Standing Committee E
Tuesday 19 May 1998
[Mr. Roger Gale in the Chair]
(Except clauses 1, 7, 10, 11, 25, 27, 30, 75, 119 and 147)
[Continuation from column 294]
Mr. Geoffrey Robinson: I was drawing my remarks to a close. We have debated the schedule for longer than anticipated and we have dealt with all the points raised.
Mr. Gibb: I have one final question. The Paymaster General referred several times to paragraph 48, or rather new paragraph 56, which says that in section 67 of the Capital Allowances Act 1990, omit subsections (2), (3) and (3A). Why should those be omitted?
Mr. Robinson: We have not touched on that. I shall be happy to supply the hon. Gentleman with further information on the new paragraph.
Mr. Gibb: That is inadequate. I did not pick a paragraph in the schedule at random; I picked one that has been referred to several times. We received two assurances about what it means. I merely asked why subsections (2), (3) and (3A) should be omitted. I could probably tell the Paymaster General why they should be omitted, but I want to hear that from him.
Mr. Robinson: If the hon. Gentleman knows the answer, he is wasting the Committee's time.
The Chairman: The Question is--
Mr. Clifton-Brown: Mr. Gale--
The Chairman: Is it a point of order?
Mr. Clifton-Brown: No.
The Chairman: I am in the middle of putting the Question.
Mr. Clifton-Brown: On a point of order, Mr. Gale.
The Chairman: I trust that it is relevant.
Mr. Clifton-Brown: It is, Mr. Gale. Opposition Members have posed a genuine question. We have not received an answer from the Paymaster General. How can the Question be put if we do not receive answers to our questions?
The Chairman: The hon. Gentleman has been in the House long enough to know that he has the opportunity to force a Division. I am about to put the Question. If you, as a hon. Member of this House, wish to vote against it, you are entitled to do so.
Schedule 5, as amended, agreed to.
Land managed as one estate and maintenance funds for historic buildings
Mr. Shaun Woodward (Witney): I beg to move amendment No. 115, in page 23, line 2, after `buildings)', insert
`except in the case of Grade 1 heritage buildings and those houses with One Estate Election that already open to the public.'.
This is an extremely important clause. The amendment is important because many people have not realised the full significance of the clause which will deprive many millions of people access to some of the most important historic properties in our country. The clause will also hit many people who, in good faith in 1963, made a contract with the Government to elect for one estate election. The clause will break that contract. That breach of faith will cause many people to suffer but tourists, both British and foreign, will suffer the most because they explore our country in the hope of seeing some of the most spectacular architecture and the finest houses and collections of furniture and art treasures in the world.
The clause attacks the very principle that the Government espoused of giving everyone greater access to our heritage. The clause denies the public the right to see the properties, and the treasures within those properties, of which we are justly very proud.
This is one of those clauses that occasionally gets slipped into a Finance Bill. It received not much--if any--discussion in the Chancellor's Budget statement, but here it is, nestling in this large Bill. If it were not for the hard work of the Historic Houses Association, most people would be unaware of it. It would be extremely foolish for the Committee to accept the clause without proper consideration.
Many properties will be affected by the proposal. Many properties provide significant funding for rural communities. The people who visit houses and subsequently spend their money in hotels and cafes and on taxis are crucial to our country's local economies.
Under current legislation, one estate election was available to those who, in 1963, elected to continue the old basis of schedule A taxation. The proposal affected only several hundred houses, many of which were farmhouses. It continued a practice whereby people could set the cost of maintenance against their schedule A rental income provided--and this is the crucial point--that they were taxed on a notional rent called the annual value, which was based on the rateable value. In other words, in 1963 one could elect to say, ``We wish to go on as we are. We have rental property on our estate and we wish to set that against the cost of the upkeep of our property.''
Those who so elected were people whose repair costs were higher than the notional value of their rent.
Mr. Geraint Davies: Does the hon. Gentleman have a personal interest in the clause, given the enormous size of his estates, landholdings and so on?
Mr. Woodward: This is one of those great moments on a Finance Committee, when Labour Members think that they can pull off a cheap trick.
I am happy to tell you, Mr. Gale, that I have no personal interests to declare. The hon. Gentleman is of course trying to impugn, in the course of his intervention, that I might in some way benefit from the amendment. I happily confess that I am fortunate enough to live in a grade 2 star property, but neither I nor my family are beneficiaries of one estate election.
Had the hon. Gentleman listened to what I said, he would have heard me say that the election was in 1963. As is often the case with newer Labour Members, he failed to do his homework. If he had done so, he could have discovered that I did not buy my property in 1963. If he had done a little more homework--although we cannot expect that much; we know that Labour Members often fail to read relevant briefings--he would have discovered that my gardens and house will be made available to the local parish church so that it can raise money for local charitable causes to help children.
Having made such a lamentable intervention to impugn my reputation, I hope that the hon. Gentleman will have the courtesy to come and pay a fee, which will be given to the local church, to visit my property. I look forward to hearing from the hon. Gentleman about whether he will join members of my constituency--
Mr. Geraint Davies: I will open my back garden to the local community, although it is not very large.
Mr. Woodward: I note that the hon. Gentleman did not invite me to his back garden. [Laughter.] I should perhaps remind Labour Members that they should take the matter a little more seriously.
Those who in 1963 elected to continue the old basis of schedule A taxation were people for whom the repair costs were higher than the notional value. In 1963 the notional value was effectively frozen--it was uprated in the 1970s. The effect was that it could be fixed as low as a few hundred pounds, which in 1963 was a fair reflection of the amount for which a house could be rated and rented. Strictly speaking, the notional value was the figure that the owner could reasonably charge as rent.
Today, the notional value would be a much higher figure. The Historic Houses Association has no problem with the Government introducing a clause that would annually uprate the rental value, which the owners of those very important historic homes would be happy to pay.
However, as drafted, the clause will wreak havoc on our national heritage. The clause's scope is not exclusively confined to those fortunate enough to live in historic properties. In 1963, many farmers chose to take the one estate election as a way of managing their farms. The Country Landowners Association estimates that between 300 and 900 families elected to take that route. Many such people are owners with in-hand farms who occupy homes that qualify as farmhouses in relation to the land in-hand.
The clause will constitute a swipe at the future livelihood of those farmers. We must not underestimate their perilously difficult position, caused by the value of sterling and other problems in farming communities. In responding to the amendment the Government must indicate the way in which they have considered the farmers' plight.
Those farmers who run schedule D case 1 businesses on their estates, which grants public access to their houses or land, will be directly hit. That impact may mean that the costs of administration connected with the withdrawal of one estate election will be greater than the cost of maintaining the current legislation.
For some farmers, that will be a very heavy hit that will put them out of business completely. In some cases there will be owners who have granted tenancies over parts of their estates in consequence of the one estate election. They will be particularly heavily penalised.
Hon. Members would do well to consider the impact of a clause that apparently tidies up and sorts out anomalies. Treasury officials may have worked extremely hard to meet the Chancellor's request to look at Government spending. In doing so, they may have overlooked the clause's impact on the farming community and the tourist industry.
For those people who were granted pre-1995 agricultural tenancies agreements, one estate election provides an incentive to increase schedule A income to absorb allowable expenses. One estate election helped to preserve a relationship between landlord and tenant that was important to the farming community. Many farmers want to farm but cannot afford to buy their farms. As the Country Landowners Association has pointed out, the legislation has until now given farmers the chance to do that.
It is extremely important that the Government recognise a particular consequence of the clause. The abolition of one estate election will send a powerful signal to some farming estates against letting land in the future. I cannot believe that the Paymaster General wishes that to happen. It is crucial that the Government are confident that the consultation has made them fully abreast of the proposal's impact.
The real impact of the clause is that it may lead to the closure of some of the most important historic houses in our country and their removal from public access. On 18 February this year, the Inland Revenue met the Historic Houses Association and the Country Landowners Association to receive their response to a consultative document. That document, which was called ``Schedule A and Companies Chargeable to Corporation Tax'', covered a range of schedule A proposals. It examined how schedule A rules would apply to companies. Many of the Bill's provisions reflect the responses to it. The document also covered those who decided on one estate election for historic homes. The effect of the clause will be devastating. No one should be in any doubt about its effect on those homes.
The Inland Revenue's defence at those meetings with the Historic Houses Association was that the original provision had been introduced as a transitional measure 35 years ago. The Revenue felt that the measure could not be expected to continue for ever. It was a way of tidying up what it regarded as something purely transitionary. The Historic Houses Association was told that the Revenue had been asked to review every concession and transitional relief. The officials made a good job of that. It was felt that the 1963 measure was badly targeted because it could apply to all houses, not just to those of architectural merit. However, it applied only to those houses that elected for one estate election in 1963. In other words, Mr. Gale, you could have owned a grade 1 property in 1963, which you elected for one estate election. At the same time, you could have owned a house of no architectural merit--for instance, a two-up, two-down farmhouse--that you could also have elected for one estate election. People in 1963 thought that that provision would continue for ever.
Officials decided that the measure was badly targeted and that it did not help houses of architectural merit. The amendment recognises the problem with the 1963 legislation. The crucial questions are: what will be the impact of the clause and why introduce the amendment? Many of the houses that will be affected are farmhouses, but at least 60 of the houses of the families who elected in 1963 for one estate election will, according to the Historic Houses Association, be directly affected. Of those 60 houses, 54 are open to the public and nearly all of them have received the highest accolade in architectural interest of a grade 1 listing.
The houses are part of a wide spectrum that includes Hutton-in-the-Forest, a 17th century house in Cumbria; Levens hall, a 13th century house in Cumbria; Hovingham hall, a splendid 18th century Palladian house in Yorkshire; and Elton hall, built in 1666 in Cambridgeshire. It also includes castles such as Rockingham castle in Northamptonshire, Eastnor castle in Herefordshire, Glynde place in Sussex, Bowood house in Wiltshire and Knebworth house, a crucial Tudor manor house, which is not only of great architectural interest, but is where many things have happened that are crucial to our heritage. It is where Dickens performed privately in theatrical events and where Churchill painted; it was the home of the suffragette, Constance Lytton, and, of particular interest to the Paymaster General, Knebworth house has gardens that were modernised and updated at the beginning of the century by Lutyens. It is a house of particular interest, open to the public and crucial for enhancing our interest in historic houses, but it will be affected by the legislation.