwick)
Johnson Smith, G. (E Grinstead)	Morris, Michael (Northampton S)	Spence, John
Jones, Arthur (Daventry)	Morrison, Charles (Devizes)	Spicer, Michael (S Worcester)
Jopling, Michael	Morrison, Hon Peter (Chester)	Sproat, Iain
Joseph, Rt Hon Sir Keith	Mudd, David	Stainton, Keith
Kaberry, Sir Donald	Neave, Airey	Stanley, John
Kellett-Bowman, Mrs Elaine	Nelson, Anthony	Steen, Anthony (Wavertree)
Kershaw, Anthony	Neubert, Michael	Stewart, Ian (Hitchin)
Kilfedder, James	Newton, Tony	Stokes, John
Kimball, Marcus	Normanton, Tom	Stradling Thomas, J.
King, Evelyn (South Dorset)	Nott, John	Tapsell, Peter
King, Tom (Bridgwater)	Onslow, Cranley	Taylor, R. (Croydon NW)
Kitson, Sir Timothy	Oppenheim, Mrs Sally	Taylor, Teddy (Cathcart)
Knight, Mrs Jill	Page, John (Harrow West)	Tebbit, Norman
Knox, David	Page, Rt Hon R. Graham (Crosby)	Temple-Morris, Peter
Lamont, Norman	Parkinson, Cecil	Thatcher, Rt Hon Margaret
Lane, David	Pattie, Geoffrey	Thomas, Rt Hon P. (Hendon S)
Langford-Holt, Sir John	Percival, Ian	Thompson, George
Lawrence, Ivan	Peyton, Rt Hon John	Townsend, Cyril D.
Lawson, Nigel	Pink, R. Bonner	Trotter, Neville
Lester, Jim (Beeston)	Powell, Rt Hon J. Enoch	Tugendhat, Christopher
Lewis, Kenneth (Rutland)	Price, David (Eastleigh)	van Straubenzee, W. R.
Lloyd, Ian	Prior, Rt Hon James	Vaughan, Dr Gerard
Loveridge, John	Pym, Rt Hon Francis	Viggers, Peter
Luce, Richard	Raison, Timothy	Wakeham, John
McAdden, Sir Stephen	Rathbone, Tim	Walder, David (Clitheroe)
MacCormick, Iain	Rawlinson, Rt Hon Sir Peter	Walker, Rt Hon P. (Worcester)
McCrindle, Robert	Rees, Peter (Dover & Deal)	Wall, Patrick
McCusker, H.	Rees-Davies, W. R.	Walters, Dennis
Macfarlane, Neil	Reid, George	Watt, Hamish
MacGregor, John	Renton, Tim (Mid-Sussex)	Weatherill, Bernard
Macmillan, Rt Hon M. (Farnham)	Ridley, Hon Nicholas	Wells, John
McNair-Wilson, M. (Newbury)	Ridsdale, Julian	Whitelaw, Rt Hon William
Madel, David	Rifkind, Malcolm	Wiggin, Jerry
Marshall, Michael (Arundel)	Rippon, Rt. Hon Geoffrey	Wigley, Dafydd
Marten, Neil	Roberts, Michael (Cardiff NW)	Winterton, Nicholas
Mates, Michael	Roberts, Wyn (Conway)	Wood, Rt Hon Richard
Mather, Carol	Rodgers, Sir John (Sevenoaks)	Young, Sir G. (Ealing, Acton)
Maude, Angus	Ross, William (Londonderry)	Younger, Hon George
Maudling, Rt Hon Reginald	Rossi, Hugh (Hornsey)
Maxwell-Hyslop, Robin	Rost, Peter (SE Derbyshire)	TELLERS FOR THE AYES:
Mayhew, Patrick	Royle, Sir Anthony	Mr. Spencer Le Marchant and
Meyer, Sir Anthony	Sainsbury, Tim	Mr. Fred Silvester.
NOES
Abse, Leo	Brown, Ronald (Hackney S)	Davies, Denzil (Llanelli)
Allaun, Frank	Buchan, Norman	Davies, Ifor (Gower)
Anderson, Donald	Buchanan, Richard	Davis, Clinton (Hackney C)
Archer, Peter	Butler, Mrs Joyce (Wood Green)	Deakins, Eric
Armstrong, Ernest	Callaghan, Jim (Middleton & P)	Dean, Joseph (Leeds West)
Ashley, Jack	Campbell, Ian	de Freitas, Rt Hon Sir Geoffrey
Ashton, Joe	Canavan, Dennis	Dell, Rt Hon Edmund
Atkins, Ronald (Preston N)	Cant, R. B.	Dempsey, James
Atkinson, Norman	Carmichael, Neil	Doig, Peter
Bagier, Gordon A. T.	Carter, Ray	Dormand, J. D.
Barnett, Guy (Greenwich)	Carter-Jones, Lewis	Douglas-Mann, Bruce
Barnett, Rt Hon Joel (Heywood)	Cartwright, John	Dunn, James A.
Bates, Alf	Clemitson, Ivor	Dunned, Jack
Bean, R. E.	Cocks, Michael (Bristol S)	Dunwoody, Mrs Gwyneth
Beith, A. J.	Cohen, Stanley	Eadie, Alex
Benn, Rt Hon Anthony Wedgwood	Coleman, Donald	Edge, Geoff
Bennett, Andrew (Stockport N)	Colquhoun, Ms Maureen	Edwards, Robert (Wolv SE)
Bidwell, Sydney	Cook, Robin F. (Edin C)	Ellis, John (Brigg & Scun)
Bishop, E. S.	Corbett, Robin	Ellis, Tom (Wrexham)
Blenkinsop, Arthur	Cox, Thomas (Tooting)	English, Michael
Boardman, H.	Craigen, J. M. (Maryhill)	Ennals, David
Booth, Rt Hon Albert	Cronin, John	Evans, Fred (Caerphilly)
Bottomley, Rt Hon Arthur	Cryer, Bob	Evans, Ioan (Aberdare)
Boyden, James (Bish Auck)	Cunningham, G. (Islington S)	Ewing, Harry (Stirling)
Bradley, Tom	Cunningham, Dr J. (Whiteh)	Faulds, Andrew
Bray, Dr Jeremy	Dalyell, Tam	Fernyhough, Rt Hon E.
Brown, Hugh D (Provan)	Davidson, Arthur	Flannery, Martin
Brown, Robert C. (Newcastle W)	Davies, Bryan (Enfield N)	Fletcher, Raymond (Ilkeston)

Fletcher, Ted (Darlington)	Lomas, Kenneth	Rodgers, William (Stockton)
Foot, Rt Hon Michael	Loyden, Eddie	Rooker, J. W.
Ford, Ben	Luard, Evan	Ross, Stephen (Isle of Wight)
Forrester, John	Lyons, Edward (Bradford W)	Ross, Rt. Hon W. (Kilmarnock)
Fowler, Gerald (The Wrekin)	Mabon, Dr J. Dickson	Rowlands, Ted
Fraser, John (Lambeth, N'w'd)	McCartney, Hugh	Sandelson, Neville
Freeson, Reginald	McElhone, Frank	Sedgemore, Brian
Freud, Clement	MacFarquhar, Roderick	Selby, Harry
Garrett, John (Norwich S)	McGuire, Michael (Ince)	Shaw, Arnold (Ilford South)
Garrett, W. E. (Wallsend)	Mackenzie, Gregor	Sheldon, Robert (Ashton-u-Lyne)
George, Bruce	Mackintosh, John P.	Shore, Rt Hon Peter
Gilbert, Dr John	Maclennan, Robert	Short, Rt Hon E. (Newcastle C)
Ginsburg, David	McMillan, Tom (Glasgow C)	Short, Mrs Renée (Wolv NE)
Golding, John	McNamara, Kevin	Silkin, Rt Hon John (Deptford)
Gould, Bryan	Madden, Max	Silkin, Rt Hon S. C. (Dulwich)
Gourlay, Harry	Magee, Bryan	Sillars, James
Graham, Ted	Mahon, Simon	Silverman, Julius
Grant, George (Morpeth)	Mallalleu, J. P. W.	Skinner, Dennis
Grant, John (Islington C)	Marks, Kenneth	Small, William
Grocott, Bruce	Marquand, David	Smith, John (N Lanarkshire)
Hamilton, James (Bothwell)	Marshall, Dr Edmund (Goole)	Spearing, Nigel
Hardy, Peter	Marshall, Jim (Leicester S)	Stallard, A. W.
Harper, Joseph	Maynard, Miss Joan	Stewart, Rt Hon M. (Fulham)
Harrison, Walter (Wakefield)	Meacher, Michael	Stoddart, David
Hart, Rt Hon Judith	Mellish, Rt Hon Robert	Strang, Gavin
Hatton, Frank	Mendelson, John	Strauss, Rt Hon G. R.
Hayman, Mrs Helene	Mikardo, Ian	Summerskill, Hon Dr Shirley
Heffer, Eric S.	Millan, Bruce	Swain, Thomas
Hooley, Frank	Miller, Mrs Millie (Ilford N)	Taylor, Mrs Ann (Bolton W)
Hooson, Emlyn	Mitchell, R. C. (Soton, Itchen)	Thomas, Jeffrey (Abertillery)
Horam, John	Molloy, William	Thomas, Mike (Newcastle E)
Howell, Rt Hon Denis	Moonman, Eric	Thomas, Ron (Bristol NW)
Howells, Geraint (Cardigan)	Morris, Alfred (Wythenshawe)	Thorne, Stan (Preston South)
Hoyle, Doug (Nelson)	Morris, Charles R. (Openshaw)	Tierney, Sydney
Huckfield, Les		Tomlinson, John
	Morris, Rt Hon J.(Aberavon)	Tomney, Frank
Hughes, Rt Hon C. (Anglesey)	Moyle, Roland	Torney, Tom
Hughes, Mark (Durham)	Mulley, Rt Hon Frederick	Tuck, Raphael
Hughes, Robert (Aberdeen N)	Murray, Rt Hon Ronald King	Urwin, T. W.
Hughes, Roy (Newport)	Newens, Stanley	Varley, Rt Hon Eric G.
Hunter, Adam	Noble, Mike	Wainwright, Edwin (Dearne V)
Irvine, Rt Hon Sir A. (Edge Hill)	Oakes, Gordon	Walden, Brian (B'ham, L'dyw'd)
Irving, Rt Hon S. (Dartford)	Ogden, Eric	Walker, Harold (Doncaster)
Jackson, Colin (Brighouse)	O'Halloran, Michael	Walker, Terry (Kingswood)
Jackson, Miss Margaret (Lincoln)	Orbach, Maurice	Ward, Michael
Janner, Greville	Orme, Rt Hon Stanley	Watkins, David
Jay, Rt Hon Douglas	Ovenden, John	Watkinson, John
Jeger, Mrs Lena	Owen, Dr David	Weetch, Ken
Jenkins, Hugh (Putney)
	Park, George	Wellbeloved, James
John, Brynmor	Palmer, Arthur	Weitzman, David
Johnson, James (Hull West)	Parker, John	Wellbeloved, James
Johnson, Walter (Derby S)	Parry, Robert	White, Frank R. (Bury)
Johnston, Russell (Inverness)	Pavitt, Laurie	White, James (Pollok)
Jones, Barry (East Flint)	Peart, Rt Hon Fred	Whitehead, Phillip
Jones, Dan (Burnley)		Whitlock, William
Judd, Frank	Pendry, Tom	Willey, Rt Hon Frederick
Kaufman, Gerald	Penhaligon, David	Williams, Alan (Swansea W)
Kelley, Richard	Perry, Ernest	Williams, Alan Lee (Hornch'ch)
Kerr, Russell	Phipps, Dr Colin	Williams, Rt Hon Shirley (Hertford)
Kilroy-Silk, Robert	Prentice, Rt Hon Reg	Williams, Sir Thomas
Kinnock, Neil	Prescott, John	Wilson, Alexander (Hamilton)
Lambie, David	Price, C. (Lewisham W)	Wilson, Rt Hon H. (Huyton)
Lamborn, Harry	Price, William (Rugby)	Wilson, William (Coventry SE)
Lamond, James	Radice, Giles	Wise, Mrs Audrey
Latham, Arthur (Paddington)	Rees, Rt Hon Merlyn (Leeds S)	Woodall, Alec
Leadbitter, Ted	Richardson, Miss Jo	Woof, Robert
Lee, John	Roberts, Albert (Normanton)	Wrigglesworth, Ian
Lestor, Miss Joan (Eton & Slough)	Roberts, Gwilym (Cannock)	Young, David (Bolton E)
Lever, Rt Hon Harold	Robertson, John (Paisley)
Lewis, Ron (Carlisle)	Robinson, Geoffrey	TELLERS FOR THE NOES:
Lipton, Marcus	Roderick, Caerwyn	Mr. Peter Snape and
Litterick, Tom	Rodgers, George (Chorley)	Mr. James Tinn.

Question accordingly negatived.