UNDEVELOPED LAND DUTY.

HL Deb 11 August 1913 vol 14 cc1743-9

THE EARL OF CAMPERDOWN rose to ask whether it is the fact that in many cases where land is liable to Undeveloped Land Duty, the duty amounts to 50 per cent. or upwards of the highest income obtainable for the present time; also to ask whether the Government is aware that while in town planning schemes the use of the land is restricted to certain classes of building, the Undeveloped Land Duty on such land is based on a site value calculated on the unrestricted use of the land; and to move for Papers.

The noble Earl said: The Undeveloped Land Duty is, I think, the heaviest and the most unjust of all the land taxes under the Budget of 1909–10. Undeveloped Land Duty is imposed on the difference between the value of land for agricultural purposes and the assessable site value of the same land. In order to meet this duty the owner of the land has only the income which he is at the time receiving, but he is taxed upon the capital value of what the land is assessed at. In saying that this duty amounts to 50 per cent. or upwards of the highest income obtainable at the present time I have put it at a very moderate figure, because in a great many cases it amounts to a great deal more than 100 per cent. I will give your Lordships a few instances to show how this tax operates. I may say that the instances are innumerable; they exist all over the country in the neighbourhood of every town, but I am taking some in the neighbourhood of Birmingham, because Birmingham is also under the town planning scheme.

Here is one case. It concerns three acres of land. The present income is£7 10s.; the capital value on which the duty is assessed is£2,490, and the amount of the duty is£5 4s. As against£7 10s. income the owner has to pay£5 4s. duty, and it is calculated that in fifteen years that land may be developed. That is not the only hardship, because five years hence this land will be revalued. It may not have been developed—indeed, the valuer does not expect that it will be developed for fifteen years—but at that time the capital value may be considerably increased, and therefore the duty payable would be also considerably increased. The owner of this property has to pay£5 4s.in duty out of an income of£7 10s. until such time as the land is developed, and when it is developed, if it is found to be of a higher value than it is assessed at—if the owner receives more for the land than it is assessed at at the end of those fifteen years—he will be liable to Increment Duty on the difference.

Here are other cases. Three acres of land, present income£6 10s., duty£4 13s. 9d.; 13½acres, present income£20, duty £9 5s. 7d.; eight acres, present income£12, duty£3 13s. 4d.; six acres, present income£18, duty£10 13s. 6d.; five acres, present income£11, duty£5 10s. There are not only hundreds but thousands of such cases. Here is a particularly hard case. It is an estate called the Little Aston estate, near Sutton Cold-field, eight miles from Birmingham. It consists of rough heath land of no value at the present time, but£5 is got for it for rabbit shooting. The duty on that is no less than£20, so that the owner has to pay every year four times the amount that he derives from that land. That might go on for fifteen or twenty years. Suppose that the land is then not developed, what is the result to the owner? Really his whole property has been confiscated. I have been told since arriving at the House this afternoon of a noble Lord who also has to pay in respect of a certain portion of his property Undeveloped Land Duty to the extent of four times the amount of the annual income he receives. How can a charge of that sort be justified?

Now I come to my second Question. This is a much harder case than those which I have just laid before your Lordships. When a town planning scheme is made—and a town planning scheme has just been made in Birmingham, which is the case I have in mind at the moment—it is usual to set apart certain portions of the land for certain purposes. For instance, houses are to be erected on one portion and factories are not permitted; on another portion factories are permitted and houses are excluded; and so on. So that the purposes to which the owner may put his land are restricted. Owners contend that in many cases this restriction of the purposes to which they may put their land is a very great hardship to them, and they will incur very great loss thereby. How does Undeveloped Land Duty tell in that particular case? They are taxed on the value of the land as available for purposes without any restriction whatsoever. There is, therefore, a double hardship. It is all very well to call this a tax. It is not a tax; it is an extortion. It is such a tax as would be imposed by a Turkish or Bulgarian tax-gatherer or somebody of that sort. Surely in this country we have a right to expect that the taxing authorities shall have some regard to justice and to fairness. I beg to ask the two Questions standing in my name, and to move for Papers.

Moved, That there be laid before the House Papers relating to Undeveloped Land Duty.—(The Earl of Camperdown.)

THE PAYMASTER-GENERAL (LORD STRACHIE)

My Lords, the answer to the first Question is in the affirmative if an owner lets land for agricultural purposes at a rent which is less than its value for building or trade purposes. In answer to the second Question, Undeveloped Land Duty is charged on a valuation of the land as on April 30, 1909; and, following the precedent of the Metropolitan Valuation Act, 1869, the valuation cannot be reviewed for five years. Accordingly no restrictions imposed since 1909 which depreciate the value of the land can be taken into account until the next periodical valuation.

The noble Earl will not expect me, of course, to deal with the details of particular cases of which I have had no notice, but I will deal broadly with his statement as regards the Undeveloped Land Duty being a ridiculous one. That may be one point of view; but there is another. The object of the Undeveloped Land Duty is to prevent land in or adjoining great towns from being "held up" by the owners when it is ripe for building purposes. The noble Earl quoted a case where land valued at£2,490 was let for£7 10s., and upon which Undeveloped Land Duty of£5 4s. was charged. But if the value of this land is£2,490—and apparently the valuation has not been appealed against—surely that land ought to be let at more than£7 10s. a year. It is much more likely that it could be let at£100 a year.

THE EARL OF CAMPERDOWN

The noble Lord will remember that fifteen years hence was the time stated by the valuer as that at which it might be developed.

LORD STRACHIE

When laud is "held up" and used for agricultural purposes when it might be used for more beneficial purposes the taxpayer loses in consequence. Land is not subject to the Undeveloped Land Duty unless it can be used for a better purpose than agricultural purposes, and if it can be used for better purposes and is being "held up" by the owner it is only right that the general taxpayer should not suffer. As regards the restrictions under town planning schemes, these restrictions were imposed since April 30, 1909, and, as I have explained, there are only quinquennial valuations, and nothing can be done to increase or decrease the valuation in the meantime. But this cuts both ways. It is quite possible that the restrictions may have the effect of actually increasing the value of the land. The restriction, for instance, that no public-house should be put on the land might have the effect of increasing the value, and people might be more likely to purchase land in that district. There is the question both of appreciation and depreciation, which, under the Act, cannot be settled under the five years.

THE EARL OF SELBORNE

Does not the noble Lord beg the whole question when he talks of land being "held up"? Does the noble Lord contend that all the land which is subjected to Undeveloped Land Duty could be built upon at the present moment if the owners wished it? The noble Lord knows perfectly well that for one case of an owner deliberately "holding up" his land there are ten cases where the owner could not get his land built over whatever efforts he made to let it for the purpose. Therefore the noble Lord's explanation has no justification at all. He may think it an equitable mode of raising money. That is a wholly different question. But to try and explain the position away by saying that land is being "held up" is really throwing dust in the eyes of the public. Then as regards the reply to the second Question. A man may have land available for building at a future date, and which he intends to put into the market for that purpose. That has been valued at a certain rate, and he is paying the duty upon it. But when the land is included within a town planning scheme and all the plans which he had previously made for the development of his property are altered, it may be that the value for development has depreciated. Yet we are asked to think it is just that he should be called upon to continue to pay a tax based on the supposition of a future development which has since become impossible owing to the operation of another Act of Parliament, because another man might have an adjoining property on which the Town Planning Act would have had a contrary effect.

THE EARL OF CAMPERDOWN

I do not know whether I correctly gathered the answer which the noble Lord gave me, but what I think he said was this. He spoke of land being let for agricultural purposes which might be used for other purposes. Does he mean that if a man can prove that he cannot use the land for any purposes other than agriculture he will be freed from the Undeveloped Land Duty? There are plenty such cases. The noble Lord talks of land being "held up." Lord Selborne has just exposed the absurdity of that answer. I know instances in which the valuer has said that the land may not be developed for forty years, and yet the duty is charged upon that land. The Chancellor of the Exchequer refers to this duty as "only a half-penny in the£." "Who can grudge," he asks, "a halfpenny in the£?" That is a mis-statement of the facts. This is a tax upon capital, and I confess that of all these land taxes this one appears to me to be by far the most unjust.

THE LORD PRIVY SEAL AND SECRETARY OF STATE FOR INDIA (THE MARQUESS OF CREWE)

My Lords, it seems to me that two things are being somewhat confused—in the first place, whether, as the noble Earl on the Front Bench put it, this is a fair and reasonable way of raising money; and, in the second place, whether in particular cases the Act is being fairly and properly administered. Those are two entirely different questions, but they seemed to suffer a certain confusion in the noble Earl's speech.

THE EARL OF CAMPERDOWN

I did not say anything as to the Act being unfairly administered. What I said was that the Act itself was unfair.

THE MARQUESS OF CREWE

That is to say, the noble Earl does not think that this is a proper and reasonable way of raising money. It has never been contended on this side of the House that this particular tax is only to be applied to cases in which it could be shown that land which might be profitably built on tomorrow is being by deliberation kept out of the market. There are no doubt a certain number of cases where land which might be sold or let for building is "held up" because people think that the building estate as a whole will increase in value, and that the revenue which they sacrifice by postponement will be more than made up to them by the enhanced price or rent which they may get in a certain number of years. There are cases of that kind. But there are also cases in which land would not be considered to be what a speculative builder would call "ripe for building," but at the same time, as we venture to think, an impost of this kind might very properly be charged on it. On the other hand, suppose the owner of the land can show that it is definitely impossible for him to obtain more than an agricultural rent or more than the price of agricultural land if the land actually is put up, then in such a case, if he were to appeal, he would, I have no doubt, be excused the sum which might mistakenly have been charged. It cannot be denied that in a conceivable or isolated case a mistake is liable to be made, but such a mistake, we hope, would be corrected on appeal. I have no desire to renew the old Budget argument of whether this tax on undeveloped land is a reasonable or an unreasonable one. I confess, so far as my recollection goes back, I had thought that of the various taxes proposed in the Budget of 1909–10 this one was considered by noble Lords opposite to be the least objectionable as compared with the Increment Duty, or in some cases, perhaps, the Mineral Rights Duty. I was under the impression that this particular placing of a tax on what is called in a somewhat vague expression "building land" was considered by noble Lords opposite to be in the main not unreasonable.

THE EARL OF SELBORNE

I would remind the noble Marquess that the operation of the Town Planning Act on the Undeveloped Land Duty was not part of the original discussion. That Act was passed subsequently.

LORD STRACHIE

If before 1909 the land had been laid out for a garden city and the restrictions had already been imposed, then it would not have come under valuation without restrictions.

THE EARL OF SELBORNE

My point was that the noble Marquess did not think we should reargue the question of the Budget of 1909–10, and I ventured to remind him that the effect of the Town Planning Act was subsequent to that and could not then have been foreseen.

THE MARQUESS OF CREWE

That is quite true; but, as my noble friend Lord Strachie has said, land which was actually laid out at that time for building development in the character of a garden suburb or a garden city was given a large measure of freedom from these particular imposts.

Motion, by leave, withdrawn.