Clause 24.—(ABOLITION OF DUTIES.)

HC Deb 11 July 1949 vol 467 cc63-119

Mr. R. A. Butler

I beg to move, in page 16, line 31, to leave out Clause 24.

We now come to one of the major Debates of this afternoon, that is, on the subject of the alteration in the Death Duties and the abolition of the Legacy and Succession Duties. You have suggested, Mr. Deputy-Speaker, that the Debate on these Clauses should take place together. I think that will be convenient, and we should like to reserve our position in regard to voting on one or both of these Clauses. The Debate thus gives us an opportunity to consider what the Chancellor described in his Budget speech as a moderate lift in the Death Duties. The more we have examined this matter, either from the angle of the desire of the Chancellor not to favour the family or from the point of view of the lift, the more we think this is a subject which deserves further Debate upon the Report stage of the Bill.

Now, there appear to be several propositions put forward by the Government with which we disagree profoundly. The first proposition was put forward by the Solicitor-General in the course of our previous Debates, and that was that the present law is unjust in its operation. The second proposition put forward by the Government, and the Chancellor during his Budget speech, is that it is better not to favour the family when making a will. The third proposition is that the burden of the Death Duties should be increased. I confess that I feel more inclined to be highly critical upon the first two propositions, and on the subject of the burden of the Death Duties simply to express my great regret that this section of the Revenue should be called upon to raise a large sum of money in order to help us through our present economic crisis and difficulties—but I will deal with that matter at the end of my remarks.

I shall now make one or two general observations which apply to the various propositions put forward by the Government spokesmen. The first general observation is that it is quite clear that the Chancellor and the Government have undertaken this so-called reform in regard to Clauses 24 and 25 for what is described as administrative convenience. They are proud of themselves for abolishing the Legacy and Succession Duties because, they claim, those duties have been difficult to administer and because, presumably, they occupy a large staff in their administration. I call this a very poor peck at tax reform. If we are to reform all our taxation structure, I would direct the attention of the Government to the need for reforming our Income Tax generally, instead of concentrating so much upon these two taxes which have been operating for many years to the satisfaction of all those who have been beneficiaries and, I hope, to the satisfaction of those who have now passed away.

5.0 p.m.

I do not believe that to approach a reform of the taxation system simply from the angle of these two taxes is either an important move or a just move, I do not believe that the result which will be produced by the Government's so-called reform will be just to the widow and family. The second general observation is that the really heavy incidence of the alteration of the burden is due to the Government being in a muddled state of mind, for I maintain that they have tried to combine a reform in the Legacy and Succession Duties with the very considerable lift upwards which the Chancellor has tried to give to the Death Duties. When we examine the effect of these two efforts together—an attempt at reform and an attempt at lift—we see that at cerain scales in the range of estates a definite, severe injustice has crept in; and no taxation system will endure if there is injustice. I doubt whether the Revenue in future years will be able to look forward to the same results from the Death Duties generally as it has done in the past.

The first arguments to which I want to address my attention are those put forward by the Solicitor-General in the course of our previous Debates. They are chiefly on the subject of the elimination of the preference for the family, which normally we should desire the testator to have. I quote the actual words of the Solicitor-General in his first argument, because it is very important that the whole case of the Government on this matter should be demolished. The right hon. and learned Gentleman said: … notwithstanding that the testator has intimated as his desire that the relative shall have her legacy free of duty, we, in enforcing the present law, go contrary to his wish and carve the Legacy Duty out of the residue of the estate … the present state of the law is … utterly irrational. During the Committee stage, hon. Members on this side attempted to show that it is not the state of the law that is irrational, but the Solicitor-General's mind, because it must be clear to him, the Solicitor-General, that if it is the intention of a testator to leave a certain sum to a beneficiary, if he consults a capable firm of solicitors or lawyers of repute he will be given advice which will enable him to make his own wish in making his will.

For example, if a man takes legal advice in making his will, which it is usually desirable to do, he can, with the aid of modern science in the legal world, presumably reach an accurate picture. He can so draw his will that the Legacy Duty under the present state of the law is taken from the residue, and so the point made by the Solicitor-General is met. We do not, therefore, think that the right hon. and learned Gentleman's first point, that the law does not now operate fairly, can hold water, because, if a will is properly made, with legal advice, it is possible for the testator to aim at the target and to hit it. If, however, the testator does not wish to consult a lawyer and makes his will in a wrong way, it is possible to uphold the Solicitor-General's argument.

The Solicitor-General's next argument in defence of this irrational proposal to remove the preference or benefit from the family was when he said: Whereas we have an increase of from 3 per cent to 13 per cent. in the case of an estate of £6,000, with a big estate—an estate charged at the rate of 75 per cent. which is the rate charged on estates over £2 million—the increase is 2½ per cent. That is another reason why the present rate of Legacy Duty is indefensible. It is rather an extreme case to take a £2 million estate as an illustration, but it is obvious that when we start by a levy of 75 per cent. extra duty in one case and 3 per cent. in the other, any percentage rate for Succession Duty must mathematically represent the smaller proportion or the larger initial figure. If we look at the illustration given by the Solicitor-General, we find that in the end the gentleman who is in the fortunate position of owning a £2 million estate has to pay a tax of about £1,550,000. The Solicitor-General might well feel satisfied that, taking the whole of the duties together—Succession, Legacy and the ordinary Death Duty lift—the Chancellor does quite well out of the larger estate. In the case of the smaller estate—the £6,000 estate—the total liability will amount to about £750. I do not, therefore, think that the present law is operating particularly much in favour of the larger estate, and when we come to the increase in the lift the larger estate will, of course, be very much more hit than it was before.

The Solicitor-General's third argument was in these words: At the same time we have considerably advantaged the poor dependent relatives who, in the future, will not have to pay the 20 per cent. which, in the case of a small legacy, is very heavy indeed if the relative is dependent largely upon the legacy for his or her support …"—[OFFICIAL REPORT, 27th June, 1949; Vol. 466, c. 792, 794.] The right hon. and learned Gentleman went on to make the burden of his argument that, thanks to the new irrational procedure proposed by the Government—taking away the preference given to the family—it would now be possible for the Government, so to speak, to insist that testators leave fairly and squarely the right amount of money which the Government think they ought to leave to people who are not their own near relatives. I do not believe that the distant aunt, the mistress, the friend, the chauffeur or anybody else will be advantaged by the Government's proposal, or that any Government can dictate to a testator how he decides his own will. At present, as I have tried to show, if we take legal advice and operate the present law as it stands, we can, in fact, achieve the results we desire; if we want to leave more to our families than to other people, we can achieve that result. If we want to switch the burden of our legacy on to the non-family person, non-related by blood, we can equally well do so.

I do not believe that these things will be effected better by the Government's reform. In fact, the very reverse will happen to what the Solicitor-General said he desired, because if he tells, as he is telling, the public in this country that the present preference rate for the family—the widow especially—is to be removed, and that, in fact, the incidence of the new rates at certain levels over £17,500 is to go right against the family such care will be taken by testators to look after their own families that the distant relatives—those who have served them faithfully and who are not relatives by blood—will be much worse off than before. Therefore, I draw the Solicitor-General's attention to the weakness of his own arguments, because I believe that this reform will not achieve the result he desires and that he will be cursed by the ass, as Balaam was in the end, instead of being blessed by that venerable animal.

I want now to turn to some of the broader aspects of this particular reform. The Solicitor-General's main argument was that in the case of the family with an estate below the level of £17,500, the situation had been positively improved. However, if we examine some slightly larger figures, we find that the facts are somewhat disturbing as between the present and the future proposed law in regard both to the family and to strangers in blood or charities of any sort. Take, for example, an estate of £23,000. Under existing law the present rate of duty for a stranger is 12 per cent. Under the Budget proposals, however, there will be an actual reduction, as against the family, of some £3,358, as compared with the burden which would have fallen on the stranger under the existing law. Take the same estate of £23,000, and in the case of the family we find that, instead of a reduction as compared with the existing position, there is actually an addition of £286. As far as I know those figures are correct and they indicate a colossal improvement in the case of a stranger and a slight deterioration in the case of the family. On an estate of £67,000, where the general rate has gone up from 27 per cent. to 40 per cent., we find that the family, the widow and child or lineal descendants, are worse off by £7,734, whereas the stranger is still better off by £1,072.

These are striking examples of the particular range of income to which the Solicitor-General did not give his attention very closely when he was addressing us on the last occasion. We claim that it is quite wrong for the Government to satisfy themselves that they are being equitable in the figure of £17,500 if, in fact, they are introducing gross anomalies of this sort in the general range of duties higher than that. We are told that there should not be one law for the rich and one for the poor. I am using those terms relatively in reference to these figures, but it is not an equitable basis on which to erect any taxation system that we should treat certain people's estates with gross unfairness just because we combine the general lift of £20 million which the Chancellor wants from Death Duties with these new proposals for the abolition of preference under the Legacy and Succession Duties.

The Financial Secretary to the Treasury (Mr. Glenvil Hall)

My right hon. and learned Friend indicated that in the middle ranges the scales were, to use the words of the right hon. Member for Saffron Walden (Mr. R. A. Butler), somewhat anomalous and in collecting the extra £20 million he has evened out the scales in the middle ranges. Therefore, it is quite easy to get the type of figure which the right hon. Gentleman is quoting. The anomaly was there before.

Mr. Butler

I should be quite ready to detain the House by giving a series of anomalous figures which would take a considerable time because, with the aid of very able advice, I have been able to collect combined tables which are extremely impressive and from which I have picked these two examples at two particular ranges, one which is above the range to which the Solicitor-General previously referred and one at a range of £67,000. If the Financial Secretary wishes to be completely convinced, I can continue to quote cases until the cows come home to show how unfair the matter is.

If the right hon. Gentleman rises to intervene in my observations, I would ask why the Solicitor-General did not satisfactorily answer a similar case put forward from this side when the matter was previously discussed, and if today the right hon. Gentleman is so much aware of the anomalies in the Chancellor's proposals, why did he not put the cases fairly and squarely to us at an earlier stage? They completely justify the Opposition in raising these matters on the Report stage and the procedure of the House which enables us to go over these matters again. We have now, for the first time, a fair and square admission from the Government that the Chancellor's proposals operate in an inequitable manner over a range of incomes and we must ask the Government to give us satisfaction before we come to the end of the Debate, which is likely to take some little time. I have attempted to deal with some of the inequities arising out of the decision of the Chancellor to combine his lift with the abolition of the preference hitherto given to the family and lineal descendants.

5.15 p.m.

I now turn to the second general part of the Debate—the effect of this lift on certain other aspects of the Revenue. The first point I wish to make is in relation to business and agricultural land. When we are considering Death Duties we very often find that the Debate is clouded by passion or class considerations, because we have in our minds a dear old boy, having a pleasant, fat and jovial exterior, who will be mulcted by the Chancellor, and the general impression on the other side of the House is that that would be a good thing and that at any rate the disparity is too great between one section and another. The argument is that it would be a good thing for the younger people to make their own way in the world and that Death Duties are an amiable way of giving the young a better opportunity in life.

I will not argue on that basis this afternoon, for we are all ready to face the new world into which we have been moving and in which we are all closely knit together and there is not the same disparity of income. I consider that there are certain social results which follow raising the Death Duties and which, on the whole, all sections of the community will wish could have been avoided. I refer to certain traditions in England which it will not be possible to carry on because of the incidence of Death Duty.

I want to concentrate the attention of the House this afternoon on the effect of these Death Duties on the small business and on the business of agriculture. Death Duties do not, of course, apply in the case of a continuing company, but they hit extremely hard the small family business and small family farm. I should like to get from the Financial Secretary or the Solicitor-General some indication of the effect they think this moderate lift of Death Duties will have on small businesses in this country. I have been able to collect no impressive statistics on the matter, but I know, from talking to people in my own district and discussing with them in private small businesses, whatever they may be, that the effect of the new lift will not only complicate the normal passage of a business from father to son, which is a proper and legitimate thing, but will have an effect on keeping them in being.

I understand that this Duty is to bring in £300,000 at the expense of agriculture. It will have the effect of what is described by economists as a disincentive on agricultural production. The agricultural industry entered a contract that the capital side of the industry would endeavour to support good estate management under the Agriculture Act, 1947. That entails greater and greater investment in agricultural land. Those with whom I have discussed this matter in the agricultural industry do not find it very encouraging that in this Budget they are expected to find by way of Death Duties a greater amount from agricultural land itself. In this respect the Chancellor has not been able to follow his predecessor's excellent example—the only excellent example given in the whole régime of his predecessor—and he has felt obliged to put a further burden on agricultural land. The effect will be that the Duty on an estate of some £100,000 level is more than 70 per cent. greater than it was before.

I wish to refer to a further possible social consequence if we are to continue putting extra duties on agricultural land. The effect will be that some of the larger agricultural estates will be parcelled out, and I believe the division and cutting up of agricultural land is, in the end, against the interests of food production in this country. The party opposite have never been against the size of an industrial concern. It is certain they have not gone out to humanise that concern in the way we have, but they have never been against the size of industrial concerns. It is, if I may say so, extremely old-fashioned to think that for social reasons it is a good thing to cut up an agricultural estate. In fact, the more we cut up our agricultural estates, the less likely we are to get efficient food production, to provide full opportunity for the men on the land and to be able to employ modern machinery on the land. Therefore, I deprecate any attempt to use the taxation system for the purpose of parcelling up the land and cutting it up into small bits. I believe it would result, as it has done in European countries in British agriculture being less able to meet the vital need of saving dollars by producing more food at home.

On this matter of agricultural Death Duties, I do not desire unduly to exaggerate the position. I have named the total sum which is likely to accrue from this source. I have made these observations simply in order to indicate to the Government that I think it wrong, when they ask the capital side of the agricultural industry to invest more freely in the land, to impose extra burdens upon it. I think it right to ventilate these matters because, if not ventilated, they slip by without notice and observation, and their consequences are not registered either by the House or by the country.

After raising most of the issues in connection with the family and with the moderate lift in Death Duties, I turn, in conclusion, to the main issue—the question of whether we ought ourselves to oppose this sum of £20 million on which the Chancellor depends from this source in this Budget. The issue is divided between the two Clauses, and, if I may give my opinion to my hon. Friends, I would say that we should be wise to oppose Clause 24 by our vote, and thereby in that way indicate our disagreement with the Chancellor in the methods he has chosen to adopt to discriminate against the family, and to make a very unfair arrangement under which the original family preference goes in the incidence of the Duties. In the case of the large sum of money which the Chancellor is expecting to get from Death Duties, I should like to indicate most strongly our regret that any more money has to be raised from this source, but in view of the severe financial difficulties which we are facing, I cannot advise my hon. Friends to vote at this time for leaving out that Clause. I have tried to cover the subject. I hope that we may now have a more convincing answer from the Government than we have yet had.

Mr. Eccles (Chippenham)

My right hon. Friend has clearly indicated that there are two quite separate issues which this Debate is to cover. In the first place there is the family principle upon which we had considerable discussion during the Committee stage. I very much regret that the Chancellor is not with us on this occasion because we particularly wished to have his views upon a matter on which many of us feel very strongly. The Chan- cellor is altering the law of the land so that whether I leave a large or a small sum of money to my wife or child, or to a distant relative, or to a stranger, or to a cats' home, the total Estate Duty levied upon that legacy will now, for the first time, be the same.

We feel very strongly that that is wrong. I have taken the trouble to read the debates on Sir William Harcourt's Budget when these duties were first introduced in a large way. It is quite clear that the House of Commons then felt, and I believe the same is true today, that the principle of the family is something which we ought to defend irrespectve of the weight of taxation imposed upon any particular estate. It is not a question of how much money a man or a woman is allowed to pass on at death; it is a question of whether the nearer members of the family should not be preferred over the more distant beneficiaries.

I should have liked to ask the Chancellor to give us a clear answer on why he has abandoned the principle of consanguinity. As my right hon. Friend pointed out, we cannot be satisfied with the answers which have been given by the Solicitor-General. Has the Chancellor done this because he does not think that the principle of the family is of importance, or has he done it entirely for administrative convenience, in order that he might raise more revenue? We really must have a clear answer on that point because it is a matter of concern to us to know upon what social principles the Government base their whole attitude towards the legislation of this country.

I shall say no more about that, and will turn to the second point, which is the increase in the revenue to be collected from Estates Duties. We did not discuss that at any length on the Committee stage. I put down a Question to the right hon. and learned Gentleman for written answer, which was answered last Monday. I put it down in an endeavour to find out exactly who is to pay the £20 million additional revenue. The answer which I got from the Treasury was not clear and was. I am bound to say, very unsatisfactory, because it must have been obvious that what I was trying to find out was from what particular categories of estate was the £20 million to come.

In his reply, the Chancellor said: The existing Estate Duty scale is being retained for estates up to £17,500, … That means that no one will pay more, whether they be a near relative or a stranger, on money coming to them out of estates not exceeding £17,500.

The answer goes on: Above that figure and up to £35,000 the proposed new scale of duty will not exceed the average of the three old duties taken together on estates of the same size. That means that none of the £20 million extra money will come out of estates in the category between £17,500 and £35,000. But in practice the distant relative and the stranger and the cats' home will pay less and the near relative will pay more, and the two will balance. That is thoroughly wrong as a principle of taxation if we are altering the duties.

The final part of the answer is the part to which I really object. It says: The additional £20 million of new revenue will come from estates above £35,000."—[OFFICIAL REPORT, 4th July, 1949; Vol. 466, c. 137.] The Chancellor knew perfectly well that I put down the Question in order to know from which estates of over £35,000 the £20 million a year is to come. I cannot make the calculation with the same accuracy as the Treasury, but is it not a fact that the great bulk of this £20 million will come from estates of between £35,000 and £100,000, and most of it from estates between £35,000 and £60,000. [An HON. MEMBER: "Between £35,000 and £75,000."] My hon. Friend says £75,000. That is very serious because it means that the lift in the Death Duties will not hit the very rich people but the middle range of estate, the sort of estate which is built up by men of initiative who get on in their own business and accumulate just about that size of fortune—something between £35,000 and £75,000. I think that those are the most desirable people to encourage on what I would call the enterprising or management side of our economy. Yet I believe they are the very people who are to bear the new duties, and not the very rich people, or those with estates of £250,000 to £5 million, or whatever may be the largest estate. Therefore I object to the scale on that ground as well.

5.30 p.m.

Like my right hon. Friend, I wish to make one or two short observations upon this whole question of raising taxation upon capital and spending it upon anything which the Government have on the expenditure side of their Budget. If we go on as we are going now, what will happen is that the whole burden of taxation will finally rest upon the lower income groups. If successive Governments continue, for reasons of their social theory, to wipe out fortunes of any size at all, of course someone else will have to pay the taxation. The Death Duties injure our economy in two ways. In the first place, they reduce the taxable income on which Surtax can be levied. Perhaps hon Gentlemen opposite do not mind that. But they do something else which at the present time is a great deal more serious; they reduce savings.

There cannot possibly be anything more likely to discourage people from saving than the Death Duties. When we read in the newspapers that in the first 14 weeks of the financial year the net result of small savings in this country was a deficit of £10 million I wonder what hon. Gentlemen opposite consider are the prospects for savings in this country over the next few years. We have not the figures for the big savings, and in this Clause we are largely dealing with people who make big savings. But we can be quite sure that if there is any dis-saving on the part of small people then it is even larger on the part of big people. I submit to the House that we shall not recover our position in the world if we destroy the sources of savings.

The fact is that the original conception of Socialist policy was that it would be self-financing. It was originally supposed that it would be independent of taxation upon individuals. The State was to acquire the ownership of all means of production, exchange and distribution, and of course, having got that ownership into its hands, the State could decide how much of the national income the people could consume. It would be the complete arbiter over the proportion between savings and consumption. Hon. Gentlemen opposite have gone through a revolution in their thinking. They have quite abandoned the idea of Socialism being self-financing; now they seem to think that we can have Socialism financed by high taxation upon individuals.

I wonder if they realise how new a doctrine that is, and whether they have put it to their people that if they go on as they are going on now, it means that it will be the wage-earners who will have to bear the whole cost of the State. I am firmly convinced that they have not thought this out, and that they will find the people of this country did not expect that from their State Socialism. They expected it would be paid for by somebody else, but that has been abandoned; and now we have a system of taxation which will wipe out all the top fortunes. It may be that for reasons of social justice, hon. Gentlemen opposite think that is a good thing to do. But from the point of view of economics it can have but one result; the wage-earners will have to pay the whole cost of the State, and they will not like to do that.

I myself do not like great extremes of wealth; I think they are incompatible with the age in which we live; but here we have a proposal which is not really attacking the great extremes of wealth. It is levying a duty on that middle band of fortunes which, as I have said previously, I think represent the most enterprising section of the whole population. I do not think the British people really dislike inequality. I have never found any of them who minded a man earning £5,000 a year if he came down to the factory and took off his coat and did a good day's work. That kind of inequality all British people, in their heart of hearts, admire; because they aspire to it themselves.

I quite agree that it is somewhat difficult when we come to the conception of inequalities of fortune as opposed to income. But we must make up our minds that if hon. Gentlemen opposite—for some principle of social justice which I think most of them hold—believe it right to wipe out private fortunes, they are wiping out the capital which nourishes our industry and agriculture; and they must find some substitute for it. It appears to me logically impossible to have the great expense of the welfare State, which we have now, if all the cost of it is to be laid upon the backs of the working classes.

Mr. H. Strauss

I think it was very much in the interest of our Debate that it was ruled that we might discuss these two Clauses together. Having regard to the admirable speeches to which we have just listened I shall detain the House for only a few minutes. I wish to deal with what seem to me, as to the previous speakers, to be two separate points; the discrimination against the family and the height to which the total duties are being raised. In my opinion those two things together are quite disastrous. I was astonished by one sentence of the right hon. and learned Solicitor-General in his speech on the last occasion. It seemed to me to be very characteristic of what looked like logic, but as a matter of fact was quite foolish. In resisting the Amendment put forward from this side the right hon. and learned Gentleman used these words: Either Estate Duty is wrong or it is right."—[OFFICIAL REPORT, 27th June, 1949; Vol. 466, c. 790.] thus implying that the height to which the duty was raised had nothing whatever to do with its merits. I cannot imagine a more short-sighted or a more foolish argument.

Let me take first the question of the discrimination against the family. I do not wish to repeat the admirable statement of the facts which has been made by my hon. Friend the Member for Chippenham (Mr. Eccles) and others. But let us see what is admitted. It is admitted that over a large section of all the estates in this country, if the testator leaves his fortune to a stranger, that stranger will be better off after this change in the law than before; while, if he leaves it to his wife and children, the wife and children will be worse off under the change of law than they were before. I have not heard any justification of that at all. On a previous occasion the learned Solicitor-General drew a pathetic picture of a maiden aunt, who, he thought, might not under the existing law get quite what she might otherwise get. I do not know why he thought that.

If this Finance Bill goes through in its present form, every well-advised person who has drawn a will will certainly reconsider all the legacies that he or she has left in order to minimise the great injury done to the family. But why should hon. Members opposite wish to do this injury to the family? It looks like a simplification of the law, of course, to abolish Legacy Duty and Succession Duty and only to have Estate Duty, but, if Legacy Duty and Succession Duty are the only convenient method for securing some advantages to the wife and family over the stranger, then I think we should certainly resist their abolition. I hope that before this Debate ends, some hon. Member opposite will say why the Socialist Party desire to do this admitted injury to the family. So far, we have not been told, though the injury to the family is now not disputed.

The other matter is the greatly excessive height of these duties, when we look at the rates in the Seventh Schedule. It is quite useless for Ministers to say that comparatively few people will be injured by this proposal. Even if it were true, and it is not, there is no real ground for being unjust to a few. It is thoroughly bad policy to discourage, and even to end, saving, nor will it further the policy, if any, of the right hon. and learned Gentleman the Chancellor of the Exchequer.

There are a few hon. Members opposite who, as my hon. Friend the Member for Chippenham (Mr. Eccles) said, may think it very desirable as a matter of social policy to wipe out great accumulations of wealth. Assume that that is a desirable end. I think that if they study the economists who have given the most thought to this subject they will find out that, if that is their object, there is no need to raise even the maximum rates of Estate Duty to anything like the heights mentioned in the Seventh Schedule. A rate of Estate Duty between 30 per cent. and 40 per cent. would itself in a comparatively short time wipe out great accumulations of capital. It is wholly unnecessary for any purpose which I believe hon. Gentlemen opposite have in mind to raise the duty to the heights now suggested. With other measures that they have taken, it clearly discourages and, I suggest, ends saving.

I know that hon. Members opposite can often satisfy their consciences by taking steps which will have these effects which they deny and then, a year later, they express extreme surprise that the financial state of the country entirely justifies the warning previously given them from these benches, the force of which they had hitherto denied. But I think even those hon. Members who have thought least should begin to think when they have these two Clauses before them. They should begin to wonder whether there is not something slightly wrong in a philosophy that says that it is right to benefit the stranger, the cats' home, the mistress or any outside body to whom the testator may leave his money, and it is also right to penalise the widow and the children.

5.45 p.m.

I ask them to think again of the figure which has been mentioned of the size of estate which falls within the mischief of this Clause, according to their calculations—an estate over £35,000. An estate over £35,000, with the £ at the value that it had before the last war, may have sounded a fairly big estate. But I wonder if an estate of £35,000, at the present value of the £, is the sort of estate which has been much mentioned even by hon. Members opposite when they have sought to rouse the passions of the mob against great accumulations of wealth.

Mr. Hugh Fraser (Stone)

What about the value of the £ in future?

Mr. Strauss

I doubt if I should be in Order if I went into that. No reason has been given for this differentiation against the family. If the only effective legal method of differentiating in favour of the family is to have Legacy Duty as well as Estate Duty, then I am against the abolition of the former. But, if there is an alternative method, let the Government and their skilled advisers advise us what that method is. What is quite certain is that they have not accomplished anything but injury to the family under the Clauses as they now appear in the Bill.

Secondly, I say that the height of these Estate Duties is obviously and demontrably too great. Some hon. Members have used the revolting word, "disincentive," which I imagine to be the latest jargon for what used to be called a "deterrent." Certainly, now we have deterrents to saving. I think that it is time that we stopped deterrents to saving. Thirdly, I say that even if it were true that only a few were affected, and it is not true, that is no argument in support of the Clauses. Lastly, I say that it is quite unnecessary to have duties of this height, if the aim in view is to end great accumulations of capital.

Mr. Haworth (Liverpool, Walton)

I did not intend to intervene in this Debate, but the very attractive way in which the hon. Member for Chippenham (Mr. Eccles) expressed his dissent from the Government's policy compels one to try to put the other point of view. In pursuing our Socialist policy and deciding that in this case an increase in Death Duties is justified, we are dealing with the problem which arises from our attempt to be just in the operations which we are carrying out. We have tried to be just to the people from whom, for instance, we have bought over shares in the various undertakings which we have nationalised.

If we try to transform our society and, at the same time, try to give the same amount of money to all the shareholders in the various industries, we encounter a problem which can only be solved by fiscal methods. If we say, as in effect we have said up to now, "We will guarantee you practically the same income, because we will give you a fair purchase price for the industries we take over," then it is only the Chancellor of the Exchequer who can rectify that position if we try, as we do, to give a greater share of the national income to those who, in our opinion, deserve it most—the people who are right down at the bottom of the scale.

Our view is that the more we spread out the national wealth, the greater the benefits to the whole of the community, even to the top people, because I think the hon. Member for Chippenham will agree that it is not a good thing morally or in any other way, that a few people should enjoy too much wealth. We are trying to remedy that position in the increase in the scale of the Death Duties, and it is because of the spread-over that we are improving the position of the vast mass of our people.

There are cries of poverty and of the hardships that are caused from the Opposition, but if one travels about the country or in London, one can see no diminution in the numbers of people who are enjoying great fortunes. If one goes to the Dorchester or Savoy Hotels, or indeed to any first-class hotels in London, one does not see any falling-off in the number of people who are living on a very high standard. I have not seen any difference in that respect, even with Death Duties as they are. There is no real falling-off in the number of very high incomes, though there has been some change in the division of incomes.

The people who are suffering most are the people in the intermediate stages; the salaried workers are the hardest hit. Those most affected are at the top and at the bottom, but those at the bottom are considerably better off, those at the top slightly better off, and those in the middle considerably worse off. That does not indicate, however, a great falling away in the direction in which the Chancellor is suggesting in this Clause. This change can only he made by fiscal methods of changes in taxation.

The other way would have been to appropriate the various industries, but we said that we would buy them out fairly, and, in our opinion, what is creating the difficulties is the fact that we took over these industries when they were practically bankrupt. We took over the coal industry when it was practically bankrupt, we guaranteed a full market price for it and gave to the shareholders in the industry a considerable amount of money more than the industry had been earning, and, for the first time, we have given to the workers in that industry reasonable conditions of work. The same thing applies to my own industry, the railways, which are bankrupt, not because of nationalisation—they would have been bankrupt anyway—but because we have to find £30 million in order to buy out somebody who had make investments in the railways in the past. As a result, we have been told that we have to change our outlook.

As a Socialist, I have been brought up to believe that the only source of wealth is labour, and that it is only labour that can create wealth. People invest their money, and we like them to do so, but their investment does not mean the creation of wealth. It is only the people who work who earn a return on those investments. [Laughter.] It may be comical, but it is true, and until we get down to that position, I do not see any other remedy than for the Chancellor to increase the taxation on the shoulders of the people who can best afford to pay it. For that reason, I shall support the Chan- cellor's proposal and oppose the Amendment.

The Solicitor-General

Hon. Gentlemen opposite have intimated that they desire to discuss this matter fully, and I thought that possibly it might be helpful if I intervened now to deal with part of their arguments. Their arguments have fallen mainly into two categories. One is the sort of argument which the hon. Member for Chippenham (Mr. Eccles) outlined regarding the general character and incidence of taxation, and whether it should be raised and so on, while the right hon. Gentleman the Member for Saffron Walden (Mr. Butler) put forward an argument the main burden of which was that we were doing injury to the family, and the hon. and learned Member for the Combined English Universities (Mr. H. Strauss) went further and said that we were not only doing that, but were discriminating against it. I am quite sure that all hon. Members regard this as a matter of great importance which we should discuss without prejudice or heat, and nobody so far has endeavoured to engender either heat or prejudice.

May I state quite dispassionately what we think, and why we have drawn this Clause as we have done? Of course, we accept at once, as I hope everybody in this House and outside it does, that the unity of the family and the preservation of the family tie are of prime importance to the future and welfare of this country. The question is whether, by this fiscal measure, we are in any way invading that principle. We think that we are not. I hope, without unduly restating what I said in the Committee stage, to put some aspects of the matter from the point of view which we take.

I have said that, to start with, in 98 per cent. of the cases, the testator or the intestate leaves less than £17,500. I pointed out to the Committee that, in the case of estates up to £15,000, the new rates are the same as the old Estate Duty without the addition of Legacy and Succession Duties, and that, indeed, is the case for estates up to £17,500. In that sense we preserve the position, and in the case of estates up to £15,000 they do not have to pay the 2 per cent. Legacy and Succession Duty. As for estates between £15,000 and £17,500 the combined duty is not raised beyond what Estate Duty was alone. That covers about 98 per cent. of the cases of death in this country either where there is intestacy or a will.

I think that any impartial observer must say that, so far as 98 per cent. of our people are concerned, it cannot possibly be said that we are invading that principle. Indeed, it would be a complete travesty to say that we were. It is true that, although we are not lightening the burden for the widow, except for estates between £15,000 and £17,500, we are at the same time lightening the burden of the relative who is not so close as the wife and also for the stranger, because we remove from them the burden of having to pay Legacy Duty and Succession Duty. We put them on a par in cases of estates up to £17,500, which covers the vast majority or 98 per cent. of the people in this country.

Next, it is said that we are removing a preference in favour of the wife and child. We are preserving the rule of the law, under which at the moment, upon the death of a spouse upon whom money has been settled by his or her deceased spouse, Estate Duty is not payable, so that there is to that extent a preference given in the cases of wife and child, and that exists not only in cases of estates of £17,500, but below. That is the position with regard to the majority of people in this country. It is then said that we are invading the principle in regard to estates over £35,000.

In the case of the other estates of between £17,500 and £35,000, the new Duty is the equivalent of a combination of the three existing duties. It is said that when we get to estates above £35,000, we are beginning seriously to invade the principle that there should be some preference in favour of the family. I ask the House not to base their arguments on the great principle of the sanctity of the family, because that has nothing to do with it. It is true that we are now, in the cases of estates above £35,000 and those up to £17,500, putting the relatives, the cats' homes and the wife on the same footing. We have one duty now instead of three, and we really think that that works out more fairly than the present system. It is true that we are not giving the wife and child in any case any preference. We do not think that justice requires that we should, nor that the principle requires that we should. We think it is proper to put them upon the same footing in relation to this combined duty.

Mr. R. A. Butler

Why, in that case, did the right hon. and learned Gentleman make so much in the earlier part of his remarks of the argument he advanced of the cases below £17,500? Why does he preen himself upon that, and then proceed to the opposite argument over the 2 per cent.?

6.0 p.m.

The Solicitor-General

I was not conscious that I was preening myself upon anything. I was saying that we are, in point of fact, lightening the burden between £15,000 and £17,500. In the case of estates of up to £15,000, the wife and child simply pay what they paid before by way of Estate Duty only. That is to say, the new compound rate is only the equivalent of the old Estate Duty by itself. I said also that in the case of small estates, relatives, more distant relatives and strangers are advantaged in that they do not have to pay the Legacy and Succession Duties which they otherwise would have to pay. In the case of larger estates, as I said, they are all put upon the same footing.

It is perfectly true, if one works it out arithmetically, that supposing a whole estate is bequeathed to a stranger in blood, that stranger, inasmuch as he would otherwise have had to pay 20 per cent. Legacy or Succession Duty before this Clause was introduced, by not having to pay it now, is considerably advantaged. He has to pay much less. It is also true that the family has to pay more than it otherwise would have to pay, but I shall make two comments with regard to that. The increase which the family has to pay is only to a certain extent attributable to the combination of the duty. It is largely attributable to the lift in the rate of duties as a whole in order to produce the £20 million. Therefore, the net result is that where there is a stranger or a relative not so close in blood as a wife and child, or where there is a wife or child, they are put upon the same footing.

During the Committee stage, I sought to justify that by asking the Committee to look at the normal state of affairs. In the ordinary case of a large estate, it is not left to a stranger or to a cats' home, and, thank heaven, it is not left to a mistress. That is not the normal practice of this country, and I hope it never will be. It is normally left to a close relative; if there is a wife and child, it is left to them. They get the whole of the residue, but the estate does, in point of fact, carve out modest legacies to dependants. I talked about dependent aunts, and so on, and hon. Gentlemen opposite poured a certain amount of scorn upon it. But it should not be treated with levity because, generally speaking, such people are dependent on the legacy. In their case, we have taken the view that the present scale of Estate Duty and Legacy and Succession Duties operates unfairly because, as I pointed out, we might constantly get a case of a son who is young and in the prime of life, and who can earn his living, inheriting £40,000 or £50,000 on which he has to pay 2 per cent. under the present rate of Legacy Duty.

The relative who gets £5,000 or even £1,000, which means a great deal more to him or her—having regard to the fact that they are generally too old to work—than the £40,000 or £50,000 means to the son still young and able to earn his living, has to pay 10 or 20 per cent., as the case may be. We do not think that is fair, and that is what I meant by saying to the Committee that we thought that the present system works unfairly. It is much too burdensome upon the relative who is dependent upon the small legacy he or she receives, and it is too favourable, by reference to that relative, to the son who inherits the whole of the residue. All we have done is not to discriminate against the family—and in saying that, the hon. and learned Gentleman the junior Member for the Combined English Universities was really misdescribing the position—but to put them on the same basis. That is the way in which we have reconstructed this duty.

If it were the case that an estate is nearly always left to a stranger, and if it were not normally the case that an estate goes to a wife or child with moderate legacies carved out of it for relatives, servants, and so on, there might be more to be said for the view that we should not take off the burden to such an extent in the case of the stranger and increase it in the case of the family. But that is the abnormal case; it is the case which one comes across far more rarely than one comes across the case where the estate goes to the nearest relative, the wife or the son. For those reasons, we do not think that the change we have made is unjust, and we certainly repudiate and resent the suggestion that it in any way interferes with the sanctity of the home.

We ask hon. Members on both sides of the House not to judge this matter as if it were the normal thing for testators to hesitate whether to leave their estates to their wives or to their mistresses. That, fortunately, as I have said, is not the state of affairs in this country. The normal thing is for the testator to leave his estate to his wife and to make provision for his other dependants, servants, and so on. For those reasons, we think that the new form we have embodied in the Bill works out fairly and reasonably.

I said that two testators out of three, in the case of small legacies, evinced the desire, by the terms of the will, that such legacies should be free from Legacy and Succession Duties. Of course, it is perfectly true that by having his will properly drawn, the testator can carry out his intention. In the change we are making, we are seeking to reflect in the state of the law, the desire evinced by two out of three testators in leaving the small bequests which they make to dependants and servants free of Legacy and Succession Duties. I hope hon. Members will agree that it is not correct to accuse us of invading the sanctity of the home, and that those are reasons which justify us in the new form of duty we are seeking to put on the Statute Book.

The right hon. Gentleman opposite said that this was simply administrative convenience. It is very far from that. We are firmly convinced that accountants, solicitors, members of families, legatees and everybody concerned in a bequest of any sort are gravely inconvenienced by not knowing when they have paid the last amount which they are called upon to pay. It is to their advantage to know once and for all, what is to come out of the estate by way of Estate Duty, and when they get the residue or their legacy, to know that nothing is to come out of it. As things stand at the moment, a legatee receives his legacy and then finds that he has to pay more out of it. It is that which we seek to avoid in endeavouring to simplify the whole of the Death Duty code.

With regard to the question of agricultural property, the rate at which we are giving relief—45 per cent.—is, as the House knows, just over the average rate under the present system. With regard to the lift, that is to say, the £20 million, only £300,000 of that will come from agricultural estates, and I do not think it can be said that there is very much ground for the apprehension expressed by the hon. Member for Chippenham in his speech when he said that would have the effect of causing many estates to be broken up into smaller and uneconomic units.

With regard to the incidence of the duty upon small businesses, one has to remember that it is only in the case of estates over £35,000 that there is any increase in the rate. In the normal case, a small business would come either wholly or partly below that £35,000 limit. For those reasons, I hope the House will agree that there is no ground for wishing to delete this Clause. It only proposes to bring about a change which is necessary, and which is sensible in its framing.

Mr. Eccles

Could the Solicitor-General tell us how much of the £20 million it is expected will come out of estates of between £35,000 and £75,000?

The Solicitor-General

I shall have the figure obtained, but I can tell the hon. Gentleman that the great proportion of the £20 million—I speak subject to correction—will come from estates of between the £35,000 and the £100,000 limit. I shall have the figure obtained and checked, and then possibly it can be given to the House during a later stage of this Debate.

Mr. Hugh Fraser (Stone)

When we listened to the Solicitor-General during the previous stage of the Bill I must say that we on these benches were not impressed by his argument. As one of my hon. Friends pointed out, one of the most extraordinary answers the Solicitor-General put forward at that time was that either these duties are right or wrong. That was the burden of his argument last time. He may become a learned judge one day and say that imprisonment is either right or wrong, whether it is 15 or 20 years. We have the same attitude in this euphemistic talk about the so-called "lift," as though it were something happy and glorious, like the advertisement for American cigarettes, "Get a lift from a Camel."

In point of fact, this is an imposition of the heaviest sort. This is another example of scraping the barrel to its uttermost depth. That is precisely what the Government are doing. They produce extraordinary reasons why these duties are right and proper. The Solicitor-General has gone even further in distinguishing himself in his argument this afternoon. One of the arguments which the Solicitor-General produced in the first half of his speech, as was pointed out by my right hon. Friend the Member for Saffron Walden (Mr. R. A. Butler), was that it is all right for families at such and such a level, but that above that level it is not quite so good for them. Is it a new Socialist doctrine that some families are more sacred than others? This is very much an "animal farm" argument, such as we have been having this afternoon.

Then the Solicitor-General said, "What we are really protecting is the maiden aunt of the fairly rich man; the maiden aunt or the mistress, as the case may be, should receive her bequest duty free." But such provision could be made if the will was properly drawn up. Surely, there is no need to defend that class of person against the possibility of the will being drawn on bits of old envelopes and left lying about. The serious arguments of the right hon. and learned Gentleman were put forward on the Committee stage, and they do not impress me. All that has happened is that the Government need £20 million, and are determined to get it. For that reason they have brought themselves into a quite absurd ideological position. The jump, or the "lift," falls heaviest on precisely those people who may be the most efficient and most dynamic—those who are making their way in the world, who have had considerable success and who may go well ahead. It is precisely those people to whom this duty is a grave disincentive.

6.15 p.m.

The next thing it attacks is the land. We must see that over the next few years something like a further £100 million is invested in the land, and it is thoroughly bad that there should be this disincentive against further investment. For the Government to do anything which will decrease production from the land is crazy. It is time that hon. Members opposite thought seriously about these matters. They know that it is manifestly unjust to make these impositions in the interests of the Socialist State and the Socialist Party. Hon. Members opposite ought to stop going in for vote catching, and do a bit of serious breadwinning for this country. That is what is needed. This form of taxation is destroying the guts of our economic structure.

Lastly, I come to the question of family legislation. The Solicitor-General said that this proposal is not in any way aimed against the family, but I submit that the effect of it is. One sometimes wonders whether the Chancellor of the Exchequer, being a younger son, is hankering to return to the succession system under which younger sons inherited the home. The effect of this imposition will be not in favour of the family but in favour of relations. We know that in certain areas of the world there are remote tribes where the uncle is the most important person, and where the act of marriage is not connected with birth.

The principle behind this proposal is aimed against the family, despite the fact that the Chancellor is a leading person in a movement known as "Christian Action." I believe that any discrimination against the family is wrong. The Government are trying to get the maximum amount of money to pay for their own dissolute and ridiculous expenditure; and they are putting up wise and admirable people such as the unfortunate Solicitor-General to put before the House the most ridiculous arguments to which it has ever listened.

Mr. Selwyn Lloyd

I should like very shortly to reinforce the forceful remarks of my hon. Friend the Member for Stone (Mr. H. Fraser). I think the only remark of the Solicitor-General with which I can agree was his remark to the effect that it was too hot for heated controversy. Apart from that, I was not in the least convinced by anything he said. He began by saying that 98 per cent. of the people were not affected by this problem at all. It is not true. We believe that in this matter lies something which goes a very long way towards continued prosperity and production of wealth in this country. It is quite wrong to say that 98 per cent. of the people are not affected; they are extremely concerned.

The first argument with which the Solicitor-General dealt was the simplification argument. I think we all agree that it would be a good thing to simplify these three types of duty, but we are not prepared to see them simplified if it means that the consanguinity principle is to go. How can he seriously deny that the consanguinity principle is affected in view of the figures? I have quoted some of them before, but I do not apologise for quoting them again. In the case of a man who leaves an estate of £50,000 to his son, the son has now, under the new order, to pay £3,720 more than he would have had to pay had these proposals not been brought forward.

In other words, so I am told, the duty he will have to pay will be £15,500, whereas in the case of a stranger benefitting from the same-sized estate, the stranger will be £3,300 better off. I do not know whether those figures are correct or not, but they were given to me by an eminent chartered accountant and I do not think they are greatly wrong. The principle is that in the case of the man who leaves his property to his son, his estate will be very much more seriously affected. I say that that is a blow at the family, a blow for which no defence has been put forward this afternoon.

The right hon. and learned Gentleman has not dealt with that last argument at all. His second argument was, "It is a very good thing in the interests of the poor relative." The right hon. and learned Gentleman is always very courteous and one hesitates to be discourteous to him, but it really is brazen effrontery to expect the House to accept an argument of that sort, because the matter lies entirely within the power of testator. He can decide how much the relative is to get under the new regime just as he could decide it under the old regime.

The effect of this alteration may be that in certain cases the impoverished relative will be cut out altogether rather than derive any extra benefit, the point being that under the present law it lies within the power of the testator to decide how much the impoverished relative will get and it will equally lie within his power to make that decision under the new order. If the Government want to bring in something which will prescribe how much should be left to elderly relatives, that is a very different business; but under these proposals freedom of action will still be with the testator. Therefore, that argument does not carry us any further.

As my hon. Friend the Member for Stone just said, the real reason for this increase is clear. This proposal is dressed up in the same way as the increased duty on matches was dressed up as a benefit to the match-maker. In the same way, the relief of tax on national insurance benefits was dressed up, and the fact was concealed that it involved a further £10 million burden on the ordinary taxpayer. In this case it is an allegation of simplification and of help to the elderly relative, when what is really meant is to conceal the fact that it is the exaction of a further £20 million from the taxpayers of this country.

The Chancellor himself introduced this proposal, if I may say so, in very diffident words. Perhaps I may quote them to the House: Although, as I have stated earlier, there is not much further room for the equalisation of incomes by taxation, there is still a degree of inequality in the ownership of property, which may well be the subject of further adjustment."—[OFFICIAL REPORT, 6th April, 1949; Vol. 463, c. 2095.] I do not think these are frightfully enthusiastic arguments in favour of what is described as this "moderate lift."

Who will be hit by this proposal? I am told that much of this money will come from people who leave between £35,000 or £75,000. The hon. Member for Walton (Mr. Haworth) talked about people he sees at the Dorchester doing themselves extremely well. If they are in that class, they are doing themselves extremely well in order to get rid of money so that they will have less to leave on which Death Duties will be payable. But in fact, it is not people within that class who are those who go and spend their money in that way at the Dorchester. This proposal will hit a type of small estate, of family business, which I maintain represents a very important part of this country and which deserves every sort of encouragement.

We are in a pretty critical condition so far as savings are concerned. Figures have already been quoted. I gave some figures on the Second Reading of the Finance Bill showing that at the present time net personal savings amounted to practically nothing. So far as industry is concerned, although there is this figure of £550 million or whatever it is, it is conceded that a great proportion of it has to go back in order to replace equipment and machinery, leaving a net saving in private industry of £200 million to £250 million a year. Where are the other savings to come from? Presumably they can come only by compulsory savings from the public and, in view of the mounting expenditure, it looks as though the Chancellor has not very much chance of obtaining much from there.

Another aspect of the position is revealed in the figures for gross capital formation. The Chancellor, not very recently, talked about the Government's great capital investment programme. I have not the 1948 figures with me, but I think the 1947 figures for gross capital formation were £2,020 million. If one considers how that money was disposed of, it will be obvious that it was not too much. On one analysis I have seen it is calculated that replacement and repairs should have absorbed £1,175 million, that increase in working capital owing to the increasing cost of carrying stocks would be about £400 million and that expenditure on housing and various other capital projects, such as schools, etc., would be about £460 million.

If those items are added together, it will be seen that they come to an excess over the £2,020 million without any provision for new industrial plant and machinery. There was not in fact adequate provision for replacement of old plant and machinery and, therefore, there was some expenditure on new plant and machinery. But the figures show, in my submission, that we do not suffer from excess of gross capital formation and, therefore, to make an additional tax on capital is wholly wrong.

Like my hon. Friend the Member for Chippenham (Mr. Eccles) I looked up the old discussions on this matter in 1894 and I noticed with some interest a memorandum from Sir William Harcourt to Lord Rosebery, dated 4th April, 1894. He was dealing with some criticism of his proposals from Lord Rosebery, who was the Prime Minister of the day. Sir William Harcourt wrote: The fear as to the taxation of capital had some foundation 50 or 60 years ago when capital in this country was in deficiency. At the present time it is super-abundant and, not finding sufficiency of employment at home, runs to waste in Argentine and elsewhere. That is rather a curious and significant comment on overseas investment and Sir William Harcourt would no doubt be surprised to know that a subsequent generation has had to rely for their meat ration for one year on some of that money that had run to waste in the Argentine. In defending his proposals he spoke of capital being "superabundant." That is not the case in this country at the present time and an additional attempt to tax capital is, to my mind, wholly contrary to most of the things which the right hon. and learned Gentleman, the Chancellor, has been saying during the past year. The very fact that he includes within this Finance Bill a further measure taxing capital makes one doubt how much weight should be attached to the other things which he says.

Mr. Benson

There is, at any rate, one point of agreement between this side of the House and the hon. and learned Member for Wirral (Mr. Selwyn Lloyd), and it is that Death Duties as a whole are, at the present time, a great deal too complex and should be simplified. The Chancellor has attempted to do that fairly successfully. But if we make a change we invariably tend to affect somebody adversely. When listening to the language which hon. and right hon. Gentlemen opposite have used with regard to the effect of the changes upon the family, it is very difficult indeed to take them seriously.

6.30 p.m.

This change has been described as an anomaly. It is not an anomaly; it is merely a change. There is no particular reason why the old form of Death Duties, the old incidence of Death Duties, should have been chosen in preference. It has been suggested that the change is disastrous to the family. Those were the words of the hon. and learned Member for the Combined English Universities (Mr. H. Strauss), and I think someone else used the word "disastrous" as well. To use the language of hyperbole destroys any effectiveness a case may have—certainly the effect of the case put up by hon. Gentlemen opposite. What is the effect on the family? The Solicitor-General pointed out that 98 per cent. of the families in this country are not affected.

Mr. H. Fraser

That has nothing to do with the argument.

Mr. Benson

98.2 per cent. of the families are not affected in any way, and therefore this change cannot have a disastrous effect on those families. Surely that stands to reason. What about the other 2 per cent.? Is it really suggested that this change will undermine the other 2 per cent.? Hon. Gentlemen know it is nonsense. As a matter of fact, the whole of this problem of the stranger and the family has been puffed up quite beyond what the facts warrant. The Chancellor is asking for £185 million in Death Duties this year. To what extent is the stranger actually going to benefit because of that £185 million? By a very tiny fraction indeed. I know it is possible for hon. Gentlemen opposite to pick out certain ranges of tax and say that the change would mean this effect or that in the case of a specific estate, if this amount were left to the stranger. One can always pick out examples of that kind. But what is the actual weight of benefit? It is less than 5 per cent. of the total amount of tax. It is a very tiny fraction—less than 5 per cent.

But what is the definition of "stranger"? The right hon. Member for Saffron Walden (Mr. R. A. Butler) talked about mistresses and chauffeurs. It includes everyone further away than a brother or sister. The vast majority of the estates which are left to strangers, even by that definition, are really still left inside the family. The actual amount left to completely non-consanguineous strangers is a tiny fraction. Even where the money is left, it is, as everybody knows, frequently left free of all taxation. So that when we came to put this question of the stranger's inheriting as against the family into the proper perspective, we find it is really a very tiny little problem indeed, and to suggest that this change, which is a tiny little change so far as the actual amount of money involved is concerned, will have a disastrous affect on the family is to reduce our Debate in this House to a farce.

Mr. Assheton (City of London)

I do not want to bring this interesting Debate to a close, but I should like to make an observation or two.

The Solicitor-General

Would the right hon. Gentleman allow me? I gave a figure in answer to a question asked by the hon. Member for Chippenham (Mr. Eccles) with regard to the ranges of fortune upon which this £20 million principally fell. The figure I gave was not quite correct, and I am sure that it will be the desire of the House that the correct figure should be given. It is this. Of the £20 million net increase in the Estate Duty, approximately a quarter comes from estates between £35,000 and £75,000; one half comes from estates between £75,000 and £250,000; the remaining quarter comes from estates over £250,000.

Mr. Assheton

I am sure the House is most indebted to the right hon. and learned Gentleman for correcting the figures he previously gave, and I am sorry that my hon. Friend the Member for Chippenham (Mr. Eccles) is not here to hear him. I want to intervene in the Debate for only a few minutes. I spoke during the Committee stage on this subject. I want to make one or two observations with regard to some things that have been said, particularly by the hon. Member for Chesterfield (Mr. Benson). He made the case that this particular imposition was not to have a disastrous effect on the family. I should like to put the matter to him in a rather different way.

The Chancellor of the Exchequer comes along to the House with a new proposal for dealing with the whole question of Death Duties, and at first blush many hon. Members think there are attractions in the new proposal. It is a simplification, and we have so many additional complications these days that if any Chancellor or any Minister comes along with a simplification it naturally attracts a good deal of sympathy. It is only when the House comes to examine this more closely that it finds that there are a great many snags. The hon. Member for Chesterfield made the case that this is not going to be disastrous to the family. He said that 98 per cent. of the families would not be affected, and that as far as the remaining 2 per cent. were concerned—I am not sure how concerned he is about them—it was not going to be disastrous.

What I want to put to him is, that if we are to make a new plan for levying taxes such as the tax of Death Duty, why not make the best plan we can?

Mr. Benson

We have.

Mr. Assheton

I want to suggest to the hon. Member and to the House that the way this plan is worked out it is not the best plan that can be proposed in the circumstances. It was brought out when we looked at the figures that all the way up to estates of £67,000 the stranger was to gain, and that family was to lose all the way up from £19,000. I do not believe it is the wish of the country as a whole that in estates in general there should be considerable additional tax on close relatives who inherit property, and, at the same time, a considerable concession to strangers and distant relatives.

The figures have been quoted so often, but I should like the House to look at them again, because they are very interesting indeed. Take an estate of £4,000, which is quite a small estate. It goes to a stranger, and a stranger has to pay £1,100 less. If we take an estate of £8,000 the difference in the amount the stranger has to pay is £1,536 less.

Mr. Glenvil Hall

Did the right hon. Gentleman mean £4,000 or £40,000?

Mr. Assheton

An estate of £4,000. I think I am not going wrong. If the whole estate is left to a stranger, on £4,000 the difference in the amount payable is—I beg the pardon of the House—£784. In an estate of £8,000 it is £1,536. These are two comparatively small estates, and in both cases the stranger has to pay a great deal less, and I cannot for the life of me see why, taking the whole range of estates up to £35,000 there should be a considerable advantage given to the stranger at the expense of the family. That is the point I wanted to put to the hon. Member, without using any exaggeration.

Mr. Benson

What the right hon. Gentleman is doing now is to explain the anomalies in the past rates of taxation, not in the present one.

Mr. Assheton

I am merely saying that when the balance is changed the money is taken out of the pocket of the family and put into the pocket of the stranger, and I do not think that is a very sensible thing to do.

The hon. Member for Walton (Mr. Haworth)—whom I have the pleasure of meeting frequently on the Public Accounts Committee, and who always makes very valuable contributions to its proceedings—made one or two points which I think cannot be substantiated. I shall not argue with him whether or not it is only labour that produces wealth, because it would take far too long and is not wholly relevant to this occasion. Nor shall I argue with him the merits of having paid £1,000 million to railway stockholders and then subsequently finding that interest has to be paid, whether or not the interest is being earned. That would not have been the case, of course, had the railways not been nationalised.

But I do want to argue with him the actual effect of taking this money from the testators and using it as income. The hon. Gentleman seemed to think that in some way or other that would be of great advantage to the rest of the community. He suggested that when the railways or the coalmines were nationalised the shareholders were paid out with Government stock, and the only way to put that right was to take it off them when they died. That, he argued, would be a great benefit to the community. I suggest that when the money is taken off them when they die that wealth is used to meet annual expenditure.

The Chancellor is asking for approximately £170 million a year; he is using it as income; it is being used once-for-all. That wealth, I am sorry to say, is being destroyed, and it is a great pity that it is being destroyed. If it were used for capital purposes there would be at any rate a sounder economic argument than there is when it is used entirely for income.

Mr. Benson

It is not being used for income.

Mr. Assheton

Well, it is being used by the Chancellor in his Budget. He told us that he had a surplus of £14 million, and as this figure is £170 million—

The Chancellor of the Exchequer (Sir Stafford Cripps)

May I correct the right hon. Gentleman? I do not want any misunderstanding to arise in the country about this. He will appreciate that the capital expenditure of the Government, including loans to local authorities for housing, is met out of revenue, so that a great many capital items are discharged by the revenue receipts of the Budget, and that of which he is speaking is one.

Mr. Assheton

It is perfectly true that there are considerable capital commitments which are met by the Budget. It is also true that the Chancellor has drawn lines in three different places which make it a little more difficult for the general public to understand it.

Sir S. Cripps

I do not want them to be misled.

Mr. Assheton

It is none the less true, as the Chancellor will see, that over the last 50 years or more since these heavy duties were imposed in 1894, money has been taken year by year from the capital resources of the country and used as income. There is not the slightest doubt about that.

Sir S. Cripps

The right hon. Gentleman must not blame me for what Conservative Governments have done over the last 50 years.

Mr. Assheton

There have not been Conservative Governments in power all the time during the last 50 years. Moreover, we shall wait to see how the Chancellor's proposal turns out. He does not differentiate the £170 million in his Budget. He puts it in as an item, and we are perfectly justified in suggesting that the revenue being garnered for this tax is being used for expenditure.

The Solicitor-General told us that he accepted the family tie, and said that the principle of the family was not invaded. His arguments have not convinced the House, and I do not think anybody on this side of the House shared the view that the burden ought to be increased upon the family and reduced pro rata for the benefit of the stranger. A great many arguments have been used, and I have not yet found out how the Chancellor explains this to be a moderate lift. It has been shown how the lift is as steep as 70 per cent. in certain agricultural estates, and the Chancellor describes that as "moderate." He may argue that they were taxed too low before. I think he does. But it certainly is not possible to argue that a lift of 70 per cent. is moderate.

The argument of my hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) is one to which we must attach a great deal of importance. The country as a whole is only just beginning to understand the full significance of these proposals; it is only-just beginning to understand the great increased burden which is being placed upon the family; and it is only just beginning to understand the increased burden being placed on agriculture and upon moderate sized businesses. When the effects of all these things come to be felt in the years ahead we shall bitterly regret the change proposed today.

6.45 p.m.

Mr. David Renton (Huntingdon)

Liberal statesmen of a bygone age have been quoted in this Debate, and it is perhaps time that one who has a Liberal origin and background should express his views. Let us make no mistake about it: there is no difference between the parties in this House as to whether we should redistribute and transfer wealth by means of Death Duties. It was first done a long time ago by Sir William Harcourt, and the duties which he imposed have been increased from time to time by successive Governments of different complexions. What does matter, however, and what is between us in discussing these two Clauses, is how it is done: whether it is justly done and whether the results will be beneficial or otherwise to the people as a whole.

In the first place, I suggest that when dealing with other people's property, whether it be the property of rich people or of not so rich people, we should remember that the people of the country probably feel that, if the Government cannot act fairly in a big way and with regard to big estates, they are not likely to be capable of acting fairly in smaller ways and with regard to smaller people. It is, therefore, as important that we should be just where the larger esates are concerned as where much smaller ones are concerned.

I was appalled to hear the Solicitor-General, with all his courtesy and charm, say not once but several times—as be has done since this Bill was introduced—that these Clauses do not interfere with the sanctity of the home. One cannot find words to express one's views of such a remark made in such a glib way. Hon. Members have shown us clearly how this proposal does interfere with the sanctity of the home. I would only repeat the remarks of the right hon. Member for the City of London (Mr. Assheton) when he pointed out clearly what the net result will be if these Clauses are accepted; how in some estates wives and children will be worse off, while in comparable circumstances those who have no ties of blood, who may have only the crankiest of relationship or affinity, will be better off than they would have been before.

For the Solicitor-General to say that this does not interfere with the sanctity of the home is palpably absurd, especially when we realise that an estate of £35,000—which, to use modern jargon, is the "dead line" in this matter—even if no duties were deducted from it at all, would at 3 per cent., deducting 9s. in the £, produce a yearly income of only £577 10s. But by the time the duties have been deducted the widow will find herself living on something like £1 a day. Therefore, to say that this figure of £35,000 affects—as I think was implied in the arguments of hon. Members opposite—people who are in any case very well able to look after themselves, is clearly incorrect. I was surprised that the hon. Member for Chesterfield (Mr. Benson), of all hon. Members, should advance in defence of these Clauses the housemaid's traditional excuse, by saying that in any case this is a very small matter affecting only a very few people and involving not a very large amount of money. What is important is that we should get our principles right. That is far more important, perhaps, than the quantities.

The other matter we should bear in mind, on an occasion like this, is that if we are not very careful we shall defeat the object which Members on both sides have in attempting to redistribute wealth, as it has been done in the last 50 years. The hon. Member for Chippenham (Mr. Eccles) pointed out very clearly that, if we are not very careful, we shall inflict on the masses of the people of this country a greater burden of taxation than they would otherwise have to bear; that is, if we so redistribute wealth that there are fewer high incomes on which Surtax is paid.

I am not in favour of the unlimited accumulation of wealth; I am in favour of Death Duties; but I do say that this has to be done very carefully. The Government, in spite of the attitude of the hon. Member for Walton (Mr. Haworth)—who has given an example of the kind of oratory more frequently heard from platforms outside this House, and Communist platforms at that, when dealing with serious fiscal and economic matters—have succeeded in making the rich poor without any evidence whatsoever being given that the poor have become richer. I say that with all respect to the hon. Member, because I know he is a very sincere Socialist and thinks that he is a moderate one.

Mr. Haworth

I tried, very inadequately no doubt, to show to the House that the reason we had to take this money was that we had to pay it back; it is because of having to draw the money to pay it back, usually to the same people.

Mr. Renton

If the hon. Member seriously believes that the money which is taken in Death Duties finds its way into the pockets of the poor, he had better attend even more diligently to his work on the Public Accounts Committee.

I feel it is important that the Liberal view, which has permeated the ideas of many members of both the Socialist and Conservative Parties, should be expressed, and I hope that the other section of the Liberal Party will be spurred by my somewhat provocative remarks to say something on this important matter. This is a line of thought and action which was started by our forebears many years ago, and it is up to us to see that we bring it to a sensible conclusion so that its whole object is not defeated.

General Sir George Jeffreys (Petersfield)

My right hon. Friend the Member for the City of London (Mr. Assheton) has dealt with the objections to the taxation of capital and spending the proceeds as income, so I will not labour the point. I will merely say that if an individual does this sort of thing, he is considered to be on the road to ruin; yet the sum of all individuals' capital constitutes the nation's capital, which the Government are dissipating like the individual who spends his capital, as many are compelled to do nowadays by the Government's policy, the Government therefore losing the income by confiscation of the capital. The capital in the hands of individuals produces income. It produces Income Tax for the Government, and that tax the Government will no longer get when they have confiscated the capital which produces it.

My right hon. Friend has pointed out how the Government's policy must militate against savings. Why should anyone save if the Government are to take the money and the savings? Is not the provision for children and dependants the greatest incentive of all, both to making money and to saving money? I know of no greater incentive, and I do not think there is one. The Government are not only taking as much as they can, but are now preventing widows and children from succeeding on better terms than non-relatives. There may be arguments for Death Duties on a moderate scale. Personally, I do not like them at all, and I do not pretend to like them. There may be arguments for spending the proceeds on capital expenditure, or possibly on the repayment of debt, but there are no valid arguments for Death Duties on the present huge scale, and for spending the proceeds as revenue.

We have heard a great deal from hon. Members opposite about the undesirability of large fortunes, but if they had said the undesirability of fortunes of any kind, medium, moderate or large, they would have been nearer producing arguments on their own ideas for this Bill. They have quoted the undesirability of large fortunes as reasons for confiscatory taxation, but they do not consider whether it will do any good, as far as I can make out, or where the revenue is to come from when they have abolished income-producing capital. The fact is they are more concerned with doing harm to those who are, in general, their political opponents rather than with doing good to anyone at all.

The Solicitor-General repudiated any idea on the part of the Government of any action against the home. We all know the old song to the effect that "Be it ever so humble, there's no place like home." I venture to suggest to hon. Members opposite that, apart from humble homes, there are less humble homes, there are moderate homes and there are even noble homes, and that to those whose homes they are there is no place like home. The Chancellor of the Exchequer is definitely taking action to break up all but the humble homes in the country—[Laughter.] It is not too much to say that. It is already the result of the Death Duties. I have no doubt that hon. Members opposite are laughing at that.

Sir S. Cripps

It is laughable when 98 per cent. of the homes, the humble homes, in this country have nothing whatever to do with this point.

Sir G. Jeffreys

The right hon. and learned Gentleman no doubt has a great deal of knowledge of the ordinary life of the country outside the Treasury and the House of Commons. If he would reflect on that, he would realise that what he has said is definitely not the case, and that large homes are being broken up wholesale, as well as many of the moderate homes.

Sir S. Cripps

What the hon. and gallant Member said was "the most humble." He said the majority of "the most humble homes."

Sir G. Jeffreys

I beg the right hon. Gentleman's pardon. I think he misunderstood me. I said "all but the humble homes." I said that the largest homes and a great many moderate ones as well were being definitely broken up owing to his policy. I think that is a correct statement.

Sir S. Cripps

I apologise. I certainly thought I heard, as did my right hon. and hon. Friends, the hon. and gallant Member say "all the more humble homes."

Sir G. Jeffreys

It is perhaps a little outside the point, but we are now not at war; nevertheless, the same rule applies as regards Death Duties on those who are killed in action, which is definitely another blow at the home. The Treasury are pleased to take the life of a man who is killed, and if he has any property it takes a large slice of that, too, leaving his widow not only in sorrow and bereaved, but often in serious financial embarrassment as well. Though they make a generous gesture by offering her a pension of perhaps £120 a year, to say that that is not a blow at the home is stretching words to a very great extent.

I will not labour the point any more. I believe that this policy is disastrous. It is unsound financially to compel people to realise their capital and then to take it and spend it as income on a very large scale. In the end it will cause the Government to lose revenue, and that revenue will have to be found somewhere else, possibly from the very much poorer stratum of the population. I suggest that this is a very definite blow at the home, and is aimed not only at the home itself, but at the family which inherits the home.

7.0 p.m.

Mr. Ivor Owen Thomas (The Wrekin)

I did not intend to intervene in this Debate, but I am prompted to do so by certain of the arguments which have come from the Opposition. I am rather amazed at their constant concern for family life. I look down the proposed scale of rates of Estate Duty in the Seventh Schedule, and I gather that what concerns hon. Gentlemen opposite is the medium sized estate. In terms of figures I do not know what a medium sized estate is, because I am not even on the bottom figure in this list, nor are the vast majority of the people of this country. Millions of families in this country have not yet reached the quite modest achievement of a £2,000 estate, which is the lowest figure in the list in the Seventh Schedule.

When I hear arguments about the proposed new rates breaking up family life, my memory goes back to the days of the means test, which was instituted by a Tory Government in the years before the war. I think of the hundreds, nay, thousands of families in South Wales, which were broken up by that dastardly policy practised by the Tory Government in those years.

Mr. Renton

Does the hon. Gentleman deny that there is still a means test in certain instances?

Mr. Willis (Edinburgh, North)

Not a family means test.

Mr. Thomas

A means test may mean one thing or another. In fact, it may mean many things. What matters is what is left when any duty is imposed in the form of Estate Duty or what is left when a means test is applied, as it was applied in the days when the Tory Government were in power, particularly to the humble homes of working-class families in industrial areas. Unemployment was rampant in those days, and there was no assured income for thousands of families. The last resort was an application for public assistance. The Tory Government applied a means test, which literally meant the breaking up of thousands of ordinary working-class families. When I see the crocodile tears coursing down the cheeks of hon. Members opposite as they make their plea for the people affected by this range of Estate Duty, I am amazed at their effrontery.

Let us take the medium sized estate in this Schedule. Presumably hon. Gentlemen opposite are not concerned about the effect on the £1 million estate. I would not worry very much if I were to inherit the remainder of a £1 million estate even after 75 per cent. had been taken by the Chancellor of the Exchequer; it would give me a fairly good start in life if I were the youngest son of a so-called noble sire. On an estate of £15,000, which is a medium sized estate, duty of 10 per cent. means a payment of £1,500. That leaves £13,500. If the imposition of Estate Duty of that kind is going to result in the breaking up of family life I am certainly amazed. It is sheer nonsense, and it does not stand the light of reasonable criticism or argument. I hope, therefore, that for the sake of what remains of their good name in the field of logic and real honesty in political debate, there will be no further contributors from the Opposition to the Debate on this Amendment.

Viscount Hinchingbrooke (Dorset, Southern)

I am sure the House enjoyed the incursion of the hon. Member for The Wrekin (Mr. I. O. Thomas) on the subject of Death Duties, and I trust that the House will hear from him again. His speech seemed to be an admixture of "It is more blessed to give than to receive" and sweet revenge for the Socialists. If he looks upon Death Duties in that light then I think he has yet very much to learn.

The Debate has centred round two things—what is left of the Death Duties and the elimination of the discrimination as between relatives and non-relatives. It was because the Solicitor-General chose to combine both the principles, in replying in such an intricate way, that on this side of the House we were unable to follow what he said. He reminds me of the electronic brain in Manchester University. The scientists, or Members of the House of Commons in this case, set up the conditions for the apparatus by their speeches, and then the brain responds, but it produces an answer on a cathode ray tube which nobody understands. Laymen as we are, we are not always able to follow all the legal intricacies in the speeches of the right hon. and learned Gentleman. That was our position. He did not make his meaning clear, and he did not deal faithfully with the points that were made.

I deplore the increase in Death Duties. I think that they are extravagantly high and do grave social damage. I want to make a comment in passing. I shall deal more specifically with the main part of what has been said. I deplore the fact that neither the Socialist Party nor any other party over the last 20 years has been able to devise a principle in Death Duties which married wealth to responsibility. Except in the case of agriculture, which is specially treated, there has been no attempt to set aside the case on the one hand of the man who has ended his life, with, say £2 million in securities from which, on his death, the duties were extracted by the Treasury and the residue went to some distant relative, from, on the other hand, the case of the man who is surrounded by a multiplicity of responsibilities in a firm, a business or an estate.

Farmers, bankers, merchants, lawyers, manufacturers, heads of distributive houses and hundreds of other important men and women in business end their lives and their estates are taken and subjected to penal taxation. In the process of that penal taxation their share in the business is broken up, although it may have been a most vital one. It is handed over to someone else. The business may be forced into becoming a limited liability company. The shareholders take over, and the family interest disappears. The whole connection is lost. Both political parties ought to turn their attention to the possibility of differentiating sharply between on the one hand the case of men and women whose wealth is proportionate to their responsibilities and, on the other hand, the case of men and women whose wealth is absolutely intact and does not affect the lives and businesses of others.

7.15 p.m.

I should like to say a word or two about the principle of differentiation. We feel that the same differentiation should have been carried through into this Budget this year and should apply to the enhanced scheme of Death Duties. Here the Solicitor-General was not I think entirely accurate in what he said. He told us that 98 per cent. of persons leave less than £17,500 and are not touched by what is done in this Clause. I have before me a table which shows that the destruction of this principle of differentiation proceeds upwards from estates valued at £4,000. That is exactly what we complain about. All the way up from £4,000 to estates of the greatest magnitude, the Chancellor has made a change this year between what a man leaves to a distant relative or stranger and what be leaves to his widow or to a close relative. We are not trying to dispute the right of the Treasury to exact duties, but are trying to maintain the differentiation that always existed between those who were close and those who were further away.

My right hon. Friend gave a figure for an estate of £4,000. It is quite wrong that the Chancellor should come along and say that a man's estate should pay £784 less this year than it would have paid last year in leaving the money to a stranger. In the case of an estate of £23,000, the difference is made up this year with £286 more in duty when the estate passes to the widow or lineal descendant, and £3,358 less when it passes to a stranger. That is the kind of example of which we complain. The Chancellor decides to take so much money every year in Death Duties. This year he has made a change in the principle. We ask: Is it right for him to take more this year than he did last year from the widow and less this year than he did last year from the mistress or the cats' home? We think that in this matter the Chancellor is devoid of the finer sensibilities.

Sir S. Cripps

As I have to go in a few minutes, perhaps I may be allowed to address the House and to give my views on points which have been raised. The first is as to the quantum of Death Duties, that is the general financial point whether further charges should be made upon the estates of deceased persons. The second point is the question of how those charges should be levied.

As regards the first point, I do not think that any further arguments are required than those which were put forward in the Budget speech this year. Though we have by taxation done a great deal to bring incomes into a more equal relationship than they were originally, we have not recently done very much by way of Death Duties to bring estates into a more equal relationship. There still remains plenty of opportunity for bringing these estates into a more equal relationship by the imposition of further Death Duties. That principle I expressed then as being the basis, or the reason, for putting forward increases in Death Duties at this time.

The second point, which has occupied more of the Debate than the first, is as to whether any damage is done to the family life by this method of taxation. I am bound to say that I do not take quite such a depressed view of the sanctity of home life as to think that it is affected by 2 per cent. or 20 per cent. Succession or Legacy Duties. I believe there is something a good deal deeper in it than that. I hope there is. So far as 98 per cent. of the families of this country are concerned, it must be so, because that incidence does not affect them at all. The question is whether it does affect the other 2 per cent. —

Mr. Assheton

Whether it is a better plan?

Sir S. Cripps

No, the point with which I am dealing is whether, as I am accused of doing, I am destroying the sanctity of family life. What does "destroying the sanctity of family life" mean? It is a very easy and glib phrase to use. How does one do it by altering the charge of a Death Duty? Is it really to be said that the sanctity of family life depends upon the amount which is charged on an estate when it passes from the head of the family by death to dependants? Surely, if this is the cash method of assessing the sanctity of family life, it is really in the hands of the testator. It is a matter of where he leaves money which may have an effect. One knows the terrible effect it sometimes has in a family when a large sum of money is left or divided in ways which the family did not expect.

Colonel Dower (Penrith and Cockermouth)

I do not think that the Chancellor of the Exchequer has quite got the point. The point is that when a person dies, his wife and his near relatives are now regarded by the State as not being in any kind of preferential position to strangers. In South Africa and other countries, which have high rates of Death Duty, there is no Death Duty at all when a man dies and his money is left to his wife.

Sir S. Cripps

This is a matter of whether one believes in the free will of the testator or thinks that the State ought to take part in the allocation of the testator's estate. Personally, I have always taken the view that it is better to leave that matter to the free will of the testator. Let him do as he likes. Leave him a fair deal.

This alteration in the Death Duties will not make the slightest difference to any testator who likes to re-adjust his will. He can re-adjust it to give exactly the same results as he would have got under the old system if he wishes to do so. He will have time to do it. That is why we did not introduce this at the time of the Budget, when the Budget Resolutions are ordinarily introduced; we wanted testators to have time to reconsider the effect on their estates and make whatever alterations they liked. It is entirely and absolutely in their hands. If they think that under their existing will a more distant relative will benefit at the expense of a close relative, they can make the alteration in the sums they leave to the two, and if they wish to do so, that puts them in exactly the same position as they were before.

We believe as a matter of principle that it is better on the whole to have what is called the estate duty principle rather than the inheritance duty principle. I am aware that the inheritance duty principle has been adopted in many countries—it has been adopted in many of the Commonwealth countries—but very strong arguments have been used against it and in this country 90 per cent. of our Death Duties have always been on the estate duty principle.

The fact that between 66 and 75 per cent. of testators today disregard the Legacy and Succession Duties by leaving their legacies free of duty, so that the duty falls on the remainder, shows that it is not a popular form of taxation. The fact that for a long time 90 per cent. has been collected in the form of Estate Duty and that the great majority of testators avoid the Legacy and Succession Duties should be sufficient to show that, of the two, Estate Duty is the one that anyhow suits us better. If we are to have a simplification—everybody agrees that it is desirable—we are obviously simplifying it on the basis of the most acceptable form of taxation, which is Estate Duty.

I hope that hon. and right hon. Gentlemen opposite will not confuse the issue by thinking that somehow or other we have taken away the free will of the testator. We have done nothing of the sort. We have given him a much greater free will than he had before, because there are no longer any elements in the duty which tend to constrain him in a certain direction. It seems to me that, on the whole, that will be a desirable state of affairs for the testator. We take the amount which we consider right over the whole estate, and he is left, without any influence one way or the other, to divide it exactly as he likes, and he can do that after this Bill just as well as he could before. There is really no argument against this method of altering Death Duties so as to make them far more convenient and much more consistent, subject to a better graduated scale than we have ever had before, and something which is more practical in use both for those who are to represent the estates of deceased persons and for the taxing authorities.

Mr. Frederic Harris (Croydon)

The Chancellor has restated the Government's attitude to Death Duties. The point of view of both sides has been put clearly before the House. The hon. Member for Walton (Mr. Haworth) seemed to base much of his argument that the effect of Death Duties cannot be very serious in respect of estates of this size, on the fact that he goes to places like the Dorchester and sees plenty going on there. If an hon. Member is to participate in a Debate concerned with this sort of legislation, he ought to understand a little more about what must be going on in such places. It is apparent that today much of the expenditure going on in such places is out of capital. People are very regretfully spending their money from estates because of the effect of taxation upon death. There can be no doubt that capital is being expended very fast as a result of that, apart from the fact that people use places like that in an effort to get export business, for to do that they must entertain people on that scale.

Another hon. Member explained what his point of view would be if he were privileged to be left a large estate. He forgot a very material point, and that is that having to realise on such estates in order to pay Death Duties, causes tremendous worry to all concerned.

7.30 p.m.

Mr. Ivor Owen Thomas

If the hon. Gentleman is in difficulty, or if he knows of any of his hon. Friends who have a million pounds estate to dispose of, and they are in difficulty about finding suitable legatees, I will endeavour to remedy the deficiency if he will give me details.

Mr. Harris

I am sorry that the hon. Member will not see my point. All I am saying, quite clearly, is that when estates are left today, the Death Duties are so high that the estates have to be broken up, and therefore it is obvious that to increase the Death Duties in any way, is an obvious design on the part of the Government to break down one estate after another. We have been discussing all this afternoon the effect of these duties, and I cannot understand why we cannot talk from the point of view of saving £20 million instead of looking to Death Duties for a further £20 million. As I understood the Solicitor-General's arguments, they were based on the fact that this would be more simple. I do not think anyone in this House could grumble at any simplification of administration—that is all to the good—but why has there to be a simplification of administration and at the same time an additional burden by way of taxation?

Mr. Speaker

I must point out that expenditure is outside the scope of this Amendment.

Mr. Harris

I am sorry, Mr. Speaker, but I was trying to refer to the arguments which have been put forward. I will end by saying that instead of considering putting on to those with estates another burden of £20 million, surely we should try to cut out the need for additional expenditure.

Mr. Mott-Radclyffe (Windsor)

I have considerable sympathy with the Solicitor-General in his obvious difficulty of trying to argue a rather threadbare case. The speech of the Chancellor of the Exchequer did not tally entirely with his speech. The Solicitor-General's argument was that he was trying to protect the aged aunt who was a beneficiary under a will; the Chancellor's argument was that he was removing any pressure upon a testator to leave his money either to his family or outside it. The average individual in this country does not need any advice from any member of any Government on how to make his will. Let him be free to make his own mistakes as he wishes.

I cannot conceive of any worse argument to put forward in favour of discrimination against a near relative than the argument we have heard this afternoon from right hon. and learned Gentlemen and hon. Gentlemen opposite. The argument appears to be that since 98 per cent. of estates are not touched by this Clause, because they are below £17,500 in value, the other 2 per cent. do not matter. In other words, as a general principle the Government think it is sound that there should be no discrimination against the near relative up to £17,500 only.

Since when does a principle cease to be a principle above £17,500? If a principle is right, it is right up to 100 per cent., and not only up to 98 per cent. Why should we in this House do injustice to even 2 per cent. without making a protest? It is a pretty grim outlook for the future if, in spite of all the appeals from the Chancellor for the creation of new wealth, the Government envisage that 98 per cent. of the value of future estates will be less than £17,500. That does not show much hope for the creation of the new wealth which the Chancellor demands to meet the financial strain of the enormously heavy Government expenditure.

The hon. Member for Walton (Mr. Haworth) made a revealing speech. He said that when he now went to the Dorchester Hotel he could not see any evidence of less luxury than he saw before. Apparently he saw plenty of his old friends. I have no doubt he did. I have no doubt that he saw plenty of hon. and right hon. Gentlemen from the Front Bench opposite. I have no doubt that he saw some of his colleagues from the Railway Executive—[An HON. MEMBER: "And the Coal Board."] What else did he see? He saw other men and women doing exactly what my hon. Friend the Member for North Croydon (Mr. Frederic Harris) said, "blowing" their capital because they would rather "blow" it at the Dorchester than allow the Chancellor to spend it as he wishes after their death.

Mr. John Lewis (Bolton)

Is the hon. Member a shareholder of the Dorchester?

Mr. Mott-Radclyffe

No, I am not a shareholder and I have never been to the Dorchester at my own expense, but if the hon. Member would like to invite me there, I should be glad to accept.

This lift, as it is called, in the incidence of Death Duties makes nonsense of the appeals of the Chancellor for the production drive, because the urge which impels a man forward to increased efforts is the urge to save for his children and to see that they have at least as good a start in life as he had, and preferably a better one. It is a serious matter that so heavy an increased burden should fall on the middle income groups, that is to say, those who leave estates between £20,000 and £40,000 in value. This cult of the mediocre is dangerous because, on the whole, progress is achieved not by the man of ordinary ability but by the man of extraordinary ability, if the man of extraordinary ability is not permitted to build up something for his family, much progress that might have been achieved is not achieved and the ordinary men and women do not benefit.

In regard to agriculture, I do not wish to repeat the arguments used already today and in the discussion last week. The Chancellor is in the difficulty that he cannot have his cake and eat it. He has told us that we cannot do so, but he cannot either. From time to time agriculture, like every other industry, needs new capital which is what might be called a blood transfusion. To act on the principle that the more a man improves the value of his agricultural estate, the more he penalises his successor and the less likely he makes it for him to succeed, is not the way to attract fresh capital into agriculture. The right hon. and learned Gentleman must understand that the capital sums available for investment in agriculture can either go into buildings and equipment and towards improving the land generally, or they can go into his own pocket in the form of Death Duties, but they cannot go in both directions at the same time.

Mr. Baldwin (Leominster)

I do not propose to discuss the question of family discrimination. I largely agreed with the Chancellor when he said that a testator could make his arrangements accordingly, but the right hon. and learned Gentleman did not say that what the testator will in fact do is to take good care not to leave as much money as he originally intended. I want the House to take a long-term view of what we are doing with the legislation we are now enacting. Our forefathers, by hard work and thrift, built up a great Empire and amassed great wealth, but we, who follow in the 20th century, are liquidating the British Empire and dissipating that wealth. As was well said by a noble Lord in another place, we are in the middle of a rake's progress. We are not looking ahead in what we are doing.

We are actually living on capital, and although the Chancellor made the remark that a lot of the taxation now being collected is being spent on capital expenditure—with that I agree—I should like to examine briefly what that capital expenditure is. Take, for example, the money which has been spent on subsidising the building of houses. If we were to transfer the amount of Death Duty which is taken from the big estates and to spend it on building and subsidising those houses, we should be finished with that wealth so far as Death Duties are concerned; those houses would never again be assessed for Death Duties.

What the Government are trying to imagine is that we are still a wealthy nation. Although out forefathers might have accumulated a fairly substantial heap of gold, our wealth today is very largely—almost entirely, in fact, comprised of confidence in the future. If that confidence is destroyed, our wealth will be destroyed overnight. Let me give an illustration of an estate of £100,000, which is represented by the ownership of a factory. When its owner dies the district valuer will assess the value of the factory. That value depends almost entirely on whether the wheels inside the factory are turning or not. If the district valuer wishes to assess a factory at more than its worth I can well imagine the trustees deciding to surrender it to the Chancellor in payment for the Death Duties. The Chancellor, I know, was at one time engaged in agriculture, but I should be very interested to see him engaged in carrying on a factory which had been handed over to him in payment for Death Duties. The House should remember that wealth is represented not by a pile of gold, but by confidence in the future of this country.

On the question of Death Duties on agricultural land, I do not see eye to eye with some of my right hon. and hon. Friends. I think it would be wrong to exempt agricultural land entirely from liability to Death Duties. If that were done, there would be such a tremendous flow of capital into land and its price would rocket sky high, making it impossible for any young farmer either to buy or to move into a farm. I would much prefer that Death Duties which are assessed on the land should be paid into a suspense account and be reimbursed to the beneficiary if the money is spent on the capital improvement of the land within five years of death.

It may be asked, why should that be necessary; is it not the responsibility of an owner of an estate to accumulate out of the revenue of that estate sufficient

money with which to meet the payment for Death Duty? At present that is quite impossible. The revenue from land as assessed in terms of rent per acre, is completely out of step with the cost of maintaining an estate. In the last four or five years rents have been increased by, possibly, 25 to 50 per cent., but expenditure on repairs and building work has risen by over 300 per cent. The effect is that the net income from a large estate is such that there is no possibility of the owner of that estate being able to live and at the same time to maintain its upkeep.

7.45 p.m.

Let me relate my experience with an estate in which I am interested. The heir is a young lad still at school. Out of this estate, which has been assessed for Death Duty purposes at £100,000, it is extremely difficult to maintain the young lad at school and to keep the widow in some small degree of comfort. We are endeavouring to provide sufficient money out of the estate with which to pay the Death Duties but I am afraid that that will be impossible. As was so well said by my hon. Friend the Member for Chippenham (Mr. Eccles), we are losing the incentive to save. Wealth is being taxed by penal duties. The effect will be that wealth will disappear and that successive Governments will then find that it is our working people and the small income groups who will in future have to pay all the taxation which is required to maintain this welfare State.

Question put, "That the words proposed to be left out stand part of the Bill."

The House divided: Ayes, 242; Noes, 88.

Division No. 206.]	AYES	[7.47 p.m.
Acland, Sir Richard	Beswick, F.	Callaghan, James
Adams, Richard (Balham)	Binns, J.	Chater, D.
Alexander, Rt. Hon. A. V.	Blackburn, A. R.	Chetwynd, G. R.
Allen, A. C. (Bosworth)	Blyton, W. R.	Cluse, W. S.
Allen, Scholefield (Crewe)	Bottomley, A. G.	Cobb, F. A.
Alpass, J. H.	Bowden, Fig. Offr. H. W.	Cocks, F. S.
Attewell, H. C.	Braddock, Mrs. E. M. (L'pl. Exch'ge)	Coldrick, W.
Austin, H. Lewis	Braddock, T. (Mitcham)	Collick, P.
Ayles, W. H.	Bramall, E. A.	Collins, V. J.
Bacon, Miss A.	Brook, D. (Halifax)	Colman, Miss G. M.
Baird, J.	Brooks, T. J. (Rothwell)	Comyns, Dr. L.
Balfour, A.	Broughton, Dr. A. D. D.	Cooper, G.
Barstow, P. G.	Brown, George (Belper)	Cove, W. G.
Barton, C.	Brown, T. J. (Ince)	Cripps, Rt. Hon. Sir S.
Battley, J. R.	Brown, W. J. (Rugby)	Crossman, R. H. S.
Bechervaise, A. E.	Bruce, Maj. D. W. T.	Daggar, G.
Berson, G.	Burke, W. A.	Daines, P.
Berry, H.	Butler, H. W. (Hackney, S.)	Dalton, Rt. Hon H.
Davies, Rt. Hn. Clement (Montgomery)	Keenan, W.	Randall, H. E.
Davies, Edward (Burslem)	Key, Rt. Hon. C. W.	Ranger, J.
Davies, Haydn (St. Pancras, S.W.)	King, E. M.	Reeves, J.
Davies, R. J. (Westhoughton)	Kinley, J.	Reid, T. (Swindon)
Deer, G.	Kirby, B. V.	Rhodes, H.
Delargy, H. J.	Lang, G.	Roberts, Emrys (Merioneth)
Diamond, J.	Lawson, Rt Hon. J. J.	Roberts, Goronwy (Caernarvonshire)
Dobbie, W.	Leslie, J. R.	Robinson, Kenneth (St Pancras, N.)
Dodds, N. N.	Levy, B. W.	Rogers, G. H. R.
Driberg, T. E. N.	Lewis, A. W. J. (Upton)	Ross, William (Kilmarnock)
Dugdale, J. (W. Bromwich)	Lewis, J. (Bolton)	Scott-Elliot, W.
Dumpleton, C. W.	Lindgren, G. S.	Sharp, Granville
Dye, S.	Lipton, Lt.-Col M.	Shawcross, Rt. Hn Sir H. (St. Helens)
Ede, Rt. Hon. J. C.	Longden, F.	Shurmer, P.
Edwards, John (Blackburn)	Lyne, A. W.	Silverman, J. (Erdington)
Edwards, Rt. Hon. N. (Caerphilly)	McAdam, W.	Simmons, C. J.
Evans, E. (Lowestoft)	McEntee, V. La. T.	Smith, C. (Colchester)
Evans, S. N. (Wednesbury)	McGhee, H. G.	Smith, Ellis (Stoke)
Ewart, R.	MeGovern, J.	Smith, H. N. (Nottingham, S.)
Fairhurst, F.	McKay, J. (Wallsend)	Smith, S. H. (Hull, S. W.)
Farthing, W. J.	Mackay, R. W. G. (Hull, N. W.)	Snow, J. W.
Fletcher, E. G. M. (Islington, E.)	McLeavy, F.	Solley, L. J.
Follick, M.	MacMillan, M. K. (Western Isles)	Sorensen, R. W.
Foot, M. M.	MacPherson, Malcolm (Stirling)	Soskice, Rt. Hon. Sir Frank
Fraser, T. (Hamilton)	Macpherson, T. (Romford)	Sparks, J. A.
Freeman, J. (Watford)	Mainwaring, W. H.	Steele, T.
Ganley, Mrs. C. S.	Mallalieu, E. L. (Brigg)	Strauss, Rt. Hon G. R. (Lambeth)
Gibbins, J.	Mallalieu, J. P. W. {Huddersfield)	Stross, Dr. B.
Gilzean, A.	Mann, Mrs J.	Stubbs, A. E.
Glanville, J. E. (Consett)	Manning, C. (Camberwell, N.)	Sylvester, G. O.
Goodrich, H. E.	Manning, Mrs. L. (Epping)	Symonds, A. L.
Gordon-Walker, P. C.	Marquand, Rt. Hon. H. A.	Taylor, H. B. (Mansfield)
Greenwood, A. W. J. (Heywood)	Marshall, F. (Brightside)	Taylor, R. J. (Morpeth)
Grey, C. F.	Mathers, Rt. Hon George	Taylor, Dr. S. (Barnet)
Grierson, E.	Mellish, R. J.	Thomas, I. O. (Wrekin)
Griffiths, D. (Rother Valley)	Messer, F.	Thorneycroft, Harry (Clayton)
Griffiths, Rt. Hon. J. (Llanelly)	Middleton, Mrs. L.	Titterington, M. F.
Guy, W. H.	Mitchison, G. R.	Tolley, L.
Hall, Rt. Hon. Glenvil	Monslow, W.	Tomlinson, Rt. Hon. G.
Hamilton Lieut.-Col. R.	Moody, A. S.	Viant, S. P.
Hannan, W. (Maryhill)	Mort, D. L.	Walker, G. H.
Hardman, D. R.	Moyle, A.	Wallace, G. D. (Chislehurst)
Hardy, E. A.	Naylor, T. E.	Wallace, H. W. (Walthamstow, E.)
Harrison, J.	Neal, H. (Claycross)	Weitzman, D.
Hastings, Dr. Somerville	Nichol, Mrs. M. E. (Bradford, N.)	Wells, P. L. (Faversham)
Haworth, J.	Nicholls, H. R. (Stratford)	Wells, W. T. (Walsall)
Henderson, Rt. Hn. A. (Kingswinford)	Noel-Baker, Rt. Hon. P. J. (Derby)	Wheatley, Rt. Hon. John (Edinb'gh, E.)
Henderson, Joseph (Ardwick)	O'Brien, T.	White, H. (Derbyshire, N.E.)
Herbison, Miss M.	Oldfield, W. H.	Whiteley, Rt. Hon. W.
Holman, P.	Oliver, G. H.	Wigg, George
Holmes, H. E. (Hemsworth)	Paling, Rt Hon. Wilfred (Wentworth)	Willey, O. G. (Cleveland)
Houghton, A. L. N. D.	Paling, Will T. (Dewsbury)	Williams, D. J. (Neath)
Hoy, J.	Palmer, A. M. F.	Williams, J. L. (Kelvingrove)
Hughes, Emrys (S. Ayr.)	Parker, J.	Williams, Ronald (Wigan)
Hughes, H. D. (W'lverh'ton, W.)	Parkin, B. T.	Williams, Rt. Han. T. (Don Valley)
Irvine, A. J. (Liver pool)	Paton, Mrs. F. (Rushclifle)	Williams, W. R. (Heston)
Irving, W. J. (Tottenham, N.)	Paton, J. (Norwich)	Willis, E.
Isaacs, Rt. Hon. G. A.	Pearson, A.	Wise, Major F. J.
Janner, B.	Peart, T. F.	Woodburn, Rt. Hon A.
Jay, D. P. T.	Popplewell, E.	Woods, G. S.
Jeger, G. (Winchester)	Porter, E. (Warrington)	Yates, V. F.
Jones, D. T. (Hartlepool)	Porter, G. (Leeds)	Younger, Hon. Kenneth
Jones, Elwyn (Plaistow)	Price, M. Philips
Jones, P. Asterley (Hitchin)	Proctor, W. T.	TELLERS FOR THE AYES:
		Mr. Collindridge and Mr. Wilkins.
NOES
Agnew, Cmdr. P. G.	Crookshank, Capt. Rt. Hon. H. F. C.	Harris, F. W. (Croydon, N.)
Assheton, Rt. Hon. R.	Crowder, Capt. John E.	Headlam, Lieut.-Col. Rt. Hon Sir C.
Baldwin, A. E.	Cuthbert, W. N.	Henderson, John (Cathcart)
Barlow, Sir J.	Darling, Sir W. Y.	Hogg, Hon. Q.
Baxter, A. B.	De la Bère, R.	Hudson, Rt. Hon. R. S. (Southport)
Birch, Nigel	Digby, Simon Wingfield	Jeffreys, General Sir G.
Boles, Lt.-Col. D. C. (Wells)	Dodds-Parker, A. D.	Lambert, Hon. G.
Boothby, R.	Dower, Col. A. V. G. (Penrith)	Lancaster, Col. C. G.
Bower, N.	Drewe, C.	Legge-Bourke, Maj. E. A. H.
Boyd-Carpenter, J. A.	Duthie, W. S.	Lennox-Boyd, A. T.
Braithwaite, Lt.-Comdr. J. G.	Eccles, D. M.	Lloyd, Selwyn (Wirral)
Buchan-Hepburn, P. G. T.	Fraser, Sir I. (Lonsdale)	Low, A. R. W.
Butler, Rt. Hon. R. A. (S'ffr'n W'ld'n)	Fyfe, Rt. Hon. Sir D. P. M.	McCorquodale, Rt. Hon. M. S.
Carson, E.	Gage, C.	Mackeson, Brig. H. R.
Clarke, Col. R. S.	Gomme-Duncan, Col. A.	Maclay, Hon. J. S.
Clifton-Brown, Lt.-Col. G.	Hannon, Sir P. (Moseley)	MacLeod, J.

Macpherson, N. (Dumfries)	Reed, Sir S. (Aylesbury)	Thorp, Brigadier R. A. F.
Maitland, Comdr. J. W.	Renton, D.	Turton, R. H.
Manningham-Buller, R. E.	Sanderson, Sir F.	Walker-Smith, D.
Marlowe, A. A. H.	Shephard, S. (Newark)	Ward, Hon. G. R.
Marples, A. E.	Shepherd, W. S. (Bucklow)	White, Sir D. (Fareham)
Marshall, D. (Bodmin)	Smithers, Sir W.	Williams, C. (Torquay)
Marshall, S. H. (Sutton)	Spearman, A. C. M.	Williams, Gerald (Tonbridge)
Mellor, Sir J.	Stanley, Rt. Hon. O.	Willoughby de Eresby, Lord
Morrison, Maj. J. G. (Salisbury)	Stewart, J. Henderson (Fife, E.)	Winterton, Rt. Hon. Earl
Mott-Radclyffe, C. E.	Stoddart-Scott, Col. M.	York, C.
Nicholson, G.	Strauss, Henry (English Universities)
Odey, G. W.	Studholme, H. G.	TELLERS FOR THE NOES:
Pickthorn, K.	Sutcliffe, H.	Major Conant and
Poole, O. B. S. (Oswestry)	Thomas, Ivor (Keighley)	Colonel Wheatley.
Rayner, Brig. R.	Thorneycroft, G. E. P. (Monmouth)

Question put, and agreed to.