§ The scale set out in the Schedule (Scale of Rates of Estate Duty) to this Act shall in the case of persons dying after the commencement of this Act be substituted for the scale set out in the Second Schedule to the Finance Act, 1930, and the schedule of rates of estate duty.—[Captain Cazalet.]
§ Brought up, and read the First time.
§ 5.20 p.m.
Captain CAZALETI beg to move, "That the Clause be read a Second time."
It is no new or unexpected incident on the Committee stage of the Finance Bill that the Chancellor of the Exchequer should be asked to reduce the incidence of the Death Duties. We know that it is equally not new or unexpected that we shall not get much satisfaction from the Chancellor of the Exchequer on this point.
§ Mr. ALBERYCan you tell us for our guidance, Sir Dennis, whether any of the following new Clauses upon this subject are likely to be called.
§ The CHAIRMANNo, I am afraid that I cannot make any announcement or statement whether any particular new Clause will or will not be called. Hon. Members can sometimes by enquiries of their own form an opinion as to what is likely to happen. On general principles it is not likely that more than one new Clause to a similar effect will be called.
Captain CAZALETThere is one thing about the tax and the request which we are making to the Chancellor of the Ex- 2110 chequer to review it sympathetically which is different from requests in regard to any other form of tax, namely, that the bulk of the hon. Members who are supporting the proposed Clause have already had to suffer the full brunt of Death Duties, and they themselves will never benefit by one penny from the reduction of this particular form of taxation. That should be, if not a justification of the case we are making, at any rate a justification of the Sincerity of the motive which prompts us to put it forward. The Estate or Death Duties are a burden which have to be experienced to be fully appreciated. I know full well that the observation of the ordinary individual on any complaint which is made by an individual who has to pay Death Duties is: "You are very lucky to get anything at all." I appreciate that point of view, but we are not particularly stressing, or concerning ourselves with, the case of the individual beneficiaries. We wish to emphasise the point that, although certain individuals may suffer in the amounts they receive, it is not often realised that there are a very large number of other individuals who are not beneficiaries in any way under a particular will, but who are most directly affected by the incidence of the duties and by the height of the actual taxation. It is in their interests in particular that we are moving the Clause this afternoon. I do not think that it is always recognised how far the wealth of the so-called rich individual, particularly the rich individual who lives in the countryside, is already allocated to dependants, employés and charities, all of whom suffer through no fault of their 2111 own by the incidence of the tax which comes unexpectedly at any moment and with such great force.
The question was fully argued and discussed by a committee in 1927. Various opinions were expressed to that committee on the whole issue of Estate Duties. One witness described these taxes as having every defect which a tax could possess; others took a less strong view, but all were unanimous that already the tax was dangerously high for the effectiveness of the revenue it was intended to produce. What has happened Since? The rates are higher, and the value of all property and estates has obviously decreased Since 1927. There is another point which is not often recognised. Ever Since 1929 Death Duties have had to be paid on a falling market. It is impossible to get probate for a will sometimes for weeks and sometimes for months, and it may be for years if there are any complications, with the result that ever Since 1929 there has always been an additional 10, 20, or even 30 per cent. to be paid by the individuals, in addition to the high rate exacted by the duties themselves because of the very considerable fall in the value of all stocks and shares, and, indeed, of practically all property during the last five or six years.
The question may well be asked: Why have the returns kept up so well? I think that the answer is that the Chancellor of the Exchequer is still reaping the first crop from these duties, and that it will not be until the present generation, or until another 10 years has gone by, when the duties will have been in operation at a high level for some 30 years, that the full results of the height and extent of the duties will be observed in the diminishing returns which the Exchequer will receive. The report deals fully with the question of whether this is taxing Capttal and applying it to revenue, and I accept their opinion, that it is only a Capttal tax as regards the individual, and from the point of view of the State it is no more a Capttal tax than is high Income Tax or Surtax.
My hon. and gallant Friend who is supporting me in this Clause will deal, in particular, with the effect of Estate Duties upon agricultural estates, but there are 2112 one or two observations of a general nature which I wish to make with regard to the effect these duties have on the countryside. In no other country in the world has there been pursued such a deliberate policy of bleeding the countryside white. In Germany, Czechoslovakia and Denmark, countries where there have been Radical and even Socialistic Governments, and where high taxation rules, they have always made prosion that adequate working Capttal should be left to support and to carry on agriculture in the countryside. In Italy to-day, although death duties are fairly high, arrangements are made so that large estates can be preserved, because they believe, as we believe, that the large estates perform a useful function and are an asset to the country as a whole. I appreciate the fact that during the past 10 years Conservative Governments, who presumably hold the same views as we hold on this matter, have been in office with Majorities, and have done nothing to ease the situation. The only step which has been taken is that Death Duties have been increased by a Chancellor of the Exchequer of a Conservative Government. This is one of the very few things for which we cannot entirely blame the Socialist party.
I think it is generally agreed that everyone desires to see to-day a better balance restored between town and country. We all desire to get more people back again to the countryside, which is a better, healthier and happier life for the individual, and I am certain that the agricultural policy pursued by that most invigorating personality the present Minister of Agriculture will do a great deal to restore agriculture to a prosperous basis. But England is rather different from other countries in this respect. The countryside in England has always been supported by the importation of artificial wealth from outside. It has never alone depended upon agriculture for its prosperity. The amenities of the countryside, whether they are health, sporting or social amenities, have always attracted to the countryside a proportion of wealth which never came solely from agriculture. There is one illustration of that truth in the fact that never were working people better housed and at cheaper rents than in the cottages on agricultural estates in England. During 2113 the past 40 or 50 years or even further back during the last century hardly an agricultural cottage in England has been built for economic purposes.
What has been the result of this penal taxation! It has driven Capttal out of agriculture on the countryside. The landowner has either been forced to sell his property, in which case the tenant farmer has been encouraged to buy it, and thereby his working Capttal has gone in buying his farm and has not been available for carrying on his business, or the individual landowner has struggled to continue and he has been deprived of the life-blood of his business by the exactions of this taxation. It is, in other words, impounding the workman's tools as regards agriculture. I do not think you can treat the business of agriculture like any other ordinary industrial or manufacturing concern. What advantage is it to destroy the economy of the countryside? To whose benefit is it to have an estate broken up, to have the house empty, paying no local rates, and to have the farms to let? Each estate which is a going concern is a national asset, but each estate which is broken up is a wasting asset. Quite apart from the psychological or the sentimental view of these matters, and I think there is a great deal to be said for that in the form of society in which we live to-day, these duties have meant disaster to many unemployed in the very districts where we least wish to see unemployment. I hope that the Chancellor of the Exchequer, if not this year at some time in the future, will be able to make some concession in regard to Death Duties on agricultural estates. Either let him lower the rates or let him alter the system of Valuation. If possible, I should like to see agricultural land treated as regards Death Duties in the same way that it is treated in regard to rates, namely, to be free of them altogether.
I should like to make one point in regard to the incidence of Death Duties on personal estate, namely, stocks and shares and other individual possessions. There a case can be made for sympathetic inquiry. I dare say hon. Members are not aware that there has been practically no change made in the incidence of, or in the manner in which Death Duties are levied on personal estate Since the Death Duties were origiNaily 2114 instituted by Sir William Harcourt in 1903, when the maximum rate was 8 per cent. May I give an instance which if the Chancellor of the Exchequer could review it, sympathetically would entail no very great burden on the Treasury but would do something to bring about a measure of justice? Death Duties become payable on an estate from the date of death. Although the executors of the estate may actually have the money in the bank with which to pay the duties, they cannot get hold of the money and they cannot pay the duties and they cannot avoid paying the interest because they cannot get probate. They cannot get probate for several weeks if not for months. All that time the Treasury is charging interest, which was formerly 4 per cent. and is now 3 per cent. The same latitude ought to be allowed in regard to personal estate as in regard to Death Duties on agricultural land. In the latter case a year is allowed before the debt charge is made and before any interest is charged by the Government on the amount owing. I suggest that on personal estate three months' grace should be allowed, because if there are no complications in that time one ought to be able to get probate and find out what exact sum is required to be paid. That would give three months in which to find the money.
The second point is in regard to the valuation of personal estate. To-day, stocks and shares are valued at their price on the day of the death of the individual concerned. I contend that that price is not a bona fide price.
§ The CHAIRMANI think the hon. and gallant Member is straying beyond the terms of the new Clause. There are other new Clauses on the Order Paper dealing with the point to which he is now referring.
Captain CAZALETI thought that this Clause raised the whole question of Death Duties and that my arguments were pertinent.
§ The CHAIRMANIf we were to allow a discussion on the whole subject on the particular new Clauses referred to, we should be here all next week.
Captain CAZALETI appreciate your point. My point relates to the question of the amount charged on certain stocks and shares. In our new Clause we 2115 suggest that a lower rate should be charged, and I was putting forward arguments why I think a lower rate should be charged.
§ The CHAIRMANIf the hon. And gallant Member does that, I am afraid that I shall be obliged to shut out entirely the new Clause dealing specifically with valuation of stocks and shares.
Captain CAZALETI hardly know how to proceed. If I can raise my point on the other new Clauses, I presume that other hon. Members will also be allowed to raise their particular points.
§ Mr. ALBERYIf the new Clause happens to be called, there would be nothing to prevent the hon. and gallant Member from raising his point on it.
§ The CHAIRMANThe hon. and gallant Member cannot tell now, but he may be quite certain that if he discusses a future new Clause on this Clause that future new Amendment is not likely to be selected.
Captain CAZALETI hope you will excuse me. I could not possibly tell whether you were going to call a subsequent new Clause on which I could raise my point; therefore I have endeavoured to raise it where I thought it was in Order. I do not wish to stand in the way of the hon. Member opposite raising his particular point, and I shall be very glad to support him.
Mr. HASLAMSeeing that this new Clause asks that there should be a reduction in Death Duties and Estate Duties on agricultural properties, should the hon. and gallant Member not be entitled to argue that there is an unfairness as between the duties on agricultural property and other property?
§ The CHAIRMANThe hon. Member is mistaken. The new Clause with which we are dealing does not refer specially to agricultural property; it does not mention it.
Captain CAZALETI will not labour the point further. I should like to give an example of something that occurred on an estate that I know. The estate happened to possess what are euphemistically known as certain gold Russian bonds. Those bonds have had no value whatso- 2116 ever for the last 15 years, but because there was one quotation one morning on the Stock Exchange the Treasury have charged several hundred pounds on these absolutely worthless bonds. As you say, these matters can be discussed later on and other suggestions can be made, and I have no desire to elaborate them now. I only wish to say that the present arrangements seem to us to admit of a gamble both in the amount that the Treasury may receive in certain cases and in the amount that the individual may have to pay. There is one further point which I hope will be raised on a later Amendment. We do not expect much from the Chancellor of the Exchequer this year. High taxation is bad and it is difficult to draw invidious distinctions between one form of bad taxation and another.
Some taxes are only oppressive, but these Death Duties are, I believe, oppressive and destructive. I realise that no reduction can be expected this year and I do not ask the Chancellor of the Exchequer to appoint a full-blooded Royal Commission to inquire into the full incidence of Death Duties, but I ask for his sympathetic consideration of the suggestions I have made and that other hon. Members will I hope be allowed to make later on. Perhaps next year we may be bolder in our hopes that he will meet us sympathetically in regard to our demands. I am certain that if he will take certain steps which we suggest he will remove injustice and do something to restore prosperity to agriculture and the countryside and he will create new assets instead of destroying old ones from which he and other Chancellors of the Exchequer will be able to replenish their revenue in time to come.
§ 5.45 p.m.
§ Brigadier-General CLIFTON BROWNI desire to say a few words on this Clause and to emphasise the great harm that is being done to agriculture by Death Duties. Some few months ago the Chancellor of the Exchequer was good enough to receive a deputation representing the agricultural owners of the country, not only those in England but those in Scotland as well; but it was rather an unfortunate time, because on that very morning he informed us that he had received a message from the President of the United States of America 2117 asking that a sum of £15,000,000 or £20,000,000 should be paid at once. Nevertheless, he listened to our representations, and Since then he has had time to consider the case which was put before him. In addition to the case put forward by the representatives of agricultural owners, other representative bodies like the Auctioneers and Estate Agents and the Law Society, and similar professional bodies, who have to deal with these matters day after day, have sent in a memorandum expressing strongly their view as to the great damage which Death Duties are doing to estates in the country and to the agricultural industry in the countryside. They all agree as to the disastrous effects of these duties on agricultural land. Successive Chancellors of the Exchequer Since the right hon. Member for Epping (Mr. Churchill) have realised the position and Death Duties have not been increased on agricultural land, but they are at such a high figure that the Capttal which should go to the improvement of farms and estates, to the building of cottages for the agricultural labourer, and for the construction of water supply, is not available.
During the last 10 years a sum of about £27,000,000 in Capttal has been withdrawn from agriculture by Death Duties, most of which would have gone into the development of the industry, and when you remember that during the last three or four years agriculture has been going through a period of depression more terrible than ever known, you will realise how necessary it is to restore the life-blood of the industry instead of taking it away in Death Duties. It should also be remembered that under the present system of landlord and tenant Capttal has been obtained upon very favourable terms. Agriculture enjoys the cheapest rate of interest in regard to Capttal of any industry. As a rule it is able to borrow Capttal at about 2½ or 2 per cent., and there is no other industry in the country which is able to draw upon such cheap money. What happens when estates are broken up? It would not matter so much in other industries, but in agriculture it is others who have to suffer when the landowner has to go. The farmer has to buy his farm, and to do so must borrow money. He has done so in hundreds of cases rather than go 2118 away from the place where he and his predecessors have been for generations. Instead of being able to borrow money at 2½ per cent. as under former conditions, he has had to pay 5 per cent. and 6 per cent. That does not permit him to have sufficient working Capttal to develop his farm, and the farm thus goes from bad to worse. The fate of the agricultural worker is even worse. He not only feels the effect of the disturbance, he has to go because the estate is split up, but he has to find fresh fields, another occupation, or he goes into some old cottage in the village while his children drift into the town. The effect of this upon agriculture is most serious, because you cannot get fresh Capttal into the industry as you can in the case of other industries, and that is why the Death Duties have such a disastrous effect on the industry as a whole.
The Ministry of Agriculture issued a report in connection with the agricultural credit scheme. It was examined by interests connected with agriculture who stated that the effect of these Death Duties was such that they looked upon them as one of the greatest evils that existed, and that the credit scheme would not be such a success as it might otherwise be. I do not want to weary the Committee with details, but I am sure the Chancellor of the Exchequer will realise that this is becoming more acute as the years go by. I want to support my hon. and gallant Friend in pressing on the Government to institute a thorough inquiry into the whole incidence of these duties, especially in their relation to agricultural land and their effect on unemployment in the countryside. I know that any such inquiry will make the Government realise the tremendous damage that is being done to all agricultural interests. They mean not only a loss of revenue on undeveloped estates, but a loss on account of Capttal in the agricultural industry, and a loss of unemployment insurance. The sooner we have an inquiry to ascertain whether these Death Duties are not doing far more damage than good, even at a time when we must get money from somewhere, the better; and I hope that the Government will institute such an inquiry.
§ 5.54 p.m.
§ Mr. MANDERI am surprised at the audacity of the hon. and gallant Member 2119 in bringing forward a proposal of this kind in present circumstances. It may be true that there are cases of real hardship in connection with the payment of Death Duties, but what are these hardships compared with those of millions who have nothing at all. To bring forward a proposal of this kind, within 18 months of the appeal to the country for equality of sacrifice, when there have been cuts all round, seems to me to be a perfect mockery of the situation which then arose. How can you, at a time when the dole cut of 10 per cent. is still on, when the means test administration is what it is, possibly justify a proposal which in the case of a man who leaves £2,000,000 gives him another £330,000?That would be the effect of this proposal. Really it is beyond all understanding how such a proposal can be seriously put forward in the name of equality of sacrifice.
Brigadier-General BROWNThe hon. Member is quite right, it is beyond some understanding. But he is bringing up something quite different. He does not understand tie point.
§ Mr. MANDERThe point is that the new Clause substitutes one scale of duties for the existing scale, and I suppose it is meant to be carried. If it is carried, then the effect, beyond question, is that a man who leaves £2,000,000 will, under this new Clause, be left with £330,000 odd more than he would have under the present scale.
§ Captain DOWERHe would be dead.
§ Mr. MANDERHe himself would not have the enjoyment of this money, but his successors would be helped. I do not see how an Amendment of this kind can be justified, and I am sure that the Chancellor of the Exchequer will not consider it for one moment. If there is any proposal to reduce taxation, I hope that Death Duties will be one of the last to receive consideration. They are fair, and just. What is more just than that a man who has had the full enjoyment of his wealth throughout his life should be asked to make some contribution—and a substantial contribution—to the State, or that those who follow him, who have made no contribution to this wealth, should be asked to make some contribution to the State, and who will be for- 2120 tunate indeed, at a time when millions have nothing, to receive the large sums which will still be coming to them?
§ 5.58 p.m.
§ Mr. SCRYMGEOUR-WEDDERBURNSurely the hon. Member for East Wolverhampton (Mr. Mander) is aware that the purpose of reducing this taxation is not in order to lighten the incidence upon the individual, but to lighten the burden on the employment of those whom he professes to represent. The effect of the proposed new Clause would be a general reduction in the scale of duties on all classes of property, but it has been put down partly in the hope that the Chancellor of the Exchequer may take this opportunity to indicate whether it is not possible to consider some discriminatory modifications in the incidence of this tax with the object of lightening its burden, at no great cost to the Treasury, in those places where it weighs most injuriously on industry and employment. It is not in order to discuss in detail any such proposal, but the industry which I have particularly in mind, and the industry upon which, as everybody knows, the burden of these Death Duties falls with the most peculiar unfairness and the most devastating ill-effects, is the industry of agriculture. If a man dies holding £100,000 in Government stock, it may not be a difficult matter for his executors to dispose of 20 per cent. of his property and no irreparable damage will be done; and, in the case of certain classes of real property which may be readily saleable, it could not be said that the owner was being more harshly treated than the general body of taxpayers, but in the case of an agricultural estate, whose assessed Capttal value may be out of all proportion to the net annual income, whose good management may be destroyed by subdivision, which may not be saleable at all, or which may be legally debarred from sale by an entail, it is unquestionable that the colossal burden of these taxes on property of this sort has deterred the employment of Capttal on the land, and has hindered the modernisation and improvement of British agriculture to an extent that is simply disastrous.
The Chancellor of the Exchequer was good enough to receive a deputation on this subject, and I will not, therefore, trouble him with a repetition of the arguments to which he has already listened. It was on a day when, because of remote 2121 causes, he was not likely to be in so accommodating a mood as otherwise; and even now I have some misgivings when I reflect that another critical date is uncomfortably close. But I hope the Chancellor of the Exchequer may be able to tell us that he will consider whether something can be done, not with the object of giving any special favour to any one industry, but simply in the interests of economic good sense.
§ 6.0 p.m.
§ Mr. ATTLEEThe speeches to which we have just listened have raised a very interesting dilemma. It is quite clear from what was said by the last speaker that there is no wish that property in a particular form should get off more lightly than other property when it comes to Death Duties, because the hon. Member believes in equality of sacrifice and the duty of citizens to support the State. On the other hand we gather that the present incidence of the Death Duties has an injurious effect on agricultural economy, which we understand is being, or is about to be, restored by the activities of the Ministry of Agriculture. If hon. Members will give the matter a little further consideration, they will see that a restoration of agriculture is incompatible with the present system of Death Duties, in which, as they say, all Capttal is drained away from the Countryside. 80 it is quite clear that what hon. Members should be doing is, not approaching the Chancellor of the Exchequer for some particular relief, but going to the Minister of Agriculture and the Prime Minister, whom they will find quite receptive of these ideas, and going "all out" for the nationalisation of the land as a means of avoiding these difficulties.
§ 6.1 p.m.
Mr. CHAMBERLAINThe hon. Member for Wolverhampton, East (Mr. Mander) expressed some surprise at what he called the audacity of my hon. and gallant Friend in making this proposal. I think the hon. Member for Wolverhampton East should be the last man in this House to express surprise at audacity, for no one brings forward more reckless proposals than the hon. Member himself. As I understood my hon. and gallant Friend, he did not bring forward this proposal with any idea that it was likely to meet with acceptance from the Chancellor of the Exchequer, and that 2122 his object was rather to put before the Committee and the public the views which he holds upon the injurious effect, as he thinks, of the present level of Death Duties. The Clause makes no distinction between Death Duties on different kinds of property, but I understand that my hon. and gallant Friend and my hon. Friend who spoke last desired particularly to call attention to the effect upon agriculture. They will not think it discourteous of me if I do not express any views on the subject, because, as they fully realise, it would be quite impossible in the present year to carry out any such proposals as these. The loss to the revenue would be very considerable, and it is obvious that I am not in a position to afford the money, even if it were possible to give relief in the direction indicated.
There may be something to be said for the view that in the case of agriculture in particular the present level of Death Duties has the effect not only of breaking up estates hut of bringing about changes in the social structure and the general state of affairs in the country. But agricultural estates have already received some relief from the Treasury in respect of Death Duties; at any rate they have not been subject to the same basis as other forms of property, and that has involved an expense of some £600,000 a year. If it were possible to-give relief, and if the Government of the day thought it desirable to give relief, i that could be done very simply by a percentage reduction in the Capttal value of agricultural estates. I do not propose to express any opinion as to whether or not it is desirable to do that, because I know that anything I might say would be liable to be brought up in evidence against me on some future occasion. Let me say, however, that if it were desired to do anything it would be quite a simple matter to do it. It would not require the setting up of any further committee. All the facts are known. All you have I to decide is, first, is it. desirable to give I relief by way of reduction of Death I Duties upon agricultural land; and, secondly, how much are you prepared to give? When you have answered those two questions it is quite easy to do it by a reduction in Capttal value. I hope that my hon. Friends will be satisfied, after having ventilated this question and reminded us that it is still a live one.
§ 6.6 p.m.
§ Mr. SMITHERSI would like to refer to the speech of the hon. Member for Wolverhampton East (Mr. Mander). I do not want to be impolite, but a more miserable speech I have not listened to for a long time. The hon. Member talked about equality of sacrifice and about the poorest of the poor. The whole object in relieving the burden of Death Duties in this way would be to take some of the weight off the backs of people, especially in the country, who have to pay these heavy Duties. That would be an enormous relief and would lead to the abolition of the dole to a large extent, because the money so available would be actively used in creating employment.
§ Mr. MANDERDoes the hon. Member hold that this step should be taken before the restoration of the cut in the dole?
§ Mr. SMITHERSYes, I think it should be taken. It would immediately do away with some of the dole, and would create employment. I want this Amendment to be passed together with another Amendment which asks that the amount collected in Death Duties should be definitely allocated to the redemption of debt. The latter Amendment, I fear, may not be called. The claim that we want to stake is this: Although a rich country in time of difficulty may be able to live for a time on its Capttal, that cannot go on indefinitely. We want to be able to say that we persistently made this claim that the taking of Death Duties and using them for the purpose of current expenditure is taking money out of the Capttal of the country. That cannot go on for ever. We want to stake that claim strongly this year, in the hope that when better times come we shall cease, to some extent, to live on our Capttal and get back to a sounder basis of national finance.
§ 6.9 p.m.
Captain CAZALETIn view, not so much of what the Chancellor of the Exchequer has said, because he really did not say anything, but because of what I believe his attitude to be on this matter, and what we hope it will be next year, I beg to ask leave to withdraw the Motion.
§ Motion, and Clause, by leave, withdrawn.