PROPERTY SPECULATION (Hansard, 20 December 1973)

§ LORD O'HAGAN
My Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.

§ THE PARLIAMENTARY UNDERSECRETARY of STATE, DEPARTMENT OF THE ENVIRONMENT (BARONESS YOUNG)
My Lords, the profits from speculation in land are taxed as income under the existing law. In addition, my right honourable friend the Chancellor of the Exchequer announced on Monday that the Government proposed to introduce legislation in the 1974 Finance Bill to alter the basis on which tax is charged on substantial windfall capital gains that arise on the disposal of land or buildings with development value or potential. It will also provide for tax on capital gains to be charged on the occasion on which a building (other than one used for residential purposes) is 460 first let following material development. The measures will ensure that up to 75 per cent. of the gains from land development will accrue to the community. The Government are also considering a surcharge on the rating or empty office blocks in the context of the Local Government Bill which is now being considered in another place and which will come before the House shortly.

§ LORD O'HAGAN
My Lords, I thank the noble Baroness for that comprehensive Answer. May I ask her whether any of the measures that she has explained cover unrealised capital gains? Will they affect those companies or individuals who use buildings which are kept empty for a long time as a way of securing bank loans to acquire more buildings, which again may be kept empty for a long time, and so on?

§ BARONESS YOUNG
My Lords, the answer to the noble Lord is, Yes. This is a complex matter, but if I may put it in terms which I understand, the proposals of the Chancellor of the Exchequer mean in effect that there will be a tax on the difference between the value of the office block when built and its value on first letting if it was to be sold. Therefore the tax will arise on the length of time in which the block has been left empty.

§ LORD O'HAGAN
My Lords, may I ask the noble Baroness to answer my specific question, which was whether any of these measures tackle the problem before there was any letting or disposal?

§ BARONESS YOUNG
My Lords, yes, because this will come into effect from the date of the speech. It will be put into effect in the Finance Bill, but will be effective from December 18.

§ LORD WADE
My Lords, may I ask the noble Baroness whether the weakness of these proposals, like so many others in the past, is that they encourage owners of properties to hold on to them, to make no disposition either of selling or letting, and to pay no tax and just watch the values rise? Surely that is the kind of social injustice that the public feel concerned about.

§ BARONESS YOUNG
My Lords, I entirely agree with the noble Lord. My right 461 honourable friends the Chancellor of the Exchequer and the Secretary of State for the Environment are very concerned about this point, and this particular measure is designed to deal precisely with those cases.

§ LORD SHINWELL
My Lords, may I ask the noble Baroness whether she noted that immediately after the Chancellor's announcement about additional tax on property developers the shares in property companies rose on the Stock Exchange? Did that indicate that they were very much worried about the announcement?

§ BARONESS YOUNG
My Lords, if the shares rose it might well be in connection with the entire series of proposals rather than the particular proposals affecting property companies.

§ LORD TAYLOR OF MANSFIELD
My Lords, in the light of the complicated details to which the noble Baroness has referred, and the time factor, would she not agree that the global amount mentioned by the Chancellor of the Exchequer in another place is £80 million? In the light of the enormous fortunes that have been made, would she not regard that as mere "chicken feed"?

§ BARONESS YOUNG
No, my Lords, for two reasons. The measures will involve for individuals an increase in tax liability from, at present, 30 per cent. up to as much as 75 per cent., which is two and a half times as much. It is obviously difficult to estimate the yield from proposals of this sort, but some noble Lords may have seen the suggestion in yesterday's Financial Times that two developments in the City of London alone could account for well over half the figure of £80 million I think it would be a mistake to underestimate the effect of these proposals.

§ BARONESS STOCKS
My Lords, has any attempt been made to calculate how many hundreds of thousands of pounds would have been saved for the ratepayers of Camden had Centre Point been 100 per cent. rated instead of 50 per cent.? Would it not therefore be desirable to have full rating of all empty properties?

§ BARONESS YOUNG
My Lords, I have not the answer to that specific question as to the amount of loss in rates suggested by the noble Baroness, but I would suggest to her that the whole question of the rating of empty properties will be a matter which may be discussed by your Lordships' House under the Local Government Finance Bill.