HC Deb 09 May 1889 vol 335 cc1567-74

Resolutions [2nd May] reported.

Resolution 1 (see page 995.)

Question proposed, "That the House will agree with the Committee in the said Resolution."

MR. GLADSTONE (Mid Lothian)

The Chancellor of the Exchequer was kind enough to give time for the consideration of the Report, because at the commencement of the previous debate, the House was not able to gather the full effect of the resolutions. It was only towards the close of the debate that we were able to understand their effect. With respect to the present resolution, I cannot say that our objection to it is weakened, and it will be the duty of myself and those who act with me to give effect to the opinion which we entertain. The Resolution is objectionable, inasmuch as it introduces fresh distinctions between realty and personalty to the disadvantage of personalty. I know that this is a matter which it is not very easy to deal with. But I think it will be for the convenience of the House, and will avoid all misapprehension, if we wait until we have the Bill in our hands before discussing the question and debating the matter either upon the Second Reading or in the Committee on the Bill. I observe that the Chancellor of the Exchequer has put down an amendment to the Resolution.

MR. PICTON

The right hon. Member for Mid Lothian (Mr. Gladstone) suggests that the discussion of the new distinction between Death Duties upon realty and those upon personalty should not be taken now, but there was an objection which I urged on a previous occasion which, I think, has not yet received adequate consideration. My objection is that the additional duty will press unequally and unfairly on people of small property, who by their labour and thrift have managed to save up more than £10,000, which is divided at their death among a family of children. Let me take the case of a shopkeeper in a small way of business in a provincial town, who, having one child, has managed to save up £9,500. When he dies the whole of his estate goes to his one child, paying only the ordinary Probate Duty of 3 per cent, the extra Probate Duty of 1 per cent not being charged. Take also the case of a professional man—say a clergyman—who by his living and by literary work has managed to save up £12,000, which has to be divided among six children. Each child, instead of receiving £2,000, will have the Probate Duty of 3 per cent deducted and the new duty of 1 per cent in addition, while the fortunate inheritor of the £9,500 will receive that sum without the additional tax being deducted at all. It may be said that the 1 per cent upon £2,000 is not a very large sum, but when poor people, out of a small property, have to pay £80 instead of £60, they will feel inclined to make great complaints. I cannot help thinking that the Chancellor of the Exchequer might have avoided the difficulty if he had pressed a little further his principles of graduated taxation. If he had allowed divided estates of £10,000 to go without additional taxation, and had imposed a tax of 1 per cent upon estates to that amount which were inherited by one person, with an extra 1 per cent upon estates of £50,000, and a proportionate increase upon estates of £100,000 and upwards, I think the difficulty might have been met. I trust that the right hon. Gentleman will yet be able to avoid the injustice which his scheme now proposes to inflict, and which I can assure him is causing great irritation and grief to a large and respectable class of the community.

*MR. GOSCHEN

I quite appreciate the objection of the right hon. Gentleman opposite to discuss these questions now, and I agree that the best time for discussing them will be on the Second Reading or in Committee on the Bill. In reply to the hon. Member opposite I assure the House that graduation is not in the mind of the Government. The exemption is based on the same ground as exemptions in the case of small incomes. The hon. Member's suggestions might carry us much further than the hon. Member himself would desire. For example, a man might die worth £50,000 leaving ten children. £5,000 apiece would be but a comparatively small provision; but it does not follow that all the children would be in necessitous circumstances. These difficulties were only such as must occur wherever we have exemptions.

SIR W. HARCOURT (Derby)

The Chancellor of the Exchequer put the case of a man dying and leaving an estate of £50,000 divided among ten children, or £5,000 each, and he says it would be unreasonable that those sums should not contribute to the Estate Duty. There is one question I should like to ask him, namely, whether if £50,000 were left in realty and divided among ten children so that each child should have £5,000, the children would pay the new duty in the same manner as in the case of personalty?

*MR. GOSCHEN

The right hon. Gentleman's experience will suggest to him that the case he has supposed is a very rare and almost theoretic one. It is very rarely that such a real estate is divided up into five parts, or even into more than three parts.

SIR W. HARCOURT

Let me take the case of a man leaving five or six farms each worth about £5,000 to different persons. Would the duty then be paid in the same manner as in the case of personalty?

*MR. GOSCHEN

No, I admit that there is a difference between the two eases, and that difference I have previously endeavoured to explain As the law stands in the case of succession to realty it is impossible to get at the total value of the the corpus, and to treat it in the same way as the corpus of personalty. I admit that there is a certain amount of inequality in the matter, as well as in the case of settled personalty as compared with personalty that is not settled. The difficulty of getting at the total value of the corpus of realty is enormous.

SIR G. CAMPBELL

I am afraid that the right hon. Gentleman has not heard the last of his proposal to establish a system of graduated taxation. Although he disclaims having the idea of further graduation of taxation, he has put it in people's minds to think that if a man with an estate of £10,000 should pay one per cent, men with much larger estates should pay more. With regard to the distinction between personalty and realty, I confess that they are not things that I very well understand, but I think that something should be done to rectify the glaring inequality of requiring personalty of £10,000 to pay more than realty of the same amount.

*MR. GOSCHEN

I may point out to the hon. Gentleman that settled personalty stands on the same footing as realty; and the Amendment is to the effect that in the case of settled personalty the interest of each successor only and not the corpus is taxed.

SIR H. DAVEY (Stockton)

I do not propose to discuss the Resolution at any length, at this moment, but I wish to point out that in my opinion the Chancellor of the Exchequer has exaggerated the difficulty which would arise in ascertaining the corpus of a real estate. The right hon. Gentlemen proposes to put a duty of one per cent on the corpus of real estate that passes; and for that purpose he must ascertain the value of the corpus.

*MR. GOSCHEN

No, I only take the value of the succession. In the case of realty we tax the whole value of that which a man receives. In the case of personalty we take the value of the estate, but in the case or realty we cannot get at that, and must look to the value of each succession.

SIR H. DAVEY

I think I correctly understood the right hon. Gentleman, even without that explanation. What I want to point out is, that if an estate is left to one devisee, the whole value must be ascertained for the purpose of imposing the duty of one per cent upon it. Suppose a man leaves three estates and devises them to three devisees, the value of the three estates must be ascertained for the purpose of getting at the amount upon which the one per cent must be charged. Then what is the difficulty of ascertaining the value of the aggregate estate? Although I quite understand what the Chancellor of the Exchequer means, I cannot myself see the difficulty of adding together the total value of the items which constitute a man's real estate, where he leaves more than one, or where he divides his real estate into several parts.

MR. S. BUXTON (Tower Hamlets, Poplar)

I trust that in the Bill of the Chancellor of the Exchequer he will show what the actual burden is in the case of personalty, and what it is in the case of realty. He has already specified the amounts that will be paid in each case, but it would be of advantage if we were furnished with a few details. I would, therefore, appeal to him to circulate some Paper which may supply us with information in this respect.

*MR. HALDANE (Haddington)

The Act of 1853 recognized the principle of assessing the Succession Duty on the orpus of the estate in the case of Corporations, and so affords the Chancellor of the Exchequer a precedent for assessing realty in the same way as personalty. I wish also to point out that the new duty, as I apprehend, will be payable upon personalty wherever it is locally situated, even abroad, and is treated constructively, as within the country, for the purpose of the Death Duties; whereas in the case of land that is never the case.

*MR. GOSCHEN

I will see what can he done in the matter, but 'I am not very hopeful about it, the subject being an extremely complicated one.

Resolution agreed to.

Resolution 2 (see page 996).

Question proposed, "That the House agree with the Resolution."

SIR GEORGE TREVELYAN (Glasgow, Bridgeton)

May I ask the Chancellor of the Exchequer a question arising out of Clause A? Now, I followed the Chancellor of the Exchequer's statement of the other day very carefully, but I was unable to understand how the "principal value" referred to in the Resolution is obtained. I have consulted an eminent lawyer on the point, but have received no light; and if the Chancellor of the Exchequer will explain, his words will probably have an important bearing on the discussion, which has been going on for the last quarter of an hour.

*MR. GOSCHEN

I propose to follow very closely the arrangement for ascertaining the principal value which was suggested by the right hon. Gentleman the Member for Edinburgh in his Budget of 1885. The first step to take is to ascertain the annual value of the land, and this value is then capitalized, the number of years taken varying with the class of property. A larger number of years is taken for land than for houses, and for houses of a superior quality than for houses of an inferior quality. The Inland Revenue have to make these principal valuations for other purposes, and are quite familiar with the process. I can not give the exact words to be inserted in the Bill, but the right hon. Gentleman will see them tomorrow morning, when the Bill will be in the hands of Members. I now propose to move an Amendment which will clear up the differences which existed at the end of the last discussion. The Resolution as drawn would have placed the duty upon the entire value of the personal estate in the case of settled estate, instead of its being placed on the interest of each individual. It is desired that personalty and realty should be treated as far as possible in the same way, and the Amendment will make the duty payable only on the interest of each successor in the case of settled personalty. This was my original intention in drafting the Resolution.

Amendment proposed, To leave out from 'of,' in line 2, to 'where,' in line 8, and inserting the words 'every succession chargeable with Duty under The Succession Duty Act, 1853,' upon the death of any person dying on or after the first day of June, one thousand eight hundred and eighty-nine, the following Duty (that is to say):"—(Mr. Chancellor of the Exchequer.)

SIR GEORGE CAMPBELL

Are we to understand that the effect of this Resolution will be that settled property, whether real or personal, will have an advantage over other property? In the case of simple succession will the duty be levied on the whole property, and in the case of settled estate only on the value of each portion succeeded to? If so, it seems to me, that it will place a premium on entail.

MR. GOSCHEN

Settled property is not in the same position as property left absolutely, and therefore it should not be taxed to the same extent. A distinction in this respect has always been drawn in taxation. I think it is a fair argument which the hon. Member used, that persons may desire to escape the tax in the way he suggests; but I hold that the increase in the duty, is hardly sufficient to bring that about; at all events, the Government of the right hon. Gentleman the Member for Mid Lothian did not think that such a distinction would be sufficient to increase the tendency towards entail when they proposed to increase the Succession Duty by putting 3 per cent on the principal value when property passed absolutely and on the life interest when the property was settled.

MR. PICTON

This alteration seems to me to aggravate the injustice that I complained of on the previous Resolution. Who are the people who usually come into settled or entailed persona] property? It is not the lower class, but generally families of some consideration or distinction.

*MR. GOSCHEN

I do not wish to interrupt the hon. Gentleman, but marriage settlements, of the most humble character, will benefit by the alteration.

*MR. G. J. SHAW LEFEVRE (Bradford, Central)

I should like the Chancellor of the Exchequer to say whether or not I am right in this view of the case. Supposing a man gave £20,000 in a marriage settlement to a daughter on the understanding that the sum was to be equally divided among the children on the parent's death, the succession would only be paid if the portions exceeded £1 0,000.

*MR. GOSCHEN

Yes, such would be case. But there are hypothetical methods of avoiding the Death Duties in almost every direction. If persons act with the special object of escaping the Death Duties, and not as they generally act, it may be impossible to prevent their attaining their object. I think it is extremely difficult to shut the door against all such devices.

Resolution as amended agreed to.

Subsequent Resolutions (see page 1031) agreed to. Ordered, That it be an instruction to the Gentlemen appointed to prepare and bring in a Bill upon the Resolutions reported from the Committee of Ways and Means on the 16th day of April, and then agreed to by the House, that they do make provision therein pursuant to the said Resolutions.