CLAUSE 3.

§ Mr. JAMES HOPE

When we were interrupted [at a quarter-past eight o'clock] I was putting a question to the Attorney-General as to the need of the words either as they stood in the Bill or as he proposes to amend them. At the end of the first clause these words are found: "And on each of those occasions the duty, or proportionate part of the 1947 duty, due, so far as it has not been paid on any previous occasion, shall be collected in accordance with the provisions of this Act." Then when we come to the present Amendment on the first sub-section of Clause 3: "On each occasion on which Increment Value Duty is collected on the increment value of any land, such an amount of duty shall be deemed to be due as the Commissioners determine, having regard to the amount of duty paid on previous occasions." I should have thought on the face of it that the words at the end of Clause 1 covered this point, and that neither the words of the Bill nor the Amendment were necessary.

§ Sir W. ROBSON

The words in Clause 1 deal simply with the levying of the duty. The words of section 1 of Clause 3 deal with the duty of the Commissioners in fixing the amount of the duty, and it is necessary in this case, precisely as it was in Clause 1, to have regard to the amount of duty paid on the previous occasion. This is not repeating what was in Clause 1, but giving the same direction in relation to a different matter.

§ Mr. PRETYMAN

I think there is a good deal to be said for the Attorney-General's words, and, from the point of view of those who have spoken from this side of the House, "giving credit for" is a more distinct direction than "having regard to," which may mean anything; but at the same time it again raises the same difficulty of the extraordinary results which will follow to people who own exactly the same kind of property, because what this enacts now clearly and distinctly, when these words are inserted, is that whenever Increment Value Duty becomes due any amounts previously paid on the same property will be deducted and credit will be given for them. Then Increment Value Duty is not always paid by the same person or by the same interest. Where you have a building lease granted on the property, and the two interests run concurrently, one waxing and the other waning you will have a tenant liable to pay the Increment Value Duty on a part of the interest, and then eventually that part of the interest on which the tenant has paid will pass to the owner, and the owner will then have to pay the balance of the duty. Therefore, the owner in fee simple of property of that description will, when the lease falls in, find that the Increment Value Duty which he has to pay not only depends upon whether 1948 there has been an increase in the value of the property during the currency of the lease, but will depend even more largely upon whether the leasehold interest of the property has happened to pass from hand to hand once or more than once during the currency of the lease, circumstances over which he can have no possible control, because an ordinary condition of such a lease is that the consent of the owner has to be obtained to any transfer, but that such consent shall not be unreasonably withheld. That being so the lease can be transferred from hand to hand without any action on the part of the landlord. He cannot prevent it. Yet these transfers are going in some cases to entirely absolve him, and in those cases where there has not been a transfer the whole duty will fall to be paid on the termination of the lease. That will involve very great inequality in the levying of the duty upon persons who are exactly similarly circumstanced as regards their relation to their own property and to the State. By the action of a third party, who is in no way concerned as between the State and the owner of the land, the amount of duty payable is going to be very largely affected, and I think we ought to have some further information and some statement from the Attorney-General as to what line the Government propose to take about it.

§ Sir W. ROBSON

I think the difficulty is not really germane to this Amendment. I quite appreciate the point which was put that conceivably it may arise, and I have already dealt with the point. I have stated that what the hon. Gentleman calls an inequality will arise in the circumstances to which he refers, but I do not regard it as an inequality in the sense of its being an inequity. It seems to me a natural and not an unreasonable consequence, that where a lessee transfers his interest several times he pays whatever Increment Duty arises in respect of his interest. We have decided that that Increment Duty shall be credited against the Increment Duty which may arise in respect of any interest in the land, that is to say, it shall go to frank the fee simple to that extent. I thought this was a proper and rather a generous thing to do, that we would not take the duty in respect to the same increment on both interests, and we adopted what we thought the more merciful and certainly the more generous alternative. But I do not think that gives rise to any inequity, because after all a reversioner when 1949 he comes into the increment does not take charge of the unearned amount which another reversioner would enjoy owing to the frequent changes of transfer on the part of the leaseholder. That is an inequality, but not in the sense of its being a hardship. It simply means that one leaseholder has mad3 many changes of interest, and on each change has paid quite justly and properly upon his increment. That has gone on for years, to the benefit not only of the leaseholder but of all other interests, and therefore he is exceptionally fortunate in the matter. There is no injustice to the reversioner. I need scarcely tell the Committee, what I have always been anxious to explain, that there is not the same exact incidence in all these cases, because in some cases, according to the circumstances, the reversioner is able to escape the full burden of the increment. A question arises which I do not think is germane to this Amendment at all. It is to be raised afterwards by the hon. Member for Windsor (Mr. Mason), and I think when that Amendment is reached will be the proper time to deal with certain observations as to how the division is to be made.

§ Mr. J. F. MASON

I desire to move the insertion at the end of section (1) of the words "and where apportionment of site value is necessary after Increment Duty has already been paid on any land as a whole, then the increment upon which duty has been already paid shall be apportioned in the same manner, but not necessarily in the same proportions, as the original site value." he point raised in this Amendment is one which I think it is certainly necessary to bring forward, because it follows upon something which is practically admitted by the Chancellor of the Exchequer, and which I think has received some consideration. I am not at all sure whether the deduction is adequately met by the words which have been inserted. I think I can best explain the meaning of the Amendment on the Paper by taking an imaginary case. In that way it will be easily demonstrated that the apportionment of the increment is not provided for in any part of the Bill. Suppose the owner of four acres of land of which the original site value has been declared to be £2,000; he leaves that land in exactly the same condition, and a few years later dies. Owing to various causes that land has increased in value, and on his death is declared to have an increment value 1950 beyond the £2,000 or £1,000, so that it is worth at the date of his death £3,000. Increment Duty will be paid on £1,000, that is to say, £200 will be paid. His successor holds the land for some time, and after that develops it. He begins by selling one acre, presumably the most favourable acre, for £l,000. It is clear, therefore, that the £l,000 again shows an increment on that one acre, and the duty has again to be paid on the sale—that is to say, duty is paid for the second time, duty having already been once paid on the death of the owner. The question arises how much Increment Duty is due? Sub-section (3) of Clause 2 provides that in a case of this kind original site value will be apportioned to various parts of the original four acres, so that one acre will be given an apportionment of the original site value, but not necessarily one-fourth. The sub-section (1) of Clause 3 provides that credit is to be given for duty paid on previous occasions. But how much is the duty paid on previous occasions on this particular acre? It is true that £200 has been paid in respect of the four acres, but it is natural to suppose that the acre, which has now been developed, has an advantage over the other three acres, and it is quite evident that it would not be fair to say that that acre had merely appreciated by one-fourth of £l,000. That is to say, the acre in question, which is now sold, will have accounted for more than one-fourth of the first increment of £1,000, and consequently, if that is so, it is absolutely necessary to apportion the first increment of £1,000 between the three acres, which are left in somewhat the same manner in which you apportioned the original site value over the various parts of the total area. I think this is a case which shows beyond doubt that some apportionment of the first increment is absolutely necessary where land is subdivided after one Increment Duty or two Increment Duties have already been paid. I am aware that in Clause 19 there is an occasion mentioned of apportionment, and a great deal of that clause would deal with cases of this kind, but I think it is necessary to point out that arrangement is made for apportionment only where it is necessary for purposes of assessment. Under Clause 2, as it now stands, after the alterations of yesterday and the Amendment of the Chancellor of the Exchequer, the owner has a right to ask for an apportionment of the original site value, for the purpose, as I gather from the speech of the Chancellor of the Exchequer, of 1951 getting some indication, for himself to guide him in the policy of development. That is to say, the owner under Clause 2 has the right to ask for an apportionment before he begins to work his land, in order to see bow much original site value is put on any particular plot, and it seems to me particularly important for the owner for the same reason also to know how much of the increment which already has been declared, and on which duty has been paid, has also been apportioned on plots and sub-divisions. To sum up: When sub-division of various lots of a given area is necessary after Increment Duty has already been paid once, or more than once, then that increment should be apportioned in the same manner, but not necessarily in the same proportion as the original site value had been apportioned.

§ Sir W. ROBSON

I am inclined to think, as a matter of fair construction, that the words just added, namely, "after giving credit for," would be construed by the court so as to have the effect desired by the hon. Member for Windsor (Mr. J. F. Mason), and which he seeks to achieve in this Amendment. But I quite agree after considering the hon. Member's Amendment that his words certainly make the matter more expressive. I think it is desirable not to leave to mere implication the apportionment of Increment Duty as well as the apportionment of increment value. That is what the hon. Member has brought out by his Amendment in his very useful point. But the words which he has chosen, I think he himself will agree, are not quite satisfactory. For instance, he said, "where apportionment of site value is necessary after Increment Duty has already been paid on any land as a whole": the words "as a whole" are not very convenient, and I am not very well satisfied with them, and I shall be glad if he will allow me to put in words indicating what both the hon. Member and myself are striving for, and to insert "where for the purpose of giving such credit," that is giving credit for the Increment Value Duty that has been paid "it becomes necessary to apportion any Increment Duty previously paid, the Commissioners shall make such apportionment of that duty as they may determine to be proper." The hon. Member has reached the same end by saying that the apportionment is to be made, of course, by 1952 the Commissioners, but it is not to be necessarily in the same proportion as the original site value. That is clear. The apportionment of the increment will, of course, not necessarily follow the apportionment of the site value; quite the reverse. So it should be left more or less in general terms. Personally, if the Committee desired the words to be inserted now, I should certainly do so, but I am bound to say that I think the better plan would be—and I shall be guided by the Committee in this matter—to leave the matter over until the Report stage, with an explicit pledge that the object sought to be achieved by the hon. Member shall be met by the Government in some well-considered form of words.

§ Mr. PRETYMAN

Do we or do we not vary the unit of valuation? You get the original unit of valuation of four acres. That is split up into a dozen different ownerships. You have got to go back in every case to the original unit of valuation, and you have a dozen different owners all at once of different parts of the property on which Increment Value Duty has been paid.

§ Sir W. ROBSON

I do not think it touches the unit of valuation. The case was put by the hon. Member for Windsor (Mr. Mason) where you have an increment value of one particular acre, that acre has to have allocated to it not merely its proportion of the original site value, but its proportion of the Increment Duty which has already been paid. That would be entirely a question of value. If it is paid as one interest there is no difficulty at all. Anyhow, the hon. and gallant Gentleman's warning shall not be lost sight of. It is quite understood that words are to be brought up at the Report stage which are to give effect to the hon. Member's Amendment, and also to take into consideration the suggestion of the hon. and gallant Gentleman.

§ Mr. WATSON RUTHERFORD

On the question of apportionment I venture to point out that if they had in the previous clause inserted words to say that upon each occasion upon which Increment Duty became payable such apportionment should be made as the Commissioners might determine and in the manner in which they might determine, then there would have been an end of these difficulties. That opportunity was lost, and we passed the clause in the shape in which it now appears 1953 on the Paper. The consequence is in dealing with the present clause we have been, by the Amendment we have passed a few moments ago, placed in the difficulty of having to consider these words of apportionment. I think it the most desirable course to leave the whole of these difficult words over to the Report stage, because it would be undesirable to frame in. a hurry or without mature consideration the words which are intended for all times to guide the Commissioners in this very difficult question, when two or three Increment Duties have already been paid on a piece of land in which all sorts of interests arise. The astounding difficulty of dealing with that question would be brought home to the Government more if they sat down to try to draft sensible words which would adequately meet the various occasions that may arise. Not only will they require to apportion the original value—that obviously must be apportioned to the new site—but they will require to apportion that original site value again when it is part of a piece that has already been apportioned, and, where anything has happened, they will require to do that over again to apportion the site value of a piece perhaps in quite a different way——

§ The DEPUTY-CHAIRMAN (Mr. Caldwell)

If the Amendment is to be withdrawn, I do not see any need for going into this discussion.

§ Mr. WATSON RUTHERFORD

Then we should oppose the Amendment being withdrawn. I am prepared to say that unless we are to have some intelligible machinery to carry out this. Bill, it would be our duty to stop at this point and insist on knowing how this is going to be done. At all events, I think we are entitled to insist upon trying to find out whether the Government have realised the astounding difficulties which may arise in almost the most simple transaction, and to meet which they are not making the faintest effort. It is all very fine to come here and alter this clause at the last moment with manuscript Amendments, while they actually tell us that they are not satisfied with those Amendments, and propose, therefore, to get rid of the difficulty for perhaps twelve months until this clause is taken on Report. I do not think that is a satisfactory position for the Government to take up. Whilst I for one would be prepared to admit that the wisest course the Government could take 5s to adjourn this difficulty as long as they 1954 possibly can in the hope that people will have forgotten it when it comes to be dealt with again, at the same time I think it is not treating this Committee fairly to put this most important question of machinery off to a remote date, and not to deal with it in Committee in some practical shape.

§ Mr. J. F. MASON

In view of what the hon. and learned Gentleman has said, I think it well to ask leave to withdraw my Amendment.

§ Sir W. ROBSON

The Noble Lord must see that this is a deduction not from the increment value, but from the Increment Duty itself. Death Duties are paid on the whole estate, and Increment Tax is paid on the increment, so that when it comes to making deductions in respect of the Death Duties and the Increment Taxes——

§ Viscount HELMSLEY

In respect of that land.

§ Sir W. ROBSON

The Noble Lord has drafted this Amendment rather hastily, but when you come to deduct all those sums Increment Value Duty has disappeared. When you have got to the end of your deductions you have entirely disposed 1956 of it, that is the consequence. On the merits itself there is no reason why, granting this to be a fair tax—and that is the assumption on which the Committee is proceeding—for deducting Estate Duties. There is one point which I think might fairly be considered, and we shall consider it. I think it arises on some later Amendment. We ought not undoubtedly to aggregate for the purposes of Estate Duty until we have deducted the amount of Increment Duty before we begin the aggregation of Estate Duties.

§ Viscount HELMSLEY

That is obvious.

§ Sir W. ROBSON

Estate Duties are paid on the whole value, the capital value and Increment Value Duty is taxed on a particular value for the reasons that have been urged so often in the course of this Committee stage This is a tax no doubt additional to the other taxes already existing on land and upon land-owners, just in the same way as you have Settlement Estate Duty, a tax which is additional to the ordinary Death Duty, and Succession Duties, which are additional to the Estate Duties. You have a great many taxes which are on different interests in land, and it would not be fair to say you are taxing the same thing twice over. You are taxing different interests in the same thing, but not twice over. We are adding Increment Value Duty to the burdens which fall on the land.

§ Mr. JOHN GRETTON

As far as I can make out the argument of the right hon Gentleman, it is that the Government, by existing taxation, are going to already appropriate the increment value and then for the purposes of this clause they are going to tax the estate for the money which has been already extracted from it. It appears to me that any proceedings of that kind is a complete condemnation of the whole process of taxation which they propose on the occasion of the death of the owner. I may have misunderstood the argument, but it occurs to me we really want some further explanation. A more amazing and astonishing argument from those benches opposite on the whole collection of arguments we have heard against the proposals we have made to improve the Bill we have not heard than that we have just listened to. It is an abominable injustice in many cases to tax the same property over and over again, and again on death, with an accumulation of taxes. I could understand that argument if it were urged by hon. Members sitting below 1957 the Gangway on this side, but advanced by the Government it amounts to a complete revolution of the whole policy which has hitherto directed taxation in this country. It is so remarkable that I think we should have a more clear and definite explanation than that given by the hon. and learned Gentleman (Sir W. Robson).

§ Mr. G. R. LANE-FOX

It is obvious this Amendment has been drafted rather hastily, but my Noble Friend did not ask the Attorney-General to accept the absolute words, but to accept the principle. It was not quite fair of the right hon. Gentleman in reply to say that the Amendment as drafted would not carry out the purpose. The argument of my Noble Friend was that, as the Prime Minister said that the reason for not taxing other increments was that they were already taxed in another form, then land should be treated exactly with the same degree of fairness as all the other forms of property. The answer of the learned Attorney-General is what does it matter; we have already two or three forms of Death Duties, and therefore why should we not put on another? If the Prime Minister's words are to be carried out, then some such Amendment as this should be accepted, and the Government ought to give the matter consideration.

§ Mr. PRETYMAN

I moved an Amendment to Clause 2 on this particular point, and there is a rather curious disagreement between hon. Gentlemen on the Front Bench, because the Chancellor of the Exchequer agreed to accept my Amendment, but in this form, that he would make the deduction in Part III. of the Bill, and that he would allow Increment Value Duty to be deducted first. The Chancellor of the Exchequer on July 7th said ["Official Report"]:— It is a case which I have been looking into, and it is one which I have to deal with, and I frankly admit that I am more favourable, in a sense, to the owner in my view than the hon. Gentleman himself. But I think he had better leave it to me, and I propose to deal with it on Part III. of the Bill, and I give him a promise that I will deal with it there. The point on which the right hon. Gentleman said that he was more favourable to the owner was a mathematical point, and on looking into the matter I find it makes absolutely no difference which you take first. I proposed, as does this Amendment, that the Death Duties should be taken first, and that Increment Duty should only be levied on the residue. The hon. Gentleman must be aware that Death Duties are not now levied on the same 1958 sum. There is, first, Estate Duty on settlement on the residue, and Succession Duty on the residue. It is obviously just that you cannot levy Increment Value Duty which is paid from the estate in Death Duties. It is quite immaterial, mathematically and financially, which you deduct first. The Chancellor of the Exchequer having given his definite undertaking that he would accept that principle, and that he would make the deduction when we come to Part III. of the Bill, and as he prefers to let the Increment Value Duty be paid first and the Death Duty afterwards, we shall raise no objection to that course. I regret I did not observe this sooner, and ask my hon. Friend to withdraw his Amendment, as the point is met by the Chancellor of the Exchequer.

§ Viscount HELMSLEY

I am not certain that the point is quite the same; but if it is, of course I will withdraw my Amendment.

§ Mr. PRETYMAN

Not Increment Tax?

§ Viscount HELMSLEY

There is that point in addition, and there is also the question whether it is the same to deduct the amount paid in Death Duties from the amount to be paid in Increment Duty as to deduct the amount paid in Increment Duty from the amount to be paid in Death Duties. It seems to me that my Amendment would produce a rather greater deduction than the Amendment which the Chancellor of the Exchequer has promised to accept. We have also had from the Attorney-General to-night the admission that he was prepared to deduct from the amount payable in Death Duties the amount paid in Increment Duty. I do not quite see that that is the same as I am proposing, and I should like some explanation as to what the Government really propose to do before I withdraw the Amendment. The criticism of the Attorney-General that my Amendment was too widely drawn has a certain amount of weight. It does cover rather more ground than I intended. I did not mean to deduct the amount of Death Duties payable over the whole estate, but the additional amount due to the increment; and if the Government can see their way to adopt the principle, there will be no difficulty whatever in adjusting the words.

§ The SOLICITOR-GENERAL for SCOTLAND (Mr. A. Dewar)

I am afraid that all the information I can give the Noble 1959 Lord, and all that he can possibly expect from me is this. If it be that his Amendment comes within the promise made by the Chancellor of the Exchequer, it will be given effect to. On the other hand, if it does not, for the reasons stated by the Attorney-General, it will not be given effect to.

§ Mr. WATSON RUTHERFORD

I think we ought to be deeply grateful to the Solicitor-General for Scotland for the exceedingly logical method in which he has discharged the trust reposed in him during his temporary occupancy of that illustrious Bench. The Attorney-General has three methods of dealing with Amendments. The first is to give us a highly technical legal disquisition. He has spared us that on this occasion. His second method is to give us a paternal lecture as to how we ought to read the Bill, and where we shall find things, which, when we look into the clauses referred to, we are unable to discover. No doubt they are really there if only we could see them. His third method is, in a speech altogether apart from the real object of the Amendment, to make on behalf of the Government a most damaging admission. That is the method he has adopted on this occasion. This Amendment says that on the payment of Increment Duty there shall be deducted an allowance for the payment of Death Duties and for the payment of Income Tax. I cannot follow my Noble Friend in regard to an allowance for Income Tax, because I do not see that Income Tax has anything whatever to do with Increment Duty. But the Attorney-General made the astonishing admission that if the Government allowed Death Duties and Income Tax to be deducted there would be no Increment Duty to pay. That is a most damaging admission, because it means that the Government, in asking for this Increment Duty, are asking for a tax which they have already collected under other names. I do not think that is what they intended, but that is what the Attorney-General actually said and gave as his reason for rejecting the Amendment. I listened very carefully to the Chancellor of the Exchequer last week upon an Amendment to the same effect as this, and if I understood him aright he distinctly promised that there should be a deduction with respect to the two duties where they fell upon the same object. That is to say, if increment accrued to a property and Increment Duty became payable, no Death 1960 Duties should be collected in respect of that increment or in respect of that duty—I am not quite certain which. My Noble Friend has explained that he does not wish to go quite so far as the actual words of his Amendment. If the Amendment were carried so as to say that the same property should not pay two taxes it would be absurd; I think my Noble Friend would have to modify the words in some way so as to make them reasonable under the circumstances; but what he really desires is, I think, perfectly just.

§ Viscount HELMSLEY

I understand from the hon. and gallant Member below me (Mr. Pretyman) that the substance of this Amendment has been promised by the Chancellor of the Exchequer.

§ Mr. LLOYD-GEORGE

I gave a very definite promise to deal with it, and my recollection is that I gave a promise much more favourable than the hon. and gallant Member was trying to extract from me.

§ Mr. PRETYMAN

Take a pencil and a piece of paper; the two sums work out exactly the same. Take off 20 per cent., and afterwards 10 per cent. on the residue, and it is exactly the same as if you took off 10 per cent. and 20 per cent. off the residue. [HON. MEMBERS: "No, no."] I should not make a statement to the Committee if I had not tried it. Therefore that underlies the fact of our insistence on the point. This Debate has arisen because the Attorney-General, on behalf of the Government, has been refusing this suggestion.

§ Mr. LLOYD-GEOGE

I myself gave a definite promise on Part 3 of the Bill.

§ Mr. PRETYMAN

I stated so, and asked the Noble Lord to withdraw his Amendment.

§ Viscount HELMSLEY

There still remains the question of the Income Tax, which is not covered. I maintain that if Income Tax has been paid in respect of this particular increment this ought to be adopted. It is obviously fair, and it is putting into formal words the argument which was raised by the Prime Minister at Southport. I hope the Chancellor of the Exchequer will consider that point of view as well. As I understand from the Government there is a pledge that really the substance of this Amendment will be met—although no one would have gathered so from the Attorney-General—I withdraw the Amendment.

§ Mr. A. DEWAR

We have made arrangements on the lines suggested by the hon. Gentleman for the collection of the debt. What the hon. Member intends 1962 will be a fact. It is a short point, and I do not think I need go into it further.

§ Mr. CLYDE

As the hon. Member puts it the purpose of section (2) and even of section (3), but particularly section (2) is to provide the machinery for collection, but there is not a single bit of machinery either in section (2) or (3). It has got nothing to do with machinery. I admit that the hon. and learned Gentleman will find that in section (4) but section (3) has to do with something else altogether. Accordingly it would not do to say that there is no inconsistency in the words proposed under section (2), and what the Committee have determined in the preceding section. On the contrary it seems to me that if the analogy to which appeal has been made so frequently is of any value at all, the exact analogous position of the Act of 1S94 is section (6). After all what section (6) was dealing with was the duty, and a heavy duty moreover, payable on death. So is this. I submit that if the analogy of 1894 has any value, it ought to be followed. My answer is it is nothing to do with machinery at all; it relates to the case of the passing on death, as under the Act of 1904. Surely it would be reasonable to treat them both in the same way? I agree you cannot confound the case of sales with that of passing at death, and therefore I submit that the reasons advanced for not accepting this Amendment are wholly insufficient, and that the Amendment is fully justified.

§ Mr. LANE-FOX

The answer given by the hon. and learned Gentleman does not meet the point at all. The whole point of my hon. Friend's argument was that in the clause as it stands it does not provide for mortgages. I submit to the Government that they ought to give some answer to these points, raised very clearly and very properly. It is quite obvious that the hon. and learned Gentleman the Solicitor-General for Scotland did not appreciate the point that was made.

§ Mr. LLOYD-GEORGE

After listening very carefully to the speech of the hon. and learned Gentleman (Mr. Clyde), I would like him to explain what payment by instalments has to do with the omission of these words. I confess I am unable to follow his arguments so far.

§ Mr. CLYDE

As I understand, the present Amendment involves as a sequel to 1963 it the Amendment lower down on the Paper, which seeks to insert "at such times and in such instalments as the Commissioners may think fit."

§ Mr. LLOYD-GEORGE

You mean a consequential Amendment?

§ Mr. CLYDE

Yes. I am sure the Chancellor of the Exchequer sees that that could not be applied to sale, and therefore could not be applied to transfer.

§ Mr. J. F. MASON

There seems to be some difficulty about the meaning of these words. The reason for desiring to remove the words "transfer or" is that in the case of mortgage which amounts to the whole of the amount of the sale there would be some difficulty in paying the whole of the duty at once, and I desire to get transfer put into the same category in sub-section (3). It seems to me that my object might be equally met by my other Amendment, and if at the end of sub-section (2) you put in the words "at such times and in such instalments as the Commissioners may think fit," I would withdraw my Amendment for the omission of the words "transfer or," the object being that the duty should be paid in instalments instead of at once. I might point out in case of land passing on death it is only reasonable that it should be paid in instalments, because already the duty at death is paid in instalments.

§ Mr. LLOYD-GEORGE

I think the hon. Member will find this is provided for by the Act. This Amendment is only the first of a series by the hon. Gentleman opposite

§ Mr. J. F. MASON

I do not think the right hon. Gentleman has been dealing with the same point. I propose these two Amendments as one alternative to the other, and my hon. Friend (Mr. Clyde) took them as consequential one on the other.

§ Mr. RAWLINSON

My hon. Friend was not dealing with Death Duties at all, but with the question of transfer on sale. The Amendment is to leave out "transfer or." The proposition is to exclude the occasion of the sale of land from section (2), which makes the duty collectable in one lump sum. The case given in support of this Amendment has not been dealt with at all. The point was that in the case of a mortgage which had exhausted the whole value of the estate, it would be exceedingly inconvenient for the person liable to find the whole of that duty at that particular moment, and it is only fair that it should come under section (3). That point has not been answered by the Solicitor-General for Scotland.

§ Mr. JAMES HOPE

The Chancellor of the Exchequer has referred the Committee to Clause 5. Is it not a fact that in that case the payment would be spread over eight years?

§ Mr. J. F. HOPE

On a point of order: Do I understand you to rule the whole question of instalments out of order. I thought my hon. Friend the Member for Windsor (Mr. Mason) proposed first the omission of the words "transfer or" with the intention that, if that were rejected, the question of the instalment might be dealt with as a second alternative.

§ Mr. LLOYD-GEORGE

Two or three speeches were delivered on that specific point during the discussion on the last Amendment.

§ The CHAIRMAN (Mr. Emmott)

I certainly thought that point was disposed of.

§ Mr. J. F. MASON

I think the difficulties likely to arise in the case of passing on death of the fee simple in land might to a certain extent be met if the Commissioners had power to make rules in the same way as is provided in section (3). It appears to me that it is necessary to do something to avoid having laid down hard and fast rules in these particular cases, that the whole amount of duty shall be collected in one sum. I fail to understand what objection there is to giving some facilities for paying in a more convenient manner. I take it if the Commissioners were able to make rules for the purpose it would include the power to make arrangements for payment by instalments, or otherwise, and such rules would to a certain extent facilitate the working of the section. I beg to move.

§ Sir W. ROBSON

Of course rules are not so necessary in this case as they are in the following section (3), but at all events it may be desirable that the Commissioners should lay down any regulations which they may think necessary to deal with cases of death or sale.

§ Mr. JAMES HOPE

I am not sure that my hon. Friend is altogether wise in moving this Amendment, because he is giving the Commissioners a very large discretion in admitting these rules, and when he spoke of the analogy of the next section I may say that I take very strong objection to it, because of the powers given to the Commissioners there, and Amendments have been put down providing that the rules to be framed by the Commissioners in that section shall not take effect until they have been reviewed by Parliament. I do not know that the occasion on this section is so important, but I view with some suspicion the readiness of the Attorney-General to accept this Amendment, and if these words are passed I would submit that very likely the same reference to Parliament, and hanging the rules up until the assent of Parliament has been given, will be necessary in this section, as we above the Gangway hold that it will be necessary in the section to come. Therefore I am not disposed to vote for the Amendment.

§ Mr. BALFOUR

Would not the objection of my hon. Friend be met if we understood from the Government that any qualification introduced in section (3) as to rules to be laid down by the Commissioners shall also be applied to section (2). I think it would be inconvenient to discuss this question of whether the rules should be laid on the Table, but if that Amendment is introduced in section (3) I have no doubt the Government will be prepared to introduce it on Report in this section.

§ Mr. LLOYD-GEORGE

I quite accept the view taken by the Leader of the Opposition.

§ Sir F. BANBURY

I object to leaving these powers to the Commissioners. Am I to understand that the right hon. Gentleman will limit the power of the Commissioners to make rules in a manner to be discussed later on?

§ Mr. LLOYD-GEORGE

That is not the point. That point is raised specifically, on 1969 the Amendment of the right hon. Gentleman, the Member for St. George's, Hanover Square (Mr. Lyttelton). The only undertaking is that whatever limitation there is would apply to these rules as well as to the others. That is the point put by the Leader of the Opposition, and to that I assented.

§ Sir W. ROBSON

I think the hon. Member underrates his intelligence in dealing with the clause, and very much overrates my delight in explaining such a point as he has raised. I have difficulty in connecting the point raised by the hon. Gentleman with the Amendment in any shape or form.

§ Mr. WATSON RUTHERFORD

I thought you would.

§ Sir W. ROBSON

I will make some observations with the object of satisfying the 1970 hon. Gentleman on the question of payment by instalments. Under section (2) we have payment upon sale when the whole amount is being received by the vendor. Why should he not pay the whole amount subject to the Amendment which I have accepted as to rules which the Commissioners may make as to collection. In section (3) we are dealing with payments which will be of a periodical character For instance, the duty upon the grant of a lease will be assessed under this section. The consideration for a lease may well consist of periodical payments, and it is convenient therefore in such a case that there should be power given to the Commissioners to collect by instalments. That power is given by section (5) of Clause 4. When we come to deal with payments on death under Clause 5, we provide that the powers contained in the Finance Act of 1894 shall apply. I think I have made the point clear.

§ Mr. WATSON RUTHERFORD

It has been made so clear by the Attorney-General that the two clauses are inconsistent that if he wishes to put them in the Bill I think we had better consider it. I would therefore ask leave to withdraw my Amendment.

§ Sir W. ROBSON

I gather that the intention of the hon. Member really is to introduce a suhstantive Amendment?

§ Mr. JAMES HOPE

That is so. I thought it necessary to omit the word in order to bring in the substantive Amendment.

§ Sir W. ROBSON

That hardly is a matter that arises subsequently.

§ The CHAIRMAN

As I understand, the two arguments substantially arise now.

§ Sir W. ROBSON

The substantive Amendment is "to leave out from 'collected' to the end of section (3), and to insert (so far as it has not been paid on any previous occasion) 'as bears the same proportion to the whole amount of the Increment Value Duty on the land as the value of the interest bears to the site value of the land.'" That is the substance of the hon. Member's Amendment. I think it is founded upon a mistaken conception of how the duty will be calculated in such a case. The hon. Member denies that the increment shall be assessed in the same proportion as the value of the interest appears to be to the value of the land. I think there are instances where that will not be the case. Take a long leasehold interest at a time when the leaseholder's interest is five-sixths of the increment value and the reversioner's interest one-sixth. Let us suppose that the leaseholder makes a claim, there being then an interest. The leaseholder has then made up five-sixths of the interest, leaving one-sixth which has been allocated to the share of the reversioner. Later on—the increment not altering: I am keeping it at the same figures—the increment will remain stable when the leaseholder's interest is down to one-sixth and the reversioner's has become five-sixths, because the reversion may have fallen in. The result of the hon. Member's words if adopted would be that the leaseholder would pay the whole of the increment, appropriating his share when the sale would be brought into this fresh apportionment, because if the reversioner sold when his interest was only one-sixth 1972 of the increment he would claim under the hon. Member's words an allocation of part of that one-sixth of the increment in the leaseholder's interest. He would say, "You are only to put against me exactly the proportion of the value of the increment which, in my case one-sixth, it bears to the site value of the land," the truth being that there ought to be put against him the whole of the one-sixth increment which had been registered and appropriated as his share when the leaseholder's interest was five-sixth. I hope the hon. Gentleman will take my assurance that the words he desires to add would introduce a proportion into the case where no such proportion would be equitable as between the parties concerned. The proper sum to be paid by the reversioner when he ceases his interest towards the end of the lease, would be at least the proportion which he ought to have paid if he had paid at the time of the original appropriation.

§ Mr. JAMES HOPE

I confess I have not absolutely followed every word the hon. and learned Gentleman has said with full appreciation. It arises from the extraordinary method of including the site value where the interest passes under Clause 2. The Amendment is perfectly logical as applied to Clause 2. It sheds a rather lurid light on the way in which increment value is computed under Clause 2. Under that clause the site value is got by certain deductions from the fee simple, and the fee simple is got at by calculating the value of the interest passing. It was argued then, and not disputed, that that was often an exceedingly fallacious way of calculating the value of the fee simple, and, consequently, a fallacious way of calculating the site value. If that method be adhered to, my Amendment follows logically. If my Amendment results in injustice it only follows from the extraordinary way in which the fee simple, and therefore the site value, is arrived at in Clause 2 (c) of the Bill, and that the whole method is entirely wrong.

§ Mr. WATSON RUTHERFORD

The amendment is an attempt to introduce mathematical accuracy into the calculation where it is not possible, as the learned Attorney-General has explained for a variety of reasons, with any justice. When you come really to look at the, facts, to introduce any mathematical accuracy whatever, or to get any real sensible relation. As the learned Attorney-General has pointed out in certain cases of leases what 1973 is the position? The lessor and the lessee are the two persons interested in the property at the moment. Their respective interests as between one another are constantly changing from the very first year when the lease is made. Suppose the lease is for 75 years, from the very first year right down to the end of it the proportion of ownership as between the lessor and lessee is constantly changing. The lessee at the beginning especially has got a very considerable interest in the property. If the lessee dies or assigns his interest, there is a very large proportion of the Increment Duty payable at that moment. Supposing, after ten years passes along, the owner of the fee simple dies, there again his interest is quite a different proportion at that date from what it would have been if he happened to die two years earlier or if his life had been prolonged for three or four years more. There is not only that difficulty, but the uncertainty of the increment, which is also continually altering. The land may have risen in value owing to a variety of circumstances, which may affect one corner of the property and not the rest. I could give numerous illustrations showing this to be the case. Then, again, you have got almost every other factor in value and in increment which attached to the original site attaching to the new site, or proportionate part. It is practically impossible to draft any clause which would adequately describe the maze of calculations and of apportionments into which this Bill is bound inevitably to lead. Therefore the learned Attorney-General was perfectly right when he said it was not possible for him to accept an Amendment to make mathematical or arithmetical sense of the position. Even with regard to one illustration which he gave he very carefully guarded himself, and stipulated that you must not have any variation in any of the other interests affected, because, if you have, you would make confusion worse confounded. I do not think we could have a better illustration after all these days and nights of discussion on this Bill of the utter impracticability and impossibility of the machinery by which this Bill is sought to be carried out than the illustration we have brought about by this Amendment, and the admissions of the Attorney-General himself.

§ Mr. BALFOUR

I think the point is really an important one. My hon. Friend (Mr. Rutherford) seems to regard the case as so complicated that no simple arith- 1974 metical statement will do justice as between the parties. That may be true, though I am not sure, that it is. But if it is true, we ought, before we leave the section, to know on what principle the Commissioners are to act. The suggestion of my hon. Friend (Mr. James Hope) is that when, in the case of a property which belongs in part to the freeholder and in part to the lessor, Increment Duty has to be collected it should be collected in proportion to the interests of the various parties concerned in the property. That seems quite simple and, on the face of it, quite just. The Attorney-General made a speech, which I am sure he endeavoured to make clear, and tried to prove that to make each person pay in proportion to his interest in the property would not be fair. Did anybody in the House understand the Attorney-General's argument? I am sure he made it as clear as it could be made, but I did not understand it, and I do not believe a single Member who listened to him understood it. I do not believe the Chancellor of the Exchequer himself understood it. The Amendment we do understand, and it seems to be perfectly just. But the matter is so complicated, that I may be wrong. There may lurk behind this apparently simple and just Amendment some fallacy which at present I do not see. Does anybody see the fallacy? If it is unjust—as it may be; the matter is so complicated—we ought to be told why it is unjust, and to have from the Government some indication of how the unfortunate people concerned are to discover what they have to pay to the State on account of Increment Value. That should be explained by the Government, unless they plead guilty to having brought forward a Bill which, perhaps from the nature of the case, or through faulty drafting, is of so incomprehensible a character that the vast interests it affects will be as little able to understand what they have to do and why they have to do it, as this Committee is able to understand the provisions it is endeavouring to, and I suppose will, pass, without the smallest conception of upon what substantial grounds the policy is based.

§ Sir W. ROBSON

Let me try, if I can to put in a somewhat simpler form, why I think the Amendment of the hon. Member is unnecessary. He says, that under his Amendment, whenever he comes to collect increment value you must collect it. You must, he says, collect it in such proportion 1975 as the value of the interest appears to the site value of the land. I take the ease of where there is a leaseholder who made a sale at an early period of his lease, when he had the greater part of the value. His value, of course, is a waning value; the reversioner's interest is a waxing value. The increment attached to the site value remains, in my hypothesis, the same. The leaseholder makes a sale of his interest, of which, at the time, he has five-sixths. The Commissioners say: "You have five-sixths of the interest at this moment, if you sell your land you will get five-sixths of the value and there will be one-sixth left for the reversioner." Years roll on. For the purpose of the illustration, the increment remains exactly the same, but the leaseholder's interest gradually diminishes. The reversioner's interest gradually increases. The reversioner still remains liable. Nothing has occurred to alter his liability for the one-sixth of the increment value. That is the way in which the increment value was understood: that was the proportion in which it was divided—five-sixths and one-sixth. Nothing has happened to alter the amount of the increment. But something has happened to increase the reversioner's interest. The reversioner sells. How much ought he to pay? On one-sixth, which is the interest against him all the time. The hon. Member says: "No; that one-sixth which is to be collected shall be collected in the proportion in which your interest appears to the complete site value of the land at the time of the collection." By this time the reversioner has got five-sixths interest, and so he will not pay the whole of it. Part of it will be turned over to the leaseholder, who has paid his full share a long time before. Under these circumstances it is not a wise plan which compels the Commissioners every time they collect the duty to have regard, not to the amount of duty which has actually accrued against each particular interest and ought to be paid as soon as the occasion arises, but to have regard only to the proportionate value of that particular interest to the whole site value at that time. It is right when you are taking the increment on a transfer or a sale to then treat the proportion between the interest and the site value as the amount which ought to be collected; but it is quite wrong to do it in this particular case. It is quite wrong to take the test as suggested by the hon. Member's Amendment, because it would 1976 put upon every leaseholder a part of the Increment Value Duty that he ought not to bear. He has paid the full five-sixths——

§ Mr. BALFOUR

He paid nothing!

§ Sir W. ROBSON

The payment was made by the leaseholder. I am treating one person as representing the increment. It is clearly unfair to throw over the leaseholder's interest whic