HC Deb 08 June 1932 vol 266 cc1979-88

It shall be lawful for the Treasury to accept payment of death duties in stocks or shares by agreement with the representatives of the deceased and with the consent of the board of the company concerned. —[Mr. Mander.]

Brought up, and read the First time.


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

I hope that the Financial Secretary will lend a sympathetic ear to this very moderate and reasonable Amendment. I am not raising any objection whatever to the Death Duties, which seem to be perfectly sound and necessary, in view of the present state of the country and the heavy burden that is laid on people who are in a very much poorer position. It is not the rate—I think that is right—but it is the fact that in certain cases it has been found very difficult to pay on the one side, and to collect on the other, in certain circumstances. Let me explain exactly what the Clause will do. In cases where you have full agreement, first of all with the Treasury, then with the representatives of the deceased, and then with the board of the company that is affected, you would be able in certain circumstances to pay the Death Duties in stock. It is not suggested that that stock would be held for more than a very short period. The Treasury would no doubt get rid of it at the earliest possible moment, as soon as there was a market.

I am sure that hon. Members opposite may well look upon this as being a means of gradually transferring the whole of industry to the State. That is not my idea for a moment, and I am sure it is not the idea of anyone who will ever be at the Treasury. But everyone in this House will appreciate that under present conditions you may have the cases of a large number of private companies where nearly all the capital may be in the form of shares in those companies, and it is not realisable with readiness on the market. You may get other cases of public companies where the stock is of such a kind that it really is not practicable, without a very great sacrifice of capital, and therefore contrary to the interests of the State as well as of the individual, that forced sales should take place. A Conservative friend of mine has put down an Amendment which, although in different terms, is on the same lines as mine, and I think he has more or less the same idea.

There is no new precedent involved in legislation of this kind. I think it was in the Budget of 1910 that the Treasury were allowed to accept payment of Death Duties in land. I know that a great deal of use has not been made of that provision, but it is a valuable thing to have on this Statute Book. In the payment of Income Tax during the last 10 difficult years quite a substantial sum has been taken by the Treasury in the form of stocks and shares, for the very good reason that unless they took Income Tax in that form there was very small chance of their getting it at all. The Financial Secretary may no doubt say that to pass a Clause of this kind might suggest to people that it was no longer necessary to insure, as now, against Death Duties, and that it would simply remain for the State to take over whatever shares it cared to have. That is not a sound argument. It would be sound if it were at the option of the person who was paying the tax. But I am sure there will be very few cases where the Treasury will agree to payment in this form, and only in cases where in the public interest it is desirable that that should be done.

Furthermore, I think many people are finding it most difficult in present circumstances to insure against Death Duties at all. It is not a practicable proposition; and I do not think that my right hon. and gallant Friend will make a strong point if he puts forward that argument. I suggest that we have in this proposed new Clause a very useful little Measure which, if placed upon the Statute Book, may do something to ease the very heavy burden now lying upon certain classes of taxpayers. Just the same amount of revenue will be brought into the State under it as is brought in at present, and it will give satisfaction in certain circles. I hope that if the Financial Secretary cannot accept it to-day, he will look into the matter and consult with the industrial interests of this country to see whether it may not be possible, perhaps in some other form, to introduce a proposal of the kind next year.


I beg to second the Motion.

The new Clause has been explained in such a clear and lucid manner by my hon. Friend that I do not think I need add much to what he has said. Here is an opportunity for the Treasury to use its discretion in this matter. It is not being asked definitely to accept stocks or shares. It is simply being given the opportunity, in cases of difficulty should they arise, to use its discretion in the acceptance of stocks or shares. Those who have experience of the winding-up of estates when a person dies know that there are cases in which it is exceedingly difficult to put stocks and shares on the market in order to pay Estate Duty. I do not say that such a difficulty arises on every occasion but it arises in many instances and produces very bad results not only for those who are called upon to pay but also for the companies in which those stocks and shares are held. That being the case and in view of the fact that the Treasury are not anxious to lose revenue, nor are the successors of the deceased person anxious to deprive the Treasury of what is properly due to it, I submit that the Financial Secretary might consider accepting this proposed new Clause. I commend it on two grounds, in the first place that it is discretionary, and in the second place that it would help in many instances where the Treasury might, without it he deprived entirely or partially of the revenue which would normally arise from an estate, owing to the fact that the people concerned were called upon to sell shares to pay the duty.


I wish to add my support to the proposed new Clause. I have come across some very tragic cases in professional life arising out of the difficulty with which the new Clause proposes to deal. I know of one case in which a man who died in 1919 left a fortune apparently of over £180,000 but when the six months period had elapsed and his debts were payable, circumstances had so changed that the total value of the estate turned out to be less than £10,000 and there was nothing with which to pay the Death Duties. There have been many cases of that kind in which businesses have slumped altogether and in which the successors have been left in a very difficult position. The idea of taxation is to adjust the burden to the back which has to bear it and it is perfectly monstrous that when a commercial misfortune of the kind which I have described has fallen upon the descendents of thrifty and industrious people, the State should come in and sweep away the whole of the estate and leave the successors destitute.

It is no answer to say that if the shares went up the beneficiaries would get the benefit. That is no answer to people who have been ruined in instances such as I have indicated. There should be some provision of the kind proposed in the new Clause whereby those who are administering an estate can hand over stock to the Treasury and the same thing should apply in the case of land. When a man dies leaving a big estate and the Treasury claims 50 per cent. of the value of the land it should be possible to say to the Treasury, "Take the land and give us the change." The land would soon be given back in that case and that would be the best way to put a check upon that kind of thing. It should always be possible to deal with these matters by a system of barter. That is what we are being driven to in international trade and just as nobody has any right to demand payments in gold in other respects the Treasury should not demand the money in a case like this, but should be prepared to take stock instead. It would be a humane and effective manner of dealing with the difficulties which arise in these cases and would lighten a burden of taxation which has ruined many a respectable man.


The hon. Member for East Wolverhampton (Mr. Mander) has mentioned an Amendment which I put down on the Committee stage of the Bill. I did not put it down again for the Report stage as I thought the question at issue could be discussed on this proposed new Clause. My Amendment only referred to railway stock and I put it down because there is a very large sum of money in this country invested—really invested and not speculated—in railway stock. The total probably runs into a thousand million pounds and a great proportion of it consists of trustee securities. I think in most cases of large estates it is found that some portion of the estate is invested in railway securities. The present system is that those securities are valued at some fraction under the middle market price and in the present state of the market it is quite impossible to liquidate any considerable amount of railway stock at anything approaching the market price. So, right away, an injustice is inflicted upon the people interested. I mention the matter not so much from the point of view of the individual, but because I think that, from the point of view of the State also, some measure of this kind ought to be considered. Under the present system we go on depreciating the value of the important industrial securities in this country. The credit of the country in the long run depends upon its main industries. If our main industries are of no value, neither is the credit of the country and it is not in the interests of the State to depreciate unnecessarily and without any real justification the value of important industrial interests in this country.


I am in sympathy with the proposed new Clause but before the Financial Secretary replies I should like to know whether the promoters of the new Clause wish the House to accept, as the value of the shares in a case like this, their value on the date of the death of the person concerned, or their value on the date on which they are acquired by the Government, or their value on the date on which they are ultimately disposed of by the Government. It may be assumed that the differences in value as between these dates may be very great and we should have some idea from the promoters of this proposal as to which position they ask us to accept.


That would clearly be a matter for negotiation between the Treasury, the representatives of the deceased and the board of the company concerned. If they were all in agreement the matter would so through but if any one of the three was not in agreement, then it would not go through.


The new Clause moved in such conciliatory and persuasive terms by the hon. Member for East Wolverhampton (Mr. Mander) at first sight appears reasonable and it was supported by the hon. Member for Gravesend (Mr. Albery) on the ground that it could not be the desire of the State to ruin or even depreciate its main industries by causing stock to be thrown on the market. But if hon. Members pursue that argument a little further they will see that what the State requires, and what is required for the running of the country, is not securities but ready money. It would be no use offering the Army, the Navy or the Air Force a section of land in Argyllshire or even some bonds in a private business. The ordinary private in the Army wants has wages and wants to carry on his ordinary activities and for that purpose certain sums of money and not securities, must be handed over to the Army authorities. The same applies to other great expenditures of the State such as grants to local authorities, payments of War debt, and so forth. It would be no use handing to a holder of War loan a certain number of railway shares in payment of his annual dividend. He would go into the market to realise and by that means he would not get any further forward.

The proposal originally brought forward by the hon. Member for East Wolverhampton was much more moderate. He said that it would only apply in cases were all three parties concerned were agreed. He said it would be an advantage to have such a Clause on the Statute Book even if no use were made of it. He admitted that there was such a provision on the Statute Book in the case of land and that it had scarcely ever been used, but he argued that nevertheless it was a good thing to have it there. I join issue with him on that point. I think it is a mistake to import anything into the Finance Bill of the year unless we seriously think that considerable use is going to be made of it. This new Clause is brought forward as a concession to the Treasury but the Treasury is not asking for it. The hon. Member proposes to leave it to the discretion of the Treasury as to whether it will use this power or not. My advisers say that they can conceive of no circumstances in which they would be likely to use it and therefore it seems to me that it would be an illusory thing.


But is it not a fact that the Treasury already have accepted stock in payment of Income Tax?


That is quite another matter. They have accepted Victory Bonds in payment of Estate Duty. That is a concession which was specially given in the case of Victory Bonds and is a concession which could not, of course, be indefinitely extended.


That is Government stock.


Yes, it is a Government stock. I do not wish, however, to be led into a discussion on the whole ques- tion as to whether the State should or should not take into its coffers in these cases either Government stock or private stock. The thing is that the State, which is ourselves, which is the community, requires a certain amount of money—a very large amount of money, it may be an injuriously large amount of money—in order to carry on its activities and you cannot escape from that fact by any complicated methods of shifting the burden from one shoulder to another. The only way in which you can lighten the burden upon the citizen is to make a smaller demand from the citizen. It is no use trying to lighten the burden in this way or the other way if you simply have to increase the taxation imposed upon the citizen in general in order to make up for a particular concession if concession there be.


In the least injurious way.


Certainly the object is to do it in the least injurious way. In this case I think we are all agreed that the State, if it were to obtain bonds or stocks, would not obtain bonds or stocks which could readily be sold in the open market. They would only get stocks or shares which could not be disposed of readily for some reason or another.


For a time.


For how long a time? Supposing that the State is asked to take instead of £1,000 of good money £1,000 of Kreuger and Toll shares, how long is it to hold those shares and in what circumstances is it to realise them?


You would not accept them.


But suppose they were Bryant and Mays?

6.0 p.m.


I only say that that is not the sort of transaction into which the State could possibly enter, because the State requires these sums for expenditure within the current year for the purposes of the current year. Hard as it may be on the individual to make provision for the heavy taxes levied by the State, this is a responsibility which must rest upon him so long as the State imposes these gigantic taxes. The only way in which the burden can be diminished is by a diminution of the taxes, not by finding such methods as this.


I am sure the right hon. and gallant Gentleman the Financial Secretary to the Treasury could not really have thought that those who brought forward this new Clause were doing so on the basis that the State would ever sell the shares it received. It is obvious that the hon. and learned Member for Argyll (Mr. Macquisten) has really become converted to Socialism, but he has tried to cloak his conversion with specious arguments put forward on another ground. The intention of the Mover and supporters of the Amendment is perfectly clear. They desire that the right hon. Gentleman and the Treasury should gradually, through this means, accumulate stocks in the railways and industries of the country and should accumulate the land of the country; and, of course, no one would expect them to realise, especially in the conditions of the market that have been spoken of. They would issue Government securities and raise the money which they would need for the day-to-day business. Although we look upon this as a very extravagant system for socialisation, still, in view of the quarters from which it comes, we intend, certainly as a gesture, to give it our support, in the hope that the hon. and learned Member for Argyll, when he makes his next essay into practical Socialism, will be able to do it perhaps on better advice and in a more economical way.


I thoroughly agree with all those who have said bad things about the Death Duties, yet no illustration is wanted, after the speech to which we have just listened, to show that the real meaning behind this Clause, which has unfortunately deceived some of my hon. Friends, is that it should be ultimately used for the process of building up another great Government department. It causes very great sorrow to me to think that my hon. and learned Friend the Member for Argyll (Mr. Macquisten) should fall into a trap set by hon. Members below the Gangway quite as easily as he has done this afternoon. I hope, at any rate, although he has given himself away, he will not go any further by voting against the Government on this or on any other question.


I rather hoped that my right hon. and gallant Friend the Financial Secretary to the Treasury would meet my hon. Friend the Member for East Wolverhampton (Mr. Mander) by offering some concession in the way of time for the collection of these duties. To place many stocks on the market at one time leads to great depreciation, which means an ultimate loss to the whole country, and I am sure the right hon. and gallant Gentleman does not wish to bring that about, especially in these days, when it is so very difficult to do business. If he could meet the case by offering time in the collection of these duties, perhaps my hon. Friend would withdraw his Clause.


I must say that I am not convinced by the arguments used by my right hon. and gallant Friend for not accepting this very moderate permissive proposal, and I am glad to note that it has met with a large body of support in all quarters of the House and from all parties. I hope that, attention having been called to the idea, it will be studied and thought over during the next 12 months, and that when the next Finance Bill comes up this or something on these lines may perhaps find a place within it. In the circumstances, I ask leave to withdraw the Clause.



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

The House proceeded to a Division.

There being no Member willing to act as Teller for the Ayes, Mr. SPEAKER declared that the Noes had it.