FINANCE BILL.—(No. 190.)

HC Deb 15 June 1894 vol 25 cc1231-314

COMMITTEE. [Progress, 14th June.]

[THIRTEENTH NIGHT.]

Bill considered in Committee.

(In the Committee.)

Clause 6.

SIR W. HARCOURT

Before going into the discussion of the Amendments, it may be convenient that I should state that the Government are prepared to accept the Amendment which stands on page 16 in the name of the Leader of the Opposition with reference to the definition of the principal value in the case of agricultural land. I mention this now not for the purpose of discussion, but because I think it will be found to dispose of many previous Amendments which stand on the Paper.

*MR. GRANTLAWSON (York, N.R., Thirsk)

said, that in the absence of the hon. and learned Member for York (Mr. Butcher) he desired to propose an Amendment the object of which was to secure that the Estate Duty allowances, whatever might be their amount, should be made from the property primarily chargeable with the duty. For instance, he would take an estate of £10,000, half of which was represented by personalty and the other made up of realty. There might be a mortgage on the realty of £2,000, and his desire was to secure that the personalty was not reduced by £1,000 as representing a half of the debt, and that the allowance should be apportioned in accordance with the net amount passing. He did not know whether such a state of affairs was provided for in a subsequent part of the Bill; if not, possibly the Government would accept the Amendment.

Amendment proposed, in page 4, line 4, after the word "made," to insert the words "as against each portion of the estate primarily liable for the same."—(Mr. Grant Lawson.)

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

THE SOLICITOR GENERAL (Mr. R. T. REID,&c.) Dumfries,

said, the point was provided for in lines 17 and 18, page 4, which ran— Any debt or incumbrance for which an allowance is made shall be deducted from the value of the property liable thereto.

MR. GRANT LAWSON

That being so, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

MR. HENEAGE (Great Grimsby)

said, he had to move an Amendment to insert in line 4, after "funeral," the words "and administration." He pointed out that in the case of real property the cost of administration—by reason of the aggregation provided for in Clause 3—would be rather heavy, and he would suggest that this was a matter for which Estate Duty allowance might be made.

Amendment proposed, in page 4, line 4, after the word "funeral," to insert the words "and administration."—(Mr. Heneage.)

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

SIR W. HARCOURT

said, he did not think administration expenses could be brought within the same category as funeral expenses, and he could not, therefore, accept the Amendment.

*SIR M. HICKS-BEACH (Bristol, W.)

said, it was proposed that the expense of administration should be met by an allowance from the principal value of the estate, but he would like to point out that the cost of administering a property situated abroad might be very heavy indeed. In the case of an estate of £10,000 the expense of administration, including the Death Duties payable abroad, might amount to 15 or 20 per cent., and surely the right hon. Gentleman did not intend that in such a case the gross sum of £10,000 should be liable to the Estate Duty here. This was a point which might be raised in connection with Colonial and foreign property; it was one of very great importance in calculating the principal value of the whole estate, and he hoped the Chancellor of the Exchequer would bear it in mind.

SIR W. HARCOURT

The Government will consider that. I can quite see it is a matter to which attention must be given.

*MR. GIBSON BOWLES (Lynn Regis)

said, it was admitted that funeral expenses ought to be deducted, and everybody knew what they included and what they did not. For instance, tombstones were not included, although he knew not why. Administration expenses also were fairly well defined both in law and in practice. He wished, however, to draw especial attention to the question of testamentary expenses. At present testamentary expenses were allowed to be deducted in the case of legacies, as, for instance, where there was a residue. That being the state of the case under the existing law, and it being a fact that this Bill merged the Legacy Duty in the Estate Duty, should the liabilities not also be merged and a pro tanto reduction made, as in the case at present of the Legacy Duty? He had an Amendment on the Paper to provide for that. Further than that, inasmuch as the Estate Duty increased the existing duty, was there not a fair case for extending to the new duty existing allowances? He hoped the Chancellor of the Exchequer would give that matter consideration.

SIR W. HARCOURT

said, the allowances would include all expenses connected with the winding up of the estate. But the expenses indicated by the hon. Member could not be taken as coming under the same head as funeral expenses.

MR. GIBSON BOWLES

pointed out in some eases an administration suit might become necessary and the testamentary expenses would include the cost of such a suit. At present such costs were deducted before Legacy Duty was charged. After all, it not unfrequently happened that as the result of such a suit the lawyers took the oysters and the shells were left to the litigants, and he submitted that in such a case the duty should be paid on the shells only.

MR. HENEAGE

said, he was satisfied with the promise made by the Solicitor General that no estate which had been provided beforehand by a policy of assurance should be included in the aggregation, and he would withdraw the Amendment.

Amendment, by leave, withdrawn.

MR. HEYWOOD JOHNSTONE (Sussex, Horsham) moved to insert in page 4, line 5, after "incumbrances," the words and for the reasonable expenses of any valuation required for the purposes of this Act. He contended that, as valuation was necessary, and might be expensive, the cost ought to be deducted from the total on which duty had to be paid. If the property consisted of land with timber upon it, it might be put to very considerable expense indeed to ascertain the value in the ordinary way. According to Whitaker's Almanac the charge made by surveyors for a timber valuation was 5 per cent, on the first £100; and 2½ per cent, on the remainder, in addition to out-of-pocket expenses. The usual charge for valuation for Probate Duty was 2 per cent, on the first £500, and 1¼ per cent, on the rest, besides out-of-pocket expenses. In the case of an estate worth £100,000, of which £20,000 was for timber, he calculated that according to that scale of charges the cost of valuation would be £1,517 10s.; and he thought it would be a very hard thing if the executor were not allowed to make a deduction from the estate on which he had to pay duty in respect to necessary expenses of that kind.

Amendment proposed, in page 4, line 5, after the word "incumbrances," to insert the words and for the reasonable expenses of any valuation required for the purposes of this Act."—(Mr. Heywood Johnstone.)

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

SIR W. HARCOURT

said, the Committee would see that one of the main objects of the Government in accepting the Amendment of the Leader of the Opposition was that all questions of valuation might be eliminated, because the value in respect of agricultural property was to be based on the annual income. Those who had experience would know that nothing like the rates cited from Whitaker's Almanack were paid in valuations for Probate and Succession Duty. In most cases the Inland Revenue were able to accept the valuation that was sent in, and they had never had to go into Court on a question of valuation. It was undesirable to promote elaborate valuations by professional gentlemen, who would say they must be paid upon the liberal scale of the Almanack, particularly as the money could be deducted from what was to be received by the Government.

*MR. TOMLINSON (Preston)

said, the Inland Revenue, before they accepted a valuation, required evidence that proper steps had been taken to provide a proper valuation. He really thought that in cases where an expensive valuation was required the cost should be deducted from the taxable amount of the estate.

MR. A. J. BALFOUR (Manchester, E.)

said, that while recognising the conciliatory disposition shown by the Chancellor of the Exchequer, he rather demurred to the version given of his Amendment by the right hon. Gentleman. If valuation were to be based upon what property would fetch if sold in the open market at the time of the death of the deceased, that would involve some kind of valuation, some process of arriving at the capital value, and surely the cost of the valuation should be deducted from the estate. In this valuation an expense might be involved on the owner of realty which was not thrown upon the owner of personalty. It was sufficient to equalise the burdens upon realty and personalty, without going a step further and subjecting realty to the costs of valuation.

SIR W. HARCOURT

said, that an Amendment at a later stage in the name of the Leader of the Opposition, which the Government would accept, proposed that the principal value of any property should be estimated to be the price which, in the opinion of the Commissioners, such property would fetch if sold in the open market at the time of the death of the deceased, provided that in the case of agricultural property the principal value should not exceed 25 times the annual value as assessed under the Income Tax Acts. They had, therefore, got the Income Tax valuation, and if that were so no valuation was requisite in the case of agricultural property. With regard to property of other descriptions, the valuation could easily be obtained at a small cost, and there would be no such inconvenience as would require them to adopt the Amendment.

MR. GOSCHEN (St. George's, Hanover Square)

said, that in order to prevent any misunderstanding he wished to demur to the interpretation put upon the Amendment of the Leader of the Opposition to the effect that it implied it would not be necessary in the ease of agricultural land to value it. The figure named in that Amendment was to be the maximum, and the fact that there was a maximum showed that there was to be a valuation, the maximum being put in to safeguard certain interests and to provide that the valuation should not go beyond that limit.

SIR W. HARCOURT

said, that according to his knowledge and information, these expensive valuations did not occur, but he would consider the desirability of making some provision that when the Commissioners of Income Tax thought fit to require an expensive valuation in such a case allowance should be made in respect of it.

MR. HEYWOOD JOHNSTONE

said, there could be no doubt that if property on which there was a large amount of timber had to be valued on the death of the owner, a very considerable and heavy expenditure would be placed on the executor. The expenses in such a case would not be met by the Amendment of the Leader of the Opposition; and he should be compelled to press his Amendment unless he clearly understood that the Chancellor of the Exchequer would give the matter further consideration on a further stage.

SIR W. HARCOURT

I have said that I will consider that in cases of expensive valuation required at the instance of the Inland Revenue the expenses should be allowed.

Amendment, by leave, withdrawn.

MR. BYRNE (Essex, Walthamstow) moved to omit Sub-section (a). As a matter of fact he said he did not wish to have the sub-section struck out, but as it was worded he was afraid it expressed more than was intended. For instance, if a man had settled £10,000 on his marriage, he did not think it could be intended that in reckoning the value of his real estate he should not be entitled to deduct the property he had mortgaged for the purpose of the settlement.

Amendment proposed, in page 4, line 7, to leave out Sub-section (a).—(Mr. Byrne.)

Question proposed, "That Sub-section (a) stand part of the Clause."

SIR W. HARCOURT

said, the Government could not omit Sub-section (a), because if that sub-section was not in the Bill nothing could be easier for a person who wished to evade the duty than for him to execute a number of bonds to persons whom he desired should get the money, and upon his death the bonds would be debts to the persons whom he wished to benefit. That would defeat the duty altogether.

*MR. GIBSON BOWLES

said, he desired to know whether a wife, which was "a valuable consideration," was also in the meaning of "money's worth" in the language of the clause, and thereby liable to be valued and included in the aggregate of the estate?

MR. GOSCHEN

asked, what was the genesis of this particular sub-section? He was not opposed to it so far as he understood it, but he should like to know whether it had been found necessary in consequence of certain particular frauds, or was it deemed necessary that new precautions should be taken in view of possible evasion?

MR. R. T. REID

said, that no doubt a wife was a valuable consideration, but she was not a consideration that was "money's worth," at least not in all cases. In reply to the right hon. Gentleman the Member for St. George's Division, he was not aware that any particular cases had originated the idea of this sub-section, which, as the Chancellor of the Exchequer had indicated, was to prevent the evasion of duty which might take place in certain cases by the means which he had suggested, and by the adoption of similar methods. For instance, a farmer who desired to provide for his son, and evade the duty, might say to a third person, "If you give £1,000 to my son I will give you a bond for £1,000 payable at my death." He was not aware that there were any pitfalls in this clause, but if the hon. and learned Gentleman would point such things out to him he would carefully consider them.

MR. BYRNE

I will communicate with the hon. and learned Gentleman on one or two points.

Amendment, by leave, withdrawn.

MR. BARTLEY

said, it seemed to him that there should be some limit to the clause. A person might endow a bonâ fide institution and die before the endowment operated, and yet under the clause the gift would not be deducted from the estate of the deceased because it had not been given for money or money's worth. As the clause stood, every sort of incumbrance might be brought within its operation, therefore some such Amendment as he now proposed should be adopted.

Amendment proposed, in page 4, line 8, after the word "deceased," to insert the words "within twelve months of his death."—(Mr. Bartley.)

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

SIR W. HARCOURT

said, that the Amendment appeared to be founded on the analogy of voluntary gifts under the Account Duty. In order to prevent evasion under the Account Duty, which was made to protect Probate Duty, voluntary gifts made within 12 months of death paid the tax. There was great difference between a limit of 12 months and a shorter period. It had been proved by experience that the largest amount of evasion had taken place within a shorter period. The limit originally adopted was three months, but it had been found necessary to extend that period to 12 mouths. The case of an incumbrance was very different to that of a voluntary gift. If a man gave his property away he parted with the control of it. There was no room for suspicion of evasion there at all. But, as the Solicitor General had pointed out, if he created an incumbrance he might escape the duty and keep the control of the property. Therefore, it would be impossible to apply the limit the hon. Member desired to effect.

*MR. GIBSON BOWLES

said, the period of limitation was three months under the Act of 1881, and in 1888 it was made 12 months, so that the three months' period only existed for seven years. He confessed he thought it reasonable that this Sub-section (a) should be adopted. He considered that it was reasonable that when a man created a bogus gift or a so-called debt and had received nothing for it, it should not be deducted from his estate. Still, he thought there was a good deal to be said in favour of the 12 months' limit.

MR. BARTLEY

said, that of course all bogus cases should be excluded, but he had had in his mind cases where charges were made on the estate for charitable purposes—for public institutions, and things of that kind. Cases of this kind would come under the clause as at present drawn, for the deceased would have had "no consideration in money or money's worth." The clause would tend to discourage what he might call municipal gifts unless the cash was directly paid down by the individuals making such gifts, which was not the ordinary practice. It was usual to make the gift a charge on the estate.

MR. GOSCHEN

was not sure whether the hon. and learned Gentleman the Solicitor General would not, on consideration, be able to find words which would cover the case raised by his hon. Friend (Mr. Bartley) before the Report stage was reached. He thought the Committee would wish to cover bonâ fide cases which might be excluded by the words of the clause. The words "bonâ fide for full consideration in money" would only refer to gifts of money, and there might be other cases—cases where a person voluntarily encumbered the estate, say for a charity, intending that that charity should escape Death Duty and the incumbrance should remain till he died. Would that be an evasion of the law? On the other hand, there might be an arrangement made under which an instalment of the gift should be paid over every year without having death in contemplation. In that case it would be right for the debt to be treated as any other debt. No money or money's worth would pass, but at the same time it would be an incumbrance that would remove the property from a man's control, and should not be left undeducted from his general estate. It would be a pity if anything were done to put a stop to arrangements of the kind he described.

MR. BARTLEY

said, he would put the case of the late Sir J. Whitworth, who left £500,000, afterwards increased to £1,000,000, for Science Scholarships, which were given by the Science and Art Department. The money was not handed over, but the estate was charged until Sir J. Whitworth's death. The gift was made by deed, but it was thought advisable that the original £500,000 should remain invested in Sir Joseph's business.

MR. HALDANE

said, that if a man in his lifetime parted out-and-out with his property it ought not to be brought within the scope of the clause. If, on the other hand, he made a gift in such a manner as to reserve as far as possible to himself the control of the property during his life it ought not to be excluded from the estate. Where there were doubtful cases it was well, probably, that there should be a line drawn, as was done in this clause, and say, "If you want to escape the Death Duty you must keep on that side of the line." They were all agreed as to the cases where there was an out-and out transaction by which a man parted with his property for good. Deduction ought to be allowed in such cases; but by a clause like this they would give notice to the world that if people desired to dispose of their property so as to evade the Death Duties, they ought to do so in such a manner as would leave no room for doubt.

MR. GOSCHEN

Will my right hon. Friend consider whether any further words are necessary?

SIR W. HARCOURT

I must not be taken as giving a pledge, but I will consider the matter.

MR. J. LOWTHER (Kent, Thanet)

expressed a hope that nothing would be done to put a premium upon the granting of benefactions to take effect at some remote period. He hardly thought that the case of the deceased Baronet referred to was one that they should put a premium upon.

MR. BARTLEY

said, the benefaction to which he had referred began at once, and not at the time of the Baronet's death. It began 20 years before the death of deceased.

Amendment, by leave, withdrawn.

MR. GRANT LAWSON

said, he begged to move, in page 4, line 10, to leave out from "fide" to end of line 12, and insert "and for valuable consideration." He was advised by a solicitor in large practice that Sub-section (a), standing as now drawn, would in a case where a man had covenanted with trustees at the marriage of his son or daughter to pay a certain sum of money on his death or within a certain period of his death prevent that sum from being allowed off the value of the estate, the words of the clause being for "full consideration in money or money's worth." If he were assured that this money would be deducted, or that some words would be inserted to carry out his object, he would not press his Amendment.

Amendment proposed, in page 4, line 10, to leave out from the word "fide" to end of line 12, and insert the words "and for valuable consideration."—(Mr. Grant Lawson.)

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

*SIR M. HICKS-BEACH

said, the same point had been brought under his notice, and it had been strongly pressed on him by persons entitled to speak on the subject that the effect the hon. and learned Member feared would be produced by the clause. In the case referred to, not only would the sum in question be included in the settled estate and be liable to the payment of the Death Duties as part of that estate, but the trustees of the son or daughter would have to pay duty upon it also, so that duty would be paid twice over.

MR. R. T. REID

said, that in the case mentioned, the sum in question would certainly be considered as being at the death of the father a part of his estate. He would have enjoyed it during his own life, and it only passed on his death. Under the clause the sum would not be deducted. It would be a debt by deed, but not a deed coming within the definition of Sub-section (a), for he had explained that it was not intended to deduct debts except those given "for full consideration in money or money's worth." They had discussed the words "for valuable consideration," and he had thought the Committee had come to a decision upon them. If a man kept his property until his death, and then left it by will, the duty would have to be paid, and if instead of doing that he made a deed retaining his property all his life and leaving the charge to operate against his estate at his death, it was in substance the same as leaving the money by will. He did not agree with what the last hon. Member had said—that the sum of money would be charged with a double tax. It certainly was not intended that there should be a double duty payable. The principle of the Bill was "one death, one duty."

SIR M. HICKS-BEACH

said, the executor or the person accountable for the estate would have to pay, and the trustee or the beneficiary would also have to pay.

MR. R. T. REID

said, that was not the case. The whole estate of a deceased would pay, and the amounts would be properly distributed.

MR. GIBSON BOWLES

said, he should like to pin the Solicitor General to his statement as to "one death, one duty." As the Bill now stood it appeared that there might be four or five duties on one death.

MR. COURTNEY

said, he was in sympathy with the argument of the hon. and learned Gentleman the Solicitor General, but was in a difficulty as to whether the words he proposed would not carry him farther than he wished to go. In the case of a man who covenanted to pay a sum of money to his son or daughter on marriage, and who for some reason or other did not do so, but paid interest regularly up to the time of his death, that sum should not be considered as forming part of his estate at his death. It would be unjust if such a case as that did not fall within the definition of a bonâ fide debt due from the estate. The words of the clause allowed those debts to be deducted only from the estate possessed by the deceased at the time of his death that had been incurred by him for "money or money's worth." He hoped that the terms of the sub-section would be enlarged.

MR. R. T. REID

said, the primary question would be whether or not the property passed on death. If it had not been paid over, but was retained by the person making the covenant, it would not have been alienated.

MR. COURTNEY

said, it would be a debt.

MR. R. T. REID

said, that under Subsection (a) such property as was here in question would not be deducted. If the right hon. Gentleman would allow him, however, he would look carefully into the matter and see how it stood.

MR. COURTNEY

said, he put it as a case which had puzzled him, and which he failed to see the clause would meet.

*SIR M. HICKS-BEACH

said, he certainly hoped the Government would con- sider the point. If, instead of paying the interest on a sum of £5,000 during his life, and giving a bond to be paid off on his death, the person to whom he had referred in his preceding speech borrowed £5,000 on his estate and paid that sum over, the amount would be deducted under the statute as a debt on the estate. He thought, therefore, the Solicitor General would see that practically the money would be a debt in whichever way it was dealt with.

MR. GOSCHEN

said, this was a question which arose continually. A father frequently made a settlement for his son, but instead of parting with his capital paid his son the interest mentioned in the settlement. If the son died before the capital had been handed over, the amount would not be deducted from the estate, inasmuch as no valuable consideration would have passed. He thought the Solicitor General agreed that this was a case which must be dealt with, and he (Mr. Goschen) thought it was an example of the necessity for examining most carefully every word of the Bill, and of bringing home to gentlemen opposite the fact that the Opposition were not spinning out the proceedings unnecessarily.

MR. HALDANE (Haddington)

said, that if the Committee laid down that "valuable consideration" was sufficient in itself all sorts of difficulties would arise. As the Judges had laid down the law they would not, when once they had found a valuable consideration, proceed to estimate it, and therefore a perfectly binding covenant might be allowed to pass under the proposed words for a consideration which was enormously less than its value. He took it that the draftsman of this clause purposely inserted the words "full consideration in money or money's worth," and he thought those words should be adhered to. The public ought to be told that if they were to escape the duty they must put forward their transaction in a form which was unimpeachable. He was afraid that if the Committee adopted the words proposed in the Amendment it would encourage evasions of the duty.

MR. GOSCHEN

remarked that in many cases the object would be not to evade the Death Duty, but to secure a higher rate of interest than it would be possible to secure under trustee clauses. For purely business reasons a man might desire to make a settlement upon his son and to pay him the interest on the amount of the settlement instead of handing over the capital. He (Mr. Goschen) attached very great importance indeed to the matter.

SIR W. HARCOURT

said, the Government were of course bound to protect themselves against invalid transactions. A valuable consideration might, as his hon. and learned Friend (Mr. Haldane) pointed out, be an inadequate consideration. He quite saw the point that had been taken, and would carefully consider it.

MR. J. LOWTHER

hoped the Chancellor of the Exchequer would, in considering the question, bear in mind the distinction that there was between past transactions and future transactions, or, in other words, between settlements made before the Bill was passed or even thought of, and settlements made after its passage. There could, of course, be no question of any trick or fraud in the case of a settlement already made, and he thought that words could be framed which would prevent any abuse in the future.

MR. COURTNEY

said, that after the remarks of the hon. and learned Member for Haddington (Mr. Haldane), he felt bound to press the point he had already raised. Legislation was surely to be condemned which gave a different consequence to the same fact, because that fact happened to be expressed in a different way. Supposing a man's daughter were about to be married, and the father proposed to give her £5,000 as a dowry, there were several ways in which he could do so. He might hand over the £5,000 at once, or he might enter into a covenant with the trustees to pay the £5,000, and in the meantime to pay interest. As years went on he might find it more convenient to pay over the money than to pay the interest. Again, he might borrow the money and hand it over to his daughter. The money would be as much given away in one of these cases as in the other, and, therefore, the fiscal effect ought to be the same.

MR. GRANT LAWSON

said, that if he had a distinct understanding that the Government intended to meet the point he had raised he would not press his Amendment. He would suggest, how- ever, that the proposal of the Government should be placed upon the Paper as soon as possible, because the world was not standing still; people were marrying and being given in marriage, and he knew that there was a difficulty as to the form in which marriage settlements were now to be drawn.

SIR W. HARCOURT

said, he had not given any pledge to do more than look into the matter.

*MR. LEES KNOWLES

said, that if the right hon. Gentleman would not give a definite pledge the Committee ought still farther to thresh the matter out. The right hon. Gentleman the Member for Bodmin had given one illustration, and he (Mr. Lees Knowles) would give another. Take the case of three men, A, B, and C, each with a fortune of £30,000, and each wishing to settle £5,000 on the occasion of the marriage of a child. Suppose A raised the £5,000 by the sale of Consols and paid it over to trustees for his child; when A died the Estate Duty would be paid on only £25,000. In the case of B, suppose him to be engaged in business, and suppose B did not take the money out of his business, but covenanted with trustees to provide the £5,000 as soon as convenient, and to pay interest on it in the meantime. Suppose he eventually drew £3,000 out of his business, leaving at his death £2,000 still due under the covenant, duty would have to be paid not on £25,000, as in A's case, but upon £27,000. Then, take the case of C. Suppose C happened to be a landowner—and landowners were not as a rule blessed with much ready money. In order to raise the £5,000, he mortgaged his property and then died. Duty in his case would have to be paid on the whole £30,000. Here they had each of the three individuals settling the same amount, though in different ways, for the same object, and the successors of each paying a different amount of Estate Duty. This would be the effect of the clause if passed in its present form. Surely it required amending in some way, and he had hoped to hear the Chancellor of the Exchequer give a pledge to propose an Amendment at some future stage of the Bill.

*SIR M. HICKS-BEACH

said, he wished the right hon. Gentleman the Chancellor of the Exchequer had gone farther than he seemed disposed to go to meet cases in which, as the hon. and learned Gentleman the Member for Haddington had admitted, there could be no question of fraud or evasion. Would it not be possible to insert, after "money or money's worth," the words "or upon the consideration of marriage"?

SIR W. HARCOURT

said, he did not know whether there was any valuable consideration except marriage. He would carefully consider whether the able and plausible arguments that had been used necessitated any alteration in the clause.

MR. COURTNEY

said, that a distinction should be drawn between a covenant to take effect at any time and one which was not to take effect until I death.

MR. J. LOWTHER

said, he could understand the right hon. Gentleman I being cautious as to considerations of natural love and affection, but he thought unnecessary alarm existed in the right hon. Gentleman's mind in regard to the words "and for valuable consideration." The right hon. Gentleman had promised to consider the matter, but had; held out little hope that the result of his consideration would accord with the suggestions of the Opposition. For his own part, he (Mr. Lowther) was at a loss to see what distinction there was between the case of a covenant to take effect at any time, and one not to take effect until death, provided that the covenant was made for a consideration such as marriage. He hoped the right hon. Gentleman would approach the consideration of the matter with the conviction that an anomaly and injustice had to be avoided, even if it necessitated some alteration in the framing of the Bill.

MR. BUTCHER

said, that in a case where a man raised £10,000 on laud valued at £30,000 for a marriage settlement, not only would there be no deduction made in respect of the £10,000, but duty would have to be paid on it as well as the original £30,000.

*MR. GRANT LAWSON

said, he hoped that when the Government had given further consideration to the matter it would prove to be another species of valuable consideration than those the right how. Gentleman had referred to. He would not press the Amendment.

Amendment, by leave, withdrawn.

SIR W. HARCOURT

said, he desired to move an Amendment in place of one on the Paper in the name of the hon. Member for Thirst (Mr. J. G. Lawson), the object of which was to meet a case in which a reimbursement might be due and yet not obtainable. He moved to insert the words "unless such reimbursement cannot be obtained."

Amendment proposed, to insert the words "unless such reimbursement cannot be obtained."—(Sir W. Harcourt.)

Question proposed, "That those words be inserted."

MR, GOSCHEN (St. George's, Hanover Square)

said, it might be many years and after a number of difficulties before it could be proved to the Inland Revenue. Let him put this case; Supposing there were a debt; that someone else was responsible for that debt, but was insolvent or compounded with his creditors, and there was no chance of recovering that debt except in the course of 20 years, the words of the Chancellor of the Exchequer would not go far enough. The reimbursement would be so distant that it would be extremely hard unless such a debt were allowed. These cases occurred every day, and he thought that the most distinct words should be introduced to secure justice.

SIR W. HARCOURT

said, the point was this; if the man could not get the return he made what was called an affidavit. The fact the right hon. Gentleman had alluded to, that these things happen every day, showed conclusively that the words proposed were superfluous, and that no difficulty arose with the Department. So far as it had been worked by the Department, no difficulty had been found in these matters; but if the right hon. Gentleman could suggest other words that more perfectly explained what was meant, he was not particular about these words of his own. He had put it in a common phrase way that he thought expressed the idea. If the Department were vexatious in the matter, what would happen would be that there would be lawsuits, but he did not think these were circumstances that were likely to arise.

MR. JACKSON (Leeds, N.)

thought the case was a little more difficult than the Chancellor of the Exchequer seemed to think, and it was more difficult by reason of the fact that it was now proposed to alter the law by graduation and by aggregation. Let them take this case. The power to claim reimbursements under the existing law was no doubt a pretty good protection to the individual who overpaid, or who found subsequently that he had been unable to recover from some person responsible to him, because he would claim and get back the money, which could be easily calculated. But put this case: Suppose the debt were a debt of £20,000, there was a right to recover under the words of the Bill generally; he would not be allowed to deduct that debt, and he (Mr. Jackson) doubted whether the words proposed by the Chancellor of the Exchequer met the case, because the scale of duty payable upon the estate by reason of that £20,000 being aggregated was higher; and, therefore, supposing that years hence it was found that that amount could not be recovered from the persons against whom there was a right to be reimbursed, what had been the effect? It was not enough that they should claim back from the Inland Revenue the amount of duty on this particular debt, but they were entitled to get back from the Inland Revenue a rectification of the duty paid upon the whole estate, and that appeared to him to be a real difficulty.

SIR W. HARCOURT

said, the right hon. Gentleman would find that particular point was met in Clause 7, Sub-section 8— Where it is proved to the satisfaction of the Commissioners that too much Estate but) has been paid, the excess shall be repaid by them. That sub-section was intended to cover such a case as that alluded to by the right hon. Gentleman.

MR. JACKSON

said, it was true there was a power where it is proved to the satisfaction of the Commissioners that too much Estate Duty has been paid. He accepted it from the right hon. Gentleman, because the right hon. Gentleman said it was intended to cover the case he referred to; but reading it as a layman, and without any knowledge of the law, he thought it might be construed to be simply the amount paid and not necessarily a rectification of the scale. If the hon. and learned Gentleman was quite satisfied that it did cover such a case he would not say more on that.

MR. GOSCHEN

said, that perhaps the best solution would be to accept the words of the Chancellor of the Exchequer for the present, and if on examination they did not go far enough they could raise the question again on Report, or endeavour to come to an understanding with the Chancellor of the Exchequer. It was not only a point as to the exclusions, but what was to be done in the affidavit that was to be prepared. He was afraid it might be held that in drawing up the statement of accounts no debts ought to be put in on which there was a prospect of reimbursement; it seemed a direction to the executors to exclude debts in that position. It appeared to him that the words, therefore, ought to be fair and clear, quite irrespective whether the Inland Revenue would put too harsh an interpretation on them. He thought they should accept the words, subject to further consideration.

Question put, and agreed to.

*SIR M. HICKS-BEACH (Bristol, W.)

said, that after what had fallen from the Solicitor General he supposed the hon. and learned Gentleman would have no objection to the Amendment which he now moved.

Amendment proposed, in page 4, line 16, at end, insert— Provided that no property passing on the death of the deceased shall, on such death, be aggregated more than once, nor be chargeable more than once, with Estate Duty."—(Sir M. Hicks-Beach.)

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

MR. R. T. REID

said, the introduction of these words at the present time would be absolutely unnecessary, and if inserted might only tend to perplex matters.

*SIR M. HICKS-BEACH

said, he would cite a case that had been put to him. Supposing the owner for life of settled property had power to charge upon it a jointure for his wife, and exercised that power; on his death the property passed to a nephew charged with jointure, and without some words of this kind the nephew, having no power to deduct the jointure from the estate, would have to pay duty upon it, and the widow would also have to pay duty upon it.

SIR W. HARCOURT

said, he did not think the words were necessary; but if they were necessary they ought to have been put in on Clause 3, as they would not come properly in this clause.

SIR M. HICKS-BEACH

said, he did not wish to press the matter, and, therefore, would withdraw it.

Amendment, by leave, withdrawn.

COLONEL KENYON-SLANEY (Shropshire, Newport)

said, he could quite understand that at first sight it might be thought the Amendment in his name was not quite reasonable and was going too far, but he thought he should be able to prove it was not, and that it raised a point worthy of consideration. It was a matter of common notoriety that upon all lauded estates a large expenditure went on which practically brought in no return at all. They were consequently taunted with the charge that their business was not conducted on proper principles; but certainly on almost every estate with which he was acquainted, practically, a large expenditure was going on which brought in no return at all. It was upon this practically inoperative expenditure that a large number of the agricultural population lived, and if that was not indulged in or pursued a large number of those now employed in agricultural districts would lose their employment; therefore, he urged it was a matter of some national importance and some general interest to the community that an expenditure such as this should be maintained and encouraged. Naturally, the Chancellor of the Exchequer would say he did not want vague generalities and would ask for a case to be given, showing what was meant. He must confess the point he had uppermost in his mind in moving this Amendment was a case in which he took a great interest—namely, the supply of a better class of cottages throughout the agricultural and rural districts. He had had what experience could be gained by the administration of a small squire's property for a few years, and during that time he had done something to improve the class of cottages, and he thought it was only fair to state that upon the property for which he was responsible the average occupation of the tenants was from 13 to 14 years. He merely mentioned that to show that upon this question he had some right to speak, and in all the various efforts made in this direction the money spent had been a direct pecuniary loss; there was no such thing as a remunerative return for this class of cottages. Of course, he did not refer to the erection of great rows of cottages or workmen's dwellings near to large factories, but merely to suitable cottages for the benefit of agricultural labourers. And when he spoke of these cottages he meant decent cottages, sufficiently large to meet the proper requirements of the population, cottages with at least three good bedrooms, with proper ground-floor accommodation, and proper sanitary arrangements, which could not be purchased under £350 or £400 a pair. Those cottages would not be let, at the outside, for more than perhaps £5 a year rental; therefore it was manifest that money spent upon cottages such as he had described was money producing no direct return at all, but was unremunerative expenditure. Yet, at the same time, this very expenditure employed an enormous number of people who, if it did not go on, would have to go elsewhere to find their living. Having built these cottages and let them at as small a rent as they could take, they had to maintain them, and everyone knew the maintenance of cottages absolutely ate up the small rental they obtained from them. He was not arguing it was not right and proper that landlords should try and do their best to meet the requirements, and he asserted that most loyally and unselfishly they did so; but if this new system was to come into operation and land was to be continued on very strict economic principles as the result of such legislation as this, it stood to reason that the unremunerative expenditure must be kept down to the smallest limit. He therefore trusted that expenditure under this system might be met by the adoption of some such system as was shown in his Amendment. Since he had had the honour of a seat in this House he did not know that there was any subject he had heard alluded to with greater unction than the duty of trying to make village life better, more rational for self-advancement, and more in keeping with the lives of the urban population. What did that mean? Practically it meant that the owner in such cases was naturally the only source from which this supply could be obtained. When an owner appreciated rightly the duties attaching to his position, and created such things as reading rooms, cottage hospitals, and institutes, he was spending money in the way in which agricultural and village life could be best improved, and the villagers induced to remain in the country rather than flock to the towns, but whilst spending money in these directions it must be manifest it was money which was absolutely unremunerative. Under this Bill all this was a source of expenditure that would have to be reduced in order to meet the extra burdens that would fall upon land. But there was more than that, and again he claimed to speak with some experience in the matter. There was the question of the supply of good water to cottages for the use of the agricultural population. It was perfectly impossible to go on with the sort of indifferent supply which existed in many places, and yet to supply a better and more plentiful supply of water was a great expense to the landlord, and for that he could not charge any extra rent or impose upon the cottagers any additional impost. He did not want to multiply instances or he might quote such things as sanitary drainage to be undertaken upon the theory which was now adopted in towns, and which was beginning to be considered requisite in the villages. This was another instance of agricultural improvement for which the landlord received no return, but which it was to the interest of the community to encourage and maintain. He might fairly be told that many of these improvements, though they did not get a direct return for them, still they got it indirectly, because otherwise their larger tenants would not be willing to pay so much rent as they paid; better cottages was a convenience to them, and therefore was an inducement to them the more willingly to take the farms. But here he wished to guard himself on that point, as he wished to keep out of view any improvement that in any way could be said to add to a larger rental; and therefore he wished to confine his Amendment to that sort of expenditure which was bonâ fide, honestly and really unremunerative to the landlord, but which for the benefit of the commonweal he should be encouraged to undertake. There were other sources of expenditure which did not emphasise his case so strongly, such as the making of roads, the substitution of decent bridges for awkward and impracticable forms, and engineering works of that sort, for which the landlord received no pecuniary return, which did not affect the letting value of his estate, but which at the same time did conduce to the advantage of the neighbourhood generally and caused the employment of a large number of labourers and other workmen. Of course, such expenditure as that had been frankly and loyally undertaken under the old state of things. And why? Because there had been no principle more heartily acknowledged by the landlords of the country, nothing in which they had shown more heartily their approval and concurrence than the idea running through the whole system of our social rural life, that these estates are not for the benefit and amusement of the individuals who happen to hold them, but were hereditary possessions carrying a responsibility both to those living in the place at the time and those who were to come after. It was in fulfilment of that sort of conception and position that landlords had dealt with those around them, but he was afraid—and he did not think he was pointing out a shadowy or bogus dauger—that one of the chief results of this legislation would be, perforce, to drive men to substitute for that idea the poorer feeling of only being life tenants and having very little interest in the property that surrounded them. It was worthy the consideration of the Chancellor of the Exchequer whether by encouraging the continuance of the present good system he would not really benefit the country without in any way injuring his measure. He did not ask that anything should be deducted out of that from which the landlord got any direct interest, not that he should be allowed to deduct anything from an expenditure he charged to his tenants or received any benefit from, but that out of unremunerative expenditure, which was to be subject to investigation, half should be deducted, and so in that way mitigate the burden that would rest upon the land. He foresaw a danger of the diminution of the very sort of expenditure which he wished to see extended, and it was in order that they might not run into that danger, at all events without warning from one who had practical acquaintance with the subject, that he had ventured to press on the right how. Gentleman the Chancellor of the Exchequer the Amendment which stood in his name.

Amendment proposed, in page 4, line 18, at end, to insert— And, in the case of agricultural land, an allowance shall be made for one-half of the money expended by the deceased in the promotion of agriculture on the said land for which no direct return is being, or has been, received."—(Colonel Kenyon-Slaney.)

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

*SIR W. HARCOUKT

said, he sympathised very heartily with what the hon. and gallant Gentleman had said, and he hoped he would be allowed to point out he sympathised with it twice as much as the hon. and gallant Member. He would explain that in a sentence. What the Government was going to charge duty upon was upon the value of the land of the estate. If money was laid out which did not add to the value of the estate no duty would be charged upon it. He hoped that was a specific answer to the hon. and gallant Gentleman, because the Amendment proposed that duty should be charged upon half the expenditure, while the Government did not propose to charge anything at all upon the money which had not added to the value of the estate. The hon. and gallant Gentleman had referred to the subject of cottages. But the provision of cottages which were necessary for the labourers on the estate was part of the general improvement of the estate, and part of the general plan which was necessary for carrying on the business of agriculture, and to regard that as if it were an expenditure which should boar a separate interest from the other necessary expenditure was a wrong view of the matter. The provision which was made for the shelter of cattle or horses on a farm was not a thing for which separate treatment was claimed. How much higher, then, was the case of the provision of cottages for the men who were necessary for the carrying on the business. It was absolutely part of the business and part of the improvement of the estate, even if not a penny of return was received in respect of these cottages. He only mentioned this incidentally be cause of the unfortunate view which had been taken of this question. He knew many great firms who made improvements of different kinds for their workmen in the recreation and reading rooms, and so on; and that they regarded as part of their business, and they received, though not in cash, but in truth and in deed, adequate remuneration in the better and more contented condition of the men whom they employed. That was the point of view in which this question ought to be dealt with, and there was no greater improvement to an estate than that which contributes to the physical and moral well-being of the people necessary for the cultivation of that estate. From that point of view he thought the provision of cottages for labourers on an estate was an improvement even if there was no direct monetary remuneration received from it. But on the general point of the Amendment if money was laid out at a loss it would not be subject to duty. He was afraid most people who dabbled in agriculture had diminished the sums upon which duty would be paid. That, he thought, was everybody's experience, and he hoped the hon. and gallant Member would see that the object which he had at heart was accomplished by the clause as it stood.

MR. CHAPLIN (Lincolnshire, Sleaford)

said, if he understood the Chancellor of the Exchequer's explanation aright, it meant that cottages on an estate would be valued for duty.

SIR W. HARCOURT

I say if they have not added to the value of the estate they will not be charged. If they have they will.

MR. CHAPLIN

Yes, but at the same time they may be unremunerative to the man who made the outlay on them. The right hon. Gentleman the Chancellor of the Exchequer towards the close of his observations had taken a different line, and said there was no greater improvement that could be made on an estate than improvements which added to the more condition of the people and to their material interests. He quite agreed with the right hon. Gentleman there, and that was what his hon. and gallant Friend who moved the Amendment was desirous should go on in the future. But if this Bill passed into law that expendi- ture must be curtailed, because the taxes which in some cases it would add to estates when they were passing at the death of the owner; that the interest on the money which it would be necessary to raise or procure by some means to meet these Death Duties, would swallow up so large a part of the income that remained that there would be no money at the disposal of the landlord to spend in the erection of cottages. He could not help pointing out to his right hon. Friend that this particular part of what he considered the inherent mischief of the Bill would greatly curtail that expenditure which he thought so desirable in the interest of the people.

MR. J. LOWTHER (Kent, Thanet)

said, the Chancellor of the Exchequer had fallen into a slight error. He spoke of the tendency amongst owners of land to regard money expended upon cottages as if it ought to bear a return, although no return according to the right hon. Gentleman was looked for in respect of outlay incurred for the housing of cattle. If the right hon. Gentleman had ever had the misfortune—which he was happy to know he had not—of making an application under the Land Improvement Act for an advance for the purpose of estate improvement he would have found the expenditure for the housing of cattle, and so forth, equally with the erection of cottages, was charged as expenditure which ought to be allocated for a specific purpose, and had to bear a return and be a distinct improvement to the estate.

MR. A. J. BALFOUR (Manchester, E.)

was in complete sympathy with his hon. and gallant Friend (Colonel Kenyon-Slaney) in thinking this Bill would have the effect described, especially with regard to improvements of the kind which were more to the benefit of the people on the land than of the individual who owned it. He had pointed out on a previous occasion that, if they were to be taxed on the principal value of property, the person who had neglected his property so that it had no market value would benefit by the neglect, and would be excused from paying any Death Duty at all. That would be the result of the system proposed by the Government. At the same time he thought the wording of his hon. and gallant Friend's Amendment hardly carried out the object he had in view. Neither did he think that the present would be a convenient time to draft words to modify the Bill. He hoped, therefore, his hon. and gallant Friend would be content with the discussion which had taken place without pressing the Amendment to a Division.

COLONEL KENYON-SLANEY

could not deny the point raised by the Leader of the Opposition, and he would be most unwilling not to accept the advice tendered. He was prepared to thank the Chancellor of the Exchequer for the sympathy he had shown and the kindly tone in which he had replied to the Amendment. He thought, however, that the right hon. Gentleman rather misunderstood him. He would acknowledge that it was a fundamental necessity that cottages should be maintained up to a sufficient level, but he would like to see them even better maintained. The right hon. Gentleman made a comparison between great firms and their employés and the agricultural landlords and their cottage tenants. No one knew better than the right hon. Gentleman that there were so many points of difference in these two cases that it was hardly possible to argue from one to the other. The convenience and facility with which improvements could be effected in towns placed them on an entirely different footing from improvements effected in small and scattered villages in distant parts of the country. The right hon. Gentleman stated that nothing could be a greater improvement to an estate than the erection of good cottages. But what happened? A man spent a certain amount of money in effecting this improvement, and, according to the Chancellor of the Exchequer's own showing, the value of the property was enhanced by this unremunerative expenditure, and, as a result, the man's successor was charged with a higher duty in consequence of it. That would be the precise effect of the present legislation. He would, however, withdraw his Amendment.

Amendment, by leave, withdrawn.

MR. COUETNEY moved, in page 4, line 18, after the word "thereto," to insert the words— (2)An allowance shall also be made in respect of any sum payable under a policy of insurance on the life of the deceased and form- ing part of his estate to an extent not exceeding the Estate Duty payable on his estate. He hoped the right hon. Gentleman the Chancellor of the Exchequer was not going to withdraw the proposal he had made to the Committee. He could assure him it had excited a great deal of interest in many parts of the country, and many landlords would like to see the Amendment which he had just proposed adopted, as it would afford a means of escape from these Death Duties. He would submit to the right hon. Gentleman that it was only reasonable that the proposition contained in the Amendment should be allowed, because it would encourage a person to provide the means, by a policy of insurance, for the payment of the Death Duties when they became payable. It used to be argued by economists that the consequence of a Death Duty would be to diminish capital. If a certain amount was to be taken away from a man's capital in Death Duties, the capital of the country would suffer a continual diminution unless there was a corresponding action on the part of other persons to counteract the effect of these Death Duties. But if an allowance were made in respect of the amounts necessary to provide by insurance for the payment of these duties it would be an encouragement to tenants for life to provide during their lives the means of paying the duty payable at their deaths, and it would also be a means of counteracting the fundamental argument against such duties. Perhaps a more powerful argument with the right hon. Gentleman would be that it would remove many of the objections which have been raised against the operation of the duty, and would tend to smooth the working of the Act. Almost all the hard cases of which the Committee had heard would be met if tenants for life were encouraged to provide a separate fund for the payment of Estate Duty. It would prevent alike the infliction of hardship and the wasting of estates, and cruelty in any case would be avoided. It was most desirable, therefore, that every encouragement and assistance, consistent with the fiscal administration, should be given to persons during their lives to make provision for the payment of these duties. He might point out that this would be consistent, with the view which both the right hon. Gentleman and he entertained, that this was really a deferred Property Tax which ought to be paid by the persons while living if it could be conveniently done. But inasmuch as it could not be conveniently done while the person was living, it had to be collected after death. If persons during life, by effecting a policy of insurance on their lives, could provide for the payment of the duty after death it would be a great advantage. He did not know what objection the right hon. Gentleman had to this proposal; he might say it would make a serious inroad into the amount which he expected the tax to realise, but he (Mr. Courtney) would venture to say if that was the ease such a fear was illusory. It was estimated that the amount realisable from Estate Duty, if it were an annual collection, would be £10,000,000. If everybody concerned effected an insurance, the annual loss on this sum would not be more than £400,000; but as that would not be the case, and as there were some circumstances to be taken into account, he did not believe that in the end there would be more than £100,000 of a total loss. Against this loss could be put the great social and fiscal gain, and the smoothness with which the administration of this duty could be carried on. Something had been said privately of the possibility of evasion. He did not believe that evasion was possible; but if the right hon. Gentleman had any words to suggest to safeguard against anything in this respect, he would be glad to adopt them in the Amendment. The principle embodied was one that deserved not merely sympathy, but support. It would make the work of the Chancellor of the Exchequer and his successors easier, and it would not involve any loss, but would, in fact, effect a saving which would more than counteract any possible loss which the Chancellor of the Exchequer might sustain. It would avoid a difficulty which would undoubtedly result if persons did not during their lives provide the means of paying the Estate Duty. If it was not brought home in some forcible way to the possessors of great estates that there was this burden to be provided for when they died, by insuring their lives, the working of this fiscal arrangement would be found to produce great delay and friction, and would cause resentment and regret. The Amendment which he had proposed would benefit not only people professionally interested in the promotion of life insurance, whose interest was the last he would consider, but it would benefit a large number of persons throughout the country who were looking forward to the operation of the Finance Bill with some apprehension, and who saw in the adoption of the Amendment the only means of escape from what they apprehended would be the wasting operation of the proposals of the Chancellor of the Exchequer.

Amendment proposed, in page 4, line 18, after the word "thereto," to insert the words— (2) An allowance shall also be made in respect of any sum payable under a policy of insurance on the life of the deceased and forming part of his estate to an extent not exceeding the Estate Duty payable on his estate."—(Mr. Courtney.)

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

SIR W. HARCORTRT

said, the object of his right hon. Friend was to provide for the payment of Death Duties by insurance. It would be a very good way of meeting that end if it were largely adopted; but when they came to examine the matter, it was found to be wholly inadvisable, except from the point of view of the able advocate of the Insurance Companies. He did not think that would commend itself to his right hon. Friend. Again, a person might not have an insurable life, and would have to save in some other way to meet the Death Duties. I have no doubt that an exemption of this kind would induce some persons to save a certain amount of money each year which would go into that insurance fund. That would be a help to those persons, but the inequality arises again, because this Amendment would not help people in business at all. I am quite willing to say that insurance is an excellent mode of saving, and perhaps the best for this purpose. But I am afraid that in this case thrift, like virtue, must be its own reward. I say I think that insurance is a very good thing, and I am sure I hope it will be very largely adopted. My right hon. Friend the Member for Bodmin is good enough to say that if this Amendment is adopted the Exchequer will only lose something like £400,000 a year. The real fact is, according to the calculation of the Inland Revenue authorities, that the loss would be more like £500,000; but whether it be one or the other, I cannot afford to lose it, and therefore I cannot accept the Amendment.

*MR. COHEN (Islington, E.)

said, he thought the answer of the right hon. Gentleman the Chancellor of the Exchequer would cause profound disappointment throughout the country, and he was afraid that disappointment would not be mitigated when they came to consider what were the arguments upon which the right hon. Gentleman based his refusal to accept the Amendment. The Chancellor of the Exchequer did not say that he disapproved of insurance. On the contrary, he went out of his way to say he thought it was an excellent virtue, and that he would be glad to encourage and advise everybody to take that additional method of protection against the burden which he was going to cast upon society. He (Mr. Cohen) had no interest, direct or indirect, in any Life Assurance Company, but lie ventured to say that it was not enough for the Chancellor of the Exchequer to meet their proposals with the reply that if this Amendment were accepted it would incidentally benefit the Life Assurance Companies of the country. It would benefit other than the Life Assurances Societies—chiefly the owners of small estates, who could not afford to see the diminution of properties which had been bequeathed to them by the bread-winner of the family. He must say that he had not seen in the Budgets of the last 20 years any proposals so likely to injure small property owners as those which the right hon. Gentleman was now putting forward. He noticed that the right hon. Gentleman met his statement with a laugh, which he not infrequently did; but that did not convey any argument. He hoped that the right hon. Gentleman would see that a policy of this kind attacked all the capital of the country, and would inflict the gravest injury upon small estates while tending to maintain intact the large estates which the right hon. Gentleman supposed he was invading, much to the delight of his supporters behind him. It was quite clear that the owners of small properties could not pay out of income these enormous and increased duties, and surely it was a wise thing that they should be induced to insure, so that if death took place three or four years afterwards their assets should remain intact notwithstanding the burden of the tax levied upon them by the right hon. Gentleman. He should have thought the right hon. Gentleman would have seen that by accepting this Amendment he would have been doing something for those on whose behalf he had professed so much interest—namely, the small estate owners. It would turn out for his own interest also, for collection would be facilitated, and there would be an absence of any friction. It was true that the Bill proposed to allow eight years for the collection of the duty, and that would perhaps be some advantage, except that interest was charged on arrears. Considering what the right hon. Gentleman had so often said about the money-lenders, he could hardly suppose that he wanted to turn the State into a money-lender. Here was a plan which would offer to the Chancellor of the Exchequer very considerable facilities for the collection of that tax; but it was to be rejected, notwithstanding that the facts were admitted and even enlarged upon by the Chancellor of the Exchequer—rejected for the insufficient and almost ill-natured reason that it would incidentally benefit the Life Assurance Companies.

MR. GOSCHEN

Before the discussion on this exceedingly important matter goes further, and while the Chancellor of the Exchequer's arguments are fresh in our minds, I should like to say a word upon the points which the right hon. Gentleman has taken. There are a great many arguments that might be used against this proposal. It is a very important proposal; and looking at the temptation that the Bill offers to disperse capital, I think there is a deal of force in the speeches made in favour of the Amendment. What are the arguments of the Chancellor of the Exchequer? He says that other forms of saving would be prejudiced by the encouragement which would be given to property owners to insure. The right hon. Gentleman surely must have forgotten that provision has already been made in our legislation for the encourage- ment of insurance and other forms of thrift by the exemption of premiums from the Income Tax. It seemed good to the House of Commons, looking at the enormous mass of insurance, to treat it in a different way to other savings. The right hon. Gentleman may say that this is no argument; but I maintain that having once introduced this principle into our legislation, that from your income you may deduct your insurance premium, it is one that takes root in one's mind, and naturally leads up to the present proposal of my right hon. Friend. The Chancellor of the Exchequer has acknowledged the principle, and I do not understand why he does not give further effect to it. If the right hon. Gentleman says the point is not arguable, I reply that unless our existing legislation is not arguable this is a proposal upon which many arguments can be based. Then the right hon. Gentleman dealt with the financial effects of the proposal. The right hon. Gentleman the Member for Bodmin has assumed that the insurance which might take place would reduce the amount of duty available for the Exchequer by £400,000. The Chancellor of the Exchequer says that the Revenue Department places it at £500,000. They would not have put it so high unless they expected everybody to insure, and if everybody insured what becomes of the argument that preference is given to insurance over other forms of saving? Then the Chancellor of the Exchequer thought he could weaken the case of my right hon. Friend by hinting at a financial deficit; but his argument of financial loss is destructive of his other arguments. No one can seriously believe that everyone would insure to the full value of the Death Duties. I venture to think, notwithstanding the threat of the loss of revenue, that the calculation ought not to go beyond £200,000 instead of £500,000. The Inland Revenue authorities naturally take an outside view, but according to their calculation the worst that could happen would be that the Exchequer would lose £500,000. You may be sure that they have allowed a very sufficient margin, just the same as in their calculation of the Death Duties. I believe that the Death Duties will secure a larger financial result than is shown by the figures of the Inland Revenue. If that is so the right hon. Gentleman has a margin to spare in order to meet the proposal of my right hon. Friend, and I do not see any reason, therefore, why the Chancellor of the Exchequer should not accept it.

SIR W. HARCOURT

The right hon. Gentleman has brought to the aid of this proposal an argument drawn from the allowance which is made out of the Income Tax with regard to insurance. If the right hon. Gentleman more carefully considers the matter he will see that the argument applies the other way. You allow for life insurance because the money spent in insurance is money that is saved, and you calculate that you will collect your Death Duty upon the insurance hereafter. Therefore, the argument of the right hon. Gentleman with reference to the deduction of the Income Tax is the strongest possible argument why more reduction should not be made in respect of Death Duty. You have relieved insurance premiums from payment of Income Tax, because it represents an ultimate saving upon which the Death Duty would be payable. Under the Account Duty, so far from granting any release, you have taken care that voluntary gifts, and so on, shall not escape you. We regard moneys produced under insurances as amongst the most valuable assets that can become the subject of Death Duties; the premiums have already been exempted from payment of Income Tax, and I do not see that we can afford to exempt them again from Death Duty.

MR. GATHORNE-HARDY (Sussex, East Grinstead)

said, that as he had not before spoken on this Bill, he might be allowed to raise one more argument in favour of the Amendment. By the principle of aggregation which the Chancellor of the Exchequer had for the first time set up, he had afforded the very best argument that could be adduced for the Amendment of the right hon. Gentleman. The Chancellor of the Exchequer admitted that it was a desirable thing in itself that insurances should be made, especially in the case of large estates, for the purpose of paying the Death Duties; but the larger the insurance which a man set up and paid out of his income, the more he might penalise himself and his heirs by causing a larger aggregation to be made. That was a point to which the Chancellor of the Exchequer ought to give some attention. He believed that the financial effect of the proposal would be very much less than the Chancellor of the Exchequer chose to think. If the right hon. Gentleman would give up the small amount involved, he would recoup himself over and over again by the facility with which he would recover the Duties. He had the honour of being a director of a large Insurance Company, but he was sure that the Committee would understand that he was speaking without any reference to that fact. He would like to point out that the Insurance Companies paid enormous incomes, and if it was true that they were going to increase the insurances to the extent suggested, the Chancellor of the Exchequer would be recouped in Income Tax. The right hon. Gentleman was unwise in summarily rejecting this Amendment, and he could not believe that he had given to it the consideration it deserved. He supported this Amendment in the interests of frugality and thrift, and in the interest of the Revenue also.

MR. HENEAGE (Great Grimsby)

said, he was astounded at the speech of the Chancellor of the Exchequer, because he raised this point the other night. He gave the case of a man whose estate would be brought into a fresh scale of aggregation because of the insurance, and he put it to the hon. and learned Solicitor General whether it was fair, and he replied in the negative.

MR. R. T. REID

said, he was asked to express an opinion, and he certainly gave an answer in the direction indicated by the hon. Gentleman, but he found that he was mistaken, and so informed the hon. Member in the Lobby afterwards.

MR. HENEAGE

said, he remembered that his hon. Friend told him he had made a mistake, but all the same, after what took place, he must express his surprise at the answer given by the Chancellor of the Exchequer. He would like to point out that these policies of insurance would only be entered into by those who wished to save the 3 per cent. interest on the instalments, and that it would be a great advantage to the Treasury to have the money paid in in one year instead of having it distributed over eight years. He was astonished that there should have been a change of line, and that they should now be told that this proposal could not be accepted because of some fanciful loss which the Chancellor of the Exchequer thought would be incurred.

*SIR A. ROLLIT (Islington, S.)

said, he had hoped that more favourable consideration would have been given to what was really a constructive Amendment to this Bill. Assuming that the Bill was right in every respect, it would yet carry with it grave social difficulties among large classes of persons in the country. He believed that in introducing a great reform they ought to contemplate the evils with which it would be accompanied, and endeavour to restrict them so far as they possibly could. The difficulty of raising this duty would in many cases be of a practical character, and the only real remedy that presented itself was the organised and familiar system of insurance. If advantage could not be taken of that plan the evils would be very much intensified. Anything that tended to encourage insurance ought, therefore, to be recognised in dealing with the Bill. The Chancellor of the Exchequer said that people must save money in order to pay the duty, but that was exactly what the majority of men could not and would not do. The whole system of life insurance was devised to enable men of restricted means to provide for the future. The right hon. Gentleman said this proposal, if adopted, would mean a bonus to certain classes. Was not the system of bonuses already recognised by the State, and acted upon for a long period in connection with Friendly and Provident Societies and Savings Banks? That plan was adopted because it was thought that saving was advantageous to the State. He made a last appeal to the Solicitor General on grounds which he thought ought to commend themselves to him, that was that in some cases these insurances would be double insurances—an insurance for the owner and an insurance for the Government itself. Let them take the case of a derelict estate. The Government must either sell it or take it; but if by the encouragement of this system of insurance the owner of the estate had been stimulated to save the duty out of his income, the money would be available for payment of the duty, and could be obtained without delay or litigation. So far from believing that the system of insurance, if increased by bonuses, would be a disadvantage to the State, it was his conviction that it would on general grounds be a direct benefit, and that in the particular case he put of an estate becoming less and less valuable, and ultimately almost impossible to realise, it was very likely that the duties would be provided if the owner was able to make provision for the Death Duty by the system of insurance. In that case both the estate and the Government would be benefited. He thought the Amendment was worthy of support, and that in his own interest the Chancellor of the Exchequer would do wisely in accepting it.

*THE SECRETARY OF STATE FOR INDIA (Mr. H. H. FOWLER, Wolverhampton, E.)

I do not quite understand the arguments which have been brought forward in support of this Amendment. They appear to be based upon the assumption that if a new system of insurance should be inaugurated, the Government are in some way to have a control or a lien over these insurances, and that money so arising is to be paid over to them. That, however, is not germane to the Amendment we are now discussing, but I am prepared to answer it afterwards. The Amendment is that— An allowance shall also be made in respect of any sum payable under a policy of insurance on the life of the deceased, and forming part of his estate to an extent not exceeding the Estate Duty payable on his estate. My right hon. Friend behind me knows that the amount now insured is some hundreds of millions. The first proposal is that upon these existing policies, to an extent not exceeding the Estate Duty payable upon the various estates, there is to be exemption from duty. This, of course, would mean an enormous loss to the Revenue. [A cry of "No!"] Let us take two or three concrete cases. First let us take the case of a man worth £100,000. He is a prudent man, and part of his property may consist of a policy of insurance on his own life, say for £5,000. When he dies the larger amount of property will consist of land and freehold estate. It is proposed that there should be a deduction of duty to the extent of £5,000, so that he could only be made to pay on £95,000. Why is this particular form of investment to be separated from other forms of investment and treated with special favour? Why is that man to be allowed to have this exemption? Or let us take the case of a man who knows that he must pay duty at death on £100,000, or rather that he will die worth only £95,000 after the duty is paid. He may say, "I wish to leave my estate entire; I wish my family to have the £100,000 as a whole. Although I should have to pay £4,000 under the existing law, under the new duties I must pay £5,500, and I wish to provide for that." There are two ways of doing that. He must either save so as to add to his capital a sufficient amount of money to pay this charge; he can invest in ordinary securities and accumulate the proceeds at compound interest, and he can tell pretty well what amount will be required to enable him to provide the necessary fund at his death to pay duty on the £100,000. Or he may say, "I prefer to pay to the Insurance Companies premiums which will bring in that amount." Insurance is simply saving, and nothing else. As a matter of fact, those who live pay for those who die, and the people who do live, and have the advantage of a longer life, pay very largely in excess of the amount that they receive in order to cover the cases of those who receive in excess of what they pay. Why is the Legislature to step in and say, "If you choose to pay this amount through an insurance company we will exempt your savings from duty"? Why is only that form of saving to be exempted? Why not exempt savings invested either in Consols or Railway Debentures? Another man may buy a certain property, the value of which he thinks is going to rise, calculating that in a certain number of years he will get a considerable profit. Why not exempt that investment? But no, this one specific mode of saving through the agency of an Insurance Company is to enjoy the advantage of paying no duty because assets so increased by means of savings of which insurance is the visible representation will enable the testator to band over to those interested in the settlements the complete amount originally settled without any reduction in respect of Estate Duty. I believe that everybody admits the desirability of insurance. We, however, do not propose to put a bonus on it. The advantage of insurance is self-evident. People insure because they see it is to their benefit to do so. Insurance statistics show that the amount insured is every year increasing in an enormous ratio. So far as the landed interest is concerned, I can quite understand that these duties will fall heavily upon freeholders or tenants for life of settled estates. But if you are going to enforce the principle of insurance you must enforce it to a wider extent than for the payment of Estate Duty. An able writer on political economy has pointed out that if the lauded estates of this country are to be kept together the owners must largely resort to insurance, and he points out also the injustice of calling upon the successor to provide for the children of the predecessor. Assuming that insurance, as I believe it would be, a great advantage, I cannot myself see why this particular mode of saving should be possessed of this advantage of exemption over other forms of thrift. You cannot confine the advantage to one system, but must make it universal.

MR. COURTNEY (Cornwall, Bodmin)

said, that with regard to the terms of the Amendment he distinctly submitted them to the discretion of the Chancellor of the Exchequer, and stated that he was ready to assent to any reasonable limitation, and that the rebate should only be made to the executor in cases where the insurance was effected for the purpose of meeting the Estate Duty. The question had been asked why exemption should be given to this form of saving. The matter arose out of the form in which the duty was proposed to be levied, and that was one of high policy. The Government were going to impose a duty which would affect the social life of the community. The question simply was, would they give such an encouragement to the practice of life insurance as would prevent the evils which the Government themselves confessed might be brought about, and which they desired to avoid? He admitted that the proposal was an encouragement to life insurance. He did not put it forward as one interested in Life Insurance Companies, but in the interest of the public at large, and it had been supported on general grounds right and left by those who had no connection with Life Insurance Companies. It would form a ready method of collection of the tax and make the task easy to all concerned. He was quite ready to have the proposal limited in the strictest way. The amount by which it would diminish the receipts was infinitesimal as compared with the tax itself. It was a proposal to stimulate saving, and create saving, and to bring into existence large reserves which would not otherwise come into existence—not from foreign but from home sources. The proposal ought to recommend itself to Finance Ministers present and future, and in view of the expressions of opinion which he had heard upon it he must ask the Committee to take a Division upon it.

Question put.

The Committee divided:—Ayes 78; Noes 113.—(Division List, No. 100.)

MR. BARTLEY

said, the Amendment he had now to move he should divide into sections, and he proposed first to move the following:— (2) In calculating the principal value of an estate, reversions shall not be taken into account, provided that—

1. (a) on the sale of such reversion, or on the possessor raising money or any consideration for his interest in such reversion, Estate Duty shall be paid on the value of the reversion as estimated by this section of this Act on the scale given in Section 14 of this Act, according to the aggregated value of the last estate of which the reversion formed a part, and no person shall be able to give a good discharge or receipt for any sale or loan unless it is certified by the Commissioners that there is no claim for Estate Duty thereon, and the Commissioners shall, on application in the prescribed form, if satisfied that there is no claim, give such certificate;
2. (b) on the maturing of such reversion, providing the Estate Duty has not been paid as required by Sub-section (a), Estate Duty shall be paid on the principal value of the reversion according to the aggregated value of the last estate of which the reversion formed a part, and no person shall be able to obtain a good discharge in handing over such reversion 1271 unless it is certified by the Commissioners that there is no claim for Estate Duty thereon, and the Commissioners shall, on application in the prescribed form, if satisfied that there is no claim, give such certificate."

He was afraid it was somewhat technical, but nevertheless it was a very important branch of property, and he ventured to move it as carrying out the Amendment of his on the first clause, which the Government accepted. Though the Government might not have had the same view that he had in moving the former Amendment, the Chancellor of the Exchequer indicated the Bill would contain some words showing how the principal value would be arrived at. According to the way in which the value of property was arrived at, there might be considerable hardship inflicted or great alleviation produced in the payment of the Estate Duty. This clause was one of the most complicated and difficult clauses to understand by those who had not studied the whole question, but if the Bill should become law unamended, persons would get to know very severely what reversions meant by being touched up on paying them. He ventured to assert that a reversion was a very common form of property. There were reversions of many sorts and many descriptions, and they had this peculiarity: that they were not in any way confined to real property. A reversion was of value in three ways. It had a value, of course, when it fell in—that was the full value of the reversion when it matured; then it had a value when it was sold, and almost all reversions were saleable; and, thirdly, it had a value when money was raised upon it. In those three categories the value of a reversion consisted, and he saw no possible objection to Estate Duty being charged upon all those occasions with regard to reversions; he did not wish in any way to let reversions escape, and the Amendment he proposed distinctly stated that all these values should be taxed. But he said there was no value in the simple fact that at some distant time a man was to receive something; that time might be very remote, and even beyond the probability of his life or the possible span of his life, but unless he sold or raised money upon it the reversion was of no value to him. Let him take a simple ease. Supposing a man had a reversion for £50,000 which was due in 50 years on the 3 per cent. table, that reversion had a nominal value of £11,000; or, in other words, if a reversion of good property, it could be sold for £11,000. The Estate Duty upon that would vary from 4 to 8 per cent., according to the gross amount of value left by the deceased of which the reversion formed a part. In the case of 4 per cent. the duty would be £440, and in the case of the 8 per cent. it would be £880. Either of those sums was a large one to pay, though in the case of a rich man there might be no difficulty in his paying it; but still it must be remembered that the man who received the reversion did not receive anything by it, but under the Bill would have to pay either £440 or £880 for the simple gratification of being the channel through which some person in a distant age would receive a large sum of money. He knew a case of a reversion for £22,000 payable in 50 years, the selling value of which would be £5,000, and the Estate Duty would vary from £150 to £300, according to the value of the property of which it formed part. If a rich man received that it would be possible for him to pay it, but in the case of a poor man it would be absolutely impossible, unless he sold it. It seemed to him to be very unfair that a man who was left a reversion out of which he individually received no benefit should be called upon to pay a heavy sum for it. Then, again, a large number of these reversions were reversions on lives, and the same rule applied to these, but in these cases it might very often be very unpleasant to sell the reversion, as the person inheriting it might have relations who would resent the sale. The Bill would place poor persons in a very unpleasant position, whereas by his Amendment he relieved them from all difficulty, as a person would only pay when he received benefit from the reversion. When a man of small means succeeded to a reversion the law should not so arrange that he should be bound to sell it. Many of these reversions were ground rents, and therefore they need not consider the annual rent at all, because it must not be forgotten that his Amendment only related to the reversion. He would venture to point out to those who were not technically acquainted with these par- ticular details that a ground rent consisted of two things—it was an annuity and a reversion. His Amendment did not touch the annuity, but the reversion, and they must therefore separate those two, and by a subsequent Amendment he ventured to propose a certain regulation by which the annuity of ground rents should be fairly taxed. Closely allied to this was the reversion of a peppercorn. Most persons knew what a peppercorn rent was, but a poor man would not be able to hold some of these peppercorns. He had had some very startling instances brought before him, cases in which houses of considerable value were held on 1s. peppercorn rents. He had one before him in which a house was held on a shilling peppercorn rent. The reversion, which was £5,000 with 30 years to run, was valued at about £2,000, so that a man might be called upon to pay a heavy Estate Duty for the simple advantage of being the medium through which this peppercorn went, and all he would receive would be 1s. a year for 30 years. As he had said, a rich man would be able to pay the duty; but a poor man, however much he would like to retain the reversion for the benefit of his children or grand-children, would be compelled to sell owing to the enormous duty that was asked under this Bill. But further than that, a reversion of 40 or 50 years would very probably pay several times, and each time that it was paid the amount would be so much more, owing to to the increased value of the reversion as the date of failing drew nearer. Therefore they would have this result, that three, four, or five persons would have paid a large part of the gross value of the reversion in Estate Duties. Such a proposal as that was not right; it could not be right to make people who did not receive any benefit, but were merely the channel through whom it went for some one else many years hence to enjoy, to pay this duty. If they sold or in any way received any benefit under it, then, according to his Amendment, the State would swoop down upon them and make them pay Estate Duty. If it was insisted that these reversions should be charged on the estate, and were not only to be charged, but were to swell the aggregate of the estate, the consequence must be that all these reversions would be sold to Insurance Companies, so that the Chancellor of the Exchequer would gain nothing by it. His proposal, he thought, was extremely fair, as it was to tax these reversions the moment they became valuable. He believed that if the question regarding reversions was thoroughly understood by the Committee there would be a strong feeling about them, and for the reasons he had given he begged to move the Amendment.

Amendment proposed, in page 4, line 18, to insert after the word "thereto," as a new sub-section, the words— (2) In calculating the principal value of an estate, reversions shall not be taken into account, provided that—

1. (a) on the sale of such reversion, or on the possessor raising money or any consideration for his interest in such reversion, Estate Duty shall be paid on the value of the reversion as estimated by this section of this Act on the scale given in Section 14 of this Act, according to the aggregated value of the last estate of which the reversion formed a part, and no person shall be able to give a good discharge or receipt for any sale or loan unless it is certified by the Commissioners that there is no claim for Estate Duty thereon, and the Commissioners shall, on application in the prescribed form, if satisfied that there is no claim, give such certificate;
2. (b) on the maturing of such reversion, providing the Estate Duty has not been paid as required by Sub-section (a), Estate Duty shall be paid on the principal value of the reversion according to the aggregated value of the last estate of which the reversion formed a part, and no person shall be able to obtain a good discharge in handing over such reversion, unless it is certified by the Commissioners that there is no claim for Estate Duty thereon, and the Commissioners shall, on application in the prescribed form, if satisfied that there is no claim, give such certificate."—(Mr. Bartley.)

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

MR. BARTLEY

asked, on a point of Order, if the effect of moving the Amendment in this form would be to cut out the subsequent part of it?

THE CHAIRMAN

It would be left to these words, "an allowance shall not be made," in the sub-section.

SIR R. WEBSTER

Would we have no opportunity of raising the next part of the Amendment?

THE CHAIRMAN

I cannot say that.

MR. R. T. REID

said, he could not give any adherence to the Amendment of the hon. Member, because a reversion had a market value, and could at once be turned into money. If the person holding a reversion did not choose to use it, or convert it into money, that would not affect the argument. It was just the same as if a man left a number of bags of gold, or a sum of money lying accumulated in Consols for his children. He could not see that in substance there was any distinction between that and where the property was made use of and was converted into money during the lifetime of the deceased. When he made the illustration of Consols he was strictly accurate. Consols left to accumulate in a bank would amount larger and larger by the annual increment of interest just as a reversion became more and more valuable by the diminution of the period in which it comes into enjoyment. He could not, therefore, see any distinction between the two things. Reversions were available property, and could be converted into cash for the enjoyment of the reversionary and be utilised by him. He thought it would be unfair to other forms of property to exclude reversions from the operation of the Death Duties. According to the hon. Gentleman's argument, if a man left a reversion worth £10,000, there would be no tax; but if the same man left £10,000 in Consols, there would be the full tax imposed. He had dealt with the proposal of the hon. Gentleman from the point of view of principle, and he would say from that point of view it would not be equal in principle to treat this form of property in an exceptional manner. He had not dealt with the matter in detail, and he hoped the hon. Member would excuse him for not doing so.

SIR R. WEBSTER (Isle of Wight)

was sorry that the discussion had taken place before such a small audience, because the matter was of some importance. He would observe, parenthetically, that he was sorry his hon. Friend had moved his Amendment by way of substitution for Sub-section 2, with which it did not seem to have any connection. The result would be that it would have to be brought forward as additional sub-sections to some other part of the clause. He desired to have it placed on record why it was that he could not agree with the arguments of his hon. Friend the Solicitor General. It appeared to him that the Solicitor General had entirely confused the distinction between actual value and prospective value. The hon. Gentleman had alluded to Consols being allowed to accumulate, but there was no analogy between that and reversions. That form of accumulation was not one of the incidents of reversions. His hon. Friend had not grappled with this difficulty, because he had not brought his mind to bear on what the incidents of reversion were. Why was it unfair to treat reversions as property for the purposes of the Death Duties in the same way as other property? Because reversions had not got anything more than an artificial value for the time being. He would give an illustration. Suppose a man had bought a reversion contingent on two lives, a common market transaction at the present time. The man with the title to the reversion dies and on his death the reversion is to be valued at the market price, assuming say 20 years to be the proper term. Suppose during the 20 years there were three successions by death to this same reversion, what possible ground would there be for claiming three times over the same amount of Death Duty in respect of the same reversion? Yet this was a case which, to his knowledge, had occurred more than once. But in each case the amount to be paid on a reversion would be larger because the term would be shorter each time, while the fact still remained that the estate or reversion had not benefited Id. by its transmission. He thought the principle of the Amendment was one that might fairly be recognised by the Government—namely, that reversions should be treated as property and dealt with as property when the person entitled turned them into money or when the person came actually into possession. For example, take the case of a man who had vested his money in ground rents; say a £10 ground rent with the reversion to a £50 rackrent at the end of 40 years. That man made the investment for his children. No one would want to escape the Death Duty in a case like that, but what he would like to protest against was treating that property as property convertible into money and charging duty on its prospective value. No one could grasp even the rudimentary features of that kind of commercial transaction without seeing that to treat that property or succession during the currency of the term at its increased market value would be to bring into the category of marketable property reversions which were not available in the same way as were the Consols or bags of gold to which the Solicitor General had referred. The point sought to be raised in the Amendment was that the reversion should be taken at its real Value and not at an assumed value, which could not be realised for a long period; in other words, that it should not be treated as property immediately available. If the Government persisted in what was apparently their present intention the Death Duty might be paid over and over again several times in respect of the same property, because the reversion would be treated as available property every time a death took place during the currency of the term before the reversion came into possession. He regretted Her Majesty's Government did not see their way to make some amendment in the clause, and remove what was undoubtedly a grievance, which, in the circumstances, would call for some remission of taxation.

MR. BYRNE

said, if he had a sovereign in his pocket that was a form of property easily exchanged; but suppose he had also an I O U for its complement from an hon. Member opposite payable a year hence, that would be a very different thing. But this was just what happened in the case of reversions, because a reversion was payable on a contingency. What was the value of that reversion in view of the contingency? Once that question was raised they entered at once on the sea of actuarial valuations, with questions as to the probability of life, the amount of premium one would have to pay for insurance, and so on; yet the Government, as he understood the matter, proposed that every one of these things should be valued on a man's death just as if they were an available market commodity at the moment, like the sovereign to which he had re- ferred. This was what lay behind the Amendment, just as everybody saw, and as the Government, to a certain extent, were compelled to see, that if equal taxation was to be imposed it could only be done by having regard to the nature of the subject-matter which was to be taxed. Theoretically, one might sit in a garret and work at Arabic figures as much as he liked, and say that property was property whatever its form; but, as a matter of practice, while one item of property was valuable and available from day to day, another item depended on contingencies and future events, and might not be worth a farthing at the time it fell into possession. What resulted from that? First, it would be recognised that with regard to such properties as were absolutely saleable at any time in the market no difficulty arose. But immediately that this class of property was disposed of and another class, say land, was reached, then immediately came in the question, was there a market for it? Well, sometimes there was, and sometimes there was not. The difficulties in regard to reversions vested in personalty could be calculated, but it was a different matter when real estate came to be dealt with. The first contingency to be dealt with as to a personalty reversion was the question, who was going to buy it? Only the man who was prepared to insure that the event would happen, or the man who bought so many reversions that he became himself an insurer. With regard to real estate, the difficulty of dealing with it was increased immensely. All through the Bill, in his opinion, sufficient regard had not been paid to the subject-matter in calculating how the Death Duties were to be paid. It might be answered that when a man died possessed of a reversion, whether vested or contingent, personalty or realty, it was property, and worth something. Quite true, but just as many men were content to enjoy a particular kind of property, such as pictures or jewellery or furniture, which produced no income whatever. In case of reversion, if this class of property was not realised the value increased, and when it fell in the duty payable was much in proportion to the time in which the person was in the actual enjoyment of them, so that it would be a fair and reasonable thing to say by all means let the reversion be paid for, but do not let it be paid for at a time when they still remain reversionary and contingent. The Government would lose nothing if they waited until the reversion fell in, because the item of property on which the duty was charged had increased in value precisely in proportion to the lapse of time that had intervened. He thought the result of the clause as it stood would be to prevent in a large number of cases that which had been a marketable reversion from being so any longer, and such restrictions would be placed on dealing that the Government would be just as well off if they took the duty at the end of the time when the reversion fell in as they would be if they took it by degrees on each succession, unless they meant to charge once, twice, three times the full duty in respect of the reversion each time a death occurred during its currency.

*MR. GIBSON BOWLES

said, he had ventured more than once to say that the true principle with regard to taxation was to go where the money was. If you wanted apples you must go to the orchard. But what did the Government do? If a man put an apple pip into the ground the Government would say, "We will begin to tax you, because one day or other that pip will grow into an apple tree and may bear apples, and that is property." But if the Government were prepared to place a tax upon potential value would they be prepared to tax a picture by a rising young artist or a great work of state by a rising politician, say the Solicitor General, at its possible potential value! Herein lay the difficulty. If it was assumed that property had a potential value that value might never be realised. But, on the other hand, if they were prepared to stand by the determination to tax reversions before they fell in they ought to be prepared to accept payment of the duty as a reversion. Let them take a case which the Chancellor of the Exchequer was always fond of referring to, ground values in London. These would be worth something enormous in future days, but should these values be taxed in the present at their potential worth? No; the true principle on which to go was to wait until their value rose, until a money payment was made, and then let the share that belonged to the State be taken in the way of taxation. If the potential value was taxed many things might happen which might prevent any of the potentialities being realised. When the reversion fell in let it be taxed, but while it was still contingent leave it alone. He would say this not merely in the interest of the taxpayer but also in the interest of the tax collector. If it was desired that the collector should do his work properly, easily, and with comfort to himself, and some degree of toleration to the people whom he was deputed to flay alive, then the tax should only be placed on property which was already realised. Where reversions and potential values were taxed the Government went entirely outside the proper sphere of the taxpayer. With regard to the present Amendment, he was constrained to admit that it might, perhaps, be necessary to put it in a somewhat different form if it came to be read into the Bill. But, as regarded the principle, he had no doubt whatever but that principle was that the tax should be levied only on property which was realised, and not on property which was, as it were, in the air.

*MR. BARTLEY

was sorry that the Government had not accepted the principle of the Amendment. The matter was a difficult and technical one, and as he was not a lawyer he had only framed his Amendment in a way which seemed reasonably to embody the principle he wished to see adopted in the Bill. The possible value of reversions was really an unknown quantity. Take grounds-rents. If Belgrave Square, for instance, remained a fashionable part of London its ground values would be maintained, but if it became a trading district like Golden Square and other districts of London which were once fashionable, the value of the reversion of the ground-rents when it matured would be smaller than it was now supposed to be. It would be quite possible, therefore, that a man might be called on to pay duty on a valuation of the reversion which would be far higher than the actual value of the property when it came to be realised. He supposed, however, that it was impossible to get the Government to take a reasonable view of this matter. Their desire seemed to be to spread the net wide enough to catch everything in it. But he would tell them there would be a revulsion of feeling against this tax, and against those who had caused it to be imposed.

MR. BOUSFIELD (Hackney, N.)

said, it seemed as if the Government were only desirous of criticising the Amendment, and left the principle embodied in it to take care of itself. How would this tax work out in case of an estate which consisted wholly of reversions? These were cases that frequently happened, and where was the money to come from in such cases to pay the tax? The people entitled to the reversions must realise, which in many cases would mean selling and ending their whole prospects. The Chancellor of the Exchequer had said that they must manage in some way to borrow money on the reversion, but that could only be done in many cases at a very considerable rate of interest. Why should the Government not practically lend money themselves upon reversions to pay the Duty? He thought such a proceeding would be absolutely safe for the Government. If it would not be safe for the Government to lend money on these reversions at a low rate of interest, then they had no right to tax them. If the reversions were safe, the Government could easily lend money on them at 3 per cent., and a separate Department could be created to attend to this sort of business. Even if the Chancellor of the Exchequer was advancing the money with the one hand, he would be receiving it with the other, and his money would be available for the year. The right hon. Gentleman was taxing these reversions on the footing that they were absolutely realisable property, and safe to borrow upon, and therefore he did not see why the Government should not advance the money themselves. He did not see what practical objection could be raised to this proposal, because if the reversion were not considered to be of sufficient value to offer a fair security for the loan, then the Government could not insist that they had a just right to impose any duty in respect of it at all.

MR. TOMLINSON (Preston)

said, he hoped Parliament would pause before they accepted the proposal to tax reversions. It had been pointed out before in the course of these Debates that the effect of the proposals of the Government was to tax the corpus of the property of the country—that meant the capital available to maintain the property of the country, of which these reversions were a part. In the case of reversions it was proposed to levy the tax, not upon their present value only, but upon a value which could only come into enjoyment at a future date. Such a course, he submitted, could not be defended upon any general rules of taxation. No doubt something might be said against the exact form in which the Amendment had been moved, but, in his opinion, it was right in principle, and he trusted therefore that the Committee would agree to accept it.

*MR. T. H. BOLTON (St. Pancras, N.)

said, that hitherto the charge upon reversions had been deferred until the reversions fell in. He knew that in some eases arrangements had been made by which the whole duty had been assessed upon any present interest with the addition of the reversion, but in the main the duty had been charged on the present interest, and the tax on the value of the reversion had been postponed until the reversion had fallen in. That was the principle which had prevailed, and it had been considered to be a very fair one. A man had paid upon his present benefit, and if that benefit had been increased he had paid upon that increased benefit. Now the Government proposed, as he understood, not only to take the capital value of the present income, but also to add to that the present saleable value of the reversionary interest, and put the two together and charge upon the capital value of both. The result would be that a very considerably increased tax would be charged, while frequently the income from the property or the present benefit would be utterly inadequate to enable a man with anything like convenience or fairness to himself to pay the duty. Where the present income was very small, or where there was no income at all, he would be placed in the position that he must either pay out other money of his own to meet the duty or borrow money or sell his reversion. If the object of the Government was to force these reversionary interests into the market to be sold at a disadvantage—because all reversions were sold at a dis- advantage—he could understand their action in placing this proposal in the Bill. But he could hardly suppose that a Bill which was intended to raise money for the Public Service was to be made use of in order to force property into the market and to inflict a loss upon its owners. Surely some means might be found by which, where the present income was very small, or nominal, as in the case of a peppercorn rent, to postpone the payment of the duty to the Government on fair terms. That would be only right, but if reversions were taxed in this way the result would be that during the continuance of the present small interest the Government would be receiving very large sums in respect of the capital value of the reversion, and then, when the reversion accrued, they would receive again the full benefit of the taxation of the capital value. That was neither fair nor considerate. The object of taxation was to place the burden on the shoulders of the people who were able to bear it, and to adjust the burden so that there was an equality of sacrifice. As it appeared that in dealing with reversions the taxation proposed by the Government would be unfair in its incidence, some means ought to be devised by which it could be dealt with with less inconvenience and without unfairness. Of course, he knew that the object of the Government was to hit the owners of ground-rents. It was said that if a man had ground-rents and if they were small ground-rents there might be a valuable reversion. It was said that next to nothing was paid upon ground-rents, that the owners saved up money by the accretion of the value in the reversion, and that a man who early in life bought ground-rents with a reversion somewhat distant saved up the increasing value without paying any taxation upon it. That was a very plausible argument, and he admitted that there was a good deal in it, and that in some form or another such increasing value should be taxed, but he could not help thinking that the Government proposal of taxation was too drastic. He knew there were cases of considerable estates in the North of London two-thirds of which he supposed were held by the lessees on peppercorn ground-rents, and where the rack-rental would fall in in 30 or 40 years. Upon such estates as those he admitted that a charge of next to nothing in respect of the peppercorn rental was unfair, but to charge upon them the capital value in prospect of the reversions falling in in 30 or 40 years hence was equally unfair. Therefore, he thought some practical course should be adopted by which under a particular scale, or some different postponement of payment to that suggested by the Government, the duty on the capital value should be spread over a period of time, and gradually and proportionately obtained. He was not prepared to suggest at the present moment an exact practical mode of dealing with the matter. It was a very difficult and intricate question. While, on the one hand, he thought the present system worked to a certain extent unfairly and perhaps too advantageously to the owners of reversions, on the other hand he believed the proposals of the Government would place upon them far more taxation than they ought to bear. He was not raising this difficulty as an insuperable objection to the principle of taxing reversions, but he did think that the proposals of the Government erred very much on the side of injustice. The Government had at their back an hon. and learned Gentleman of great distinction who had made some novel proposals with reference to the taxation of ground values in London. Surely the ingenuity of that hon. and learned Gentleman was equal to suggesting to the Government an application of some of the principles which he enumerated in respect to County Council taxation in London, in order to enable them to bring forward some proposal which, while it would give to the country a fair and reasonable taxation upon reversions upon present, as well as future interest should not have the confiscatory effect which the present proposals of the Government had. To tax this interest from the point at which it began up to the time that it fell into possession; to tax it from time to time upon what was estimated to be the capital value, when perhaps there was no income or scarcely any income to provide for the tax, and then perhaps to tax it again when it fell into possession on its then full value, seemed to him to be a confiscatory system of taxation which he did not think that the sense of fair dealing, which the House of Commons entertained, would permit. He was quite ready to admit that it was a difficult question, a large and complicated question, because of the extraordinary complexity connected with the system of ground rents and reversions, especially in London, and that it could not be dealt with off-hand by an Amendment such as they were now discussing. But as the Mover of the Amendment had said, they could take a Division upon the principle underlying his proposal. It was to emphasise their objections to the particular proposals of the Government rather than to commit themselves to the Amendment before them that, if there was a Division, they would divide against the Government. The subject was one worthy of the most serious consideration of the Government, and he believed that unless they made some concession with regard to reversions, they would incur the disapprobation of all just and reasonable and right thinking men, who, while they believed that reversion-holders ought to pay what was fair and reasonable, objected to crushing them under the drastic impositions which were proposed in the Bill.

MR. JACKSON (Leeds, N.)

said, he rose for the purpose of asking the Solicitor General a question. In regard to these reversions, he would ask the hon. and learned Gentleman if he could tell them whether reversions would come within the category under which the Estate Duty might be paid by eight yearly instalments? He could imagine, with regard to reversions to real property, that possibly they might come under the provision for payment by the eight yearly instalments; but this was something in the nature of reversion to personal property—something in the nature of Consols or Railway Stock. It might be that a person who had invested his money in the reversion of this personal property might practically have invested all his money, or nearly all, and it might be extremely difficult if his executors were called upon to pay the Estate Duty upon reversions which had not fallen in. How was he to raise the money? He must either sell the reversion or realise it—and surely that was not the object of the Government—or he must mortgage it. It seemed to him there would be some relief if it was clear that in this case also the duty must be paid by instalments.

MR. R. T. REID

made a reply which was inaudible in the Gallery.

MR. T. H. BOLTON

said, the mode of dealing with the matter proposed by the Government was unsatisfactory. He understood that, taking the case of a present ground rent of £5 a year with the reversion to a rack-rental of £50 a year, 50 years hence there would have to be paid on the death of the owner next year the capital saleable value of the £5 a year, and also the present value of the reversion to the additional £45 a year 49 years hence, and there would be the option of postponing the payment of the duty on the reversion until the end of the 49 years. But supposing that the successor to this property died a few years afterwards, and another owner came into possession, was he to have similar taxation imposed upon him, and were five or six other people who might come into possession before the reversion fell in to have like taxation to bear? In that case what would be the procedure as the various taxations accrued if successive owners postponed payment of duty on the reversions? Would each of the taxations carry interest, and was all this postponed duty and interest to be reckoned up and charged on the estate at the end of 50 years when the reversion fell in? And when that event happened, and the full duty on the capital value had to be paid by the person in possession of the full rack rental, how was he to recover their proportions from the estates of former owners? Was this to be a continual encumbrance in favour of the Government? And, if so, what machinery had they to enable them to carry the process through? How was the property to be dealt with, and how were the holders to know what the charges would be?

MR. R. T. REID

said, the hon. Member made a speech in the course of which he said it was essential that all the duty on reversion should be paid at once. He did not interrupt him, because he thought he was familiar with the nature of the subject which they were discussing. Afterwards a suggestion was made that the tax was an unjust one, and then the hon. Gentleman said what a monstrous thing it was not to defer the collection. [A cry of "No!"] Well, he would say no more about it, but leave it to the Committee. The hon. Gentleman would find the information he wanted in Subsection 4 of the clause; and with regard to the question asked as to what was meant by the term "interest" in expectancy, if the hon. Gentleman would turn to Clause 18, page 12, line 18, he would find the words— The expression 'interest in expectancy' includes an estate in remainder or reversion, and every other future interest, whether vested or contingent.

SIR R. WEBSTER (Isle of Wight)

said, the Solicitor General, in order to meet certain arguments used by the hon. Member for St. Pancras, said they were to look at Sub-section 4 of the clause. They found by that clause that the duty was to be paid as and when the reversions came in. That brought out in strong relief the objections they had been urging. Where there were three or four successions in a short time, the reversion becoming nearer, the capital value would be larger, and the difficulties which would arise out of these successions had not been provided for. It was said that all the charges were to be piled up until the reversion came in. If that was the only answer that could be given, he should very much hope that the Government would reconsider the matter.

MR. W. AMBROSE (Middlesex, Harrow)

said, the definition referred to by the Solicitor General created a difficulty in this case, because the expression "interest in expectancy" included an interest in the remainder of a reversion. The hon. Member for St. Pancras had given the case of a ground-rent of £5 a year with reversion to the property in a short period. In every case where there was a lease the interest of the landlord was a reversion. Instead of being £5 a year it might be £1,000 a year rack rent, and on the termination of the lease the landlord might be able to get £2,000 a year or more. The interest would include the interest in possession, which would not be included in the term "interest in expectation," as usually understood. Interest in expectation applied where upon the death of somebody a property was to be sold and the proceeds divided among certain individuals. He was not prepared to say that this Amendment met the difficulty, but it was one that needed the further attention of the Government.

MR. CARSON (Dublin University)

said, he had an Amendment further down on the Paper which by reason of the Forms of the House he would not be able to move, and so he wished to mention it now. The Motion before the House at present was, as he understood it, that the words "Allowance shall not be made" shall stand part of the Bill.

THE CHAIRMAN

No, to leave out Sub-section 2.

MR. CARSON

said, his Amendment was to the same effect. Therefore, if the Committee now decided that the sub section was to stand part of the Bill he would be practically shut out from moving the Amendment which stood in his name. He was not going to enter at all into the questions raised and so fully discussed upon the Amendment of the hon. Member for Islington; but he wished to direct the attention of the Government to the very serious proposal that was made in the second sub-section of Section 6. What was the proposal? It was that an executor, in the event of a testator leaving any foreign estate, was not to be allowed, in the first instance at all events, to deduct the amount of any debts due by the testator abroad save to the extent of this foreign estate, and out of this estate alone. The result of that would be that no matter how small might be the amount of property left by a testator abroad, and no matter how large might be his debts, the duty must, in the first instance, be paid, without de ducting these debts, by the executor in this country. The debts of the testator and the property abroad had no relation at all under the Bill; and while the executor must pay the duty in respect of assets in this country, he must pay the debts—

MR. COURTNEY

said, he was very unwilling to do so, but he must rise to Order. He understood they had got an Amendment before them moved by the hon. and learned Member which related to Sub section 4, and had nothing in the world to do with Sub-section 2.

SIR R. WEBSTER

I think the Question has been put as it stands on the Paper. You, Mr. Chairman, have put the Question that the words "An allowance shall not be made" stand part of the sub-section.

MR. R. T. REID

said, he understood that the discussion was in Order.

SIR R. WEBSTER

May I not urge that if the Amendment is withdrawn it can then be put as an addition to the first sub-section, and then you, Sir, need not put the Question which involves the first four words of Sub-section 2. A very serious question arises on Sub-section 2, and we do not want to be shut out from debate upon it.

MR. R. T. REID

was understood to say that this matter had been under discussion for an hour and a-half. He hoped that it was not proposed to re-discuss it.

MR. A. J. BALFOUR (Manchester, E.)

I understand there is an Amendment before the Committee that has been fully debated. If that Amendment, be not withdrawn it will be impossible for another perfectly legitimate Amendment to be discussed. No one desires to unduly prolong debate on the Amendment before the Committee; but the real question we have to decide is not whether this matter shall come up for discussion again, but what plan can be devised by which a perfectly legitimate Amendment can be dealt with without an undue prolongation of debate. What we desire is that nothing that is really legitimate shall be kept out of the purview of our discussion.

MR. COURTNEY

If the hon. Gentleman agrees to withdraw his Amendment on the understanding that the discussion is not to be renewed, that would simplify the whole business.

THE CHAIRMAN

If my attention had been called to this originally, I should have suggested that the hon. Gentleman should have moved the Amendment lower down on the Paper. I have pointed out that in my opinion the Amendment ought to come in after Section 4. Perhaps the Committee will be willing that for the convenience of the House the Amendment should be withdrawn. [A cry of "No!"]

*MR. BARTLEY

I must suggest that this Amendment be withdrawn and that we take a Division upon it as a new subsection. It is a little awkward to divide to-morrow upon an Amendment which has been discussed to-day.

MR. H. H. FOWLER

We only object to this protracted discussion being repeated.

THE CHAIRMAN

I think the best course would be that this Amendment be withdrawn, and that then the Amendment should be moved as a separate subsection.

Amendment, by leave, withdrawn.

MR. BARTLEY moved the following as a new sub-section:— In calculating the principal value of an estate reversions shall not be taken into account, provided that on the sale of such reversion, or on the possessor raising money or any consideration for his interest in such reversion, Estate Duty shall be paid on the value of the reversion as estimated by this section of this Act on the scale given in Section 14 of this Act, according to the aggregated value of the last estate of which the reversion formed a part, and no person shall be able to give a good discharge or receipt for any sale or loan unless it is certified by the Commissioners that there is no claim for Estate Duty thereon, and the Commissioners shall, on application in the prescribed form, if satisfied that there is no claim, give such certificate.

Question put.

The Committee divided:—Ayes 66; Noes 108.—(Division List, No. 101.)

MR. CARSON (Dublin University) moved to leave out Sub-section 2. He said the effect of the sub-section was that an executor could not take out of the general assets of the deceased any debts due by the testator abroad. If the subsection was carried, not only would great hardship be inflicted upon the beneficiaries who were entitled to the assets of the deceased, but upon the executor, in consequence of the great length of time that must ensue before the estate could be wound up. He could see no reason in the world why the debts abroad should not be deducted like any other debts of the deceased. Many persons who would have to pay duty, or whose executors would have to pay duty, under this Bill would be merchants and owners in this country carrying on a considerable trade abroad, and consequently a large proportion of their debts might be debts payable abroad. He could understand the sub-section if it said that the creditors of deceased abroad could only resort to the foreign property of the testator, because in that case they would protect the executor from being sued in this country. He would point out that, while the executor would have to go abroad to realise foreign property, the creditors abroad could insist upon payment of their debts, not out of the foreign assets, but out of assets in this country. So far as foreign creditors were concerned, every creditor had a right to be paid by the executor in England out of any assets in his hands. That would dislocate the whole method of computing the duty that had to be paid. If the debts were deducted—the debts which would have to be paid by the executor as others must be paid—the effect would be to reduce the value of the estate, so that upon a given property there might be paid only 4 instead of 5 per cent. The result of that would be that the beneficiaries at home—the parties who were entitled to this money—would be delayed in receipt of the property until the foreign assets had been realised by the executor; and when they had been realised he must frame an entirely different account, not concerning the foreign debts only, but concerning the whole estate, and bringing in and reducing the duty originally paid, say, at 5 per cent. to 4 per cent. The Amendment of the Chancellor of the Exchequer said that if the debts contracted were paid in England the duty might be reduced, and therefore he ought to allow it to be deducted from the total aggregate sum, and if the executor was liable for debts in England he did not think the position taken up by the right hon. Gentleman in putting the Amendment on the Paper was an original one. If debt was payable out of the English assets it was to all intents and purposes English debt so far as the assets were concerned. As regarded the second portion of the sub-section, it seemed to him that a most complicated duty was put upon the executor, and he must say that when people came to realise what were the duties and the complications which were being thrown on the unfortunate executor under this Bill, he did not believe they would meet with a sane man in the United Kingdom who would under- take the duties of an executor. He would have to prepare a new account; he would have to be prepared, if he wanted to get back this money, to satisfy the Commissioners that the personal property of the deceased situated out of the United Kingdom was insufficient to pay the debts. That meant before he got back a shilling of this money he would have to take out an administration or probate, or whatever corresponded to it in the foreign country, and he would then have to proceed as best he could to realise the different classes of property that the deceased might leave there. If he succeeded, well and good. But supposing he found he could not realise them, he must pay expenses out of his own pocket and bring over evidence from these foreign countries that would satisfy the Commissioners. If they threw that duty upon executors then they threw upon them duties which would cause trouble to them, and involve a vast amount of expense in the administration of the estate of the deceased. If they were going to aggregate and consider foreign property in every respect, so far as duty was concerned, as English property, why should they distinguish between the foreign and English debts? He thought if this sub-section were left out it would not take a shilling away from the Chancellor of the Exchequer. This was a matter of administration, and of carrying out the intention of the Act, and, above all, of justice to those who had a right to be enabled to effect the speedy winding up of the estates with which they were concerned. He submitted that the hon. and learned Solicitor General might favourably consider this Amendment.

Amendment proposed, in page 4, line 19, to leave out Sub-section (2).—(Mr. Carson.)

Question proposed, "That 'Subsection 2' stand part of the Clause."

MR. R. T. REID

said, the hon. and learned Member could not have fully considered what would be the effect of the excision of the second sub-section. They were all agreed, he presumed, in regard to the question of foreign assets, that if the duty was to be charged on those assets that duty should be obtained. But, if the Amendment was adopted, the position would be that foreign creditors might come and obtain payment of their debts from the English assets, and thereby reduce the amount of property in this country liable to the Estate Duty, and there would be no means afterwards of obtaining payment of the Estate Duty out of the foreign assets of the property.

SIR R. WEBSTER

said, that with every desire to appreciate the arguments of the hon. and learned Solicitor General, he failed to understand the justice of this sub-section. A foreign asset might be in India, but the debt might be owed in France; and there was not a word in the sub-section as it stood which would have the effect of forcing a foreign creditor with claims against English assets to go against the foreign assets. The Solicitor General seemed to imagine that the sub-section would force the foreign creditor to spare the English assets, and to go against the foreign assets. He (Sir R. Webster) believed there was not one single word in the sub-section which would have that effect. Did the hon. and learned Gentleman deny that foreign assets were to be brought in for the purpose of aggregation or graduation, or that there would be an increased percentage payable in consequence, although the greater part of the foreign assets might be eaten up by foreign debts? Let the Government aggregate if they liked, but, in the name of common honesty, let them not treat a man's estate as being worth £30,000 when, as a matter of fact, it was only worth £15,000. He wished to know whether it was the intention of the Government to have the calculation as to the amount of duty chargeable set right, if it proved to have been erroneous through neglect to include in it the foreign debts? Supposing an estate which was supposed to be worth £50,000 proved to be burdened with £15,000 worth of debt, was the original calculation to be allowed to stand? There was nothing to prevent the foreign creditor coming to England and getting a judgment against the English assets. The clause was wholly inapplicable to such a scheme of taxation as the Government had devised, and he asked the Committee seriously to consider what they were doing before they consented to pass it.

*MR. GIBSON BOWLES

said, he could not understand what the Solicitor General meant by saying that this was the law now.

MR. R. T. REID

I would refer the hon. Gentleman to Section 28 of the Act of 1881.

*MR. GIBSON BOWLES

said, that was exactly where he joined issue with the hon. and learned Gentleman. He held the Act in his hand, and that section referred exclusively to the property in the affidavit of inventory, which meant the property in this country.

MR. R. T. REID

It deals with debts due from the deceased to persons resident in the United Kingdom. In that case, as in this, debts are to be deducted.

SIR R. WEBSTER

Might I be allowed to point out that, under the Act of 1881, foreign property was not taxed at all, and therefore the analogy would not apply?

*MR. GIBSON BOWLES

said, that was just what he was about to say. Section 28 of the Act of 1881, no doubt, provided that the debts to be deducted were only debts due to persons resident in the United Kingdom. But from what were those debts to be deducted? They were to be deducted from the property comprised in the affidavit of inventory, and that included only property in the United Kingdom. Under the present Bill, however, property, wherever situate, was to be aggregated, and yet the debts of foreigners were not to be deducted, although they diminished the property itself. Inasmuch as the Bill proposed to deal with foreign property, foreign debts ought to be deducted, just as English debts were deducted from English property under the Act of 1881. If the Government were prepared to give up the foreign property, as they would have to give it up, he would raise no objection at all to the application of Section 28 of the Act of 1881 to the condition of things to which that section was intended to apply.

MR. GOSCHEN

The trading classes of this country are very much interested in this particular clause, as it will deeply affect our foreign trade. The Solicitor General has assumed that there is a kind of foreign property which might in all cases be set off against debts due to foreigners, but evidently it would be absurd to say that if there was property in France it could be set off against a debt due in India.

MR. R. T. REID

I never used the term "set off." I referred to a case in which the English Courts had declined to allow English assets to be divided amongst foreign creditors unless they were satisfied that there were not foreign assets for foreign creditors to deal with.

MR. GOSCHEN

The argument on which this clause is based is that there is a certain amount of foreign property to be set off against the debts due to foreigners. We say that the assets in one foreign country cannot be brought into account in any degree whatever with regard to debts due in another country. The case has been put of an Englishman who owes money in India but has certain assets in France. As the Bill is drawn the assets in France might be set against the debt due in India, and that debt would have to be deducted. It will be most unjust if there are debts due to foreigners in various parts of the world and those debts are not deducted, just as an English debt would be, from the estate of the deceased. I appreciate the efforts of the Inland Revenue Department to secure a distinct recognition of all the assets, and I understand the meaning of this sub-section to be that the executors must give a proper account of all the foreign assets, and that no debts due to foreigners are to be recognised until all those assets have been brought into the account. I do not think, however, that you can fairly lump everything together in this way. This matter must affect an enormous number of people trading in foreign countries. There may be a manufacturer here who owes money for jute in India and for hides in Buenos Ayres. Those debts represent a diminution in the value of his estate. Is it fair that they should not be taken into consideration? It appears to me that no effort that is made to get hold of property in foreign countries should be allowed to interfere with the deduction of those debts. I feel confident that it cannot be the object or the wish of the Government to inflict any injustice on English- men trading with foreign countries and to exclude from the deductions which will probably be made from the estates of such men debts which are due in those countries. I do trust that the Government will see the necessity of dealing fairly and equitably with the case, and that they will not pursue a course which must hamper the transactions of English traders with foreign countries.

MR. BOUSFIELD (Hackney, N.)

thought that the Government might meet the Opposition half way in this matter. He quite followed the argument of the Solicitor General (Mr. R. T. Reid) in reference to having Estate Duty paid on property abroad. That argument, however, only affected the desirability of having the payment made in the first instance on a sort of gross value. It was wholly unnecessary, in fixing the rate of graduation, to take these debts into account. In fixing that rate the actual value of a man's estate must be taken into account. Supposing a man had £20,000 in Belgium and owed £20,000 in France, the two amounts ought to balance one another in fixing the rate of graduation. If the debt of £20,000 were not deducted a fictitious value would be given to the estate, and this would introduce immense complications when the estate afterwards was wound up.

MR. A. J. BALFOUR

I hope that we may bring this discussion to a rapid conclusion, so that we may proceed with the other business that is before the Committee; but I do think that before doing so we must have some reply to the arguments that have been used. I think it will be admitted by the Secretary of State for India (Mr. H. H. Fowler), who has been present during the Debate, that there is a point to be met. The difficulty is this: that while you propose to reckon among the assets of an Englishman, for the purpose of taxing the money he leaves, that which is owed to him by foreigners, you do not deduct what he owes to them. That is not fair. If the Government will admit that there is here some injustice to be remedied, and will do their best to find some method of meeting it before the Report stage, I hope we may proceed with other business. The question is one of great im- portance, not so much to those who you have said throughout these discussions are speaking in the interests of real property, but to the great trading classes of the country whose interests have been to a great extent ignored by those who have been considering this Bill.

MR. JACKSON (Leeds, N.)

I do not want to go through the points which have been so ably put by those who have preceded me in this Debate. The Government decline even to attempt to make an answer—

SIR W. HARCOURT

We were just about to make an answer when you got up.

MR. JACKSON

I was not aware of that, and I will gladly sit down again.

THE SECRETARY OF STATE FOR INDIA (Mr. H. H. FOWLER, Wolverhampton, E.)

I was going to respond to the appeal that had been made by the Leader of the Opposition (Mr. A. J. Balfour) when the right hon. Gentleman rose. I am quite willing to admit that there will be considerable administrative difficulty in carrying this clause out. The Commissioners of Inland Revenue are quite aware of the effect of the clause, and their intention is not to commit an act of unfairness, but to secure in the first instance the payment of the Estate Duty. If there are foreign assets available against foreign debts, the one will under the clause be set against the other, whilst if the foreign assets are inferior to the foreign liabilities the latter will then be reckoned against the English assets. The question is full of difficulties. This is an administrative question, and I am sure that the right hon. Gentleman opposite will recognise that it is one on which the Government must be guided by the officers of the Inland Revenue Department. The Government have no desire to do any injustice in the matter, but they wish to prevent what they believe to be a possible danger—namely, the setting off of foreign debts against English assets, so as to interfere with the payment of the Estate Duty. We will consider the question with the officers of Inland Revenue, and before the Report we hope we shall be able to get over the difficulty.

MR. JACKSON

I am very glad to learn that the Government are prepared to re-consider this matter. I can assure the Government and the Committee that, from my point of view, this is not simply a question of administrative difficulty. I represent a constituency which may be called a commercial constituency, and there are a great many gentlemen sitting opposite who are in a similar position. I will first put a simple case which, I am sure, the Government will admit must be met. I will take a manufacturer in Bradford, who buys his wool in Australia. Suppose he has bought £50,000 worth of wool in Australia, and owes the money for it, are you going to count the £50,000 worth of wool as part of his assets, and to exclude the debt? That certainly is the proposal of the Bill. You have no business to count the wool as part of the man's assets unless you allow the debt to be deducted. I know the right hon. Gentleman will say that you are going to deduct it afterwards. Then, of course, your administrative difficulty comes in, because by including the £50,000 worth of wool amongst the assets you have put the man into a different category as far as the percentage he has to pay is concerned.

MR. H. H. FOWLER

In a case of that kind the debt would be allowed in the first instance.

MR. JACKSON

Well, let me take another case—an everyday case. I happen to be in business, and most of my purchases are made in India, so that my debts are contracted in India. Suppose I am owing £50,000, if you like, for hides bought in India. I happen to have some property in Australia. In the first instance you are going to take as part of my assets the goods bought in India and you are not going to deduct the amount I owe to my Indian creditors until somebody has realised my Australian property and has satisfied the Inland Revenue Commissioners that the amount so realised is not sufficient to pay my Indian debts. How is the executor to satisfy the Inland Revenue Commissioners? Must he satisfy them not only that he has realised the Australian property, but that he has realised its full value? Well, the Government have promised to consider the questions. I have endeavoured to put before them practical cases, and I am sure that those gentlemen connected with commerce who sit behind the Government will admit from their own personal experience and observation that those cases are not merely cases brought forward for the purpose of argument, but are cases of almost daily occurrence in the commercial community.

SIR W. HARCOURT

If the clause be open to the objections which have been stated it shall certainly be amended.

MR. GOSCHEN

said, he thought the Committee might take it that the Government admitted that at all events the property and the debts dealt with should be in the same country. That would be scarcely sufficient. If a man had debts in India and a coffee plantation in Ceylon would it be fair because he had that coffee plantation to refuse him the power of deducting the debts in India?

MR. CARSON

After the statement made on behalf of the Government, I ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

On Motion of Sir W. HARCOURT, the following Amendment was agreed to:—Page 4, line 20, after "Kingdom," insert "unless contracted to be paid in the United Kingdom."

On Motion of Mr. BUTCHER, the following Amendment was agreed to:—To add, after the words last inserted "or are charged on property situate within the United Kingdom."

MR. R. T. REID

I propose to ask to withdraw Sub-section 3 of the clause. It relates to dealings by the deceased with property for money or money's worth. This matter has been discussed several times, and the Government are under a pledge to bring in a clause dealing with the whole question. I hope to put that clause down on Monday, and it will cover the entire ground of this sub-section.

Amendment proposed, to leave out Sub-section 3.—(Mr. R. T. Reid.)

Question proposed, "That Sub-section 3 stand part of the Clause."

SIR R. WEBSTER

pointed out that the sub-section was limited to transactions by the deceased, and said that consideration ought also to be given to dealings by other persons who were legally entitled to deal with the property.

Question put, and negatived.

MR. A. J. BALFOUR

The Amendment which I now have to move is the one which the Chancellor of the Exchequer was good enough to tell the Committee earlier in the evening he was prepared on behalf of the Government to accept. I am glad he is going to accept it, for, though I do not think that in any important sense it modifies the provisions of the Bill or alters the principles he announced in his Second Reading speech as governing his policy upon this matter, it will, I think, allay some fears with regard to the method in which the valuation of the principal value of an estate is to be taken. The Amendment itself applies only to agricultural land. I do not pretend that it meets the difficulties or the grievances which I recognise as attaching to the Government plan of dealing with urban land, with works of art, and with other forms of property which bring no income in to their possessor—

SIR W. HARCOURT

here made a remark which did not reach the Reporters' Gallery.

MR. A. J. BALFOUR

I will take advantage of the right hon. Gentleman's interruption to deal with the Amendment, first, as regards the Preamble, and then as regards the proviso. The general principle laid down in the first paragraph of my Amendment applies to all property. I think that if the Government are going to proceed at all by way of levying a large part of their revenue upon property left by a deceased person it is only fair that the actual value of that property should be estimated in all cases, not according to the income which it brings in, but according to the value it would fetch at a forced sale. By a forced sale I mean a sale which has to take place at a particular time, irrespective of whether that time is favourable for a sale of that particular kind of property or not. If you are going to deal with the actual value the only conceivable way of dealing with it is by taking the property at the time of the death and estimating what it would fetch if sold in the open market. The Government have laid down this principle largely with the view of throwing additional taxation on urban and other property whose income does not correspond with its value. I go so far with the Government as to admit that that kind of property should bear its fail-share of taxation; where I differ from them is in thinking that they should not exact the full value or the capital value when it depends upon some future increment until that future increment has been reached. It may be, and I think is, rather hard, and in some respects rather absurd, to tax the speculative value of property which does not bring in a present income. You may say that property is worth so much because at some future time it will bring in so much; but that is a matter of speculation, and, speaking for myself, I do not think it desirable or even fair that you should exact from the owners of this kind of property the amount of the Death Duty until the speculative prospective value has been realised. When it has been realised, exact to the uttermost farthing what that property owes to the public; but I do not myself think it fair that you should exact from it a Death Duty which the owner cannot possibly pay if he depends merely upon the income of the property. I am sorry, therefore, that the Government have adopted a plan which may make it necessary for the owner to borrow in order to pay the Death Duty. My Amendment in the main does not include the urban property or property which has a speculative value, but deals chiefly with agricultural property. It is to the effect of the second paragraph that I desire to call the attention of Members. The Government, by their plan of taxing the capital or principal value, hope, as I said before, that they will bring into their net at once not only the urban property in so far as it produces a present income, but that property in so far as it has a present value based upon the expectation of the future. If they take that view and claim that advantage, they must take the corresponding disadvantage of estimating agricultural land purely upon its actual value; it must not be estimated simply upon the amount of income it may bring in, but upon its future value, as shown by the prices which can be obtained in the open market for laud in the same neighbourhood. The main object of my Amendment is to secure that the owners of agricultural land, which is practically or very nearly unsaleable, shall pay upon the value which such land will fetch in the open market. At present the Inland Revenue Authorities are in the habit of estimating the value of such property not according to what it will fetch in the open market, but according to some value which they gather it will fetch because it has a certain income. It ought to be estimated on the principle the Government have laid down, simply according to the money it would fetch if put under the hammer at the time its owner dies. I certainly am of opinion that if this principle, which is obviously equitable if the views of the Government be accurate, be adopted it will really diminish greatly the burden which certain owners of agricultural land feel will be thrown upon their successors if the present proposals of the Government are carried into law. So far I have dealt simply with the mode of estimating the gross value—namely, by requiring the Inland Revenue to make some estimate of what property would fetch in the open market, subject, of course, to an appeal to the High Court. I feel, however, that we ought not to leave it to the Department absolutely to settle questions of this great importance, and that, in the interest both of the Department itself and of the owners of property, they ought to know what is the superior limit beyond which the value of property of this character will never be estimated for the purposes of the Death Duty. It is in order to carry out that object that I have framed the last few lines of the second paragraph of my Amendment. I there lay it down that there shall in no case be more than 25 years' purchase. Of course, I admit that 25 years' purchase is probably far too much for a great deal of the agricultural land of this country. There is nothing in the Amendment, however, which in the slightest degree suggests that 25 years is a limit which ought to be approached, nor do I put it down as a guiding principle to direct the Department as to what value they should put upon land. It is merely, as I have said, "superior limit, and nothing but a superior limit. The Department are directed in the most explicit terms by the first part of the Amendment to consider not what the income of the possessor of the property may be nor what number of years' purchase they would like to assess his property at, but what the property would fetch in the open market at that particular moment. I have introduced a provision into the Amendment for determining what constitutes the net income, 25 years' purchase of which gives us the superior limit, beyond which the valuation of agricultural property is not to extend. I think we ought to acknowledge that the Government have endeavoured to meet us in a fair spirit with regard to the abatements from the gross income which they allow in making the estimate. It has always been an extremely difficult thing to determine what constitutes the net annual value of agricultural property, and probably every owner of property would be inclined to give you a different view of what he meant by net annual value. The abatements included in my Amendment are, broadly speaking and without going into details, insurance, repairs, public burdens and management. I think that these four heads do on the whole include all that we can ask the Government to allow us as the difference between the gross income and the net income of property. I do not say that the contention of the Government is without force, that outgoings other than repairs should be included. Anybody who has set to work to devise a clause which shall include not only repairs but great structural alterations, great schemes of drainage, cottage construction, and so on among the ordinary outgoings of property, must have felt he had engaged in a task which he could hardly bring to a successful issue. The four great heads of insurance, repairs, public burdens, and management do, I think, on the whole include all we can fairly ask the Government to concede as abatements upon the gross income, in order to arrive at the net income; and, for my own part, I beg to express my thanks to the Government for the course they have taken in this matter. I need not dwell longer upon an Amendment which has already been accepted, except to say that hon. Gentlemen who are interested in agricultural property must have seen what we gain by the adoption of this Amendment. In the first place, we secure that the property shall be estimated upon the market value at the time of the death of the deceased—to use the somewhat clumsy phrase that appears in each clause of this Bill; in the next place, we secure a superior limit of 25 years' purchase; and, in the third place, we make it plain that the net income is to be estimated after taking into account certain deductions, which up to the present date have not, I think, been recognised in any Act of Parliament. These are not inconsiderable objects to attain, and I desire to express my own thanks to the Government for the spirit in which they have met us, and which I desire in every way to reciprocate.

Amendment proposed, in page 4, line 34, at end, insert— The principal value of any property shall be estimated to be the price which, in the opinion of the Commissioners, such property would fetch if sold in the open market at the time of the death of the deceased. Provided that, in the case of any agricultural property, where no part of the principal value is due to the expectation of an increased income from such property, the principal value shall not exceed twenty-five times the annual value as assessed under Schedule A of the Income Tax Acts, after making such deductions as have not been allowed in that assessment and are allowed under 'The Succession Duty Act, 1853,' and making a deduction for expenses of management not exceeding 5 per cent. of the annual value so assessed."—(Mr. A. J. Balfour)

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

*SIR W. HARCOURT

It is not necessary for me to add many words to what the right hon. Gentleman the Leader of the Opposition (Mr. A. J. Balfour) has said. It is a great satisfaction to the Government to know that as far as it goes this Amendment will be satisfactory to the great interests on behalf of whom in this respect he speaks. The first part of the Amendment expresses what really has always been the intention of the Government. We always meant that the principal value should be the market value. I stated when this measure was introduced that it was to be what the property would sell for at the time. As regards agricultural land, I said at a very early part of the proceedings I was very desirous that the case of such land should be met in a fair and a favourable spirit. I also said in introducing this measure to the House that, though we desired that the principle of equality in charge should prevail, we wished that the method of levying the charge should be made as far as possible appropriate to the particular character of the property on which it was placed. I said we had a perfectly open mind as to the manner of levying the charge, and that we were very desirous of learning as far as we could in the discussion of the matter what was the best and fairest manner of adapting the method of levying the charge to the character of the property dealt with. That agricultural land has a character different from other classes of property no one will deny; it is let at what is often called a rack rent, and where that is the case the annual value is really the measure of its capital value. In this respect agricultural land differs from some other kinds of realty, and therefore it did seem to us that there was a fair ground for treating agricultural land in accordance with its natural characteristics. This Amendment seems fairly to deal with the matter, and there is a great advantage I think in its form, inasmuch as it provides for the adoption of the Income Tax value which is already ascertained and will render it unnecessary to obtain several valuations upon each class of property. By this means you escape many difficulties that might otherwise be raised with reference to timber, and so on. The Amendment, then, takes the allowances under the Succession Duty Act and adds a new allowance, which has never before been claimed, for expenses of management. These seem to be the elements of the case, and I am very glad to think that the Government are able to accept a proposal which seems to be satisfactory to the right hon. Gentleman and his supporters.

*MR. A. J. BALFOUR (Manchester, E.)

There is one thing I wish to make clear. In agricultural property I include practically all kinds of real property other than land used for the purpose of building, or with a prospective building value. I include parks, mansions, houses, pasture and tillage farms.

SIR W. HARCOURT

As well as agricultural farms.

MR. A. J. BALFOUR

I understand, according to the view of the Government, that these things are all included in the words "agricultural property," and I desire it to be on record that the meaning of the Government in accepting the Amendment is that the words "agricultural property" include all these various kinds of property which I have endeavoured to enumerate, and not merely farms and land which are used for purposes of tillage or pasture.

MR. HENEAGE (Great Grimsby)

said, a fair and reasonable compromise had been arrived at, and there was now a fair basis on which agricultural land could be fairly assessed. He understood from what the Leader of the Opposition had just stated that agricultural land included every sort and description of land, whether small allotments or large farms. He did not wish to raise the question of urban property when they were discussing agricultural land, but there could be no doubt that what was required when there was an assimilation between real and personal property was that there should be some deduction in order to get a fair value to start with.

MAJOR DARWIN (Staffordshire, Lichfield)

said, he was very glad that the Government had seen their way to accept this Amendment, but he would have also liked that the right hon. Gentleman the Leader of the Opposition had been able to persuade the Government to accept his views with regard to urban land. He thought the Commission had looked at such lands too much from the point of view of the owner. There were several other points of view which ought not to be overlooked. There had been several allusions during the Debates to places like Holland House, where the prospective value was very great, but where the annual value was very small. He thought it was generally admitted that the result of the Bill would be to throw such estates as that into the market in the course of time, because it was practically certain that the duties in respect of successive deaths would be too much for anyone to stand the strain. This would be generally agreed, but he did not think the Commission or the country realised now this same circumstance would apply to small estates equally with large. As an illustration of what he meant he would take the case of a row of cottages with gardens. It seemed to him practically certain that the system of estimating land according to its prospective value would in time have the result of taking away those gardens from the cottages where it would be possible to take them. Wherever it would be possible to build on a vacant space in towns he believed it would be built on. If they estimated duties on the prospective value of land, then the builders were perfectly certain to endeavour to realise this prospective value, and the result of this method of taxation would be to increase the overcrowding of the towns. Anyone who looked to the American system of taxing prospective values would see the disastrous results which it had on the town populations. For this reason it seemed to him that it would have been much better if the Government could have been induced to adopt some different view with regard to urban land. If the proposed system of taxation were put in force another result would be to overcrowd the towns and to increase the actual value of urban lands. From this point of view it appeared to him that the result would be simply disastrous to the towns.

THE CHAIRMAN

The hon. and gallant Gentleman is going now considerably beyond the scope of the Amendment.

MR. CHAPLIN (Lincolnshire, Sleaford)

I hope the right hon. Gentlemen who are naturally anxious to make progress with this Bill will allow me to say one word on this Amendment. I understand it is the view of the Chancellor of the Exchequer that generally speaking agricultural land is let at a rack-rent. That is to say, that the annual value of the land should be taken as the measure of the actual value. I would like to say one word on this point so that it may be on record. I do not agree, in the first place, that agricultural land is usually let at a rack-rent, and that the annual value of land at present in many districts of the country can be safely taken as a measure of the actual value. And for this reason, that there are districts in which, although agricultural land may still let for a certain rent, it is almost impossible in those very districts to find a purchaser for it at any price whatever. I merely wish to state this in order that there may be no mistake of the view we take on this side of the House on this question, although I am quite willing to recognise the conciliatory spirit which the Chancellor of the Exchequer has manifested.

*MR. GIBSON BOWLES

said, he wished to say a few practical words on two practical points. One was that the value of land was to be deduced from the assessment under Schedule (A). He did not quite know how the Government were going to ascertain the valuation under Schedule (A), for the Inland Revenue Commissioners were without any right of access to the records of the Income Tax Commissioners. It would be found necessary, he thought, that some further clause should be added to the Bill, because the Income Tax Commissioners were at present precluded from disclosing any information in their possession. Another point was that the provision to which he was referring was represented as a concession on the part of the Government—and he would admit it was to some extent a concession—but he would point out that the Government had driven a rather hard bargain as to the number of years purchase. They had taken 25 years' purchase as the maximum, but so high a maximum had never yet been fixed up to the present with regard to land. The principal value at which land was at present taken for the purposes of the Succession Duty was 24 2–5th years' purchase, and the practical point he desired to make was that inasmuch as the Succession Duty was maintained in its present condition in the Bill, the awkward result would follow that the Succession Duty would be levied on 24 2–5th years' purchase, while the Estate Duty under the same Bill would be levied on 25 years' purchase. He thought this rather an awkward contradiction in the assessment of the value of property, and that it would be necessary to amend it in some way.

MR. HEYWOOD JOHNSTONE (Sussex, Horsham)

desired to know whether timber and woods which were not let at a rack-rent, but which at the same time were valued under Schedule (A) for Income Tax, would be within the scope of the Amendment.

SIR W. HARCOURT

I understand that taking the Income Tax valuation the Amendment would appear to coves the question of timber.

Question put, and agreed to.

*MR. T. H. BOLTON moved, in page 4, line 35, after the word "expectancy," to insert the words "only one." He did not propose to repeat the arguments that were used in the earlier discussions during the evening, and which bore on Sub-section 4. He would just ask the Government to consider how far this sub-section carried out what it professed to carry out. It professed to provide that the duty on the value of reversions should be paid with the rest of the Estate Duty, or postponed until the reversions fell in. As he had pointed out, there might be several successions before a reversion actually came into possession, and in order that there might be no misunderstanding as to the duty to be paid—that there should be one payment of duty in respect of reversion—he proposed to insert the words "only one" after "expectancy" in line 35. This Amendment was suggested, after very careful consideration, by the Council of the Incorporated Law Society as necessary to give effect to what was supposed to be the intentions of the Government. He did not wish to elaborate the point, but merely desired to make the matter clear.

Amendment proposed, in page 4, line 35, after the word "expectancy," to insert the words "only one."—(Mr. T. H. Bolton.)

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

SIR W. HARCOURT

We do not consider that these words are necessary to give effect to the intentions of the Government.

Amendment, by leave, withdrawn.

*MR. GIBSON BOWLES moved, in page 4, line 36, after "paid," insert "at the option of the beneficiary." He presumed that this Amendment expressed the intention of the Government, although he would confess that he was not quite sure that he understood what the clause meant, because it seemed to him to be almost identical with the Amendment of the hon. Member for Islington, which had been negatived previously by the supporters of Her Majesty's Government. He hoped the Government would accept his Amendment.

Amendment proposed, in page 4, line 36, after the word "paid," to insert the words "at the option of the beneficiary."—(Mr. Gibson Bowles.)

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

SIR W. HARCOURT

The word "beneficiary" would hardly meet the requirements of the case. But if the hon. Member will put instead the words "at the option of the person accountable for the duties," we will accept his Amendment.

MR. GIBSON BOWLES

I move it in that form.

Amendment proposed, in page 4, line 36, after the word "paid," to insert the words "at the option of the person accountable for the duties."—(Mr. Gibson Bowles.)

Question, "That those words be there inserted," put, and agreed to.

SIR W. HARCOURT

(for the SOLICITOR GENERAL) proposed, in page 5, line 6, after the word "ascertained," to insert, as a new Sub-section, the words— The value of the benefit accruing or arising from the cessor of the interest of a deceased person in any property shall—

1. (a) if the interest extended to the whole income of the property, be the principal value of that property; and
2. (b) if the interest extended to less than the whole income of the property, be the principal value of an addition to the property equal to the income to which the interest extended."

*MR. GIBSON BOWLES

thought the Committee should have some little explanation of the intention of the Government in moving this Amendment. He himself might have moved an Amendment to line 5 previous to the Amendment of the Solicitor General, so as to raise the question of how the value of the estate was to be ascertained. Per- haps this Amendment of the Solicitor General would cover his objection, and he hoped there would be some explanation of the Amendment given.

SIR W. HARCOURT

said, there might be two different cases requiring to be dealt with: one case where the whole property was affected, and the other where it was intended to affect less than the whole income of the property.

MR. R. T. REID

said, the Amendment was a supplementary Amendment to the Amendment which he had moved, and which was carried, upon Clause 2, Subsection (b). He then said he would bring in words to explain what was the meaning of the words "benefit accruing or arising by the cession of such interest." What was to be deemed "benefit accruing by the cession of such interest"? They were not here dealing with interest of a problematical character, such as annuities. An annuity for a fixed term of, say, 50 or 60 years continued irrespective of the death of anybody, and was dependent merely upon a particular date. Therefore, if a man died holding an annuity of that character its value depended merely on the term of years there was unexpired, and on the value of the annuity itself. Different considerations arose when dealing with what was in substance settled property. In the first place, there was a life interest in an estate, and in the end a form of settlement from A to B for life or remainder in fee; but of course there might be limitations. What, then, was to be deemed a benefit accruing or arising by the cession of such interest? The view was pretty obvious. It was this: they were not estimating the value of the property which the deceased person had. What they were valuing was the benefit that arose to the property of which he was charged by being released from further obligation. The first clause of the Amendment which he was moving ran as follows:—The value to beneficiary shall, if the interest extended to the whole income of the property, be the principal value of that property. He would illustrate that again by referring to the case he had previously put of a life interest followed by an entail or estate in fee. When the person sold the life interest dropped and the full settlement duty was paid upon the benefit accruing or arising from cession of the interest of the deceased person. That was to say, it was paid upon the whole value of the property in settlement which by reason of the death had been released from the encumbrances which covered the entire property. The second subsection of the Amendment was as follows:— (b) If the interest extended to less than, the whole income of the property, be the principal value of an addition to the property equal to the income to which the interest extended. That simply meant that if the life interest was in half the property then there would be only half the property realised by the cession of that interest. That was all he thought he need say on the subject, and he begged to move the Amendment.

Amendment proposed, in page 5, line 6, after the word "ascertained," to insert as a new sub-section, the words— The value of the benefit accruing or arising from the cessor of the interest of a deceased person in any property shall—

1. (a) if the interest extended to the whole income of the property, be the principal value of that property; and
2. (b) if the interest extended to less than the whole income of the property, be the principal value of an addition to the property equal to the income to which the interest extended."—(Mr. R. T. Reid.)

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

*MR. GIBSON BOWLES

said, he was not quite sure that the Amendment carried out what was intended. Clause 2, Sub-section (b) applied to benefit arising by the cessor of any interest whether of the deceased or anybody else. The Amendment only applied to the cessor of the interest of the deceased, and was therefore much narrower than the subsection. If there was a cessor of the deceased's interest under the Amendment then the property became chargeable in the way set forth, but it did not refer to cessor upon his death of the interest of any other person. It seemed to him, therefore, that the Amendment did not carry out what the Solicitor General imagined it did—namely, the amplification of Clause 2, Sub-section (b.)

MR. BYRNE

said, he could not at all make out how this would read in with Sub-section (d) at the top of page 5. There seemed to be something wanting j in the language. The words read— Together with the rest of the estate as originally ascertained. Then came in the proposed continuation— The value of the benefit accruing or arising from the cessor of the interest of a deceased person in any property shall, if the interest extended to the whole income of the property, be the principal value of that property," &c. It was simply a clerical point, but there seemed to be something wanting.

MR. R. T. REID

said, it was a new sub-section.

MR. BYRNE

said, if it was meant to be an entirely new sub-section that answered his question.

MR. R. T. REID

thought the words, "benefit arising from the cessor of the interest," were quite clear even without the words "of a deceased person." With those words omitted, the purpose would be equally effected; but perhaps it would be better to retain the words, though it was scarcely worth arguing.

MR. MATTHEWS

said, he would like to ask a question going to the substance of the clause, and he took the simplest possible case by way of illustration. Suppose he settled £10,000 upon his son, who would enjoy the income for his life, and then upon his son's widow for her life, and after that the money to return to him. Was he really to understand that the Solicitor General was going to treat the whole of that £ 10,000 as part of the estate of his son's widow? It would go from her and her heirs; she could not dispose of it in any way; it would return to the settlor. To use the language of the clause, the cessor of the interest of a deceased person would extend to the whole income of the property, and would be regarded as part of the estate aggregated with other property, and pay duty.

MR. R. T. REID

said, this had been repeatedly discussed and explained. It was perfectly true that wherever there was an effective settlement it would be so treated, as, for instance, on A for life, B for life, afterwards on a third life, with return to settlor. There being a settlement, it was intended there should be once for all a payment in respect to the whole subject of the property. Of course, it must be paid at once; but it was not intended that it should be paid more than once. The payment must either be made on the dropping of the first life, or the payment must wait until the end of the settlement; but that would mean, perhaps, postponement for a long period of 50, 60, or 70 years. On several previous occasions he had fully explained this. It was necessary that on the dropping of the first life all property should pay; but, of course, the various interests would contribute; it would not all fall upon the first life.

MR. MATTHEWS

said, that hardly answered his question. The Solicitor General said in general terms that the Estate Duty would be paid once; but his point was, that the widow's estate would be made to bear the duty, though her estate got no benefit from the fund, the beneficial interest of which went to someone else.

MR. R. T. REID

said, it was not a question of the widow's estate. The duty would be allocated to each interest under the settlement, and that answer he thought the right hon. Gentleman would accept.

MR. TOMLINSON

said, it should be noted that for the first time the interest of widows was to be treated in this exceptional manner.

Question put, and agreed to.

Committee report Progress; to sit again upon Monday next.