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Finance Bill

Volume 887: debated on Wednesday 5 March 1975

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Question again proposed.

—in England and Scotland, I should like to say that not only has it tried in the past to have talks with the Inland Revenue on the question of alleged tax avoidance but it also positively welcomes the five-year rule which has now been proposed as a means of putting an end to death bed purchases.

It would be ungracious not to acknowledge that there has been some response from the Government in the form of the new clause and schedule which have appeared on the Notice Paper. At the same time, it would be hypocritical not to say that the Bill as originally presented was an outrage to the forestry industry.

It would be untrue to say that the clause and schedule now presented go any appreciable way towards removing this evil. The clause has a title to the effect that it is a relieving clause. This at once raises the question, as it appears to affect only cases of transfer on death, whether it is intended that transfers in life should remain under the main charging provisions. If this is so, surely the clause is immediately at fault in inhibiting such transfers and ossifying the private forestry industry.

The Government measures are apparently directed against owners. The Chief Secretary must realise that the real victims of this will be all sections engaged in the private forestry industry and, most of all, the forestry workers. I have had letters from the Economic Forestry Group, the Woodland Management Association Limited, the Flintshire Woodlands Limited, and the Association of Professional Foresters. The Association of Professional Foresters, together with the British Foresters Action Group, represents about 10,000 workers employed in the forestry industry.

The Chief Secretary should hear just one or two things that the Association of Professional Foresters has said in a letter to myself which arrived this morning:
"the grossing up principle"
which is inherent in the capital transfer tax
"will place a very high tax burden on woodlands. However, by far the most … disastrous principle appears to have been … that the tax will be assessed on the sale value of the timber. … Inevitably therefore, all future forestry will take place on a short term rotation … those people who derive their livelihood from the private sector of British forestry are likely to lose their jobs, and also cause heavy depopulation in the rural areas … the traditionally long term hardwood rotation will cease and be succeeded by soft woods on a short term rotation. There will be no replacement of long term hardwood woodlands such as areas of Beech, Oak, etc.…
We trust that you will find time to try to ensure that the livelihood of those employed in forestry is safeguarded and that the future landscape of the country is protected."
It is clear from the clause and the schedule that many of the practical implications have not been thought out. The 45 per cent. relief on agricultural land which hitherto has been available also for forestry land has been lost. No alternative form of relief has been substituted. It is surely reasonable to ask that as long as land remains committed to forestry it should receive the same treatment for capital transfer tax purposes as the trees grown thereon—that is, that it should be left out of account in determining the value transferred on death and tax charged only if and when it is sold.

Nothing has been considered, apparently, with regard to underwood. This has never been subject to estate duty. It is now to be made liable to the tax. The deductions allowable from the proceeds of sale are considerably less generous than those which were permitted in the case of estate duty.

The clause appears to cover only the case of woodlands owned by individuals and not to deal with trusts and companies. There is no mention of the things which are bound to happen in forestry, mostly windfalls and losses resulting from windblows. It has been suggested that the new clause appears to relieve only dedicated woodlands. This is surely nonsense in a fiscal context. Whatever the advantages of dedication, it is surely nonsense that the existence or not of dedication should determine a liability to tax. Quite apart from other considerations, the main object of the dedication scheme has always been the use of the land for timber production. It is the land—not the trees—which is dedicated. Many amenity woods, small woods, copses, and all hedgerow and park timber have been deliberately kept outside the scheme. The trees and woods involved account for about 29 per cent. of all privately-owned timber, and for 37 per cent. of all hardwoods growing in Great Britain.

Unless such timber is to be penalised as regards capital transfer tax, with disastrous consequences for the appearance of the countryside, the rules of the dedication scheme will require substantial modification, and all restrictions on what can and cannot be dedicated will have to be lifted. Whether this is practicable, whether it will be welcome to the Forestry Commission as the authority responsible for the administration of the scheme, and whether the scheme will benefit as a result are all open questions.

I come to the major objections which have already been referred to in the letter which I read from the association representing forestry workers. There are two main objections—first, the question of the basis of value on which the tax is to be paid, and, secondly, the question of the rate at which the tax is to be paid. As regards the basis of value, it is proposed that the deferred tax should be chargeable not on the value of the trees at the time of death but on the proceeds of their eventual sale. The latter value, due to the growth of the trees in the interval, could be anything up to 10 or more times higher than the former. It is thus the intention to tax values which to a greater or lesser extent will have been non-existent at the time when the transfer took place—that is, at the date of death.

This is patently unjust and contrary to the principles of the capital transfer tax, and will place on forestry a tax burden suffered by no other industry. There is no comparison with the objects dealt with in Clause 31, which can be left out of account in determining the value of the transfer on death, but in the case of which, if they are subsequently sold, the proceeds of sale rather than the value at death become chargeable to tax.

The second question is the rate of duty. This is the second serious short- coming in the Government's new clause; namely, the proposal to charge the tax on the proceeds of eventual sales at the rate applicable to the top slice of the estate transferred on death.

I take it that there can be three ways in which the rate could have been fixed. It could have been done by reference to the average rate on the main estate. It could have been done by assessment on the timber as a separate estate, or it could have been done at the highest rate of the main estate. The Government have chosen the third and most onerous of those three methods.

The extraordinary situation could arise, as a result of these Government proposals, that in cases where woodlands are divided and left to more than one individual, the felling or selling decisions of any one of the beneficiaries will affect the capital transfer tax liability of the others.

I sum up in this way the case which the Government must accept before this tax passes into law. In view of the nature of the tax, the only just basis for levying it is on the value at the date of transfer, and in these circumstances the simplest and fairest method for dealing with the problem is to treat the timber as a separate estate but without the benefit of the £15,000 exemption limit.

On a point of order, Mr. Speaker. I am curious to know what is happening. Are we listening to a speech from the hon. Gentleman, or is he reading a brief prepared by someone else?

I hope that the Chief Secretary will give us the views of the Forestry Commission on what the Government have proposed. If tomorrow or on Monday we come to discuss the new schedule which has been put down, and if Mr. Speaker looks favourably on some of the amendments thereto, the Chief Secretary will, I hope, understand that there are several issues, including those to which I have referred, which we shall wish to raise again.

I found the response of my hon. Friend the Member for Dudley, West (Dr. Phipps) to the Opposition's new Clause 3 most refreshing. I am sure all will agree that my hon. Friend is someone who could be described as a typical British farmer, and he called for a 100 per cent. tax, which would, incidentally, have the effect of giving the lands back to the people.

Is not the hon. Gentleman capable of distinguishing between the people, who are human beings, and the State, which is not?

I should have expected that suggestion to bring delight to the faces of hon. Members on the Liberal bench, but I imagine that Lloyd George is now turning in his grave at the response of the right hon. Member for Orkney and Shetland (Mr. Grimond).

New Clause 3 should be rejected because it does not take account of a number of reliefs already granted by the Treasury in respect of both farmers and small businesses. The Opposition will recall the announcement that the rates of tax on transfers during life were halved on transfers up to £100,000, and they were reduced by one-third on transfers up to £250,000. That was done in part specifically to help small farmers and small businesses.

Second, the Opposition will remember that the Treasury introduced an amendment to reduce the value upon which the tax is charged to farmers by the introduction of the multiplier of 20. Third, owner farmers are helped by the Treasury's proposal to enable them to pay by eight yearly or 16 half-yearly instalments.

Taking those concessions together, I calculate—my right hon. Friend will tell me whether I am right—that the capital transfer tax will be charged to farmers at roughly the same rate at which estate duty would have been charged, namely, with effectively a 45 per cent. relief. Hon. Members will say that the situation is not, the same because many farmers never paid estate duty, but one thing which is slowly sinking in during our long debates—

The hon. Gentleman is utterly out of touch with agriculture in his constituency. Will he take it from me that farmers in the Highlands of Scotland—poor men, men probably earning less than he does—will be literally forced out of business by this tax? Does he imagine that that in any way helps his Socialist cause?

10.15 p.m.

If anything, the Opposition's proposal would force a lot of owner farmers and working farmers out of business, as was obvious from comments by my hon. Friend the Member for Dudley, West (Dr. Phipps). My constituency contains one field and two cows. When they look healthy, I take it that the state of British agriculture is healthy.

Since the amended capital transfer tax is roughly in line with the old estate duty, and since there have been special concessions to owner farmers, it must be regarded as fair.

One of the problems in considering new Clause 3—its effect would be to halve the value of the transfer upon which the tax will be levied—is that it would produce an unfair tax. A second problem of the clause is that it would cause economic distortions. In the year that I have been a Member of this House I have heard right hon. and hon. Members on the Opposition benches state repeatedly that it was central to their political philosophy that they did not want to cause economic distortions. In view of the question of fairness and the creation of distortion, we should reject their clause.

In view of the concessions already given to farming, if the value at which tax is to be charged were reduced to 50 per cent. this would obviously provide special help to farmers but not to small businesses, retailers or others who are concerned with the payment of the tax. That means—it is a point that the Treasury must consider when introducing a new tax—that it would be unfair as between one class of taxpayer and another. Immediately this concession was granted, the small business men, retailers and others who were liable to pay the tax would demand the same treatment.

The hon. Member says that distortions might be introduced if certain allowances were given to agriculture and not to other businesses. Are not agricultural land values so much out of parallel with other asset values that distortions already exist and steps must be taken to make up for this?

If the hon. Member is saying that agricultural land values are too high I agree with him, but he must think of what would happen to agricultural land values if we accepted the Opposition's new clause. It would lead to further investment in agricultural land purely for investment purposes. Land values would inevitably be forced up, which would mean fewer owner farmers and fewer worker farmers. I am sure that the Opposition do not want that.

Therefore, because the Opposition's clause would be unfair and because it would introduce distortions, I shall vote against it if the Chief Secretary is prepared to accept it.

Some Conservative Members did not have the pleasure of listening to their comrades speaking in Committee on the capital transfer tax. Perhaps I could tell them of the words of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley). He developed a new species of man called "Tewkesbury Man". He said that there were plenty of farmers in his constituency worth £500,000 a year. They got up at five o'clock in the morning to do the milking, seven days a week, 52 weeks a year. They had threadbare clothes and they did not go on holiday. He said that they were the people who would be hurt.

I do not think that it is the purpose of my right hon. Friend the Chief Secretary or of the Treasury to hurt small businesses, large businesses or farmers. I am sure that all my hon. Friends are concerned to see small businesses, large businesses and farms flourish. The only matter at issue, and the divide between us, is how that can be done. I believe that new Clause 3 would not help the future of farming.

I turn to the woodlands concession. My right hon. Friend the Chief Secretary rightly said that the TUC thinks he has gone a little too far, but I may just feel able to support him. I do not have with me the figures that the TUC gave me, but I am sure I am right in saying that since 1970 the amount of private planting has increased and the amount of planting for the Forestry Commission has reduced. I accept that the import of timber is a serious matter and that it is reaching proportions almost equivalent to the import of oil. Therefore, the future of forestry is a serious subject which we must consider. I agree with the TUC that we must take steps to ensure that planting by the Forestry Commission increases radically. That may mean an alteration in the Treasury's public expenditure plans.

Does the hon. Gentleman seriously suggest that all the planting of trees must be done by the Forestry Commission? Does he not appreciate that it is vital that the private sector of forestry plants as many trees as it can?

I did not say that, and I do not argue that all the planting should be done by the Forestry Commission. What I say is that if the effect of the tax is to diminish private planting, the Government should take systematic steps to ensure that that is more than made up for by the increases in Forestry Commission planting and use the Bill as an opportunity to see that that comes about.

Everyone knows that the TUC was right in saying that forestry had become a traditional area of tax avoidance. By investments in forestry one could avoid the payment of not only capital gains tax but in certain circumstances, if one was clever enough, income tax.

We on this side of the House are not against forestry, but we are against the sort of pressure campaign we have seen in the House over this issue. There has been whipped up a campaign allegedly concerned with forestry workers, but more concerned with the interests of landowners. I am sure that the Government have come to a reasonable compromise on the matter, and we should congratulate them on that.

I am sure that the farmers in Luton and Dudley will rejoice, but I am sure also that the heaviest, most profound and most disastrous tax over which the present Government are presiding is the tax of inflation at 20 per cent. a year. That is the root of our problem. It is only proper to look at the taxes proposed on agriculture and forestry in the light of that rate of inflation.

The hon. Member for Dudley, West (Dr. Phipps) is a farmer. I am sure he is a good employer. Let me give him some idea of the effect of a 20 per cent. rate of inflation. If the hon. Gentleman takes on a new dairyman to milk his cattle he will be paying him, given the present rate of inflation, £2 million a year by the time he retires. That is the rate of inflation over which the Government are presiding, and that is the situation that they are not lifting one finger to abate. The gravamen of the charge against the Government is that on top of this inflation they come forward with this kind of tax.

I think the whole House will agree—the hon. Member for Rother Valley (Mr. Hardy) and Dagenham (Mr. Parker) rightly made this point—that the taxation of farming and agriculture needs to be considered from the long-term point of view. Such taxes cannot be changed overnight as has been suggested. We must take a long look at agriculture and forestry. The hon. Members for Luton, West (Mr. Sedgemore) and for Dudley, West are closely in touch with the TUC on these great problems. Doubtless they will be reinforced by the arrival of Mr. Shelepin. He will be able to give us his views on State farming and on how to treat the peasant in the Ukraine. Perhaps a report will be passed to the subservient Government Front Bench by the hon. Members for Luton, West and Dudley, West on how these things are better done.

The hon. Member for Rother Valley rightly said that taxation is not merely a question of squeezing the rich, trying to get money from the rich or trying to redress a social grievance. Those may be some of the functions of taxation, but a fundamental function of taxation, as employed by an inteligent and percipient Government, should be to apply principles which ensure that our resources are spent in the most fruitful areas for the nation as a whole.

It is precisely for those reasons that I would attack the proposals that have been put forward for farming and forestry. Taxes on farms, whether it be the proprietor or the tenant who is involved, will undoubtedly lead to the fragmentation of farming. Whether we are Marxists, Conservatives, supporters of the school of Balogh or supporters of the school of Keynes, such taxation can only do one thing—namely, to increase the cost of food.

As I have said, 40 years from now we shall be paying farmhands £2 million a year, given the present rate of inflation. Let us consider the price of the fragmentation of farming and the replacement of already over-expensive building. With respect, there is already far too much investment in building in agriculture. On that basis fragmentation will lead to an immense distortion of the cost of food production. The tenant farmer will be faced with heavy outgoings on his working capital.

I do not know whether the hon. Member for Dudley, West is a large or small farmer. Undoubtedly he is of Matto Grosso type and just right for dealing with the peasantry and all that sort of thing. Of course, Shelepin can tell us how to deal with the kulaks. But even today on a comparatively small farm the outgoings when a farmer gets out of the business or dies run into £60,000 to £80,000. That is the position on a comparatively small farm.

With this new heavy burden, agricultural production will be distorted. That is not good planning. The Government and their supporters are merely pursuing a policy which forms part of this mysterious social contract, on which one either is or is not welshing. I should refer the matter to the Victoria Club to decide who is welshing. If the two Ministers appeared before the bookmakers they would undoubtedly get a fair judgment.

10.30 p.m.

It is certain that the purpose of the tax is not to improve agriculture, not to make better use of resources, but to win votes in Luton, West and Dudley, West by attacking in a vindictive way the people who oppose the Government's policies.

A point about forestry which has perhaps been missed by the Government Front Bench but has been seen by the hon. Member for Rother Valley and many of my hon. Friends is that the calculation should not be based on the actual value of a tree cut down in this country but on the value of the imports which are saved. Every £100 worth of timber grown in this country saves £400 worth of sawn timber from abroad. That is the key point which is always missed by Treasury officials.

The policy being pursued by the Government is not the conservation or improvement of national resources. On the contrary, it will lead to a reduction in the amount of timber we produce. The Government's proposal does not go far enough, and in all reason they should accept our proposal and that of the Scottish Nationalists.

The trouble with the right hon. Member for Stafford and Stone (Mr. Fraser) is not so much that he objects to my hon. Friends wanting to take lessons in how to treat the peasants but that he and the Conservative Party are continually irritated by the fact that the British people are no longer content to be treated by the Conservatives as peasants.

The debate has been a mixture of stupidity and naivety. I had some sympathy with the hon. Member for Banff (Mr. Watt), who made this subject the major part of his previous campaign as a member of the Conservative Party. Tonight he expressed views similar to those of the Conservative Party, but he is extremely naive if he thinks that the main problem in relation to land is the capital transfer tax. It is not. The main problem is the inflated land values over the last few years which have resulted from land being bought for investment purposes and as a hedge against inflation. The story told by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) about farmers worth £500,000 working a seven-day week and wearing threadbare clothes is true, and it is true because the value of land has been distorted. The tax will not raise the value of land to that extent.

The proposals made by the Conservatives in new Clause 3 are supported, to my astonishment, by the Scottish National Members who at one time claimed to be radical. I notice that when radical proposals are discussed there is always one Welsh Nationalist present and one Scottish Nationalist missing—the hon. Member for Clackmannan and East Stirlingshire (Mr. Reid). I am astonished that the SNP, with its pretence at radicalism, should be supporting—

It is the attendance that alarms me. I might have expected one hon. Member from the SNP but not the whole bench.

Does that mean that the 37 Scottish Labour Members who are not in the Chamber disagree with the hon. Member for Renfrewshire, West (Mr. Buchan)?

That is the point I was making. If the hon. Gentleman wants a historical record I will give it. We were discussing industrial development certificates last week. Not one Member from the Scottish National Party was present. We discussed regional policy. Not one Member from the SNP turned up. They all turned up on Wedensday to vote for the increased pay for the Queen. That was the party's record last week.

The support of the SNP for new Clause 3 is based on a mixture of naivety and stupidity—stupidity because it has not looked at the consequences and naivety because it has listened to the siren voices of the Conservative Party. The effect of the clause would be to distort land values. It would make agricultural land an investment, and when that happened we would be on the road to destroying agriculture in this country.

Does the hon. Member want the people of Scotland to have a system of collective agriculture such as was introduced in the USSR? That seems to be the natural end to what he is suggesting.

I said that the SNP argument was based on naivety and stupidity. The naivety is illustrated by the hon. Member for Banff and the stupidity by the hon. Member for Argyll (Mr. MacCormick). This clause would have the effect of increasing the value of farm land beyond any agricultural value. That would hurt the farmer and his family. If the hon. Member wants collectivisation, he will get it—collectivisation by the large institutions.

There was a story told of Robert Blatchford who was walking across a field with some scouts when the owner came up and said "Get off my land." "What do you mean by 'my land'?" asked Blatchford. "It is my land. I inherited it from my ancestors", said the landowner. "How did your ancestors get it?" "Oh", said the landowner, "they fought for it." "Right", said Blatchford, "I'll fight you for it."

The British people have a right to determine the use of land and a right to take action which prevents the drift of good agricultural land into the hands of institutions, using it as a hedge against inflation, which distorts its value and harms the working farmer, owner-occupier or tenant farmer. It is these people we are out to protect.

Does the hon. Member agree with my condemnation of his Government who, between 1967 and 1970, boasted that they did not allow the Forestry Commission to use its powers of compulsory purchase in respect of one acre of land?

I shall deal with that when I get on to forestry matters. With respect to the hon. Lady, I was talking about farming. I was not condemning it. Indeed, I was responsible for the policy in Scotland at that time.

I thank my hon. Friend the Minister for ensuring that the change in values will help the lower taxpayer, whether in business or in agriculture, and also for the concession made to the widow. That is an extremely important point in agriculture. Opposition Members would know all this if they knew more of the people who live and work on the farms rather than listening to the views of the landowners.

The real problem in forestry has not been dealt with by Opposition Members. The problem is the lack of investment in forestry and the lack of planned planting. Therefore, the real solution is to increase the investment in forestry—[Interruption.] I will deal with whether it be public or private in a moment. The second requirement is enhanced planning of large-scale forestry planting.

It is not enough to leave these matters to the private forestry developer. Historically, private activity has been one of the main methods used to evade tax. By carrying out private development, those people evaded estate duty, income tax and capital gains tax. [An HON. MEMBER: "Avoided."] I am corrected. I should have said "avoided". At any rate, they so framed the laws that they avoided tax by legal methods. Secondly, they did not let timber and forestry planting be seen as a national asset to add to the economy. It was planting carried out often uneconomically, often on good agricultural land, and often in an unplanned direction.

Let us look at the situation in South-West Scotland. I agree that we did not do enough in earlier administrations. I agree that I would like to have seen the use of compulsory purchase powers. I was working on the subject when the election came in June 1970. It took time to analyse the situation. The situation was that private forestry was buying good agricultural land for planting and the Forestry Commission was debarred from buying land for planting.

The answer to the problem is not simply to purchase land for forestry planting. The answer is to get planned use between forestry and agriculture. For this reason I asked the Highlands and Islands Development Board to take action in the Strath of Kildonan, the glen in which the clearance took place and in which I was born. For the first of these historical reasons—not for the second—I asked for a land use survey. But when I got it, I said that it was too timid. That land, the equivalent of stretching from here to Birmingham, was in the hands of seven landowners. These are problems which we must seek to deal with in taxation policies. This is why the story involving Robert Blatchford is so important.

The hon. Gentleman spoke of a part of Scotland I know well since I used to manage an estate above the Strath of Kildonan. Does he agree that those landowners, whatever their faults, spent large sums of money over a period of 20 years draining and restoring land for planting, and that much money has gone into those areas from the pockets of landowners, whether they be from the South or from the North?

10.45 p.m.

Some of the home farms were well managed. However, the planting was not sufficient, nor was there a sufficient carving out of mixed forestry and agricultural use. That is what was lacking. Furthermore, it gave a comparatively small amount of employment compared with employment on the support side of the industry. I therefore hope that new Clause 3 will be rejected.

I request the Minister to look closely at the points raised during this discussion on forestry. We require more money for forestry, and that money should be made available through the Forestry Commission. I am sorry for the many workers who came to protest, and who appealed to the naive side of the Scottish National Party, in regard to jobs in private forestry. However, the task is to initiate a properly planned programme of public investment in public planting and ancillary industries in the rural areas.

I shall not refer to the long-winded and ill-informed speech of the hon. Member for Renfrewshire, West (Mr. Buchan) except to point out that the Forestry Commission probably has a worse land use policy than that of any other landlord in the country.

The problems of horticulture will be made much worse by this legislation. We are all aware of the difficulties which farmers will face if they are forced to fragment their holdings to pay this heavy impost. It will be even worse for the horticulturist whose holding is even more compact, since the capital value per acre of such a holding is very much greater.

The hon. Member for Banff (Mr. Watt) made a fundamental mistake in his assessment when he spoke about acreages, because in horticulture and intensive agricultural situations the values of glasshouses run to perhaps £40,000 or £45,000 per acre at today's prices. The glasshouse sector of the horticulture industry is suffering desperately. The hop growers are in grave difficulties because of European competition. Of all the hop growers in the E.E.C., the British are the only ones not to expand their industry. The British fruit growers are experiencing great difficulties. Yet an extra burden is now put upon them.

Since it appears that Finance Bills come once a quarter, I hope that British industry will be remembered kindly when the next one comes along.

There has been a great deal of levity in this debate instead of the seriousness which I would have wished to see, considering the gravity of the situation we are discussing.

There was a great deal of talk in Committee about forestry and agriculture. We were promised relief of a certain type, which eventually arrived for forestry. However, that relief does not meet the points made in Committee and does not go far enough to meet the requirements of public and private forestry.

Forestry does not necessarily start with planting out the trees. It starts with the plans for producing the seedlings. I fear that grave damage has already been done to the private forestry industry. Many trees have not been planted this year because of the difficulties which people could see ahead. As a result, many of those trees will be lost. Producers will lose those young trees, and they will see no reason to produce more. The repercussions of the present difficulties will extend for several years ahead.

If this nation needs timber, we must encourage people to grow trees. The Bill positively discourages investment in timber, on the grounds that there are vast profits to be made. Whether that is so is a moot point. However, profit certainly does not come quickly. Profit will not be reaped for about 50 years. Therefore, as we do not know what will happen in the next 50 years, it seems the rankest foolishness to discourage planting at this time.

In this regard I should like to turn to a point that I have made previously not only in this Chamber but in Committee. If the land were not used for growing timber, it would be producing mutton, wool and beef. Therefore, we must consider the profit to be made from mutton, wool and beef compared with the profit from timber at the end of 50 years. That is what the private forester will consider. It is on that basis that he will decide whether to plant trees.

If forestry in this country declines, many of the 10,000 or 11,000 people employed in the industry will lose their jobs and move not so much to other industries as to other nations where their expertise and hard work will be used for the benefit of other peoples and will be lost for ever to Britain.

A suggestion was made by one right hon. Gentleman that planting was carried out on good agricultural land. The policy of the Northern Ireland Government was that good agricultural land should not be used for planting trees. The small private grower in Northern Ireland—there are only two or three private growers of medium size—will not plant trees on good agricultural land because he needs it for farming. Such people should be positively encouraged as the Minister of Agriculture, Fisheries and Food is encouraging them. If the Minister of Agriculture is encouraging and the Treasury is discouraging the planting of trees, may I suggest that they put their heads together and endeavour to come up with a reasonable and sensible policy which will demonstrate that the Government are heading in the same direction?

The hon. Member for Banff (Mr. Watt) said that farmers were overworked and underpaid. As a farmer I feel sure he was speaking the truth, because I have often felt underpaid and overworked. Of course I am overworked here, as are all hon. Members, but that is only to be expected.

This is the second or third time that this point has been made by Opposition Members. If farming is such an unpleasant, poorly paid and fearsome life, are we not doing the farmer's children a favour by taking the burden of the farm off them?

If the hon. Gentleman considers farming to be a profitable business, why is he not in it?

I am pleased to hear that. That is no doubt why the hon. Gentle- man needs another source of income. As a farmer, he will be aware that there is a steady drift from farming into other industries. If farming is all that good, why are so many people leaving the industry? Why is there not a tremendous rush from other professions into farming? People are not going into farming. The drift is out of the industry.

The Government have not made their land policy clear. What do they want? Do they want the family farm to continue or to disappear? If this tax is allowed to run its course, two things can happen. I think that this point has often been made. The family farm will either fragment, become a totally uneconomic part-time farm and have a low level of productivity, or it will fall into the hands of the State. Precisely how the State will run it I am not clear. The State will have to put in civil servants to run that kind of farm, otherwise it will fall into the hands of a large corporation.

I believe that the system of owner-occupiers in Northern Ireland is the best system, all things being taken into account, and I think that this House, which was responsible for bringing about that situation in Ireland, should look at the situation at home and try to bring it about here if it wants to improve the position in the rest of the United Kingdom.

We have not had a clear definition of what "agricultural property" really is. It is in this respect that new Clause 3 draws attention to a principle which the Government have failed to take into account. Paragraph 7 of Schedule 8 defines "agricultural property" as
"agricultural land or pasture and includes woodland … cottages, farm buildings"
and so on. What it does not include, unfortunately, are crops and the animals which produce most of the profit and most of the living wage for the farmers. On that aspect of farming the full rate of tax will have to be paid, and it will have the most disastrous effects for those who wish to continue in family farming.

The hon. Member for Luton, West (Mr. Sedgemore) thinks that this is a fair tax. That is a matter of opinion. But if it is a fair tax, he is therefore saying that before the changes were made it was not fair. If it was not fair then, why did he not seek to get changes made at that time rather than support them now?

Hon. Members have asked why special help is needed for farming. The special help that has always been given to farming is a reflection of the low return for the work and capital employed in trying to get a reasonable living from farming.

There are many things wrong with this tax in so far as it affects farming and the private forestry interests. I ask the Minister to go away, look at this again and for Heavens sake present something that is reasoned and presentable to the House.

I shall be brief because of the little time that is available. I do not want to reiterate the points that have been made so far, nor to go over the ground which we shall cover when Schedule 8 is debated and the amendments considered and I hope that the Treasury Bench will take a sensible and careful look at the amendments.

I do not think that the forestry and farming industries are looking to the Government for compassion or anything like that. They want a serious appraisal of the long-term prospects of their respective industries, and they do not feel that that has so far been done.

I wonder whether the Minister and his hon. Friends have looked at some sample farm accounts in order to see the impact of the tax upon them and taken a strict and practical view of what farms of specific sizes will have to pay under the tax proposed. Have the Government taken a close and practical look at the impact of the tax on individual farms, which is necessary in order to get some understanding of why these fears are so strong and widespread?

The farming community wants to feel that its prospects of contributing to future food production have been taken seriously by the Government. It is not interested in who is clobbering whom, or to what extent concessions have been made, or whether the Government have yielded sufficient concessions. They want to know whether the Government have done their sums right, and whether they have calculated that food will be grown and produced in the future. People in the industry believe that the Government have either not made that calculation, or that they have got their sums wrong.

There are some things which bear out this fear. Reference has been made to working capital, which is one of the crucial problems facing any farmer at the present time. Another is the 20-years' purchase value, which is clearly out of line with what has happened to land values since somebody thought it out while sitting at a desk in some Government Department. There is a lack of appreciation in the Government's proposals of the differences in farm sizes in different parts of the country. It does not make sense to talk about a farm of 500 acres as if it were a standard size farm. That is not a standard size in an area where a large portion of the farm is hill or marginal land. There are areas in which 500 acres is a large farm, while in other areas it is quite a small farm and where the impact of the tax would be quite different.

11.0 p.m.

There are obviously ideological problems for hon. Members opposite, with some of which I can sympathise, about the fact that, on paper, farmers look rich men who are in a position to hand over to their descendants what look like large sums of money, but hon. Members must not be bemused by what they see on paper.

As long as it stays in agriculture, this is not money but assets to be used, to set against the liabilities and to keep farming going.

If the Labour Party are concerned to achieve changes, we would be with them in some things, but surely they do not want to bring about fragmentation, tenancies to be taken in and the enlargement of home farms, the consolidation of estates and the removal of tenants, with no farms being available to tenants.

If they want state ownership of land they surely do not want it to result from acquisitions, in lieu of tax, of parcels of land in different parts of the country, from those struggling to pay taxation. What kind of State land management could be based on pieces of land on estates throughout the country made over for the purpose of making tax payments, without regard to sensible management?

However some of the fears expressed about the Opposition's new Clause 3 are fears which I share, so I am not readily disposed to give support to new Clause 3 in the way it is phrased, giving wider relief than did the old estate duty. If there had been some other amendment which the Government would accept—we suggested £50,000 as a slice on which the Government could give exemption—it would have been different. They have made it difficult by not producing an amendment of their own, since we have fundamental fears about the effects of their proposals on agriculture.

One cannot serve two masters, and I would remind the Conservative Party that they cannot serve the farmer and the speculator at the same time. We must distinguish between the two, but the Government do not make it easy to draw a distinction if they give no indication of a willingness to accept proposals which would preserve farming production in this country. It would not be preserved as the Bill stands.

We have had an interesting debate on two subjects which go together—agriculture and woodlands.

I would say to my hon. Friend the Member for Dudley, West (Dr. Phipps) that I am obliged for his support and I hope he will not mind if I do not go quite so far as he would have me go. I hope to be able to convince hon. Members that we are concerned about the genuine full-time working farmers. I am sure he will understand.

I would say to the hon. Member for Banff (Mr. Watt)—he is not here—that there seemed to be a debate there which might have been better placed in the Scottish Grand Committee, but he told us how difficult it was going to be for the small working farmers in Scotland, particularly for those of whom he had experience. I do not know whether that is the experience of his hon. Friends. I see they nod, but the hon. Member said that none of those farmers earned enough to pay income tax or capital transfer tax, so I assume that they do not need to worry.—[Interruption.] That is exactly what he said. I should be happy if he looked at it in Hansard tomorrow.

I was glad to hear that the Liberal Party and the hon. Member for Berwick-upon-Tweed (Mr. Beith) noted that new Clause 3 was not at all concerned with the small full-time working farmer. That was not the purpose behind that new clause, as was fairly recognised. What that new clause does is once again to seek to insert into the legislation even higher relief than applies under estate duty—50 per cent. relief on assets. That is what the Opposition seek to put up. It would be well beyond what was available under estate duty. The Opposition seek once again to have a most favoured asset.

As my hon. Friend the Member for Luton, West (Mr. Sedgemore) said, with his great knowledge of farming, that has done very great harm to the whole of our farming community—the real working farmers. The economic distortions have been immense. I am astonished that the right hon. Member for Cambridgeshire (Mr. Pym) should seek to put that kind of relief back on the statute book. If new Clause 3 went on the statute book—I do not know whether this was the right hon. Gentleman's intention, but this is what would happen—a man with no interest in farming could buy a farm and then give it to his son, and the son could sell it immediately thereafter and receive the cash having had 50 per cent. relief from the tax. That is the sort of thing which happened under estate duty.

But the right hon. Gentleman seeks to go even further, because not only does he want to have a relief in excess of the relief under estate duty; he wants it on top of the reliefs we have already in the Bill. That is the kind of situation that the right hon. Gentleman seeks to create. I think that not all of my hon. Friends would support that kind of situation, and I am glad that the Liberal Party will not support it—[Interruption.] I am sorry. The Liberal Party is very independent. But at least the hon. Member for Berwick-upon-Tweed could not support that kind of situation.

My hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) speaks for us all.

I am interested to hear that the hon. Gentleman speaks only for himself and that there are divisions within the Liberal Party.

I apologise to the hon. Gentleman. That is excellent. I am delighted to hear it, especially when such excellent things were being said.

In the Bill we have a number of reliefs. The right hon. Member for Orkney and Shetland (Mr. Grimond) referred to the multiplier, which at 20 times the rental value, as I explained in Standing Committee, would in most cases—I am not giving the favoured asset situation, because obviously we are talking about an average—give a similar situation to the 45 per cent. relief but without giving the avoidance opportunities of that kind of relief. Furthermore, it is better in a number of ways. First, it goes to those who are genuinely full-time working farmers, as defined in the Bill. Second, the relief is for the top rate, as opposed to the average rate under estate duty for the 45 per cent. relief. The multiplier is better in every way.

I have agreed—there is a later amendment on the Order Paper—that we are prepared to look constantly at the size of this multiplier to see that it is right. Depending on what happens to the values of land, we shall be able to reduce the value of the multiplier in order to reduce the value of the land by order. I hope that this will be acceptable to the House.

I should be happy to give way, but I gather that the Opposition would like to debate the next new Clause. I see that the right hon. Member for Cambridgeshire would rather that I continued.—[Interruption.]

Will the right hon. Gentleman give the same undertaking about the rate of inflation?

The right hon. Member for Cambridgeshire was quite right. I should not have given way.

The other relief that we gave is to reduce the lifetime rates, particularly for the small full-time working farmer. Rates below £250,000 will help small farmers, business men and traders. That is what that relief is there for. In addition to that, both the working farmer and the agricultural landlord may benefit from the instalment arrangements to spread the tax over eight years by 16 half-yearly instalments.

All these reliefs are fairly substantial. I should have thought that they would be helpful to most full-time working farmers.

I turn now to the issue of agriculture. Again the hon. Member for Banff was very honest. He said that he did not care if there was tax avoidance as long as trees were planted. That is a very interesting argument. The implication of that argument, if this is the general view of the Scottish National Party—and, no doubt, they will qualify it at a later stage—is that the only reason we had a substantial amount of planting before was the avoidance which used to be available under estate duty. Much of the private planting was done under investment companies. That is precisely what happened. That is not what my hon. Friends the Members for Rother Valley (Mr. Hardy) and for Dagenham (Mr. Parker) would have wanted to happen. They would not want effects of that kind to reappear.

A number of hon. Members asked us to find more money by way of public expenditure to improve the amount of planting. I know that the right hon. Member for Cambridgeshire is constantly asking us to spend a great deal more money in all areas of agriculture. Perhaps he has not spoken to his other right hon. Friends on the Opposition Front Bench, not least his new Leader. She is not interested in increasing public expenditure. That is not, as I understand it, the Opposition's policy. I must assure the right hon. Gentleman that while I am concerned to see whether we can find more money to improve planting, through the Forestry Commission and through dedication grants, one has to have a tight control on public expenditure, and I cannot promise more at present, although I can assure my hon. Friends that if there are any really harmful effects I will look at the matter again. I can promise that. That is why we have put into the Bill the opportunity, for example, in agriculture, for altering the multiplier, and that is why I have given an assurance that we shall be looking at this matter constantly.

I was asked the reason for the provision in the new clause which gives relief for genuine woodlands; why the dedication scheme? The answer is quite simple. It is to stop the sort of devices that existed under estate duty whereby a man could buy woodlands on his death bed and save an enormous amount of estate duty. If hon. Members opposite do not know that that was going on, they are rather more naive than I think they are. It certainly has been going on under estate duty.

I think, and I am sure that my hon. Friends also think, that our proposals on woodlands go a long way to meet the case that was made to us on behalf of the genuine foresters, and I hope my hon. Friends will support the new clause. I hope at the same time that they will vote against new Clause 3 on agricultural relief, against going back to the bad old days, showing the country that what the right hon. Member for Cambridgeshire seeks to do is to represent, as his party does with business men, not the small traders, small shopkeepers and small farmers, but the very large ones and the large landowners as well.

We have a very short time in which to wind up this debate, and I am certain that the largest single industry in this country—agriculture—coupled with that of forestry, will note the timetable that has been forced upon us to deal with this tax which will have such a serious effect on both these industries, as indeed they will note the absence of the right hon. Gentlemen the Minister of Agriculture and the Secretary of State for Scotland from these debates.

I hope that under this tight timetable we may have a short period in which to debate the new schedule on forestry. Therefore, I will confine my remarks to one or two of the points which have been raised.

The Government consistently seem to fail to understand that forestry requires special taxation relief solely and only due to the length of time that the crop takes to grow. Inevitably some people in the past have taken advantage of the relief for taxation purposes. But both the CLA and the forestry interests have gone to the Treasury time and again and said that they would be perfectly happy to see such tax avoidance loopholes closed. Therefore the argument that special tax treatment for forestry could be used as a tax avoidance dodge is particularly inappropriate.

11.15 p.m.

I am interested to hear that the TUC has been able to get its views across to the Government on forestry in general and on the Government's forestry amendment. That is a great deal more than the Forestry Commission of Great Britain has been able to do, and it represents all the forestry interests in the United Kingdom. It is deplorable that in spite of repeated requests to see the Inland Revenue it has been unable to put its representations since the statement by the Chief Secretary in Standing Committee.

The hon. Member for Dagenham (Mr. Parker) made a most constructive contribution to the debate and pointed out succinctly the country's enormous need for timber. Because of the extended timescale involved the disastrous effect of the introduction of the tax may take a long time to be felt. I am certain that in the end this country will be deeply sorry for what has been done here tonight. My hon. Friend the Member for Ludlow (Mr. More) covered comprehensively a number of the technical faults in the forestry amendment, and I hope that the Chief Secretary will answer those criticisms when we debate the schedule on Monday.

I turn now to agriculture and declare an interest not, unfortunately, as a land owner, but as a tenant farmer deeply to be affected by the tax. There are three important faults in the proposals. First is the rate of relief. At 20 times rental value it can be shown quite easily, particularly with rents going up and land values coming down, that the present relief referred to by the Chief Secretary is worth little or nothing to the industry. It is easy for him to say that he is to introduce an order to change matters, but we want to know why he has not introduced it already, or why he has not written a different rate into the Bill, which he could have done.

The right hon. Gentleman talks about the relief he has given on gifts inter vivos. This is rather like the situation of the condemned man who is to be hanged, drawn and quartered and is subsequently told that he is, after all, only to be hanged. That would no doubt be a relief, but it is of small comfort. That is how the land owners and farmers will greet the Government's proposals.

The relief given under New Clause 8 applies to less than half our land. Let land is totally excluded and both the NFU and the CLA have made it clear that without the let land relief there will be a substantial change in the pattern of British farming. It will become increasingly hard for anyone to come in, and will remove one of the advantages this country has over its Continental neighbours—the landlord and tenant system. Obsessed as it is with the problems of the domestic tenant the Labour Party has totally failed to understand the great benefits which accrue to agriculture from our landlord and tenant system.

The tax will apply to breeding stock, to growing crops and to the machinery that is used in the industry. These were subject to relief under the old estate duty. Both the tenant farmers and the owner-occupiers will find it extremely hard to find the money to pay the tax and continue in business.

The Chief Secretary said that he believed that part of the virtue of this measure was that it would make it harder to avoid the tax and that one of the difficulties of the amendment was that it could be easily used to transfer large sums by the purchase and sale of agricultural land. We should be happy to see some such arrangement as is in the forestry amendment, to ensure that such a means of evasion could not be used, by providing that ownership of the land should last for, say, five or more years.

No Opposition hon. Member wishes to see these concessions used for tax avoidance, but we do not wish to see the total destruction of the present landowning structure. The hon. Member for Dudley, West (Dr. Phipps) put his finger on the matter when he made it clear that he and his hon. Friends wanted the total nationalisation of all agricultural land. Whether it comes within one generation or two, as a result of the tax, come it surely will.

I believe that some of the points made by Scottish National Party Members may well lead to their voting with us. I can only advise the hon. Member for Banff (Mr. Watt) to be careful what company he keeps, particularly among the more hirsute Labour Members. I believe that it will be found that the genuine farmer in Scotland is as concerned as the genuine farmer in England and Wales to see the tax substantially ameliorated.

One or two reasonable points have been made from the Liberal bench. I hope that I can persuade Liberal Members into our Lobby. They continually wish to have things all ways. The speech of the hon. Member for Berwick-upon-Tweed (Mr. Beith) was much the same as it always is.

In Committee we put down an amendment, which was debated, dealing with a 60 per cent. application of the tax. To ensure a debate here, we have put down a different rate. I make no apology for that. What I hope the Liberal Party will support tonight is the principle. From the fact that the complex Schedule 8 gives a little relief, I believe that the Government's intentions are clear, and that they mean to give relief of about 40 per cent. for agricultural land, if the figures used were those that I am informed they were. If that is not the case, no doubt we shall find out what percentage relief they had in mind.

We are offering a simpler alternative, which can be understood in advance and easily applied as a rule of thumb. What farmer will be able to take advantage of giving away £1,000 a year? How will he know what acreage to give? He will not be able to measure in advance. It can only be valued afterwards. The relief that we propose is simple and straightforward. We are prepared to accept an extension of ownership to cover tax avoidance.

The Government are obsessed with avoidance. That obsession should be forgotten in the interests of seeing that we do not break up that which is important and valuable to us.

As crumbs from the table, new Clause 8 should be accepted by us. I hope that my hon. Friend will vote in favour of new Clause 3.

Question put and agreed to.

Clause read a Second time and added to the Bill.