(1) Where any property consisting of land with a building thereon or an interest in such land is included in a clearance area declared by a local authority under section one of the Housing Act, 1930, and the building is demolished or purchased compulsorily by order of the local authority for the purposes of the clearance area within five years after estate duty or succession duty (in this section referred to as "death duty") became payable in respect of the property the Commissioners of Inland Revenue shall on the application of the administrators of the estate of which the property formed part repay to the administrators the amount of the excess payment of death duty on the property calculated on the following basis:—
Provided that no application under this section shall be considered by the Commissioners in any case where the property has been sold within the said five years or unless the building in respect of which the application is made was maintained in reasonably good repair until the date of the declaration of the clearance area.
(2) All sums paid under this section to the administrators of the estate shall be accounted for and paid by them to the persons entitled to the property in respect of which the death duty was paid according to their several interests therein.—[Mr. Hannon.]
I beg to move, "That the Clause be read a Second time."
This Clause, which stands on the Paper in my name and the names of some of my hon. Friends, embodies proposals with reference to relief of property owners in this country, which, I hope, the Financial Secretary will see have real substance. The Clause aims at the repayment of Estate Duty on property included in a clearance area. Members of the Committee are familiar with many cases throughout the country of great hardship on owners of property subject to clearance by having assessment of Estate Duty on an Inland Revenue basis of which they have no possibility of realising, as they only receive a nominal sum for site value, of property under clearance orders. It is the fact that estates are liable for payment of Estate Duty when followed by a condemnation of the property for clearance purposes. The Estate Duty having been assessed, and a subsequent clearance order having been made, it means that the owners have practically no relief at all from the burden of payment of Estate Duty.
There are two valuations in the case of property in this country. One is the Inland Revenue valuation for the purpose of Estate Duty, and the other is a valuation for site value for clearance purposes under the Housing Acts. This Clause is designed to give relief on payment of the Death Duties under those valuations. It endeavours to provide a remedy where, for instance, you have freehold property ordered to be demolished. The Clause provides for the repayment of Estate Duty on the difference between Estate Duty paid on the property and the amount which would have been payable if the land had been cleared of buildings. It is obviously a measure of justice, and I am sure that the Committee will see the propriety of having some provision of this kind embodied in the Finance Bill. Again, where leasehold property has been ordered to be demolished, the Clause provides for the repayment of Estate Duty which has been paid on the house alone, and, further, in the case of compulsory purchase, the estate should be allowed to recover the difference between the amount of Estate Duty actually paid and the amount which would have been paid if the valuation had been at a compulsory purchase figure. In the judgment of those who have prepared it and of Members of this House who are giving close attention to many of the grievances from which property owners now suffer under clearance schemes, the Clause is regarded as a reasonable one to be embodied in the Finance Bill.
There are several safeguards which are embodied in the Clause. There is a five years' period during which a claim can be made by the administrators from and after the date on which the Estate Duty or Succession Duty have become payable in respect of the property, and the date of the condemnation of the property for clearance. If the property has changed hands within five years of the date on which the Estate Duty or Succession Duty became payable, then no application for easement will be entertained. Further, there is a provision in the Clause that property must be kept in reasonably good condition. Sometime ago the Minister of Health received a deputation which I had the honour of introducing to him, dealing with the very complex and embarrassing question of slum clearance in many of our industrial areas, and he was kind enough to say that cases of hardship would be taken into individual consideration so far as the provisions of the Housing Act would admit. In this particular case, we are pleading with the Financial Secretary to the Treasury not to impose in the Finance Bill a grave hardship on property owners when they become subject to a clearance order, but to accept the new Clause.
I rise to support the Clause because of a case that arose in Leeds, which was generally felt to create a real hardship. The case was a simple one. The Inland Revenue valued certain property at about £2,500 and Death Duties were paid on that valuation. Within about 10 days of the payment of the Death Duties on that valuation the property was included in a clearance area, and the value in those circumstances was estimated to be about £600. I am not criticising the valuation made under the clearance scheme, but I am citing the case as a typical example of what we desire to meet. The new Clause merely lays down the principle that where the Inland Revenue values property for the purposes of taxation at a certain figure and then a short time afterwards the property is taken for public purposes at a very much less valuation, the person who has paid Death Duty on the higher valuation may reasonably claim an equivalent refund of Death Duty so as to bring the two valuations—the valuation of the Inland Revenue for the purpose of Death Duty and the valuation for the purpose of clearance—into harmony. This is so simple a principle and so obviously a matter of justice that I am sure it will appeal to the warm heart of the Chancellor of the Exchequer.
I think there is a very important difference between paragraph (a) and paragraph (b) of the proposed Clause. I think there is a strong case for consideration in regard to the question of compulsory purchase of land where it is required for public purposes. As a rule, a very full and generous allowance is made in such cases. Paragraph (a) comes under an entirely different category. I was connected for many years with the housing authority of London—I am no longer a member of it—and year in and year out we had the problem of slum clearance before us. Whenever land was required for slum clearance we had tragic tales about widows and orphans and about the poor person who was in- terested in the property, and we were told how hard, cruel and unreasonable we were in our treatment of these people. I would remind the Committee that the procedure may be complex, but on the whole it is in the interests of the owner of property.
A very careful inquiry is made by the representative of the Ministry of Health before land can be included in a slum clearance area; in other words, before it can be marked red. Not only has the evidence of a medical officer of health to be produced, but every opportunity is given to the owners of the property to prove that the land and the houses thereon may be regarded as fit for human habitation. I admit that there may be exceptions where hardship is done, but in the great majority of cases the revenue has been enjoyed by the owner of the property from most undesirable property. There are often cases where nobody would really feel sorry for the property owner if he lost his property, because the property is very bad. The same argument applies to the person who sells bad food or any article that is unfit for human consumption.
On a point of Order. Is the hon. Baronet's argument relevant to the Clause. We are dealing in this Clause with two valuations, and we are asking that a measure of justice should be meted out. The hon. Baronet is now speaking of the clearance of slum property in London.
I can assure the hon. Baronet that I am making a very good case, and if he will listen to me, I think I can convert him. If there were an owner of property in his area and his constituents had been living for years in undesirable property owned by that person, and if that property had been spread- ing disease in his district, I am sure that he would not suggest that the owner of the property should get the commercial value and not the slum value, as the law provides. It is suggested by the Mover of the Clause that when the real value of the property has been ascertained as a result of a public inquiry and that value has been arrived at by the depreciation caused by the existence of slums, the owner of the property should be given the difference between the slum property value and the artificial value from the commercial point of view.
The property owner has been enjoying revenue from the slum property for years. If he had been looking after his property in a proper way and seeing that good property was there instead of slum property, he would not have been enjoying exceptional revenue out of it. That is the essential point.
Estate Duty is not paid on what a man has received in his life-time, but on what the possibilities are of money being received by the person to whom the estate is to come.
Estate Duty is paid on the value of the property. Slum property brings in very considerable revenue, rents have been paid and a certain value has been given to the property by the fact that the site has been covered with slum property. It is valued on that basis. When it comes to the inheritor who has to pay Estate Duty it is not unreasonable, if it is proved to the satisfaction of an impartial tribunal that that value was given to it because of its slum value, that it should be valued on any other basis. We want to make ownership of slum property a crime.
Every Member of the Committee knows what slum property is Surely no one will suggest that after a property has been valued on the basis of the rents it has brought in for years that afterwards, because it has been con demned, a lower valuation should be taken. If there is one concession the Financial Secretary is going to make I hope it is not in the interest of slum values.
I hope that the Chancellor of the Exchequer is not going to give way to the demands of hon. Members behind him. When hon. Members raise questions of this kind we are at once suspicious as to what they are after. The hon. Member for South-West Bethnal Green (Sir P. Harris) has been told that he has not grasped what this is all about; perhaps the same will be said of hon. Members on these benches. I noticed that the hon. Member who moved the Amendment was so careful of the terms he used that he practically read the bulk of his explanation of the new Clause. The point made by the hon. Member for South-West Bethnal Green is quite a good one. The people concerned have been getting the benefit of this slum property for years, and all we are asking now is that when it is revalued as a result of clearance there should be a revaluation for the purposes of Death Duty. People who own this kind of property have been getting the benefit all these years while the people who ought to have our sympathy are those who have had to live in it. I hope the Government will not yield on this matter. It is not only a question of financial justice, it is a matter of social justice to the people who have had to live in these slums for years, and the sooner we get rid of them the better.
The hon. Member for South-West Bethnal Green (Sir P. Harris) has an inaccurate idea of the valuation for Death Duty. Land is not valued for Death Duty on what the owner has made out of it in the past, the basis of the valuation is what the land would fetch in the open market, and as slum property is fetching very small sums in the open market now because of the knowledge of these various schemes of the Government, slum property is more likely to be valued low than high. There may have been a number of cases where the valuation has been very high, far higher than the property turned out to be worth, but it is harsh on a man when the Government values it at £1,000 and his successor pays Death Duty on that amount, that in a short time the Government again should value the land and say, if it is leasehold it is nothing, if it is freehold it is £100. The successor has already paid Death Duty on the higher sum. The Government in both cases value the land, and it seems only common justice that the successor should not get the worst of it, both ways. I do not want to say anything which might be thought to be in favour of slum landlords, yet it is known that in slum areas there is a good deal of property which has been well kept. It gets into a clearance order, and site value is all that the owner can get. There is a strong case for the new Clause. As a simple matter of common justice the Government should not make two valuations in a short time.
It has been suggested that property owners have been fairly treated. I think this is an occasion when we should not consider any special category of property owners, or investment. I am looking at the matter and supporting the new Clause because I want to take a broader view. I can see the effect of the legislation in the 1930 Act and the operation of values for Estate Duty purposes, on property referred to as slum property, having a very detrimental effect on this class of property generally. Already one can see that investors are going away from this class of property. The effect of that will be that values generally will fall, whether it is slum property or property in a good sanitary condition. The effect of that ultimately must be that the Chancellor of the Exchequer will lose money on Death Duties. That is the reason why I want to take a much broader view. The new Clause, undoubtedly, is reasonable, and if the Chancellor of the Exchequer will take the broad view I suggest he will find in the end that Exchequer receipts will benefit.
Large sums of money have been invested in small property by building societies. I want to issue a note of warning to the Government, because, unless a check is put upon this attack coming from many angles against property, building societies must eventually suffer. You are shaking the foundations of a source of investment upon which the workers of this country have relied, and upon which they look as being more stable than any other form of investment, and I feel that the Chancellor of the Exchequer will be well advised not to listen to hon. Members opposite but to hon. Members behind him, and to remove from his mind any possibility of favouring either one side or the other, but to take a national view and think of the revenue of the future and the stability of real estate, upon which he relies for so much of his revenue.
There is one aspect that must strike everyone who has listened to this Debate, and that is that those on the other side of the Committee who support this Clause are concerned very much with the grievances and hardships of a certain class of property owners. I cannot believe for a moment that the grievance is a real one. After we have had a National Government for nearly three years, a Government composed very largely of property owners or people representing property owners, and indeed after we have had Government after Government composed largely of property owners, I cannot believe that there can be any single case of hardship or grievance of a property owner. Property owners have been well looked after by Conservative Governments. The hon. Member who spoke last did say something of what he thought about poor working people who had their money invested in the slums. In the old days when we tried to abolish slavery we heard pleas for the poor widow with two slaves. We have been told nothing to-day about the slums of Kensington or Paddington. I am very glad to see hon. Members for Kensington and Paddington present. They have special reasons to be present, seeing that in their areas are the worst slums in the whole of London, and perhaps in England.
That is no point of Order. The hon. Member for Central Leeds (Mr. Denman) surprised me very much. I think I am correct in saying that he represents an organisation which has a great interest in Paddington, which is a great owner of land in Paddington and upon whose land are some of the worst slums in London.
I did not mention the Ecclesiastical Commission. The hon. Member for Central Leeds ought to be trying to, get fines from those people instead of getting concessions for them. I feel confident that the Financial Secretary will resist this Clause. Only half-an-hour ago his Chief told us that he could not afford a concession to the poorest people of this country; he told us that £2,000,000 was far too much to concede. I am sure that on the same ground of financial urgency the right hon. Gentleman will oppose this Clause. If we cannot afford to give grants to the poorest of the people I am sure that the Chancellor of the Exchequer will find himself equally unable to give concessions to the slum landlords of London.
Lieut.-Colonel SANDEMAN ALLEN:
I would like to put forward cogent reasons for resisting this Clause. First of all I see nothing in the Clause to provide that further duty shall be paid to the Exchequer should there be an increase instead of a decrease in the value of the property concerned. If the property was the Lena Goldfields, for which the hon. Member for South Kensington (Sir W. Davison) has so often pleaded, and if within five years after death occurred there was a rise in the value of the property, are the people concerned to go to the Chancellor and say: "Here are more Death Duties which we feel we owe to you because our shares have risen?." The same thing applies to any kind of property. I see no reason why the Chancellor should accept the Clause because the value of property has depreciated instead of appreciated.
An impartial auditor of this Debate must have come to the conclusion that a great deal of sympathy is to be attached to the type of case for whom my hon. Friend the Member for Moseley (Mr. Hannon) pleaded so lucidly. The Clause bristles with technical flaws. If he would like me to examine the Clause with him in detail I will with pleasure do so, but perhaps the Committee will prefer me to leave that task and to deal only with the broader ground of principle. My hon. Friend proposes that where land with buildings on it has passed at death and has been charged Death Duties, a reduction of a portion of the duty shall be made if within six years—there is a technical reason for the six years—of the death the property is included in a clearance scheme and the local authority orders the building to be demolished, or the property is purchased compulsorily for the purpose of a clearance area. On the face of it that proposition sounds most attractive. But, as the hon. Member for Ecclesall (Sir S. Roberts) has pointed out, the value for purposes of Estate Duty is the market value of the property at the date of death. Once a breach is made in that principle the whole of the Estate Duty is in chaos—for many factors may intervene, such as a change in the value after the death, which may give rise to claims by the Revenue on the one hand or by the heir on the other—and one might as well abandon the Estate Duty altogether.
Therefore, we have to stand firm, in justice, as it may be in some cases to the taxpayer, and in justice to the Revenue in the other; we have to stand firm on that principle. Let us see how that principle falls within the terms of this Clause. There are only two cases to be considered. One is where the property is already the subject of a clearance scheme. Plainly that is taken into account for the purpose of valuation for Estate Duty, and no injustice is done. That is the case where the property is already within a scheme. The other case is where within the next six years by chance it comes within a scheme. During the whole of those six years the owner of the property has had it at his complete disposal. He might have sold it at any moment.
Precisely, and by that exclusion my hon. Friend recognises the fact that there has been a free opportunity for a disposition of the property. Under the proviso the purchaser is not to have the benefit of any compensation. Therefore, if the owner of the property happens to have disposed of it and the purchaser has made a bad bargain, there is no redress for the purchaser and no redress for anybody. The proviso further says—and this emphasises the difficulty—that there is to be no refund unless the property has been maintained, for the whole of the six years, in reasonably good repair. What method has the Inland Revenue at its disposal for looking back over a period of six years and checking as to whether a particular property has been kept in proper repair or not during that period? We have no adequate staff for that purpose and absolutely no method of fulfilling this proviso. If this Clause were accepted, we would be asked to establish some machinery of this kind which would be quite without our province, and if property had not been maintained in proper order and if the refund of duty were refused, we would be confronted with protests from every quarter and, no doubt, questions in the House of Commons.
In nothing that I have said do I wish to be interpreted as not appreciating the apparent injustice which is done here, but that is an injustice inherent in the Death Duties themselves, if it is to be described as an injustice at all. Once you establish the principle of Death Duties you cannot have regard to anything that happens after the date of death. It is significant that in the whole of this discussion only one instance has been given and that was the illustration brought by the hon. Member for Central Leeds (Mr. Denman). I am not acquainted with the case he mentioned, but I ask the Committee to observe his own words in regard to it, namely, that within 12 days of the payment of Death Duties the property was taken for public purposes. My hon. Friend said that a wrong had been done in that case, but it was within 12 days of the payment of the Death Duties and not within 12 days of the death that the property was taken for public purposes, and there was probably a very long delay between the death and the payment of the duties. Strongly as my hon. Friend has argued this case and strongly as it has been pleaded by other hon. Members, I think even those who have supported the new Clause realise that we must abide by the principle that valuation for the purposes of Death Duties must be as at the date of death and, in the circumstances, with great reluctance I must ask the Committee not to accept the new Clause.