HC Deb 11 June 1947 vol 438 cc1213-23

11.30 p.m.

The Solicitor-General

I beg to move, in page 36, line 16, to leave out from the first "and," to "Sin," in line 18, and to insert: to the extent to which duty under the existing law— (a) is payable thereon.' This Amendment and the two subsequent Amendments are to correct what is really an error in drafting. The Clause as it stands specifies certain cases where, according to the wording, the Legacy or Succession Duty is charged after a certain date, that is to say, it is charged after a death occurring at the time of the passing of the Act. It has been held that in the case of Legacy or Succession Duty that may become payable as a result of a subsequent event, it becomes charged when the death takes place. If the testator dies in 1944, and by his will gives someone an interest in a particular property to continue for a certain time, and with the happening of a certain event, we say that where that certain event happens after the passing of the Act, the Legacy or Succession Duty shall be charged upon the happening of that event. It has been held in the courts that this is not a correct view of what happens. In a case like that, the Legacy or Succession Duty is charged when the testator dies, and it may become payable on the happening of a subsequent event. Therefore, what we do in the passages to which these three Amendments relate is to substitute the words "payable" or "paid" for the words "chargeable" or "charged", in order to bring the wording of the Clause into consonance with the judicial decision to which I have referred, which says that the charge becomes chargeable when the death takes place which makes it possible for the subsequent event to bring about the payment of a particular benefit. That is why we substitute the word "payable" for the word "charge". The two succeeding Amendments are consequential on the first. They all have the same purpose.

Captain Crookshank

I want to ask a question on a point that is not clear. When is it actually paid?

The Solicitor-General

Suppose a testator dies in 1944 and grants a particular property to a particular beneficiary and gives that beneficiary the power of appointment in respect of that property, and the beneficiary in due course exercises that power of appointment in favour of another person. It becomes payable when the power of appointment is exorcised, but it becomes chargeable when the death takes place which sets up the trust.

Amendment agreed to.

Further Amendments made: In page 36, line 21, leave out "chargeable with, duty," and insert "payable."

Leave out lines 26 to 29, and insert: or (c) would be payable as aforesaid but for any payment made in advance and not made under the enactments relating to commutations or compositions; and references in this subsection to duty being payable in connection with an event shall, in relation to legacy duty, include its being payable when the legacy is paid, delivered, retained, satisfied or discharged in connection with that event."—[The Solicitor-General.]

The Solicitor-General

I beg to move, in page 37, line 12, to leave out from the first "of," to "be," in line 13, and to insert: this section shall, where the duty under the existing law was before the said sixteenth day of April paid on the capital value of property given for successive interests to persons all chargeable with the same rate of duty. The object of this Amendment is to correct a drafting slip. In line 12, hon. Members will see a reference to "paragraph (b) of Subsection (2) of this section." The Amendment seeks to widen the scope of the tax, because it will not always be under paragraph (b) of Subsection (2) that the particular effect which is brought about will take place. It is purely a drafting Amendment.

Mr. J. S. C. Reid (Glasgow, Hillhead)

I think this really is rather a difficult Amendment. Will the Solicitor-General explain in a little more detail what it does? Will he give a concrete example of how it works?

The Solicitor-General

The Clause affected by this Amendment deals with Succession Duties. I will cite an actual case. Suppose we take a settlement made by "D." The existing duty may have been paid on capital value. When one gets a series of persons—a series of sisters, perhaps—taking over, when the first tenant for life dies before 16th April, 1947, if the further duty is chargeable on the second tenant for life on or after that date, it is charged not by Subsection (2, b), but by Subsection (1) of the Clause. What we seek to do is to widen the existing phraseology of the Clause so as to include a case where it would fall within Subsection (1) instead of Subsection (2, b).

Mr. Assheton

Does that mean it will be payable at the new rate—double—or at the old rate, in that particular case?

Mr. Reid

Do I understand that a case was left out under which there would have been no increased duty payable, and that this Amendment is intended to catch up with that? Is that the point? If it is not, I am bound to say I am completely "fogged."

Mr. Assheton

We must have some more satisfaction on this matter. We have not received an answer to the question. The Solicitor-General gave us a case of succession among sisters and postulated that one died after 16th April. In the case of the second death, I am only asking whether the rate is 1 per cent., 5 per cent., or 10 per cent., as in the old scheme, or whether it is to be 2 per cent., 10 per cent., and 20 per cent. It is quite a simple question.

The Solicitor-General

There is no increase. The Amendment simply applies to the method of charging.

Amendment agreed to.

Motion made, and Question proposed, "That the Clause, as amended, stand part of the Bill."

Colonel Clarke

I rise only to call attention to what I think is a somewhat onerous provision in this Clause. It concerns the Legacy Duties on bequests to servants—that term being used in the widest sense of clerks, foremen, and men and women of that sort. Quite often a legacy is really intended only to carry on a pension that has been paid during the lifetime of a testator, and it seems to me that to increase the duty to 20 per cent. will impose a considerable hardship—particularly when, in the case of charitable bequests, the duty remains at 10 per cent. I am wondering whether this might be considered before the Report stage. I have not put down an Amendment, but I should be glad if the Chancellor would consider the matter.

Mr. Eccles

I would like to pursue the point raised by my hon. and gallant Friend the Member for East Grinstead (Colonel Clarke). I really object to this Clause because if somebody leaves money to a cats' home, the duty is not to be doubled, but if they leave money to one of their relatives, the duty is to be doubled. There is a good old phrase "Charity begins at.home"—and by "home," I mean family. I cannot understand why the duty should be doubled if one leaves some money to, say, a distant cousin or other member of one's family, while if you leave it to some charitable institution, the rate remains the same. I ask the Chancellor on what grounds he has doubled the duty when one leaves money to one's family, and left the rate the same when one leaves the money to a charitable institution? I think we ought to have a definition of that principle.

Lieut.-Commander Braithwaite

I think the Committee might well spend a few minutes on the general issues raised in Clause 41 and its successor, dealing with the somewhat lugubrious subject of what happens when people are translated to what we hope is a better world. These two Clauses, of course, implement the proposals contained in the Budget Speech. As in the case of Death Duties last year, the blow is softened to a certain extent by exemptions. What I think we have to focus attention on is that the changes do, in fact, add £9 million in a full year to the sum extracted from the community by the method of Legacy Duty. I have no doubt that the Chancellor will use the same argument as that which he used when I expressed my regret that Income Tax was running at 9s. in the £ He said, If it had not been for me, it would be 10s." I think that is a somewhat grandiose comment in the circumstances. The right hon. Gentleman inherited peace at the collapse of our enemies, and I am sorry to see him take the credit to himself. We take the view that taxation is running far too high. It is curious that there should be a tax on the most natural and noble of human emotions—the desire to leave such of the world's goods as one has to a relative or someone of that kind —whereas, as my hon. Friend the Member for Chippenham (Mr. Eccles) quite truthfully said, if one leaves it to some charitable institution, however worthy—one dealing perhaps with the betterment of conditions for animals—it will not carry this increase. I do not know what my right hon. Friends in front of me have in mina. I think this is a vicious increase, and I hope the Opposition will register their opinion by dividing on the Clause. It would be a great pity if Clause 41 were to be allowed to go without some protest being made against this unnecessary increase.

11.45 p.m.

Mr. Assheton

My hon. and gallant Friend has put the case very clearly, as he always does. We on this side strongly object to increases of this sort at a time when taxation ought to be reduced. The Death Duties have been raised' time after time, and have now reached levels which have become in some cases almost ridiculous. I do not know whether hon. Members are aware that on the highest levels, the Death Duties—and naturally hon. Members opposite do not express any sympathy—are 75 per cent.; and here there is the possibility of a Legacy Duty or Succession Duty of 20 per cent. on top of them. Really, the thing is becoming ridiculous. I do not believe hon. Members opposite, except perhaps the hon. Member for West Fife (Mr. Gallacher), can justify taxation on that level. I, for one, shall vote against this increase.

Mr. Gallacher

Hon. Members opposite think there is a case when they talk about human emotions and sentiment. It is very strange how they can work up human emotions and sentiment when accumulated profits are concerned, but can never do so when it is the unemployed workers who are concerned. Suppose we take the cases of two lads, with the same physical and mental abilities. One of them is a lad whose father is an ordinary worker. The other is the son of an accumulator of profits. The robber dies, and leaves his property to his son. But what is he leaving him? He is leaving him the power to extract from the other lad the fruits of the other lad's labour. He is not leaving him goods, but the power to get the goods that the other lad makes. The other lad making goods will support the Chancellor in saying that if these goods go to a charitable institution, they are going to a better object than someone who is giving no service of any kind to the community. Therefore, I stand by the Chancellor, and the producers of goods—the miners who produce the coal, the engineers, and the railwaymen—and the other workers will stand by him.

Sir Ian Fraser (Lonsdale)

I cannot help feeling that that argument is very false. Might not the lad who inherited this money by his ingenuity, hard work, and ability provide a job for the lad who has not got one? That has often happened. I did not rise to discuss that point, however, but another point. I am glad to think that we on this side of the Committee propose to vote against this increase in succession taxation on general principles—

Mr. Gallacher

On rotten principles.

Sir I. Fraser

—not, I hope, because the duty on charity bequests was not made as high as that which goes on bequests to other persons. That was implied by some hon. Members who spoke earlier. I am glad that most of these duties have not been raised on charities, of which there are very many admirable ones. It is against the general rise in the level of this taxation that we propose to vote.

Mr. Jay

I should like to associate myself with the remarks of the hon. Member for West Fife (Mr. Gallacher). In my opinion, the Death Duties are not level enough all along the line. The attitude of the party opposite is extremely interesting. I gather now that they propose, as they did last year, to vote against the rise in the level of this taxation. Not many months ago, the right hon. Gentleman the Member for Warwick and Leamington (Mr. Eden) told us that one of the essential parts of the Tory Party's policy was a property-owning democracy. There are only two ways in practice of establishing the equal distribution of property. One is by higher wages to enable the wage earners to buy property of their own, a policy which it is not generally understood the Party opposite has encouraged. The other, and probably in existing circumstances the more important policy, is by the raising of the Death Duties on high estates and the reduction of Death Duties on low estates. I think it is correct to say that the latter is precisely what the Chancellor has followed in the two alterations in Death Duties—in the Estate Duty last year and the Succession Duty this year. The Party opposite now say that they are going to vote against this levelling, and the whole country will notice that by so doing they are totally insincere in advocating a property-owning democracy.

Mr. Dalton

I think it is right that I should make some reply to the points which have been raised. The hon. Member for Chippenham (Mr. Eccles) found it difficult to justify the exemption in favour of legacies by succession to charities. He said that charity began at home, and the legacy of a member of one's own family was now subject to tax. We are now on Clause 41. Of course, Clause 42 contains three or four alleviations which it would not be in order to discuss on this Clause, but which I should like to mention in passing. They are designed to clear from Legacy and Succession Duties bequests below a certain amount. Reference has been made in this discussion to a legacy left to a domestic servant, or some other person not even a member of the family who was associated with the deceased person. For the first time, I am proposing an alleviation in part of the law on this subject. It was proposed last year for the first time in the long history of Death Duties, that all estates of under £2,000 were to be cleared from liability tax. It is quite true I put it on a bit further up, but that is another matter. It must be recalled, in fairness to what has been done in this Bill, that on the initiative of this Government, for the first time since Death Duties in their present form were introduced—which was by Sir William Harcourt in 1893—there is to be a clearance of duty on all estates up to £2,000. Before, they had been clear only up to £100. That should be borne in mind in any balanced discussion on this subject.

Having said that, I welcome very much the speeches that have been made by my hon. Friends on this side in justification of the general policy here embodied of getting some part of the revenue, which we so greatly need for so many beneficent purposes, from increased taxation of inherited wealth, particularly when that wealth runs into large figures and great amounts. I am prepared to justify this not only in this Committee, but in any other place in the country. I am sure that on this issue an average audience would be entirely on my side if the issue could be extracted from all others, and they could be got to understand that it had no connection with their ordinary political affiliations. I am sure an audience of ordinary men and women chosen at random from the community, whatever their wealth might be, would agree that great wealth that passes on death to a person who, by definition, has done nothing whatever to earn it, is a suitable subject for taxation at the present time. I am prepared to stand up to that with anybody at any time. If the Opposition vote against this Clause, we shall be able to explain and comment on the matter in the right places.

This is a matter on which I have a very profound conviction, and I am sure other hon. Members have an equally profound conviction. But I am convinced of nothing so firmly in the whole field of economic propositions as that great inherited wealth is a great evil both to those who inherit it and to those whom it deprives. I am sure we shall gain by this provision. In statistical information which has been published—and which may be read by any hon. Member—by the Inland Revenue Commissioners in their latest report, there is a new table introduced for the first time—I think Table 43, but that can be checked by anybody who studies it—in which there is an analysis of the Surtax income for recent years. This is not out of Order, as you will see in a moment, Mr. Beaumont, because I am relating it to inherited wealth. What I am submitting to you, and inviting hon. Members to study, because they will find it very interesting, is an analysis which shows that, if we divide the Surtax payers according to the magnitude of their income, the greater the income the greater the proportion of it which is admittedly derived, not from exertion of any kind, but from investment income of various sorts; and it is clear that the great bulk of that investment income is derived from inheritances, and not from anything done by the persons themselves. The bulk of it is inherited. This is the greatest root cause of inequality in our social and economic

system, and I am glad it falls to my lot, as a Socialist Chancellor of the Exchequer supported by a Socialist Government, to do something to aid the advance towards closer equality in this matter.

Colonel Clarke

Will the Chancellor, now or on Clause 42, answer my question concerning legacies to servants, and whether they might not be considered as charities? I should like to point out in that respect that I do not see any better way in which we could carry out the policy of increasing the numbers of property owners in a property-owning democracy than by leaving money by legacies to servants.

Mr. Dalton

I am in your hands, Mr. Beaumont, but I shall be very happy to make a reply to the question now or later.

The Deputy-Chairman

I think it would be better to answer that question when we reach the next Clause.

Question put, "That the Clause, as amended, stand part of the Bill."

The Committee divided: Ayes, 179; Noes, 68.

Division No. 248.] AYES. [12.0 m
Adams, W. T. (Hammersmith, South) Foot, M. M, Lewis, A. W. J. (Upton)
Alexander, Rt. Hon. A. V. Forman, J. C. Lipton, Lt.-Col. M.
Anderson, A. (Motherwell) Freeman, Maj. J. (Watford) Logan, D. G.
Attewell, H. C. Freeman, Peter (Newport) Longden, F.
Austin, H. Lewis Gallacher, W. Lyne, A. W.
Baird J. Gibbins, J. McAllister, G.
Barton, C Gilzean, A. McGhee, H. G.
Berry, H. Glanville, J. E. (Consett) Mack, J. D.
Beswick, F. Greenwood, A. W. J. (Heywood) McKay, J. (Wallsend)
Blackburn, A. R Griffiths, D. (Rother Valley) McKinlay, A. S.
Blyton, W. R Griffiths, W. D. (Moss Side) McLeavy, F.
Braddock, T. (M[...]cham) Gunter, R. J. Manning, C. (Camberwell, N.)
Bramall, E. A. Guy, W. H. Medland, H. M.
Brook, O. (Halifax) Hall, W. G. Mellish, R. J.
Brown, George (Belper) Hannan, W. (Maryhill) Middleton, Mrs. L.
Burke, W. A. Hardy, E. A. Millington, Wing-Comdr E R
Byers, Frank Harrison, J. Mitchison, G. R.
Callaghan, James Henderson, A. (Kingswinford) Monslow, W.
Champion, A. J. Henderson, Joseph (Ardwick) Morris, Lt.-Col. H. (Sheffield, C)
Collindridge, F. Hewitson, Capt. M Morris, P. (Swansea, W.)
Collins, V. J. Hobson, C. R. Moyle, A.
Corbet, Mrs. F. K. (Camberwell, N. W.) Holman, P. Nally, W.
Corlett, Dr. J. Holmes, H. E. (Hemsworth) Neal, H. (Claycross)
Corvedale, Viscount House, G. Nichol, Mrs. M. E. (Bradford, N)
Crawley, A. Hoy, J Noel-Buxton, Lady
Dames, P. Hudson, J. H. (Ealing, W.) Oliver, G. H.
Dalton, Rt. Hon. H. Hughes, H. D. (W'lverh'plon, W.) Paget, R. T.
Davies, Ernest (Enfield) Irving, W. J. Paling, Will T. (Dewsbury)
Davies, Harold (Leek) Janner, B. Pargiter, G. A.
Deer, G. Jay, D. P. T. Paton, J. (Norwich)
Delargy, H. J Jeger, Dr. S. W. (St. Pancras, S.E.) Pearson, A.
Diamond, J. Jones, D. T. (Hartlepools) Peart, Thomas F.
Dodds, N. N. Jones, Elwyn (Plaistow) Platts-Mills, J. F. F.
Driberg, T. E. N. Jones, J. H. (Bolton) Poole, Major Cecil (Lichfield)
Dugdale, J. (W. Bromwich) Jones, P. Asterley (Hitchin) Porter, G. (Leeds)
Dumpleton, C. W. Keenan, W Pritt, D. N.
Durbin, E. F. M. Kinley, J. Proctor, W. T
Ede, Rt. Hon. J. C. Lang, G. Pryde, D. J.
Evans, S. N. (Wednesbury) Lee, F. (Hulme) Ranger, J.
Farthing, W. J. Lee, Miss J. (Cannock) Rankin, J.
Fernyhough, E. Levy, B. W. Reid, T. (Swindon)
Rhodes, H Symonds, A. L. West, D. G.
Roberts, Emrys (Merioneth) Taylor, H. B. (Mansfield) White, H. (Derbyshire, N.E.)
Roberts, Goronwy (Caernarvonshire) Taylor, R. J. (Morpeth) Whiteley, Rt. Hon. W.
Roberts, W. (Cumberland, N.) Taylor, Dr. S. (Barnet) Wigg, Col. G. E.
Robertson, J. J. (Berwick) Thomas, D. E. (Aberdare) Willey, F. T. (Sunderland)
Rogers, G. H. R. Thomas, Ivor (Keighley) Willey, O. G. (Cleveland)
Ross, William (Kilmarnock) Thomas, I. O. (Wrekin) Williams, D. J. (Neath)
Royle, C. Thomas, George (Cardiff) Williams, J. L. (Kelvingrove)
Sargood, R. Timmons, J Williams, W. R. (Heston)
Segal, Dr. S. Tolley, L. Williamson, T.
Sharp, Granville Ungoed-Thomas, L Willis, E.
Shawcross, C. N. (Widnes) Usborne, Henry Wills, Mrs. E. A
Skinnard, F. W. Wadsworth, G. Wilson, J. H.
Snow, Capt. J. W Walkden, E Woods, G. S.
Sorensen, R. W. Wallace, G. D. (Chislehurst) Wyatt, W.
Soskice, Maj. Sir F. Wallace, H. W. (Walthamstow, E.) Yates, V. F.
Stewart, Michael (Fulham, E.) Watson, W. M.
Stokes, R. R. Weitzman, D. TELLERS FOR THE AYES;
Stubbs, A. E Wells, P. L. (Faversham) Mr. Simmons and
Swingler, S Wells, W. T. (Walsall) Mr. Popplewell.
Assheton, Rt. Hon. R Head, Brig. A. H. Ropner, Col. L.
Barlow, Sir J. Headlam, Lieut.-Col. Rt. Hon. Sir C Shepherd, S. (Newark)
Bossom, A. C Henderson, John (Cathcart) Shepherd, W. S. (Bucklow)
Bower, N. Hope, Lord J. Smith, E. P (Ashford)
Braithwaite, Lt.-Comdr. J. G. Hutchison, Col. J. R. (Glasgow, C.) Spearman, A. C. M.
Bromley-Davenport, Lt.-Col W Jarvis, Sir J. Spence, H. R.
Buchan-Hepburn, P. G. T. Joynson-Hicks, Hon. L. W. Stanley, Rt. Hon. O.
Challen, C. Keeling, E. H Strauss, H, G. (English Universities)
Clarke, Col. R. S Lambert, Hon. G. Stuart, Rt. Hon. J. (Moray)
Crookshank, Capt. Rt. Hon H F. C. Lindsay, M. (Solihull) Studholme, H. G..
Crosthwaite-Eyre, Col. O. E Low, Brig. A. R. W. Teeling, William
Digby, S. W. Lucas-Tooth, Sir H. Thomas, J. P. L. (Hereford)
Duthie, W. S. Mackeson, Brig. H. R Thornton-Kemsley, C. N.
Eccles, D. M. Mellor, Sir J. Touche, G. C.
Eden, Rt. Hon. A. Molson, A. H. E. Walker-Smith, D
Fletcher, W. (Bury) Morrison, Maj. J. G. (Salisbury) Ward, Hon. G. R.
Fraser, H. C. P. (Stone) Neven-Spence, Sir B. Wheatley, Colonel M. J
Fraser, Sir I. (Lonsdale) Nield, B. (Chester) White, J. B. (Canterbury)
Galbraith, Cmdr. T D. Noble, Comdr. A. H. P Willoughby de Eresby Lord
Gates, Maj. E. E. Prescott, Stanley York, C.
Gomme-Duncan, Col. A Price-White, Lt.-Col. D
Grimston, R. V. Prior-Palmer, Brig. O. TELLERS FOR THE NOES:
Hare, Hon. J. H. (Woodbridge) Ramsay, Maj. S. Major Conant and
Haughton, S. G. Reid, Rt Hon J. S. C. (Hillhead) Lieut.-Colonel Thorp.

Question put, and agreed to.