New Clause.—(AGGREGATION OF PROPERTY FOR PURPOSES OF DEATH DUTIES.) (Hansard, 14 June 1951)

§ Mr. Turton
I beg to move, "That the Clause be read a Second time."
The object of this Clause is to deal with the law of aggregation for Death Duty purposes. The present law is that all property passing on the death of any person is aggregated together so that the rate of duty depends on the total of the property which passes on death, whether the deceased has the power to dispose of that property or not. I hope the Committee will agree that the just way of looking at this matter is this: It is quite clear that where a person leaves property to a number of different people it is only right that these different dispositions should be aggregated and the rate of duty fixed on the total disposed of. It is also right that if in addition to disposing by will he has made a settlement whereby property passes on his death to any person that that settlement also should be brought in and aggregated. But it appears manifestly unjust that property over which the deceased had no control 2672 at all should be aggregated for Death Duty purposes at a higher rate of charge by reason thereof.
The law on Death Duties—as the Committee will know—was originally imposed by Sir William Harcourt in the Finance Act, 1894. When the proposal was made it was realised then by the Liberal Government that introduced the Measure, that it was unfair that if a man had no control over the disposition of his property it should be aggregated. In fact, my new Clause is in exactly the same terms as Section 4 of the Finance Act of 1894. Curiously, only six years after the 1894 Act was passed Parliament suddenly reversed the decision so that property over which the deceased had no control was aggregated.
11.15 p.m.
I have looked with interest at the debates in 1900 to find out what was the justification for this change that appears now to work such manifest injustice. Sir Michael Hicks-Beach said in his speech, when he moved the Clause, that the reason was to catch some wealthy persons, but in fact the people who are being caught by his net are not wealthy at all. Mr. Gibson Bowles, who made many contributions to the debates in those days, put the case very well. He said that Brown left property for life to Jones, and, on Jones's death, to a hospital, say, for distressed Chancellors of the Exchequer or for an epileptic asylum; but when the life tenant died there was absolute extinction of his whole interest in it. Why should that be aggregated with his other property?
That is the case I am putting. I ask the Government, What is the justification for this present law of aggregation? My hon. Friend the Member for Altrincham and Sale (Mr. Erroll) raised this point five years ago on a similar debate, and the answer then given by the predecessor of the Attorney-General was that this was recommended in 1900 by a very weighty committee. I have examined that. I find that committee was nothing more nor less than a working party. It was composed of the Solicitor-General, who was aided by the Attorney-General of the day, the ex-Attorney-General, and the chairman of the Board of Inland Revenue. That does not seem to me to be an impartial committee to advise changes in taxation.
2673 On that ground alone I should have thought that we should look very carefully at the present law to see whether it should be amended. It is working very great injustice. I would give the Committee an instance that was brought to my attention of a constituent who has suffered. First, let me make it clear that this injustice works usually among those who are old and who are in receipt of annuities that lapse when they die.
There was a case in my constituency where the wife had, during her life, the income from a quarter share of her father's estate. That income lapsed on her death and for Death Duty purposes it was then at £4,500. But she also had some £15,000 of her own. This is what she wished to do with it: she left the main part of it to the "Sunshine Home for Blind Babies," and the remainder, subject to a life interest, she left to the poor of Harrogate, Manchester, and Lytham St. Anne's. By reason of the fact that she had, during her life, this small annuity from her father's estate, the rate of duty goes up from 10 per cent. to 12 per cent. In fact, the people who suffered by reason of that are these charitable institutions that this lady constituent of mine wished to benefit.
I maintain that that is a case that nobody in this Committee would desire to support—that you should get an extra £200 or so out of charitable institutions that this lady wished to help. Hon. Members in all parts of the Committee will have knowledge of similar cases where the law of aggregation is working unjustly. I have tried to suggest a solution by going to the 1894 Act. I ask the Attorney-General if he cannot find himself in a position to revise the decision of the working party formed by all those attorneys and solicitors and himself suggest a way of dealing with this manifest injustice.

The Attorney-General
It is perfectly true that in some cases the operation of the law as it stands at present works in a rather anomalous fashion. It is equally true that it is practically impossible to draft legislation on Death Duties without there being some anomalies in some cases. I would advise the Committee to reject the new Clause because, although it might avoid anomalies resulting in the sort of case the hon. Member indicated, it would produce far worse anomalies in other directions.
2674 The history of this matter is that a Clause such as the hon. Gentleman seeks to put into present legislation was originally in the Act of 1894. There then was appointed a Committee, of which the hon. Gentleman spoke rather slightingly, referring to it as a committee of "attorneys and solicitors." The Committee included Lord Finlay, Lord Loreburn, Lord Haldane and other distinguished persons.

§ Mr. Turton
They became Law Lords afterwards.

The Attorney-General
At any rate, they had it in them to become what they did. The Committee carefully studied the problem and, for reasons which are as valid today as when the Committee first pointed them out, they advised that the Section in the 1894 Act should be amended to take the form it has today. They gave various reasons, but I would quote one reason from their Report. But the rest of the proviso is worded as to result in conferring on collaterals or strangers who take under a disposition not made by the deceased an exemption from aggregation of this property with the other property of the deceased, quite irrespective of the destination of such other property, or of the existence of any persons such as the proviso was designed to protect. In other words, what influenced them most was that the Section in the 1894 Act produced the result that strangers to the family received, as it were, a wholly un-covenanted benefit. When property passed to them under a disposition not made by the deceased, for the wholly illogical reason, as it seemed to the Committee, that they were strangers to the family, that property was not aggregated with the rest of the estate and consequently duty was paid at a lower scale. I confess that there are arguments in favour of the view which the hon. Gentleman has presented, but these arguments were investigated by the Committee, which formed the opinion that the counter considerations which I have quoted outweighed them. They advised that the original section should be amended to its present form.
There is the much wider consideration that the whole structure of Death Duties legislation does not provide for a tax on acquisition. In other words, the scale of the tax is not measured by the amount which a particular beneficiary passes. The whole conception is based on this; that 2675 the scale of duties should be apportioned by reference to the total aggregate value of the property which passes on death, being property in which the deceased had an interest.
If one adopts a change such as is proposed one is going directly counter to the legislation which embodies our Death Duty taxation. There is no reason in principle why this should not be done on occasions, but when it is done with such an illogical result as the one I have mentioned, and when it only advantages a limited number of persons, then I think making that change.
The point of view which the hon. Gentleman has advanced was advanced on previous occasions. A change such as is at present proposed was proposed in the Finance Bill of 1934, and Mr. Chamberlain, the then Chancellor of the Exchequer, opposed it, giving reasons very similar to those I am giving today. The reasons being the same were just as valid then as they are now, and for this reason I hope the Committee will not accept the Clause.

§ Mr. Wilkins (Lord Commissioner to the Treasury)
I beg to move, "That the Chairman do report Progress, and ask leave to sit again."

§ Captain Crookshank
Would the Chancellor of the Exchequer indicate what his intentions are, as this Motion has been sprung on us in the middle of a debate? We have not even finished the Clause, so I should like to know what the Government's views are.

§ The Secretary of State for the Home Department (Mr. Ede)
I think it was generally accepted that we should move to report Progress at this time. I had hoped that after the reply of my right hon. and learned Friend it might have been felt that we could come to a decision. I am anxious to help all sides, and if there is only to be one more speech perhaps we could continue.

§ Sir H. Williams
Two more.

§ Mr. Ede
If that is the position it would be better that we should report Progress now and resume on Monday.