Motion made, and Question proposed,
That, if provision is made by any Act of the present Session to enable tenants of residential property to acquire the freehold, then any conveyance of a reversionary interest required to be made for that purpose shall for
the purposes of Part III of the Land Commission Act 1967 be treated as a conveyance on sale or assignment on sale of that interest, and the price payable for the interest shall be treated as consideration payable in respect of the disposition of the interest, and betterment levy shall be chargeable accordingly.—[Mr. MacDermot.]
To use the example we have been using in the last hour or so, does this Resolution really mean that a man who has been deprived of a £2,000 house, compulsorily, for £105 will now have to pay a betterment levy on part of that £105? Is this really so? If it is, what happens when the tenant sells? What is the base value when the tenant comes to sell? Is the base value the consideration of this transaction. £105, and, if he sells the property for £3,000, does he pay development value levy of 40 per cent. on the difference between £105 and £3,000? We ought to have an explanation and not let this Resolution go through on the nod.
Obviously, the hon. Gentleman is confused. He has exerted himself strenuously in replying to the Second Reading debate from the Opposition Front Bench and he has not got this matter clear. It is consequential on Clause 25(2) of the Bill.
It was anticipated in the White Paper. We explained that, if there was development value, the development value would attract the levy. The levy is a universal charge, and it is right and proper that any development value realised should attract the levy. The whole principle of Part III of the Land Commission Act which the hon. Gentleman and I have discussed exhaustively is that development value which has already borne levy will not bear the levy again.
The right hon. Gentleman has not answered my question. This only goes half way. What is the next stage? When the tenant sells, we have to discover a base value and a market value on the sale in order to arrive at the net development value on which betterment levy is charged. On the sale what is the base value?
According to the Schedule to the Land Commission Act as it stands, it will be £105. So the tenant selling, after he has acquired the property compulsorily, would have to pay on the difference between £105 in my example and what he may sell the property for, perhaps £3,000 or £4,000.
The right hon. Gentleman ought to try to answer my hon. Friend's question. If he does not understand the Resolution which he has put to the House, he ought to say SO. [HON. MEMBERS: "Do you?"] I confess that I do not understand it. But at this stage, before we pass the Resolution, we are entitled to a clear explanation. I add the further question: if a tenant acquires ownership under the Bill, does he have to pay Capital Gains Tax if he sells at the other figure later on?
I respond at once to the right hon. Gentleman's invitation. I have explained that I cannot answer the hon. Gentleman's point because he referred to a case which did not involve development value at all. Obviously, he was not informed. We have published explanatory leaflets about Part III of the Land Commission Act, and I recommend hon. and right hon. Gentlemen to read them before they raise the matter again.