HC Deb 19 February 1861 vol 161 cc615-24

rose to move a Resolution that real property should be made to pay the same probate duty as that now payable on personal property. The hon. Member said, that for sixty-five years since 1796, personal property, which consisted of all descriptions of property except land, had been subject to the payment of probate duty; and during the whole of that period landed property had been exempt from it. Now there was a manifest anomaly that property which had been accumulated by savings should be made to pay a duty, while landed property, which descended from generation to generation, should escape the infliction altogether. Again, probate duty commenced on sums as low in amount as £20, and was levied on sums up to £1,000,000. And one most extraordinary thing was that, while £20 saved by the industry and the economy of the hardworking man paid a probate duty of 2½ per cent, and a duty at that rate was levied on all sums up to £8,000; from £8,000 up to £1,000,000 the rate was only 1½ per cent. Now, would any man contend for the justice of this? He thought not. The proposal to levy probate duty was brought forward in 1796 by Mr. Pitt. But it was allowed to make very little progress in the House before Mr. Pitt was obliged to divide the measure into two parts: one of which proposed to levy the tax upon personal property, and the other to levy it upon real property. Well, in obedience to the dictates of the great landed aristocracy of that day, the measure affecting personal property was first brought forward and pushed on, and upon a division only sixteen Members opposed the imposition of the tax. It was sent to the other House, passed without objection, and received the Royal Assent. After it had been secured the Bill as to real property was brought in. It was allowed to go on to the third reading, when, on a division, there was a majority of two against it. Mr. Pitt then proposed that the Bill be read a third time the next day, when the House divided equally, and the Speaker gave the casting vote in favour of the Bill passing. Upon that, the all-powerful landed aristocracy of the day went, it was stated, to Mr. Pitt, and told him that if he proceeded with the Bill, he should exist as Prime Minister but for a very short time. The consequence was, he withdrew the Bill altogether, and so left the tax in the position in which it has remained ever since. Now the provisions of the latter Bill were entirely embraced in the Motion now before the House. One half of the Members present in 1796 thought the tax should be imposed on landed property as well as on personal property. They formed part of the unreformed Parliament, of whom it was said most of them were sent into the House by Peers and great borough proprietors. He thought, therefore, it was but a very moderate expectation to anticipate that the reformed Parliament of to-day would not hesitate in correcting an injustice which had been condemned by one-half of an unreformed Parliament present at division. The legacy duty had been collected under precisely the same conditions as the probate duty. But in 1853 the right hon. Gentleman (the Chancellor of the Exchequer) had the manliness—and no small degree of manliness it was—and the honesty to bring forward a Bill to apply the legacy duty to real as well as to personal property. But notwithstanding all the ability and energy displayed by the right hon. Gentleman, he only succeeded in imposing the legacy duty on landed property to the amount of about one-half of that which was imposed on personal property. The measure failed to produce the amount of £2,000,000, which it was estimated to produce; but that arose from the fact that the tax was in amount only one-half of that levied on personal property. He was aware that the right hon. Gentleman would meet with considerable opposition if he were to attempt to do away with the inequality; but he would be able to overcome it, and by so doing he would confer a great benefit on the community at large. In the Bill of 1853, there were certain very objectionable exemptions—such, for instance, as those in favour of corporations and of trading companies, which were in reality corpora- tions. In 1854 he (Mr. Williams) called attention to the fact; and Mr. Wilson, who then held the office of Secretary to the Treasury, stated to the House that a Bill was in preparation by the Government to impose probate duty on the property of corporations. That Bill, although it would have produced a large amount, had never yet been brought forward, and he (Mr. Williams) hoped the right hon. Gentleman the Chancellor of the Exchequer would give it his consideration. It was calculated that if the probate tax should be extended to landed property at the same rate as was now levied on real property, if it were equalized at 2½ per cent on all sums up to £1,000,000, if all the loopholes by which the tax was at present evaded were closed (and no man was better able to effect that than the right hon. Gentleman the Chancellor of the Exchequer), and if all the exemptions now existing in reference to large properties were abolished, the tax would produce £2,500,000 annually. He (Mr. Williams) had not the least doubt it would produce that. Some of the exemptions and loopholes by which payment of the tax could be evaded wore of the most extraordinary kind. He would not detain the House with a long list, but he would give a few instances. The late Lord Stowell, a lawyer of great eminence, Judge of the Admiralty Court, and who, during his life, filled many offices, had a large property in the funds. Well, he got the whole of that property transferred to his son, taking very good care to get his son to grant him a power of attorney to receive the dividends. It happened very remarkable, however, that the son died before the father, and it became a question between the representatives of the son and the father as to whom the property belonged. The matter was brought into the Court of Chancery to be settled, and that Court decided that the property belonged to the son. By that means the probate duty and the legacy duty were altogether avoided. Again, another mode of evasion was by having the property held in joint names,—for instance, the names of a father and his son. Then, when the father died, the son came into possession of the property without paying any probate duty. Again, with reference to legacies; it was a common thing for the richer classes to evade the tax by leaving legacies chargeable on land; and although now the right hon. Gentleman the Chancellor of the Exchequer had made legacies of this kind pay up to a certain point, he had not been able to raise the tax to the same rate as that levied on personal property; but no probate duty is paid on such leagacies. Then, with reference to leases on land. Persons building houses commonly took leases of sixty or ninety-nine years. Now, when a person died in possession of houses so built his representatives were obliged to pay probate duty on the full value of the houses, while the freehold landlord did not pay a single farthing. And what was more remarkable, when the lease expired and the houses fell into the hands of the freehold landlord, he ceased to be liable to pay the probate duty altogether, because they then became as much part of the freehold as the land upon which they were built. In Scotland, houses built upon building leases land paid no probate duty. In the large towns in this country, houses were, to a great extent, built upon freehold land, escaped the duty. There was, also, among the richer classes a vast amount of property left by settlement, deeds of trust, and deeds of gift after death, and all of these descriptions of property were exempt from paying probate duty. The late Mr. Porter, in his work called, The Progress of the Nation, stated that three-tenths of the property left by heads of families was thus entirely exempt from the payment of this tax. This was an anomaly which ought not to exist, and one which had been, at various times, condemned by some of the most eminent men the country had produced. Mr. Pitt had spoken energetically in favour of the application of probate duty to landed property, and Mr. Fox and other eminent men of his day had urged the application of the same tax. The present Chancellor of the Exchequer, indeed, upon a former occasion, when he (Mr. Williams) brought the subject under the notice of the House, admitted that the present law was objectionable and absurd—an opinion in which he was borne out, to some extent, by the right hon. Gentleman the Member for Bucks, when he, in turn, was Chancellor of the Exchequer, who had stated that the existence of a species of property exempt from taxation had been found to lead to the disturbance of nations and the overthrow of thrones. The present Chancellor of the Exchequer had, however, veered round from the principles he had once expressed, and upon the last occasion when this question was before the House used arguments against it, and stated that the expenses of the conveyance of land were enormous when compared with other property; but at present the cost of conveyance of land is precisely the same as the cost of conveyance of railway shares or any other kind of property of joint stock companies. He asked the House whether it was just that the present distinction between real and personal property in relation to this tax ought to continue, and he appealed to the Chancellor of the Exchequer's sense of justice whether he would not engage his great powers in doing away with an anomaly so gross. He hoped the right hon. Gentleman would take the question into his serious consideration, as he believed he was almost the only man who, at the present moment, could carry through successfully so important a reform. The hon. Gentleman concluded, by moving, "That, in the opinion of this House, Real Property should be made to pay the same Probate Duty as that now payable on Personal Property."


seconded the Motion, and observed that this was one of the few remaining distinctions between what might be called aristocratic property and the property of the community at large that still remained. He hoped both classes of property would be placed upon exactly the same footing with regard to the probate and every other description of tax. He believed that by giving way in cases of this kind the landed interest gained, not only in character, but also in a money sense. To his knowledge there were cases in which personal property had paid probate duty four or five times over in the course of five or six years. Sooner or later the alteration now sought would be made; and then, he believed, all parties would agree in admitting its justice.

Motion made, and Question proposed.


I regret that I occupy the position in which my hon. Friend the Member for Lambeth has placed me to-night; for on former occasions, and occasions of great importance, when it has been my duty to make large and important proposals to this House I have had to make them with the acknowledgment that he was the Member of this House who had taken the most prominent part in bringing those proposals under our notice. With regard to the succession duties, for example, and the importance of bringing the whole revenue of the country under the control of Parliament, I have paid public tribute to his exertions, because my hon. Friend made proposals with regard to both of these matters that, being in themselves just, have proved both practicable and beneficial. But on this occasion, I am sorry to say, whether from the infirmity of my own mind, or from some other cause, my views are entirely opposed to his. I cannot admit the proposals he makes to be just, nor, if just, that they can be described as practicable. My hon. Friend proposes that the House should resolve "that real property should be made to pay the same probate duty as is now payable on personal property." Any one reading that Motion would suppose that a distinction now exists in law by which property is divided into two categories, the one real, and the other personal; and that of these two categories, one, namely, personal property, is subject to probate duty; while the other, real property, is not. But my hon. Friend omits the most important fact, that the adoption of his Motion would lead to a greater anomaly than he proposes to rectify. A very large proportion of personal property that passes by death from one man to another pays no probate duty at all, but, passing under settlement, is exempted from payment of the probate duty. [Mr. WILLIAMS: It should not be exempted.] My hon. Friend says it ought not to be exempted. Then let him join with me in the objection I am making to this Motion; for in asking us to rectify an anomaly he omits the most glaring part of that anomaly. Whatever might be said in regard to landed property, and with respect to moveable property in regard to the fact that it was burdened in a peculiar form with heavy taxation, that did not apply to money in the funds or other money passing by settlement; and, therefore, the Motion of his hon. Friend, if it were adopted as it stood, would, in consequence of the exemption of settled personalty from probate, create a much greater anomaly than the one he professed to remove. The subject was one which involved a great deal of complicated matter. I think my hon. Friend did not distinguish between the separate parts of this subject. My hon. Friend spoke of the succession duty of Mr. Pitt and the exemption of landed property from the succession duty; but neither of these subjects has any bearing on the present discussion. He says that when the Succession Duty Act was passed it was intended to bring within the scope of that Act the property of corporations, and that this has never been done. That is perfectly true, and I admit that I should like to give to that subject more consideration than I have been able to bestow upon it since I have been in office. Still, after all, that is a very small question. My right hon. Friend the Secretary of State for the Home Department, when Chancellor of the Exchequer, made a statement to the effect that the proceeds of such a duty would not exceed £5,000 a year. That may or may not be an understatement, I hope it is. But it is but a small matter, and it has also nothing to do with the present discussion. If the law in regard to the succession duty is imperfect let us amend that Act, and let us make the succession duty perfectly efficient for its purpose. But that Succession Duty Act is analogous to the Legacy Duty Act. The probate duty is entirely different in its character. It is a stamp duty charged on proving the will, and, without proving the will, no executor can proceed to give effect to the disposition of the will. You, therefore, have an absolute certainty that the parties interested must proceed to do the Act that insures our getting the tax. In the case of unsettled personalty passing by will this is the easiest possible operation, and the duty is efficient for its purpose. But if you adopt the Resolution of my hon. Friend, how will you make it effectual for the purpose he has in view? Land does not require to be made the subject of a will at all. There is no necessary intervention between the predecessor and the successor for the purpose of passing it over from the one to the other. There is no executor who is to enable you to lay hold upon that land and secure the means of getting at the payment of the tax. Suppose it were otherwise. In dealing with taxes you must look not only at the mere theoretical equality, but also to the mode in which different taxes operate on different subject matters. It would be, in the first instance, necessary to ascertain the value of the laud. On coming into the possession of his land it would be necessary for the owner in order to pay you the 1 per cent on its value that you might probably impose, to go to the cost of 1, 2, or 3 per cent in order to have the valuation of it made. Would not that be a most inconvenient and unjust mode of proceeding? Your great object in levying taxes is to take care that nothing more shall be taken from the tax-payer than comes into the coffers of the State; but here you take two or three times as much from the taxpayer as you secure from the coffers of the State. If you take the personalty that passes by probate you may say that, almost without exception, the will contains money, or something that may easily be converted into money, or be brought to sale promptly, wherewith to pay the probate duty. But the proposal of my hon. Friend would not only compel a valuation, hut would likewise entail the necessity of selling a portion of the land to pay the duty. Suppose land going to three or four co-heiresses, and that they had no other property, there must be a valuation of the land; they must divide the shares, and each separate portion must he brought into the market by a forced sale in order to pay the cost of the valuation and the duty. In short, the difficulty of the machinery would be such, and the aggravation of a tax of this kind in operation would be such, that even if justice brought you to the conclusion that the scale was at present unequal between land and unsettled personal property, still, you would not, as prudent men, take the mode which my hon. Friend proposes of rectifying and adjusting the balance; but you would seek some other mode of taxing land in order to bring about a substantial equality. Then, with regard to a probate duty on land. Suppose my hon. Friend got a law such as he asks for. The probate duty that he proposes to apply to land takes no cognizance of settled property under any conditions—neither settled personalty nor land. But, according to the best estimates that have been made, four-fifths of the land of this country is under settlement and entail. That being so, the proposal of my hon. Friend would allow to escape from his grasp by far the greater portion of this property. To give effect to the principle of my hon. Friend would, therefore, be attended with every kind of inconvenience and disadvantage, even if it were practicable. But, as Chancellor of the Exchequer, I am not able to say that my hon. Friend's proposal is practicable. To carry it into effect, I must call in the aid of the law reformers. My hon. and learned Friend, the Attorney General, must first reconstruct the whole law of the land relating to real property, and get it into a shape that would enable me to lay my fingers on it in passing from one owner to another. That is a task which I should shrink from undertaking except on the clearest demonstration of justice, and an imperative necessity. But, supposing it practicable, is it true that justice requires us to make this change, or that justice either warrants or would permit us to make this change? With regard to the Bill of 1853, so far as I was able to form a judgment, it was the intention of the Government and Parliament of that day that the Succession Duty Act of that year should be regarded as a settlement of the question. My hon. Friend the Member for Sheffield (Mr. Hadfield), no doubt, says that the principle was then introduced, and that it was intended to be carried further; yet, neither he nor the hon. Member for Lambeth has cited any declarations or warrant for the doctrine that this was but a commencement of Legislation which it was the intention of Parliament further to develope and extend. I think that to adopt continual changes in a matter involving the interests of classes would be most unwise, and would tend to keep up a jealousy and distrust most injurious to the interests of all classes, and to the character of this House. The course that common sense required, and which Parliament adopted, was by one and the same law to supply whatever was wanting to establish a just equilibrium in taxation, as between personal and landed property settled and unsettled. My hon. Friend, arguing this question, with his usual honesty, referred to the great fact characteristic of our local taxation, that it is levied almost exclusively on unmoveable property. He says that does not affect the case. But, if not, I do not know what does or can affect this question. He says the towns pay their share of local taxation. No doubt they do. But will he contend that a banker who makes £50,000 pays as much taxation in the transaction of his business by one-half, by one-fifth, or even by one-tenth as much as is paid by the landed proprietor? The truth is that the bulk of our local taxation is borne by the proprietors of land and houses, and not as between land and that which is not land, because freehold house property is under the same circumstances as freehold landed property in this matter. I think that, on the whole, our system of taxation is in this respect a very wise one. It taxes personalty heavily in the act of passing from one proprietor to another on death. It taxes land with comparative lightness at that juncture. But, on the other hand, the incidence of annual direct taxation—I take imperial and local taxation together—is light on personal property employed in trade, and heavy on land and real property. It is obvious common sense to make such an adjustment of the law, because you have no difficulty in getting at the annual income of real property, but great difficulty in taxing it on the capital; real property being extremely difficult to convert at a moment's notice. If you lay any tax upon it to be fixed upon the capital at the juncture of death you put the taxpayer to suffering and almost to torture in order to bring his property into a state to make it the subject of taxation, and you would not only run the perpetual risk of forcing sales, but you would inflict upon the landowner a loss infinitely greater than any benefit the State would derive. Upon these grounds, neither at this nor at any other time can I hold out the prospect of acceding to the wish of my hon. Friend. Though he would be the last to make the proposal unless he believed it to be just, yet I think it not warranted or sustained by justice; and even if it were, I conceive that the objections and difficulties necessary to be encountered to give it a practical form, and the incidental hardships which would be inflicted in order to obtain a fiscal advantage comparatively small, are such that even then it would not be advisable to proceed in the path marked out by my hon. Friend; but it would be better to adopt some other course, if necessary, whereby a just balance of taxation should be established.


replied. He readily admitted that the right hon. Gentleman had made the most ingenious and able defence that could be made of this gross injustice. But the right hon. Gentleman had never touched the point—that if they imposed a tax at all upon landed property they could surely have made that tax a fairer one.

Question put,—

The House divided;—Ayes 51; Noes 167: Majority 116.