Mrs. Margaret Thatcher (Finchley)
It is my pleasant privilege to add my congratulations to my hon. Friend the [column 798]Member for the Cities of London and Westminster (Mr. John Smith) on his maiden speech. There is only one way in which I can describe it. It was outstanding among maiden speeches in he House both in its original content and in the way in which it was delivered. I am sure that we all look forward to hearing my hon. Friend when he can be more controversial than he was today.
I was particularly glad that he mentioned the subject of charities in connection with the Bill. In my constituency one piece of land was sold at an enormous price which was a tremendous help to an old people's home who happened to own it. It was one and a half acres and it was sold for £360,000 to a development company. Needless to say, the money was a godsend to the home which for the first time in its life was able to provide proper accommodation, a purpose-built home, and a proper endowment. So there are occasions when large prices for land can be of tremendous benefit to charities.
Whether charities would still be exempt under the Bill in a case like that, I, in common with others, have not yet been able to decipher. I have a great deal of sympathy with the hon. Member for Nottingham, Central (Mr. Dunnett) who said that he did not understand much of the Bill. He then concluded that he would commend it. I do not understand a great deal of it and, therefore, unlike him, I am not prepared to commend it to the House
Many major points have been made and I should like to refer to some of them. I shall take the first head, that of individual rights. A number of Clauses are designed to over-ride all individual rights to an extent which we never thought would be introduced by any Government in peacetime. My right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) has already referred to the provisions in Schedule 2 relating to the service of notices. These may be so curtailed that the person whose rights are to be taken away or affected may never even know about it.
Further, under the same Schedule, the Minister can dispense with a public inquiry. The relevant paragraph says:
“The Minister … shall not be required … to cause a public local inquiry to be held, or to afford to an objector an opportunity of appearing before and being heard by a person [column 799]appointed by that Minister for the purpose, unless in the circumstances of the case the Minister considers it expedient to do so.”
So the general rule that everyone has a right to be heard has now been changed and the general rule is to be that no one has a right to be heard unless the Minister grants him one. I am amazed that any party could put such a provision into legislation, for this is an arbitrary power, indeed.
Moreover, when notices have been curtailed and when inquiries have been dispensed with, there is a specially expedited planning procedure to hurry things along as quickly as possible. It is true that there has been an expedited planning procedure before. There was one in the Consolidated Town and Planning Act, 1962, but its use was strictly circumscribed. It was to be used only in the exceptional case. Special application had to be made to the Minister for its use in each individual case and he could grant that application only if he considered that it was urgently necessary in the public interest to do so. Under the Bill the Ministry may direct the procedure to apply by order to very large groups of transactions.
Once again we have the spectacle of the exceptional power coming to be used as a general rule against the individual. Once expedited planning procedure has been invoked, an expedited vesting declaration can then be made. Under previous Acts, this again was an exceptional measure for exceptional circumstances. Now one finds that it is not an exceptional Measure, but it may be used, or could be used, or could be used, by the Land Commission in all cases of compulsory purchase, and that the period is reduced to 14 days. The position was put very well in a letter in The Times dated 8th January, 1966, which summed up the position as follows.
“After regulations authorised by the Bill have been made the Commission can draft Compulsory Purchase Orders without specifying the purpose for which they require the land, they have no need to advertise and there are less stringent provisions for serving notices. The Minister can then confirm the Compulsory Purchase Order without a public inquiry. The Commission can then vest the land in themselves by a vesting declaration and enter upon it 14 days later. Experience shows that it may be years later before the overburdened Valuation Department of the Inland Revenue can agree the compensation for the party dispossessed in this summary manner.”
[column 800]No Bill should contain these sweeping powers.
Turning to the effect of the proposed Bill on industry, Harold Wilsonthe Prime Minister said last weekend, after the Hull by-election, that there was a need to economies in Government expenditure. I did not get that impression from Bills and Papers published before the Hull by-election, but this was so afterwards. He also said that there was an urgent need to modernise industry. This Bill, coming two days after the speech, provides for unnecessary expenditure on the setting up of a Land Commission and for a tax on modernisation. One can conclude that, whatever the Prime Minister said Saturday, the reverse is to be done by the Bill in the House on Monday.
Under the Bill any project of material development becomes liable for the levy. This applies to industries as well as to house building and to development. If the owner of a factory who is successful wishes to extend his premises and obtains planning permission to do so, he becomes liable for a levy as soon as the first trench is dug in order to put in the foundations of the extension. This can only add to the costs of modernisation, and it is quite outside the scope of the Bill, or the reasons existing in the public mind for which this Bill was introduced.
Added to that, when the industrialist has secured planning permission for the extension and, if he is fortunate, an industrial development certificate, he may then be liable, under the powers given to the Land Commission, after the second appointed day, to have the whole extension compulsorily acquired by the Land Commission. One should perhaps say that the Land Commission is generous, for the Bill provides for an industry to serve notice on it so that the industry may check whether it will be liable to a compulsory purchase order.
This is little consolation to a person who has been successful and wishes to expand, who has gone through all the difficulties of obtaining local authority permission and has provided finance. These are just a part of the problems facing industry. The Confederation of British Industry memorandum has this to say about compulsory purchase.
“With regard to 6(3a) large industrial units are not developed overnight and planning permission may therefore be obtained some time [column 801]before the stage of development for which it is needed is reached. Industry would be very uneasy if this were made the pretext for compulsory acquisition”
Hon. Members will appreciate that after the second appointed day the Land Commission has power to acquire all land on which there is planning permission. That applies to industry just as much as to any other land.
A third effect on industry is that to which my right hon. Friend the Member for Kingston-upon-Thames referred about minerals. When land containing minerals is sold for development, it will be liable, naturally, to the levy. But, as the Bill stands, there will also be a levy when those minerals commence to be extracted. This is not a levy on betterment of the land. This is a levy on depletion of the land. It is absurd to attempt to levy a charge in those circumstances.
So much for the effect of the Bill on industry. Let it be clearly understood that F. Willeythe Minister has brought before the House a Bill which deliberately imposes a tax on the modernisation of industry and which deliberately exposes industries to compulsory purchase by the Land Commission. In one of the Schedules of the Bill there is provision that where part of a factory has been acquired by the Commission the Commission can be asked to purchase the rest. That, too, is small consolation to the successful industrialist.
I turn to the effect on house prices. I take the view that any levy will put up the price of land. Therefore, it is very necessary to keep it down as far as possible. If the Bill eventually gets through, the Minister should consider the possibility of reducing as well as of increasing it. One would think that if he were concerned at the price of land he would take powers to reduce the levy if the first level were to prove too high.
With regard to private house development, it is fairly certain that the cost of land will rise in any event, because as long as inflation and a high demand for housing continue there will inevitably be an increased demand for land. This is so not only in this country but the world over, since land prices rise wherever there are similar conditions. There was a seminar on the cost and price of land in Paris last year. People who read the report of that seminar would have the impression that rising land prices were [column 802]a problem wherever there was an urban centre and high demand. It is not a problem which it is easy to solve by any particular method.
The special effect on the price of houses for private development will be very much felt in the type of case where there is a large garden attached to a house for which planning permission can be given and upon which a number of houses are erected. I have very much in mind the Victorian house in some of the suburbs in London which often is demolished and a number of flats or houses are put up in its place. This kind of house is characterised by there being a difference between its existing use value as a single house and the site value. A levy based on 110 per cent. of the current use value would take away some of the profit to the vendor. If what he is left with is so small in amount that it is not a sufficient inducement for him to move, the land will not come into the market.
Perhaps an example will make what I have said clearer. The existing use value of the house might be £10,000 and its site value £14,000. I have a specific case in mind when I use these figures. At present the levy would be chargeable on £3,000. The vendor would have £1,800 left when the whole transaction had been completed. I doubt whether that would be a sufficient inducement for him to move to find another place, possibly at greater cost, and to enter into all the expense of moving. I should know because I moved last Monday and I have now become a constituent of my hon. Friend John Smiththe Member for the Cities of London and Westminster who today has made his maiden speech, and the costs of moving are always more expensive than one thinks.
Clearly, if not enough inducement is left by the operation of the levy, the site value price will go up so that the vendor will have enough money in his pocket. This means that the price of land for housing will rise. Alternatively, it will not come on to the market. One must not underestimate the tremendous value to the housing programme of land which is supplied in this kind of way. It provides land for a considerable number of houses. [column 803]
I turn now to the effects upon the commercial developer. There have been a number of hard words today about commercial development. One should recognise at the outset that the commercial developer has performed a tremendous service in partnership with local authorities in redeveloping urban centres. He has often done it without a penny cost to the taxpayer or to the ratepayer and sometimes with great benefit to the ratepayer. One of the great problems affecting the commercial developer is that the development is often only marginal and the profit upon it very small indeed. It could easily be wiped out by the imposition of the levy. The other great practical problem facing the commercial developer is that, as the Bill is drafted, it is practically impossible for him to judge now much levy he will have to pay on the development, which he may have taken years to plan.
I have the impression from the Minister that he thought that many of the tasks of valuation would be quite simple. In the kind of case undertaken by the commercial developer, they will be extremely complicated. He might acquire the land over a large number of years. Various parts of the whole site will be liable to different amounts of levy. There is no provision in the Bill, as there is in the Stamp Duty legislation, whereby the commercial developer or any other developer can ask the Commission to state what amount the levy will be. He is, therefore, in a position of having to embark upon an expensive development, borrowing money at very high cost, without knowing what his liabilities will be. Bearing in mind that margins on some commercial development are as little as 2½ per cent., there is no room for this kind of uncertainty and it may well be that such development will be stopped altogether.
I turn now to the taxation provisions, because the development levy is in reality a tax. It is called a levy, but it is another form of tax. This is a form of Finance Bill, the tax being partly in this Bill and partly in the Finance Bill. It has always been a cardinal principle of taxation law that tax should be payable only where a charge is clearly imposed by Statute. Here, however, whatever there is in the [column 804]Bill, one thing which is certain is that it is not clear. This is one of the most complicated charging provisions that I have ever seen. It is impossible even for a valuer coupled with an accountant and coupled with a barrister to say what amount of levy would be chargeable. The uncertainty which is being created is tremendous.
There is another serious aspect of the taxation provisions of the Bill. First, they attempt to impose taxation by regulation. I should have thought that had we been a colony, we would set up an illegal régime if the attempt was made to impose taxation by regulation. Under Clause 34, there is a great sweeping up provision—Case F—which is similar in some ways to the old Case VI under Schedule D, but the old Schedule D was clearly defined by Statute. Here, the Minister has said, “There may be other cases where I want to impose a levy. I do not know quite what they are, therefore I will ask the House for powers to impose taxation on these by regulation. Again, one would not expect any Government to bring such powers before this House, bearing in mind that Parliamentary representation and control have always been fundamental to taxation.
The number of sanctions which empower the Minister to issue regulations is very great indeed. Also relevant to the taxation regulations aspect are paragraph 8 of Schedule 7 and paragraph 26 of Schedule 4. I think these provisions are because the Minister knows there will not be enough valuers to do the job properly, and therefore he takes a short cut by providing for valuation by regulation, and not of the event itself. That is quite wrong.
Further he takes powers to exempt certain cases from the levy by regulation. If he starts to take such powers what he is really saying is, “I have already taken powers too great, so I am going to ask you to let me dispense with some of them.” He should not take the powers in the first instance.
I have said something about the complexity of the taxation provisions. In addition to the complexity there is also the duty to notify the Commission, and this covers some six pages or more in the Bill. The procedure for notification is different according to the chargeable transaction. I should like Arthur Skeffingtonthe Joint [column 805]Parliamentary Secretary to give some indication of what sort of levy would be chargeable in a case such as the following, a very common case but one which, I think, illustrates the tremendous difficulties of valuation.
Suppose there is a shop in a commercial centre and it becomes vacant; the neighbouring shop requires it for extension of its premises; a competitor wants that shop in order to compete with the neighbour; the developer also wants the shop. All three attend the auction. Whatever price is paid for whatever use will be the highest price, and it must include development value. That transaction will have to be notified to the Commission. The Commission will have to decide how much levy is chargeable. Perhaps the Joint Parliamentary Secretary will be able to tell us how it will be calculated in a case like that.
Then it will have to go to the Inland Revenue to decide how much Capital Gains Tax will be chargeable. Every single transaction will have to be notified to the Land Commission. It will have to scrutinise it to see how much levy is chargeable, how much Capital Gains Tax is chargeable. Some may be chargeable, none may be chargeable; but the administrative problem will be enormous, and indeed, so great as to make the Bill almost unworkable.
Once the transaction has been notified to the Land Commission the Commission then has to give to the person who has given notice a counter-notice “as soon as is practicable” . So one gives notice that there has been a transaction, and the only duty upon the Commission is to give one a counter-notice “as soon as is practicable” . So one may go for months without knowing whether any levy is chargeable at all and the Commission may never have to tell one till the end of six years how much. This really is administrative nonsense.
There is, of course, as a number of my hon. Friends have said, a tremendous shortage of valuers. There are now, I gather, some 100 fewer than there were in 1962 in the Inland Revenue office.
According to an article in the Sunday Times on 19th December, each Inland Revenue valuer had to deal with an average of 1,000 cases in 1964. Add to that the number of cases under the [column 806]present Bill—and there are approximately 411,000 planning applications each year—and the task is such that it makes the Bill practically unworkable.
I turn now to the Land Commission and the local authorities. My right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith) pointed out the tremendous extent to which local authorities already have powers of compulsory purchase under Sections 67 and 68 read in conjunction with Section 4 of the Town and Country Planning Act, 1962. They have all the powers that they need in order to see that land is used in accordance with the development plan.
Earlier on in introducing the Bill, F. Willeythe Minister said that he did not believe in the duplication of powers. But that is exactly what he is doing in the Land Commission. He is duplicating every power already in the hands of the local authorities, and that can only be because, sooner or later, the Commission, too, will exercise the powers and possibly usurp the functions of local authorities and clash with them in the discharge of their functions either in seeing that land is properly used under the plan or in acquiring it for the purposes of the plan.
Any further powers that are needed could quite easily be granted by a small amendment of existing town and country planning law or the existing Housing Act, 1957, both of which give the local authority powers to dispose of land, in the one case for urban centre redevelopment and in the other for housing. All the powers are there.
What is needed is not powers but finance. If the local authorities had that, they could very well discharge the duties which it is planned that the Land Commission would discharge. The local authorities are the planning authorities and are the proper authorities to discharge that particular function. They are already very well equipped to manage land and to acquire it, and they are very used to dealing with transactions in land. In 1964–65, for example, local authorities spent some £164 million on land, which is a lot even compared with the borrowing powers of the Land Commission.
Here one has authorities already equipped and well able to do the job. [column 807]Indeed, at the town and country planning conference a couple of week ago at which the Minister was present—because I sat next to him [Laughter]—there was a paper read by the borough treasurer of Norwich which was highly critical of giving the Land Commission these powers. He pointed out the tremendous powers which local authorities already have and gave a figure unknown to me that loan sanctions in each of the last two years alone had totalled over £1,250 million. So the local authorities are well able to cope with the job.
It follows from what I have said that while most people applaud the objectives of the Bill as defined in the White Paper, the Bill is not the method by which to achieve them. If there is to be a levy imposed, it should be imposed in accordance with the proper principles of taxation and subject to the strict construction and the usual provisions related to the taxation Acts. In other words, we should have it in a Finance Act administered by the Inland Revenue and not in this extra and unusual form of Finance Act. The Bill also duplicates quite unnecessarily the powers of local authorities, and may usurp them. We think that the Bill should be referred back to the Minister with an instruction to reintroduce a levy under the Finance Act and to amend the powers of local authorities, and that that is the best way of achieving the objectives set but in the White Paper.