HC Deb 21 June 1926 vol 197 cc169-73

The scale set out in the Fourth Schedule of the Finance Act, 1925, with relation to Death Duties shall he subject to discount of five per cent, on all payments made during lifetime.—[Viscount Sandon.]

Brought up, and read the First time.

Viscount SANDON

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

I am quite sure, as the Chancellor of the Exchequer has been so apologetic for saying "No," that there is an admirable opportunity for departing on another line. I do not want to urge this Clause on account of the persons involved. It involves the State. As things are at present, it is well known that when these duties arise, the obligations cannot be met out of income. They have to be met out of capital assets. These assets in the interests of the country should not be realised. It must be to the loss of the country in that respect. Every one has to do the same thing, and many are doing it at the same time; consequently the markets are flooded, prices lower, and so money has to be realized to raise the duty. A great amount has to be sent out of the country, and this lowers the amount available to be handed in to the Treasury. If an estate is valued at the present moment for £200,000, the Treasury, taking its estate duty, will get £46,000, but if that estate is broken up as it would have to be in another generation, and is sold in 10 lots of £20,000, then the duty would only amount to £16,000 and the Treasury would be £30,000 down. I hope that consideration will appeal to the purely practical and cold mind of the Exchequer. And similar losses are suffered in respect of Super-tax and Income Tax, in the case of an estate of that size, varying between £4 and £1,500. The duty has all the objections we used to apply to the Capital Levy, and hon. Members opposite who have such enormous enthusiasm for the Capital Levy will no doubt be in favour of the existing system.

The Chancellor of the Exchequer knows quite well that in all these cases it is the land which is hit the most because land is the least easily convertible. Although we cannot remedy that, there is an alternative which can, to a certain extent, mitigate the evil. There are moments in the lives of all of us when money comes easier to our hands; there are also times when we cannot easily obtain money, when it is harder to obtain. Under the proposals in the Amendment we shall pay in our easiest moments out of income, en bloc or in instalments and as we all have to make some sacrifice we should then make the sacrifice at a moment when it is more convenient to us and better for the Exchequer, certainly under the present system it is the most awkward time in spite of the eight years respite. I suggest to the Treasury that it will be worth their while, as they might be paid twenty years in advance. I have put down 5 per cent., but I quite realise that that is an arbitrary figure and the exact figure will have to be the subject of consideration—I do not attach any great importance to the particular figure. I quite realise that as a matter of public policy people who own these assets must be fleeced in the public interest, but at least, some consideration should be had for the victims, for whom it is a domestic issue, as to what is their convenience as far as possible, and especially is that so when the Treasury does not stand to lose by it. It may be when the time comes that there will be a difference in the amount paid and the actual amount of the duty, and that we shall have to adjust the amounts paid in advance with the actual duty, as they may not tally, but I hope the Chancellor of the Exchequer, whose voice must be tired saying "No," will think this is an occasion on which he can do some service to the Treasury and at the same time stop the dispatch of tangible assets to America.


The object of this Clause, as the Noble Lord has indicated, is to enable any person during his lifetime to make payments in anticipation of Estate Duty payable on his death, and such payments to be subject to a discount of 5 per cent. The discount of 5 per cent., as implied in the new Clause, would mean that any payment made by a man in advance of his death on account of Death Duties would have 5 per cent. deducted from it. For instance, on £100 of Death Duties he would pay ક now, and when he died that £95 would have extinguished £100 worth of Death Duties. I do not know fi that is the proposal of my Noble Friend.

Viscount SANDON

Yes, broadly, subject to the fact that I am open-minded, and as to the 5 per cent., I have no objection to it being on a sliding scale, as found to be suitable by the Exchequer, on the basis of the interval between payment and death.


I am relieved to know that my Noble Friend does not intend by his proposed new Clause, to suggest that it should be 5 per cent. annually which would be much more attractive to the taxpayer and much more expensive to the Revenue. For instance, if a man who expected to die five years hence paid £75, thereby extinguishing £100 by five instalments of 5 per cent., he would have a very great advantage given to him as to tae character of the investment he would make. Coming to the much more limited proposal of my Noble Friend, it is evident that the option which he proposes to give to the taxpayer would always be exercised to the detriment of the State, in so far as the taxpayer was capable of foreseeing the future. No one is able to forecast the exact moment of his death. That is a mystery which is hidden from all of us. Still, as the years pass by, and as each of us in our turn, pass the summit of the way and descend slowly and gradually or rapidly as the case may be, the actuarial position of each taxpayer is definitely and effectively altered. This proposal would be of advantage to persons who, according to the actuarial calculation, bad a reasonable expectation of dying in the course of the ensuing few years. It would not be at all an attractive investment to those who might, according to the actuarial calculation, look forward to 10 years or 15 years or a longer span of human life. They would find much better opportunities of investing their 5 per cent. discount in other ways.

What would happen is that in so far as this proposal would be used at all, it would be used only by those who had reason to believe that their estates would benefit and their heirs would benefit by the exercise of the option, whereas, in every case where the State might gain an advantage from it, the propensity of the taxpayer would be to keep his money in his own pocket and not to worry too much about death until, apparently, it came a little nearer. Very few people would care to ensure a mere 5 per cent. discount by the immediate disbursement of heavy sums of money in their own lifetime. As far as the Exchequer is concerned, we can find no sort of enthusiasm for the suggestion of my Noble Friend. Therefore, I trust he will not press this matter further, but will allow it to stand in the long category of proposals which have been considered to-day without it having been found possible to make any effective advance in regard to them.

Motion and Clause, by leave, withdrawn.