PATRINGTON SMALL HOLDINGS COLONY. (Hansard, 4 July 1918)

§ THE JOINT PARLIAMENTARY SECRETARY OF THE BOARD OF AGRICULTURE (LORD CLINTON)
The noble Viscount has asked me, on behalf of the Board, to agree to a Return showing the position of this colony at Patrington at Lady Day, 1918. Under the Act of 1916 it is our duty to submit to Parliament in each year the results of the colony working. A Return—I admit a very incomplete Return—has been submitted, and last night I gave the noble Viscount certain further particulars in my possession. The noble Vicount is not satisfied with those particulars, for two reasons. Firstly, because the Return includes two harvests. That is perfectly correct, the time being for eighteen months from the date on which we took possess in, estimated forward to Michaelmas of this year. It seemed to be the only way in the circumstances by which I could put the proper information before the House. It is true that it entails two harvests. It is equally true that it entails two expenses of working, as applicable to both those harvests, and in giving the Return I stated that it was for eighteen months; but in showing the profits I allocated them to the or e year only. That is to say, I took one-half or two-thirds of the total sum by which the credit side exceeded the debit side and gave that as the profits of the year.
The noble Viscount now says that the Return should be to Lady Day. We discussed that question last night, and I said that in my opinion, for purely grain-growing farms like Patrington the Michaelmas term is much the better term to which to make up our accounts. That is the opinion of the Board. As your Lordships know, the Board have a considerable number of farms in their possession, some Lady Day and some Michaelmas entries, and it is an obvious convenience to settle them all up to the same date. There is a practical difficulty, which I would point out, at this moment in endeavouring to comply with the suggestion of the noble Viscount that we should bring the accounts up to the Lady Day which has just passed It is perfectly clear that merely to put the 639 cash statement so far as payments and receipts are concerned can be done quite easily, but your Lordships know very well that such a statement would in no sense disclose the position of the farm, because the bulk of the value of the farm is included in the valuation. How I am to go back three or four months now to Lady Day and value the stock and crops as they existed at that moment, I really do not know. I think it is a serious practical difficulty, if I am to do anything more than make a guess at the whole thing; but, apart from the unpractical nature of it, the labour and cost and time involved would be out of all proportion to any advantage which your Lordships would get from it.
I submit that our proper course is the one that we have suggested, which is to lay before the House, immediately the Michaelmas year is ended, a full account of the cash, valuations, and all transactiens if the farm up to that date. That complies with the Act, and I am quite certain it will give the House much more information than any partial statement we could give at this moment. I am, of course, perfectly ready to give the noble Viscount the statement from which I quoted last night and all the data upon which the accounts are based. I hope that this will be satisfactory to the noble Viscount.

LORD BALFOUR OF BURLEIGH
11v Lords, I intervene with some reluctance. It is no use dividing on this now, because there are not thirty members in the House and the result would be that it would be postponed to another day. On one point I am in great sympathy with the noble Lord who represents the Board of Agriculture, and that is that the financial year from Michaelmas to Michaelmas is a very much better period for English farming than any other period of the year. In Scotland, we should take it from Martinmas to Martinmas, November to November, but then our harvest is later and the work following on it is not all done, potatoes are not gathered, and so, on. I agree that Michaelmas to Michaelmas is better for the debtor and creditor accounts of English farms. But—and this is one point on which I was not quite satisfied—the noble Lord did not seem to give a promise that his Return, whenever it comes, will make a real difference between capital and ordinary expenditure. A great point for enabling us to decide whether these small farms and farm colonies are a success or 640 not is to discover whether the accounts as between capital and expenditure are fairly distinct. You may stock a farm very largely, but unless you have the valuation of what remains at the end of the year and compare it with the beginning you cannot settle the question whether the farm is being run on commercial and successful lines or not. Capital expenditure may mean buildings, but also it may mean management and the amount of stock and implements on the farm. Therefore I think it is of the greatest importance that in these accounts there should be a distinct differentiation as between what is put down in the name of capital and in the name of ordinary expenditure. We may differ as to these items, but if they are stated separately we can form our own opinion.

§ LORD PARMOOR
My Lords, every one who pays Income Tax on farming profits, apart from paying on a rental basis, has of necessity to make an account in which differentiation is made between capital and annual farm expenditure. Unless that was done, it would be impossible to bring forward any balance sheet which would comply with the requirements of the Inland Revenue Department. I think the noble Lord, from his know ledge of these matters, appreciates this. I understand that the desire of the noble Viscount is to have the same sort of account made out as is necessary when making out farm accounts for Income Tax purposes—that is to say, he should have a balance sheet which would really show what was the profit during the year in question, differentiating entirely what is a mere matter of capital expenditure. What I want to ask the noble Lord who represents the Department of Agriculture is this. Assuming, as I will assume in his favour, that generally Michaelmas is the more convenient date up to which it is desirable to make farmers' accounts, will he in such an account, when made up to Michaelmas, show a differentiation between capital expenditure and annual farm expenditure such as you would have to make for Income Tax purposes, in order that any one who sees the accounts may know whether there has been a profit or not, and what the true extent of the profit may be? If the account is given in that form, although in a number of instances it would be for more than a year and subsequently from Michaelmas to Michaelmas, that would be satisfactory

§ LORD CLINTON
My Lords, I entirely agree with the noble Lord who has just spoken that a valuation is a necessary part of the accounting to enable any one to understand the financial position of a farm. I stated that, but not sufficiently clearly, when I was replying to the noble Viscount. It is one of the reasons why I find it so difficult to make out the account up to a time previous to the present when I cannot get at the valuation. A model form, which I have had under discussion for two or three days, is being got out, and it will show quite clearly the capital which the farmer has in the undertaking at the beginning of the year and the capital which he has when he comes out at the end of the year, and it will also show the capital which he has expended on the estate, expenditure which is for cottages and other buildings, and the farm as a farm will pay interest upon that expenditure. I think that is the main point which both the noble Lords raised, ask I can assure them that the account will snake a proper differentiation between income and capital, which, I quite agree, is the only possible way in which you can fairly present farm accounts.

VISCOUNT GALWAY
My Lords, I did wish to have the Return for the year, as for Income Tax purposes, and that is why I specially suggested a differentiation between capital and farming. I want to point out, if time noble Lord is going to try and make everything go from Michaelmas to Michaelmas, that in the case of all the farmers who make out their accounts now in my pan of the country and elsewhere, Lady Day tenancies will be the only tenancies. I think that fact might have led to the Board of Agriculture saying that the two dates were equally good for Income Tax purposes and valuation of stock. As Income Tax has been referred to, I should like to point out that there is great danger if, for Income Tax purposes, the valuation of stock is included. If a man has £200 more stock at either Lady Day or Michaelmas, 1918, than at Lady Day or Michaelmas, 1917, he might be called upon to pay Income Tax on that sum, while it would only be producing income in the year 1918–1919. In that case you would be forcing the tenant to pay Income Tax twice over. If the stock was sold in 1918, then you would bring it into the profits of the farmer on 642 which he would be justly charged Income Tax, but if the increased valuation is brought into the return made for Income Tax, I think a great injustice is liable to be done to the tenant farmer. I hope the noble Lord will bear that point in mind. With regard to my Motion, as there are only a small number of noble Lords present—and I desire to consult some of my friends with regard to pressing the Motion further—I should like to withdraw it for the time being.