HC Deb 01 October 1909 vol 11 cc1584-95

In the case of property of any person dying on or after the thirtieth day of April, nineteen hundred and nine, passing to a wife or a husband or a lineal descendant, or a brother or a sister, or the lineal descendant of a brother or a sister, or a father or a mother, or an uncle or an aunt, such property shall, if, during any time during the ten years next succeeding, it again pass by death to any successor in title of the relationship above mentioned, become liable only to a reduced rate of Estate Duty calculated on the following basis: If the property pass in the same year in which duty has already become leviable, there shall be chargeable only one-tenth of the amount leviable under Section one of the Finance Act, 1894, or any Amendment thereof; if in the second year, two-tenths; and so on for each additional completed year an extra tenth of the amount chargeable under the said Section until the limit of abatement is reached.

The object of this Clause is to provide for abatements of Estate Duty where deaths occur frequently in a family. There can be no difference of opinion that where more than one death does occur in a few years in a family, the estate of the family is unfairly dealt with when the whole amount of the Estate Duty has to be paid over again. The Amendment is that where death occurs within 10 years, there should be an abatement graduated in this way: that, if death occurs in the first year, there should be only one-tenth of the Estate Duty paid over again. If death occurs in the second year, there should be two-tenths of the duty paid over again, and so on until you get to the 10th year, after which time the whole of the Estate Duty should be payable. No doubt before Sir William Harcourt introduced the graduated scale of Death Duties, and we had a fixed 3 per cent. Probate Duty, the cases that have been described were not so serious, but when you get to Estate Duties increased in the abnormal way in which the present Budget proposes and death occurs frequently it does create a very serious position for the family. By the proposals of the Government the average of Estate Duties is raised from 5 to 7 per cent., and, not only that, but where an estate is settled there is an increase of Settlement Estate Duty of 1 per cent. I would like to quote a case which will show the Committee exactly the grievance which I wish to meet. Sir Herbert Maxwell wrote to "The Times" newspaper a month or two ago, and gave the case of a Scotch gentleman whom he knew who died in the year 1899. The eldest son died three years afterwards, and the whole Estate Duty had to be paid over again. The estate then came to the youngest son. He had to pay the jointures of the two widows of the father and the eldest brother, and having paid the second Estate Duty, Sir Herbert Maxwell says, "The result is that he is not only without the means of keeping the house which has been the house of the family for more than 300 years, but he is unable to maintain the expenditure necessary to secure the fruition of operations undertaken prospectively by his predecessors, such as plantations, etc." That shows a grievance, not only of this young man and the family, but it also shows a grievance to the estate and the employés on the estate, who had to be discharged owing to the young man not being able to maintain the property in the way in which it had been kept up.

I will give the Committee some figures which will show how these new Death Duties will affect estates of different values. I will take estates of £20,000, £50,000, £100,000, £500,000, and £1,000,000, and I will show the difference between the charges on death under this Budget and what they would have been before Sir William Harcourt's Budget of 1894 became law. The first case is that of the £20,000 estate. Prior to the Act of 1894 it would pay 3 per cent. Probate Duty and 1 per cent. Legacy or Succession Duty. That would make a payment of £800, and if there were three deaths the total payments would be £2,400. The corresponding figure now in the case of three deaths would be £4,200, or over one-fifth of the corpus of the estate and nearly double the rate of the old duty. Next take the £50,000 estate. Under the old system the payment on death would be £2,000, and if there were three deaths the total payments would be £6,000. Under the present Budget the three deaths would absorb £12,000, or nearly one-fourth of the whole estate and double the old Estate Duty. Take next the £100,000 estate. The old duty would be £4,000 on death, and on three deaths it would be £12,000, and under the new Budget three deaths would absorb £30,000, or nearly one-third of the estate. Take the estate of a half-million, the old payment would be £20,000 on death, and, if there were three deaths, £60,000, but, according to the new scale, the payments on three deaths would be £195,000. Finally, take the case of an estate of £1,000,000. The old rate would be £40,000 on death, and £120,000 on three deaths. Under the Budget the rate would be 16 per cent., or £160,000 on death, and three deaths would absorb £480,000, or nearly one-half of the whole estate. I have taken these duties quite apart from settlements. As the Committee is aware, frequently these estates are settled, and this will be a separate Estate Duty of 2 per cent. payable so long as the settlement continues until it comes into the possession of the person competent to dispose. I may be told by the learned Solicitor-General that there are great difficulties in adopting any scheme of this kind. I suppose that there are difficulties when all the abatements are granted which have to be made, and that the Solicitor-General will say you cannot earmark estates and trace them, that properties will change and investments will change, and therefore it would be difficult to ascertain what was the property which had paid duty in the first instance. I think that the onus of proof would be on the recipient of the money. The onus would be on the acceptor, when the duty came to be paid for the second time, to prove that the property had paid in the first instance. I hope I have made my point clear. My object is more to urge the principle of abatement in these cases than to urge a scheme in detail. I have put a scheme down in detail as a suggestion, and only as a suggestion, and my object is to press upon the Government—when they are largely increasing the Death Duties, as they are under this Budget, and when the tax is becoming a greater and greater hardship—the importance of the considerations which I have advanced. The hardships to which I have referred press heavily on families in which death frequently occurs, thus involving the payment of largely increased duties over and over again. I beg to move.

The SOLICITOR-GENERAL (Sir Samuel Evans)

The hon. Member has brought forward a subject which is by no means a new one, and which has been discussed several times in the course of these Debates on the Finance Bill. It is quite true that the hon. Member, when he collects figures like those which he has placed before the Committee, is able to show—assuming that it is always necessary to keep an estate intact—some hard cases. He has compared the figures of the Finance Act before 1894 with the figures which would represent the taxes under the present Bill. Of course, he is entitled to do that, but a fair comparison would have been between the figures under the Act of 1894 for the last 15 years with what they will be under the present Bill. Of course, that comparison would not show in so strong a light as the comparison made by the hon. Gentleman. It must be quite obvious to the Committee that if we adopted the sliding scale suggested by the hon. Member the State would lose nine-tenths of the taxes in one year, eight-tenths in two years, seven-tenths another year, and so on. The diminution in the taxes which the State would receive would be enormous, and if my right hon. Friend the Chancellor of the Exchequer were here I think that would be for him a conclusive answer to the proposal of the hon. Gentleman. It is impossible to calculate what the loss of revenue would be, but it would be very considerable indeed. The principle of the Estate Duty, as I understand it, is that if property passes at death to any individual, whether he be a near relative or some distant relative, or, indeed, a stranger, the State has a right to come in and say: "This property has been protected under the possession of the former owner, it has come to you without paying anything for it at all, and it is fairly subject to taxation." Of course, the amount of the tax is another matter; it is the principle I am speaking of. I have never been able to understand the complaint of people who have to pay even £50,000 on succeeding to a property. I should be delighted to pay £50,000 Legacy Duty, but no one ever leaves me anything.

An HON. MEMBER

"Suppose the estate were left to you by your father?"

Sir SAMUEL EVANS

I should pay it; and I claim that the principle of the tax is a perfectly sound one. If a man receives property from somebody else, the State should come in and take a fair share of it. The hon. Member who moved the Amendment gave us the instances of particular estates. He admitted candidly that he had done so, and lay answer to him is that the estate is not necessarily the same after a death as it was before, because it may have been added to or deducted from by expenditure; it is not necessarily always the same property. I do not think that hon. Members are entitled to assume that a particular estate, because it happens to be in land, ought to be untouched by the tax to the extent that you ought to knock off portions of it. At any rate, that cannot be done now, and, since the Act of 1894, it is impossible. I have not gone into the figures; I have no doubt that they are perfectly accurate, because the hon. Member takes great pains to be accurate in anything which he puts before us. I think, in principle, the answer is that the amount has already been fixed, and that however frequent deaths may be, although this is a case of property coming from father to son, yet it is in principle the same transfer of property at death to a successor. The Committee has decided the amount, and we cannot accept a sliding scale exempting people from the operation of the tax simply because the devolution of the property has been earlier and quicker than succession usually is in such cases.

Sir E. CARSON

The subject which my hon. Friend has raised is one of vast importance and of far-reaching consequences in the administration of the Death Duties. It must be apparent to anybody who has followed the history of these Death Duties, particularly in the last three or four years, since the present Government came into power, that we are coming to a point in relation to the Death Duties at which tremendous hardships must necessarily occur, having regard to the way in which the present Government have gone on increasing the Duties. The present Government since they came into power have increased the Death Duties up to something like 75 per cent. When in 1894 they were imposed by Sir William Harcourt he assured us that what had to be paid would in no degree militate against the carrying on of business, having regard to the necessary capital which is to be maintained. But when in the course of three or four years you bring the tax up to the point of 75 per cent., of course the matter becomes one of extreme hardship and gravity in some cases. The case put by my hon. Friend is one which sooner or later will have to be met. I do not suppose that the Solicitor-General could meet it now, nor I suppose could the Chancellor of the Exchequer. But the deduction of capital from business will depend upon the mere accident of whether a man lives a long time or a short time. Anyone can see that with successive deaths and successive payments of the duty a whole business may be very easily ruined. Whereas by an accident or, as the hon. and learned Gentlemen would prefer to say, by the gift of Providence, a man gets a long life and the distribution of his estate, and the retention of his capital in his business takes an entirely different form. I do not believe myself with these high duties that it is possible for this to go on. I do not think it is fair, and I do not think it is impossible to find a solution. Take where in lieu of Death Duties you have a tax every 15 years, that is exactly the same principle of logic that my hon. Friend is trying to apply. It certainly would be far fairer to value the property every 15 years and take away a portion of it than to say in some cases, "We shall take away a portion of your property once in 50 years and in another case three times within five or ten years," which frequently happens. The question is one of equity, and must force itself to the minds of thinking men, and men who do not wish to carry on the taxation of the country in a haphazard fashion, as I am afraid we are getting into the habit of doing, especially since this Budget was brought in. My hon. and learned Friend the Solicitor-General, being a Welshman with a peculiar temperament, cannot see how anybody does not exult in paying taxes. I, as an Irishman, have not got the same great desire to pay the Death Duties. He seems to think nobody ought to abject. Let me put this case, and it is, I think, a very ordinary case throughout the country. A man has nothing but his business, and when he dies the Death Duties must be taken out of the capital of his business. You cannot avoid that. Supposing he dies and leaves the business to a son, and that two or three deaths occur in the business within three or four years: What will become of the whole capital of the business? Now is that a case where, from what the Solicitor-General says, the son, or the grandson, or the nephew, ought to be absolutely delighted at the idea of having to take away from their business the necessary capital for carrying on the business?

The question raised by my hon. Friend (Mr. S. Roberts) is certainly not a new subject, but it is one which will have to be fully considered. I agree with the Solicitor-General that the acceptance of the new Clause would be to diminish the Exchequer; but, at the same time, I think my hon. Friend is doing good service, and the matter has really nothing to do with politics, in raising the question, and in the figures he has given he has pointed out the way in which we are going in this country by leaps and bounds increasing these Death Duties, which must certainly be an abstraction of capital necessary for the purpose of carrying on the business and trade of the country. I do hope that some time or other some Chancellor of the Exchequer will think it worth his while to look into the question, and see whether some more equitable means of charging these Death Duties to taxpayers cannot be invented than the haphazard way of leaving it to the chance of life and death, without regard to whether a business is to be really ruined or not.

Mr. ALFRED MOND

I regret that the Chancellor of the Exchequer has not been converted on this somewhat important new Clause. Although I cannot say that the machinery proposed by the hon. Member (Mr. S. Roberts) appears to be altogether equitable, still I have always felt that the point he has raised is one which ought to have been met long ago. The scale of Death Duties must naturally have some relation to the normal expectation of life. This House would never tax at the present rate if it was usual for those duties to become payable, say, every five years. Therefore we fix the scale on the normal expectation as to when those duties will become payable. There are, however, exceptional cases, and those exceptional cases, it seems to me, ought to be dealt with in a more businesslike manner than they are now being dealt with. The only argument against dealing with these exceptional cases in an exceptional manner seems tome to be that they are very rare. If they were more numerous there would be such an outcry that no Government could possibly withstand the legitimate demand that this burden should not fall on what you may call a few families much more severely than it does on other families. I am bound to say that in other countries where Death Duties exist this has been taken into account. In Germany the proposition was that no such duty should be paid on any particular estate within ten years of the last death. The principle has been admitted in other countries, I think properly, and I think it ought to be admitted here. I cannot quite follow the line of argument that this would mean a great loss of revenue to the Exchequer. After all, as was pointed out, these cases are very exceptional; they are not common. The very fact that they are exceptional shows that the Treasury would lose very little. It is not a common thing for an estate to pay frequently, so that some limitation of time in which an estate would be made free of duty would not diminish the yield to the revenue very much. I think most of the estates will be found to pay from every 20 to 25 years, and certainly not frequently under 10 years. I do not see that that would be any reason for not making a change. It would be more equitable to raise the scale of the Death Duties rather than to take it out of what you may call the accidental misfortune of certain persons.

The learned Solicitor-General's argument that the individual inheriting money is happy to inherit and that he is better off than he was before is no doubt true; but you cannot quite put the Death Duties in that way. After all, a man who has a family largely consisting of daughters, incapable of earning their own living, would like to have some guarantee, or to have the satisfaction of knowing that his estate will not be diminished in an unreasonable manner. Accidental or unnecessary hardship ought to be avoided. I cannot quite agree with the right hon. and learned Gentleman (Sir E. Carson) about the assumed destruction of capital owing to the Death Duties. It seems to me that it is a perfectly fallacious argument. If a man has £100,000, and leaves it to ten nephews nobody says it is destroyed. If you substitute the State for one of the nephews I do not think the capital is any more destroyed. Some of the nephews might take their share out, and spend it at Monte Carlo. If the business is a good one, I do not think there would be any difficulty in finding someone who would put capital into it, and the business would go on as before. I do not think that the argument has any real foundation. We have not heard that owing to Sir William Harcourt's Death Duties any business has ceased to exist owing to the fact that the executors had to pay Death Duties. It is the first function of the executor to proceed to convert the estate into money, and very often to pay much larger amounts than the Death Duties. If you are so anxious to protect the business capital of the country, you ought to pass a short Bill preventing testators from so leaving their money that it is withdrawn from the business to be paid out to the beneficiaries. The fact that the State is one of the beneficiaries does not affect the business aspect of the question at all.

Mr. W. P. BYLES

I do not quarrel in the least with the moderate suggestion made by my hon. Friend with regard to Death Duties; it might very well be considered by the Government. But I cannot see my way to vote with the hon. Member opposite. The right hon. and learned Gentleman (Sir E. Carson) threw out the interesting suggestion that the State would do better if, as an alternative to the present method of collecting Death Duties, it took an instalment every 15 years. I imagine that any Government that proposed to penalise a man in that way for living long would be far more complained of than the Government which is now alleged to be penalising a man for not living long enough. I cannot agree with the right hon. and learned Gentleman that these Death Duties are inflicting an extreme hardship upon society. It seems to me that the minimum of hardship which taxes must impose upon the payer is inflicted by taxes which are imposed at death. When a man comes to die, his property is of no consequence to him; he cannot take it with him; he has no further interest whatever in it himself. Therefore it seems to me that if a man is asked to pay these taxes only when he has done with his wealth, when he is obliged to lay it down, the minimum of hardship is inflicted upon him. It is said that the successor is the sufferer. No doubt he has less money. But who is there who will contend that the son should begin where the father leaves off?

Mr. J. F. REMNANT

I do, for one.

Mr. BYLES

If that were always done there would be an enormous accumulation.

Mr. REMNANT

Why not?

Mr. BYLES

Mr. Carnegie said the other day that he thought the State would do right to take half the estate of a millionaire at death. I hope that the taxes challenged by this Amendment are deliberately intended to discourage, or that they are part of the policy, of which I approve, of discouraging huge accumulations of wealth. Recently a man died leaving ten millions of money. We do not want men to leave ten millions of money. It is not good for themselves that they should acquire so much, nor for their dependents, nor for their tenants upon whom they are able to levy tribute, nor for the nation at large. In my judgment, the policy of the Government in regard to Death Duties is one which should have the support of Members representing the people. Let them take as much as they can when, a man has done with his wealth. It is desirable that wealth should be diffused, not accumulated, because when diffused it fertilises the nation, but when accumulated it injures the nation.

Mr. CLAVELL SALTER

I agree with the whole of the speech of the hon. Member for Chester (Mr. Mond), except his statement that there is nothing in the contention that Death Duties destroy capital, because if a man leaves £10,000 apiece to ten nephews it makes no difference if you substitute the State for one of the nephews. I think it makes a great difference. If the tenth nephew spent the whole of his legacy in the first year, I agree it would make no difference. But the difference arises because the chances are many thousands to one that that will not be the case, but that the money will remain capital in the hands of the nephew, whereas in the hands of the State it will not, but will be spent. The essence of

the point as against Death Duties is that the State takes capital for the purpose of spending it as income. The hon. Member for Salford (Mr. Byles) laid it down as a principle that accumulations are an evil to the State.

Mr. BYLES

Large accumulations.

Mr. CLAVELL SALTER

I understand then, that the hon. Member does not say that the process of saving, by which I mean the accumulation of capital as distinguished from income, is a disadvantage to the State? He would, I take it, agree that the more money is saved in the nation the more capital is accumulated; speaking of the nation as a whole, the better for us all. I should like to know what his view is. If by saying that large accumulations are an evil he means to attack, not the principle of accumulation, not the abstraction of money from revenue and the creation of capital, but accumulations in single hands; if he means that it is undesirable that the resources of the country should be gathered into a few hands, then, without entering into that very wide question, I would say that that is a very different matter. That evil would be struck at, not by these Death Duties, but by some kind of legislation such as exists, I think, in France and elsewhere, prohibiting those who possess means from leaving them all to one person. If what he means is that he is opposed to the accumulation of capital, I differ from him utterly. I say that that view is utterly unsound; but if he merely means that he is opposed to the aggregation of capital in a few hands, whatever our views may be in regard to that, that evil is not struck at by the Death Duties. You do not strike at that by abstracting from any man's capital and spending it as income.

Question put, "That the Clause be read: a second time."

The Committee divided: Ayes, 34; Noes, 140.

Division No. 751.] AYES. [2.8 p.m.
Anstruthor-Gray, Major Gooch, Henry Cubitt (Peckham) Pease, Herbert Pike (Darlington).
Ashley, W. W. Gretton, John Powell, Sir Francis Sharp
Balcarres, Lord Guinness, Hon. R. (Haggerston) Remnant, James Farquharson
Banbury, Sir Frederick George Haddock, George B. Renwick, George
Banner, John S. Harmood- Hamilton, Marquess of Starkey, John R.
Barrie, H. T. (Londonderry, N.) Harris, Frederick Leverton Valentia, Viscount
Campbell, Rt. Hon. J. H. M. Harrison-Broadley, H. B. Walker, Col. W. H. (Lancashire)
Carlile, E. Hildred Hills, J. W. Warde, Col. C. E. (Kent, Mid.)
Craik, Sir Henry Hunt, Rowland Younger, George
Dalrymple, Viscount Magnus, Sir Philip
Faber, George Denison (York) Morrison-Bell, Captain TELLERS FOR THE AYES.—Mr. S. Roberts and Mr. Clavell Salter.
Fletcher, J. S. Nicholson, Wm. G. (Petersfield)
NOES.
Ainsworth, John Stirling Hedges, A. Paget Pearson, Sir W. D. (Colchester)
Allen, Charles P. (Stroud) Helmsley, Viscount Pearson, W. H. M. (Suffolk, Eye)
Armitage, R. Henderson, Arthur (Durham) Pointer, J.
Ashton, Thomas Gair Henderson, J. McD. (Aberdeen, W.) Ponsonby, Arthur A. W. H.
Barnard, E. B. Higham, John Sharp Price, C. E. (Edinburgh, Central)
Beale, W. P. Hobart, Sir Robert Priestley, Sir W. E. B. (Bradford, E.)
Boland, John Hobhouse, Rt. Hon. Charles E. H. Reddy, M.
Bowerman, C. W. Hodge, John Rees, J. D.
Branch, James Horniman, Emslie John Richards, T. F. (Wolverhampton, W.)
Brigg, John Howard, Hon. Geoffrey Roberts, Charles H. (Lincoln)
Brunner, J. F. L. (Lancs., Leigh) Hyde, Clarendon G. Roberts, G. H. (Norwich)
Burns, Rt. Hon. John Illingworth, Percy H. Roberts, Sir J. H. (Denbighs.)
Byles, William Pollard Isaacs, Rufus Daniel Robson, Sir William Snowdon
Clancy, John Joseph Jones, Sir D. Brynmor (Swansea) Roch, Walter F. (Pembroke)
Clough, William Jones, Leif (Appleby) Roe, Sir Thomas
Cobbold, Felix Thornley Keating, Matthew Rogers, F. E. Newman
Collins, Stephen (Lambeth) Kekewich, Sir George Rose, Sir Charles Day
Compton-Rickett, Sir J. Kilbride, Denis Rutherford, V. H. (Brentford)
Corbett, A. Cameron (Glasgow) Lamont, Norman Scanlan, Thomas
Corbett, C. H. (Sussex, E. Grinstead) Layland-Barratt, Sir Francis Scott, A. H. (Ashton-under-Lyne)
Cornwall, Sir Edwin A. Lehmann, R. C. Seddon, J.
Cotton, Sir H. J. S. Lever, A. Levy (Essex, Harwich) Seely, Colonel
Craig, Herbert J. (Tynemouth) Lloyd-George, Rt. Hon. David Sheehy, David
Devlin, Joseph Lundon, T. Sherwell, Arthur James
Dickinson, W. H. (St. Pancras, N.) Macnamara, Dr. Thomas J. Sloan, Thomas Henry
Dunn, A. Edward (Camborne) Macpherson, J. T. Steadman, W. C.
Dunne, Major E. Martin (Walsall) MacVeigh, Charles (Donegal, E.) Stewart-Smith, D. (Kendal)
Edwards, Sir Francis (Radnor) M'Callum, John M. Straus, B. S. (Mile End)
Essex, R. W. M'Laren, H. D. (Stafford, W.) Tennant, H. J. (Berwickshire)
Evans, Sir S. T. Maddison, Frederick Thorne, G. R. (Wolverhampton)
Everett, R. Lacey Mallet, Charles E. Thorne, William (West Ham)
Ferens, T. R. Markham, Arthur Basit Toulmin, George
Gibb, James (Harrow) Marnham, F. J. Ure, Rt. Hon. Alexander
Gladstone, Rt. Hon. Herbert John Massie, J. Wadsworth, J.
Glendinning, R. G. Masterman, C. F. G. Walker, H. De R. (Leicester)
Goddard, Sir Daniel Ford Mooney, J. J. Wason, Rt. Hon. E. (Clackmannan)
Greenwood, G. (Peterborough) Morse, L. L. Wason, John Cathcart (Orkney)
Gulland, John W. Muldoon, John Waterlow, D. S.
Gwynn, Stephen Lucius Murray, Capt. Hon. A. C. (Kincard.) White, J. Dundas (Dumbartonshire)
Harcourt, Robert V. (Montrose) Myer, Horatio White, Sir Luke (York, E.R.)
Hardle, J. Keir (Merthyr Tydvil) Nicholls, George Whitehead, Rowland
Hardy, George A. (Suffolk) Nicholson, Charles N. (Doncaster) Williamson, Sir A.
Harmsworth, Cecil B. (Worcester) Nolan, Joseph Wilson, Henry J. (York, W.R.)
Hart-Davies, T. O'Brien, Patrick (Kilkenny) Yoxall, Sir James Henry
Harvey, W. E. (Derbyshire, N.E.T O'Shaughnessy, P. J.
Haslam, Lewis (Monmouth) Parker, James (Halifax) TELLERS FOR THE NOES.—Mr. Joseph Pease and Mr. Fuller.
Hazel, Dr. A. E. W. Pearce, Robert (Staffs, Leek)
Healy, Timothy Michael

Colonel WARDE moved to insert the following:—