HL Deb 27 February 1969 vol 299 cc1254-76

6.0 p.m.

THE EARL OF KINNOULL rose to ask Her Majesty's Government whether they are aware that the Land Commission levy in certain cases is proving excessively burdensome and whether they consider the Land Commission itself is now achieving one of its original objectives of making development land cheaper. The noble Earl said: My Lords, I think it may be said of this House that it has something of an advantage over another place when discussing the Land Commission by virtue of the fact that, besides the wisdom of the noble Lord, Lord Silkin, we have also the noble Lord, Lord Kennet, who is in the unique position of being the only Minister who has not deserted the helm since helping to pilot the Land Commission Bill through Parliament in 1967. He therefore has the advantage of being something of a father figure; and, as a father figure on a more personal note, he is of course well qualified.

My Lords, in asking this Unstarred Question on the Land Commission, I hope very much that the noble Lord will be able to give us a more positive and helpful reply than that given by the Government in another place during the debate on February 6. As the House knows the Land Commission have now been in operation for just over two years.

The Commission's original objectives were set out in the White Paper of 1965. They were:

  1. "(1) To secure that the right land is available at the right time for the implementation of national, regional and local plans;
  2. "(2) To secure that a substantial part of the development value created by the community returns to the community and that the burden of the cost of land for essential purposes is reduced."
It is the effect of the second objective, in other words, the betterment levy under Part III of the Act, to which the first part of my Question relates.

As the House knows, and as I am sure the noble Lord, Lord Kennet, is aware, the betterment levy and the way in which it is operated have been the direct cause over the past year of a rapidly growing number of cases of acute and sometimes inequitable hardships falling on individuals. Almost every day one can pick up a newspaper and see a report of yet another case of a young couple, or perhaps an old retired couple, who face a large bill from the Land Commission on an assessment that they did not understand and had not anticipated; an assessment often based on a valuation and calculations meaningless to the recipients, many of whom feel that they cannot afford professional advice. The result of these hardship cases is always the same: the young couple or the old couple are unable to proceed with their plans to improve their homes and to enjoy that little more comfort for which they have saved, perhaps for many years.

It is easy to paint an emotional picture of these cases of hardship, but I do not intend to do that to-night. I am personally aware of over twenty individual cases of hardship caused by the levy, none of which I intend to go into in great detail to-night but all of which I can make available to the noble Lord, Lord Kennet, later if he so wishes. I am sure that he is aware of most of them. All of them have a fundamental point in common. All are cases involving a fairly low levy tax—under £2,000, I think; all are cases affecting people's homes, some under Case "c" of the betterment levy where people have improved their own homes with their own labour. I hardly need add that the reason for this is the development charge under Case "c". Many of the people affected are apparently totally unable to meet this levy tax, even by instalments. It may mean in some cases that they have to sell their house; and many of them feel so strongly about the injustice of their case that they have said that they would rather go to prison than to pay.

My Lords, this unhappy atmosphere has not, I believe, been helped by the indecisive attitude which the Government have so far adopted. In the debate on February 6 last in another place the reply by Mr. MacColl, when he was pressed about hardship cases, was as follows: We must consider such cases to see what we can do to improve their lot and let the Land Commission machinery get into operation. We should not start tinkering with that machinery until we see the best way to tackle it."—[OFFICIAL REPORT, Commons, 6/2/69, col. 707.] I should have thought that by now the Government had ample evidence of these cases and ample time to get the Land Commission to assess them and to formulate changes in the levy. Perhaps at this point I might ask the noble Lord, Lord Kennet, whether the Land Commission have submitted lists of suggested alterations and exemptions from the levy. As the House knows, the Government have the power, under Section 63 of the Act, to add by statutory order any exemptions of levy. But this power, so far as I am aware, has not yet been used. But unless the Government take action soon I believe that, with the intense feeling of injustice, and often sheer physical worry, that surrounds these cases, there may be a tragedy on the lines of the Pilgrim case.

It is true to say that it is easy to be critical and often more difficult to be constructive; but I should like to put forward to the noble Lord, Lord Kennet three cases which I believe could qualify for exemption from the levy or for delay of payment. The first is that the levy shoud not apply below a minimum figure. I am sure that the noble Lord, Lord Silkin, will support me in this, for he moved such an Amendment during the passage of the Bill. The Government reply at that time was that it would lead to widespread abuses. I am told on good authority that, with careful drafting, the Government fears of widespread abuses could be met. If the noble Lord would so wish it I should be happy to furnish him with such a draft. If this minimum figure were accepted by the Government it would, in my opinion, kill two birds with one stone.

First, it would relieve many cases of hardship (which I am sure the Government are as anxious to relieve as we are), and, secondly, it would save a great deal of time and expense on the part of the Commission in the collection of these small amounts. The Commission stated recently that they anticipated that the costs of collection of levy for last year would exceed £2 million. I think it would be of interest to-night if the Government or the noble Lord could advise us what studies, if any, have been made on the cost of collection and what proportion of the collections are of a low figure—say £2,000. The second change that I would advocate has already been pressed in another place. That is the exemption of the owner-occupier. This would fall in line with the legislation on capital gains tax. The third change that I would submit to the noble Lord relates to the Case "c". It is particularly relevant, I believe, to the example that has become known as the "Sweeting case", where a young couple were given a barn by an uncle. With their own hands, they converted the barn into a house. Under Case "c", they were charged a development value levy of £900, a sum which, I am told, amounted to something like 50 per cent. of what they had actually spent on the house itself. If one accepts that Case "c" is justified, would it not be possible to provide that the charge should not become operative until the property was sold? That is when the profit is in fact made.

The last point I would make to the noble Lord concerns professional fees. Here I perhaps should declare an interest. At the present time, under Schedule 6, paragraph 19, the full cost of professional fees is not allowed as a deduction in the assessment of net development value. I have no idea how this restriction arose and perhaps the noble Lord could explain it to us later. Yet for capital gains tax purposes it can he deducted.

May I give a short example of how this operates at present? There was a case some time ago when a gentleman purchased a property, after April 5, 1967, at £2,250 and a year later sold it for £2,400. The net development value on this purchase and sale amounted to £150 and the levy was assessed at £60. The gentleman incurred fees on the initial purchase of the property which amounted to £60 and incurred fees on the sale of the property amounting to £186. Therefore, he made a loss on the whole operation of £36, and as he was charged a further £60 this made a total loss of £96.

I would make one final point. It is no exaggeration to say that this new tax has proved at the lower end of the scale to be a pernicious and cruel tax. It has already caused many terrible cases of hardship, involving quite innocent people. These cases multiply monthly. They are no longer one or two exceptions; they may now, I believe, run into three figures. The Land Commission have a very large backlog of cases, all fairly small, and all must be physically uneconomic to collect. In many instances, the Land Commission must be paying more to collect the money than they are receiving. No one seems to benefit. Everyone seems to lose.

The Government so far have said that they are willing to look into every case. Can the noble Lord tell us how many cases they have looked into and what the results are? The Chairman of the Land Commission is reported as saying that he can only work within a framework of legislation. Of course, that is correct. As the noble and learned Lord the Lord Chancellor is present, I could refer to some of his words, when moving the Second Reading of the Land Commission Bill he said: For too long the property speculators have bled white those of our people who wanted a home to live in.—[OFFICIAL REPORT, 14/11/68, col. 1088.] I think that one could now adapt the phrase "bled white" to this tax. I believe it is time that the Government took action. Enough has been seen of the way the tax works in smaller cases.

I turn briefly to the second half of my Question. The House will recall that besides administering the levy tax, the Commission have two other prime duties: to see that the right land is made available at the right time and that the cost of land for essential purposes is reduced. Some of us who have had dealings with the Land Commission realise that they work under difficult conditions and I am afraid that they are going to work under more difficult conditions in the near future. The, live under a cloud of uncertainty—uncertainty as to their role as a land bank, uncertainty as to their relations with the local authorities, uncertainty as to their relationship to planning and uncertainty as to their future in the next Election.

We were told by the Minister of Planning in another place a fortnight ago that there are many myths surrounding the Land Commission. That was one of the few remarks in his long speech with which I found myself to be in complete harmony. One of these myths which I hope the noble Lord can clear up tonight is the precise instructions given to the Land Commission as to the jobs they are to perform. Are they, for instance, to tackle city centre redevelopments and the twilight areas? This, I think, must be an urgent priority. Or are they simply to take part in the rapid expansion of new residential development areas which the Minister of Housing has been calling for? If they are to tackle the city centre redevelopment, may I ask what areas they have under consideration at the present time?

Another myth of Land Commission policy, which many people consider almost sinister, is that they have suddenly begun to advertise in the national Press for 100-acre blocks of white land. One immediately asks: what is the purpose of this? Are they implying that they will be able to accelerate the planning consents for development use of land? In other words, are they receiving preferential treatment over individuals? So far as we know, they have no powers of planning and an application of theirs stands or falls alongside any other application. Here the implication seems to fall in this way. The Commission, in their wisdom, are intended to purchase what is known as ripe land. One assumes that that is land ripe for development. Suppose the planning authority turns down the application from the Commission. Of course, the Commission can then appeal, as a normal individual can, but the appeal is to the Minister to whom they are responsible. What happens then? Is political pressure going to interfere with sound town planning? Even if it does not, there is always a suspicion. And I should be grateful to learn from the noble Lord, when he answers, how many acres of white land the Commission have already purchased or are in process of acquiring and whether they have made any planning applications for this white land.

Perhaps the biggest myth of all is about the effect the Commission have been having on building-land prices. There is no doubt about it that at the time legislation was going through this House most of us were under the impression that the Government stated that the Commission would result in a reduction in building-land prices. I am sure that no one in this House, not even the noble Lord, Lord Kennet, needs to be told what in fact has happened. Land prices have risen, in some cases by 60 and even by 80 per cent. above 1967 levels. I should like to know what the Government put this down to. Is it, as I suspect, partly due to the levy and partly due to shortage of land available, or is there another reason? The effect of the increases in land prices has been yet one more difficulty for the housing programmes to cope with. The increasing cost of land, the increase in building costs and now an acute shortage of mortgage facilities, are the present ingredients of what must rapidly be becoming a pretty sickly housing programme. It seems to me that the Land Commission are doing precious little to assist. The term "myth" I believe describes the Land Commission very well. They seem at present to have a white mist surrounding their purposes and a black cloud surrounding the tax they impose. I hope that both of those can be cleared up to-night by the noble Lord, Lord Kennet.

6.40 p.m.


My Lords, I should like to congratulate the noble Earl on having asked these important questions and on having dealt with this matter in a relatively moderate manner. When one compares the language he used with the language used in another place, one must be grateful that the noble Earl has put forward the points he has made in a really practical way. I think he has gone a little wider than his Question, which deals with two specific matters. I propose to deal with the two specific points in the Question, and if my noble friend wants to deal with any extraneous matters he can do so.

The first point is that of the excessively burdensome amount of the levy in certain cases. The noble Earl was not suggesting, in any case, that the Commission were going outside the terms of the Act. His complaint was really about the Act itself. He made three points altogether, and I think his major point was that it would be an advantage if there was now a de minimis provision so as to exclude small claims. That, of course, is not a criticism of the administration; it is not even a criticism of the Act. It is something which has emerged as the result of two years' experience, and certainly I, for one, should be grateful if the Government were prepared to reconsider some form of a de minimis provision, provided that it could be done within the terms of the Act itself. I believe that the Government have taken powers to modify the levy in certain respects, and if it were possible to do this I should be grateful.

The noble Earl referred to a dozen cases of hardship. There may well be a dozen cases of hardship, and many more; but this does not mean that the levy is wrong. Cases of hardship occur when one receives an income tax demand or any other demand for payment to the Government. There are always these cases of hardship, and particularly when people are just outside the borderline. Cases of hardship will arise even if you have a de minimis provision, because there will always be people who are just outside the provision, and we could then well have the noble Earl coming along and saying that something ought to be done about those people.

The Act contains provision for a great many exemptions, and perhaps I may mention some of them. Housing associations, charities and statutory undertakers are exempt. But particularly, so far as individuals are concerned, any person who owned land before September 23, 1965, on which he proposed to build a single dwelling-house is exempt from the development charge. But it has to be for the owner's own occupation, or for the occupation of a wife or husband, a daughter or a son, including an illegitimate child or an adopted child, or a father or mother of the owner. That is a pretty wide range of exemptions. But you will always find somebody who acquired the land in October, 1965, and who is therefore outside this exemption.

I do not see how the Government can deal with a case of that kind. As I say, there will always be borderline cases which noble Lords can represent as hardship cases which ought to be dealt with. I shall leave my noble friend to deal with the various suggestions which the noble Earl made for dealing with these hardships. However, as I say, I should be willing to support a de minimis provision if that were practicable, mostly on the grounds which the noble Earl put forward: that it would save a great deal of effort, and that the small sums are not worth collecting. I think he made that his major point rather than the alleviation of hardship.

As a matter of fact, even today the Land Commission have the opportunity of mitigating hardship by accepting instalments. They can be small instalments, and they can be spread over a long period of time. These matters are entirely within the discretion of the Land Commission, and I understand that they exercise this discretion quite freely. But, of course, they cannot waive a charge: if a charge is payable, they have to enforce it. That is all I wish to say about hardship. Having looked at this matter quite objectively, I feel that there is rather a tendency to exaggerate the hardships. I do not say that hardship does not exist—no doubt there are cases of hardship—but I think it is really much more a matter of hard luck that people happen to fall just outside the limits laid down in the Act; and, as I have said, there will always be hardship so far as those who do not happen to come within the limits are concerned.

The noble Earl dealt also with the question of the cost of land. I quite agree with him that when the Bill was going through the House we all had the belief that somehow it would have the effect of reducing land costs, and that, generally speaking, land costs have risen. I would, however, make the point that the Commission themselves are not liable for the levy. They are able to acquire land at 40 per cent. below the cost that other people would have to pay. They can, and do, exercise that advantage in disposing of land to developers at a cost which is lower than the market price. But one has to face the fact that land to-day is being dealt with at the market price. Like everything else, it conforms to the law of supply and demand, and the demand is much greater than the supply, with the normal results.

One reason for this is that not enough land is being released by the local authorities for development. Local authorities, generally speaking (and I have had a good deal of experience of local authorities, even recently), have an unfortunate tendency to say "No" rather than "Yes" to an application for development. Sometimes they can be forced by persistence to give way; but the trend, wherever possible, is to refuse permission to develop. No doubt they have their reasons. I am bound to say that the Minister himself far too often supports the local authorities on appeal; seldom does he go against a local authority, even in cases where one might think that land could quite properly be released. While the Minister is constantly saying that land should be released for development, his actions are quite contrary to this; and when it comes to an appeal against the decision of the local authority, generally his decision is in support of the local authority.

I would submit that if more land could be released and made available for development, this would have the normal effect—and this we find in all cases where the supply is increased to meet the demand—of reducing the cost of land. To-day we know that developers are so eager to get on with development that they are prepared to pay very high prices for land—an action which is not justified—with the inevitable result that dwellings and other buildings are much too costly. Furthermore, the Land Commission have not yet full authority to acquire all the land they would like to acquire. Their powers at the present time, during the first stage of the operation of the Act, are somewhat restricted. When we come to the second stage, which the Minister can declare at any time he thinks right, the Land Commission will have much greater freedom to acquire land. They will be able to acquire land of a category, perhaps in advance of requirement, and have it readily available for developments, and to acquire land on a much bigger scale. That will again have the effect of reducing the tension, making more land available and, consequently, of reducing the cost.

I should like to express my gratitude to the noble Earl for giving us the opportunity to have this preliminary discussion on the workings of the Land Development Act. I should like us to have at some stage during this Session a full-scale debate on the whole question. There have been suggestions that the Land Commission might be abolished. I should like to have this matter freely discussed. I believe that this House is essentially the kind of place where we can have this question debated without prejudice on either side, with a view to obtaining what is the wise and correct decision. There are other matters, such as those on which the noble Earl has briefly touched, outside his Question which one would like to discuss at greater length. I hope that that will be possible. Perhaps the noble Earl himself will put down a Motion on this subject for debate on a day when we can have a full day's discussion on it. I am sure that it would be well worth while. In the meantime, I am afraid that my own support for the point of this Question is somewhat limited. I feel that it might be possible to have a de minimis provision, but I doubt whether it would be very helpful for the kind of people he is referring to. Apart from that, I am afraid that I cannot give it very much support.

6.33 p.m.


My Lords, I do not want to say much about the hardship side of this particular question because I think that that has been dealt with fairly completely by the noble Earl, Lord Kinnoull, and by the noble Lord, Lord Silkin. But I should like to say a few words on the second part of the Question, which is the matter of making development land cheaper. I have always belonged to that school of thought which felt that this was a very doubtful proposition in any event. It is possible to make something cheaper by increasing the quantity of it, and thus reducing the cost, but in the prevailing circumstances of land in this country that is not possible. All one can do, as the noble Lord, Lord Silkin, suggested, is to make planning authorities disgorge a little more land. Again, I am not really sure whether this is either necessary or desirable.

The noble Lord, I think, feels that demand is greater than supply. On the other hand, there is a considerable body of evidence—notably from the Chartered Land Societies Joint Committee—to suggest that the demand is no greater than the supply and that the system has in fact been working perfectly adequately. However, that is the only way of increasing the quantity of land: by causing the planning authorities to disgorge more. In this respect the Land Commission have failed. They have tried to make the planning authorities release more land for development, but have not succeeded.

I strongly deprecate any attempt on the part of a body such as the Land Commission to try to bring pressure of this sort to bear upon planning authorities. It is not the job of the Land Commission to get planning authorities to act in this way. As I say, I do not believe that we can make land of itself cheaper; one can only redistribute the cost. It is possible, as the noble Lord, Lord Silkin, has mentioned, to buy land at an artificially low, compulsory price and to sell it at an even lower price. This is a practice known as, "Robbing Peter to pay Paul". If it is felt that Peter is too rich and Paul is not quite rich enough, this is a perfectly reasonable course to take. But let us not kid ourselves that it is making land itself any cheaper; it is not. It is merely redistributing the cost of that land.

Even if the Land Commission were able to make land cheaper I myself doubt whether that would have very much effect on the cost of houses. I think that Dr. Denman has shown that in fact it has a marginal effect here and indeed that this was the basic fallacy which led to the Land Commission's being set up. But we are not talking about whether cheaper land makes houses cheaper, but about whether the Land Commission have succeeded in making land cheaper. It is clear from their own Report that they do not think they have, and that they also feel they are spending a great deal of money in not making land any cheaper.

There are indications that the Land Commission are going to try another tack. I refer here to the point to which the noble Earl has already drawn our attention: that is, the advertisements which have recently been appearing in the professional papers on behalf of the Land Commission. The Land Commission, as he told us, have been advertising to try to get owners of white land to sell it to the Commission, and they have said that they have a preference for 100-acre blocks. Why do they want land in 100-acre blocks? Why not, on the other hand, in small and scattered blocks; in blocks which have access problems; in blocks where, for reasons of this sort, planning permission might not be readily granted but where planning might be granted for a scheme which was a comprehensive whole and a phased operation? It seems to me that it is not the 100-acre blocks where the Land Commission could be useful. They could be useful, on the other hand, in scattered blocks which need to be dealt with as a comprehensive whole and where the Land Commission, by acting as an agent, would be performing some useful service. Similarly, in circumstances of this kind the land owner might feel he was glad to sell to the Land Commission. But I do not quite see why a land owner should want to sell to the Land Commission in 100-acre blocks of white land.

Again, this raises a question which we discussed on the Second Reading of the Bill—and I hope that at this point I have the ear of the noble Lord, Lord Kennet. I think that both the noble Viscount, Lord Gage, and myself asked the noble Lord what the proposals were for the Land Commission to manage those large areas of land which they were going to buy. The noble Lord said that this issue would never arise, because the Land Commission were not going to buy and hold on to white land; they were merely going to turn over land ready for development, and turn it over quick. That is what the noble Lord told me in the Second Reading debate, and it may at the time have been a perfectly sound assessment of what the Land Commission were proposing to do.

But the Land Commission are now proposing to do something else. As they are proposing to do something else I want to know the answers to the questions we put then. Will they manage the land with a staff of their own land agents; will they put the management of this white land out to firms in general practice, or will they lease back the land to the owner? The latter might be an attractive proposition to owners; the Land Commission are obviously anxious to be friends with owners, and they have indicated that they hope to be able to buy and sell land to the advantage of all parties, if they wish to do this we should like to know how they propose to do it and what are the implications to land owners if they accept the invitation of the Commission to sell land.

I think it might help if the Land Commission were themselves to be a little more forthcoming and to say exactly what their reasons for this form of advertisement are. Why do the Commission want to buy land by agreement which has no planning consent for development and, on the face of it, is unlikely to receive any consent for some years to come? The noble Earl made a suggestion which I hope is not the reason, and that is that they want to do this as they will find themselves in a better position to exert pressure on planning authorities to give planning permission on white land which at the moment is held in baulk by not having planning permission and for which, if it was owned by the Land Commission, the pressure would be such that the planning authorities might in fact give that permission. I hope that is not true, but it is part of what landowners want to know about what the Commission are aiming at, if they are to know whether the propositions being offered to them by the Land Commission are attractive ones.

For instance, how will the Commission go about deciding what white land to buy and what not to buy? If they do not get blocks of white land voluntarily as a result of their advertisement will they resort to compulsion in order to build up an estate of white land? Will the Commission give publicity to their decision so that neighbouring owners may know what material development may take place, and when, on land acquired by the Land Commission? I am not asking the noble Lord to answer these questions, because I know he cannot do so.


My Lords, I can.


My Lords, if he can, I am very surprised indeed, because some of these questions have in fact been put to the Land Commission and they are unwilling to answer any of them. The only question I can think of at this time that the Land Commission have answered specifically is whether they will make public the number of offers they have had and the total acreage and, if not, whether they will also keep that information private from Government Departments. The only answer they gave to that was that they could not give any undertaking, which is a rather negative kind of answer.

The position is that the Land Commission feel that they are falling down on their job—or I suspect that they feel this. They are trying a tack which they have not tried before, of persuading landowners to sell white land to them voluntarily. They want to create a state of affairs in which they have a friendly relationship with landowners in order that they may do this, and in order that they may buy and sell land, as they suggest, to the advantage of all parties. But if they are going to do this, if they are going to attract landowners to accept this invitation to sell white land, preferably in blocks of 100 acres, then they will have to answer some of these inquiries a little more readily, otherwise I cannot see landowners selling them the blocks of land which they require.

All that the Commission have said is that in connection with managing their affairs they will adopt normal commercial practices, as would any other prudent investor. In other words, the Land Commission are going into business as ordinary land speculators. I am not sure that I see anything wrong in that. A great many people said on Second Reading that if this was going to work at all it could only work by the Land Commission becoming speculators, buying white land and holding it either until it became ripe for development or until they could persuade the planning authorities to make it so. That is as it may be, but I do not think it will make land any cheaper.

6.45 p.m.


My Lords, I wish to touch upon only one rather narrow aspect of this subject. The question I wish to ask is what effect will the Land Commission's betterment levy have on the conversion grant scheme on which the Government have shown themselves to be extremely keen? It is a scheme whereby land owners are being urged to convert buildings which are not at present houses into houses, and large grants are to be held out as an inducement to these land owners to do these conversions to provide houses. The Government are clearly in earnest about it. May I just quote two sentences from last year's Housing White Paper. Under the heading "General policy" on page 2, it says: Local authorities must take the lead and drive the policy forward in each town and district. Each authority will need to make up its mind to secure results. So, my Lords, if this policy is pursued people will be offered grants, which I think are to be up to £1,000 a time, as inducements to convert buildings which are not at present houses into houses.

I have studied as best I can the booklet put out by the Ministry of Housing and Local Government called Betterment Levy: an Explanatory Memorandum. I would not call it exactly "a child's guide", but from understanding it as best I can it seems that in most of these cases, if not all, where a building which is not at present a house is converted into a house, betterment levy will be chargeable The question I wish to ask is this: at what stage, if any, is the applicant for a conversion grant going to be told that if he accepts it and does his conversion he will be caught for betterment levy? It will not, I think, be a very healthy state of affairs if large numbers of people accept grants of £1,000 and enter into conversion schemes, only to find that they are then caught for perhaps £1,200 a time for betterment levy. I do not know what the exact figures will be, of course, but what I suggest, in order that there will not be widespread disquiet about this matter, is that in every case where a local authority inform a developer that his application for a conversion grant is accepted they shall at the same time furnish him with a certificate which shall state the maximum amount which may be chargeable as betterment levy on that conversion, so that the developer will know exactly, from the outset, what his financial position is going to be as between receiving a generous grant of up to £1,000 on the one hand and being liable for betterment levy of I know not how much on the other hand.

I dare say I may be told by the Government this evening that all this can be discussed when the Housing Bill which is now before another place comes before us, but I hope that perhaps the Government's thoughts about this may be forthcoming this evening. After all, the Government wanted our thoughts about that present Housing Bill—that is why they published a White Paper about it last year—and therefore I hope that this matter will have been considered and that something may be said now, so that we shall be better prepared, when the Housing Bill comes before us, to deal with this rather narrow aspect of the betterment levy. Nevertheless, it is a very important one, in my submission, and one which, if it is not dealt with clearly and firmly, may cause a great deal of disquiet and annoyance as the conversion grant scheme develops.

6.50 p.m.


My Lords, may I take up as many of the questions as I can—so many questions have been raised, all of them useful, that I cannot be as short as I should wish to be. With regard to the question raised by the noble Earl, Lord Kinnoull, and my noble friend, Lord Silkin, of the de minimis provision, both noble Lords, I think, had forgotten that there is one in the Act. It is the famous 10 per cent. Development levy bites only on the development value. What is the development value? It is that which is not the existing use value. Existing use value is market value plus 10 per cent.

Lord Kinnoull asked about hardship cases and I think he mentioned the possibility of using Section 63 to alleviate individual hardship. The problem is that this power is not a power to give exemption in individual cases but is a general power if it becomes necessary to give exemption in any defined set of circumstances to a class of cases. The levy applies generally where development value is realised, and the Commission have no power, and Parliament gave them no power, to waive it because of the personal circumstances of the levy payer. While the working of the Act is under review it has to be accepted that it is not a personal tax—but a tax on realised development value, whoever realises it. If the operation of the levy reveals any general circumstances suggesting a change, the Government will consider them.

That is what happened over cases where the purchase had taken place in the interim period after the Land Commission White Paper. The Commission recommended changes in those circumstances and the Government have announced two rather far-ranging extra statutory concessions which will be put into legislation as soon as possible. These have dealt with the class of hardship cases arising from the famous absence of last transaction base value in the interim period. But where development value is realised in the ordinary case of a sale of land a profit has been made, so there is no question of exempting this profit from its due taxation in the form of this levy because of the personal circumstances of the levy payer. That is hard, but it is not unfamiliar in law.


My Lords, under Case "c" the property is not realised and therefore there is no profit in the hands of the vendor. I do not think the noble Lord covered that.


I hope and believe I am coming to that point. It is difficult to remember which is Case "c" and which Case "f". On the question of costs, there is an allowance for costs reasonably incurred in making any valuation or apportionment required in the levy calculation. Sales of land are now liable to levy on development value and to capital gains tax on increase in current use value. Conveyancing costs, as opposed to valuation costs, are allowed against capital gains tax. We did not make another allowance for conveyancing costs against land levy because this could have led to the same costs being allowed twice, and, in any case, there is the 10 per cent. upwards on the existing use value which I just mentioned, which not only is intended to be de minimis but also might be regarded as looking after the incidental costs not already allowed against the capital gains tax.

I was asked about the question of white land, and it is true, indeed, that in addition to acquiring land for early development—that is, land for which there is planning permission or for which the Commission can obtain planning permission—the Commission have decided, subject to the scope of their capital investment programme, to acquire for long-term holding areas of white land; that is, land not allocated for any particular use in a development plan. The success of this policy will depend on the Commission's ability to buy the land by agreement, since unless there is a planning permission for development the Commission's compulsory purchase powers are not available to them. I think this answers one of Lord Henley's major points. The Commission are thus seeking only to buy land offered to them or coming on to the market, and the Commission will exercise their own judgment as to the development potential in the land in the reasonably long term, say, seven to ten years. The Commission will not receive preferential treatement.

I come to the complaint of my noble friend, Lord Silkin, that the Minister does not uphold developers on appeal. It is absolutely impossible for me to answer that as a general charge. I should have to know what cases he had in mind. With regard to the question raised by Lord Airedale about conversion grants and improvement grants (I hope he will agree to my treating them together), the case he mentioned was of the conversion of something which is not a house into a house. That is a case which in circumstances set out in the Bill will attract levy because there is an increase in the development value and it is right that since that increase has been generated by the planning permission, and not by an act of the owner or developer, 40 per cent. of that increase should go to the community. What Lord Airedale was wrong about was in linking this matter to the Government's drive for conversion and improvement of urban property. I say urban property, but it could be anywhere. This drive is not for the conversion of barns or windmills or warehouses into dwellings; it is for the conversion of one large old Victorian house into two or more flats, and it is for the improvement of existing houses, many millions of which lack basic amenities up to decent modern standards. In those two cases, conversion of a dwelling into more than one dwelling and improvement of a dwelling to modern standards, no liability to levy arises.


If a developer gets a grant of £1,000 towards a conversion, will he not be told at the time that he will be liable for betterment levy? Will he be given an idea of how much the levy is going to be so that he may balance the £1,000 on the one hand against the levy on the other? He is entitled to know.


This is going to be a very small class of cases in the great improvement drive coming up. The conversion of your warehouse or mill is going to be very much a sideline, but I will go into it and write to the noble Lord. This is a welcome opportunity to correct a number of misconceptions which seem to be prevalent about this levy. They fall on opposite sides of the fence. One is that it is a tax designed only to tax the profits of the big land speculators with no application to the small man. The other opposite misconception is that it is an all pervasive levy on all transactions. I think I have made it clear that by means of the 10 per cent. de minimis provision it is not the latter. The levy means that anyone going in for land transactions or development of land must in future take into account the question of the levy and in making his calculations consider what his obligations will be just as he does in normal familiar taxation matters. He would in any case be needing professional advice when it is a question of transferring land, and it would be convenient to seek advice on the levy aspect at the same time. This is what people do, and what people should do.

It is of course a principle of the levy that it is not charged twice on the same increase in development value. The Act provides that the price paid for the land on a previous transaction can be used as a deduction in the assessment of levy, the so-called Schedule 5 base. This ensures that in the great majority of cases where a person buys land for the purpose of building a house for himself and pays the full market price for the land, he will have little or no levy to pay. The liability for levy normally arises only if he has paid a low price for the land, or has received it as a gift—as in some of the cases which have recently been given publicity. In these cases, despite appearances and the fact that the levy seems to have come as a surprise, because no money has in fact changed hands on the transfer of the land, and the levy is then asked for as a lump sum, the levy payer has to reflect that he is, in spite of everything, better off than if he had bought the land at the normal price. If he had paid the full market value for the land he would have paid the whole of the net development value in the price, and the vendor would be liable for levy. If he receives the land as a gift, he pays 40 per cent. of the net development value, and nothing else. This is a case which has given rise to a certain amount of Press comment recently.

I should also say a word about the cases where the land was bought, during the interim period. This was the matter to which I referred earlier. Some of the cases which have been brought to the notice of my right honourable friend are those where the person called on to pay levy has sold his house and garden. In the average case of such a sale any profit made is in current use, and no question of development value, or, therefore, of development levy, arises. It is only if there is land adjoining the house—perhaps part of the garden—and this land possesses development value, that the question of levy arises.

We have heard of poor people and old-age pensioners, and of young couples with families, who thought they had made a good lump sum with which to pay for improvements on their house, or even for another house. I have already mentioned the exemption through the capital gains machinery for such a person to be exempt from tax on any profit on the sale of his house for continued use as a house, but this does not, of course, cover the sale of a garden, or part of a garden, on which planning permission has arisen and which therefore obtains development value and attracts levy. I am afraid that in the case of such a family, whether their means be small or great, there is an accrual of development value which is in no way due to the work or to the enterprise of that person. It is due to a decision by the community in giving planning permission, and it is as right in the case of a small man that he should pay 40 per cent. of the windfall as it is in the case of the large one.

I have spoken in general terms because I think, and I believe the House will agree, that it is undesirable to debate in detail the private financial affairs of individuals, and no noble Lord has sought to do so. To sum up this matter of the levy, I think the long and the short of it is that it surprises people; it hurts people; it gives rise to Press comment, much of it grossly politically slanted and unjustified, but not all of it. This cannot be avoided when Parliament imposes a new tax. It happened when income tax was first imposed; it happened when purchase tax was first imposed. When any new charge is first placed on the people it surprises them until they get used to it. One may have the greatest possible sympathy with those who are surprised. The Government must, and do, do all they can to inform people of the way the levy works, but I believe that in time, if this levy continues (and I note that the Opposition have no proposals to withdraw it), people will become as used to it as they have become to income tax, and it will just become part of the surrounding which is accepted as a basic act of social justice.

My Lords, I have not much more to say. I remember that on the Second Reading of the Bill which has become the Land Commission Act your Lordships showed nervousness that the compulsory powers provided in the Act would be irresponsibly used. But I think that any disappointment this House may feel at the extensive purchases by which the Commission can influence the price of land by bringing more on to the market must be tempered by the feeling that the Commission have not taken advantage of their powers by taking land indiscriminately, and I do not believe that they will do so.

More generally, on the price of land, the charge that the Land Commission have themselves caused the price of land to increase is, of course, totally unsustainable and is not supported by any evidence known to me. Because of the variability of land price it is not possible to estimate trends in such a short period as the Land Commission have been in operation, and even if it were possible to estimate trends in general over that short period it would be quite impossible to quantify the effect of the Land Commission's own operations on those trends. They have been small as yet, as the House knows. What can be said is that the average annual increase in the price of private house-building land in England and Wales has been far lower from the end of 1964 to the middle of 1968 than it was in the early '60s. The average price of public sector housing land showed a national increase from 1961 to 1966, since when it was fairly stable until the middle of 1968, the last date up to which it has been possible to assess it.

Of course, there will always be individual cases where a high and increased price is paid for land, and these are the ones which hit the Press. But it is quite wrong to base on these cases a general charge that land prices are showing a general substantial increase. In fact, as I have said, it was in the early '60s—when the Party of noble Lords opposite were in power—that land prices rose so substantially. The job of the Land Commission is to make land available for development while working within the planning system, so as to meet the danger that scarcity of land for development will otherwise lead to rises in price. The Opposition have not, that I have heard, any suggestion to offer as to how they can meet this risk better than the Land Commission are doing.


My Lords, I wonder whether the noble Lord could answer one question which I asked him. In another place the Minister undertook to look into all these cases of hardship, and the question I asked was: how many has he looked into, and what has been the result?


My Lords, I regret that I am not in a position to tell the noble Earl exactly how many cases have been looked into by the Minister, and how many not. It is only the duty, and indeed the natural impulse, of the Land Commission to look into them first, and I should expect the Land Commission to formulate the first recommendations for any changes which may be necessary in procedure and submit them to the Minister. The Minister, of course, keeps a watching brief on all that is going on.