WAR DAMAGE VALUE PAYMENTS. (Hansard, 13 November 1945)

§ LORD CHESHAM
My Lords, I should like to emphasize what the noble Lord, Lord Wolverton, has said. This is a very important question, and I feel sure that he would have explained it more fully had it not been for the important debate which is to follow. I have in my hand a whole list of cases of definite hardship caused by war damage and the non-payment of any compensation. It is not my intention to read out all these cases to you; there is not time, and it would only weary your Lordships. They come from all over England, from all the bombed cities. I should like to refer to one only, as an example of the sort of hardship which is going on. This case comes from Liverpool, and concerns a shop and a house which were occupied by the owner and used by him for a gentlemen's hairdresser business, which provided him with the sum of about £6 a week. The house was entirely demolished by enemy action as long ago as 1940. The estimate by the owner for the value payment is about £600, while the War Damage Commission offer the princely sum of £233. But that, of course, is a different question; what we 820 are discussing to-day is the date. The applicant has lost his entire means of livelihood, with the total loss of his property. Having since suffered a stroke, he is in near destitute circumstances, and is now dependent on an old age pension. I could quote a good many more cases, but I do not want to take up your Lordships' time. I do, however, want to emphasize the fact that this delay in the payment of compensation is causing a great deal of hardship. I hope that the Government will do something to ensure that some payment is made to these individuals as soon as possible.

LORD MESTON
My Lords,I should like to say a few words about the magnitude of the problem. If we exclude the damage which has been done to railways and roads, and to public utilities such as clocks and electricity, gas and water undertakings, it is safe to say that about 3,500,000 properties have suffered war damage. Of that number, about 92 per cent. are dwelling-houses. In round figures, the number of dwellings in respect of which a value payment will be made is just under 200,000. Of course, gar more than 200,000 buildings have been totally destroyed; but, as your Lordships will know, statutory power has been conferred on the War Damage Commission to make, in certain cases, a payment of cost of works, notwithstanding the fact that the building has been totally destroyed. Moreover, the Treasury direction of October 25, 1943, to the War Damage Commission has further increased the power of that Commission to make payments on a cost-of-works basis in the case of certain dwelling-houses which have been erected since 1914, and also in the case of certain dwelling-houses which were erected before that year.
As we all know, a value payment is made to every person who has a proprietary interest in the building. If we assume that there are, on an average, two proprietary interests in every building which is going to be the subject-matter of a value payment, it means to say that there are about 400,000 people in this country who are expectant recipients of value payments. In a great number of cases those people have no money, they have no homes, and in fact they have 821 only hope. Personally, I have not a great deal of hope that they will receive payment in full at an early date. It may be that the Government reply will be somewhat on these lines: Hope springs eternal in the human breast. The soul of mall forever more is blessed. The Treasury have the money in the chest. And there for evermore the cash will rest.

LORD PAKENHAM
My Lords, the Government are grateful to the noble Lords who have raised this matter, and they are anxious that a full and careful statement should be made on behalf of the Treasury. Noble Lords, therefore, will forgive me if I explain the general position rather carefully, although I shall keep an eye on the clock, in view of the important debate which is to follow and the other developments which have been foreshadowed. The noble Lord, Lord Wolverton, was kind enough to supply me in advance with four points that he proposed to raise. Out of deference to the con venience of the House he has not in tact raised them, but I hope he will feel that they are covered in this reply. If he doe, not feel that, I should like to assure him that I come here equipped with a full answer to the points which he had intended to raise.
Let me first of all state very briefly the legal position; secondly, indicate the general attitude of the Government towards the possibility of making value payments at an early date; and thirdly, let me give an explanation of the interim arrangements which are now in force to cope with cares of special hardship. The legal position was finally established by the War Damage Act of 1943—an Act passed, of course, during the period of the Coalition Government. Your Lordships, I am sure, will excuse me from canvassing the merits of that Act. They are not in point to-day. I am not sorry to be excused from dealing with that Act in detail, because it is quite as complicated as the Supplies and Services Bill, which we considered last week, and a very great deal longer. Broadly speaking, your Lordships will recall that payments under Part I of the Act—the Part referring to buildings—are of two kinds, cost-of-works payments and value payments. Cost-of-works payments can be defined, very broadly, as those made where it is economically worth While to incur the cost of restoring 822 a building to its pre-damage condition, and where such restoration in fact takes place. Value payments are made, or will be made, in cases where it is not judged economically worth while to effect restoration. I do not know whether your Lordships will wish me to go into the method of deciding whether a cost-of-works payment or a value payment is to be made, or into the method of assessing the amounts to be paid. Unless you desire that, I will pass over those matters for the moment. But let me just say that in fixing value payments, you will recall that the Commission awards a sum equivalent in amount, at 1939 prices, to the amount by which the value of the property after the damage is less than the value immediately before the damage. It is with these value payments and not with cost-of-works payments that the noble Lord's question is concerned.
To conclude this summary of the legal position, let me recall three of the previsions of the Act which relate to these value payments. First, interest is added at 2½ per cent. per annum from the date of the damage to the date of the payment. I should like to emphasize that point. Secondly (though this does not concern us at the moment), if, when the discharge of value payments generally, or in substantial volume, has become permissible, the War Damage Commission thinks that value payments based on 1939 prices are inadequate, they are to report to the Treasury, and the Treasury have power, if they so wish, and subject to Parliamentary approval, to increase the payments. Thirdly—and this is more relevant this afternoon—under Section 22 value payments are to be made at such time or times as may be specified in regulations made by the Treasury, either generally or as respects payments to be made in different circumstances. So much for the legal position. It gives, as your Lordships are aware, wide discretion to the Treasury, and it is the use of that discretion which to-day is under discussion.
Coming now to policy in general, we may distinguish between what may be called the physical and the financial aspects of policy. Let us take the physical aspect first. Cost-of-works payments are made as soon as the war damge has been made good, and are made to the person who has incurred the cost 823 of making it good, whoever he is. In present circumstances, however, not all the damage, even in cost-of-works cases, can yet be made good. The available supplies of building labour and materials are at present insufficient to make good the war damage to all the properties in respect of which a cost-of-works payment is due to be made—houses, offices, shops, factories, schools and so on. For the time being, therefore, an order of priority is necessary, and the repair of houses entitled to cost-of-works payments is given a substantial priority. It is obviously sensible that for the present, while there is such a shortage of houses and other essential buildings, the labour and material available for making good war damage should be reserved for the cases where the damage is not equivalent to a total loss—i.e. for cost-of-works cases. Rebuilding in value payment cases, therefore, like all other new building other than that regarded as essential, must wait for the present.
That is the physical aspect of the matter, but the financial problem is no less acute than the physical, and this is an aspect on which the Treasury desires special stress to be laid. Value payments, as your Lordships are aware, will not be conditional on their being spent on new buildings, either before or after payment. Nor are they related in any way to rebuilding costs, but only to 1939 investment value. The recipients will be free to devote them to whatever purpose they like. In theory, they should reinvest them as capital in some form, but in practice they will be free to use them, for example, to meet current expenditure. Therefore, whenever value payments begin to be made they will represent an appreciable addition to the volume of purchasing power in the hands of the public. If we could be sure that this additional purchasing power would all be saved and used to augment the pool of capital moneys available for investment in Government loans or in new industrial securities, all would be well. But there is a big risk that it would be used in competing either for existing properties available for sale, or for the limited supplies of consumption goods, thus aggravating the inflationary factors in our present economic situation.
Those inflationary factors are one of the chief concerns of the Government at the present time. They are more potent than 824 at any time during the war. We must, at all costs, ensure that the standard of living of the people, as well as the smooth and speedy conversion of our industries to much-needed peace-time production, are not prejudiced, as they assuredly would be, by any vicious spiral of rising prices and wages. The risk of inflation in our present conditions is the justification for the continuance of most of our war-time controls; it is the reason why, in his recent Budget, the Chancellor of the Exchequer was obliged to approach with considerable caution the question of reductions in taxation, and it is the reason why he postponed the operation of his major tax reductions until next April, when it is to be hoped that more consumption goods will be available. It is also the reason why there can be no question, for the time being, of releasing the Income Tax post-war credits which have been accumulating in taxpayers' favour during the last five years. In these circumstances, we cannot take the risk of adding further to the present surplus of purchasing power by the release of value payments. At the moment, it is too early to say when the order for release can be given. We must watch how the general economic situation develops. But the House can be assured that release will be allowed as soon as it is judged to be safe in the general interest of the community.
So much for the broad attitude of the Government towards the possibility of making value payments in the immediate future. Finally, a few words about the interim position. Here, I feel, there may be a certain amount of misunderstanding or, at any rate, incomplete knowledge of the facts. The Government are far from blind to the possibilities of hardship occurring in a considerable number of cases through the inevitable postponement of value payments—dictated though that postponement be by the overriding interests of the community as a whole. There is power, under Section 22 subsection (2) of the War Damage Act, 1943, to make advance payments on account up to a maximum of £800 to claimants who were maintaining a residence or carrying on business in the damaged premises and are in need of funds in order to secure alternative accommodation. To anticipate criticism I would explain that that sum of £800 is intended primarily to enable persons in 825 that position to acquire alternative accommodation for themselves or for their businesses. Further, under a direction by the Treasury—this may be known to one or two noble Lords—immediate payments, either in whole or in part, can be made where the owner has incurred cost on works of demolition, clearance or repair or for the construction of a substitute for the damaged building. Your Lordships may rest assured that both the powers which I have mentioned are being exercised at the present time.
I am afraid that this statement may cause a certain amount of disappointment, but I feel sure that while we all sympathize with people who are placed in the position of those whose tragedy was outlined in earlier, speeches, we must agree that the interests of the community as a whole must come first. With the ever-present danger of inflation before us it is impossible as vet to begin to make these value payments.