HC Deb 27 October 1909 vol 12 cc1119-42

In the case of a person dying on or after the thirtieth day of April nineteen hundred and nine the period preceding the death of the deceased before which a disposition purporting to operate as an immediate gift inter vivos must have been made, or a surrender, assurance, divesting, or disposition must have been made or effected in order that the property taken under the disposition or affected by the surrender, assurance, divesting or disposition may not be included as property passing on the death of the deceased shall be three years instead of twelve months before the death, and accordingly paragraph (a) of Subsection (2) of Section thirty-eight of the Customs and Inland Revenue Act, 1881 (as amended by Section eleven of the Customs and Inland Revenue Act, 1889, and applied by paragraph (c) of Sub-section (1) of Section two of the principal Act), Subsection (3) of Section two of the principal Act, and Section eleven of the Finance Act, 1900, shall be read as if three years were substituted for twelve months:

Provided that this Section shall not apply to any gift inter vivos, surrender, assurance, divesting, or disposition made or effected before the thirtieth day of April, nineteen hundred and eight, or made or effected for public or charitable purposes.

So much of paragraph (c) of Sub-section one of Section two of the principal Act and this Section as makes gifts inter vivos property which is deemed to pass on the death of the deceased shall not apply to gifts which are made in consideration of marriage, or which are proved to the satisfaction of the Commissioners to have been part of the normal annual expenditure of the deceased, and to have been reasonable, having regard to the amount of his income, or to the circumstances, or which, in the case of any donee, do not exceed in the aggregate one hundred pounds in value or amount.

Mr. EVELYN CECIL moved to leave out the Clause.

10.0 P.M.

I rise with a little more confidence than I should have clone but for the speech just made by the Secretary of State. As the Chancellor of the Exchequer is so conservative and so much disposed to follow precedent, I hope he will consent to omit Clause 59, which certainly does not strike me as being an extremely conservative clause. To my mind, it is a very unusual clause, one entirely without precedent, and savouring of revolution. Since the Bill went into Committee the Clause has undergone considerable modification. In the first place, the period of five years has been changed into three years. The Chancellor of the Exchequer has also introduced various exceptions to the application of the three years' period, exceptions which I notice are largely the result of criticisms made from this side of the House in Committee. He excepts marriage settlements, charitable gifts, gifts which may be considered by the Commissioners to be reasonable and to be justified by the circumstances—such, I presume, as voluntary pensions to old servants—and gifts not exceeding £100. These constitute a large number of exceptions. To a large extent I approve of them, but I cannot help thinking that the number of exceptions introduced proves how extremely bad the rule is. While some persons are no doubt disposed to think that the present period of 12 months ought not to be diminished, as I moved in Committee, a large number of persons think it ought not to be increased, and a still larger number think it grossly unjust to increase it to so long a period as three years. In Committee we challenged merely the period. As the Chancellor of the Exchequer still maintains what we believe to be a wholly unjust and unreasonable period, we shall at this stage challenge the whole method. I do not think the right hon. Gentleman will attain his object by this unfair extension. Not only will the increased severity of the duties encourage avoidance of the tax, but the increased period of time will also have that effect, and, so far from stopping the leakage of which the Chancellor of the Exchequer complains, he will probably add to it. It is not easy for any Government or any human being altogether to prevent leakage in connection with a tax such as this, and I fear—circumstances will show—that if a tax of this sort is introduced it will produce such irritation that lawyers and others will find means of driving a coach and six through this Clause. I am certain that many people who have never done so before will think of doing so now, whether they succeed or not. Another objection is that, in addition to trying to avoid the unreasonable imposts of the Treasury simply because they think them unjust and irritating, people will do so by giving sums to their children somewhat earlier than they probably would have done naturally. We all know by this time that Mr. Gladstone and others entirely approved of disposition inter vivos of this character; that he rather desired to encourage them; that he thought it was a good plan. There are many parents who train their children to manage sums of money when they become of sufficient age to entrust them with these sums by way of preparing them for their future career in life. That is an estimable object, and I do not suppose that even the Chancellor of the Exchequer will be against it. But I fear putting on this very high, this irritating, period of time which is imposed by this Clause will make people think Whether they ought not to give their children these sums at a somewhat earlier age than is really good for the children—and if it is not good for the children, then I think it is not good for the community. It makes them, instead of being careful, apt to be wasteful and luxurious. If we want genuinely to encourage gifts inter vivos, as I personally should do from the point of view of good citizenship, I do not think this is the way to do it. I think it produces on the one hand great irritation, and on the other hand the danger that children will be entrusted with money at an age when they should not be entrusted with so much. I again desire to thank the Chancellor of the Exchequer for introducing the exceptions which he has done, because I think they were very necessary. But that does not do away with the fundamental objection to this false attempt by the Government to stop the leakage which I think will do more harm than good.


I beg to second the Amendment of my hon. Friend. Though, of course, the Amendment proposed by the Chancellor of the Exchequer does meet some of the more glaring cases raised in it, yet at the same time the Section as a whole is still very unsatisfactory. I do not think we have ever had any explanation from the Government as to the principle which underlies their action in extending this period from one to three years. It seems to me that there is no principle in it at all. One can quite understand these provisions for one year. It was, I think, to prevent gifts being made when a donor was in articulo mortis. That is quite understandable. But why it should be extended to three years when it is not at all reasonable to suppose that the donor will have in view his immediate demise, I cannot for one moment understand. It seems to me that it lays people open to a very great difficulty. For instance, supposing the donee dies shortly after the gift has been made. Does the Chancellor of the Exchequer contemplate the fact that the executors of the donee will then be unable to wind up his affairs until after three years have elapsed; because they will not know whether that property which he leaves at his death really was his to leave, or whether, as a matter of fact, a large proportion of it will not have to go to the State in the form of Death Duties? So you come to this absurd position: that a man who has been giving property in this way, if he dies, cannot have his property handed over to those to whom he may leave it until three years have gone by—that is if he dies shortly after the gift has been executed. I think that is a very grave difficulty and inconvenience to put upon anybody, and especially when it is wholly unnecessary, as it appears to be in this instance. Because, after all, does the Chancellor of the Exchequer suppose for one moment that he will stop anybody making these gifts inter vivos by this provision? What would happen? It seems to me that people will make the gifts earlier than they have hitherto done.

The tendency at the present time among people who intend to make over portions of their property during their lifetime to their descendants is to delay making over that property until perhaps they themselves have got beyond the period when they can enjoy it to the full, as formerly. But now there is an inducement to make over the property very much younger, because they will realise that unless they take time by the forelock and make it over when life still seems to have some reasonable prospects of continuance, the object of their doing so will be frustrated. So the net result of it all very likely will be that people will make these gifts inter vivos at a younger age than hitherto. I do not know whether the Chancellor of the Exchequer considers whether or not it is desirable that these gifts should be made. If he considers it desirable, then it seems to me that he might just as well have left alone the Sub-section of the Bill which deals with this matter, which is a very reasonable Section, and which provided quite enough against any possibility of fraud, or, as it were, collusion in the matter. I do not really know why the three years has been fixed upon instead of five. The original proposal of the Government to make five years was, I think, perfectly absurd. It was generally recognised as such. But even three years is far too long. Short of any explanation by the Government why three years has been fixed upon; short of any explanation as to this matter of executors which I venture to raise—though I believe it has been raised before—I shall myself certainly go into the Lobby with my hon. Friend against this Section.

The CHANCELLOR of the EXCHEQUER (Mr. Lloyd-George)

This very point was discussed at almost, I will not say inordinate length, because that might be regarded as a reflection upon hon. Members, but at very considerable length during the Committee stage. In fact it was one of the longest Debates we had in the Committee stage, and it ended in what might be regarded as a compromise. The Government were strongly of opinion that five years was the right time. There was a great deal of criticism of the period. Some of my hon. Friend's behind me took the view that five years was an excessive period. The Government offered three years as a compromise between the views which they still adhere to and the views expressed by hon. Members on this side of the House. I do not say hon. Members opposite accepted that, but hon. Members on this side who criticised the five years were, on the whole, satisfied with the three years which we eventually adopted. I would also like to point out to the hon. Gentleman who moved this Amendment, pretty fairly, I think, that we have introduced very substantial exemptions. The one is in relation to gifts effected for public or charitable purposes, whilst there is a new exemption, not in the original Clause at all, in respect of property passed over in consideration of marriage. That is a very considerable inroad upon the original proposition, and introduced by the Government as it appears in the Act of 1881 and amending Acts. These are two very considerable exemptions. I may also say that we propose to accept in principle the Amendment of the hon. and learned Gentleman the Member for Kingston; not, perhaps, in the words put down, but in effect. We cannot accept it in the same words as it is on the Paper in the name of the hon. Member, but I think he will admit that the form in which we are prepared to accept it is also quite a substantial concession. Therefore I think the Government have really gone out of their way to meet the objections which have been raised against the Clause. On the merits of the Clause I should like to say one or two words. I quite agree that gifts inter vivos are desirable, and I cannot for the life of me understand why hon. Gentlemen opposite should oppose a Clause which, according to them, would have the effect of inducing the donor to make these gifts at an earlier period of his life. The criticisms of both the Mover and Seconder of the Amendment were directed to the belief that one of the effects of this Clause would be to induce men to part with their property a little earlier than they otherwise would have done. That is a very desirable thing to do.


Not for the Exchequer.


I understand from the Noble Lord that these gifts inter vivos were very desirable in themselves, and if they are desirable in themselves the sooner they are made the better. Would it not be infinitely better, instead of waiting until he thinks he is nearing the end of his life, and has probably, say, twelve months or two years to live, that a man should part with his property to his sons and daughters at an earlier stage, when they will make better use of it than that he should wait until they also are advanced in years, and have not the same period of life in which to enjoy it. It is because I agree with the principle of hon. Members opposite that I deprecate their Amendments. I am a supporter of the Clause, and I was a supporter for five years, because I think it is very desirable that a man should make a fair disposition of his property and give generous gifts to his immediate relatives long before he attains a very old age, and when it will be of more service to his sons and daughters. Hon. Members have argued upon the assumption that this is a prohibition of gifts. It is nothing of the kind. Supposing a man wishes to part with his property, this will not deter him. What difference will it make? If he parts with it and dies within a year, the person to whom the gift is given has to pay Death Duties. We say if he dies within three years the person to whom the gift is given will have to pay Death Duties, but there is always the chance that he may survive three years. If he does not part with it at all, Death Duties will have to be paid in any event, so that so far from being a deterrent there is always the probability that Death Duty will be evaded. With regard to the executor, who is the person to whom the gift is made, he will have to bear the burden.


Supposing the person to whom the gift is made dies within three years, supposing he dies a month after the gift is made to him.


That might arise now in the case of the donor, and the chances of it happening will be increased when you extend the period. There was one notorious case where there was a death, and within 12 months the property went back to the original donor. It is absolutely essential in the interests of the Exchequer that there should be some protection in regard to these gifts inter vivos.


The Chancellor of the Exchequer during the Committee stage said it made very little difference in the case of a man making a gift, because the Estate Duty would have to be paid, and if he had not made the gift the Estate Duty would equally have to be paid. May I point out that it would be paid by a different person? When a gift has been made the duty has to be paid not out of the original estate, and not out of the pocket of the big man's estate, but by the man who receives the gift or by his executors. That will operate in some cases very hardly, and not in a manner which is at all desirable. Supposing a rich man gives a poor man £1,000 to pay off his debts in order that he may start again on a fresh footing. If he dies you come down, not on the rich man's estate for the duty but on this small man who has just managed to get straight by having his debts paid for him. That would hardly be what is intended. That was distinctly pointed out in Committee, and I had been hoping that some alteration would have appeared in the Bill to rectify what seems to me to be obviously a weak point in the Clause. This point has not been in any way met, and it can hardly be desirable that it should be paid by the donee and not by the donor.


I want to know if it is perfectly clear that gifts to hospitals exceeding £100 in value are exempt under this Clause from Death Duties, and are they also exempt under the existing law? If they are not exempt under the existing law and they are exempt under this Clause, then this gives an advantage to hospitals which they do not now possess. I do not know what the law is, but I should like a definite pronouncement from the Chancellor of the Exchequer that they are under this Clause exempt absolutely from the Death Duties when they come to be made, if they are made at once.


The answer to the hon. Member is that they are exempt from the additional duties imposed by this Clause, but not exempt under the existing law. Supposing a man gives money to a hospital exceeding £100 and dies within a year, the hospital has to pay duty, but, if he lives a year and dies within three years, then, under this Clause, duty would not have to be paid. It is a somewhat absurd result, and one which I think is intended to be met by an Amendment in the name of the hon. Member for Wandsworth (Sir Henry Kimber), which would have the effect of exempting gifts to hospitals entirely from the duties imposed by these two Acts together. With regard to the general question, I want to say that there was no compromise of any kind with any hon. Member on this side of the House. There was strong pressure from the other side of the House either to omit the Clause altogether or to reduce the period to two years, or something of that kind. The Chancellor of the Exchequer, not by way of a compromise, but as the most he would yield even to the very urgent pressure from his own side of the House, consented to three years. That was accepted by them with some grumbling, but it was never accepted by us. We always held the view that one year, the present time fixed, was quite enough for all purposes. Surely the object is to prevent evasion of the Death Duties. It is clear, I think, to all of us that, speaking generally, no one looks forward, except in rare cases, more than a year to the probability of his own death. A year is a longish time, and, if you say that gifts within a year shall be liable to Death Duties, you really go as far as the needs of the case require, unless you are putting upon the individual so strong a pressure by increasing your Death Duties to an abnormal amount that in order to evade duties so heavy he will look forward even to a longer period; and I think that is the origin of this Clause. The Government know the new Death Duties are far too heavy, and that they are near to breaking-point. People will do anything rather than pay duties so heavy, and the Government feel that if they press this great increase they are more likely to lose than to gain revenue. That appeared even on the change of 1907, and you will find it more so under the present Bill. The Government realise that men will give all their property away in their lifetime in order, I will not say to evade, but to prevent their estates coming under the burden of these very heavy duties. That is the meaning of this otherwise inexplicable —and, I still think very unreasonable—Clause. The period of three years is far too long for any ordinary purpose. Just see what inconvenience you cause. A man perhaps owes a large sum of money, and his father pays his debts, or he is going into business and his father finds the capital, or for some other reason a father provides money for his son or someone else dependent on him, and the Clause will mean that for three years the son or whoever it may be will be liable to pay these duties. He cannot risk the money in his business, and he cannot pay all his debts because his father may die in the period, and he may have to pay the duties. In every case the donee is liable for three years to pay the duties, and to pay the duty, not upon the basis of the value of his own estate, which may be very small, but upon a rate fixed by reference to the estates of the person from whom the gift comes. You have the estate aggregated, and both the donee and the donor pay duty on the value of the whole, although for practical purposes they are separate estates. Suppose the donee dies within the three years. The estate cannot be distributed until the end of the three years, and nobody can take property under the will because of the various contingencies in regard to the payment of the duty. Again, there is a serious risk of a double death. Both the donee and the donor may die within a very short period, so that by this fiction of the law you get a double duty on property which really only devolves once. The more one looks at this Clause the more unreasonable it appears to be. I am quite sure that the law as it stands is sufficient. I do not anticipate securing a change in the law, but I am glad of this opportunity to make a protest against this Clause, which, I think, of all the Death Duty proposals, is the most unreasonable.


There is no doubt that this period of three years has been fixed upon with the object of preventing evasions of the Death Duties. But if you fix a time which a person who owns the property deems to be an unfair time he will set his mind to work to see in what way he can avoid your duty, and he may put his investments in the form of "bearer" securities instead of "registered" securities. Human life is very uncertain; one cannot tell at what period death may take place, and naturally a man will distribute his gifts in a form in which they are not readily traceable. This provision will give an enormous stimulus to the creation of bearer securities at the expense of registered securities, and stamps will suffer thereby. I cannot conceive that the Chancellor of the Exchequer wishes that operation to take place. As far as my humble judgment goes, the law as it stands is sufficient to meet all the cases that may reasonably be expected to arise.


I wish merely to point out that this is no longer a provision to add to the actual Death Duty, but it is a new tax upon gifts which are made not in expectation of death at all. This will be a distinct tax upon gifts which has never been levied before. The Chancellor of the Exchequer has given a most curious answer. First of all, he agreed that the result of this provision would be that there would be a large passing of property before death—that there would be distinct encouragement of that practice, and that it would be a desirable thing that property should pass before death. I would point out, however, that it would not be a very desirable thing for the Exchequer, although the very point upon which this proposal was defended by the Chancellor of the Exchequer and others was that it would be good for the Exchequer. Later on, in his speech, moreover, the Chancellor of the Exchequer defended the proposal on the ground that it would be good for the Exchequer, but he cannot depend upon both his arguments to-day. The right hon. Gentleman said he did not know actually of a case in which the donee had died, and there was a difficulty on the part of the executor. I would mention one case in which a rich man—he is known to be rich—gave a considerable sum of money to a brother or a relation of his who was in bad circumstances, his health having broken down and his business capacity having failed. He gave him a considerable sum of money to help him out of his difficulties. A month after the donee died, and the executor is wondering what he is to do. Until the donor dies he does not know what the amount of the estate is, and it will have to be held up until some years have elapsed or until the donor dies. It is obvious that there must be constant cases of this kind of great difficulty and hardship which will

arise under this alteration of the law. I am certain within the purview of the three years' limit this will cause great hardship.


The speech which we have just heard is characterised by the hon. Member's knowledge of his subject and by his usual moderation of statement, and he has made it clear to the House that this Clause means really a very considerable amount of addition to the Death Duties and the proportion which is to be paid to the State. I should like to say a few words upon that in regard to labour, because as regards labour it is most important to consider the matter. Here we have an addition to the amount taken from capital, and I would rather prefer to speak of it in regard to businesses which are always founded upon capital and regarded as investments. It is very common for a father to start a son in business, and in doing so he invests a sum of money in that way. How can this act otherwise than as a hardship upon labour and upon investment in new undertakings, and as an additional burden upon such industries? I have heard the argument that these Death Duties are only an inconsiderable increase of existing Death Duties. That is not so. They are raised by 50 per cent.—from an average of something like 4½ per cent. they have gone up to 6½ per cent. That is most serious. A fruit tree bears every year if it is properly protected. It is right, perhaps, to take part of the fruit of the tree every year, but how foolish to cut away part of the trunk of the tree. It is a piece of wood which may be useful, but it is cutting away the tree which yields the fruit. I think experience of the Death Duties, started on what is considered a moderate scale by Sir William Harcourt, has already demonstrated, by the actual cases which have occurred, that they have gone as far as they ought to go, and that to carry them further will only be penalising labour and adding to the army of the unemployed.

Question put, "That the words of the Clause, to the words 'nineteen hundred and,' stand part of the Bill."

The House divided: Ayes, 169; Noes, 67.

Division No. 855.] AYES. [10.45 p.m.
Abraham William (Rhondda) Ainsworth John Stirling Ashton Thomas Gair
Acland Francis Dyke Allen A. Acland (Christchurch) Astbury John Meir
Agnew George William Allen Charles P. (Stroud) Balfour Robert (Lanark)
Baring, Godfrey (Isle of Wight) Harmsworth, Cecil B. (Worcester) Price, C. E. (Edinburgh, Central)
Barker, Sir John Haslam, James (Derbyshire) Raphael, Herbert H.
Beale, W. P. Haworth, Arthur A Rea, Rt. Hon. Russell (Gloucester)
Beauchamp, E. Hedges, A. Paget Rea, Walter Russell (Scarborough)
Bennett, E. N. Helme, Norval Watson Rendall, Athelstan
Berridge, T. H. D. Henry, Charles S. Richards, Thomas (W. Monmouth)
Boulton, A. C. F. Herbert, T. Arnold (Wycombe) Roberts, Charles H. (Lincoln)
Bowerman, C. W. Hobart, Sir Robert Roberts, Sir J. H. (Denbighs)
Brace, William Hobhouse, Rt. Hon. Charles E. H. Robertson, Sir G. Scott (Bradford)
Brigg, John Hodge, John Robertson, Sir J. M. (Tyneside)
Brooke, Stopford Holland, Sir William Henry Robinson, S.
Brunner, J. F. L. (Lanes., Leigh) Holt, Richard Durning Roe, Sir Thomas
Brunner, Rt. Hon. Sir J. T. (Cheshire) Hooper, A. G. Rogers, F. E. Newman
Bryce, J. Annan Horniman, Emslie John Rowlands, J.
Burns, Rt. Hon. John Howard, Hon. Geoffrey Runciman, Rt. Hon. Walter
Byles, William Pollard Hyde, Clarendon G. Rutherford, V. H. (Brentford)
Clough, William Illingworth, Percy H. Samuel, Rt. Hon. H. L. (Cleveland)
Cobbold, Felix Thornley Isaacs, Rufus Daniel Samuel, S. M. (Whitechapel)
Compton-Rickett, Sir J. Jardine, Sir J. Seely, Colonel
Corbett, A. Cameron (Glasgow) Johnson, John (Gateshead) Shackleton, David James
Corbett, C. H. (Sussex, E. Grinstead) Jones, William (Carnarvonshire) Sherwell, Arthur James
Cornwall, Sir Edwin A. Jowett, F. W. Silcock, Thomas Ball
Cotton, Sir H. J. S. Keating, M. Simon, John Allsebrook
Craig, Herbert J. (Tynemouth) King, Alfred John (Knutsford) Stanley, Hon. A. Lyulph (Cheshire)
Crossley, William J. Laidlaw, Robert Stewart-Smith, D. (Kendal)
Davies, Ellis William (Eifion) Lamb, Ernest H. (Rochester) Strachey, Sir Edward
Duckworth, Sir James Lambert, George Summerbell, T.
Duncan, C. (Barrow-in-Furness) Lamont, Norman Sutherland, J. E.
Duncan, J. Hastings (York, Otley) Layland-Barratt, Sir Francis Taylor, John W. (Durham)
Dunne, Major E. Martin (Walsall) Lehmann, R. C. Taylor, Theodore C. (Radcliffe)
Edwards, A. Clement (Denbigh) Lever, A. Levy (Essex, Harwich) Thomas, Abel (Carmarthen, E.)
Edwards, Sir Francis (Radnor) Levy, Sir Maurice Thompson, J. W. H. (Somerset, E.)
Elibank, Master of Lewis, John Herbert Toulmin, George
Erskine, David C. Lloyd-George, Rt. Hon. David Verney, F. W.
Essex, R. W. Lupton, Arnold Villiers, Ernest Amherst
Esslemont, George Birnie Lynch, H. B. Vivian, Henry
Everett, R. Lacey M'Laren, Sir C. B. (Leicester) Wadsworth, J.
Falconer, J. M'Micking, Major G. Walsh, Stephen
Ferens, T. R. Marnham, F. J. Wason, John Cathcart (Orkney)
Fiennes, Hon. Eustace Massie, J White, Sir George (Norfolk)
Findlay, Alexander Middlebrook, William White, J. Dundas (Dumbartonshire)
Foster, Rt. Hon. Sir Walter Molteno, Percy Alport White, Sir Luke (York, E.R.)
Fuller, John Michael F. Mond, A. Wiles, Thomas
Gladstone, Rt. Hon. Herbert John Montagu, Hon. E. S. Wilkie, Alexander
Glendinning, R. G. Murray, Capt. Hon. A. C. (Kincard.) Williamson, Sir A.
Glover, Thomas Newnes, F. (Notts, Bassetlaw) Wilson, Hon. G. G. (Hull, W.)
Goddard, Sir Daniel Ford Nuttall, Harry Wilson, J. W. (Worcestershire, N.)
Greenwood, G. (Peterborough) O'Brien, Patrick (Kilkenny) Wilson, P. W. (St. Pancras, S.)
Griffith, Ellis J. O'Donnell, C. J. (Walworth) Wilson, W. T. (Westhoughton)
Gulland, John W. Parker, James (Halifax) Wood, T. M'Kinnon
Gwynn, Stephen Lucius Pearson, W. H. M. (Suffolk, Eye)
Haldane, Rt. Hon. Richard B. Philipps, Col. Ivor (Southampton)
Hall, Frederick Philipps, Owen C. (Pembroke) TELLERS FOR THE AYES.—Mr. Joseph Pease and Captain Norton.
Harcourt Rt. Hon. L. (Rossendale) Pollard, Dr. G. H.
Harcourt, Robert V. (Montrose) Ponsonby, Arthur A. W. H.
Anson, Sir William Reynell Gibbs, G. A. (Bristol, West) Powell, Sir Francis Sharp
Balcarres, Lord Gretton, John Radford, G. H.
Balfour, Rt. Hon. A. J. (City, Lond.) Guinness, Hon. W. E. (B. S. Edmunds) Ratcliff, Major R. F.
Banbury, Sir Frederick George Hamilton, Marquess of Ridsdale, E. A.
Banner, John S. Harmood- Hardy, Laurence (Kent, Ashford) Roberts, S. (Sheffield, Ecclesall)
Barrie, H. T. (Londonderry, N.) Harrison-roadley, H. B. Ronaldshay, Earl of
Beach, Hon. Michael Hugh Hicks Hill, Sir Clement Rutherford, John (Lancashire)
Beckett, Hon. Gervase Hills, J. W. Rutherford, Watson (Liverpool)
Bellairs, Carlyon Hope, James Fitzalan (Sheffield) Scott, Sir S. (Marylebone, W.)
Bull, Sir William James Joynson-Hicks, William Stanier, Beville
Carlile, E. Hildred Kennaway, Rt. Hon. Sir John H. Starkey, John ft.
Cave, George Kimber, Sir Henry Staveley-Hill, Henry (Staffordshire)
Cecil, Lord R. (Marylebone, E.) King, Sir Henry Seymour (Hull) Thomson, W. Mitchell- (Lanark)
Channing, Sir Francis Allston Lane-Fox, G. R. Thornton, Percy M.
Clive, Percy Archer Long, Col. Charles W. (Evesham) Valentia, Viscount
Craig, Charles Curtis (Antrim, S.) Lonsdale, John Brownlee Walrond, Hon. Lionel
Craik, Sir Henry MacCaw, William J. MacGeagh Waterlow, D. S.
Dickson, Rt. Hon. C. Scott M'Arthur, Charles Willoughby de Eresby, Lord
Douglas, Rt. Hon. A. Akers- Magnus, Sir Philip Wortley, Rt. Hon. C. B. Stuart-
Duncan, Robert (Lanark, Govan) Mason, James F. (Windsor)
Faber, George Denison (York) Nicholson, Wm. G. (Petersfield)
Fletcher, J. S. Parkes, Ebenezer TELLERS FOR THE NOES.—Mr. Evelyn Cecil and Viscount Helmsley.
Forster, Henry William Pease, Herbert Pike (Darlington)
Gardner, Ernest Peel, Hon. W. R. W.

Question, "That the word 'eight' stand part of the Bill," put and agreed to.

Mr. CAVE moved, in the second paragraph of the Section, to omit the word "eight;" and to insert instead thereof the word "nine."

In the discussion on the financial Resolution dealing with this Clause, I asked the Chancellor of the Exchequer whether the Clause was intended to be retrospective, and his answer was, Certainly not. But the Clause as it stands is retrospective; that is, it applies to gifts made before the introduction of the Bill. My Amendment is to confine the operation of the Clause to gifts made after the 30th April last. This very point no doubt has arisen in many cases. It certainly has arisen in one case I know of from personal knowledge. A man made a gift about the 1st or 2nd of May, 1908. Until the Bill was introduced he thought that if he succeeded in living for a year his gift would be safe. I am happy to say that he did succeed in living for a year, and he is living still, but if he dies within two years from this time the effect will be that duty will be paid upon his gift. I call that making the Bill retrospective. There would be a great hardship in such a case, and I think that the Government ought to accept this Amendment if for no other reason than to carry out their promise.


I beg to second the Amendment.


The question raised here has been discussed over and over again. Under Clause 2, Sub-section (1), (c), of the Finance Act of 1894, the same principle applies, with this difference: That in this case three years are substituted for one year, but it is obvious that, so far as the principle is concerned, what was true in the case of one year is true in the case of three, and vice versâ. The principle is that when a person dies after the Bill has become law, and there has been a gift, the duty is payable, now for three years, but formerly for one year before the Act came into operation. It is not for the first time this question has been raised, and the Amendment of the hon. and learned Gentleman would have the effect of divesting the proviso of its purpose, which is to save people who are already immune. The Amendment would turn the proviso to something wholly different and convert it into an exempting Clause, going back to the principle which was the principle of the Act of 1894. For these reasons, which were very fully discussed in the Committee stage, I am afraid that we are unable to accept the Amendment.

11.0 P.M.

Sir H. KIMBER moved, in the second paragraph, to leave out the words "or made or effected for public or charitable purposes."

The object of this will, I think, appeal to the consideration of the Chancellor of the Exchequer. An hon. Member on the other side on a previous Amendment pointed out that gifts for charitable purposes ought not to be included in the tax. The Chancellor of the Exchequer has been good enough in the next paragraph to amend the principal Act by making gifts inter vivos on consideration of marriage, or part of the normal expenditure exempt, and there is no reason when he has given that why he should not also be willing to Include charitable gifts and exempt from Death Duties money which has been parted with never to come back again.

Mr. HILLS seconded the Amendment. I hope the Government will accept this, as it is surely a logical consequence of the other. If a man dies within the year, the hospital legacy will, if the Bill remains as it is, pay a tax that it would not pay if he survived a year and died in the second or third year. Surely, since you admit the principle that a gift to a hospital is on a different scale from other gifts, it is logical to extend the exemption to those that are made by a testator who dies within the year.


The result of the concession made on this subject makes one almost despair of making any more. If there is one principle which has been laid down in the last 50 years, it is that charitable gifts should not, as a general principle, be exempt from Legacy and Succession Duties, or from duties analogous to the Estate Duties. That was the subject of a memorable Debate in 1853, and it has been the principle of Parliament ever since. We have made a slight concession in the preceding Sub-section, and it is seized upon as a reason for repealing the whole principle. Governments do not impose taxes for the pleasure of imposing them. If once you make the concession that gifts of charity are to escape Death Duties, there is no limit to the extent to which what you raise by Death Duties may be broken into. It is quite impossible for the Government to accept the Amendment.


I was hoping that the Government would see their way to accept this Amendment. It is perfectly true that as the law stands at present a hospital has to pay Death Duties on any gift if the donor dies within 12 months. As I understand, that principle will continue, and the concession the Government have made is that the 12 months shall not be extended to three years. That is a very small concession. In view of the serious financial straits in which hospitals are placed, it must be to the public advantage that donors should be encouraged in every possible way to give their money to such institutions. The Chancellor of the Exchequer may say that he would lose money if he made this concession. That may be so; but the amount would be extremely small, while the advantage to the hospitals would be great. On behalf of the hospitals I ask the Government to grant this concession.


I think the Government have not quite realised the great change which has taken place since 1853. We more and more feel that the pressure upon charitable donors and great institutions is increasing. I do not believe for a moment that in 1853 the necessity for hospitals was appreciated to the same extent as now; I am absolutely certain that in 1853 the necessity for charitable gifts and other bequests for purposes of higher education was not appreciated. As civilisation becomes more complicated, as the demand for these institutions increases, and as we have to compete more and more with foreign countries who draw more freely upon the public purse than by our traditions and practice we do in this country, it is specially desirable that we should do all we can to encourage these private bequests, whether in the last year of life or any other. I do not in the least sympathise with the contempt and scorn which is poured upon those who give their money only when they are within measurable distance of the time when they will be no longer able to enjoy it. I quite agree that if I were to weigh their moral qualities in comparison with those who give at an earlier stage of life I should not put them on the same level. But I am looking at the matter, not from the point of view of the morality of the donor, but from the point of view of the institutions. We want greater gifts to be given to promote higher education in our universities and to help the prodigious work now done by hospitals, not merely in dealing with cases of sickness and accident, but in carrying out those important investigations upon which, in my opinion, so much of the future increased happiness of mankind depends. The need for the recognition of these modern necessities as compared with the recognition some 54 or 55 years ago is strengthened by the collateral effects of the present Budget. We need not from this point of view consider the fairness or propriety of the Budget, but undoubtedly it does, apart from the necessities of the national finances, press upon properties from which these contributions used chiefly to be paid. I merely desire, apart from opinion, to state naked, hard and undeniable facts. If it be as I have stated that is all the more reason for taking care in this Budget that we do all we can to promote at any time of life the liberality of those who are in a position to give for public beneficent objects, educational, medical, or otherwise. Under these circumstances, though it may be quite impossible to induce the Government to alter their decision, I cannot refrain from adding my voice to that of my hon. Friend's, by way of appeal to the Government to, if possible, make some concession which really cannot seriously hurt the Exchequer, but may aid those great institutions which may be in need of the subscriptions of those able to give.


I should be very glad, if possible, to respond to the very eloquent appeal made by the right hon. Gentleman, but I would remind the House that this Amendment is not altogether for educational or hospital purposes, but "for public or charitable purposes." That will include a very wide area of disposition which comes under the term charity.


The same words are in the Bill.


I agree, but this is another thing, and I want the House to remember that we are not altering the law.


That is quite true.


To an extent we are altering it by making the concession, but we are taking care in our proviso, in so far as we are altering the law, that gifts which are not applied for public or charitable purposes are not included; and we can hardly include hospitals. May I point out that the Government quite ap- preciate the importance of giving encouragement, more especially to hospitals, and part of the proceeds that we are raising will go towards the maintenance of hospitals. I have not the faintest doubt, so far as this Budget is concerned, hospitals will be very much better off as part of the general scheme, of which the Budget is only a portion, and therefore from the point of view of hospitals I do not think there is much to complain of. I wish the House to bear in mind that on the whole we are leaving charities better off than before.


I should like to ask a question which arises out of the answer the Chancellor has just given. Many of us on this side of the House were not aware that part of the funds raised by the Finance Bill were to be devoted to this form of insurance—sickness and sick pay. I should like, if the right hon. Gentleman would tell us, under which estimate that money comes.

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

The House divided: Ayes, 160; Noes, 63.

Division No. 856.] AYES. [11.17 p.m.
Abraham, William (Rhondda) Goddard, Sir Daniel Ford Philipps, Col. Ivor (Southampton)
Acland, Francis Dyke Greenwood, G. (Peterborough) Philipps, Owen C. (Pembroke)
Agnew, George William Griffith, Ellis J. Pollard, Dr. G. H.
Ainsworth, John Stirling Haldane, Rt. Hon. Richard B. Ponsonby, Arthur A. W. H.
Allen, A. Acland (Christchurch) Hall, Frederick Price, C. E. (Edinburgh, Central)
Allen, Charles P. (Stroud) Harcourt Rt. Hon. L. (Rossendale) Priestley, Sir W. E. B. (Bradford, E.)
Ashton, Thomas Gair Harcourt, Robert V. (Montrose) Raphael, Herbert H.
Balfour, Robert (Lanark) Harmsworth, Cecil B. (Worcester) Rea, Rt. Hon. Russell (Gloucester)
Baring, Godfrey (Isle of Wight) Haslam, James (Derbyshire) Rea, Walter Pussell (Scarborough)
Barker, Sir John Haworth, Arthur A. Rendall, Athelstan
Barran, Rowland Hirst Hedges, A. Paget Richards, Thomas (W. Monmouth)
Beauchamp, E. Helme, Norval Watson Ridsdale, E. A.
Bennett, E. N. Henry, Charles S. Roberts, Charles H. (Lincoln)
Berridge, T. H. D. Herbert, T. Arnold (Wycombe) Roberts, Sir J. H. (Denbighs)
Boulton, A. C. F. Hobart, Sir Robert Robertson, Sir G. Scott (Bradford)
Bowerman, C. W. Hobhouse, Rt. Hon. Charles E. H. Robertson, J. M. (Tyneside)
Brace, William Hodge, John Robinson, S.
Brigg, John Holland, Sir William Henry Roe, Sir Thomas
Brunner, J. F. L. (Lanes., Leigh) Holt, Richard Durning Rogers, F. E. Newman
Brunner, Rt. Hon. Sir J. T. (Cheshire) Hooper, A. G. Rowlands, J.
Bryce, J. Annan Horniman, Emslie John Samuel, Rt. Hon. H. L. (Cleveland)
Burns, Rt. Hon. John Howard, Hon. Geoffrey Samuel, S. M. (Whitechapel)
Byles, William Pollard Hyde, Clarendon G. Seely, Colonel
Cheetham, John Frederick Illingworth, Percy H. Shackleton, David James
Clough, William Isaacs, Rufus Daniel Snerwell, Artnur James
Cobbold, Felix Thornley Jardine, Sir J. Silcock, Thomas Ball
Collins, Sir Wm. J. (St. Pancras, W.) Johnson, John (Gateshead) Simon, John Allsebrook
Compton-Rickett, Sir J Jones, William (Carnarvonshire) Stanley, Hon. A. Lyulph (Cheshire)
Corbett, A. Cameron (Glasgow) Jowett, F. W. Stewart-Smith, D. (Kendal)
Corbett, C. H. (Sussex, E. Grinstead) Keating, M. Strachey, Sir Edward
Cornwall, Sir Edwin A. King, Alfred John (Knutsford) Summerbell, T.
Cotton, Sir H. J. S. Laidlaw, Robert Sutherland, J. E.
Craig, Herbert J. (Tynemouth) Lamb, Ernest H. (Rochester) Taylor, John W. (Durham)
Crosfield, A. H. Lambert, George Taylor, Theodore C. (Radcliffe)
Crossley, William J. Lament, Norman Thompson, J. W. H. (Somerset, E.)
Davies, Ellis William (Eifion) Layland-Barratt, Sir Francis Toulmin, George
Duncan, C. (Barrow-in-Furness) Lehmann, R. C. Verney, F. W.
Duncan, J. Hastings (York, Otley) Lever, A. Levy (Essex, Harwich) Villiers, Ernest Amherst
Dunne, Major E. Martin (Walsall) Levy, Sir Maurice Vivian, Henry
Edwards, A. Clement (Denbigh) Lewis, John Herbert Wadsworth, J.
Edwards, Sir Francis (Radnor) Lloyd-George, Rt. Hon. David Walsh, Stephen
Elibank, Master of Lupton, Arnold Wason, John Cathcart (Orkney)
Erskine, David C. M'Laren, Sir C. B. (Leicester) White, Sir George (Norfolk)
Essex, R. W. M'Micking, Major G. White, Sir Luke (York, E.R.)
Esslemont, George Birnie Marnham, F. J. Wiles, Thomas
Everett, R. Lacey Massie, J. Wilkie, Alexander
Falconer, J. Middlebrook, William Williamson, Sir A.
Ferens, T. R. Mond, A. Wilson, Hon. G. G. (Hull, W.)
Fiennes, Hon. Eustace Morton, Alpheus Cleophas Wilson, J. W. (Worcestershire, N.)
Findlay, Alexander Murray, Capt. Hon. A. C. (Kincard.) Wilson, P. W. (St. Pancras, S.)
Fuller, John Michael F. Nussey, Sir Willans Wilson, W. T. (Westhoughton)
Gladstone, Rt. Hon. Herbert John Nuttall, Harry Wood, T. M'Kinnon
Glendinning, R. G. Parker, James (Halifax) TELLERS FOR THE AYES.—Mr. Joseph Pease and Captain Norton.
Glover, Thomas Pearson, W. H. M. (Suffolk, Eye)
Anson, Sir William Reynell Banner, John S. Harmood- Bellairs, Carlyon
Balcarres, Lord Barrie, H. T. (Londonderry N.) Bull, Sir William James
Balfour, Rt. Hon. A. J. (City, Lond.) Beach, Hon. Michael Hugh Hicks Carille, E. Mildred
Banbury, Sir Frederick George Beckett, Hon. Gervase Cave, George
Cecil, Evelyn (Aston Manor) Harrison-Broadley, H. B. Roberts, S. (Sheffield, Ecclesall)
Cecil, Lord R. (Marylebone, E.) Hay, Hon. Claude George Ronaldshay, Earl of
Channing, Sir Francis Allston Helmsley, Viscount Rutherford, John (Lancashire)
Clive, Percy Archer Hill, Sir Clement Rutherford, Watson (Liverpool)
Craik, Sir Henry Hope, James Fitzalan (Sheffield) Scott, Sir S. (Marylebone, W.)
Davies, David (Montgomery Co.) King, Sir Henry Seymour (Hull) Stanier, Beville
Douglas, Fit. Hon. A. Akers- Lane-Fox, G. R. Starkey, John R.
Faber, George Denison (York) Long, Col. Charles W. (Evesham) Staveley-Hill, Henry (Staffordshire)
Fell, Arthur Long, Rt. Hon. Walter (Dublin, S.) Thomson, W. Mitchell-(Lanark)
Fletcher, J. S. Lynch, H. B. Thornton, Percy M.
Forster, Henry William MacCaw, William J. MacGeagh Valentia, Viscount
Gardner, Ernest Mason, James F. (Windsor) Walrond, Hon. Lionel
Gibbs, G. A. (Bristol, West) Nicholson, Wm. G. (Petersfield) Waterlow, D. S.
Gretton, John Parkes, Ebenezer Willoughby de Eresby, Lord
Guinness, Hon. R. (Haggerston) Pease, Herbert Pike (Darlington) Wortley, Rt. Hon. C. B. Stuart-
Guinness, Hon. W. E. (B. S. Edm'ds.) Powell, Sir Francis Sharp
Hamilton, Marquess of Radford, G. H. TELLERS FOR THE NOES—Sir H. Kimber and Mr. Hills.
Hardy, Laurence (Kent, Ashford) Ratcliff, Major R. F.

Question, "That the word 'and' stand part of the Bill," put, and agreed to.

Sir HENRY KIMBER moved in the third paragraph, after the word "marriage" ["made in consideration of marriage"] to insert the words "or consanguinity."

You have exempted any donation given by a testator during the three years in consideration of the marriage of a daughter, sister, or anybody, and I ask the Government whether it is not equally fair that a donation made during the three years to a son or a daughter for their advancement in life should be exempt. The money has been parted with out of the testator's estate, and it seems to me rather unconscionable that the Death Duties should be levied on it as if it still existed and was included in the money left behind. If you are to exclude the money he gives to his daughter upon her marriage, it appears to me the same equitable consideration should apply to a donation given to a son for his advancement in the army, the navy, or even in a mercantile business. The money will have been parted with by the testator, and certainly will not be part of his estate in reality, however much you may seek to include it for the purpose of calculating the duty. It is not the duty merely upon the gift which I seek to release. The inclusion of such a gift, whether upon marriage or not, may bring the total amount of the estate over one of the graduated steps at which the rate of charge for the Death Duties will be increased, not upon the part but upon the whole of the estate. I should like to ask the Chancellor of the Exchequer and the Secretary of State for War, whose knowledge of equitable consideration cannot be transcended, even if it can be equalled, whether they will not consider this and bring it within the exemptions made in the Clause.

Viscount HELMSLEY seconded the Amendment.


Because we have exempted marriage contracts, the hon. Baronet seems to think we should exempt gifts to a man's third cousin once removed. The proposition is impossible.

Question put, "That those words be there inserted in the Bill," put, and negatived.

Sir H. KIMBER moved in the last paragraph of the Clause to leave out the word "and" ["and to have been reasonable"] and to insert instead thereof the word "or."

Mr. CARLILE seconded the Amendment.


This would make a huge gap. It proposes that where a man chooses to make a gift to his son it shall not pay duty. It would involve an enormous loss to the revenue and we cannot, therefore, accept the proposal.

Mr. CAVE moved to add at the end of the Clause:— Where property taken under such a disposition or affected by such a surrender, assurance, divesting or disposition as aforesaid is deemed to be property passing on the death of the deceased by reason only that the property was not, as from the date of the disposition, surrender, assurance, or divesting retained to the entire exclusion of the deceased or a person who had an estate or interest limited to cease on the death of the deceased, and of any benefit to him by contract or otherwise, the property shall not be deemed to pass on the death of the deceased if subsequently, by means of the surrender of the benefit reserved or other- wise, it is enjoyed to the entire exclusion of the deceased or such other person as aforesaid, and of any benefit to him by contract or otherwise for such period preceding the death of the deceased as is provided by this Section.

The object of this Amendment is to get rid of an anomaly, and I move the Subsection in words which I understand are accepted by the Government.


The position is simply this. Under the law as it stood, if a gift of a livelihood were made within a year of death the gift paid duty as part of the estate. In the year 1900, under the Finance Act, gifts of that kind were relieved of the duty; the actual life estate was released, it being found that if the life interest were released no property passes. No property could be deemed to pass, and the Government, in order to put that right, and in order to give an air of generosity to the transaction, passed a Clause which enacted that when the life interest was released in this fashion by death of the person whose estate paid the duty, no duty shall be payable. Now comes the hon. and learned Member who says, "If a life estate has this beneficial treatment, how can you refuse it in other cases?" I agree we cannot. We feel that, and now we have made the full concession with regard to all this class of case.

Proposed words there inserted in the Bill.

Sir HENRY KIMBER moved at the end of the Clause to insert the words, "Where the person making or effecting and the person taking a benefit under any such gift inter vivos, surrender, assurance, divesting, or disposition shall both die within such period of three years, any property which is the subect of such gift, surrender, assurance, divesting, or disposition, and which shall have been charged with Estate Duty on the first of such deaths, shall not again be chargeable with Estate Duty on the death of the survivor of such persons, or be liable to aggregation on his death." I think this, again, is a case in which the Government will concede the fairness and the equity of the concession which is asked.


If there is one principle which has been firmly fixed in the Death Duties Act since the time of Mr. Pitt it is that you do not make an alteration merely because two people die near to one another. I do not say it would not be right to do it generally, but you cannot do it on an Amendment like this or at this stage of the Bill. It is a principle which has been observed before, but now comes the hon. Baronet and proposes his Amendment, but we cannot introduce it at this time of the day.


When the present Government find principles I always know there is something wrong. I put this simple point to hon. and right hon. Gentlemen, do they think it right that if a man hands over his property to his eldest son three years before his death, and the son dies within three years, and the man himself dies within three years—that is the proposal which is now put—that you ought to charge the same estate at short intervals, and therefore amplify the Death Duties and mulct the estate. If you would deal with individuals as you deal with the corporations and charge them at fixed intervals every man who owns money and property would know where he was. They would be impoverished, but they would know when they were to be impoverished, but no man can know where he is if you impoverish that estate very frequently or every two or three years. It is a grave defect in the whole scheme, and the Amendment does something to remedy it, and I am sorry the Government, on the ground of principle, think so obvious an act of equity and justice cannot be performed.

Amendment, by leave, withdrawn.