HC Deb 14 September 1909 vol 10 cc2009-93

In the case of a person dying on or after the thirtieth day of April nineteen hundred and nine the period preceding the death of the deceased before which a disposition purporting to operate as an immediate gift inter vivos must have been made, or a surrender, assurance, divesting, or disposition must have been made or effected in order that the property taken under the disposition or affected by the surrender, assur- ance, divesting or disposition may not be included as property passing on the death of the deceased shall be five years instead of twelve months before the death, and accordingly paragraph (a) of Sub-section (2) of Section thirty-eight of the Customs and Inland Revenue Act, 1881 (as amended by Section eleven of the Customs and Inland Revenue Act, 1889, and applied by paragraph (c) of Sub-section (1) of Section two of the principal Act), Sub-section (3) of Section two of the principal Act, and Sec- tion eleven of the Finance Act, 1900, shall be read as if five years were substituted for twelve months:

Provided that this Section shall not apply to any gift inter vivos, surrender, assurance, divesting, or disposition made or effected before the thirtieth day of April nineteen hundred and eight, or made or effected for the benefit of any institution carried on for purposes which in the opinion of the Commissioners are public purposes or charitable purposes.

Mr. EVELYN CECIL

moved, to leave out the words "five years" ["shall be five years instead of twelve months before the death"], and to insert instead thereof the words "six months."

This Amendment, though concise, is one of the most important Amendments dealing with this Clause of the Bill. It is felt very strongly by, I think I may say, everyone whom it affects, that five years is a grossly improper time. Whoever heard of death-bed scenes going on for five years? [An HON. MEMBER: "Oh."] I do not know what the hon. Member means by saying "Oh." This particular term of five years in intended to apply to gifts in view of death, and nothing can be more plain than the fact that no gift can be made in view of death in any legal, or, I should say, in any other sense that can in the least support or justify the Chancellor of the Exchequer in proposing such a term as this. The original term proposed was three months. That is a perfectly intelligible proposal. I think it is, indeed, a reasonable proposal that nobody should deliberately, when death is close at hand, transfer his property without, perhaps, paying some of the tax which he would naturally have paid if he had not transferred it immediately before his death. But it is quite another thing when this period is being extended to five years. I do not know why you should not extend it to 10, or 20, or 30 years. There is no logic in it. I cannot help thinking that the whole thing has been done in a very haphazard way. There are numerous Amendments down, as the Government is aware, for making exceptions. Possibly a few of these the Government may think it right to accept. What about marriage settlements? What about allowances to children? What about voluntary pensions to old servants? Have all these things to be lumped together and to be considered as part of the estate which is to be charged with duty because it was done within five years of death? I cannot conceive that the Government have seriously thought out these proposals. It is plain that the original grim determination of the Chancellor of the Exchequer was to sweep in everything, but money that was to be given to charities or money that was to be devoted to public purposes. It is a perfectly ludicrous injustice. I have said in previous Debates with regard to other taxes that they lead to avoidance. This will also certainly lead to avoidance.

In many cases people in various classes of life have said to me, "Do you mean to say that under this Bill we are not to be allowed to give a £25 cheque to our son without it being brought in as part of our estate if given within five years before death?" Of course I tell them that in the draft Bill that is so, and that that £25 cheque would have to be brought in and duty would have to be paid upon it. Those whom it concerns are intensely irritated, and set about—though they may be perfectly honest persons—to see how they can best evade such an absurd proposition. It is very easily done. I should certainly do it myself if my son were old enough, and I wanted to give him a cheque for £25. Instead of paying the £25 cheque to him I should draw it in favour of myself, and then hand over the money to him when I pleased. My executors would not have the slightest idea as to what had happened to that cheque, and if they had they would have no means of proving it. That is how I should personally choose to drive a carriage and six through the Act. I have no conscience whatever in the matter. I should certainly do it, because I consider it a preposterously foolish proposition, grossly unjust, and I should feel I was justified in resisting it in every possible way. It tries to put a stigma upon what is a perfectly legitimate action, and brands honest, straightforward people as people who are trying to evade the law. Fancy such a situation—fancy forcing honest, straightforward people to resort to such subterfuges! It shows the absurdity of such a provision in itself straightaway. It tries to put a stigma upon what is a perfectly legitimate action, upon an action which Mr. Gladstone himself practised and practised with a very reasonable and proper object in view. His object, as has been the object of many another parent who has done the same thing, was to train up his children to know how to manage sums of money or estates, to train them up at a sufficiently early age to make that training useful. It is a very laudable object. It helps to develop a citizen to a sense of that prac- tical public duty which he ought to practise. To try and prevent this and to discourage it in every possible way by enacting a provision such as the one now before us seems to me the height of folly and unwisdom if you want to train up our citizens properly. There is one other point which I should like to draw attention to, and that is the retrospective effect of this provision. What justification is there for making this Clause retrospective? Nobody has had any notice of it, and I think those whom it affects ought to have had notice of it. I suppose the only justification which the Chancellor of the Exchequer will bring forward will be the old one that he wants money, and that therefore he has got to do this. But equally I reply in the old argument that what is not just or fair to those individuals whom it concerns cannot be right from the point of law, or from the point of view of public policy. I cannot use words strong enough to impress upon this Committee how strongly people feel against this proposal. If it is a means of inducing the Government to alter it, or still better to adopt my Amendment, let me say that I think it will lose them many votes at any election. Though I do not adopt that threatening attitude, I earnestly appeal to their sense of justice to alter this absurd term of five years to the very reasonable term that I propose.

Mr. HALDANE

I do not wonder at people taking a not lenient view of this Clause if they conceive its operation and purpose are anything like what the hon. Member who has just sat down has told the Committee they are. He has informed the Committee that in future the giving of a cheque for £25 by a father to his son is to come in under this Clause. The Inland Revenue never touch these cases, and would never do so, and there is an Amendment down on the Paper which puts a transaction such as that absolutely out of the question.

Mr. EVELYN CECIL

I was speaking of the Clause as originally drafted.

Mr. HALDANE

What is the use of working oneself to a state of mortal indignation when you know that in a few minutes the Clause is to be put into the shape you desire?

Mr. EVELYN CECIL

It shows the original intention of the Government.

Mr. HALDANE

There was nothing in the hon. Gentleman's point. Twenty-five pound cheques were never charged, and the Clause merely declares what would happen. The Amendment which is on the Paper, and which, I hope, the Committee will reach before long, says:—

"So much of paragraph (c) of Sub-section (1) of Section 2 of the principal Act and this Section as makes gifts inter vivos property which is deemed to pass on the death of the deceased shall not apply to gifts which are proved to the satisfaction of the Commissioners to have been part of the normal annual expenditure of the deceased, and to have been reasonable having regard to the amount of his income, or which, in the case of any donee, do not exceed in the aggregate £100 in value or amount."

Suppose a father, not under covenant but voluntarily, makes an allowance to his eldest son which is reasonable, having regard to the amount of his income, which may be very large, then it is exempt by the Amendment which we have on the Paper. It seems to me that the criticism of the hon. Member, so far as it is based upon that, not only was unreasonable, but was altogether out of the question having regard to the Amendment which has been on the Paper for some time past.

I come now to the more general part of the hon. Member's objection. He admits that it is necessary to make some provision for these inter vivos gifts. He did not complain that it should be three months, as enacted by the Act of 1881, nor did he complain—at least I did not understand him to do so—that it should be one year according to the Act of 1894. What he complains of is that it should be a period of five years. Well, all I can say is, I have as large an experience as anybody in this House of these transactions, and I have not the least hesitation in telling the Committee that the amount of abuse practised by the making of voluntary transfers which has gone on, and is going on, is very great indeed. When I say abuse, I do not mean legal abuse or anything fraudulent. If there is a hole in the law anybody is entitled to take account of it. Very often people say their object is to avoid having to pay the Death Duties. They are entitled to avoid paying them if the Act of Parliament leaves them a loophole, and they make these transfers in nine cases out of ten for the simple purpose of not having to pay the duty which would otherwise fall upon them. If there is that hole in the law and they can get through it surely the Legislature cannot be reproached for endeavouring to stop it up, when we know that these transactions are entered into and carried out in order to avoid the payment of the Death Duties? The number of such cases has increased enormously and is increasing, and will increase furthers because of the amount of the tax which is being raised.

People will resort to every means in their power to avoid it, and if they do so we must resort to every means in our power to prevent them. It is hard on people who go straight to know that the law should be left with gaps in it which enable other people who do not desire to pay the duty to resort to this means of avoiding it and getting through without paying. The general form of the transaction when it takes place between father and son is for the father to transfer the property without transferring the real benefit from himself under the deal. The son allows the father to go on perhaps as he did before, and the arrangements between them are such that until the father's death he is virtually as well off as before, but when he dies the son takes his place as if the property had passed at death. That is the normal case. There are many hon. Members in this House who know as well as I do how often that has occurred in recent years. Stop that we must. You cannot do it by putting in a period of three months or of six months or of 12 months. The only way you can stop it is by saying to people, "If you make this disposition of passing your property in substance in order to avoid the duty we shall catch you by putting the period so long that you will not be under the same temptation to do it as you are at the present time.

I do not say that there are not cases in which fathers transfer their properties to their sons for the purpose of educating them in the business or calling, but I do say that these cases are comparatively rare, and that in the greater number of cases it is done for the purpose of evasion. I am speaking of what I have seen a good deal of. When a father sets his son up for the benefit of his property, he does so in a great many cases under circumstances which will not be affected by this provision. The estate is transferred by him in middle age, and, if he does not die within five years, the duty is not payable. That kind of legitimate case will not often be hit, but the other case is the case in which the vast majority of people enter for the purposes of evading the duty. The duty is getting to be more stringent and the attempts to evade it will be greater than ever they were under the old duties. It is absolutely essential, if this system is to be a reality, that steps should be taken to prevent what will certainly happen on a larger scale if not checked than at the present time. Five years is said to be too long a period. Well, it is not a period which is serious in the case of a middle-aged man who transfers his property for the purpose of educating his son in its management. Hon. Members know that in past years instances of transfer before death have been common in the cases of old gentlemen, and the purpose of the transfer was to avoid the payment of the duties. A great many people in this House, I am sure, are aware of voluntary transactions going on for a long time past in which that has been done. The hon. Member said we had made this Clause retrospective, but if he will look at the proviso at the end of the Clause he will find that it does not apply to gifts inter vivos "made or effected before the 30th day of April, 1908." Already at this moment it is 12 months, and if it takes place within 12 months of the testator's death by the law as it stands, we thought it right to put in the date 1908, but that is not retrospective. All I need to say in conclusion is that unless this step is taken I am certain we shall have to put up with a great deal of loss of revenue which we ought not to suffer incurred by persons who have the deliberate intention, I will not say of evading, but of avoiding, payments of duties which are now being put upon those whose property passes at death. Unless the step of fixing a period as long as five years is taken there will be no security to the revenue against a great loss of this kind.

Mr. JAMES MASON

I was very much struck with the case which has been mentioned of a man who might offer a portion of his property to his son and die within a period of five years. We are told that is a transaction which is not legitimate, but if the man lived five years it is said that that makes it a perfectly legitimate transaction. The main point to which we should direct our attention is that the duty which is now proposed with this five years period really makes the tax only very slightly connected with the Death Duties at all. The transaction which is taxed is one which may possibly have been carried through four years and eleven months before a man dies. It is really a tax upon gifts. It is perfectly reasonable to say you must have this provision six months or one year, but, to say the least of it, five years is a very excessive period. One of the effects of this prolongation of the period from one year to five will be that it will act detrimentally on the occasion of those generous incidents in life which we all like to see and approve of. Suppose we have the possibility of a man making over large presents, not as part of his normal expenditure; the possibility of a man giving large presents either to his son or some friends or dependents who have done him good service, and they may be those, and they may or may not be those, in receipt of a regular salary. Supposing he wishes to reward them by a present. By the Bill you are going to penalise a transaction of that kind, which no one would blame you for, and for which there is no more reason to penalise than the ordinary wages or salaries the man may be paying to some of those self-same individuals. I cannot see why a present of this kind should be penalised, which may or may not be in return for services rendered, and may or may not be a mark of approval for services to the man who makes the gift, or possibly to the State. If you are going to tax a man in a case of this kind, why not tax all gifts, and why limit your proposal to five years? This is a tax on gifts, and if you are going to tax them you should tax them on the ground that gifts are windfalls.

My hon. Friend asked whether it was proposed to tax pensions. There are proposals of this kind with which we are going to deal affecting certain limited cases, but the provisions made there are very narrow and hardly adequate to the case. You admit that there are to be exemptions in the case of charitable gifts, and yet you are going to tax acts of kindness or generosity to the immediate circle of relations and friends among whom a man lives. Surely there can be no logical reason why you should tax gifts given from a generous motive any more than you should tax gifts given from a charitable motive. If there is anything at all in the saying, "Charity begins at home," it seems to me the reason for this proposal is very small. The right hon. Gentleman said evasion was practised to a large extent, and he admits it will continue to be practised by the transferring of property during life. It seems to me that the period which has been fixed is very excessive. What has rather puzzled me has been that this proposal seems to be such a contradiction of ordinary Liberal tenets. The Liberals are always professing a great anxiety that property should be more evenly distributed. Surely that is the main justification for the graduation of these taxes and the taxation of capital and land. But here you are carrying out something which is an exact contradiction to that, because you are attempting to discourage distribution and to concentrate wealth more into fewer hands. You are endeavouring to keep it into fewer hands by penalising its distribution. What is the explanation? I cannot help thinking that the explanation may be that the real aim of the Government is not so much the distribution of wealth among many individuals as a concentration of wealth in the hands of only one individual, and that individual is the State.

Mr. LEIF JONES

I listened to the very uncompromising reply of the Secretary of State for War with very great disappointment and not a little surprise. It will be in the recollection of the Committee that this matter was raised in the second reading Debate. The answer we then received from the Government was by no means of this uncompromising nature, and I have lived in hope that to-night the Government would announce they had considered the matter, and that the five years they had inserted in their Bill was really longer than was necessary for their purpose. I am certain a great deal more justification for five years is required than the Government have yet given us. I quite admit the great experience of the right hon. Gentleman who has spoken, but, after all, there are figures by which we can test whether this is a growing evil, and, so far as I know, there are no figures to show that evasion of the Death Duties is practised more now than it used to be. There may be a certain amount of desire to evade the duty on the part of certain people, but I see nothing to prove that it is growing or that more property is escaping taxation than in the early years after the duties were put on. A year is a very long time for a man to look forward to, and I cannot for a moment assent to the proposition of the Secretary of State for War that a man always knows when he is within a year of his death, and can then set to make arrangements on the supposition that within 12 months he will be in his grave. We none of us know whether this day 12 months we may be alive. If it is true there is a certain amount of evasion, I would put it to the Government whether they have not in mind not the passing of ordinary gifts but the transference of great blocks of landed estates. If there is more, I will not say evasion, because I do not admit it is evasion, but if there is more escaping the duties in the transference of real property, I suggest to the Government that it would be a more practicable proposal to put a limitation on the transference of property requiring formal deeds before transference may take place. I do not much believe in. landowners or anybody else giving up their property without keeping any hold upon it while they are living. It is a very unsafe proceeding.

I am bound to say that no case has been made out to justify the very long extension to five years of this one year, which in my judgment is a very long time. I always thought that the three months originally proposed was enough to deal with death-bed transactions where a deliberate attempt is made to evade the duty. I am really against the policy of this Clause on the ground just put forward by the hon. Member for Windsor (Mr. James Mason). I think it is contrary to the rest of the Budget. The ideal of the Government in this Clause appears to be that it is desirable to have large accumulations of property in one hand, because, when the owner of that property dies, the State will get a large sum. I hold another view. I hold the view attributed to Liberals by the hon. Member, that the distribution of property is an object at which we ought to aim, and one of the direct advantages of the Death Duties is that it has promoted in some degree the distribution of property into more hands. It was one of the standard objections to the Death Duties of Sir W. Harcourt that they would be evaded by properly being given away during lifetime, and his answer, and the answer of every Liberal was, "So much the better; the more property is distributed the better." What is the meaning of the high graduation which is the feature of this Budget? What is the meaning of the greater and greater taxation you put upon very large fortunes? Surely, in its essence, it means that we think it is desirous to tax more heavily and make more difficult the accumulation of very large fortunes, and to facilitate and multiply small fortunes in the country.

9.0 P.M.

It is no disadvantage, the Budget says all through until you come to this Clause, to tax heavily a very large fortune, because, if very large fortunes are not accumulated society will be none the worse. That is the underlying theory in the Budget. This Clause makes in the very opposite direction. The Chancellor of the Exchequer now seems to approach a man who is going to distribute his property and say, "What, break up your property! Give it away among your children! Transfer it by deeds right and left! Why, you are an enemy of society. You are fighting the interests of the State. You are evading taxation. You shall not escape in that way. I will watch your proceedings and investigate your transactions for five years before you die." I take the opposite view. I hold that the more wealthy people distribute their property during life the better. It may be a spendthrift view, but I hold that property is held by people in order that they may spend and distribute it, and not that they may leave it to the Chancellor of the Exchequer to tax at death. Indeed, I thought the policy of the Government meant that when a man left a great fortune at his death they said in effect, "You have failed in your duty; you have not distributed your property; you have left too much, and, therefore, we shall take a much larger proportion from your estate than if you had acted as a good man and distributed your property wisely and to the benefit of all people surrounding." The Government have to justify to the House and to the country this contradiction by Clause 43 of the policy of the rest of their Budget.

The hon. Member who moved the Amendment attacked the Bill as it stood, but he omitted to notice the amending Clause the Government have put upon the Paper, which undoubtedly, in some degree, lessens some of the evils of the present system, and certainly of the Bill as it is drawn. The Secretary of State for War dismissed the case of the cheque for £25 to the son very contemptuously, saying the tactics of the Inland Revenue were not to tax that £25. That may be their tactics, but it is not the law. Under the existing law, all gifts made within 12 months, however small, are subject to taxation if the Inland Revenue authorities choose to demand it. I am no lawyer, but there is no Clause I can find which defines the nature of the gifts or the transfer. So long as it is a transfer inter vivos without consideration, then it is subject to the tax, and, whether it is a cheque of £25 to the son or a larger sum to somebody else, it is all alike subject to taxation according to the law. I admit that in practice to my knowledge the Inland Revenue authorities have not interpreted this very strictly, but that may be because they were flush of money. When it is in the power of an official or a Department to exact more, if there is a period of stringency and difficulty, then a new interpretation may be given to the words. I for one am very glad that words have been put in which do, to some extent, modify the practice. What are the modifications? The Clause is not to apply to gifts which are part of the "normal annual expenditure" of the deceased. But what is the "normal annual expenditure"? I have in my mind instances of well-to-do men who have made it a practice when their sons have grown up and have reached the age of discretion, instead of continuing their annual allowance, to hand over to them a capital sum, representing the amount of the allowance, because the father thinks that the son, while yet young and in the prime of life, should learn to manage the capital which represents the income upon which he has to depend. Is it not a perfectly common thing, where a man has plenty of money, to hand over capital sums in that way, and are such sums to be treated as part of his "normal annual expenditure"? I know particularly of one large family where these sums have been handed over year after year to sons as they have grown up. I again ask is that to be treated as normal annual expenditure? Again, where is the justice of discriminating between cases where a man gives £1,000 a year away in the form of charitable gifts for ten years, while another man holds his money back until he realises that he is nearing his end, and then gives possibly £10,000 in a single year? Is that £10,000 to be taxed while the £1,000, given away in ten successive years, is to escape taxation? Where is the justification for a discrimination between the two sets of disbursements? Why should one be treated as normal annual expenditure and the other be taxed? Then the Clause goes on to say that the Commissioners are to judge whether the expenditure is reasonable, having regard to the size of a man's income.

The DEPUTY-CHAIRMAN

I do not think this question can be raised on this Amendment. There are Government Amendments down dealing with the question.

Mr. BALFOUR

On a point of Order. May I remind you that the Secretary for War reproached the Mover of this Amendment because he had discussed this Clause, and not the Clause as proposed to be amended by the Government. He actually denounced my hon. Friend because he said that an Amendment was going to be proposed by the Government in a very few moments. I do not see how it is possible for us to discuss the Clause unamended when there are Amendments to be proposed which really go to the root of the Clause, and when the Government attack us for our criticisms on the Clause when they have got Amendments down to it.

The DEPUTY-CHAIRMAN

I quite appreciate the difficulty, but the right hon. Gentleman, with his experience of this House, will recognise the difficulty and inconvenience of now discussing Amendments which will come on later. The question presently before the Committee is not the Clause but a specific Amendment. It is in accordance with the practice of the House to keep each Amendment Separate and to discuss at as it comes on. It seems to me, for instance, that the question of five years is a complete question in itself. The point whether it shall be extended or otherwise must be dealt with separately, and there are Amendments on the Paper dealing with that. Then the question what is normal expenditure is another point to be treated separately, and that I think is dealt with in the Government Amendment.

Mr. BALFOUR

I quite agree with your view that any detailed discussion of the Government Amendment will be quite out of place, but I take it that your ruling does not exclude any reference to Government Amendments.

The DEPUTY-CHAIRMAN

Not at all. I think the night hon. Gentleman will have noticed that the hon. Member has been dealing in some detail with those Amendments, especially so far as normal expenditure is concerned.

Mr. LEIF JONES

I apologise to the Committee if I have trespassed in any way on the rules of Debate, but I must point out that these questions are very much involved, and that the Government Amendments do really go to the root of the Clause. It is almost impossible to discuss the Clause without at the same time referring to the Amendments. May I briefly deal with the question as to the period of five years? Our main objection to that is with regard to the nature of the investigations which it involves into a man's past accounts. It really does not seem to be reasonable to insist that for five years before a man's death, which, be it remembered, may happen at any time, all his payments shall be recorded. If he scrupulously wishes not to escape the burden placed on him by the Government, it will involve a financial procedure such as very few men ever follow. I do not think it is desirable that it should be so. It would be immensely difficult for the official to trace for five years back what a man's expenditure has been. The hon. Member who moved the Amendment pointed out that it would be the simplest thing in the world for a man to draw a large cheque and give away the money, and that it could be done in such a way that no one could trace the transaction. The indirect effect would be, when you are dealing with large fortunes and large estates to penalise good accountancy, and to give a direct incentive to leave matters in as much confusion as possible, so that the Government officials may not be able to trace the payments. I particularly ask the Government to give me, if they can, any justification for the long period of five years which they have chosen. Will they tell me how they propose to avoid the difficulties which I have put before them? I can assure them that they have no more loyal supporter than myself in their Budget proposals, and it is only the practical difficulties which I think attach to this Clause, and which seem to me to derogate from the value of the rest of the Budget that has induced me to take this action.

Mr. J. W. HILLS

The hon. Member who last spoke and myself are not often in agreement, but I am bound to say that I endorse the words he has said on this matter. It surely cannot be denied that this is a tax on gifts. A short examination of the history of the tax will prove that. It was first imposed in 1881, and then the limit of exemption was three months. In 1889 that limit was raised to 12 months. Now it is proposed to raise it to five years. Surely that is a change not in detail, but in principle, and it passes out of the category of the Estate Duty into the category of a tax on gifts. Within three months of death a man may send for his family and for his solicitor and make over his fortune, but it is quite a different thing when you date the transaction back for five years, especially in view of the fact that one cannot possibly anticipate the date of death. I should like for one minute just to pass outside this House and to look at the thing as the taxpayer looks at it. He will tell you that it does not matter that these taxes were first put on by a Liberal, then by a Conservative, and now again by a Liberal Government. He, poor luckless man, is the shuttlecock between the two parties, and it does not matter to him by whom they are imposed. In the course of the development of the tax it has ceased to be an Estate Duty, and ceased to earn any of the praise which could be given to such a duty, and it becomes a preventive tax against the distribution of estates. As to what this tax includes, I disagree entirely with the Secretary of State for War. Even supposing the Government Amendment is passed, you have to prove, in order to secure exemption, that the expenditure is annual and reasonable. It is not even annual or reasonable. It is annual, normal expenditure, and reasonable expenditure too, and it has to fulfil those two conditions. A periodical payment which is not annual is not inside the exemption, and excessive payments are also outside it; and, supposing a man, in a fit of unreasonable generosity, gives a wedding present to an old friend, it is taxed. Also, if in a period of years, in a single instance, he gives a large sum to his son, that also is taxed, and so it is no good to say that an ordinary or a reasonable expenditure is included; it is not; it is all taxable; and then it is not generally known that the person who pays the tax is the man who gets the gift. Suppose in this case of the wedding present it turns out to be unreasonable four years after, the unfortunate friend is called upon to sink 7 per cent. or 8 per cent. upon the value of that wedding present. I am perfectly certain that that cannot be the intention of the Government, but still it is the meaning of the Clause, as the Clause stands, and, moreover, unless the Amendment of the Chancellor of the Exchequer is very substantially changed, it will remain the meaning of the Clause.

So much has been said about the inquisitorial character of this tax that I do not think I can say any more, but I really do ask the Committee to consider if they really mean to go back and find out all the sums that are given away in the last five years of a life. You will have to go through every single transaction of that daily life; even the man's bank-book is not sufficient criterion, because he may have drawn money out and paid it away himself, and every single page of the bank-book has to be scrutinised to see if the deceased is paying debt; and then you would have to separate the gifts from the payments for debts, and you have to decide whether they are unreasonable or not. I do say that it is impossible to collect a tax on these lines, and I wish to add, in conclusion, if you want to tax gifts, tax them, but do not call it Estate Duty. You are by Clause 53 imposing a new duty on voluntary transfers on passing. If I transfer shares to somebody as a present—I am not in the habit of doing it—but if I did, I have only to pay 10s. duty on that transfer. But if Clause 53 is passed I shall pay £1 for each £100 of those shares, so you have already increased the tax on voluntary gifts, and now you mean to bring those gifts within the purview of this tax. Surely that cannot be right. I do not agree with the policy of taxing gifts at all. I agree with the last speaker that it is a laudable thing for a man to split up his fortune, and the best way of treating capital is not always to preserve it, and by this Bill the Government are in two ways encouraging the preservation of fortune. They tax a gift, or intend to tax a gift, under Clause 53. That may be right or wrong, but anyhow it is quite a straightforward way of doing it. This additional duty is paid then and there, and the parties know what they have to pay, but here under this Clause it is paid three or four years afterwards. The unfortunate man who has received a gift may be called upon to pay for it. It is not the estate that pays the duty; it is he that pays it. I do hope that the Government even now will see reason to change their mind. I know that no words of mine can have any effect upon them, but I think they may pay some attention to the words that come from behind them.

Mr. D. STEWART-SMITH

It is with some regret that I object to this Clause. I am fully in sympathy with the Clauses dealing with the Death Duties. I believe them to be just and reasonable, with the single exception of Clause 43. I think that is neither. I am going to ask the Committee to look at this matter from a very practical point of view. I am going to ask them to resolve themselves with me, if they will, into a board of executors, and see what our duties are under this Clause with the Amendment which the Chancellor of the Exchequer proposes, somewhat late, to introduce. The duties of an executor under this Clause, as amended, would be these. He must include the gifts and dispositions of his testator, for the past five yeans, in the account which he delivers to the Inland Revenue. He may, but he is not bound to, pay duties on gifts, because substantially the gifts do not pass to him as executor. Having fulfilled the first pant of these duties he has got to find out the following things: The amount of all the gifts of his testator during the preceding five years, to whom they were given, the purposes for which they were given, and the normal annual expenditure of his testator. The matter is not one easily determined. Men do not generally keep accounts of their domestic expenses. It may be extremely inconvenient to do so. It is always uncomfortable to refer to them. The executor desirous of doing his duty must therefore obtain the best information he can, and in nine cases out of ten the only source of information is the testator's bank book or bank books. He is bound to search these fox five years back. Let us assume that he finds there are considerable sums of money which disappear from the account, and which cannot be traced by the name of the payee to any cheque. What is his duty then? He is bound to hold a sort of court of inquisition to find out what his testator has been doing with his money. He is bound to inquire of the testator's relatives, and if he inquires of the near relatives what they have received from him the executor may get a delusive and perhaps a derisive answer. He is bound to ascertain the names of the charities which the testator has benefited and the amount of the benefits, because unless he does that he cannot possibly tell whether the gifts fall within the exception in the last words of the Clause. He is bound to ascertain the testator's normal income. If his income varies, as it does in the case of a professional man, I defy any executor to ascertain his testator's normal income. It may depend in some years on the amount of Death Duties he has to pay. At all events, it varies in the case of most men who earn their living. Then he has to submit the whole to the Commissioners, who are to say if the testator has been reasonably charitable. That has to be determined ex post facto, and he may have been reasonably charitable, according to his own ideas, at the time when he gave the money. The Commissioners may find out, in consequence of disasters which have subsequently happened, that the expenditure was not reasonable. What are the gifts which the man is to be able to dispose of during the last five years of his life without penalty? Are they to be gifts to his children? No, not if they exceed £100, and the allowance to the boy at college and to the boy in the Army are not to escape the duty. The amounts which he allows to the ladies of his family for dress—no laughing matter, I am told, in some cases—are not to escape the duty either, because they may not be normal expenditure. It entirely depends upon the circumstances of the family whether these allowances are normal in any one year.

What are public or charitable purposes in the opinion of the Commissioners? In the view of some persons we are nearing a General Election. At such times high-minded persons find money for patriotic purposes. Their names are not necessarily disclosed, but their executor would be bound to make a return of the money so expended, and a period of five years would in the ordinary course oblige any person who did make a return to disclose the matter, because elections as a rule occur within a period of five years, and if the executor happens to be on the other side in politics what an opportunity for him. But supposing the Commissioners admit such a payment, I do not know who would have the courage to put in the account and pay the duty, I suppose it would be one of the Parliamentary Whips—then the Commissioners have to decide that he has been not unreasonably charitable. What is the effect of that? Are they to disallow specific payments in specific years, or is there to be a rateable abatement of all charitable gifts, and over what period? If the gifts exceed the maximum is the executor to bring the facts to the notice of the Attorney-General, and leave him to lay an information, or is he to take proceedings on his own account against the donees to recover the duties? If he does the latter he runs the risk of failing in his action, and having to pay the cost himself. He can protect himself against that by an application to the court for advice. He can get that advice. The court would probably advise him to take no steps at all. Then what is the position of the Government under these conditions? If the executor furnished the information they must make up their minds whether they will act upon it or not. Supposing he does, at whose expense is the information to be furnished? At whose expense are inquiries to be made? Would it be at the expense of the residuary legatee? That would be obviously unfair, because the residuary legatees will pay their share of the duties, or the executor will pay it for them, and they will get the balance. Of course the expense ought to be that of the donees, but what machinery is there by which the executor, if he met the expense out of the residuary estate, could recover it from the donees? Assume that the executor at his own risk ventures to take these proceedings, the result will be that he will certainly have involved his estate in expense which he cannot recover from anyone else. That will go to the debit of the residuary legatees if he succeeds. If he fails he will deplete his residuary estate in the endeavour to recover the duty, and the only person to gain by that will be the Crown.

What is the object of the present exception from the general rule? The object of bringing gifts made within a year was to prevent those gifts being made by testators in extremis, and that is quite a fair exception to make. I can well remember when Sir William Harcourt referred to this Clause of the Finance Bill of 1894 he said that old men's grip upon property tightened as they grew older, and it is quite true that a man is less likely to part with his property to his descendants at 70 by voluntary gift than he is at 55. Therefore there is no reason for extending the 12 months to five years if your only object is to stop the transfer of property in extremis. What is the object, of extending it to five years at all? I do not know that any explanation has been given by the Government of how they think the revenue will be increased by the extension of the term. Obviously it is very difficult to see how that can be, because the increase of revenue must be a matter of conjecture, and conjecture only. Of course, if there are any figures available, I should be prepared to modify that statement, but I am looking at it only from the point of view of the executor—the man who performs a trust, as a rule, for a relative, running considerable risk, without remuneration. He is asked now to undertake the additional burden which will fall upon him in having to investigate the accounts of the testator for a period of five years. I can only say, as one whose business it is to advise executors, that under these conditions there is only one piece of advice I could give him, and that is that he should renounce probate.

Mr. WALTER GUINNESS

I think it is somewhat regrettable that the Secretary of State for War is not present to hear the-most interesting speeches made by two hon. Members on his own side, because, in answering the Amendment, the right hon. Gentleman did not deal with any of the points which have been raised. He devoted himself only to the most general grounds for imposing the tax. I think more weighty grounds will have to be found if the Government are to carry their own supporters with them. There were one or two points raised by the Secretary of State for War on which I should like to say a word. The right hon. Gentleman did not agree that this provision as to five years was retrospective. The only justification of the longer period is to prevent the new scale from stimulating people to hand over inter vivos. Of course, by bringing in gifts made between the end of April, 1908, and the end of April, 1909, you go very much further, because you bring into the net people who cannot in any way be said to have tried to evade these new and higher duties. Why should you single them out? A man may have handed over his property, say, last June. He handed it over without contemplation of the higher tax. He handed it over in the ordinary course. If he died in July this year why should he be made liable under this five years' duty when he handed over the property without considering the higher rates now proposed? The Secretary of State for War apparently forget this case altogether. He said that the Finance Bill of this year was ample notice. It was no notice to the man who handed over his property in June last year. I know there is very little sympathy in certain quarters of the House for anybody who has any property on which to pay any Estate Duty whatever; but I think that common justice demands that when they handed over their property in accordance with the law as it stood, and when they made a gift, the poor condemned wretches should be allowed the year on which they reckoned to die in peace. Then the Secretary of State for War urged that we ought to be comforted in the hardships which may be entailed on children who were given large gifts by the fact that it was part of the normal and reasonable annual expenditure, and that it would escape. But I do not think that will take away the injustice in the great majority of cases we have in mind. Take the case of a marriage settlement. It is not normal annual expenditure. A man cannot expect to settle a sum of money every year unless he has a child to marry every year, and I think that is a very rare case. I think a decision of the Irish Court says that a marriage settlement is liable to Estate Duty within a year. I believe it was held that although a marriage was a valuable consideration it was not a consideration for money or money's worth. I think it is a very great hardship if any marriage settlement within the last five years is to be mulcted for Estate Duty, and if a parent who settles money on his son's marriage dies within the five years. I think that is a hardship which this Amendment of the Government will not in any way meet. Apart from that, I think the tax will probably have a very bad effect, for it will stimulate gifts. A great many people probably wait, if they want to avoid the tax, to the time when they think there is a reasonable prospect on account of advancing years, of dying in the course of a year or two, but nobody can be expected to foresee death by five years. The only result will be to encourage a healthy man to hand over in the full vigour of his life, because if he waits until he gets old there will be no chance of evading the tax at all. The result will be an increase in the amount of property passing inter vivos,

No doubt the Chancellor of the Extion from the general rule? The object of five years there will be a very great drop in the yield to the Government. At the end of five years the Chancellor of the Exchequer then in office will have to face a very great deficit on the Death Duties. I think it is very bad finance to try to dry up the source of this valuable branch of the revenue, and bequeath the difficulty of today to five years hence. If the Government had more consideration for the convenience of the taxpayer I daresay the arguments of the hon. Member for the Kendal Division of Westmoreland (Mr. Stewart-Smith) might have weighed with them very heavily. I think the hon. Member moved us all to very great sympathy with the lot of executors, but unfortunately, the Government seem to think that everyone who is in possession of property should spend his whole time in filling up returns. Under the Finance Bill as originally introduced everybody in the position of holding land was expected to fill up any number of returns on subjects he could form no valuable opinion upon unless he was an expert. It is the same in the case of the Income Tax. I think there will be great hardship on heirs on account of the time which must inevitably be taken before an estate can be wound up. I believe one of the first instructions to executors is in regard to dealing with inter vivos gifts. I believe the first question always asked of executors is, What gifts were made during the past year? I am told there is always very great difficulty in getting probate until all these delicate matters have been traced to the utmost possible extent. For this reason I think it is perfectly certain that an enormous amount of inconvenience will be caused, and, having in view the fact that the revenue from your tax, if not at present, certainly in five years' time, will tend to diminish owing to the stimulus you are now going to give to gifts without any prospect of death, I think this is a most wasteful form of taxation, and I shall certainly vote against it.

Mr. G. A. HARDY

I have listened to the arguments of the hon. Member who has just sat down, and I cannot say that many of those arguments will ever come into actual realisation. But from the hon. Members who have spoken from this side we have received weighty words, which make some of us feel that perhaps it would be well for us to urge the Government to see if they cannot in some way or another meet the case that has been made. I have supported them from the beginning, because I believe this is the most reasonable Budget that has ever been produced and will be most helpful to the country when carried into effect; but I do feel that if the Government could see their way to in some way reduce the number of years it would help to answer some of the objections that have been made by hon. Members who have spoken on this side of the House. There is the difficulty, and it is a great difficulty, of being able to trace your accounts. I suppose there is hardly a Member of this House who, looking through his bank book of last year, would be able accurately to say as regards every cheque, even up to £20, what that particular cheque was drawn for. If that be so, how much greater will be the difficulty if the responsibility is thrown back as is proposed. For two or three years it might be easy, but at five years I am afraid that some of us would find it difficult.

Mr. BALFOUR

The hon. Gentleman who has just sat down drew an invidious distinction between the character of the speeches from that side of the House and the character of those which proceed from the benches behind me. I do not know whether he distinguished between the form and substance. So far as regards form, it is not for me to offer an opinion on the merits of speakers sitting either on your right or left hand side; but, as regards the substance I, who have sat through the whole of this Debate, can really see no difference at all. The arguments that have been addressed to the Government on that side of the House, though there may be individual shades of difference, are in substance precisely the same as the arguments addressed from this side of the House, and like the arguments from this side of the House they have, so far, received no reply from the Government.

Mr. LLOYD-GEORGE

Yes, they have.

Mr. BALFOUR

I heard a speech from that bench, but I heard no reply, and nobody now sitting on that bench even heard the speech. When it was delivered the Secretary of State for War was the solitary occupant of that bench, and I was the solitary occupant of this. I speak with an authority which no other Front Bench occupant on either side of the House, in the absence of the Secretary of State for War, can profess to have on this point. I am quite confident that those who have followed the whole of the Debate, even those who have only heard the latter half of the Debate, must feel that the Government have absolutely no choice but to give way. I speak as an old Parliamentary hand, and I say I am confident that it is perfectly impossible for the Government to sustain their position. They labour under every conceivable misfortune; they are acting entirely contrary to the whole theory of the Act of 1894. As has been shown by many speakers, and as I shall perhaps show myself, they are throwing upon executors an absolutely impracticable task. The proposals are consistent neither with theory nor with modern possibilities, and cannot be sustained, and will not be sustained. I am perfectly certain that when the Chancellor of the Exchequer or anyone else gets up to finish this Debate he will announce that some concession, enough to satisfy the hon. Gentleman who has just sat down, if not to meet the arguments which he and others have addressed, must be made. It is quite plain oil the face of it. Just consider to what the Government are asking the House to assent. They used to claim, and their predecessors in title, Sir W. Harcourt, and the Government which he led in this House used to boast, that the Finance Act of 1894, in so far as it encouraged gifts inter vivos, was a good Act; that in so far as it distributed property in that way it carried out a great public policy. How on earth can they come down now and, through the mouth of the Minister for War, say to the man who distributes pro- perty among relations or among friends and then happens to die within five years of his gifts, was a public enemy? They cannot sustain that. The Government are absolutely putting a tax on family affection. You choose to leave your property to an institution for the preservation of oats; it escapes duty, and you may die happy within 13 months after that generous gift. The tax collectors have nothing to say to you. Even the Inland Revenue will leave you alone; you have spent your money nobly and profitably. You have spent it as the Government would desire you to spend it. You have spent it on a charitable institution. If you are criminal enough, if you so disregard public interests as to give £5,000 to a son to start in a business and then die within five years, the matter is very different. Then it is a crime; then the Exchequer has a right to come and take toll, in the classical phrase, of your property. You have not used it to the best public advantage; you have tried to evade the tax; you have tried to diminish the property which ought to pay its way for public purposes; you have not sufficiently supported the Chancellor of the Exchequer in his desire to obtain adequate funds to carry on the Government of the country, you must be taxed. How can you possibly justify that? Why may you give it to cats and not to sons? It really does not bear upon the argument, and, mark you, gifts are not touched in the Government Amendment to which the Secretary of State for War in a most disorderly manner called our attention. The Amendment only deals with annual expenditure as I understand it; so that you are really going to enact that no man may part with his property without, if he is foolish enough to die within five years, paying a tax to the community. Observe that this has no relation whatever, logical or illogical, with the limitation of the death bed gift. It has nothing to do with it. To make a gift within five years is in all probability to give in the full vigour of life, with an unknown prospect of enjoyment of your property before you, and that is to give in the full sense of the word; it is parting with that which you might have kept, and which you might have enjoyed. The death bed gift is wholly different. There the warning is before your eyes; the future enjoyment of your property is by hypothesis denied you; you cannot keep it yourself, and you may as well leave it to others. There is no merit in such a gift. The two cases are absolutely different. They are not divided to any extent by degree, and they are not divided to any extent by time; they are divided absolutely by a gulf that cannot be passed over. I do not believe that anybody who accepts the theory of the Act of 1894 will say this is merely screwing up that Act in order to meet the growing evasions of which the Secretary of State for War so bitterly complained. There is another to which I would like to call the attention of the Committee. It has been referred to in the most brilliant speeches of two hon. Members to-night, and I am referring at this moment to the last speech made by the hon. and learned Gentleman who represents the Kendal Division (Mr. Stewart-Smith). He called attention in passing to the duties that are to be thrown on the Commissioners in regard to these gifts that are made in the preceding five years. It would be out of order, I think, to discuss in detail the Government Amendment by which the Chancellor of the Exchequer hopes to get ever all the plain and patent objections to his proposals, but, I think, it would not be out of order to make some reference to them.

10.0 P.M.

Just consider what the proposal of the Government is. We have heard a good deal of what Government Commissioners are to do under this Bill, and the earlier portion of it, and under other proposals of the Government. Our whole life, or, at all events, the management of our property, is to be subject to perpetual valuation and perpetual interference by various Government officials. Never before has any Government official been entrusted with a task so difficult and so delicate as that which, I understand, is to be entrusted to the Commissioners under the Clause as the Government propose to pass it into law. They are to consider whether the annual expenditure is reasonable. I suppose they are to discuss whether the allowance a man gives his wife for her dress is, or is not, in excess of what a reasonable man would allow. That is not an easy position in which to place the Commissioners or the executors, because I take it the executors would have to make a preliminary survey of the same kind. They would be a kind of grand jury, and would consider whether or not they should regard the annual allowance which a man has made to his wife is in excess, or is not in excess, of what a reasonable man might be expected to allow. I am told that some wives are extraordinarily extravagant. Amazing figures have been given to me, and I have no means of testing them. I am neither an executor nor a Commissioner, and I have no means of testing the amazing figures which are given to me as to what certain ladies think necessary to keep up their position and to do full justice to their natural beauty. For five years this is to be looked into by the executors and by the Commissioners. It is idiotic. It is a thing which no Government can seriously support. And what is to be the position of the unfortunate man who is considering whether he shall make an allowance or a gift either to his wife or to a relation, or to any other object—remember, charitable object? I do not investigate any of the darker corners that may have to be dealt with by the executors. I take the plain, open, and manifest everyday cases. The Government are going to make no exemption of charity, unless charitable institutions. They are going to make no allowance for lump sums given in charity; they are only going to make allowance for annual gifts. Consider the position of a man who has to ask himself whether it is wise or unwise of him to make a gift. He will consider, "What is the chance of my dying? The doctor says I am in good health; I have no symptoms of organic disease; but life is uncertain." The Government are going to make the tax, which is in itself arbitrary, however you place it, doubly arbitrary by the fact that a man does not know and cannot know when he makes a gift whether or not there will be a tax not merely upon that gift, but in respect of all the property with which that gift is associated for the purpose of aggregation.

He cannot decide, the Government cannot decide, the courts cannot help him, the Commissioners cannot help him—the whole thing is settled by the Angel of Death, and the Angel of Death is not under the control even of the Commissioners. How can you really think that a system like that is one which free men will tolerate for long? Then, what about the executor? The position of the executor was explained, I am sorry to say, to a thinner House than that which I am addressing, in a speech I have already referred to, by the hon. and learned Member for Kendal. He spoke with authority on the subject. I cannot speak with authority, but it does not require a lawyer to see how impossible is the situation to every executor if this Clause passes in its present form. You are asking him to undertake the duties of a detective, and you are not paying him for the job. That is what it really comes to. He will have to go into the private life of the man of whose estate he is executor. He will have to look into his bank books, to cross-examine his relations and his friends, to look into his whole career, so far as he has means of doing it, and then communicate with the Inland Revenue. Who is going to undertake, unrewarded and unpaid, a task so dangerous and so thankless? Why, nobody in his senses will do it. I really am not lawyer enough to know what happens when everybody refuses to be an executor. I suppose the law has found a remedy, although I do not happen to know what it is. You have a Public Trustee, and I suppose we shall have a Public Executor. The Trustee can act as Public Executor, and, if so, you would have to greatly increase his salary, and you will have to supply him with a large staff of detectives in order to really find out what has been given in the last five years by the owners of every one of the estates which he is called upon to administer. I believe your whole system will break down by its own weight, apart from the resentment which it creates, apart from the collateral objection which I and other people have ventured to put before the Committee. I believe it will break down by its own weight, because it would not work, and nobody would consent to work it for you.

I am afraid that this really shows you have reached the limit, more than reached the limit, of what you can extract in this form of taxation. Very few people heard the speech, the one speech so far delivered, by the Government in defence of this Clause. The solitary argument of the Secretary of State for War was this. He said evasion was going on, or avoidance; I think he used the word "avoidance." He certainly did not attempt to use any word of condemnation. He said that avoidance of the duties as they stand is going on, and that that avoidance has already reached formidable proportions, and that if these duties are increased, as they will be under the Bill, that avoidance will necessarily augment. I am afraid that is true. I think it is true, but I am quite certain that this remedy will not cure that disease. That disease is inherent in the situation. You cannot prevent people giving in their life—it cannot be done. The Commissioners and the Treasury may set their wits to work against the man who really says "I have got property and I mean to give it," but it is impossible to do it. There are certain kinds of property with which you can do it. Property in trust is subject to inspection, and can avoid nothing. It may be real estate, and that cannot easily avoid the meshes which the Chancellor of the Exchequer proposes to throw out. But real estate, as we ah know, though it is often forgotten outside this House, is but a relatively insignificant fraction of the total wealth of this country, and putting aside that estate and settled estate, other property cannot be caught if people are determined to avoid it. You are righting an impossible battle, and I think you are fighting in a wrong cause. The idea that you can tie a man, that is what the Government are doing. The old Radical view was that it was good, as has been pointed out by one Radical speaker after another, with far greater force than I can put it, that it was desirable that property should be distributed.

The whole object of the Government is to tie a man to his property until he dies, in order that when he dies you may extract the largest possible sum out of it. Something very like that was tried in the decaying days of the ancient Roman Empire, and that more than anything else brought it to financial ruin. They tied a man to his profession, they tied a man to his trade, they tied a man to his property. You cannot do that kind of thing in the twentieth century; however you may have been able to do it in the fourth century, you cannot do it now. In my judgment, I entirely concur with the Secretary of State for War when he says that avoidance at the present rate of Death Duties is reaching a dangerous height. I entirely agree when he goes on to say, "if you augment these duties avoidance will increase." I believe in both these cases. I am sorry he is not here, for I think he would admit I am not misrepresenting him. That was his whole argument. I say that, although that be true, it is impossible to look for a remedy in the direction which the Government are taking. If you increase the stringency of your position, you only increase the ingenuity of avoidance. Increase the stringency of your provisions, you may here and there prevent a man using his property to the best of his ability in his life, either in charity to other than institutions, or for the purpose of helping his family in the manner which best suits himself; but you really cannot prevent him, if he really chooses, in most cases to give his property away; and you ought not to do it. You ought, not, on broad liberal principles, which I, following other speakers, have endeavoured to express, and you ought not on the most practical ground. Say a man wishes to help his son by giving a. lump sum to start the son in business. He says: "Now, I should like to wait for four or five years till I see how my son's character develops; what strength and vigour of character he shows, whether he is steady, and whether he is intelligent. I should like to see for what business he is best qualified. But if I wait I may go within the five years, and my other heirs and my son are to be mulcted in the Death Duties." You drive that man to give the money before it ought to be given. You prevent him waiting, you make him give it to the immature youth; you prevent him waiting to see what the young man is likely to turn out. Is that a thing people are going to tolerate? Of course, they are not. This is a mad attempt to get over an inevitable difficulty. The magnitude of the difficulty I admit. I believe that the difficulty will grow, and that the augmentation of the difficulty will lead to increased avoidance. I am absolutely certain that this endeavour to deal with that difficulty, this method of stopping that leak, will prove wholly inefficacious, and that it will cause in every class of the community who come under these duties a general feeling of resentment which will make it impossible for any Government, however strong, to retain them in their present shape.

Mr. LLOYD-GEORGE

What is the point upon which the Committee will be called upon to decide? An Amendment has been moved by the hon. Member for Aston Manor (Mr. E. Cecil) proposing to cut down the twelve months to six. The Government, on the other hand, propose to extend the period to five years. For the moment I ask the Committee to dismiss the question whether it should be five, four, or three years. The point of principle they have to decide is whether there shall be an extension or a curtailment of the period. The case of the Government for extending the period could not have been better put than it was put by the Leader of the Opposition in his concluding observations when he said, "Evasions are inevitable; evasions will grow." His view is that we have got to the limit of this tax, and he practically admits the case of the Government, so far as evasions are concerned. The Government are prompted to submit this proposal to the Committee because there has been a series of notorious cases—I do not want to give any names, because it would look like an attack upon individuals—Owing to which undoubtedly a very considerable proportion of the property of the country has escaped taxation within the last ten years. The question is, Is the Government entitled to take steps, and, if so, what, to see that property does not escape what has been accepted by both parties in the State as a very fair principle and method of taxation? This is the chief method by which property contributes, by which capital contributes, apart from income, apart from commodities; and unless a Government takes steps to prevent these evasions, well, then, I agree with the right hon. Gentleman that this method of taxation would fail altogether, and property would escape taxation in this country as it escapes in other countries. That is the question which the Committee has got to decide. First of all, the question of principle: Whether we are entitled to take steps to prevent such evasions that have come to our knowledge? Some of them are well known. The right hon. Gentleman says, "Why do you exempt charity? If a man gives his property to a charity you exempt it; if a man gives his property to his relatives you do not exempt it." Surely the reasons are perfectly obvious. Men may make arrangements with their relatives to avoid the duty. Men do not give their property away from their relatives to charities merely to escape Death Duties. The right hon. Gentleman, has treated this as if it were some method of penalising the distribution of property inter vivos. This does not prevent the disposition of property inter vivos. On the contrary, what were the observations made in my hearing by the hon. Gentleman the Member for Bury St. Edmunds (Mr. Walter Guinness)? He said:— This will stimulate gifts and encourage a healthy man to distribute his property long before he anticipates his dissolution. His view is that so far from our discouraging gifts inter vivos, this five years' limit will encourage them. Why should it discourage it? This is not a penalty upon distribution. The view of the right hon. Gentleman is this: That if you treat property which has been disposed of by gift inter vivos within five, four, three, or two years, as the ease may be—if you treat it as part of the estate of the person, well, that is discouraging. It will discourage no bonâ fide distribution. Supposing a man disposes of £100,000 amongst his relatives during his lifetime. If he dies, say, within 12 months, the duty is paid upon it. But supposing he did not distribute his property, the duty would be paid just the same. If this were a proposal to double the duty because a man had distributed his property within five years that undoubtedly would be a detriment, but it simply means that the same duty will be paid as would be paid if he had not distributed it. Where is the penalty there? I ask again, Why should it be a detriment to the man who wants to distribute his property amongst his children? What is the position? A penalty means that a man would have to pay something for the acts which he had perpetrated which he would not otherwise have had to pay. He does not pay any more here; his property would not pay any more whether distributed or not; it makes no difference at all, and there is no deterrent here to the man who wishes to distribute his property, say two years before his death. [An HON. MEMBER: "Five years."] Take any period for the moment. I am inviting the Committee to consider the question of the principle of extending the period; I will come to the number of years later. There is no deterrent; on the contrary, there is an inducement. If the man dies the property which passes inter vivos only pays exactly the same duty as if he did not distribute it. On the other hand, if he survives the period the property may not pay the same duty at all. Where is the penalty there? There is no penalty upon distribution, and to treat this as if it was a penalty upon distribution is not to take into account in the slightest degree the facts of the case.

Let me take it a stage further. The right hon. Gentleman the Leader of the Opposition says this involves a new minute and meticulous examination of accounts extending over five years. You, examine, the right hon. Gentleman said, what a man spent upon his wife's dresses and upon his household expenses. Really, the right hon. Gentleman talks as if this were not in operation at the present moment. You have got the 12 months' period now. Does the right hon. Gentleman mean to convey that the Commissioners of Inland Revenue ever enter into questions of that character? You really must assume that those who are administering the revenues of this country are men of great experience and men of great ability, and really they are men gifted with some common-sense, and that is the reason why this system has been conducted up to the present, I venture to say, without the slightest offence. It has been in operation for a good many years. I never heard a discussion in this House of Commons challenging the action of the Commissioners in the administration of their duties in regard to the 12 months' period, and yet everything the right hon. Gentleman urged against the five yeans could be urged against the 12 months.

Mr. BURDETT-COUTTS

There is nothing about normal expenditure in the twelve months—

Mr. LLOYD-GEORGE

If the hon. Member knew what the existing law is upon that point he would have known that I am making a concession, and that under the twelve months' period gifts of any sort or kind should, if there was a strict interpretation of the law as it stands, without the limitation which I propose to impose by the Amendment which is on the Paper, come in, and the Commissioners could examine accounts of that kind at the present moment. [An HON. MEMBER dissented.] The hon. Member contradicts me. I can assure him that that is the law at present. There never has been a case where there has been any complaint of the Commissioners entering into this minute examination of accounts of household expenses of the testator and, of course, the way the Commissioners have administered it up to the present will be the way they will administer it in the future, with this difference, that there is the limitation now which we impose for the first time by our Amendment. The right hon. Gentleman criticised that Amendment, but that Amendment is a limitation. If I had not put it down upon the Paper he would probably not have known anything at all about it. Why? Because the Commissioners at the present moment are carrying out their work under those conditions without the slightest trouble or difficulty. There is at present no examination of household expenditure or the money spent upon dress. The only gifts arrested are those obviously outside the annual expenditure of a man. If a man makes a gift of £5,000 or £10,000 to a relative that is not the ordinary expenditure of the year. There is no examination of such items as the right hon. Gentleman has referred to, and if he had made the slightest inquiry he would have known that that was the case. I hope the Committee will not decide this matter upon mere exaggerations of the practice at the present moment or upon the assumption that the Commissioners are going to abuse the powers which are vested in them. Therefore I say that, if the Revenue is to be protected at all, you can only protect it by an extension of the period. Twelve months is quite inadequate, and I think that is admitted by hon. Members on this side of the House. It is admitted that 12 months is inadequate. The whole point is this: Do hon. Members wish to assist property to escape taxation or do they not? That is the real point. If they do wish to assist property to escape taxation, the best thing they can do is to leave the law as it stands at the present moment. If they wish to strengthen the law in seeing that property does pay its fair share upon the occasion of death, which is the occasion seized by the successive Governments as the proper opportunity upon which to take that toll, then I say that the only way to do it is to strengthen the hands of the Revenue Commissioners by extending the period within which gifts inter vivos cannot be made without payment at all.

Let me put another point. After all, death is simply taken as the occasion upon which to tax property. There are countries where capital is taxed annually. In some countries there is a tax of a small percentage on property annually, but instead of taxing property and capital annually, we have chosen to tax it at death. If that is to be evaded by means of gifts inter vivos in the way some very wealthy persons have done within the last five or ten years, the only alternative open to any Government which desires to put a tax upon property would be by converting that tax upon the occasion of death into an annual tax upon property, otherwise property escapes altogether. I do not think that would be in the interests even of property-owners. I have conversed within the last few days with men who have paid very heavy Death Duties, and they have said to me that they consider it to be the fairest way they knew to make a contribution to the State in respect of property. If this system is to be continued, there is only one way of doing it, and that is by stopping these obvious leakages which have had the effect of depriving the revenue within the last few years of hundreds of thousands of pounds.

I come now to the length of the period. I observe that there are three suggestions on the Paper. One is the proposal of the Government making the period five years, and the other extreme is the proposal of the hon. Member opposite to make it six months. Then there is another proposal by the hon. Member for one of the Divisions of Westmoreland (Mr. Leif Jones) to make the period two years. I do not think that two years is sufficient. I should not be doing my duty if I did not inform the Committee that after a careful investigation of the matter with the assistance of the Secretary of State for War, the Attorney-General and the Solicitor-General, I have come to the conclusion that in my judgment two years are quite inadequate. I am quite willing to respond to the obvious feelings amongst a number of hon. Members in this House whose fidelity, at any rate to the general policy of the Government, is beyond suspicion. I certainly do not suggest on their part any unfair carping or criticism, because they have not embarrassed me in the slightest degree during the discussion of this Bill. There have been no more loyal supporters of the Government. Therefore I will be certainly quite willing to defer to their views, but I really could not, with a full sense of responsibility, assent to a proposal that two years is sufficient.

I make two suggestions to the Committee. The first is this: When I entered the House there was a discussion with regard to the effect upon marriage settlements. I agree that marriage settlements are of a totally different character. No man can compel his son to marry in order to evade the Death Duties. He would probably consider the penalty would be too high. That, therefore, at any rate, is not a transaction with a view to evading the Death Duties. It is a perfectly bonâ fide transaction, and is not the sort of transaction against which we want to have this limitation operating. I should be perfectly prepared to accept an Amendment, which I think is down on the Paper, dealing with that, and putting marriage settlements outside the category altogether of gifts which would come within this Clause. My second proposal is that the period of five years should be reduced to three. I do not even ask my hon. Friends to meet me half-way. I will go more than half-way to meet them. I will go two-thirds of the way if they will come a third, and I will suggest three years. I agree there is a very strong feeling on both sides of the House. I have heard two speeches from the Opposition and one or two speeches from this side, and I judge the right hon. Gentleman (Mr. Balfour) had very strong feeling in regard to this; but I really could not assent to the proposal of six months. I do not think the right hon. Gentleman would support that. He does not propose we should go back. I think, therefore, I am making a very fair proposal on behalf of the Government, that, at any rate, they should see whether three years would not answer the purpose. If it does not, I have not the faintest doubt some future Chancellor of the Exchequer—it may be the right hon. Gentleman—will come and say, "Three years is not enough; I propose to put on a year or two." I am quite willing, in deference to the views so strongly and powerfully expressed by both sides of the House, to meet hon. Members by first of all exempting marriage settlements altogether, and in the second place by cutting down the period of five years to three years.

Mr. AUSTEN CHAMBERLAIN

The right hon. Gentleman has made a strategic movement to the rear on this question, which will, no doubt, facilitate the passage of this proposal, but which does not diminish its gravity nor remove the objection to it. Nothing could measure more visibly the ground we have travelled since the Budget of Sir W. Harcourt than the speeches which have been delivered by the two right hon. Gentlemen who have spoken from that bench. From this side of the House my predecessors at the time when Sir W. Harcourt's Budget was passed, and others of us since, have again and again drawn the attention of the Government to the fact that if you raise these duties to excessive rates you will stimulate avoidance within the law. Until to-night the Government have laughed at our fears and derided our prophecies. They have denied again and again that there was any foundation for them. If the Chancellor of the Exchequer and his colleagues will look at the speeches made within very recent years they will find that the Prime Minister has ridiculed the idea that there was any danger of avoidance in consequence of an increase of the duties. But now we have the Government coming down and saying that already this avoidance, amounting in their view to evasion, has grown to such an alarming extent that unless they have the power of looking back into what a man had done for years before he died, their tax will become a nullity, and they will cease to get the revenue expected from it. That marks the distance we have travelled since the time of Sir W. Harcourt, who, in answer to criticisms from this side of the House, said that if his proposals resulted in gifts being made among the living that would exercise a most beneficent effect, in which he would be glad to have a part.

If the statements of the Government are right as to what is taking place now, there can be no greater condemnation, from a purely fiscal point of view, of the proposals they are making to-day. I confess I am astonished to hear the statement of the Chancellor of the Exchequer. It is not so very long ago that I occupied the position he now holds, and I must say he obtains from the Inland Revenue authorities an entirely different report to that which was given to me by the Commissioners of Inland Revenue at the time I held office. Of course, there have been cases in which some ingenious solicitors have found loopholes, and there is one which is still under litigation. But that does not justify the proposal of the right hon. Gentleman; it would not prevent a recurrence of cases like that. I do not want to discuss cases by name, but what I say is that up till the time when I left office the reports of the Commissioners of Inland Revenue and the advice they gave me afforded no foundation for such a general statement as the Chancellor of the Exchequer has made to-night. I had had my attention drawn to a particular case, or to a few cases, where it might be that a gap had been discovered in the enactment of the original law and as to whether some amendment might be necessary, but what the Chancellor of the Exchequer proposes is not a change suitable to meet these cases, and will not prevent these cases from occurring, and, as far as I know, there has been no such general evasion as would justify such a speech as the Chancellor of the Exchequer has made to-night. The information which I had did not go to show any such general evasion as that of which the Government now speak—any such large and frequent evasion as to form any danger to the tax. On the contrary, all the information that I had was to the effect that the tax had done what its authors had intended, it produced the general results which they desired to produce, and would take the toll which they wished to levy. It might have led, as Sir William Harcourt thought and hoped it would, to the larger distribution of property inter vivos, but there had been nothing of a character to call for any general revision of the law. Now the right hon. Gentleman says that the taxes are producing such an effect upon testators that the gifts, inter vivos, come not in the ordinary course and naturally, but come with the intention of evading payment of Death Duties, and have come so much that you must extend the period within which you must carry back your inquisition. I say, what others have said before, that that is the most serious argument that can be adduced against adding to these duties at the present time; and I go one step further, and say if that be true, you cannot stop it by any such contrivance as this. Anybody who has the knowledge which the Chancellor of the Exchequer possesses knows that if you create a feeling of injustice and persecution among those who are subject to these duties, the wits of the taxpayers and of their advisers are set to work to see how they can evade the obligation which the law seeks to impose, and are keener and more inventive than the wits of his advisers. If the public is against the Government the public will always defeat the Government. You will not prevent that by going back from three years or five years. You will only cause the avoidance to take different forms and more insidious forms—forms which it is more difficult to trace. You cannot prevent that kind of thing if you once set up a desire to do it, and a feeling among the taxpayers that it is fair and just to do it, and the great safeguard of the revenue for these taxes, as for all other taxes, can only be if the taxpayers themselves believe that on the whole they are fair and just, and that they apportion the obligation of the State equitably among its citizens. If you once destroy, as you are destroying, the confidence of the taxpayer in the equity of the Stats all precautions that you may take will not serve to protect your revenue.

Mr. LEIF JONES

I should like to express thanks to the Chancellor of the Exchequer for the offer to substitute three years for five. I should have preferred two years, but if three is all he will give us we will take it and thank him very warmly.

Mr. W. PEEL

I should like to offer some comments on the extraordinary reasons that the Chancellor of the Exchequer gave for making this, what he would no doubt call a concession. He did it under compulsion and not very willingly. He told Members behind him that their arguments were very powerful, and he was going to give way to them because of their extraordinary fidelity to the Government, because some hon. Members vote steadily, either with or against their consciences, and not because of the larger statesmanship of the matter, not because it inflicts a hardship on particular individuals or classes, not because it is bad for the State or for finance, but simply because of the fidelity of hon. Members. Then the Chancellor of the Exchequer said there is a great deal of property in this country that escapes taxation. His whole assumption seems to be that property is rather wicked if it does not pass at someone's death. He seemed to treat property as though if it did not pass at death and was given away during a man's lifetime, it has in some way escaped proper taxation. But this tax is nothing of the kind. It is a tax upon property which passes at death, and if it does not pass at death there is no reason whatever why Death Duty should fall upon it. The Chancellor of the Exchequer, further, gave us a very remarkable reason in favour of his particular proposal. He repeated his argument two or three times and seemed to think that Members on this side did not understand what he was saying. He said: "Take the case of property which is given away four years before death. It will pay duty if given four years before death, and it will pay duty if it passes at death." The reason why hon. Members on this side were amused was because they saw the obvious answer to that point which the Chancellor of the Exchequer did not seem to be aware of. They saw that the ordinary testator, if the property paid duty, whether he gave it away in his lifetime or whether it passed at death, would naturally desire to retain his property in his own hands. As to what the Chancellor of the Exchequer said about a concession in favour of charities, I would say that it is quite obvious that when these Death Duties are steep there will be a strong reason for giving away a small sum in charity, so that the rest of the estate may come within the smaller amount on the scale and escape some taxation. We have heard a great deal from hon. Members opposite as to the great disturbance that must take place to executors in making inquiries into the actions of men as to gifts and other matters for five years previous to their death. They drew a tearful tale, and the Chancellor of the Exchequer was affected by them. But will the substitution of three for five years make all the difference? Are all these difficulties and objections going to be removed simply by saying that the period is to be three instead of five years?

11.0 P.M.

Mr. J. D. REES

I heard with the greatest satisfaction that the Chancellor of the Exchequer is going to give a restriction of the period to three years. I have been asked to put before the Committee the case of people who are seldom represented in this House and who from the electoral point of view are not very important. They provide for the public service of this country. I mean naval and military officers and Civil servants, who send their sons into those Services. While I gratefully accept the concession the Chancellor of the Exchequer has announced, I say that it would have been more acceptable had the period been made two years instead of three, because very often men who have been in the public service and retired with very small incomes strive to provide their children with allowances in order to help them to a better position and it would be very hard on such men that these duties should have a retrospective effect for such a long period as three years. I should be glad if the Chancellor of the Exchequer would consider the possibility of reducing the period to two years. Of course, there is the difficulty of evasion, as to which everybody who has ever been in the public service must sympathise with the Chancellor of the Exchequer. But there also seems to be the inevitable disposition to think that the persons dealt with by taxes of this character are rich men who are giving large sums as gifts to their children. I have risen on behalf of those who have been in the public service, and who, wishing to put their sons into better positions, make them an allowance.

Mr. LLOYD-GEORGE

Those allowances will not be taxed.

Mr. REES

Does the Chancellor of the Exchequer say that an allowance of £200 a year to a son in the Army will not be taxed?

Mr. LLOYD-GEORGE

Certainly not.

Mr. REES

If so this matter has been much misunderstood, and the fact that those allowances are to be exempt will be a cause of great satisfaction to those on whose behalf I have risen.

Colonel WILLIAMS

The Chancellor of the Exchequer has just said that the allowances referred to by the last speaker would not come within the scope of this Sub-section. I suppose he means if a further Amendment is passed, because as the Clause stands the effect will be nothing of the kind. On another subject we are often told that protective duties are bad, because the more you protect the more you have to protect. But in the present instance the more you raise the duties the more you have got to protect those duties, and the longer you have got to make your period in which you are going to improve them. There are several maxims of taxation which have been quoted, and one of them is that a tax which leads to evasion is a bad and an immoral tax, because it leads a man to do that which he would not otherwise do. My objection to three years is just as strong as it was to five years, and I should have liked, if the hon. Member for Appleby and other hon.

Members had stuck to their two years and not accepted the compromise of five years. One year does no great harm, because his estate would be submitted to the executors and to the Commissioners within the year. But when it comes to two years, and still more to three years, and to raking up a man's bank book for three years, it means that the executors cannot wind up the estate. The Chancellor of the Exchequer made a great merit of exempting marriage settlements, but I cannot see that it is any concession at all; it is merely a matter of common-sense and justice.

Question, "That 'five years' stand part of the Clause," put, and negatived.

Question put, "That 'six months' be there inserted."

The Committee divided: Ayes, 95; Noes, 219.

Division No 654.] AYES. [11.10 p.m.
Acland-Hood, Rt. Hon. Sir Alex. F. Fletcher, J. S. Meysey-Thompson, E. C.
Anson, Sir William Reynell Forster, Henry William Mooney, J. J.
Anstruther-Gray, Major Foster, P. S. Moore, William
Arkwright, John Stanhope Gardner, Ernest Morpeth, Viscount
Balcarres, Lord Gibbs, G. A. (Bristol, West) Nicholson, Wm. G. (Petersfield)
Baldwin, Stanley Gordon, J. Parker, Sir Gilbert (Gravesend)
Balfour, Rt. Hon. A. J. (City, Lond.) Gretton, John Parkes, Ebenezer
Banbury, Sir Frederick George Guinness, Hon. W. E. (B. S. Edmunds) Percy, Earl of
Banner, John S. Harmood- Hamilton, Marquess of Pretyman, E. G.
Baring, Capt. Hon. G. (Winchester) Hardy, Laurence (Kent, Ashford) Rawlinson, John Frederick Peel
Barrie, H. T. (Londonderry, N.) Harris, Frederick Leverton Renton, Leslie
Beach, Hon. Michael Hugh Hicks- Harrison-Broadley, H. B. Renwick, George
Bull, Sir William James Hay, Hon. Claude George Roberts, S. (Sheffield, Ecclesall)
Burdett-Coutts, W. Hermon-Hodge, Sir Robert Rutherford, Watson (Liverpool)
Carlile, E. Hildred Hill, Sir Clement Salter, Arthur Clavell
Cave, George Hills, J. H. Scott, Sir S. (Marylebone, W.)
Chamberlain, Rt. Hon. J. A. (Worc'r.) Hope, James Fitzalan (Sheffield) Sheffield, Sir Berkeley George D.
Clark, George Smith Hunt, Rowland Stanier, Beville
Clive, Percy Archer Joynson-Hicks, William Starkey, John R.
Coates, Major E. F. (Lewisham) Kennaway, Rt. Hon. Sir John H. Staveley-Hill, Henry (Staffordshire)
Cochrane, Hon. Thomas H. A. E. Kerry, Earl of Talbot, Lord E. (Chichester)
Corbett, T. L. (Down, North) Keswick, William Thomson, W. Mitchell- (Lanark)
Courthops, G. Loyd Kimber, Sir Henry Thornton, Percy M.
Craig, Captain James (Down, E.) King, Sir Henry Seymour (Hull) Valentia, Viscount
Craik, Sir Henry Law, Andrew Bonar (Dulwich) Walker, Col. W. H. (Lancashire)
Dalrymple, Viscount Lee, Arthur H. (Hants, Fareham) Walrond, Hon. Lionel
Dickson, Rt. Hon. C. Scott Long, Col. Charles W. (Evesham) Warde, Col. C. E. (Kent, Mid)
Doughty, Sir George Lonsdale, John Brownlee Williams, Col. R. (Dorset, W.)
Douglas, Rt. Hon. A. Akers- Lowe, Sir Francis William Wilson, A. Stanley (York, E.R.)
Du Cros, Arthur Lyttelton, Rt. Hon. Alfred
Faber, George Denison (York) MacCaw, Wm. J. MacGeagh TELLERS FOR THE AYES.—Mr.
Faber, Capt. W. V. (Hants, W.) M'Arthur, Charles Evelyn Cecil and Mr. W. Peel.
Fell, Arthur Mason, James F. (Windsor)
NOES.
Abraham, William (Rhondda) Barnard, E. B. Bryce, J. Annan
Acland, Francis Dyke Barran, Rowland Hirst Buckmaster, Stanley O.
Agar-Robartes, Hon. T. C. R. Beauchamp, E. Burns, Rt. Hon. John
Agnew, George William Bell, Richard Burnyeat, W. J. D.
Allen, A. Acland (Christchurch) Benn, Sir J. Williams (Devonport) Burt, Rt. Hon. Thomas
Allen, Charles P. (Stroud) Berridge, T. H. D. Buxton, Rt. Hon. Sydney Charles
Ashton, Thomas Gair Boulton, A. C. F. Byles, William Pollard
Asquith, Rt. Hon. Herbert Henry Bowerman, C. W. Cawley, Sir Frederick
Baker, Joseph A. (Finsbury, E.) Brace, William Channing, Sir Francis Allston
Balfour, Robert (Lanark) Branch, James Cherry, Rt. Hon. R. R.
Baring, Godfrey (Isle of Wight) Bright, J. A. Clough, William
Barker, Sir John Brunner, J. F. L. (Lanes., Leigh) Clynes, J. R.
Barlow, Sir John E. (Somerset) Brunner, Rt. Hon. Sir J. T. (Cheshire) Cobbold, Felix Thornley
Collins, Stephen (Lambeth) Lamb, Ernest H. (Rochester) Roe, Sir Thomas
Collins, Sir Wm. J. (St. Pancras, W.) Lambert, George Rogers, F. E. Newman
Cooper, G. J. Lamon, Norman Rose, Sir Charles Day
Corbett, C. H. (Sussex, E. Grinstead) Layland-Barratt, Sir Francis Rowlands, J.
Cornwall, Sir Edwin A. Leese, Sir John F. (Accrington) Runciman, Rt. Hon. Walter
Cotton, Sir H. J. S. Lever, W. H. (Cheshire, Wirral) Rutherford, V. H. (Brentford)
Crossfield, A. H. Levy, Sir Maurice Samuel, S. M. (Whitechapel)
Dalziel, Sir James Henry Lewis, John Herbert Scanlan, Thomas
Davies, Timothy (Fulham) Lloyd-George, Rt. Hon. David Scarisbrick, Sir T. T. L.
Davies, Sir W. Howell (Bristol, S.) Lupton, Arnold Schwann, C. Duncan (Hyde)
Dewar, Arthur (Edinburgh, S.) Luttrell, Hugh Fownes Schwann, Sir C. E. (Manchester)
Dickinson, W. H. (St. Pancras, N.) Macdonald, J. R. (Leicester) Seely, Colonel
Duckworth, Sir James Maclean, Donald Shackleton, David James
Dunne, Major E. Martin (Walsall) Macnamara, Dr. Thomas J. Shaw, Sir Charles E. (Stafford)
Edwards, A. Clement (Denbigh) Macpherson, J. T. Sherwell, Arthur James
Edwards, Sir Francis (Radnor) MacVeagh, Jeremiah (Down, S.) Shipman, Dr. John G.
Erskine, David C. McKenna, Rt. Hon. Reginald Snowden, P.
Essex, R. W. M'Laren, Sir C. B. (Leicester) Stanger, H. Y.
Esslemont, George Birnie M'Laren, H. D. (Stafford, W.) Stanley, Albert (Staffs, N.W.)
Evans, Sir William T. M'Micking, Major G. Stanley, Hon. A. Lyulph (Cheshire)
Everett, R. Lacey Mallet, Charles E. Stewart-Smith, D. (Kendal)
Falconer, James Markham, Arthur Basil Strachey, Sir Edward
Fenwick, Charles Marks, G. Croydon (Launceston) Straus, B. S. (Mile End)
Ferguson, R. C. Munro Marnham, F. J. Strauss, E. A. (Abingdon)
Ffrench, Peter Massie, J. Summerbell, T.
Flynn, James Christopher Masterman, C. F. G. Taylor, John W. (Durham)
Foster, Rt. Hon. Sir Walter Menzies, Sir Walter Taylor, Theodore C. (Radcliffe)
Fuller, John Michael F. Middlebrook, William Tennant, Sir Edward (Salisbury)
Fullerton, Hugh Molteno, Percy Alport Tennant, H. J. (Berwickshire)
Gibb, James (Harrow) Money, L. G. Chiozza Thomas, Sir A. (Glamorgan, E.)
Gill, A. H. Morgan, J. Lloyd (Carmarthen) Thomasson, Franklin
Glover, Thomas Morrell, Philip Thompson, J. W. H. (Somerset, E.)
Gooch, George Peabody (Bath) Morse, L. L. Thorne, G. R. (Wolverhampton)
Grey, Rt. Hon. Sir Richard Morton, Alpheus Cleophas Thorne, William (West Ham)
Haldane, Rt. Hon. Richard B. Murray, James (Aberdeen, E.) Trevelyan, Charles Philips
Hancock, J G. Myer, Horatio Verney, F. W.
Harcourt, Rt. Hon. L. (Rossendale) Newnes, F. (Notts, Bassetlaw) Vivian, Henry
Hardy, George A. (Suffolk) Nicholls, George Walsh, Stephen
Harmsworth, R. L. (Caithness-shire) Nussey, Sir Willans Wardle, George J.
Harvey, W. E. (Derbyshire, N.E.) Nuttall, Harry Waring, Walter
Harwood, George O'Brien, K. (Tipperary, Mid) Warner, Thomas Courtenay T.
Haworth, Arthur, A O'Donnell, C. J. (Walworth) Wason, Rt. Hon. E. (Clackmannan)
Helme, Norval Watson O'Grady, J. Wason, John Cathcart (Orkney)
Henderson, Arthur (Durham) Parker, James (Halifax) Watt, Henry A.
Henderson, J. McD. (Aberdeen, W.) Partington, Oswald White, Sir George (Norfolk)
Higham, John Sharp Pearce, Robert (Staffs, Leek) White, J. Dundas (Dumbartonshire)
Hobhouse, Rt. Hon. Charles E. H. Pointer, Joseph White, Sir Luke (York, E.R.)
Hogan, Michael Ponsonby, Arthur A. W. H. Whittaker, Rt. Hon. Sir Thomas P.
Holland, Sir William Henry Price, Sir Robert J. (Norfolk, E.) Wiles, Thomas
Holt, Richard Durning Priestley, Sir W. E. B. (Bradford, E.) Williams, J. (Glamorgan)
Hooper, A. G. Rainy, A. Rolland Williams, W. Llewelyn (Carmarthen)
Hope, John Deans (Fife, West) Raphael, Herbert H. Williamson, Sir A.
Howard, Hon. Geoffrey Rees, J. D. Wilson, Henry J. (York, W.R.)
Jardine, Sir J. Rendall, Athelstan Wilson, J. W. (Worcestershire, N.)
Jones, Leif (Appleby) Richards, Thomas (W. Monmouth) Wilson, P. W. (St. Pancras, S.)
Jones, William (Carnarvonshire) Roberts, Charles H. (Lincoln) Wilson, W. T. (Westhoughton)
Jowett, F. W. Roberts, G. H. (Norwich) Winfrey, R.
Keating, M. Robertson, Sir G. Scott (Bradford) Wood, T. M'Kinnon
Kekewich, Sir George Robinson, S.
King, Alfred John (Knutsford) Robson, Sir William Snowdon TELLERS FOR THE NOES.—Mr.
Laidlaw, Robert Roch, Walter F. (Pembroke) Joseph Pease and Captain Norton.
Mr. LLOYD-GEORGE

moved, in place of the words omitted ["five years"] to insert the words "three years."

Question put, "That those words be there inserted."

The Committee divided: Ayes, 211; Noes, 96.

Division No. 655.] AYES. [11.20 p.m.
Abraham, William (Rhondda) Barlow, Sir John E. (Somerset) Bright, J. A.
Acland, Francis Dyke Barnard, E. B. Brunner, J. F. L. (Lanes., Leigh)
Agnew, George William Barran, Rowland Hirst Brunner, Rt. Hon. Sir J. T. (Cheshire)
Allen, A. Acland (Christchurch) Beauchamp, E. Buckmaster, Stanley O.
Allen, Charles P. (Stroud) Bell, Richard Burns, Rt. Hon. John
Ashton, Thomas Gair Benn, Sir J. Williams (Devonport) Burnyeat, W. J. D.
Asquith, Rt. Hon. Herbert Henry Berridge, T. H. D. Burt, Rt. Hon. Thomas
Baker, Joseph A. (Finsbury, E.) Boulton, A. C. F. Buxton, Rt. Hon. Sydney Charles
Balfour, Robert (Lanark) Bowerman, C. W. Byles, William Pollard
Baring, Godfrey (Isle of Wight) Brace, William Cawley, Sir Frederick
Barker, Sir John Branch, James Cherry, Rt. Hon. R. R.
Clough, William Kekewich, Sir George Roch, Walter F. (Pembroke)
Clynes, J. R. King, Alfred John (Knutsford) Roe, Sir Thomas
Cobbold, Felix Thornley Laidlaw, Robert Rogers, F. E. Newman
Collins, Stephen (Lambeth) Lamb, Ernest H. (Rochester) Rose, Sir Charles Day
Cooper, G. J. Lambert, George Rowlands, J.
Corbett, C. H. (Sussex, E. Grinstead) Lamont, Norman Runciman, Rt. Hon. Walter
Cornwall, Sir Edwin A. Layland-Barratt, Sir Francis Rutherford, V. H. (Brentford)
Cotton, Sir H. J. S. Leese, Sir Joseph F. (Accrington) Samuel, S. M. (Whitechapel)
Crosfield, A. H. Lever, W. H. (Cheshire, Wirral) Scanian, Thomas
Dalziel, Sir James Henry Levy, Sir Mourice Scarisbrick, Sir T. T. L.
Davies, Timothy (Fulham) Lewis, John Herbert Seely, Colonel
Davies, Sir W. Howell (Bristol, S.) Lloyd-George, Rt. Hon. David Shackleton, David James
Dewar, Arthur (Edinburgh, S.) Lupton, Arnold Shaw, Sir Charles E. (Stafford)
Dickinson, W. H. (St. Pancras, N.) Luttrell, Hugh Fownes Sherwell, Arthur James
Duckworth, Sir James Macdonald, J. R. (Leicester) Shipman, Dr. John G.
Dunne, Major E. Martin (Walsall) Maclean, Donald Snowden, P.
Edwards, A. Clement (Denbigh) Macnamara, Dr. Thomas J. Stanger, H. Y.
Edwards, Sir Francis (Radnor) Macpherson, J. T. Stanley, Albert (Staffs, N.W.)
Erskine, David C. M'Kenna, Rt Hon. Reginald Stanley, Hon. A. Lyulph (Cheshire)
Essex, R. W. M'Laren, Sir C. B. (Leicester) Stewart-Smith, D. (Kendal)
Esslemont, George Birnie M'Micking, Major G. Strachey, Sir Edward
Evans, Sir Samuel T. Mallet, Charles E. Straus, B. S. (Mile End)
Everett, R. Lacey Markham, Arthur Basil Strauss, E. A. (Abingdon)
Falconer, J. Marks, G. Croydon (Launceston) Summerbell, T.
Fenwick, Charles Marnham, F. J. Taylor, John W. (Durham)
Ferguson, R. C. Munro Massie, J. Taylor, Theodore C. (Radcliffe)
Ffrench, Peter Masterman, C. F. G. Tennant, Sir Edward (Salisbury)
Flynn, James Christopher Menzies, Sir Walter Tennant, H. J. (Berwickshire)
Foster, Rt. Hon. Sir Walter Middlebrook, William Thomas, Sir A. (Glamorgan, E.)
Fuller, John Michael F. Molteno, Percy Alport Thomasson, Franklin
Fullerton, Hugh Morgan, J. Lloyd (Carmarthen) Thompson, J. W. H. (Somerset, E.)
Gibb, James (Harrow) Morrell, Philip Thorne, G. R. (Wolverhampton)
Gill, A. H. Morse, L. L. Thorne, William (West Ham)
Glover, Thomas Morton, Alpheus Cleophas Trevelyan, Charles Philips
Gooch, George Peabody (Bath) Murray, James (Aberdeen, E.) Verney, F. W.
Grey, Rt. Hon. Sir Edward Myer, Horatio Vivian, Henry
Haldane, Rt. Hon. Richard B. Newnes, F. (Notts, Bassetlaw) Walsh, Stephen
Hancock, J. G. Nicholls, George Wardle, George J.
Harcourt, Rt. Hon. L. (Rossendale) Nuttall, Harry Waring, Walter
Hardy, George A. (Suffolk) O'Brien, K. (Tipperary, Mid) Warner, Thomas Courtenay T.
Harmsworth, R. L. (Caithness-shire) O'Donnell, C. J. (Walworth) Wason, Rt. Hon. E. (Clackmannan)
Harvey, W. E. (Derbyshire, N.E.) O'Grady, J. Wason, John Cathcart (Orkney)
Harwood, George O'Kelly, Conor (Mayo, N.) Watt, Henry A.
Haworth, Arthur A. Parker, James (Halifax) White, Sir George (Norfolk)
Helme, Norval Watson Partington, Oswald White, J. Dundas (Dumbartonshire)
Henderson, Arthur (Durham) Pearce, Robert (Staffs, Leek) White, Sir Luke (York, E.R.)
Henderson, J. McD. (Aberdeen, W.) Pointer, J. Whittaker, Rt. Hon. Sir Thomas P.
Higham, John Sharp Ponsonby, Arthur A. W. H. Wiles, Thomas
Hobhouse, Rt. Hon. Charles E. H. Price, Sir Robert J. (Norfolk, E.) Williams, J. (Glamorgan)
Hogan, Michael Priestley, Sir W. E. B. (Bradford, E.) Williams, W. Llewelyn (Carmarthen)
Holland, Sir William Henry Rainy, A. Rolland Williamson, Sir A.
Holt, Richard Durning Raphael, Herbert H. Wilson, H. J. (York, W.R.)
Hooper, A. G. Rees, J. D. Wilson, J. W. (Worcestershire, N.)
Hope, John Deans (Fife, West) Rendall, Athelstan Wilson, P. W. (St. Pancras, S.)
Howard, Hon. Geoffrey Richards, Thomas (W. Monmouth) Wilson, W. T. (Westhoughton)
Jardine, Sir J. Roberts, Charles H. (Lincoln) Winfrey, R.
Jones, Leif (Appleby) Roberts, G. H. (Norwich) Wood, T. M'Kinnon
Jones, William (Carnarvonshire) Robertson, Sir G. Scott (Bradford)
Jowett, F. W. Robinson, S. TELLERS FOR THE AYES.—Mr.
Keating, M. Robson, Sir William Snowdon Joseph Pease and Captain Norton.
NOES.
Acland-Hood, Rt. Hon. Sir Alex. F. Clive, Percy Archer Gretton, John
Agar-Robartes, Hon. T. C. R. Coates, Major E. F. (Lewisham) Guinness, Hon. W. E. (B. S. Edmunds)
Anson, Sir William Reynell Cochrane, Hon. Thomas H. A. E. Hamilton, Marquess of
Anstruther-Gray, Major Courthope, G. Loyd Hardy, Laurence (Kent, Ashford)
Arkwright, John Stanhope Craig, Captain James (Down, E.) Harris, Frederick Leverton
Balcarres, Lord Craik, Sir Henry Harrison-Broadley, H. B.
Baldwin, Stanley Dalrymple, Viscount Hay, Hon. Claude George
Balfour, Rt. Hon. A. J. (City, Lond.) Dickson, Rt. Hon. C. Scott Hermon-Hodge, Sir Robert
Banbury, Sir Frederick George Doughty, Sir George Hill, Sir Clement
Banner, John S. Harmood- Douglas, Rt. Hon. A. Akers- Hope, James Fitzalan (Sheffield)
Baring, Capt. Hon. G. (Winchester) Du Cross, Arthur Joynson-Kicks, William
Barrie, H. T. (Londonderry, N.) Faber, George Denison (York) Kennaway, Rt. Hon. Sir John H.
Beach, Hon. Michael Hugh Hicks Faber, Captain W. V. (Hants, W.) Kerry, Earl of
Bull, Sir William James Fell, Arthur Keswick, William
Burdett-Coutts, W. Fletcher, J. S. Kimber, Sir Henry
Carlile, E. Hildred Forster, Henry William King, Sir Henry Seymour (Hull)
Cave, George Foster, P. S. Law, Andrew Bonar (Dulwich)
Cecil, Evelyn (Aston Manor) Gardner, Ernest Lee, Arthur H. (Hants, Fareham)
Chamberlain, Rt. Hon. J. A. (Worc'r) Gibbs, G. A. (Bristol, West) Long, Col. Charles W. (Evesham)
Clark, George Smith Gordon, J. Lonsdale, John Brownlee
Lowe, Sir Francis William Pretyman, E. G. Talbot, Lord E. (Chichester)
Lyttelton, Rt. Hon. Alfred Radford, G. H. Thomson, W. Mitchell-(Lanark)
MacCaw, William J. MacGeagh Rawlinson, John Frederick Peel Thornton, Percy M.
M'Arthur, Charles Renton, Leslie Valentia, Viscount
Mason, James F. (Windsor) Renwick, George Walrond, Hon. Lionel
Meysey-Thompson, E. C. Roberts, S. (Sheffield, Ecclesall) Warde, Col. C. E. (Kent, Mid)
Moore, William Rutherford, Watson (Liverpool) Williams, Col. R. (Dorset, W.)
Morpeth, Viscount Salter, Arthur Clavell Wilson, A. Stanley (York, E.R.)
Nicholson, Wm. G. (Petersfield) Scott, Sir S. (Marylebone, W.) Wyndham, Rt. Hon. George
Parker, Sir Gilbert (Gravesend) Sheffield, Sir Berkeley George D. Younger, George
Parkes, Ebenezer Stanier, Beville
Peel, Hon. W. R. W. Starkey, John R. TELLERS FOR THE NOES.—Mr.
Percy, Earl Staveley-Hill, Henry (Staffordshire) R. Hunt and Mr. J. W. Hills.

Question, "That 'three' be there inserted," put, and agreed to.

Mr. J. W. HILLS

I wish to move the Amendment standing in the name of the hon. Member for the Luton division of Bedfordshire (Mr. T. G. Ashton) to add at the end of the first paragraph—

"Provided that the duty shall not be recoverable from executors or trustees, but shall only be recoverable from the person or persons benefited by a gift or disposition in proportion to their interest in it, and." I am not quite sure how the law stands. As I understand it the donee is accountable for the duty on the gift, and the executor is not accountable.

Mr. HALDANE

If the hon. Member will look at Section 9, Sub-section (1) of the Finance Act, 1904, he will see that this Amendment is quite unnecessary.

Mr. BALFOUR

Let the Committee consider what an extraordinary injustice may be done. Supposing a man gives his son £5,000 to start in business. If his estate increases, the rate at which the £5,000 is to be taxed goes on increasing. Supposing the son fails in business, and perhaps there is only £500 of the original £5,000 left. In that case you come down upon him and take the whole of that £500. I think that form of taxation is grotesque. How are you going to justify it? Will the hon. Member opposite, who should have moved this Amendment, explain what equity there is in the Exchequer coming down upon a man who may not have a shilling in the world, and asking for a very large tax, simply because somebody who gave him money has died worth a million. That is your just taxation. That is not denied by the Government, and that is what the right hon. Gentleman tells us is going to be the law.

Mr. PRETYMAN

The right hon. Gentleman has referred us to Section 9, Sub-section (1) of the Finance Act. Will he tell us whether under that Section, in case the property happens to be land that has been sold, that will be exempt because it has been sold?

Mr. LEVERTON HARRIS

Will the right hon. Gentleman also tell us what would happen in case a father pays his son's debts to the extent of £5,000?

Mr. HALDANE

I will take the last Question first. The hon. Member asks me supposing the father gives £5,000 to his son to pay his debts, who has to pay the duty? Why, the son has to pay. [An Hon. MEMBER: "But the son has not got it."] Then so much the worse for the Exchequer. Then the hon. and gallant Member asked me what would happen if the property happened to be land which had been sold and purchased by a bonâ fide purchaser? That purchaser would clearly be exempt. The case put by the right hon. Gentleman was this: £5,000 was given to the son, and the father died leaving a million, so that the Death Duties amounted to a very large amount—say, 15 per cent. He asked us why 15 per cent. is to be recovered from the son who may have lost it in business. He got a gift, and all I can say is that anybody who gets £5,000 and only has to pay 15 per cent. is a lucky fellow. He had better take that into account when he gets such a gift and make some provision.

Mr. BALFOUR

Such is the policy of the Government that a man in that case has to pay every shilling he has in the world simply because he has a relation who has died rich.

Mr. CAVE

Take the ordinary case. A man wants to set up his son in business, and he gives him £5,000 for the purpose. He dies a rich man, and by the accident of the father's death the son has to pay this large duty. Nobody meant to evade that duty. The father meant to take the money out of his estate once and for all and give it to his son. Yet this heavy fine is put upon the son. Take another case. The father on his daughter's marriage gives her £500. He dies, and the daughter has actually got to raise a percentage on that £500 to pay this duty. The Chancellor of the Exchequer used an argument which I am sure he would not have used if he had had this point in mind. He said: "You object to the duty upon these gifts, but the gifts pay duty either way. If they remain in the estate they pay as part of the estate, and if they are given away within the three years they pay as gifts. Therefore, the result is the same either way." He did not remember that the burden falls upon a different person. If the gift is not made, it falls upon the residue of the estate, which is well able to bear it. In the other case it falls upon the donee, who may not have a shilling with which to pay. The effect is to take out of gifts made in the period of three years a percentage which may be small or large, not according to the amount of the gift or the means of the donee, but according to the estate of the donor and the money he leaves to other people. A more absurd proposal one cannot conceive. It is a gross hardship where no one dreams of evasion that the donee should have to pay this duty. It is not a Death Duty, but a tax on gifts, which will certainly have the result of checking gifts.

Mr. HALDANE

Why did not the party to which the hon. and learned Gentleman belongs alter this while they were in power? It applies just as much to one year as to more.

Mr. CAVE

No; a man may look forward to one year, but may not look forward three years.

Mr. BALFOUR

The right hon. Gentleman is very pat in defending the Government, but he is not so pat in putting awkward questions. Is it likely the contingency I spoke of will occur within a year? It is extremely likely to occur within three or five years, and I ask how can the right hon. Gentleman justify the hardship which will be created—which will be trebled and even quadrupled under his proposal? A man may give his son £5,000 and die within a year. But here you have a period of years during which the man may have done well in business, yet at the last he may have lost everything in the business. In that case this will inflict a gross hardship.

Mr. LEVERTON HARRIS

I think the light hon. Gentleman has hardly appreciated the very great anomaly this will create if you extend the period, because these gifts to sons and others during the three years previous to decease will be aggregated for the purpose of arriving at the scale of duty. The aggregation in the case of legacies will not only apply to the scale of duty, but the whole tax will be paid out of the aggregate. Therefore the gift would be treated far more severely than the legacy, because the latter will be free of duty, whereas the former is not.

The CHAIRMAN

Is it proposed to take a division on this Amendment?

Mr. HILLS

No, I am quite satisfied with the discussion.

Amendment, by leave, withdrawn.

Question, "That 'five' stand part of the Clause," put, and negatived.

The CHAIRMAN

I understand that the subject of the Amendment standing in the name of the hon. Member for Uxbridge will be incorporated by the Government in their Amendment at the end of the Clause.

Mr. HICKS BEACH

moved in the second paragraph, to leave out the word "eight" ["disposition made or effected before the thirtieth day of April, nineteen hundred and eight"] and to insert instead thereof the word "nine."

I believe the wording of the Clause makes it retrospective, which I think it would be very unfair to make a new law of this kind, without giving notice to people, in regard to the disposition of their property. I know the Secretary of State for War says that it is not retrospective. Under the Amendment all gifts from now onwards, which are made before the 31st of April, 1909, would be free of duty if the donor happened to die meantime. The view of the right hon. Gentleman is not that of a great many people who have studied the Clause, and therefore I move the Amendment in order to obtain some answer to the argument of those who think this Clause is retrospective.

Mr. HALDANE

If the Amendment were carried it would be a repeal of the existing law, and it is not applicable to what we are doing to make this Amendment. The "eight" simply represents the effect of the law at the present time.

Mr. CAVE

Surely that is not quite accurate. This proviso restricts the effect of the present Clause as to gifts made before the 30th of April, 1908, and even if the proviso were altered as proposed, the old law would remain as regards giftsinter vivos,made between that date and the 30th April, 1909. Therefore I do not think the answer of the right hon. Gentleman is satisfactory. May I read to the Committee a letter which I have had from a gentleman who is well known to hon. Members opposite. He raises the very point, and writes:— On the 30th April, 1908. I wrote to my sister, whose husband had recently died, and told her that I should transfer to her some stocks as a gift, and on the 1st of May I signed the transfer to her accordingly. About the same time I transferred other stocks to some of my nieces as gifts to them. The total value of all these stocks was about £6.000. The Finance Bill, as I read it, will require my executors to reckon that sum as part of my estate for Estate Duty purposes unless I live, which is very unlikely, live years from the date of the transfer. If however, the transfer had been made on the 29th of April, 1908, they would not be liable to be put on to the Estate Duty account. Not only, therefore, will the Estate Duty have to be paid on £6,000, but it would, I believe, bring my total estate into a higher category and so increase the total duty. I think that is a very hard case, and that the Bill ought to be amended so as to exclude all giftsinter vivos,made bonâ fide before the 30th of April, 1909, or, at all events, where the donor lives one year after the gift. The 30th of April. 1909, is the date when the new and additional duties were announced by Mr. Lloyd-George, and a gift made one year previous to that date ought to be allowed. Therefore the very point has happened, and there would be great hardship unless this Amendment is made. The right hon. Gentleman opposite did not quite follow the point made by the Amendment on the Paper, and I hope he will consider whether the operation of the Bill will not be made retrospective. The effect of the Amendment would be to apply it to all gifts made after the Budget Resolution.

Mr. AUSTEN CHAMBERLAIN

The Secretary of State for War gave in a single sentence an answer which was incorrect. He stated that if the Amendment were accepted, it would alter the existing law, and that gifts which under the existing law are taxed will go free. That apparently is not the case. Does the Government really intend to rest satisfied with an answer that is proved to be inaccurate, and do they intend to vouchsafe no other answer?

Mr. HALDANE

Does the right hon. Gentleman, who was Chancellor of the Exchequer, and who may be supposed to be familiar with these things, really mean that there is any precedent whatever for making such a proviso as is suggested here? It would violate the whole of the precedents. By putting in 1908 we have not only preserved the existing state of the law, but we have made it clear that no gift which under that law has lost its contingent liability to estate duty is again contingently chargeable with duty by reason of the five years not having elapsed. It was a generous proviso having regard to precedent.

Mr. HILLS

I think there is a misunderstanding. May I give a concrete case? On July 1st last year I was concerned in the transfer of property. In the ordinary course on July 1st this year it would become free from Death Duty. If this proviso stands two more years have to run because the transfer was not made before April last year. How can it be contended that the Clause is not retrospective? It takes away an advantage that that special gift has got. As things stand at present that gift is free from Estate Duty. If the Clause is passed two more years have to run before the freedom is complete. The right hon. Gentleman's second point was also, I think, a misunderstanding. All that we want to do is to free gifts which are made before April 30th this year. One year will still have to elapse before these gifts are free of duty. It cannot be contended that a person who-transferred his property before 30th April last knew that the provision was coming in force, and surely a transfer of that sort that is made on the faith of the existing law ought not to be penalised by a new law.

Mr. HALDANE

My answer is that that has been done in every case of an Amendment of the law up till now. The late Chancellor of the Exchequer, who professes to know all about these, things, will tell the hon. Member.

Mr. AUSTEN CHAMBERLAIN

I do not profess to know all about these things, but with the aid of my hon. and learned Friend (Mr. Cave), I had sufficient knowledge to see that the answer which the right hon. Gentleman gave was inaccurate and unfounded. So much was that the case that the moment the right hen. Gentleman got up again he changed his ground, and instead of saying, as he did in the first instance, that we were asking to repeal and alter the existing law, he invited us to find precedents for not taking the course which the Government followed. I do not know what the precedents are or whether the right hon. Gentleman's knowledge on this point has been refreshed, and is therefore more accurate than the first information he gave the Committee. I think the case put by my two hon. and learned Friends is unanswerable, that it is unjust, as is now proposed, to retrospectively tax gifts which under the existing law are free.

Mr. PRETYMAN

Will the right hon. Gentleman tell us what his precedent is? This is a very serious case indeed on the face of it. Under the existing law a man has become possessed of property which is subject to no duty and which he is entitled to deal with as he likes, and now it is proposed to remove that liberty which has been given to him, and to place this property under a ban for three years so that he cannot touch it. He has under the existing law taken that property on the clear understanding that after twelve months he will be able to deal with it without any restriction whatever. It is clearly contrary to public law to alter the law after the event to the detriment of the subject.

Mr. HALDANE

The precedents are to be found in Section 38 of the Customs and Inland Revenue Act of 1881, Section 11 of the Customs and Inland Revenue Act of 1889, and Section 2, Sub-section (c) of the Finance Act of 1890.

Mr. GEORGE WYNDHAM

The Secretary of State for War did not refer us to these three Sections unless he wished to carry conviction to the minds of the majority of those who had the privilege of listening to him. I can say with confidence, speaking for the majority, that his references to these Sections by their mere numbers carried no conviction. If it was worth his while to answer my right hon. Friend by saying, "Here are the precedents," it was necessary to his argument to explain what the precedents were, and I invite him to do so.

12.0 P.M.

Mr. WATSON RUTHERFORD

It seems to me that it is no real reply to a case of hardship that wants amending to point out that there are precedents. That is the only reply the Government have given us. Some of us are now endeavouring to subject the financial propositions of the Government to something like examination and criticism, and if this is the first time that this serious difficulty has been pointed out, surely it is time to try

to put it right. The exact point proposed to be put right is this. A large number of transfers of property have been effected during the year ending 30th April this year. The whole of these have been carried out on the footing that at the end of twelve months from 30th April, 1908, the subject matter of these transfers would be freed from duty. Each transaction was entered into on that footing, the property was transferred by the donor on that footing, and the property was received by the donee on that footing. The twelve months having expired, that particular property ceased to be liable to Death Duty. Now the Chancellor of the Exchequer says, "We will rake up the whole of the transactions between 30th April, 1908, and 30th April, 1909, and we will make these duties hark back on them. If the donor dies within three years they will be brought in and made liable for duty." All I can say is that the proposition is eminently unfair in itself, and whether there is precedent for it or not is not an answer. We ought to do something to put it right.

Mr. J. F. MASON

I may draw attention to the case of a donor handing over to his son a certain sum of money for the purpose of entering into business. That sum of money is invested in the business in such a manner that no part of it can be withdrawn, and being a prudent man he insures against the risk of the eventuality that he may die within 12 months. This transaction may have taken place in the May of last year, and in the May of this year that insurance will run out. There may be a death within 12 months, and then you come down on the donce. The moment he has become, according to the original terms of the arrangement, absolutely free you come down, on him and say, "You are still liable for over two years."

Question put, "That the word 'eight' stand part of the Clause."

The Committee divided: Ayes, 174; Noes, 89.

Division No. 656.] AYES. [12.5 a.m.
Abraham, William (Rhondda) Barnard, E. B. Brunner, Rt. Hon. Sir J. T. (Cheshire)
Acland, Francis Dyke Barran, Rowland Hirst Buckmaster, Stanley O.
Agnew, George William Beauchamp, E. Burns, Rt. Hon. John
Allen, A. Acland (Christchurch) Benn, Sir J. Williams (Devonport) Burnyeat, W. J. D.
Allen, Charles P. (Stroud) Birrell, Rt. Hon. Augustine Buxton, Rt. Hon. Sydney Charles
Ashton, Thomas Gair Boulton, A. C. F. Byles, William Pollard
Baker, Joseph A. (Finsbury, E.) Bowerman, C. W. Cawley, Sir Frederick
Balfour, Robert (Lanark) Brace, William Cherry, Rt. Hon. R R.
Baring, Godfrey (Isle of Wight) Branch, James Clough, William
Barker. Sir John Brunner, J. F. L. (Lancs., Leigh) Clynes, J. R.
Cobbold, Felix Thernley Lambert, George Rose, Sir Charles Day
Collins, Stephen (Lambeth) Lamont, Norman Rowlands, J.
Collins, Sir Wm. J. (St. Pancras, W.) Layland-Barratt, Sir Francis Runciman, Rt. Hon. Walter
Cooper, G. J. Leese, Sir Joseph F. (Accrington) Rutherford, V. H. (Brentford)
Corbett, C. H. (Sussex, E. Grinstead) Levy, Sir Maurice Samuel, S. M. (Whitechapel)
Cornwall, Sir Edwin A. Lewis, John Herbert Scarisbrick, Sir T. T. L.
Cotton, Sir H. J. S. Lloyd-George, Rt. Hon. David Schwann, Sir C. E. (Manchester)
Crosfield, A. H. Lupton, Arnold Seely, Colonel
Dalziel, Sir James Henry Macdonald, J. R. (Leicester) Shackleton, David James
Davies, Timothy (Fulham) Maclean, Donald Shaw, Sir Charles E. (Stafford)
Davies, Sir w. Howell (Bristol, S.) Macnamara, Dr. Thomas J. Shipman, Dr. John G.
Dewar, Arthur (Edinburgh, S.) Macpherson, J. T. Stanger, H. Y.
Dickinson, W. H. (St. Pancras, N.) M'Laren, Sir C. B. (Leicester) Stanley, Albert (Staffs, N.W.)
Duckworth, Sir James M'Laren, H. D. (Stafford, W.) Stanley, Hon. A. Lyulph (Cheshire)
Edwards, Sir Francis (Radnor) M'Micking, Major G. Stewart-Smith, D. (Kendal)
Essex, R. W. Mallet, Charles E. Strachey, Sir Edward
Esslemont, George Birnie Markham, Arthur Basil Strauss, E. A. (Abingdon)
Evans, Sir S. T. Marks, G. Croydon (Launceston) Summerbell, T.
Everett, R. Lacey Massie, J. Taylor, John W. (Durham)
Falconer, J. Masterman, C. F. G. Taylor, Theodore C. (Radcliffe)
Fenwick, Charles Menzies, Sir Walter Tennant, H. J. (Berwickshire)
Ferguson, R. C. Munro Middlebrook, Williams Thomas, Sir A. (Glamorgan, E.)
Fullerton, Hugh Worrell, Philip Thomasson, Franklin
Gill, A. H. Morse, L. L. Thompson, J. W. H. (Somerset, E.)
Glover, Thomas Myer, Horatio Thorne, G. R. (Wolverhampton)
Gooch, George Peabody (Bath) Newnes, F. (Notts, Bassetlaw) Trevelyan, Charles Philips
Grey, Rt. Hon. Sir Edward Nicholls, George Verney, F. W.
Haldane, Rt. Hon. Richard B. Nuttali, Harry Vivian, Henry
Hancock, J. G. O'Donnell, C. J. (Walworth) Walsh, Stephen
Harcourt, Rt. Hon. L. (Rossendale) O'Grady, J. Wason, Rt. Hon. E. (Clackmannan)
Harcourt, Robert V. (Montrose) Parker, James (Halifax) Wason, John Cathcart (Orkney)
Harmsworth, R. L. (Caithness-shire) Partington, Oswald White, Sir George (Norfolk)
Harvey, W. E. (Derbyshire, N.E.) Pearce, Robert (Staffs, Leek) White, J. Dundas (Dumbartonshire)
Harwood, George Pointer, J. White, Sir Luke (York, E.R.)
Haworth, Arthur A. Ponsonby, Arthur A. W. H. Whittaker, Rt. Hon. Sir Thomas P.
Helme, Norval Watson Price, Sir Robert J. (Norfolk, E.) Wiles, Thomas
Henderson, Arthur (Durham) Priestley, Sir W. E. B. (Bradford, E.) Williams, J. (Glamorgan)
Higham, John Sharp Rainy, A. Rolland Williams, W. Llewelyn (Carmarthen)
Hogan, Michael Raphael, Herbert H. Williamson, Sir A.
Holland, Sir William Henry Rendall, Athelstan Wilson, Henry J. (York, W.R.)
Holt, Richard Durning Richards, Thomas (W. Monmouth) Wilson, J. W. (Worcestershire, N.)
Hooper, A. G. Roberts, Charles H. (Lincoln) Wilson, P. W. (St. Pancras, S.)
Horniman, Emslie John Roberts, G. H. (Norwich) Wilson, W. T. (Westhoughton)
Isaacs, Rufus Daniel Robertson, Sir G. Scott (Bradford) Winfrey, R.
Jones, Leif (Appleby) Robinson, S. Wood, T. M'Kinnon
Jones, William (Carnarvonshire) Robson, Sir William Snowdon
Jowett, F. W. Roch, Walter F. (Pembroke) TELLERS FOR THE AYES.—Mr.
King, Alfred John (Knutsford) Roe, Sir Thomas Fuller and Captain Norton.
Laidlaw, Robert Rogers, F. E. Newman
NOES.
Acland-Hood, Rt. Hon. Sir Alex. F. Fell, Arthur Morpeth, Viscount
Anson, Sir William Reynell Forster, Henry William Nicholson, Wm. G. (Petersfield)
Arkwright, John Stanhope Foster, P. S. Parkes, Ebenezer
Balcarres, Lord Gardner, Ernest Peel, Hon. W. R. W.
Baldwin, Stanley Gibbs, G. A. (Bristol, West) Percy, Earl
Baltour, Rt. Hon. A. J. (City Lond.) Gordon, J. Pretyman, E. G.
Banbury, Sir Frederick George Gretton, John Rawlinson, John Frederick Peel
Banner, John S. Harmood- Guinness, Hon. W. E. (B. S. Edmunds) Renton, Leslie
Baring, Capt. Hon. G. (Winchester) Hamilton, Marquess of Renwick, George
Barrie, H. T. (Londonderry, N.) Hardy, Laurence (Kent, Ashford) Roberts, S. (Sheffield, Ecclesall)
Bryce, J. Annan Harrison-Broadley, H. B. Rutherford, Watson (Liverpool)
Bull, Sir William James Hay, Hon. Claude George Salter, Arthur Clavell
Burdett-Coutts, W. Hermon-Hodge, Sir Robert Scott, Sir S. (Marylebone, W.)
Carlile, E. Hildred Hill, Sir Clement Sheffield, Sir Berkeley George D.
Castlereagh, Viscount Hills, J. W. Stanicr, Beville
Cave, George Hope, James Fitzalan (Sheffield) Starkey, John R.
Cecil, Evelyn (Aston Manor) Howard, Hon. Geoffrey Staveley-Hill, Henry (Staffordshire)
Chamberlain, Rt. Hon. J. A. (Worc'r.) Hunt, Rowland Talbot, Lord E. (Chichester)
Channing, Sir Francis Allston Joynson-Hicks, William Tennant, Sir Edward (Salisbury)
Clark, George Smith Kennaway, Rt. Hon. Sir John H. Thomson, W. Mitchell- (Lanark)
Clive, Percy Archer Kerry, Earl of Thornton, Percy M.
Coates, Major E. F. (Lewisham) Keswick, William Valentia, Viscount
Courthope, G. Loyd Kimber, Sir Henry Warde, Col. C. E. (Kent, Mid.)
Craig, Captain James (Down, E.) King, Sir Henry Seymour (Hull) Williams, Col. R. (Dorset, W.)
Craik, Sir Henry Long, Col. Charles W. (Evesham) Wilson, A. Stanley (York, E.R.)
Dickson, Rt. Hon. C. Scott Lonsdale, John Brownlee Wyndham, Rt. Hon. George
Doughty, Sir George Lowe, Sir Francis William Younger, George
Douglas, Rt. Hon. A. Akers- Lyttelton, Rt. Hon. Alfred
Du Cros, Arthur MacCaw, Wm. J. MacGeagh TELLERS FOR THE NOES.—Mr.
Faber, George Denison (York) Mason, James F. (Windsor) Hicks Beach and Mr. Leverton Harris.
Faber, Captain W, V. (Hants, W.) Moore, William

Amendment made: To leave out the words, "for the benefit of any institution" ["made or effected for the benefit of any institution"].—Mr. Pretyman.

Sir HENRY CRAIK

moved to leave out the words, "for purposes which, in the opinion of the Commissioners, are public purposes or charitable purposes."

This raises a question of great importance, as to whether these Commissioners, who are to be the tyrants over estates under this measure, shall be left to decide what are for public or charitable purposes.

Mr. LLOYD-GEORGE

I practically accepted the same thing in regard to Clause 35.

Amendment agreed to.

Mr. JAMES HOPE

moved to leave out the word "purposes" ["are public purposes"] and to insert the words "or educational."

If I am assured that the words "public or charitable" cover the cases where a man gives money to a school for some purpose for the benefit of the school, then I shall not press my Amendment. I have two cases in my mind where an individual presents money to his old school, in one case for scholarships and in the other for purposes connected with sport in the school. I want to be sure that these cases are covered by the words in the Bill; and, in case they are not, I move the Amendment.

Sir W. ROBSON

The words "charitable purposes" cover educational purposes which are charitable. That is not an unimportant distinction. You may have educational purposes connected with schools carried on purely for private profit; they would not come within the definition of charitable purposes. "Charitable purposes" are words of very wide extent and cover gifts made in relief of poverty, in advancement of religion, for purposes of education, and for general public purposes. Any educational gifts which are charitable in the ordinary sense, not merely gifts to a schoolmaster carrying on a school for private profit, but to advance education, would come within the general definition of "charitable purposes."

Mr. AUSTEN CHAMBERLAIN

Take the case of an ordinary public school, such as Rugby or Harrow, to which an old pupil bequeaths a sum of money, not necessarily for a scholarship, but for a swim- ming bath, a playing field, or whatever it may be. Is that a "charitable purpose"? I ask the question because on a previous occasion, when we were considering a new ground given to the school by old members, Harrow was described by the Secretary of State for War as "an institution carried on for private profit."

Sir W. ROBSON

There is sometimes a distinction between one school and another, and between one purpose and another. For instance, if a university is claiming exemption from Income Tax, the Court holds that there is an element of personal profit in the carrying on of the college which may make if subject to Income Tax. If, on the other hand, it is a question of a legacy for a scholarship left to the college, it becomes the duty of the Attorney-General to see that the money is devoted to that purpose, and he would apply to the Court to have it declared that it was an educational purpose given with charitable intent. In construing the words "charitable purpose" in a case like that, the Court would give a very wide construction, whereas in dealing with Income Tax the construction is often somewhat narrower. It is all laid down in a well-known case by Lord Macnaughten. My own opinion is that the case put by the right hon. Gentleman would be held by the Court to be a charitable purpose.

Mr. J. W. HILLS

May I point out the case of Oxford, where Lord Curzon is at present engaged in raising a fund. Is it a charitable fund or not? Surely there is no harm in inserting the word "educational." In the case of my own college at Oxford a certain gentleman has recently given us a very large sum of money for general purposes. Still, we are not a charity. I should like to know for certain if these two funds I have named are in the exceptions?

Sir W. ROBSON

I can assure the hon. Gentleman that if in either of the two cases the fund is not devoted to the purpose for which the money has been given, it would be my duty to bring the matter before the Court, and see that the money was devoted to the purposes for which it was given by the subscribers. If it were given for the purposes of charity I should have no jurisdiction at all.

Mr. JAMES HOPE

I feel very much disposed to withdraw my Amendment after what the right hon. Gentleman has said. There is just one difficulty. Supposing a governing body indirectly got some property, that saved them some expense in building; would the amount saved have to be deducted, and would that deduction vitiate the charitable effect of the gift?

Sir W. ROBSON

It will be my duty shortly to contend that where a profit of that kind is made an institution cannot plead its general educational purposes as charitable purposes. But the gift is undoubtedly a charitable gift, though it is educational, and given with a charitable intent. It is a charitable purpose, then, for the purpose of this Sub-section. But I warn hon. Members that if they keep in the word "educational" it may have a bad effect upon the construction of the word "charitable." It will be argued that the words "charitable purposes" were not intended to have a wide construction. I do not know what the Court might hold in such a case, but my opinion is that the cases put would be enforced by the Court as charitable.

Mr. JAMES HOPE

This is the first time in these Debates that the Attorney-General has convinced me.

Mr. PRETYMAN

Leave out the word "purposes," and do not insert the word "educational."

Mr. WATSON RUTHERFORD

Before this Amendment is withdrawn I would like to mention to the right hon. Gentleman the case of Liverpool University. A number of wealthy men have of late years been very generous to that University, and have helped us to make it a very great thing for our city. They have given us large sums of money in the shape of buildings and donations, and if it were allowed to go forth that in the passing of the Bill, without this Amendment, that within a period of three years any of those moneys which have been given to the University were liable to be paid by the University in the shape of Death Duties; and in addition to that would be brought into the aggregation of Estate Duties, then I think it would be a very great pity. I hope the Government will make it clear that legacies of that kind, at all events, will not pay duties at all.

Sir W. ROBSON

I have just, in the case of the Welsh universities, contended that there are certain elements of profit.

Mr. WATSON RUTHERFORD

There are at Liverpool too; we charge fees.

Amendment, by leave, withdrawn.

Mr. PRETYMAN

moved to leave out the word "purposes" before the word "or" in the last line of the second paragraph ["which in the opinion of the Commissioners are public purposes or charitable purposes"].

Amendment agreed to.

Mr. HALDANE

moved to add at the end of paragraph two the words, "So much of paragraph (c) of Sub-section one of Section two of the principal Act and this section as makes gifts inter vivos property which is deemed to pass on the death of the deceased shall not apply to gifts which are proved to the satisfaction of the Commissioners to have been part of the normal annual expenditure of the deceased, and to have been reasonable, having regard to the amount of his income, or which, in the case of any donee, do not exceed in the aggregate one hundred pounds in value or amount."

I move this Amendment in fulfilment of the pledge given by the Chancellor of the Exchequer, and in order to give the fullest scope to the Amendment it is necessary to amplify it by inserting after the words "shall not apply to gifts which," the following words: "are made in consideration of marriage or which." I move the Amendment, therefore, in this form.

Question proposed, at the end of paragraph two to add the words, "So much of paragraph (c) of Sub-section (1) of Section (2) of the principal Act and this Section as makes gifts inter vivos property which is deemed to pass on the death of the deceased shall not apply to gifts which are made in consideration of marriage or which are proved to the satisfaction of the Commissioners to have been part of the normal annual expenditure of the deceased, and to have been reasonable having regard to the amount of his income, or which, in the case of any donee, do not exceed in the aggregate one hundred pounds in value or amount."

Colonel WILLIAMS

moved in the proposed Amendment after the word "apply" ["shall not apply to gifts which are proved to the satisfaction of the Commissioners"] to insert the words "to a gift to or for the benefit of the wife of the donor or."

The husband and wife are treated by law as one and the same person. Under the Income Tax Acts the income of the husband and wife are lumped together for the purpose of extracting a little extra Income Tax and if the husband and wife are regarded as one and the same person for the purpose of the extraction of taxes, it is rather hard to treat them as two persons for the purpose of extracting more money when the husband dies. It is only reasonable that if a man does make any provision for his wife that should not be reckoned against him, and the wife should not have to pay duty on that amount. The Secretary of State for War has argued this point on another Clause, but I hope he will consider my Amendment relevant now. I trust when considering exemptions from the general rule the right hon. Gentleman will consider that this is a valid case and will accept this Amendment.

Sir W. ROBSON

The hon. and gallant Gentleman proposes to exempt from the operation of this Clause a class which above all others it is most important to include. We are really desirous of preventing evasion or avoidance of the Death Duties, and therefore we have to be most particular and careful in regard to the grants which a man makes to his wife or child. These grants are made most easily and therefore the Government could not accept this Amendment.

Colonel WILLIAMS

I said nothing about the child, and my Amendment relates only to husband and wife.

Sir W. ROBSON

Yes, but there are other Amendments which do relate to the child, and I might as well for my purpose group the child with the wife, because it comes within the same reasoning so far as I am concerned. It is most important that the gifts of the wife should come within the scope of the Clause, otherwise Death Duties would cease to have the effect they ought to have in benefiting the Exchequer.

Mr. HICKS BEACH

Though an estate may escape for the moment the Death Duties on passing from the husband it will certainly have to pay when the wife dies. Consequently there is very little to be lost by the Treasury in accepting this Amendment. My hon. and gallant Friend carefully avoided bringing in the case of the child, which is a totally different case altogether. The child is not included in this Amendment, which only refers to the case of the wife. It is not too much to say that a man should be entitled in the future as in the past to make a gift to his wife without her having been compelled to pay the Estate Duty if she loses her husband within three years.

Amendment to proposed Amendment put, and negatived.

Mr. GEORGE CAVE

moved, in the proposed Amendment, after the word "apply" ["shall not apply to gifts"], to insert the words "to a gift for setting up or maintaining a son of the donor in any profession, business, or employment, or."

My Amendment applies to gifts for maintaining a son of the donor in any profession or business. I do not propose to exempt all gifts to a son by any man, but only gifts for a specially limited and temporary purpose. That is the setting up of a son in business or maintaining him until he is able to maintain himself. The point may arise in two ways. Ought a gift of capital by a father to a son for the purpose of either buying a business or starting a business for himself to be subject to a special tax? I suggest not. In one case the object of the gift is to provide the son with capital to be used in business. During the three years the son runs the risk of losing it, and the fact that he may have to pay upon it will make it somewhat difficult for him to deal with it in his business. In the other case, the sum is given to the son to buy a business. He actually pays it away, and yet, if the father dies within three years, that son will have to provide a percentage for the purpose of paying the duty on the sum given him for the purpose of buying a business. It is intended to be spent by the son and not to be retained by him, and he ought not during three years to be subject to be taxed on that sum. Let me put the second point about maintenance. A father starts his son in a business or a profession. The son at the beginning probably cannot keep himself. His father makes him a yearly payment. It cannot be said to be normal annual expenditure of the father. It is an abnormal payment for a temporary period. It may continue only two or three years until the son has attained a position for himself. I suggest that would not come within the words "normal annual expenditure of the deceased." It is special expenditure for a temporary purpose. I want to save that kind of case, and therefore I have put in the words "or maintaining a son in any profession, business, or employment." I think both are reasonable points which the Government will desire to meet. They stand to some extent on the same footing as marriage settlements.

Mr. HALDANE

I take the two points separately, and deal first with that referring to capital advances. The objection to the proposition to exempt the gift to a son for the purpose of setting him up in business is two-fold. It is, in the first place, a complete innovation, and, in the second place, it seems to me to be wrong in principle, because the son gets the money as an anticipation of his inheritance. Nobody makes a gift to a son without taking it into account in his will. That is an illustration of the extent to which not only the Courts but the public generally look on these as anticipations. If that is so, ought they to be subject to duty? After all, the duty is very much smaller in amount than the sum which would have to be spent on interest were the capital borrowed. Then I come to the case of maintenance. I think the Clause which the Chancellor of the Exchequer has moved with regard to normal expenditure goes as far as we ought to; the words of it represent with fair accuracy what expenditure is normal. We cannot accept the Amendment of the hon. and learned Gentleman.

Mr. AUSTEN CHAMBERLAIN

Let me first deal with the case of maintenance. My hon. and learned Friend has put the case of a son going to the bar and getting no briefs, a state of affairs which I believe is not uncommon. In the meantime lie is supported by his father. I gather that if the father gives him a bigger allowance than heretofore that would be treated as normal expenditure. If it is so, then I hope the Government will make it clear that that is their intention. I am not competent to argue as to the interpretation which the Courts of Law put on the English language.

Mr. HALDANE

If the Party of my right hon. Friend is in possession of these benches next year, and it is found necessary to alter the Clause so as to make the meaning more clear I will support the right hon. Gentleman's proposal to the best of my ability.

Mr. AUSTEN CHAMBERLAIN

I was not casting my mind so far forward as next year. I was thinking about the present. I take it that if the right hon. Gentleman has any doubt on the point he will consult the advisers of the Government, and make the matter perfectly clear. In the course of the Debates we have been told once or twice by the Secretary for War that he can find no precedent for acceding to our demands. But the Government themselves are not shy of making precedents, and cannot they now make one which would be both reasonable and just? This is a small matter; the real point is that the right hon. Gentleman says, that this is in fact some part of the patrimony of the son, which, if he did not have it in this way would probably come to him on his father's death, when he would have to pay these duties. Surely we have got very far from the case which the Government made on setting up this Clause. They did not propose this Clause to prevent gifts inter vivos, and never pretended that they were wrong, or undesirable, but they based it upon the necessity of providing against gifts made to avoid taxation. Can anybody say that the cases which have been put were attempts to evade taxation. The object of the Clause was to prevent gifts passing between living people with a view of avoiding payment of Death Duties. A man gives his son a sum of money to set him up in his business or profession, not in order to avoid the Death Duties. That is part of his normal expenditure, if you regard that expression as meaning the ordinary and customary thing for a man to do when his son arrives at a proper age. It will be an unfortunate and lamentable thing for all concerned if this Clause of the Government brings this kind of gift under taxation. I do ask the Government to be consistent to their own principles, and bear in mind that all they have expressed a desire to do, is to stop gifts made for the purpose of evading taxation.

Sir HENRY CRAIK

It is unfortunate that we have, in regard to points like this, to listen to the discussion of technicalities between legal gentlemen, and to hear a good deal about the precedents in this and other Parliaments, but the Committee will see that there is a human side to this question. What are the real facts in ordinary life to which this case will apply? We are not speaking of millionaires, but of men who have managed to make a small competence, and who hope to leave something to their family to enable them to keep poverty from their doors. The Secretary of State for War says these gifts are all right, and it is cheaper for the son to be taxed, when they are made, than at the death of his father, when he had an expectation of an inheritance. But in the case of a man who has £8,000, £10,000, or £12,000, if he has a wife and daughter it is not necessary that he should leave his money to his sons, and he will possibly leave it so as to preserve those who cannot make money for themselves, and whom it is his duty to preserve from poverty. What he does, as a matter of fact, is that he diminishes that amount in his lifetime in order to enable his sons to start in life, and he thinks nothing about them when he comes to make his will. He reduces the provision which he may make for his wife and for his unmarried daughters by a sacrifice made probably with their full concurrence, perhaps at their request, and this is what you want to tax. Suppose a man has three sons. He sends one, perhaps, to a ranch in South America, and gives him two or three thousand to start him there. Does the Chancellor of the Exchequer think he will ever get any percentage of that? He may whistle for it. The man would be a fool if he pays any attention to any request that reaches him in South America. His next son he sends to the Bar, and he makes him an allowance. Surely it is not an ordinary allowance that a parent has to pay in starting his son as a solicitor or barrister. There are very high fees to be paid, and I am not prepared to accept the words of the right hon. Gentleman's Amendment as covering any such special expenditure as that. The third son he sends to the Army and gives him an allowance. He goes to war and is killed. Who is to pay the allowance of the dead soldier? Talk as we may, these gifts inter vivos will escape to a great extent, and the man who by any means in his power is able to avoid payment of what is an unjust and extortionate and inquisitorial charge, does right as long as he can keep within the four corners of the law.

Mr. HILLS

Supposing a father sends his son to the Bar, he has to pay the fees of his call and for reading in chambers for two or three years. Are these normal expenditure or are they not?

Sir W. ROBSON

Yes.

Mr. HILLS

Then is the fee for articling a son to a solicitor normal annual expenditure?

Sir W. ROBSON

That has been the practice of the Department. This Bill will be carried out by men of sense and ability.

Mr. HILLS

We are passing a new Clause, and if the hon. and learned Gentleman can tell me that the cases I have mentioned will come within it, I shall be satisfied.

Mr. AUSTEN CHAMBERLAIN

I am rather puzzled by the interpretation which the hon. and learned Gentleman has put on the words "normal annual expenditure." It seems to me that the word "annual" limits the meaning of the Section, because you might have expenditure which would be normal though not annual. An allowance made to some one might, though not annual, be for a specific purpose, and therefore it would be normal. The Attorney-General says that an allowance may be made occasionally, and yet the Government treat that as normal annual expenditure. Take the case of establishing or starting a son before he is able to earn his living. If I understand the Government rightly, we are in a curious position. A man may allow his son £500 a year while he is waiting for briefs at the Bar, and that will escape taxation, but if he gives him £1,500 down, that is to be treated as taxable. I think that is rather a new principle. May I have the attention of the hon. and learned Gentleman for a moment? Perhaps he has not heard what. I have said.

Sir W. ROBSON

Whether I can listen to the right hon. Gentleman or not, I must, listen to my colleagues.

Mr. AUSTEN CHAMBERLAIN

I do not know whether the hon. and learned Gentleman realises it, but I am trying to be perfectly courteous to him. If the Attorney-General is prepared to tell me now whether the interpretation I have put on the position is correct or not, I will sit. down at once.

Sir W. ROBSON

I must say that the right hon. Gentleman adopts a somewhat unusual course in regard to the conversation which necessarily took place on this bench regarding the matter on which he was himself addressing the Committee. It is absolutely necessary and unavoidable that one should sometimes consult his colleagues. If a colleague addresses me, it is necessary to listen to him. It is going beyond Parliamentary custom to make that the subject-matter of debate.

Mr. AUSTEN CHAMBERLAIN

I did not make it the subject of debate. I said I did not know whether the Attorney-General had heard what I said. All I wish to say is that I was making no complaint about his consulting a colleague.

10.A.M.

Sir W. ROBSON

I did hear what the right hon. Gentleman said, and, what is more, I was much impressed. I will make it my duty to inquire as to the administration of this Clause. The word "annual," I think, imports some element of difficulty. I have to consider "the normal annual expenditure" of the testator, which is always worthy of some consideration. The practice in the past has been to exclude the normal expenditure of the testator or deceased. It may very well be that there are some elements that do not occur every year. In drafting these statutes we have always to remember that the fixed rule of the Court in cases brought by the Crown is that the construction most favourable to the subject is always adopted. I have myself very little doubt that the construction I have just given of the word "annual" will be that adopted by the Court. If, on consideration, I find there is no objection to the words "normal expenditure," we will drop the word "annual." Perhaps, therefore, the Committee will allow me to consider this matter before the Report stage. If after consultation with what I may call the Executive Department I find there is no serious objection to the omission of the word we will leave it out.

Mr. WATSON RUTHERFORD

I have had considerable experience in dealing with the Commissioners of Inland Revenue in respect to matters of this sort, and I will only say, if it is necessary, that I can corroborate what the hon. and learned Gentleman has told us, viz., that the Commissioners of Inland Revenue never in my experience strictly construed the existing law. If they did, no doubt as the law stands to-day they would be entitled to ask how much a man had given in church collections in the year previous to the death? What they do ask in practice is this—and I take it they will continue to I do it—they ask, "Has there been any exceptional payment made by the deceased during the twelve months (now it will be three years), with the object of evading the death duties?" After all, that is the real test. That is the reason for the Section. It never was intended by the original Act to tax gifts. All that is intended by this Section is to prevent evasion. If we are to understand that in spite of the strict words of this Clause, and

in spite of the strict words of the law, as it stood before, that the same course is to be pursued in the future, and that really in practice the only matters that can be brought to account by this extra taxation are to be sums paid away with the object of evading the Death Duty, I do not think anybody will be prepared to quarrel. The difficulty that we are brought face to face with is this: that the Government propose to introduce an Amendment in which they go into a great deal too much detail. I do not think it necessary to amend the Amendment by putting in the words "to a gift for setting up or maintaining a son of the donor in any profession, business, or employment, or," and the reason I do not think these words are necessary is that if this money were paid by the deceased with a view to evading the duty then it ought to pay the duty; but if it were not paid with a view to evading the duty, but in a boná fideway, and as proper expenditure, it ought not to be brought into account at all. The real test of the matter is the object with which the gift was made.

Mr. LEVERTON HARRIS

The right hon. Gentleman said he is going to consider the terminology of this phrase, "normal annual expenditure." We have had the case mentioned of the father whose son has gone to the Bar, and has had to pay a premium of £400 or £500. [MINISTERIAL cries of "No, no."] Articled to a solicitor, I mean. It might well be in the case of two sons—the one the son of a poor man and the other the son of a rich man—that what is proposed might be reasonable in regard to the rich man's income, but unreasonable in regard to the poor man's income, and I would respectfully urge the Attorney-General, in considering the terminology of the phrase, to keep that point in mind, so that the poor man may not be handicapped.

Question put, That the words proposed ["to a gift for setting up or maintaining a son of the donor in any profession, business, or employment, or"] be there inserted.

The Committee divided: Ayes, 63; Noes, 158.

Division No. 657.] AYES. [1.10 a.m.
Acland-Hood, Rt. Hon. Sir Alex. F. Beach Hon. Michael Hugh Hicks Chamberlain, Rt. Hon. J. A. (Worc'r.)
Balcarres, Lord Bryce J. Annan Channing, Sir Francis Allston
Baldwin, Stanley Bull, Sir William James Clive, Percy Archer
Banner, John S. Harmood- Carlile, E. Hildred Coates, Major E. F. (Lewisham)
Baring, Capt. Hon. G. (Winchester) Cave, George Courthope, G. Loyd
Barrie, H. T. (Londonderry, N.) Cecil, Evelyn (Aston Manor) Craig, Captain James (Down, E.)
Doughty, Sir George Hunt, Rowland Sheffield, Sir Berkeley George D.
Douglas, Rt. Hon. A. Akers- Kerry, Earl of Sianier, Beville
Faber, George Denison (York) Kimber, Sir Henry Starkey, John R.
Fell, Arthur King, Sir Henry Seymour (Hull) Staveley-Hill, Henry (Staffordshire)
Forster, Henry William Mason James F. (Windsor) Talbot, Lord E. (Chichester)
Foster, P. S. Moore, William Thomson, w. Mitchell- (Lanark)
Gibbs, G. A. (Bristol, West) Nicholson, Wm. G. (Petersfield) Valentia, Viscount
Gordon, J. Peel, Hon. W. Robert Wellesley Warde, Col. C. E. (Kent, Mid)
Guinness, Hon. W. E. (B. S. Edm'ds.) Pretyman, E. G. Williams, Col. R. (Dorset, W.)
Hamilton, Marquess of Rawlinson, John Frederick Peel Wilson, A. Stanley (York, E.R.)
Hardy, Laurence (Kent, Ashford) Renton, Leslie Wyndham, Rt. Hon. George
Harris, Frederick Leverton Renwick, George Younger, George
Harrison-Broadley, H. B. Roberts, S. (Sheffield, Ecclesall)
Hay, Hon. Claude George Rutherford, Watson (Liverpool) TELLERS FOR THE AYES—Mr.
Hill, Sir Clement Salter, Arthur Clavell J. W. Hills and Sir H. Craik.
Hope, James Fitzalan (Sheffield) Scott, Sir S. (Marylebone, W.)
NOES.
Abraham, William (Rhondda) Hancock, J. G. Ponsonby, Arthur A. W. H.
Acland, Francis Dyke Harcourt. Rt. Hon. L. (Rossendale) Price, Sir Robert J. (Norfolk, E.)
Agnew, George William Harcourt. Robert V. (Montrose) Priestley, Sir W. E. B. (Bradford, E.)
Allen, A. Acland (Christchurch) Harmsworth, R. L. (Caithness-shire) Rainy, A. Rolland
Allen, Charles P. (Stroud) Harvey, W. E. (Derbyshire, N.E.) Rendall, Athelstan
Ashton, Thomas Gair Harwood, George Richards, Thomas (W. Monmouth)
Balfour, Robert (Lanark) Haworth, Arthur A. Roberts, Charles H. (Lincoln)
Baring, Godfrey (Isle of Wight) Helme, Norval Watson Roberts, G. H. (Norwich)
Barker, Sir John Hemmerde, Edward George Robertson, Sir G. Scott (Bradford)
Barnard, E. B. Henderson, Arthur (Durham) Robinson, S.
Barran, Rowland Hirst Higham, John Sharp Robson, Sir William Snowdon
Birrell, Rt. Hon. Augustine Hogan, Michael Rogers, F. E. Newman
Boulton, A. C. F. Holt, Richard Durning Rose, Sir Charles Day
Bowerman, C. W. Hooper, A. G. Rutherford, V. H. (Brentford)
Brace, William Horniman, Emslie John Samuel, S. M. (Whitechapel)
Branch, James Howard, Hon. Geoffrey Scanlan, Thomas
Bright, J. A. Isaacs, Rufus Daniel Scarisbrick, Sir T. T. L.
Brunner, J. F. L. (Lanes., Leigh) Jones, Leif (Appleby) Seely, Colonel
Brunner, Rt. Hon. Sir J. T. (Cheshire) Jones, William (Carnarvonshire) Shackleton, David James
Buckmaster, Stanley O. Jowett, F. W. Shaw, Sir Charles E. (Stafford)
Burns, Rt. Hon. John Keatina. Matthew Stanger, H. Y.
Buxton, Rt. Hon. Sydney Charles King, Alfred John (Knutsford) Stanley, Hon. A. Lyulph (Cheshire)
Cawley, Sir Frederick Laidlaw, Robert Stewart-Smith, D. (Kendal)
Cherry, Rt. Hon. R. R. Lambert, George Strauss, E. A. (Abingdon)
Clancy, John Joseph Lamont, Norman Summerbell, T.
Clough, William Layland-Barratt, Sir Francis Taylor, John W. (Durham)
Clyncs, J. R. Levy, Sir Maurice Taylor, Theodore C. (Radcliffe)
Collins, Stephen (Lambeth) Lloyd-George, Rt. Hon. David Tennant, H. J. (Berwickshire)
Collins, Sir Wm. J. (St. Pancras, W.) Lupton, Arnold Thomas, Sir A. (Glamorgan, E.)
Corbett, C. H. (Sussex, E. Grinstead) Macdonald, J. R. (Leicester) Thomasson, Franklin
Cornwall, Sir Edwin A. Maclean, Donald Thorne, G. R. (Wolverhampton)
Cotton, Sir H. J. S. Macnamara, Dr. Thomas J. Trevelyan, Charles Philips
Crosfield, A. H. Macpherson, J. T. Verney, F. W.
Dalziel, Sir James Henry M'Laren, Sir C. B. (Leicester) Walsh, Stephen
Davies, Sir W. Howell (Bristol, S.) M'Laren, H. D. (Stafford, W.) Ward, W. Dudley (Southampton)
Dewar, Arthur (Edinburgh, S.) Markham, Arthur Basil Wason, John Cathcart (Orkney)
Dickinson, W. H. (St. Pancras, N.) Massie, J. Watt, Henry A.
Dillon, John Masterman, C. F. G. White, Sir George (Norfolk)
Duckworth, Sir James Menzies, Sir Walter White, J. Dundas (Dumbartonshire)
Dunne, Major E. Martin (Walsall) Middlebrook, William White, Sir Luke (York, E.R.)
Edwards, A. Clement (Denbigh) Morrell, Philip Whittaker, Rt. Hon. Sir Thomas P.
Edwards, Sir Francis (Radnor) Muldoon, John Wiles, Thomas
Essex, R. W. Murray, James (Aberdeen, E.) Williams, J. (Glamorgan)
Evans, Sir Samuel T. Myer, Horatio Williams, W. Llewelyn (Carmarthen)
Everett, R. Lacey Ncwncs, F. (Notts, Bassetlaw) Williamson, Sir A.
Fenwick, Charles Nicholls, George Wilson, J. W. (Worcestershire, N.)
Ferguson, R. C. Munro Nusscy, Sir Willans Wilson, W. T. (Westhoughton)
Fuller, John Michael F. Nuttall, Harry Winfrey, R.
Fullerton, Hugh O'Brien, K. (Tipperary, Mid) Wood, T. M'Kinnon
Gill, A, H. O'Brien, Patrick (Kilkenny)
Glover, Thomas Parker, James (Halifax)
Gooch, George Peabody (Bath) Partington, Oswald TELLERS FOR THE NOES.—Captain
Guest, Hon. Ivor Churchill Pearce, Robert (Staffs, Leek) Norton and Sir E. Strachey.
Haldane, Rt. Hon. Richard B. Pointer, J.

Question, "That the words proposed, as amended, be there added," put, and agreed to.

Mr. CAVE

moved to omit from the proposed Amendment the words "and to have been reasonable having regard to the amount of his income."

I rather think this Amendment will be accepted. If a gift, whatever it is, is part of a man's normal expenditure, is that not enough? I suggest that it is rather ridiculous to leave it to the Commissioners to go into the amount of a man's income and consider whether, having regard to his income, this was a reasonable gift for him to make. It may be that in order to help his child a man has made a gift rather beyond what a perfectly prudent man would make. Is it right in that case to penalise the donee—for that is what you are doing here—because his father made a sacrifice for his benefit and has given more than according to his means he ought to have given. Apart altogether from that, it is absurd to lay it down that, when a man is dead, Commissioners should go into all his accounts and see whether the allowances were larger or smaller than they ought to have been to his wife, children or dependents. Where there is a bonâ fide gift and it is found to be part of the normal expenditure of the deceased, that ought to be good enough for the Treasury. It is not right for them to sit in judgment on a man and say whether he acted reasonably or not.

Mr. HALDANE

I think it would be extremely dangerous if all reference to income were omitted, and that the door would be open to possible serious consequences. The Commissioners have worked matters extremely well up to now, and, with the new Clause putting things as it does, I certainly think the prospects of smooth working in the future are at any rate as good as they have been in the past. Therefore, this is not an Amendment which the Government could accept.

Mr. AUSTEN CHAMBERLAIN

I think the right hon. Gentleman asks us to rely a little too much on what has been the practice of the Commissioners in the past. The Government are desirous to change the law and the practice in certain respects. It may be that hereafter the Commissioners will interpret the provisions as indicating a wider change than the Government have any intention of making. It must be remembered that whilst the sums we are now considering may in twelve months be a comparatively small amount, about which the Commissioners do not think it worth while to trouble very much, yet when you take all the gifts in three years it must become a more important matter, which they are likely to scrutinise with greater care. It is likely that there will be more cases in which the question whether you aggregate these gifts or not will affect the scale at which the estate of the deceased becomes dutiable, and the whole matter therefore assumes greater importance. I do not think the Commissioners will act in exactly the same way under those circumstances in the future as they have done in the past.

Just consider, too, what very curious inquiries the Commissioners may fairly conceive themselves to be invited to make by these words. They are to consider not, merely whether the gift has been habitual with the man, or normal in all the circumstances, but whether it is reasonable having regard to his income. Suppose a farmer for some reason makes a very large allowance to one of his sons at the expense of his other children. Are the Commissioners to consider whether a gift which he made to the one son for reasons known to him, but which may or may not be known to others, is reasonable, or whether he ought not to have given a proportion of that sum to his other children? It seems to me you are going to have an inquisition into the private conduct of the deceased. You are to review his family relations, and you are to decide whether what he did was reasonable as between one child and another. I am quite certain that is not the intention of the Government, and I cannot quite understand what is the case they intend to cover by these words that would not be covered by the preceding words, which direct that the gifts shall be part of the normal annual expenditure of the deceased. If they are I do not see that you have any right to go behind them unless you are prepared to alter altogether the law dealing with the disposition of property and limit the powers of a testator in a way of which hitherto we have had no example. If my hon. and learned Friend goes to a division I shall support him. I hope it will not be necessary for him to do so, but that the Government will consent further to consider the matter.

Mr. WALTER GUINNESS

I am very much disappointed that the Secretary for War does not see his way to accept the Amendment, because I think it is undoubted that the second part of this condition must inevitably rule out quite arbitrarily a large number of cases which would get exemption under the first part of the condition. It must be remembered that; it is a double condition, and that these are not alternatives. I should like to suggest to the right hon. Gentleman that if he cannot accept the Amendment just moved he should make this double condition into alternatives by substituting the word "or" for "and." If he would accept that solution he would remove a good deal of the haphazard effect of the Clause as it stands, because as it is you will have a very unpleasant inquisition into what is reasonable and what is annual expenditure. I think that either of these conditions ought to be a ground for exemption. The right hon. Gentleman the Secretary for War has told us that at present the practice is working very smoothly and these difficult cases do not arise. I think it is very desirable to leave this discretion to the Commissioners, otherwise you will have a very uneven effect. Small gifts which have not been traced will escape, whereas large gifts which are really on all fours will be discovered and will have to pay. If you are to continue what the right hon. Gentleman says is the satisfactory old practice, the best way will be to give a discretion to the Commissioners to enable them to look on this double condition as alternative conditions.

Mr. HALDANE

I have listened to what the hon. Member and the ex-Chancellor of the Exchequer have said on this point. In reply o them I may say that we really want to meet the situation in a businesslike way. The Amendment of the Chancellor of the Exchequer provides that there shall be exemption in the case of gifts "which are proved to the satisfaction of the Commissioners to have been part of the normal annual expenditure of the deceased, and to have been reasonable having regard to the amount of his income, or which, in the case of any donee, do not exceed in the aggregate one hundred pounds in value or amount." I think the end condition is necessary. I can conceive a case of a father, who might without doing anything unreasonable, having regard to the amount of his income, give £100,000 or £200,000 to his son. Therefore, the Amendment which is to leave out the words altogether is not one that we could accept. On the other hand, I am inclined to agree with the ex-Chancellor of the Exchequer that a little more elasticity is desirable in this case. There is an Amendment down in the name of the hon Member for Wandsworth (Sir Henry Kimber) to insert after "income" the words "or to the circumstances," and I think if they were put in some of the objections which have been raised would fairly be met. It seems to me to cover what has been aimed at in this discussion.

Mr. J. F. MASON

The right hon. Gentleman in the proposal he has just made maintains it as a necessary part of the condition that it shall be part of the normal expenditure. I would like to ask him whether, for instance, in the case of a father paying his son's election expenses that would be part of the normal expenditure?

Mr. HALDANE

Certainly.

Sir HENRY CRAIK

For my own part I am not prepared to accept these words and for this reason: Surely no one knows better than the right hon. Gentleman himself ought to know the circumstances of the poorer classes—I do not mean those who require help or assistance, but those who wish to be independent—in his country and my own. Is he not aware that constantly in Scotland the small farmer educates one son entirely beyond what is reasonable, having regard to the amount of his income—that he strains every resource he can command upon the education of one son, and is it not the case that from such households—the manse and the small farm—in Scotland there have come some of the greatest ornaments of his profession and of the Churches? Would anyone call the expenditure in such a case, of which the right hon. Gentleman knows the circumstances as well as I do, reasonable, having regard to the proportion it bears to his income and to the ideas of those who live south of the Tweed?

Question put, "That the words proposed to be left out stand part of the proposed Amendment."

Mr. CAVE

I do not want to put the Committee to the trouble of a division. I cannot actually withdraw, but I propose simply to say "No" and not divide.

Amendment to proposed Amendment negatived.

Mr. MITCHELL-THOMSON

moved, in the proposed Amendment, after the word "income" ["having regard to the amount of his income"], to insert the words" or to the circumstances."

Mr. AUSTEN CHAMBERLAIN

I recognise that the Secretary of State has gone a little way to meet us. I do not desire to prolong the Debate at this point, but I just want to leave on record that this does not satisfy us, because it leaves the inquisition, a distasteful, invidious and improper inquisition, still to be carried on by the Commissioners. Having said that I shall say nothing more.

Mr. WATSON RUTHERFORD

moved to leave out from the word "income" ["having regard to the amount to his income"] to the end of the proposed Amendment.

My object is this: If we leave in any such reference to a sum of £100, the effect would be that the Commissioners would consider it their duty to specially investigate every item of a deceased's expenditure that happened to be over £100—say, a hundred guineas. It is, I think, a mistake to put a sum of money like this in the Clause, as it will lead to very great confusion and misconception. I think it would be much better if the Clause stopped after the word "income" with the addition of the words "or to the circumstances," already agreed to. I move that Amendment.

Mr. HALDANE

I think these words would be useful if you take the case of a very small income indeed. We wish to make it quite clear that such a case is exempt. It will be useful for enabling the Commissioners to make a further exemption in a case where it is a very small income, and I think it would be useful to leave the words in.

Mr. CAVE

I also hope the words will be left in because they will exempt small gifts to servants and others not exceeding £100. In doing that a large number of cases will be covered.

Mr. WATSON RUTHERFORD

I fully appreciate the argument used by the right hon. Gentleman and by my hon. and learned Friend, and I ask leave to withdraw the Amendment.

Amendment to the proposed Amendment, by leave, withdrawn.

Mr. W. PEEL

moved at the end of the Clause to add: "Provided that where both the person making or effecting and the person taking a benefit under any such gift inter vivos, surrender, assurance, divesting, or disposition shall both die within such period of three years, any duty which, but for this proviso, might or would be chargeable on the death of the survivor of such person by reason of any such gift inter vivos, surrender, assurance, divesting, or disposition, shall not be chargeable on such last-mentioned death."

This Amendment is moved to meet a certain class of case, a class of case that is likely to increase owing to the previous one year within which gifts become liable to Death Duties having now been increased to three years. Take the case, for instance, where the donee dies within three years. The gift is treated as if it really passed at death for the purposes of taxation, or, to put it in another way, the gift is treated as if it were left by will to the donee, or the son or daughter, as it may be, who takes that particular gift. Of course, in that case there would be only one duty payable. But if the donee dies three years before the donor the gift pays duty on his death, and then within three years the donor dies, the same amount of money pays duty over again. It seems to be a very hard case indeed. This Amendment remedies that hardship and suggests that the "duty which, but for this proviso, might or would be chargeable on the death of the survivor of such persons by reason of any such gift inter vivos, surrender, assurance, divesting, or disposition, shall not be chargeable on such last-mentioned death." Of course, it is quite true that this Amendment goes a little wider than that, because it will also apply to the case where the donee dies within three years after the death of the donor, and it is possible that we ought not to apply it to a case of that kind. If the right hon. Gentleman is ready to accept the Amendment as applying to the first class of cases, which I think are really hard cases, it might possibly be necessary to alter the Amendment so that it should not apply to the second class of cases. As the Death Duties themselves are spasmodic and fall at very irregular intervals, and sometimes too frequent intervals, I think it is fair in this class of case that at least some exemptions should be given and these duties should not be charged twice over for the same amount of money in three years.

Sir W. ROBSON

The hon. Member (Mr. Peel) has anticipated an objection which is obvious on the face of his Amendment. But we cannot accept the Amendment at all. It is quite true, as the hon. Member has pointed out, there might be cases which might probably be described as hard, but this class of hard case has been found in the past, and will, I think, be found in the future, to be a necessary and useful deterrent against gifts which are intended to escape the Death Duties. One of the most effective deterrents has been the fear that the donee may die, and the property may revert to the donor, and be subject to double taxation. Although I can imagine cases where there is no intention of evading Death Duties, and where they may bear hardly, we must deal with the cases as a whole, and therefore we cannot accept the Amendment.

Mr. CAVE

It is true that the liability to a double duty may be a deterrent against gifts made to evade duty, but it is also a deterrent against gifts which are not made for that purpose. I hope, however, my hon. Friend will not press the Amendment, because it is not, as he said, in the form in which he would have it, but I hope the Question will be considered sooner or later by the Government.

Mr. PEEL

I beg to withdraw the Amendment, but as regards the first class of case, I hope the right hon. Gentleman will consider that, and see whether he cannot deal with what I consider is a real hardship.

Amendment, by leave, withdrawn.

Mr. CAVE

moved to add at the end of the Clause: "Provided that where the value of the property chargeable by reason of any such gift inter vivos, surrender, assurance, divesting, or disposition for whatever purpose made shall not exceed one thousand pounds, or where, whatever the amount of the property, it becomes chargeable by reason of any such gift, assurance, divesting, or disposition made or effected more than twelve months but less than three years before the death of the deceased, such property for the purpose of Estate Duty shall not be aggregated with any other property, but shall form an estate by itself."

The proviso is intended to deal with the point that when a gift which is made, the rate of duty is ascertained not by reference to the amount of the gift, but by reference to the whole of the estate passing on the death of the donor. There is really no logical relation between the amount of the gift and the amount of the whole estate. I suggest that you ought to treat the gift as an estate by itself and reckon the rate of duty by the amount of the gift, and not by the amount of the donor's estate.

Mr. HALDANE

The difficulty about this is that it would open wide the door for evasion. If the words proposed were added to the Clause it would enable the owner of a large fortune, by making gifts, to reduce his Estate Duty to 2 per cent. I do not see any way in which the effect of the Amendment proposed would be workable.

Mr. AUSTEN CHAMBERLAIN

Would the right hon. Gentleman at any hour—at two o'clock in the morning—present such an argument? Does any Member of the Committee seriously think that a man possessed of £100,000 is going to leave it not to his relatives or to anybody who has interest, but that he is going to give it away in small gifts for the sake of evading the Estate Duty? That appears to be the danger which the Secretary for War says prevents him from accepting the modest proposal of my hon. and learned Friend. I really think the Secretary for War will think better of this matter. If he has no stronger argument then surely he will accept the Amendment. The Debate comes as a curious kind of echo of the Debates of 1896. I remember the case of Dives and Lazarus. Dives was the millionaire who left £1,000 to Lazarus, the old servant, and because it was a gift he would have to pay 8 per cent. Then the opposite case was stated of the old servant who had saved a little money. I daresay many of us have heard of the case of the man—the servant—who, having no relatives or people for whom he cared, left his money to a member of the family in which he had spent all his life. Lazarus having his £100 left it to Dives, and Dives the millionaire paid only 1 per cent., or nothing, because Lazarus was poor. That was an argument at the time. How was it answered? It was argued that when Dives dies he leaves little legacies free of duty. This is a gift which is made outright when the man had no thought of dying, and when he had no suspicion that there would be a tax, and this poor man who is getting but a small gift—amounting to a sum not exceeding £1,000, in the course of three years must pay whatever rate of duty is applicable to the whole estate of the deceased. I am certain the Secretary of State for War feels that his own argument will not do, and as that is the only one that occurred to him, I hope he will show himself conciliatory once again and accept this proposal. After all, in these matters I quite understand the Government's refusal when there are large sums at stake; but in this case the loss to the Treasury would be perfectly insignificant, and the hardship on particular individuals may be very great.

Mr. STANLEY WILSON

May I press the right hon. Gentleman for some sort of answer to what the last speaker has said. It seems as if the right hon. Gentleman the Chancellor of the Exchequer is going to sit down and give no replies at all. This is the most absurd position that any responsible Minister has ever taken up. He said it is probable that this man of £100,000 will promptly give it all away in small gifts. I cannot imagine why the right; hon. Gentleman should adopt an attitude such as that. That he cannot give some reply to the question raised is too preposterous for words. The Amendment is a reasonable one, and one which the Government can perfectly easily understand. It is going to take nothing, or practically nothing, out of the pocket of the Treasury, and I think from every point of view the Government ought to reconsider the position adopted, and accept the Amendment.

Sir W. ROBSON

It is not right to say that an Amendment of this kind would only affect a few estates. It may affect a good many estates—a larger number than

hon. Members are prepared to say I can see no reason why, if the property is to be brought within the estate, and if the gift that has been made has been made within three years, it should not be aggregated. It ought to share in the incidence of the estate, and be aggregated to make up the value of the estate.

2.0 A.M.

Mr. PRETYMAN

Is the learned Attorney-General right? I thought the law was that where property passes under two different settlements, then they might not be aggregated. Is there any case where settled property and free property, both passing together on the same death, were not aggregated?

Sir W. ROBSON

I am not prepared to answer on the spur of the moment, but I am so informed. I am not prepared with any reference.

Question put, "That the words proposed be there added."

The Committee divided: Ayes, 55; Noes, 140.

Division No. 658.] AYES. [2.3 a.m.
Acland-Hood, Rt. Hon. Sir Alex. F. Fell, Arthur Renwick, George
Balcarres, Lord Forster, Henry William Roberts, S. (Sheffield, Ecclesall)
Baldwin, Stanley Gordon, J. Rutherford, Watson (Liverpool)
Baring, Capt. Hon. G. (Winchester) Guinness, Hon. W. E. (B. S. Edmunds) Scott, Sir S. (Marylebone, W.)
Barrie, H. T. (Londonderry, N.) Hamilton, Marquess of Sheffield, Sir Berkeley George D.
Bull, Sir William James Hardy, Laurence (Kent, Ashford) Stanier, Beville
Carlile. E. Hildred Harris, Frederick Leverton Starkey, John R.
Cave, George Harrison-Broadley, H. B. Staveley-Hill, Henry (Staffordshire)
Cecil, Evelyn (Aston Manor) Hay, Hon. Claude George Talbot, Lord E. (Chichester)
Chamberlain, Rt. Hon. J. A. (Worc'r.) Hill, Sir Clement Thomson, W. Mitchell-(Lanark)
Charming, Sir Francis Allston Hills, J. W. Valentia, Viscount
Clive, Percy Archer Hunt, Rowland Warde, Col. C. E. (Kent, Mid)
Coates, Major E. F. (Lewisham) Kerry, Earl of Williams, Col. R. (Dorset, W.)
Courthope, G. Loyd King, Sir Henry Seymour (Hull) Wilson, A. Stanley (York, E.R.)
Craig, Captain James (Down, E.) Mason, James F. (Windsor) Wyndham, Rt. Hon. George
Craik, Sir Henry Moore, William Younger, George
Dickson, Rt. Hon. C. Scott Peel, Hon W. Robert Wellesley
Doughty, Sir George Pretyman, E. G. TELLERS FOR THE AYES.—Mr.
Douglas, Rt. Hon. A. Akers- Renton, Leslie Hicks Beach and Mr. G. A. Gibbs.
NOES.
Acland, Francis Dyke Clynes, J. R. Everett, R. Lacey
Agar-Robartes, Hon. T. C R. Collins, Stephen (Lambeth) Fenwick, Charles
Agnew, George William Collins, Sir Wm. J. (St. Pancras, W.) Ferguson, R. C. Munro
Allen, A. Acland (Christchurch) Cooper, G. J. Fuller, John Michael F.
Allen, Charles P. (Stroud) Corbett, C. H. (Sussex, E Grinstead) Fullerton, Hugh
Ashton, Thomas Gair Cornwall, Sir Edwin A. Gill, A. H.
Barker, Sir John Cotton, Sir H. J. S. Glover, Thomas
Barnard, E. B. Crosfield, A. H. Gooch, George Peabody (Bath)
Barran, Rowland Hirst Cullinan, J. Haldane, Rt. Hon. Richard B.
Boulton, A. C F. Dalziel, Sir James Henry Harcourt, Rt. Hon. L. (Rossendale)
Bowerman, C. W. Davies, Sir W. Howell (Bristol, S.) Harcourt, Robert V. (Montrose)
Brace, William Dewar, Arthur (Edinburgh, S.) Harmsworth, R. L. (Caithness-shire)
Branch, James Dickinson, W. H. (St. Pancras, N.) Harvey, W. E. (Derbyshire, N.E.)
Bright, J. A. Dillon, John Harwood, George
Brunner, J. F. L. (Lanes., Leigh) Duckworth, Sir James Haworth, Arthur A.
Brunner, Rt. Hon. Sir J. T. (Cheshire) Dunne, Major E. Martin (Walsall) Helme, Norval Watson
Bryce, J Annan Edwards, A. Clement (Denbigh) Hemmerde, Edward George
Burns, Rt. Hon. John Edwards, Sir Francis (Radnor) Henderson, Arthur (Durham)
Buxton, Rt. Hon. Sydney Charles Essex, R. W. Higham, John Sharp
Clough, William Evans, Sir Samuel T. Hogan, Michael
Holt, Richard Durning Newnes, F. (Notts, Bassetlaw) Stewart-Smith, D. (Kendal)
Hooper, A. G. Nicholls, George Strauss, E. A. (Abingdon)
Horniman, Emslie John Nussey, Sir Willans Summerbell, T.
Howard, Hon. Geoffrey Nuttall, Harry Taylor, John W. (Durham)
Isaacs, Rufus Daniel O'Brien, K. (Tipperary, Mid) Tennant, H. J. (Berwickshire)
Jones, Leif (Appleby) O'Kelly, Conor (Mayo, N.) Thomas, Sir A. (Glamorgan, E.)
Jones, William (Carnarvonshire) Parker, James (Halifax) Thomasson, Franklin
Jowett, F. W. Partington, Oswald Thorne, G. R. (Wolverhampton)
Keating, Matthew Pearce, Robert (Staffs, Leek) Trevelyan, Charles Philips
King, Alfred John (Knutsford) Pointer, J. Verney, F. W.
Lambert, George Ponsonby, Arthur A. W. H. Walsh, Stephen
Lamont, Norman Price, Sir Robert J. (Norfolk, E.) Ward, John (Stoke-upon-Trent)
Layland-Barratt, Sir Francis Priestley, Sir W. E. B. (Bradford, E) Wason, John Cathcart (Orkney)
Levy, Sir Maurice Rainy, A. Rolland Watt, Henry A.
Lloyd-George, Rt. Hon. David Roberts, Charles H. (Lincoln) White, Sir George (Norfolk)
Lupton, Arnold Roberts, G. H. (Norwich) White, J. Dundas (Dumbartonshire)
Macdonald, J. R. (Leicester) Robertson, Sir G. Scott (Bradford) White, Sir Luke (York, E.R.)
Maclean, Donald Robinson, S. White, Patrick (Meath, North)
Macnamara, Dr. Thomas J. Robson, Sir William Snowdon Wiles, Thomas
Macpherson, J. T. Rogers, F. E. Newman Williams, W. Llewelyn (Carmarthen)
M'Laren, H. D. (Stafford, W.) Rutherford, V. H. (Brentford) Williamson, Sir A.
Markham, Arthur Basil Samuel, S. M. (Whitechapel) Wilson, J. W. (Worcestershire, N.)
Meagher, Michael Scarisbrick, Sir T. T. L. Wilson, W. T. (Westhoughton)
Middlebrook, William Seely, Colonel Winfrey, R.
Morrell, Philip Shackleton, David James Wood, T. M'Kinnon
Muldoon, John Shaw, Sir Charles E. (Stafford)
Murray, James (Aberdeen, E.) Stanger, H. Y. TELLERS FOR THE NOES.—Captain
Myer, Horatio Stanley, Hon. A. Lyulph (Cheshire) Norton and Sir E. Strachey.
Mr. CAVE

moved, after the words last inserted, to add the words:

"Provided that in the case of every person dying on or after the thirtieth day of April, nineteen hundred and nine, property of any kind comprised in any such gift inter vivos, surrender, assurance, divesting, or disposition made or effected by the deceased in or out of which he originally created or reserved an estate or interest for his own benefit, shall not be deemed to pass on the death of the deceased where such estate or interest shall have been surrendered, assured, divested, or disposed of in such manner and within such time as is prescribed by The Finance Act, 1900, Section eleven (1), as amended by this Act in regard to the surrender, assurance, divesting, or disposition of an estate or interest in property within the meaning of the first-mentioned Section in order to exempt the property from being property passing on the death of the deceased."

I will move this very shortly having regard to an intimation I have received from the right hon. Gentleman in charge

of the Bill at the present time, and I understand that this will be practically accepted. The purport of it is that when a man makes a gift reserving to himself the life interest, of course that does not free it from the duty, and that when later on he releases the life interest still it is not free from the duty. It should be made free in the latter case.

Mr. HALDANE

I think this Amendment is a very reasonable one. I am not perfectly satisfied with the words, but we will undertake to bring up a Clause on Report embodying the substance of what the hon. Member has moved. Perhaps under the circumstances he will consent to withdraw the Amendment.

Mr. CAVE

On those terms I ask leave to withdraw.

Amendment, by leave, withdrawn.

Question put, "That the Clause, as amended, stand part of the Bill."

The Committee divided: Ayes, 135; Noes, 52.

Division No. 659.] AYES. [2.15 a.m.
Acland, Francis Dyke Branch, James Cornwall, Sir Edwin A.
Agar-Robartes, Hon. T. C. R. Bright, J. A. Cotton, Sir H. J. S.
Agnew, George William Brunner, J. F. L. (Lanes., Leigh) Crosfield, A. H.
Allen, A. Acland (Christchurch) Brunner, Rt. Hon. Sir J. T. (Cheshire) Cullinan, J.
Allen, Charles P. (Stroud) Bryce, J. Annan Dalziel, Sir James Henry
Ashton, Thomas Gair Burns, Rt. Hon. John Davies, Sir W. Howell (Bristol, S.)
Barker, Sir John Buxton, Rt. Hon. Sydney Charles Dewar, Arthur (Edinburgh, S.)
Barnard, E. B. Clough, William Dickinson, W. H. (St. Pancras, N.)
Barran, Rowland Hirst Clynes, J. R. Dillon, John
Boulton, A. C. F. Collins, Stephen (Lambeth) Duckworth, Sir James
Bowerman, C. W. Cooper, G. J. Dunne, Major E. Martin (Walsall)
Brace, William Corbett, C. H. (Sussex, E. Grinstead) Edwards, A. Clement (Denbigh)
Edwards, Sir Francis (Radnor) Layland-Barratt, Sir Francis Samuel, S. M. (Whitechapel)
Essex, R. W. Levy, Sir Maurice Scarisbrick, Sir T. T. L.
Evans, Sir S. T. Lloyd-George, Rt. Hon. David Seely, Colonel
Everett, R. Lacey Lupton, Arnold Shackleton, David James
Fenwick, Charles Macdonald, J. R. (Leicester) Shaw, Sir Charles E. (Stafford)
Ferguson, R. C. Munro Maclean, Donald Stanger, H. Y.
Fuller, John Michael F. Macnamara, Dr. Thomas J. Stanley, Hon. A. Lyulph (Cheshire)
Fullerton, Hugh Macpherson, J. T. Stewart-Smith, D. (Kendal)
Gill, A. H. M'Laren, H. D. (Stafford, W.) Strauss, E. A. (Abingdon)
Glover, Thomas Markham, Arthur Basil Summerbell, T.
Gooch, George Peabody (Bath) Middlebrook, William Taylor, John W. (Durham)
Haldane, Rt. Hon. Richard B. Morrell, Philip Tennant, H. J. (Berwickshire)
Harcourt, Rt. Hon. L. (Rossendale) Muldoon, John Thomas, Sir A. (Glamorgan, E.)
Harcourt, Robert V. (Montrose) Murray, James (Aberdeen, E.) Thomasson, Franklin
Harmsworth, R. L. (Caithness-shire) Myer, Horatio Thorne, G. R. (Wolverhampton)
Harvey, W. E. (Derbyshire, N.E.) Newnes, F. (Notts, Bassetlaw) Trevelyan, Charles Philips
Harwood, George Nicholls, George Verney, F. W.
Haworth, Arthur A. Nuttall, Harry Walsh, Stephen
Helme, Norval Watson O'Brien, K. (Tipperary, Mid) Ward, W. Dudley (Southampton)
Hemmerde, Edward George O'Kelly, Conor (Mayo, N.) Wason, John Cathcart (Orkney)
Henderson, Arthur (Durham) Parker, James (Halifax) Watt, Henry A.
Higham, John Sharp Partington, Oswald White, Sir George (Norfolk)
Hogan, Michael Pearce, Robert (Staffs, Leek) White, J. Dundas (Dumbartonshire)
Holt, Richard Durning Pointer, J. White, Sir Luke (York, E.R.)
Hooper, A. G. Ponsonby, Arthur A. W. H. White, Patrick (Meath, North)
Horniman, Emslie John Price, Sir Robert J. (Norfolk, E.) Wiles, Thomas
Howard, Hon. Geoffrey Priestley, Sir W. E. B. (Bradford, E.) Williams, W. Llewelyn (Carmarthen)
Isaacs, Rufus Daniel Rainy, A. Rolland Williamson, Sir A.
Jones, Leif (Appleby) Roberts, Charles H. (Lincoln) Wilson, J. W. (Worcestershire, N.)
Jones, William (Carnarvonshire) Roberts, G. H. (Norwich) Wilson, W. T. (Westhoughton)
Jowett, F. W. Robertson, Sir G. Scott (Bradford) Wood, T. McKinnon
King, Alfred John (Knutsford) Robinson, S.
Lambert, George Robson, Sir William Snowdon TELLERS FOR THE AYES.—Captain
Lamont, Norman Rogers, F. E. Newman Norton and Sir E. Strachey.
NOES.
Acland-Hood, Rt. Hon. Sir Alex. F. Gibbs, G. A. (Bristol, West) Renwick, George
Balcarres, Lord Gordon, J. Roberts, S. (Sheffield, Ecclesall)
Baldwin, Stanley Guinness, Hon. W. E. (B. S. Edmunds) Rutherford, Watson (Liverpool)
Baring, Capt. Hon. G. (Winchester) Hamilton, Marquess of Scott, Sir S. (Marylebone, W.)
Barrie, H. T. (Londonderry, N.) Hardy, Laurence (Kent, Ashford) Sheffield, Sir Berkeley George D.
Beach, Hon. Michael H. H. Harris, Frederick Leverton Stanier, Beville
Bull, Sir William James Harrison-Broadley, H. B. Starkey, John R.
Carlile, E. Hildred Hay, Hon. Claude George Staveley-Hill, Henry (Staffordshire)
Cave, George Hill, Sir Clement Talbot, Lord E. (Chichester)
Cecil, Evelyn (Aston Manor) Hills, J. W. Thomson, W. Mitchell-(Lanark)
Chamberlain, Rt. Hon. J. A. (Worc'r.) Hunt, Rowland Warde, Col. C. E. (Kent, Mid)
Channing, Sir Francis Allston Kerry, Earl of Williams, Col. R. (Dorset, W.)
Clive, Percy Archer King, Sir Henry Seymour (Hull) Wilson, A. Stanley (York, E.R.)
Coates, Major E. F. (Lewisham) Long, Col. Charles W. (Evesham) Wyndham, Rt. Hon. George
Courthope, G. Loyd Mason, James F. (Windsor)
Craig, Captain James (Down, E.) Moore, William
Dickson, Rt. Hon. C. Scott Peel, Hon. W. R. W. TELLERS FOR THE NOES.—Viscount
Doughty, Sir George Pretyman, E. G. Valentia and Mr. H. W. Forster.
Douglas, Rt. Hon. A. Akers- Renton, Leslie

Question, "That the Clause, as amended, stand part of the Bill," put, and agreed to.

Mr. AUSTEN CHAMBERLAIN

I beg to move "That the Chairman do report Progress, and ask leave to sit again." I am unaware what are the intentions of the Government, but I hope they will see their way to accept this Motion. I do not know whether the Chancellor of the Exchequer is tired, but I think we shall all agree that he has done a very good day's work. The next Sub-section raises an entirely new question. It, of course, upsets the settlement come to in 1906 and raises an entirely new question, which we have practically had no opportunity of discussing at all so far. I think it is rather unreasonable to ask us to enter upon it at half-past two in the morning, and I trust the Government will allow us to proceed with it on a new day.

Mr. LLOYD-GEORGE

I do not like to resist a Motion of this kind, because I must say the Opposition have treated us very fairly in the criticism of the Bill to-day. There has certainly been nothing in the nature of protracted or unreasonable discussion, and therefore we have no reason to complain. But I must say I understood that last night there was, I will not say an arrangement, but an understanding, that we should have Death Duties and Estate Duties to-night, and begin on Monday morning with the Income Tax. I was so much under that impression that, so far as I am concerned, I assented to reporting Progress at an earlier hour than I intended, because my own intention was to go on very much later this morning in order to get further on with the work. There are two points of substance, undoubtedly, upon that Clause. One is the 25 years purchase, and the other is the Sub-section with regard to valuation. Those are two very important points, but, nevertheless, I would suggest to the Committee that it is very much better we should dispense with the Death Duties to-night and begin with Income Tax at the beginning of the week. It is desirable we should not unduly prolong the discussion on the Bill, and I think I should be meeting the general convenience of Members if I were to press the Committee to conclude the Death Duties to-night.

Mr. AUSTEN CHAMBERLAIN

What the right hon. Gentleman says places me in a little difficulty. If there was an arrangement, of course, neither I nor my friends would want to go back on it in any shape or form, and had I any idea that there was anything like an arrangement I should not have made this Motion. I was not here at the end of the proceedings last night. I had an inquiry addressed to me by the right hon. Gentleman much earlier in the evening as to what I thought would be the course of the proceedings. I did not communicate with him directly. I told the Chief Opposition Whip that I thought we should be able to finish this Clause in reasonable hours within the week, and that if the Government were prepared to give an extra day it would make the thing settled. That is therefore all of which I had knowledge. Of course at that time we had no knowledge that the Government were going to introduce a highly-contentious Resolution at three o'clock to-day, which took two hours or something like that out of the time which would otherwise have been available for the Budget. I think we do well to be jealous of the observance of anything that can be called an agreement, or anything which has given rise to an understanding on which one side or other of the House has acted. Without inquiring further, I accept the right hon. Gentleman's statement that he acted upon the belief that there was such an understanding last night when he consented to the adjournment then, and I beg leave to withdraw the Motion.

Motion to report Progress, by leave, withdrawn.