§ 2.6 p.m.
§ LORD MESTON rose to call the attention of His Majesty's Government to the inadequacy of value payments under the War Damage Act, 1943, and to the situation which will arise owing to such inadequacy; and to move for Papers. The noble Lord said: My Lords, I rise to move the Motion which stands in my name. A considerable number of people are exercised in their minds to-day over the question of value payments under the War Damage Act, 1943. I think I am right in saying that up to date only a few value payments have in fact been made, but the War Damage Commission are now busily engaged in determining the amounts of those payments in individual cases and in trying to agree those amounts with the appropriate parties. To put the matter in the simplest language, a value payment is determined with reference to the price which the freehold 607 of the property would have fetched on a sale in the open market as at March 31, 1939. It is important to emphasize that for the purpose of determining the amount of a value payment, the valuation that is needed is a valuation of the property as a whole, not of the particular interest in it, whether it be the interest of owner, tenant, mortgagee, or whatever it may be. Once the value payment is determined, it will be paid in due course to the owner of the proprietary interest in the property, if there be only one such owner. If there are several proprietary interests in the property—for instance, freeholder, lessee and sub-lessee—then the value payment is split up between the owners of the various proprietary interests by agreement between them. Failing agreement, the matter is referred to and determined by a referee.
§ In order to understand what I am about to say, it is as well to remember that the first War Damage Act—namely, the War Damage Act, 1941–was passed on March 26, 1941. At that time prices had not risen to any great extent as compared with the prices prevailing on March 31, 1939. Hence, when that War Damage Act was passed it was quite reasonable to take March 31, 1939, as the date by reference to which prices and values should be ascertained for the purpose of calculating the amount of a value payment. Moreover, for the same reason when the War Damage Act, 1941, was passed there was probably no great difference between a value payment and a payment of cost of works. All that, however, is now changed. Prices have risen by from 6o to no per cent., and no one knows what will be the level of prices after the war. In this connexion, when I speak of prices I am referring to the prices of building and materials and labour.
§ Let us take a very simple case. A house of simple design and without any ornamentation is totally destroyed by a bomb. The War Damage Commission determine to make a value payment of £2,000, which we will assume is a correct figure according to the provisions of the Act. The owner of the freehold is the sole occupier, and therefore he is entitled to the whole of the value payment. What happens next? The vacant site still remains the property of the owner. Is he to sit and look at the vacant site, or 608 is he to rebuild on the vacant site? He decides on the latter course, and in, let us say, the year 1946 he obtains plans and estimates, and finds that it will cost him £4,000 to rebuild the house. He may not be able to afford to spend £4,000, having only received £2,000 from the War Damage Commission, or he may consider the whole proposal uneconomical. He decides, finally not to rebuild.
§ What happens next? Is the owner to sit and look at the vacant site until the cost of labour and material renders it possible for him to rebuild the house for £2,000? There are a number of possible answers to that question. If the house in question and all the other houses in the same street have been destroyed, the Minister of Town and Country Planning may perhaps make an order which I will call, for short, a "Redevelopment Order" under Section 1 of the Town and Country Planning Act, 1944, and then the local authority may purchase the vacant site of the whole street and redevelop the area. But if the house in question is the only house in the street that has been destroyed, the Minister of Town and Country Planning will have no power under Section 1 of the Town and Country Planning Act, 1944, for the simple reason that there has been no "extensive war damage" so as to bring the case within that section. There is another possible answer. The War Damage Commission may invoke the Treasury Direction of the 25th October, 1943, and make a payment of cost of works in respect of the house. In that event the house will be rebuilt by the owner, who will receive a payment of cost of works which is based on the current prices prevailing at the lime of rebuilding.
§ But suppose that the War Damage Commission decide not to make a payment of cost of works but a value payment, what happens next? It is now appropriate to mention that the War Damage Commission have power to impose conditions on a person who receives a value payment or a share of such payment. For example, the Commission may make a value payment on condition that alternative buildings are set up upon the site of the demolished houses. In this connexion it should be noted that the power to impose conditions as to the location of buildings is limited to the period while the Emergency Powers (Defence) Act, 1939, remains in force, that is to say the period of the war. Suppose, therefore, that the Commission 609 impose a condition on the recipient of a value payment that he is to rebuild a similar house to that which has been demolished. That means that the recipient of the payment—say the owner of the freehold—has spent £4,000 on rebuilding when, in fact, he has only received £2,000 from the Commission. On the other hand, if the Commission decide that the owner can only spend up to £2,000 on the rebuilding, then the owner is only able to build a house approximately half the size of his former residence.
§ I have throughout taken the simple case of a freeholder who receives the whole of the value payment, say £2,000. But in a more complicated case that value payment of £2,000 might have to be split up between the owners of the various proprietary interests in the property. Let us postulate the trinity of freeholder, lessee and sub-lessee, each with a proprietary interest. Let us assume by way of example that the freeholder gets £1000, the lessee gets £700 and the sublessee gets £300. The freeholder is now in possession of £1,000 and a vacant site. The position of the freeholder with £1,000 and a vacant site is clearly worse than the position of the freeholder with £2,000 and a vacant site. I am sure that your Lordships will appreciate the seriousness of the position. It is already serious when an inadequate value payment is paid wholly to one person, but how much more serious is the position when an inadequate value payment has to be split up between two or more persons. The examples of what may happen can be multiplied several hundredfold. In order to complete the sad story I may say that Death Duties are payable on value payments. Thus, where an estate includes a value payment in respect of war damage, Death Duties will have to be paid on that payment. However, it is only fair to the Inland Revenue to say that in such a case, although the value payment is to be taken into account for purposes of aggregation, in the ordinary way where the estate retains the right to value payment the duty in respect of that payment will not be collected until value payment has been received.
§ I now come to the main point. Under Section 11 of the War Damage Act, 1943, when the time comes for the payment of value payments generally or in substantial volume, the matter shall be considered by the War Damage Commission. If the 610 Commission consider in the light of their experience that the value payments are inadequate they shall report to the Treasury. The report shall be published. The Treasury shall have power, in the light of the recommendations which may be made by the Commission, to increase the sums which would otherwise be payable under the War Damage Act, 1943. Any order that the Treasury may make increasing the value payments under those provisions shall be laid before the House of Commons and shall be subject to an affirmative Resolution. The whole matter, therefore, will be ultimately decided by the House of Commons.
§ These are very important provisions. But it is equally important to know how they will operate in practice. At the present time the War Damage Commission are busy determining the amounts of value payments and are trying to agree those payments with the appropriate parties. No doubt many of those value payments are being amicably agreed between the War Damage Commission and the appropriate parties without any recourse to a referee. But the payments themselves will not be paid, subject to a few exceptions which I need not mention, until after the war. It may be that in the year 1946, as in my example, the cost of labour and materials will be 100 per cent. greater than in 1939. If the Treasury decide to increase the amount that would otherwise be payable under the Act I hope that the increase will be retrospective in the sense that it will cover the value payments which are now being determined by the Commission and agreed upon between the Commission and the appropriate parties.
§ The fact is that under Section 11 of the. War Damage Act, 1943, the time has not yet arrived to make any increase in value payments for the reason that value payments are not yet being in fact paid generally or in substantial volume. This Motion, therefore, I must confess, is premature, but it is only intended to explore the situation. I may say in conclusion that I have expressly refrained from making any comparison between the measure of compensation under the War Damage Act, 1943, and the measure of compensation under the Town and Country Planning Act, 1944. That is another matter. I have also expressly refrained from saying anything about the alleged 611 tendency of the War Damage Commission to value the site as high as possible so as to reduce the amount of the value payment. That also is another matter. I have tried throughout to confine my observations to the position which arises from the inadequacy of a value payment under the existing law. I beg to move for Papers.
§ 2.20 p.m.
§ LORD CHESHAM
My Lords, I am very glad that Lord Meston has raised this question, and I am very glad that he has raised it at the present time. Lord Meston said that the question might be considered premature, but the fact is that the War Damage Commission are at the present moment negotiating with owners and trying to persuade them to come to an amicable agreement as regards these value payments. In view of that fact I do not think that discussion of this question is at all premature. I should like to support everything that Lord Meston has said, and to draw attention to one or two points in particular which have not been mentioned. The first concerns what I might call office or business accommodation—blocks of buildings with offices. On the present value-payment basis there is very little prospect of such buildings being rebuilt by the owners. The best way in which I can explain what I mean is by quoting one or two examples. Lord Meston has given one example which referred to a dwelling house; I have been supplied with particulars of six properties of the type to which I refer—office property and blocks of offices—selected from the London region. They are not together; they are separate, at various places. I am going to quote to you, very shortly, the estimated value payment which is due to be paid on this "blitzed" property and the actual cost, at present-day prices, of reinstating them to the condition in which they were before the "Blitz."
In the first case the value payment is estimated at £27,400, whereas the cost of replacement to-day is £48,300. This means that if you want the owner to rebuild, he will have to produce £21,000 of fresh capital himself. In another case the value payment is £102,000 and the cost of reinstatement £130,000, leaving a difference of £28,000 to be provided by the owner. In the third case the value payment is £39,800 and the cost of rein- 612 statement £88,500–a difference of £49,000. I can cite several other cases, but I will just take this last one in which the value payment is estimated at £53,500 and the cost of reinstatement at £140,000, which means that in that particular instance the owner would have to provide £87,000 to restore that property to the state in which it was before. I could quote a great many more examples, but I do not wish to weary your Lordships. This type of property, as your Lordships know perfectly well, has been very heavily "blitzed" and has suffered very severe damage in London and other "blitzed" cities. If the present basis of value payment is going to be adhered to, it will be impossible for the owners to replace the property. At a rough estimate, the value payment might be able to replace just about half of what has been damaged.
Now I know that a certain number of people expect the whole of the rebuilding, the whole of reconstruction, to be left to local authorities. I do not know if it is expected that the local authorities are going to provide this office accommodation in large quantities or in anything like the amount which is required to replace what has been damaged, but if they do they will have to raise the money, and they will have to raise the money presumably by borrowing from the Treasury or from the Government or by some other means; and in the few cases which I have quoted, if the Government are going to advance the money to reinstate these properties on anything like the scale they were before, the Government will have to produce an extra £300,000.
But apart from any question of justice to owners who are expected to rebuild these places and who will be unable to do so if the value payment is not altered, I want to draw your attention to the very serious effect which this lack of office and business accommodation may have on business generally after the war. We have been told that business has got to be revived; we have got to get our trade back in greater quantity than it was before. Well, the volume of the damage which has been done to this type of business accommodation is so great that unless it is replaced the mere fact that there is no accommodation in which to do business may have a serious effect on the rivival of business after the war, which, in turn, and indeed directly, might very seriously 613 affect also the employment of ex-Service men and ex-war workers. You cannot establish a business and employ clerks to run a business if you have nowhere to put them, and there is going to be a very serious shortage. I do urge that value payments must be brought in much closer relation to reality, to the actual cost of reinstating what has been damaged. I know, as Lord Meston has pointed out, that there is rather heavy and clumsy provision for raising the basis of value payments; but surely that increase in the basis of value payments should be made now, while negotiations are going on with owners. I have no doubt a considerable number of owners are coining to an arrangement with the War Damage Commission, and I am very much afraid that if they are doing so they may find that they have got a very bad bargain, compared with the owners who are perhaps not quite so—I was going to say gullible, but I mean so easily inveigled into things.
Another point I want to raise has already been put up to the Government and I believe they are considering it, but nothing has happened. It has been referred to generally as rebuilding on alternative sites. This refers more to house property and the smaller owner. If a house is "blitzed" and damaged and qualifies for a cost-of-works payment it means that compensation would be paid of the exact amount that it costs to reinstate that house, but the building must be carried out on the same site as that on which the "blitzed" house stood. That provision is having a very unfortunate effect—an effect, I am told, that was never intended when the War Damage Acts were introduced. A great many of these sites cannot be built on owing to town planning. A house is bombed and severely damaged and the owner is told to rebuild and that the cost of rebuilding will be paid. But the local authority steps in and says, "You can't rebuild there because we want that site for a road," or, "it does not conform with the plans that we have made for rebuilding this town." The owner is not allowed to spend the money which he is going to get from the cost-of-works payment by building on any other site. If he builds on any other site he is automatically reduced to what is called value payment which is very much less.
This is a point of major importance because it is having a very serious effect 614 in some parts of the country. I can quote one case which has come to me from Clydebank, Scotland. Here a number of houses were destroyed in a bombing raid in 1941. These houses qualified for a cost-of-works payment and the owner was prepared to rebuild, but the town planning authority stepped in and stopped him from building on the site because that he proposed to do did not conform with the plans which they had prepared. This owner happened to own vacant sites adjoining which had not been damaged, and he offered to build the houses on an alternative site which would have complied completely with the general planning requirements. But the War Damage Commission were compelled by the Act to reduce their cost-of-works payment to a value payment because it was a different site on which he was going to build. The result was that the owner was not able to build those houses. That sort of thing is happening in a great many places all over the country. I do not believe it was intended originally by the Government that the Act should have this effect, because provision was specially made in the Act of 1943 in respect of churches and ecclesiastical buildings that the provision should not apply and that a cost-of-works payment to damaged churches could be paid where those churches were rebuilt on a different site.
As a side issue on this particular case in Clydebank, I would like to mention that in addition to having to deal with the War Damage Commission the owner found he had to have lengthy dealings with the local authority as regards town planning and also with the Board of Trade who were concerned with the location of industry. I do not know if your Lordships realize what it means to have dealings with three different Departments but that particular case shows that there is a very considerable lack of co-ordination. It also illustrates the difficulties of the owner who has to deal with three different Departments, making the whole project virtually impossible.
On the question of war damage compensation generally it cannot be sufficiently emphasized that this type of compensation differs very materially from the other compensation which is being discussed by the Government. It differs to this extent, that in regard to war damage the owner is making a very substantial contribution to the cost. The 615 last figures which I have been able to get were those up to March, 1944. These show that the contributions paid compulsorily by owners amounted to over £113,000,000. In the same period the expenditure on repairs—not on compensation but on repairs—amounted to £152,000,000. But in July of last year I understand that another £40,000,000 was due from the owners, which means that the owners themselves have paid very nearly the whole of the expenditure so far. They have not paid quite all but they have so far virtually paid by their contributions for the expenditure on repairs of war damage. When the War Damage Acts were introduced it was understood that the owners would be required to pay the first £200,000,000 and that the Treasury would find the second £200,000,000, after which any further expenditure would be on a fifty-fifty basis, produced by a levy on the owners and payment from the Treasury. We have spent already nearly £200,000,000 in repairs alone.
Your Lordships are well aware of the agitation which is going on at the present moment in regard to the slowness of repairs to bomb-damaged property. There is a great deal more to be done and the damage is not yet over. Damage and destruction are still going on. Almost every day some damage is being reported, indeed it is quite possible that the damage may increase very seriously. I do not know whether that will be so—I certainly hope not—but there is always the possibility of it, so that it is impossible to say what the total bill for repairs alone will amount to. Therefore it is reasonable to suppose that when it comes to the payment of compensation value to owners it will come out of money in excess of the first £400,000,000. In fact it is reasonable to suppose the owners themselves will contribute a considerable proportion of the money that will be paid as value payments. If they are going to make this large contribution, surely they are justified in expecting a reasonable amount of money in compensation. At present, as I have pointed out, value payment has no relation whatever to the cost of reinstating the property. I urge upon the Government the necessity of a declaration, firstly, to bring the basis of value payments much nearer to the actual cost of reinstatement, and secondly, once a cost- 616 of-works payment on a building has been authorized, that that payment should stay and be allowed even if the building is to be put up on a different site. I urge that not only in the interests of justice, but in the interests of rebuilding. Rebuilding and reconstruction generally is vitally essential and we have got to mobilize all forces if we are going to get reconstruction after the war. At present value payment is acting, and will act, as a very severe handicap in getting necessary rebuilding done.
§ 2.41 p.m.
§ THE LORD CHANCELLOR
My Lords, my noble friend Lord Meston has stated to your Lordships, with the clearness to be expected from a man with his legal training and experience, some of the main provisions of this admittedly complicated legislation, and my noble friend Lord Chesham has reinforced the discussion by calling attention, from his practical knowledge, to some impending or present difficulties. I think your Lordships will be grateful to both noble Lords for making these contributions. It so happens that I have had the duty from time to time of expounding the War Damage Acts to your Lordships and I really hesitate to say very much to-day. The subject is complicated, but I think the main lines are capable of being stated quite clearly and fairly briefly. Perhaps your Lordships would like me just to state in my own way what are the broad lines of this legislation which your Lordships' House has passed after discussion, as being one of the two Houses of Parliament.
Let me begin with this. If you did not have any war legislation, then, when a building is bombed or damaged, the owner and, in some cases, the tenant would simply have to repair it or endure the damage. There is no principle of law that because a house is burned down or bombed for any reason, even by enemy action, compensation in some form or other should be provided by the general taxpayer. Indeed, even if a tenant under an ordinary lease including a covenant to repair was absent and could not in the least control what happened, he would, if the house was knocked to pieces by an enemy bomb, be bound, under his covenant, apart from war legislation, to build it up again. Those consequences were so serious and unreasonable that it 617 was necessary to consider what could be done to meet the situation. I think myself that a most ingenious body of Statute law has been brought together for this purpose, for it is by no means an easy question to answer. The scheme, as your Lordships know, was this: that there should be a fund created in part by contributions from property owners—I do not stop to modify that expression as it ought in strictness to be modified in particular cases—and to that fund, at a certain point, the Treasury, that is to say the general body of taxpayers, added an equal amount. If the claims on the fund ultimately came out at more than those two initial contributions, from the property owners first and then if that amounted to more than £200,000,000, another £200,000,000 from the Treasury, the surplus was to be found, as my noble friend clearly explained, share and share alike.
The next question is what are the conditions under which payments are to be made out of this fund? It is the duty of the War Damage Commission to administer the fund according to the law which we have passed. Stated broadly, but I hope not inadequately, there are, as was indicated in the speech of my noble friend Lord Chesham, two ways, either of which may be the proper way in the circumstances. Primarily, the proper way when war damage has occurred to property—to a house, factory, offices or whatever it may be—is to undertake that, when the premises are put back to the state in which they were before, the cost shall be paid out of the fund. That is the actual cost, the reasonable cost. There have been, as your Lordships of course know, tens of thousands of cases in which, after any necessary inspection, the War Damage Commission have said to the owner whose Property has been damaged, "Go ahead, repair it." Upon that being done the actual cost, the out-of-pocket cost, is paid. My noble friend has not criticized that provision when it operates. But there is a second case to be considered—an alternative which, as your Lordships remember, is called a "value payment"—which it is absolutely necessary in some form or other to provide for. Nobody will suggest, if the damage that has been done by the bomb would cost more to repair than the added value that would be thereby given to the property, that you should employ the cost-of-works basis. A "total loss" 618 in insurance is a loss where it is better not to repair because the expense of repair will not increase the value by the amount of the cost of repair. Such cases may happen, and indeed quite often have happened, in this imperfect world. Therefore there was a second form of payment devised as an alternative—the "value payment."
That value payment, when it was proper to make it, was not conditional upon the rebuilding or repair of the house at all. It was a payment that was to be made in respect of the undoubted loss that the owner had suffered, though the property did not earn a cost-of-works payment. A great many people have thought that, whenever a house was badly or completely smashed up, a value payment would be the only sort of payment which could be made. I took occasion in an earlier debate, as I think my noble friend Lord Meston will remember—it was a debate on October 17 of last year which he also raised—to point out that that is not so. If you take a dwelling house, say of three storeys with five bedrooms, built with reasonable conveniences and reasonably up-to-date, and if it is in a situation where that sort of house is a quite proper house to maintain, there would be not a value payment but a cost-of-works payment. The reason is because the expense, great as it is, of rebuilding the house as it was before, will be worth while; for it will add more value to the property than the expenditure. This is the real distinction between the two.
But the matter went further. As I recollect, Lord Meston called our attention, in the earlier debate, to the fact that, in order to secure that cost-of-works payments should be made in preference to these value payments wherever it was proper, the Treasury issued a Direction, I think it was called—which they were authorized to do under the Act—and they directed that cost-of-works payments should get the preference in a large class of house, that the Commission were to treat cases of seriously damaged house property of this kind as cases for cost-of-works payment wherever they could—partly, I conceive, because of the extreme importance of doing everything we can to increase the number of houses. The only case in which that is not done is where it would inflict some injury on the claimant. I think I had the pleasure on 619 the last occasion of satisfying Lord Meston on that point. We were all agreed, I think, that it was a good plan.
But now let us realize what is the measure of the value payment in the cases where it will be made. Undoubtedly, my noble friends are both perfectly right when they say that, as matters stand at this moment, it looks very likely that value payments when they are made at the end of the war, or when they are dealt with now, will not come up in many cases—indeed in most cases—to the actual cost of rebuilding the premises. That is quite deliberate in the Act, and it was one of the provisions which was explained to your Lordships most fully at the time. I have looked up the report of the debate, and have endured the not altogether pleasant sensation of re-reading my own speech, and I think that nothing could have been made more clear. Still it is just as well to remind ourselves of what the reason is, because there is a perfectly good reason, more reasons than one in tact. If you were to say now, in the middle of the war, that in a case where a house, say, has been destroyed by a bomb the fund will pay out what it costs to rebuild that house, some very curious results would follow as between different parts of the country. An area of the country which has been exposed, as some areas have, to the most frightful bombardment, an area from which there has been, perhaps, compulsory evacuation will be an area in which house property for the time being has gone down very much in value. On the other hand, areas to which people have crowded because they were getting away from the more dangerous localities—and in many cases people are crowding the provincial towns —are the areas in which, for the time being, the value of property will have much gone up. You will see that if at once one was to be told, "You will get the value at the date your house was struck," most unequal consequences would follow which nobody could possibly justify. This is one reason. There is another reason. That is that, since this is a joint venture between property owners and the Treasury, it is really necessary to see how this thing works out. Hence it was provided that in the case of these value payments, the payments should be calculated on the basis of values on the 620 31st March, 1939. That was to give you a common basis.
Now arises the point, which Lord Chesham has most clearly brought before us afresh this afternoon, that in many cases, looking at the position as it is, that amount will not pay the equivalent of what has been lost. But in order to make sure that that difficulty was faced there was a provision in the War Damage Act, 1943, which I wish to read to the House. It is better for me to read it, though it is perhaps rather long, than just to paraphrase it, possibly with some loss of accuracy:If, when the discharge of value payments generally or in substantial volume has become permissible,"—and that has not happened yet—it appears to the Commission that, having regard to any circumstances arising since the passage of the War Damage Act, 1941",—undoubtedly, change of the values is within that phrase—the amounts of any such payments computed on the basis of a valuation made by reference to prices current at the thirty-first day of March, nineteen hundred and thirty-nine, are inadequate, the Commission shall make a report to the Treasury stating that they are of that opinion, the circumstances to which they have had regard in forming it, and the deductions which they draw therefrom; and, on receipt from the Commission of any such report, the Treasury shall consider the report, and shall have power by order to direct that the amounts of value payments shall, either in all cases or in such classes of cases as may be specified in the order,"—my noble friend Lord Chesham gave the example, I think, of office accommodation—be increased by a sum equal to such proportion of the amount computed as provided by this Act as may be specified in the order.And there are provisions about publication.
Let me hasten to add that my noble friend Lord Meston, in his opening speech, was right, and my muttered interjection was wrong, when I said that I supposed the order would go before both Houses. A subsequent subsection reads:An order made under this section shall be of no effect until it has been approved by a Resolution of the Commons House of ParliamentMy noble friend therefore was right and my interjection was not justified. Now I do not wish to make out that the passage I have read means anything more than it states. It recognizes that you 621 really cannot determine this question until the end of the war. It is conceivable, though not likely, that values may turn and go down rather than increase further. I do not agree with my noble friend Lord Chesham when he seems to suggest that adjustment should be made now. If that was done what would happen, if there was a further rise of values before the war comes to an end? Surely, the right thing is what is here provided—look at the situation when the war ends. I quite agree that in the first instance it is within the discretion of the Treasury to propose, but having regard to the fact that the War Damage Commission are seized with the whole situation and dealing with it every day, and are minutely informed as to these matters, I do not feel very much doubt that they would make a report and call attention to circumstances of change. If they did so, I agree again that it is for the Treasury to say what they propose. There again I think that, Parliament being what it is, the Treasury will naturally pay regard to the realities of the case, whatever they may be. Therefore, while I cannot and must not be understood for a moment to give any promise or assurance on the point—it would be quite wrong if I did, and contrary to the Act of Parliament—I do call the attention of your Lordships to the fact that this is most carefully provided for.
Then my noble friend Lord Meston, if I understood him aright, put a most pertinent question, and I think that Lord Chesham, on the same point, thought that there was a danger of some people being too gullible, too innocent in this matter. It will be a comfort to both noble Lords if I give them this assurance on behalf of the Treasury, as I am instructed to do, that if under Section II an adjustment order of the kind that I have indicated is made, the operation of that adjustment order will be retrospective, so that even the most innocent or most easily misled of these property owners may safely entrust himself for the time being to straightforward negotiation. That is a definite answer, which I am very glad to be able to give.
There is one other matter on which my noble friend who raised this question would like to be assured. Before I deal with it I must say again that it must be appreciated that under Section 11 the time has not yet come, because it is not the 622 fact at present that the War Damage Commission have dealt with any substantial volume of these cases of value payments. They have devoted themselves in the first instance, and quite rightly, to what is after all a more urgent matter, that of cost-of-works payments, because that is what causes houses to go up or makes them habitable. I therefore entirely accept the observation made by my noble friend Lord Meston that in one sense this is a premature debate, but it is a useful exploratory debate. I must quite firmly resist the idea that the valuers of the Commissioners are under some general trend—I do not know that pressure was suggested—to over-estimate the value of properties after damage. The Treasury, who have a great responsibility in this matter, assure me that that is not so, and I hope that the House will accept that assurance.
Another point which was raised was whether the Treasury would use the power given them by Section 20 of the Act of 1943 to attach the condition to a value payment that the money when received must be invested in a new building. There is such a provision in the Act, and I think that one can see why such a provision was put in, but the situation in fact is that no direction to apply this condition has ever been given to the Commission, and I am authorized to say that that provision is in fact likely to remain a completely dead letter. In any event I can give the assurance that it would not be used with unfairness to the recipient; that is to say, it would not be used to compel him to spend money out of his own pocket, or, which is just as bad, to erect a wholly inadequate building on what may be a splendid site, merely because he gets a small value payment. I really think that when we consider the vastness of these operations and how much the whole community is interested in them, we may attach value, as I attach value, to that assurance which I have just given on the express authority of the Treasury.
There was one small point raised by my noble friend Lord Meston which I should not like entirely to omit, although I must say that he alarmed me. It is bad enough to have to keep the War Damage Acts in one's mind, but if they are to be expounded together with the Town and Country Planning Act I should feel almost like resigning my office! I shall do my best, however, to make the matter clear. 623 The noble Lord said—and the point, I think, has been made in the House of Commons—that under the Town and Country Planning Act the local planning authority in certain cases may compulsorily acquire property; supposing they acquired a single house, the owner would only get a value payment. I think that the answer to that—I speak from my own recollection of the point; I have not examined the Act in detail for this purpose because I did not realize that the point was going to be raised—is that under the Town and Country Planning Act the Minister can only make an order empowering the local authority to acquire an "area" of property which has been substantially devastated by war damage. There are areas, as we know, which have been almost levelled to the ground. I shall not mention where, because conceivably people may be listening who ought not to know. Where you have a devastated area of that kind, this section does, with proper limitations, permit such an order to be made. If you take the case put by my noble friend—which admittedly is an extreme example—he says. "If only one house has been struck, instead of a whole street being swept away, what is the position?" I think the answer is that one house could not possibly be regarded as an "area which has been substantially devastated," and therefore the power under the Town and Country Planning Act would not in fact arise and could not be exercised.
I do not at all claim that I have made to your Lordships what is sometimes called a neat speech, but I hope that it has had a certain order in it. It involves no peroration, but I hope that I have answered the specific questions put to me by my noble friends. I well understand that the remaining point, which was raised very powerfully by the second speaker, is one which is under consideration. It is a very great difficulty. After all, if you give a man a cost-of-works payment it is a payment which is to indemnify him for the re-erection on its old site of the building which has been damaged. To give a cost-of-works payment in order that he may build a house somewhere else is a difficult thing to fit in. It is true that, I think largely owing to the persuasive arguments of the former Bishop of London, the provision was made that in the case of churches and chapels they 624 might get the right to build elsewhere. That perhaps had partly to do with the possible shifting of population. But it is quite true with ordinary buildings that under the Act as it stands if you get a cost-of-works payment it will be to rebuild on the site. I may say that some of us are very much interested in this subject, quite apart from this House. If you want an illustration, go and look at the state of the Temple, and ask yourself whether every building there should be put up on exactly the same site. But the whole matter is under consideration, and I share the hope of my noble friend that a conclusion may be reached and announced, whatever it is, without an undue loss of time. I have done my best, therefore, to serve the House by explaining this matter as far as I can. I thank my noble friend for bringing it before us, and I think we have occupied, not the whole afternoon but an hour of time, very profitably.
§ 3.11 p.m.
My Lords, I hope I may be forgiven for asking the noble and learned Viscount a question, though it is only a minor one, which I think arises from this debate. I do not apologize for not having given the noble and learned Viscount notice, because the question has only arisen this morning, and as he has been Chancellor of the Exchequer I am quite certain that the fact of his not having had notice of the question will be no impediment to him. The matter is this. These payments by the War Damage Commission are, I understand, regarded by the Treasury as in the nature of capital payments, and the particular case I have in mind is that of a very small employee of a hospital with which I am connected who had his house destroyed quite recently. He was left with almost no means at all, and we arranged that a small sum of money should be paid to him as a compassionate allowance or as a partial means for his re-establishment. I have now reason to believe that it is thought in some quarters that that might be regarded as income and that he will be charged Income Tax upon it. I do not know if the Lord Chancellor is able to give an answer on that question at this moment. I may say that I myself have had damage done and have received payment from the War Damage Commission, and I have never thought of entering it on my Income Tax return.
The hospital. I do not know whether the Lord Chancellor can give any indication which would help me.
§ THE LORD CHANCELLOR
I should be very happy to do so, publicly or privately, if. I could, but the circumstance that I spent three years as Chancellor of the Exchequer does not justify me, I am afraid, in offering an opinion at a moment's notice on a matter not connected with the War Damage Act that concerns the revenue about a case which arose this morning. No doubt this is a Government which gets things done but that is too quick.
§ 3.13 p.m.
My Lords, I would like to thank the noble and learned Viscount on the Woolsack for the tremendous amount of trouble that he has taken over this matter and for his very fair and comprehensive and courteous reply. I would also like to thank the noble Lord, Lord Chesham, for the support that he has given me in the debate on this Motion, and for the very valuable examples which he has quoted to illustrate the practical aspects of the problem. There is one thing I forgot to mention and I hope it will not be out of order if I mention it now. The War Damage Commission have power to impose conditions upon the recipient of a value payment or a share in value payments, but the Act does not say that the War Damage Commission must impose those conditions. If I have a house and it is entirely destroyed by a bomb and I become entitled to a value payment of £2,000 and no condition is imposed upon me by the War Damage Commission, can I put that money in the bank or spend it on a holiday, or do what I like with it? I am sorry I did not ask the question before, but it is a matter which I intended to raise.
I am very grateful, and a great number of people will be grateful, to the Lord Chancellor for the undertaking that he has given on behalf of the Government as to the retrospective nature of any adjustment orders that may be made in the future, and also for the statement that no one will be compelled to rebuild a house which costs him a sum of money in excess of that which he receives by way 626 of value payment. That is going to clear up a most difficult point. After the war a number of landlords may say to their tenants, "You never disclaimed your lease, your lease is still in existence, and you are under a covenant to repair the building and to rebuild it if it falls down." Well, if the recipient of the value payment only receives the sum of money which enables him to put up a building half the size of his former residence, I presume that that will be quite a reasonably good defence should the other side to the covenant to repair take any action. Once again, I really do thank the Lord Chancellor for the great trouble he has taken over this matter. I am sure that many people will be very pleased to know that the Government have constantly got this difficult problem under consideration. I beg to withdraw the Motion.
§ Motion for Papers, by leave, withdrawn.