DEATH DUTIES (HIS MAJESTY'S SHIP "THETIS" OFFICERS' ESTATES). (Hansard, 5 October 1939)

§ Mr. Dingle Foot
The hon. and gallant Member opposite raised a very wide issue at this time of the night. I want to raise a rather narrow and, I am afraid, a more technical question. I wish to draw attention to a matter which was considered at Question Time on Monday. I asked the Chancellor of the Exchequer: whether his attention has been called to the refusal of the Lords Commissioners of His Majesty's Treasury to remit the Death Duties payable on the property of an officer who lost his life on His Majesty's Ship "Thetis"; and whether this refusal represents the settled policy of the Treasury and, if so, whether he will reconsider the interpretation placed by the Treasury on Section 38 of the Finance Act, 1934? The reply given to that question by the Financial Secretary to the Treasury was as follows: Accidents occurring during practice manoeuvres of a dangerous character in which no element of hostile action is involved are held to be outside the scope of the relief from duties granted by Section 38 of the Finance Act, 1924. This interpretation has been consistently followed by the Treasury ever since the Act was passed; it is in accordance with the intention of the enactment and from time to time has been discussed and reaffirmed. My right hon. Friend the Chancellor of the Exchequer would not feel justified in directing that it should be abandoned." — [OFFICIAL REPORT, 2nd October, 1939; col. 1663, Vol. 351.] I will ask the House to consider the interpretation that is thus placed on Section 38 of the Act of 1924. Broadly, the history of the law on this matter is this: In the Finance Act of 1900 a provision was introduced exempting from a portion of Death Duties the estates of those who fell in active service in time of war. That was the beginning. That provision was extended by various enactments. It was extended two or three times during the course of the last war. It was extended to people other than those in the Services, and I hope that we may have some similar extension in this war. Finally, Section 38 was introduced in the Finance Act, 1924. It was proposed, I think, by Sir John Marriott, and put on the Order Paper in final form in the days of the Labour Government by Mr. Snowden, when he was Chancellor of the Exchequer. Section 38 makes the exemption rather wider than actual service in 2200 war. It makes it extend to people who are on active service even when they are not technically engaged in war. May I read the Section, in order to show its effect? It provides that: All such relief as might have been given under section fourteen of the Finance Act, 1900, as amended by subsequent enactments (but not including Section two of the Death Duties (Killed in War) Act, 1914) in respect of the Death Duties payable on property passing on the death of certain persons killed in the late war shall be given in respect of the Death Duties payable on the death of persons, being persons to whom this Section applies, who die from wounds inflicted, accidents occurring, or disease contracted while on active service against an enemy, or on service which is of a warlike nature, or which, in the opinion of the Treasury, otherwise involves the same risk as active service. The Treasury have held that that Section does not cover the estates of those officers —the men are covered by another statutory provision—who lost their lives in the "Thetis" disaster. I want to call attention to the ground of that refusal. It has been refused on the ground that in that disaster there was no element of hostile action involved. It is quite clear that the Treasury view is that there must be this element of hostile action before the Section can be applied. I am going to submit that that is placing an unduly narrow construction upon the words of the Section. It is a little difficult to deal with these technical matters at so late an hour, but if hon. Members care to look at the Section they will see that there are three alternatives. The duties are to be remitted, in the first place, if death occurs on active service against an enemy; (2) if it occurs on service of a warlike nature, or (3) if, in the opinion of the Treasury, it otherwise involves the same risk as active service. These are alternatives, they are not cumulative but alternatives, which means that each of these three limbs of the Section must be something different from the other two. The second limb of the Section refers to service where the man loses his life in service of a warlike nature. The third limb must be something different from that, otherwise it would not be included; it would mean nothing at all. It must mean, therefore, something not necessarily of a warlike nature but, nevertheless, involving the same risk as active service.
It seems to me, after closely considering this Section, that by insisting that the element of hostile action must be there before they will exercise discretion and 2201 give a favourable opinion, the Treasury is, in fact, depriving the third limb of the Section of its meaning. They would arrive at the same conclusion if the third limb had been cut out of the Section. Let me give an example. It is not easy to think of hypothetical examples, but let me submit this one. Suppose the war were to come to an end some time in the next few months and that some vessel, a naval patrol or some other ship of that kind, manned by persons in the Navy, put to sea and was blown up, through some error, by one of our own mines. That is something which no one would say could not happen. What would be the position under this Section? The men involved would not be engaged on active service against an enemy; it would not be service of a warlike nature and there would be in that case no element of hostile action involved. Under the interpretation which the Treasury attach to this Section, the benefit of the Section would not extend to the officers of the ship blown up in those circumstances. It seems to me that that would be an absurd conclusion, because clearly I should have thought men in those circumstances who lost their lives would be undergoing the same risks as if they were on active service. Is it the Treasury view that all members of the Fighting Services during war are on active service against the enemy, no matter how they may be employed at any particular time? The answer to that question is, I think, a matter of considerable importance. If, in fact, from the commencement of a war everyone in the Navy, Army and Air Force is deemed to be on active service against the enemy, the importance of the Section becomes very much less, at any rate for the duration of the war. But if, on the other hand, they are not so deemed to be on active service against the enemy unless they are actually engaged in one of the theatres of conflict in some actual attack on the enemy, the interpretation of the Sub-section becomes a matter of great importance for the duration of the war, because there will be all sorts of people required to undergo risks of different kinds though they are not actually in conflict with the enemy.
So although it does not arise directly from the question that I put on Monday, I would ask the Financial Secretary for the Treasury view on that point. These 2202 matters that I have raised are general considerations. They go far outside the limits of the particular incident to which I have referred, but I think the interpretation that the Treasury places upon the Sub-section may be a matter of importance to a great many other people. It may be argued—and I can see that there will be force in the argument—that the phrase "same risks" means risks which are the same in kind. I do not know whether that is the view that is to be put forward, but I cannot see how on any other view it would be possible to justify the Treasury decision. If that is so, it seems to me to reveal a very unsatisfactory state of the law.
Officers or men may be asked to perform a very dangerous duty. I am not prejudging the report of the "Thetis" disaster, which will come before us at some future time, but it may possibly be very dangerous because of some entirely unsuspected circumstance at the time the men put to sea, and it may very well be that the risks they undergo will be equal in degree to the risks undergone by men actually engaged in conflict with the enemy even if they are not precisely the same in kind. It seems to me to be an anomalous state of the law, if indeed it is the correct view, that in the one case we should give this remission, which may make a very great deal of difference, because quite considerable sums are involved, and in the other, where men may be facing dangers equally great, that we should give no remission at all. If that is the Treasury view of the existing state of the law, although it is a matter that I cannot enlarge on on the Motion for the Adjournment, I hope the Government will very seriously consider whether our law in that respect does not demand alteration.

§ Captain Crookshank
It is not usual to speak twice on the Adjournment. I do not know whether I should ask your leave, Sir, but if it is granted—

§ Mr. Deputy-Speaker (Sir Dennis Herbert)
The right hon. Gentleman should ask leave not of me but of the House.

§ Captain Crookshank
The hon. and learned Gentleman has raised this point arising out of the "Thetis" case, though he enlarged it by the questions that he 2203 put. In common fairness to my Noble Friend the Member for Lonsdale (Lord Balniel) I should tell him that the matter has been raised before, because my Noble Friend communicated with me about it very shortly after the disaster, and even he was not the first to consider that particular case because the Chancellor of the Exchequer and I had considered it very soon after the "Thetis disaster; for prima facie, before one had looked up what the governing Statutes were, it might be a case where something should be done. But we came to the conclusion that it did not fall within the wording of the law.
After all, what the Treasury have to do is to administer the law in these matters as best they can. The hon. Gentleman will not expect me to answer him on the legal point. He pointed out that Section 38 of the Act of 1924 dealt with three cases. The Statute refers to death "from wounds inflicted, accidents occurring or disease contracted while on active service against an enemy, or on service which is of a warlike nature, or which, in the opinion of the Treasury, otherwise involves the same risks as active service." He thought that, if we insisted too far on the text of hostile action, etc., no sense could be given to the third limb of the provision "otherwise involves the same risks as active service." It may interest him as an historical fact that the real occasion for the change in the law arose out of a case of two officers who were sniped by Afridis from over the border while walking on the Peshawar Road. They were not on active service or on service of a warlike character. They were, I think, walking on the road on our side of the Frontier, but they were serving at a spot where, owing to the lawlessness of the tribes, service "involved the same risks as active service." So, curiously enough, though the hon. Gentleman implied that he could not envisage a case, there was actually a case of that kind which led to the alteration of the law and the inclusion of that limb to make up the three circumstances in which relief should be given.
There have been, of course, in the period that has elapsed since 1924 a number of cases which have come up for decision and, while it is always difficult to 2204 have to exercise discretion, I think in the great majority, if not all the cases, those definitions were such that really no doubt arose as to which side of the line the decision should be taken. The hon. Gentleman asked me whether, now all members of the armed Forces are called up, they are on active service. The answer is "Yes"; so that to that extent this Clause has not got such a wide field of application during the period of the war, though cases may still come up on the border-line on which we shall have to take decisions. But it has consistently been held in all the cases which have been decided—not only by the present Chancellor of the Exchequer but by the present Prime Minister when the matter was raised in Committee on the Finance Bill in 1936, so that it is not one person's decision and no one else's—that accidents occurring in the course of practice manoeuvres could not be considered as coming within the Section. There is no element of hostile action about that, and there is no element of active service or service of a warlike nature.
Of course, the hon. Gentleman recognises that not only in the case of submarines but in the case of flying machines and tanks and all kinds of accidents, it has always been held that practice manoeuvres cannot in themselves be regarded as service which involves the same risks as active service. The hon. Member may be quite right and we may be entirely wrong, but that is our interpretation of the law. Actually, I believe that the first important case since the 1924 Act was that of a flying officer in India who was killed as a result of a bombing accident. One could multiply instances, or give hypothetical cases like the hon. Member, to show why at one time a particular decision was reached, but I do not think any useful purpose would be served by reviewing 40 or 50 cases with all the details in order to show why a particular decision was taken in a particular case. When this matter was last before the House on the Finance Bill of 1936 an attempt was made to bring in the case of officers who met their death "as a result of a flying accident occuring to such persons flying on duty in peace-time." The House decided against making the concession 2205 because it was persuaded by the present Prime Minister that once you got away from the test of hostile action or conditions analogous to it you were driven along the road from one case to another and eventually found it impossible to make any difference in any case. The hon. Member has raised the point on the "Thetis" case, but he enlarged it. If I have not stressed the "Thetis" case or expressed any sympathy with the victims it is because that has been done already in this House.
Let me put this final consideration to the hon. Member. While we want to do our duty according to the law, it is worth reflecting whether actual fact relief from taxation is a really satisfactory way of giving compensation in cases of this kind. I do not know that because a man is in the srevice of the State it necessarily constitutes a reason why his relations after he has died should have a claim on the State for a remission of Death Duties.

§ Mr. Kingsley Griffith
Would not that apply in the case where death results from hostile action?

§ Captain Crookshank
It does apply, but I only put that point forward as a matter which is worth consideration; that it is not the best way of helping them. The incidence of such relief must always be arbitrary, and we may even give relief to the less unfortunate party. The better way is, I suggest, to deal with the matter on the compensation side to the surviving relatives, rather than by way of relief from Death Duties. I do not expect for one moment that I shall succeed in persuading the hon. Member to my point of view, but I hope I have given some explanation of the way in which we can deal with these cases. I can assure him that we are as sympathetic as we can be within the authority which Parliament 2206 has given us. If he wants a change it is to Parliament that he must appeal.

§ Mr. Foot
Perhaps I did not make myself clear, but in the course of his courteous reply the Financial Secretary has not met the principal point. It is that he is unduly narrowing the last limb of the Sub-section by the insistence that the element of hostile action must be there in every case before the Treasury can exercise discretion.

§ Captain Crookshank
I have said that the case which brought this matter up in 1924 was one in which there was no active service, nor service of a warlike character. It was a case which fell under part three, namely, "involving the same risks as active service."

§ Mr. Foot
Surely it is not a sufficient answer to point to the circumstances which gave rise to the Section. We are not concerned about the genesis of the Sub-section, but about what the Subsection means. The submission I make is not met by referring to one particular case. The submission I am making is that there is nothing in this particular limb which insists on the necessity of hostile action and that the Treasury in insisting on that ingredient being there in every case is undoubtedly narrowing the consideration of the Sub-section.

§ Captain Crookshank
I was only pointing out the kind of case which brought the matter up, and if there are other cases which arise they will be dealt with under the third limb of the Section.