§ House again in Committee (according to Order):
§ [The EARL OF ONSLOW in the Chair.]
§ Clause 8:
§ Time when payments may be made.
§ (5) Any sum or sums to be paid in accordance with the last preceding subsection may be paid subject to any conditions which the Commission think requisite for the purposes aforesaid.
§ THE LORD CHANCELLOR (VISCOUNT SIMON)
I beg to move the drafting Amendment which stands in my name.
Page 10, line 1, leave out ("in accordance with the last preceding subsection") and insert ("under subsection (3) of this section").—(The Lord Chancellor.)
§ On Question, Amendment agreed to.
§ THE LORD CHANCELLOR moved to insert, at the end of subsection (5), "and, if any conditions imposed under this subsection are not complied with, the sum in question shall be recoverable as money had and received to the use of His Majesty." The noble and learned Viscount said: Your Lordships will, of course, appreciate that it is necessary to have some sanction for the observance of conditions imposed under this clause. This seems the proper form, and it is a form which is used elsewhere in the Bill. I beg to move.663
Page 10, line 3, at end insert the said words.—(The Lord Chancellor.)
§ On Question, Amendment agreed to.
§ On Question, Whether Clause 8, as amended, shall stand part of the Bill?
§ THE EARL OF CLANWILLIAM
May I say one word before we part with this clause? On the Second Reading I asked the noble and learned Viscount whether he would tell me if, under the temporary-works payments, the payment for work done would be made on completion of the work or whether it would be made at the end of the war. The noble and learned Viscount, in reply, kindly referred me to Clause 8. I have studied Clause 8, and I am afraid I can find no real answer to my question whether this payment will be made on completion of the work or whether it will be made at the end of the war. To make my point quite clear, may I state a case? I am indirectly interested in a certain building in this City which has suffered from enemy action. The damage is not very great, and if the temporary works were done the building would be preserved as an asset to the country. If they are not done, the house will deteriorate owing to weather conditions, and in time will be a total loss to the country.
I am, as I say, only indirectly interested in this matter, but those who are more-interested in it are the Crown, the Treasury, and, in consequence, the public. The Crown, quite rightly, for many reasons, say they are unable to do the work. If I can get an assurance that the money will be repaid, I am prepared to risk the money. It is not my own money. If it were, I should not be here addressing your Lordships. It is money belonging to other people. I have to be more than careful. In fact, I am at the moment in the presence of many noble Lords who would soon call me to book if I hazarded money which belongs to them before assuring myself that I should be reasonably able to recover the money on completion of the work. I can find no provision in this clause which will satisfy me in that way. The clause is strictly permissive. At the beginning it states "the times when payments may be made." I quite understand that His Majesty's Government would never tie themselves down to anything, but there it is, it is a permis- 664 sive clause, and that is, I would say with the greatest respect to His Majesty's Government, not enough for me.
Now this is an asset to the country and I, in my work connected with other buildings, have taken the greatest care to preserve every asset, whether it is a library or whether it is fittings, or whether it is furniture or anything else, because at the end of the war there will then be something tangible which can be converted into money, whereas if it is destroyed the whole of the money goes and a great deal of it can never be replaced. There are many other people in the country to-day who are not perhaps in exactly the same position as I am, but who are in very nearly the same position. They have suffered from enemy action, the damage has not been very-severe and could be repaired at a cost under £800, which is provided for in this Bill, but many of them are unable to provide that amount to-day.
Everybody knows how difficult it is for some people to find money. They would go to a builder and would say, "Will you repair this building for me?" The builder would reply, "Yes, I will look into it," and he Would estimate the cost. Then he would naturally ask, "Who is going to pay?" The owner's reply would be, "Presumably the Government under the War Damage Bill." Then the builder would say, "That's all right, but when will they pay?" "Well," says the owner, "I am very sorry I cannot tell you that because they have not said when they are going to pay. It might be to-day or to-morrow, or it might be at the end of the war." The builder would naturally say to that, "I am very sorry; if you cannot pay I cannot afford to do the work and I must leave it alone." There must be many people all over the country in that position. Although I do not ask His Majesty's Government to tie themselves down to any terms or to an undertaking that this will be paid, I think they should give us some assurance which will assist us to go ahead with this very important national work of preserving the assets of the country.
§ THE LORD CHANCELLOR
My noble friend behind me has put his point very clearly and, if I may say so, in a very practical spirit, but with all respect to him, I still think that if he will look 665 at Clause 8, or perhaps I may say if we look at it together, we shall find that the necessary provision is made. The question is as to how far the Bill contains any assurance indicating when payments of this kind will be made. As I think I pointed out on the Second Reading, a temporary works payment is dealt with in Clause 5, which we have already passed, and the matter that is dealt with later in Clause 8, on page 9, and which may amount to £800 in value, is not a temporary works payment, but is an advance that is made in proper cases because the sufferer has got to move himself or his family or has to move his place of trading. The answer I can now give will really cover, I think, what the noble Lord wishes to know.
May I ask his attention to the words at the beginning of Clause 8? The side note to the clause is "Time when payments may be made." The clause reads:The times when payments may be made under this Part of the Act shall, except in such cases as may be determined by the Commission in accordance with directions given to them by the Treasury, be the following, that is to say—(a) in the case of payments of cost of works … the time of the completion of the works, or where payment is to be made by instalments, of the relevant parts thereof.That is to say that in the case supposed my noble friend calls in his builder and the builder will be left in no doubt as to whether he will have to wait for his money, because the payments will be made as and when the works are being executed, either in a single lump sum or, if the amount is too large, in instalments. The intention of these words, though the word "may" is used, is really to convey an assurance that it is the intention and the policy of the Bill that the cost of works payments shall be paid when the works are done, and the only qualification really is that which appears on the top of page 9. Alternatively, it will have to be atthe expiratian of such period thereafter as may be reasonably requisite for enabling the Commission to ascertain whether the works have been duly completed and what was the proper cost thereof.That, I am sure, will appear to everybody as quite reasonable as a matter of business.
You cannot pay for a thing when you do not know what it is, but there is no reason to suppose as I read the Bill that the payments will not be made as and 666 when the work is executed. I think a point of importance that there may be anxiety about is as regards temporary works payments, which are rather different. They really are made under Clause 5. Instances will occur where it has not been possible to wait, and where a man has to put up some temporary-structure or make some temporary-arrangements to live in what are broken-down premises. In the same way the provision is that the payment should be made in the case of temporary works at latest as soon as the Commission can ascertain what it was that was done and what it was that it cost. I think that is the correct answer and I hope it is a clear answer which will satisfy my noble friend.
§ THE MARQUESS OF SALISBURY
I am quite sure your Lordships are very glad to have so clear an answer to my noble friend from the noble and learned Viscount. Ever since I have been in Parliament, I am sorry to say a good many years, there has always been this tremendous struggle as to whether "may" means "shall" or not. In almost every Bill the difficulty arises. On the one hand it is quite clear that "may" does not always mean "shall" and on the other hand we generally have an assurance that it does; but I think the Lord Chancellor's assurance goes rather farther than the assurance we usually get in these cases. He has said in the clearest language that, except in particular cases where the work has not been completed which was alleged to have been completed, "may" in this case does mean "shall," and if that is so then I am quite sure my noble friend will be satisfied.
§ VISCOUNT SWINTON
May I ask one question? Do I understand that anybody who can do these repairs has the authority to go forward and do them? I know, of course, that the necessary leave has to be given in respect of materials and so on from the proper authorities which grant licences; but, provided that that authority is forthcoming from the Department which controls the supply of all material and the priority of building, is anybody free to come forward without any other authority, do the repairs and claim to be paid under this clause?
§ THE LORD CHANCELLOR
I am glad my noble friend has mentioned this 667 point. It is obviously "may," and, while I stand to what I have said and accept the noble Marquess's interpretation, I would like to make this quite plain. The overriding principle of this Bill is that the public interest must come before any private and particular interest, and, as I pointed out on Second Reading, there might be cases where in the public interest it was not desirable that there should be reconstruction of the damaged property on the spot. The heavy duties which are put on the shoulders of my noble friend Lord Reith might come to grief if it were not so. Both town and country planning may be involved. The scheme in substance would be that anybody who has suffered this sort of damage and is about to repair it will be given an opportunity of giving notice to the War Damage Commission, and I trust and believe that the arrangement will be as simple and speedy as possible. Unless the War Damage Commission, in the name of the public interest, say "We are sorry, but you cannot have this building reconstructed, we shall have to compensate you on the value basis," then everybody has a right to go ahead and will be entitled to receive pari passu the appropriate compensation.
§ LORD MANCROFT
Is there not a practical or work-a-day difficulty about the interpretation of the words in paragraph (a) at the top of page 9? The noble and learned Viscount used the words "simple and speedy." As one with some experience of these operations—not in war-time—it occurs to me that the War Damage Commission will undoubtedly be snowed in with large numbers of claims, and a claimant, who may be a poorish contractor or a poorish owner, will have to wait the convenience of the Commission who are looking after the public interest. Ought there not to be some statement by the Government that time shall not drag on week after week with the poor contractor kept out of his money, or equally the poor owner kept out of his money? We have no reason to believe that there will be a simple and speedy method of enabling the Commission to look into the matter, and therefore I think we should be given some assurance by the Government that there shall be some limit of time.
§ THE LORD CHANCELLOR
I do not think that I could undertake to mention a number of days or weeks in such a case. The circumstances might alter the appropriate time. But I will certainly say, not in any formal sense but speaking, I am sure, the mind of the Government as a whole, that it is going to be our fixed object to create the machinery of a War Damage Commission which will work in a businesslike way and as quickly as circumstances admit. We must face the fact that there will be an enormous number of cases to be dealt with—many of them cases which have already arisen—and there must be many people who are waiting until the Royal Assent is given to this Bill in order to send in their particulars. All that creates a difficulty. All that I can say, and all that I think the Committee will expect me to say, is that I am not dealing with this matter formally or trying to put off my noble friend with a mere assurance. I will certainly make it my business to call the attention of the Chancellor of the Exchequer to this debate, and I will urge that everything possible shall be done both in the organisation and in the working of the organisation not to waste time unnecessarily.
§ LORD RANKEILLOUR
There is one other point to which I would like the noble and learned Viscount the Lord Chancellor to give attention before the Report stage. I cannot help feeling that subsection (3) of this clause is too narrow. Two cases have been brought to my notice, one of them only to-day, affecting in one case a really poor, and in the other case a relatively poor, owner. Both depend for their income upon small house property, and in each case a considerable part of that property has been destroyed. If the rest were destroyed—in one case it consists only of four houses, two of which have been destroyed—the two owners would be absolutely destitute. Subsection (3) provides for the case of a house in which the owner is himself residing or carrying on his trade, but it does not provide for the case in which the property is the sole or principal means of subsistence. Great hardship might result in certain cases if this matter is not looked into before the next stage.
§ THE EARL OF CLANWILLIAM
I would like to thank the noble and learned Viscount for his courtesy. His reply has certainty helped me and I expect it will help many other people.
§ Clause 8, as amended, agreed to.
§ Clause 9 [Persons to whom payments are to be made]:
§ THE LORD CHANCELLOR moved, in subsection (3) (a), to leave out "any surrendered tenancy" and insert "any such tenancy surrendered by virtue of that Act." The noble and learned Viscount said: This is really a drafting Amendment, but I might explain that its purpose is to make it clear that the reference here is to surrenders that take effect by virtue of the Landlord and Tenant (War Damage) Act—which are referred to earlier in paragraph (a)—and not to surrenders on agreed terms. As your Lordships know, there are cases where by arrangement between the landlord and tenant a tenancy is surrendered. What we are dealing with here is the case where a house is damaged and the tenant exercises his right to surrender the tenancy.
Page 11, line 3, leave out ("any surrendered tenancy") and insert ("any such tenancy surrendered by virtue of that Act").—(The Lord Chancellor.)
§ VISCOUNT MAUGHAM
I should like to suggest to the noble and learned Viscount the Lord Chancellor that he might consider whether he ought not to add the words "or any amendment thereof." It is common knowledge that amendment of that Act is extremely likely at an early date.
§ On Question, Amendment agreed to.
§ Clause 9, as amended, agreed to.
§ Clauses 10 to 17 agreed to.
§ Clause 18:
§ Contribution to be made towards expense of making payments.
§ 18. Contributions towards the expense of making payments under this Part of this Act in respect of war damage shall be made in respect of the properties, at the rates and in the manner specified in the following provisions of this Part of this Act.670
LORD RANKEILLOUR moved to add to the clause:
Provided that if a sum due and paid to any person out of a fund distributed under subsection (2) of Section eighty-six of this Act shall be less than the amount due and paid by such person to the said fund, the difference shall be credited to him in respect of any contribution due by him under this Part of the Act. This provision shall apply only in the case of a fund constituted under a scheme approved by the Board of Trade.
§ The noble Lord said: This matter arises out of the affairs of, and the effect of this Bill on, the mutual indemnity trust that I referred to yesterday. Then I referred to the position of the managing company of that trust. On this occasion I want to say just a word on the position of the existing contributors to that trust. I may say that while yesterday I stated that I had no interest in the matter, today I am bound to say that I have an interest which may amount to £10. If it be thought that that impairs the validity of my argument, I shall be glad, if I am ever repaid that money, to surrender it to the Exchequer.
§ The position is that under this Bill moneys received by way of premium—since it is not strictly insurance perhaps I ought to say contributions—are to be repaid on compulsory liquidation. But it will be impossible to repay them all. The position is that 25 per cent. of the contributions were assigned to the management company for expenses, and they and a good deal more have gone. Therefore the contributors will go short. Besides the expenses of the management company, there are the expenses of the trustees, which may perhaps be put at 5 per cent., so that the money paid in by contributors will be 30 per cent. short. Now I do suggest that they should not suffer in this regard. After all, they have made provision to the best of their power against damage and have paid their contributions accordingly. But now they will have to be on exactly the same footing as those who have made no contributions, and have made no effort. They will have paid their contributions and will not be relieved in any degree for it, they will not have got their money back; yet they will, under this compulsory scheme, have to pay their new contributions as well.
§ I do suggest that this is a case which has arisen solely through the action of the Government and the forced liquidation of 671 a trust like this, while it may be a very small matter in money from the point of view of the Government, is not so from the point of view of individual cases. I suggest that there is an equitable claim here which the Government ought to consider. It may be better to deal with it on Report. But whether dealt with here or elsewhere, I do trust it will be done. After all, these schemes went through with the sanction of the Board of Trade and it would be hard, if through the action of this Bill not only was the whole scheme made void but individuals have to suffer.
Page 16, line 43, insert the said proviso.—(Lord Rankeillour.)
§ THE LORD CHANCELLOR
I regret that I am not able to offer to meet my noble friend on this point and I must make a very short statement to tell how this matter stands as it appears to the Government. I notice that my noble friend's Amendment ends with the words "This provision shall apply only in the case of a fund constituted under a scheme approved by the Board of Trade." These schemes to which he refers—the one in which he has told us he is interested and the others—were private schemes in the nature of mutual insurance against war damage by which members joining up paid a premium—a very much smaller premium than the Government have thought it wise to make their contribution—in return for an undertaking, subject of course to many stated limitations, to compensate them if war damage happened to them. It is not the case that any such scheme has ever been approved by the Board of Trade.
§ THE LORD CHANCELLOR
They have not even been sanctioned. From beginning to end there has been on the part of the Board of Trade and of the Government the very strongest view that these schemes were unfortunate, and on this ground: that however carefully and honourably they were administered there was no possible actuarial material which enabled those who promoted them to know what the premium ought to be. I think that there have been cases where the premium was as low as 2s. 6d. per £100. 672 The premium of the Government scheme is something like £2 10s. per £100.
§ LORD BARNBY
Is there not some distinction between the insinuation which the noble and learned Viscount made that the intention was to compensate for the damage done in some of those cases and the suggestion that the contemplation is to bridge the difference between what the damage ultimately might prove to be and what the Government might at any time pay.
§ THE LORD CHANCELLOR
The noble Lord will no doubt find it more convenient to explain his distinction, if he wishes, if he takes part later in the debate. What I am saying is that it really is a misunderstanding to suppose that such schemes have been approved by the Board of Trade. Any proposals of this kind have been steadily rejected by Lloyds and by the established insurance companies of the country. We may be quite certain that if Lloyds and the established insurance companies fought shy of them, it was because they felt it was not a piece of business which they wished to encourage as being profitable and assured. I make no criticism of those who started private schemes but it is a complete misunderstanding to say, as this Amendment say's, that a scheme was approved by the Board of Trade.
The Weir Committee reported, in reference to schemes of this sort, that they saw the strongest objection to them because they feared that members of the public might be led to go in for them and find afterwards that they did not get the return they expected. They would of course get what they contracted to get; I make no reflection on anybody. But the Weir Committee, I think, recommended that the advertising of these schemes should be brought under control. Parliament accordingly passed the Restriction of Advertisement (War Risks Insurance) Act, 1939, which, broadly speaking, forbade such schemes being advertised. It is only because the Board of Trade was satisfied that the restrictions imposed were being observed that one can say that, in any sense, there was approval or sanction by the Board of Trade. Nothing more was required than that the Board should be satisfied on this point.
I gather that as these different schemes are going to be wound up it unfortunately 673 arises that in some cases there will not be returned to the subscribers the full amount which they subscribed. That is very unfortunate. It has been, in the view of the Government, rather a risk which was being run, but would the House for a moment consider that there is any possible reason why the Government, the Treasury or the taxpayer should now come in and say: "If that is the case we will make up to you that which is short on the return of the money made to you in connection with one of these schemes"? Manifestly, there is no reason for the Government to do anything of the kind. I believe that cases where there has been any actual payment of compensation from these schemes, as yet, have been extremely few. Of course, in cases where there has been payment the total fund has been reduced and there is therefore a slightly smaller sum remaining to be distributed to the members. I think that was one of the risks incidental to this kind of business, and it should be plain that the Treasury is not going to say that the taxpayer should be called upon for the purpose of making it up. I regret that I cannot accept the Amendment.
§ LORD RANKEILLOUR
I wish to say as a trustee though not a director of this scheme, that there were, I think, constant conferences. The draft scheme was prepared under counsel's opinion, was taken to the Board of Trade and was gone through with the greatest care. It may not have amounted to any official statutory approval, but it was encouragement to the promoters of this to go on. When the Lord Chancellor says that the Weir Committee protested against these schemes, their opinion might equally have been quoted against the Government Bill. If that is quoted in one case, therefore, it may well be quoted in the other. Obviously I cannot press this Amendment now, but I do think that before this Bill is passed further attention should be given to this matter.
§ LORD BARNBY
As one who has consistently urged that this matter should be regarded as the responsibility of the State, and who did so long before this Bill was discussed, I cannot help intervening at this point Since I spoke in the debate on the Second Reading I have refreshed my memory, and I find that the Federation of British Industries urged very 674 strongly that the State should regard this responsibility as one which essentially should be undertaken by it, on the ground that no private individual should suffer unreasonably owing to war conditions without receiving some contribution from the community as a whole. My noble friend who has just spoken referred to certain schemes which were undertaken by private enterprise in order to assist in meeting—not, as I understand it, to meet entirely—the damage done, and which were undertaken in the face of the categorical repudiation by His Majesty's Government of the suggestion that this was an appropriate task for the State to undertake. I shall not retrace the ground just covered by my noble friend, but I cannot refrain from taking note of the tribute which the noble and learned Viscount has paid to the skill with which these private undertakings were managed. It is obvious that skilful selection was exercised; and that still further emphasizes the justice of the contention which has been put forward in this House and elsewhere, that this matter ought to have been taken up by the Government at a much earlier stage.
§ Amendment, by leave, withdrawn.
§ Clause 18 agreed to.
§ Clause 19:
§ Properties liable to contribution.
§ 19.—(1) The properties liable to the said contributions (hereinafter referred to as "contributory properties") shall, save as otherwise provided in this Part of this Act, be every property—
- (a) the full annual value of which was ascertained for the purposes of an assessment under Schedule A in force at any time during the risk period; or
- (b) which, not being a property to which paragraph (a) of this subsection applies, was, at any time during the risk period, the subject of a valuation shown in a valuation list for the time being in force under the Rating and Valuation Acts, 1925 to 1940, or the Rating and Valuation (Metropolis) Acts, 1869 to 1940, as the case may be:
§ Provided that a property shall not be treated for the purposes of this Part of this Act as a contributory property if the conditions specified in paragraph (a) or paragraph (b) of this subsection are satisfied as respects the property by reason only of the use of any land for the exhibition of advertisements, or for the erection of any hoarding, frame, post, wall or structure used for the exhibition of advertisements.675
THE LORD CHANCELLOR moved, at the end of subsection (1), to insert:
so, however, that nothing in paragraph (ii) of this proviso shall affect any liability to the said contributions in respect of properties consisting of or including such fishing rights as are mentioned in Section six of the Rating Act, 1874."
The noble and learned Viscount said: The Amendments which I have to move, beginning with Clause 19, are necessarily somewhat technical. I will give a fuller explanation if it is desired, but let me state quite briefly what I am now proposing. In Clause 19 I am proposing to insert a second and a third case, in addition to the one already given; and, if these insertions are made, the proviso in subsection (1) will run:
Provided that a property shall not be treated for the purposes of this Part of this Act as a contributory property if the conditions specified in paragraph (a) or paragraph (b) of this subsection are satisfied as respects the property by reason only
so, however, that nothing in paragraph (ii) of this proviso "—
that is, the reference to a fishery—
shall affect any liability to the said contributions in respect of properties consisting of or including such fishing rights as are mentioned in Section six of the Rating Act, 1874.
§ The fishery rights that are referred to in the Act of 1874 are the ordinary sporting rights of fishery over non-tidal waters, and they do not come into this Amendment at all. The fishery that is referred to in my proposed paragraph (ii) is, for example, a salmon fishery or an oyster fishery in tidal waters, and in private hands. Apart from this Amendment, those fisheries would be contributory properties and would have to pay something towards this compensating fund, because they are rated; you rate an oyster fishery. It seems very difficult to imagine circumstances in which that sort 676 of property is going to be damaged, and it was therefore thought right to exclude it, just as we exclude the case of property which is rated but which is used for the purposes of advertisement.
§ In the case of paragraph (iii), which deals with corn-rent, it is possible that other noble Lords, like myself, would not have been prepared without inquiry to give a definition there. It appears that corn-rents, which are rare nowadays, are old rents paid in connection with the commutation of tithe. They also, apart from this Amendment, would be contributory property, as being subject to Schedule A assessment. These, therefore, are the two additions which I wish to make. They are not of great general importance, but they are of importance to the people concerned. By them we say, "We do not think it fair to take a contribution from you, and we therefore exclude you."
Page 17, line 21, at end insert the said words.—(The Lord Chancellor.)
§ On Question, Amendment agreed to.
§ THE LORD CHANCELLOR
The next three Amendments which follow on the Paper are purely drafting, and I ask that they may be accepted en bloc.
§ Amendments moved—
§ Page 18, line 3, after ("property") insert ("which").
§ Page 18, line 6, leave out ("but") and insert ("comprised").
§ Page 18, line 7, leave out ("comprised").—(The Lord Chancellor.)
§ On Question, Amendments agreed to.
Page 18, line 14, leave out ("but the property").—(The Lord Chancellor.)
§ On Question, Amendment agreed to.
§ THE LORD CHANCELLOR
The next Amendment, in subsection (5), is merely a proposal to leave out the word "and," because it will be neater drafting if that is done.
Page 18, line 36, leave out ("and").—(The Lord Chancellor.)
§ On Question, Amendment agreed to.
§ On Question, Whether Clause 19, as amended, shall stand part of the Bill?677
§ THE EARL OF LISTOWEL
I should like to ask the noble and learned Viscount a question arising out of the proviso in subsection (1) of this clause. The intention of paragraph (i) of this proviso appears to be to exclude all property used solely for the purpose of displaying advertisements from the necessity of paying contributions under the compulsory insurance scheme. Does this cover all types of property used for this purpose? Does it, for instance, cover hoardings attached to business or residential premises and assessed separately for rating and Income Tax purposes, as well as hoardings which are set up in fields and open spaces? That is a question which has vexed the minds of a certain number of people and they would be very much obliged if the noble and learned Viscount could enlighten them.
§ THE LORD CHANCELLOR
I was warned that this question might be raised, and I am glad I was warned because I doubt if anybody could give a confident and precise answer without preparation. But I think I now can. The proviso to which the noble Lord referred aims at excluding advertisements for a reason which the Committee will appreciate, because if you have an advertisement hoarding the amount at which it is rated is very often a high figure, out of all proportion to the sort of damage that might be expected to be done to an advertisement hoarding. It is thought better to leave them out. But there is a qualification which I will state. There are two types of case. First of all, you may have a property which is used exclusively for poster advertising—a hoarding erected on a vacant building site is the obvious example. The second case is the case where the hoarding is affixed to premises occupied for other purposes; or it may be, posters posted on an external wall of a house.
If we take the first of those cases, the answer to the noble Lord's question is that the effect of the proviso is to exempt from the contribution all cases of the first type. As regards the second type, it will exclude from contribution any case in which the advertising rights would be a separate contributory property, either because they are separately assessed under Schedule A or because they are separately rated. There are many such cases, in which the rating authorities and the Income Tax authorities will make a separate 678 assessment of the hoarding, even though it be fixed perhaps loosely to the building. Well, all those will be excluded. But there is this qualification. What I have already said will exclude, it is estimated, 70 per cent. of the cases. But if there were a case in which the advertising rights exercised on a building arc included in the Schedule A assessment on the property, then the contribution will be charged on the Schedule A assessment. It really would not be practicable to dissect it in that case. That is in accord with the general principle adopted in the Bill of taking Schedule A assessments as they stand as the measure of contributory value. I do not expect I have stated it so clearly that it could be followed completely by everybody, but I think those specially concerned, if they look at the words I am reported to have emitted, will there find out exactly how they stand.
§ THE EARL OF LISTOWEL
I am very much obliged to the noble and learned Viscount for his exceedingly lucid reply.
§ Clause 19, as amended, agreed to.
§ Clause 20:
§ Amount of contribution and time for payment thereof.
§ (3) The amount of each instalment shall be two shillings in every pound of the contributory value of the contributory property:
Provided that in the case of a contributory property—
(e) which consisted of such rights as are mentioned in Section six of the Rating Act, 1874 (which relates to shooting, fishing and other rights)
the amount of each instalment shall be sixpence in every pound of the contributory value.
THE LORD CHANCELLOR moved, at the end of paragraph (e), to insert "or of any other incorporeal rights." The noble and learned Viscount said: I referred just now to the sporting rights, like fishing rights, in non-tidal waters which fall within the Rating Act, 1874, but of course there are other incorporeal rights which may be contributory properties—easements, for example, like a private right of way which the occupier of one property may have over an adjoining property. The effect of inserting these words will be to secure that the contribution in those cases also is not at the rate of 2s. on the annual value, but at the rate of 6d. If I might
be allowed at the same time to refer to the next Amendment, I am proposing there to insert:
but nothing in paragraph (e) of this proviso shall be construed as affecting the amount of an instalment in respect of a property which was the subject of a valuation for rating purposes by virtue of the occupation of land.
The first Amendment, which I am now moving, reduces the rate of instalment on such rights as these to 6d. in the pound, and later on, under Clause 26, the contributions will be payable by the contributor in respect of the land over which the rights are exercisable. The purpose of the second Amendment is to make it clear that the lower rate of 6d. does not necessarily apply where the property is not the right, but is land which is occupied by virtue of the right. For example, you may have land which is occupied by virtue of a wayleave; you could not get the full enjoyment of the wayleave unless you had what amounts to a right to occupy the land. You may have the case of a shop belonging to a private person which in fact is in a railway station, and the private person may occupy the shop, or a stall on the platform, just as the newspaper people I think do by virtue of a licence. Those Amendments are technical but they have been very carefully looked at. They are not of very great importance in money, but they affect a certain number of people and it is in the endeavour to get the Bill completely right that we have thought it proper to put in these changes.
Page 19, line 28, at end insert ("or of any other incorporeal rights").—(The Lord Chancellor.)
§ On Question, Amendment agreed to.
Page 19, line 30, at end insert ("but nothing in paragraph (e) of this proviso shall be construed as affecting the amount of an instalment in respect of a property which was the subject of a valuation for rating purposes by virtue of the occupation of land").—(The Lord Chancellor.)
§ On Question, Amendment agreed to.
§ Clause 20, as amended, agreed to.
§ Clauses 21 and 22 agreed to.680
§ Clause 23:
§ Persons primarily liable for instalments.
§ 23.—(1) An instalment of contribution be coming due in any year in respect of any contributory property shall save as otherwise provided in this Part of this Act—
- (a) if there is at the relevant date only one proprietary interest subsisting in the whole of that property, be payable by the owner at that date of that interest;
- (b) if there is then subsisting therein more than one such interest, be payable by the owner at that date of that one of those interests which as between them carries the immediate right to possession of the whole of the property.
§ (2 The person who is liable as aforesaid in respect of any instalment on any property is hereinafter referred to as a "direct contributor."
LORD BARNBY moved to leave out all words in subsection (1) after "shall" and insert:
(a) in the case of property to which paragraph (a) of subsection (1) of Section nineteen of this Act applies, be payable by the person primarily liable to pay Income Tax under Schedule A in respect of such property;
(b) in the case of a property to which paragraph (b) of subsection (1) of Section nineteen of this Act applies, be payable by the person primarily liable to pay a general rate under the Rating and Valuation Acts, 1925 to 1940, or the Rating and Valuation (Metropolis) Acts, 1869 (as the case may be) in respect of such property.
§ The noble Lord said: Curiously enough, in the discussions in another place, this clause passed with little, if any, comment. In the light of subsequent discussion on other Parts of the Bill and after further consideration, it appears that there is some confusion of thought as to what is intended by this clause. The aim of the Amendment is merely to simplify the procedure under the Bill. It suggests no new financial liability and it would not, of course, infringe on the structure of the scheme, nor would it impose a charge on the subject. The general impression in the country and the impression of all students of the Bill was that the usual Schedule A procedure would be followed in connection with this, and that that method of collection would obtain. But such does not appear to be the case. It is for that reason that the Amendment appears to simplify the procedure.
§ Paragraph (a) of subsection (1), dealing with an owner occupier, is clear, but the words of paragraph (b) might appear to imply the employment of a new Schedule. It may be that that is not the intention; 681 anyhow it is for that reason that this Amendment is moved. I realise that, were this proposal agreed to, it would involve some amendment of the Fourth Schedule by the insertion of a new line, but that would merely be a technical change. I hope it will be understood that in a Bill as complicated as this, it is quite possible that some wrong interpretation should be put on it, and, with a full knowledge of the patience and care with which the noble and learned Viscount explains this Bill, I hope he will see his way to dispose of my anxiety in this matter. It may be that the assurance which one seeks—namely, that the normal procedure of Schedule A will be employed—may remove the necessity for this Amendment, but it would seem nevertheless that the wording of the Amendment would make the matter clear. I beg to move.
Page 21, line 2, leave out from ("shall") to the end of line it, and insert the said new words.—(Lord Barnby.)
§ THE LORD CHANCELLOR
My noble friend is right when he says that what he is here proposing is only a modification in the machinery. He commends it to us because he thinks it will be simpler and better machinery. Whether or not in another place this Amendment would be regarded as putting a new burden upon a class of citizens I am not so sure—the rules are very strict there—but I shall deal with the thing on its merits. The purpose of Clause 23 is, of course, to define who are the people who have to pay to the authorities these contributions. There may be cases in which, the whole of the contribution having been paid, the party liable to pay it to the Government may get some part of it back by way of contribution from some other party under the Schedule; but here we are dealing simply with the question how shall we define who are the people who are to make the payment in the first instance.
I understand that my noble friend's proposal is to shift the primary burden of the contribution from, let us say, landlords to tenants, even in the case where the tenant holds the tenancy for a term of seven years or less, and that would include a very large class of tenants and farmers whose tenancy is merely from year to year. It is not the design of the Bill at all that these contributions will be collected from the same individuals who 682 might have to pay Schedule A in the first instance, and I do not think it would be a very simple process if it were so, because consider Schedule A. Income Tax under Schedule A is generally collected, as we all know, from the occupier of the property, who has the right to subtract it from the payment of rent, but the tax is collected from the landlord if the house is let for a period of less than a year—weekly tenancies, for example—or if the dwelling-house is of a value of less titan £10 or, again, if the house is let in tenements or flats. It is therefore not a very simple transfer that is being made. If one takes the rating test which is mentioned in paragraph (b) of my noble friend's Amendment, there again you will find there are some very complicated arrangements as to who is to pay the rates, especially when you have regard to what is called compounding.
The scheme of the Bill is to say, if the tenant is a tenant holding for a term of seven years or less, in which case, for practical purposes, you may assume he is really holding at rack rent and has no intermediate profit, or if the tenant is holding it from year to year, that in these circumstances the landlord shall find the money and the tenant shall be free of obligation to do so. My noble friend's proposal is that all these people should find the money in the first instance—people holding from year to year, small householders, farmers and everybody else, although they are not going to be finally liable because ultimately they hope to get it out of another party. I think, beyond any question, that the scheme of the Bill is to be preferred on grounds of simplicity of working. I am glad to have had the opportunity which my noble friend has given me of stating quite clearly that the scheme of the Bill is not to collect in all cases from the same people who would have to find the money for the Revenue under Schedule A. The scheme of the Bill is designed to make the simplest possible plan with as few transfers from one individual to another as possible, but at the same time, in the Schedule, to provide where necessary for recovery of portion of the contribution from a party secondarily liable.
I hope my noble friend will be good enough to help the progress of the Bill by withdrawing his Amendment. This matter has been carefully considered. I 683 recognise that his suggestion is intended to be constructive and helpful, but the authorities who have looked at this—and they include those who have the best knowledge of the administration of the subject at the Inland Revenue—are satisfied that the scheme in Clause 23 is to be preferred to the scheme which the noble Lord suggests.
§ LORD BARNBY
I am deeply appreciative of the noble and learned Viscount's patience and of his detailed explanation of this point. It will be apparent to your Lordships from his careful review that it does bring in very many fundamental underlying considerations of the whole administration of this Bill. I am still confused in my mind on the main point. Is one to understand that Schedule A procedure is to be applied? I understood the noble and learned Viscount to say it is not. If it is not, what other simple procedure is going to be employed? The assumption is that it will involve the compilation of some completely supplementary Schedule which would permit the proper apportionment of the liability for contributions. I regret very much delaying the discussion of the Bill, but I would ask the noble and learned Viscount if he can explain that some supplementary Schedule will be needed in order to permit the operation of this clause as it stands in the Bill. If not, then the interpretation is that the usual Schedule A procedure will be employed.
The noble and learned Viscount has brought up an obviously controversial point as to the method of apportionment of these contributions. I cannot suppress the natural reflection that, while appreciating the very pertinent cases of complication and even hardship that might result on the original contributor under this suggestion when he would not be the one ultimately responsible, nevertheless m many cases which must occur to your Lordships' mind, like rents, it would be easy for the contributor to deduct from such payments which he has to make to another person such proportion of the contribution as would be necessary. Therefore I have to ask the noble and learned Viscount whether I am correct in the assumption of these two alternatives.
§ THE LORD CHANCELLOR
May I in a single sentence just say that the noble 684 Lord is not quite correct? Schedule A is used for the purpose of fixing what is the size of the figure on which the contribution is to be charged, and there exists a complete assessment which states what that figure is in respect of every property assessed to Schedule A—net assessment under Schedule A. If there is no Schedule A assessment available then one takes the net rateable value on the property. The question, with great respect, has nothing to do with what may be the total amount of the figure. The question simply is who should pay it, and my noble friend's suggestion would cause an enormous number of people to have to pay it in the first instance who under the Bill would have no ultimate liability to pay it at all. It would be a pity if all those people then had, by some process or other, to get it indirectly out of somebody else who is made directly chargeable.
§ VISCOUNT MAUGHAM
May I mention one point to the Lord Chancellor for consideration? It is only a trifle, but I am not quite sure that some thought ought not to be given to cases where receivers are in possession of the land. The clause, as the noble and learned Viscount says, determines merely who is to pay. It may put an obligation on a person who has been excluded from possession by an order of the Court or by some other legal appointment of a Receiver. I think it wants looking into.
§ LORD BARNBY
I should like again to express my appreciation of the noble and learned Viscount's reply. I have some diffidence in laying myself open to a charge of not being in order by further discussing a detailed legal matter like this with the noble and learned Viscount; but while I must accept his emphasis of the difficulties that would arise from the employment of the method I suggested rather than the method in the Bill, my proposal would in no way impair the structure and operation of the Bill. I hope the Lord Chancellor will between now and the next stage give further consideration to this matter and perhaps make a further statement upon it at a subsequent stage.
§ Amendment, by leave, withdrawn.685
Page 21, line 9, leave out ("as between them carried the immediate right") and insert ("as against the owners of the remainder of those interests carries the right.").—[The Lord Chancellor.]
§ On Question, Amendment agreed to.
§ Clause 23, as amended, agreed to.
§ Clause 24 [Rights over against landlords and tenants]:
Page 21, line 17, leave out ("to") and insert ("for").—[The Lord Chancellor.]
§ On Question, Amendment agreed to.
§ Clause 24, as amended, agreed to.
§ Clause 25:
§ Rights over against mortgagees in certain cases.
§ (8) For the purposes of this section—
§ (b) the amount secured by a mortgage at any date shall be taken to be the capital sum secured thereby, together with any arrears of interest sc secured;
§ THE LORD CHANCELLOR
The first two Amendments in my name are drafting changes to bring the description of the mortgages referred to in the proviso into line with that of the mortgages dealt with in the main part of the subsection. I beg to move.
§ Amendments moved—
§ Page 23, line 7, after the first ("of") insert ("and in connection with.")
§ Page 23, line 8, after the first ("of") insert ("and in connection with.")—(The Lord Chancellor.)
§ On Question Amendments agreed to.
Page 23, line 42, after ("conclusive") insert ("for the purpose of this section.").—(The Lord Chancellor.)
§ On Question, Amendment agreed to.
§ THE LORD CHANCELLOR moved, in subsection 8 (b), after "any," to insert "costs or." The noble and learned Viscount said: This is the paragraph 686 which defines a mortgage debt which has to be compared with the price on acquisition or value of a property for the purpose of determining the amount, if any, of the mortgagee's share of the contribution. As many of your Lordships know, costs incurred by a mortgagee are often added to the mortgage debt, and it seems to be proper that they, as well as arrears of interest, should be clearly included in the amount of the debt. I beg to move.
Page 24, line 8, after ("any") insert ("costs or").—(The Lord Chancellor.)
§ On Question, Amendment agreed to.
§ On Question, Whether Clause 25, as amended, shall stand part of the Bill?
§ LORD STAMP
May I raise a point on Clause 25 before it is passed? The question I want to raise is one of interpretation or intention, and has an important bearing on the working of the clause, and possibly on the new clause that is about to be moved. There is a most scrupulous object throughout the Bill, quite clearly observed, to protect the interests of the small or average man. I therefore distrust my own interpretation if it runs contrary to what is so clearly the object of the Bill. With all the will in the world I cannot find that my interpretation, which I propose to put to you, is wrong, nor anything in the debates in another place which would show that it is wrong. I find that the operation of the first part of the clause, subsection (1) with the scale, does, in fact, discriminate very heavily against a particular class of the community—the class that the Bill sets out so particularly to help. It seems to me that under paragraph (d), the highest part of the scale, clearly the major part of the money advanced belongs to a certain class of the community, what I may call the small man, meaning by that term the upper working classes and the lower middle classes, and the operation is very arbitrary as between two in that class for this reason.
Take a very simplified case where a small borrower is about to purchase a house at £1,000. He goes to a small lender and says: "I have some money, £150, to pay the builder but I want £850 on mortgage; can you lend it to me?" The small lender says: "I have looked at it and I am advised I ought not to give you more than £750." The borrower 687 says: "Well, I must see what I can do." He has several alternatives. The clause comes upon them in too arbitrary a manner. His first idea is to sell some other stock or security, say War Loan, and raise £100, and with that and the mortgage money of £750 and his original money buy the house, or he may go to a life assurance company and raise £100 on the surrender value of a policy. Or he may go to the small lender and ask for a loan of £850, giving his war stock or insurance policy as collateral security. By that means he does in fact get an advance of £850. But he comes in bracket (c) and his contribution is smaller than in the third alternative. For there is a third alternative. He deposits his collateral with the lender himself, then he comes under the very heavy provisions of paragraph (d) and he recovers two-thirds. As between the two first and this third there is no difference in substance at all. This is a very arbitrary action indeed.
Now I know I have simplified this case. The small lender and the small borrower are not in this way in personal contact. Actually the affairs of the small lender are managed for him collectively by men of his own choosing, but it is his money that is in the hands of these collective users or boards of the different societies registered under the Provident Societies Act. It is the money of the small man that is being advanced in this way, and what I have put in a simplified form is strictly true of a very large body of people. The practice of lending above the value of the house provided there is collateral security has been sanctioned by the Courts as being perfectly proper and it is done on a very large scale. Some 3,000,000 people are affected by this highly discriminatory clause. No debate took place in another place, nor has any reason been put forward for this proposal, and therefore there has been little opportunity for examining it minutely. It is the only clause in the Bill to secure any contribution in respect of any wealth or property not the subject of the Bill and which gets no benefit from it, so there is this grave discrimination against this class of lenders whom we have for many years been trying to augment.
I may be misinterpreting the clause. If so, I hope that the reproof that will 688 be administered will be gentle. I have tried my best to get at its meaning. There are three difficulties. The first is based on the case of mere acquisition and therefore it hits a particular type of lender. That I will not debate in principle, because it is raised by the new clause that is to be proposed later. In the second place, it deals with a particular grade of lender; and thirdly, it is quite arbitrary in its action. In reading the report of the earlier discussion on this Bill, I noted that it was stated that if you are in acquisition, so to speak, then in these cases you are practically establishing the position of landlord and tenant. That is a very facile observation for one aspect of it, but it is also a dangerous one, because the points of distinction are much more numerous than those of identity.
Of course statements made in the course of these proceedings cannot be quoted in the Courts, but if they could be they would make havoc of the whole principle of the Bill. In the first place, borrowers can at any moment become owners; tenants cannot. In the second place, borrowers can sell and take the profit if there is one; tenants certainly cannot do that. In the third place the lender cannot sell the house and clear out his money; the borrowing owner can do that. In the fourth place there is the question of liability and upkeep and repairs. It seems to me that we must not be misled by a facile analogy of landlord and tenant. The distinction is clear. I hope that if discrimination exists we shall be assured that it was not intended, or, if it was intended, I hope it will be explained why it should be so intended. If I am right in my interpretation I hope the Government will seriously consider the matter.
§ THE LORD CHANCELLOR
We all recognise the quite exceptional authority with which my noble friend Lord Stamp deals with these matters, and no one could put his comment in a more moderate and reasonable way. The matter which he raises, as far as I am concerned without notice, is a little complicated and I am not sure that I am prepared at the moment to give him the full answer which, of course, his speech deserves, but I will take the opportunity of studying it and if necessary will deal with it further at a subsequent stage. The scheme, as he sees it very clearly— 689 and I do not think he misdescribed it—is one which we had better look at for the moment without regard to the fact that there are mortgages of another sort which are not made to share any part of the burden. Take it that, for adequate reasons, this provision is made in the case of mortgages entered into on the occasion of or in connection with the acquisition of a house, or in connection with the construction or improvement of a house. We shall probably be having some debateasto whether the distinction between that class of case and other cases is right, because that point was prominently referred to by my noble friend Viscount Swinton, and I think by others. We may postpone that for the moment.
Assuming it is right to ask for a contribution in these cases, which I may perhaps not with complete accuracy but conveniently call building societies cases, the scheme is, as your Lordships will see, that the traction of the contribution paid in the first instance by the mortgagor, which can be recovered from the mortgagee, will depend, amongst other things, upon the size of the advance as compared with the price of the subject matter. I have seen the comment nude that this is not worked out according to the strict rule of three, but that the proportion that is laid on the back of—may I say the building society? is less than the rule of three might suggest. But then, of course, mortgagees have other advantages besides the security of the house, though I agree that in the case of the small man who is buying a house no doubt the building society must place very great importance upon the security of the structure, because supposing it was destroyed probably the personal promise of the small man—sometimes the man and his wife, I think—is not necessarily very valuable. Of course, if there is in addition contributory security, such as the noble Lord, Lord Stamp, suggested, that is valuable, even though the house does disappear owing to the malevolence of the Germans.
We thought these proportions, all things considered, were about right. They have been somewhat revised in the passage of the Bill through another place. I do not wish to make any assertion on the subject of which I am not quite certain, and probably the noble Lord knows this point better than I do, but I certainly 690 understood that the building societies, who are extremely well organised, had been consulted, and that, while nobody can be expected to be pleased at having to bear a burden, they were not in a condition of violent protest but on the whole were prepared to acquiesce. I thought therefore that the scheme was about right. I do not myself see that there is anything wrong in providing that if the amount which is secured by the mortgage exceeds three-fourths of the price, the proportion of the contribution should be higher than if the amount only exceeds two-thirds. It seems, on the face of it at least, moving in the natural direction.
My noble friend described the paragraph as discriminatory and called it a very heavy contribution. Of course it is a very heavy contribution from the point of view of the mortgagee who has to find that amount of contribution, but it is a relieving provision, an enlightening provision not a heavy one, if you consider it from the other side, from the position of the mortgagor who should not be made to contribute too much for the reconstruction of the house out of this fund which will inure very largely to the benefit of the mortgagor who has made so considerable an advance. I am not quite sure that the noble Lord said this—he probably did not as I am not going to agree with it—but it would not appear a true proposition to say that the mortgagor gets no benefit from the payment that is provided out of the fund. He gets a very substantial benefit in any case. It is true the money will be paid to the mortgagee and so it ought to be, but one result is that instead of the mortgagor being the prospective owner of a smashed-up house he is a person who has had his mortage discharged, or very largely discharged, by the operation of the Bill. In other words, if you have a man whose house is smashed but it is a mortgaged house, it is not correct to say that the owner of the house gets no advantage from the compensation because it all goes to the mortgagee. He gets the advantage that his mortgage debt is discharged. It is paid off, so far as the money is available, by the process of the Bill.
Probably these observations do not completely cover the point which the noble Lord has raised and which is, I have no doubt, a very important point. If I may 691 venture to suggest it, the noble Lord having made his point and having given us the opportunity to consider it, he will not, I am sure, ask that Clause 25 should be modified at the present moment. I think the right course would be to consider what he has said—it is well worthy of consideration—and when we come to the Report stage we can, if necessary, give the matter more attention.
§ LORD STAMP
I am greatly obliged to the noble and learned Viscount. I was anxious to ask that special attention might be given to the arbitrary distinction between two people, the one who uses collateral with the lender and the other who uses his collateral outside. It seems to me that there is going to be great distinction between the two different classes even if the operation of the Bill is right. I am not going at all on what the building society authorities or the building society movement have done in relation to the matter.
§ Clause 25, as amended, agreed to.
§ LORD BARNBY moved to insert the following new clause after Clause 25:
§ Rights over against mortgages in cases to which Section 25 does not apply.
§ (1) This Section applies in all cases where the interest of a direct or indirect contributor in respect of a contributory property is at the relevant date subject to a mortgage, except any case where the contributory property is one to which Section twenty-five of this Act applies and the mortgage is also one to which that section applies.
§ (2) In any case in which this section applies the contributor shall be entitled to be indemnified by the mortgagee against the contributor's net liability in each year ending 1st January of the period during which contributions are payable under this Act to the extent of two shillings in every pound of the mortgage interest payable to the mortgagee in respect of that year but not exceeding in respect of any year two-thirds of the contributor's net liability in that year. Provided that in any case where the contributory property is subject to more than one mortgage to which this section applies the indemnity to which the contributor shall be entitled under this subsection from each mortgage in respect of any year shall extend to two shillings in every pound of the mortgage interest payable to that mortgagee in respect of that year, but not exceeding such proportion of two-thirds of the contributor's net liability in that year as the mortgage interest payable to that mortgagee in respect of that year bears to the total of the mortgage interest payable to all the mortgagees in respect of that year.
§ (3) If in a case in which subsection (2) of this section has effect the interest in question 692 of the contributor is not the only property, real or personal, which is at the relevant date subject to a mortgage in respect of which the contributor is entitled to an indemnity, that subsection shall have effect as if for the references therein to the amount secured by that mortgage at that date there were substituted references to an amount which bears to the amount secured by that mortgage the same proportion as the value of that interest bears to the aggregate value of all the property, real or personal, then subject to that mortgage. The said proportion, if it is not agreed between all the parties concerned, shall be determined by the Commission. An appeal shall lie for any such determination of the Commission at the instance of any of the parties concerned, to one of the panel of reference appointed under Part I of the Finance (1909–10) Act, 1910, and the provision of the Second Schedule to this Act shall have effect in relation to any such appeal.
§ In this section—
- (a) the expression "mortgage" includes any charge, lien, floating charge, debenture, debenture stock or like security on any property (including in that expression floating assets) for securing money or money's worth, and the expression "mortgagee" has a corresponding meaning;
- (b) the expression "the mortgage interest" means the gross amount of interest payable to the mortgagee on the amount secured by the mortgage, before deduction of Income Tax; and
- (c) the expression "value" has the same meaning in relation to property which is subject to a mortgage to which this section applies as it has in Section nineteen of this Act in relation to property which is subject to a mortgage to which that section applies.
§ The noble Lord said: I regret that I have again so quickly to ask the indulgence of your Lordships and I hope that the generous tribute of the noble and learned Viscount to the constructive intentions of my last Amendment will be extended to this, which covers a much wider field. It strikes indeed at the underlying intentions of the operation of the Bill. I propose rather to avoid the legal angle of it, and to confine myself to the public relations angle. I welcome the presence of Lord Stamp this afternoon and I am glad that a discussion between himself and the noble and learned Viscount has preceded my moving this Amendment, because it has enabled ground in the field with which Clause 25 particularly aims to deal to be again covered in this House. The object of my Amendment is, of course, to cover all classes of mortgage other than those which are dealt with in Clause 25—which are of the character generally known as building society mortgages—all other mortgages indeed, including building charges.693
§ The principle to which I draw attention, without addressing myself to the terminology of the clause which is a very lengthy one, is that, because this is a measure brought about by the war, conditions of advantage accruing from it should be recognised. The discussion on this clause, on this aspect of the operation of the Bill, in another place was quite lengthy, and that has been urged by the Chancellor of the Exchequer in another place, and indeed pointed out by the noble and learned Viscount in his review of the Second Reading, on rereading which, as many of your Lordships will have done, one cannot fail to have been struck with admiration that it should have been so clearly outlined in so short a space of time. Here the thought is that now because of the position assumed by the State, the peace-time angle whereby the lender, a mortgagee, expects a low rate of interest because of low risk, is changed by the war-time position.
§ I realise, from the discussions that have taken place, that the proposals which motivate this Amendment are of a character which will be distasteful in many circles, but I am not going to be deterred from urging it because it seems to me that it does come within the ambit of the Bill. I repeat that it was originally thought that no such insurance would be necessary. Now a change of outlook has changed that thought. Originally it was intended that the contribution should be entirely from the owner of a property, with the exceptions provided for in Clause 25. There are circumstances when the equity in a mortgage may have in substance passed entirely to the mortgagee and be no longer in the hands of the mortgagor. In those circumstances, the mortgagee is in the more happy position, in that he is assured of receiving such money as is available; but meanwhile the burden of contribution lies entirely on the mortgagor, who may, indeed, be receiving nothing at all.
§ I realise that it has been argued that it is unattractive in principle to make the mortgagee a contributor, but surely that is based on peace-time reasoning. Again, it is said that it must mean a valuation; and here I make the suggestion to the noble and learned Viscount that the Schedule A procedure would be appropriate. It has been suggested that it would discourage mortgagees, and it is 694 urged that it interferes with the sanctity of contract. I have already said that this is war-time legislation. Does not the Rent Restrictions Acts already interfere with the sanctity of contract? Do not various other regulations and Acts which are inevitable in time of war also do so? As opposed to that reasoning, I would suggest that, as the mortgagee is assured of the first claim, it is difficult to understand why he should not bear some part of the burden in return for the underwriting of the value of his property by the provisions of the Bill.
§ Moreover, what I suggest should achieve a very desirable purpose from the point of view of the Bill itself. I urge this because I would say with regard to this Amendment, as I said with regard to the last one on which I spoke, that this clause does not affect the aims or the operation of the Bill. What I suggest would mean a widening of the basis of contribution, and that must surely be to the advantage of the Bill and should therefore commend itself strongly to the noble and learned Viscount. If it were collected by deduction, only a small reduction of interest to the mortgagee would occur—probably not more than 5 per cent., unless the interest was more than 5 per cent. It is a small matter compared with the responsibility of the mortgagor for the contributions, based on a hypothetical figure, the net annual value, which, incidentally, he may not receive, so that he will be responsible for the outgoings and will have no income from that particular source. There is a natural suspicion in one's mind, when it is said on grounds of equity that this course should be adopted, that there must be some outside influence which has affected the reasoning of the Chancellor of the Exchequer in another place.
§ LORD BARNBY
I did not hear the interruption, but the point which I was about to make was that one would feel that there must have been some influences at work in the decisions which the Chancellor of the Exchequer took, and which are not apparent on the surface of the discussions in another place. I impute nothing irregular; I do not know what was suggested by the insinuation.
§ THE LORD CHANCELLOR
The noble Lord may like to be reminded that he said that he thought in the circumstances that the Chancellor of the Exchequer, in coming to a conclusion on this matter, must have been under some outside influence. That is what the noble Lord said.
§ LORD BARNBY
I am very glad that the noble and learned Viscount has called my attention to the words which I employed, because, as sometimes does happen in the course of one's remarks, I said something which did not represent my intention. I appreciate very much the support which other noble Lords gave to the noble and learned Viscount in raising the point.
§ LORD BARNBY
I certainly withdraw any such suggestion. I was dealing with the reasons why the principle had been adopted that the mortgagee should in no circumstances pay some contribution; and what I was attempting to explain was that in reading the debates in another place one felt that there must have been considerations—doubtless valuable and weighty considerations—in the mind of the Chancellor of the Exchequer which did not appear in the speeches which he made. I should like at this stage to give an instance which will illustrate what I have to say. Perhaps it will be safer to deal with the matter in that way. Let us assume a mortgage of £2,000, the rent at a yield of 6 per cent. being £120.
§ LORD BARNBY
I beg your pardon; let us assume that it was on the basis of a rent. Taking a Schedule A valuation of only £100, the contribution at 2s. in the pound would be £10 per annum. Assuming a mortgage of £1,300 at 5 per cent. per annum, this would equal £65. The contribution on this at 2s. in the pound would therefore equal £6 10s., so that it would amount to less than two-thirds of the £10. Under the proposed Amendment, therefore, the mortgagee would suffer a deduction from his £65 of £6 10s., but if the building suffered damage, the mortgagor would receive no income from his building but the liability for interest 696 would remain. That is a simple illustration, and it shows what I want to bring to the attention of the Committee.
I anticipate other objections, because this strikes, I repeat, at what has been preserved as a principle until now in the discussions on this Bill. I note the presence here of my noble friend Lord Wardington, who presides with such effect over the activities of what is easily the best of the five large joint stock banks. I noticed interest on his part in this subject during the Second Reading debate in this House, and I listened, as was appropriate, with great attention to the weighty comments which he made. Many of your Lordships, however, are probably directors of large joint stock banks, and familiar with current practice. It has been suggested that because banks are in the habit of making advances against collective security, which charge would include, among other kinds of security, that of buildings, the money would be very difficult to collect. Surely all those buildings would be subject to Schedule A valuation, and it would appear to present no great difficulty, apart from the inconvenience of administration, which I admit is appreciable. It would, nevertheless, be a feasible thing.
I have heard it said that in the case of all these debentures, of which there might be many hundreds or even thousands, the attempt to collect from so wide a field would present great difficulties. But would it? Because there would always be the normal method of making the deduction from the interest received, and presumably, if the holders of the debentures could be reached through addresses available, they could also be subject to the deductions for this purpose. My noble and learned friend, I remember, made the obvious point that the charges which banks place over their various classes of security might often be against accounts which are of fluctuating character, and it would be a very indelicate thing to assume the deduction of contributions when the account was in such a situation. Again, that is an administrative matter. I would repeat that the proposals in this additional clause in no way strike at the intentions of the Bill, and would in no way affect the financial receipts from the Bill. It is, therefore, a matter of considering the delicate adjustment of convenience. In any case, I 697 hope I may assure the noble and learned Viscount that this is put forward with the same constructive aim that he was generous enough to attribute to me on the last Amendment.
After Clause 25 insert the said new clause.—(Lord Barnby.)
§ VISCOUNT SWINTON
I need hardly say that I dissociate myself entirely from any possible suggestion that in drafting this Bill, or in considering it, anyone in charge of it or so advising in connection with it, would be actuated by any motive other than a proper consideration of what is the most practicable and the fairest thing to do. I support this Amendment, and I propose to base my case entirely on what is fair and equitable—which I do not think was really disputed by the Lord Chancellor last time—and also on what is practicable. Let me anticipate one argument, and the only argument which has been used to suggest that the mortgagee should not contribute as well as the mortgagor: that there is a contract and a personal covenant by the mortgagor to pay. Well, that stands. But can anybody suppose that the reality of the transaction in a mortgage is not something much more than the personal covenant? Of course it is. The security is the mortgaged property, and if the lender had not taken that security then he would have relied merely on a promise to pay. I anticipate that argument; it is the only one which has been used to suggest that there is any reason why the mortgagee should not contribute.
But now we have passed Clause 9. That clause gives to every mortgagee the complete protection of his interest. If the property is repaired and the cost of that is paid, the whole of the new building inures first and foremost to the benefit of the mortgagee, and there will be many mortgagors who will never probably be in a position to redeem their mortgage. But, more than that, if, either in the public interest or because the cost of repairs and restoration is too high, the compensation money (which is what is contributed for under this Bill) is paid by the State, to whom is it paid? It is not paid to the mortgagor, and the Lord Chancellor said it is quite rightly not paid to the mortgagor. Every penny of the compensation money is paid to the mort- 698 gagee. The mortgagee satisfies, within that compensation money, the whole of his principal and accrued interest, and the Lord Chancellor has just moved an Amendment, which the Committee has accepted, that he should get his costs in addition. Now where every single provision in this Bill inures to the benefit of the mortgagee first, and the mortgagor always comes in for what is left after the rights of the mortgagee are completely satisfied, I do suggest in common fairness that when we talk about equality of sacrifice the mortgagee ought to contribute towards this insurance fund as well as the mortgagor.
And indeed the whole of this principle which I contend for is accepted in the case of the building societies. In the case of the building society mortgage the mortgagee has to contribute. Whether he contributes in the right proportion is a matter on which the Lord Chancellor and Lord Stamp may hold slightly differing views, but neither of them differs on the principle. The principle is accepted that the mortgagee should contribute. And I do hope the Lord Chancellor will not advance the argument that he contributes because this is a landlord and tenant business. I am sure no Law Lord in this House would agree with that. My noble friend Lord Stamp has advanced admirable reasons why it is nothing of the sort. Of course it is not; it is an ordinary relation between the mortgagor and mortgagee, the only difference being that when the man who has borrowed money from a building society pays, he pays something on account of principal with his interest every year; he pays back the capital by instalments. But the position, of course, is the position of the mortgagor and the mortgagee.
I ask any layman in this House and I ask any independent lawyer whether in common fairness, where everything inures to the benefit of the mortgagee, it is not fair and reasonable that he should contribute towards his insurance fund. I am not concerned to argue now what is the right proportion. The Lord Chancellor said we must do rough justice; I think he said that, certainly it was said in another place. I accept that. Let us do rough justice, let us say that the contribution shall be fifty-fifty, or whatever is the proportion which is considered most fair and reasonable. Lord Wardington 699 himself said that what I was saying last time on the face of it sounded quite fair, but there were great practical difficulties in the way. I do hope the British Parliament is not going to lay down or accept the principle that we should do something unjust because it is administratively difficult to do justice. That is a principle which the British Parliament has never accepted, and I hope never will accept. I have far too high an opinion of the ingenuity of the Parliamentary draftsmen and of the Treasury and the British Civil Service to believe that they cannot devise and administer a perfectly sound scheme.
The actual case cited by the Lord Chancellor to me last time was, "What would you do in the case of debenture holders?" This Amendment says what might be done in the case of debenture holders, quite simply and clearly. The Lord Chancellor asks how would you collect the contribution from a large number of debenture holders? Why not collect it out of the interest which is paid on the debentures? There are the trustees for the debenture holders. When they pay interest, they pay Income Tax. We receive, if we are debenture holders, interest after tax has been deducted. The company or trustees who are paying the interest pay the Income Tax to the Inland Revenue. Let them pay, say, Is. in the pound or whatever it is, half and half, as the contribution on the mortgages just as they pay tax on the debenture holders' interest. There is nothing difficult in administration there.
What were the other difficulties in administration? There was the case raised by Lord Wardington—the case of the banks—which may be more difficult. I say this to him. I am sure he wants to be as fair as I do in this matter. If the property which is mortgaged to the bank—the land or buildings, because that is what we are concerned with here—is mortgaged for a very substantial amount, and is not just a little bit in a large amount of collateral security deposited against an overdraft, in that case it is quite possible to make an apportionment, because if the real security which the bank relies upon is the mortgage of the freehold of the land, then it is reasonable that the bank should pay part of this; but if it is only a small part of a large amount of collateral 700 security in respect of a floating overdraft, then—de minimis…—I should let it go. Rather than do this grave injustice, leave out the case of the banks where there is collateral security. Certainly we ought not to do a grave wrong because there may be a difficulty in providing for the case of the banks.
I believe this is a great Bill. It is a bold and ingenious Bill. It is a Bill in which we are all called upon to contribute. I am not in the least concerned with whether, as a landlord in a rural area, I am contributing more than my actuarial contribution to help other people in the towns. It is quite right that we should all be in it, and all be in on the basis of a fair contribution and equality of sacrifice. I do beg the Government to reconsider this position, and not to mar a great Bill by doing a grave and obvious injustice.
§ LORD STAMP
I should like to support; the closing words of the last speaker in this way. As Clause 25 stands, it turns on the accident of the mortgage being raised for acquisition. I call it an accident. We can leave building societies out of the picture altogether, and take the case of two adjoining owners who are mortgagors with identical mortgages from the same mortgagee. One finds that he is recovering part of his contribution and the other is not and they exchange notes and say, "Why is this?" The reply is, "When I bought the house I raised the money from A," and the other says, "I did not do that. I was in possession of the house for two years, but I wanted the money for other reasons." Could you have anything more arbitrary, more inexact, more unscientific and unfair as between two people? Let us suppose the idea of landlord and tenant, as suggested, is correct. Surely it is not correct that the matter should depend on the accident of time of acquisition. If the intention is to deal with specific classes, why not have a clause saying this applies to building societies and is not applicable to banks and solicitors' mortgages? Let us be definite and clear about it. As it stands the distinction rests on the most arbitrary of all grounds. While I do not impugn the principle of Clause 25, it cannot in justice stop there. It must be made to cover similar cases which have nothing to do with the time and the reason for which the mortgages were raised.
Lord Barnby said that I am connected with banking, and no doubt banks arc very closely associated with the problem before us, but I do not want to speak on the matter from the point of view of the banks. I want to consider it from the point of view of fairness to the general community and also in relation to the administrative difficulties which would undoubtedly arise. I do not myself see how they could be overcome it this Amendment is passed. The noble Viscount, Lord Swinton, referred last week and again this week to the great unfairness of the case of the owner of property who mortgages his property, pays all the contributions, and then, when the property is, destroyed, finds that the mortgagee who has paid nothing gets the whole of the compensation money I did say that that, on the face of it, sounded lard, put in that way, but is it really as hard as the noble Viscount makes out? Naturally all our sympathies go out to the man who has had his property destroyed, whether by enemy action or by what I may call a peace-time fire.
May I take the analogy of insurance against fire? The owner of the property insures his house. It is mortgaged, and he insures his house against fire. The mortgagee sees that he does so. He does not think of asking the mortgagee to pay the premiums. The mortgagee would not do so if asked. He would refuse a mortgage on these terms. A fire comes, unfortunately, and burns the house down. What happens then? The owner gets the money from the insurance company, and if it is sufficient to rebuild the house he does so. If it is not sufficient, owing to the fact that it has been under-insured, or the value of money has gone down and the cost of building has gone up, he either finds the balance out of his other resources or he pays off the mortgage with the insurance money. He seems to me to be in exactly the same position if his house is destroyed by fire or by enemy action. I cannot for the life of me see that there is this great unfairness to which the noble Viscount has referred.
Also it is necessary in considering the whole situation to have a very clear idea of the difference between the building society type of mortgage and the commercial mortgage. In the building society type of mortgage one uses rather loose language sometimes, but there is a definite 702 element of joint venture. Although it might not be legally correct to say that the building society is more in the position of owner in the first stages, there is no doubt it is so, in the ordinary everyday sense of the word; but as the instalments are gradually repaid year by year, the mortgagor tightens his hold on the property to the same extent as the mortgagee lessens his, until with the final payment he becomes the complete owner without any incumbrance. In the case of a commercial mortgage, however, the purpose for which the mortgage is raised in 99 cases out of 100 has nothing whatever to do with the property at all. It may be for an entirely different purpose. It may be that the mortgagor wishes to re-invest the money in something else, it may be he wishes to extend his factory or set up his son in business. It may be for a hundred and one different purposes, none of them connected with the property itself. You get this case also of a temporary borrowing pending a mortgage. If that temporary borrowing happens to take place on the relevant date, that temporary lender is responsible for contribution. That is an entirely unfair thing when the permanent mortgage wipes out the temporary loan the very next week.
The Government have recognised the distinction between these types of mortgages, and have in my opinion been most successful in dealing with a very complicated subject, and in bringing in a Bill which is fair on the whole to all parties. As the noble and learned Viscount has said, it does present a rough measure of justice. Many of your Lordships no doubt are in the position of trustees under a marriage settlement or under a will, and you have the duty of looking out for investments, and may have chosen as an investment a mortgage, which is a very suitable investment for a trustee. It provides full trusteeship quality and you get rather more interest with equal security than you get on the Stock Exchange. You pay the interest to the beneficiaries under your trusteeship who may be a widow and orphans. Is it fair, then, to ask the widows and orphans to bear their contribution under this scheme? I maintain that it would be quite unfair.
With regard to the point about debentures, which has been raised, I do not think the main objection is the difficulty of administration, arising from 703 the necessity of collecting from all the different holders of the debentures. But how would you find out what the contribution ought to be? The debenture is based on various securities. Only a very small proportion of it will probably be secured by the actual freehold. The debenture holder looks much more carefully at the liquid assets, and the liquid assets might be, and very often are, four or five times the amount of the actual freehold. Again, looking at the matter from the point of view of fairness, you get a company with a debenture issue of, say, £100,000 and ordinary capital of £500,000, paying 10, 15 or 20 per cent. The debenture holder has to put up with his 4 per cent. or 4½ per cent. interest, or whatever it may be, whereas the ordinary shareholder has got a very fine investment, and why should he not pay the contribution rather than the investor in debentures? It seems to me to be altogether unfair to suggest that the mortgagee in a case of that sort should have to pay his contribution.
There is another considerable administrative difficulty in connection with debentures. I gather from the rather difficult wording of the Amendment that the proposition is that in trying to arrive at the amount of contribution you must take the proportion of the freehold to the liquid assets, and apply that to the contribution which has to be borne. Let us for the sake of example take this case. The assets are £500,000. The freehold is £100,000, and the liquid assets are £400,000. The freehold, therefore, is one-fifth of the whole, and you must apply that proportion to the obligation of the debenture holder under this Amendment. That seems to me an extraordinarily difficult thing to do. How are you to arrive at the value of these liquid assets? You have to take the figure appearing in the balance sheet, but the balance sheet may have been produced at June 30, whereas the relevant date is January 1, and to apply the amount on January 1 to the figures that appear in the balance sheet of June 30 would not be to act with any fairness at all so far as I can see. In a commercial mortgage the mortgagee's interest in the property is very limited as compared with the interest of the owner of the equity of redemption. The mortgagor pays his 4 per cent., or whatever the interest is, and hopes to make 704 much more out of it. He hopes to make an investment which will perhaps double his income, and in that respect the mortgagor is the adventurer. The annual profit is his, and the capital gain is also his, and the rewards he expects from his enterprise or his adventure are his, and surely the contribution ought to be his also. The mortgagee has no part or lot in any profit or any increased income.
If this Amendment were passed I think one of the effects of it very likely might be largely to dry up the lending market on property, and that surely could not be for the benefit of the community. It is a very convenient form of security to offer to any lender, and just as partly-paid shares with a callable liability are looked upon in the market with less favour than fully-paid shares, so you would have in the ordinary course, if this Amendment were passed, people looking askance at property as a security with this liability attached to it. Some reference has been made already to the difficulties arising out of third parties. A third party may deposit the deeds of his house in support of a friend's overdraft, or he may be kind enough to guarantee the advance, and in support of his guarantee may lodge the deeds of his own house. How can you attach any contribution to the owner of the house in that case? He is actually a mortgagor although he has no debt, and he may never have a debt unless he is asked to implement his guarantee. It seems to me the Amendment would create very great difficulties and would be unfair to a very large number of people. The Bill as it stands has been widely proclaimed as a desirable one and the Government, rightly, I think, has been praised for their courage in bringing it in. I think our gratitude is due to the Chancellor of the Exchequer in another place for the patience and conciliatory manner in which he listened to all kinds of suggestions and criticisms, many of which he met. It has brought new hope and confidence to thousands of people. On grounds of equity, expediency and convenience of administration, I hope the Government will stand firm on the Bill as it is and will refuse this Amendment.
§ Moved accordingly, and on Question, Motion agreed to.
§ House resumed.