NEW CLAUSE.—(Estate Duty). (Hansard, 8 July 1924)

Mr. HERBERT

I beg to move, "That the Clause be read a Second time."

This is an amendment designed to remove a curious case of hardship in regard to the incidence of Estate Duty. At the present time if a fund is settled by a rich man for the benefit of, let us say, three or four people, one after the other taking an interest for life, with remainder, say, to a child of one of those persons, then that particular trust fund has to be aggregated with the estate of the deceased person as a whole, and bears the same rate of duty which is applicable to the whole estate. Take the case of a millionaire who has a very old servant, an old widow perhaps, for whom he wants to provide; she may have an only daughter who would by that time be an oldish woman herself; and he leaves, say, £2,000. upon trust after his wife's death for the old woman for her life with remainder to her daughter. In such a case, when the Estate Duty has to be aggregated, notwithstanding the fact that it is only a matter of £2,000, for people who do not possess any other money in the world, that has to bear duty at the rate which is applicable to the estate of the deceased. When 2146 this was Moved from the Liberal benches last year the answer which was given by the then Solicitor-General was that the matter had been dealt with by a Commission which inquired into this matter in the year 1899. But it was then pointed out by the hon. Member in question who Moved, and also by myself, that considerable changes had taken place which altered the position since that Commission sat in 1899. First of all, since that time the Estate Duties have been largely increased, and they have been much more steeply graded. Therefore, so far as there is an injustice, it is very much more exaggerated now than it was in those days.

But there is another point which I think entirely throws out of court any real reason for relying on the Report of that Commission, and that is that Estate Duty in the case of a separate fund is now payable an the death of every person who dies who has an interest for life. In the days when that Commission sat, Estate Duty was only payable once during the occurrence of the settlement, but if you take this tax together with the increase in the rate of Duty, the steeper graduation of the duty, and the fact that the duty is now payable on every life tentant's death, instead of only once during the occurrence of the settlement, think there is a very considerable answer to the argument that the Commission found against in 1899. I only regret that the hon. and learned Member of the Liberal party who moved this Amendment last year is unable to move it now because he is Deputy Chairman. He moved it with the sympathy of, I think, the greater number of the Conservative party, and with the sympathy and the active support of his own party, while the party to which the Chancellor of the Exchequer belongs also supported it. There is so much support for this Amendment among all those who have any experience of Death Duties that I do ask the Chancellor of the Exchequer to consider this question and see whether, in spite of the money involved, he cannot remedy this hardship. This will get rid of a hardship which penalises the poor classes.

Mr. GRAHAM

I am sure that the Committee will forgive me if I do not enter into detail on this question, as I 2147 think the case can be quite shortly stated. It is true, as suggested, that this was originally in force in the Finance Act, 1894, but after inquiry that was amended in the Finance Act, 1900, and, as I understand the hon Member, he proposes to put the position back as it was in 1894—that is to say to take out of the aggregation for the purposes of Estate Duty, this estate, in respect of which the deceased party did not make a will, under his disposition. It is perfectly plain, that for all practical purposes to-day, that cuts across the principle of aggregation for Estate Duty purposes. I take the Report of that very distinguished Committee which considered this matter in 1899–1900. They made it perfectly clear that any hardship which existed would be removed by their proviso. In the light of their Report and the Finance Act, 1900, as it amended the position, I am afraid it would be impossible to depart from that at the present day. The Committee will not expect a longer reply because it is impossible to night to make an inroad into the accepted principle of aggregation for the purpose of Death Duty without exposing ourselves to very great risks in several directions and substantial loss of revenue.