HL Deb 06 December 1966 vol 278 cc1038-125

2.49 p.m.

Order of the Day for the House to be again in Committee read.

Moved, That the House do now resolve itself into Committee.—(Lord Kennet.)

On Question, Motion agreed to.

House in Committee accordingly.

[The EARL OF LISTOWEL in the Chair.]

Clause 29 [Levy in Case A]:

LORD NUGENT OF GUILDFORD moved to add to subsection (1): Provided that no levy shall be chargeable in respect of a disposition to which this section applies where the disposition is in respect of a dwelling-house or part of a dwelling-house which is the owner's only or main residence or land which he has for his own occupation and enjoyment with that residence as its garden or grounds up to an area (inclusive of the site of the dwelling-house) of one acre or such larger area as the Commission may in any particular case determine, on being satisfied that, regard being had to the size and character of the dwelling-house, the larger area is required for the reasonable enjoyment of it (or of the part in question) as a residence.

The noble Lord said: I beg to move the Amendment standing in the name of my noble friend Lord Brooke of Cumnor, my noble friend Lord Newton, and myself. This Amendment has a simple purpose. It is simply to exempt from levy the owner-occupied house. The drafting of our Amendment follows that of Clause 29 of the Finance Act 1965 which exempts the owner-occupied house from capital gains tax. I can therefore with confidence commend it to the Committee as being sound and workable and, at any rate in some respects, I hope, acceptable in principle to Her Majesty's Government.

As this is a matter of great importance to our people as a whole, I hope that Her Majesty's Ministers will feel able to meet us on it. But there is obviously a possibility that they may not feel able to, and that this debate on this Amendment might therefore end up with a division of opinion which could lead to a Vote. It is in these circumstances that it would appear to me that I am acting in contravention of the advice which the noble and learned Lord the Lord Chancellor gave us last night, when he advised us with regard to the effect of the Amendments to Part III of the Bill. I feel, therefore, that I should explain to the Committee my justification, as I see it, for moving this Amendment now.

To start with, there seem to me to be two elements in this situation. The first is the legal and constitutional one, and the other is the Parliamentary one. Of course, on the first one I naturally acknowledge and respect the great authority of the noble and learned Lord the Lord Chancellor on all legal and constitutional matters. It is, indeed, the highest in the land. But on the second, Parliamentary principle and practice, I suggest to noble Lords that the opinion of one noble Lord, or indeed of an honourable Member of another place, is as good as another. It is on this basis that I make my comment.

Of course, I recognise the force of the noble and learned Lord's advice that Part III of the Bill has the character of a Supply Bill, and that if therefore this noble House amends Part III of the Bill and sends it back amended to the Commons, it runs the risk of the Commons regarding this as a breach of privilege. Of course, I wish to avoid this. But, on the best information that I can obtain, if on Report or Third Reading we move to take out the whole of Part III—and this was referred to last night by my noble friend Lord Brooke of Cumnor—and the Commons therefore receive the Bill with Part III omitted, no infringement of Commons privilege would arise. This leaves it open for the Commons to put back the whole of Part III unamended if they wish, or indeed to amend it if they so wish.

There is a practical point I would make to noble Lords opposite. At this stage the Commons are debarred from raising any fresh point by way of Amendment unless it arises as an Amendment from this noble House. There may be some points raised in Committee here on Part III which have such value that it is possible the Commons might like to give a second thought to them. Indeed, last night noble Lords opposite told us that there was real sympathy with the de minimis Amendment which we were then discussing. In any event, I submit to noble Lords that this keeps the option open, and I should have thought that the comment of my noble friend Lord Salisbury, that at the end of the day it is for the Commons themselves to determine what is an infringement of their privilege, was the right one.

To turn now to the second aspect of the situation, the Parliamentary aspect, last night the Lord Chancellor expressed the view that, as Amendments to Part III would not be considered by the Commons, it was therefore a profitless exercise to spend days debating them in Committee here. Although I am conscious that I am a very junior Member of this noble House, I strongly submit to your Lordships that this must be a mistaken view. If it was correct, it would equally be a waste of time to debate Amendments and vote on them on another Bill, because we do so in the knowledge that when they go back to another place they will probably be reversed, and when the reversals are sent hack to this House again we will usually accept them. It could be contended even more strongly that when noble Lords opposite were sitting in Opposition (and my noble friends were sitting opposite) they knew that Amendments they moved would be defeated; yet that did not deter them from moving many Amendments, and sometimes with such effect that they are in the Acts now. In the ultimate, if this were true it would not be worthwhile for the Opposition in another place to raise Amendments and divide on them.

I am sure noble Lords will agree with me that debating is the very essence of Parliamentary life, and that we should be failing in our duty if we allowed anybody or anything to restrain us from speaking out freely on any matter of public interest. I am sure that the noble and learned Lord did not intend to imply that he was speaking with the authority of the Judiciary when he expressed the view that our debates would be a profitless exercise. I trust that this Committee will agree with me that the debate on the major features of this Bill, which have such far-reaching effects on the life of the whole community, is both worthwhile and in the public interest. This is my justification for asking your Lordships now to consider this Amendment.

As I have said, the object of the Amendment is to exclude the owner-occupied house from the effect of the levy. As drafted, the Bill requires that the sale of every single house in the country shall be notified to the Land Commission, and shall be liable to levy. There are about 8 million owner-occupied houses in the country, and all the signs are that the owners of these 8 million houses are becoming increasingly aware that this Bill has some dangers for them, and that most people who started at any rate with the general impression that the effect of this Bill was to reduce house prices generally (and I say this with respect to the noble Lord, Lord Kennet, who gave us a most lucid, if not very convincing, exposition about how house prices would come down) no longer have this impression. They see house prices continuing to rise. They have risen 16 per cent. in the last two years. A third of that is due to the Government's own action with S.E.T., and people are increasingly feeling the dangers that lie ahead for them.

There are two specific benefits that would flow from this Amendment. The first is that it would relieve the Land Commission of a large part of the annual notifications. I believe the estimate is that there will be some 2 million to 2,500,000 notifications per annum. If we assume that the owner-occupiers move, on average, about as much as the rest of the community—that is to say, about 10 per cent. per annum—the relief of 800,000 notifications would be no less than one-third of the total notifications expected. This must be a substantial relief, for which the Land Commission would be glad. The Land Commission have to assemble this large professional staff of, I believe, some 2,000 in a field in which there is known to be an acute shortage. I understand that Her Majesty's Government have decided not to proceed with the 1958 revaluation because of the shortage of valuers so this must be quite an important point.

I now come to the second point, which is a substantial one. I believe that the liability to levy of the owner-occupied house will be a penalty and a deterrent to owner-occupation. I looked with approval at the Minutes of Proceedings to-day and saw an entry, "Home ownership—Help towards Home Ownership," which is an objective I warmly commend to the Government, and which no doubt refers to their scheme for cheaper mortgages in the future. I personally regard owner-occupation of houses as the top priority of housing and land policy, and I am sure Her Majesty's Government do, too. But under this Bill the sale of your house will in future attract levy if the Land Commission consider that development value arises. And they will have six years in which to tell you; so for six years you will not know whether or no there is a levy to which you are liable.

Ministers have argued in another place that the majority of houses will not be affected and will not be liable to levy, but that is a guess and it does not remove the general liability that every sale of a house will have; and certainly it is true that large classes of houses will be particularly vulnerable. For instance, the large house in any circumstances in any town; the medium-sized house with a garden in the suburbs, and also the smaller house with a garden in towns and cities. Let us look no further than London: there are large areas in the suburbs of London with small and medium sized houses with gardens—certainly tens of thousands and possibly even hundreds of thousands. These occupy sites which can and should be due for redevelopment to a greater density within the course of the next ten to twenty years, and it is only by the redevelopment of sites of this kind that we shall have successful planning which will preserve the Green Belt and avoid unnecessary, encroachment on to the countryside. This is good planning and it is bound to happen to some extent, and it will be true of big cities and towns throughout the country.

In total there must be literally hundreds of thousands of houses of this kind which will be particularly vulnerable to this levy. What will happen in practice if the Bill goes on to the Statute Book unamended? There will be two consequences: first, that a house owner who is in two minds whether or not to move will be more reluctant to move and will probably decide to stay where he is. This is regrettable because mobility is of great economic value in connection with the movement of workers and it is something which this Government, and indeed all Governments, wish to encourage. Secondly, in this category we have the consideration of housing accommodation itself. It is a desirable thing that older people, when their families have grown up, should move out of their houses which have become too big for them and move into smaller ones, while the rising generation with families growing up can move into the bigger houses. This will undoubtedly be halted because of the uncertainty of the possible penalty.

When a sale takes place, what will happen? The owners will be aware of this and will, undoubtedly, want a higher price in order to protect themselves against the possibility of the levy falling upon them at some time in the future, and also because they will suspect that when they buy another house a higher price will be asked for that as well. This is exactly against the public interest. So, while noble Lords opposite are struggling to keep house prices down, the effect of this Bill is bound to increase those prices. To put this Bill on the Statute Book with a liability to levy really will be a deterrent to the owner-occupation of houses and thus directly against the Government's housing policy. It is in that sense that I beg to move the Amendment.

Amendment moved—

Page 33, line 12, at end insert the said proviso.—(Lord Nugent of Guildford.)

3.7 p.m.

LORD WADE

Before saying a few words in support of the objects of this Amendment, may I ask for a little further elucidation of the constitutional point which was raised yesterday, as it would seem to have some bearing on this and other Amendments to Part III of this Bill. Reading from yesterday's Hansard, at column 989, I see that the noble and learned Lord the Lord Chancellor said: if your Lordships were to amend this part of the Bill and send it to another place, that course would appear to be an infringement of the privileges of the Commons". But in the following column, 990, he said: If noble Lords opposite could suggest a clause which was watertight I have no doubt that we should be happy to consider it. Later there was a Division, after which the Lord Chancellor said (column 1011): The offer which I made was to consider something together with noble Lords opposite. He went on to point out that the Amendment had been pressed to a Division and that he did not necessarily feel bound by that offer. That I understand. I do not quarrel with it—in fact I agreed with my noble friend Lord Ogmore yesterday, that in view of the Lord Chancellor's advice we had to vote against the Amendment although we were sympathetic towards it.

Then in column 1012 the noble and learned Lord the Lord Chancellor said: My general answer would have been the same as before if we had all agreed that we would think about this and see whether we could find a practical answer. That is the point I am raising: what is the practical answer?

I am sure we are all anxious to know what was meant when the spokesman for the Government, when considering Part III, said they would be happy to consider a suggestion and would try to find a practical answer. For example, if the Government are satisfied that a good point has been made, although they may not be satisfied with the precise wording, is there some method whereby the Bill can be amended in that way? Perhaps this is not the stage at which the precise procedure should be outlined, but I am sure that if we are to have useful discussions on Part III it would be helpful to know whether it is any good trying to persuade the Government that our point of view is right, in trying to get an assurance that at some stage an Amendment will he introduced and that such a course is possible. If there is no method whereby that can be done then I fear that we shall be wasting our time.

With regard to this Amendment, it may be that it is rather too wide. I have my own views as to how betterment should be collected, but it would be out of order to go into that now. However, I think the principle of this Amendment is sound. The difficulties arise from the fact that the levy is collected from the vendor, but so far as owner-occupation is concerned the test is what is the purchaser going to do with the property he buys? There may be an exemption under Clause 61 because the purchaser is going to buy the house for his own occupation, but the vendor may not know that; and the question we have to consider under this clause is whether there should be some relief for the vendor who is the owner-occupier. It seems to me there is a case for some relief along the lines advocated in this Amendment.

LORD MITCHISON

It is not for me to discuss the procedural aspect of what we are doing, but I should like to say a word or two about the principle which seems to me to emerge from these discussions. The noble Lord, Lord Wade, will be the first to remember that the Parliament Act 1911 was passed under a Liberal Government in order to facilitate a Liberal Budget. It contained in its Preamble a statement that it was only a temporary measure and that a further reform of this House would be required. Unfortunately, that has been so long delayed; but it is obvious that it is getting nearer and nearer. That was a dispute about money, and the House of Commons, very rightly and properly, keeps an exceedingly tight control of money in the interests of the Government of the day, which is responsible for our national finances. The Government, of course, can be attacked at any point, but it is not open to the Opposition in the House of Commons to bring forward measures which involve the expenditure of public money or a change in the incidence of taxation or anything of that sort. Broadly, measures which require a Ways and Means Resolution are open to the Government but not to the Opposition.

The present position is that at the last General Election the taxpayers of this country elected a Labour Government by a considerable majority, and that tight control over financial matters is still exercised. What seems to me, as an outsider and a "new boy" here—not in age—to be suggested here is that this House should have greater powers in moving Amendments and the like on money matters than are open to the Opposition in the House of Commons. I cannot believe that that is democratic.

LORD WADE

So far as I am concerned, I was not advocating greater powers. I was simply asking for elucidation on this point. I wished to know whether, if the Government were persuaded that some Amendment would he beneficial and might improve the Bill, there was any way in which that could be done.

LORD MITCHISON

It is for that reason I did not discuss the procedural point. That seems to me to be much more properly a matter for my noble and learned friend the Lord Chancellor than for (as I have described myself) a junior Member of the House. All I am talking about is the broad principle that seems to me to emerge. The substance of the matter seems to me to be that this is a wholly undemocratic claim by an unrepresentative Chamber to exercise rights in financial matters which are not open to the Opposition or Back Bench members in another place.

I am not going to pursue the point further to-day, because here we are discussing particular Amendments. But I owe a great deal of gratitude to noble Lords opposite. I have been trying, in the Press and various other places, to get my Panty to carry out its Election pledge to cut the powers of this House as soon as possible, and noble Lords opposite are giving me some unsolicited help in that direction, for which I am quite sincerely grateful. As a citizen of this country and as an ordinary democrat, I think that two and two make four, and when there is a difference of opinion between this House and an elected Chamber the elected Chamber ought always to prevail. It is for that reason I am against this kind of procedure which gives to an Opposition here procedural rights which are not given, as I understand it, to an Opposition in another place.

LORD BROOKE OF CUMNOR

I am sorry to interrupt the noble Lord. Is he seeking to argue that the Amendment now before the Committee is one which it would not have been in order for the Opposition to move in another place?

LORD MITCHISON

I am seeking to argue this that the whole of this Part of the Bill would have required a Ways and Means Resolution. It would depend, of course, on the terms of the Ways and Means Resolution what was and what was not in order, but the substance of all these financial Amendments is to change the basis of the levy—I see the noble Lord, Lord Brooke of Cumnor, shaking his head. He might hear the end of the sentence before he disagrees. We know that he is a difficult person to convince, but it is better if he hears the end. What I was going on to say was, or change the incidence of this levy, which seems to be a financial matter. I am not going to discuss whether any particular Amendment is or is not one that would require a Money Resolution in another place. For what I am saying, it is sufficient to say, as the noble Lord, Lord Brooke of Cumnor, himself admitted after a little difficulty yesterday, that a Ways and Means Resolution would have been required for this Part of the Bill, and it was a Supply Bill. That is all.

LORD BROOKE OF CUMNOR

The outcome of the noble Lord's argument is that it would be out of order in the other place for the Opposition to move to reduce a tax. That would render all discussion on the Finance Bill nugatory.

LORD MITCHISON

I got it quite right. I did not say that, and I chose my words very carefully: to impose a tax or change the incidence of taxation. That is the test. The noble Lord, who has been Financial Secretary to the Treasury, is just as well aware of that as I am. He knows perfectly well that the substance of what is going on is a form of mass suicide by the Opposition here; they are trying to get powers over taxation which they know perfectly well will result in rather firm dealing with their efforts.

I turn to the particular Amendment we are discussing to-day.

SEVERAL NOBLE LORDS: Hear, hear!

LORD MITCHISON

It is all very well for noble Lords to say "Hear, hear!" in that way. I am always glad of applause, even from the most unsuspected quarters, but I would point out to noble Lords opposite that their own representative started his speech with a long reference to this aspect, which was followed by a speech from the Liberal Party—and I am always anxious to know whether they do or do not repudiate the Parliament Act of their predecessors. I am surely entitled to say a few words as a Back-Bencher.

LORD LINDGREN

And a "new boy."

LORD MITCHISON

And a "new boy." The last thing I want to do is to be offensive to anybody about this, and I did not regard those cheers as in the least offensive; I am most grateful for them. On this Amendment it seems to me there are one or two troubles about this. The White Paper quite clearly stated what was to be done for the benefit of owneroccupiers—namely, that where they built a new house they should be free of the levy—and Clause 61 of the Bill gives effect to that. You are now asking for something quite different to be done, and I think it wants looking at rather closely.

What is sought is to exempt them, not from Case A levy or Case B levy, which are the ordinary cases that would affect them if they moved their house, but from the Case C levy, which involves a project of "material development." Later in the Bill there is an elaborate description of "material development", and all I need say about it is that it is pretty wide and it hinges, as does so much else in this Bill, on the planning machinery. It certainly is wide, in fact rather wider than developments allowed under Schedule 3 to the Bill which do not require planning permission. When the noble Lord, Lord Nugent of Guildford, wrings our withers with tales of the poor man who has to move his house, it being of importance to the country that he should be able to move quite easily, I would reply two things. One is that he will not be able to move unless he can find a house somewhere else—that is what hampers his mobility, but that is another story.

SEVERAL NOBLE LORDS: Hear, hear!

LORD MITCHISON

We all agree. We all think more houses are needed; there is no dispute about it. That being so, one says: is such a man really going to be hindered by this? In the case put to us, I should have thought it was quite clearly a Case A levy on the sale of his house and not a Case C levy at all. But when one comes to the Case C levy one has to remember something else. It is quite true that this Amendment is drafted from the language of the Finance (No.2) Act 1965 but—

VISCOUNT COLVILLE OF CULROSS

Before the noble Lord pursues this matter, I wonder whether he has noticed the way in which this Amendment is drafted. He will see that it is an Amendment to Clause 29 of the Bill, and not to the one which deals with Case C. It applies specifically to a disposition to which this clause applies, which is Case A only; and, in any event, when dealing with Case C you are not dealing with a disposition but with a project.

LORD MITCHISON

Let us not dispute too much about this. It seems to me that that is a good answer to the Case C point, and the Case C point was made. I leave it at that for the moment—and I leave it there because I am not standing on my feet to cope with this particular question—but I should like to go a little further. This Amendment is drafted in the language of the section of the Finance Act 1965, to which the noble Lord has referred us; that is, Section 29. If the levy is not imposable in any particular case, then capital gains tax will be imposable; and it seems to me highly desirable that the standards for exemption from capital gains tax—does the noble Viscount want to say anything?

VISCOUNT COLVILLE OF CULROSS

I was trying to follow the noble Lord in this. As I understand it, under Section 29 of the Finance Act of last year, the disposal of an owner-occupied house with a garden of, I think, an acre or less, is exempt from capital gains tax.

LORD MITCHISON

That is my whole point, and I am glad that the noble Viscount has understood it. That is the point; and it is most desirable that the standards of exemption should be the same in both cases, and they are not the same. It is perfectly true that the clauses begin in the same way, but Section 29 of the Finance Act goes on to lay down conditions about the individual's only or main residence throughout the period of ownership, or throughout the period of ownership except for all or any part of the last twelve months of that period. It then goes on, in subsections (3) to (13) inclusive, to lay down conditions for applying that particular standard. Not a word of this appears in this Amendment. The result is that what you are going to do is to exempt a certain class of houses from the levy; but you are going to exempt them without any of the safeguards, for that is what they are, which are elaborated at considerable length in the Finance Act 1965; and you are going to get three classes of houses: those which are exempt from the levy, those which are exempt from capital gains, and those which are exempt from neither. You are bound to do that, as I see it, unless you make this exemption follow exactly the terms of Section 29. For that reason, I fear that the introduction of this particular Amendment would considerably confuse the application of this Act in the cases which the noble Lords have in mind. So far from saving anybody any trouble, I think it would give them a great deal more.

At the time when this clause was discussed in another place the Amendments dealing with the application of the Finance Act had not been introduced; and though an indication was given that they were coming, no detail was available. There is no such excuse now, and I should have thought that you either ought to say that any house that is exempt under the Finance Act 1965 is exempted under this Bill, or ought to keep to the language of the White Paper. I must say that when a White Paper has been approved by Parliament as a whole, when so far as I know there has been no attack on it anywhere, and when the relief to be given to the owner-occupier is considerable and clearly stated, I cannot think that it is right to introduce, or to seek to introduce, at this late stage a relief which is going to be exceedingly complicated in practice, and which quite clearly is different from the relief from the capital gains tax given by the Finance Act 1965.

3.27 p.m.

LORD CONESFORD

The capacity of the noble Lord, Lord Mitchison, to astonish me has almost been exhausted. I was wondering for a long time what the exact object of his last speech was, and it was explained, I think, when he said that he was "saying a few words". That is perhaps the understatement of the century. We all know from his numerous interventions—no, the noble Lord can interrupt me a little later.

LORD MITCHISON

I was interrupted.

LORD CONESFORD

I dare say.

LORD MITCHISON

And I gave way.

SEVERAL NOBLE LORDS: Order, order!

LORD MITCHISON

I am obliged to the noble Lord. I always feel frightened by the Brooke-Conesford axis, if I may so call it. I am duly frightened in this case. But I do assure the noble Lord that my intentions were good, and if I took too long and bored him I am terribly sorry. I hate making long speeches, but I was interrupted several times.

LORD CONESFORD

I do not quite know why, unless he is a masochist, the noble Lord does so continually the thing he hates. But what I found most astonishing was this. We all know that the noble Lord desires either a great reform of this House or its abolition, but he benefits a great deal from the absence of rules of procedure in this House and raises that question on every Amendment of every Bill in every speech he makes.

What I wish to do is to point out the complete irrelevance of much that he was saying. He said quite a lot about the Parliament Act. That is quite irrelevant to the discussion that we are having on this Amendment this afternoon. Whatever else this Bill is, it is not a Money Bill. That is perfectly certain, because the test of that is a quite simple one—namely, has Mr. Speaker certified it as a Money Bill? The answer to that is that he has not. So we need have no more discussion at all on the subject of a Money Bill.

The next question is—and this was put, needless to say, in language with which I would respectfully agree, by the noble and learned Lord the Lord Chancellor yesterday—the question of Commons privilege, which of course arises quite independently of whether or not the Bill is a Money Bill. Where a Money Bill is not concerned, the noble and learned Lord the Lord Chancellor. in one of his useful interventions last night, explained how we could wholly avoid all danger of infringing the Commons privileges, even if we amended this Part of the Bill, by simply moving at a later stage to leave out this Part. That would leave the Commons entirely free to reinsert it in any form they like, either to reinstate it in a form revised in the light either of our Amendments or of any second thoughts that they might have, or in its original state.

We all know now, on the authority of Erskine May, the Lord Chancellor, and, indeed, everybody who has looked into this matter, that there need be no danger whatsoever of infringing the Commons privileges, even if we amend this Part of the Bill. The question therefore is: is that a desirable thing to do? I think that at an earlier stage Her Majesty's Government thought that the House as a whole would consider that it was. That is the reason they devoted a considerable number of days to the discussion of this Bill in Committee. The noble and learned Lord the Lord Chancellor said that there were Amendments on this Part of the Bill which, on the merits, he would like to make. I hope he will make them. That will enable this House to perform a more useful function than otherwise it would do.

Then the noble Lord, Lord Mitchison, suggested that we were now doing something which the Opposition could not do in another place. That, of course, is entirely untrue. In another place members of the Opposition could move Amendments, and did move Amendments, to this Part of the Bill. The noble Lord, Lord Mitchison, was wholly wrong in his relevance, in his facts, and in his theory. He finally proceeded to give his views on the Amendment, which he did not think was a good one. He could have saved a great deal of time had he said that at the beginning. I do not wish to say anything about the Amendment, on which perhaps enough has been said already. But I hope that, by way of anticipation. I may possibly have shortened a few of Lord Mitchison's subsequent speeches.

LORD SALTOUN

If I may intervene with a very few words, I should like to say that I have read what the noble and learned Lord the Lord Chancellor said last night, and it seemed to me that what he was dealing with was very much older than the Parliament Act. It was the normal restraint which your Lordships have always practised in matters of Supply, which dates from the time when your Lordships voted your own Supply. He was perfectly correct in what he said there.

The noble Lord, Lord Mitchison, brought in the Parliament Act, and I should like to remind your Lordships very shortly of what I was told by the noble Earl, Lord Donoughmore, who was one of our most distinguished Lord Chairmen and was a very important Member of your Lordships' House at the time the Parliament Act was passed. He said that leaders of both Parties and both Houses met after the passage of the Parliament Act, and they decided that there was nothing in the Parliament Act to affect the practice of either House in any way on any Bill or any matter which was before it, provided that it was traditional; and that the question of the Parliament Act came into play only after your Lordships had done whatever you wished to do and when the Bill went back to the House of Commons.

The noble and learned Lord, the Lord Chancellor, said in the course of yesterday's debate that, his proposition having been rejected by our proceeding to a Division, he felt absolved from it. I would point out that we are a House of Parliament. It is true that we are divided among Parties and that our Party feelings run very high, but our primary duty is to make the best Act of Parliament we can. I should be sorry if the Lord Chancellor felt that anything which would improve this Bill should be rejected by any Division. Divisions sometimes happen out of very strong feelings of principle; sometimes they happen out of mere irritation; but, in the end, they are not really a material factor of your Lordships' House. Our primary duty is to make the best Bill, and if the Opposition brings forward a good case which makes the Government think, then I hope the Government will not feel that a Division is a Party rejection, and that they will address themselves to any valid points which are raised to make a better Bill.

3.35 p.m.

THE LORD CHANCELLOR (LORD GARDINER)

The Government are very concerned about the position of owner- occupiers, and, as your Lordships know, before long this House will be asked to give approval to Bills designed to help the owner-occupier, and I have no reason to think that when noble Lords opposite express interest in the owner-occupier they are any less sincere about it than are the Government. Noble Lords opposite will have an opportunity of showing all that when they come to consider a Bill relating to option mortgages and a Bill relating to leasehold enfranchisement. We have in fact gone out of our way, as indicated in the White Paper, to consider the position under Clause 61 of the man who has already bought a plot of land on which he intends to build a bungalow for himself for retirement. But, of course, in relation to this particular clause, where one is dealing with Case A generally, the Amendment appears to be based on the exemption of dwelling-houses from the capital gains tax.

I do not quite see what justification there is for such a provision in regard to levy. It is obviously right under the capital gains tax that a man should be allowed to buy himself a house comparable to that which he has sold. But the levy is not a tax on personal incomes, and, except for Clause 61, the means of the person concerned are quite irrelevant. It is not a tax in relation to income; it is a levy upon a particular kind of transaction. If a man has a £5,000 house, which might be worth rather more if it were not so inaccessible, and the community spends a great deal of money on an arterial road to a point convenient to his house, the house may become worth £10,000. The Bill is not trying to deprive him of his £5,000 so that he can go and buy an equivalent house in an equivalent kind of place. He is in fact going to have £8,000. All the Bill says is that out of the additional £5,000, which has resulted not from anything he has done but from something the community has done, the community ought to have £2,000.

Dealing with the points which were made by the noble Lord, Lord Nugent of Guildford, it is an exaggeration to say that there are likely to be about 2½ million transactions a year. The probable number, I think, is about a million. These transactions already have to be notified to the Stamp Duty Office. Therefore, it is not a valid point that the Amendment, if carried, would reduce the number of notifications. Moreover, the transactions would still have to be examined to determine whether they were or were not exempt within the terms of the Amendment.

In opposing the Amendment on these grounds, I am quite aware that I am not saying anything either brilliant or novel. I would respectfully adopt the technical objections to this particular Amendment to which my noble friend Lord Mitchison has already referred. But the substance of this Amendment is the same as the new Clause 7 which was moved on Report stage in another place; and from the 15 columns between cols. 1101 and 1116 of the OFFICIAL REPORT we all know what the arguments were. I have listened with great attention to the observations which have been made by noble Lords, but I have not found any argument in favour of exception of owner-occupied houses which was not put forward on new Clause 7 by Mr. Boyd-Carpenter, Sir John Foster, Sir Derek Walker-Smith, Mr. Graham Page, Mr. Rippon and other Members of another place.

We had all the same points: the enormous numbers of small houses in Greater London, and how people did not realise the effect of the Bill; the owner-occupier had had a very difficult time lately; the importance of the whole question of mobility. The only difference that I can trace is that the noble Lord, Lord Nugent of Guildford, said that he accepted the sincerity of the Government's attitude to owner-occupiers, whereas Mr. Boyd-Carpenter said that he doubted it. I cannot pretend to have added anything to the arguments which were used in another place. But there it is. It is in substance the same point; the same reasons have been given by my noble friend Lord Mitchison, and the reasons which I ventured to give are, as I have said, not novel. They are exactly the same on both sides as they were in another place. I would ask the Committee to reject the Amendment.

On the constitutional point, I made it perfectly plain yesterday that, for the reasons which I gave, my noble friends Lind I would not feel able to take part in any Amendment of this Part of the Bill which related to the Schedules. But I did say, in an extreme anxiety to be 'as conciliatory and friendly as possible about the whole matter, that I was quite ready to consult with noble Lords as to any particular Amendment. What I had in mind was that of course it is open to them to move any further Amendment to the Bill on Report stage, but that if they insisted on carrying Amendments and sending them down to another place, it might be better to get them right rather than wrong. In answer to the appeal made by the noble Lord, Lord Saltoun, I am always ready to discuss anything with anybody. I have never in my life, I think, refused to see anybody who wanted to see me. I am always ready to discuss anything with anyone. Your Lordships may remember the case in which, for the reasons which I pointed out and which were not dealt with at all by noble Lords opposite in their reply, even if the object of the Amendment had been desirable it would have enabled levy-avoiders to drive a coach-and-pair through the Act. Therefore, if one were going to have an Amendment to achieve an object, it would seem better that it should be worded in a wav which avoided that consequence.

As to the constitutional position as a whole, I listened with great care to what the noble Lord, Lord Nugent of Guildford, said. I did not disagree with a word that he said, and I think he would agree that what he said did not differ in any way from what I said yesterday. So there is no question between us at all, so far as I know, about what the constitutional position is. I particularly agreed with his observation that in your Lordships' House one man's opinion was as good as another's. If I may add a word entirely from that point of view, and on the assumption that even the Lord Chancellor is entitled to express his own opinion on the footing that his opinion is no better, or, I should hope, not necessarily worse than that of other Members of your Lordships' House, what I think is this.

I think that when you have a Constitution with a Parliament which has two Chambers, in circumstances in which it must occur from time to time that the Party which is in a majority in the elected Chamber is of one kind, and another Party is in the majority in the hereditary Chamber, it is a situation which calls for an ordinary amount of English common sense and—I think Mr. Speaker would agree—one in which it is desirable to avoid, if possible, unnecessary causes of friction between the two Houses. It is already apparent, when there is a Royal Commission and all the Members of another place are summoned to come here by the Royal Commissioners, that every time fewer and fewer come. Also, I feel concerned, as I should think any Member of the House who is not the Lord Chancellor might equally feel concerned, about the reception of Black Rod when he goes for us to another place. In these circumstances, I should have thought there might be a good deal to be said for each House getting on with its own job, and not trying to do the other House's job, too.

The noble Lord, Lord Conesford, is, as always, absolutely right when he says that this has nothing to do with the Parliament Act; it has nothing to do with this Bill being a Money Bill. The privilege of the Commons in relation to Supplies is far, far older than the Parliament Act or Money Bills. This goes back to Stuart times, and no noble Lord opposite has differed from the view that details on Supplies are a matter for the other House. Now is it, in this situation wise for this House to spend some days on 34 different Amendments on this Part of the Bill and and its Schedules alone, dealing in detail—and knowingly dealing in detail—with that which noble Lords themselves know is, and has been for hundreds of years. the privilege of the other House?

It would not be courteous, I think, if my noble friends and I just sat down, did not take part, and said, "You can do what you like." As long as noble Lords opposite choose courteously, as they do, to move Amendments raising, most of them, the same points as have already been discussed in another place, whose proper business details of Supply are, we shall continue to reply with, I hope, equal courtesy, giving, as I have done on this Amendment, the answers which noble Lords knew that I should give, because they are the same as the Minister's below, just as I knew exactly what they were going to say in support of the Amendment.

The matter is entirely one for this House to decide for itself, but I think it is open to question whether, in existing circumstances, this House is being wise in being provocative in this sense: that noble Lords know perfectly well that for centuries details of Supply matters have been the privilege of the other House. It is doubtful whether in those circumstances we should occupy a number of days on these points—this is, I think, the third day on this Bill and there are on this Part and the Schedules alone another 33 Amendments. I wonder whether, on the whole, it would not be wiser for each House to do its own job and not try to do the job of the other House as well.

LORD BROOKE OF CUMNOR

I rise only for a moment, because I was in debate with the noble and learned Lord the Lord Chancellor yesterday, and I did not feel at one with everything that he said. I hope that I described the position correctly in my contribution to yesterday's debate. Fortunately, we are all in agreement to-day that the statement made by the noble Lord, Lord Nugent of Guildford, when he moved this Amendment is acceptable in all quarters. The noble and learned Lord said that he had no fault to find with it, and I would venture to submit that these basic constitutional questions, if they need to be discussed further, might be discussed on another occasion. We are now addressing ourselves to an Amendment.

But I feel worried, though I am a junior in your Lordships' House, at the suggestion of the noble and learned Lord that we ought not to discuss Amendments to Supply Bills or to Parts of Bills which deal with Supply. It seems to me that that would be a departure from what I have been led to believe are the traditions of this House. It has never been supposed since Stuart times, or earlier, that matters of Supply are anything but the privilege of the House of Commons. Nevertheless, according to my reading over the years there have been many occasions when a Bill or a Part of a Bill which dealt with Supply matters has been debated in detail in your Lordships' House—and certainly there have been many occasions when your Lordships' House has decided to amend a Part of such a Bill—and when, to avoid infringement of Commons privilege, your Lordships have moved the whole of that Part out of the Bill at a late stage before sending it back to the Commons. I am quite certain there have been such cases. I have in mind the 1931 case. When the Bill went back to another place with the Part that dealt with Supply moved out of it, the Commons did not reinsert that Part of the Bill in its original and unamended form but in fact sent it back to your Lordships' House with certain changes—some, though not all, of which were related to Amendments to which your Lordships' House had agreed.

It appears to me, therefore, that in a case like that your Lordships' House effected what were accepted by both Houses of Parliament as improvements to the Bill; and if your Lordships had not spent time in Committee discussing Amendments to the Bill the Bill would have reached the Statute Book in a less satisfactory form than it eventually did. That is the justification, as I see it, for noble Lords putting down and discussing Amendments to Part III of this Bill; and I for one, although, as I say, I am very junior, hope we may be able to carry on to the end of the Committee stage on that basis.

I do not think it need take a very great deal of time to finish off the remaining Amendments on the Marshalled List, and I certainly have no desire to prolong the proceedings. I hope that we can do this in good part, knowing that we cannot expect another place to agree that the Bill should be amended in precisely these ways, but nevertheless knowing that everything we may do to-day and to-morrow will be on record in Hansard and will be known to Members of another place and members of the Government. And it may be—who can tell?—that eventually the Bill will reach the Statute Book in an improved form. The noble and learned Lord the Lord Chancellor himself said that, if it were not for this difficulty, there were one or two Amendments which he would feel disposed to accept as improvements to this Bill.

THE LORD CHANCELLOR

If the noble Lord will forgive me, I did not say "as improvements" I said that there are one or two Amendments—and I shall identify them when I come to them—which are related to substituting one word for another where, in our view, the two words mean the same thing and it does not make the slightest difference which is chosen. That is the sort of case in which ordinarily one says, "We do not think this matters; we will accept the Amendment", and where, but for this constitutional point, I should have advised my noble friends to do that.

LORD BROOKE OF CUMNOR

I would not urge the noble and learned Lord and his noble friends to accept Amendments if they were not definite improvements to the Bill; but I hope we can complete our consideration of these Amendments in a good spirit on both sides, and then, if there have to be further discussions about the basic constitutional questions, postpone those for another occasion.

LORD MACANDREW

I want to address your Lordships for only one moment on this question of privilege Amendments. Time and again, when I was in the Chair in the Commons, Privilege Amendments came down from this House, and one announced from the Chair that they were all Privilege; and then, if the House of Commons agreed, an entry was made in the Journals. It is a perfectly simple procedure, and there is nothing wrong with it. Sending Privilege Amendments down to the Commons has been done time and time again.

LORD NUGENT OF GUILDFORD

May I also thank the noble and learned Lord the Lord Chancellor for answering the debate in the terms in which he did, and for answering the constitutional points which I raised? May I say how glad I am to know that what I said has his approval and agreement on the constitutional point, and that he also agrees with me on the political point? I certainly agree with him that he is at least as entitled as I am to have his own opinion.

My noble friend Lord Brooke of Cumnor has, I think, already sufficiently dealt with this constitutional point, and I should like to turn briefly, if I may, to the answer that the noble and learned Lord gave the Committee on the substance of the Amendment. He told me a piece of information which I had not learnt before: that it is estimated that there will not be more than about a million transactions annually for the Land Commission. That I am interested to learn, but I do make the point that the average movement is about 10 per cent. per annum. A recent survey that we did in the South-East has most astonishingly revealed this; and, if that is correct, I suspect that the number of transactions may be considerably higher, because that would account for 800,000 in the owner-occupation class alone. However, let it pass: it is a minor point.

The major point, as the noble and learned Lord rightly observed, is the argument which was deployed at length in another place. I readily confess that I have not adduced new arguments to those that were produced by my honourable and right honourable friends in another place. Those are the arguments, the basic arguments. As noble Lords on both sides of the Committee recognise, I am sure, there is here a basic difference in philosophy. Noble Lords opposite believe—with all sincerity, I am sure—that development value is something which is brought about by the action of

the community in all cases, and that therefore a substantial part of it should go to the public purse. They put that as the top priority. I partially acknowledge the force of their argument there. I am not against it in principle, although I am against it in degree. I put as my top priority house-ownership itself. I believe that this Bill as now drafted will have a deterrent effect in the ways I have described on house-ownership, and therefore, sincerely and rightly conceived though it may be in principle, it is unacceptable to me in this form. This really is the basic different between us. I accept that we cannot bridge the gap, and in these circumstances I must ask the Committee to divide.

4.2 p.m.

On Question, Whether the said Amendment (No. 27) shall be agreed to?

Their Lordships divided: Contents, 77; Not-Contents, 46.

CONTENTS
Albemarle, E. Dundee, E. Kilmuir, E.
Alexander of Tunis, E. Dundonald, E. Kinnoull, E.
Allerton, L. Eccles, V. Lloyd, L.
Amherst of Hackney, L. Effingham, E. MacAndrew, L.
Ampthill, L. Elton, L. Merrivale, L.
Atholl, D. Emmet of Amberley, Bs. Mersey, V.
Auckland, L. Falkland, V. Milverton, L.
Balerno, L. Falmouth, V. Monsell, V.
Balfour of Burleigh, L. Ferrier, L. Newall, L.
Balfour of Inchrye, L. Forbes, L. Newton, L.
Bessborough, E. Fraser of North Cape, L. Nugent of Guildford, L.
Birdwood, L. Goschen, V. [Teller.] Oakshott, L.
Brooke of Cumnor, L. Greenway, L. St. Aldwyn, E. [Teller.]
Brooke of Ystradfellte, Bs. Gridley, L. St. Helens, L.
Buccleuch and Queensbury, D. Grimston of Westbury, L. St. Oswald, L.
Carrington, L. Guest, L. Sandford, L.
Coleraine, L. Hacking, L. Savile, L.
Colville of Culross, V. Haddington, E. Selkirk, E.
Conesford, L. Harlech, L. Somers, L.
Congleton, L. Hastings, L. Strange of Knokin, Bs.
Cottesloe, L. Hawke, L. Teynham, L.
Daventry, V. Howard of Glossop, L. Ullswater, V.
Denham, L. Howe, E. Vivian, L.
Derwent, L. Ilford, L. Wedgwood, L.
Drumalbyn, L. Inglewood, L. Wolverton, L.
Dudley, L. Jessel, L.
NOT-CONTENTS
Addison, V. Chorley, L. Lindgren, L.
Archibald, L. Citrine, L. Longford, E. (L. Privy Seal.)
Arwyn, L. Faringdon, L. Maelor, L.
Attlee, E. Gardiner, L. (L. Chancellor.) Mitchison, L.
Boothby, L. Hanworth, V. Morrison, L.
Bowles, L. [Teller.] Henderson, L. Moyle, L.
Brockway, L. Hilton of Upton, L. Pargiter, L.
Burden, L. Hurcomb, L. Phillips, Bs.
Burton of Coventry, Bs. Kennet, L. Plummer, Bs.
Campbell of Eskan, L. Latham, L. Popplewell, L.
Champion, L. Leatherland, L. Rhodes, L.
Ritchie-Calder, L. Sorensen, L. [Teller.] Walston, L.
Royle, L. Stow Hill, L. Wells-Pestell, L.
St. Davids, V. Summerskill, Bs. Williamson, L.
Shepherd, L. Taylor of Mansfield, L. Winterbottom, L.
Silkin, L.

Resolved in the affirmative, and Amendment agreed to accordingly.

Clause 29, as amended, agreed to.

Clauses 30 to 35 agreed to.

Clause 36 [Liability to pay levy]:

4.10 p.m.

VISCOUNT COLVILLE OF CULROSS moved, in subsection (3), to leave out paragraph (b) and to substitute: and

The noble Viscount said: This Amendment is only a wording Amendment in that it attempts to insert instead of the word "subject" in the preceding paragraph the words appearing in the Amendment. I hope the noble and learned Lord, the Lord Chancellor, will not consider it illegitimate to move this Amendment. I do not believe it has been moved anywhere else or the matter to which it relates discussed anywhere else. I do not move the Amendment for fun but because there has been genuine misunderstanding and dismay about one possible meaning which people think may arise out of this clause. I am therefore hoping that an explanation may be forthcoming, whether or not the noble and learned Lord says that the Amendment is a good one—which I gather is not going to be the case. I hope, therefore, that the noble and learned Lord will forgive me if I try to explain how it is that I see difficulty arising.

I should like to take the fairly simple case of the levy under Case C. an example which I think is one for which the Bill already caters in one of the Schedules. There is a vendor who owns the freehold of the land and there is a purchaser who is a developer and who proposes to buy the land and then build houses or something else upon it. I will call the two parties the vendor and the purchaser respectively. At the date when the building begins—that is to say, when the project begins to be carried out—the transfer of the land, the sale, has not been executed, so the freehold still officially belongs to the vendor. The situation that will arise is this. First, under Clause 31 the levy will be chargeable in respect of any assessable interest in the relevant land. One then goes on to look at Clause 32 and one finds there, in subsection (1), what is the assessable interest. For the purposes of this example it is, in fact, the freehold which exists on the relevant date: that is to say, looking back to Clause 31(5), the date on which the project begins to be carried out. Having discovered what is the assessable interest, one goes on to a further concept in subsection (5) of Clause 32 where a new term of art, the "developing owner", is first introduced. He is a person who may be a developing owner in respect of one or other of the cases set out in the three paragraphs of subsection (5). The one in which I am interested is paragraph (b). He is under an enforceable contract to purchase the land. There are therefore two people interested in the assessable value, the freeholder, who has not yet sold, and the developing owner.

In Clause 32(6) there is a provision by which for the purpose of deciding who is the developing owner, account is taken of who is the person who would have possession of the land when the project begins to be carried out and that is clearly the builder, the purchaser of the land. Subsection (7) also deals with another term of art: an assessable interest by virtue of which a person is the developing owner. There can be an assessable interest by virtue of which a person is the developing owner if he has a contract to purchase. That is dealt with in paragraph (b) of subsection (7).

In the circumstances we have the purchaser, who has an assessable interest by virtue of which he is a developing owner under that subsection and he is the developing owner under subsection (6). Then we go on to the clause with which we are dealing to see who is liable to pay the levy under subsection (4). It says, in the first place, that: the person (if any) who is the developing owner in relation to the relevant project shall be liable to pay the levy in respect of every assessable interest in the relvant land … by virtue of which he is the developing owner. That is the freehold which he has contracted to purchase, and he has to pay the levy on that.

The second paragraph says: subject to the preceding paragraph, the person who … is entitled to any assessable interest … shall be liable to pay the levy in respect of that interest. In respect of the same interest, the same freehold, the vendor is also entitled to an assessable interest. There are therefore prima facie under subsection (4) two people liable to pay levy. I do not suppose that more than one of them is intended to pay it, but, as I see it and as the subsection is drafted at the moment, it looks as though both of them are liable. Therefore the crucial words in this connection are: Subject to the preceding paragraph in paragraph (b). That may mean that both are liable, and the Land Commission wish to have a reserve power so that in case they do not get the money out of the developing owner they can get it from the vendor who still has the free-hold. On the other hand, it may mean that if the developing owner is the one who is liable—because there may not be a developing owner; hence the words "(if any)" in paragraph (a)—and if the developing owner does pay the levy then the vendor in the circumstances which I have outlined will not be liable. If that is what is meant then all is well.

The wording in my Amendment attempts to draw this point to the attention of the noble and learned Lord opposite to try to get an explanation from him of exactly how this matter is going to work in practice; because there is a fear at the moment that, in these circumstances (and of course there are many others where there will be two people who have the assessable interest in some respect or another) they will both be liable to pay the levy in a way which I am sure was not intended. I hope, therefore, that an explanation may be given to clear up the matter. I beg to move.

Amendment moved— Page 43, line 4, leave out paragraph (b) and insert the said new paragraph.—[Viscount Colville of Culross.]

THE LORD CHANCELLOR

I was not at all clear what the object of the Amendment really was or whether the noble Viscount, Lord Colville of Culross, wanted to ensure that the levy was not paid twice on the same interest, once by the owner and once by the person who had contracted to buy. Clause 32(6) ensures that in such cases the owner of the interest, and not the person under contract, shall be the developing owner and be liable by virtue of Clause 34(4)(a) to pay levy on his interest. The person under contract to buy would not be the developing owner and hence could not be levied under Clause 36(4)(a). Nor would he have an assessable interest which would make him liable to levy under Clause 36(4)(b), which is designed to deal with the situation where more than one interest exists in the land; for example, a freehold interest and a tenancy. The Amendment proposed is, if I may say so, merely a lot of words to achieve precisely what the words "Subject to the preceding paragraph" do in Clause 36(4)(b) and are therefore unnecessary.

VISCOUNT COLVILLE OF CULROSS

I appreciate the complexity of this matter, but I think I cannot have correctly explained the situation which I had intended to put to the noble and learned Lord. In the circumstances which I envisage, the purchaser began to develop the land before the contract was executed and therefore while the vendor still had the freehold interest in it. At that stage, the noble and learned Lord said, the freeholder had an assessable interest. But the developing owner is brought into the picture by the provisions of Clause 32. He also is the developing owner because of the provisions of subsection (5). Because of the provisions of subsection (5) I believe that the freeholder—the vendor—is also a developing owner. There is therefore a clash between the two of them and that is where subsection (6) resolves the matter in favour of the man who has possession at the time when the project begins, who is clearly the purchaser under contract. Therefore, we have two people who come, one within paragraph (a) and one within paragraph (b) of Clause 36(4) and who are both interested in the same assessable interest. That is the situation which I am attempting to put before the noble and learned Lord.

This matter is complicated. It is perfectly possible that I have misunderstood the provisions of the Bill. I have tried hard not to do so. Equally, it may be that it cannot be resolved in debate in Committee. If there is still something which I have not adequately explained to the noble and learned Lord, I will gladly do so at another time and in another place, but if he can give the Committee some satisfaction on this example now, I should be greatly obliged.

THE LORD CHANCELLOR

I would be the last person to say that I understand the Bill, but I suggest that the noble Viscount's argument is one which gives no effect at all to the words "Subject to the preceding paragraph" in Clause 36(4)(b).

VISCOUNT COLVILLE OF CULROSS

I want to know what the effect of these words are where there are two people interested in the same assessable interest. Where this is so—and I believe it can happen—is there a dual liability, or is there not? This is the point to which I wish to have an answer.

LORD MITCHISON

Like my noble and learned friend, I looked at the Amendment originally and could not quite make out what the noble Viscount was after. I have now heard his explanation, and I am confirmed in the conclusion I arrived at on my own, that the words, "Subject to the last preceding paragraph" really meet the case. The noble Lord thinks there is the possibility that one person might be liable under paragraph (a) and another under paragraph (b). That does not seem to me to be possible under the wording in the Bill, because it is only if there is no developing owner—that is why the words,"if any," are there—that there is a liability under paragraph (b). Accordingly, the liability under paragraph (b) is expressed as "subject to the preceding paragraph" I am not trying to lay down the law. I have ceased to practise it for many years past, but I looked at this matter carefully, and if I might, he like the man in the War Office who is kept there to read the dispatches, on the ground that if he can understand them, anybody will, I came to that conclusion. I did not find any difficulty.

VISCOUNT COLVILLE OF CULROSS:

The noble Lord is singularly fortunate. There is a great number of other people in the country who find this matter exceedingly difficult. I do not believe that they are foolish or untrained or inexperienced. They have said to me that they find this Bill difficult. They suspect that under the wording of subsection (4) there is a possibility of dual liability in respect of the same interest. I am not interested in cases where there are two interests, where it is obviously clear that each person has his own liability. It is where there is a single interest that I wish to avoid the dual liability.

THE LORD CHANCELLOR

Let me make it clear, so far as the Government are concerned. The clause is not drafted with that intention. There should be no double liability. We are satisfied that, on the wording as it is, that is the result, unless there are two different interests in one.

VISCOUNT COLVILLE OF CULROSS

I am obliged to the noble and learned Lord. I will look again at what he said. I hope it will not be considered a waste of the time of the Committee if, after I have done so, I still feel that the matter is not plain and that I ought to return to this at the next stage. Meanwhile, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 36 agreed to.

Clause 37 agreed to.

Clause 38 [Notification in Case C]:

On Question, Whether Clause 38 shall stand part of the Bill?

VISCOUNT COLVILLE OF CULROSS

I should like to raise a small point on Clause 38, of which I hope I have given adequate notice to the noble and learned Lord the Lord Chancellor. It will arise, I think, only during the first six weeks after the first appointed day. Under Clause 38, and subsequent provisions of this Bill, it will be an offence to begin carrying out a project after the first appointed day unless proper notice has been given to the Land Commission. Subsection (2) provides that that notice shall not have effect if it is served more than twelve months before the date on which the project begins or, equally, if served less than six weeks before the project begins, unless planning permission authorising the whole of the project is in force at the time the notice is served.

Where a builder begins a phased project, it is not uncommon that he has outline planning permission for all of it, though at the stage when he wishes to begin he has detailed permission for only part of it. Your Lordships will see from Clause 99(3) of the Bill that, in those circumstances, by virtue of that definition subsection, he will not have got planning permission authorising the carrying out of the whole of the project and therefore, whether he gives a notice or not within the first six weeks after the appointed day, his notice will have no effect, and he will thereby make himself liable to all the penalties which are set out later in the Bill.

I believe that there must be administrative methods of getting round this difficulty, because I cannot believe that the Government would have kept this phraseology in the Bill (I think that it was a concession in the first place) without having thought of this contingency. I believe that it would be of interest to those who are likely to be faced with the difficulty I have described to know how the Government consider it would he possible for a builder in the circumstances I have described, to begin his larger project during the first six weeks after the first appointed day. I should like to have an explanation of this clause because I think that it would be of help and guidance for those who certainly would not wish to break the law when this Bill becomes law. I hope that the noble and learned Lord can do something to help in this matter.

LORD SORENSEN

I hope that the noble Viscount will allow me to deal with this matter. I will deal with it to the best of my ability. I am glad that the noble Viscount said that this was a relatively small point, because I can deal only with relatively small points. Since Clause 99(3) puts beyond argument the meaning of planning permission "authorising," an outline planning permission authorises development only if the necessary detailed approvals have been obtained. Clause 38(2)(b) has the effect that at least six weeks' notice must be given of the start of a project of development, unless detailed approvals have been obtained for the whole project. That covers the ground the noble Viscount himself explained.

This means that no project which is not completely covered by detailed approvals can be started within the first six weeks after the appointed day. Here again, both the noble Viscount and I are agreed. However, detailed approvals are generally obtained before a project is started. When a project is to be carried out in stages, then detailed approvals would certainly be available for the first stage and this can be made the project notified in the first six weeks. It is therefore most unlikely that any difficulty would arise in the first six weeks. I would, however, give the noble Viscount the assurance that if a developer who feels he would be seriously hindered by this provision gets in touch with the Commission, means will be found administratively to ensure that the difficulty is overcome. I trust that that explanation satisfies the noble Viscount.

VISCOUNT COLVILLE OF CULROSS

I think that what the noble Lord, Lord Sorsensen, has said is most helpful. I am not sure of the technicalities of this matter, and whether in every single case where this arises it may be possible to split the whole project up into a number of smaller ones, one at least of which has detailed planning permission and on which a start is to be made. Therefore the assurance which the noble Lord gave at the end of his remarks is of great value, because neither I nor, I am sure, the Government wish to penalise people who have perfectly genuine projects which they wish to start, but who, by some misfortune, cannot fit within the precise terminology of this very precise Bill. I hope, therefore, the noble Lord will see to it that the assurance he has just given is also given some prominence in the trade Press, or in other ways where it will be available to those who are likely to be interested in this matter, because I am sure that what he has said will be appreciated and will be most useful to them.

LORD SORENSEN

I assure the noble Viscount that I will convey his plea to my colleague who sits next to me, who in turn will convey it to the Minister.

Clause 38 agreed to.

Clauses 39 to 43 agreed to.

Clause 44 [Notice of assessment of levy]:

4.32 p.m.

LORD BROOKE OF CUMNOR

moved, in subsection (3), to leave out "six years" and insert "one year". The noble Lord said: This is a simple point, but one of great importance. I need not use many words in explaining the Amendment and commending it to your Lordships. Subsection (3) of Clause 44 lays down that a notice of assessment of levy …shall not have effect if it is served more than six years after the relevant date". But there is nothing in this Bill to ensure that the Land Commission serve a notice of assessment as early as they conveniently can; and in fact, the Commission could comply with the Bill by never serving any notice of assessment until a period of several years, not exceeding six, after the event in question.

When I first saw this subsection, I seriously imagined that it was a protection against the likelihood that the Land Commission would get so hopelessly in arrears with their work that they would need a very long period before they could get around to serving notices of assessment. However, I understand that this is too pessimistic a view of the reasons underlying this subsection. I understand that this has simply been imported from the Income Tax Acts, because it is by law open to the Commissioners of Inland Revenue to claim tax for a period of six years. But there, of course, as in subsection (4) of this clause, there is provision for acting at a later date beyond the limit if there has been any fraud. Nobody would question that. But there does not seem to me to be an exact compelling parallel between this and the Income Tax Acts. In the case of income tax, the Commissioners will require in the course of their ordinary duties to raise an assessment each year on every taxpayer, and the taxpayer will be able to keep up to date, and be kept up to date, on his tax liabilities through that simple fact. But there is no similar obligation here on the Land Commission to keep up to date, and to serve a notice of assessment each year to make sure that the person liable to pay the levy keeps up with his obligations.

I see that in the next Amendment the noble Lord, Lord Wade, is proposing to empower the Commission to answer questions within a reasonable time. I suggest to your Lordships that we must try to overcome this genuine difficulty by some means or other. The vendor under Case A will wish to know within a reasonable time where he stands; the less or or grantor (to use the phrase in the Bill) under Case B will want within a reasonable time to know where he stands; and still more will the developer under Case C want to know within a reasonable time where he stands. It seems to me that your Lordships should demand that some provision is inserted in the Bill to enable all these people to discover their position reasonably soon.

Everybody grants that this is a complex matter. Most people grant that the Land Commission are likely to fall into arrears dealing with the one million notifications a year they are likely to get. But surely your Lordships will agree that it is in the public interest that members of the public, in all classes of society, should be informed as soon as maybe whether they are under a liability and, if so, what that liability is. With Clause 44 as it stands, not only may the person concerned remain in ignorance for up to six years as to the amount of levy he will have to pay; he may be in ignorance for up to six years as to whether he will have to pay any levy at all. I submit most strongly that in the public eye this will be a blot on the working of this Land Commission. It will not be the only blot; but this, I think, is an avoidable blot.

In this Amendment I have suggested that the words "six years" should be removed and the words "one year" substituted. I pay no special attention to the precise term—it may be argued by the Government that one year is not the right period—but I most earnestly beg noble Lords on the Front Bench opposite to seek, by some means or other. to meet this very genuine point that I am raising, and thereby ensure that members of the public who may be liable to levy under this Bill may be able within a reasonable time to extract a definite answer from the Land Commission as to whether they will be liable, and what the amount of their liability will be. I beg to move.

Amendment moved— Page 48, line 43, leave out ("six years") and insert ("one year").—(Lord Brooke of Cumnor.)

LORD WOLVERTON

I should like to support my noble friend on this Amendment. I think it is an important Amendment, and this is a matter about which people in the country, who are beginning to discover what this Bill does, are worried. I feel that a period of six years is far too long, and I was amazed when I read it in the Bill. I hope that the Government will see their way to reduce it quite materially. As my noble friend has said, this period is taken from the Income Tax Acts; but in the case of income tax an assessment has to be made every year, and the taxpayer knows how he stands, whereas in this case the person does not know how he stands, certainly up to six years. I think my noble friend was right in putting down this Amendment; it is an important Amendment, and one to which I am sure the Committee should give careful consideration.

LORD MITCHISON

I am not going to take long after all the warnings I have received. This is surely, in one sense, rather a hit-and-miss matter. We can all have different opinions about what ought to be the right time. Clearly, if we take a time that is too short, the Land Commission will not be able to get through the cases within the time they are allowed. It is rather odd it should be argued that there will be a great pressure on the Land Commission, and that for that reason the time ought to be shorter. I should have thought that this argument worked the other way round. If there is going to be great pressure on the Land Commission, and if they are to do their job properly and fairly to all concerned, surely that is a reason for keeping a reasonably long time.

When one comes to consider this matter, there is some value, it seems to me, in two things. One is the Minister's own guess—because it must be a guess. This was the point in the Bill at which the figure of 1 million chargeable events during a year (which appeared to have escaped the attention of one noble Lord opposite) was mentioned and discussed. Exactly the same arguments were put forward in the Commons—rather more briefly, but they were the same. The noble Lord, Lord Brooke of Cumnor, shakes his head. Perhaps he will tell me why?

LORD BROOKE OF CUMNOR

Not more briefly.

LORD MITCHISON

Well, they were pretty short. The individual speeches were short. There were more speeches, but I will not quarrel with the noble Lord about that. This is a case, is it not, where the opinion of the man, his officials and advisers, of how best to work the Bill is of considerable value. The Minister defended this choice on the ground that it was taken straight out of the Income Tax Acts—that it proved to be about right there. It is a very old-established thing. It used to be—I think it still is—the period of limitation. It seems to be a reasonable period for this kind of purpose.

I repeat that if the period is made too short, it will oblige the Land Commission to do their job too quickly or too hurriedly, and I am sure that none of us wants that to happen—certainly the people concerned do not. I notice that Mr. Page, who was leading for the Opposition in Committee, said that it depended entirely on whether or not the levy was regarded as a tax. He said he would agree that it was the right period if it was regarded as a tax, and that he had himself regarded it as a tax; but that, of course, if it was a levy it was not the right period. That is hairsplitting, and there is no practical point in that at all. I suggest that in this case, as the Minister himself suggested, it would be wise to follow not one but many precedents, though none of them is exactly appropriate to this Bill.

LORD MESTON

I desire to support this Amendment. Among other considerations take the case where a person liable to pay levy dies, and his estate is wound tip. Years later the levy is said to be payable by somebody. But by whom?

THE LORD CHANCELLOR

If I may deal with the last point first, there is, of course, the provision in subsection (6) which provides a limit of three years after death, and this is exactly the same as in Section 47 (2) of the Income Tax Act. It follows it precisely. The noble Lord, Lord Brooke of Cumnor, has put this point, if I may respectfully say so, very clearly. He will not mind my saying that it is exactly the same point as was discussed in the Chamber whose business details of Supply are, and he will not be surprised if I make the same answer as was made by the Minister there; first that the Members of the Opposition have contended that this ought to have been dealt with by the Inland Revenue and not by the Land Commission. If so, it would have been six years. Secondly, of course, it will be to the interests of the Commission to assess levy as quickly as possible, and they will be under strong incentive to get on with the job.

But there are, of course, a number of reasons why a longer period should be allowed, and almost all of these are entirely in the interest of the person who has to pay the levy. Normally, the Commission will write within a few weeks of receiving a notification to anybody who is potentially liable to levy. Before a formal assessment can be made, however, further inquiries may have to be made, and then negotiations will take place to see whether the amount of the levy can be agreed. In a complicated case, where, for instance, the developers have assembled together a large number of parcels of land over a period, these negotiations may be quite protracted, and time must be allowed for this. Moreover, your Lordships will remember that there are provisions in Schedule 4, Part V, and in Schedule 5, under which, if a levy payer, after the date of a chargeable act or event incurs expenditure of certain types, the assessment can be reopened to give him relief. This is possible, however, only within the period when the Commission have power to revise an assessment.

Schedule 8 provides for relief in certain circumstances for capital gains tax, but since the period of six years is allowed for settling capital gains tax a similar period must be allowed to the Commission. The procedure for assessment has been modelled closely on the well-tried procedure in the Income Tax Acts, and the period of six years, which has caused no trouble there, is knitted into many of the clauses and Schedules on a consistent basis.

It is not right to say that the Inland Revenue are obliged to make an assessment every year. They are not obliged to do so, and in fact they do not always do so. They do so with notice of coding for PAYE, but this is not an assessment. I am not at all an expert in tax law, but I have made inquiries and I am told that it is a complete misconception to think that there is any legal obligation whatever on the Inland Revenue to tell somebody, "You do not owe any tax". Like any sensible people, if they are asked they may say that; or more often, they say, "On the information at present before us", or "So far as we are aware". and so on. But naturally people will act in a sensible way. The fact that the Inland Revenue have six years has not in practice been found to give rise to great hardship. It will obviously be in the interests of the Land Commission to get on with the matter, and it will not, I hope, be assumed by your Lordships that this will be a body that will be either incompetent or, still less, unreasonable.

I have not been present at every hour of the Committee stage of the Bill, and I do not know whether or not this fact has been pointed out. But, as I mentioned on the Second Reading of the Bill, the Land Commission are being added to the Schedule of the Parliamentary Commissioner Bill. This will be one of the departments in relation to which any citizen who thinks that he is being unfairly administratively treated, that there is delay in correspondence, or who is bursting to pay the levy and the Commission seem to be hanging back, could appropriately ask the Parliamentary Commissioner to deal with. It is on those grounds that the Government are unable to accept the Amendment.

LORD BROOKE OF CUMNOR

I am very much obliged to the noble and learned Lord for what he has said. At the beginning of his reply I thought I heard him refer to subsection (6). There is in fact no subsection (6) of this clause, and perhaps if he made a verbal slip that could be corrected.

THE LORD CHANCELLOR

I think I did.

LORD BROOKE OF CUMNOR

As to the main issue, despite what the noble and learned Lord has said I still think that there is a distinction in kind between this and the administration of income tax, because although there is no statutory obligation on the Commissioners of Inland Revenue to raise an assessment on each taxpayer each year, that is what they do in the ordinary course of their business, unless they find that no tax is chargeable. What we are mainly concerned with here, and what induced me to put down an Amendment of this character, was the widespread fear that things may drift on and on, and that it may be impossible for the person who is perhaps liable to levy to get an answer from the Land Commission as to whether or not he is liable.

LORD MITCHISON

Why?

LORD BROOKE OF CUMNOR

The noble Lord asks me "Why?"—because I have said on previous occasions that the task of the Land Commission is going to be an extremely heavy one, and unless they employ even more staff than they are estimated to be likely to need they are going to fall into serious arrears. I do not want to argue afresh the whole issue of betterment, but it is almost universally accepted by—now the noble Lord raises his eyebrows without listening to the end of what I am going to say.

LORD MITCHISON

I am sorry; I will never raise them again.

LORD BROOKE OFCUMNOR

One of the inherent difficulties of having any kind of betterment tax is that there is a great deal of uncertainty about it; it is far easier to assess liability to almost any other form of tax than a tax on betterment. However that may be, the noble and learned Lord the Lord Chancellor said that normally the Land Commission would communicate with the person concerned as soon as they conveniently could; that although it might take a long time to settle the precise liability for levy it would not be the desire of the Land Commission to keep members of the public waiting, and that in any case there would be the Ombudsman. We find difficulty in discussing the Ombudsman in your Lordships' House because the Bill has not yet arrived here. We know that the Land Commission will be within the things that can be submitted to the Ombudsman, but he will be so overwhelmed by work that it may be difficult to get an answer from him either.

I do not intend to press this Amendment, although I think that both this and the next Amendment are of considerable public importance. I greatly hope that the discussion of these two Amendments will not be considered by anybody to be a waste of time, and that the outcome will be that it will be on record that the Land Commission will recognise their responsibility to communicate at the earliest possible moment with those who may be liable to levy. I beg to withdraw the Amendment.

Amendment, by leave, withdrawn.

4.53 p.m.

LORD WADE moved to add to the clause: (5) The Commission may, upon application in writing by any person having an interest in land in respect of which a chargeable act or event has occurred state that, on the facts known to the Commission, no levy will be payable in respect of the chargeable act or event to which the application relates. or if a notice of assessment of levy has been served in relation to that chargeable act or event, that, in the facts so known, no levy will payable in respect thereof in excess of the amount (if any) specified in the notice".

The noble Lord said: In moving this Amendment it might be convenient if I were to refer to Amendments 30 and 32. The noble Lord, Lord Tangley, who had intended to support me in this Amendment, has written to explain that unfortunately he has to be in Brussels and is therefore unable to be here to-day. I am pleased to see that the noble Lord, Lord Silkin, has added his name to this Amendment. We have had some discussion of this problem on the previous Amendment, and my Amendment is designed to go some way towards meeting the problem that arises under this clause. It is the uncertainty created by the six-year period which I think is liable to cause some hardship and confusion. This arises because the levy is payable by the vendor. The completion of the sale will not be the end of the matter so far as the vendor is concerned; he, or the person acting for him, may be left in a state of suspense.

Notice of assessment of levy is effective if given at any time within six years of the relevant date, and the Bill deals with procedure subsequent to the notice—namely, the serving of the counter-notice—but it does not deal with the period prior to the notice of assessment, by which I mean that no provision is made whereby the Land Commission can be required to serve the notice of assessment within the period of six years, and I think this may give rise to a number of serious difficulties. For example, a person whose only asset is the house in which he lives and who is relying on the net proceeds of the sale of his present house to assist in the purchase of a new one cannot know for certain for a period of six years whether the levy will be payable in respect of the sale. The vendor will not necessarily be covered by the exemption in Clause 61, since that will depend on the future use of the house and the land by the purchaser. The vendor may therefore be placed in an impossible position.

To take another example, a solicitor arranging the sale of one property and the purchase of another may find himself unable to calculate for the benefit of his client what balance will be available from the sale and whether there will be sufficient to complete the proposed purchase. He may have to retain a sum for potential liability to levy. To take one more example, building societies, insurance companies and banks providing loans do not rely solely on security. The last thing they would wish to do would be to sell the house or other property over the mortgagor's head. The institution lending money has to inquire into the income and the general financial position of the borrower, and if this Bill goes through unamended the lender will have to inquire about possible liability for levy, and the only answer the borrower will be able to give will be that he will not know for certain for six years. In those circumstances it would be extremely difficult to carry out normal conveyancing work.

I understand that in another place Mr. Willey said that in most cases it would be obvious whether the levy would be payable or not, but I do not think that provides a sufficiently satisfactory answer, since an element of doubt will remain in a number of cases. The important point to appreciate is that there is often not much margin between the amount received on a sale and the amount required to complete a purchase. A vendor, or the person acting for him, may have to keep various people waiting for anything up to six years. The position is likely to be even more serious v/hen a person liable to levy dies on or after the relevant date. No doubt we shall discuss Schedule 12 later, and at this stage I would merely point out, as I think the noble and learned Lord the Lord Chancellor has already pointed out, that under paragraph 5 of Part II of Schedule 12 the period for the service of noticeis reduced to three years. But three years is a long time when beneficiaries are waiting for their money, and personal representatives may be in a dilemma in that it may not be safe for them to distribute an estate until three years have elapsed since the death. Moreover, under sub-paragraph (3) of paragraph 5 the liability of the personal representative is expressly preserved if he winds up an estate without having paid levy where it is due. Complaints are often made about delays in winding-up estates, which may or may not be justified, but surely the Government do not wish to aggravate the position.

So the problem is how to minimise the effect of this potential liability to levy. Perhaps your Lordships will forgive me if I read out the Amendment which I am proposing as an addition to the clause. It says: The Commission may, and I stress the fact that it is permissive— upon application in writing by any person having an interest in land in respect of which a chargeable act or event has occurred, state that, on the facts known to the Commission, no levy will be payable in respect of the chargeable act or event to which the application relates, or if a notice of assessment of levy has been served in relation to that chargeable act or event, that on the facts so known, no levy will be payable in respect thereof in excess of the amount (if any) specified in the notice". This Amendment is based on precedents from long-standing practice in dealing with estate duty liability, and I have attempted to follow that practice in principle. I am suggesting that the Bill should make provision for a clearance procedure authorising the Land Commission to state whether or not on the facts known to them levy would be chargeable. I have come armed with Dymond on Death Duties, the 14th Edition, but I thought perhaps I would spare your Lordships a long quotation from that highly respected volume.

So far as estate duty is concerned, Section 11(2) of the Finance Act 1894 provides for a certificate of discharge to be given by the Commissioners of Inland Revenue on application by an accountable party after the lapse of two years from the death. The effect of this certificate, on payment of estate duty at a rate determined by the Commissioners, is to discharge both the applicant or applicants and the property specified in the form from any further claim for estate duty in connection with the death on which duty has been paid.

There is another procedure. It is the practice of the Estate Duty Office on application to issue to personal representatives who have completed the winding-up of an estate a "clearance letter" stating that on the facts before the Office there is no outstanding claim for duty. This letter has no statutory force and does not afford complete protection to a person wishing to distribute the estate, any more than does an advertisement under Section 27 of the Trustee Act 1925. For complete protection a certificate under Section 11(2) of the Finance Act 1894 is required. The clearance letter, however, has a value in that if one is issued without qualification it may be assumed that the values returned in the Inland Revenue affidavit for assets which do not have a determined market value will not subsequently be questioned.

I am following in my Amendment the precedent of this clearance letter. I believe it would cause less administrative difficulties for the Land Commission than the procedure which I outlined earlier—namely, a clearance certificate. It will, of course, be helpful to have a clearance certificate, but I think that even if we had the clearance letter that would be of real value to practitioners. It is most important that some such procedure should be adopted. If the wording is not to the Government's liking, I hope they will accept the idea in principle.

I will not speak again on the question of the constitutional aspects. I merely mention that this is just the kind of point that could be taken up, and I hope accepted, in some form by the Government. Finally, might I point out that if some procedure of this sort is adopted it should apply both where levy is payable and where no levy is payable. That really is the purpose of the later Amendments where I propose that the words "if any" should be inserted. I think the main point, and it was really raised initially by the noble Lord, Lord Brooke of Cumnor, in his Amendment, is that we must find some procedure for people who quite properly, without wishing to evade their liabilities, are anxious to get their estate or their conveyance cleared up and finished and all monies due paid without undue delay; and I believe the proposal I am putting forward would be of some help. I beg to move.

Amendment moved— Page 49, line 16, at end insert the said new subsection (5).—(Lord Wade.)

LORD NUGENT OF GUILDFORD

May I say a brief word in support of this Amendment, which seems to me entirely helpful. Although I appreciate that the Bill as now amended by the first Amendment on the Order Paper today would relieve owner-occupied houses from all incidence of the levy in future, I recognise that the future of that Amendment cannot be absolutely certain, and Lord Wade's Amendment would provide a small but limited second string to our bow. It is in that sense that I wish to support the noble Lord, Lord Wade, who has, I think, well explained just what the value of this Amendment would be. It is one aspect of the owner-occupied house, and indeed I would think that the new mortgage provisions which the Government are intending to make, with a reduced rate of mortgage to assist the lower income groups who are wishing to buy their own houses, could well be frustrated unless this point could be covered.

Quite clearly, if there is this measure of uncertainty for a period of six years this could completely frustrate the normal bridging operation which takes place when an owner-occupier moves from one house to another. I should, therefore, like to say just that word to support this Amendment. I hope that noble Lords opposite will feel that they can accept an Amendment in this sense; that it would be a valuable Amendment which would not handicap the Land Commission in the exercise of their work but would be of very great benefit to owner-occupiers generally.

5.6 p.m.

THE LORD CHANCELLOR

This, of course, is the way in which any sensible Commission would behave. Obviously, if somebody writes to them in a case where the Commission have not already expressed an opinion and says, "Am I liable to levy or not?", the Commission will say, unless there are further facts to be ascertained. The Revenue, who are under no obligation in the matter, do exactly the same. There are cases in which what your future taxation position is going to be is open to some doubt. It would be very nice if you knew, but the Revenue are under no obligation. You go to a solicitor and he gives the best advice he can and you have to remain content with that position. The position here is really the same.

The noble Lord, Lord Wade, has stressed that this provision is purely permissive—"The Commission may"—and to that extent, and accepting that that is the intention, it is really redundant because there is nothing to stop the Commission from telling people whether they owe levy or do not. There is nothing as a matter of law to stop them from writing a letter to anybody to say, "We are quite certain that no levy arises in this case". Therefore it is quite unnecessary to have this permissive power. This question of nil assessment has already been discussed in another place. The general position of the Commission is exactly the same as the Inland Revenue's. It can be awkward if you do not know for various reasons what your tax position is going to be, but nobody has ever suggested that a duty should be imposed on the Inland Revenue to say, Yes or No; nor of course is that what the noble Lord, Lord Wade, is suggesting; he is saying it should be merely permissive.

I can understand noble Lords opposite saying, "If this is what you are going to do anyhow, and you have power to do it, this Amendment will not make the slightest difference, so what objection to it can there be?" I am bound to say, accepting what the noble Lord, Lord Wade, says as to the intention, that it should be merely permissive, that if we felt free to take part in Part III Amendments I should certainly oppose this one for a reason which the noble Viscount, Lord Colville of Culross, will understand. There are no two more difficult groups of cases than the case in which it has been held that "may" means "may" and the case in which it has been held that "may" means "must". I see the noble Viscount agreeing with that proposition.

It is extraordinary how far the cases that "may" means "must" have gone, even when there are words like "may if they think fit". There are some pages of a variety of cases where people who have been authorised to do something have been held to be compelled to do it. Section 9 of the Indictable Offences Act 1848 enacted that justices may issue a summons on an information laid before them only if they "shall think 'fit". It was held that they were not at liberty to refuse it on any extraneous considerations, such as that the prosecution was inexpedient or the law would operate unjustly in a particular case. Even where it was enacted that the Lord Chancellor should have full power to issue a commission of bankruptcy, it was held that "may" means "must". In the County Courts Act it was enacted that the superior court may give the plaintiff the costs of his action if he lived more than twenty miles from the defendant. It was said that if he lived more than 20 miles from the defendant the court must give him the costs.

I think that the general principle is that "may" is permissive unless there is something in the context to show that it means "must". But it is extraordinary, looking through the cases, how in case after case where I should ordinarily have thought, I must confess, that "may" means "may", it has been held to mean "must"; and where, as here, a court has to approach a Statute not knowing what the Parliamentary history of the matter is, I should have thought that the strong possibility was, if you accept this Amendment, that a judge would say, "Well, what it is said the Commission may do is a thing they can do anyway; therefore Parliament, in putting in a special section providing that they may do something which they may do in the permissive sense anyway, must have intended 'may" to be 'must'." This is an additional reason for which I would ask the Committee not to accept the Amendment.

LORD WADE

I am a little disappointed with the reply of the noble and learned Lord the Lord Chancellor. If he would prefer the word "shall", I should be quite content, but I thought it would be reasonable to start by asking for "may". So far as the estate duty question is concerned, as I understand it, a party can ask for a clearance certificate under Section 11(2) of the Finance Act, 1894; but in practice reliance is placed on the clearance letter, and those who ask for a clearance letter know that in the last resort they could ask for a clearance certificate. The practice of the clearance letter has grown up, but there is what I must call a statutory background, and I believe it would be helpful to have a clause written into the Bill, especially with the whole new procedure only just coming into being. I think it would be helpful if something were written into the Bill so that all parties would know that there is this opportunity to write to the Land Commission and ask for a clearance letter. However, if the Government were prepared to give some indication that it is the intention of the Land Commission to follow this procedure, I think that might go some way to meet the concern that is genuinely felt among those who would have to try to operate this new procedure. I wonder whether it would be possible to have some kind of assurance?

LORD MITCHISON

I rise, without raising my eyebrows and knowing that the Conesford half of the axis is here, in the hope that I shall not have to speak too long. But I am not quite clear what kind of case Lord Wade has in mind for this purpose. What he wants to do is to tell people when there is a new liability, as is done as a matter of practice, but not of Statute, in connection with estate duty. I quite understand that. But the notice of assessment of levy has to indicate the chargeable act or event to which it relates; and when one looks at the definition of a chargeable act or event, which is in Clause 27(3), one finds it is: Any act or event …whereby …the development value, or part of the development value. …is taken to be realized". It seems to me that in order to get a chargeable act or event you must have a development value, and the levy will bite on most cases of development value. That is what it is intended to do. There are, of course, some exceptions. There are Statutes, local authorities and a number of things about which one need not go into detail. Are those the only ones that Lord Wade has in mind? Otherwise, it seems to me that he may either be intending too little or too much. If in fact he intends to cover cases of the other kind, then I do not see how they can be linked up with the statement about the "chargeable act or event".

VISCOUNT COLVILLE OF CULROSS

The noble and learned Lord the Lord Chancellor has made an interesting speech upon this matter of the word "may". I wonder whether he can now confirm what it means in Clause 44(1). The subsection provides, in effect, that where there has been a chargeable act or event the Commission may serve a notice under this section (in this Part of the Act referred to as a 'notice of assessment of levy')". In view of what the noble and learned Lord the Lord Chancellor has said, will there be some discretion given to the Commission whether or not they send notices, or is this going to be one of those cases where "may" means "must"?

THE LORD CHANCELLOR

No, it is discretionary; "may" means "may".

VISCOUNT COLVILLE OF CULROSS

Will there then be chargeable acts or events which occur and on which a levy would technically, under the terms of the Bill, be payable, but where the Commission are not going to serve a notice? It may be a most important point. Perhaps they will have some discretion not to serve a notice of assessment of levy where in fact the levy payable is small. Is that the intention?

THE LORD CHANCELLOR

It is not the intention to make people presents, but the intention of the clause is to confer a power.

LORD HAWKE

Would the noble and learned Lord the Lord Chancellor elucidate one point? Under the Amendment the applicant writes to the Commission and says, "Have I a liability, or have I not a liability?"; and the Amendment says that the Commission may reply one way or the other. Is it not nonsense to have such an Amendment containing the word "may"? Should it not, alternatively, be either "shall", or not be inserted in the Bill at all? Because in any case the Commission are going to reply saying either, "Yes, you have" or, "You have not". They may say they do not want to reply. But if you put "shall" in, they would have to reply.

THE LORD CHANCELLOR

In reply to the noble Lord, Lord Hawke, I would say that that is the point I was making. I was pointing out that a special statutory power in an Act of Parliament to write a letter is not needed. One assumes that people will act reasonably. It is intended to operate this in exactly the same way as the Revenue do. If anybody writes to the Commission and says, "Does this transaction attract levy or not, and if so how much?", they will write back and tell him what they think. But the noble Lord, Lord Wade, has made it plain that this Amendment is intended to be purely permissive. If that is so, and it would be so constructed, then it is unnecessary, because you do not need a special Act of Parliament in order to ask somebody to answer a letter.

LORD WADE

I should like to give further thought to the question as to whether the word should be "shall" rather than "may". The word "may" was inserted, as I have said before, in order to be as helpful as possible, but it may be that "shall" is preferable. I derive some comfort from the fact that the noble and learned Lord the Lord Chancellor has said that the intention is to operate this in the same way as the Inland Revenue deals with these matters. The way in which this kind of problem is handled by the Inland Revenue is reasonably satisfactory to those who have to deal with them, in so far as anything concerned with the Revenue can be regarded as satisfactory. In those circumstances, and reserving the position for a later stage, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 44 agreed to.

Clause 45:

Contents of notice of assessment

45.—(1) A notice of assessment of levy shall—

  1. (a) indicate the chargeable act or event to which it relates;
  2. (b) specify the amount appearing to the Commission to be the principal amount of the levy payable in respect of that act or event, or, where the notice is served in Case C, the principal amount of the levy payable in respect of the interest in land to which the notice relates; and

LORD WADE

moved in subsection (1) after the first "amount" to insert "(if any)". The noble Lord said: I beg leave to move this Amendment formally, in case the noble and learned Lord has anything to say upon it.

Amendment moved— Page 49, line 19, after ("amount") insert ("(if any)").—(Lord Wade.)

THE LORD CHANCELLOR

This is a purely consequential Amendment. I can only add, in regard to the last observations made by the noble Lord, Lord Wade, that he is quite right in thinking that the Commission propose to act in the same sort of reasonable way as the Inland Revenue act.

LORD WADE

I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

5.22 p.m.

THE EARL OF KINNOULL

moved, in subsection (1)(b), after "to be" to insert "the market value, the base value and." The noble Earl said: As the Committee are aware, Clause 45 deals with the notice of assessment which the Commission will serve on any person who is liable for the levy. Under this notice there are four headings which the Commission will have to set out: the chargeable act—that is, the land; the levy due; the date by which it must be paid; and the right of appeal against the assessment. The purpose of my Amendment concerns the levy due. As I understand the clause, it would be quite possible for the Commission simply to state a figure without giving the break-up values. And, however much one assumes that the Land Commission will be sensible, it is perfectly possible, in my view, that if they were heavily pressed with work they could take the view that they would simply put down the one figure. If they did this it could cause considerable hardship to any recipient and needless worry to him whilst his advisers were working out the assessment with the Land Commission.

Before the noble and learned Lord accuses me of raising exactly similar arguments to those which were brought up in another place, I would suggest to him that there is one subtle difference. At that time the Government spokesman, Mr. Skeffington, undertook to look at the Amendment again, having obviously been swayed by the force of the Amendment. Since then, so far as I am aware, nothing has been heard, and I am now hopeful that the noble Lord will be able to advise us. I beg to move.

Amendment moved— Page 49, line 19, at end insert the said words.—(The Earl of Kinnoull.)

VISCOUNT COLVILLE OF CULROSS

May I add one word in support of what my noble friend Lord Kinnoull has said? This is an important matter, and I hope that the Government can give us an assurance on it. The Committee will observe from Clause 46 that if you want to serve a counter-notice, not only have you a comparatively short time in which to serve it, but you must also state in the counter-notice the grounds on which you object to the notice of the assessment of the levy. If you are going to state the grounds of your objection, then it is of the greatest importance that you should know how the assessment of the levy has been reached, because otherwise it will be quite impossible for you to tell where, if anywhere, you wish to challenge the calculations which have been made. Therefore, whether or not this is written into the Bill, it is an important matter from the practical point of view.

THE LORD CHANCELLOR

This matter was raised in another place, in a rather better form. The Parliamentary Secretary said that he would think about it, but it was not, in fact, raised again at the Report stage.

LORD MITCHISON

It was raised, more or less.

THE LORD CHANCELLOR

I will leave my noble friend to deal with that; I thought it was left at that point. The Amendment in its present form would require the market value and the base value, as well as the principal amount of the levy, to be stated on the notice of assessment. This cannot be right because these factors are relevant only in Cases A and C, and not in Cases B, D, E and G. The Amendment in another place, I think I am right in saying, contained further words which would have applied to those Cases. If the corresponding factors were to be prescribed in the Bill for all the other Cases, the list would be immensely long, and, even then, incomplete.

In practice, the Minister has given assurances that the notices of assessment will include a statement of the main factors relevant to the assessment of levy. These will, however, be the factors appropriate to the particular case, and those which are significant for the particular chargeable act or event. Thus, in a simple casein Case A, the sale of land, it will show market value, base value and the net development value. In a more complicated case it may show, under Case B, the consideration for the disposition, the base values realised, an appropriate allowance for estate duty, and a credit carried forward under Schedule 11, but they must depend on the particular circumstances of the particular case. The Minister has said that that will be done.

THE EARL OF KINNOULL

I am obliged for the noble and learned Lord's reply and, having received that assurance, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

THE EARL OF KINNOULL moved, after subsection (2) to insert: ( ) Where levy is chargeable on an act or event falling within Cases A, B or E a notice of assessment of levy shall contain such provision as is mentioned in the last preceding subsection as shall be requisite to secure that the levy payable by the grantor at any time shall not exceed the amount of the consideration for the relevant disposition received by him.

The noble Earl said: The purpose of this Amendment concerns cases in which payment of grant by instalments attracts levy. As I understand this clause, it would he possible, at the discretion of the Commission, for the levy on this payment to be demanded in one lump sum or in instalments. The situation that could arise, as I see it, is that a levy could be charged prior to an equal payment by instalments from the grantor. The purpose of this Amendment is to put the discretion on the part of the grantor as to whether or not these instalments will be paid by the grantor. This Amendment has been noticed by the C.B.I., and I am told that industry generally is concerned about the point. They wish to know the Government's intentions in this matter and whether they will issue the Commission with any instructions. I beg to move.

Amendment moved— Page 49, line 41, at end insert the said subsection.—(The Earl of Kinnoull.)

LORD MITCHISON

I read this Amendment with great interest, but I do not see that it carries out the purpose which the noble Lord states it to have. It appears to me to be connected with a possible case in which a man might, in the noble Lord's opinion, have to pay more by way of levy than the consideration which was passing on the contract. Perhaps I may take it from the noble Earl that that is what he intended as regards this Amendment. I am bound to say that I should still rather like to know what sort of case the noble Earl has in mind, as I myself cannot quite see what it is likely to be. I am sure there is something in somebody's mind about this, but I am not quite clear what it is. I hope the noble Earl will believe that even Socialists try to be helpful sometimes, and I am trying.

THE EARL OF KINNOULL

I am sorry if I did not explain the Amendment very carefully. The instance where this could arise is where the grant of an interest is paid for by instalments such as a rent. What I am trying to secure is that the grantor should be entitled as of right to elect that a levy will be paid by instalments. At present it is the Commission who have this election of right as to whether they will charge by instalments or in a lump sum.

THE LORD CHANCELLOR

As I follow the argument, it is intended to postpone collection of the levy on a transaction until the vendor or the grantor of the lease, or the person liable under Case C, actually had the money. This would obviously make the administration of the levy impossible. The Commission would not know when the consideration had been received, and I suppose it would mean that when there was a 99-year lease they would have to follow up and collect instalments every year for maybe 98 years.

Landowners must realise that the levy is payable as a capital sum, and if they dispose of land it is for them to make such provisions as they may think fit. If there is a lease they can, of course, obtain a premium to the extent that they want a premium to pay the levy; or, alternatively, of course, they can borrow on the security of the rent. But it would be administratively impossible to work this levy except on the footing that ordinarily it is a sum which is payable on a particular transaction, though of course the Commission are given power to agree to instalments in the proper case.

THE EARL OF KINNOULL

I wonder whether the noble and learned Lord would explain why it would be administratively impossible, when the Commission could call upon the grantor or the leaseholder for a copy of the lease. What this Amendment is asking is that when such a grant or lease is entered into, the vendor will not suddenly find that he has to go to the bank in order to pay the levy.

LORD MITCHISON

May I just remind the noble Earl that there are provisions for the postponement of the levy, and indeed for interest being paid on it? They are in Clauses 51 and 52 of the Bill. I rather think that what may be happening here is that the noble Earl, and others who have the same difficulty, are feeling that they ought to oblige the Land Commission to do something in all cases which the Land Commission might be quite willing to do in the vast majority of cases. For example, one feels that where a man was out of pocket on a transaction, reasonable people—which we take the Land Commission or their officials to be—would give him time to pay. I do not know whether it is indiscreet to say it, but it is well known that the income tax authorities are very reasonable over this kind of situation where a man is in difficulties. I see no reason why the Land Commission should not be, too.

THE EARL OF KINNOULL

I am most grateful to the noble Lord. Perhaps I have not explained this Amendment sufficiently but I do not wish to continue the proceedings on this occasion. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 45 agreed to.

Clause 46 [Objection to notice of assessment]:

THE EARL OF KINNOULL

moved, in subsection (4), to leave out "alleged" and insert "claimed". The noble Earl said: About a fortnight ago this Committee discussed the Criminal Law Bill, and spent some fifty minutes deciding whether the phrase "an arrest able offence" was acceptable terminology and acceptable in a Bill. I am sure the Committee to-day will be pleased to hear that I do not intend to take up quite so much time on an Amendment which is very similar in character. Its purpose is to improve the wording of this Bill.

Clause 46 deals with the right of serving a counter-notice on the Commission where an assessment is considered too high. The phrase to which I am objecting is that which describes the statement prepared by the objector as "the amount alleged" to be owing. I would suggest to the Committee that the word "alleged" implies that he is doing something dishonest, whereas of course he is only protecting his rights. I am informed that there is a precedent set for this in the Finance Acts, where the word "claimed" is used in a similar circumstance. The noble and learned Lord suggested earlier to-day that there were one or two small Amendments which he was prepared not to oppose. I have an elated feeling about this Amendment and that, in order to break the proverbial "duck" in the Committee, it will be accepted. I beg to move.

Amendment moved— Page 50, line 19, leave out ("alleged") and insert ("claimed").—(The Earl of Kinnoull.)

THE LORD CHANCELLOR

I cannot see that there is the slightest difference between the two words. I do not know what the noble Viscount, Lord Colville of Culross, thinks, but the two words seem to me to mean exactly the same. This is one of the cases to which I referred when I said there were some Amendments which, if it had not meant taking part in a Supplies exercise, I should be disposed to say, "Yes, it does not make any difference. Let it go."

LORD MITCHISON

May I add that they are both seven-letter words?

VISCOUNT COLVILLE OF CULROSS

Perhaps there is in the word "alleged" the slightest derogatory sense which may not be in the word "claimed". Were the noble and learned Lord feeling like accepting any Amendments at all, I think I could point out, also, that in the first line of subsection (4) the matter is referred to as a "claim", and for the sake of consistency one might as well stick to the same word throughout. But do not suppose that, in fact, it is going to make very much practical difference one way or the other.

THE LORD CHANCELLOR

I would go so far as to say that, if I could accept any Amendment, this is the one I would choose.

THE EARL OF KINNOULL

In that case, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 46 agreed to.

Clauses 47 to 55 agreed to.

Clause 56.—[Local authorities and other bodies]:

5.39 p.m.

LORD MOLSON moved, in subsection (4), after paragraph (b) to insert: ( ) any public body required or empowered by any enactment to provide facilities for the conduct of a market for the dealing in bulk in horticultural produce,

The noble Lord said: The purpose of this Amendment is to exempt the Covent Garden Market Authority from the obligation to pay betterment levy. It has been redrafted in this form, whereas I put it down originally under the name of Covent Garden, but that was considered to have the effect of hybridising the Bill. I am advised that this draft removes that technical objection.

Your Lordships' House has taken a great interest in the Covent Garden Market. In 1961, when the late Government introduced legislation into this House for the rebuilding, on modern lines, of the Covent Garden Market, I moved an Amendment, which your Lordships accepted, to enable the Market Authority to move to another site. On the Report stage, the Government of the day announced that if the old form of words was restored they would take no objection if the Authority decided, after investigating the matter, that it would be better if the Market were moved elsewhere. After going into the whole matter with the help of industrial advisers, the Authority recommended that the Nine Elms site should be used. This proved acceptable to the purchasers, to the vendors, to the workers, to the Greater London Council, to the local authorities concerned and to Parliament. The 1966 Act laid down very strictly the conditions under which the Market Authority was to remove from the old congested site in the middle of London to the Nine Elms site. The Act vested in the Authority the six or seven acres of the old site, and imposed upon the Authority the obligation to carry out the removal to the Nine Elms site before 1972.

The Authority is a statutory authority set up under the Act of 1961. The finances are strictly controlled; and the capital for all the earlier operations is provided by borrowed money, much of which may be borrowed from the Minister of Agriculture and Fisheries under rules laid down by the Treasury. It is a non-profit-making authority. It is required, out of the rents that it charges to the traders in the market, to cover its running expenses and to service the loans which it has contracted. If it appears that there is going to be a profit, the Minister of Agriculture has power to issue an instruction to the Authority to pay that surplus over to the Treasury. Therefore it can be said that this is a statutory authority, strictly controlled by the Government and having imposed upon it the duty to provide convenient marketing opportunities for the sale and purchase of horticultural articles for London and the South-East of England.

The purpose of my Amendment is to exempt the Authority from the obligation to pay betterment duty upon the sale of the old site, which will be sold in accordance with the decisions of the planning authorities; and to exempt it, also, from the obligation to pay betterment duty if such arises in respect of the new Nine Elms site. When the Act of 1966 was before the Select Committee of another place, certain amendments were made to the provisions of the Bill which were not very welcome to the Authority, but they had little option in the matter and did not strenuously resist it, because they felt that it would be possible for them to provide a modern and a reasonably satisfactory market on the Nine Elms site. But it is necessary to bear in mind that Parliament did not allow them to have as large an area for the development of this market as they themselves, after consulting industrial consultants, thought was desirable. It is therefore possible that at some time in the future they will find it necessary to make some extensions of the market facilities on the Nine Elms site; and. if I understand this Bill aright, when they obtain planning permission for (shall we say?) another storey to be built upon the market which they are going to erect there, they will then become liable to pay betterment levy upon the further developments that they are making on that site.

Clause 56 of the Bill provides that a whole number of different kinds of authorities should be exempted from the obligation to pay betterment levy—that is to say, "any local authority" and a number of other bodies, such as the United Kingdom Atomic Energy Authority and bodies like the Highlands and Islands Development Board, housing associations and so forth, which I take it can be regarded as statutory authorities charged with a special duty to provide some service which is deemed desirable and necessary for the country. These bodies are all in the nature of non-profit-making authorities.

The most important of the exemptions from the point of view of my argument is that of the local authorities. Most of the large markets in this country are owned and controlled by local authorities. That is so in a number of provincial towns, many of which are proposing to do what Parliament has called upon the Covent Garden Authority to do—namely, to remove their markets from the congested centres of these towns and to rebuild them on modern lines in order to provide an efficient and economical service to horticulture and to the food consumers of the country. They are all exempted from paying betterment duty when they sell for other purposes the central areas which have in the past been occupied for this marketing purpose. Therefore there does not seem to be any justification for not exempting the Covent Garden Authority.

But when we come to London the position is even worse. Here there are four major markets—Covent Garden, the Borough, Spitalfields and Brentford. Spitalfields, still in direct competition with Covent Garden, will be exempted from the levy because it is owned by the Corporation of the City of London. Brentford will be exempted because it is owned by the London Borough of Hounslow. I aminclined to think—though I confess that it is a very difficult matter to decide—that the Borough Market would not be exempt under the provisions of the Bill, though it would he exempt, I think, under the provisions of my Amendment. I am not seeking any privileged or exceptional position for Covent Garden. I am merely asking that Covent Garden Market should be treated in exactly the same way as most of the other large markets of the country which are exempted from the levy because they are owned by their local authority.

The effect of imposing the betterment levy upon Covent Garden will of course be that the rents charged will have to be substantially higher. I hesitate to give figures, because one cannot tell what the sale price of the old Covent Garden site will he; but it will be a very substantial sum even if, as appears likely, it is bought by the local authority. It may have a development value of £1 million; and if by the time the transfer takes place, which has to be before 1971, the levy has been increased from 40 per cent. to 50 per cent. (in which case the levy payable will amount to half a million pounds) that would probably result in an annual burden of an extra £35,000 to £40,000. That amount would be added to the rents charged to the traders in the new market.

The effect of that must, in the first place, be either to increase the cost of food to the consumers of it or reduce the price paid to the growers of it. It will also have another, as I think, very important effect. The whole of this legislation was based upon the Report of a very authoritative Committee under the chairmanship of the noble Viscount, Lord Runciman of Doxford, who, in dealing with the whole of this problem of marketing, said that Covent Garden was so much the largest and most important horticultural market in this country that it had, to a large extent, the effect of fixing what were the quoted prices of commodities. Therefore, anything that tends to increase the prices of foodstuffs in Covent Garden Market not only has the effect of putting up prices to those inhabitants of London and South-East England whose food is bought through the Covent Garden Market machinery but will also have the effect of raising the prices which largely governsales throughout the whole of the country.

I urge acceptance of this Amendment for these reasons. In the first place, it appears undesirable to impose an extra burden upon any market for food; in the second place, is appears unjust to impose it upon Covent Garden Market when it is not imposed upon other markets in direct competition with Covent Garden because they happen to be owned by the local authorities. Covent Garden Market is a statutory body that is very strictly controlled by the provisions of the two Statutes dealing with it. But in the case of Spitalfields Market, which the Corporation of the City of London is at the present time considering removing to a new, less congested and less central site, the Authority are able to choose their own time fordoing it. Presumably they will do it when money is a good deal cheaper than it is at the present time. Covent Garden Market has no freedom of action in this matter; what it does has been laid down in statutes passed by Parliament, and I suggest that it is unfair, inequitable and unwise to impose this special betterment tax upon the Covent Garden Market Authority. I beg to move.

Amendment moved— Page 58, line 11, at end insert the said paragraph.—(Lord Molson.)

5.54 p.m.

THE LORD CHANCELLOR

The noble Lord, Lord Molson, has very properly developed his case on this Amendment in some detail. I am afraid that I must equally reply in some detail. So far as the Market Authority's financial arrangements are concerned, as he said, they obtain their money for running the market by tolls, rents, and other charges; they are under obligation to balance their revenue account. To pay for the Covent Garden site, and to meet other capital expenditure, they were given powers to borrow money by the issue of stock or debentures and by advances from the Exchequer, subject to a maximum of £8 million.

The Authority have not, in fact, issued any stock or debentures but have relied entirely on advances from the Exchequer. Their outstanding debt is of the order of £5 million. The Authority hope to get enough from the disposal of the site to repay this outstanding debt. Expenditure on the acquisition of the new site and rebuilding at Nine Elms will be met one-third by grant (not repayable), under Section 10 of the Agriculture and Horticulture Act 1964, and the rest by borrowing either from the Exchequer or by the issue of stock and debentures.

We do not know yet what exactly the Authority will get when they dispose of the site and whether it would cover the Authority's outstanding debt to the Exchequer on the Covent Garden site. But if the disposal were at the sort of sum at the moment being discussed, the current use value plus 10 per cent. is likely to be as high so that little or no levy would be chargeable. But if, on the other hand, they were to get a higher price this would be because of the development value, and there would seem to the Government no good reason why they should not pay levy. In form, as the noble Lord agreed, the Amendment would exempt from payment of the levy anybody running a horticultural market under statutory powers. But, in fact, it would apply only to Covent Garden, as I think he realises.

The reasons why the others are exempted in the Bill are two: either it would be impossible to assess levy because a realistic current use value cannot be found (as with operational land of statutory undertakers), or because the financial relationship of the body with the Exchequer is so close that to take levy would be simply a bookkeeping transaction—as, for example, with the United Kingdom Atomic Energy Authority. Exemption for market authorities would not be justified on either of these grounds. Horticultural markets receive grant from the Exchequer under Section 10 of the Agriculture and Horticulture Act, 1964, to which I have already referred, and grants can be made of one-third of the capital cost of providing, reconstructing or extending wholesale horticultural markets. There are many other activities which may be given financial assistance or tax relief by the Government to encourage them, but no exemption from levy is given. In any case, liability for levy is unlikely to arise on the building of a market because, assuming the market authority had paid for the land a price including the full development value, it would be the vendor who would have paid levy. The amount of grant payable would, therefore, not be affected by the levy.

The real concern of the Covent Garden Market Authority is the disposal of their Covent Garden site when they move from it to Nine Elms, Battersea. In the case of the Authority, the financial link with the Exchequer is closer than with other horticultural markets, since the Authority borrow from the Exchequer, as I have explained. But assuming that levy would be chargeable on the disposal of the Covent Garden site, since this would depend upon what the future development of that area is to be, and this is not yet settled—the question of the levy is at the moment hypothetical. If the Authority, under this Amendment, were exempted, there would be some reduction in the extent of their borrowing, but since the Authority must repay, the effect would not be to reduce Exchequer expenditure but to reduce the level of future tolls and charges.

The noble Lord sought to argue that bodies with a statutory duty to run a market are no different from local authorities which are exempt for their land, including markets; but the levy would be taken from a local authority if this were practicable. Indeed, the White Paper said that the levy would be charged on land held by local authorities for commercial purposes, which would have included markets. This intention was abandoned simply because, in practice, to distinguish such land in the accounts of local authorities would have led to considerable administrative complications which would not be justified by the likely yield from the levy charge. Even though the Covent Garden Market Authority is a public authority it is more like a body, such as the British Broadcasting Corporation or British European Airways, set up to carry out a particular undertaking in competition with private bodies, than it is like a local authority, and these public corporations will not be exempt from levy.

If it is said to be hard hit by having to pay levy on the disposal of the Covent Garden site, the answer, as I have suggested, is that very probably there will not be any—we do not know. But in the view of the Government the Authority must accept that one of the general effects of the Bill will be to reduce the profit that can be obtained from the sale of land for development; and if there is development value there is no reason why they should be exempt from it. Indeed as there is no effective competition to Covent Garden Market, it could be argued that to enable Covent Garden to be subsidised by the profit from particularly valuable future development of the market site would enable them to compete unfairly with others. It is on these grounds that my noble friends and I have not felt able to accept the Amendment.

6.3 p.m.

LORD MOLSON

I remain completely unconvinced by the argument of the noble and learned Lord the Lord Chancellor. He has explained that the reason—and, as he would say the only reason—that local authorities are exempt is that it would be administratively difficult and inconvenient to impose the betterment levy upon them. I cannot regard it as being a satisfactory argument that in order to meet the administrative convenience of the Government this should not be imposed upon the Corporation of the City of London, which owns Spitalfields Market, and is intending of its own accord to do, at its convenience, exactly what the Covent Garden authority has been compelled by Parliament to do.

The argument put forward by the noble and learned Lord the Lord Chancellor, that he thought that if the Covent Garden Authority were exempt from paying this levy that they would enjoy some unfair advantage, bears the other way. The great majority of these horticultural markets all through the country, and the Spitalfields Market and the Brentford Market in London, which are in direct competition with Covent Garden, are being exempt under the Bill from this levy. Therefore, when the noble and learned Lord puts forward the argument that there should be no unfair competition, in point of fact that operates exactly against his own argument. That is the strongest argument that I can put forward in favour in the Amendment—that other markets which are in direct competition with Covent Garden Market will be exempt from the levy, whereas it will be imposed on Covent Garden.

I have had no answer at all to the general proposition that where you have a market which is considered to be, and was considered by the Runcirnan Committee and the Government of the day and by both Houses of Parliament to be. an absolutely essential piece of the machinery for the distribution of horticultural products in this country to the consumers, and for the fixing of prices which could be quoted, it is undesirable that such a body should he singled out—because that is what it amounts to—for the levy to be imposed upon it. I remain completely unconvinced by the argument of the noble and learned Lord the Lord Chancellor, and unless he can say anything about looking at this matter again before the Report stage I am afraid that I shall have to divide the Committee.

LORD HAWKE

As one of those instrumental, with my noble friend Lord Molson, in getting the potential movement of Covent Garden set on foot—voting against my own Front Bench in the process—I claim a slight interest in this matter. The fact that this Bill with the levy has come in the interval has, I think, made it very much more difficult for the Market Authority. There is no doubt that when we jostled (if that be the right expression) the authority out of its very nice site, one of the best sites in London, the expectation was that the proceeds from that site would repay their loan and set them up very nicely in some new place. They were very reluctant to move, I understand, and understandably so. They have their facilities, their pubs and the clubs to which they have gone all their lives around there, but they eventually bowed to circumstances and they are moving. But surely they are moving under the expectation that the proceeds of their valuable site should be available for the purposes for which they were set up.

I hope that the noble and learned Lord the Lord Chancellor will look at this matter to see whether there has been an omission by mistake. I did not think he was speaking from his brief on this matter with great conviction. I am not privy to what my noble friends on the Front Bench are going to do about this section of the Bill, but if in fact there is to be some exclusion of a whole Part, which would give another place the opportunity to have second thoughts on various matters, could they not agree that this is a matter on which they might have second thoughts? I think that would be very much better than actually dividing the Committee on a matter of this nature.

THE LORD CHANCELLOR

If the noble Lord will forgive me, may I say—I should have said this before, but it has just occurred to me—that I have acted professionally in some inquiry, although I cannot remember now which side I was on, about some site—I know I was saying it was an unsuitable site—in East London. It was not the Nine Elms site—

LORD MOLSON

No, it was near Moorfields Hospital.

THE LORD CHANCELLOR

I was saying that I did not think it was suitable.

LORD MOLSON

It was down near the docks. I forget the name.

THE LORD CHANCELLOR

I should have mentioned it before, if I had thought of it. I had no personal view.

LORD SOMERS

I hesitate to question the decision of the noble and learned Lord the Lord Chancellor, but surely it is in the economic interests of the country that markets which provide food for the people should be allowed to function at the lowest possible cost and that they should be allowed to improve their conditions, whether on their present site or on a new site. So far as I can see, and speaking as a layman, it seems to me that if they are subject to this levy there can be only one result: the wholesale price of the food which they produce will go up, and as a result the retailers will have to put up prices, too.

THE LORD CHANCELLOR

I appreciate that. Of course, this is not a tax in relation to which one looks round and says, "Do I like this person or not? Is he a good chap? Is he helping the community? Would it be a good thing for the community to help this body financially?" This is a levy on a transaction in land where development value arises. There is no reason, except on the ground of impracticability, why any body who gains from that which they have not created themselves but which the community has created should not pay their share of the levy.

LORD HAWKE

Will the noble and learned Lord reply to what I suggested, that this particular body might have been admitted by mistake? Otherwise, my noble friend looks remarkably militant at the moment and I fear he may divide the Committee.

THE LORD CHANCELLOR

No, I think there is no mistake at all. I think that the noble Lord, Lord Molson, was not here when we had an interesting discussion on the constitutional position yesterday and early this afternoon.

LORD MOLSON

I am afraid that I had an engagement this afternoon.

THE LORD CHANCELLOR

No one is making any complaint. How do I summarise this fairly and properly? We all agree that detailed Amendments on Supply are the privilege of the other Chamber. This has nothing to do with the Parliament Act or Finance Bills. The privilege of the Commons to deal with Supply is much older than that. It goes back hundreds of years. We discussed this afternoon whether it was or was not wise, just at this particular point in our Parliamentary history, for this House to insist on doing that which we all know is the privilege of the other House. Without arguing this one way or the other, this led me to say, as I said yesterday, that the Government will not feel able to take any part in any Amendments to Part III of this Bill, which it is agreed on both sides of the Committee are pure Supply, so that if Part III had been a separate Bill it could only have been introduced in another place on a Ways and Means Resolution. This explains why, quite apart from its merits, I do not feel able to accept any Amendment which arises on Part III.

LORD MOLSON

It is true that I was not here when the discussions took place, for which I am sorry. I was engaged in quasi-political work this afternoon. But having discussed this matter with the authorities of the House, I understand that there is a procedure by which Part III could be amended here and then left out and in this way avoid raising the question of the privilege of another place. I thought that it had been agreed that it is possible to do that without going outside the proper constitutional powers of the Upper House.

THE LORD CHANCELLOR

What the noble Lord has said is agreed to be quite right. What would be an infringement of privilege would be to amend the Bill and then send it down to another place; but if Amendments are made and then this House disregards its own Amendments, removes them all and sends the Bill back with a large hole in it, this is not an infringement of the privileges of another place. Whether so peculiar a procedure does any good is a matter of opinion. Whether it is wise (although there may be this way of wriggling out of it) to do the very thing which is the Commons' privilege and deal with matters of detail of what is admitted to be pure Supply is another matter. I am giving the reasons why, whatever the merits of the case, my noble friends and I do not feel able to accept any Amendments to the Supply part of this Bill.

LORD BROOKE OF CUMNOR

Perhaps I can help my noble friend Lord Molson. It is agreed, at any rate between the two Front Benches, what will or will not be infringement of the privilege of the Commons. The only thing I would take exception to in what the noble and learned Lord the Lord Chancellor has just said is his reference to a "peculiar" procedure. In fact, this procedure has been carried out very many times in the long history of this House, and, with respect, I do not think that any new situation has now arisen which would justify its being described as "peculiar". If I may say this to my noble friend, in Committee on this Bill your Lordships are completely at liberty to make Amendments without infringing Commons privilege. There can be an infringement only at the moment when we send the Bill back to the Commons in a certain form. Until then, the question of Commons privilege does not arise.

If my noble friend presses this Amendment to a Division, I am bound to say that I shall not feel disposed to vote for it, because hitherto I have been advising my noble friends to divide the Committee only on matters which seem to be of principle affecting a large section of Her Majesty's subjects. With great respect to the cogent arguments that my noble friend has used, I find difficulty in bringing this Amendment inside that category. I hope, therefore, that he will forgive me if I do not feel able to support it. But I would make it perfectly clear to him from his own side of the House that there is no infringement of Commons privilege if an Amendment is carried in Committee against the advice of Her Majesty's Government on this Part of the Bill.

LORD MOLSON

I was a little surprised. I was at fault, not through any deliberate omission on my part, in not having heard the discussion on this point. What my noble friend Lord Brooke of Cumnor has said is exactly in line with the advice which I obtained. My information is that there is nothing exceptional or unusual in this procedure. It has been done on a number of occasions in the past. I should be the last person to wish to infringe the privileges of another place, and if my Amendment were carried I should be willing to move to leave this out in order that we should not raise this matter. But I regard this as a matter of considerable importance to the whole horticultural industry of this country, and because of its effect upon prices, and I am still disposed to divide the Committee.

On Question, Amendment negatived.

6.19 p.m.

THE EARL OF KINNOULL moved to add to subsection (4): ( ) the trustees of any superannuation fund which has been approved by the Commissioners of the Inland Revenue for tax purposes.

The noble Earl said: I rise to move this Amendment standing in the name of my noble friend Lord Jessel. Its purpose is to include superannuation funds among exemptions from levy under this clause. Both on the Second Reading of the Bill in this House and on Committee stage in another place, it was strongly argued on both sides of the House that pension funds should be exempt from levy. This has been resisted by the Government up till now on the ground that it would give rise to what they termed "unworkable complications".

The Committee will be aware that many industrial pension funds include investments in land. These funds are exempt from both capital gains tax and income tax. The question I would put to the Government is: that being so, why should they be subject to the levy? It is very difficult to understand how "unworkable complications" would arise in reality. Perhaps when the noble and learned Lord comes to reply he will enumerate some of these unworkable complications. The Land Commission will have no difficulty in satisfying themselves that the funds in question have been approved by the Inland Revenue, and it would appear that once this has been established there would be no difficulty in dealing with such funds, along with other bodies exempted, by this clause. I beg to move.

Amendment moved— Page 58, line 18, at end insert the said paragraph.—(The Earl of Kinnoull.)

LORD MITCHISON

This Amendment was moved in identical terms in the Commons in Committee, and it was met with the answer to the question which the noble Earl has just put. Why, he says, are these bodies to be subject to land levy and not be subject to income tax and so on? I think this point was answered in column 670 of the OFFICIAL REPORT of the Standing Committee in another place on July 28, where the Parliamentary Secretary said: We have this suggestion that the superannuation funds and the funds of institutions catering for pensions should be exempt. I agree they are entirely honourable bodies, but the fact is that they are making profits from land investment, and there is really no reason why they should escape the levy. If people derive income, the whole purpose is that they should make a contribution by levy, and for that reason, as far as that body is concerned, although representations were made by fund managers, they had to be told about the basic principles of the levy and the way in which exemptions would operate. The White Fish Authority, another highly admirable institution, were turned down at the same time. The answer, surely, is that this is intended to be a levy on a particular kind of transaction or chargeable event, whichever you like to call it; that the real fundamental reason for it is the use of land for public purposes, and that Part III of this Bill is an instrument for carrying out what is intended in Part II of the Bill.

Perhaps I may add one further short comment—I see that the noble Lord, Lord Conesford, is not here. There was once a man called Mr. Smith who practised bootlegging in Canada. When he received a notice of assessment from the Canadian taxing authorities he was very indignant. He said: "Am I to make the Canadian authorities partners in my crime of bootlegging? This is scandalous." I think he took them up to the Privy Council, but I am not certain. What the income tax authorities said was: "Income is income, whatever the source of it." In this particular case development value, betterment, land levy, whatever you like to call it, is just that, regardless of the source from which it comes; and the exemptions in the Bill, so far as I can see, are granted for reasons of impossibility of levying or grave administrative difficulty, and are not exemptions in principle.

THE EARL OF KINNOULL

I am grateful to the noble Lord for quoting the proceedings in another place; in fact, I have also read them. But where I would suggest the inconsistency arises is that these funds are exempt from capital gains tax and income tax; yet for some reason they will not be exempt from the levy. That is the point of my argument.

THE LORD CHANCELLOR

We have, with respect, tried to explain this several times, including more than one occasion this afternoon. Capital gains tax, income tax and surtax are taxes on the personal income of individuals, and one can say: "He is rather poor, so he ought not to have to pay so much," and that somebody else less deserving ought to pay more. But this is a levy on a transaction in land where the man who has the interest in the land has gained because of development work that has been carried out by the community. We accept the functional land of charities, but that is not because we are well disposed to charities—as, of course, we are—but because of the great difficulty of valuation which arises in their case. But as to everybody else, there is nobody who is exempt on the ground that he is a good person, or anything of that sort.

The fact is that people, however admirable, whether they are charities or whether they are trustees of superannuation funds, who have a certain amount of money to invest will be entitled, as they have always been, to invest it in anything they like. Most trustees of superannuation funds, although not all, are insurance companies. But, whoever they are, they can invest their money in anything they like. One of the things which tend to go up in value in a small country with a large population is land. If they think they will do well by investing in land, then they can invest in land. If they invest in agricultural land near a town, it may be that, even now, they can repeat Lavender Hill. If they invest in agricultural land near a town, and put £7,500 into it, they may find, even now, that two years later they may be able to get £400.000 for it—though such cases are rare. In future, however, they will not get the whole of that £400,000 profit; they will get only three-fifths of it, because two-fifths is being taken for duty.

All this has nothing to do with whether the person who invests the money is somebody we like or somebody we do not like. All we say is "Whether you are a good or a bad person, if you choose to invest your money in land and you are lucky enough to have the value increased because of the prospects of development work by the community, in future you will pay two-fifths of that lucky increase to the community which gave it to you."

THE EARL OF KINNOULL

I am obliged to the noble and learned Lord for his reply. What I think he is saying is that these trustees of these funds should not invest in land because land is a bad investment. I think it is a sad occasion when the noble and learned Lord advises this, because land requires a lot of capital. However, in view of his reply, disappointing though it is, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 56 agreed to.

Clause 57 [Charities]:

6.28 p.m.

LORD BROOKE OF CUMNOR

moved to leave out all words from the first "chargeable" in subsection (1) to the end of subsection (5), and insert "on any charity". The noble Lord said: The first virtue of this Amendment is that it would considerably shorten and simplify the Bill. It would cut out some 50 lines—that is to say, the whole of subsections (1), (2), (3), (4) and (5) of Clause 57—and substitute for them the simple words: No levy shall he chargeable on any charity". This would seem to be in accord with the traditions of Parliament.

It is the tradition in this country that charities are exempt from taxation. For some reason the tradition seems to be distasteful to a Socialist Government, and I would ask the Government not only to try to justify their proposal, which they presumably wish to do in reply to my Amendment, but to explain their proposal. It would be of great value if we could have on the Record a simple and clear exposition for the benefit of charities, indicating precisely what the Government proposal means, because, though I have read all the proceedings in another place, both in Committee and on Report, referring to this clause, I do not think that a simple straightforward explanation was ever achieved.

As I understand it, land used immediately for the purposes of the charity and also the permanent endowment of a charity will be exempt from betterment levy. But if the charity invests in land its other resources, whether they are derived from surplus revenue, from gifts, or anywhere else, that land may be liable to levy. Let us take the case of a body of trustees who are administering an old charity which has provided almshouses on the edge of a town. If I read the clause aright the almshouses themselves, and the land on which they are built, will be exempt from levy. Also, if there was originally given to the charity some other land from which income was to be derived for the support of the charity, that would be exempted because it is permanent endowment. But if the charity has been for good reason under spending its income and has thereby had surplus revenue to invest and has used that money to purchase other land, that will not be exempt, though it might be in certain circumstances.

This is where we get into the complications of the clause. It would certainly appear that a charity, in order to take as much advantage as it can of this clause, would have to draw a fixed demarcation line between what it claims to be its permanent endowment and the rest of its assets. To my way of thinking this is an out-of-date distinction in the administration of charitable trusts. I should have thought that nowadays anybody who was setting up a charitable trust would not follow this somewhat old-fashioned procedure of insisting upon a strict distinction between the use of money as a permanent endowment and the use of surplus revenue. Indeed, I should have thought that this was a quite unnecessary complication for a small trust.

Moreover, as I read this clause, a charity would get into serious difficulty if it were to buy land partly out of its permanent endowment and partly out of what I might describe as free moneys, surplus income, which had accumulated. It would be very unwise to do that. In fact, one of the main conclusions I draw here is that a charity henceforth will be ill-advised to invest surplus revenue or windfall assets in land. It will do much better to buy stocks and shares, because the Government, for some reason at present unknown to me, have decided to differentiate. The Government have said that the investments of charities in stocks and shares shall be exempt from capital gains tax. It was quite natural that the Government should have said that, because that is in accordance with the age-old tradition of the country. In future, supposing this Bill goes forward unamended, they can still invest their surplus money on the Stock Exchange and be exempt from tax; but if they are so rash as to invest it in land, then they may be attracting a liability to the levy.

What is the reason for compelling charities to make this division between their permanent endowment and the rest of their assets? What is the reason for giving them this strong incentive to invest their surplus revenue on the Stock Exchange rather than in land? Why give charities exemption from capital gains tax but not from betterment levy? Why complicate not only the law but also the administrative duties of charitable trustees by seeking to draw this line of demarcation between permanent endowment and the rest of the assets? Which Socialist principle is it that drives the Government to taxing charities which, according to our traditions, have not been taxed?

Surely, the simplest course would be for your Lordships to accept my Amendment which, as I say, will vastly simplify the law and the administration of charities and will also remove from the Government this stain on their escutcheon, which otherwise they are deliberately placing upon it because they have decided to make charities liable to tax. I beg to move.

Amendment moved— Page 58, line 19, leave out from first ("chargeable") to end of line 26 on page 59. and insert ("on any charity").—(Lord Brooke of Cumnor.)

LORD MITCHISON

I am rather surprised that the noble Lord, Lord Brooke of Cumnor, has found the distinctions that were drawn below so difficult, because the clearest explanation of what this Amendment is about appears three times in the Commons proceedings. Moreover, it was made by an honourable friend of his, Mr. Graham Page, who stated it in Committee, and it so happens that it was twice repeated on Report. It must have escaped the attention of the noble Lord, and for that reason I will read it to him: May I try to crystallise the issue?

LORD NEWTON

May I ask the noble Lord the Deputy Leader whether it is in order for a noble Lord to quote what a Back Bencher says in another place?

LORD CHAMPION

No, it is not in order, but he may paraphrase it.

LORD NEWTON

I am much obliged to the noble Lord.

LORD MITCHISON

I do not mind. I am willing to put it in my own words if necessary, but I thought the Opposition Front Bench might accept it more easily from one of their own side. It is really quite a simple matter. Only a small part of the money of charities is concerned in this Amendment, formidable though the noble Lord tried to make his Amendment look. May I try to crystallise the issue? As I understand the right honourable Gentleman, there are four types of land held by 'charity'". This is nothing to do with Socialist principles or anything of that sort. These are quite well-known distinctions in charity endowments and the like and, therefore, they are for a good purpose, which I do not think one need go into at the moment. There are four types of land held by 'charity'. The first is functional, the second is recently functional, the third is permanent endowment and the fourth is investment land. The first three are exempt from the levy under this clause and the fourth is not exempt. That is all we are talking about in this Amendment—whether or not you should treat the investment land in the same way as endowment or functional land. I go on: We on this side of the Committee wish to exempt the fourth on the grounds that income from that category is exempt from income tax …and should be exempt from levy. That is the point. If I may say so, it is not a surprising point or a new one. It is exactly the same point that we have had already several times to-day. On page 687 the Minister said—and I can read this: What we are doing is, as I said, to exempt charities in so far as one cannot establish a base value of the land they hold. For this reason we exempt functional land, land held for the purpose of the charity. I have, as I have explained, gone further than the 1947 Act by also excluding—although this might on purely logical grounds be a criticism—the permanent endowment land, which, I am told, is a familiar concept in the charity world."— but not in the Conservative Central Office— Investment land is not covered. It is perfectly clear what is happening. This is a case where the investment land of charities will not fit into the machinery of the Bill. It is not practical to bring it in under the Bill because one cannot establish a base value of the land they hold.

LORD BROOKE OF CUMNOR

If it is impossible to establish a base value for the investment land, why are the Government seeking to impose levy on it?

LORD MITCHISON

It is not on any question of principle, other than this: that one does not put into the operation of the levy things which cannot be dealt with under its machinery. We were given one case with regard to local authorities, and then another case just now, and this is the third case; and this is the explanation that has been given by the Minister. I repeated it to the noble Lord, Lord Brooke of Cumnor, and to other noble Lords because they must have read the proceedings in the other place without noticing that this was the principle that had been put forward. I can see the distinction in it and the reason for it, and anyhow, when the Minister of the day who has to get the plan working says this, then I, for one, am not prepared to differ from him. The issue was obscured by a great deal of talk about charities generally, Socialist principles, and all the rest of it, whereas it seems to me to be purely a matter of what can be brought within the scope of the Bill.

LORD BROOKE OF CUMNOR

When the noble Lord says "investment land" does he mean "functional land"?

LORD MITCHISON

May I read it out again, because I am not sure whether the noble Lord has read it? What we are doing, as I said before, is to exempt charities in so far as one cannot establish a base value of the land they hold. He then says that we are exempting on that ground the permanent endowment land (and he says, rightly, I think, that this may be quite logical) and the two varieties of functional land that I have already mentioned. The only thing we are talking about to-day is neither of those, but investment land. What is the question of principle in this other than that the levy shall apply to all land transactions except in cases where it is really unsuitable or inoperable?

EARL FORTESCUE

Could the noble Lord give the exact definition of "investment land"?

LORD HAWKE

My point is a much simpler one, namely, what is "a permanent endowment of the charity"? There cannot be a levy unless there is a sale, and if one sells something it ceases to be a permanent endowment, because the very word "permanent" means something that is never sold. I think the word "permanent" should be left out.

Then again, what is the difference between an investment and an endowment? I am the chairman of a diocesan board of finance, and at intervals we are left houses. Are they endowmentsor are they investments? Also, at what stage does an investment become an endowment? The cases are inextricably mixed and I feel the whole clause will lead to a great deal of trouble unless this Amendment, or something like it, is accepted, to exclude the levy on both the endowment and the so-called investment, because they are indistinguishable in the case of charity.

6.44 p.m.

LORD BUTLER OF SAFFRON WALDEN

I have been trying for some time to intervene in this debate. I find it more difficult to be able to speak in the Committee stage in this House than in the other place in which I spent so large a part of my life, but I hope your Lordships will forgive me if I intervene on this matter. I am not really interested in the discussion which has been taking place, on somewhat political lines, between the noble Lord, Lord Mitchison, and my noble friend Lord Brooke of Cumnor, because I do not believe there is any question of charity involved in this matter. We are dealing with the question of whether this levy shall or shall not apply to charities, and I should like to state quite unequivocally that I support the Amendment of my noble friend Lord Brooke of Cumnor that this clause should be simplified and that the levy should not apply to charities.

I also support his plea to the noble and learned Lord the Lord Chancellor that some explanation of the working of the clause should be given, because although, like the noble Lord, Lord Mitchison, I have read what the Minister said in another place, I am none the wiser as to how this extremely complicated clause is likely to operate in the end. Therefore, whatever the constitutional issues may be, and whatever the conclusion of this particular debate may be, I hope that at least we may have a little more clarity on the subject of charities than we have had up to date.

We have investigated this clause carefully from the point of view of the Cambridge colleges, not only my own college but other colleges with which I have communicated. We have great experts we can consult, and I think it is true to say that the majority of the land involved in that particular discussion would be either functional or endowment land; so that it is not purely from that point of view that I am taking part in this debate. It is because I believe that it would be a great blow to charities as a whole if investment land were not exempted in the same way as endowment land. I believe that other charities, quite apart from the ones I have mentioned, would suffer grievously if investment land were not brought in. As has been made clear by the noble Lord, Lord Mitchison, functional land, recently functional land and permanent endowment land are already exempted under the Bill. Investment land, not being permanent endowment, is not exempt, and I find the explanations given by the noble Lord, Lord Mitchison, in this House, and by the Minister in another place most unsatisfactory and unconvincing. And I have read all he said about the impossibility of valuing certain types of land.

This may be an important consideration, but an even more important one is that on grounds of common sense or common humanity there should be complete exemption from levy for all land in a charity which provides either physical accommodation for the work of a charity or revenue with which to carry on that work. My noble friend Lord Brooke of Cumnor referred to almshouses: I am thinking particularly of schools, with which I have spent the greater part of my career, and I think it would be a ridiculous position if the investment land of schools were to be submitted to the levy while the functional land on which they operate was not.

Furthermore I take the view, after consultation with members of the legal profession who draw up trusts, that nowadays the thing to do is not always to set apart a permanent endowment capital but rather to give the trustees discretion to employ the total assets of the trust as capital or income, as they think best in the changing circumstances of the world to-day. That is the modern view of charitable trusts, and it is against that view that this Bill will operate.

It may well be that in a particular case the trustees of a charity will be able best to carry out their charitable purposes by having this important degree of flexibility, and I should like an answer as to why if they invest in stocks and shares they are to be exempt, whereas if they invest in land they shall not be exempt, which seems to me to be quite contrary to the doctrine which many trustees of charity have carried out in the past. If the assets of such a trust include land, they may suffer a most damaging levy which can only make a serious inroad into the charitable work of the trustees. This is wholly wrong, and a simple form of Amendment such as has been moved by my noble friend is, I think, very desirable. It may be that the noble and learned Lord the Lord Chancellor will not be able, owing to his inhibition of a constitutional character, to accept the Amendment on the spot, but I hope that my noble friend will stick to his Amendment because in my view it is an important one.

I cannot help saying that in any case I regard with some fear the future of this Bill, whether we are dealing with charities or not. We know what happened to previous attempts to tax land values, dating from Lloyd George, through the occasion I remember myself, in 1931, and the next occasion in 1947. However, it is not in order to discuss such a disagreeable outlook on this particular Amendment. What I want to do with this particular Amendment is to exempt charity. It is completely illogical to charge the levy on one section of charities' land and to do so in such a way which would cause wise legal advisers to take a backward step and abolish that flexibility of assets which can be very useful and desirable in carrying out charitable work. I particularly urge that we should not submit charities to this uncertainty, and therefore I beg to support my noble friend.

6.52 p.m.

THE LORD CHANCELLOR

I do not think I can really add anything to what my noble friend Lord Mitchison has already said. Of course, permanent endowment land is a well known charity concept, and I am told that if anybody is in doubt in discovering what land is covered by charities' permanent endowment land, if they ring up the Charity Commissioners, or, for that matter, the Department of Education, it is unlikely that there will be any difficulty in their being told. What I am afraid I cannot agree to is the suggestion, as I understand it, that charities are being in some way penalised. This is not so. I do not know how long the noble Lord, Lord Butler of Saffron Walden, has been here this afternoon. This is not a tax on anybody it is a levy on a particular kind of transaction which arises, and arises only when the value of land has been increased by the work of the community. Whether it is a trustee of an insurance fund, a racing millionaire, a charity or whoever it is, if he invests in land large profits may well be made. The only difference, as I pointed out, is that if a case like the Lavender Hill case happened again, it would not matter who the individual was, instead of his making a profit of £240,000 about £96,000 would go to the State, and whoever it was who had invested the money in land would get only about £130,000 from it on an original investment of £10,000.

Nobody is being penalised. It is merely that some part of the development value which the State has created is going to be returned to the community which created it. But to suggest, as was suggested I think by the noble Lord, Lord Brooke of Cumnor, that the effect of this is that everybody who invests will have to do so on the Stock Exchange, is not so at all. I should have thought that as long as it is possible in two years to make a profit of about £130,000 from an investment of £10,000, it is something that can hardly be called an unsatisfactory thing to invest in.

LORD MITCHISON

May I add one word before the noble Lord, Lord Brooke of Cumnor, replies—or two words. The first is this. This is an Amendment that was discussed on Report and divided on in another place. Whatever one's view about it, I should have thought it was rather doubtful whether we should take it upon ourselves here to differ from a decision of the other place supported by a Division. The Amendment itself is at the top of column 1342 of the OFFICIAL REPORT for October 27, and the Division begins at the bottom of column 1360. There were a good many speakers, all, I think, on the side of the Opposition, and including, with more than usual respect to the noble Lord, Lord Butler of Saffron Walden, if I may say so, the points he put to-day. They did not relate particularly to Cambridge colleges or anything of that sort, but they were the same points. And the reason is quite clear. The Minister said: We discussed this question with the charities. The precedent was that functional land should be exempt, as the Committee knows, and I accepted it. There are technical reasons for it. That is the point I read out before. I went beyond that and struck a compromise."— this is Lord Brooke of Cumnor's point. I may be criticised on grounds of logic, but I went beyond that to include permanent endowment land. I regard that as a fair compromise and I ask the House to rest upon it. The point about this Amendment seems to me to be what has happened below. The Minister has seen the charities; he has made a compromise. I do not say the charities agreed—I do not know. He has made a compromise in deference to their views. There was then the Amendment which would upset the compromise, as he calls it—it is his word—and there was a Division on it. Now are we to divide in the other sense here? I leave it at that. The second point is a very short one indeed. I am afraid that the noble Lord, Lord Hawke, and a great many other people are not going to get out of the realm of uncertainty by having an exemption of charities. It sounds all right till you begin to examine what is and what is not a charity, but I am not going into that.

LORD HAWKE

It is quite easily done; it is one accepted by the Inland Revenue as a charity.

LORD MITCHISON

That is one definition but there are about half a dozen others, and there is a volume of stuff about it. I am not going into it to-day. I assure the noble Lord, Lord Hawke, and other noble Lords, in all good faith, that there is going to be a very uncertain margin unless you are prepared to accept some statutory defini- tion other than the ordinary meaning of the word—which is what this Amendment would do—in substitution for it.

LORD BROOKE OF CUMNOR

If we do come to a Division on this Amendment it certainly will not be the first time that your Lordships' House has discussed and divided on a matter which has already been discussed in another place. The noble Lord, Lord Mitchison, says that this is all right because the Minister in another place claimed that he had struck a compromise. It is rather like the man who said that he did not murder his enemy, he did him grievous bodily harm because he wanted to strike a compromise.

I am afraid I found the reply of the noble and learned Lord the Lord Chancellor very unsatisfactory. He did not give any valid reason that I could hear for compelling charities to make this artificial distinction between their permanent endowment land and the rest. He did not seem to me to give any valid defence of the case for subjecting charities to this levy at all. I admit that he repeated the statement, which I sincerely believe to be a fallacious statement, that this is development value which the community has created. I should have thought that by now one of the few things on which we could all agree, as I think I said on Second Reading of this Bill, is that some development value is largely created by the community and some development value is hardly created by the community at all; and if any of us argue either that all development values are created by the community or that no development values are created by the community we are both wrong.

I find it hard to discover logic in the Government's argument. If charities.are to be made liable to this levy, why should they not be made liable to capital gains tax? Yet this same Government accepted that they should not be liable to capital gains tax. Perhaps it is argued against me that this is a tax on land and not on people or bodies. But I could reply that the capital gains tax is a tax on stocks and shares and on land; but in the end it is paid by people or by bodies. It is not paid by the stocks and shares; it is not paid by the land. It falls on people who have to pay, whether tax or levy.

Then there is this argument, which was repeated by the noble Lord, Lord Mitchison, emanating originally from the Minister in another place, that that part of a charity's assets which could be made so liable was being made liable to betterment levy, but that it was natural for the Government to exempt that which could not be made liable. Everybody agrees that it would he extraordinarily difficult to assess to betterment levy the around on which a school is built. But why in the normal case it should be more difficult to assess to betterment levy the permanent endowment land of a charity than land which it holds for investment purposes, I find it extraordinarily difficult to understand. If this is a compromise, it seems to me to be in every sense a bad compromise.

Resolved in the affirmative, and Amendment agreed to accordingly.

Clause 57, as amended, agreed to.

Clause 58 agreed to.

Clause 59 [Housing associations.]:

LORD WADE moved to omit the proviso to subsection (4) and to insert instead: ( ) A housing association being a charity as defined by section 57(6) of this Act shall not he entitled to relief from liability to levy under this section in any case where it is entitled to

I confess that when I moved this Amendment I was hoping that I should get a more convincing reply from the Government, because I do not want to press many Amendments to a Division. But so far, having had no reply at all which would carry conviction outside Socialist ranks—indeed, outside the ranks of those people who have been responsible for the preparation of this Bill—I feel that in justice I must ask the Committee to divide.

7.4 p.m.

On Question, Whether the said Amendment (No. 36A) shall be agreed to?

Their Lordships divided: Contents, 53; Not-Contents, 22.

CONTENTS
Albemarle, E. Derwent, L. McCorquodale of Newton, L.
Allerton, L. Dudley, L. Milverton, L.
Amherst of Hackney, L. Effingham, E. Molson, L.
Arran, E. Falkland, V. Mountevans, L.
Atholl, D. Ferrier, L. Newton, L.
Audley, Bs. Fortescue, E. Nugent of Guildford, L.
Barnby, L. Gage, V. Rathcavan, L.
Barrington, V. Gladwyn, L. Redmayne, L.
Belstead, L. Goschen, V. [Teller.] St. Helens, L.
Bessborough, E. Grimston of Westbury, L. St. Oswald, L.
Bridgeman, V. Hawke, L. Salisbury, M.
Brooke of Cumnor, L. Hertford, M. Salter, L.
Buccleuch and Queensberry, D. Iddesleigh, E. Sandford, L.
Butler of Saffron Walden, L. Killearn, L. Savile, L.
Colville of Culross, V. Kilmany, L. Somers, L.
Congleton, L. Kinloss, Ly. Vivian, L.
Daventry, V. Kinnoull, E. Wolverton, L.
Denham, L. [Teller.] Lloyd, L.
NOT-CONTENTS
Addison, V. Kennet, L. Plummer, Bs.
Arwyn, L. Leatherland, L. Popplewell, L.
Blyton, L. Longford, E. (L. Privy Seal.) Rhodes, L.
Bowles, L. Mitchison, L. Ritchie-Calder, L.
Champion, L. Moyle, L. Shepherd, L.
Gardiner, L. (L. Chancellor.) Peddie, L. Sorensen, L.
Henderson, L. Phillips, Bs. [Teller.] Stow Hill, L.
Hilton of Upton. L. [Teller.]

such relief because the requirements of subsection (2) or (3) of the said section 57 (as the case may be) arc fulfilled."

The noble Lord said: It may be that, in the light of the decision reached on Clause 57, the latter part of the wording of this Amendment will require alteration. Nevertheless, I should like to put on record what this Amendment is designed to do. It is a comparatively small point, yet an important one for some charities, because there are certain trusts which are housing associations, within the meaning of Clause 59(4), but which are also charities.

The proviso to subsection (4) of Clause 59 reads as follows: Provided that (whether in relation to England, and Wales or to Scotland) it does not include any charity as defined by section 57(6) of this Act. Section 57(6) has not been taken out. As I understand it, the intention is that a housing association or trust should not be entitled to claim exemption both under Clause 57 and under Clause 59. That appears to be reasonable. But a situation may arise in which there is a housing association which is also a charity. Being a charity, it cannot claim exemption Clause 59.

We then have to turn to Clause 57, and here I have to admit to your Lordships that I am in some difficulty, because I do not know at this stage whether the words which have been taken out of Clause 57 will be put back. May I put it this way? When this Bill reaches the Statute Book it may be that under a provision a charity, in order to claim exemption as a charity, will have to show a distinction between capital and income. There are certain housing associations (there is one trust which is known to me) where no distinction is made in the trust deed between capital and income. It is permanent in this respect, in that the trust deed was drawn up in 1900. The particular charity I have in mind does not wish its name to be mentioned; it prefers to do its good works without publicity. But the very fact that it has been in being since 1900 indicates its permanent nature.

If I have interpreted these two clauses correctly, and on the assumption that there is a condition so far as charities are concerned—namely, that there must be this distinction between capital and income—and if, as a result of any further changes that take place, this distinction between capital and income is made obligatory, then I fear that very worthy trusts such as this which are housing associations may fail under both clauses—under Clause 59 because the proviso applies, and under Clause 57 because they do not satisfy the conditions of a charity. The intention of my Amendment is to make it clear that a trust such as the one I have been describing may be entitled to exemption either under Clause 57 or under Clause 59. It would seem only reasonable that that should be so. It is important to get this on the Record. I do not know what is going to happen. and I will not embark upon a discussion of the constitutional position, about which we have already heard a good deal. I can only express the hope that bodies such as this will not fall between two stools and find that there is this condition inserted in regard to charities, and that, because the charity is a housing association it will fail to get any exemption at all. I am quite sure that the Government cannot have intended that to be the situation. I beg to move.

Amendment moved— Page 61, leave out lines 31 to 33 and insert the said new subsection.—(Lord Wade.)

THE LORD CHANCELLOR

The noble Lord's aim, as I understand it, relates to the position of a housing association which is a charity but which fails to get exemption under the charities clause because the land in question is not a permanent endowment and is not being used for the purpose of the charity. It is most unlikely that a housing association would have land which does not fall within these categories, but to the extent that it has it would be normal investment land which should be liable to levy, in the same way that investment land of anybody else, including charities, is liable to levy. There is no reason for treating charitable housing associations more favourably than other charities. As a matter of practice, in any case, the Ministry of Housing would not grant a certificate under Clause 59 to a non-charitable association in circumstances where if it had been a charity it would not have been entitled to exemption under Clause 57.

I am afraid that all this will be cold comfort to the noble Lord, but that is the position. We are back again, in a sense, to the old differences as to whether in regard to levies on transactions in land one should say "This is a good chap", or "That is a good chap, and we will let him off", or whether, with the very limited exceptions whicn there are in the Bill, all transactions should be treated alike.

LORD WADE

This is perhaps not the occasion on which to ask the Lord Chancellor for a legal opinion, but may I put this point to him? Supposing a housing association is a charity and the property which is owned is being used for the purpose of the charity—namely, for the purpose of providing housing—but that its trust deed makes no distinction between endowments and non-endowments, between capital and income. Will such an association, in the opinion of the Lord Chancellor, satisfy the conditions which enable it to be exempt in relation to the property which is being used for the purpose of the charity?

TILE LORD CHANCELLOR

I should feel it very unwise to express any opinion about a particular case which is dependent on the particular terms of the trust.

LORD WADE

In view of the decision made on the earlier clause, I do not feel that I can press my Amendment any further at this stage. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 59 agreed to.

Clause 60 agreed to.

LORD CHAMPION

I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.

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