§ When an insurance policy payable upon the death of a person is included among the assets liable for duty upon the estate of that same deceased person the amount passing with his deceased estate by virtue of that same policy shall not be aggregated with his estate but shall be assessed for duty separately, and at half the percentage rate of duty applicable to the remainder of his estate, and as if the value of the aforesaid life policy were not aggregated to his estate.—[Mr. A. M. Samuel.]
§ Brought up, and read the First time.
§ Mr. ARTHUR MICHAEL SAMUELI beg to move, "That the Clause be read a Second time."
This new Clause seeks to remove what has been in some degree and for some considerable time a clog upon life insurance. The Clause is intended to have, in the first place, a general effect, and then a particular effect. I suppose the Committee are aware that as a nation we are very much behind as regards the amount of insurance upon life in relation to our population. We have only a life insurance amount of £30 per head compared with £90 per head, or three times that amount in the United States. Estate Duty, as it now operates, hampers the progress of life insurance. I do not think it is necessary to insist on the view that life insurance is a very healthy thing, simply on the broad general ground of thrift; but in a particular sense it has the effect of being beneficial, not only to private individuals, but to the Exchequer. Life insurance helps the Exchequer and consequently helps the State very much. The premiums which are collected on life insurances are not simply put into a cupboard. For the most part our great British insurance offices 120 invest those premiums in high-class securities, principally trustee securities, and during the War they rendered the State immense service by the sums which they were able to place at the disposal of the State to meet the urgent requirements of that time.
In times of peace these funds are also useful to the State because they keep up the capital value of Government and trustee stocks, and the higher the price of Government and trustee stocks, the better can the Exchequer make its conversions, the better the price it can get, and the more easily it can convert its loans. Of late years too the great insurance companies are beginning to feed industry with capital to a greater extent than heretofore. They are now putting money into industrial concerns and in this way helping in the reorganisation and rationalisation of industry. I know from my own experience, and I am sure the Financial Secretary also knows it, that when the Chancellor of the Exchequer seeks to convert a loan which is falling due, the Treasury receive great help from the insurance companies who come along with the premiums which they have collected and subscribe very large sums to help the Treasury to float its conversion loan.
Finally, life insurance policies used for Estate Duty payments are very useful to the Treasury, because they enable the Exchequer to get in quickly and without difficulty, the moneys required for this form of taxation, and as shown by cases which have come under my personal notice in my private capacity, a life insurance policy very often helps the owner of a factory when his partner dies, it pays the death duties upon his partner's property in that factory, without reducing the employment given in that factory or interfering with its business. Therefore, not only upon the general lines of thrift but on all these particular lines of usefulness which I have mentioned and which converge upon the Treasury, we ought to do what we can to encourage the spread of life insurance. The amount of money which is involved in Estate Duty upon life insurance policies per year is, roughly, if I remember aright, £1,750,000. I think there is a sum of about £18,500,000 in life policies every year going into the Estate Duty net, on which the Exchequer receives about the sum which I have mentioned. I suggest that 121 the Exchequer might be content with half that amount or about £835,000. I submit this point in support of my argument:—I do not believe that at the present time in cases where these high duties operate it pays a man very well to insure his life for Estate Duty.
If a man takes out a life policy not only for the general reason of thrift but for the particular reasons which I have already mentioned, for Estate Duty purposes, the amount of that policy is added on to the total of his estate, with the result that there sometimes is a higher rate of duty on the whole of the estate. For instance, there is the case of a man who leaves £50,000 and who has had a £5,000 life insurance policy. Had he not had the life insurance policy, the duty payable would be at the rate applicable to a £50,000 estate but with the addition of the policy it becomes a £55,000 estate, and that causes an increase in the rate of duty which wipes out the benefit of the insurance when the premium cost is taken into account. That state of things discourages life insurance; the increase in the rate of duty on the estate is also in addition to the Estate Duty on the policy money paid at death. That is a wrong state of affairs. The position in relation to life insurance and Death Duties at present is one which is not beneficial to the State, and it ought to be regularised. I do not know whether or not the Financial Secretary is empowered to accept either my new Clause or that in the name of my hon. Friend the Member for Barnstaple (Sir B. Peto)—[Proceeds of life policies not to be chargeable with Estate Duty]—which goes a little further, but I am perfectly certain that we need to increase the habit of life insurance, generally for provident purposes, and particularly in order to assist in the collection of these duties. As matters now stand, with Estate Duty at the present rate, it is as I have said, a clog upon life insurance, and I hope the Government will look into the matter.
§ Sir B. PETOI wish to put a specific case to the Financial Secretary which I think makes the argument for this new Clause almost unanswerable. I take the level of £100,000. According to the Second Schedule, an estate of £100,000 pays at the rate of 20 per cent. If the 122 person owning the estate desired to cover it in this respect by an insurance policy he would require a policy of £20,000. That policy is aggregated to the estate which makes the estate £120,000, and then the whole of the estate becomes chargeable with an additional 2 per cent. of duty—22 per cent. instead of 20 per cent. Therefore, the insurance policy of £20,000 is deficient to the extent of £2,000 in meeting the Estate Duty which ex hypothesi was £20,000. How does that work out? The improvident estate owner, whether he is the owner of a business or the owner of landed property, who does not care about keeping his estate intact, or his business running after his death, who does not care whether there is dislocation or not—
§ It being Half-past Seven of the Clock, and there being Private Business set down by direction of the Chairman of Ways and Means under Standing Order No. 8, further Proceeding was postponed, without Question put.