§ LORD DESBOROUGH
My Lords, I rise to call attention to the action of the Commissioners of Inland Revenue with regard to the Lumsden case and others governed by the same judgment, and to move for Papers. This may at the outset seem rather a trivial matter, but I can assure your Lordships that it is not. It is causing discontent and heartburning to, I think I may say, tens of thousands of builders, property-owners, and others throughout the country, and it is quite time that Parliament stepped in and gave some decision in the matter. I raise this in no Party spirit; in fact, I do so entirely from the point of view of giving Parliament the opportunity of carrying out the intentions of the Liberal Government which passed the Budget in the year 1909–10.
The point, very briefly, in the Lumsden case is this. It was admitted that although there was no increase in the value of the site Mr. Lumsden had been charged by the Commissioners of Inland Revenue with Increment Value Duty. The whole question turns on whether this Increment Value Duty which has been charged to Mr. Lumsden under threats for some years past is really payable under the intentions of the Parliament which passed this legislation at the time. It might be well at this point if I remind your Lordships of the intention of the Act when passed by the then Chancellor of the Exchequer. In the year 1909, in introducing the measure, Mr. Lloyd George said—We propose to charge the duty only upon the additional value which the land may hereafter acquire. The valuations upon the difference between which the tax will be chargeable will be valuations of the land itself—apart from buildings and other improvements—and of this difference, the strictly unearned increment, we propose to take one-fifth, or twenty per cent., for the State.That is to say, it was clearly laid down that the Increment Value Duty would accrue only in those cases where there had been an increase in the bare value of the site. The then Attorney-General (Sir William Robson) was even more emphatic on the point. He said—This is a tax on site value. The right hon. gentleman has again and again spoken as if this were a tax on buildings. Really the value of a building—that is to say, the cost of a building—whether it be great or small, whether it was a wise or a foolish expenditure, does not affect the value of the site as a site. That is all we are taxing. First of all, we ascertain what is the site value as on April 30. 1909. Having ascertained that, we compare with it the site value when the tax comes to be assessed.726 Mr. Lloyd George addressed a conference of builders on October 6, 1910, and used the following words—Nothing which was due to brains, capital, or expenditure was to be taxed, and if any lawyer told him that the Act did not carry out the intention he had mentioned he was perfectly willing to put in words to that effect in the Budget. He would accept any Amendment, no matter from what quarter of the House it was moved, to make the point clear.There are many other quotations which I could give, but I will just quote from a letter written front Treasury Chambers, Whitehall, on November 1, 1910, and signed by Mr. Lloyd George's Private Secretary—Increment Value Duty will only be chargeable on any portion of the increased value which is due to increase in the value of the land as it would be if divested of buildings and improvements.I think it is quite clear, therefore, that the intention of Parliament in passing the Act as regards increment Value Duty was only to tax that increase in value which had occurred through no exertion of the owner but was due to the increase of population or the exertions of his neighbours. Nothing was said, of course, about detriment due to the putting up of gas works or the making of sewage farms. Time point is that when the Increment Value Duty was imposed it was imposed solely and entirely on the increment value of the site divested of buildings and improvements, and that the increased value due to brains, and so on, bestowed upon it was not to be taxed.
Now I come to the case of Mr. Lumsden, whom I look upon as a sort of builders' Hampden. There are tens of thousands of cases depending upon this case of Mr. Lumsden. What happened to Mr. Lumsden? He bought a piece of land and upon it built a house and made a profit. Of course, it is impossible for builders or anybody else to go on in this country if they never make a profit. You must remember that the Government tax the profit in building, which is very speculative. But if you ever make a loss they never offer to pay one-fifth of that in order that you can go on and make a profit from some other building plot. As I say, Mr. Lumsden bought this piece of land and on it built a house. He afterwards sold the house and the land. It was agreed at the time by the representatives of the Crown when they came to tax it that there had been no increase whatever in the value of the site. Still the 727 Commissioners of Inland Revenue contended that as Mr. Lumsden had made a profit on the transaction they were entitled to twenty per cent. of it. This case came into Court. It came first of all before the Referee. Then it was taken to the High Court, and unfortunately it was there held that, owing to the obscurity of the wording of the Act—though the intention of Parliament was plain to everybody—and owing to certain manipulations on the part of the valuers, Mr. Lumsden should pay up part of his profit to the Crown, which the Crown advocate said he would no doubt gladly do, and he hoped Mr. Lumsden would make many more profits in time to come which they would be glad to share with him. In point of fact, he had to pay a tax of twenty per cent.—namely, an extra duty of 4s. in the £—on the profit he had made. The case was taken to the House of Lords, and the four Judges were divided on the matter. Two were in favour of this demand being made by the Commissioners of Inland Revenue on Mr. Lumsden, saving that it was a justifiable demand; and two were against it. And as the House of Lords was divided the judgment of the lower Court was upheld, I think unjustly, and so do many property-owners and builders throughout the length and breadth of this country, who hold that it was the intention of the Act to tax only a rise in site value. One of the Judges who heard the case, Lord Justice Moulton, spoke about the matter very strongly, because those who go into this have some very severe conundrums to deal with. There is a very great difference between the statutory site value and the value of the site. An ordinary person would think them the same, but they are not. The value of the site is the real value, but the statutory site value is the value which the land valuers representing the Crown put upon the site with the object of getting hold of any profits the builders may make. That is practically what it comes to. This is what Lord Justice Moulton said about it. He said that in future a "Catechism on the Laws of England" will read thus—Question: What is the increment of the site value of land when the value of the site has not changed?Answer: It is the difference of opinion of two sets of Government valuers as to the value of the owner's total interest in the estate.That is a new doctrine introduced into English law in order that the Land Depart- 728 ment of Inland Revenue may justify their existence by getting sums of money into the Treasury even in cases where it is admitted that there has been absolutely no rise in the value of the site.
What happened? It was felt that Mr. Lumsden and those with him had been badly treated; and so the late Chancellor of the Exchequer, in the Revenue Bill of 1913, Clause 2, introduced a passage, to quote his actual words, "to protect people like Mr. Lumsden." But why should Mr. Lumsden want protection if he had not suffered any injustice? However that Revenue Bill did not pass, and the same fate befell the Revenue Bill of 1914, in which there was a similar clause—Clause 4—"to protect people like Mr. Lumsden." On July 23, 1914, Mr. Austen Chamberlain drew the Prime Minister's attention to Lord Justice Moulton's remarks and to various other remarks which had been made about the Commissioners of Inland Revenue in this case, and also to the fact that in the highest Court of Appeal opinion was divided; and he asked the Prime Minister whether' anything was proposed to be done considering that the two Revenue Bills had failed to pass. The Prime Minister promised to introduce a one-clause Bill to deal with this particular matter. There you have in Parliament practically three attempts—two Revenue Bills and a one-clause Bill promised by the Prime Minister and backed up by the Financial Secretary of the Treasury—to deal with this particular case.
But what do the Commissioners of Inland Revenue do? The Commissioners, after these three attempts to put the matter right, threatened Mr. Lumsden that if he did not pay forthwith the £22 which he had been charged and £249 costs they would take proceedings and sell him up. That is the state of the case now. Mr. Lumsden and tens of thousands of others have this threat hanging over their heads. It is perfectly well known that throughout the length and breadth of the country a great many others are in similar case to Mr. Lumsden; that is to say, builders and other property-owners are being threatened that if they do not pay up under the Lumsden judgment—although three times it has been stated in Parliament that it is going to be reversed—proceedings will be taken against them forthwith. And I can assure your Lordships that fighting the Crown is not a cheap amusement.
729 I will now take the Foran case—the case of the executors of Canon Foran, which was heard in this House the other day. The Commissioners of Inland Revenue were very severely "hauled over the coals" in the highest Court of Appeal for going on with cases when they must have known they had no case, and for dragging this unfortunate litigant from Court to Court. But the injustice is that you cannot claim costs against the Crown. Supposing you owe £22; the Crown may pile up costs against you, and they do. It is, I feel absolutely confident, contrary to the intention of Parliament that these men should be bullied and threatened that if they do not pay up the terrors of the law will be let loose on them. As I say, you have to be very careful nowadays with the Commissioners of Inland Revenue. There was a time when you could actually treat them like friends and go to them for advice, but since this new land legislation that is all changed. Now, when one gets a document from the Inland Revenue it is a hundred to one that there is a trap in it, and it is sent for the purpose of getting money out of one by hook or by crook. For instance, in the Aran case the other day one Judge said that the document on which they attempted to sue this unfortunate trustee was a sort of document that one would expect at the hands of a company promoter, but not from a respectable State Department. Another Judge also spoke very strongly to them for bringing this man through Court after Court after they had forced him to sign the document—they practically forced him, for they said that if he did not sign he would incur a penalty of £50. The document, according to the House, was an illegal one. But because he had signed it the Commissioners said, "You cannot object; you have to look after that." Under a false interpretation of the intention of Parliament, on which the Highest. Court of the land has pronounced, these people all over the country are to be mulcted, although the Government have said three times that they would put the matter right.
The solution of the matter seems to me to be simple. The wrong is admitted. Yet at the present time men are being pressed to pay up money which they do not morally owe. We have a Party truce, but no Party truce ought to be employed for such an object as that. If there had been no Party truce, very strong objection to 730 this would have been taken in Parliament. But on account of the truce, perhaps, nothing has been said about this. What I respectfully suggest is that either the promised one-clause Bill to remedy the case of Mr. Lumsden and people like him should be introduced and passed forthwith, or else until the war is over and Parliament, has time to deal with the matter those who are in the position of Mr. Lumsden should not be pressed to pay Increment Value Duty where it is admitted that there has been no increment in the value of the site. I hope that one of those alternatives will be adopted. I beg to move.
§ Moved, That there be laid before the House Papers relating to the action of the Commissioners of inland Revenue with regard to the Lumsden case and others governed by the same judgment.—(Lord Desborough.)
§ LORD HYLTON
My Lords, I do not know whether the noble Lord who has brought forward this Motion was in the House of Commons on a certain occasion when the present Lord Spencer rather astonished the House by declaring that he was "not an agricultural labourer"; but I hope I may be allowed to paraphrase those words and, in replying to the noble Lord, say that I am not a Minister of the Crown. I answer as well as I can for the Treasury in this house, but I know the noble Lord is too generous to look upon me as one responsible either for the Lumsden judgment or for any of the legislation which preceded it. But speaking on behalf of the Treasury and the Inland Revenue Department, certain facts and figures have been furnished to me with regard to this matter which I will endeavour to put before the House.
I think the noble Lord opposite put the whole matter quite accurately and fairly before your Lordships with regard to the Lumsden judgment. But the Treasury hold that under the Finance (1909–10) Act, 1910, Part I, as drafted, a claim for Increment Value Duty can arise on the occasion of a sale, lease, etc., not only where there has been a genuine increase in the value of the site of land, but also where there has been a sale or lease, etc., at an excessive price. This view has received the support of the Courts in the Lumsden case. As Lord Desborough very truly remarked, almost immediately after the passing of the Act it was contended that this view 731 that Increment Value Duty became payable in such cases such as I have mentioned was not the intention of Parliament—certainly the words of the then Chancellor of the Exchequer would appear to support the noble Lord's view—and that the real intention of Parliament was to charge duty only in cases where a genuine increase in site value had taken place.
So much apparently was the late Government impressed with the justice of this contention that the then Chancellor of the Exchequer, who is at present Minister of Munitions, agreed to introduce legislation on the subject, and a clause designed to exclude elements other than genuine increase in site value from the scope of the charge was embodied in the Revenue Bill of 1913. That Bill was introduced into the House of Commons on May 7, 1913. The Bill was dropped, but Clause 4 of the Revenue Bill of 1914 was framed to give effect to the same principle. Under that clause a taxpayer had the option in certain circumstances of requiring the Commissioners to ascertain the site value on the occasion of a sale or lease on a basis other than that laid down in the Act of 1910; and under this method a taxpayer could, if he so desired, secure that duty would only be charged where there had been a genuine increase of site value, and that he should not be charged to duty in cases where an excess of price paid, as distinct from a real increase of value, was reflected in the site value. It was provided that this clause should have retrospective effect, but only so as to cover cases arising after May 7, 1913, the date of the introduction of the Revenue Bill of that year. The Revenue Bill of 1914, as Lord Desborough told your Lordships, was eventually not proceeded with, but the Prime Minister promised to bring in a one-clause Bill giving effect to the proposals of Clause 4, but owing to the outbreak of war this Bill has been postponed. The noble Lord did not mention the fact that, in answer to a Question in the House of Commons, Mr. McKenna said that he would make inquiries as to whether it was an agreed matter, and, if so, would see about introducing a Bill.
But meanwhile the Commissioners of Inland Revenue, with the consent in the first place of Mr. Lloyd George and since of the present Chancellor of the Exchequer, have agreed as a concession not to make assessments to duty at present in cases 732 which fall within the terms of Clause 4 of the Bill of 1914. These cases are for the time being held in abeyance. But just as Clause 4 was to operate only in respect of cases arising after May 7, 1913, so this concession only extends to occasions of sale, etc., which took place after that date. In cases arising before May 7, 1913, the Commissioners are making and have made assessments to duty in accordance with the provisions of the Act of 1910 and are pressing for payment of the duty assessed. It has been contended, I know, that as the Government have decided to legislate to remedy what is considered an injustice, it is unjust to take an arbitrary date, such as May 7, 1913, and grant a concession only in respect of cases arising after that date. But, generally speaking, I believe that amending legislation is not retrospective at all, and in this respect the Crown and the taxpayer are treated alike. The Treasury consider that to go back to the earlier date of 1910, when the original legislation which it is desired to amend Was first passed, would lead to many claims to reopen assessments long since settled, and in their opinion such a course would be destructive of all finality and might reduce the administration of the law to a state of complete chaos. In being retrospective Clause 4 of the Revenue Bill of 1914 was an exception to the rule. It was retrospective in favour of the taxpayer for the special reason that it was a resumption of Clause 4 of the Revenue Bill of 1913, which had suffered shipwreck owing to quite extraneous circumstances. Except for this definite fact there would have been no question of making the provision of 1914 retrospective at all. The Treasury hold that clearly then there was no reason to date it further back than May 7, 1913, the day on which the Revenue Bill of that year was introduced.
Now I must say a few words with regard to the Lumsden case itself. The course of the litigation Lord Desborough quite accurately described to your Lordships. The Crown was successful in the High Court and in the Court of Appeal. Then, as Lord Desborough told your Lordships, in the House of Lords the opinion of the Court was equally divided. The Court of Appeal judgment therefore stood, and the appeal was dismissed, but without costs. The effect of this was that the Crown was entitled to recover from Mr. Lumsden its costs in the High Court and in the Court of Appeal, in each of which it was 733 successful, and also part of its costs before the Referee. There was about the same time another case, to which the noble Lord did not refer—a case somewhat on all fours, called the Walker case; and in the Walker case the Crown did not press for costs. Mrs. Walker was successful in the Scottish Valuation Court. The Crown took the case to the House of Lords, and the Chancellor promised that, if successful, the Crown would pay the reasonable costs of all parties in the House of Lords, on the ground, I believe, that Mrs. Walker was a widow of limited means. But in the Lumsden case it was held that Mr. Lumsden was not entitled to the same treatment. There was no plea of poverty advanced, and the Land Union, of which the noble Lord and myself are members, was behind Mr. Lumsden; and therefore there was no occasion to give Mr. Lumsden his costs.
The noble Lord, in his concluding remarks, referred to the Foran case. That case, as your Lordships may be aware, was settled against the Crown in this House a short time ago, and the judgments have been reported in the Press. But I think it is only fair to the Treasury that the House should know that numerous applications by owners to amend their returns on Form 4 by rendering subsequently a statement of the nature and value of their minerals have been received by the Commissioners, and that wherever it is clear that the taxpayer has been misled by the form of return, and the underlying intention of the Act would justify it, it has been and still is the practice of the Commissioners to accede to the request, and on receipt of a statement of the nature and value of the minerals to proceed to make the necessary valuations. No such opportunity was afforded in the Foran case because the Commissioners considered that at April 30, 1909, there was in fact no value in the minerals in question, and that in these circumstances to allow any question to be raised as to the valuation of the minerals, already valued automatically at nil, would serve no useful purpose.
§ THE LORD CHANCELLOR
My Lords, I recognise that in attempting to embark upon this debate I am treading upon cinders which barely conceal a very glowing and intense fire. It is impossible to discuss this question without having feelings aroused on one side or the other as to the justice of the tax which is the 734 subject of debate. I will do my best to avoid saying anything to defend the general policy of the Act of Parliament which is the subject of criticism, because I recognise that the noble Lord himself intended to avoid doing anything of the kind. I should not have interfered at all had I taken part judicially in either of these decisions, because I cannot help thinking that it would not tend to strengthen the character of your Lordships' House for judicial impartiality if judgments delivered by members sitting in a judicial capacity were afterwards canvassed in a general political discussion.
I do not think I should have intervened at all but for two things that the noble Lord said. He said, first of all, that the figures were "manipulated" by the Commissioners; secondly, that the Commissioners of Inland Revenue by "questionable methods were attempting to obtain taxes to which they were not entitled." I do not really think the noble Lord meant what his words suggested, but the words have an ugly ring and are apt to lead people outside to imagine that in dealing with a Government Department they are being tricked and unfairly dealt with. From the earliest days of history the Inland Revenue Commissioners have never been popular, but I have yet to learn that the Inland Revenue Commissioners of this country are dishonest or that there is anything questionable in their methods in the sense which the noble Lord's words suggested, although I do not really think that is what he meant.
Let me say a word about the "manipulated figures" and the "questionable methods" to which the noble Lord referred. In the case of Lumsden, the original figures of the valuation had been agreed between both parties. There was no manipulation at all. It was a perfectly fair investigation—perfectly fair figures fixed by one side and agreed to by the other; and there was no dispute in the whole history of that case as to the fairness, justice, and accuracy of the figures. What happened was something for which the valuers themselves were in no way responsible. It was that when the property was sold and when the duty assessable on the occasion of the sale had to be fixed, owing to the construction of the Statute it had the result that you began with the price which the man had received for his property, and from that you proceeded to 735 make deductions according to certain principles of valuation laid down by the Statute, which caused the profit he had made to he thrown on to the site value which was the subject of taxation. I agree with the noble Lord that this was stated not to he the intention of the Statute, but it is not fair to say that anybody has been guilty of manipulating figures. There was no figure in dispute in the whole case. The only thing that was in dispute was the construction of the Act of Parliament, and that was a matter essentially and eminently for the Law Courts to decide, and they decided it in accordance with what the Judges regarded as the true meaning of the Act.
§ THE LORD CHANCELLOR
I cannot help regretting that the noble Lord should refer to what Lord Moulton said in this case, for I cannot help thinking that it is likely to provoke observations which I do not desire to make. Certainly Lord Moulton, in one or two sentences that he used, departed from the ordinary judicial practice which I trust will always obtain in your Lordships' House in dealing with judgments on controversial issues. But I pass it by. I say that on the construction of the Act of Parliament—a disagreeable and uninviting subject—the Judges who decided that Mr. Lumsden was wrong were many in number and great in eminence, and the fact that other people take a different view means no more than that the Act of Parliament was obscure. I do not complain that the noble Lord should say that it ought to be amended. All I was venturing to answer were suggestions that at the bottom of Mr. Lumsden's difficulties lay some harsh, improper, and unfair action on the part of the Government's servants. That is not the case.
The same is true when you come to deal with the case of Mr. Foran. It has been said in this House more than once with regard to this case that the litigant was "dragged from Court to Court by the Crown"—in fact, it was said that a more pitiable spectacle than that presented by the case of Foran could not be imagined. But what are the facts? Valuations were not made as to the minerals by the people on whom the form was served. They deliberately abstained from making the 736 form out. They may have been perfectly right, but nevertheless they abstained. One of the persons concerned was a lawyer, who was not very likely to be frightened by the words on the form. As I say, they abstained from making it out; and some of your Lordships' House sitting on the case thought the form had not made it plain what the effect of omitting to make the return would be. What resulted was this, not that the Crown took proceedings against these people at all, but that they took proceedings against the Crown and asked for a declaration that the form was bad and need not be regarded. The Crown "dragged" nobody. When the case came before the Courts it was open to the Crown —I will not say how their contention might have fared—to say "This is not the way to challenge these proceedings," but they did not take that view. The Crown met the man and had the case decided in the simplest and most inexpensive manner possible. That is not dragging a man into Court, nor is it treating him harshly. What resulted has been lost sight of in these discussions. The learned Judge who decided the case decided in favour of the Crown. It was not a case in which the Crown was held to be wrong from beginning to end. The learned Judge in the Court of first instance was Mr. Justice Warrington (as he then was), a learned and eminent Chancery Judge. All that has happened only shows that the Act is obscure; it does not show that anybody was guilty of questionable methods" or of any "manipulation of figures." I ask the noble Lord to permit me to suggest to him that the words which he used might be repeated outside with a meaning that I do not think he ever intended them to bear. But if he did intend them to possess such an ugly meaning, then I protest that they are not justified.
THE EARL OF CAMPERDOWN
My Lords, I do not desire to say anything with regard to the construction of the Act of Parliament, for with that I have nothing to do. Nor do I intend to attack the proceedings of the Commissioners. What I have to do with are the facts of this case and with nothing else. It has been admitted that the result has been to do an injustice to Mr. Lumsden. The Chancellor of the Exchequer said so, and the Prime Minister said so; and it was intended to introduce a clause to put the matter right. I must confess that I do not see, because 737 an injustice was done before May 7, 1913, that it was any the less an injustice than if it had been clone after that date. What we have to do, it appears to me, is to see what action is to be taken with regard to an injustice which everybody admits has been done. It was only by an accident in 1913 that the Bill of that year was not passed to put this right. The Inland Revenue Commissioners appear to be threatening Mr. Lumsden at the present time with penalties if he does not pay up upon a judgment which the Chancellor of the Exchequer himself said he never intended and was perfectly willing to put right. Now are the Commissioners of inland Revenue going to enforce this judgment? It seems to me that if they do they will be committing a very great injustice. The noble and learned Lord on the Woolsack did not answer either of the questions which were put to him by Lord Desborough, which were—Are the Government willing to bring in a one-clause Bill, as they said they would? Or are they willing to say that further proceedings are not to be taken on this and similar cases until Parliament has had an opportunity, after the war, of considering the matter? I must say that as far as I am personally able to form a judgment from what I have heard, I think that if one of the two courses proposed by Lord Desborough is not adopted a very great injustice will be done, and that to that extent the Inland Revenue Commissioners will have enforced the law in an exceedingly arbitrary manner.
THE LORD PRESIDENT OF THE COUNCIL (THE MARQUESS OF CREWE):
My Lords, I do not desire, being a layman, to engage in any discussion on the legal aspect of this question, but it appears to me that as it was stated by my noble friend who presented the case for the Treasury (Lord Hylton) the point at issue is simply this, whether the terms of an Amending Bill, which would cause cases parallel to those of Mr. Lumsden not to be subject to Increment Value Duty, should cover all cases dating from the Finance Act of 1910, or whether they should cover only those which have arisen since May, 1913, when the intention of altering the law was first promulgated in another place.
My noble friend opposite (Lord Desborough) suggested that one of two courses might be taken, either that a Bill 738 of the kind suggested might be introduced at once, or that until that time no pressure should be put on anybody to pay the duty which was claimed by the Inland Revenue Commissioners. If the second course were taken it would clearly beg the question which I just now described as being at issue, as to whether the terms of an Amending Bill should be retrospective as from 1910 or only from 1913, and I do not know that the Treasury would be prepared to adopt that course. On the other hand, I think my noble friend will agree that the introduction of an Amending Bill at this moment—at which, of course, the particular point would be raised and discussed as to how far it is legitimate to make the Bill retrospective for the whole period or for only part of it—might give rise to a great deal of animated discussion on both sides on the general principles governing the whole business of land valuation. That would not be a desirable outcome in itself. We do not desire to see this vexed question connected with land minutely discussed at the present moment by persons who hold very strong views on one side or the other, because a discussion of that kind would be an interference with the business in which most of us in one capacity or another are endeavouring to assist—that of carrying on the war.
I think that perhaps my noble friend Lord Desborough overstated his case when he spoke of "tens of thousands" of persons as being affected by the Lumsden judgment. Supposing it to be accurate, as have no doubt it is, that no pressure is put upon anybody whose liability begins after the spring of 1913, there could hardly, I suppose, in the two years from 1910 to 1912 have been cases concerned with this particular form of alleged increment numbering so many thousands. I have no doubt that the Treasury will consider the particular arguments that have been put forward by my noble friend in favour of a relaxation of pressure upon those whose cases are precisely parallel with that of Mr. Lumsden; but it is, of course, impossible for me, without consulting the Chancellor of the Exchequer, to know what view will be taken as regards those particular individuals.
§ VISCOUNT PEEL
My Lords, I think it is a little hard if nothing is done in the case of Mr. Lumsden himself; because, after all, it is admitted that the Government 739 wish to alter the law and not to charge builders' profits. It has been practically decided, I understand, by the Government that they will deal in a Bill with all cases in which the same principle is involved which have arisen subsequent to a certain date. It is not fair that the poor victim, the man who is the cause of this change in the law, should be one of the few people exempted from the benefit of this change in the law. I fail to see how something which was unjust subsequently to a particular date in May, 1913, can be fair at a date previous to that.
The noble and learned Lord was rather hard on my noble friend on my right (Lord Desborough) in condemning the statements which he made, about the way in which the Inland Revenue Commissioners had acted, because my noble friend was only following very humbly, not only in the steps of Lord Moulton, but in the steps of another very eminent member of the Judicial body of your Lordships' House, who, I think, in one of these cases compared the action of the Commissioners of Inland Revenue in issuing a particular form with that of a company promoter in issuing a prospectus. Of course, the phrase may have been used in a laudatory sense. I myself have been concerned with the drawing up of prospectuses for companies, and I believe they were admirable. It may be only a mistake on the part of my noble friend in mistaking what were a few words of panegyric for some observations of criticism.
I think, further, that the noble and learned Lord on the Woolsack was a little unfair in criticising my noble friend on the Foran case. The noble and learned Lord said, quite truly, that those proceedings were not initiated by the Crown but by the unfortunate person who had been taxed; and therefore he seemed to suggest that it was not the fault of the Crown but a sort of superfluity of naughtiness on the part of the person taxed to try to challenge the action of the Commissioners of Inland Revenue. What were the facts? This unfortunate person was obliged to go to the Courts for a declaration because of the way in which he was treated by the Commissioners of Inland Revenue. Had he not gone to the Courts he would have had to pay; and he was forced to go to the Court by a document which was subsequently stated by the highest Judges in the land to be "worthy of a company promoter." Therefore my noble friend 740 was, I think, hardly dealt with by the noble and learned Lord on the Woolsack in respect of his criticisms of the Commissioners of Inland Revenue. I did not understand my noble friend to say that they had been guilty of any sharp practice, or anything of that sort. But I think the case was a hard one.
I was interested to hear the Lumsden case brought up again. Those who were in another place at the time are familiar with all the arguments that were used when that case was discussed there. The difficulty arose in this way. It may have been owing to the deficiencies of the Act of Parliament. But it arose from the Inland Revenue Commissioners or those dealing with the matter refusing to appreciate the difference between the value of the composite subject and the different items making up the composite subject. For instance, supposing the value of the land was £600 and the value of the house £1,400. They assumed that the value of the composite subject was £2,000. Everybody knows that the two elements added together may make a far more valuable subject. And in those cases, when this composite subject nominally worth £2,000 was sold for, say, £2,400, the Commissioners argued this way. "The house itself was worth £1,400. Everybody knows that a house does not improve but rather diminishes in value as it gets older," which is true with certain exceptions. "Therefore," they said, "if the value of the house has not increased but decreased and there has been an increase in the total value, it must be due to the land. Consequently the land has increased in value, and we ought to tax the amount of the increment." They also assumed, in making this statement, that their own valuation was correct and that they did not undervalue the property; whereas, of course, most ordinary persons assume that the market price given for a particular article is probably a better test of the value of that article than, the opinion of a valuer who has put a price upon it before.
It was stated over and over again in another place by the Chancellor of the Exchequer, and it was also stated, I think, by him in response to a deputation of builders, that in no circumstances were builders' profits to be taxed. But builders' profits have been taxed over and over again. Although I have no doubt that the Inland Revenue Commissioners in fixing these profits acted with perfect good faith on their 741 own interpretation of the Act, they certainly acted in direct contravention of the statements of the Chancellor of the Exchequer. I must say that it seems to me incredible that the Government, if they are going to put this matter right, should put a statutory limitation of a fixed date in 1913 and not extend the relief to cases before that date. If the noble Marquess thinks that there will be difficulty in introducing legislation in the House of Commons at this time, that is another matter. But, if I may say so with all respect, I think this is a matter pretty well admitted between the two sides. On neither side of the House is there any wish to tax builders' profits, which was contrary to the original idea and strongly repudiated by those very extreme men whose existence was referred to the other day by the noble Marquess as a good reason for not dealing at this time with the curious anomalies of the land taxes and the cost of valuation. If it is the fact that there is a difficulty about introducing legislation, I think a little less pressure might fairly he exercised by the Commissioners both in cases previous to May, 1913, and in those subsequent to that date.
§ LORD DESBOROUGH
My Lords, I believe I have the right to say one or two words in reply, as I have made a Motion. I should like to explain my reference to what was said by Lord Justice Moulton. That point was raised in the House of Commons by Mr. Austen Chamberlain, who asked the Prime Minister whether his attention had been drawn to the Judge's observations. Therefore, as the Prime Minister of this country was asked in another place whether his attention had been called to those particular remarks, I think I was justified in also calling the attention of this House to them. And I do not think I said anything much stronger than was said at the other end of this Chamber by the Judges of Appeal with regard to the case of the executors of the late Canon Foran.
I asked two things. One was that a one-clause Bill, which has already been promised by the Prime Minister, should be, by consent, introduced to deal with all these cases. I do not believe there would be any difficulty in passing such a measure through both Houses. And if that cannot be done I think some limit should be put upon pressure in these cases. My information is that there are, not 742 thousands of cases, but tens of thousands of cases, of men who are expecting threats of writs from the Commissioners of Inland Revenue—as happened to Mr. Lumsden—unless they pay up what they do not think they really owe under the Act of 1909.
I cannot understand why May 7, 1913, should be such a sacred date. If it was wrong to tax the brains and the money and the improvements of builders after 1913, I cannot conceive anything that would make it right to tax them between 1909 and 1913. It is a question of principle. To include those cases may, of course, cause a great deal of inconvenience as the money has been paid. People find it very difficult to get money back when once it has been paid. I think the Commissioners of Inland Revenue in this particular department want to show something for the large sum of money they have spent. They have spent £3,000,000, and land-owners and others have spent £3,000,000; there is £6,000,000 gone, and that there is very little to show for it I think is admitted on both sides. I do not consider that this matter is left in a very satisfactory situation. We have had no assurance on either of the two points I have raised. We have not been promised a Bill, nor any discontinuance of what we think are unjust demands for money.
§ LORD DESBOROUGH
The Papers I should like very much to get are as to the number of cases affected by the Lumsden judgment which are still outstanding. There has been some doubt expressed as to the number. It could be got from the Commissioners of Inland Revenue.
THE MARQUESS OF CREWE
We will certainly ask the Treasury whether they are able to supply the information which my noble friend wants. He will understand that it is impossible for us to say here whether it will be available or not, but we will ask them whether they can furnish it.
§ VISCOUNT MIDLETON
My Lords, I imagine that my noble friend Lord Desborough will not press the matter further. It is not, however, a very satisfactory conclusion, and I can hardly believe that His Majesty's Government are quite satisfied as to the position.
§ Motion, by leave, withdrawn.