§ Where the estate of a deceased person includes moneys paid on his death under a policy of insurance upon his life, the percentage rate of the estate duty payable in respect of the whole estate shall be the rate which would have been chargeable if the value of the estate were reduced by an amount equal to so much of those insurance moneys as is applied in the payment of death duties.—[Sir J. Reynolds.]
§ Brought up, and read the First time.
§ Lieut.-Colonel Sir JAMES REYNOLDSI beg to move, "That the Clause be read a Second time."
The proposed new Clause is to ensure that insurances taken out to pay Death Duties shall, as they are available for those duties—
§ Mr. LANSBURYOn a point of Order. As so many Amendments have been passed over, may I ask which Amendment is being moved now?
The DEPUTY-CHAIRMANI have much pleasure in informing the right hon. Gentleman. We are dealing with the proposed new Clause in the name of the hon. and gallant Member for the Exchange Division of Liverpool (Sir J. Reynolds) dealing with the rate of Estate Duty.
§ Sir J. REYNOLDSThe purpose of my proposal is that insurance taken out to pay Death Duties, in being available for those duties, shall in no case cause those duties to be raised to a higher category. Everyone realises the terrible depression of estates through Death Duties, and it must be readily evident that, if people are to preserve estates, insurance is vital and necessary. It may come about, as things stand at present, that, while an insurance is taken out for the very purpose of paying the Death Duties which the individual expects that his estate will have to pay, that insurance may actually raise the estate to another category, and not only will the insurance be lost, but a further loss may fall upon the estate. This militates against taking out an insurance, and eventually it will create a desire on the part of those having 652 capital to leave to give their capital away rather than let the estate face the very heavy duties that will fall upon it at death. It may happen, in fact, that a man who has an estate of between, say, £400,000 and £500,000, has an insurance policy of £10,000. If by chance the estate is £495,000, the policy raises it to £505,000, and 2 per cent. extra duty is incurred, so that the £10,000 insurance is lost. If you take another category, that of an estate of £600,000, not only will the £10,000 insurance be lost, but a further £2,000 will have to be paid. A millionaire with an insurance of £100,000 may lose the whole of it if his estate gets into the category of £2,000,000. That is inequitable, and it militates against insurance which is the only prudent way of dealing with Death Duties.
§ 8.30 p.m.
§ Major ELLIOTAfter the remarkably rapid progress which the Committee has made in the last few minutes, it would be ungracious if I were to allow this proposed new Clause to pass without a word of discussion. The Committee was primed for lengthy discussions which, owing to the absence of the Movers of certain Amendments, has been baulked. The proposals of the hon. and gallant Member are proposals which I should have wished to consider a little move deeply than I have been able to do. The difficulty in all these insurance propositions which are brought before us is that they cost the revenue an enormous sum either immediately or later on, and that under present conditions we cannot afford it. The hon. Gentleman gave an example during his speech. Let us take an estate of £1,050,000, and including a good proportion of insurance money, as I am sure such an estate normally would do. Estate duty is payable on that amount at the rate of 40 per cent., and the amount of duty would reach £420,000. If the insurance money, which might amount to £300,000, were applied in payment of the duty, then under the present proposals that estate would be charged not at the rate of 40 per cent., which is applicable to an estate of £1,050,000, but at the rate 653 applicable to an estate of £750,000— £1,050,000 less £300,000. That would come out at 36 per cent., and the duty would be £378,000, a loss of duty to the State amounting to £42,000.
It may be that my hon. Friend will say that a levy of £378,000 is quite sufficiently large for the community to take out of any man's estate, and that insurance is an advantage both to the individual and to the community while he lives and to the State after his death. But the fundamental fact in regard to direct taxation is this, that the proper way to reduce the burden is not to invent new ways of getting round taxes but to lower the level of the taxes. That is the only fundamental way in which relief can be brought. At first sight one is attracted by such special schemes and procedure. It is said that under this system of insurance a large sum of money is readily available for the State at death, that there is not a disturbance of the market caused by the throwing of great blocks of shares upon it, and there is not a disturbance to the individuals concerned, and a disturbance, it may be, of enterprises in which such individuals are engaged. But all those difficulties are due to the high level of taxation. If every estate of that sort were to fall by a proportionate amount, all that would happen would be that the rate of the tax would have to be put up, and the second state of the taxpayers would be no better than the first, and in addition people would feel that indignation which we all feel when, having put through what we consider a successful method of eluding some disagreeable duty, we find that that disagreeable duty, after having been pushed out of the window, is knocking at the door and insisting on coming in.
I would ask my hon. Friends on the Opposition side to consider these points as well. These great levies are producing serious disturbance in the affairs not merely of private individuals but of the businesses upon which both we and they depend for our livelihood. When economy is spoken of they only see it, quite naturally, in the repulsive and grim aspect of a lesser sum available for the people in whom they are most immediately interested, or in the way of a greater burden upon those whose interests they desire to promote, but if we do not have economy it will be impossible to 654 reduce the level of taxation, and those great levies will begin to defeat their own ends by producing schemes such as this scheme, whereby people, if they cannot by fair means get a remission of taxation, will seek to get it—not by foul means, but at any rate by means which sail a great deal nearer the wind than any of us care for. If we make the most remunerative action a man can engage in the task of getting round the Commissioners of Inland Revenue we shall find that we are turning a great many people into that particular occupation who otherwise would be out to earn an honest living for themselves and to give employment to other people. We have to refuse this proposal, firstly, because no limit whatever is placed on the operation. The greater the amount of the policy the more the relief would be. This Clause would be capable of giving complete exemption in the extreme case of an estate consisting wholly of policy money. But leaving that case of special pleading out, I found myself on the broad general point that we are not so anxious to find special ways of escaping crushing burdens of taxation in particular cases as of escaping it in general. We must bend the whole of our efforts to reducing the general rate of taxation, and not a particular rate of taxation; and on that ground, and not on the special point which, as I have shown, makes the operation of this Clause wholly unacceptable, I must refuse to accept the Clause.
§ Mr. CROOM-JOHNSONHolding the views which some of us have as to the possibility of the national revenue reaching the sums required by April next, I must confess that the answer which has been given so often to the Committee, "We cannot afford it," is a complete and satisfactory answer to me; but a great many of us hope that this particular subject may be considered when an opportunity arises, when it looks as if we were going to have happier times. I intervene to express the view, so that it may be recorded, that from the point of view of estates which consist mainly of land, and particularly agricultural land, there may be something in this proposal which is worthy of examination when those times come. I would like to make one practical suggestion—that if at any future time we give this relief it should be done 655 in a way to make it perfectly secure that the policy moneys are in some way implemented for the benefit of the Exchequer, so that the Exchequer may be in a position to say, "Now, upon that event, we can come down upon the policy moneys, and get our duties straight away." I am well aware that considerable relief is already given to agricultural estates in the matter of the estate duty, by the operation of the arrangement by which such duty is payable by instalments spread over, I think, eight years. This proposal might in the end redound to the benefit of the Exchequer, if it could be provided that the policy moneys were to be applied to the Exchequer, so that when the estate fell in the Exchequer could say, "We will take these policy moneys at once," instead of having to wait for payment by instalments. I am sure those of us who have been examining this question are very much obliged to the Financial Secretary for the way in which he has dealt with this matter.
§ Sir J. REYNOLDSI beg to ask leave to withdraw my Motion.
§ Motion and Clause, by leave, withdrawn.