Clause 87

Part of Orders of the Day — Finance Bill – in the House of Commons at 6:30 pm on 8th May 1985.

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Photo of Austin Mitchell Austin Mitchell Chair, Treasury & Civil Service Sub-Committee, Opposition Whip (Commons) 6:30 pm, 8th May 1985

That was not my argument. I was saying that it is right to take back some element of the unearned improvement in land values. The principle has been a long-standing part of fiscal legislation and endeavour, dating back to the "people's Budget" of 1909.

One can argue about planning permission and how it should be pursued, but one cannot argue that people who have done nothing to increase the value of land should benefit from that increase, as they would if development land tax was abolished. It is an unearned profit, and it is right to tax it.

It has been shown that the income can be taxed without inhibiting development. Indeed, my hon. Friend the Member for Birmingham, Hodge Hill (Mr. Davis) produced telling figures in support of that argument. Despite all that the Government have done to increase interest rates, depress the building industry and drive builders into bankruptcy, there is still development, except in public sector housing. It is not true to say that the tax has inhibited development. The increase in value should be taxed because it is a socially produced increase from which the full benefit should not accrue to the landowner. It should accrue to the community.

Labour introduced development land tax, which accompanied the Community Land Act. It was intended as a step towards public ownership of all development land. That would seem to be right in principle. One can argue about the way in which it is operated and about whether one needs to go to the full 100 per cent., but the tax is an attempt to see land values accrue to the community, which in itself, is right. The idea was that there should be public ownership and that the profits should accrue to the community. That was the essence of the argument. It was a tax on the windfall profit.

7.30 pm

The exemptions allowed under the Labour Government were adequate to ensure that the system functioned efficiently and fairly. Local authorities, charities and anyone building a house for his own use have always been exempt. If an industrialist developed land for his own use, the tax was deferred until the property was sold, under Labour's scheme. Labour exempted the first £50,000 profit per year by any developer. Therefore, there were sufficient exemptions and allowances to make it a fair system and to embody the principle that I have emphasised is important.

I am glad to see the Liberals here in their serried ranks to back us, as they did in 1909, with the people's Budget. However, their Social Democratic party allies are not here—they were not here yesterday either. The new members of the alliance are not as strong in the defence of Lloyd George's tradition as we are in the rest of the House.

The principle is right and fair and should be maintained. What has been done by the Government is a straightforward, vicious, nasty, sordid and tawdry concession to their fat friends.