LAND VALUES (SCOTLAND) BILL.

HL Deb 25 March 1908 vol 186 cc1353-93

[SECOND READING].

Order of the Day for the Second Reading read.

LORD HERSCHELL

My Lords, in rising to move the Second Reading of this Bill I roust confess that I do so with a certain measure of hopefulness, having regard to the words spoken in this House last August by the noble Marquess, the Leader of the Opposition. With your Lordships' permission I will read a short extract from, his speech on that occasion. The noble Marquess said— Therefore, my Lords, if we refuse to read this Bill a second time this evening I trust it will be understood that we are in reality only doing that which the First Lord of the Admiralty has suggested that we should do—deferring the further consideration of this Bill and its consequences until a more opportune moment. This statement must surely mean that the further consideration of the Bill—that is to say, the Committee stage—could not be entered upon at that time owing to the lateness of the session and I cannot but feel that the words contained the prospect of a Second Reading at any rate—a prospect which I hope will shortly be realised.

As the provisions of this Bill have already been described to your Lordships I do not propose in this instance to repeat them., but shall pass at once to a very brief sketch of the existing system of valuation in Scotland. Valuation is computed on a basis of annual rental value—that is to say, either the rent which is paid or the annual rental which the subject in its existing state might be reasonably expected to fetch. The valuation roll is drawn up by the burghs and counties, and in it is entered the annual rental value of each subject—that is, lands and heritages.

THE EARL OF CAMPERDOWN

Annual value, not rental.

LORD HERSCHELL

I should have said annual value. I beg your Lordships' pardon. The drawing up of the roll is entrusted to an official called an assessor, who is appointed by the town or county council as the case may be. If the local authorities choose to appoint the surveyor for income-tax as their assessor, then the expense of drawing up the roll is defrayed by the Commissioners of Inland Revenue, and the assessor is called a surveyor assessor. If, on the other hand, the authorities prefer to appoint some person other than the surveyor for income-tax, then the cost of the valuation is borne by the local authorities and the assessor is called a local assessor. At present—and this is a point I would ask your Lordships to note, as I propose referring to it when dealing with the question of expense—the total valuation of Scotland is, roughly speaking, £31,000,000. From this we must deduct £3,000,000 for railways and canals, leaving as the valuation to which this Bill applies £28,000,000. Of this, £15,000,000 are valued by surveyor assessors, the cost of the valuation, as I have already pointed out, being defrayed by the Exchequer. The remaining £13,000,000 are valued by local assessors, and the expense of this valuation is borne by the local authorities. It is also worthy of note that the £15,000,000 valued by surveyor assessors represent 17,880 square miles, as compared with 11,920 square miles which are represented by the £13,000,000 valued by local assessors.

My Lords, this Bill does not in any way reform the system of rating. It is merely a preliminary, and, as we think, an essential, step to be taken before any question of rating reform can be considered. I think it is unnecessary for me to point out that under the existing system certain inequities do arise, but perhaps I may be allowed to give an instance of what I mean. In some cases land which has enormously benefited by the surrounding improvements effected by the local authorities does not, owing to its valuation, contribute its proper share to the carrying out of those improvements. Let us suppose, for example, that there is an area of unoccupied land in a burgh lying too high for the existing water supply to reach it. We will then suppose that the town council decides to adopt an extensive and costly water scheme, by means of which water will be brought with the reach of this area of land. This land then has enormously benefited, and yet the valuation remains precisely the same, although, as a matter of fact, the land has not contributed as much to the carrying out of the improvements by which it has so greatly benefited as the surrounding property which has not reaped an adequate advantage.

Again, let us take an instance of unoccupied land lying in or adjacent to a burgh. This land is valued at a very small amount and continues year by year to be so valued, although in reality it is steadily increasing in worth. This state of things must tend to such land being held up in the hope, even the certainty, of a larger price being ultimately received for it; and this holding up of land may prove an obstacle in the way of the natural expansion and development of the town. The desire for some reform of the rating system is, I think, generally conceded, and the Agricultural Rating and Relief Act of 1896 shows this desire, as that Act was a temporary measure and has since been renewed.

But before we can consider any question of rating reform we must first of all, in order to be accurately informed on the subject, arrive at the real ground value of the land. The existing system pro- ceeds upon a basis of annual value. The capital value with which this Bill proposes to supplement the valuation roll will show the real ground value of the land, which is not in many cases shown by the annual rental value. Let us for a moment look at the definition upon which the present system of valuation rests. It is as follows— In estimating the yearly value of lands and heritages under this Act, the same shall he taken to be the rent at which one year with another such lands and heritages might, in their actual state, be reasonably expected to let from year to year. Now it is quite possible that the actual state of the land may not represent its true value. For example, land lying near a town might be worth for feuing from £20 to £30 an acre, whereas it is entered year after year in the valuation roll as worth £2 an acre—that is, as agricultural land. The object then of this Bill is to ascertain the capital value—the real ground value of the land.

Your Lordships may have noticed that railways and canals have been omitted from the present Bill. These two classes of property are, under existing circumstances, treated differently and by a different machinery from other property. Their valuation is based roughly speaking, upon profit, and the rating is cut up and distributed among the different rating districts through which the railway or canal passes. As these undertakings are continuous and pass from one rating district to another, it is clear that a separate machinery is necessary for valuing them; and it has been thought unnecessary and even inapposite to depart from existing usage in the case of the present Bill.

I now come to the question of expense under the Bill. A great deal has been said on this point, and the most widely divergent views have been expressed with regard to it. I should like, therefore, with your Lordships permission, to say a few words about this question of expense. Your Lordships will remember that of the £28,000,000 of valuation to which this Bill applies, £15,000,000 are valued by surveyor assessors, and that the cost of these valuations is defrayed by the Exchequer. The same will apply under the Bill. We have, therefore, only to deal with the £13,000,00 of valuation which remain to be valued by the local assessors. Of this £13,000,000, £8,000,000 are represented by the cities of Edinburgh and Glasgow; and the assessor of Glasgow estimates the cost of ascertaining the capital value under this Bill in his city at from £6,000 to £8,000 in the first year. The assessor of Edinburgh, it is understood, estimates the cost for his city at about £2,500. We have thus an estimate of from £8,500 to £10,500 for the £8,000,000 represented by the two cities of Edinburgh and Glasgow. There remain £5,000,000 out of the £13,000,000, and, with regard to this, the assessor for Argyleshire estimates the cost for that county at £1,433. On the other hand, the assessor for Roxburghshire writes— I should say that, with a local assessor for the county of Roxburgh, the added cost would be; Salary, £120; clerks, £60; journeys and outlays, £40; printing, postages, etc., £50—£270 in ail; or, at most £300. These views are, of course, somewhat divergent; but, at the same time, even if we take the higher estimate, I do not see that the expense is likely to be very great. I cannot help feeling that, after all, these authorities are surely the persons most qualified to judge of the probable expense of this Bill; and as they are the persons who will have to make the valuation, it is surely unlikely that they would largely under-estimate the cost of the Bill and thus lay themselves open to the imputation of ignorance of their own business. Apart from this, a statement with regard to the expense which was likely to fall upon local authorities was made in another place on the authority of the Chancellor of the Exchequer. It was as follows— If it should be found that such an addition will be made to the duties of those assessors as really to be in a reasonable sense a fair addition to their duties worthy of estimating and worthy of consideration by the Exchequer, the claims by the local authority on which this initial charge for the first year will thus heavily fall will receive fair and favourable consideration from the Exchequer with a view to granting what, in the opinion of the Treasury, is a reasonable subsidy. It was further pointed out that this subsidy would be a general subsidy and would go on from year to year to meet the exigencies of the case.

Objectors to this Bill have denounced it as unfeasible, and in this connection it has been pointed out that, under existing conditions in Scotland, all that the assessor has to do is to go to a man and ask him what rent he pays. But this does not take into account the land which is not let, and for which, consequently, no rent is paid. Yet no difficulty is found under the existing system in ascertaining the value of the land, and it is worthy of note that where sales have taken place under arbitration, the value of the land has been arrived at without the smallest trouble. I cannot help feeling, my Lords, that if these critics of the Bill are genuine in their objections they should surely vote for it, because if it is unfeasible it will inevitably by its failure prove them to have been right in their contention. But seriously, my Lords, the evidence given before the Commission on Taxation was, I think, sufficiently strong to warrant our not doubting the feasibility of this Bill.

It has also been said that the Bill is useless and an unnecessary expense, unless at the same time some measure of rating reform is introduced. This is, so far, satisfactory, as showing the anxiety of certain opponents of the Bill with regard to the ratepayers of Scotland; but I cannot help feeling that this objection is very difficult to maintain, and I can well imagine the outburst of indignation which would have greeted the Government had they brought in some measure of rating reform without having previously introduced this preliminary Bill. They would have been told that they were rushing into legislation without due care and forethought, and, as I think, rightly so told. Objection has also been taken to the Bill on this ground, that the passing of this measure would imply agreement with subsequent rating proposals. But does any noble Lord seriously believe that, by assisting to pass this Bill, he will bind himself to accept every possible suggestion for rating reform which may be brought forward? Why, if proof were needed that this is not the case it would be furnished by the fact that the Government have explicitly declined to entertain a suggestion which has been made to apply a rating: proposal to existing feu duties. No, my Lords. All that the passing of this Bill could possibly imply, would be the willingness of your Lordships to consider the question of rating reform. In conclusion, I should like once more to emphasise this point. This Bill is not a rating Bill. It is merely a preliminary measure to pave the way by giving us additional information for the consideration of the question of rating reform, and as such I ask your Lordships to give it a Second Reading.

Moved, "That the Bill be now read 2^a"—(Lord Herschell.)

*VISCOUNT RIDLEY

My Lords, I rise to move that this Bill be read a second time this day six months. This being ostensibly a Scottish Bill concerning Scotland only, I feel that I, as a mere Englishman, am somewhat out of place in moving this Motion, and I may say that when I placed it on the Paper it was merely with the intention of taking part in a debate upon a subject on which I have had opportunities of speaking in another place. I desire to explain to your Lordships that it is not merely on the merits of the Bill as a Scottish Valuation Bill that I move this Motion. On that I shall venture to say a few words later. But there are other grounds.

In the first place, it is well known—it was mentioned in the King's Speech—that this measure is to be followed by a similar proposal for England, and if this House admits the principle for Scotland it will be difficult, if not impossible, to say that it should not be applied to every other part of the united Kingdom. I, therefore, think it is important that your Lordships should take into very early consideration the real principle of this Bill and what it will mean if carried into law. In the second place, the issues involved lie considerably outside the Bill itself. Your Lordships will remember that the same Bill was introduced last year, and that your Lordships were unable at that late period of the session to give it a Second Reading. It was not properly considered last year in either House of Parliament. It was given practically no consideration whatever last year; and when the scene of activity was transferred from Westminster to the country the speeches made by the supporters of the Bill, and the interest, such as it was, that was shown in the measure, were directed to a considerable-number of questions which had nothing whatever to do with the Bill itself. In fact, if you study the majority of the orations delivered on public platforms you will find that they took less note of the virtues of the Bill than of the vices of a Second Chamber.

The measure, moreover, has not been practically debated this year in the other House, and, therefore, your Lordships have to consider the Bill almost for the first time on its merits. It has hitherto been used as a battering-ram and nothing else; and I venture to think that if your Lordships were to treat it as a battering-ram, and give it that consideration which is usually extended to a battering-ram by defenders of a fortress, you would be perfectly justified. But I do not ask your Lordships to reject it on those grounds. I ask you to consider it on its merits, and on its merits to pronounce it a bad and impossible Bill. We are asked to pass a Bill which deals with a new system of rating before we are told what that new system of rating is to be. I submit that that is a premature thing to ask us to do. It is totally unnecessary to upset the whole system of valuation in Scotland or anywhere else without due cause shown, and, until we are shown that a workable system of rating on the basis of the capital valuation of land can be made part of our rating system, I submit that it is premature to introduce a Bill which, while causing considerable expense and difficulty makes a great innovation on the system which has been in force for a great many years. You are producing the arms and legs of a new system of valuation without the body. Who cares what the valuation is except in regard to the taxation which is to be founded upon it?

The noble Lord who introduced this Bill tells us that if we object to the system which is to be founded upon it we can express our objections at a later stage. I venture to submit that when the noble Lord at a later stage is concerned in pressing upon this Assembly the legislation founded upon this Bill we shall be told that it is a money Bill to which we can have nothing to say. I therefore ask this House at this stage to take the procedure of saying that the legislation which confessedly is intended to be founded on this Bill is bad in principle and should be stopped at the very outset. I need not quote the declarations of the Government on the point. They began by telling us it was a mere valuation Bill and had nothing to do with anything else. But now we have it from the noble Lord—and it was stated last year from the Woolsack—that this Bill is intended to be followed by further legislation. The legislation which is to be founded on this Bill must be, and can only be, in the direction of imposing some taxation on ground values on the basis of the capital valuation of those ground values; and it is material to point out that whatever the Government may say—and I fully acknowledge that responsible speakers on behalf of the Government have disavowed all responsibility as far as they themselves are concerned for the doctrines of Henry George—those doctrines are the driving power behind this Bill, doctrines which aim at the complete confiscation of the land values of this country. That proposition does not need proof. Behind this Bill is the Scottish League for the Taxation of Land Values, and the real support that the Bill gets is from gentlemen who think it would be to the advantage of this country to tax all land values out of existence. If it were necessary to prove that, I have here a letter written by an English Member of Parliament, Mr. Wedgwood, to The Times, in which he seeks to prove the advantages which would follow from the transfer of taxation from land and buildings combined, on to land only, and that letter could be matched again and again.

The object of the chief supporters of this Bill is to put the whole rate upon land values alone. Let me give an instance of what would probably happen. It is almost the only instance upon which an argument can be fairly founded. It is very difficult to find out what proportion of the rateable value is really paid by the land, but we have approximately, in the case of the County of London, the annual rateable value of land alone. I can give for the last quinquennial assessment, in 1906, what the London County Council estimated to be the annual rateable value of land values alone. The estimate of the annual rateable value of the land in London in 1906 was £18,000,000. The rateable value in the same year was £43,000,000; so that of the annual rateable value in 1906, the year of the last quinquennial assessment, land was estimated in the county of London to be £18,000,000 out of £43,000,000, or 40 per cent. of the rateable value. Now the argument I wish to found upon that is that 40 per cent. roughly represents the average incidence of the rates. It is somewhere between 33 per cent. and 50 per cent., but 40 per cent. is near enough. Forty per cent. is the annual incidence of the rates, and, therefore, if the whole burden of the rates is thrown on land, you will need a rate of 20s. in the £ in London, and there is every reason to suppose that practically a similar state of affairs would be disclosed all over the country. Therefore, if the avowed object of the chief supporters of this Bill is carried out in anything like its entirety you will have a rate of 20s. in the £ on land values in this country.

I do not propose to carry this House into a detailed discussion of what the precise effect of a rate of 20s. in the £ would be on land. I leave your Lordships to figure it out yourselves; but when we have a Bill introduced which is confessedly meant to be followed by legislation, somewhat of that character, when we have a large number of the supporters of the Bill advocating legislation entirely of that character, then I do say we are entitled to ask the Government, before we allow this Bill to pass, to give us an indication of what they really mean to found upon it. I do not believe that any amount of questioning will elicit from the Government what their real intentions are; but, whatever they mean to do, I believe they will find that they will come against the difficulty that land reformers constantly come against. How ever reformers may desire to change the incidence of rates, however much there may be of sympathetic support in the attempt to get out of men who enjoy very large rents in populous places some portion of the wealth which they derive from what has been termed unearned increment—however much sympathy there may be in that, land reformers invariably come against the difficulty which the Government will experience, of how they are to get any of that increased value without doing irreparable injustice to the large class of small investors, and even to the large investors who have recently bought property, who are consequently in a different position from those who have inherited property which has been in the family for many years, and who, perhaps, may be said to enjoy, in truth, unearned increment. It is not unearned increment when you have bought it within the last year or two on the expectation of a large rent and paid a capital value which corresponds to that large rent. The Government will find that difficulty.

Let me give an illustration of how great that difficulty will be from an incident in the early history of land rating. John Stuart Mill was an advocate for the taxation of the unearned increment—I believe he was the originator of the phrase "unearned increment"—and he had a scheme for appropriating unearned increment for the benefit of the State. But, my Lords, what did he propose? He proposed in 1870 to take for the benefit of the State all the unearned increment that should accrue for the future, but in order to do that with perfect justice to existing proprietors he proposed that the land of the country should all be valued at once, and that the taxation should be founded on the additional value that should come to that land in future years; but that at any time during the future any landowner should have the right of selling his land to the State at the prices of 1870. Had that been carried into effect the State would now be the owner of very large tracts of country bought at 1870 prices, which would to-day be a dead loss to the country. There is an unearned decrement as well as an unearned increment, and the same difficulty which faced John Stuart Mill when he attempted to deal justly with the question will face any Government that attempts to deal with it.

It is true that His Majesty's Government during recent years have been graduating in the school of pocket-picking, and we are getting accustomed to legislation which attempts to take from private persons the legitimate profits of their industry; but I hesitate to believe that they really mean to found unjust legislation upon this Bill. They may be graduating in the school of Fagin, but I do not think they have reached the skill of the Artful Dodger; they are more likely, like Oliver Twist, to run away from their schoolmaster. Therefore I say that when they introduce the Bill founded on this measure they will find it difficult to deal fairly with the existing owners of land.

On what theory of local taxation is this Bill founded? Hitherto we have had our local taxation founded, practically speaking, on two theories—either in respect of benefits received or in respect of ability to pay. I cannot see that this Bill is founded upon either theory. Its chief effect will be to get at what is called unoccupied land, vacant spaces, land that is held up. But vacant land is precisely the class of land which receives less benefit from the rates than any other class. What benefit does vacant land derive from the police rate, the education rate, or the poor rate? Unoccupied land, which is proposed to be valued under this Bill for the purpose of taxation, derives no benefit from a large portion of the rates; yet it will be very largely taxed. Nor is the Bill founded upon the theory of ability to pay. Will your Lordships imagine two contiguous properties—a mansion and a farm of equal area. It is obvious that the man who can afford to occupy a mansion is better able to pay rates than the man who merely occupies a small farm. Yet under this Bill the man who occupies the mansion and the occupier of the small farm adjoining will pay the same rates. The Bill, therefore, is not founded on any of the principles which have hitherto governed our rating system. Nor has the valuation system proposed any relation whatever to our previous system. Up to the present time, except for the purpose of the death duty, annual value has been the regular basis of the valuation of property in this country, and I see no reason whatever for departing from it. For the death duties, it is true, we value the capital value, but we value personalty and realty also, and both fall under the same category. In the State of New York, where a similar system of capital valuing prevails, there also every kind of property fall under the same category. But here the proposal is to extend to land, and to land only, an unfair system of capital valuation.

I submit that, whatever the noble Lord who introduced the Bill may say, it will be practically impossible to carry out the Bill, and I see no reason why the community should be put to the risk and danger of attempting to carry it out. Of course, in one sense a valuation can be made. It is obviously possible to place some value on a property; the question is whether the land of this country could be valued satisfactorily on the basis of capital value; and I submit that the testimony of those who have been consulted by the various Commissions and Committees which have sat on this question is so very discrepant as to afford no indication whatever as to what is likely to happen.

When the noble Lord, in moving the Second Reading of the Bill, asked us to accept as final and conlcusive the evidence of the gentlemen who will be entrusted with the task of valuing the various properties, I think he showed a somewhat confiding nature. I do not desire to impute any interested motives whatever to the class of valuer who will be engaged under this Bill, but it is perfectly clear to me that if we want a testimony which we can accept as final we should not go only to the gentleman who will be paid for carrying out the Bill. Nothing has been said as to the expense to which a private person would be put if he disputed the valuation. The cost thrown upon the community in a personal capacity, apart from what they will have to pay as ratepayers and taxpayers, will be very large; and I submit that it is quite unnecessary to harass them in that way. Nor are we told in this Bill, although the Chancellor of the Exchequer has made certain conditional promises in another place, anything about the taxpayer bearing any portion of the expense. The Chancellor of the Exchequer has stated explicitly that he will consider the question of subsidising various districts, if it is found to be wanted, but no indication of this intention is to be found in the Bill. As the Bill stands there is cast upon the ratepayer what may be an enormous cost.

In order to show how difficult it will be to make this valuation, let me quote the effective words of the Bill. Clause 3 provides that— 'Capital land value' in reference to any lands and heritages includes the value of any common interest in land, and means the sum which such lands and heritages or common interest might be expected to realise if sold by a willing seller in the open market at the time of the valuation if (1) divested of buildings, erections or improvements, of whatever nature, on, in, or under the soil, woods, fixed or attached machinery, and work of drainage and of reclamation, making up, levelling, and the like, where the benefit thereof is unexhausted at the time of valuation; and (2) sold free from all burdens, public and private, except building restrictions or servitudes: Provided that where the assessor considers that any restriction or servitude created after the passing of this Act has been created in order to defeat this Act it shall be lawful for him (without prejudice to the appeal to which any person aggrieved is entitled) to disregard such restriction or servitude. Picture to yourselves what the valuer will have to do. I do not say he cannot do it. A valuer will value anything. But picture to yourselves the process, and ask yourselves if it can be a satisfactory or uniform one throughout the kingdom. The valuer will take that clause. He will go to one house and picture to himself that house gone. The land is to be divested of buildings, erections, or improvements; and he will value the site without the house. For the purpose of his valuation of that particular site he will have to leave the land on the side of it with the house standing and perhaps with the house standing on the other side; and when the valuer has finished the valuation of the first site, he will have to go next door, and, in his imagination, build up the first house while pulling down the second, and so on down street after street of our great towns. He has to value it divested of buildings, erections, or improvements, of whatever nature, on, in, or under the soil, and works of drainage and reclamation. According to the strict terms of Clause 3, when he has done this the land is left really without even agricultural value. I cannot see how it is possible for even the most imaginative of men to carry out strictly the requirements of this Bill. It cannot be done. It seems to me that the only guide which a valuer has is the price which can be got for an article. Professional valuing, as I understand it, is not a profession which requires a sort of intuitive genius or any very particular training. It requires a long experience of finding what land can sell for, but that is precisely the experience you are going to deny to valuers under this Bill.

Having tried to show that the Bill is, in the first place, premature, in the second place unfair, and in the third place impracticable, I desire before I sit down to touch briefly on two sentimental considerations which seem to have great weight with the supporters of this Bill. It is imagined that the Bill will prevent overcrowding by compelling landowners to put their land to the best use. I do not deny that there may be cases where land is held up; but I believe that these are rare, and that it is a mistake to suppose that land is held up in any large quantities. I would, however, mention one case. The Glasgow Corporation have been, I believe, most enthusiastic in support of the Bill. According to a return just granted, they have 300,000 square yards of land fit for building on, which is entered at a valuation of £600,000 and in one particular district they are holding up land at the price of £9,000 an acre. This is a price which it is obvious that no builder could afford to pay for speculative purposes. Here is a case of holding up land in its most aggravated form which is practised by the very corporation which is most forward in attacking private owners on that ground. I question whether the best use that land can be put to is to cover it with jerry-built houses. May it not sometimes be better to leave it open for the benefit of the lungs of a town?

If this Bill is meant as a remedy for overcrowding, I would point out that in Paris and New York, where the system of taxing the capital value of land is in force, overcrowding of a worse description than anything in this country is to be found. The first effect of the Bill would certainly be to lessen the taxation borne by factories and breweries in country districts and increase the amount that has to be paid by the agricultural community, who can least afford it. I ask your Lordships to reject the Bill because I believe it to be unfair, incomplete, and impracticable, and that no amount of amendment or modification could affect the principle of the Bill. It is founded not on any principle which has hitherto guided the rating system of this country but on a system suggested by the Scottish Taxation of Land Values Association and other Henry Georgeite societies. It is begotten by fanatical societies out of an ignorant Government; it stands allied with another Bill equally unsound and vicious, which your Lordships rejected a fortnight ago, and I ask the House not to allow the two Bills to be divided in death.

Amendment moved— To leave out the word 'now' in order to insert the words 'this day six months.' "—(Viscount Ridley.)

*VISCOUNT ST. ALDWYN

My Lords, two very different views of this measure have been put before your Lordships. The first was that of the noble Lord who, in an interesting speech, asked your Lordships to agree to the Second Reading. He minimised the importance of the Bill, treating it as merely preliminary to some measure of rating reform, of which he did not suggest the contents, or on what principles that measure should be based. He practically repeated the words of the Lord Advocate to the effect that it was merely the insertion of an additional column in the valuation roll for the purpose of obtaining information and would do no harm to anybody so far as any fresh rating or taxation was concerned.

But both the noble Lord and the Lord Advocate did not sufficiently allow for the expenses which will be inflicted first on the owners of the property, who will have great trouble in assessing their own land as required; and secondly, upon the taxpayer, who, I think, will have to bear a good deal more than the very moderate expenditure suggested by the noble Lord opposite. I can quite understand that the Chancellor of the Exchequer has a natural predilection for Scotland in imposing charges upon the Exchequer, but, even so, I think the estimates are extremely low and are likely to be very greatly exceeded. But that, after all, is a minor point. The general view of the Bill taken by the noble Lord was that of a very harmless, unimportant amendment of the technical and dry details of the law relating to valuation in Scotland.

My noble friend who has just sat down, in his able speech, dealt with the measure from a very different point of view. It is evident he had in his mind a very much more important matter than anything dealt with by this Bill—the possible adoption by Parliament, or, at any rate, by this Government, of some wild proposal for a change in the incidence of rates and income-tax put forward by the bodies to which he alluded, and supported by a very active and noisy party among the supporters of the Government, who have been, I am afraid, encouraged by the speeches of one, if not both, of the Scottish law officers of the Crown. I wish to examine the measure, in the first place, as a proposal for dealing with the particular grievance to which the noble Lord who introduced it referred.

What is the grievance with which it is intended to deal? In the first place, I would ask your Lordships to bear in mind that, as it appeared from the speech of the noble Lord, it is purely an urban grievance. He put two cases, and only two. He put the case of land on high ground which did not get the benefit of a town water supply. The town then decided to expend large sums on a new water supply through which they could benefit the land on the high ground, and he said that in such a case the land, though benefited, would not fairly contribute towards the cost of the water supply. If it did not, I admit that there may be some reason for altering the law of assessment, but I think it would, certainly directly there were buildings on that land and buildings would be rendered possible by the existence of the water supply. Those buildings would at once be rated for the town expenditure, and the people in them would bear, in one shape or another, the cost of the water supply. Then the noble Lord put the case of unoccupied land in or near a burgh—the word "near" I think was a little vague—which was held up for future building purposes, which, he said, according to the present law was rated only on its value as agricultural land, although it could be immediately utilised for building. If such a case exists, I think it would be possible to deal with it without going the length of the Bill before us.

What is the proposal under this Bill? My noble friend and the noble Lord who introduced it have referred to the basis of the system of annual valuation for rating and taxation in Scotland. That basis is, I think, identical at present with the English basis. It is the annual value or rent which may accrue to the owner, the owner and the tenant respectively undertaking to bear certain liabilities with regard to the property, The definitions are not, I think, quite identical in England and in Scotland. I think in England the Assessment Committee has rather more latitude than the Scottish assessor, because the Assessment Committee might, if they thought the rent was either too high or too low as representing the real annual value of the hereditament, lower or increase the gross estimated rental so as to make it properly correspond to the words of the law.

THE EARL OF CAMPERDOWN

And so can the Scottish assessor.

*VISCOUNT ST. ALDWYN

I do not know how that may be, but that is the case, I think, in England. What does this Bill propose? As my noble friend behind me has stated, it departs for the first time, and for one kind of hereditament alone, that of land, from the system of assessment according to annual value. If it merely did that to this extent, that it provided for an assessment on capital value which should be calculated according to so many years' purchase of the annual value, the difference would not be important, though I should not see any particular reason for making the change. But it does much more. What it does is to invent a definition of capital value such as I do not think has been heard of in English or Scottish local taxation. The definition in the Bill is— 'Capital land value' in reference to any lands and heritages includes the value of any common interest in land, and means the sum which such lands and heritages or common interest might be expected to realise if sold by a willing seller in the open market at the time of the valuation, divested of buildings, erections, or improvements, where the benefit thereof is unexhausted at the time of valuation, and sold free from all public burdens. The noble Lord who introduced the Bill said that that was a very easy thing to discover; that they found no difficulty now under the system of annual value in deducing what would be the fair rent for an unlet tenement from the rent of a tenement of a similar kind which is actually let. He further said that you will be able to deduce, in the same way, the capital value of one property which has not been sold from the capital value of a similar property which has lately been sold in the market. The noble Lord entirely forgot that no property, except, perhaps, a tract of mountain or down land, or a piece of land which had been set aside for building and had for a time been allowed to become waste, is ever sold on the unimproved basis referred to in this Bill. When a man wishes to buy a house, with or without a garden, he does not in considering the purchase, separate the land value from the value of the building on it. He considers what he will give for the whole hereditament. That is the way that almost all such property is bought and sold. The same with a farm. Whoever thought, in considering the purchase of a farm, what the value of the land of that farm was without any houses or building or or cottages, or roads or hedges or drains any other improvements? I venture to say that any such calculation would, where the land is poor, very often lead the intending purchaser to this, that he would find, supposing the land in that unimproved condition, that it would cost him so much to supply the farm with all the equipment necessary to cultivate it, that the land by itself would hardly be worth anything at all. The idea that an assessor or an owner would find it easy to estimate the capital value of land on this basis is, I think, a delusion. I do not understand, either, why the estimate should be as if the land were free from all public burdens. I am afraid I know of no land which is free from public burdens either in Scotland or England, and, therefore, it could not be sold unless it were subject to public burdens. Then, again, you do not deal with all land, for the noble Lord opposite said that land occupied by railways and canals would be exempt from this assessment, though I think there must be some other reason than the one he gave, which has not yet been communicated to us, why such land should not be included in the assessment.

But there is something more important than this. I have said that the basis of our rating system is annual value, which means, practically, the income the owner derives, or might derive, from his property, if he utilises it to the best advantage. The Bill proposes, by its definition of capital value, to assess something which has never yet been the subject of local or Imperial annual taxation. It proposes to assess the prospective value of land. What would be the effect of the valuation proposed in this Bill? The prospect is simply unlimited and indefinite. It is all left, practically, to be guessed by the assessor. An assessor of a vivid imagination and a sanguine temperarment may see in an estate some distance from a town a prospective building value fifty years hence which nobody else could imagine. Or he may see the possibility of a naval dockyard on a barren shore, or he may have a great idea of the possibilities of mineral development—possibilities even more remote than those of the Kentish coalfield—and according to these ideas he may assess the land value at something far beyond anything that the owner could possibly realise and something which does not come into his pocket at the moment.

That is the essence of the whole thing. If it is right to assess the owner of land to annual taxation on something which he does not actually derive from his property and which he may never derive from his property, I will venture to say that you cannot stop at land. You will have to extend the principle to other classes of property as well. Why should not you assess to such taxation, as you do assess to the death duties, pictures, or plate, or jewels or furniture, or anything which a man has which does not yield any present income to the owner, on the very same basis of capital value as you propose to assess his land?

The only reason I can suggest is this, and I should be very sorry to suggest it as the reason that influences His Majesty's Government, because I do not think they share the theories to which I am about to allude. But there are active persons who do hold the theory that laud should be nationalised, and who are trying all they can to promote that result. Their idea is that a first step in that should be the placing of all local taxation on the basis of land values. My noble friend has dwelt on the effect this would have upon the present owners of land. I cannot believe for a moment that this view is really the view of His Majesty's Government, but I have been told that it is the view which has been advanced by the law officers of the Crown for Scotland, and that they have actually said that it is their intention, in a rating Bill which is to follow this measure, to impose on the owners of capital land value all the rates now leviable on the composite value of buildings and land. And they have defended this proposal on the ground that the change would result in liberating improvements from the increased taxation to which they are now subject, owing to the increased value which they confer on the hereditament, and that, therefore, it would be an incentive to owners to improve their land, that it would force unoccupied land into the market, and be some solution of the great housing problem. When that proposition was suggested in the debate in this House last year, the Lord Chancellor, I think, spoke of any such alteration of taxation as ridiculous.

THE LORD CHANCELLOR

nodded assent.

*VISCOUNT ST. ALDWYN

I am very glad to see that I have correctly quoted the noble and learned Lord. What is the most important matter, to my mind, in connection with this Bill is that your Lordships should have the most distinct declarations from the Members of the Cabinet in this House, who can speak with an authority which is not given to their satellites, the Scottish law officers, that His Majesty's Government do not intend to introduce into the rating Bill for Scotland that they contemplate, any proposition of that kind. If no such assurance is forthcoming, then I think your Lordships would have no choice but to reject this Bill as a mere first step to what would practically be confiscation and robbery. Of course, if we had such an assurance we might be able to consider it in Committee. Then the points to which I have alluded would arise in a manner which would, at any rate, enable His Majesty's Government, if they can justify the particular machinery proposed by this Bill, to justify it in a shape which would be easier to criticise and to answer than could possibly be the case in a debate on the Second Reading.

I feel, as an old House of Commons man, that any question of the basis of rating is cognate to those questions of taxation which are peculiarly the province of the House of Commons. Therefore I should be very sorry that your Lordships should reject the Second Reading of the Bill, which we have sufficient time this year to consider. Those most opposed in principle to the imposition of all rates on land values would profit most by discussions in Committee, and we might be able to introduce important Amendments which would put our case before the country in a way which would be impossible if we rejected the Second Reading.

Take, for example, the extent to which this Bill is to be applied. As it stands it is applicable to the whole of Scotland. Why? Is there any demand for it, is there any necessity for it throughout the whole of Scotland? No such demand or necessity has been even suggested. Is it necessary that it should be compulsory upon the local authorities? No doubt Glasgow and other burghs are very much in favour of some change of the kind as a remedy for their grievances. But I saw the other day that the Town Council of Edinburgh, by a large majority, declined to have anything to do with the Bill. Why are you to enforce on an unwilling community, even at the cost of the Exchequer, this experiment which they might be very willing to see tried by others, but which they do not wish to apply to themselves?

These matters can be fairly considered in Committee; and I think that to reject this Bill without endeavouring to have the whole case of the Government stated in reply to Amendments, and to ascertain precisely what are the grievances and by what changes they may be remedied, would be a mistake which, I hope, the House will not commit. Therefore, although I feel as strongly as my noble friend about the policy of confiscation to which he referred and which some observations of the law officers might seem to foreshadow, I hope we may have such explanations and assurances from the Government as to their intentions in a matter of far more importance than this Bill—namely, the rating Bill, of which it is the preliminary—as will justify us in giving a Second Reading to this measure.

THE LORD CHANCELLOR (Lord LOREBURN)

My Lords, my noble friend Lord Herschell, who introduced this Bill in a speech to which I think the House listened with very great pleasure, has not only relieved me from the labour of expounding the contents of the Bill, but he said one thing which is eminently true. This Bill is not a rating Bill at all. But it is a preliminary to any effective measure by which the rating system is to be amended. Therefore it ought to be judged by itself. At the same time, I am neither surprised nor sorry that the debate should have travelled also into the question of rating, because, although without the information which this valuation, I hope, will give us and without very mature consideration, it is not possible to announce beforehand the contents of some future Bill, I see no reason at any time why the general principles on which rating or taxation are to be settled should not be freely discussed; and I have no intention of observing any reserve or the subject.

The main part of the speech of the noble Viscount who moved the rejection of this Bill assumed that His Majesty's Government intended to take part in some scheme which he very easily demonstrated to be a scheme of confiscation and dishonesty; and, having assumed that premiss, the noble Viscount had no difficulty in carrying it to its legitimate conclusion of vigorous denunciation of ourselves. He compared us to pickpockets and to Fagin. I thought that in a little questionable taste.

VISCOUNT RIDLEY

I said you were graduating in the school of Fagin.

THE LORD CHANCELLOR

But what is the proposal which the noble Viscount thinks we are in peril of entertaining? It is that the basis of rating should be so altered that, whereas the present rates are assessed on the composite subject of land and buildings, in future it should be assessed on land alone. The noble Viscount was right in saying that such a proposal was impracticable. As an illustration of it, he told us that the total rateable value of London is now £43,000,000, that the portion which is appropriated to site values is £18,000,000, and that the rates are £18,000,000. I believe that those figures are accurate; and the conclusion is irresistible. If you put the rates on the land value alone, it would destroy the land value altogether; in other words, it would eat it up. But the noble Viscount did not give us credit for penetration enough to perceive that fact, or for honesty enough to avoid accomplishing it.

The noble Viscount has tasted but not drunk deep of the Pierian spring. There are other objections that he does not suspect. One is that, if you impose on land values the entire rates, you would create a state of affairs in which the occupiers would strike the rate and the owners would pay it; and you would be relieving the rich at the expense of the poor; because a large suburban house with valuable land, which now pays on the composite value, would then pay only on the prairie value of the land, while the shopkeeper in the next street would have to pay £50 or £60 a year. Surely the noble Viscount might suppose that we see these things; and I do not think that it is quite charitable to assume of us, who are responsible for the government of the country, that we are unable to see or unwilling to prevent, as far as we can, such nonsense as that. But that was the whole basis of the noble Viscount's speech, and he is frank enough to admit that that was the substance of his objection to the Bill. There is not a word in this Bill which gives the least sanction or countenance to anything of the kind.

To dispose of that argument is easy, but it does not dispose of the subject; nor is it possible that persons should come to extravagant views of that kind unless there were a real grievance in connection with the rating or, rather, the non-rating, of land values—a grievance which requires to be remedied. Let me present my view of this really intricate subject. There has been for a considerable time in this country a great movement of population from the country districts to the crowded centres; and now four-fifths of the inhabitants of this country live in the towns. Along-side of the movement of the population towards the centres the rates in the central districts have increased. Does the the House appreciate the extent to which they have increased, or how dangerous and serious that constant increase is?

I will compare the two years 1899 and 1904. In 1899 the rates in England and Wales were £38,000,000, and in 1904 they were £52,000,000. The increase of assessable value in England and Wales in this period of five years was from £159,000,000 to £182,000,000. An increase of the rates to the extent of two-thirds kept pace with the increase in the assessable value. The loans outstanding for non-productive undertakings in England and Wales for these five years rose from £151,000,000 to £206,000,000. Those are appalling figures. The rates increased from 4s. 9d. to 5s. 9d. in the £; and in the towns the rates averaged something like 8s. in the £. There are towns in England and Wales in which they are even higher, reaching to 10s. and 11s., and in one case even to 12s. in the £. With these high rates have come also high land values, and the rates tend to increase the land values. The cause of the two is the same—namely, the concentration of the people in small areas.

The thing has come to this—that in London, and, I believe, also in other great cities, it has become impracticable to house the poor people at economic rents at all. There was a Royal Commission on Traffic upon which I served, and the Report of which enters into these things. The Commissioners said that certain propositions were clearly established. One was that the price of land in the central districts in London makes it impossible to re-house the working classes within these districts at rents which they can afford to pay without a heavy loss to those who undertake the re-housing schemes. I will give an illustration. It is the Holborn to Strand improvement, which took place a few years ago. In connection with that the County Council were obliged to buy land for re-housing. They bought an estate for £201,000, and they were obliged to write this sum down to £44,000. This value was ear-marked for artisan housing, and they debited the balance to street improvements. The consequence was that they accommodated 2,640 persons at a cost of £60 per head to the rates. Your Lordships will appreciate what the meaning is of high land value in London. It means that the rents are largely paid out of the rates. The Commissioners say— The evidence before us proves that it is impracticable to re-house the working classes in the central districts at economic rents. Here you put your finger on the source of that to which reference has been made by the noble Viscount—namely, the question of overcrowding. Overcrowding is simply caused because land values are so high that the rents become necessarily high, though the land is not fully made use of for commercial purposes, and the people cannot afford to pay these rents. They are thus driven into these hovels and wretched slums from which so many evil consequences arise. On one side you have the population being swept up from the country to London; on the other side, you have these great land values confronting them there and driving them into the shims. There is no question whatever that this is one of the chief causes of this overcrowding evil. Reference has been made to the Bill which was rejected, I am sorry to say, by your Lordships about a fortnight ago, and with regard to which I indicated that I would try to meet you. It is one way, and only one way, of trying to meet some portion of this difficulty. This Bill touches another side of this same question. Of course, I shall be told, as I was then, that the Bill then submitted was not a remedy. No; it was not, and it may be said that the Bill now before you is not a remedy. I agree that it is not, for it only touches a portion of the evil. The mischief itself is many sided and the remedy accordingly has to be many sided.

When the rates are pressing so hardly, as they arc, on the population of the great cities, the first instinct of every one will be to try to bring in some fresh source of taxation, as, for example, personal property. I was surprised to hear the noble Viscount, Lord St. Aldwyn, speak of that as something of a predatory kind. But for 200 years after the statute of Elizabeth it was the practice in this country—intermittent, I admit—to subject stock-in-trade to rating, as well as pictures, and so forth. Lord Mansfield always resisted it, and it was only about sixty years ago that an Act which is passed annually in Parliament put an end to the rating of personal property. It was found to be impracticable to rate personal property for the reason that you were not able to localise it so as to say, for example, that this piece of goods belongs to the parish of Holborn and should be taxed there. Some other method, therefore, must be adopted. The rating must be confined to real property, though it was difficult to lay all rating on the real value of real property.

There was a Report of the Royal Commission on the Housing of the Working Glasses in 1885, against whose character for integrity I have never heard any accusation made. There were three dissentients, but the majority of the Commission pointed out the fact that by reason of the annual value being the standard on which rates were based, it presupposes that you must value according to the use actually made of the land at the time, and not the value of the land. A man, say, has a great property which is not under building. Although it is of very great value, it pays rates on the footing of its being agricultural land, whereas the neighbour of this proprietor, with a much smaller property, and of much less value—perhaps one-tenth of its value—pays three or four times more rates. That is an anomaly which has been pointed out by the Royal Commission. The Commissioners said that at at present land available for building in populous centres, though its capital value is very great, is probably producing a small yearly return, until let for building. The owners are rated, not in relation to the real value, but on the actual annual income. The Commissioners proceed— If this land were rated at, say, 4 per cent. on its selling value, the owners would have a more direct incentive to part with it to those who are desirous of building, and a twofold advantage would result to the community. With admirable brevity the Royal Commissioners state, in two sentences, what the two-fold advantage is. They say— First, all available property would contribute to the rates and thus the burden on the occupiers would be diminished by the increase in the rateable property; next, the owner of the building land would be forced to offer the land for sale, and thus competition one with another would bring down the price of the building land, and so diminish the tax in the shape of ground rent or price paid for land now levied on urban enterprise by the adjacent landowner—a tax, be it remembered, which is no recompense for any industry or enterprise on their part, but is the natural result of the energy and activity of the townspeople themselves. Accordingly these Royal Commissioners in whose footsteps I humbly tread, with three dissentients recommended a tax of this kind. And will your Lordships be pleased to observe it was a tax upon capital value. It was not a tax upon the annual value at all. The point of it was that it was on the capital value, because if you put it on the annual value you restrict the assessment to the actual use of the land which probably may be let out from year to year.

I draw attention to another Report, which is a minority Report, signed by Lord Balfour and other Commissioners only a few years ago, dealing with local I taxation. It proceeds on different lines. When you spend money on improvements, in a certain sense you benefit the whole town, but you specially benefit the site values by all improvements. The improvement of a street does not make a house more comfortable, but the land on which it is built is made more valuable, because, if the property is put along a fine street, it would let better than before. I will give two illustrations which will show that Parliament has recognised the truth of these propositions, and has given effect to them in Acts of Parliament. In the case of the Tower Bridge improvement there were certain clauses known as the "betterment clauses," by which a special rate was I authorised in respect of certain lands near the Tower which were to be improved, and which were made more valuable by the improvement itself. Similar clauses found their way into other London Acts, and certainly in a Manchester Act. The equity of the principle is so obvious that no one nowadays objects to it. But there was another method adopted in the case of the Holborn and Strand improvement. Instead of utilising the betterment clauses, which were in rather a crude form at that time, power was given to take belts of land alongside the projected street although they were not necessary for the construction of the street, in order that the local authority might compulsorily buy these strips at their value before the improvement, and so realise the profit which would arise after the improvement had been effected.

The minority Report, signed by such names as those of Lord Balfour, Sir E. Hamilton, Lord Kinross, and Sir George Murray, is a most interesting and valuable Report, full of suggestions, full of common sense. That Report generalises in effect to my mind the principles to which I have adverted, and proposes that all urban rateable property should be taxed alike for such purposes as poor relief, police, and so forth, and that expenditure on improvements beneficial to site value should be defrayed by a special charge proportioned to the site value alone.

My Lords, I admit the full difficulty of the question. There is, I know, room for difference of opinion. I am aware that economists of a very high order of skill and experience do differ in opinion upon it, but let no man imagine that you can dispose of a question of this kind by trotting forth the old worn-out fallacies propounded in the early days of Henry George and endeavouring to fix the Government with proposals with which they have no sympathy whatever, while ignoring the real facts and difficulties as well as the suggested remedies. What we have to do is to address ourselves to the immense economic difficulties that underlie these problems, and that is what we have to do when we come to the question of rating.

But now the noble Viscount wishes to shut the door, and says that we are not even to enter into the consideration of that, that we are not to have even the preliminary valuation that alone will enable us to bring forward proposals for the purpose of meeting the difficulty. Your Lordships will have plenty of opportunity, if the proposals are such as the noble Viscount adumbrated, of throwing out the Bill when the proposals are made. It is a money Bill we are told. Well, if a money Bill is brought forward this House has always the power to throw it out. It is the question of amending money Bills that is a question of privilege, but as to the question of throwing out money Bills your Lordships have the most ample powers. If you think the proposals, when they are brought forward, are dishonest proposals, you have the most ample power to say they are dishonest and to throw: them out. But to throw out this preliminary measure, without which you cannot enter one step upon this most thorny and at the same time most vital question, would be very unwise.

I must observe in regard to the last Report to which I referred that it is quite true it refers simply to urban land and did not commit those who signed it to an opinion at all in favour of capital valuation. I quite agree, I shall be prepared to meet my critics on both these points when we come to them in Committee, and I shall be prepared to give reasons why it should not be confined to urban land, and why it should be extended to capital value. But in the principle I think I have fairly stated the point of the minority Report, and I say it justifies and, indeed, demands that a Bill of this kind should be read a second time, and that we should be able to discuss it. Site value must be valued in one way or another if any of these proposals are to be carried. Can it be done? asks one noble Earl. I am told it is habitually and constantly done in the ordinary valuation of Scotland. It is done in Glasgow, in New York, and in Paris, but not to a very great extent. Now, my Lords, I have stated, not indeed the contents of the Bill which may hereafter be introduced into Parliament—I hope it will—but the principles that I think are applicable to the subject, and I sincerely hope that this Bill will not share the fate of its twin—a twin equally deserving, in my humble opinion—which perished at your Lordships' hands.

EARL ROSEBERY

May I, by the courtesy of the noble and learned Lord, ask him one question? Why is it that all his figures and examples refer to England alone, while the Bill refers to Scotland alone?

THE LORD CHANCELLOR

Because the figures and examples that are available, relate almost entirely, I think, to London, and I am not aware of any similar figures that are available in regard to Scotland. If the noble Earl will be so kind as to furnish me with such figures I will in future amend my ways and quote Scottish figures. But there is absolutely no difference in the principle of land valuation, which is the same in both countries.

EARL ROSEBERY

Yes, but do not the figures and examples make an almost admirable case for bringing in a Bill for London or England, but none whatever for bringing in a Bill for Scotland?

THE LORD CHANCELLOR

I think they do make a good case for England, and we shall bring in a Bill for England.

A NOBLE LORD

When?

THE LORD CHANCELLOR

We really cannot do everything at once. But will the noble Earl permit me to say that his statement that the figures and examples do not furnish a good foundation for a Bill for Scotland is, with all respect to him, completely erroneous? The principle is the same, overcrowding is the same, the increase of rent is the same, the increase of value is the same. All are the same, mutatis mutandis.

EARL ROSEBERY

What we cannot understand is why all these experiments are to be tried on Scotland when the whole ground-work of the noble and learned Lord's speech was laid in England, and the whole infliction—or, shall I say, the whole benefit—is confined to Scotland.

LORD BALFOUR OF BURLEIGH

My Lords, I hope your Lordships will allow me even at this hour, when many may desire to go, to say a few words in answer to the speech of the noble and learned Lord on the Woolsack. I think I can undertake to be really brief upon this occasion, because, so far as my sympathies go, I concur to this extent with the noble Viscount on the Front Opposition Bench, and the noble and learned Lord on the Woolsack, that I express the hope that the House will not reject this Bill upon the Second Reading. But, my Lords, I have very nearly as serious objections to take to some of the provisions in the Bill as have been stated by the noble Viscounts who have spoken.

With regard to some of the figures given by the Lord Chancellor, I think they will hardly carry him to all the conclusions he desires to draw from them. When you talk about rates in urban districts being 8s. and 10s. in the £, and try to compare them with rates in other places, you are bound to remember that the rates in towns include a great many things which are not done in the country. Before you can make a careful and useful examination of the amount of rates in town and cities you must not forget that they are, generally speaking, to be divided into two great classes—namely, those which are burdensome, and burdensome only, and those which I shall describe as beneficial, rates which are really not so much rates as we generally speak of them, but rather the payment for services rendered—services undertaken by the community because they can be done cheaper by the community than if each individual had to do them for himself.

But to my mind the curious feature of the noble and learned Lord's speech is that it is so entirely inconsistent with most of the arguments which have been used for this Bill in Scotland by at least one of the Law Officers of the Crown. I will say at once that, so far as the noble and learned Lord's description and analysis of the Minority Report of the Royal Commission on Local Taxation, for which I was responsible, is concerned, I have no word of complaint. It was absolutely fair; and it was fair even to admitting that, so far as the question of a change of basis of rating from annual to capital value is concerned, there was not one word in that Report which could be said to advocate it. We have had an interesting discussion, and the noble Lord who moved the second Reading of the Bill seemed to have been advised to minimise it as far as possible. It was a very small thing, hardly worth taking serious exception to, and it was purely preliminary to another and greater change. That is what the Lord Advocate said. He described it as a simple addition of a column to the existing valuation roll. I have grave doubts whether that is accurate, because I do not believe it is possible to take the capital value of each individual entry on the valuation roll apart from properties as a whole. You can value the annual return which you get from a house or a farm, but the value of the whole of a man's property when you begin to take the capital value is a very different thing. But I venture to say that only by the way. The Lord Advocate went on to argue that it was only— To make us able to note the additions to or deductions from capital value according as there is a rise or fall in the market value of land in Scotland. … The Bill is valuation and nothing more. … It is a first step towards the solution, not only of the rating question, but of housing and other useful questions, and also the question of the transfer of land at capital value to public authorities. The noble and learned Lord on the Woolsack said, in no measured language, that no one would be foolish enough to suppose that you could charge the whole of the rates to the land value. He characterised that as nonsense, and said in a later part of his speech that it was nothing but a foolish dream. But that is exactly what the Solicitor-General for Scotland, both in his Report and in his speeches, has been advocating over the whole length and breadth of Scotland. On the Second Reading of this Bill in another place, he said the Bill was— introduced not only for the purpose which the Lord Advocate had said, but as an essential preliminary to a change in the system of rating. They were, he said, to— blot out altogether buildings and improvements as the standard of rating, and take not the fruit of men's labour but simply the land. That is the very proposal which the noble and learned Lord on the Woolsack has just described as nonsense and as a foolish dream. The Solicitor-General also said, with regard to the objection that we ought to Know what was intended before we passed the Bill, that he did not dispute the relevancy of the objection— Because it was quite obvious that if the second step was unwise and imprudent, they ought not to take the first step. It is because of the arguments which have been used by the Solicitor-General who, after all, being a Law Officer of the Crown, may, I think, by outsiders like I myself, be supposed to know what the intentions of the Government are, that we have looked upon this Bill askance and with doubt.

You cannot judge of the position in which we are placed without looking at the history of this matter. The noble Viscount who has moved the rejection of this Bill is absolutely right when he says that for years past there has been a school of economists in Scotland who desire to put the whole of the burden of local rates upon the value of land, and upon the value of land alone. That was the idea which underlay the Glasgow Bill, which, in 1906, was passed by the present House of Commons and referred to a Select Committee, of which tie Solicitor-General was Chairman. The Lord Advocate had praised that Bill in no measured terms; he had practically accepted it in all its main principles, but when it went to the Select Committee it was condemned, and condemned so thoroughly that I hope your Lordships will allow me to read the verdict of the Select Committee upon it. Describing the Bill the Committee said— The Bill does not, therefore, give complete effect to the new rating standard which it sets up. It is confined in its operation to burghs. It leaves owners as well as occupiers of land and buildings still rated on the present basis, the rental of the whole composite subject. It leaves them so rated in the same proportions as they are rated at present. And it proposes to levy on owners alone an additional rate, fixed no doubt on a basis assumed to be sound, but absolutely arbitrary in amount. Your Committee consider these proposals to be indefensible. The Select Committee proceeded to formulate another scheme for attaining the object which contained this conclusion— That a new standard of rating based upon the yearly value of land apart from the buildings and improvements upon it, is sound and would prove advantageous. That is the system which the Committee supported, with the Solicitor-General in the chair, and which the noble and learned Lord on the Woolsack describes as nonsense and as a foolish dream. In another paragraph the Committee went on to say that— So far as both occupiers and owners are concerned, the new standard of rating should be substituted for the present standard; and within the category of owners ought to he included owners of feu-duties whensoever created. That last proposal caused such a stir in Scotland that one of the largest and most influential deputations which ever came from Scotland to England waited upon the Prime Minister to protest against it, and the Prime Minister and the Chancellor of the Exchequer together announced that they would have nothing to do with it and did not intend to support the scheme. Since that part of the Solicitor-General's scheme was put aside a great deal of the enthusiasm which had been created in certain towns and municipalities for this alteration in the basis of rating evaporated and disappeared.

But the other conditions propounded by the Solicitor-General and his Committee, which I have quoted, have never until to-night been disavowed by any responsible member of the Government. Just let me remind you what they were. The proposal of the Committee was that a new standard of rating based upon the yearly value of land apart from the buildings and improvements upon it is sound and would prove advantageous, and in speech after speech throughout Scotland the Solicitor-General has maintained his view that the basis of rating is to be wholly changed and is to be put upon the land and the land alone. I could give half a dozen quotations, if it were worth while to do so, in perfectly distinct terms urging, with all the authority that appertains to a Law Officer of the Crown, the very scheme which we have heard described from the Woolsack as nonsense and a foolish dream. I say distinctly that we are entitled to know whether the Government as a whole, repudiate the proposals put forward by the Select Committee of the other House and advocated with almost wearisome reiteration by the Solicitor-General.

I turn for a moment to the suggestion that capital value is a good basis for rating. The noble Viscount on the Front Opposition Bench said, with perfect accuracy, that the law in England and in Scotland is practically the same. In England it is the basis of what the hypothetical tenant would give for a yearly occupation of the property; in Scotland the assessor is bound to take the yearly rent stated in the lease, provided the lease does not extend for more than twenty-one years, in which case he is entitled to go behind it and to put a valuation of his own, subject to appeal. I was surprised to hear the noble and learned Lord on the Woolsack give such unmitigated support to the idea of rating on capital value. Just look what it means. I agree with him that some urban expenditure increases the value of urban property. The Minority Report, to which reference has been made, expressed the opinion that to that extent there ought to be placed on the value of the land a certain rate, strictly defined in amount and applicable to purposes carefully defined by Parliament. Much as that Report has been misrepresented, by every word to which I subscribed five or six years ago I stand to-day. In that Report there will not be found an iota of argument for substituting capital for annual valve as the basis of rating. Such a change would have the opposite effect from that intended.

It is argued that our present system penalises the outskirts of a town in favour of the central parts, that greater relative burdens are put on the suburbs than on the central parts of most towns. In some aspects that is true, but if you go on capital value you will do what has been done in America and other places—you will impose a penalty on the retention of open spaces, and will do greater harm than can be easily imagined. Let me give an illustration. The noble and learned Lord on the Woolsack advocates it, and says that as things stand the annual value is not a fair representation of the real value to the owner. Take such a property as Holland House. It is obviously an advantage to the community that open spaces should be retained, but if for rating purposes you are going to value Holland House upon its capital value and rate the owner on such value, you would make it impossible to maintain such an open space as that within a city; and, instead of making it easier to give people more space, you would lead directly to what has been done in New York and other cities, where buildings have been extended vertically instead of laterally.

I know that the question of unoccupied land in towns is one of the most difficult problems for rating purposes which can be faced. I do not think the illustrations given by the noble Lord who moved the Second Reading of the Bill were very happy, and I think they were completely disposed of by the noble Viscount who spoke from the Front Opposition Bench. It is not necessary to have recourse to capital value in order to bring, for such purposes as may be right, unoccupied land into the net of rating. It can be done perfectly well by a modification of the legal maxim rebus sic stantibus, and by allowing the whole of the circumstances to be taken into account. For that purpose it is not necessary to make such a violent change as to go to capital value. As, I have said, I am anxious to see this Bill discussed fully in Committee. I believe that there are many provisions in it which, in themselves, are so supremely absurd that they cannot be defended. We cannot discuss them satisfactorily on the Second Reading; and I hope that the proposal to reject the Bill will not be pressed, although I trust I shall not be told afterwards that I am committed to the idea of rating upon capital value if I do not venture to oppose the Second Reading. I believe we can much more successfully discuss the various proposals of the Bill in Committee, and therefore I hope the noble Viscount on the back benches will not persist in his Amendment.

LORD SALTOUN

My Lords, one thing I regret is that the real intentions of the Government have not been put into this Bill. The noble and learned Lord on the Woolsack has to a certain extent informed us what is intended, but at the same time the proposals of the Government are not before us in the Bill, and it is, therefore, very difficult to discuss them. The capital land value is not the value at which the subject might be estimated at its present state, but a value created by the Bill and which outside the Bill has no existence. The value is to be the value with the land divested of buildings, erections, or improvements of whatever nature, on, in, or under the soil. Sub-section (1) of Clause 3 requires only a careful study to realise the enormous task laid upon owner, assessor, and town or county council, and, finally, upon the Judge of the Court of Session in the Valuation Appeal Court.

Then we come to "improvements in or under the soil." This is so comprehensive as to force us to contemplate land in its original primeval state, for everything that has been done and has assisted to bring it into its present state has been an improvement. Further, the land must be divested of "work of drainage and reclamation." How far back must we go back to ascertain this? How are we to find out what has been done to each piece of ground during the past centuries? No owner can show it, and it seems to me that the more this sub-section is examined the more impossible it appears. We still have to consider and ascertain how much of the benefit thereof is un-exhausted at present. This only adds to the difficulties, and I do not press it further. Capital land value is, then, the value of a figment of the imagination. Then, again, is there such a thing as a willing seller under these conditions, and, if there is, where will he find an "open market" for his commodity?

But even this is not enough. It has to be sold "free of all burdens, public and private." Can you imagine any estate without a public or private burden? It does not exist upon this earth. Why should the owners of subjects in Scotland, from the smallest cottage to the largest estate, be subjected to the necessity of performing these feats of imagination, and afterwards compelled to defend them against other conclusions arrived at by the assessor? The assessors already have their hands full, and town or county councils may well shrink from the tremendous task imposed upon them under this Bill and the difficulties they would have to face in the complex questions that would arise. According to the Secretary for Scotland, not one of the thirty-three county councils, and only four of the 205 town councils in Scotland have resolved in favour of the Bill; and one of these—Glasgow—the promoter of this legislation, which has already spent £2,500 on the promotion of this Bill, is now anxious to have the cost borne by the State, and to have a schedule of particulars to be required from proprietors introduced. Their assessor, who has always been supposed to approve of his employers' project, has relieved himself of any chance of having to carry out the Bill by sending in his resignation at the end of last month.

Clause 1 excludes from the operation of the Bill heritages valued by the assessor of railways and canals. This, I think, shows ignorance of the practice of valuation. At present all companies, water, gas, and others, having continuous lands in more than one burgh, parish, or county, can apply to be valued by the railway assessor. We have, therefore, the result that any company falling under this definition may escape the operation of the Act by applying to the railway assessor. There are a great number of tenement houses in Edinburgh in which flats have been sold at different times, entirely without consideration of the feu-duty. Think of the labour it would be for the proprietor of the seventh or eighth storey to have to assess his proportion of the right in the ground. The assessor would be sure to make a different assessment, and endless litigation would result. Then take the case of houses with terraces and gardens. These gardens are part of the feu and belong jointly to all the feuers in the terrace. What is to happen to them? Probably the owner bought the house at a larger price because of these amenities, but now he is to suffer, and not only to suffer, but to enter on law suits to determine which part of the garden belongs to him and how he can utilise it to pay his assessment.

I should like to impress upon your Lordships the difference between a lease and a feu. In a lease there may be unearned increment. If houses are let on a ninety-nine years lease the ground landlord's grandson, at the end of that term, does certainly reap a benefit from the increase of the town and the enhanced value of the house; but, in the case of the ground landlord who feus the land, it is absolutely impossible that either he or his descendants can ever reap unearned increment under any conditions. Under the proposed system it will be practically taking the ownership from the ground-owner. In my opinion, sales will probably take the place of feus ill the future. The result would be disastrous to the poor man, who would have to find money for the purchase as well as for the building. At present, for a feu duty of about £1 per site, a labourer can acquire land, and can always borrow two thirds of the cost of the house he erects, which would be an improving property as the land round him was built upon. He thus has his home and a stake and vote—not always wisely used—in the country.

I apologise to your Lordships for bringing before you a personal case, but it is a very good illustration. We have heard a certain amount of discussion upon "in and about" towns. Well, "in and about" in Scotland does not only mean the unbuilt-upon parts of towns; it also means land within the burgh boundary. I should like to give figures showing how it will affect my own town—Fraserburgh. The population is 10,500, and the assessable rental £48,625. It was, until a few years ago, a fishing community, and the value of the fish landed during the past year was £309,000, and the value cured and sold £500,000. That shows that they do a very large trade, but the total feus rental is only £2,400. The burgh area up to 1899, including 42 acres of common, was 192 acres; it was extended in 1899 by 92 acres, making the total 284 acres. In 1903 a pneumatic tyre works took ground outside the burgh boundary of 20 acres, with the option of another 50 acres. That year the town council and the tool works company asked me to allow the burgh boundary to be extended. The beneficial results to both parties are plain. The town got the advantage of the rates, and it was a great benefit to the tool factory because they got the benefit of the water supply and other services at a cheaper rate. The burgh boundary was increased by another 86 acres, which raised the acreage, including the common, to 370. According to this Bill the whole of the land unbuilt upon—180 acres—within the burgh boundary is liable to be claimed and assessed for building value. This, I contend, would be obviously unfair.

It has been said that this Bill has nothing whatever to do with the Henry George school of politics. I think everything shows that it had its origin in that school. There is not the slightest doubt that the parent of this Bill—the Glasgow Bill—was a rating Bill, and it is only from that that we can ascertain what the proposal of the Government is with regard to this Bill. This Bill is one of the worst ever introduced into your Lordships' House. It is so bad in principle that I should like to see it thrown out.

Moved, "That the debate be adjourned until To-morrow."—(The Earl of Mar and Kellie.)

On Question, Motion agreed to, and debate adjourned accordingly.