§ Bill considered in Committee.
§ (In the Committee.)
§ Clause 1.
§ MR. HANBURY (Preston)said, the Amendment he had placed on the Paper to Clause 1 was, after "person," to insert "domiciled in the United Kingdom." It would, no doubt, have struck the Committee that as regarded this Estate Duty the Chancellor of the Exchequer had been only too anxious to lay his hands upon every kind of property, upon every person upon whom he could bring the duty to bear; the right hon. Gentleman laid his hands upon willed realty, settled property, personalty at home and abroad, on property of British subjects and of foreigners, and the only thing he excepted was real estate outside the United Kingdom. In all cases in which the right hon. Gentleman was able to touch property, either directly, because it was situate in this country, or indirectly, because it was the personalty of a British subject domiciled in this country—he drew no distinction whatever between the Englishman domiciled in this country and a colonist resident abroad and a foreigner domiciled and resident abroad—upon all of them the right hon. Gentleman laid the same heavy rate, and in the case of all of them he brought all the property into one great lump and charged this heavy duty upon the total aggregate. In this Amendment his object was to exempt realty of persons domiciled abroad, and his reason was that he thought every precaution should be taken to prevent foreign capital being driven out of this country. He feared that the heavy duties to be imposed would have the result of driving foreign personalty out of this country. There were two broad distinctions that 1453 could be drawn between the case of a man domiciled in this country and the case of a foreigner or colonist domiciled outside. In the first place, it was possible for him to remove his personalty and not to invest it in the United Kingdom, and if a person domiciled abroad chose to withdraw his capital their opportunity of taxing it would be lost. There was this further distinction in the case of a person domiciled abroad, whether he were living in one of the Colonies or was an actual foreigner living in a foreign State, if they put too heavy a duty upon his personalty in this country, the Government—whether it were the Government of a Colony or that of a foreign independent State, might retaliate by putting equally high Death Duties on Englishmen resident in such Colony or Foreign State. That, he thought, was a very serious danger, He was quite aware a broad distinction ought to be drawn between real and personal estate; he was aware that under the law as it stood the law was that they should tax real estate in this country; he did not deny that for a moment, and he admitted that his case with regard to real estate was not so strong as it was with regard to personalty, and he should be quite willing to see the Estate Duty placed upon realty, though he thought there was a good deal to be said in regard to that point. In the first place, the real estate of foreigners was not touched by the existing duties, but it was brought under the new duty and charged as portion of the whole aggregate property; therefore the foreigner was to be liable for a new duty upon his realty in this country, a duty which would be very heavy indeed. He was not so sure that it was a wise thing to discourage colonists from holding land in this country. For his part, he thought they should do everything they possibly could that was calculated to bind our colonists to the Mother Country. If they put this heavy duty upon the real estate of colonists in this country the result might be that they would alienate the affections of that colony from the Mother Country, and it certainly would not be an inducement to a colonist who had spent a large portion of his life in the colonies to come back to the Mother Country and invest his money in realty. When real property was at a wery low value he thought it was well to 1454 get purchasers from all parts of the world to take an interest in the land and give to it a value that it had not got at the present moment. He did not wish to see the demand for real property restricted or diminished. Then of course there was the other great danger he had referred to. He thought that more Englishmen held property abroad, in the colonies and foreign countries, than colonists or foreigners held in the Mother Country, and consequently there was the danger that if they taxed the foreigner too heavily they would retaliate upon the Englishmen holding property abroad.
§ THE CHANCELLOR OF THE EXCHEQUER (Sir W. HARCOURT,) DerbyThere is no inducement to do so.
§ MR. HANBURYsaid, he thought the right hon. Gentleman could not have read the important manifesto issued from the agents of our colonics. [An hon. MEMBER: Not from the agents.] At all events, it represented colonial opinion, and they said that an Englishman was not taxed upon the property he held in the colonies, and if colonists domiciled in this country were to be taxed they would have every opportunity to retaliate. There was another reason why the realty of a foreigner should not be so heavily taxed as that of the Englishman domiciled in the United Kingdom, and it was this: The right hon. Gentleman had said that a great deal of this duty was raised for the purpose of maintaining the Navy. He (Mr. Hanbury) hardly thought the foreigner was interested to the same extent in maintaining the Navy as the Englishman. He denied that real estate was the thing most interested in maintaining the Navy, whether that real estate were in the hands of foreigners or Englishmen. The gainer in the maintenance of the Navy was commerce, and the disadvantage had fallen on real estate; therefore there were reasons why this tax should not fall so heavily upon real estate. But he did not propose to press the matter with regard to realty, the main object for which he should contend was maintaining the existing state of things which had been regarded as an international agreement for many years. Two great principles had hitherto been regarded in our taxation. The first was that taxation should be levied on real estate in accordance with the law of the laud in which that real estate was situate. 1455 That was one of the old maxims with regard to realty, but the maxim with regard to personalty was wholly different. Hitherto personalty in the possession of a person domiciled abroad had not been liable to the duties levied on personalty in this country. No Legacy Duty was paid on the willed personalty of a person domiciled abroad, and no Succession Duty was paid on settled personalty. They might be told that willed personalty did pay Probate Duty and also the new Estate Duty of the late Chancellor of the Exchequer whether the person was domiciled in this country or outside. In that one case of Probate Duty, undoubtedly the personalty of a man domiciled abroad was put on the same footing as the personal willed property of a man domiciled in this country. There was a good and sound reason for that. The duty was paid in that case not because the man had this property—for in the shape of Legacy and Succession Duties he escaped the payment—but because he got certain advantages from the law in this country, and he was charged the Probate Duty because the State performed a duty towards him which forced him in return to pay the State. But now, for the first time, they were going to put the settled personalty and the real estate of the man domiciled abroad in exactly the same position that willed personalty had been hitherto. That was to say they were going to abrogate the rule which had hitherto said that practically he should not pay upon his personalty unless the State had performed some duty for which it could charge him. If they were going to impose this heavy exceptional duty on willed and settled personalty they would have to deal with the fact that whatever they might do the personalty, if a man died intestate, would be distributed not according to the law of this country, but according to the country in which he was domiciled. That was clearly a complication that would arise under this legislation. As Clause 3 stood at the present moment if they were going to levy this Estate Duty on personalty, settled and willed, of a man domiciled in this country, in order to arrive at what that estate duty ought to be they would have to take into the calculation the whole of that man's property abroad willed and settled. But how were they going to know anything 1456 about a foreigner's personalty abroad? They had no means of arriving at any information with regard to it. They had thus this position of things. Not only were they going to impose heavy duty upon the settled personalty of the foreigner, but supposing a foreigner had got £1,000,000 of personalty abroad, which the Chancellor of the Exchequer had got no right whatever to tax—the right hon. Gentleman was going to bring in the whole of that personalty into the aggregate amount, and levy the Estate Duty on that sum in addition to the small amount of personalty which the foreigner held in this country. A man might have £1,000,000 of personalty abroad and £100,000 worth in this country, and actually in the case of a foreigner that Estate Duty would be levied on £1,100,000. That was legitimate in the case of a man domiciled in this country, but in the case of a foreigner they had no right to tax his personalty abroad. The right hon. Gentleman was actually saying by this Bill: "Although I am not entitled to tax his personalty abroad I will bring it into the aggregate, and if I cannot tax it abroad I will calculate it for the Estate Duty at Home, and he shall pay not only on the £100,000 which I can tax, but also on the £1,000,000 which I cannot' tax." He would ask the right hon. Gentleman was it. wise as a matter of policy to drive foreign capital from their shores in this way? There was little enough of capital in this country at the present time, and he thought the more they encouraged foreign capital here the better it would be. It would be a most foolish thing, if by any heavy Death Duties they were to drive capital out of the country. Already their Death Duties were the highest in the world; and now in addition to making them higher they were going to make them more complicated by the proposals to which he had adverted, and by charging a lump sum dependent on the value of the estate varying with the amount a man died possessed of, and not with the amount of the legacy. A foreigner would be an idiot indeed if he invested one penny of his money in this country if these proposals became law. They could tax the personalty of a man domiciled in this country, hut they could not apply the same principle to those not 1457 domiciled in this country, and for this reason: A man domiciled here could not retaliate, but a man with a foreign domicile was cither a colonist or a foreigner, and his country might retaliate and impose heavy duties in consequence of the heavy duties this country had imposed upon him and his fellow-subjects. What would be the effect of this? Take the case of the hon. Member for Keighley, who had a large amount of personalty invested abroad. What would happen in his case? He would be taxed twice over for that personalty. Even if the duties were not raised he would pay to the taxation of the country in which his mills were situated, and then he would pay this heavy additional duty as being a man domiciled in this country and having personalty abroad. He did not think that was an equitable principle upon which to proceed. He did not go the length of saying that all foreign personalty or realty ought to be exempt, because the case of realty was not so strong as personalty; but be thought he had made out a case for exempting foreign personalty mainly on the ground that they did not want to drive foreign capital out of this country by an increase of the Death Duties, and in the case of Englishmen domiciled in this country who had works or personalty abroad they did not want them retaliated upon and additional duties placed upon them; so that, not only would they have to pay the heavy duties of the country in which the works were situated, but also these additional duties which would be, for the first time, levied upon them as subjects of this country. What he asked was that they should leave the law with regard to foreigners exactly as it stood at the present moment, and he did soon the ground that he did not want to see foreign capital driven out of this country. Considering that their Death Duties were the highest in the world, he asked that they should not so enormously add to them to such an extent as to prevent foreign capital being invested in this country. Again, he would point out that there would be a great temptation to the foreigner to evade the duty, and his opportunities for doing so must naturally be greater than those of men domiciled in this country. He should like to ask the right hon. Gentleman whether, as a matter of fact, even the small Probate 1458 Duty on the personalty of persons domiciled out of the country was not already evaded? They knew that there were numbers of foreigners—and foreigners in Royal positions, who, looking to this country as about the safest place to invest money, and the possibility of revolutions in their own country, sent a great deal of capital here. Had the Probate Duty touched these men hitherto? He very much doubted if even the small Probate Duty levied on the personalty of foreigners domiciled outside this country had hitherto been paid to any great extent. He feared that in the future there would be much greater risk of one of two things happening: either the personalty would not be sent over for investment in this country, or if sent by foreigners the duty upon it would be evaded. For these two reasons he begged to move his Amendment.
§ Amendment proposed, in page 1, line 16, after the word "person," to insert the words "domiciled in the United Kingdom."—(Mr. Hanbury.)
§ Question proposed, "That those words be there inserted."
§ * SIR W. HARCOURTsaid, he could not help thinking that the hon. Member had moved his Amendment in entire ignorance of the present law on this matter. At present the whole of the personal property in this country held by persons domiciled abroad was subject to and did pay Probate Duty.
§ MR. HANBURYSettled personalty?
§ * SIR W. HARCOURTsaid, his statement referred to personal property as a rule. Probate Duty, he repeated, was a duty payable and paid upon administration in respect of personal property in this country belonging to the deceased wherever domiciled. That was the general rule, and the personal property of everybody, whether domiciled here or abroad, was subject to Probate Duty and did pay it.
§ MR. HANBURYWhat about settled personalty?
§ * SIR W. HARCOURTasked the hon. Member to allow him to state the general proposition. Settled personalty, as everybody knew, because of the character of the settlement, did not pay Probate Duty 1459 Settled property did not pay Probate Duty for the technical reason that, under the settlement, it could not come under the jurisdiction of the Probate Court, and it was upon that ground, and that ground alone, that it did not pay Probate Duty.
Probate is not granted in respect of the estates generally, but in respect of such parts as are at the testator's death within the jurisdiction of the spiritual judge by whom it is granted.It was upon that technical ground that property under settlement did not pay Probate. It was not the least in the world on the ground of domicile, for wherever a man was domiciled he now paid the Probate Duty. The consequence of passing the Amendment would be the loss of hundreds of the thousands of pounds which were now paid by persons domiciled abroad under Probate Duty and Estate Duty. [Mr. HANBURY interrupted with some observation.] They were now in Committee, and if the hon. Member wanted to contradict him, he would have an opportunity of doing so hereafter, but he had a right to make a statement on this subject without being exposed to continued interruption. He did not interrupt the hon. Member, though, in his opinion, every sentence he uttered was founded in error, both in law and in fact. That was the general proposition, and there was no rule of exemption in respect of domicile upon that ground. He had stated the general proposition that personalty belonging to persons domiciled outside the United Kingdom now paid Probate to the extent of hundreds of thousands of pounds. There was a difference with regard to real property, which was charged under the law of the country in which that real property was situated. The hon. Member had contended that the proposals of the Government would have the effect of driving capital out of the country. At the present moment personalty belonging to persons domiciled abroad paid 4 per cent. Probate Duty. What was the proposition of the hon. Member? He would take real property first. The hon. Member said that great complaints were made of the high taxation of realty in this country, and he asked that because a foreign gentleman or an Englishman 1460 chose to live abroad and owned an estate here he should not be asked to pay any taxes upon the realty, whilst the English gentleman residing here was to pay such taxes. Would such a state of things be tolerated for a moment, as that any foreigner who chose to bring his capital to this country should be at an advantage compared with English capitalists? The proposition was absurd, and it was hardly possible to treat arguments of this kind seriously. Probate Duty was now put upon personalty, and was not put upon settled personalty, and that was one of the very evils the Government proposed to remedy. If free personalty was to be charged, then settled personalty ought also to be liable to this tax; and if both were liable, then real property ought to be. He thought the right hon. Gentleman's argument about driving capital abroad was absurd. The Amendment struck not only at the root of the proposal in the clause, but against taxation on all property. If carried it would be absolutely ruinous to the existing sources of the Revenue of the country. He was sure his predecessor in the Office of the Chancellor of the Exchequer— whom he saw opposite—would not be a party to the depletion of the Revenue, or to striking a blow at the resources of the country. The Amendment, if carried into effect, would deplete by hundreds of thousands of pounds the resources already at the command of the Government; and, of course, they could not think of accepting it.
* MR. GRAHAM MURRAY (Buteshire)said, he should not have intervened —for he did not know that he was altogether disposed to support the Amendment—if he had not thought that if a silent vote was given many observations of the right hon. Gentleman the Chancellor of the Exchequer would be misunderstood. In his anxiety to defend himself against the Amendment the Chancellor of the Exchequer seemed to go a great deal too far, and to leave out of view some of the very real dangers pointed out by the hon. Member for Preston. It was quite true, as the right hon. Gentleman had said, that at this moment the Probate Duty was payable independently of the domicile of the 1461 deceased. But why was that? It was because Probate Duty was not so much a tax in the proper sense of the word as a payment in exchange for a service rendered. What the State gave in exchange for Probate Duty was an active title to in gather the estate which the executor otherwise would not have; and that was the distinction between settled and unsettled property. The Chancellor of the Exchequer had pointed out that Legacy and Succession Duty were payable on really but not on personalty where the deceased was domiciled abroad. Again, he asked, why? The answer was because that was really a tax, and in accordance with the view which had always prevailed in the law that moveables followed the person, it was not right to put a tax on moveables in the estate of a person—that was to say a foreigner— domiciled abroad. On the other hand, if a foreigner chose to buy real property in England, he in one sense became an Englishman, and it was out of the question to say that an Englishman should pay a tax on real property, but that if a foreigner came and held it he should be exempt. That was because it was a proper tax. That being the state of the law at present, what did the Chancellor of the Exchequer propose to do? Of course, here they were bound to take the Bill as it stood—to take the whole scheme as it would stand if passed into law. What the right hon. Gentleman proposed was this: he wished—and they all admitted that it was a very admirable wish—to reduce the number of Estate Duties and to crush into the Estate Duty the three duties previously known as Probate Duty, Estate Duty, and Account Duty. They should remember what happened with the Probate Duty at present. Although the right hon. Gentleman was quite right in saying that Probate Duty did not depend on domicile, yet he forgot the second proposition— that the incidence of the Probate Duty did depend on the local situation of the estate. At present Probate Duty was only paid on property which fell within the letters of administration so that the domiciled foreigner, though he had to pay a return for the active title which the State gave him, did not pay a sou for any property he had at home. In order to mass together the three duties, 1462 the right hon. Gentleman proposed in Section 1 that the Estate Duty should be charged upon the principal value of all property which passed, and in Section 3 he again spoke of all property passing. The dangers the hon. Member foreshadowed here were real and not imaginary. If the Bill passed in its present form it would impose on the foreigner a duty which he had never paid before, and which it was absolutely impossible to defend on any ground of equity or common-sense. He also agreed with his hon. Friend that the imposition of these duties would be followed by the real and practical danger of driving capital out of the country. He was not going to repeat the hon. Member's argument, but he ventured to say that the Chancellor of the Exchequer, in his anxiety to combat the hon. Member, really did not take note of that which was the true weight of the hon. Member's speech, and did not notice these dangers at all. The right hon. Gentleman had rather attacked the hon. Member for wishing to do that which he (Mr. Graham-Murray) was sure he did not wish to do. The right hon. Gentleman represented that the hon. Member wanted the foreigner to be exempted from all payment in regard to real property. His hon. Friend did not wish to do anything of the kind. He only wished that duty should be levied on the property for which the State here did something. Probably effect would be best given to these cogent views when the question of aggregation came before the Committee, when a judiciously-worded Amendment would avoid all the dangers which had been pointed out without running into the extreme with which alone the Chancellor of the Exchequer had dealt in his speech.
* MR. BYBNE (Essex, Walthamstow)said, he was not surprised that his hon. Friend had moved the Amendment. No doubt, like a great many of them, the right hon. Gentleman had been puzzled to know exactly what was meant by this clause. But it was very doubtful whether what the hon. Member wanted would be met by the Amendment. The Chancellor of the Exchequer had now assured the Committee that the duty which he 1463 intended to impose was a Probate Duty; but, as far as anyone could understand, the duty proposed in the Bill was not a Probate Duty at all. It was going to include the duty which had hitherto been charged as Probate, but in effect it would be a sort of Succession or Legacy Duty, that was to say, to be paid by the beneficiaries. As the clause stood, it would levy a duty on property which had never yet been liable, and which ought not to be liable, to Probate Duty, and in respect of which it could not be levied—he meant real property situated abroad. Probate Duty had always been levied in this country on one set of property and on no more. You see that it is necessary to obtain the appointment of an executor or administrator, for and upon that Probate Duty was paid. The moment the two duties were mixed up together, however, they were plunged into a sea of difficulties. If Clause 2 were meant to be an inclusive definition, it would get rid of the difficulty; but there was no assurance that that was so.
§ MR. GOSCHEN (St. George's, Hanover Square)I should have thought a short answer would have been given to my hon. and learned Friend. I do not think the Amendment should be supported at this point, but it raises some very important questions. The whole question of Death Duties on properties situated in one country and belonging to persons domiciled in another, or vice versa, is well deserving of attention. The question has frequently puzzled the Inland Revenue Department; the colonies have taken the greatest interest in it; and the Amendment ought not to be brushed aside as a frivolous Amendment to which no attention ought to be paid. The Committee must see that if you put too high a tax on foreign capital temporarily in this country the property belonging to a person domiciled abroad—that capital will be withdrawn. The Chancellor of the Exchequer said he presumed that persons in this country would not desire that capital belonging to foreigners should be retained in this country. But generally the feeling on both sides of the House will be that as little difficulty as possible should be placed upon the ebb and flow of capital from one country to another. One point the right hon. Gentleman the Chancellor of the Exchequer 1464 has failed to note is of great importance. He pointed out that the hon. Gentleman the Member for Preston would abolish even the existing Probate Duty by his Amendment. The hon. Gentleman contests that point. But if he were right the Amendment could not be supported. I admit that in the frankest manner. Although the present 4 per cent. duty on foreign property may not be excessive, it is a very different question when as much as 8 per cent. is concerned, especially if there are high duties in the other country. The Chancellor of the Exchequer told us that there was a 10 per cent. Death Duty in the Colonies. A person dying in the colonies with property in this country might, therefore, have to pay 18 per cent. That would make it very difficult for capital to be held in the two countries. The increase of the duty is a material fact in the case.
§ SIR W. HARCOURTThe man must be a millionaire for those figures to be correct. It is always the millionaire.
§ MR. GOSCHENI wish that the right hon. Gentleman would argue these questions without importing prejudice. It is not the interest of the millionaire which is in question. I am arguing in a business-like way. I am pointing out that it is the interposition of difficulties which may prevent capital flowing between the two countries, and whether a man has a million or a quarter of a million the difficulty will arise, and the right hon. Gentleman ought to take it into account. Take the case of the millionaire. Suppose he had £800,000 in the colonies and £200,000 in this country. Such a man dare not keep the £200,000 here as he grows old, because it would involve him in a duty on a million. That is a point with which the Chancellor of the Exchequer has not dealt. Does not the right hon. Gentleman see that in such cases the system of aggregation is exaggerative, and that it cannot hold water in any practical discussion? It will disturb the relations of capital between two countries. However scoffingly the right hon. Gentleman may treat the Amendment, that is a point which deserves an answer. The enormous increase of the duty, the extension of it to settled property, and the introduction of the element of aggregation are all points on which it is important to 1465 appreciate the novelty which this Budget will produce. We are not merely engaged in a controversy between the two sides of the House. The right hon. Gentleman will see that a matter so thoroughly affecting the colonies was deserving of serious attention. Therefore, I think my hon. Friend has been right in raising this question of domicile, though there may be more convenient forms of giving effect to the object of the Amendment.
§ * SIR W. HARCOURTThe fundamental reason why we object to this Amendment is because, in our opinion, capital, whether personalty or realty, should be charged on equal terms in this country to the native and domiciled people of the country and to those who hold property here and are domiciled else where. Any other distinction would be intolerably unjust. Would English capitalists endure that foreigners should bring their capital here and avoid the taxation to which English capital is subjected? He did not see present the hon. and gallant Member for Sheffield; but the proposal was enough to make every hair on his head stand on end. It would involve the marking of every investment and every sovereign as foreign property that is not to be liable to the same taxation as English capital. It is impossible to entertain such an idea seriously. I ask the Committee to conceive the position of a Frenchman establishing a mill in Manchester, and it being asked that he should pay a lower rate of taxation than an Englishman with another mill next door. It is impossible to argue this question, because the contention is absurd on the face of it. The hon. Member said that foreigners had not the same interest in the naval defence of the country. That is the ground on which the foreigner is asked to pay at a lower rate than the Englishman.
§ MR. HANBURYI said it applied to realty.
§ SIR W. HARCOURTWell, take it as applying to realty, the foreigner, therefore, who holds landed estate in England is not to pay the same taxation as the English gentleman because he has not the same interest in the safety of the country. That is the argument laid before the House of Commons. I really must be excused from treating it seriously. 1466 I invite hon. Gentlemen opposite to place it before another tribunal as well, and they will probably find that the same answer will be given as the House of Commons will give to it this evening.
§ MR. GOSCHENThe right hon. Gentleman ought to attempt to understand the views of the Opposition, and to deal with the serious points that have been raised. The right hon. Gentleman's favourite method of argument—it is very clear, and I compliment him upon it— is to seize on one weak point of an adversary's case, and to work it to death, giving the "go-by" to the other points of the case.
§ SIR W. HARCOURTThe weak point is the Amendment.
§ MR. GOSCHENThere may be some defect in the wording of the Amendment, but I urge that the serious portion of the argument must be dealt with, and that is the question of aggregation. The right hon. Gentleman says the foreigner is to stand precisely on the same footing as the native of this country; and then, in his usual manner, he says that another tribunal may decide upon the issue. I wish to argue the question in the spirit of Committee, and not in the spirit of Party contest.
§ SIR W. HARCOURTI have argued the question on the wording of the Amendment as it stands, and that is the proper business of the Committee. If the right hon. Gentleman admits that the Amendment cannot be sustained let the Committee get rid of it.
§ MR. GOSCHENIt is the duty of the right hon. Gentleman to suggest improvements in the Amendment with a view to obtain an issue out of what may be a real difficulty. There are sufficient difficulties connected with this matter to make that course very desirable. The right hon. Gentleman makes a kind of appeal to the country. He says—"See the benefit that is proposed to be given to the foreigner." Does the right hon. Gentleman not know that when a foreigner leaves his property in the shape of legacies it is placed on a different footing from the property of those who are domiciled in this country? The argument of the right hon. Gentleman about 1467 the foreigner is ridiculous. Surely the colonists deserve some consideration in the matter. If the right hon. Gentleman will look up the archives of the Treasury he will see that the question of the Death Duties as it affects foreigners has led to difficulties. There is a serious question involved in this Amendment, and it deserves serious consideration.
§ * MR. ROBY (Lancashire, Eccles)said, the right hon. Gentleman the Member for St. George's, Hanover Square, would best assist the Committee if with his knowledge of the subject he would not cast his shield of protection over unfortunate Amendments of this kind, and bring forward arguments which did not apply to this question, but might apply to something else. The point of aggregation arose on Clause 3, not on the present clause. If the right hon. Gentleman desired to exempt the foreigner from the costs of aggregation, let him put down an Amendment to Clause 3. The point they had to decide in connection with Clause 1 was, who were the persons to be subjected to the proposed duties. He confessed that having listened a good many times to hon. Gentlemen opposite dwelling on the unfortunate character of recent English legislation which, they said, was all in favour of foreigners as against the natives of this country, he was amused to find that the first Amendment brought forward on this Bill was to exempt the foreigner from the duties to be levied on natives holding properly in this country. Even the right hon. Gentleman had admitted that the Amendment was not good. Then why should not the right hon. Gentleman advise his hon. Friend to withdraw it and bring it forward in another shape. What was the good of discussing an Amendment which did not apply to the present case, and which, if carried into effect, would have results he was sure the right hon. Gentleman would not be in favour of any more than anyone else? The sooner they left this Amendment and went to one that could be supported by argument, the better it would be in the interest of the good name of the House.
MR. GIBSON BOWLES (Lynn Regis)said, he quite understood why the hon. Member for Eccles dismissed the Amendment in so airy a way. The 1468 hon. Member entirely failed to understand the Amendment, or the clause it proposed to amend. More time would be saved if the Chancellor of the Exchequer, instead of going into heavy hysterics, would read the first clause and see how pertinent the Amendment was to it. This clause taxed everybody in respect of every piece of his property all the world over. It was a case of Cæsar Augustus issuing a decree that the world should be taxed. Caesar Augustus sitting in Downing Street had framed this first clause, which was a modern instance of the decree of the ancient autocrat and ruler. It was true by the time Caesar had got to the end of Clause 2 some intelligent person, probably from the Legacy Duty Office, recommended him to put a little water into his wine, and to modify his decree. But the Committee were now dealing with Clause 1, in which Caesar Augustus decrees that every person, of the hundreds of millions of persons in the world, should pay duty on his property, whether that property was in the United Kingdom or in China. Surely it was perfectly reasonable, notwithstanding the views of the hon. Member for Eccles, that they should introduce some limitation into the clause before they passed from it.
MR. GIBSON BOWLESsaid, his complaint against the clause was that it assumed to run in China, Tartary, and even in Russia. He was only an humble layman, but he submitted that the true principle upon which the taxation of property passing by death proceeded was that when the property was in this country, actually or constructively, then they had a right to impose a tax upon it. But this clause threw a tax on the whole habitable world. There was absolutely no limit whatever, and that being so, it was highly proper that this Amendment should be entertained, and that the Committee should consider the desirability of restricting the scope of the clause to persons domiciled in the United Kingdom. He defied even the hon. Member for Eccles to find any limit to the application of the tax.
MR. GIBSON BOWLESsaid, they were not now on Clause 2. They were dealing with Clause 1, and he would confine himself, as he was bound to do, to Clause 1. The words of the first Legacy Duties Act were as extremely? wide as the words used in this Bill. But the Law Courts laid down that there was a necessary limit to the operation of the Act, and that was that it was limited to "the sphere of the enactment"—to use the words of the Judge—or to persons domiciled in this country. Whatever Act they passed it would, necessarily, be restricted to this sphere, and in this case the sphere must be such property as was found in the country.
§ MR. HANBURYsaid, that before withdrawing the Amendment, on the ground that it went too far as including realty as well as personalty, he desired to say that in so far as personalty was concerned he had not heard one single argument against it. The Chancellor of the Exchequer made a platform oration about drawing distinctions between foreigners and Englishmen. It was all perfectly absurd, because it was the law of the land at the present moment that no Legacy Duty whatever was charged upon the personalty of foreigners, although it was charged on the personalty of persons domiciled in this country. He would advise the right hon. Gentleman to forego his platform oratory in the House, if he desired his Bill to make more progress. The right hon. Gentleman asked for courtesy; but the right hon. Gentleman should give to the Opposition at least a little of the courtesy he expected from them. It was for the Leader of the House to set the example. He moved the Amendment because he did not want to see capital driven out of the country. It was in the interest of the country and not in the interest of the foreigners he made the proposal, and the right hon. Gentleman knew very well that the Amendment, if carried, would not relieve all taxation from the shoulders of the foreigner.
§ MR. HENEAGE (Great Grimsby)said, he desired to protest against the statement made by his hon. Friend the Member for Eccles that aggregation was not included in the clause. The clause was based on aggregation, and aggregation alone. Aggregation 1470 was the life and soul of the clause. If the statement were made by any other Member of the House he would not have taken any notice of it. But the hon. Member occupied a semi-official position, as one of the Deputy Chairmen of the House, and great weight was on that account attached to his statements. Another matter he would like to refer to was the action of his right hon. Friend the Chancellor of the Exchequer in dragging in the millionaire. Really, there was no necessity to refer to the millionaire at all. The man with £100,000 paid 6 per cent., and that case was good enough for argument without going to the millionaire who paid 8 per cent.
§ Question put, and negatived.
§ MR. HANBURYmoved an Amend-meet to leave out in 16 the words "commencement of this Part" and insert "passing." If the Bill stood as at present its effect would be retrospective. But that could not have been the intention of the right hon. Gentleman when the Bill was drawn up. This part of the Bill would come into operation on the 31st of May. When the right hon. Gentleman introduced his Budget he undoubtedly believed that this Bill would become law by the 1st of June, and in that case the date of the 31st of May for the measure to come into operation would have been reasonable enough. Now, however, it was impossible that the measure could become law by the 1st of June, and therefore the right hon. Gentleman ought to fix some day for the Bill to come into operation that would prevent its being of a retrospective character. It was for that reason he moved his Amendment.
§ Amendment proposed, in page 1, line 16, to leave out the words "commencement of this Part," and insert the word "passing."—(Mr. Hanbury.)
§ Question proposed, "That the words proposed to be left out stand part of the Clause."
§ THE CHANCELLOR OK THE EXCHEQUER (Sir W. HARCOURT,) Derbysaid, that the proper time to settle this matter would be upon Clause 20. He hoped the hon. Gentleman would not 1471 press his Amendment, but that the matter might be left over for discussion upon the subsequent clause.
§ SIR R. WEBSTER (Isle of Wight)said, that having a distinct assurance from the Chancellor of the Exchequer that there would be full opportunity later on for consideration of this point he thought it might be convenient to postpone the Amendment. He must, bow-ever, point out that the question was a most important one, involving entirely different conditions from those which at present prevailed. It would, of course, affect a large number of existing wills.
§ MR. BARTLEY (Islington, N.)said, he should like to understand distinctly what would be the date at which the Bill would come into operation. The date was important, because he understood that this Estate Duty represented £50,000 a day. He hoped the Chancellor of the Exchequer would be able to tell them that the date named would be one after the passing of the Act. If the Bill applied retrospectively he was afraid a great deal of hardship would be inflicted.
§ MR. HANBURY (Preston)said, the object with which he brought forward the Amendment was to avoid the cost that would be placed upon the small estates if this tax were made retrospective. He was willing to postpone the Amendment until Clause 20 was reached; but he thought he ought to get from the Chancellor of the Exchequer some assurance that the Act would not be retrospective, and that opportunity should be given for proper discussion upon Clause 20. He really hoped the right hon. Gentleman would give him some assurance that the Act would not be made retrospective, in which case he would be very glad to withdraw his Amendment. Unless he received that assurance he should certainly go to a Division.
§ THE CHANCELLOR OF THE EXCHEQUER (Sir W. HARCOURT,) DerbyWith regard to the latter matter, I do not think that the hon. Gentleman need be under any apprehension. I have read this morning, in a leading Conservative organ, that in consequence of the number of Amendments on the Paper, it 1472 is feared that the Estate Duty section of the Bill will not be disposed of before the end of this week. I think that is a rather reassuring statement. With regard to the other point I do not think it ought to be pressed now, but that it should be reserved for the House itself to fix the date when the proper opportunity arises.
§ Amendment, by leave, withdrawn.
MR. GIBSON BOWLES (Lynn Regis)said, the Amendment he had thought of moving was a very small one, framed in the interests of accuracy. The word used in the Bill was "levied," and he thought the proper word to be used was "charged." He had looked at a good many Acts and found that this was the general rule. It was not, however, a matter of first-class importance, although he submitted the suggestion to the Chancellor of the Exchequer.
§ SIR W. HARCOURTsaid, the word was used in both senses.
§ * MR. HENEAGE (Great Grimsby)proposed to omit the words providing that the Estate Duty should be levied on "the principal value of" all property. He said that these words "principal value" appeared to him to raise the whole question of the new Estate Duty at once. Certainly the House was entitled to fuller information upon the matter. No one, not even a solicitor, understood the Bill as it stood. In his opinion, the Death Duties ought to have been dealt with in a separate Bill, and very carefully considered. The House would, no doubt, remember that the right hon. Gentleman the Member for Midlothian had himself said that a Bill of so much magnitude was worthy of a whole Session's deliberation. It seemed to him that under the provisions of this Bill the Government were attempting to bring about a financial revolution (the clauses of the measure being very vaguely drafted) in order to carry out distinct operations. The first of these objects was the assimilation of personalty and realty, although every Member of the House must know 1473 that they were essentially different. The second was a graduated scale of assessment, which increased rapidly from £100 to £100,000, and from 1 per cent. to 6 per cent., but only in regard to 1 per cent. between £100,000 and £500,000, with another half per cent. in the case of properties over the value of £1,000,000. This taxation ought to be spread more gradually at first and continued gradually up to 8 per cent. in order that it might be founded upon a fair principle. The arrangement for the aggregation of the dead man's property so as to make small legatees pay the same as the successors to princely fortunes derived from the aggregate estate was most unfair. An aggregation of the kind suggested must be either very hard upon all the smaller beneficiaries under a will or a gross injustice to the residuary legatee.
§ SIR W. HARCOURTI rise to Order. This clause has nothing to do with aggregation. If there was no proposal for aggregation at all this clause would stand just as it is. Therefore, I submit to you, Mr. Mellor, that any discussion upon aggregation in respect of this clause is entirely out of Order.
§ MR. HENEAGE, continuing, said, that the proposal of the Government amounted to an attempt to mortgage the effects of a living person in anticipation of his death, and was in fact a legislative post obit. It would impose a penalty upon all thrift and good management, and was in his view the most unfair, unjust, and indefensible provision in the Budget.
§ MR. HUNTER (Aberdeen, N.)I rise to Order. Is not the question before the House that the word "levied" stand part of the Bill?
§ MR. HENEAGE, proceeding, said, that the tax was a charge upon a class of property which ought not to be so burdened. Under one of the clauses of 1474 the Bill it was proposed that all the property for assessment should be aggregated, and that all small legatees should have to pay the same tax as those who came into a princely fortune. That was a proposal for legislation of a hotch-potch kind. The "prospective value" which was included in the clause would fall entirely on private owners of property. Those who had laid out large sums on their estates would get no deduction from the Death Duty unless the money had been raised by mortgage on the property. Where urban property was held by trustees and companies nothing would be paid; therefore, private owners would be at a great disadvantage in the management of their estates. In the case of agricultural laud, how was the principal value to be assessed? Much agricultural land could not be sold readily, and a. great many details in the assessment would take a long time to value. What would become of the smaller legatees during that period of delay? Then the provisions affecting expectations in relation to principal value were most unfair. In one part of the Bill the right hon. Gentleman provided that nothing was to be allowed to those who came into property until everything was settled. In some counties rents would not be received for six months afterwards. The question was whether it was possible to assimilate the Death Duties upon realty and personalty. He objected strongly to the proposal that every kind of property should be brought into hotch-pot for the purposes of taxation.
§ Amendment proposed, in page 1, line 18, to leave out the words "the principal value of."—(Mr. Heneage.)
§ Question proposed, "That the word 'the' stand part of the Clause."
§ * SIR W. HARCOURTSir, a great part of the hon. Member's speech has no relation to the question. I have already pointed out, and will point out again, that aggregation is one of the chief reforms which the Government contemplate. Hitherto injustice has been inflicted under the Death Duties because certain kinds of property have been charged on their principal value whilst other kinds have been charged on very much less than the principal value. 1475 There are three principles of reform which the Government wish to establish —equalisation, aggregation, and graduation. Equalisation, to which I will confine my remarks at this point, can be arrived at by taking a common measure, that measure being principal value. There are various methods of finding the principal value, and I do not wish at this particular point of our proceedings to decide definitely how it is to be arrived at. The clause under consideration is simply a statement of the general principle of the Bill, and it. would be improper to ingraft upon it limitations which would be more in place in subsequent clauses. The sixth clause, Sub-section 5, proposes to enact
that the value of the property for the purpose of Estate Duty shall be ascertained by the Commissioners in such manner and by such means as they think fit.and it then provides for an appeal to the High Court by persons who think themselves aggrieved. I can quite understand that many hon. Gentlemen may not be satisfied with this precise mode of ascertaining the value of property, but I venture to suggest that they ought to wait until that clause is reached before proposing alternative methods, and not to attempt to introduce them in Clause 1. Some people wish that the duty should be levied upon the annual value of property instead of the principal value. Annual value may be a proper element in the consideration of the value of land; but that cannot be said in the case of other classes of property, where the annual value is no doubt very small, but which, if sold, would produce an enormous sum. I trust that hon. Members will once and for all grasp the fact that a great injustice is done to the community at large by not assessing the principal value of this class of property for the purposes of taxation merely because its present annual value was very inconsiderable. Take, for example, the Savernake Estate, a property that has no annual value at all, and yet is of enormous value when placed upon the market. Then there is the ease of the Maplin Sands, lately purchased by the Government for £170,000. They are valueless so far as any annual yield is concerned, because twice in a day they are covered by the sea, but they have a selling value. This is also especially 1476 true in the case of building laud around growing towns. Is it fair that the inhabitants of those towns should continue to pay high rates for the purpose of effecting improvements which directly increase the value of the land in the immediate neighbourhood, while the owners of the land who directly reap the benefit are allowed to go scot-free? The very principle and element of the Bill is that property of this class shall no longer escape paying its proportionate share of taxation, and that the millionaire in future shall contribute in the same way as other people to the revenue of the country. I assure the Committee that having said that, I am open to consider what are the proper methods in reference to each class of property by which to arrive at a fair valuation for the purposes of taxation. Hon. Gentlemen need not frighten themselves that the proposed method for the valuation of land by the State will be an unfair one. I have lately had an opportunity of asking one of the most experienced gentlemen in London in valuing property what method he adopts, and he replied that the principle he proceeded upon when estimating what would be a fair value of any work of art was not how much it would probably sell for at Christie's, but what sum be would, were he a dealer, give for it, expecting to sell it again at a reasonable profit. That appears to me to be a fair and proper line of argument to apply to the valuing of land for the purposes of taxation, and one likely to work out far more equitably than taking as the standard of valuation so many years' purchase. Any fixed rule, I believe, would be found in practice to be unfair, and likely to be too low when applied to rising properties, and too high when applied to depreciating properties. That would be especially the case when the question of ground-rents had to be considered, which are often sold at quite a fancy figure. In one case which I recently saw reported in the newspapers a ground-rent with a comparatively short period to run had been sold by auction at Tokenhouse Yard at a sum representing 90 years' purchase. I trust that hon. Members will not discuss this question further until Clause 6 is reached. That clause will directly raise this point. I feel sure that the method now proposed 1477 to be employed in making the valuation is one that will work out with fairness to all parties. Everybody knows the difficulty, but I will not go into the details now. The question is whether the principal value is to be taken, and there is no doubt that hon. Members opposite object to that principle of the Bill; but I cannot accept the Amendment.
§ MR. A. J. BALFOURThe right hon. Gentleman, in the speech he has just delivered, has violated the rule which he has himself laid down with regard to the speech of my right hon. Friend opposite. I shall not touch now on the disputed point, which the right hon. Gentleman says will more properly arise when we come to deal with Clause 6, as to the mode of ascertaining the value; but, though that question is not raised by the Amendment, there are two questions raised by it of great importance, to one of which the Chancellor of the Exchequer paid no attention at all, as far as I can see. As I understand, the existing system of dealing with agricultural lauded estate is that the Death Duty, whatever it may be, is levied on the life interest of the man who succeeds. Under this clause henceforth the tax would be estimated, not on the life interest, but upon the capital value of the property to which he succeeds. That is an enormous change, but the right hon. Gentleman did not allude to it.
§ SIR W. HARCOURTI beg pardon. I believe that I did refer to it. If not, it was an unintentional omission. I think I stated that it would be unjust to deal with the life interest only.
§ MR. A. J. BALFOURI do not think that the right hon. Gentleman mentioned the phrase "life interest." But whether he did or not, that is an arguable point. It is a case which deserves arguing, and the Chancellor of the Exchequer has got to argue it. Take the case of an ordinarily landed estate, rack-rented, belonging to the eldest of four brothers, all advanced in life. It is hard to tell how death would strike them, but it would probably strike them in accordance with their age. That property would be taxed at the full rate three or four times in 10 years at brief intervals. Is that a just method of dealing with the Death Duties? I think not. The right 1478 hon. Gentleman appears to think this is a fair system as regards the person succeeding, and he justifies the present action of the Government. This Probate Duty had a very different origin. It was originally nothing more than a Stamp Duty. But when you are going to raise it into a system of extorting money from property owners—when you are making it a complement to the Income Tax, it becomes a gross injustice if you are to levy it upon corpus or upon the whole value of the land three times in 10 years. In another case, where a healthy young man succeeds, the estate might go for 70 years without a farthing being extracted from it. This is an alteration in the law which requires defending. I come to the next point. The Chancellor of the Exchequer avows that it is his great object in making this alteration to get hold of those properties which are of very small annual value and large capital value, especially those great building estates in which there is very great reversionary value. In my judgment, it is perfectly just that that kind of property should pay its full quota to the burdens of the State. I do not say a word for relieving that or any other land of property from fair taxation. I want to point out to the right hon. Gentleman that this particular method of dealing with this particular kind of property will inflict a very great hardship, not on the millionaires, who are the bugbears of the right hon. Gentleman, but on the enormous class of small owners who own, perhaps, the great mass of property in reversionary values in this country. Why do I say that this kind of tax will be very hard? Supposing a man has cottages which bring him in £.50 a year. The property has a large reversionary value, but at present it only brings in a trifling ground-rent. Under the new system what will happen? If he dies, his heirs will immediately find themselves liable to a payment based not upon the £50 annual value, but estimated on the very large capital value, which is arrived at by considering the reversionary rent of the property as distinguished from its actual rent. How is the man who owned that property to pay the tax? He cannot raise it in the market by way of mortgage, and he will be driven compulsorily to sell. I do not mean to say that you 1479 cannot now and then raise money on mortgage of a reversionary value, but, broadly speaking, money is raised on the annual value of property. The man, therefore, who has to raise a very large sum, which he would have to raise in the supposed case I have laid before the Committee, could not borrow it upon the property, or upon the rent, or upon the capital value, because it is not easy to borrow upon capital value, and, consequently, you will drive this particular kind of investor to a compulsory sale of some of his cottages. In my opinion, that introduces quite a new principle into our taxation. I do not believe that Parliament up to this time has ever inflicted a tax on any part of the community which had to be liquidated from the thing to be taxed; hitherto, broadly speaking, we have always looked to what is actually got from the property. There may be exceptions in the cases of pictures and other works of art; but, broadly speaking, the taxation of this country has been raised in a form which does not require the taxed individual to sell the property for which he is taxed. That principle, if you carry this clause, you will have for ever abrogated. The small owner who cannot borrow will find himself driven to the expedient of a forced sale of his property—an expedient to which you have never yet driven anybody on whom you have endeavoured to levy taxes. It is perfectly true that it is necessary that these reversionary values should bear their full share of the burdens of taxation, but they ought to meet them when the reversion falls in. It is not what a man is going to get that you ought to tax, but what a man has got. When the reversions fall in you might put a retrospective tax upon them which would make them pay their full share of taxation. What you do is to ask a man to pay, not upon what he gets, but upon a speculative value, for that is what it is. An hon. Member who interrupted me just now seemed to suppose that I was going to defend the immunity from taxation of this particular kind of property. I do not wish to defend it, and think there ought to be no such immunity; but I say that this particular method of catching this property is unjust to the owner, and what you ought to aim at is some kind of 1480 taxation which, directly a man realises the reversionary value, would extract from the property the whole of the amount that, was due to the State upon the reversion reaching its fruition. Now, Mr. Mellor, I have ventured to lay before the Committee two objections to this method of taxation. The first objection is that it inflicts upon real property the unjust system which now applies to personalty. I think you ought to equalise personalty and realty by applying to personalty the just system which now applies to realty. My second objection is that you are taxing these reversionary properties, not at the time when they ought to bear the taxation— namely, when the reversion comes to fruition, but at a time when the owner probably cannot raise the money necessary for the payment of the taxation, and you are consequently driving him into a forced sale, thus possibly inflicting considerable hardship upon him. I hope, therefore, that the Committee will seriously consider before they assent to a clause the consequences of which may be so serious to all holders of property, whether real or personal.
§ MR. HALDANE (Haddington)said, the first objection of the right hon. Gentleman who had just sat down to the proposal of the Government was that it altered the principle on which the duties were levied. In one sense he thought they were all agreed that the principle must be altered. He took it that they were agreed that real and personal property ought to be assimilated.
§ MR. A. J. BALFOUROf course, if you properly regulate local forms of taxation.
§ MR. HALDANEsaid, he had assumed that another point they were agreed upon was that this was a Bill to raise revenue and not to decrease it, and therefore, as practical people, seeing that they really could not depreciate personalty to the level of realty, they must raise realty to the level of personalty. He took the principle of the Bill to be to impose a duty upon valuation at death. That was not a new principle, although the present proposal was new in its comprehensiveness. The Probate Duty did it, the Account Duty had done it in substance, and the principle was familiar to lawyers 1481 in various other forms. All this Bill proposed to do was to make the whole system logical, and this was proposed to be done on the basis that the State had a right to interfere with the devolution of property. The State might refuse to recognise any particular form of devolution, and might decline to let the owner dispose of his property freely. In France the owner of property could not leave it freely, whilst in Scotland he was compelled by law to leave one-third of his personalty to his widow and two-thirds to his children.
* MR. GRAHAM-MURRAYsaid, the hon. and learned Gentleman was mistaken as to the Scotch law. One-third of a man's property in such a case was entirely at his disposition.
§ MR. HALDANEsaid, he would accept the correction, which did not interfere with his point, which was that a large part of a man's property in Scotland was not at his own disposition. That being so, he would read what he thought was a description of the right theory of the Death Duties—
The whole theory of the Death Duties is that the State claims a share in all property passing on death. If I may use a phrase of legitimate exaggeration, a portion of the Death Duty is practically evaded by settlements. From my point of view every settlement, if not a fraud upon the Death Duty, at all events make a serious inroad upon what I may term the rights of the Chancellor of the Exchequer. …Settlements it is true pay a small duty, but nothing as compared with the total to the State which the property comprised in them escapes. I do not feel sure that equity and analog}' do not require that a higher duty should be put upon settlements to compensate for the heavy loss to Death Duties which they bring about.He did not know whether gentlemen opposite would accept this as a fair statement of the principle of the Death Duty. At any rate, those were the words of the late Chancellor of the Exchequer (Mr. Goschen) in introducing his Budget on the l5th of April, 1889, and they were extracted from Hansard of that date. Under these circumstances, it might be taken that the Government were not putting forward a very contestible principle when they said that realty and personalty should be assimilated, and that there should be a duty on all realty and personalty which passed on the death of the owner. This made 1482 it extremely difficult to maintain the first objection stated by the right hon. Gentleman. The right hon. Gentleman's second objection was that the proposal was extremely hard upon the owners of reversions. That was an expression which required a definition. The right hon. Gentleman seemed to think that the tax should not be made personally payable by anybody who did not derive a present income from the property in respect of which it was levied. What the Government proposed to tax was not the reversionary interest as such, but the present value of the reversionary interest. This mode of dealing with property was not confined to reversionary values. It was adopted in the ease of pictures, and very often in the case of businesses, and also in the case of shares in public Companies. All the Government were doing was putting realty on the same footing as other sources of property. It seemed to him that while, no doubt, in a Bill of this kind there were considerations in reference to which it was difficult to ascertain on which side the balance of advantage lay, it was clear that no other words would be possible for dealing with the Death Duties in the way suggested by the late Chancellor of the Exchequer (Mr. Goschen). The principle of this Bill was one on which it was impossible for the Government to compromise. They would be evading their duty if they adopted any other proposition than that which the Chancellor of the Exchequer put forward, not as something which was accidental, but as something which was of the very essence of the principle of the Bill.
§ MR. GOSCHEN (St. George's,) Hanover SquareI do not propose at this stage to state my free views with regard to the points which have been raised. But the hon. and learned Gentleman has just quoted some phrases I used in 1889, and has put them forward as the foundation of the present proposal. I have already shown the absolute futility of attempting to father upon me any responsibility for the present proposal. The hon. and learned Gentleman must look, not only at two or three sentences extracted from my Budget speech, but at the action I took in 1889. He seemed to think that I contended at that time that realty and personalty had been put on the same 1483 footing for Probate Duty and for general taxation. The hon. and learned Gentleman must, however, be aware that in the proposals I made I did not treat realty and personalty alike, and it was made a charge against me at the time that I still left inequality between them. I felt at that time as I feel now, that if we endeavoured to deal with the Death Duties as the Government are now proposing to deal with them and put the same taxation upon realty as upon personalty, we should attempt the impossible, because we should be treating as similar two things which are totally dissimilar. In appearance you may make the two things alike, but in substance they will continue to be dissimilar. My right hon. Friend (Mr. A. J. Balfour) has referred to the difficulty of dealing with an estate which might pass through several hands successively and be taxed at every point. In the case of personalty you cancel a portion of your property in order to cover the duties, but in the case of realty you have no security that you will be able to do so. Hon. Gentlemen opposite have frequently disputed by sounds, but have never disputed in argument, the proposition that it is impossible to dispose of realty for the payment of duty as it is possible to dispose of personalty. If that is so, do you not establish a preferential treatment as against realty if you assume that you can treat personalty and realty both alike? The right hon. Gentleman has not attempted to meet the argument which shows that you are putting on taxation which there may be no means to pay.
§ MR. W. AMBROSE (Middlesex, Harrow)said, the right hon. Gentleman the Chancellor of the Exchequer told them that this was not the clause on which this subject was to be determined, but he would ask what would be the position when they came to Clause 6 if they passed the first clause in the form in which it now stood? The words proposed to be left out were "principal value." The right hon. Gentleman said they were to leave the words in, and when they came to Clause 6 they were to settle the mode of determining the value. The first part of the clause merely dealt with deductions from the value, assuming the value to have been 1484 already ascertained. When they came to the 5th sub-section, they found it said—
Subject to the provisions of this Act the value of any property for the purpose of the Estate Duty shall be ascertained,and so on. What was the meaning of the word "value" there? And when they decided that, how would they deal with the principal value? The right hon. Gentleman had spoken of introducing "principal value" as the test of the duty, but the first question that arose was what is principal value? Was there such a thing in existence? In the case of real property there was no such thing as principal value, unless and until the property had been sold. As the Leader of the Opposition had pointed out, there was great difference between real estate and personal property. A thousand pounds they could deal with in cash. If it were in goods they would have a definite value, and it could be dealt with accordingly; but that was not the case with real estate. A man could not realise the value of land unless he parted with it, and then it was no longer his. True, the land might be sold, but it was surely not proposed that in taxing in this way they were going to oblige every landowner to sell his property to ascertain what the tax might be. Under the Bill, the value would have to be arrived at by valuation, and everyone knew in cases of sale how widely the valuation of the purchaser differed from that of the vendor. A valuer, however honest and respectable, was naturally biassed in favour of his client. In his own experience, he had known the difference between respectable valuers amount to this—that those who had to receive the money valued the property at three times as much as those who had to pay for it. The whole thing was a matter of judgment—of opinion and speculation. Was that a proper test for the purpose of determining a tax? It was a matter which was purely one of opinion. By the 6th clause the value was to be left to the Commissioners to determine. Did anybody ever hear of a tax being imposed by any properly constituted authority when, by the mere process of determining the value, those who were to receive the tax might double the amount? It was giving to the Commissioners a power 1485 which belonged to this House alone— namely, of taxing, because by the simple process of doubling the value in fixing it they might expose the subject to a tax double the amount authorised by Parliament. These were observations with reference to principal value. There was no such thing—it was an imaginary thing; and surely it was a farce to propose to tax a thing which existed only in imagination. Take the case of land which it was supposed one day would let at a good annual value and which would then fetch a good price. Surely that was a matter of opinion only. A man might hold building land till, like a horse, it had eaten its head off. It was well known that many building land speculators had ruined themselves by holding land with the prospect of getting a high price; had, by waiting for the high price, allowed the annual value to be nothing at all, and by the time they had got the high price they were actual losers by the transaction. Could the House sanction the putting upon landed property of that description a tax which the owner would have no means whatever of raising? There was some talk of levelling up by putting land upon the same footing as personalty, but at the proper time he should be prepared to show that land at the present time, apart from local rates, paid equally, according to its value, with personalty. He could understand the propriety of taxing the principal value in the case of personalty, for they had no guarantee that it would remain for anything like an annual tax to be put upon it, therefore they taxed it when they could, and he did not object to it. But the observation which applied to personalty did not apply to real estate at all, because the latter was always there to be taxed. It was not like money which took to itself wings and flew away, but it would be always there to bear its share of local and Imperial burden, and, therefore, there was no ground whatever for dealing with it in the way they would deal with personal estate. He complained that his own Amendment had not been correctly represented by the Chancellor of the Exchequer, as he would show when he came to move that Amendment.
§ * SIR R. WEBSTERdesired to say a few words in answer to what had been 1486 said by the hon. and learned Member for Haddington (Mr. Haldane). He was somewhat amused by the air of assumption which pervaded the speech of his hon. and learned Friend. It appeared to him that the hon. Gentleman desired to enforce on the House what they had heard outside in regard to certain action of his in another capacity, and to assume in the presence of the Chancellor of the Exchequer the responsibility—he might almost say the authorship—of the Budget. The hon. and learned Member seemed to put his observation in a position which he thought even his utterances were scarcely entitled to as yet. The hon. and learned Gentleman told them it was necessary to raise revenue by this Bill, and that although they were altering the principle they could not lower taxation in any respect. He utterly failed to see why because it was necessary to raise revenue they should adopt a principle which was radically wrong. The House ought first to determine on a just and equitable tax, and then fix the amount of the tax. The hon. and learned Member said the Government desired to make an arrangement based on logical principle; but did anyone suggest that this Bill was framed on a logical principle? They were dealing with the method of valuing for the purpose of levying the Estate Duty, but so far from that being in the category of Probate Duty or in the position of the Probate Tax on the personalty which the hon. and learned Member had referred to,' a considerable portion of the duty was to come out of the pockets of beneficiaries and legatees, who were to be taxed differently on the same amounts. What was the logic of levying a tax in which the amount was to depend upon the total value out of which the particular amount came, and which was to charge one man at one sum and another man at another sum? Their objection to the application of principal value to all classes of property was this—that it was impossible to justly impose the tax unless the Chancellor of the Exchequer laid down certain special and definite rules whereby that principal value was to be ascertained. The hon. and learned Member said the tax should be levied upon what he was pleased to call—he presumed—the capital or selling value of the property at the 1487 time it passed. But had he attempted to deal with the case put by the Leader of the Opposition, of a small leasehold property where they might have reversions valued and paid for at their present value two or three times over before those reversions came into possession, or where they might have the reversionary value put at such a figure that it was absolutely impossible even to obtain security on the property? The Bill had not been framed on logical principles as compared with previous systems of valuation, and the Committee would have to discuss at a later stage to what extent this rule of graduation and capital value was to prevail. A good deal was to be said in favour of the theory of graduation when they were dealing with property coming into the hands of a particular beneficiary, but for the hon. and learned Gentleman to say when they were dealing with Probate Duty—which he admitted was a tax upon transfer to be levied on the passing of a particular property on the death of the person on whose decease the succession took place—that this scheme was based upon a logical principle was to entirely forget the basis upon which the Probate Duty had been justified and levied. The right hon. Member for Great Grimsby had raised the question of whether or not the principal value was to be applied all round. In raising that question the right hon. Gentleman had at any rate enabled the House to express its judgment as to whether or not one general rule was to be laid down, but it left open the question of how the definition of principal value or how these words were to be applied when they came to the particular class of property they had to deal with. He should have thought it would have been better if the Government had seen their way to use some expression which would have indicated better the principle on which they proposed to estimate the value; but, at any rate, the Opposition were perfectly justified in raising their protest against a system which put on an inequitable basis taxes which should fall on all classes of property.
§ ME. COURTNEY (Cornwall, Bodmin) (who was received with cries of "Divide !")said, he had listened to this Debate, and he confessed he did not in the least know what they were to divide 1488 upon, and those who cried "Divide !" he expected were as ignorant as he was. The right hon. Member for Great Grimsby had moved to leave out the words "principal value of," and he understood him to have explained he made that Motion in order to obtain from the Chancellor of the Exchequer some explanation of the method proposed to be pursued in ascertaining the principal value. The Chairman had put the Question that the word "the" stand part of the clause, and in so putting that simple word had reserved the question proposed to be moved by the hon. and learned Member for Harrow, who proposed to substitute for "principal" the "net annual." If they were going to have a discussion on that Amendment, what was the use of dividing on the word "the"? It seemed to him perfectly idle to do so, for a Division now would settle nothing. He would suggest, therefore, they should not waste their time in an idle Division, but proceed with the Amendment of the hon. and learned Member for Harrow, which raised the distinct and separate question as to whether this should be the annual or the capital value; and subsequently they would be able to raise the important question proposed to be raised by the Member for the Isle of Wight as to whether the tax was to be regarded as a debt to the personal estate to be administered, or as a tax upon the interests of persons coming in in succession.
§ SIR W. HARCOURTexpressed his entire concurrence with the observations of his right hon. Friend. He was taken by surprise when he found there was an intention to divide on the word "the." They had spent a long time in discussing the Amendment of the hon. and learned Member opposite, and what they really wanted to determine was, whether they were to take the principal value or the annual value. He would venture to suggest that the right hon. Member for Great Grimsby should withdraw his Amendment and allow the Amendment of the hon. and learned Member for Harrow to come on, when they should then decide on the question, and then they could come to the important question raised by the Member for the Isle of Wight as to whether this tax should fall upon the successor or upon the corpus of 1489 the estate. Let them not waste their time on small points, but come to the principal matters at issue.
§ MR. A.J. BALFOURentirely agreed with the principle laid down by the right hon. Gentleman that they should in this most difficult and complicated matter endeavour to concentrate themselves upon the main points of attack and defence, and endeavour to isolate as far as they could the various principles with which they had to deal, so that the issues should be clean-cut issues. But that was not at all an easy matter. He agreed that to divide on the word "the" seemed to be a rather empty Parliamentary operation. But one of the points on which he felt felt most strongly was the question of life interests, and that was not raised on the subsequent Amendments. There were objections to the Amendments of the hon. Member for Harrow. Annual value taken by itself might be extremely hard on agricultural land, and might be far too lenient with regard to reversionary interest. He did not think the real alternative was capital value versus annual value. His objection to the Government scheme was that it taxed capital value as distinguished from life interest. He had no special objection to a great deal of what would be the Government's plan of taking the value of agricultural laud. Their way might be a fair way of doing it. On the other hand, he agreed with the Government in thinking that taking the annual value of land for great reversionary interests was most unduly liberal to the present owners; but he did not think it was a fair way of dealing with reversionary interests to say they had to be taxed, and pay on death the full value of that reversion. Whether the word "the" in its abstract emptiness really was the best word to divide upon he could not say, but as the matter stood he should prefer to divide upon that word.
§ * SIR W. HARCOURTsaid, the right hon. Gentleman liked the word "the," and he did not agree with the hon. and learned Gentleman below the Gangway on the question of annual value. He did not really wonder at that, because he did not think it would bear discussion for five minutes. But why did the right hon. Gentleman not give them an Amendment which represented his own view? 1490 That would be a thing worth dividing upon. He observed a remarkable absence of Amendments from responsible Members of the Opposition—from the Leader of the Opposition and the late Chancellor of the Exchequer—and he was not surprised at that. They were, he thought, entitled to ask that the gentlemen responsible for the Opposition should tell the Chairman what they wished to divide on, and not invite them to divide upon an abstract "the," which was not the most useful way of occupying the time of Parliament. If the right hon. Gentleman would tell them what views would commend themselves to him, they should understand where they were. But what was the use of dividing on the word "the," and then having the Amendment from the hon. and learned Member for Harrow, which the Leader of the Opposition had indicated he could not support. Surely that was not the way to reach that clean cut issue which the right hon. Gentleman desired to reach.
§ MR. A. J. BALFOURsaid, ho did not know whether it had ever been the duty of an Opposition to suggest an alternative Budget. One of the difficulties they had in making any suggestion in this Budget was that they were constantly and necessarily hampered by the fact that a Resolution had to be passed in Committee before they could move a positive suggestion of any kind whatever, therefore they found themselves in a difficulty at every turn in framing a substantive Resolution. What he would suggest at the present moment was that they should divide upon the words "the principal." That, he thought, was a fair enough proposition.
§ SIR W. HARCOURThoped the suggestion of the right hon. Gentleman would be accepted, as he regarded it as a business-like suggestion. If they adopted it, and divided on the words "the principal," they could then proceed with other Amendments which raised important points.
MR. GIBSON BOWLES (who was received with cries of "Divide !")said, the "principal value" of hon. Members opposite seemed to be to prevent Debate, and the "principal value" of the Chancellor of the Exchequer seemed to be to impart irrelevant and rather bitter re- 1491 marks into the Debate. The Amendment of the hon. and learned Member for Harrow would not meet the ease, because this dealt not merely with real property but also personal property. They could not take the annual value of personal property, and it would be impossible to explain the meaning of the words "principal value" in the clause. The reason was this: that, to his mind, the clause had been drawn with a set purpose of committing the House at the first stage to the whole of the Bill. If the Committee swallowed this clause it would swallow the whole of the Bill, including some parts which would have to be brought up again for the purpose of being rediscussed. The right hon. Gentleman the Chancellor of the Exchequer had founded his argument on an assumption that in this matter real estate only was dealt with. He had also stated —and the hon. Member for East Lothian had restated it—that the object of the clause was to assimilate real estate and personal estate. The Chancellor of the Exchequer had expatiated on the hardships of charging realty on annuity instead of principal value. He was not prepared to say that it was impossible to charge realty on an annuity where the fee simple passed, but the fee simple only passed in a small minority of cases. As a rule, what passed was not the fee simple, hut the life interest, and in those instances the full value was charged, inasmuch as they charged the successor with the full value of the annuity he got. In the case of the passing of the fee simple the full value of the estate should be charged, but those cases were only a small proportion of the cases in which Succession Duty was paid. The right hon. Gentleman the Chancellor of the Exchequer shook his head; but would he favour the House with the figures on this subject, which he must have got for his own information. It increased their difficulties to deal with this matter without the figures. He felt sure that if the right hon. Gentleman would produce the figures the Committee would see that in the vast majority of cases the successor to real estate did pay on all he got. This was no place to put in the method of dealing with the property. The words "principal value" were in their wrong place, and the proposal to omit them was quite 1492 proper. Their inclusion now would render it impossible to discuss very important elements in succeeding portions of the Bill.
§ MR. J. CHAMBERLAIN (Birmingham. W.)I think we have really got into a practical difficulty, and it would not be creditable to the business capacity of the House of Commons if we did not find some way out of it. It is evident that there are three separate questions which may be raised on the words "principal value." There is the question raised by the Amendment of my right hon. Friend beside me. He desired to have information as to the method of valuation to be adopted. He was answered in a most conciliatory and satisfactory manner by the Chancellor of the Exchequer. The object of my right hon. Friend has therefore been attained, and he will, no doubt, be ready to withdraw his Amendment to make room for a new question. The second question raised was that of the hon. and learned Member for Harrow, whether annual value shall be substituted for principal value. That is a proper question to raise, but, inasmuch as the official Members of the Opposition will not be able to support him, and as my hon. Friends and myself will also be unable to support him, it is obvious that, although my hon. and learned Friend may raise an interesting discussion, he cannot take a Division of any considerable importance. It is not likely that he will be supported by any large section of the House, therefore I venture to suggest that no great harm would be done if my hon. and learned Friend sees fit to withdraw his Amendment. Then there comes the third question raised by the proposed Amendment of the Leader of the Opposition. Passing over the question of whether it is customary for a Leader of the Opposition to move Amendments to a Bill, I would suggest that if the Committee passes the words in the way proposed by the Chancellor of the Exchequer the Leader of the Opposition will not be in Order subsequently in raising his very important Amendment. The present is, therefore, the only time at which to vote on the Amendment of the Leader of the Opposition, which will doubtless have the very large support of the Members of the Opposition. I do- 1493 not speak for the whole of them. As no one has been able to suggest any other way out of the difficulty, I appeal to the hon. Gentleman the Member for Harrow not to press the Amendment at this stage, but to bring it forward on Report if he sees fit to do so, and to allow the Committee to divide now on the proposal of the Leader of the Opposition.
§ MR. W. AMBROSEsaid, he hoped the Committee would give him credit for not wishing to place difficulties in the way of the Committee or in the way of the raising of a clear issue. He could not help saying, however, that it was rather hard that he should be called upon to withdraw his Amendment before he had moved it or had been heard upon it. His plan was to tax the product of the land instead of something undefinable— namely, the imaginery capital value. However, he did not wish to stand in the way of an issue being taken. He hoped they would have a vote of the House on the Question whether the words "principal value" should remain. If they were allowed to pass it would be necessary to pay on capital value. As he had not yet moved his Amendment, it was not necessary to withdraw it. He was ready to fall in with any arrangement that might be proposed.
§ MR. BARTLEYsaid, he looked upon the words "corpus value" as an essential part of the Bill. He thought the only question was that the corpus or principal value should be ascertained fairly, so that no one should pay on more than they enjoyed. If the word "principal" were left out it would make the first clause agree better with Clause 6.
§ * MR. BYRNEsaid, he would point out, as a reason for omitting the word "principal," that the duty it was proposed to impose combined the old Probate Duty and what was really a Succession Duty with reference to land, and a great deal of personal property besides. If that were so, in putting in the word "principal" they would be using a correct expression with reference to what would be equivalent to the old Probate Duty, but an improper expression with reference to what would be received as 1494 Legacy and Succession Duty. If they admitted the word here he was certain it would lead to nothing but confusion.
§ MR. A. J. BALFOURWe have now arrived at a settlement of the question. I would suggest to the right hon. Gentleman who moved the Amendment that perhaps the word "the" ought to stand. I would ask him to withdraw his Amendment, and then either he or I will move to omit the word "principal."
§ Amendment, by leave, withdrawn.
§ Amendment proposed, in page 1, line 18, to leave out the word"principal."— (Mr. Heneage.)
§ Question put, "That the word 'principal' stand part of the Clause."
§ The Committee divided:—Ayes 216; Noes 189.—(Division List, No. 62.)
§ Motion made, and Question, "That the Chairman do report Progress, and ask leave to sit again,"—(Mr. A. J. Balfour,) —put, and agreed to.
§ Committee report Progress; to sit again To-morrow.