§ No estate duty shall be levied upon an estate passing from a deceased husband to his widow.[Lord Hugh Cecil.]
§ Lord H. CECILWhen the Debate was interrupted I was moving a new Clause, 532 the purpose of which is to prevent the Estate Duty being levied when an estate passes at the death of a husband to his widow. At this late hour I think I shall consult the wishes of the Committee best by compressing my observations into as small a compass as possible, and I can. state my point in a very few words. The ideal Estate Duty is that you levy the duty upon the heir when he comes into the property and when he is well able to pay the duty that is leviable, but that is conspicuously untrue in the case of a widow. Supposing a professional man or 533 a man of business in the enjoyment of a large income which dies with him leaves his wife the savings he has been able to accumulate, he leaves her considerably worse off than she was when he was alive, and she may have to pass from the highest state of comfort to a much lower state. She has to cutdown various comforts and probably to live in a small house. She loses probably a great deal of money by the death of her husband and yet that is the moment when the State comes down to levy taxes upon her on the theoretical hypothesis that she is richer than before, whereas, as a matter of fact, she is worse off. There is another inconsistency I would like to point out. Under the Income Tax Act the incomes of husband and wife were taken together, and as the estate is jointly held it can scarcely be said there is a passage of the property. If a man and wife are to be treated as a fiscal union obviously the death of one does not create a passing of the estate to the other part of the union, Therefore the State is inconsistent in its own theory.
But I put my objection on the broad ground, mainly, of the great hardship inaicted by the fact that while the tax is levied theoretically on a person who is receiving money it actually works out that it is levied on a person who is losing money. The hardship often is very great indeed, and it is particularly odious at such a moment to have to suffer the tax at a moment when one is forced to undergo the burden of economising as a result of bereavement. I do not know, too, that there is much gain to the Treasury by the enforcement of this duty in such cases. As a rule there is not much difference in age between husband and wife, and the State does not have to wait very long before the estate passes from the wife on her death. Thus the Government are only kept out of the money for a comparatively short time. I suggest that this is precisely one of the cases where the Estate Duty weighs heavily without any compensating advantage to the revenue and, at any rate, if my right hon. Friend cannot see his way to meet me on this point now I would suggest it might be made part of the case to be submitted in the course of inquiry on the operation of the Estate Duty. I hope my right hon. Friend has not forgotten the suggestion I made on the Second Heading of the Bill, that there should be some sort of inquiry into the Death Duties, in the same way as is being done in regard to the Income Tax, in order to see if it be not possible to remove some of the 534 hardships arising through present methods of incidence. I repeat this is a conspicuous case when the duty is levied on a person who is becoming not richer but poorer.
Mr. CHAMBERLAINMy Noble Friend has opened up a very broad subject in a very brief speech, and I am rather puzzled how to deal with it. I need scarcely say that I am unable to accept his Clause. I do not know if it will be any consolation to him if I say that, after all, all taxation is unjust, and you have simply to choose from among many disadvantages. My Noble Friend says, "At any rate give me another Committee or Commission." I do not exclude that for a moment; I only say we are really in danger of getting too many Committees and Commissions, and I have had evidence this afternoon of the impatience of the House when I suggested that the fact that a subject is now beingconsidered by a Commission is a reason for not at once coming to a definite decision on a proposal before the Committee. Simultaneously, I have received an intimation that Commissioners are disturbed because I have dealt with minor details of a subject which they still have under investigation. I do not exclude the idea of a Commission, but I do not welcome it enthusiastically, and I am not quite sure if my Noble Friend thinks the matter over he himself will desire it. As to the Clause itself, I admit there is a primâ facie case in. thefact that for Death Duty purposes you treat husband and wife as two, whereas for ascertaining the rate at which they should be charged you treat their incomes as one, but the proposed Clause is no novelty. It was proposed when Sir William Harcourt first made his great alteration in the Death Duties. It was rejected then. It has been proposed at every stage since, and the House has deliberately chosen to proceed on other lines, and it would be necessary to remodel the whole rates and everything else if you contemplated anything of the kind, because otherwise you would not get the revenue. If you alter the incidence of the tax in such a way that it produces half or three-quarters of the revenue you will have to alter the rate of your tax so as to make good the gap which you create by altering the incidence.
My Noble Friend and I, however, join issue as to what is the principle on which, the tax is levied. He says it is levied on the accretion of the property to the heir. 535 That is not so. It is levied upon property which passes at the death, irrespective of the heir to whom it goes. I do not want to provoke him into an argument which he has several times put forward that taxes are levied on persons and not on chattels. Whatever his economic views may be, that is the principle on which the tax is assessed. It is assessed on the total property passing at death. My Noble Friend's great care is for the widow, and I quite agree that there is a large number of cases where the widow on death, though in law coming into property which she had not enjoyed before her husband's death, is, in fact, in poorer circumstances than she was as long as the husband lived. But I think he will observe the great difficulty of preserving the yield of the Death Duties if you allow the husband to transfer free to his wife all his property on his death or any portion of it. If my Noble Friend's Clause is passed, I leave my property to my wife in the knowledge that she will proceed to distribute it among my children as I shall direct. That is a contingency which my Noble Friend has not contemplated, that the relations between husband and wife in the majority of cases I hope are of that confidential and trustworthy kind that any husband wishing to leave money to his children and to escape duty could with confidence leave it to his wife with the knowledge that she would transfer it immediately afterwards for the benefit of the children. I think that is fatal to my Noble Friend's proposal.
§ Mr. HOGGEWhy should my right hon. Friend only trust his wife after he is dead? Why not trust her while he is alive?
§ Lord H. CECILYou can distribute your property while you are alive.
Mr. CHAMBERLAINThat is true. So can anybody. There is nothing in our present law to prevent my Noble Friend divesting himself of all his property tomorrow, and distributing it among his relations.
§ Lord H. CECILWhy bring in the machinery of a wife?
Mr. CHAMBERLAINI am sorry if I have not made myself clear. There is nothing to prevent any of us from divesting ourselves of property during our life- 536 time, and so escape payment of duty on that property of which we have divested ourselves three years before our death. By so doing we absolve that property from Death Duties when we die. Being constituted as we are we do not divide all our property among our children. Our children being in many cases young we cannot trust them. We cannot place these responsibilities upon them. The relations between husband and wife are different from the relations between any two other individuals in the world. The relationship of two people happily married is one of absolute confidence, and if the expectation of life of your wife is distinctly better than your own expectation you can give to her property which you do not intend her to enjoy, and which she would not seek to enjoy.
§ Question put, and negatived.