§ The Earl of KINNOULLMy Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
§ The Question was as follows:
§ To ask Her Majesty's Government what benefits to the community arise when development land tax falls on the development of a railway station.
§ The SOLICITOR-GENERAL for SCOTLAND (Lord McCluskey)My Lords, it is necessary to have regard to the purpose of the development. If British Rail develop their property for their own operational use, and, by doing so, realise development value, the liability to pay development land tax does not arise on the occasion of the development but is deferred; and the tax will not be payable unless and until the developed land is disposed of. If, however, British Rail develop their property for some other purpose, tax will be payable on any development value realised on the same basis as for other property developers. The tax enables the whole community to share in development values.
§ The Earl of KINNOULLMy Lords, I thank the noble and learned Lord for that reply. Will he agree that where a major redevelopment occurs at, say, an old railway station there are two types of development? There is the operational development and there is the commercial development. Can the noble and learned Lord say whether in that case the operational cost will be set off against the possible development land tax liability, as this is an issue which I think is taxing the Railways Board at the present time?
§ Lord McCLUSKEYMy Lords, the noble Earl is referring the House to the question of what is called mixed development, where development takes the form partly, of reconstructing a railway station, and partly, for example, of erecting an office block for commercial letting. In that case, only the development land tax attributable to the construction of the new station can be deferred. Of course, having regard to the terms of Section 23 of the Development Land Tax Act 1976, and other relevant sections, it would not be possible, as I read the Statute, to use the profits made upon the non-operational development, if I may so describe it, to finance the operational development.
§ The Earl of KINNOULLMy Lords, is this not a great shame, because the Railway Property Board produces something like £40 million profit a year for the railways, and indeed for the passengers? Is it not a great shame to be taxing a body such as the Railways Board on this so-called commercial development, when it is related to an operational development? Would the Government consider exempting the Railways Board completely?
§ Lord McCLUSKEYMy Lords, I would not agree with the noble Earl that it is a great shame, and I say that for this reason. It is not simply British Rail with which we are concerned. We are concerned with a vast number of statutory undertakers, including, for example, the BBC, the Post Office, the United Kingdom Atomic Energy Authority, regional water boards and so on. If one is to make an exception for British Rail, one should make the same exception for all the nationalised undertakings. I think that that could lead to a very unfortunate distortion of the market in land, because it would simply mean that any of these statutory undertakers, who happened to be big landowners and wanted their land to be developed, could compete on quite unequal terms with private landowners who would not be entitled to this exemption. So that, accordingly, I think it would lead to a distortion, if one looks at the purposes to which the tax-free profits would then be put.
§ The Earl of KINNOULLMy Lords, does the noble and learned Lord think that the distortion is a little less, when he considers that the Railways Board make 1079 considerable losses in a year, while the other statutory bodies which he mentioned do not?
§ Lord McCLUSKEYMy Lords, I do not think that the principle can take exception, simply because at this time British Rail happens to make a certain loss. One of the other bodies which I might mention is the British Steel Corporation.
§ Lord HARMAR-NICHOLLSMy Lords, would the noble and learned Lord agree that the distortion would also be removed if the development land tax was modified or removed altogether, since it is recognised that it is an obstacle in the way of getting development of such things as housing, at a time when housing is badly wanted?
§ Lord McCLUSKEYMy Lords, the Government published in September 1974 a White Paper called Land. In October 1974 the Government were returned to office. On the basis of that White Paper, they brought to this House and the other place two Acts, the Community Land Act and the Development Land Tax Act. They were both passed and we have no intention of seeking their repeal.
§ Lord SANDYSMy Lords, while recognising that this is a very technical Question, and the noble and learned Lord's first reply led us into difficult paths, can the Government say whether they agree that the Railway Property Board is in a special case, because it is a very large holder of derelict and other land? Secondly, can the Government give us an approximate figure of accruals of liability to development land tax?
§ Lord McCLUSKEYMy Lords, I could not without notice give that figure. If the noble Lord wants to have it, and if it is available, then perhaps he could write to me or put down a Question for Written Answer and I will try to provide an Answer. I do not think, when we look at the vast number of statutory undertakers to be found in the Development Land Tax Act or the Community Land Act, that the case of British Rail is so very special. There are, of course, differences of degree and I accept that the Railway Property Board holds large 1080 quantities of land. But I think that it is a difference of degree, rather than of kind.
§ Lord SHINWELLMy Lords, has the Railways Board made any demand of this kind for a reduction in development land tax? Also, if there was a reduction of development land tax, would it mean any reduction in rail fares or that the trains would always be up to time?
§ Lord McCLUSKEYMy Lords, discussions are going on between British Rail and the Board about particular cases, and I do not think it would be right for me to comment upon the particular cases. As to the effect upon rail fares, plainly, if the income of British Rail were to be enlarged by profits from the realisation of development land free of taxation, no doubt that would help British Rail's finances, but I could not predict the effect upon fares.
§ Lord GISBOROUGHMy Lords, while I would support the noble and learned Lord in saying that the railways should not be exempted, may I ask whether he will take the point that, because of this tax, development is done according to tax considerations, and therefore is not done by planning for supply and demand, which is a very much healthier state of affairs?
§ Lord McCLUSKEYMy Lords, I do not propose to re-enter the arguments about the Act of 1976. What the noble Lord is doing is attacking the whole principle contained in the two Acts which I have mentioned, and I do not think that this is an appropriate occasion to re-enter that argument.