FINANCE BILL.—(No. 190.)

HC Deb 29 May 1894 vol 24 cc1546-610

COMMITTEE. [Progress, 28th May.]

[THIRD NIGHT.]

Bill considered in Committee.

(In the Committee.)

Clause 1.

MR. BARTLEY

I wish to move the insertion, in line 18, of the words "ascer- tained as hereinafter provided. "The right hon. Gentleman yesterday hinted that the Government proposed to accept the words, and under the circumstances I need not occupy the time of the House by speaking on the Amendment.

SIR W. HARCOURT

Yes, we accept it.

Amendment proposed, in page 1, line 18, after the word "value," to insert the words "ascertained as hereinafter provided."—{Mr. Hartley.)

Amendment agreed to.

* MR. GIBSON BOWLES (Lynn Regis)

said, he desired to propose the insertion of the words "as set forth in the Inland Revenue affidavit." He did not, he said, mean to press this Amendment, but he wished simply to put it before the Chancellor of the Exchequer as a practical suggestion for carrying out the statute, and he would like the Government to reconsider their decision on the point. There were three matters here under consideration—assimilation, graduation, and aggregation. As to assimilation, no just-minded man could deny that it was right to levy upon the principal value of succession to real estate whenever such principal value actually passed, but the matter of assimilation was relatively a very small one. He might point out that the whole of the Legacy Duty amounted roughly to £3,000,000, the Probate Duty to £6,000,000, and the Succession Duty to £1,500,000. The question of assimilation affected but a small proportion of that £1,500,000; for he ventured to repeat the assertion he made on the previous day, that in the large majority of cases in point of value the principal value of real estate did not pass but only a life interest therein. The Chancellor had denied that, but, on inquiry, he would find it was the case. Assimilation, therefore, would only affect the lesser part, the £1,500,000,and would produce little or no money. It was, therefore, relatively a small matter. But the principle of aggregation embodied in the Bill was altogether mischievous, foolish, and impracticable. The Death Duties were already complicated enough. In these discussions hon. Members were too prone to take a simple case as illustration; but the vagaries of testators were infinite, and it was the complications caused thereby which led to all the difficulties. In a case recently taken into Court it appeared that A was entitled to some money on the death of B. B was his wife, and the children C, D, and E were also interested subject to B' s death. But A, C, D, and E died first, and then B died, and the result was that there were five devolutions and transmissions of personalty and five sets of legacy all arising out of one death. In another case cited in the book written by Mr. Wallace, of the Legacy Duty Office, 99 legatees' estates had to be followed out on one death, and if this absurd aggregation were adopted they would have had to be followed out not merely downwards but upwards, too, to make the aggregation of each. If there was this amount of complication under the Death Duties as they at present existed, a far greater complication would arise under the proposed scheme of taxation brought forward by the Chancellor of the Exchequer. His proposal, however, got rid of what he conceived to be the great difficulty, the great impossibility of the Budget scheme of what were improperly called Death Duties—namely, the question of aggregation—and it would reduce the duty to a Probate Duty. He did not suggest the abandonment of the desire to tax realty, because the Legacy and the Succession Duties were left as at present. His proposal would simply get rid of aggregation; it. would charge the Estate Duty on the personalty only; and if there was a wish to apply graduation and assimilation, the Chancellor of the Exchequer would be perfectly free to do this by further duties either on legacies or successions, or both, and duties graduated as he might please; but the very great difficulty of aggregation embodied in the Bill would be got rid of. It was possible to graduate, and it was possible to assimilate, but not under the scheme as it at present stood. He doubted, however, whether his Amendment really effected any alteration in the Bill, for by Clause 7, Section 6, the Estate Duty was in the first instance to be calculated at the appropriate rate according to the value of the estate as set forth in the Inland Revenue affidavit. He bogged formally to move the Amendment standing in his name.

Amendment proposed, in page 1, line 18, after the word "value," to insert the words "as set forth in the Inland Revenue affidavit."

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

* SIR W. HARCOURT

said, he was glad to hear that the hon. Member had no wish to press his Amendment. There were several objections to the Amendment, one of them being that as the affidavit was the statement of the representatives of the deceased, the authorities could not accept that statement as conclusive of the amount upon which the duties ought to be levied.

Amendment, by leave, withdrawn.

SIR R. WEBSTER (Isle of Wight)

said, he wished to move an Amendment providing that in the case of every person dying after the commencement of this part of the Act the graduated Estate Duty shall be levied and paid upon the principal value of— the benefit accruing to any person on the death of the deceased in any property, real or personal, settled or not settled, which passes on death. He said that he moved this Amendment with the object of raising the first of the three or four very important questions of principle which arose on this clause. He had consulted The Times report of the Chairman's ruling, and it confirmed his recollection that the objection of the Chairman to the Amendment proposed by the right hon. Member for the University of London was based on two grounds—namely, that it increased the Succession Duties and affected the number of persons paying. He had, how-ever, framed this Amendment in such a way as not to offend against the ruling with regard to this matter given last Thursday. He did not propose to alter in any shape or form the number of persons who would have to pay; nor did he propose to increase the duties they would have to pay. His proposition was this—that the principle of the Bill as enunciated by the Chancellor of the Exchequer was that taxes of this character, and, a fortiori, graduated taxes, ought to be assessed and paid in proportion to the ability of the persons who paid them. There were some very important questions to be considered in connection with that clause which, to some extent, approached the fringe of the question he was about to argue, which it was necessary for him to briefly enumerate. The first was the principle of graduation. When speaking of that, however, he would not be concerned with the principle of graduation itself, but with the effect of that principle when it was applied to the scheme of taxation under the present financial Bill. Nor was he at present concerned with the question of principal value—that would have to be fully discussed when they came directly to consider that subject at a later stage in the Debate—but only as to the way in which the principal value was to be arrived at. Then there was the question of aggregation. He was not concerned with it directly, but he should have to point out that the principle entered to a certain extent into the considerations he was about to bring before the House. What he was concerned with was the proposal that the tax should be levied in proportion to a person's ability to pay. It would be seen that he was quoting, and not for the first time, the right hon. Gentleman's own language in moving the Resolution upon which the Bill was founded. He submitted that that principle was a fair one, but that the way in which it was proposed to carry out that principle in the Bill was one that would not work fairly, and therefore he had introduced this Amendment, believing that, if it were adopted, the object of the proposal would receive effect, while the injustice of the 2>resent method would be avoided. Let them think what methods of increasing the Death Duty might have been adopted, because if they approached the consideration of the question from that point of view they would see in what respect the Chancellor of the Exchequer had either abandoned one standard principle in order to accept another, or had, as they (the Opposition) thought not wisely, mixed up two or three conflicting principles and modes of application. First of all, the right hon. Gentleman might have assimilated realty and personalty. He (Sir R. Webster) would accept for the purposes of his argument the view that it was consistent with the right hon. Gentleman's plan that, to a greater or less extent, the distinction between realty and personalty should be, broken down. He would assume that it was fundamental to the right hon. Gentleman's scheme that in future, for the purposes of taxation, realty and personalty should be amalgamated. He suggested that such a result could have been obtained without recourse to any new method—for example, it could have provided that all the property of deceased should have been brought into hotch-pot, and upon that an increased Probate Duty could have been levied. The Chancellor of the Exchequer had, indeed, last night defined this new tax as "an analogue" to the Probate Duty. Why was it impossible for the right hon. Gentleman to do this, and to merely increase the Probate Duty? It was because he had made up his mind that he would introduce the principle of graduation. There was nothing new in it. They were told that in 1889 there was a kind of graduation applied to the Estate Duty. Certain estates below a certain figure were exempted; but it was not graduation properly so-called. Small estates paid less, not through the operation of a graduated scale, but because they were allowed a certain fixed abatement. But they all knew there was a graduation of another kind depending on the degree of relationship of the beneficiaries to the deceased which applied to the Legacy and Succession Duty. Why was it impossible for the right hon. Gentleman the Chancellor of the Exchequer to have adopted a simple course, and to have treated all as Probate Duty, and put an increase upon it Because the application of Probate Duty, properly socalled, was absurd. He (Sir R. Webster) was aware that this view had been clearly foreshadowed by the right hon. Gentleman the Leader of the Opposition. Could anything be more logically absurd? than to say that the Probate Duty, properly so-called, should be graduated? It was as illogical as to say, if they wanted to graduate the Income Tax, that a man who had £1,000 a year should pay 6d., and the man with £20,000 a year 2s., because the bank with which the latter did business divided 50 or 60 per cent. dividend. Could anything be more absurd than to suggest that there was any justice in graduating the Probate Duty if they were going to regard merely the total amount of property that was to be divided, instead of the position in which the recipient stood? He did not wish to overlay his case with wearying examples, but he could not help giving one. Suppose a rich man chose to leave a very large sum of money to a charity and the rest of his property in very small legacies to different relations. Under the present scheme his relations would have to pay a high rate of duty, because the large sum that had been left to the charity would be amalgamated with the small sums left them and duty charged upon the whole estate. That surely would not be either fair or right. He (Sir It. Webster) need not refer to the Account Duty, which he would agree was an analogue to the Probate Duty, but he would pass on to consider what should have been done assuming that the right hon. Gentleman had determined to assimilate realty and personalty. What it seemed to him (Sir R. Webster) the right hon. Gentleman ought to have done, and what would have been the right scheme, even assuming that they accepted all the other views he (Sir It. Webster) had merely summarised with regard to the treatment of estates, would have been to assimilate the Succession Duty and the Legacy Duty, to have turned realty into personalty, taxed them all as Legacy Duty, and then have graduated the Legacy Duty. That was a principle upon which they might have had a good deal of controversy, but at any rate there would have been very much less friction, and alteration of accounts, and a far shorter Bill. This would have commended itself to those who desired to simplify and assimilate the duty. But the scheme they had before them was of a different kind. It had been well put by one of the Members for Essex the other night, who had said that it seemed to be A sort of mixing up of a duty that was a duty of alienation with duties which were duties for a benefit received, for what purpose he could not understand. It brought out in strong relief the principle he (Sir R. Webster) had endeavoured to embody in his Amendment, which many hon. Members were desirous of discussing in considering the scheme the Chancellor of the Exchequer had propounded. It was certainly a very remarkable thing: that, under the Bill as it stood, however small a benefit was taken by the beneficiary he would have to pay a penalty in the form of an increased duty if the amount passing to him happened to form part of a large estate. He was not going to allude to the case of the millionaire which the Chancellor of the Exchequer was so fond of trotting out on every possible occasion. He would confine himself to showing how that scheme would affect the pockets of ordinary individuals, and for that purpose he would take only simple cases. In estimating a man's ability to pay, other questions than the amount of property he possessed would have to be taken into consideration. By way of illustrating his point he would refer to the ordinary case of a man dying possessed of £100,000, and also leaving, say, 10 children. [Sir W. HARCOURT expressed dissent.] The right hon. Gentleman the Leader of the House shook his head. Was he objecting to the £100,000, or to the 10 children? But it was not an extravagant supposition to take the case of a man who died worth £101,000, and left his property equally amongst 10 children. The Estate Duty chargeable under this Bill for each of those children receiving £10,100 a piece was 6 per cent., or £606. Take the opposite case where a father left to an only son a sum of £10,100. The duty in that case would only be £404, the difference being accounted for by the fact that in one case the amount came from a large, and in the other case from a small estate, although the position of the different recipients so far as the amount they actually received was concerned was exactly the same. Right hon. Gentlemen opposite might say that all this was not worth considering. They might say that this kind of criticism was unnecessary, because they had made up their minds that the Estate Duty should be charged in the way provided in the Bill; but the Opposition were justified in bringing out clearly that the Bill did impose upon the recipient of the benefit a tax not at all in accordance with his ability, simply because his portion happened to come from a larger pool. The same thing would happen in regard to small legacies of £200 or £300; and it must not be supposed that, because, for the sake of clearness, he confined himself to striking examples, he was putting exaggerated eases. He was pointing out the absurdity of the scheme of aggregation in the Bill as bearing on the proposition they were now considering. He was not discussing the aggregation by itself. A legatee would have to pay a penalty in proportion to the largeness of the total from which his legacy came. Suppose £50,000 were settled by a stranger upon a man for his life, and at his death passed to his eldest son. Suppose the father had £10,000 of his own and left that to be equally divided between two children. Simply because the father had a life interest in £50,000 that would be treated as estate, making a total of £60,000, and each child would have to pay £250, whereas if the father had not had an interest in the £50,000 each would have paid only £150. This was a case in which he challenged correction. No one who had studied the Bill, and who had made a calculation, would deny that in the case ho had put the estate would be treated as a £60,000 estate, and would be charged a 5 per cent. duty.

MR. BYLES (York, W.R., Shipley)

It is the legator and not the legatee who pays the money.

* SIR R. WEBSTER

said, he did not suppose the hon. Member had given as many minutes to the consideration of this question as he (Sir R. Webster) had given hours. He denied that it was the dead man who paid the tax; if it were, it would be regarded as Probate Duty; it would be treated as coming out of the residuary estate. Could anything be more absurd than saying that the testator paid the duty because the duty passed away from him? He could give many instances of the absurd operation of the principle of aggregation which was embodied in the Bill, coming down to nominal annuities of £200 a year; but he did not want to complicate the matter by arguing it out on special cases. He had taken the case advisedly, on the broadest lines, and had mentioned instances which, though they were multiplied, would only multiply the principle he wanted to bring out. They had now to consider what was the scheme of the right hon. Gentleman in respect of this matter. He hoped it would not be thought that he desired in any way to blame the draftsmen. He had said two or three times from the Front Bench opposite how much Ministers were indebted to skilled draftsmen; he did not wish in anything he said to be understood as casting any reflection upon the draftsmen of the Bill; his criticisms applied rather to the directions given to the draftsmen to embody absurdities in the Bill in order to carry out a certain policy. The Bill started by speaking about an Estate Duty, which at first looked like a Probate Duty, to be paid partly or wholly by the executors. But when they passed to other sections a very different state of things arose. Having by Clause 5 provided that a certain duty should be paid, the Bill further provided by Sub-section 3 of Clause 7 that a certain portion of the Estate Duty should be a charge upon the person receiving any property coming out of an estate; and, more extraordinary still, in Clause 12 there was the remarkable provision that in the case of all wills made after the commencement of the Act the Estate Duty was to be borne by the person to whom the benefit was going, and the executor was to recover from the legatee or successor the whole rateable proportion of the Estate Duty. They then at once passed from the Probate Duty, and got into the category of Succession Duty. Where was the analogue now? There were hundreds of thousands—nay, millions—of wills throughout the country which would be affected by this Bill. He was sure, speaking as a member of the profession he was no longer entitled to represent in the House, that the Law Officers of the Crown might well, on behalf of the Legal Profession, thank the Chancellor of the Exchequer for the amount of work that Clause 12 would give to the lawyers. The unfortunate clients would equally not thank him. So far from the duty being an analogue to the Probate Duty, everything above 3 per cent. was to be paid by the legatee or the successor to the executor. In other words, the whole of the graduation and excess tax, which was created by graduation, was no longer to be paid on the passing of the estate, but paid and recovered from the legatee or successor. This point was indirectly brought out on Thursday by the hon. and learned Gentleman the Member for East Lothian, and he suspected that it was to a certain extent a revelation to the right hon. Gentleman the Chancellor of the Exchequer. He (Sir R. Webster) could not help thinking that if the right hon. Gentleman had appreciated that in the case of all new wills the whole Estate Duty was to be put upon the legatee or successor, if he had appreciated that under all existing wills everything above 3 per cent. was put upon the legatee or successor, he could scarcely have spoken so, glibly as he had done, of this being an analogue to the Probate Duty. If the Estate Duty in full proportion was to be paid by the legatee and successor, what became of the justice of the suggestion that the Estate Duty was to be charged, not in proportion to the amount which the man received, but according to the mere accidental circumstance that what he did receive came either from a large or a small estate? That was the position of the Opposition in the matter, whether they were right or wrong. They would, possibly, be voted down by some hundreds of hon. Members, who never appreciated even the most elementary considerations of the subject. No doubt, the organs of the Government in the Press would say that the result of his argument was a long, dull speech in which no one paid any attention; but he cared not for that kind of criticism. He wanted to bring it home to the Committee that the Chancellor of the Exchequer was not doing what he suggested he was doing, when he introduced the Budget, and that was, taxing people according to the ability to pay. The right hon. Gentleman was placing the penalty on the small man who received £100 legacy or the £500 legacy; and had the good luck—or rather the ill fortune—of receiving it from the estate of a man having above £10,000. He thought there should be some alteration in the way small legacies were left, because it was singularly unjust that there should be this additional burden on small legatees who received their money out of large estates. There was another very important question involved in this matter, one which embraced an entirely different consideration, and that was the absolute uncertainty that would be introduced into the Government scheme, by virtue of the varying tax, which was to be measured not by the sum received but by the total out of which that sum came. He was not attacking the principle of aggregation—the principle, namely, that the total benefit a man received in various other ways from an estate should be calculated in making out the Probate Duty he was to pay. But did the right hon. Gentleman imagine that estates of £25,000 or £100,000 could be wound up in a few weeks or months? They all knew that according to the nature of an estate a very considerable amount of time must be involved in winding it up. Take the case of shares in an Australian bank or a South American railway. It was utterly impossible to ascertain, in the course of a few days, the real value of such an estate. Again, what would happen when an estate got close to one of the six lines into which the right hon. Gentleman broke his system of aggregation under £100,000? Did not the right hon. Gentleman know that there would be an attempt made to get the estate below the line? Remember that a difference of £20 in an estate would make a difference of. £200 in the Estate Duty. Many people thought it was not a sin to evade, as far as possible, the payment of the Queen's taxes, and there was no doubt that, though his right hon. Friend the Member for St. George's thought it was the greatest sin that could possibly be committed, there was a natural tendency to try to evade taxes. There was another point. At present, if a man was left £10,000, he could go to the executors and get his £10,000 at once, paying the duty; but under the scheme of the right hon. Gentleman such a man would, in the future, be told he could not get his legacy until it was known how much the estate was, as, if it were £90,000, he would have to pay £4 10s. per cent., and if it were £100,000 he would have to pay more. The right hon. Gentleman could not deny that those were circumstances that would affect the amount of the tax recoverable and the expenses of levying it. The right hon. Gentleman might have the advice of the hon. and learned Member for East Lothian that his Budget was based on logical and scientific principles, but the practical way would be to wind up the estate at once, so that the Chancellor of the Exchequer might get his tax quickly. Reasonable as his proposition was, and just as it was to the Exchequer, he was sure that the mechanical majority of the Government would vote it down. But before the Amendment was rejected, the Opposition desired to make it clear to the House, and through the House to the country, that this tax did not proceed on the principle which the right hon. Gentleman himself laid down, that it was not assessed according to the person's ability to pay it, but according to the accidental circumstance that the legacy came out of a large estate. They must also protest against a plan which was neither a tax on the alienation or passing over an estate, or on parts of an estate, which so altered existing wills that the testator, in every case, would have to make a new will, if he desired to have his wishes before the Act was passed carried out, which meant the loss of money to the Exchequer, and great delay and expense in winding up an estate. For those reasons, some of which he hoped would commend themselves to hon. Gentlemen opposite, he begged to move his Amendment.

Amendment proposed, in page 1, line 18, to leave out the word "all," and insert the words— The benefit accruing to any person on the death of the deceased in any."—(Sir Richard Webster.)

Question proposed, "That the word 'all' stand part of the Clause."

* SIR W. HARCOURT

I will endeavour to address myself to the very fair speech of the hon. and learned Gentleman, and to state some practical reasons why I cannot accept the Amendment. By this Amendment the hon. and learned Gentleman raises the whole question whether, assuming graduation, we should graduate upon the A Duties, which partake of the character of probate, or whether we should graduate upon the B Duties, which are of the character of legacy and succession, and the hon. and learned Member argues that we ought to graduate, not upon the A Duties but upon the B.

SIR R. WEBSTER

If you assume graduation.

SIR W. HARCOURT

I will assume graduation. I know that the right hon. Member for St. George's is against it, and that the Leader of the Opposition is in favour of it.

MR. A. J. BALFOUR

I never said I was in favour of it.

SIR W. HARCOURT

On the Second Reading of the Bill the right hon. Gentleman was extremely careful to protest against its being supposed that he was against graduation.

MR. A. J. BALFOUR

I said it was not necessary to raise the question of graduation—that the intrinsic absurdities of the Budget could be sufficiently exposed without touching on the abstract question of graduation at all.

SIR W. HARCOURT

Either the right hon. Gentleman is for graduation or against it. The Committee are about 1o come to a Division, and then, I suppose, it will be seen what are the views of gentlemen on the Opposition side, including gentlemen who generally act with the Opposition, including my right hon. Friend the Member for West Birmingham, who, at all events, is in favour of graduation. I will, therefore, assume graduation in dealing with the plan of the hon. and learned Member for the Isle of Wight.

SIR R. WEBSTER

My objection would be equally strong if there had been no graduation, assuming that the Estate Duty is to be charged on the capital value of the estate and not upon the amount received.

* SIR W. HARCOURT

I will take it upon that ground. As I understand, the hon. and learned Member proposes to impose a duty on legacies and succession, and I have to consider what would be the result of the Amendment if carried. Well, then, one of my main objections is that his proposal is one of insolvency, and it destroys every means of raising taxation to meet the expenditure which hon. Gentlemen opposite demanded for the Fleet. I do not quite understand whether the hon. and learned Member proposes to leave the present Probate and Succession Duty alone or not.

SIR R. WEBSTER

Those duties make no difference to my scheme, but I would not have the smallest objection to deal with probate and succession.

* SIR W. HARCOURT

I should have the greatest objection, because it would destroy our proposals for the equalisation of treatment for realty and personal property. What would be the use to make a proposal to amend the Death Duties if we are going to leave the Probate Duty and Estate Duty as they are—anomalies which it has been the object of: everybody to remove? The hon. and learned Gentleman contends that instead of graduating upon the Pro- bate Duty we should have graduated on the Legacy and Succession Duty. What would be the result of that? By the hon. and learned Gentleman's plan we would at once lose £6,000,000 of the present Revenue, and as we have to find £3,500,000 more, therefore the hon. and learned Member's duty would have to be so graduated as to yield £9,500,000. Now, what would be the result to the legatees, whose interests are said to be so carefully attended to in the plan of the hon. and learned Member? The difficulty to be encountered is, that we cannot graduate any higher than the rates fixed in the Resolution of the House. Therefore, if the Amendment were adopted, we would lose the £6,000,000 under the Probate and Estate Duty; and would have to get it out of the Legacy Duty, upon the scale of graduation fixed by the Resolution. That is absolutely impossible; and so far from raising the money to meet the demands of the Fleet, you would render our Revenue insolvent. But, even supposing we could graduate the Legacy Duty to any extent we pleased, the graduation, in order to yield £9,500.000, would have to be nearly doubled. The 2 per cent. on small estates must be 3½ per cent.; the 3 per cent. below £10,000, 5 per cent.; the 4 per cent. between £10,000 and £25,000 would have to be raised to 7 per cent.; and the maximum rate would be not 8 but 14 per cent; so that, adding the 10 per cent. which may be payable under the existing Legacy Duty, the duty under the plan of the hon. and learned Member might be 24 per cent. That is the result of the practical scheme which is to render such benefits to the legatees and to the beneficiaries of these estates. Again, if the money were levied on the Legacy Duty, nothing would be collected under that duty in the course of the present financial year; it is only under the Probate Duty that any money can be got in the present year. In that case we would have abolished the whole of the Probate Duty during this year. Under these circumstances, there would be insolvency to the amount of at least £5,000,000 during the present year, and the only way in which we can meet the situation, in which the hon. and learned Member's proposal would land us, would be by a loan to fill the vacuity created. Is it possible to conceive that the House of Commons, wanting to raise Revenue in order to meet extraordinary expenditure, could be expected to adopt such a proposal? The real answer to the Amendment, to which I am now coming—[Ironical Opposition cheers.] Hon. Gentlemen are always ready to borrow money, but they do not care how it is repaid. That is their finance, but these are not the principles of the Government. The hon. and learned Member said that the Government founded their scheme upon the principle of the Probate Duty. That is perfectly true, and to that principle we absolutely adhere. The. whole of our scheme, as developed from the first clause of the Bill, is an analogue of the Probate Duty; and we stand upon that principle. So far from saying that the new Estate Duty has any reference to the interest taken by the beneficiary, I have, from the first, emphatically stated that the duty has nothing to do with that interest. I stated clearly in my speech introducing the Budget that our principle is that, upon the devolution of property of all descriptions, the State takes its share first, before any of the successors in title or beneficiaries; and I denied that the Government are taking from the legatee anything that ever belonged to himor was intended to belong to him. The. fact is, that this duty is a debt to the State; the legatee has no interest whatever in this debt, the State being the first creditor upon the property; and whatever the State does not take remains as the share of the legatee. That is the principle on which economists have always treated the Death Duties. I have shown that they were thus treated by the right hon. Gentleman the Member for St. George's, Hanover Square. I have already said that it is most important to keep that matter in view. It must not be supposed that there is any ambiguity on the part of the Government as to the principles on which this Bill is founded. Who is it that pays this duty to the State? The executor, the personal representative of the deceased. He has to make the first payment, not to the legatees, but to the State, and, he takes it out of the estate of the deceased, not out of the estate of the beneficiaries. Nothing can be clearer than the principle upon which this plan is founded,' and I maintain that in Clause 1 I have hot departed in any sense from that principle —that is to say, the payment of the Probate Duty out of the estate of the deceased by his personal representative. That is all the Revenue has to do with the matter. The Revenue receives that amount, but it knows nothing of what is done with the residue, which is distributed according to the will of the testator. Therefore, under Clause 1 I say we have nothing to do with anything whatever except the principle of probate and the payment under probate to the State. The hon. and learned Gentleman commented with great force upon the difference between the probate principle under Clause 1 and the principle under Clause 12. Upon that I would observe that Clause 12 is an entirely subordinate part of the Bill. It has nothing to do with the interest of the Revenue. If Clause 12 were out of the Bill altogether the Revenue would not lose a farthing. The money has been paid to the State by the personal representative upon the graduated scale. Clause 12 was introduced into the Bill because it was thought that it might be advisable to distribute the burden thrown upon the residuary legatee of the debt paid to the State among all the beneficiaries. Clause 12 was introduced in the interest of other persons, and not in the interest of the Revenue, and if Sub-section (a) of Clause 12 were taken out of the Bill the whole of the terrible difficulty which the hon. and learned Gentleman has raised about diminishing the interests of the legatee would disappear. Things would remain exactly as they are now under the Probate Duty. Every one of the objections which the hon. and learned Gentleman takes arose upon Clause 12, and not upon Clause 1. When we come to Clause 12 we can discuss this matter, and I will not, therefore., go into it elaborately now. I will only consider generally the reasons why Clause 12 was put in. It was thought that it might be well to relieve the residuary legatee, who now bears the whole burden of the duty, by distributing it among the beneficiaries. If the Committee object to that they may omit Sub-section (a) of Clause 12. So long as the Revenue is protected, I maintain a perfectly open mind as to the method of collecting the duty. This is merely a. question of collection, and if the Com- mittee thinks that the whole ought to be collected from the residuary legatee I do not object. I may, however, remind the Committee that, it is not until a figure over £2.5,000 is reached that the extra burden on the residuary legatee arises.

MR. A. J. BALFOUR

How about settled property?

SIR W. HARCOURT

said, he did not think any difficulty would arise in the case of settled property, because the payment would, to a great extent, distribute itself. He thought, however, that there were some difficulties with respect to realty which might arise, and which it might be desirable to meet under Clause 12. Under Clause 1 the Government had stood, and did stand, on the principle of the Probate Duty. He knew that the Leader of the Opposition had said more than once that he did not approve of the principle of the Probate Duty. He would ask, did he approve or not of the principle that the duty should be charged upon what was left by a man and not upon what was received by his successors?

MR. A. J. BALFOUR

I said that the Probate Duty, regarded as a tax, was a perfectly fair tax if you do not make it a principal source of Revenue.

* SIR W. HARCOURT

said, that the right hon. Gentleman seemed to have in his mind the maxim, de minimis non curat lex. He did not object to the probate principle when only £6,000,000 were raised by its application, but thought that it became a wrong principle when it was proposed so to apply it as to raise £3,500,000 more. The duty was a fair duty, and accorded with the old system of taxation in feudal times, when the State took possession of the whole property of a deceased man, and, having satisfied its claims out of the estate, returned it upon conditions to his successor. The hon. and learned Gentleman proposed to abolish this duty, which yielded £6,000,000 to the Revenue—a sum which the Leader of the Opposition viewed apparently as a quantité négligeable. The Probate Duty had every quality to recommend it to a Chancellor of the Exchequer; it was collected in the very simplest way, and speedily. He must, therefore, decline absolutely to part with this duty and to substitute for it another which would be collected with difficulty and would create a number of complications. He denied that he had been taken by surprise by his own Bill, as the hon. and learned Gentleman had suggested. From the first he had had a very clear view of the principles on which the Death Duties ought to be reformed, and he intended to adhere to them with the support, he hoped, of what was termed his "mechanical" majority. He did not understand why majorities only should be called "mechanical," for he had observed that minorities were equally "mechanical."

MR. BYRNE (Essex, Walthamstow)

said, he wished that the Committee had been told what instructions were given to the gentlemen who had furnished the figures which the right hon. Gentleman had placed before the Committee.

SIR W. HARCOURT

I merely asked them what would be the financial result of the Amendment of the hon. and learned Gentleman opposite.

* MR. BYRNE

said, that the gentlemen who had furnished the figures had not had the advantage of hearing the views of the hon. and learned Gentleman. Given the same persons to tax and the same property in respect of which the tax was to be levied, why should it not be possible to obtain the same amount of money by one method of procedure as by another? Given the same persons and properties, there were various ways in which this taxation could be so adjusted as to work fairly while producing all the revenue that was desired. He did not pretend to be a financial authority, but as an ordinary observer of what was going on he thought he might give expression to the views that occurred to him. He was aware that this Amendment was said to be a bankruptcy Amendment, but he should have thought that if it was possible to bring in a Resolution of so unjust of character as that of the Chancellor of the Exchequer, it was equally possible to bring in a Resolution correcting the injustice. If that were admitted, there was an end to the suggestion about this being a bankruptcy Amendment. The Chancellor of the Exchequer had told them that what he had to look at was the receipt of revenue and not to the mode of collection. He (Mr. Byrne) thought, however, that the levying of the revenue ought to have reference to what was just and right, and, whatever the Chancellor of the Exchequer might think qua Chancellor of the Exchequer, he could not acquit the Government of pressing on a scheme of taxation which was monstrously unjust. This question was directly raised by the Amendment, which went to the vital principle of the Bill. There were essential differences between the proposals of the Chancellor of the Exchequer and the system under which the scheme of Probate Duty was carried out. Where a man was parting with property, it did not matter to whom he was going to sell it, he had to pay a certain amount to the State in respect to the alienation of that property, and he actually paid an ad valorem duty on the value of the property independently of the person to whom it was conveyed. It was exactly the same with regard to the Probate Duty. There was an alienation of property there, and duty had to be paid before there was any alienation of property just in the same way as they were told that land should pay duty before alienation. What was the result? As a man's estate had to bear his debts, so it bad to bear Probate Duty. Then the other form of taxation was upon enjoyment; and just as under the present system of Legacy and Succession Duty the charge was upon what a man enjoyed, so in the present instance, as far as the duty was levied like the Legacy and Successionuty, it ought to be charged in respect of enjoyment. That was just what the Bill did not do. Consider the difference in method, and how far this tax was really carried out as a Probate Duty. In the first place, alienation duties were paid by the alienor, either directly or indirectly, as purchasers generally paid duties. Where a settlement was being made the ad valorem duty was paid by stamp out of the general estate, and was no burden upon the property afterwards. So far with regard to Probate Duty. As to Legacy and Succession Duty, that was paid by the persons who were to enjoy the property, without reference at present to the capital or sale value of the property. Each of those methods had worked well. Would the present scheme work equally advantageously? Undoubtedly it would have been competent to raise the same amount by means of increased Probate, Legacy, and Succession Duties. But another scheme had been put forward for the first time, and the House required to examine and see whether it was a fair scheme. As far as the amount to be paid was concerned, this partook of the nature of Probate Duty—regard was had to all that the testator had to part with. He was,of course, referring so far only to the general leading principle. The whole estate, real and personal, was treated as if Probate Duty were going to be charged and paid at once. That was an alienation. But having found how much could be got out of the estate, the Bill proceeded, as far as real estate was concerned, simply to increase the burden of Succession Duty, calculating it upon capital instead of upon the true principle in taxation of that description—the enjoyment of the property by the various individuals. The old Probate Duty was done away with in name, but a tax was imposed which was to include the amount formerly raised by means of Probate Duty. That old tax might have been increased for the purpose of revenue, but was no longer to be levied like Probate Duty paid by the executor, and then no longer a burden on the estate. The Bill treated the residuary legatee as if he were a pecuniary legatee. That was a most extraordinary doctrine. A man's debts were not paid out of his residuary estate; he was obliged to pay them out of his property before he could call it his own. And so the old Probate Duty was always payable before a man had anything to dispose of. Colloquially, paying out of residue was spoken of, but the expression was not strictly accurate —there was no residue until it was paid. The right hon. Gentleman's view of his scheme was not the true one. From beginning to end of this Bill the charge was treated as payable by the person having the first enjoyment of the estate, and would remain a charge upon it if not entirely paid by the person having the first life or limited interest. That was not a payment in any sense like Probate Duty. If the life tenant paid it he would have a charge upon the land for it. If he chose to pay it by instalments and died within two years the charge would continue for the remainder of eight years, although the property might be deteriorating from day to day, and the value had very much gone down. On an estate with open coal mines worth £25,000 in the market the successor paying ordinary duty would pay about £144 a year for 8 years; and that would remain a charge upon the property though the coal might have been all worked out within two years. An ordinary mortgagee under such circumstances would, of course, foreclose and sell in time before the property ceased to be valuable. Though it might afterwards be only worth £10,000 the charge would continue at that rate. That was a method of taxation which might commend itself to some; but, apart from the doctrine of aggregation (which seemed to be iniquitous) the whole system of taxation was false where enjoyment was charged upon as if it were alienation. Income Tax also was not charged upon the capital value of, but upon the profit made from, a business worth in the market a large sum because of goodwill and perhaps "the potentiality of growing rich beyond the dreams of avarice." So it should be with all enjoyment taxes. It could not be a true principle to calculate upon the footing of an alienation duty and then charge it upon the enjoyment income of the person direct.

* MR. MOULTON (Hackney, S.)

said, the powerful and vigorous speech of the hon. and learned Member for the Isle of 'Wight showed that he had given great attention to the subject, and had thoroughly worked himself into a conviction of the justice of the principles he had enunciated. He had always admired the power possessed by his hon. and learned Friend of shutting his eyes very tight or keeping them wide open, as he chose. It would be difficult to find a better example of his qualities in that respect than on this occasion. He had denounced the scheme of this Bill in most impassioned language as being unjust, unreasonable, and illogical, but he had not taken the trouble to consider the principle of the Bill. It was no good using terms of abuse to the propositions and arguments of one's enemies, but to give them every consideration. First, he would show that the Bill was clearly fair in principle. The Bill was needed because the Death Duties had become a laughing- stock from their anomalies and inequalities, yet the argument put forward against it was—"Your new scheme is illogical because it is not the same as any of those already condemned systems." It was said to be illogical because it was not identical with either the Probate or Legacy Duties, although in some respects it resembled them both, but it would have been much more illogical if it had been like either in carrying out their unsound principles. What was the principle underlying this measure? It was that when a man died the proportion of his property which went to the State was payable first, before he had any right to alienate or dispose of that which remained. That principle fairly carried out and nothing else was the foundation of the Bill as regarded testamentary dispositions. Taking that proportion at 10 per cent., for the sake of argument, the other 90 per cent. a testator had the power to alienate. Two courses might here be taken. He might be left free to alienate it as he pleased, or he might be penalised in some way if he did not alienate as was desired. The hon. and learned Member for the Isle of Wight wanted to interfere with the free disposition of the remaining 90 per cent., while the Bill left him free to dispose of it as he pleased. He had heard with delight the cheers of the hon. and learned Member's Party when he was denouncing the Radical Government for being unjust and unreasonable in not penalising the practice of, as it was called, "making an eldest son." He had not looked up to the Gallery to see whether any Members of the other House were present, but he wondered what their reflections would have been upon hearing a taxation proposed which would put a prohibitory weight on anybody leaving the bulk of his estates to an eldest son. They would probably have fervently exclaimed "Save us from our friends." [Sir R. WEBSTER: Why?] The hon. and learned Member would see why if, remembering his mathematics, he would take the two schemes for raising a certain sum of money, the gradation being in the one according to the single legacy and in the other according to the total estate. He would find that where the bulk of the property was left to one person a penalty would under his plan be imposed of double or treble duty as compared with cases where it was left in fairly equal portions to all the members of the family. But the hon. and learned Member's language would not be forgotten, and when the House had thoroughly established this just and great principle of taxation with regard to Death Duties it would be time to revise the Legacy Duties, and to take care, according to the "just and reasonable principle" put forward on the other side, that the big legacies left in the case of enormous estates subject to settlements which prevented the testator from dividing them equally among those who had equal claims upon him should bear the largest share of Legacy Duty. When the time came for making that alteration the House would remember the language they had heard that night as to that course being "just and reasonable." The next question to decide was: what should be the proportion taken by the State? The proportion was to be greater the larger the estate. That was thoroughly clear, sensible, and logical. They all knew that the Income Tax was very unfair and unjust, and the reason was that income was not the measure of a man's wealth, but indicated only the rate at which at the moment he was increasing his wealth. Nobody could learn how rich a man was, or how much taxation he could bear, merely by knowing at what rate his wealth was at the moment increasing. At present a man with £20,000 in Consols was only taxed like a person who had risen, say, in the Civil Service to £550 a year. They all recognised that that was an unfair exercise of the power of levying taxation. The only remedy would be to levy a tax upon the realised wealth possessed by individuals. But as they were not prepared to face the difficulties of levying a capital tax and taxing a man year by year on his realised wealth, the State waited until his death, and then taxed that realised wealth on the principle that the larger its amount the greater the proportion it could afford to give to the State. Once grant that that was a fair principle (and nobody could deny that it was logical and clear) and the whole of this Bill was carried in all its main lines. The remainder of the Bill was simply the necessary additions to prevent it being readily evaded. Having arrived at the principle that a man should pay a portion to the State and then have the privilege of alienating the rest as freely as he willed, and that the proportion it should bear to the whole estate should increase with the amount of the estate, how were they to get that portion? So far as the Government were concerned, they took it before the man had a right to dispose of one penny of the property. But it must come out of some of the property which was left behind. How did the matter stand before? Take a tax to which this Estate Duty is closely analogous—namely, the Probate Duty. The rule there was to take the whole duty from the man who had the residue and to make him pay the tax upon everything, both that which he did and did not get. The legacies, large or small, given to other persons were allowed to go untouched and undiminished. If there was no residuary legatee and the whole property was left specifically to one or more persons, or in even shares, then the duty was divided over the whole of the property. Many people thought it was very unfair that the residuary legatee should bear the whole of the tax. It led to great inequalities of treatment. In the case of an estate consisting of £5,000 Consols left to each of five sons they would bear it equally; but if the testator left £ 1,000 each to A, B, C, and D, and the residue to E, then E would have to bear the whole tax. [Sir R. WEBSTER: Not at all.] Some people might call that fair, but it was, at all events, open to question. What course had the Government adopted? The amount of duty had been largely increased. How was it to be borne? The old plan might be followed of throwing the whole of it upon the residuary legatee, or, on the other hand, it might be provided that each should bear his share. By the Bill the choice was left to the testator to do either the one or the other. If he did nothing, by the rule of interpretation in the Bill as it stood (this was not a matter affecting the fiscal part of the Bill) the State would presume that the testator meant the shrinkage due to the tax to be evenly divided over the whole of his estate pari passu. The House might or might not approve of that. It was not vital to the Bill—it was only a rule of interpretation. It, however, seemed to be fair. It did not seem just (where the testator had not given any direction in the matter) to make one man liable for the tax on the whole estate. Next came the objection that the Bill made people pay more when the legacies came from big than when they came from small estates. There was no truth in that at all. If a testator provided for the payment of the toll to the State, it would be paid in the way he directed. But if a man in drawing up his will dealt with his estate as though he had a right to alienate it all, then the State was forced to take its toll from some part of that which he purported to dispose of, and naturally would consider that all the legacies were swollen more than they ought to be in the proportion of the duty. How could it be said that this plan was unjust when people knew that it would be the rule of interpretation if no other provision were made in the will? So much for testamentary dispositions. Next, to take the case put by the hon. and learned Member for the Isle of Wight, of an estate of £50,000 settled on a man for life with remainder to his eldest son. The man might have saved £20,000, which he is supposed to have left to two younger sons. They would have to pay at the rate corresponding to an estate of £70,000. Was that unfair? Long before this Bill was brought in it was felt that the great difficulty in dealing with estates was the practice of making settlements. How far it was right that they should be permitted was a matter of individual opinion. There was a strong feeling growing up that the unlimited right of making settlements ought to be curtailed. This Bill, however, did not propose to deal with this question. But they could not shut their eyes to the fact that a large portion of the property of the wealthy existed in the form of settlements under which they had a beneficial interest. It would be shirking the responsibility of making the tax a just one if Parliament confined itself to dealing with wills, knowing that the flank of the Bill could be turned by making settlements instead of testamentary dispositions. He thought the framers of the Bill had done their duty in a most fair manner in facing the difficulty of settlements and dealing with them, as well as with testamentary dispositions, as they had done in this Bill. What the Government said was this—"We consider that that which passes at the death of a man should include not only that which he is competent to dispose of by will, but also property which was his for life and passed away on his death to his wife or child, even though technically the right of the successor to it did not depend on a will, but depended on some other disposition." He asked hon. Members to think of some of the estates they knew of and to decide whether, when property so passed otherwise than by will on the death of the owner of the estate, such property was not regarded by the father as part of the, family wealth, and taken into account in his testamentary dispositions. The hon. and learned Member for the Isle of Wight (Sir R. Webster) said, that in case £50,000 were settled upon an eldest son, the other sons would have to pay extra because of the existence of that settlement. No doubt this was true, but it was to be remembered that but for the settlement of £50,000' their share of the estate would probably have been reduced. The fact that the eldest son was thereby provided for enabled the father to leave the whole of the rest of the property to the younger sons, who thus would each receive the half, instead of the third, of that property. If the point were put to them there was no doubt that they would say they would rather pay £200 or £300 more duty than not have the £50,000 settled upon the eldest son. He knew that a great many of those who were listening on both sides of the House wished to be fair in this matter, and he thought they would agree that it was fairer to include settled estate, as it was included in the Bill, than to exclude it altogether. He claimed that the Bill fairly tried to include everything which was part of the practical wealth of a man in that which was called the principal value of his estate. The levying a toll upon this in increasing proportion as its amount increased was the substance of this part of the Bill, and the mode in which this payment was taken out of the estate was a secondary consideration. But if the House was prepared to authorise the levying of a toll by the State upon the total value of a man's property, such toll to increase according to the value of the property, it must do so either by leaving it to the man to decide how the duty should come out of the specific property he left (in which case an interpretation must be put upon his silence), or it must say absolutely how the duty was to be borne. The latter course would be sup- ported by neither side of the House. It was, therefore, necessary to take the former course, and one way of so doing was that suggested by the Government. Clause 12 as it stood (although it was no essential part of the Bill) said that the man's silence should be construed to mean that the duty was to be borne pari passu. He could not help thinking that this was much fairer than to allow the enormously increased burden to fall entirely on the residuary legatee.

* SIR J. LUBBOCK (London University)

submitted that the Chancellor of the Exchequer had given no clear and sufficient reason against the Amendment. The right hon. Gentleman, in an interesting letter to The Times, stated—and he had repeated to-night—that rights of inheritance were given by wills; that the power of willing was given by the State, and he drew the inference that the State was the primary heir. The right hon. Gentleman justified what was now proposed by the precedent of what was done in feudal times. Surely that would not be regarded as a satisfactory precedent by supporters of the Government. At any rate, it was a retrograde step, and a precedent which Liberals, he should have thought, would have been very loth to follow. No doubt, wills were of comparatively recent origin. They did not involve any increase of the rights of children at the expense of the State, but they involved an increase of the rights of the dead to modify the previous custom with a view of securing a fair division. The Greeks had no wills until the Peloponnesian War; the primitive Romans had no wills. The Teutonic races had no wills in the time of Tacitus. Among the Hindoos, the first will was said to be that of Omichund in 1758. He was not sure that archaic customs and rights had much bearing on the question; but when the proposals of Government were justified by general statements as to ancient laws and customs, it seemed well to point out that they had no sanction from any such venerable authority. The right of the heir was far older than the power of willing. The claims of the State were the creation of law; the right of the children were primeval and preceded the very idea of a State. The right hon. Gentleman (Sir W. Harcourt) stated in his Budget speech that every authority on political economy was in favour of the principles he proposed. He had already denied this statement, and challenged the right hon. Gentleman to produce any evidence in support of the statement. This he had not done, but he repeated the same assertion to-night, and quoted his own Budget speech in support of it. The right hon. Gentleman claimed, indeed, the support of Adam Smith on the strength of a passage in which the father of political economy expressed his opinion that— It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion. What, however, was Adam Smith's position? The House would judge whether the right hon. Gentleman was justified in leading them to suppose that he had the authority of Adam Smith. In his introductory chapter Smith laid it down that— The subjects of every State ought to contribute towards the support of the Government as nearly as possible in proportion to their respective abilities; and he went on to explain— That is in proportion to the revenue which they respectively enjoy under the protection of the State. The expense of government to the individuals of a great nation is like the expense of management to the joint tenants of a great estate, who are all obliged to contribute in proportion to their respective interests in the estate. He laid it down, then, as a general axiom, in opposition to the Chancellor of the Exchequer, that taxes should be in proportion to income. Having done this, he discussed different classes of taxes, and when he came to those on the transference of property, he said— All taxes upon the transference of property of every kind, so far as they diminish the capital value of that property, tend to diminish the funds destined for the maintenance of productive labour. They are all more or less unthrifty taxes…Even when they are proportioned to the value of the property transferred they are still unequal. When they are not proportioned to this value, which is the case with the greater part of the Stamp Duties and duties of registration, they are still more so. He then discussed taxes on houses. These, he said, would fall most heavily on the rich— A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion. The quotation referred to by the Chancellor was, therefore, merely a defence of the House Tax, and gave no support whatever to graduation, which Adam Smith had already condemned. The only other authority which the Chancellor had produced in support of his proposal was John Stuart Mill. But what did Mill say? His words were— The principle of graduation, as it has been called—that is, the levying a higher percentage on larger sums, though its application to general taxation would be a violation of first principles—is quite unobjectionable as applied to legacies and inheritances; that was to say, not to estates as proposed in the Bill, but to legacies and successions as proposed in the Amendment. Mill had never expressed himself in support of the proposals of the Government. If they were to have graduation it ought logically to be, not on the estate, but on the legacy, He thought he had shown that of the two great authorities cited by the Chancellor of the Exchequer, one, Adam Smith, was against graduation altogether, and the other, John Stuart Mill, was in favour, not of graduation on estates, but of graduation on legacies and succession. The House would judge whether it was right for a Chancellor of the Exchequer to come down and tell them, and through them, the country, that economical authorities were in favour of his proposals, when, on being challenged, he only referred to two, and those two, when examined, were found to be against him, and not in his favour. Now, why had economists denounced graduation? Economists were not capitalists, and had no desire to protect capitalists. They condemned these proposals in the interests of good finance, of justice, and of the working man. They pointed out that if this system were begun there was no logical point in which to stop. Then, as shown by Professor Fawcett and other economists, a tax upon income merely led to the denial of some luxury or comfort. But a tax on capital, as this was, fell eventually on the working man. No doubt this imposition would fall primarily on children, but political economists were agreed that taxes on capital would fall ultimately on the working classes. It would create the maximum of distress for the minimum of result, because it would be so uncertain in its results and press with so much severity upon particular neighbourhoods. Every year they would have some 10, 20, or 50 properties on which heavy fines would be inflicted. What would happen? The person coming into the property would shut up the house; go away and live cheaply elsewhere, probably abroad, for a few years, until he had saved up the amount; or, at any rate, he must sell horses, dismiss grooms, gardeners and woodmen, diminish his expenditure with tradesmen of all kinds, and the result would be a dislocation of village life, a sudden diminution of employment, the ruin of small tradesmen—a sudden curse descending first on one village and then on another, which could not be foreseen or guarded against. Who would be the real sufferers? Who would be the victims of the Chancellor of the Exchequer? The landowner, or the poor men whose employment was taken away, the small tradesmen, who were ruined? This cruel injustice would, however, be to some extent diminished if they deducted the amount, not from the estate, but from the legacy or succession. Another advantage which would result would be the greater certainty that the State would receive the amount of the duty. No executor would pay away legacies to others without making sure that the duty was paid. But the Government were evidently afraid that residuary legatees would omit to pay the Estate Duty, which would come out of their own pocket. He would ask the Committee to look at the extraordinary provisions of Clause 8. None of the property of the deceased was to be sold until the Estate Duty was paid; no stocks, shares, funds, or securities were to be sold. Where, then, were the executors to get the money to pay the duty? Other complications would arise. Insurance Offices, for instance, found that persons were very anxious to receive moneys payable under policies as soon as possible; but they would hereafter be unable to pay the policies until the Estate Duty was paid. This would be a great inconvenience to the public. There was, indeed, one source from which he feared that in too many cases the necessary sum would be obtained by the executors and others—namely, from the timber. This proposal would lead to the ruin of those woodlands which were the beauty of our country. There was another question of great importance arising out of this. Under Clause 8 no stocks, shares, or securities standing in the name of a deceased person, either alone, or conjointly with others, could be sold until the Estate Duty was paid. No person could give a good discharge unless the Commissioners gave a certificate that the duty was paid, every purchaser of any stocks, shares, funds, or securities must not only see, but must retain and be always able to produce, this certificate. In the case of Consols and other available securities held by merchants, banks, insurance offices, and other business institutions to enable them to make sudden claims if one of the trustees wore to die, they would be unable to sell any of these securities until the Estate Duty was paid. They could not quicken the process. That rested with the executors of the deceased, and under Clause 5 might be postponed for eight years. Another point was that no one could safely purchase securities coming out of the name of a deceased person. No doubt Sub-division 3 of Clause 8 said that— Nothing in this section shall invalidate the title of a purchaser for valuable consideration without notice, but if the securities came out of a deceased name he had, ipso facto, had notice. If it meant that a purchaser might retain his purchase unless he had had notice from the Commissioners that the Estate Duty had not been paid, it reduced all the preceding sections to a farce. It was quite impossible that this clause could be allowed to stand in its present form. He was astonished that it should have been proposed. The right hon. Gentleman had stated that questions raised by this Budget must ultimately be decided by the country. The country, however, would have no opportunity of deciding that or anything else if the Government could prevent it. They had been told, indeed, that if the Government could force their Budget through by a majority of 10 or even of 2 they would do so. The right hon. Gentleman had expressed complete confidence that the country would support the proposals of the Government. No doubt they were tempting. The Government always seemed to think that to say they were taking from one man to give to several was a sufficient justification for the change. This simple, not to say vicious, principle ran through much of their legislation. It was tempting. But was it right? Was it just? Was it wise? It would unsettle everything, upset all calculations, diminish inducements to thrift, and settle the security of investment. He had great confidence in the justice and good sense of his countrymen, and he believed that if their opinion could be taken upon the Budget proposals alone by means of an appeal to the country like the Swiss Referendum they would not sanction these proposals. Now, what was the object of the Government? As he understood they wished to throw more of the burden of taxation on the rich. He would not occupy the time by again going over the ground that had been so ably dealt with by the hon. and learned Gentleman the Member for the Isle of Wight (Sir R. Webster). The hon. and learned Member for South Hackney (Mr. Moulton) told them a person might have to pay more because he received less, because it was in the power of the testator to say the whole of the Estate Duty should be paid by the residuary legatee. That was true, but two residuary legatees might receive exactly the same amount, yet one might have to pay a much larger sum than the other. If graduation was to be established it should be on the succession, and not on the estate. The object was that those who inherited most should pay not only in proportion, but more than in proportion. But the proposal in the Bill did not effect this. Two men might inherit exactly the same amount, and yet one might have to pay half again as much as the other. If the Government did not accept this suggestion they ought not to say that they proposed to tax the rich more than the poor, because in a great many cases their proposals would have the very opposite effect. He maintained, therefore, that if they were logical the Government, in order to carry their own principles into effect, ought to support the present Amendment.

* SIR A. ROLLIT (Islington, S.)

said, the Chancellor of the Exchequer based his chief argument against this Amendment upon financial necessity, and, of course, they must concede that the taxes must be raised and that the Government were primarily responsible for them to the country. He readily conceded, too, that in this year the Government were entitled to additional consideration inconsequence of their response to the demands that were made in relation to the defences of the country; but when a Budget was put forward as substituting equality for inequalities, and order for anomalies, it became very necessary to see carefully whether that Budget itself was based on just and equal principles, and the Debate that afternoon, which had been by far the most important contribution to the whole discussion, was chiefly directed to that end. The Amendment challenged the provisions of the Budget as to equality and justice, and suggested a mode in which those principles could be practically established on the general lines of the Bill, and he concluded from the speeches he had heard, and not only the speeches but from many of the provisions of this measure, that the Amendment itself was based on the principles of assimilation and graduation—principles of which were the underlying elements of the Budget. For his part, he accepted the principle of graduation; he believed it to be based upon a proper rule—namely, that of coordinating taxation with ability of payment and with equality of sacrifice; but he thought that rule would be best carried out by dealing with the recipient who had the accruing benefit and the actual present enjoyment, and in whose hands they could measure the benefit derived. And, if he had to vindicate the principle of graduation, he would point out that in the exemptions from the Probate Duty and the Income Tax they had that principle of taxation actually in operation at the present time. Then with regard to assimilation, he believed that in the matter of taxation the present position of realty and personalty was distinctly unequal, and the maintenance of that inequality was in itself undesirable oven if it existed only in appearance. There ought to be apparent equality in contribution to taxation, and for that reason he thought that any inequality ought to be removed; and, so far as the Budget carried out that principle he was heartily in favour of it. He could not help thinking that on his own side of the House the differences between realty and personalty and the difficulties of dealing with them respectively had been considerably exaggerated, and even then they did not justify the inequalities of Imperial taxation as between real and personal property. Cases had been quoted referring to persons who held plentiful cash and Consols as representing personalty; but the practical questions they had to deal with in administering estates were not altogether those of cash and Consols. They had to deal, for instance, with leaseholds and with ships as well. Take the case of a large merchant steamer costing as much as an ordinary estate. In case of death the owner paid duty on the capital value, while an estate paid only on the commuted life interest. The case of a ship raised all the difficulties which had been ascribed to realty—those of valuation, sale, and payment. The values were equal: but the ship depreciated as much as realty, and, though a large number of ships were practically unrealizable, the duties had to be raised by some system of insurance taxing the income, the effect being to make a man live according to his means. He took a stronger case with which they were very familiar in the North of England, where whole towns were built on leasehold tenure. He would take the case of a large town in the North which was owned by one freehold owner deriving from it an income of from £80,000 to £100,000 a year. This owner did not contribute anything, at any rate directly and apparently to local taxation as he ought to do, and yet when a leasehold tenant died he had to pay on the capital value of his leasehold, while the freeholder paid only on the commuted life interest—a matter of vast difference. What was the distinction in any of the alleged difficulties between leaseholders and freeholders? Both an estate and a ship had to be valued, and in the case of a ship it was often the more difficult. Each class of property, whether leasehold, freehold, or ships, had, it might be, to be sold in order to raise the duties, and to realise leaseholds or ships was often a great deal more difficult than freeholds, owing to the existence of rents and covenants. It was apparently sometimes forgotten how much personalty there was in the world, and how much realty was dependent upon personalty. Equality is equity; and he agreed, therefore, with the Associated Chambers of Commerce, which had often resolved that there was need for an equalisation of those duties. To meet some of the arguments he would quote from his own Party's authorised and authoritative chief publication. Here was one extract— It must, however, be conceded that land is now too much an article of commerce, and the value of urban and commercial realty has increased in such large proportion in relation to that of agricultural land and residential country estates that it is not possible to make an absolutely satisfactory defence of the inequality of the Death Duties considered by themselves alone. But he had a more extraordinary extract from the Unionist Party literature, which said— At present real estate is more highly taxed as regards the Death Duties, but personal property escapes duty. That would be a balance of taxation which would not be disadvantageous to many of those engaged in various pursuits, but he was afraid it was not true, and he was quite unable to accept that view. But he was bound to admit that he thought there was a case for grave State and Departmental inquiry as to the proportionate burdens upon personalty and realty so far as local taxation, at any rate, was concerned. This was a matter that must be most carefully entered upon and inquiry undertaken, because this question could not be delayed after the speech of the right hon. Gentleman the Secretary of State for India. Undoubtedly it involved wide and difficult considerations, but on the other hand he thought it was a matter in which the lauded interest was entitled to ask this House and the country to consider whether at present the balance of taxation in that local direction was quite right, and to claim, after inquiry, a fair and proper adjustment, for, if only for social considerations, no class ought to be unjustly treated. So far as the Budget sought to deal with these anomalies and inequalities, he heartily agreed with it; but he asked, did it do so as completely as this Amendment? He thought the Amendment had the advantage. In listening to the speech of the hon. and learned Member for the Isle of Wight (Sir R. Webster) he could not do otherwise than believe that if the Budget removed some anomalies and inequalities it created others which were worse and of greater magnitude, especially in taxing the estate as a whole, instead of following out the principle which was involved in graduation of dealing with those who received and enjoyed the benefit from the various portions of the estate. It had been pointed out by an hon. Member that in the case of a legacy of £5,000, which formed part of a settled estate of £50,000, the legatee would have, for that reason, to pay a much higher rate of duty, though he derived no benefit out of the £50,000. That had been regarded as a great hardship on the legatee, nor did he think that the objections against that part of the scheme had been removed by the speech of the hon. Member for South Hackney. No doubt it was a hardship on the legatee, but there was even a greater question to be considered, and that was whether such a provision was just. If it were not just then it became merely a question of the legatee ransoming his legacy, and to say that he obtained some advantage from the fact that the £5,000 formed part of a rich estate was, in his opinion, wholly without foundation. What would be thought, in commerce, of a claim of a higher price for a commodity simply because it came out of a larger bulk? Yet this absurdity was not greater than taxing a legacy on a higher scale simply because it came from a larger estate. Just graduation was taxation of the legacy itself according to its amount, and the plan of the Bill was ransom and injustice. He also objected to the scheme because, instead of taxing, as it professed to do, according to ability, it involved too great an element of uncertainty and chance. The Chancellor of the Exchequer had in his reply pointed out that the provisions set out in Sections 9 and 12 must be dealt with as separate issues, but he (Sir A. Rollit) contended that they must be read as forming part of the Budget proposals treated as a whole. If they considered those sections, moreover, they would see that Section 9 referred to the charge of Estate Duty on property and facilities for raising it, while Section 12 referred to the apportionment of the duty to be paid. That was not only a permissive right to the executor to recoup the duty, it was a clause giving distinct apportionment of that duty, and it seemed to him Sections 9 and 12 had the effect of making the executor a mere agent of the recipient for the payment of the duty which was afterwards to be recouped by him.

SIR W. HARCOURT

If they stand in the Bill.

SIR A. ROLLIT

said, the relationship as it stood in the Bill was that of principal and agent. The right hon. Gentleman said "if they stand in the Bill," but they could only take the Bill as a whole. It was a Bill which proposed a whole scheme for the remedy of anomalies and injustices, and for settling the Death and other Duties on a footing of justice and equality. One must look at these sections as elements in the whole scheme, which the Chancellor of the Exchequer seemed to him to have contemplated in his first thoughts as a just provision, but one which was not quite consistent with the provisions of Clause 1 as it stood in the Bill. He had only to add a word upon the question of aggregation, and he spoke from some experience of the matter. He was afraid, however, that the scheme would introduce some new difficulties, and that it would, for instance, lead to litigation and delay. It was proposed that the rate of duty should he calculated on the value of the whole of the estate. To do so, therefore, before any legacies could be paid the whole of the estate would have to be valued and often to be actually realised, while by taxing the recipient in return for the State protection of his legacy estates could be much more speedily distributed. The Chancellor of the Exchequer had opposed the Amendment on the ground that it would cause a loss to fall upon the Revenue. That was not, in his opinion, a sufficiently good ground for not supporting the Amendment. If the principle of graduation were accepted at all he was prepared to regard the proposed scale as a fair and moderate one, and he saw no reason why even a higher rate of duty should not be levied on the very largest estates of millionaires. He was bound to say, speaking on behalf of the Chambers of Commerce, and he believed, also, for many of his constituents, who belonged chiefly to the middle classes, that, taken as a whole, the Death Duty clauses of the Budget were based on principles that were acceptable to their views; and this was especially the case, and most just, in the greater exemptions which it gave to the less wealthy classes of clerks and tradesmen and the like, who now often had a very hard struggle to make ends meet. But he thought that upon the point under attack to-day an inroad had been made upon its justice and expediency by the speeches delivered on that side of the House; and if the Amendment could be embodied without loss of Revenue, as it might, it would meet more justly the ends and results he assumed the Chancellor of the Exchequer had in view which he himself approved and which the Amendment would achieve more practically and with more real and true equality of incidence.

MR. WARNER (Somerset, N.)

did not consider the speeches of the hon. Member who had just spoken, or of the hon. and learned Member for the Isle of Wight (Sir R. Webster), were serious, as all the objections urged by those hon. Members were to Clauses 9 and 12, and the Chancellor of the Exchequer had stated he was willing to concede something on those points. But, with regard to the clause that they were then considering, by which it was proposed that the legatee, and not the legator, would be liable to pay the duty fixed on the whole estate under the graduated scale, he pointed out that it would be better for the Revenue if the payment of the tax were placed upon the estate before it was divided. He thought an exception to this rule might advantageously be made in the case of a small devise of real estate on which the recipient should only be taxed in proportion to the value of the estate that he actually received. He felt that this Budget was a great reform of the taxation of the country, and it was one the people of the country were pleased to get, and that the proposed alteration would weaken it.

MR. GRANT LAWSON (York,. N.R., Thirsk)

said, that the hon. Member for Somersetshire, speaking on the question before the Committee, which was on whom the duty would fall, agreed with the Opposition that, in considering such a question, it was desirable to look at the breadth of the shoulders on which they proposed to place the burden; but when the hon. Member went on to say that they should calculate the total ability to pay the tax of the recipient of the legacy on succession, he showed that he did not know the very nature of Probate Duty. They were assured by the Chancellor of the Exchequer that the clause made the tax Probate Duty, and if it were Probate Duty, then the tax was not in the nature of payment for services received, but was in the nature of payment for the conveyance to the living man of a certain part of the property of the dead man. In that case, what did it matter to them what was the total ability of the recipient to bear the tax? What they must look to—if the tax were really Probate Duty—was the amount of property conveyed by the enactments of the State, with regard to succession, from the testator to the recipient. The only question was—what had the State given to the recipient? It was that, and that only, that the State had the right, and indeed the possibility, of taxing. The right hon. Gentleman the Chancellor of the Exchequer quoted extracts from his speech on the Second Reading of the Bill to show that, since the Second Reading, he had not changed his opinions—a matter on which the right hon. Gentleman plumed himself very considerably. The right hon. Gentleman said he made it clear on the Second Reading that the incidence of the tax was mot by the words the Amendment proposed to leave out, and not by the words it proposed to insert. But what the right hon. Gentleman said about graduation on the introduction of the Budget gave away the case against the Amendment. The right hon. Gentleman then referred to Mr. Pitt's expedients for a system of graduation. He said that Mr. Pitt introduced a system by which a man who had two carriages was to pay more in taxation than the man who had only one carriage. But in the case of a owner of two carriages who had given one away, Mr. Pitt did not make the tax fall on the person who received one of the carriages, and have the tax increased or diminished, not by what was received by the recipient, but by the number of carriages possessed by the man who gave him the carriage. He wished to point out that there was a great difference between the two forms of taxation upon the passage of property at death—the taxation upon the conveyance of property and the taxation upon the enjoyment of property. The taxation on conveyance was, of course, in the nature of Probate Duty, and the taxation on enjoyment was in the nature of Succession or Legacy Duty. The Chancellor of the Exchequer had the option of framing his Finance Bill so that the tax should fall on conveyance or enjoyment; and the right hon. Gentleman selected the Probate Duty. But the country would rather have the tax on the enjoyment of property. All taxes on enjoyment, such as Succession Duty and Legacy Duty, could be regulated in accordance with the consanguinity scale; that was, that in assessing the tax they could take into account whether the man who got the property was the son of the deceased person or a stranger in blood who had come into the property by some happy accident, and it was undoubtedly the desire of the country that the tax should be regulated in that way. But by making it a tax in the nature of Probate Duty, the Chancellor of the Exchequer shut himself out from the opportunity of acting on the consanguinity scale; for, of course, if they put the tax on the whole of the property as it left the dead man's possession, it was impossible to consider the date of relationship to the dead man of those who received his benefaction. The Committee had the advantage of a speech from the hon. and learned Member for South Hackney, who was brought in to bless the Bill, but who cursed it altogether. As the arguments of the hon. and learned Member developed, it became evident that he was giving away the whole case for the Bill. The hon. and learned Member said that the whole of the Succession Duties bristled with anomalies and inequalities. But the gist of the speech of the hon. Member for the Isle of Wight was that the scheme of the Government proposed new anomalies and developed fresh inequalities. The hon. and learned Member went on to call attention to what should be the strongest argument in favour of the Amendment. What was the aim of the Radical Party? It was that property should be distributed, and if the Amendment were carried there would be a strong incentive to the distribution of property. If the clause were carried as it was drawn, the man who left the whole of his property to his eldest son would have to pay the heaviest rate, and if, on the other hand, he scattered his property between ten or twenty recipients, he would still, as the clause stood, have to pay the same rate. But if the Amendment was carried, what would have to be considered was the amount received by the individual recipient, and not what was left by the dead man, and on the amount received a lower rate would be levied. Therefore, a testator would have the opportunity by distributing his property of lowering the amount of money he would have to pay to the State. That was a sound argument from the Benches opposite in favour of the Amendment. The hon. and learned Member for South Hackney also said that Clause 12 was wanted in the Bill because it was felt that the whole Estate Duties should not fall upon the residuary legatee; and the hon. and learned Member was, of course, an authority on the reasons why the Bill had been drafted. The hon. and learned Member said it was hard that a man should be taxed, not on what he got, but on what somebody else got. That was a very strong argument in favour of the Amendment. In fact, it was the case for the Amendment. The hon. and learned Member attempted to dispose of one of the arguments of the hon. and learned Member for the Isle of Wight, which showed one of the peculiarities and discrepancies of the first clause of the Bill. The hon. and learned Member for the Isle of Wight pointed out that if a man who had a life interest in £50,000 bequeathed it to his son, and had £10,000 of his own, which he left to two other sons, the two sons to whom he left the £10,000 would have to pay duty at the rate, not of 1 per cent., which would be applicable to the amount of money they had received, but 4 per cent., because their elder brother had received £50,000. The hon. and learned Member for South Hackney, in trying to reply to that argument, said that the younger sons should be glad that their £10,000 were left to them clear of the elder brother's claim, and that, therefore, they should not miss paying the extra duty. But suppose it was settled money—that the £50,000 went to the eldest son, and the £10,000 to the younger children—there would, in such a case of settled property, be no advantage to the younger sons that the elder got £50,000. The Chancellor of the Exchequer did not seem to care much about the effect of Clause 12 on the case for the Amendment. The Committee could not discuss the Amendment without looking at Clause 12, because the Amendment was a question of the incidence of the tax; and to really understand how the Bill made the tax fall they should look at Clause 12 as well as Clause 1. The right hon. Gentleman said that Clause 12 was immaterial, because it did not assist the Revenue. That might be the point of view of the right hon. Gentleman as the guardian of the Public Purse; but the point of view of every one who hoped to be a residuary legatee was different. Every man who might be a residuary legatee desired to know whether the tax was to fall upon the residue or upon the residuary legatee. The Bill was so drawn that if a follower of the Government desired the tax to fall on the residue, he was referred to Clause 1, as carrying out his wishes; and if another follower of the Government desired that the duty should fall on the individual legatee, Clause 12 was pointed out to him. Both of those alternatives could not be supported. The Committee would like to know on what stool the Government would stand. If they attempted to stand on two stools, it was only natural that the Bill should fall to the ground. They were also told by the Chancellor of the Exchequer that the Amendment was an amendment of insolvency, that it would mean a loss to the Revenue. But the figures of the Chancellor of the Exchequer were based entirely upon supposition, because, in order to get at a correct estimate of what would fall to the Revenue under the Bill for the next three or four years, they must know in what way people who died in that period left their property. If they left their property in lump sums, they would pay a high graduated tax, and if they dispersed it through various beneficiaries they would pay a smaller graduated tax. The right hon. Gentleman having stated that it was Probate Duty proceeded to show that it was Legacy Duty; for he defended the taking of the money from legatees because the State claimed it. But the right hon. Gentleman could not have it both ways. If he defended the taking of the money from the legatee because the State claimed it, he was not taking it from the residuary legatee. With regard to the advantages which would accrue from the Amendment, the first was that the tax would fall upon the recipient of the money. If they went to the executor he could not tell them what passed under settlements, and in other ways, on the death of the testator; but the recipient knew very well what he had got, and could give a true return to the Chancellor of the Exchequer. He also thought that the desire to evade the duty would be very much increased by the fact that the duty would be augmented according to the amounts received by other persons. Surely it was necessary and desirable that evasion should be made as difficult as possible. The Chancellor of the Exchequer seemed to have estimated for immense evasions. The right hon. Gentleman's figures of the result of the proposed taxes were far less than the amount that ought to be realised. Where did the difference slip out? By evasions, against which they could close the door if they made the tax fall on the recipient and not on the executor, who would not know where the money had gone to. He had already spoken of the encouragement of the distribution of property that would be affected by the Amendment. If it were carried the matter of winding-up an estate could be concluded in a reasonable time, because they were only looking to the one estate that passed into the hands of the recipient. He could sum up what he received, and make an affidavit and get his certificate in a few weeks; but if they made the duty fall on the total amount of the property situated all over the world, looking at the provision of Clause 8, they made the winding up of an estate a matter of endless difficulty and complication. This clause made the unfortunate person who received a legacy from a large estate pay a high duty, whereas the man who succeeded to a small estate had to pay a small duty. As the Amendment would make the burden fall where the advantage was to be gained, and where they could calculate the ability to bear it, he considered that it would to a great extent improve the Bill.

MR. JEFFREYS (Hants, Basingstoke)

said, he desired to support the Amendment, as he thought it would press unfairly on the children of the men who had large estates. It would be a great hardship to people who had slender means, and who would feel very severely any increase on the Death Duties. The hon. Member for Hackney had said, the larger the estate the larger the duty should be. He (Mr. Jeffreys), on the contrary, said, the larger the legacy the larger the duty should be. There was every difference between a large estate and a large legacy. As had been pointed out by the late Attorney General (Sir R. Webster) a man might be one of ten children, and his father might have an estate of over £100,000. He, receiving one-tenth of that, would have to pay more on account of his father having had £100,000 than would the man who received £10,000 from a father having a smaller estate. He (Mr. Jeffreys) had been the first to submit this argument to the Chancellor of the Exchequer, the instance he had chosen being that of a man who, with six children, left £50,000 to one, and £10,000 each to the other five. Each of the five would have to pay a larger duty than would an only son, who received £10,000 as representing the whole of his father's estate. Such a state of things was most unfair, and the more the country knew of it the more they would be inclined to think that it pressed hardly on members of large families who inherited small amounts, although the testator might have had an estate of over £100,000. Therein laid the kernel of the question, that if there was to be graduation of the Death Duties, the man who inherited, or succeeded, to the large estate should pay the increased duty. He did not think that would be half as unpopular as the proposal in the Bill. The right hon. Gentleman the Chancellor of the Exchequer had said that unless these Death Duties were raised there would be a great deficit, and that would cause the present Legacy Duty to be increased, especially on small legacies. He objected to that portion of the right hon. Gentleman's speech, because whenever the right hon. Gentleman wished to answer any of their questions or arguments ho at once appealed to the small taxpayers, and said—"If you wish to raise more money, you will have either to increase the Death Duties or the Income Tax on the small owners." Why should that be? If there was a certain amount of money to be 'collected and a certain amount of property to be taxed, it came to the same amount whether they taxed the large or the small property. But the right hon. Gentleman's statement was only an appeal to the constituencies—a kind of threat to the small proprietors, that if he were defeated in this he would have to impose a largely-increased tax on these people. He would have to do nothing of the sort, because for years Governments had gone on levying the taxes on large estates, and there was no chance of the country becoming insolvent. It was a most unfair argument for the right hon. Gentleman to say that these extra duties were put on the moneyed classes of the country to raise a fund for the Navy. If they were put on for that purpose they would only be levied during the present financial year and then taken off again. He was certain, however, that once these Death Duties were put on, they would never be taken off—at any rate, not during the term of Office of the present Chancellor of the Exchequer. Many people would not grumble to have to pay for the Navy by an increased Income Tax. The Chancellor of the Exchequer had asked, "Where are you going to get your money?" It was not for him (Mr. Jeffreys) to advise the Chancellor of the Exchequer, but he could tell the right hon. Gentleman that he would himself be willing, much as ho disliked the Income Tax, to pay an extra amount in that way if he knew that the money went for the Navy. But why he objected to the new Death Duties was because he was sure, from the manner in which they were imposed, that they would never be taken off again, and because they would be an immense burden to the real estate of the country. The right hon. Gentleman had said that if the Opposition had to raise money for the Navy they would do it by borrowing. Well, every prudent man avoided borrowing as much as he could; but notwithstanding what the Chancellor of the Exchequer said, the effect of these Death Duties would be that many landowners would have to increase their mortgages to pay the charges. If an estate passed through several hands during a short term of years it might be burdened with heavy charges, whereas in the case of an estate left to an infant it might be 70 or 80 years before the tax had to be paid a second time. He held, therefore, that Death Duties were most unequally levied. If there was to be any justice at all in them they ought to be levied in such a way as to prevent estates being saddled with enormous debts which would become almost unbearable in the course of time. He was sure a tax must be excessive and oppressive if the first thing people did was to try and find some way of evading it. And what was the ease at present? Everybody who had to face this increased Death Duty began to think of how he could possibly avoid it. It was a common subject of discussion outside the House how a man could best transfer his property to his children so as to avoid the increased Death Duties of the right hon. Gentleman the Chancellor of the Exchequer. That was proof positive that the duties must be excessive. He sincerely trusted that they would never come to such a state of things in the country, through the oppressive burden of taxation, that people would endeavour to conceal the amount of their wealth so as to defraud the country of its just due of taxation. Every Member of the House was aware that most people out-of-doors just now were discussing with their lawyers how they could dispose of their property so as to avoid the immensely increased duties that would be levied under the Bill if it became law. He maintained that the tax would be oppressive, and he only hoped that even at this late hour some impression might be made on the mind of the Chancellor of the Exchequer, and that he might be inclined to levy the duty not on the estate that the dead man left, but on that portion that a man succeeded to or inherited.

* MR. BUTCHER (York)

said, he had listened with some interest to the answer of the Chancellor of the Exchequer to the late Attorney General. In the first place, the right hon. Gentleman pointed to the result that would follow the carrying of the Amendment. He endeavoured to terrify the House by pointing to the awful character of those results. But if the results were such as the right hon. Gentleman anticipated it would be no answer to the Amendment. It was no answer to say, "I will impose an unjust tax because I cannot see how to get money otherwise"—and that was the substance of the reply the right hon. Gentleman gave. What were the facts with regard to the result which the Chancellor of the Exchequer anticipated? As he (Mr. Butcher) understood the point of the hon. and learned Gentleman the Member for the Isle of Wight, it was this—"Keep the existing Probate Duty and Account Duty as they are, and, if necessary, have a duty on real property of the nature of the Probate and Account Duty; but if you want an increased duty, then have a graduated duty in the nature of the Legacy and Succession Duty, graduated according to the amount that the successor gets." How did the Chancellor of the Exchequer meet that? He represented that the object of the hon. and learned Member for the Isle of Wight was to abolish the Probate and Account Duties altogether, and the right hon. Gentleman went on to draw the terrible picture of the loss to the Revenue of £6,000,000. Such a circumstance would be most disastrous, but he denied that such a result would follow directly or indirectly from the proposal of the late Attorney General. The Chancellor of the Exchequer had put an imaginary and absurd Budget into the hands of the hon. and learned Gentleman, and had produced from that, no doubt, very absurd results. As regarded the general question of graduation, he (Mr. Butcher) looked with no objection upon graduation as a general principle. On the contrary, he thought it was a most reasonable proposal that those who got large sums of money from a dead person, or under settlement, should pay a larger sum by way of duty than those who received smaller sums. But the Bill omitted from consideration altogether what a man received by will or by settlement. The Chancellor of the Exchequer took an artificially aggregated fund, and assessed duty upon it; but how did he make that duty payable? Not out of the artificially aggregated fund, but out of the smaller sum the successor received. The Chancellor of the Exchequer had invented an artificial argument to justify that. He said the duty was not one paid by the successor, but was really a debt due to the State. What did it matter what name it received? By whatever name it was called, it came out of the interest of the successor. Take even the interest a man received under a will. In that case, under Clause 12, the duty paid was recoverable from the successor. The Chancellor of the Exchequer seemed to think it was not entirely defensible, and he intimated somewhat broadly he was prepared to throw the proposal aside when they came to Clause 12, but that was not the only section which threw the incidence of the duty upon the successor, because under Clause 7 beneficiaries under a settlement were bound to pay the duty, and would have to pay it out of the money they received. They had this absurd result. Duty was assessed on a fund which bore no relation to what a man got, and it was paid out of a fund which bore no relation to the fund upon which it was assessed. He asked the Committee to say that that was a proposal which was wrong in principle, and which would be unjust in operation. The Leader of the House had referred, in support of his proposals, to certain recent legislation in the Colonics which bore on the Death Duties. He had not been able to find a single instance in support of the proposal of the Chancellor of the Exchequer; but, on the other hand, he had found a colonial model of legislation which was against the right hon. Gentleman—the South Australian Act. In that Act the very principle for which the Opposition were contending was carried out to the letter, as the duty was charged upon what a man succeeded to and not upon what was left. In that case what was left by will was distinguished from what was left by settlement. The total amount received by the successor was ascertained and the duty was levied on that. As regarded the question of principle, they had John Stuart Mill and they had the Australian precedents with them. The hon. and learned Member for the Isle of Wight gave some instances of the unjust effect the Bill would have if passed in its present form, and he would give one or two further instances. If the Bill passed as it stood, when a man died the successor would pay an increased duty upon what he got under the will or settlement because other persons unconnected with him got benefit under other wills or settlements. Suppose a man died leaving by his will, or having settled by deed upon his widow his whole fortune of £5,000. Under the scheme of the Bill she would, if there were no other settlement, pay £150. But suppose a stranger settled £100,000 on the deceased for his life and left it after the death of the deceased to the son, then the widow's £5,000 was aggregated with this £100,000 in which she had no interest, and the duty was levied upon that aggregated amount, so that instead of paying £150 she paid at the rate of 6 per cent., or a sum of £300. In other words, because a stranger had been liberal to a son of the deceased man, therefore the widow had to pay double the amount of duty she would otherwise have to pay. That was one of the anomalies that would be removed if the Amendment were carried. Let him give one other illustration. Under the Bill a person who took a small benefit under the will of a dead man would pay an increased duty because other property in which the dead man had no interest whatsoever went to someone else. Supposing a man left £5,000 to his widow, and had no other property, under the scheme of the Bill the widow would, if there were no other settlement, pay 3 per cent., or £150. But supposing that a stranger in blood altogether, who had nothing to do with the dead man, had settled £100,000 upon someone else during the life of the deceased, and that property changed hands on the death of the deceased, and went over to the son, then the widow paid 6 per cent., or £300. So that they had the astounding result that, although the dead man had no fraction of interest whatever in this property, because on his death it went to the son, therefore the widow had to pay double the duty she would otherwise have to pay. That was the result of the scheme embodied in the Bill. He asked the Committee to say that this proposal which they now sought to amend was unjust in principle, that it would have a most inequitable operation in practice, and that it would increase the many anomalies which were already incident to the levying of the Death Duties. The object of the Amendment, was to remove some, at any rate, of these anomalies, to prevent some of these injustices, and to remove some of the inequitable results that the Bill would have, and for these reasons he asked the Committee to think long before they sanctioned this principle.

MR. BRODRICK (Surrey, Guildford)

said, it was rather remarkable that although this Debate had proceeded now for five hours—[Ironical Ministerial cheers.] Did hon. Members think that in regard to so complete a change as was about to be made in the whole law and practice governing the devolution of estates they should not have a Debate of even five hours? During that Debate they had had no independent support of the principle proposed by the Government from any hon. Member of this House except the hon. Member for North Somerset. There had only been two other speeches made from the other side of the House in favour of this change, one by its putative father the Chancellor of the Exchequer and the other by the hon. Member for South Hackney, who spoke with all the interest and affection of the real parent and whose influence in prompting this change had been already acknowledged by the Chancellor of the Exchequer. He should not complain of that if the two speeches they had heard really dealt with the arguments brought forward by the hon. Member for the Isle of Wight. The hon. Member who cheered just now the idea that they should have got through this Debate with a few sentences of protest had hardly considered, after all, that this change which they proposed to drive through Committee by the votes of the majority was one which would be felt henceforth by every person who left property throughout the whole of the Kingdom. They had a right to expect from the Chancellor of the Exchequer that he should give them some argument. The right hon. Gentleman was an adept in making debating points; he was well able in debate to meet any Member of this House, and what they wanted was some reply on the hard cases which had been instanced as likely to occur under the Bill. It was not enough for the Chancellor of the Exchequer to say with a wave of the hand that they could shunt this from one person to another. They wanted to know whether that was a just position. They wanted men of the calibre of the Solicitor General—who had not even taken a note whilst the last speaker was instancing these hard cases —to deal with the difficulties which had been pointed out. It was no argument for the Chancellor of the Exchequer to deal with this question as if it applied only to millionaires. The right hon. Gentleman seemed to have got millionaires on the brain—a sort of plutocratic delirium. It was no argument for the Government to ignore the difficulties of settlement. The right hon. Gentleman told them that Clauses 12 and 7 could be discussed when they arrived at them, and that there was nothing which had been said by the Member for the Isle of Wight which had anything to do with Clause 1 as it stood. It was all very well to say, as had been said by the Chancellor of the Exchequer and the Member for South Hackney, that under Clause 1 a man could make what disposition he pleased. That was an absolutely erroneous statement. It was impossible for a man to make what disposition he pleased so long as they mixed up settled and unsettled property in regard to this tax. They did not, as had been said by the Member for South Hackney, leave it to the man to decide. A man could not decide so long as property devolved under settlement, as was mostly the case at present. Supposing they had got a man succeeding to landed property of £60,000 or £80,000 and whatever was left in the way of personalty went to the other children. If there was £20,000 to leave among four children and a sum of £60,000 or £80,000 was left to the eldest son, both in settlement, one by marriage and the other by no action of the testator, what power had he of adjusting the duties? How could he decide for himself? In what way was it possible under Clause 1 for a man with settled property to guard his younger children, to whom he was leaving small fortunes, from having out of these small fortunes to pay large sums because of having an elder brother who had come in for the larger share of the property? That man could not decide for himself and provide for his younger children. He could not alienate or sell in many cases; he could not divest himself of settled land, and he was bound to leave a charge very often of 4 or 5 per cent. on those who were already considered an object of charity, because the Government had already stepped in and declared they were not persons from whom Income Tax could well be levied. The hon. Member for South Hackney failed altogether to make out any case for charging this duty on the principal value. The figures given by the Chancellor of the Exchequer as to the effect of this duty on agricultural land were proved in the course of the Second Reading Debate to be erroneous, while those which had been quoted by the right hon. Gentleman that day were utterly unreliable and not supported by a single argument. He confessed to great disappointment at the manner in which the Government had met the Amendment. The Committee had a right to ask that the Government should apply their minds to the obvious difficulties which arose in connection with the Bill, and he was quite certain that no Member of the Government would rise to justify the charges which were put upon small estates by the clause. They were not in this case arguing against the principle of graduation. The Chancellor of the Exchequer had made this a question not of graduation, but of the incidence of the duty on the smaller estates, and the Opposition now wished to protest against the creation of a false corpus as the basis of excessive and inequitable taxation. He had endeavoured to put before the Leader of the House a plan of which he hoped the right hon. Gentleman would take notice, and he would ask him to consider whether his action in pressing for the rejection of the Amendment would not largely increase the tendencies to evade the duty? He only wished he was at liberty to describe to the Chancellor of the Exchequer some of the manœuvres which were being executed in order to evade the clause. He could give an instance in which a man had already transferred a large property to his son in return for an annuity, and in other cases men who had been making allowances to their sons had transferred to them the principal. [Laughter.] The Chancellor of the Exchequer laughed, but it would not be a laughing matter for the Exchequer. This was a really serious matter, and he would urge the right hon. Gentleman not to shut his eyes to the facts or to ignore the arguments which had been placed before him. He could only, in conclusion, express his firm belief that so far from causing an increase of revenue the clause would lead to an enormous reduction in the prosperity of the agricultural districts, and would perpetuate and increase the inequalities between realty and personalty.

MR. COURTNEY (Cornwall, Bodmin)

said, he proposed to occupy the attention of the Committee for some little time, partly because the importance of the subject justified it and partly because he had to submit some considerations which so far had received no attention. He occupied a rather unfortunate and peculiar position. He approved the principle of most of the proposals of the right hon. Gentleman, but he could not agree with the arguments adduced in support of them. That might be perhaps a perfectly insignificant circumstance, but was one right in acquiescing in a thing without examining the arguments on which the conclusion was arrived at? It certainly ought not to be done in this case. They were dealing with a Budget which might fairly be described as historical, and it involved the application of new principles to taxation. When they remembered the great Budgets of 1841, 1853, and 1860, he thought the Chancellor of the Exchequer might well feel proud at having his Budget raised to the historic rank. But as they were taking a new departure, it wase xtremely desirable that they should completely understand upon what reasoning these proposals were based, and ascertain their justification not only in vindication of their own action, but in view of the fact that what they did now would be done again in the future. Now, he had entirely failed to find the moral and ethical basis of the proposals of the right hon. Gentleman. They had been told it was desirable and essential that taxation should be in proportion to the payment to the receiver. He could not accept the word "receiver"; it would be too limited an application. The recipients of bounty would in future be taxed as members of the community in respect of what they enjoyed, and it was extremely doubtful whether they should receive an additional burden merely because it was convenient at the moment that they should do so. The hon. and gallant Member for one of the divisions of Essex, in a speech the arrangement of which he admired exceedingly, had pointed out that there was some disposition to accept arbitrary propositions as determining the basis of taxation. What was the history of the tax upon alienation? Hon. Members must know that they could not finally settle this matter by saying that here was an existing tax and that consequently it was a good one. They should surely have respect to the position which a tax had in relation to other taxes. It was extremely doubtful whether this tax on alienation could be justified at all. The Chancellor of the Exchequer justified the tax as one that was analogous to the Probate Duty. The State at present demanded a toll because it guaranteed the validity of a gift, and the State was therefore justified in intercepting a portion in the passage from the dead to the living man. The tax was an arbitrary one in exactly the same way as the tolls were arbitrary that were levied upon traffic passing from one station to another where the passengers made a change. It was no doubt an extremely convenient course to levy a tax which should be payable upon the passing of property from a dead to a living man, but it rested upon convenience only, and that was no ground whatever for argument in favour of taxation. This alienation tax was therefore convenient in the eyes of the Chancellor of the Exchequer, whose idea was that, so long as he got a certain amount of money, it did not very much matter by what means he got it; and it was not only a very convenient but a very productive tax. When they abandoned the notion that these taxes were defensible as tolls on passing goods, the time would also come when they would abandon tolls on the passage of property from the dead to the living. He ventured to say that if they really wished to discover a moral basis for this or any other system of taxation, they must consider that they were dealing with living members of a living community, and must look at them and consider how they were taxed. They must take a larger contribution from persons of large means. He was not now going into this at length, because practically it had been decided in the discussion in the Committee. He thought the Member for the Isle of Thanet was the only Member who had raised a voice against it. They had to regard this strictly as a problem of taxation. The true way of levying the cost of national government and national action from the members of the community would be to tax them from time to time, and, if possible, from day to day, according to a graduated scale in accordance with the totality of their powers. But it was difficult to establish such a theoretically perfect scheme of taxation as that, and to carry it into operation from year to year. The direct taxation which we did impose upon the living was the Income Tax, and it was impossible to have a graduated Income Tax which should be collected with convenience and certainty. The tax in its present form involved the necessity of collecting it at the same rate, whatever might be the wealth of those on whose incomes it was levied. That was a necessity of the case, and therefore the system of direct taxation which we could apply to the living was one under which the richer members of the community were not taxed to the degree up to which they ought to be taxed. The rich man who died was, therefore, in debt to the State. There was an accumulated deficiency in his contributions to direct taxation, and the simple defence of the Probate Duty—or Estate Duty, as it was in future to be called—was this, that it was a debt due from the estate of the deceased to the State in consequence of the deficiency of his contributions during his life. If once people got hold of that luminous idea their minds would he relieved of a great many difficulties. Tenants for life, for example, would realise that a growing debt was being run up against them, and that they must save in order that it might be paid when they died without injury to their successors. It should be understood that a man had no more to leave to his successors than the residue of his property after payment of the duty. It was idle to say that the legatee paid. The duty was a debt which must be paid out of the dead man's effects before they could be distributed. In future, it was to he hoped that men would bear in mind the necessity of providing for the payment of this debt, just as they were supposed to provide for the discharge of other just obligations. If they could view the Probate Duty as a debt people would get rid of the notion that it was a toll upon the testamentary disposition of property, and similar notions derived from imperfectly developed communities like Scotland. It was of the highest importance that they should have a true knowledge of the basis upon which this tax rested. If they understood how it was justified they would also understand its limitations, and it would no longer be viewed as a convenient tax from which largely varying sums could be obtained at different times by the Chancellor of the Exchequer. If the tax were looked upon as a tax in payment of arrears accumulated during life much of the aversion caused by it would disappear.

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

I have listened, as I confess I always do listen, with very great interest to the speech of my right hon. Friend, who seems to me to never speak with more effect or power than when he finds himself at loggerheads with his Party or when he intends to support a proposal, as on the present occasion, and cast his vote along with the Government. His arguments, I must say, this evening were of a kind which we have not yet heard, and were entirely inconsistent with the course taken from the beginning by the Government. I do not wish to dwell at any length upon his arguments, because, owing to the understanding that has been come to, the time for discussing this question is running very short, and I have to deal with important arguments that have been advanced by those Members who are the chief supporters of the Bill. It appears to me, however, that he has not carried out his arguments to a logical conclusion with the views that he so strongly expressed upon the proposed Death Duties. Shortly, his opinion, I think, may be stated to be that these Death Duties are in the nature of a slowly accruing debt to the State, which arises from the fact that during life the owner of the estate had not contributed enough towards the Imperial taxation of the country, and that therefore this deficit should be made up out of his property that remained at his death. But I would ask my right hon. Friend to notice that the amount that a man should pay does not depend upon the amount of the property he leaves, but upon the length of time that he had the good fortune to enjoy it. A man who came into a million of money at 45 years of age and died at 50 owes evidently a very small sum to the State. Yet the Government comes down upon his unfortunate heir, who will have to pay 8 per cent. For my own part, I cannot see the justice of such a course. I can quite understand his view that a person who is possessed of a very large property should pay more than a man who has only a very small property. Unfortunately, the extra sum that the former should contribute cannot be extracted from him by means of the Income Tax alone, because there are technical difficulties which prevent a graduated scale of taxation being applied to that form of tax. But if, on the other hand, he were to contribute in proportion to the length of time that the individual enjoyed the estate, I think the present proposal would not answer the purpose, and that the difficulty could be met by a fairly arranged Income Tax based upon a differential scale. If this be so, then a poor man who has enjoyed but a small property, but has enjoyed it for a long time, ought to pay more than a rich man who has only enjoyed his fortune for a short time. The principle pursued in this matter by the Government, so far as I can understand it, has not been embodied in what may be considered as an equitable scheme. I have but little hopes of converting my right hon. Friend, but I do hope that when he records his vote to-night he will feel that though he is with the Government he is not of them. I pass now to consider the arguments which have been put forward by the more enthusiastic supporters of the proposal. In the first place, the Chancellor of the Exchequer—who already, I may say, seems to regard his own utterances on the question as classical expositions which may be quoted by any Member of this House when referring to the subject with the greatest safety—gave us a considerable number of arguments, all of which were very naturally strongly in support of the proposal; but it is only in reference to one or two that I think it will be necessary for me to ask for your attention now. The right hon. Gentleman said, "If you carry out your present Amendment it will be impossible to find the money that is necessary." I do not doubt for a moment that if the Amendment is carried a difference will be felt by the Government. But let me point out that in that case it would be the business of the Government to fill up the gap in the Exchequer receipts by some other means. At any rate, it would not be our business to take any steps in the matter. We all of us admit that if this Amendment were accepted the calculations of the Chancellor of the Exchequer made upon this source of revenue would be upset. But if that were an argument of real weight no Budget would ever be passed with Amendments at all. The Budget comes before this House year after year as the organised machinery for meeting the indebtedness of the State. Either the Chancellor of the Exchequer must put these things right, or give way to persons who will put them right; and, if the difficulty reach a serious crisis, such persons may possibly be found.

SIR W. HARCOURT

That is a reason why I do not accept the Amendment.

MR. A. J. BALFOUR

But it is no reason why we should accept a proposition of the Budget as a just proposition. Everybody will have felt that the defence of the Government proposals, not only in this but in other respects, is of a very technical character. It has been pointed out by my hon. and learned Friend in his very able speech that, by Clause 12 of this Bill, the Government have provided that the duty paid by the individual legatee should be proportioned, not to the amount received by him, but to the amount of the estate from which the legacy is derived. What was the reply of the Chancellor of the Exchequer? It was that Clause 12 had very little to do with the financial scheme of the measure, that it was to be taken or to be left, and whether it was taken or left, the Government at all events would get the money. Well, that is not the way a Chancellor of the Exchequer should deal with a great financial problem. The right hon. Gentleman does not appear before us as an official concerned with no other duty than that of extracting from the taxpayers a sufficient amount of money to meet the national obligations. He comes before us, or he ought to come before us, as a statesman, and a statesman who lays before us proposals for collecting the money necessary to meet the national obligations in a manner fair and equitable to every class concerned. But for the right hon.

Gentleman to say, "I, as Chancellor of the Exchequer, care nothing at all for Clause 12; it is in my Bill which you have read a second time; take it or leave it; my money in either case is secure, "is, I venture to say, to adopt a policy never adopted before by any Chancellor of the Exchequer, and un worthy of the right hon. Gentleman, both in his capacity of Chancellor of the Exchequer and in his capacity of Leader of the House. Clause 12 is an integral part of the measure as proposed by the Government; we cannot regard Clause 1 irrespectively and independently of Clause 12; it must be interpreted by Clause 12. I have no time to go into the details of the question; but I am in entire agreement with the hon. and learned Member for Hackney, who said in his speech that Clause 12 was intended to protect the residuary legatee, for the residuary legatee, without Clause 12, might find himself in the unhappy position of being saddled with the whole of this progressive tax, all the other beneficiaries escaping without any special taxation at all. I entirely agree with him; it would be unjust to the residuary legatee; but suppose you abolish Clause 12 and throw upon the residuary legatee the whole weight of this tax, is it not obvious you would commit an injustice precisely similar to that which we complain of in the whole scheme of Government taxation? What is our complaint of the scheme of Government taxation? It is that you tax a man not upon what he has, but on what somebody else had who left him the property. That injustice would not be removed by abolishing Clause 12. Cut out Clause 12 if you will, and you may remove this particular injustice from other legatees, but it only means that this particular legatee will be taxed not upon what he receives, but upon the magnitude of the property from which he receives it. This is what we complain of; this is the fundamental injustice lying at the root of all the Government proposals; and it would not be removed by abolishing Clause 12, just as it is not mitigated by leaving Clause 12 in the Bill. My right hon. Friend (Mr. Courtney) who has just sat down and the hon. Member for Hackney have both announced that the occasion of the present Budget is one upon which we ought to revise from its very basis our whole system of the Death Duties upon ethical and moral grounds. I entirely agree; but we should be content to go on with the old system until some reconstruction is initiated; and what I complain of in the Government proposals is this—having taken in hand to equalise the Death Duties, having taken in hand the gigantic task of putting in order the accumulated anomalies of half a century, they have not attempted to go to the root of the matter; they have not attempted to deal with it on fundamental principles; they have not attempted to make their proposals square with the eternal principles of justice. Not one word has fallen from the Chancellor of the Exchequer or from the hon. Member for Hackney to make me believe that they have in any respect attempted to frame these new duties upon a plan which will stand criticism, going to the root of the matter, upon principles which are fair and which may make them a permanent subject of taxation. I do not mean to dwell upon them now; but, if Death Duties are to be passed in the shape proposed now by the Government, I cannot believe they would be permanent. I do not say we should have to go back on all the changes they have proposed; but it would come before every Government as a practical matter to be considered whether they would not revise the whole system which the Government had adopted. That is the melancholy state to which we should come. If the Government think they are strong enough to carry a great alteration of the Death Duties, they ought to see that it is a great reform. The Government have not taken the trouble to do that; they have not gone to the root of the matter; and the result of that laches on their part will be that the fabric that they are so elaborately and laboriously constructing will have to be pulled down by their successors, and reconstructed upon some more equitable plan more in consonance with the necessary and elementary principles of justice. Sir, I have already dealt with my right hon. Friend's ethical defence of the Budget. Let me turn to the ethical defence given by the hon. and learned Gentleman opposite. What is it he founded himself upon? He founded himself on certain metaphysical principles with regard to property which, I will venture to say, have no basis in reason, and no justification beyond the speculations of certain 18th century legislators.

SIR W. HARCOURT

Hear, hear!

MR. A. J. BALFOUR

The right hon. Gentleman based himself upon Blackstone. I believe the right hon. Gentleman is, above all things, an expert in International Law; and I have noticed that these experts in International Law are more confused with regard to first principles than anyone else. What is it that these unfortunate experts in International Law are driven to? It is what is called "the law of nature."

SIR W. HARCOURT

The Law of Nations.

MR. A. J. BALFOUR

The basis for them of the Law of Nations is what they call the law of nature—a metaphysical conception, partly of antiquity and partly of the 18th century. When the right hon. Gentleman had the courage to lay down in this House the principle that when a man dies his whole property belongs to the State, and that after the State has extracted from that property all that seems good to it, then the heirs ought to be glad to have any fragments that remain, he was basing his speculations, not upon history, and not upon law, but upon the false metaphysics of the law of nature. Perhaps, in one sense, I am doing the right hon. Gentleman an injustice; because, while he depended upon the law of nature in his Second Reading speech, in his speech to-night he depended on the feudal law. We have the extraordinary spectacle of a Liberal Chancellor of the Exchequer driven out of the law of nature, and obliged to come to this House to tell us that this is a good old feudal Budget. I listened with intense enjoyment the other night to the right hon. Gentleman when he was driven to quoting Mr. Pitt against Mr. Fox; but I certainly did not look forward to the further satisfaction of hearing him three nights later tell us that his Budget was not based upon modern principles of legislation, but that it had its roots in the feudal system. Sir, is not there an extra- ordinary absurdity in supporting the proposition, partly defended by the right hon. Gentleman himself on the ground, as I understand, explicitly stated by the hon. and learned Member for Hackney, that these duties are the price paid by the individual for the right of disposing of his property? That is a grotesque contention. According to the universal tradition of civilised society, property is the property of the individual, and after his death of the family who succeed him. Different nations have given different degrees of liberty of bequest to the individual; but the theory of all nations through civilised time has been, as my right hon. Friend the Member for the University of London has pointed out, that property is not the property of the State, but of the individual and of the family to which he belongs. The idea that it rests with the State to take as much of the property as seems good to it without being guilty of any injustice is a gross innovation, not justified even by the law of nature or by the feudal system.

* MR. MOULTON

The right hon. Gentleman misrepresents mo. I neither used the word "price" nor did I say that the State had the right to take any capricious portion of the whole for the privilege of alienation. I said it was "toll" paid. That is the word I adhere to.

MR. A. J. BALFOUR

I am aware that the hon. and learned Gentleman used the word "toll." But I thought that he laid down the principle that the right to dispose of property was something which had been purchased from the State; and that the amount of the duty which was to be exacted from the property was, as it were, a preliminary debit due to the State before anyone took anything. Of course that is true, legally and technically. But do not let us confuse the technical with the moral aspect of the question. Morally, the property belongs to the individual, and after him to his family and successors. That has been the universal practice of civilised society. What nations have done in limiting the bequest has been to prevent a man from leaving his property out of his family. So far from denying the right to bequeath to the family, they have said that the property belongs to the family so much that it may not be left away from it. For either the hon. and learned Gentleman or the Chancellor of the Exchequer to come here and assert that property, after the death of the owner, is at large, and belongs to the State, until the State chooses to give some fraction of it back to the heirs, is to assert that Which has no foundation in practice, in law, in justice, or in equity. If we are to give up that principle we are driven back on the principle for which my hon. and learned Friend contended in the Amendment; it is simply that we should exact from each member of the community a tax which would involve an equal sacrifice in every case. Can it be pretended by any defender of the Government's proposals that they will carry out that object? My hon. and learned Friend gave one or two cases. Have they been answered? Has there been any pretence of answering them? The hon. and learned Member for Hackney made a pretence of answering one of the strongest of the cases. It was that of a man who enjoys a life interest in £50,000, settled at his demise upon his eldest son, and who has two younger sons, to whom he can leave £5,000 each—money which he has in his absolute gift. Under the Bill of the Government, on the death of that man the £5,000 left to each of the younger sons would be taxed, not in proportion to the amount they received, but in proportion to the total £60,000 which has passed upon the death of the testator. That is obviously unjust. He said these two sons were damaged in one sense by the fact that £50,000 passes to the elder brother; but, on the other hand, he said if there were no £50,000, and if the £10,000 had to be divided among the three brothers, how much worse off would they all be ! But supposing that £50,000 were £100,000, £200,000, or £1,000,000, the unfortunate recipients of £5,000 would be mulct in the 4 per cent., 6 per cent., or 8 per cent. duty, while if the £60,000 were reduced to £10,000 they would hardly be mulct at all. That inequality existing, I want to know upon what principles is it defensible. If the £50,000, the £100,000, or the £1,000,000 were settled away upon a stranger, the two sons would be taxed at the rate of 8 per cent. How are you going to justify that?

MR. MOULTON

said, if the right hon. Gentleman would look at the Bill he would find that it was not so.

MR. A. J. BALFOUR

The smallest annuity is included in the table. Will the hon. and learned Member deny that any annuity would be taxed on the higher rate? I may take it. therefore, that even in the opinion of the most strenuous defenders, or, as some almost suspect, the authors of the Bill, this monstrous and obvious injustice would be found in the Bill.

* MR. MOULTON

said, if the right hon. Gentleman would refer to the clause inserted for that particular purpose, he would find that his interpretation of the Bill was still wrong.

MR. A. J. BALFOUR

As I read the Bill—I was going to say of the hon. and learned Gentleman—but of the Government, if any benefit is reserved at all, the whole property comes in, and therefore the smallest annuity would drag in the whole of the property to determine the succession of the unfortunate persons whose condition I have described. That is an indefensible proposal. If the Chancellor of the Exchequer tells us that he requires these unjust measures in order to collect sufficient money for the State well and good, but he should not come down to this House and pose as the heaven sent Minister of Finance, who is at last groins to reduce the chaos of the Death Duties into order—to introduce justice where injustice has hitherto reigned. We have a right to ask him that the principles upon which this measure is framed shall stand examination; but we have seen that, whatever else may follow, this Budget cannot pretend to be the equitable adjustment of our Death Duties, which we were led upon the Second Reading to suppose would follow from the proposals of the right hon. Gentleman.

Question put.

The Committee divided:—Ayes 231; Noes 199.—(Division List, No. 63.)

Committee report Progress; to sit again upon Thursday.