§ COMMITTEE. [Progress, 5th June.]
§ [SEVENTH NIGHT.]
§ Bill considered in Committee.
§ (In the Committee.)
§ Clause 2.
§ SIR R. TEMPLE (Surrey, Kingston)said, that on behalf of his hon. Friend the Member for Preston (Mr. Hanbury), who was absent owing to temporary indisposition, he had to move the omission in page 2 of the words from the second "property" in line 16, to "and" in Cc1 line 18. At the end of Sub-section (c) it was provided that certain sections of the Customs and Inland Revenue Acts were to be read as if the words "voluntary" and "voluntarily" and a reference to a "volunteer" were omitted therefrom. The Amendment proposed to omit this provision. The Act of 1881 specified several kinds of property which were liable to be brought into account for the purposes of the Account Duty. Those properties, as specified in the Act of 1881, were mainly in the nature of gifts, and the word "voluntary" occurred very frequently in the Act. By the amending Act of 1889 the argument about voluntary arrangements was reiterated and strengthened, and reference was made to the famous "volunteer." The lay mind, observing this constant reiteration of the term "voluntary," inferred that transactions of the nature of gifts alone were contemplated, and that all transactions which involved a consideration were spcifically exempted. Last night the Solicitor General, speaking with his usual candour and courtesy, told the Committee that the object of the omission of the term "voluntary" was to bring under taxation all marriage settlements made within a certain time and certain other transactions of a domestic 498 character which were made for what he described as half-consideration, or partial consideration. Shortly afterwards this doctrine was repeated by the high authority of the Chancellor of the Exchequer. After what had passed on the previous night he need not labour the arguments, because the adoption of such a proposal would manifestly inflict hardship upon certain classes of persons. Surely if any engagements were made for an important consideration, an engagement to marry came into that category. Could there be a more important consideration for a contract than marriage? Nevertheless, these transactions were to come within the ruthless grasp of the present Chancellor of the Exchequer (Sir W. Harcourt). He used this language without meaning any offence to the Chancellor of the Exchequer, but he was so strongly opposed to the policy of grab and grasp which ran through this Bill that he might be excused for expressing his indignation. He must press for more information as to the transactions which were supposed to be made for a partial consideration. There must either be a consideration or not, and he could not understand what was meant by partial consideration. He hoped the Government would give some further explanation on the point, and that they would attempt to justify the bringing under taxation of domestic transactions which hitherto had always been exempted.
§ Amendment proposed, in page 2, line 16, to leave out from the second "property," to "and," in line 18.—(Sir R. Temple.)
§ Question proposed, "That the words proposed to be left out stand part of the Clause."
§ THE CHANCELLOR OF THE EXCHEQUER (Sir W. HARCOURT, Derby)said, he could assure the hon. Baronet that there never was any intention of concealing the object of the sub-section. The object of the clause was to bring settled property under the Estate Duty. The Code applied only to voluntary settlements, and they said take this Code and apply it to all settlements, whether voluntary or not. He ventured to say that was a simple, intelligible, and proper 499 form to pursue. Unless they did this, if it should be found hereafter desirable to extend this to a greater subject, they would have to enact a clause saying it should be extended to—he forgot the precise words, but extended to other things. Hon. Members were very anxious to introduce women suffrage, and if they did they would only have to provide in a sub-section to a clause in the amending Act that the words "man" or "person" should include "women." They had already extended it to personal property, and they now said that it should extend to real property. Taking the existing Act, which was well-known to the Inland Revenue and to all solicitors, they said that the principle there established with regard to voluntary settlements should hereafter extend to settlements which were not voluntary. So much for the form in which they proposed to do it. What they did was to omit the word "limitation"; and the question was, ought that to be done? One of the great injustices which they proposed to reform was that property on settlement, whether voluntary or involuntary, escaped Probate Duty as Probate Duty, of course, could only be levied where there was a will proved, and therefore settlements escaped Probate Duty. By the Bill provision was made by which settlements should pay the same contribution to the State as property which passed by will. Let them look at the nature of the injustice they proposed to remedy. If a man left property to his wife and family by will, was it right or wrong that should pay Probate Duty? Therefore, if the property was placed under settlement, why should it not pay duty similar to the Probate Duty when the property was left by will? He did not, however, propose here to raise the question again of the advantage or disadvantage of settlements, but his contention was that it was giving an unfair advantage to settlements; it might be very good or very bad, but they really gave a most distinct fiscal advantage to settlements by exempting them from a duty they would otherwise pay if left by a will, and there was no real reason why that should be so. Then also they knew perfectly well that settlements were the instruments of the well-to-do and not the 500 instruments of people in poorer circumstances. It was quite plain that if a man with £200 a year left property to his wife and children which would have to pay Probate Duty they ought not to allow the wealthy man's property to escape because the property had been put under settlement; therefore they said that the same principle should be applied to voluntary settlements as was applied to settlements that were not voluntary settlements. To strike out these words, as was proposed, was to limit the proposition they had established in the first clause—namely, that settled property should be put under contribution to the Estate Duty just the same as other property. They could not accept the Amendment, which struck at the root of the reform they wished to carry out.
MR. GRANT LAWSON (York, N.R., Thirsk)said that, no doubt the intention of the Government was obvious, but what they were discussing now was one of two matters: whether that intention was put clearly into the Act, and if it was clearly introduced whether it was the proper intention. With regard to the first part of the section, the Chancellor of the Exchequer said his intentions were so-and-so; he described his intentions, but unfortunately they were not put into the Act in clear words. There was a certain place said to be paved with good intentions, but they were not put into words. The Chancellor of the Exchequer referred to the case of the Women's Suffrage Bill, and stated that he did not wish to go through all the Acts, because the term "women" was well understood. Yes, but the term "volunteer" was Greek to those who had not studied the question. There was one matter in connection with this sub-section in which the women of England would be considerably interested. The words as they stood would have the effect of making marriage no longer a valuable consideration, as it had hitherto been considered. If these words passed, every marriage settlement would be as ineffective as if made without marriage, or as if they were post nuptial settlements. That he took to be the intention of the clause. Then the Chancellor of the Exchequer seemed to consider it did not matter what the form of settlement was 501 under which the property passed; that all settlements ought to bring something to the Revenue in the shape of Death Duties. Settlements in the Act were defined to be anything settled under the Estates Act. If they passed these words those who had bought property from any man who died within 12 months would be made liable to pay Estate Duty. He did not think that was the intention of the right hon. Gentleman, but that would be the effect of the clause if these words were passed. His hon. Friend who proposed this Amendment said that the subsection referred to five classes of property. Two of them were mere definitions, and therefore there were only three parts of the Act of 1881 which were affected by these words which it was now proposed to leave out. There were three classes of property that had to pay Death Duties under the Act of 1881, which were described (a), (b), and (c) in the Act. The first was property taken under a voluntary disposition purporting to be an immediate gift, not made 12 months before death. That was the first class. The second class was property voluntarily transferred to
yourself and some other person so that some beneficial interest may accrue to the survivors.The third place in which it came in was under (c), property passing under a past or future voluntary settlement, whereby interest terminable at death was reserved to the settlor. Those were the only three matters with which they were dealing. With regard to the (a) class of property, these words were absolutely meaningless; as regarded (b) they were unnecessary, and as regarded (c) they were absolutely mischievous. Let them take them one by one. The first class was property passing under a voluntary disposition purporting to be an immediate gift in de vivos. Those words were meaningless if they took out "voluntary," because if it was a gift it was an immediate transfer. Then take the (b) class—property voluntarily transferred to yourself or some other persons, so that some beneficial interest accrues by survivorship.That was exactly what was provided for under Sub-section (d); it covered all property so passing, whether the transfer was voluntary or involuntary. It said— 502Any annuity or other interest purchased or provided by the deceased either by himself alone or in concert or by arrangement with any other person, to the extent, of the beneficial interest accruing or arising by survivorship or otherwise on the death of the deceased.That covered the exact point which was covered by Sub-section (b) of the Act of 1881, Section 38, so that there the words were unnecessary, and they did not bring anything more into the net of the Chancellor of the Exchequer. Take the third class, property passing under a past or future voluntary settlement whereby an interest, terminable by death, I was reserved to the settlor, or a right was reserved of pre-emption. He would like to read the exact words of the subsection, because he wished to show that if they inserted those words they proposed to leave out, they would be doing an injury to the beneficiaries. The words were—Whereby the settlor may have reserved to himself the right, by the exercise of any power, to secure to himself or otherwise his absolute interest in such property.That was a voluntary settlement, and that would have to pay a duty on the death of the settlor if these words stand. There was a case that came before the Committee sitting upstairs only a fortnight ago, relating to the St. Andrew's Golf Club. In that case a person sold property for £5,000 with a clause in the deed giving himself a right of pre-emption; if they tried to sell to anyone else he was to have the right to reclaim the property. Clearly that came under this Section (c). If that had been a gift to the St, Andrew's Golf Club it would have been a voluntary settlement, and would have to pay duty; but if they took the word "voluntary" out they would make the Golf Club, on the death of the man who sold it, pay Estate Duty, because although they had given good money for the land yet it had been transferred to them with a power of the person who transferred it to secure, by exercise of the power of pre-emption, absolute interest in the property. He should be glad if the learned Solicitor General would enlighten him as to whether this golf club would be able to escape paying such duty if these words were carried? The effect of Section 38 of the Act of 1881, as amended by these words, would be that this property, transferred by an 503 ordinary settlement, though not by voluntary disposition, from A to B, if transferred within 12 months of the death of A, would have to pay Estate Duty. He was glad to see the learned Solicitor General shook his head, and he hoped that that would not be the effect of the words. They had last night from the hon. Member for Haddington (Mr. Haldane) a statement in which the hon. Gentleman said that when property was sold it ceased to be part of the estate. That was a pleasant statement, but unfortunately the speeches of the hon. Member were not incorporated in this Bill. If clear words were put in to show that, they would be able to understand where they were. The Chancellor of the Exchequer remarked just now that the effect of the clauses of the Act of 1881, as amended by the Act of 1889, were now generally understood. But they had not been understood without great legal difficulty and expense. Into that conclusion, which was still existing, the Government were going to throw some other words that would render confusion worse confounded, and entail another series of lawsuits, with a possible appeal to the House of Lords. That was going to be the result of this legislation. It was an excellent thing for the lawyers, but a bad thing for the beneficiaries. If they left out these words nothing would escape, so far as he could see, that ought to be taxed, and he therefore supported the Amendment of the hon. Baronet the Member for the Kingston Division (Sir R. Temple).
*MR. GIBSON BOWLES (Lynn Regis)thought it was most unfortunate that the Chancellor of the Exchequer should hold the opinion that the well-to-do ought to be taxed more than they were now. The right hon. Gentleman assented to that doctrine.
§ SIR W. HARCOURTsaid, he did not put it in that way; what he said was that no one ought to be relieved from the tax; that the person who could afford to make settlements ought not to be relieved any more than the person who could not so afford to make them.
*MR. GIBSON BOWLESsaid, he did not think that the Committee in its calmer moments would recognise as a special reason for putting on a special 504 tax the fact that the settlements were made mainly by the well-to-do; they should pay according to their ability, and not merely because they were well-to-do. He also thought it was unfortunate the right hon. Gentleman should defend the particular form of this clause. First, the right hon. Gentleman said that it was very convenient, and that if they were to put in this clause all they meant to include they would not have time to pass the measure through the House of Commons. That was the fault of the Chancellor of the Exchequer in putting too much work on the back of the House of Commons. He himself considered it extremely unfortunate the right hon. Gentleman could not take some simpler method of increasing the amount to be obtained from the Death Duties. It might have been done much more simply if that was his object, but he was afraid the right hon. Gentleman's object had been not to get money, but to oppress a, class, and that was why he taxed settlements in this way, because they were a source of the well-to-do. He would point out that, although the Chancellor of the Exchequer fixed his eye upon large settlements, there were an enormous number of small settlements. If they took the total number of settlements they would find that, instead of being made by the well-to-do, by far the largest portion of them were made by poor people, professional men, and others. These settlements consisted mainly of a policy on a man's life, and kept up out of his earnings in order to make some provision for the wife and family. The Chancellor of the Exchequer referred to the Women's Suffrage Bill, and said if they wanted to propose female suffrage they could do it easily by saying that all the clauses that used the word "person" or "men" should also apply to women. That was very simple, but in enacting women's suffrage they would not be bound to define a female, which would alone correspond to what they were doing with this clause. So far as to the form of the clause; now he came to the merits of the Amendment. If hon. Members would refer—he was afraid few of them would take the trouble—to the Act of 1881 and the Act of 1889, and read them together with this Clause (c) they would find they 505 referred solely and exclusively to voluntary acts. The whole essence of Clause 38 of the Act of 1881 was to prevent evasion, and an evasion was a thing that was necessarily voluntary. Every one of the five categories—he made them five, though the hon. and learned Gentleman the Member for Thirsk (Mr. Grant Lawson) only made them three—which wore set out in Clause 38 of the Act of 1881, as amended by the Act of 1888, referred to voluntary acts, and it must be so, for they could have no meaning otherwise. For instance, they had got a transfer; what was aimed at was not a real transfer for valuable consideration, but a bogus transfer by which the person who makes the transfer of property retains a hold over it. The essence of it was the voluntary character of it; the essence of every one of the five was the voluntary nature of the act; and then came the Chancellor of the Exchequer, who ramps through the whole of these with the omission of this word "voluntary," which made nonsense of the whole scheme as established by the Acts of 1881 and 1889. The clauses in those Acts were comprehensive, and were enacted with the view of preventing the Revenue being defrauded. But suppose they omitted the word "voluntary," what did it come to? It came to this: that they were claiming to include as the property of the man that of which he had really divested himself for a valuable consideration; they were attempting to establish by this method that that was his property which was not his property. He contended that marriage was a valuable consideration. A valuable consideration meant either cash or connubial bliss. A wife was considered to be worth having, and, therefore, was a valuable consideration. In 'return for that consideration a man put a certain sum into settlement, and he parted with that money just as much as if he had bought the lease of a property in the New Forest with it. But the Chancellor of the Exchequer proposed that it should be treated as if it were still part of the man's property. The clause was specially aimed at the marriage settlement. That settlement, as a rule, involved the passing of the property at its first change of hands from the husband to the wife, Already the Chancellor of the Exchequer 506 had turned the father out of the family; now he was going to turn the wife out. What the right hon. Gentleman was going to leave in the family was children without father or mother. He could quite see how the Bill had been scrambled together. A consistent and coherent plan of Death Duties had been proposed to the Chancellor of the Exchequer by the Comptroller of Legacy Duties. The Chancellor of the Exchequer had said that the lines were not broad enough, that they did not appeal sufficiently to the great heart of the people, the well-to-do were let off too easily, and that they must have another plan. The right hon. Gentleman then got the assistance of the Member for Haddington and the Member for South Hackney, and a few Commissioners of Inland Revenue, and scrambled up this Bill, with this clause in it taken bodily out of the Act of 1881, which had been applied to a totally different set of circumstances, and so applied in this case as to make it nonsense. It was not right to apply this clause in this way. It was not right, having turned out the father of the family, to seek to turn the wife out. Unless the Chancellor of the Exchequer was prepared to say that in no case was the wife a valuable consideration, he could not possibly stand to this clause.
§ THE SOLICITOR GENERAL (Mr. R. T. REID,&c.) Dumfries,said, there were two points taken by the Amendment, the first being a point of substance and the second a point of drafting. In regard to the purpose of this clause he said yesterday, and the Chancellor of the Exchequer had again said to-day, that the object here was that a settlement in consideration of marriage should be included. That was one object, and the second object was that partial settlements should be provided for. With regard to marriage settlements, what was proposed was that upon the death of the first person who enjoyed a life interest in the property settled Estate Duty should be paid. It was only a question of when the duty was to be paid. Did hon. Gentlemen desire that in the case of a sum of money tied up under a settlement which might last for 60 or 70 years the corpus of that property should escape Estate Duty for the whole of that period? [Cries of "No, no‡"] Of course not.
MR. GIBSON BOWLESWhat I suggested was that when the original settlor had parted with the sum settled for a valuable consideration, then upon his death the duty ought not to be charged.
§ MR. R. T. REIDsaid, if the settlor had parted with the money absolutely the duty would not fall upon the death of the settlor, because the settlor was not a life under the settlement at all, and therefore what he might describe as the signal for this Estate Duty would not in that case have arisen. It was not until the death of the first tenant for life that the duty was payable. He did not enter into the case of jointure at present. This was a terrible business which seemed to have troubled the hon. Gentleman, he rather thought, because he had not considered the matter fully. All that was proposed was that there should be one Estate Duty payable during the duration of the settlement, and if the settlor had reserved for himself a life interest his death was the signal for the first duty being paid, and provision was made for the contribution of the various persons according to their several interests. He had been asked to explain the meaning of "partial consideration." If a man parted with his property for full consideration there was an end of the question; but if he settled the property on various persons, reserving a life interest to himself, then the proposal of the Bill was that on the death of the settlor no tax should be payable with respect of anything for which a valuable consideration was given. With regard to the form of the clause, he was sorry the method adopted by the draftsmen did not commend itself to some hon. Gentlemen. Legislation by cross reference was rendered most expedient in some cases. There was a purpose in it, for when particular words in Acts of Parliament, and especially in fiscal Acts, which of necessity were intricate, had either received a construction in the Courts or had been construed by a particular practice, of course it was very expedient that that construction should be followed.
§ *MR. BUTCHER (York)said, that they were obliged to the Solicitor General for the conciliatory way in which he had tried to meet their not unfounded apprehensions. He contended that there were 508 many objects sought to be attained by the Solicitor General which were not attained by the words he proposed to retain. In a matter of this sort their primary object ought to be to make the words as clear and as precise as possible. He contended that the words of this subsection were both vague and illogical, and the effect would be either to bring in as property subject to this Estate Duty property never intended to be brought in, or else to bring in property already brought in under other sub-sections of the clause. The object of Clause 2 was to enumerate and define in as precise a manner as possible the various classes of property which would be subject to the Estate Duty, which he admitted was a legitimate and fair object. The subsection brought in property at present subject to the Account Duty, but the very essence of the clause imposing the Account Duty was that the property should be subject to voluntary disposition, and when they eliminated the word "voluntary" they annihilated the meaning of the clause altogether. They were introducing totally new considerations, and they did not know where they would be lauded. They were destroying the whole meaning of the clause, and were-introducing something which might or might not be intended. The Chancellor of the Exchequer had told them that the intention of the Government was to bring in and make subject to the Estate Duty property which was the subject of settlement. To this he offered no objection whatever, but he said that in every case where settled property could legitimately be made subject to Estate Duty it had already been provided for by other sub-sections of the clause. Could the Solicitor General suggest one single instance in which settled property would not be covered by Sub-section (b), even if these words were left out of Subsection (c)? He did not know any. So far as marriage settlements were concerned, there was no reason whatsoever for putting in these words they objected to at the end of the clause. Take the case of a settlement for a partial consideration. It was a settlement on deceased for life or on another person for life, and upon the death of the first life tenant the property became liable to Estate Duty under Sub-section (b). There- 509 fore, he was entitled to say that every case I where the Estate Duty was legitimately chargeable upon settled property passing on the death of the deceased was charged either by Sub-section (b), or by Subsection (d), and he did not know any cases to which these words could apply except cases of property which ought not to be taxed at all or of property already taxed under other sub-sections. Under these circumstances, he asked the Committee to say that the words were undoubtedly vague, illogical, and un-necessary.
§ SIR W. HARCOURTobserved that the argument of the hon. and learned Member for York had been put, as his arguments were always put, extremely clearly. The hon. Member objected to any provision here as affecting marriage settlements, because, he said, such settlements were already charged under the clauses or sub-clauses they had already passed. The hon. Member said that every charge the Government contemplated or could contemplate under this section was already met under the section which was already passed. If that were so, and if the Government were right in that, then all the objection to this clause, so far as this matter was concerned, was at an end, because the hon. Member admitted that these things, though objectionable as chargeable under this clause, were really already chargeable under the clauses they had passed. Therefore, his objection to the sub-section was merely that it was surplusage. The Government did not take that view. The Attorney General, who, he regretted to say, was unable to be present through illness, was au able authority on this subject, and the hon. and learned Gentleman and the capable draftsmen had considered the matter very carefully. They regarded the words as necessary in order to complete the principle of charging settlements. The Government, of course, relied upon the experience of their very able advisers in this matter.
§ MR. BUTCHERsaid, he did say that there were certain things which were legitimately included, but he very much suspected there were many things which were illegitimate which were included in these words.
§ SIR W. HARCOURTsaid, the hon. and learned Member did not specify what 510 were the illegitimate things which he thought would be included by these words. The Government were not aware of any illegitimate things that these words would include. In their opinion these words were necessary and proper, and that the Account Act would not, as the hon. and learned Member suggested, be made unworkable by omitting the word "voluntary." He really hoped that under these circumstances the Committee would now allow a decision to be taken on the subject.
§ MR. A. J. BALFOUR (Manchester, E.)said, he must say that the speech they had heard from the Chancellor of the Exchequer confused his already confused mind as to the intentions of the Government and the draftsmen of the Bill. When they met that morning the Chancellor of the Exchequer began by a long and interesting speech, in which he defended both the draftsmen of the Bill and also the policy the Bill was intended to embody. His defence of the policy of the Bill was the same as he put forward the previous night, but in addition to the argument he then adduced the right hon. Gentleman pointed out that it was a common practice when they wanted to modify au Act of Parliament to introduce a new Act or a new clause of an Act of Parliament, in which they very briefly enumerated certain words in the old Act on which they either put their construction in the new Act or embodied altogether, but the illustration the right hon. Gentleman gave had really no analogy or relation to the case now before them. They might read the subsection they were now discussing a dozen times and not know what was its meaning. One could hardly read it aloud unless one was unusually articulate and sober. At that time of the day it was impossible to do it, and it required extreme care to make the various syllables form anything articulate, even by an accustomed tongue. If the sub-section was difficult enough to pronounce and understand, it was three times more difficult to understand after it was explained by the Government than it was before. Just consider where they were. After an hour and a-half's discussion the Chancellor of the Exchequer and the Solicitor General told them that the main fundamental objects of the 511 words they were now discussing was to drag within the net of the Chancellor of the Exchequer money passing under marriage settlements. Then the hon. and learned Member for York got up and pointed out that marriage settlements were already included under Sub-section (b) and all that the Chancellor of the Exchequer had to say was that it might be so; that was not the opinion of the draftsmen or the Attorney General, but it was the opinion of the Member for York, and therefore let them pass this sub-section of the clause. Either these matters were included in Sub-section (b) or not; and if they were, then the Committee was to pass a word which had no meaning, which was mere surplusage, and to do that which had already been done by a previous sub-section. That was not the way to do business. That was not the way to draft, to defend, or to pass a Bill. He asked what the meaning of Sub-section (b) and Subsection (c) was? If they did not mean the same thing, in what did they differ? Did Sub-section (b) include marriage settlements? If so, the speeches of the Solicitor General and the Chancellor of the Exchequer earlier in the morning were obstructive speeches, dealing with matters that were discussed and ought to have been dealt with the previous day when discussing Sub-section (b). If, on the other hand, marriage settlements were not dealt with by Subsection (b), they required some answer to the objection made by the hon. and learned Member for York, who pointed out that this sub-section was either surplusage or mischievous. They required some explanation. They could hardly proceed with the words until they knew what legal meaning was put on the subsection by competent legal authorities. He passed from that to the matter of substance, and he preferred to argue the clause on the meaning the Government had themselves placed upon it rather than upon the meaning the Member for York placed upon it, and which the Government were now anxious to snatch at in order to get out of a difficulty. He would assume that the explanation given by the Solicitor General and the Chancellor of the Exchequer was right, that marriage settlements were not included under Sub-section (b) and that the whole 512 object of Sub-section (c) was to tax marriage settlements not otherwise included in the Bill. He would ask, on that interpretation of Sub-section (c), were the Committee prepared to endorse the policy embodied in that sub-section? They had always decided that certain property was to be caught in the Bill; but when they came to a further proposition that the wife of a man who came into the life interest in settled property which she enjoyed from the time of her marriage in common with her husband, on the death of the husband was to enjoy it alone. When he found out she was to pay Estate Duty he thought they were making a revolution in the laws of taxation which struck at their whole civilised idea of taxation. The Chancellor of the Exchequer and the Solicitor General appeared to think that the case of a wife or widow coming into the sole enjoyment of property was a precisely analogous case to a widow to whom the husband had left money on his demise. He saw no parallel. The law had always held that settlements made on marriage were settlements for valuable consideration. He took that to be a legal fiction, started in order to carry out the broadly equitable proposition that in the case of husband and wife who enjoyed property settled upon them jointly, the relict of the two could not be regarded as an heir in the ordinary sense of the word. It was unjust that the survivor under a marriage settlement should be called upon to pay the duty, and it was an entirely new principle to introduce into our law to regard the relict in the position of an heir coming into the property. He could imagine nothing more contrary to every principle of justice, or to the established views of the relationship of married people. They should, therefore, give the most strenuous resistance to that part of the sub-section. He drew a distinction between the case of the children inheriting after the death of both parents, and the husband or wife inheriting on the death of either. He agreed that the children, on the death of the husband and the wife, ought to pay; but that the husband or the wife was to be regarded as the heir of the other was a proposition he hoped the House would never sanction. One result of the clause did not appear to have been contemplated. If property had been parted with for a 513 consideration not equal to its value, and the man died within a year, the Exchequer naturally sought to take some toll. He asked whether, if in every case of sale where the seller died within the year, the officers of the Inland Revenue would have to overhaul the transaction in order to see whether the consideration for the sale was a sufficient consideration? If so, the results would be great inconvenience and possible injustice.
§ MR. R. T. REID,replying to the last question put by the right hon. Gentleman, said the power under the present Bill to the Revenue officials would be precisely the same in this particular as it was under the existing law, and at present anything in the nature of a gift or voluntary disposition within 12 months of the death of a testator had to be brought within the account. It was, of course, incumbent on the Revenue authorities to make inquiries where they thought a transaction of this kind had taken place, but it did not involve the overhauling of all sales. As to the point made by the right hon. Gentleman as to marriage settlements, it was really no point at all. They were agreed that some duty must be paid, and the only point was as to the epoch of payment. That did not involve any such point of principle as that raised by the right hon. Gentleman—of the wife becoming heir to her husband. There was on the Paper an Amendment to Clause 6 in his name regulating the payment under settlements of this character, and that clause and Amendment would furnish a fitting opportunity to discuss the question.
§ MR. GOSCHEN (St. George's, Hanover Square)said, the epoch at which this payment was to take effect was of enormous importance to the persons interested. There might be this case: The children who would inherit ultimately were well placed in life, the daughter married, and the son in a position to pay; whereas the widow, who was the mother of the children, might be placed in an extremely difficult position by having to pay this very duty on coming into sole possession of that which she possessed before. Were they not establishing a new principle, which it would be most undesirable to sanction, by the course which the Government proposed? Were they to sanction the principle that for this purpose husband 514 and wife were not one, and that property which they enjoyed together was not joint property to which they were both equally entitled? All the legislation which bore upon the relation of husband and wife was to that effect. He did not know how far this matter might be carried if this new principle put forward by the Government were to be adopted. The Solicitor General might think the matter as regarded payment was a small matter, but for his part he did not think so. He thought there were many instances in which great hardship indeed might be inflicted upon the widow. Supposing that the settled property consisted of a house, and that the husband and wife had inhabited this house together, but that there were comparatively small means for paying the duty, would it be right that the wife should have to raise the amount of money necessary to pay the duty on that house when her husband died, as if she had inherited that house from him? What a distinction that was from the case of the children. The children would have houses of their own; very possibly they might have gone out into life, they had not got that same identity to the deceased as the identity between husband and wife; therefore he begged most respectfully to put these two points in reply to the speech of the Solicitor General. In the first place, they were establishing a new principle, which could not, he thought, be defended, and which the Solicitor General only tried to defend on the plea that they were only changing the epoch. He contended that not only were they changing the epoch, but the very principles upon which the duties were levied, for a principle which might have existed once, but which certainly all legislation had attempted to avoid as far as possible—namely, that the wife should not be burdened with heavy duties upon the death of her husband. The principle was the one point and the hardship to the widow was the other point. He did not think that the hon. and learned Solicitor General had at all appreciated the magnitude of this point. When he drew attention to this matter on the Second Reading of the Bill, he received a sympathetic reply from the Chancellor of the Exchequer, who admitted that there was some force in his contention, and said that this question of a wife 515 coming into possession of property which had belonged to husband and wife jointly was a matter which would be considered in Committee. He still hoped, therefore, that the Government would introduce some words into the clause which would remove this injustice.
§ SIR W. HARCOURTobserved that if he could concede this point without departing from the principle of the Bill he should gladly do as was suggested. What was the principle of the Bill? The principle of the Bill was that this tax was payable not out of what anybody got, be it the widow or anybody else, but out of property which passed on the death of the deceased, and that was totally regardless of the person or persons ultimately affected by the distribution of the money. He could not depart from that principle without doing violence to the fundamental principle on which the Bill was based. If they made exceptions to that principle they broke down the foundation on which the Bill was constructed. He ventured to say that cases of probate were far more numerous than cases of settlement—that there were 10 cases of property that passed by will to one that passed by settlement. No doubt the class to which they in that House belonged made settlements, but they were not the majority of the people of the country. Personal property in the great majority of cases passed by will to the widow, and the widow was charged. An artizan left his house to his widow by will, and she paid Probate Duty; but if a wealthier man left his house to his widow, that being by settlement, she would not have to pay. It was impossible not to see the extreme injustice of the present state of the law. It was not the nature of the instrument which ought to exempt. He heard of an instance the other day of the injustice of making the instrument the test of the duty and not the value. Two houses in Piccadilly passed on the demise of their owner. One was a leasehold from the Crown, and the duty was between £2,000 and £3,000; the other, being one of the great freeholds, paid only as many hundreds. This was the kind of thing the Bill was intended to put an end to. They could not deal with settlement upon a different footing to the will-making class. The will-making class of the community were the majority of the people 516 of this country; they taxed them, and whilst taxing them they ought not to let the wealthier classes escape taxation. He held that Sub-section (c) was necessary to the clause.
§ MR. COURTNEY (Cornwall, Bodmin)said, the argument of the right hon. Gentleman the Chancellor of the Exchequer was a very forcible one—namely, that if the property was such as had been charged Probate Duty in the past when passing by will, and which would remain so in the future, they must, in order to secure the Revenue from fraud, deal equally with all classes of the community. That was a good position, unless they went further than the right hon. Gentleman the Leader of the Opposition and say that whether under will or settlement property passing between husband and wife should not be chargeable. That would rest on the suggestion that the husband and wife constituted a community—which was the common idea of the French law—the community lasting until the marriage of a survivor. They could not distinguish between a will and a post-nuptial settlement; and what was the difference between a post-nuptial settlement and a settlement made in anticipation of marriage? A great deal was to be said in favour of waiting for the death of both husband and wife before making the duty payable. But this question could not be dealt with on the present Amendment without mixing it up with other issues. He would suggest that consideration of the question could better be entered upon an Amendment of the hon. Member for East Somerset (Mr. H. Hobhouse), later on, which provided—
That Estate Duty shall not be payable on any property passing from a wife to a husband, or from a husband to a wife.
§ MR. BYRNEsaid, the Amendment now before the Committee was one of great importance, as the sub-section they were dealing with contained a great deal more than the Government evidently intended. All through the proceedings on the Bill they had been assured that the duty proposed to be levied was intended to be an analogue to the Probate Duty by taking in whole estates and leaving Succession and Legacy Duty still to be payable. Was it the fact that the analogy would bear in the present case? He ventured to say "no." Pro- 517 bate Duty was paid by a man for what he had power to dispose of, and for the right to dispose of it when he gave it away by will. The Account Duty was paid in the same way. The analogy was perfect; but the moment they went beyond that the analogy ceased. If the Government were going to charge the beneficiaries under the new Estate Duty they were including a duty analogous to the Succession and Legacy Duty. It was true they were sweeping in Probate Duty along with it, but the analogy was lost immediately. Confusion was introduced by reason of mixing up two things together. The result of the sub-section would be in certain cases to charge property with a double duty. If a man bought a reversion for £5,000, not only would he have to pay duty on the conveyance, but duty would have to be paid upon the £5,000 which he himself had paid for the purchase of the reversion on his death. It was well enough to say—as they had done in the previous sub-section—that on the increase of a beneficial interest on the death of a person interest had to be paid, but that was not what was said here. By this delphic sub-section they were introducing—perhaps accidentally—cases which would produce great injustice, and cases which the Government could not mean to bring in.
§ MR. A. J. BALFOURsaid, that as to the proper principle which ought to animate the Committee in dealing with property passing from a husband to a wife, or from a wife to a husband, he entirely agreed with the observations that had fallen from his right hon. Friend the Member for the Bodmin Division of Cornwall. It would be better to defer the further discussion of the point raised until the Amendment of the hon. Member for Somerset was before the Committee. He was rather afraid, however, that in taking that course the Government, who held that the present Amendment was too invidious and would only benefit a small class of the community, would declare that the Amendment of the hon. Member for Somerset was too big. It was, therefore, with some apprehension that he agreed to defer the discussion to the broader issue of the hon. Member for Somerset. But that being deferred on the present Amendment there was only a technical point to be settled. He thought 518 that probably a word or two from the Chancellor of the Exchequer would remove the difficulty as to procedure.
§ SIR W. HARCOURTsaid, he did not understand how the question raised by the hon. Member (Mr. Byrne) came under the Amendment.
MR. TOMLLNSONsaid, that if the Amendment were accepted the mischief the hon. and learned Member had pointed out would be done away with. If the hon. Member's views were correct there would be the hardship of a double duty being charged in certain cases. That, presumably, was not the desire of the Government, therefore let them promise to prevent that hardship taking place.
§ MR. HENEAGE (Great Grimsby)said, that the Amendment of the hon. Member for Somerset would govern the present sub-section as well as the other part of the clause.
§ *MR. MATTHEWS (Birmingham, E.)said, that the scheme of the Government would enable and require the Inland Revenue to inquire into the adequacy of the consideration given for the transference of property during life. However bonâ fide the transaction might have been, it would be open to the Inland Revenue to rip it up, and to charge duty, not on the consideration given, but on the consideration which, in their opinion, ought to have been given.
§ SIR W. HARCOURTsaid, he hoped the Committee would not go on discussing these minor points. There was no objection taken to the principle of the sub-section. There was really no intention on the part of the Government to charge double duty. A clause would be brought up later dealing with "valuable consideration." He could promise that the matter should be examined, and if there were found to be such injustice as had been suggested, it should receive attention.
§ Question put, and agreed to.
§ MR. COURTNEY moved an Amendment to insert in Sub-section (d) exemption of any annuity not exceeding £100 from the definition of "property" liable to Estate Duty. This Amendment, he hoped, would be accepted by the right hon. Gentleman. Its object was very simple and would require but very few minutes to state. The sub-section dealt 519 with, among other things, annuities, and this Amendment was specially intended to meet the case of small joint annuities which on the death of one of the annuitants would become chargeable with Succession Duty. That tax would have to be paid by the survivor of the two annuitants. As examples of cases in which the imposition of the new duty would fall with extreme hardness he mentioned that of a husband and wife who in their old age had sunk what little capital they had saved in that description of investment as a provision in old age; and also that of old ladies or two sisters who had purchased an anuuity of perhaps £100 in order to increase their slender income. At the most, £100 a year would but give these persons sufficient to provide themselves with the bare necessaries of life. The difference that this exemption would make to the Revenue would be very small, but to persons in reduced circumstances it was a matter of the greatest importance. To inflict such a burden upon small annuitants would also be directly contrary to the wishes that had been freely expressed in the House that some scheme for providing old-age pensions should be brought forward. This class of persons also often paid Income Tax, although it was not necessary for them to do so if they understood how to claim exemption; and he pointed out that where they did so, they paid, not on the value of the annuity, but on the value of their property. He hoped, therefore, that hon. Members would support him in his Amendment to exempt such small annuities from the operation of the section.
§ Amendment proposed, in page 2, line 19, after "annuity," insert "exceeding one hundred pounds per annum."—(Mr. Courtney.)
§ SIR W. HARCOURTsaid, that under the Amendment sums of £500 and £700 might, if invested in annuities, escape the Estate Duty. The Bill reduced the duty payable on Small Estates, and it would not be safe to make a distinction between different kinds of investments. He was prepared to exempt from duty reversions purchased for full value, but though he was in sympathy with a great deal that the right hon. Gentleman had said, he could not agree to the Amendment.
§ MR. FORWOOD (Lancashire, Ormskirk)said, he would put one point before the right hon. Gentleman the Chancellor of the Exchequer. Where a joint annuity had been purchased which would pass to the survivor the right hon. Gentleman wished to exempt the survivor from the payment of Estate Duty on the increased sum received. The right hon. Gentleman objected to that as drawing a distinction between one class of property and another. He (Mr. Forwood) would put this position: in the case of an annuity purchased from an Insurance Company in England it was probable that the Chancellor of the Exchequer might see his way to put a duty on the increased annuity coming to the survivor. But supposing the annuity was purchased in an American office, and the whole of the property of the husband and wife had been sunk in the transaction. There would be no letters of administration to be proved. The American life office would continue to pay the annuity to the survivor without the Chancellor of the Exchequer having any knowledge of the change of circumstances. Clearly, if the Amendment were not accepted, a premium would be put upon annuities purchased in American Life Offices as against those purchased in English Life Offices, while the former would escape the latter would have to pay Estate Duty.
§ SIR W. HARCOURTsaid, he thanked the right hon. Member for having drawn his attention to this matter. He would promise carefully to consider it. His desire was that no foreign property should escape duty.
§ SIR D. MACFARLANE (Argyll)said, he was in sympathy with a great deal which had fallen from the right hon. Gentleman the Member for Bodmin. It would not be any more improper to exempt certain annuities from taxation than it was to exempt certain incomes from Income Tax. He would plead for the exemption of small annuities. Take the case of an aged couple having an annuity of £100 between them. One of them died, and surely the only sum that it should be possible to tax should be the one-half accruing to the survivor. He would suggest, however, that these small annuities should be exempted altogether. He would not say at what figure he would limit the exemption, but 521 he would not increase the amount payable at present on small annuities. He would abolish it altogether. The Revenue would not lose much. Chancellors of the Exchequer were naturally hard-hearted, and were unable to see any difference between one person and another except in regard to the amount of taxation they paid. These discussions for the past day or two had been in the highest degree technical, and he had not felt himself competent to take part in them, but on this point he had listened to counsel on either side, and felt bound to plead for the holders of small annuities. He could not help remarking how the opinions of legal gentlemen differed according to the side of the House on which they sat.
§ *MR. BARTLEYsaid, he did not think the Amendment before the Committee was in the best form. The proposal he had himself put upon the Paper met the case of survivorships, he thought, better than that under discussion. His Amendment was to add after line 23—
Provided that this sub-section shall not apply to survivorship annuities payable as long as one of the parties survive.What had been said about small annuities being held by husband and wife of advanced years or two elderly sisters was quite true. It was conceivable that an old couple of 70 or 80 might have a small joint annuity; and when one died the survivor would have to pay on one-half of the annuity practically the same amount as if it were a freehold estate. That seemed to be unfair. He saw nothing in the Bill which would enable the charge to be made as on a short life interest. Investments like these were most proper for persons with small accumulated savings and no children dependent on them. It was better than taking an annuity on one life, though one might be much younger than the other. Many of these annuities only amounted to £10, £20, or £30, and it seemed astonishing that, tinder what was called a popular Budget, the survivor, in the case of an old couple who had scraped together £300, might have to pay away a year's income to meet the tax. These persons paid an excessive amount of taxation, because they paid on the gross amount. If they invested in Consols they would only pay on the interest they received. The Chancellor of the Exchequer, when 522 he used the expression "it is not safe" to allow an aged couple to buy a joint annuity under the terms of the Amendment, could not have meant what he said.
MR. GRANT LAWSONsaid, that besides the two courses which the Chancellor of the Exchequer had mentioned as being open to these people—namely, investing the money in annuities or keeping it—there was the third course of spending the money, in which case the Exchequer would get nothing. The question was, whether these investments, from the point of view of thrift, were to be encouraged or discouraged? The right hon. Gentleman had discovered that all purchasers of settlements were not money-lenders, as he had declared—
§ SIR W. HARCOURTI never said anything of the kind.
MR. GRANT LAWSONHe said I was speaking for the money-lenders, but he now finds that the Insurance Companies buy settlements.
§ SIR W. HARCOURTI thought the hon. Member accepted the offer I made on a previous occasion. If the hon. Member objects to my concession, I will withdraw it, and I shall not consider myself bound by the statement I have made.
§ SIR W. HARCOURTI withdraw my offer.
§ SIR M. HICKS-BEACH (Bristol, W.)said, he could not imagine that the Chancellor of the Exchequer was serious in what he had said. The strongest representations had been made to the right hon. Gentleman by his hon. Friend (Mr. Grant Lawson) on behalf of certain Insurance Companies, and the right hon. Gentleman had stated to the House and the public that he was prepared to make some concession. Now, because his hon. Friend had said something was required beyond the concession, the right hon. Gentleman proposed to withdraw it. That was not the proper way to deal with a matter of this kind.
§ SIR W. HARCOURTsaid, he merely desired to emphasise the spirit with which concessions were met by the Opposition. He had endeavoured to receive in a spirit of conciliation suggestions which had been 523 made, and he was met by such a speech as that of the hon. Member (Mr. Grant Lawson). He did not mean, however, to retire from his offer, but only desired to point out the spirit in which the Government were met when they endeavoured to make concessions.
§ SIE M. HICKS-BEACHsaid, he was glad that he had been able to appeal satisfactorily from the Chancellor of the Exchequer in an angry mood—
§ SIR W. HARCOURTRighteous indignation‡
§ SIR M. HICKS-BEACHsaid, that if anyone had cause for righteous indignation it was his hon. Friend, who had been accused of speaking on behalf of moneylenders.
§ SIR W. HARCOURTsaid, he had made no imputation on the hon. Member. He only pointed out that the effect of the bon. Member's proposal would benefit the money-lenders as well as the Insurance Companies.
§ SIR M. HICKS-BEACHasked whether the right hon. Gentleman intended that the concession which he had announced should apply to the Insurance Companies alone, and not to anyone else who had lent money on these reversions?
§ SIR W. HARCOURTI am afraid my concession must shine on the just and unjust alike. I cannot distinguish.
§ SIR M. HICKS-BEACHasked whether the Chancellor of the Exchequer would, as soon as possible, place his Amendment on the Paper, in order that those interested in the subject might have an opportunity of knowing what was to be done?
§ SIR W. HARCOURTI will do that, and take a lesson from what has happened, and never announce a concession beforehand.
§ SIR W. HARCOURTI have to apologise for making that statement, and I have to say now that I will say no more on the subject. It was an irregularity, and it is one which I will not repeat.
*MR. GIBSON BOWLESsaid, he could not conceive how the Chancellor of 524 the Exchequer, of all people, could oppose the Amendment before the Committee. The right hon. Gentleman was always telling them that the object of the Finance Bill was to put the duties on the richest people, and here was a proposal made in the same spirit as that which had animated the right hon. Gentleman in dealing with the Income Tax—a proposal to exempt from payment persons in receipt of small annuities. He had heard no reason why the Amendment should not be adopted.
§ *MR. T. H. BOLTON (St. Pancras, N.)said, he hoped that the proposition might be accepted. As the Bill stood a great deal of annoyance would be caused to poor persons. He was astonished that there should be any objection to the Amendment, because the strongest argument used in course of the discussions which had taken place on graduation was that only those who could afford it should pay the increased duty. Where there was special provision made for exemption from Income Tax there surely ought to be exemption from this duty. If £100 was too much, possibly the right hon. Gentleman the Member for Bodmin would accept £50, or be grateful for any concession which would have the effect of relieving a deserving class of persons who already had their claim recognised by exemption from Income Tax.
§ MR. COURTNEY (Cornwall, Bodmin)said, the point of the Chancellor of the Exchequer was that they ought not to allow a tax to be evaded by a change of form. His answer was, that the mere fact of the annuities being in existence proved the extreme poverty of their recipients. It was not so much a question of an increase of duty, but was for all purposes a new tax placed upon a certain class of persons.
§ SIR M. HICKS-BEACH (Bristol, W.)said, he thought there was a great deal of force in the objection which the Chancellor of the Exchequer had raised to the proposal of his right hon. Friend. As it stood it appeared to him that it would be possible for a single individual to purchase any number of annuities of not more than £100, so that he might exempt himself from the operation of the tax. At the same time, there was, no doubt, a considerable hardship likely to arise in the case of small annuities, and particularly in the case of survivorship 525 annuities, and he asked the Chancellor of the Exchequer whether he could not promise a favourable consideration of cases of this kind?
§ SIR W. HARCOURTsaid, he was willing to see what could be done in the direction aimed at by the right hon. Gentleman who had moved the Amendment. He was afraid that the Amendment as it stood would lead to evasion of the tax, but, as he had said, he would consider the matter, and at the proper moment announce his decision.
§ MR. COURTNEYsaid, that if a man bought annuities in the names of 50 other persons, he would place upon them the responsibility for the payment of the tax, which would not, therefore, be evaded. In view, however, of the statement of the Chancellor of the Exchequer, he would ask leave to withdraw his Amendment.
§ Amendment, by leave, withdrawn.
MR. GRANT LAWSON (York, N.R., Thirsk)said, he had an Amendment upon the Paper which gave effect to his objection to retrospective action of the Bill, and also guarded the interests of Railway Companies. He would not move the Amendment now, but thought it advisable to wait until the other Amendments had been moved.
§ *MR. DARLING (Deptford)said, he desired to move an Amendment to omit all the words after "alone," in line 20, to the end of Sub-section (d). It would therefore be necessary to omit the word "either" after "deceased."
THE CHAIRMANsaid, it would be necessary for the hon. Gentleman to take the discussion on the word "either."
§ *MR. DARLING,continuing, said, that although the Solicitor General might not have been responsible for these words in the first instance, he must now be regarded as having adopted them. The words of the sub-section were—
Any annuity or other interest purchased or provided by the deceased, either by himself alone or in concert or by arrangement with any other person, to the extent of the beneficial interest accruing or arising by survivorship or otherwise on the death of the deceased.These words were extremely wide and would include such a case as this. Two persons, A and B, might buy an annuity for the benefit of C. A and B arranged 526 between themselves that A should find £1,000 and B £100. When B died C was to come into the benefit of the annuity bought for £1,100. If this clause were passed B's estate would have to pay duty upon the whole £1,100, although he had received no beneficiary interest at all. All that B had done was to act in concert with A, who found the £1,000 for the purchase of an annuity for the benefit of C, he himself only finding £100. The clause provided that the duty should be payable to the extent of the beneficial interest accruing or arising from survivorship. The beneficial interest would accrue to C on the death of B, and the extent to which it would accrue was that it would be a beneficiary interest representing such an annuity as £1,100 would purchase. B's estate would consequently be charged in respect of a transaction which brought to him no advantage whatever. He wanted to know whether this was not a perfectly possible case to arise under the clause? He did not know whether the Solicitor General was aware of the full enormity of putting a tax upon B in regard to his participation in the purchase of this annuity. It could not be said that B had any interest to the extent of more than £100; yet if this clause passed B might be charged upon the result of an investment of £1,100 of which he had contributed only £100, and which represented more money than B ever had in his life. He should be glad if the Solicitor General would direct his attention to this matter and tell the Committee whether the case he had put was not possible. He moved to omit "either."
§ Amendment proposed, to leave out the word "either."—(Mr. Darling.)
§ Question proposed, "That the word 'either' stand part of the Clause."
§ MR. R. T. REIDsaid, he could not accept the Amendment. The case of B could not be specially considered. He thought the purpose of the clause was apparent to the House. It was intended to prevent evasion. Section 38 of the Act of 1881 had a somewhat similar object, but that section did not quite cover this Bill. The clause struck at the possibility of the purchase of annuities, the benefit of which was to arise upon the purchaser's death.
§ *MR. DARLINGsaid, he had put before the hon. and learned Solicitor General a supposititious case of distinct hardship, and one which might easily arise if the Government insisted upon the passing of this clause. It might be that they intended to meet a certain evil, but he was surely entitled to put to the Solicitor General a case which, as a fact, contrary to what the Solicitor General alleged, took him no time to think out, and which struck him directly he read the clause, and to ask him whether such a case might not arise. He would inquire of the Government whether it was necessary to use such words as "in concert"? If the expression was used the Government must, at all events, take the full consequences. It was no answer for the Chancellor of the Exchequer or the Solicitor General to say that they could not reply to a point of this kind on sight; but if that was so, the hon. and learned Gentleman might postpone the settlement of the subject until he had had time to think over it; they, for their part, were not bound to pass a clause which they did not understand.
§ MR. GOSCHEN (St. George's, Hanover Square)said, he thought that collision of opinion might be avoided if the Solicitor General would clear up a matter in regard to which the House was undoubtedly entitled to some information. His hon. and learned Friend (Mr. Darling) had given them a distinct instance of hardship which would arise under the Bill as it was drawn. The Solicitor General had told them that he could not deal with the case on sight. That might be quite reasonable, but if the hon. Gentleman could not deal with the case at sight he could, at all events, indicate generally whether he could make any alteration in the clause.
§ SIR R. WEBSTER (Isle of Wight)said, the Solicitor General could perhaps answer affirmatively whether he could deal with a particular case such as that put forward by the hon. and learned Member for Deptford.
§ MR. R. T. REIDsaid, it was exceedingly hard to answer a complicated question of this kind without having had time for consideration. The substance of the point presented to him was whether in the case of two persons, both of whom paid a portion of money towards the 528 purchase of an annuity for the benefit of a third person—
§ SIR R. WEBSTERTake the case of a father and an uncle purchasing an annuity for the benefit of a child.
§ MR. R. T. REID,continuing, said, that taking a case of that kind the fact would be that two persons were contributing to the fund in order to buy an annuity for a third person. He thought that, according to the case presented, the Estate Duty would only be charged upon one person; but, as he had stated, the question was a complicated one and could not be answered offhand.
§ SIR R. WEBSTERsaid, that upon this point the explanation of the Solicitor General was clear, but he did not understand as yet what were the intentions of the Government when the life dropped.
*MR. GIBSON BOWLES (Lynn Regis)said, they had been informed by the Solicitor General that this paragraph was to prevent evasion, but he could not conceive of anything that was included under the paragraph that was not included in Clause 38 of the Act of 1881, as amended by the Act of 1889. He very much doubted if the clause was necessary.
§ MR. BYRNE (Essex, Walthamstow)said, he thought it would be better if the Amendment were withdrawn. Clause 1 showed in respect of what property Estate Duty was to be levied, and Clause 2 more or less accurately defined the property passing on death, and as he understood it the question was one of the payment of the duty out of the estate.
§ MR. DARLINGsaid, he should be glad to know if the Solicitor General, adopting the suggestion of the right hon. Gentleman the Member for the Isle of Wight, would state whether it was possible to meet a case equivalent to that which he had put forward? Otherwise it would be necessary for him to take a Division upon the Amendment.
§ MR. R. T. REIDsaid, he would undertake to look into this matter, and give a reply as soon as possible.
§ MR. GOSCHENsaid, he would like to hear a more decisive statement from the Solicitor General.
§ MR. R. T. REIDsaid, that if he were shown to be wrong he should be prepared to alter his statement.
§ Amendment, by leave, withdrawn.
529§ MR. BYRNEsaid, he wished to move an Amendment excluding from Subsection (d), which dealt with annuities and other joint and sole interests, property dealt with in Sub-sections (b) and (c), which affected property in which J the deceased or any other person had an interest ceasing on the death of the deceased when a benefit accrued or arose to any person. The sub-section looked very formidable, but its meaning was not clear. The Amendment would make it capable of being understood.
§ Amendment proposed, in page 2, line 21, after the word "person," to insert the words "and not included in Sub-sections (b) and (c) hereof."—(Mr. Byrne.)
§ Question proposed, "That those words be there inserted."
§ MR. R. T. REIDsaid, he trusted the I hon. and learned Member would not press the Amendment, for the reason that cases might arise which would come under more than one sub-section, and in dealing with such a complicated subject it was impossible that the sections could be so drawn as to be mutually exclusive one of the other.
§ SIR M. HICKS-BEACHsaid, the hon. and learned Gentleman (Mr. Byrne) could not understand the meaning of the sub-section. With the difficulty a layman would have in interpreting the provisions of the Bill, the Committee were entitled to a more detailed answer than the Solicitor General had given. Could the hon. and learned Gentleman not tell the Committee what the sub-section meant?
§ MR. R. T. REIDsaid, he had twice pointed out, in answer to the right hon. Member for Deptford and the right hon. Gentleman the Member for St. George's, Sub-section (d) would bring in a class not included in (c).
§ SIR R. WEBSTERsaid, the Solicitor General could not have considered what this Amendment was. The Opposition had no objection to saying the same thing over and over again, but it was obviously desirable for the purposes of construction that the paragraph should not include what was already in (b) and (c).
§ Question put.
§ The Committee divided:—Ayes 145; Noes 192.—(Division List, No. 78.)
§ Another Amendment proposed, in page 2, line 22, to leave out the words "by survivorship or otherwise," and insert the words "to any person."—(Mr Byrne.)
§ Question proposed, "That the words proposed to be left out stand part of the Clause."
§ MR. R. T. REIDsaid, he thought he would be able to satisfy the hon. and learned Member that it would be better to leave the words as they were, but, if not, he would make any necessary Amendment.
§ Amendment, by leave, withdrawn.
§
MR. BARTLEY (Islington, N.) moved in page 2, line 23, to add—
Provided that this sub-section shall not apply to survivorship annuities payable as long as one of the parties survive.
He said, he thought this proposal raised the question of survivorship between husband and wife, and between elderly maiden ladies more precisely perhaps than any other form of Amendment, and it was not open to the objection that had been urged by the Chancellor of the Exchequer to a previous Amendment—namely, that persons might buy annuities wholesale in order to avoid the tax, although he (Mr. Bartley) could not conceive that any persons would buy them wholesale.
§
Amendment proposed, in page 2, line 23, at end, add—
Provided that this sub-section shall not apply to survivorship annuities payable as long as one of the parties survive."—(Mr Bartley.)
§ Question proposed, "That those words be there added."
§ SIR W. HARCOURTsaid, he thought it had been understood that the discussion of this question was to be postponed until the Amendment of the hon. Member for East Somerset (Mr. H. Hobhouse) was reached. It seemed to him that the present Amendment would open the door to any amount of evasion.
§ MR. TOMLINSON (Preston)remarked that the case which had been 531 mentioned of the two maiden ladies who had an annuity upon their joint lives and upon the life of the survivor was one which was well deserving of sympathy. It would be a great hardship if on the death of one of those ladies the other had to pay duty.
§ MR. BARTLEYobserved that the cost of annuities upon the lives of father and son was quite prohibitory, and as a matter of practice joint annuities were only bought upon the lives of a husband and wife, or of two sisters.
§ SIR W. HARCOURTWe are going to discuss that on another Amendment, and I would ask the hon. Member to reserve what he has to say until we come to the Amendment of the hon. Member for Somerset.
§ MR. BARTLEYsaid, the cases of husbands and wives were not the only cases. There were many other cases, such as that of two sisters who clubbed together to buy annuities to provide for themselves to the end of their days. It seemed to him unreasonable in a Budget where they were doing everything they could to gain a large interest in the country not to take into consideration the hard case of these most deserving people. He certainly should take a Division on the clause.
§ SIR M. HICKS-BEACHsaid, there was another point that arose on the question besides that which was raised by this Amendment—namely, the question of the amount of the annuity where the estate was devisable. He believed the right hon. Gentleman had undertaken to consider that as well as the case of the survivor. [Sir W. HARCOURT: Yes.] He was glad to hear that was so. So far as the survivor was concerned, he should feel difficulty in voting with his hon. Friend behind him, and he hoped his hon. Friend would not think it necessary to carry it to a Division. The great bulk of these cases would no doubt arise between husband and wife, and the right hon. Gentleman was right when he said this had better be discussed on the Amendment of the hon. Member for Somerset (Mr. H. Hobhouse.) He hoped that his hon. Friend would not press the matter to a Division.
§ Question put, and negatived.
532§ MR. BARTLEYsaid, he did not know whether this next Amendment was met by that of the hon. Gentleman's or not. It ran as follows:—
Clause 2, page 2, line 23, at end, add—'Provided that this sub-section shall not apply to the Commissioners for the Reduction of the National Debt, or any Insurance or other Company or person who may have bonâ fide granted the annuity.'He was not quite sure where they stood on the statement of the right hon. Gentleman. If he understood he was going to bring up a clause that would meet this he would not press this Amendment, but it was certainly a substantial point, and the clause as now drawn did work very hardly on these institutions. He did not wish to waste any time, and if the right hon. Gentleman was going to-bring up a clause that would meet the case he would not move his Amendment.
§ SIR W. HARCOURTsaid, he would bring up a clause to relieve existing purchasers.
§ MR. BARTLEYasked if he was to understand that that would only apply to those already made? As he could not get an answer from the Chancellor of the Exchequer he would move his Amendment. It was in the knowledge-of the Committee there were many of these cases where annuities were provided by Insurance Companies, and it appeared to him that great difficulties would arise as to the real position of Insurance Companies if this clause stood in its present form. He could not imagine, on the death of the person to whom an annuity had been granted, that any charge or claim could be made to the estate or on the Insurance Company. He thought there was great doubt, and in order to get some answer from the Solicitor General he moved that these words be put in.
§
Amendment proposed, in page 2, line 23, at end, add—
Provided that this sub-section shall not apply to the Commissioners for the Reduction of the National Debt, or any Insurance or other Company or person who may have bonâ fide granted the annuity.
§ Question proposed, "That those words be there added."
§ MR. R. T. REIDsaid, the hon. Gentleman, as he understood the purport of the Amendment, wanted to provide 533 that, by reason of the falling in of an annuity granted by an Insurance Company, no burden should fall on the insurers—that was to say, upon the Company. The hon. Member might be perfectly satisfied that this could not be so under this clause, or any other part of the Bill. The Company made a bargain for a lump sum of money, and when the annuity fell in nothing passed. Another reason why no burden fell upon the Company was that it was a commercial transaction, and the most careful consideration had been given to cases of that kind. He thought that covered the question the hon. Member put. At the end of the clause words would have to be brought up dealing with all transactions in which full consideration had been given.
§ SIR M. HICKS-BEACHsaid, he should like to understand this a little more. Supposing a person sold for bonâ fide value an annuity on his property to a man for his life, and the annuitant died would the person having the property have to pay duty on the death of the annuitant?
§ MR. R. T. REIDNo, Sir. If a man had given an annuity on his property he had received value in return for it, and it was therefore a fair commercial transaction, and would be made so by the clause to be introduced.
§ *MR. BARTLEYsaid, as he understood it, the hon. and learned Gentleman thought it would be so, but was not certain, and proposed to bring up a clause to make it perfectly certain. On the understanding there was no possibility of liability on the part of the Company, and on the understanding that the clause to be brought up would make that clear, he would not press his Amendment.
§ *MR. T. H. BOLTONasked if the clause would extend to valuable consideration as well as money consideration? Let them take the instance of a man who charged his estate with a life annuity on the marriage of his son. If the son died during the life of the man granting the charge, would there be a succession involving the payment of duty? The consideration in that case was not a money consideration, but it was a valuable consideration recognised by the law.
§ MR. R. T. REIDsaid, perhaps he could answer the point better by reading the clause he proposed to put down, and if it was found not to be sufficient it could be amended, but it would not be in Order to discuss it at the present moment. The clause would run as follows:—
After 'deceased,' insert 'nor include property passing under a disposition made bonâ fide for good consideration in money or money's worth given, or reserved for the use or benefit of the person making the disposition to the extent of such consideration.'
§ MR. T. H. BOLTONsaid, the clause just read out would not cover the case he had suggested, and he would ask the hon. and learned Gentleman to further consider the matter.
§ Amendment, by leave, withdrawn.
§ *MR. T. H. BOLTONsaid, the portion of the clause to which his Amendment—"Clause 2, page 2, leave out lines 24 to 27"—applied raised large and important considerations in which great interest was taken, but as it was desirable that the Colonies should have further opportunities for expressing their opinions, and further attention should be given to the matter by the Government before a general discussion took place upon this part of the clause, he did not propose to move his Amendment, but to reserve his right to move it upon the Report stage.
§ *MR. BUTCHER (York)said, the Amendment which he now begged to move was merely a drafting Amendment.
§ Amendment proposed, in page 2, line 28, to leave out the words "Estate Duty shall not be payable in respect of," and insert "Property passing on the death of the deceased shall not include."—(Mr. J. G. Butcher.)
§ Question proposed, "That the words proposed to be left out stand part of the Clause."
§ MR. R. T. REIDpointed out that this would be covered by the Amendment that he had put down to this clause in line 24—to leave out "such property," and insert "property passing on the death of the deceased." The clause would then run as follows:—
And all property passing on the death of the deceased when situate out of the United Kingdom shall be included only if it is liable to Legacy and Succession Duty.535 He hoped that would be satisfactory to the hon. Gentleman.
§ MR. BUTCHERthought that would carry out his object, and he would therefore withdraw his Amendment.
§ Amendment, by leave, withdrawn.
§ On Motion of Mr. R. T. REID, the following Amendments were agreed to:—
§ Page 2, line 24, to leave out "such property," and insert "property passing on the death of the deceased."
§ Page 2, line 25, after "included," insert "only."
§ MR. H. HOBHOUSE (Somerset, E.)said, he desired by his Amendment to raise in the simplest form the principle whether they were going to discourage property passing from the husband to the wife and the wife to the husband. The most reasonable justification that had been put forward for these new duties was that this Estate Duty was in the nature of a deferred Income Tax, which was to be paid at certain standard intervals. The equity of such a tax seemed to him to depend very much on what the standard interval was to be. He should have thought that the proper standard interval was a generation. It was obvious that in many cases these duties would be paid, not by successive generations, but by successors who belonged to the same generation. There would be hard cases in consequence, but the hardest case of all would be when the Estate Duty was paid in respect of the same property on the death of the husband or on the death of the wife. To him it appeared that such a state of things was most objectionable. Under the Succession Duty Acts they had already recognised that it was not desirable to tax property coming from the wife, though they taxed it in the case of its passing to every other person. It was curious that under the operation of this Bill, in the case of small estates, the wife would be put on exactly the same footing as the uttermost stranger to the deceased. He knew that he should be told that under the existing Probate Duty the personal property passing from the wife was taxable; but he would submit that 536 now they were considering the Death Duties, increasing their burden very much, there was no objection—in fact, it was their duty to see that they did not exaggerate the injustice which might already exist. And, in the second place, he would point out to the Committee that in the old days this question was not nearly of the same importance that it had recently become. No doubt now, owing to latter-day legislation, there was great, tendency since the passing of the Married Women's Property Act, for women to hold separate property. He thought that policy should be in every way encouraged by legislation, and they would be making a mistake if the direct result of their fiscal legislation was to discourage the holding of separate property by the wife. There was no doubt that separate property would be disturbed if these heavy duties were imposed on property passing from husband to wife. It would be the duty of every solicitor on every marriage to point out it was more desirable, in the interests of the family, to settle the wife's property rather than letting it pass to separate estate, as it might then be that the family would have to bear the burden of the two-estates and the extra 1 per cent. The Chancellor of the Exchequer told them the other night he was determined that property under settlement should have no fiscal advantage. That he believed to be the safe, old-fashioned Liberal principle; but if the right hon. Gentleman I considered the operation of his Bill more closely, he would find that in many of these he would be giving a great advantage to property under settlement, and in none more than in the case of a property passing from husband to wife. He believed himself that settlements might be-very necessary in certain cases, but it-should not be the policy of the law to make them necessary, or even beneficial, in a great number of cases. It was certainly not their policy to increase the making of settlements in order to evade fiscal burdens. He had not confined his Amendment to real property, because he felt if he did so he should be at once met with the argument from the Treasury Bench that he was proposing to give advantages and privileges to the landed interest, and he, therefore, preferred to-take it on the broad grounds of policy, 537 that where property passed from husband to wife they should be regarded, in the old phrase of the law, as "a single individual."
§
Amendment proposed, in page 2, line 27, after the word "passes," to insert the words—
Estate Duty shall not be payable on any property passing from a wife to a husband, or a husband to a wife."—(Mr. H. Hobhouse.)
§ Question proposed, "That those words be there inserted."
§ MR. R. T. REIDsupposed that the hon. Gentleman would admit that the result of the Amendment would be the loss of a large amount of duty, and he also supposed the hon. Gentleman would admit that Probate Duty was payable at present upon the property passing, and also on Estate Duty in some eases. A short time ago an appeal was made on behalf of annuitants in cousequence of the smallness of the amount, and to a considerable extent the Chancellor of the Exchequer responded to the appeal, but this was an appeal exclusively on behalf of the husband and wife in cases where the deceased left more than £25,000. The hon. Member proposed to exempt real property over £25,000. Up to that sum it would pay the duty, and he thought this would perpetuate the anomaly they desired to remove.
§ MR. H. HOBHOUSEsaid, the hon. and learned Gentleman had met his Amendment by a technical objection, instead of dealing with it on the broad ground of principle. He thought the Government ought to meet the substance of his Amendment, even though it might require some verbal addition, either now or upon Report. The Amendment was well worthy of consideration upon the broad grounds he had stated, and he asked for some argument of greater substance in order to show that it was not impolitic and not unjust to tax property which passed from husband to wife with this heavy Estate Duty.
§ MR. A. J. BALFOURthought that everyone must feel that the reply given by the learned Solicitor General was not an answer to the proposal of his hon. Friend. Though on a Derby Day the House was not very full, it might be in the recollection of those who were present that the 538 practical substance of the proposal was raised by an earlier Amendment and was discussed on the broad grounds of equity. His right hon. Friend the Member for Bodmin (Mr. Courtney) then advised them to defer the discussion until they reached the Amendment just proposed. With some reluctance he consented to defer the discussion, saying he was rather afraid that the Amendment was too narrow at that earlier stage, and now it was said that his hon. Friend's Amendment was too wide. In one place the Government declined to discuss the question on its merits on the earlier Amendment, and how in another and different place they declined to discuss the merits on the larger question. Whether it was in one Amendment or not it was a question of important application, and it went to the root of their idea of married life. When the Government were making these enormous augmentations of the Death Duties they ought to be careful to put those duties on an equitable basis. The claim made on behalf of the Chancellor of the Exchequer was that he had removed the anomalies affecting the Death Duties and that he had reduced them to one coherent and equitable system; but when his scheme was examined, it was seen that all that he had done was to increase the amount of the duties, to diminish the number of the names applied to them, and to bring within their operation certain kinds of property hitherto exempted from it. This new fiscal fabric ought to be based on principles of equity, or else they would soon have to pull it down and erect another in its stead. A husband could not be regarded as inheriting from his wife, or a wife as inheriting from her husband in the ordinary sense of the term. Unless an Amendment embodying the principle of the Amendment of his hon. Friend opposite were agreed to they would strike a blow at the principle of community of interest between husband and wife, which was recognised in the rest of their legislation.
§ SIR W. HARCOURTsaid, that he was under the necessity of raising more money from the Death Duties than they at present yielded. Hon. Members had laboured day after day to cut down in one way or another the yield of these duties. If such an Amendment as the present were carried and the Probate Duty 539 as affecting husbands and wives were repealed, there would be a loss of millions to the Exchequer. Was it reasonable to ask him to accept an Amendment which, instead of assisting to replenish the Exchequer, would diminish greatly its existing resources? He could not assent to a proposal which would destroy his hopes of increasing the Revenue.
§ MR. GOSCHENsaid, he agreed that if the Amendment would cause a loss of millions to the Exchequer it could not be pressed in its present form. His recollection, however, of the total amount produced by the Probate Duty for Imperial Revenue was that it was £2,400,000. Therefore, the right hon. Gentleman's estimate of the probable loss under this Amendment seemed to him to be very high indeed. Probate was not paid by the majority of widows at all. When a man died and left a fortune, he gave a certain sum to his wife, and the children took their chance of the remainder. The Probate was paid from the remainder, and could not be said, therefore, to fall on the widow. A change of this kind would only affect that amount which was paid directly by a widow, and not by the residuary legatee. The Chancellor of the Exchequer said some days ago that in the colonies such-and-such a scale of duty was levied, but the information he had received since that statement was made showed that large exemptions or allowances reaching to us high as a half were made in the case of the wife. He submitted that if these high duties were to be levied the case of the wife should be considered with a view to relief or exemption, because she was altogether in a different category from the other members of the family.
§ MR. BOUSFIELD (Hackney, N.)proposed an Amendment to the proposed Amendment to the effect that in the present financial year the existing duties should be levied, and that automatically with the close of the financial year or the next financial year the new duties should come into operation in the case of property passing from a wife to a husband or a husband to a wife. The importance of the Amendment in principle was too great in his opinion to allow the matter to be passed over merely because in the present financial year the change 540 might cause some difficulty to the Chancellor of the Exchequer.
§ Amendment proposed to the proposed Amendment, to leave out the words "Estate Duty shall not be payable on any."—(Mr. Bousfield.)
§ Question proposed, "That the words proposed to be left out stand part of the proposed Amendment."
§ SIR W. HARCOURTsaid, it was a tempting proposal that the Chancellor of the Exchequer should at once obtain money and yet create a deficit for the Chancellor of the Exchequer who should succeed him. This was the effect of the Amendment; but he did not think it was good finance.
§ MR. WYNDHAM (Dover)said, that the right hon. Gentleman, in the case of the Spirit Duties, had overcome his scruples with regard to leaving a deficit for his successors, for those duties were imposed only for a year. A moral repugnance was entertained to duties on property passing from a husband to a wife or from a wife to a husband, and the Opposition would not give up their battle on behalf of the widow merely because of the financial scruples of the Chancellor of the Exchequer.
§ SIR J. LUBBOCKsaid, the obligation rested on the Chancellor of the Exchequer to raise the money, but to raise it fairly and equitably. It was altogether foreign to the spirit of our legislation to treat the wife as an absolute stranger to the husband, while it was contrary to the principles regulating the legislation of all other countries in the world so far as he was aware. A dangerous precedent was being introduced in our legislation.
§ It being half-past Five of the clock, the Chairman left the Chair to make his report to the House.
§ Committee report Progress; to sit again To-morrow.