Second Schedule. — (Amendments as to Ultimate Incidence of Contributions under Part I of the Principal Act.)

Orders of the Day — War Damage (Amendment) Bill. – in the House of Commons on 4th June 1942.

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Photo of Mr Frederick Bellenger Mr Frederick Bellenger , Bassetlaw

I beg to move in page 15, line 28, to leave out paragraphs 4, 5 and 6, and to insert: 4. Section twenty-five of the principal Act shall apply to all contributory properties irrespective of value or use.

Photo of Mr Herbert Williams Mr Herbert Williams , Croydon South

On a point of Order. May I ask whether it is proposed to take the general Debate on mortgagors and mortgagees on this Amendment?

Photo of Lieut-General Edward Fitzroy Lieut-General Edward Fitzroy , Daventry

I do not understand what the hon. Gentleman means by "the general Debate." What we are debating are the various Amendments which are called from time to time.

Photo of Mr Herbert Williams Mr Herbert Williams , Croydon South

Last night before Progress was reported I raised the question whether it might not be convenient to debate only one of these Amendments and, if it was desired to divide on any of them, to do so without further Debate.

Photo of Lieut-General Edward Fitzroy Lieut-General Edward Fitzroy , Daventry

I shall be only too ready to agree, 3 the Committee wish, to take the Amendments without discussion. We must debate this Amendment and see what happens.

Photo of Sir Kingsley Wood Sir Kingsley Wood , Woolwich West

I support the suggestion for one Debate, otherwise we shall be repeating many of the arguments on the various Amendments. That would not prevent anyone, if he wishes, pressing his Amendment to a Division. From my point of view it would be convenient to make one reply on all the matters at issue on these Amendments.

Photo of Mr Lewis Silkin Mr Lewis Silkin , Camberwell Peckham

I suggest that it would be to the general convenience of the Committee if we discussed these Amendments together. On the other hand, they raise separate points. The first Amendment, for instance, asks for 100 per cent., the next for 75 per cent. and another for 50 per cent. If we could discuss all these in one Debate, we could then have Divisions if necessary on any of the Amendments.

Photo of Mr Frederick Bellenger Mr Frederick Bellenger , Bassetlaw

Section 25, with which this Amendment deals, deals with the whole question of the passing-on of part of the War Damage Contribution, and the following Amendments also deal with the same subject.

Photo of Lieut-General Edward Fitzroy Lieut-General Edward Fitzroy , Daventry

There is no need for hon. Members to go on debating this question of Order. This is the first Amendment relating to this matter, and it is obviously a broad one. It must be left to the Chair to decide on the scope of the discussion. I have no desire to restrict the Debate unduly. The Chancellor has said that the arguments on this Amendment will apply to the other Amendments, and it may be that hon. Members will not want, and I hope they will not want, these arguments repeated.

Photo of Mr Frederick Bellenger Mr Frederick Bellenger , Bassetlaw

In moving this Amendment which stands in the name of my hon. Friend the Member for North Battersea (Mr. Douglas) I desire to say that to a large extent, or to a certain extent, the case has been dealt with on the Second Reading of this Bill and on the principal Act when that was under discussion. I have no doubt that most hon. Members are familiar with the arguments which Members in all parts of the Committee wish to put to the Chancellor, and we hope that we shall receive a different reply to that which was given on previous occasions. This is the most vital controversial principle in this Bill, and we desire that it should receive substantial consideration and that we should be given some improvement. Section 25 of the principal Act has admitted that in certain cases direct contributors, who may be and often are mortgagors, can pass on to the mortgagee a proportion of their War Damage Contribution. These isolated cases are those in which the mortgagor has one property on the mortgage deed which he acquired by borrowing money from a mortgagee, or which he converted and the money which went to the cost of that conversion was obtained by mortgage. That very limited class can pass on part of the War Damage Contribution. We say, therefore, that the principle of apportioning War Damage Contribution between the mortgagee and the mortgagor has been admitted in the principal Act, and we are asking for this principle to be extended to other classes.

The Committee may be aware, as the Chancellor certainly is, of an anomaly which arises under this Section 25 whereby the individual whom the Chancellor wished to protect, and has indeed protected, namely, the single householder who acquired his house by borrowing money, is prejudiced if he happens to have bought another property at the same time and more than one property was then included in the mortgage deed. Small properties are often put up in pairs as semi-detached houses. When the builder or his successor in title is asked to sell one of the houses he often says, "You must take the two if you want to buy the one." We then get the position,—a case has happened in my own constituency, and I put it to the Chancellor—that a man who wishes to buy one house to live in has at the same time to buy the semi-detached house next door, which is occupied by somebody else. If he borrows the money for the acquisition of those two houses and they are both included on the one deed, he is prohibited from passing on to the mortgagee any proportion of his War Damage Contribution. That is an anomaly which ought to be put right, whatever the Chancellor is going to say about the Amendment.

There is another anomaly to which I would draw attention before coming to the vital principle of the Amendment. Under this Section there is a limit even to the very small class of mortgagors who can pass on a proportion of their contribution. That limit arises upon the assessable value. In the case of any property over £150 assessable value even in that limited protected class the mortgagor cannot pass on a proportion of the War Damage Contribution, except in the case of agricultural property, where the figure is £500. I suggest that the Chancellor should remove the £150 limit altogether.

Now we come to the vital principle with which the Amendment deals. The argument was developed on Second Reading, and the Attorney-General replied to the Debate. As far as I understood his arguments, they were mainly these: You must not interfere with a transaction which has taken place in normal circumstances; in other words, you must not affect the sanctity of contract principle. The Attorney-General did not admit that this abnormal circumstance, damage by enemy air-raid action, should affect the mortgagee who has lent a fixed amount of capital for a fixed rate of interest and who expects nothing more and nothing less. Shylock himself asked for his pound of flesh and for nothing more and for nothing less, but the judge told him that he could not get his pound of flesh if at the same time he took some blood with it. I am suggesting seriously that what we are doing is to enthrone moneylending, currency, over money's worth, which means human effort, human endeavour and production, and I say that is a wrong principle on which to proceed.

With his other arguments the Attorney-General gave as an illustration that when the premises are insured against fire the mortgagee is not asked to bear the cost of the fire insurance premium. The mortgagor is expected to pay the fire insurance, so that if the house is burned down, the mortgagee will be protected and will be able to recover his capital. But the fire insurance covenant is a part of the mortgage deed; it was envisaged at the time the bond was settled, whereas the War Damage Contribution was never foreseen by either mortgagee or mortgagor. The Prime Minister has assured us that in these abnormal times the burden is not to lie where it falls but is to be spread equitably over the whole of the community. The mortgagee is a part of the community, and I am saying, and I hope that other hon. Members will support me, that the mortgagee is one of those persons to whom the Prime Minister referred when he said that the serious burden caused by enemy air-raid action should be spread over all classes in the country and not left as a burden upon one particular class.

I believe that in another place, the argument of the widow's mite was advanced; it was said that the widow who had only a small sum of money, which she had been advised to invest in a mortgage, would be heavily penalised. I am afraid that argument will not hold much water, because these widows who are so conveniently brought in to substantiate arguments against our case are relatively few in number and represent only a small amount of capital in relation to the capital value of mortgages in general; and, further, widows usually invest their money in the houses themselves and not in mortgages. We know that in this matter we are dealing with very powerful financial interests and that it is they that are behind the Chancellor in refusing our suggestion.

I do not want to go over the whole of the ground which I and other hon. Members traversed on the Second Reading. I have no doubt that many hon. Members will have a point of view to put which, while coinciding mainly with the point of view which I am now putting, will perhaps differ in some of the concrete examples. I want to put a particular point to the Chancellor of the Exchequer and the Attorney-General. If the mortgagor does not keep up his payments of interest, the mortgagee has the right to foreclose. Of course, he has to go to court for an order, but in certain circumstances he can foreclose and come into possession of the property, which had already been conveyed to him on a lease when the mortgage deed was entered into. The mortgagee then has to pay War Damage Contribution in order to protect his capital invested in the mortgage. In certain circumstances, the mortgagee will have to pay the War Damage Contribution or possibly lose his capital.

The mortgagee relies not only on the real property security but on the personal bond of the mortgagor. What is this personal bond worth to-day, in many cases? What was the personal bond worth before the War Damage Act was passed last year? There was no compulsory insurance. There may have been many voluntary insurance schemes, and if the mortgagor did not wish to enter into such a scheme, he did not need to do so. Therefore, the mortgagee, whose only interest was the real property itself, stood to lose the whole of his capital, if the premises in question were blitzed and the mortgagor was unable to implement his personal bond. The War Damage Act has protected not only the holders of real property but the financial interests behind them. Even if we are not prepared to admit that finance is a partner with the holders of equities in property, it has a very substantial fiduciary interest in making sure that the property—which means the capital—is fully covered, and therefore, we say it should bear the proper share of the War Damage Contribution.

Mortgagees held out inducements to mortgagors to borrow money in order that buildings should be put up for the very lowest rented class of tenants. The Housing Acts of 1933 and 1936 offered special inducements to local authorities which would persuade housing associations and housing trusts to put up hereditaments mainly for the working classes. Those associations, of which there are many in this country, did a good job of work by building houses at low rents. They are forbidden to increase those rents, in spite of the abnormal, circumstances, and are now being forced to bear a heavy contribution, running into many thousands of pounds and jeopardising their own solvency. There are many Amendments on the Order Paper dealing with those cases. I cannot imagine it is good policy for the Government to induce builders in whatever form, to put up houses for the working classes at low rents and then to throw on them a burden which they are not able to meet and which will, perhaps, force many of them, if the war lasts long enough, to go into bankruptcy. I cannot believe that that was the intention of the Government, and I hope that this argument alone will induce my right hon. Friend to see our point of view.

We are told that War Damage Contribution is a capital charge. That is all right in theory, but in practice many individuals, societies and companies are so mortgaged to-day that they cannot borrow any further capital. Indeed, if they wanted to, I am not at all sure that the Chancellor of the Exchequer would permit them to do so. I believe that he has given instructions to the banks to go very carefully in lending money for the acquisition of real estate. Money is now directed into the channels where the Chancellor wants it, namely, into war production. I know that building societies and banks have been prohibited from lending large sums of money for the acquisition of properties. Building has now almost ceased. War Damage Contribution has to be found out of income. It cannot be found out of capital. Rents have been controlled since the end of the last war, and rightly so. I am not advocating that rents should be put up in order to ease the burden of War Damage Contribution, but if rents are controlled, and then an unforeseen burden is thrown on those who receive them, there will be bankruptcy and insolvency far and wide. A very difficult position will be created. I do not know whether there is any way out of the position at the present moment, by the mortgagor passing on some of his burden, perhaps illegally. I do not think any have tried to do so yet, but facilities are given to the dishonest man to try and pass it on, even though he is prohibited from doing so by the Act.

I have given a few additional examples to those which I gave when I spoke on the Second Reading. I feel that there is support in all quarters of the House for the contention advanced in this Amendment. The mortgagee and house property business has now assumed such proportions, whether considered from the angle of the building societies, the property investment companies, housing trusts or banks, and there are millions of people who own some share of the home in which they live, even though it may be only a very small share. If you stop these people from being thrifty and from putting more of their savings into their homes, you attack the foundations of our present order and of the reconstructed order which we want to see after the war. I would reiterate something of what I said on the previous occasion. In the homes of the people is the soundest and solidest sheet anchor for good citizenship, and anything which attacks that solid principle of our national life will be dangerous for the State and for the community. Because I believe that, I have moved the Amendment.

Photo of Lieut-Colonel Sir Cuthbert Headlam Lieut-Colonel Sir Cuthbert Headlam , Newcastle upon Tyne North

I do not propose to detain the Committee for more than a few minutes, but I should like to do my utmost to induce the Chancellor to reconsider his decision on this question of the liability of the mortgagee. I gather that his present decision is based on his desire to preserve the sanctity of contract, and probably to maintain the idea that investment in mortgages is a sound form of investment which should be encouraged. I do not think that I or any sane man could fail to sympathise with him in this desire, but in the case of war damage it seems to me that this question of upsetting a contract does not arise. A new and exceptional condition has been created by the war, and the decision of the Government was to meet this new condition by exceptional measures. This measure amounts to a levy on capital, and that falls, of course, at any rate at first, upon holders of property and then upon the whole community. It weighs heaviest on small property owners and upon those who have invested their money in the ordinary shares of a property company. I do not fancy that people who are not associated with property companies realise what tremendous damage they have had to face as a result of the war. It is not only the fact that their property has been destroyed, but that as a result of the blitzing of towns it has been extraordinarily difficult to let what remains. Consequently, their incomes are enormously reduced, and this is the time when they are expected to pay—and naturally in their own interests it is right that they should have to pay—their contribution to the War Damage Fund.

It seems to me that it is quite impossible to deny the fact that all persons who lend money on property for other than a short term have a direct interest in the property, and this fact indeed is recognised, partially at any rate, in the Act of 1941. It seems to me, therefore, both illogical and unreasonable to bring into the scheme some long-term lenders and not others. I notice that the Chancellor, in his Second Reading speech, besides saying that he saw little difference between a mortgage and an ordinary debt, said that another reason which made him determine to maintain his attitude was that it was impracticable to draw up any simple formula for the mortgagee's contribution which could reasonably be applied to the various types of commercial mortgage, including floating charges, debenture capital and so forth. I appreciate that there may be some such difficulty, although I do not believe that any administrative difficulties are so great that they cannot be surmounted with a little good will. At the same time, there is a distinction between a long-term mortgage and a short one, and I should have thought that it might have been possible without any great difficulty to differentiate between the two. A lender lends his money on the security of the property, and in practice if the property is lost by enemy action or otherwise the lender will lose his money. The War Damage Act protects him against such loss caused by enemy action, and it seems to me only fair and just that mortgagees should come into the picture and take their share of the liability which is imposed upon the mortgagor. I do not propose to go any further into the matter to-day, because I know there are many other hon. Members who wish to speak. I do, however, associate myself very strongly with the speech just made by the hon. Member for Bassetlaw (Mr. Bellenger), and I hope that the Chancellor will see his way to come to the assistance of the mortgagor in this particular case.

Photo of Sir Frank Sanderson Sir Frank Sanderson , Ealing

I rise to oppose the principle which has been enunciated by my hon. Friend the Member for Bassetlaw (Mr. Bellenger). I did so on the Second Reading of the Bill, and today I do not propose to advance again the arguments which I then put forward. I rise because I am most anxious to put what I regard as a new view, and if that view is accepted by my hon. Friend, I am sure he would then see his way to withdraw his opposition to-day. In the early part of his speech he said that the Prime Minister had stated that the loss should be borne by the community as a whole. May I take the words of the Prime Minister? He promised that the damage suffered by enemy action would not be allowed to remain where it fell but would be borne by the whole community. Surely that is provided for in the Bill, which provides that after the first £200,000,000 of damage has been sustained the Government will be responsible for the second £200,000,000. Afterwards on any damage in excess of the £400,000,000 the Treasury will pay half the additional over and above that figure. I think that that puts the position in rather a different light, in view of the Prime Minister's statement, which in fact has been borne out by this Bill and by every action that my right hon. Friend the Chancellor of the Exchequer has taken during the course of the Debate.

There is another point that I might just mention in passing before I come to my main point. My hon. Friend stated that he knew that there were powerful financial interests behind this opposition. I am not here to say whether that be true or not, but I would like to say that, so far as I personally am concerned, I have no financial interest in it. I have never given a mortgage, nor have I ever taken one, and I have not been approached by any financial interest. I speak from a purely independent standpoint.

The point I wish to raise, and which I now come to, is this: In practice, it would not be possible to do what my hon. Friend desires. Indeed the very Amendment which is on the Paper in itself condemns what my hon. Friend has in view. The Clause to which I refer states: the expression 'mortgage' means any charge, lien, floating charge, debenture, debenture stock or like security on any property (including in that expression floating assets) for securing money or money's worth, other than a security, which can be discharged upon less than three months' notice". Take just one extract from the "Financial News," which I should say was supporting my hon. Friend's Amendment. I can take their own words to oppose it. This extract says: In the case of a property company, the contribution is in effect paid by the ordinary shareholder. The debenture holder goes free, although his interest in the property is real. Even if the Amendment were agreed to, he would still come off better than the ordinary shareholder. I maintain that you cannot really separate a mortgagee from a debenture holder. Therefore, for all practical purposes both come under the same category. A mortgagor is in the same position as an ordinary shareholder in a company. He owns the whole of the equity of the property or business. The mortgagee is in the same position as the debenture holder in a limited company. He holds a charge upon the whole of the properties of the company and usually also upon the floating assets. One might therefore argue—indeed, one should argue if my hon. Friend is right—that debenture holders in all limited liability companies should contribute towards the cost of war insurance in the same way.

In other words, the point I wish to make is that for all practical purposes a mortgage, whether it be a single mortgage on a property or whether it be a mortgage company that issues debentures and ordinary shares, both of these cases are parallel with the ordinary great industrial concerns that issues debentures which are secured upon the properties of the company. Indeed, if they had not the properties on which to secure the debenture no company would be able to issue a debenture. What takes place? The debenture holder secures his fixed rate of interest, nothing more. The ordinary shareholder holds the equity of the business. If the business is successful the ordinary shareholder comes off well. That applies equally to a mortgagor. On the other hand, if the business is unsuccessful, the ordinary shareholder derives no benefit upon his investment. That is parallel with the case of a company which owns property, whether a company owns property only or whether it owns property, plus machinery, plus business. So I maintain that no argument has been advanced which could really substantiate the argument which has been put forward, and for those reasons I oppose the Amendment which is before the Committee.

Photo of Mr David Gammans Mr David Gammans , Hornsey

I do not know that I can add very much to the arguments which have been put forward by my hon. Friend the Member for Bassetlaw (Mr. Bellenger) and my hon. and gallant Friend the member for North Newcastle (Sir C. Headlam). But I make no apology for bringing forward this question, because my feeling is that it is the one serious criticism against a Bill which is otherwise a very brave and courageous measure to meet the abnormal circumstances in which we find ourselves. I hope that I can impress the Chancellor with the strength of feeling which I think exists throughout the country on this one point. I have read the remarks of the Chancellor and the Attorney-General upon the Second Reading, and I gather that they both feel that the relationship between a mortgagee and a mortgagor is only that of an ordinary borrower and lender. My view, and I believe it is the view of many people throughout the country, is that in these abnormal circumstances the only real criterion which can be applied is this: Has the mortgagee any interest whatsoever in what happens to the property on which he has lent his money? If he has any interest, it is only equitable that he should bear a part of this contribution. May I put it in this way? Suppose this Act were taken off the Statute Book to-morrow morning. I wonder who would be on the Chancellor's doorstep first to ask for it to be re-enacted, the mortgagees or the mortgagors?

Supposing this Act were not on the Statute Book, would I be right in saying that in connection with the property which has been badly destroyed and upon which a mortgage exists at least 90 per cent. of the mortgagees would in fact lose every penny they have put into that property? In other words, I contend that the mortgagee is very definitely an interested party. I know that the argument has been used that he does not pay any of the fire insurance. That was dealt with very fully and, if I may say so, very ably, by the hon. Member for Bassetlaw, and I do not propose to refer to it. We also have another argument put forward, that if the mortgagees were called upon to bear some share of this contribution, it would give such a shock, as it were, to their nervous systems that property-owning businesses after the war would not be able to obtain money as they were able to do before the war.

Photo of Sir Frank Sanderson Sir Frank Sanderson , Ealing

Would my hon. and gallant Friend agree that a debenture holder in a public company would be in precisely the same position and that therefore if my right hon. Friend were to consent to my hon. Friend's suggestion he would also have to make it compulsory on debenture holders also to pay a contribution? If the mortgagee had to pay a contribution in regard to mortgages taken out in the future, the mortgagee would take this liability into consideration and ask an appropriate or equivalent increased rate of interest. In regard to existing mortgages, the mortgagee could, and in many instances would, call in the mortgage, or alternatively come to agreement with the mortgagor to increase the rate of interest to compensate him for the insurance to be paid.

Photo of Mr David Gammans Mr David Gammans , Hornsey

I think the position is exactly the same except that in one sense you may argue that the ordinary mortgagee may conceivably have some remedy in a personal covenant to recover his money, but a debenture holder has none. If the property is destroyed, he has no chance of recovering the money he has invested in that company. As I was remarking, we have had the argument that it would give this shock to the mortgagee interests, and therefore in the long run it would not be an advantage to property owners to pass on some part of this charge to the mortgagees. I fail to be impressed by that argument. It seems to me that it is an argument that you can use as a boomerang. In other words, if building and property owning generally is put at the grave disadvantage it appears to be at, you might find that people who would normally come forward after the war to put up houses will be just as disinclined to do so as we are told mortgagees will be to-day if they are called upon to bear some of this cost. In other words, my own opinion is, that taking the long view, the only sound thing, as well as the only equitable thing, to do is to spread the risk over as many people who are interested in the property as possible. May I deal with the point made by the hon. Member for Ealing (Sir F. Sanderson)? I understood that his point was that the proposers of this Amendment might be prepared to withdraw if the Treasury would provide the second £200,000,000.

Photo of Sir Frank Sanderson Sir Frank Sanderson , Ealing

That was not my point. The point I was endeavouring to make was that my hon. Friend who moved the Amendment thought that there was really no limit to the amount to which my right hon. Friend the Chancellor must be prepared to go to meet his case, if he was going to be equitable and just. Therefore, he may realise that he has no alternative but to withdraw his Amendment.

Photo of Mr David Gammans Mr David Gammans , Hornsey

I do not know whether the hon. Member for Bassetlaw (Mr. Bellenger) is impressed by that argument, but I confess that I am not impressed by it. If the contribution had been pound for pound from the beginning, I might be prepared to withdraw my Amendment; but I hope, at any rate, that we have not yet reached the first £200,000,000 worth of war damage from air raids. I was struck by the argument that this is an ordinary transaction between lender and borrower. If so, why make any exemption at all? Why make an exemption in respect of property of less value than £250 in cases where the money was specifically lent to build or to buy the house? Could anything be more unfair than an exemption granted on the question of purchase? I do not think it matters whether the money was lent to buy the house, to finance a business, or to spend at the races: the only question is, Has the mortgagee any interest in what has happened to it? I hope I have been able to impress the Chancellor with the strength of the feeling which exists throughout the country. He cannot have failed to notice that, both on the Second Reading and to-day, this point has been strongly urged from all parts of the House. I do not know whether there is any difficulty in collecting from the mortgagees. I cannot see that there is. It will simply be the case that the mortgage interest is subject to a deduction of 2s. in the £. I do not press the actual words of the Amendment in my name; if the Chancellor appreciates the principle upon which I and others feel so strongly, he may be able to meet this very important point.

Photo of Mr Maurice Hely-Hutchinson Mr Maurice Hely-Hutchinson , Hastings

I think we should try to draw a distinction in our minds between equity and soundness. We want, first, to consider whether the Amendment proposed is equitable or not, and, secondly, whether it is sound or not. On the question of equity, it has been generally admitted, in spite of what was said by my hon. and gallant Friend the Member for Hornsey (Captain Gammans), that there is, in fact, a dividing line on grounds of equity between those who borrow for the purpose of building or buying homes to live in themselves, and those who do so for other purposes—for example, in order to make an income or a capital profit. It is possible to exaggerate the analogy a little further. Surely, there is a difference in equity between someone who mortgages a house in order to own and live in it, and someone who mortgages the house he owns for the purpose of buying a pearl necklace for his wife, or, it may be, for a lady who is not his wife. Surely, between those extreme examples there is a difference in equity. It is not possible to disregard the purpose of the borrower, when considering the question of equity. I think that public opinion has generally accepted the very rough attempt to draw the line just above the small owner, to the value of £150 a year. Above that value, roughly speaking, the transactions come into the category of what might be called commercial borrowing and commercial lending, transactions between people who are engaged in the business for profit.

Once one gets above the level where equity governs, and into the field of commercial borrowing, it becomes a question of whether what is proposed by the Amendment is sound or not. Here I would join issue with my hon. and gallant Friend the Member for North Newcastle (Sir C. Headlam) and my hon. and gallant Friend the Member for Hornsey on the question of soundness. Those of us who desire that things should be left as they are do not do so because of any abstract principle of the sanctity of contract. In point of fact—and I speak from practical experience of this, as a director both of an insurance company which lends a lot of money on mortgage and of a bank which has a certain amount of mortgage transactions, and in other capacities where I have to deal daily with mortgagors and mortgagees—one is continually having to amend a contract because of the borrower's circumstances. There is never any objection by a lender to amending a borrower's contract when the borrower is in difficulties. But what we seek to avoid is any possibility that the form of a contract which has been such a valuable servant to many forms of industry for so long should be interfered with in order to relieve the present difficulties of some borrowers. Particular borrowers can always meet their lenders, and in 99 cases out of 100 get their contracts adjusted on equitable grounds of pure reason. But this business of borrowing and lending on mortgage has been a very valuable servant to the borrowing and lending community for over 200 years, and we do not want to see that form of contract upset. It is not a question of seeing that every contract made in that form is maintained, but of not upsetting the general form.

Here I speak also from the point of view of a director of investing companies which have substantial investments in the equity of large property companies. From that point of view, although the ordinary shares of those property companies are suffering at the present time, and although their sufferings are partly due to the additional load placed upon them by the War Damage Contribution, we do not, as investors in the equity, wish to see destroyed a form of covenant which is the very basis of our prosperity in peace-time. I could give figures which would reinforce what the hon. and gallant Member for North Newcastle has said about the importance of this whole thing to the property companies, but I think those figures would probably lead the Committee to a conclusion different from that which Members were invited to draw by the hon. and gallant Member for North Newcastle. An ordinary structure for a large property company might be £9,000,000 book value of property, of which they would be borrowing £6,000,000, and the remaining £3,000,000 might be represented by the equity capital. As a general rule that £9,000,000 of property may be earning 6 per cent. net, and on £6,000,000 of borrowed money the property company has to pay only 3¾ or 4 per cent. It is simple mathematics to show that 6 per cent. on £9,000,000, which is £540,000, less 4 per cent. on £6,000,000, which is £240,000, leaves £300,000 for the £3,000,000 equity capital, which is 10 per cent. thereon. That form of borrowing cheap money on mortgage has been the basis of the property companies' success for quite a period of years. I know of a particular company—and all the companies are comparable, though they differ in detail—which for years in peace-time was paying 11 per cent. on its ordinary shares owing to the fact that it was borrowing £6,000,000 at an average rate of 4 per cent. or 3¾ per cent. To-day that company is paying nothing on its ordinary shares, and, very roughly, what has brought that about is that there has been a fall in net rentals of £263,000 a year and an increased charge owing to the War Damage Act of £70,000 a year, a total of £333,000 a year, and the 11 per cent. dividend used to take £275,000.

It is clear that the major reason why that company is not paying a dividend now is not on account of War Damage Contribution, which is merely a contributory cause, but because of the falling-off of rents. It would not be proper to say at this time whether the net rentals are improving again, because that might possibly be an indication to the enemy whether particular towns were filling up or not, but if it should be the case that a large part of that loss in net revenue which took place in 1940 has now been restored, does that alter the situation with regard to the equity of whether the mortgagee should make a contribution? It might be that, without any question of this War Damage Contribution, this company might get back to the position where it could pay 11 per cent. on its equity capital. Meanwhile still the mortgagees would go on getting only their 3¾ and 4 per cent. The company might own property in a town in which there had been considerable destruction of property and there might be a great shortage of housing, office and shop space in that town after the war, and a considerable increase in rentals. The company, with the improving rentals it would get after the war, might be in a position to pay 16 per cent. or 18 per cent. on its ordinary shares. Is it desired or proper to suggest that in those circumstances the amount of interest that it pays to the holders of mortgage debentures should be increased? I do not think that the Movers of this Amendment contemplate that that should be done by the equity holders, who are suffering very much from the present situation.

I speak on this matter without any direct money interest of my own, but as touching it from many angles, as a Director and as a Trustee, from the point of view of insurance companies, which lend money on mortgage and from the much less affected point of view of the short-term lenders, the banks and others, who do not have to make new contracts if they do not want to, and therefore would not accept real property as part of their security if it carried this proposed disadvantage; and also from the point of view of the investment trusts which invest moneys in the equity of property companies. "From all these viewpoints we invite my right hon. Friend the Chancellor to leave this question alone. It is a question of sound business policy. It is a question of what is the best business. From the point of view of the investor, and as representing investors in the equities of the property companies, we would very much prefer that the management of these property companies should occupy their minds with other activities than a political agitation which can only serve in the long run to destroy the very basis of the prosperity of the companies which they are managing.

Photo of Mr Geoffrey Shakespeare Mr Geoffrey Shakespeare , Norwich

I have not intervened in these Debates before because I was not able to do so, but I am very sorry that when I do so I should have to differ from one who was my old Chief when he was Minister of Health. My hon. Friend the Member for Hastings (Mr. Hely-Hutchinson) has justified the present position on the broad grounds that it would upset a form of service which has been of very great advantage in general housing development. That is true, but as far as I can see, no one wants to upset it, neither the hon. and gallant Member for Hornsey (Captain Gammans), the hon. Member for Basset-law (Mr. Bellenger) nor the hon. and gallant Member for North Newcastle-on-Tyne (Sir C. Headlam). All that they ask is that, in providing against an unknown risk which is something altogether different from the ordinary risks that may fall in peace-time, but a risk which falls upon rich and poor alike, there should be no form of property, investment or finance which should be put into a privileged position. That is the position without a shadow of doubt. It does not matter whether rich people invest in equities, debentures or mortgages, the fact remains that companies which carry on with borrowed money are having a bad time now. The whole of the burden of providing for the security of the money advanced by the mortgagee falls on the equity and not on the mortgagor. It really does not comfort a particular company to know that at some unspecified date in the post-war period they will earn 18 per cent. The point is that here and now this burden has fallen upon them. These housing companies, particularly the Voluntary Housing Associations who use this form of mortgage, find it very difficult to keep up their contributions.

I realise the difficulty of the Chancellor of the Exchequer. It is difficult to distinguish between the different forms of lending in respect of the different propertie's. He has been rather ingenious in Section 25 of the Act in making a distinction there. The principle is admitted in that Clause that, in so far as building societies lend money in respect of certain classes of mortgage, they should pay a proportion of the contribution accofding to a sliding scale. All we ask is for an extension of that principle. We are putting a liability upon building and other societies, which is not shared by insurance companies. Why should we put one in a more favourable position than the other? I think the Committee will agree that there are certain institutions, like banks, which do not make a general principle of investing in property. If I want to borrow money from my bank, I may have to put down some security, some collateral, but it is not the business of a bank normally to invest in property. It is the business of a bank to accommodate clients in finance, and no one would wish to increase the liability of the banks. But there are agencies which normally and habitually advance money on the security of a mortgage or of debenture shares in a company, all of which is in the nature of an investment. It should be possible for the Chancellor to find some method whereby, if such advances do take the form of investment in property, then, at least the man who is mortgagor or the man who is lending the money should bear his share of the burden that falls on every one, rich or poor alike.

I cannot understand the basis on which this Bill is drawn up. It does not matter whether a man puts his house against a loan and gives a pearl necklace to his wife. The point is that he invests his money in a house. For what purpose he requires money seems to me to be immaterial. Under the Amendment the mortgagee, instead of getting 5 per cent., would get 4½ per cent. In other words, he would receive one-tenth less as his contribution for the general security of the property concerned. I think a holder in equity would be very lucky if, after the war, he thought he would get back nine-tenths of the value of what he had lost. I hope the Chancellor will realise that there is great feeling in the Committee and outside, and that he will be able to do something to meet it.

Photo of Mr Samuel Silverman Mr Samuel Silverman , Nelson and Colne

I hope the Chancellor has been impressed, not merely by the arguments which have been addressed to him now and in the Second Reading Debate, but by the fact that those arguments have been addressed to him from all quarters of the Committee by Members who, on other matters, do not act in common and who differ fundamentally very often upon their approach to social questions of this kind. I suggest to him that there has been virtual unanimity in this Debate. There have been two exceptions in this Debate, and, I think, only one in the Second Reading Debate.

Photo of Sir Kingsley Wood Sir Kingsley Wood , Woolwich West

Opinions have been about equal.

Photo of Mr Samuel Silverman Mr Samuel Silverman , Nelson and Colne

It was said last time that they were about equal, but when we counted up, it was found that they were far from being equal.

Photo of Mr Samuel Silverman Mr Samuel Silverman , Nelson and Colne

No, perhaps it does not, but it is important that the Chancellor should bear in mind that this cannot be said to be a sectional appeal. It has come from all quarters and from varied interests. What is really at stake is a general principle. My right hon. Friend the Member for South-West Bethnal Green (Sir P. Harris) and the hon. Member for Hastings (Mr. Hely-Hutchinson) both disclaimed any financial interest in this matter, and we accept what they say, but when they both said so I was forcibly reminded—I hope they will not mind—of an epigram by the late Humbert Wolfe. He once wrote: You cannot hope to bribe or twist,Thank God, the British journalist,But seeing what the man will do,Unbribed, there's no occasion to. I could not help thinking of that when they rose in order to give effect to a principle that really is indefensible. What is the purpose of the Act? It is to see that losses caused to property-owners by enemy action shall not be borne by the property on which the bomb falls but shall be equitably shared among all those people who have common interests and who should share that burden. That is the purpose of the Act. An hon. Member opposite said it was most important that you should not alter the mortgage contract but you cannot help altering it. It has been altered by the war, by this peril The question is not whether you shall or shall not write a new term into the mortgage deed. You must write a new term into the mortgage deed. You are writing it into the mortgage deed whether the Amendment is passed or rejected. The question is what the new term is to be. It is nonsense to say that you can leave the mortgage contract where it was. You could have done so if there had been no war, but here there enters into the substance of the contract something which neither the money-lender nor the borrower contemplated, something which they cannot control. The State has thought it right to legislate for that and legislate for it we must. It is for us to say that whatever new term we write into the mortgage, it shall be fair and equitable, ensuring a reasonably shared burden.

In order to examine whether, without this Amendment, the burden is equitably shared, let us see what is the position of the two parties under the Act. The hon. Member opposite raised the question of who would complain most, if there were no Bill. Let us see who would complain most. What is the position of the mortgagees under the Act, whose positions would be effected by this Amendment? If the property upon the security of which he lends his money disappears as a result of enemy action, a money-lender loses, nothing whatever. He is entitled to the whole of the debt acknowledged to be due by the Commission so far as his mortgage claim extends. It is true that he has to wait for that money until after the war, but, in the meantime, the borrower is bound by law to pay every penny of the contractual interest even though the War Damage Commission only pays to the borrower 2½ per cent. The money-lender, therefore, is fully and completely secured both as to the return of his capital and as to the payment in the meantime of every penny to which he is entitled under the letter of the mortgage deed. For that security what does he pay under the Act.

The answer is that he pays nothing. How can anybody seriously argue that that is equitably sharing a burden? There is a situation in which, on the one side, a person is entirely secure and cannot lose in any circumstances, and pays for that complete security not one penny, whereas, on the other side, a man who pays the whole of the contribution gets a partial security long deferred and has to pay in the meantime every penny to the moneylender to whom he is bound by the original contract. It really does not bear examination. The Attorney-General, in replying to this kind of argument in the Second Reading Debate, said that the Bill would admit that principle wherever the money had been lent for the purpose of buying or building the property affected.

Photo of Mr Donald Somervell Mr Donald Somervell , Crewe

I would point out that I went on to say words to this effect—in circumstances similar to a building society mortgage, where it could be said that there was an analogy with the-position of landlord and tenant.

Photo of Mr Samuel Silverman Mr Samuel Silverman , Nelson and Colne

I accept that. I was only attempting to state briefly the spirit of the argument to which the Attorney-General lent his support. That argument attempted to draw a distinction between money borrowed generally for the purposes of the building upon which it was borrowed, and money borrowed upon the security of a building for extraneous commercial purposes. I think the Attorney-General will agree that that is a fair statement of the argument. In order to illustrate the matter, the Attorney-General said that a man who lends his money upon the security of a building accepts a lower rate of interest than he might get if he had no security. He said it was fantastic to argue, in those circumstances, that the man ought to be called upon to bear a share of this contribution. The Attorney-General said that that argument is fantastic, and if he says so, perhaps it is, but all I can say is that what seems to him to be fantastic is to me the plainest of common sense, and indeed, since we are bandying words, I should have thought it was his argument and not ours that was fantastic. Once it is admitted that the moneylender has himself so highly valued the security which he gets as to be willing to forfeit a share of the return in order to get that security, surely it is established that he has an interest in the property for which he is willing to pay good hard money and to accept a lower rate of interest in order to obtain the security based upon that property. How, then, can it be argued that he has no interest in the property? His interest in the property is precisely measurable; he has valued it himself, and has paid for it according to his assessment. Certainly, he is interested in it, and if he is interested in it, he ought equitably to bear his fair share of the cost of preserving the value of that security against the acts of the King's enemies. That is all that is contended.

Were it not for the big financial interests involved, the insurance companies and the banks, this Amendment would not be resisted. It cannot be resisted in equity, and it would not in fact be resisted but for the power of these great financial organisations. This is a Bill, as it stands, to make the world safe for moneylenders. They are the only people who are fully secured under the Bill. They are the only people who will pay no share of the cost of insuring their security. It is not right that a great social Measure of this kind should be not merely marred but, as far as these matters are covered, destroyed in the public mind as an equitable Measure by its tender regard for institutions that are better able to look after themselves than are those for whose interests we are contending in this Amendment. If there had been advanced good, sound and equitable reasons why these particular mortgagees alone should escape any share of the common burden, we would not be pressing this Amendment upon the Government. But I say that no one who has listened to the two Debates on this matter, the Second Reading Debate and the Debate on the present Amendment, can think for one moment that any sound case for this favourable discrimination has been or can be made, and I hope it is not too late for the Government to look at this matter again with a view either to accepting one or other of the Amendments—I would prefer the one that raises the general principle—or, if they think that the Amendments do not effectively deal with the matter, finding some other machinery for carrying out what I think is the universal opinion of the Committee.

Photo of Sir Herbert Butcher Sir Herbert Butcher , Holland with Boston

I want to reinforce the arguments that have been used in this Debate, and to say how unusual it is that on a matter of this kind the arguments should come from every quarter of the Committee. As the hon. Member for Nelson and Colne (Mr. Silverman) has said, there is a widespread desire to remedy an injustice which is apparent and inherent in the Bill as it now stands. This is not an insurance scheme. If it were an insurance scheme, the owner of property would have the right to decide whether or not he should come into it. This Bill imposes obligations on every owner of property in however remote or safe an area of the country the property may be. There is no choice and no opportunity for the property owner to elect whether or not he will come into the scheme. But there is this point, that wherever and in however dangerous a position may be the property on which the money has been advanced, the property is guaranteed against war damage for the benefit of the moneylender who has lent money on it without his making a penny contribution to the scheme. My hon. Friend the Member for Hastings (Mr. Hely-Hutchinson) concluded his remarks by saying that the matter should be left as it is. There are many people in remote parts of England who would not come into this scheme unless the Government compelled them to do so. The purpose of the scheme is to spread the burden as far as possible and as fairly as possible, and the sole test is whether a person has a definable interest in the property of which he may suffer some loss. I do not believe the Chancellor intends to accept the Amendment, but unless he does so, it will go out that of all the people who are interested in the property only the moneylenders can get benefits for which they do not pay.

Photo of Sir Kingsley Wood Sir Kingsley Wood , Woolwich West

Let me say in reply to the observations which have been made that I hope the Committee will dismiss from its mind any question here of sinister vested interests. Indeed this is the first time this notion has been imported into our discussions. If we were to look into the question we should, I suppose, find that the large section who might be particularly interested in this Amendment are proprietors of great blocks of flats who have felt the considerable weight of the contributions which have to be paid under this Measure, coming on top of the very considerable losses which they have sustained by loss of rents. I am very sorry for them, but I am glad to observe, without giving any secrets away to the enemy, that the loss in regard to rents is now rapidly disappearing. Therefore, if one wishes to go into the motives, or into the question of where vested interests stand, much can be said on both sides. And let us not prejudice the position by using a word to which some people object. A stigma seems to be attached to the word "moneylender," which my hon. and gallant Friend the Member for Holland-with-Boston (Lieutenant Butcher) used of the mortgagee.

Photo of Sir Herbert Butcher Sir Herbert Butcher , Holland with Boston

The Chancellor will be aware that on a previous occasion we got a little tangled up with the words "mortgagee" and "mortgagor." I was trying this time to keep myself neat and square.

Photo of Sir Kingsley Wood Sir Kingsley Wood , Woolwich West

My suggestion is that my hon. and gallant Friend should use the words "borrower" and "lender." The word "moneylender" has that little touch which excites prejudice. Let us put these two matters on one side and endeavour to deal with the case on its merits. It is a case for which much can be said from both points of view. This is, of course, not the first time we have had to deal with this problem. The House has already debated it and come to a decision. That decision was taken when the first Measure was brought before the House. That Measure was the subject of very careful consideration. Points of view were put by both sides, both in this House and in another place. Therefore, as I say, we are not considering this matter for the first time. What we are really being asked to do now is to upset a decision which was arrived at by both Houses before the principal Act was put on the Statute Book. It would have very serious consequences, quite apart from the merits of the proposal, if we reversed that decision at this stage. The House of Commons has power to take a step of that kind, but first, it must have regard to the previous decision, and whether there is a considerable amount of opinion to support such a course. We have only to look round the Committee to-day to judge the measure of that. [Interruption.] My hon. Friend draws attention to the hour of the day; but I myself have not had an opportunity to avail myself of it. This Debate has been going on for some time, and here we are a nice little happy party—and no more than that. It does not look to me as if the masses of the country are up in revolution about this proposal.

I do not for a moment desire to minimise the arguments which have been advanced against the Government's proposal by my hon. Friends, who always speak with great force and persuasion, but we have to have, not only an overwhelming case, but a case which is backed up by a very large body of opinion—larger than has been exhibited to-day—before we can reverse a decision of this kind. What was the decision taken? In a typically British way we arrived at a compromise on this proposal, although, no doubt, it can be attacked upon strictly logical grounds. The compromise which we reached, as the Committee is well aware, was that we would make special provision for cases excepted by the House. There was a special kind of relationship between landlord and tenant, and for that we made special provision. The compromise was accepted, and, as is set out in the Section of the principal Act, no contributions are made by the mortgagee.

Photo of Mr Frederick Bellenger Mr Frederick Bellenger , Bassetlaw

Would the Chancellor of the Exchequer amplify his statement about the compromise in cases analogous to landlords and tenants?

Photo of Sir Kingsley Wood Sir Kingsley Wood , Woolwich West

I do not want to interrupt my argument to deal with that. I would refer my hon. Friend to the Section of the Act, with which I think most Members are fully familiar. The arrangement was come to after the most careful consideration, yet it is that arrangement which we are now asked to upset. There were very good grounds for that decision. I do not think that sufficient ground for altering that decision has been given by anything said in the course of this Debate.

Since the principal Act was passed the position of the persons who have to pay contributions has been very much improved by the decision of the Government and the course of events which have taken place since the first Bill was introduced. A considerable contribution is exacted from those who have to make it. But so far as concerns the bearing of the burdens, there has been great improvement since the House came to its decision on the last occasion, and that must obviously be borne in mind in our consideration of the matter to-day. It is true, as has been indicated by some hon. Members, that if a house is completely destroyed the mortgagee comes in and takes the whole amount of the money that is due to him. He has paid no contribution towards it, and therefore he receives great advantages under the Measure. It is entirely overlooked however that, owing to the provisions of the Bill and the money which has been found by compensation, the person who has borrowed the money is relieved entirely from the covenant into which he has entered and the obligation which he has incurred, which would follow him for the rest of his life if it were not otherwise met. And you must have regard in all these cases to the fact that, apart altogether from the question of the mortgaged property, there is a personal covenant entered into which in a very large number of cases is of considerable value. I do not think there will be very many who, with the choice of mortgages available to-day, would themselves lend money or advise other people to lend money to people with shaky reputations or about whose honesty there was doubt.

One of my hon. Friends instanced the position of some of these large property-owners and the important and proper part that they play in lending money for the purchase of houses and matters of that sort. There is another section of the community whom I do not want to see prevented from assisting us in our housing efforts in the future. I think it is the experience of almost all of us—it was certainly mine in days gone by in my professional capacity—that one of the best things in the country was the number of people, not with large fortunes, who were prepared to lend sums of £300, £400 or £500 on property and to regard it as a first-class investment. One has often been asked to advise as to the choice of investments for such sums, and again and again it has been said, "This is one of the safest investments you could make. It is true you are not getting a big sum by way of interest. You could get more if you liked to take a measure of risk, but if you lend your money in this way at a smaller rate of interest you are sure of getting it and it is one of the best and safest securities you can have." I submit we should not do anything to make people look askance at that kind of investment. If you begin to interfere and make arrangements of that kind impossible, you will be doing a great deal of mischief. We shall want all the assistance we can get in dealing with the housing problem after the war, and I believe that in this way a very useful contribution can continue to be made by those investors who have helped us so much in the past. Therefore, I will do nothing which might disturb or interfere with that valuable type of investment.

The difficulties are also illustrated by the Amendments that appear on the Paper. All sorts of suggestions have been made in order to overcome them. One of my hon. Friends seeks some kind of remedy in an arbitrary contribution to be made by the mortgagee, which he fixes at 2s. in the £1. Other of my hon. Friends have, I suppose, apprehended the difficulties which arise from bank overdrafts and commercial mortgages and they in their turn have put down varying Amendments, all in an endeavour to meet an extremely difficult situation. If we attempted to put upon the Statute Book the Amendment that we are debating, it would throw into chaos many commercial transactions. When the Act was in another place Amendments were moved designed to meet the difficulty, which it was found impossible to accept. If we accepted this Amendment or any of the others on the Paper a difficult position would be created with regard to debenture holders covering in their security some measure of real property. I can visualise a large gold-mining company with a head office in the City of London. The contribution they would have to make in respect of that building under the War Damage scheme would be hardly of any account for such a large company. If, however, this proposal were followed to its logical conclusion, there would have to be a fractional deduction in the case of every one of the people concerned with debentures. Clearly it would be impossible to follow out, in practice, a proposal of this kind.

Photo of Mr Harry Selley Mr Harry Selley , Battersea South

All that would be required would be to take the Schedule A on the property itself.

Photo of Sir Kingsley Wood Sir Kingsley Wood , Woolwich West

My hon. Friend does not follow me. I am pointing out how impossible it would be to obtain the contributions where the building was covered by debentures. I will look at some of the suggestions that have been made. I do not think it is possible to distinguish housing associations from others. I think that the House came to a reasonable decision on the last occasion. It is a compromise and I would advise the Committee to adhere to it. It has been illustrated, again and again, that that decision is a reasonable compromise, and the solution of many of the difficulties that confront us in dealing with this matter.

Photo of Mr Herbert Williams Mr Herbert Williams , Croydon South

The Chancellor of the Exchequer has almost converted me against him. On this matter I have differed with many of my property-owning friends, but now the Chancellor says, "Look at this man. He is a mortgagee and is therefore a valuable creature. We must cosset him and be careful with him, or otherwise he will not come forward in future and lend money on mortgage." If you lend £400 on mortgage you are safe, but if you use the £400 to buy the other end of the house, the equity end, you have to carry the whole burden. There is a house worth £800. If you buy the back end the Chancellor comes to your aid and you must not pay one penny. If you buy the other end you are like Barnum's elephant, you have to carry the whole lot. My King Charles's head is that this problem will never be solved until we provide compensation for loss of rent and the rates of contribution should run for a sufficient number of years to meet all charges. The burden is very oppressive on some mortgagors. Take the case of a house with a Schedule A value of £100. The income runs out roughly the same as Schedule A. There is £60 mortgage interest to be paid to the mortgagor, who pays 5s. in the £ contribution on his income. He is paying only 2s. in the £ on the £100, but his income is only £40. On that he has to make a contribution of £10, which is 5s. in the £. The Chancellor, by way of Income Tax, takes any £10, so that these people are bearing a burden, where the mortgage is 60 per cent. of the total, of 15s. in the £. If the mortgage is 70 per cent. there is only 1s. 6d. in the £ left out of the whole income. It really is, therefore, a very oppressive burden. It is not 2s. in the £, but anything from 3s. to 8s. according to the proportion which the mortgage interest bears to the Schedule A valuation. That is an aspect of the problem to which the Chancellor has not yet devoted sufficient attention.

I am satisfied that until a change is made in some direction or another, this agitation will continue. I have tried to explain to my property-owning friends that mortgages have to be divided into two categories. There are those which are associated with the purchase of a house and those advanced for reasons which have nothing to do with the purchase of a house. I do not go so far as the hon. Member for Nelson and Colne (Mr. Silverman) who suggested that big financial interests were behind the Chancellor in preventing him from doing what is desired. I think that it is the desire to preserve the sanctity of contracts that is fundamental in the Chancellor's mind. It is no good attacking the banks and insurance companies and calling them great financial interests. They are trustees and we have to bear that in mind. My hon. Friend the Member for Hastings (Mr. Hely-Hutchinson) is the director of an insurance company in which I have insured my life. He does not take a narrow selfish view of the affairs of his company as a director, but he acts as a trustee of the thousands of people whose capital is with the company. There is no narrow selfish point of view in these concerns, and it weakens our case to say that there is.

Photo of Mr Samuel Silverman Mr Samuel Silverman , Nelson and Colne

I did not suggest that anyone was taking a narrow or selfish view. I did assert, and I repeat, that even if the great institutions are acting in a trustee capacity and are as altruistic as my hon. Friend suggests, this Amendment would not be resisted but for their influence.

Sir H. Willlams:

The phrase used was "big financial interests," and we know its implications—that they are necessarily dirty dogs who must have no consideration. We all indulge in that kind of prejudice. It goes down splendidly when we are addressing our constituents on enthusiastic occasions. There was a proposed new Clause on the Paper in my name which was not called because it was thought that the Amendment in the name of the hon. Member for the Abbey Division of Westminster (Sir H. Webbe) which follows this would cover the point. The idea was that where the purchase of the property and the mortgage were transactions which took place at the same time and where they were definitely associated, the mortgagee should pay part of the contribution. We have the case of the housing associations. The proposal which I tabled affected the First National Housing Trust, which has large estates in Croydon and many other parts of the country. The Chancellor of the Exchequer actually cut the first sod of an estate in Birmingham undertaken by the Trust, and, therefore, he is interested in seeing that the great estates which he helped to develop when Parliamentary Secretary to the Ministry of Health, are not oppressively treated. When they raised the money they did not raise a separate mortgage on each house but raised a collective mortgage upon the lot, and therefore they do not get the advantage of the compromise.

They do not get the advantage of the compromise because Lord Kennet, when he was Minister of Health, with the support of the present Chancellor of the Exchequer, then Parliamentary Secretary to the Ministry of Health, passed through Parliament a very valuable housing Bill whereby people who in the ordinary way could have got mortgages up to 60 per cent. could raise a mortgage up to 90 per cent. The State came to their aid in order to encourage masses of people to buy their houses. As a result of that useful Housing Act a large number of additional houses were constructed, but the people concerned with their construction, entirely as a result of the form of the Housing Act, 1932, not through any malice on their part, not through any ill-will but merely because they were complying with one useful Act of Parliament, are now condemned under the War Damage Act. Having regard to my declarations in the past, I cannot go so far as to support the Amendment before the Committee, but I hope nevertheless that consideration will be given, if not to-day, at any rate before the Report stage, to proposals for abating an injustice which manifestly now exists.

Photo of Mr William Craven-Ellis Mr William Craven-Ellis , Southampton

I have followed this Debate closely and I am satisfied that those Members who put their names to these several Amendments had just occasion for doing so. The Chancellor has endeavoured to push this Amendment on one side, because Parliament has already passed the War Damage Act. I do not want the Financial Secretary to the Treasury to be too severe with me regarding the observations I am going to make, but at the time that Measure was passing through this House I think I am right in saying that he made an observation to the effect that it was a make-shift Measure. If those were not his exact words the words he used had that meaning, and I would say that it was a correct expression, because Parliament was doing something it had never done before and something which was deliberately contrary to the undertaking which the Prime Minister himself had given to the House. Long before the War Damage Act was introduced the Prime Minister made a statement at that Box to the effect that the State would be responsible for damage incurred through enemy action. That undertaking has never been implemented. We have had an experimental period and we have found that there are faults in this original Act, and I say there is justification for accepting one or other of these Amendments, or a compromise based on the whole of them.

I want to say that I am opposed strongly to the mortgagee making any contribution. But the position is not normal. The very fact that Parliament has put the War Damage Act on the Statute Book has created an abnormal situation, and if the Government choose to deal with this very serious matter in this way I feel justified in supporting these Amendments, although in principle I am against the mortgagee making any contribution. It has been asked, "But what

Division No. 11.]AYES.
Beamish, Rear-Admiral T. P.Culverwell, C. T.Horsbrugh, Florence
Beattie, F.Davies, Major Sir G. F. (Yeovil)Hughes, R. M.
Blair, Sir R.De Chair, Capt. S. S.Hume, Sir G. H.
Bower, Norman (Harrow)Denman, Hon. R. D.James, Wing-Comdr. A. W. H.
Bracken, Rt. Hon. B.Denville, AlfredJeffreys, Gen. Sir G. D.
Brocklebank, Sir C. E. R.Duckworth, Arthur (Shrewsbury)Jennings, R.
Burton, Col. H. W.Ede, J. C.Jowitt, Rt. Hon. Sir W. A.
Cadogan, Major Sir E,Edmondson, Major Sir J.Kerr, Sir John Graham (Scottish U's)
Campbell, Sir E. T.Elliot, Lt.-Col. Rt. Hon. W. E.Kimball, Major L.
Cazalet, Major V. A. (Chippenham)Emmott, C. E. G. C.Leighton, Major B. E. P.
Chapman, Sir S. (Edinburgh, S.)Etherton, Flight-Lieut. RaiphLinstead, H. N.
Colegate, W. A.Grimston, R. V.Lipson, D. L.
Cooke, J. D. (Hammersmith, S.)Hannon, Sir P. J. H.Little, Dr. J. (Down)
Cripps, Rt. Hon. Sir StaffordHarris, Rt. Hon. Sir P. A.McCallum, Major D.
Critchley, A.Heilgers, Major F. F. A.Makins, Brig.-Gen. Sir E.
Crookshank, Capt. Rt. Hon. H. F. C.Hely-Hutchinson, M. R.Mayhew, Lt.-Col. J

is the mortgagee's interest?" It has been said that he has merely lent money upon a definite security. His interest in the matter is more clearly identified. When money is borrowed on a property it is the natural and proper thing to insure that property against fire, and the mortgagee says, "I must have my name endorsed oh that policy as recognising that I have part ownership." I think that is so; and if that is correct, then it is right, having regard to this abnormal piece of legislation that we should expect the Government, who have failed to implement the Prime Minister's undertaking, to endeavour to bring about an equitable adjustment among the various interests. The imposition on property-owners to-day is very great, and, as I have told my property-owning friends, I blame them to a large extent for it, because there is no unity among them. If there were unity in the ranks of property-owners, this legislation would never be on the Statute Book, because it is such a piece of gross injustice. I said so yesterday and repeat it to-day. The Financial Secretary to the Treasury, in his cynical way, seemed to brush that on one side, but, after all, the property-owners of this country have a right to expect justice from this House. I hope that the Financial Secretary will report to the Chancellor that there are other Members in this Committee whom he has not heard who feel that some consideration should be given to these Amendments between now and the Report stage, in an endeavour to see whether even a small measure of justice cannot be given to the property-owning community.

Question put, "That the words proposed to be left out stand part of the Schedule."

The Committee divided: Ayes, 87; Noes, 53.

Mellor, Sir J. S. P.Russell, Sir A. (Tynemouth)Thomas, J. P. L. (Hereford)
Malson, Capt. A. H. E.Salt, E. W.Tomlinson, G.
Morrison, Rt. Hon. W. S. (Cirencester)Sanderson, Sir F. B.Tufnell, Lieut.-Comdr. R. L.
Nicholson, Captain G. (Farnham)Savory, Professor D. L.Ward, Col. Sir A. L. (Hull)
Orr-Ewing, I. L.Scott, Donald (Wansbeck)Waterhouse, Capt. C.
Palmer, G. E. H.Smith, Sir R. W. (Aberdeen)Wells, Sir S. Richard
Peto, Major B. A. J.Somervell, Rt. Hon. Sir D. B.Westwood, J.
Raikes, Flight-Lieut. H. V. A. M.Spearman, A. C. M.White, Sir Dymoke (Fareham)
Rankin, Sir R.Storey, S.Williams, C. (Torquay)
Reid, W. Allan (Derby)Strickland, Capt. W. F.Wood, Rt. Hon. Sir K. (W'lwich, W.)
Rickards, G. W.Stuart, Lord C. Crichton- (Northwich)Young, A. S. L. (Partick)
Robertson, D. (Streatham)Stuart, Rt. Hon. J. (Moray and Nairn)
Robertson, Rt. Hn. Sir M. A. (M'ham)Summers, G. S.TELLERS FOR THE AYES.
Royds, Admiral Sir P. M. R.Tate, Mavis C.Mr. Boulton and Mr. Pym.
Adams, D. (Consett)Hardie, AgnesShakespeare, G. H.
Beaumont, Hubert (Batley)Henderson, T. (Tradeston)Silkin, L.
Benson, G.Isaacs, G. A.Sloan, A.
Bowles, F. GJenkins, A. (Pontypool)Sorensen, R. W.
Buchanan, G.Kirby, B. V.Stephen, C.
Butcher, Lieut. H. W.Leslie, J. R.Strauss, G. R. (Lambeth, N.)
Charleton, H. C.Lloyd, Major E. G. R. (Renfrew, E.)Summerskill, Dr. Edith
Chater, D.McEntée, V. La T.Tasker, Sir R. I.
Craven-Ellis, W.Mainwaring, W. H.Taylor, H. B. (Mansfield)
Crooke, Sir J. SmedleyMarlowe, Major A.Thomas, Dr. W. S. Russell (S'th'm'tn)
Davidson, J. J. (Maryhill)Mathers, G.Viant, S. P.
Davies, Clement (Montgomery)Maxton, J.Walkden, E. (Doncaster)
Davies, S. O. (Merthyr)Medlicott, Colonel FrankWhite, H. Graham (Birkenhead, E.)
Edwards, N. (Caerphilly)Montague, F.Wilson, C. H.
Frankel, D.Oliver, G. H.Windsor, W.
Gallacher, W.Pritt, D. N.
Gammans, Capt. L. D.Reakes, G. L. (Wallasey)TELLERS FOR THE NOES.—
Griffiths, G. A. (Hemsworth)Reed, Sir H. S. (Aylesbury)Mr. Bellinger and Mr. Silverman.
Hall, W. G. (Colne Valley)Selley, H. R.

Photo of Mr David Gammans Mr David Gammans , Hornsey

I beg to move, in page 16, line 16, at the end, to insert: Rights over against mortgages in cases to which Section twenty-five of principal Act does not apply.7. Where at the relevant date in any year in which an instalment of contribution is payable the interest of a direct or indirect contributor in respect of a contributory property is subject to a mortgage or mortgages, such case not being one in which Section twenty-five of the principal Act applies the following provisions shall have effect:—

  1. (a) The contributor shall in respect of his net liability for the instalment of contribution payable in the year in question be entitled to be indemnified by the mortgagee or mortgagees under the mortgage or mortgages in question to the extent of a rate in the pound upon the amount of the annual interest payable by the contributor to such mortgagee or mortgagees for that year, which rate in the pound shall be the instalment rate for the year in question unless than rate when applied to the amount of such interest would yield a sum exceeding one-half of the net liability of the contributor for the instalment of contribution payable in that year, in which case the rate in the pound shall be a rate which, when applied to the amount of such interest, would yield a sum not exceeding one-half of such net liability:

Division No. 12.]AYES.
Adams, D. (Consett)Bowles, F. G.Charleton, H. C.
Beaumont, Hubert (Batley)Buchanan, G.Chater, D.
Benson, G.Butcher, Lieut. H. W.Craven-Ellis, W.

Provided that if there shall be more than one mortgagee entitled to receive interest for that year under any such mortgage the share of the indemnity to be borne by any one of such mortgagees in respect of that year shall bear the same proportion to the total amount of the indemnity in respect of that year as the amount of the interest payable to that mortgagee for that year bears to the total amount of the interest payable under the mortgage or mortgages for that year;

(b) The expression 'mortgage' means any charge, lien, floating charge, debenture, debenture stock, or like security on any property (including in that expression floating assets) for securing money or money's worth, other than a security, which can be discharged upon less than three months' notice;

The expression 'mortgagee' has a meaning corresponding to the meaning of the expression 'mortgage,' and the expression 'the instalment rate' means the rate in the pound at which in the year with respect to which the expression is used the instalment of contribution is levied in pursuance of the provisions of Sections twenty and twenty-two of this Act."

Question put, "That those words be there inserted."

The Committee divided: Ayes, 57; Noes, 90.

Davidson, J. J. (Maryhill)Kirby, B. V.Southby, Comdr. Sir A. R. J.
Davies, Clement (Montgomery)Leslie, J. R.Stephen, C.
Davies, S. O. (Merthyr)Lloyd, Major E. G. R. (Renfrew, E.)Strauss, G. R. (Lambeth, N.)
Duckworth, W. R. (Moss Side)McEntee, V. La T.Summerskill, Dr. Edith
Edwards, N. (Caerphilly)McNeil, H.Tasker, Sir R. I.
Frankel, D.Mainwaring, W. H.Taylor, H. B. (Mansfield)
Gallacher, W.Marlowe, Major A.Thomas, Dr. W. S. Russell (S'th'm'tn)
Groves, T. E.Mathers, G.Viant, S. P.
Hall, W. G. (Colne Valley)Maxton, J.Walkden, E. (Doncaster)
Hardie, AgnesMontague, F.White, H. (Derby, N. E.)
Headlam, Lt-Col. Sir C. M.Pritt, D. N.White, H. Graham (Birkenhead, E.)
Henderson, T. (Tradeston)Reakes, G. L. (Wallasey)Williams, Sir H. G. (Croydon, S.)
Higgs, W. F.Selley, H. R.Wilson, C. H.
Hughes, R. M.Silkin, L.Windsor, W.
Isaacs, G. A.Silverman, S. S.
Jenkins, A. (Pontypool)Sloan, A.TELLERS FOR THE AYES.—
Kerr, Sir John Graham (Scottish U's)Sorensen, R. W.Captain Gammans and Mr. Bellender.
Baxter, A. BeverleyGrimston, R. V.Robertson, D. (Streatham)
Beamish, Rear-Admiral T. P.Groves, T. E.Robertson, Rt. Hn. Sir M. A. (M'ham)
Beattie, F.Hannon, Sir P. J. H.Ropner, Col. L.
Blair, Sir R.Harris, Rt. Hon. Sir P. A.Royds, Admiral Sir P. M. R.
Bower, Norman (Harrow)Hely-Hutchinson, M. R.Russell, Sir A. (Tynemouth)
Bracken, Rt. Hon. B.Horsbrugh, FlorenceSalt, E. W.
Broadbridge, Sir G. T.Hume, Sir G. H.Sanderson, Sir F. B.
Brocklebank, Sir C. E. R.James, Wing-Comdr. A. W. H.Scott, Donald (Wansbeek)
Browne, Captain A. C. (Belfast, W.)Jeffreys, General Sir G. D.Smith, Sir R. W. (Aberdeen)
Burton, Col, H. W.Jennings, R.Spearman, A. C. M.
Cadogan, Major Sir E.Keeling, E. H.Storey, S.
Campbell, Sir E. T.Kimball, Major L.Strickland, Capt. W. F.
Cazalet, Major V. A. (Chippenham)Leighton, Major B. E. P.Stuart, Lord C. Crichton- (Northwick)
Challen, Flight-Lieut. C.Linstead, H. N.Stuart, Rt. Hon. J. (Moray and Nairn)
Chapman, Sir S. (Edinburgh, S.)Lipson, D. L.Summers, G. S.
Cluse, W. S.Little, Dr. J. (Down)Tate, Mavis C.
Colegate, W. A.Lucas, Major Sir J. M.Thomas, J. P. L. (Hereford)
Gripps, Rt. Hon. Sir StaffordMacdonald, Capt. P. (Isle of Wight)Tomlinson, G.
Critchley. A.Makins, Brig.-Gen. Sir E.Touche, G. C.
Crookshank, Capt. Rt. Hon. H. F. C.Mayhew, Lt.-Col. J.Tufnell, Lieut.-Comdr. R. L.
Culverwell, C. T.Mellor, Sir J. S. P.Ward, Col. Sir A. L. (Hull)
De Chair, Capt. S. S.Molson, Capt. A. H. E.Wardlaw-Milne, Sir J. S.
Denman, Hon. R. D.Morrison, Rt. Hon. W. S. (Cirencester)Waterhouse, Capt. C.
Denville, AlfredNicholson, Captain G. (Farnham)Wells, Sir S. Richard
Duckworth, Arthur (Shrewsbury)Orr-Ewing, I. L.Westwood, J.
Ede, J. C.Palmer, G. E. H.White, Sir Dymoke (Fareham)
Edmondson, Major Sir J.Petherick, Major M.Wood, Rt. Hon. Sir K. (W'lwich, W.)
Elliot, Lt.-Col. Rt. Hon. W. E.Peto, Major B. A. J.Young, A. S. L. (Partick)
Emmott, C. E. G. C.Reed, Sir H. S. (Aylesbury)
Etherton, Flight-Lieut. RalphReid, W. Allan (Derby)TELLERS FOR THE NOES.—
Frankel, D.Rickards, G. W.Mr. Boulton and Mr. Pym.

Photo of Mr Daniel Frankel Mr Daniel Frankel , Stepney Mile End

On a point of Order. I have to inform you, Sir Dennis, that I have inadvertently voted in both Lobbies, first in the left, which from my point of view is the wrong, Lobby, and secondly in the right one. Therefore, my vote is recorded in both Lobbies, first with the "Noes" and then with the "Ayes." Can anything be done about it?

Photo of Lieut-General Edward Fitzroy Lieut-General Edward Fitzroy , Daventry

I am afraid the hon. Member has done all that he can to remedy the matter. He has in fact cancelled his wrong vote, but only at the expense of, practically, not having voted at all. I am sorry, but I am afraid that in the circumstances, under our Rules of Procedure it is not possible to do anything more.

Photo of Mr Daniel Frankel Mr Daniel Frankel , Stepney Mile End

Thank you very much, Sir Dennis. I will do my best to remedy those Rules.

Amendments made:

In page 18, line 10, leave out: The foregoing provisions of this paragraph and the provisions, and insert: The provisions of this Act and. In page 19, line 2, leave out: or by paragraph 9 of this Schedule."—[Sir K. Wood.]

Photo of Sir John Mellor Sir John Mellor , Tamworth

I beg to move, in page 19, line 5, at the end, to insert: except in any case where the Commissioners of Inland Revenue have allowed the discharge of such liability to be deferred by reason of the fact that a payment in respect of expenditure on the making good of war damage to property has accrued or is accruing but has not been discharged. It is sought to insert this Amendment at the end of sub-paragraph 12, which provides: A right to indemnity conferred by Part I of, or the Fourth Schedule to, the principal Act or by paragraph 9 of this Schedule shall not be enforceable until the discharge of the liability in respect of which the right arises. The exception we seek to insert is: except in any case where the Commissioners of Inland Revenue have allowed the discharge of such liability to be deferred by reason of the fact that a payment in respect of expenditure on the making good of war damage to property has accrued or is accruing but has not been discharged. The right to indemnity which is referred to in sub-paragraph 12 of the Second Schedule to the Bill is the right which arises under the principal Act that the ground landlord shall make a partial contribution to the contribution made by the direct contributor. In the Fourth Schedule to the principal Act there is a table which defines the appropriate proportions in which the contribution is ultimately to be divided between the direct contributor and the ground landlord or other parties bearing a similar relation to him. As matters would stand, were the Bill to proceed unamended so far as this sub-paragraph 12 is concerned, the direct contributor, whose contribution is deferred because there is accruing to him a war damage payment of some kind, as in those circumstances where there is a permitted set-off, would not obtain the due indemnity from the ground landlord according to the strict wording, although I do not think according to the intention of the Government. He would not be able to get this indemnity although he had in effect discharged his liability to the contribution, because what he is to receive will be subject to an appropriate set-off. I think that the matter will be corrected if the Chancellor can accept the words of the Amendment or some similar words so as to secure in effect that a set-off shall be equivalent to a discharge of the liability within the words of sub-paragraph 12.

Photo of Sir Kingsley Wood Sir Kingsley Wood , Woolwich West

This matter is a rather complicated one, as my hon. Friend pointed out. I would just say that I will bear in mind what he has said in any further consideration I give to this particular proposal. I would remind he Committee that sub-paragraph 12 of the Second Schedule which my hon. Friend desires to amend provides that an indemnity is not to be recoverable by a landlord, tenant or mortgagor, until the liability in respect of which the right to an indemnity arises has been discharged. Consequently the direct contributor must have paid the Inland Revenue before he can recover his indemnity. My hon. Friend proposes that this condition shall not apply where under an administrative arrangement the Inland Revenue has allowed collection of the contribution to be deferred until the direct contributor has received from the War Damage Commission payment in respect of expenditure which he has incurred in repairing war damage. The deferment extends to contributions on the damaged property and the direct contributor's other properties up to the amount of the claim on the Commission.

As we see it, the proposal before the Committee would operate in a way which probably my hon. Friend would not regard as satisfactory. Suppose that a person held long leases of 20 properties from 20 different landlords and the instalment due from him as a direct contribution on 1st July, 1942, in respect of all the properties amounts to £500 and that he will be entitled to recover from his landlords indemnities amounting in all to £200. If he has expended more than £500 in repairing war damage to one of the properties and has claimed that from the War Damage Commission, the Inland Revenue Department is prepared, if he so requests, to allow the collection of £500 for all the properties to be deferred until the Commission pays. But the effect of the Amendment would be that because a direct contributor's claim for making good the damage to a single property has not been met he would be allowed, before paying anything to the Inland Revenue, to recover his indemnities, both from the landlord of the damaged property and the 19 other landlords whose property has suffered no war damage. It would indeed be hard to satisfy those 19 that they should be excepted from the general rule by the fact that the lessee holds from another landlord a property which happens to have been damaged. That, as I understand, may be the effect of this Amendment. But perhaps my hon. Friend will allow me to consider what he has said, and I will confer with him if necessary.

Photo of Sir John Mellor Sir John Mellor , Tamworth

I am much obliged to my right hon Friend, and I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Schedule, as amended, agreed to.