Clause 29.—(AGGREGATION.)

HC Deb 28 June 1954 vol 529 cc951-1009

6.0 p.m.

Sir P. Spens

I beg to move, in page 35, line 15, to leave out from second "property," to the end of line 22, and to insert: settled by the will of the deceased. As I understand it, the Clause was intended to create a straight rise of from £2,000 to £10,000 in small estates which need not be aggregated with anything else and which only have to bear duty at the rate applicable to their capital value. At first, one thought that this was the only alteration that was being made, but on looking into the present position it appears that under existing legislation a free estate of £2,000 is not aggregated with any settled property whatever, except property settled by the will of the deceased. That is the only portion of the very wide types of property which are included in the definition of settled property which has to be added in with any free estate to make up the £2,000.

One finds from the Clause, however, 'that the deceased's free estate has to be aggregated with a large amount of settled property. It has to be aggregated with any property comprised in a settlement made by the deceased or made, directly or indirectly, on his behalf or at his expense or out of funds provided by him … It has also to be aggregated with property not comprised in the settlement of which the deceased was competent to dispose and has disposed by the exercise by his will or otherwise of a power conferred by the settlement. Finally, it has to be aggregated with property which devolves on his personal representatives as assets for payment of his debts which, as far as I remember, means property over which the deceased has exercised a general power of appointment.

That means that it is not simply a mere straight rise from £2,000 to £10,000 in the value of the free estate. It is a rise from £2,000 to £10,000 in respect of a quite substantial mass of property much greater than is at present aggregated with the free estate. In the circumstances, I wonder what the effect of the Clause is likely to be. It seems to me that there will be a very great deterrent for settlements to be made, not only by a person for his own benefit, but by other people for his benefit. If this misfortune happens, the benefits of the Clause will be minimised accordingly.

It looks at first sight as though the benefit of the increase from £2,000 to £10,000 is very largely taken away by the fact that any personal savings or free estate have to be aggregated with a mass of other settled property. I should, therefore, like an explanation as to what is thought to be the effect of the benefit of the Clause.

The Financial Secretary to the Treasury (Mr. John Boyd-Carpenter)

As my right hon. and learned Friend the Member for Kensington. South (Sir P. Spens) said, subsection (1) is mainly a relieving subsection whose purpose is to raise the total of free estate which does not require to be aggregated with settled estate from £2,000, without a taper, to £10,000, with a taper. As my right hon. and learned Friend has pointed out, the words to which his Amendment relate make an alteration in the existing law with respect to what is put in with the settled estate and what is put in what one might call the free estate bag.

Under existing law, property settled by the deceased in his will is added to the free estate and, therefore, not aggregated with other settled property. On the other hand, property settled by the deceased during his lifetime—for example. to himself for life with the remainder to his children—goes in with the settled estate. That seems to be a somewhat illogical distinction between property both sets of which have been dealt with by the deceased in effecting a settlement. Therefore, what the Clause does is to put both property settled by the deceased in his will and property settled by the deceased by an instrument during his lifetime in with the free estate and separate from the rest of the settled estate.

The logic, it seems to us, which justifies this provision is this. The object of the whole subsection is to deal with the very severe hardship which can and does arise on occasions when a large settled estate passes, in accordance with the settlement, possibly to persons other than the deceased tenant-for-life's near relatives, but requires to be aggregated with his quite small free estate. As a result, it may well be that his close relatives to whom the free estate comes obtain a small free estate minus the very high rate of duty which results from aggregating it with the settled estate. The extreme example could be of a free estate, under existing law, of £2,001, a very large settled estate passing in another direction and the unfortunate beneficiaries of the free estate finding their £2,000 subjected to duty at 80 per cent. and, therefore, receiving £400.

That is the object, and, therefore, in pursuit of that object it seems to us right to draw a distinction between, on the one hand, property of which the deceased could dispose and property of which he could not. That is to say, if the deceased is concerned, in the case I have suggested, to secure that his near relatives are properly provided for—that property which he can dispose of he will use for that purpose—it can go with the free estate.

On the other hand, in pursuit of the objects that I have outlined, one puts in a separate category the estate of which the deceased was tenant for life and whose destination he cannot control. The test, in other words, is whether the deceased could have freely disposed of the property. In both cases which directly arise—the case where the deceased creates a settlement by his will on his death or by deed during his lifetime—ex hypothesi the property is at his disposal.

It therefore seems to us logical and sensible, and in accordance with the intention of the subsection as a whole, that that property which he is free to dispose of should go with the other property which he is free to dispose of for purposes of aggregation and not be aggregated with the property of which he is not free to dispose.

I think my right hon. and learned Friend will see that this is the proper way to carry out the intention and to end the curious anomaly by which property settled by the deceased in his will went into one estate and property settled during his lifetime went into another. Therefore, the purpose of this subsection would be to the effect that the dependants of persons, being tenants for life of settled property, shall be given a chance to have a reasonably sized estate without suffering the disadvantage of having it considered with the settled estate. This draws a line of distinction between whether a deceased can dispose freely of the property or not. In both cases he can, and in this case it seems to us that it should go with the free property of which he could properly dispose.

Amendment negatived.

Sir P. Spens

I beg to move, in page 35, line 16, to leave out: on his behalf or. I suggest that the meaning of these words is doubtful and that they ought to be reconsidered. I fully understand the distinction which the Financial Secretary has made as to the dividing line between one's own property or property over which a deceased had power to dispose and property over which he had no such power. But I cannot understand exactly what is meant by property comprised in a settlement made by the deceased … or on his behalf. Who by and what sort of property? Does it mean that if a stranger makes a settlement on the deceased, then that has to be treated as if it were his own property? The phrase seems to me to be a very doubtful one which I do not understand, and I am moving this Amendment to get an explanation.

Mr. Boyd-Carpenter

My right hon. and learned Friend asks what is the purport of these words. If I may I should like to begin by saying what is not their purpose. I can certainly tell him that the case of a stranger settling money on the deceased, in our view, does not come within the meaning of these words.

These words have a curious history. They have appeared in previous Finance Acts in this context—my right hon. and learned Friend is probably familiar with Section 24 of the Finance Act, 1936—and they reappear in Section 28 (2) of the Finance Act, 1949. Their general purpose—and I use these words with some caution—is to deal with that sort of case which conceivably could arise of a company acting in this respect on behalf of a deceased who had been its governing director. I admit that the words are not completely clear in their meaning though, as I say, they have been used before. In view of what my right hon. and learned Friend has said, and remembering the authority with which he speaks on this sort of subject, I should like to have a look at them again.

Sir P. Spens

I beg to ask leave to withdraw the Amendment, on the understanding that these words will be looked at and reconsidered.

Amendment, by leave, withdrawn.

6.15 p.m.

Mr. Cyril W. Black (Wimbledon)

I beg to move, in page 35, line 25, after "life," to insert: entered into on or after the sixth day of April, nineteen hundred and fifty-four.

The Temporary Chairman

I think it would be for the general convenience if, with this Amendment, we took that in the name of the hon. Member for Putney (Sir H. Linstead), in page 35, line 32, to leave out "death occurring." and to insert: policy taken out.

Mr. Black

It will be clear to the Committee that the purpose of this Amendment is to avoid Clause 29 operating with retrospective effect. The date chosen, 6th April, 1954, is the date on which the Chancellor of the Exchequer made his Budget speech. In that speech he gave notice of his intention to ask the Committee to amend the law in the sense in which Clause 29 seeks to amend it and, therefore, persons who were considering entering into life insurance policies under the Married Women's Property Acts can be deemed to have been acquainted with the intention of the Chancellor since that date.

There are two main reasons why I am asking the Committee to accept this Amendment, and I want to develop them quite briefly in view of the large amount of business which still remains to be done on this stage of the Bill. The first point I want to make, of course, is the one of general objection to retrospective legislation of this kind. I do not want to spend time going over the many arguments—with which Members of the Committee are familiar—as to why it is undesirable and unfair that legislation of this kind should be applied retrospectively. I think it is sufficient to say that when a transaction is entered into between two parties from which certain consequences of taxation flow that it is reasonable that any subsequent alteration of the law relating to taxation should apply only to new transactions entered into after that date and should not operate to the detriment of persons who have entered into contracts prior to that date. That is the general case against retrospective legislation of this kind and I do not want to develop the argument in general at any great length.

In this case it must be appreciated that there are many cases of insurance policies entered into as long ago as 50 years by a husband for the benefit of his wife. If the policies have been running for as long as 50 years, it is reasonable to assume that we are now very near to the point at which a claim is going to devlop under the policies. For 50 years the man has been paying premiums to provide his wife, on his death, with certain benefits, but if this Clause is allowed to operate without this Amendment he will be seriously and gravely prejudiced and, in many cases, he will not be leaving the provision for his wife and his family which he anticipated would be theirs when the policies were originally entered into.

That seems to me to be a most unjust and unreasonable state of affairs which would be cured by the insertion of my Amendment. In fact, in a good many cases, if the Amendment does not pass and the Clause operates retrospectively, the man in my illustration would have done much better, instead of paying premiums on policies each year over a period of 50 years, to have paid the money each year in the form of a gift inter vivos to his wife and then, if his death occurred and a claim for Estate Duty arose after the payments of gifts over 50 years, as far as 45 out of the 50 gifts were concerned, they would have escaped Estate Duty.

So it is very unfair on many grounds that Clause 29 should operate retrospectively. In this case, however, there is a second and a particular reason which adds great strength to the case I am outlining. It is that during the past five years there has been an extra-statutory arrangement between the life offices and the Inland Revenue authorities which has been freely entered into by both the parties with a view to minimising, if not entirely abolishing, the evasion against which Clause 29 is aimed.

The arrangement has taken the form of the life offices requiring from a prospective insurer, when he was about to enter into a policy under the Married Women's Property Acts, that he should answer certain questions and that, in connection with the answers to those questions, he should sign a declaration. The most important question in the declaration form is this: Have you effected a policy or policies of assurance on your life written under the provisions of the Married Women's Property Acts or similar trusts with any office or offices during the past 12 months? The purpose of this declaration has been to prevent the avoidance of tax against which Clause 29 is aimed, under which a large number of policies for relatively small amounts could be entered into in a short period by one individual, thereby gaining the benefit in the aggregate of a large amount of life insurance without the claims being aggregated on his death for Estate Duty purposes.

A friend of mine who recently entered into a policy, and was required to sign the declaration, not unnaturally asked the insurance company why he was required to sign a declaration which did not seem to him to be necessary in the nature of the transaction upon which he was embarking. I shall read out to the Committee an extract from the letter of explanation which the life office sent to my friend. It makes clear the nature of the extra-statutory arrangement betweeen the life offices and the Inland Revenue, and also makes clear the kind of representations which the life offices, on the strength of that extra-statutory arrangement, have been making to persons who were thinking of effecting insurances upon their lives under the terms of the Married Women's Property Act.

This is the letter: Policies under the Married Women's Property Acts, for the absolute benefit of one's immediate family, have always been recognized as a proper way of minimising death duties. As so often is the case, the privilege was abused by clients and indeed companies, and up to within the last five years it was possible for a man to take out, for example, 10 policies of £2,000 each, all for the absolute benefit of his wife, and as the policies did not aggregate with the main estate, or with each other, death duties were avoided entirely. The Inland Revenue were not prepared to stand for this, and they gave the life assurance companies to understand very firmly that unless they took steps to avoid obvious abuses they would have to find some means of stopping it by law. The Life Offices' Association, which represents the great majority of life assurance companies, gave an undertaking that they would do their best to see that no obvious abuses took place, and it was decided that one of the easiest ways was to devise a simple form such as the one under discussion. This is the vital sentence: In this way, we are able to preserve the valuable concession for the genuine insurer. So we have here a state of affairs in which the abuse against which Clause 29 is directed has been known to the Inland Revenue authorities for a number of years. About five years ago they entered into an arrangement with the life offices that it would be reasonable for one policy a year to be entered into, but no more. The life offices, so I am informed, have honoured the arrangement reached with the Inland Revenue authorities, although incidentally, they were under no obligation to enter into the arrangement. They did so, however, because they considered it a reasonable arrangement into which they ought to enter, and now the policies which have complied with the extra-statutory arrangement are being struck at retrospectively by Clause 29.

Mr. William Keenan (Liverpool, Kirkdale)

Too bad.

Mr. Black

That is an additional reason against retrospective legislation which, in this case. is grossly unreasonable and unfair.

If I can understand his intention, what the Chancellor is endeavouring to do, under this Clause. is to bring to an end certain abuses. I do not imagine that hon. Members of this Committee have any objection to the general action proposed under this Clause. I am not opposing the Clause as far as the future is concerned and in respect of new policies but, for the reasons I have mentioned, and for many other reasons which could be given if time permitted. I hope very much that the Chancellor will agree to accept the Amendment.

Mr. Aubrey Jones (Birmingham, Hall Green)

It would be highly regrettable if it were thought that every hon. Member of the Committee identified himself with this Amendment and with the speech of my hon. Friend the Member for Wimbledon (Mr. Black). It is quite a long time since we have had a debate upon retrospective legislation and I understand that this Amendment is based on a general objection to it. The last occasion on which we debated the matter was in the previous Parliament, in 1950 or 1951.

Although it is difficult to summarise in a few sentences the conclusions of a debate, it would not be unfair to say that on that occasion there was a broad consensus of agreement within the Committee on the proposition that the Committee has a duty to protect its own legislation and on certain occasions, in exceptional circumstances, to do that it can resort to retrospective legislation although it should not do so without prior warning and in application to closed transactions.

6.30 p.m.

The first point which is obvious is that the Clause does not apply to closed transactions. Where people have derived the benefit from this form of tax avoidance the benefit remains. The Revenue does not attempt to recoup the loss. In that sense the Clause is not retrospective. The question remains, is it or is it not right to prevent transactions already begun from running to their conclusion? That seems to be the matter which we are debating.

My hon. Friend the Member for Wimbledon (Mr. Black) said that great hardship would be inflicted on those who entered into transactions, shall we say, 50 years ago, and who are now unable to complete them. I put it to him that in fact no greater hardship would be inflicted on them than would be inflicted on all of us if there were a sudden increase in Estate Duty. If the duty went up we should all find ourselves in the position of not having made proper provision for our families.

However, suppose we accepted the Amendment. Suppose we said, "Very well, these transactions may run to their full conclusion." What should we be doing? We are concerned in the Clause with tax avoidance. My right hon. Friend the Financial Secretary, in what I thought was a most impressive moment in his Second Reading speech, drew attention to this method of avoidance. All avoidance draws a most unwholesome and invidious distinction between those who have avoided the tax and those who have not avoided it. If we accepted the Amendment. we should be announcing to the general body of citizens that nobody in future may take advantage of this form of avoidance but that those who in the past have taken steps to profit by it may go on profiting by it for the next 10, 20, 30, 40 or 50 years

My hon. Friends say that that would be quite legal, but I seriously suggest that for the Committee to utter those words would be a great derogation from the dignity of Parliament and of the law. We have a duty to defend the dignity of the law and we should be abdicating that duty if we accepted the Amendment. The truth of the matter is that this form of avoidance became clear and could have been foreseen when the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton) raised the exemption limit from a nominal figure to £2,000. It should have been foreseen then. No step was taken then to close the possible loophole.

Mr. Black

A step was taken. An arrangement was entered into to deal with the matter.

Mr. Jones

It was not a statutory arrangement. I am talking of statutes and of the force of the law. It is that which we ought to be endeavouring to uphold. The right hon. Gentleman the Member for Bishop Auckland took no step to avoid this development, nor did any of his successors. It is only just that we on this side of the Committee should pay due tribute to my right hon. Friend the Chancellor for having taken the step which he has taken. I, for one, hope that he will adhere to the course on which he has embarked.

Mr. Frederick Gough (Horsham)

At the start I should declare an interest which I have declared before in similar debates. I am actively engaged in selling life insurance. Having said that, I express the hope that what I shall say will be as impartial as it is truly intended to be.

My view is that the Amendment must be considered with the next Amendment on the Paper in page 35, line 28, to leave out "included," and to insert: passing to any separate beneficiary. I am glad that I am in order in referring to that Amendment. I am inclined to agree in a certain measure with my hon. Friend the Member for Hall Green (Mr. Aubrey Jones) that, if the matter is considered out of that context, it would appear to be giving licence to those who have been avoiding tax for years whereas it would be preventing others from avoiding it in future.

The first point which the whole Committee should realise is that the Married Women's Property Act is an extremely respectable old lady. It has been on the statute book for some 50 years. Reference has been made by my hon. Friend the Member for Wimbledon (Mr. Black) to this extra-statutory arrangement, or whatever it is, between the life insurance companies and the Board of Inland Revenue. I can tell the Committee that for years before that a very large number of life assurance offices flatly refused to issue policies to various applicants unless they more or less agreed with the views of the offices as to what was correct under the statute and what was attempting to dodge or to evade the law.

If we consider the matter with the next Amendment, then I feel that there is something to be said for applying a date. The subsection says that whereas people with large families have in the past been making provision—I maintain proper provision—not only for their wives but also for their children, they have always been allowed to take out separate policies for each individual.

The Clause as drafted, unless the second Amendment is accepted, will prejudice and victimise the family man and the man who wishes to save. I do not know whether the Chancellor realises that the Clause will be far more detrimental to the poorer rather than to the richer man. When I use the word "poorer," I use it in its context, because the Married Women's Property Act is designed for those who are beginning to get along in the world. As an example, I referred on Second Reading to a man who had a wife and three children. He had taken out four policies, one each, for £10,000. As the law stood, each of his beneficiaries on his death would have paid a duty of 4 per cent., or £400. In other words, each would have received £9,600.

Mr. Aubrey Jones

On a point of order. Am I correct in stating that we are debating only the Amendment as to date and not the one as to separate beneficiary?

The Temporary Chairman (Mr. James H. Hoy)

I was about to inform the hon. Gentleman that we are discussing the Amendment in the name of the hon. Member for Wimbledon (Mr. Black) and the last Amendment to the Clause in the name of the hon. Member for Putney (Sir H. Linstead). The Amendment which the hon. Member quoted raises a separate issue.

Mr. Gough

I understood that we were discussing the other Amendment in the name of the hon. Member for Putney which I quoted.

The Temporary Chairman

May I put the hon. Gentleman right? The Amendment is the one in page 35, line 32, to leave out "death occurring," and to insert "policy taken out."

Mr. Gough

I beg your pardon, Mr. Hoy. In that case, I wish to reserve my remarks until later.

Mr. Roy Jenkins

I thought that the hon. Member for Horsham (Mr. Gough), even though his speech was truncated, put the debate in its proper context when he defined what was a "poorer man" for the purpose of his speech. Such a man was one with at least several insurance policies of over £2,000; otherwise, he would not be concerned with what we were discussing. Later he gave an example, and it is clear that nobody gets any benefit at all unless he has several insurance policies of over £2,000.

The hon. Member for Hall Green (Mr. Aubrey Jones) made what I imagine was a very courageous speech. Certainly, it was an impressive speech. The hon. Member is certainly no crypto-Socialist. He normally opposes us very strongly, but on this point the views he put forward met with agreement on this side of the Committee far more than among hon. Members opposite.

The hon. Member for Wimbledon (Mr. Black) explained the purpose of the Amendment very clearly and I was glad to welcome him back to the Committee. I do not think we have heard him in the Committee since we were discussing Clause 15, when he made a rather surprising plea for the extension of the investment allowance to licensed premises.

Mr. Black

I really must rise to protest at that remark. I referred to hotels, but there are hotels which are licensed and hotels which are unlicensed.

The Temporary Chairman

While I allowed the hon. Member for Wimbledon (Mr. Black) to make a correction, I must warn the Committee that we must not go on to debate that point.

Mr. Jenkins

Although we cannot debate it, the hon. Member will agree that—unfortunately as he no doubt regards it—the majority of hotels are licensed.

In the course of his speech, the hon. Member explained very clearly what had been happening in the more distant past and in the last five years since life insurance offices adopted this new rule. Although I do not know whether he intended it, I thought he made an extremely powerful case for the Clause itself.

Mr. Black indicated dissent.

Mr. Jenkins

I do not know why the hon. Member shakes his head, because he said he was in favour of the Clause provided this Amendment was put in. He advanced a very powerful argument for the Clause itself. I could not understand his point of view that in some way or other it would be extremely unfair to the life offices if what they have done under a voluntary arrangement were put in as a restriction now.

Mr. Black

I was not so much concerned about being unfair to the offices as to people who insured their lives on certain assumptions.

Mr. Jenkins

There were several distinct points in the speech of the hon. Member. He dealt first with the position going far beyond the time when the arrangement came into operation. He went back over 50 years and argued cases of people who took out insurance policies then. He also put before the Committee at quite considerable length—although it was an extremely interesting point, and we do not complain about it—the views of the life offices on the position that had arisen in the last five years. He certainly gave the impression to me, and I think to some of my hon. Friends, that, in view of this position as it has operated in the past five years, it would now be extremely unfair to someone if the Government made this stautory change. I do not think the hon. Member will disagree with that.

I cannot understand why the hon. Member should take that view. The arrangement, which has been operated in the last five years seems to me to be very far short of closing a gap for tax avoidance. It merely says that one cannot take out more than one policy every year. The hon. Member himself was talking about an insurable period going back 50 years. If one wanted to avoid tax, one could get a great deal of benefit even if one operated within the voluntary agreement of the last five years. I cannot believe that the Chancellor or anyone would accept the view that, because of this voluntary agreement, the Government are behaving in any way unfairly to the life offices or to anyone else.

I think that the hon. Member for Hall Green dealt extremely well with the question whether this is retrospective legislation in the sense that it goes back and changes legitimate expectations on which certain people entered certain transactions. I think it absolutely undeniable, as the hon. Member said, that what is being done here is on all fours with the change in the weight of Estate Duty. If we accepted the position put before us by the hon. Member for Wimbledon, we should have to accept the position in which someone carrying out transactions in 1904 on the basis of certain expectations would be entitled to be protected against any change in our tax law now. That is the logical conclusion to what the hon. Member was saying. I cannot see how one can stop short at any logical half-way house between those points of view. I should have thought the point of view of the hon. Member for Wimbledon was quite unacceptable to the Government and certainly unacceptable to the Committee.

6.45 p.m.

If the Amendment were accepted, a great amount of the teeth of this Clause would be taken out and it would remain comparatively ineffective. [HON. MEMBERS: "No."] It would operate in the future; but, of course, there has been the tax avoidance—otherwise, what is the purpose of the agreement the life offices entered into? If this was a perfectly legitimate transaction such as any prudent family man would reasonably and properly enter, why was that agreement made?

Mr. S. N. Evans (Wednesbury)

My hon. Friend speaks with an authority which I envy. I should like to be clear on the point about the arrangement with the life offices that there should be only one policy issued a year. Is that one policy per year with the industry, or one policy per year per company?

Mr. Jenkins

I understand that it is the industry as a whole. Probably hon. Members opposite are much greater experts on this than I am. The point I was making was that unless there were real tax avoidance, how could this voluntary agreement ever have come about? Unless it could be shown that something was going on which was rather improper from a taxation point of view, why should life offices have considered preventing people from entering into business with them? In normal circumstances they are there to do business, not to prevent business from being done. Is it not the fact that it had been reasonably brought home to them that there was tax avoidance that caused them to contemplate such an arrangement? It is admitted on all sides that there has been a great deal of tax avoidance going on. Why should it be argued that in future people should be prevented from making this agreement which the hon. Member for Wimbledon regarded as proper but that those who have done it in the past should be allowed to benefit from it and should be in an entirely advantageous position compared with those who do it in the future?

There seems a possible anomaly here. As a correspondent in the "Financial Times" pointed out shortly after the Finance Bill was published, this Clause as it stands places people affected by it in the rather curious position that it would pay them to die before it becomes law. I do not know whether the position often arises in which people are given an incentive—which may or may not be very large—to expire within four months, but that seems a possibly anomalous position as the situation is at present. Perhaps it could be remedied by moving in the other direction and making the provision apply, not from the date of the Finance Bill, but from the date of deaths after the Budget.

Subject to that, I would not have much sympathy with the point of view of the hon. Member for Wimbledon. It is clear that he commands a great deal of sympathy among hon. Members opposite. I do not think we have seen as big an attendance in the Committee for some time. For a number of days we have been debating some extremely important Clauses relating to provisions for investment in industry and other points on company finance, but I am afraid that none of them has brought so big an attendance of hon. Members opposite as this point concerned with insurance policies. None the less, we are opposed to the Amendment.

Mr. Boyd-Carpenter

I can assure the hon. Member for Stechford (Mr. Roy Jenkins) that the incentive which he suggested the Clause gave to people to die before the Finance Bill became law does not appear to be having any significant effect. I hope that will reassure him.

I listened with very great interest to the speech of my hon. Friend and political neighbour the Member for Wimbledon (Mr. Black). I will reply one by one to his arguments.

It might be of assistance to the Committee if in the first place I tried to make clear what would be the effect of incorporating in the Clause the words which the Amendment seeks to add. It would mean that in the case of all policies entered into before Budget day this year the abuse, or the possibility of abuse, by taking out a large number of policies would continue.

The Committee may remember that on Second Reading I gave the House an example, taken from an actual case—no doubt an extreme one—of the way in which the existing law could be abused. If we were to put into the Bill the date which my hon. Friend suggests, any such arrangements made up to Budget day could and would operate in respect of the payment of Estate Duty on deaths over a very considerable period of years to come. That, for better or worse, would be the position.

There is no doubt at all that this is a form of evasion which it is proper to stop. Indeed, I have not heard from either side of the Committee any suggestion that it should be allowed to continue. Therefore, hon. Members must face the fact that if the Committee accept the Amendment, cases of this sort will continue to occur over a great many years.

Therefore, from the practical point of view of stopping a leak of this sort, I think the Committee will agree that there is a strong case for bringing the provision into operation at once. I will therefore deal with the argument that, notwithstanding that practical fact, this is retrospective legislation and, in principle, obnoxious as such.

I fully agree with what my hon. Friend so eloquently said about the desirability of being at any rate extremely restrained in indulging in retrospective legislation. Indeed, I think that this Government can claim to have shown a very proper regard for that principle in respect both of certain provisions of Clause 14 and of our resistance to an Amendment moved by the Opposition to Clause 16. However, the first question that I would ask the Committee to consider is whether this is, in point of fact, a retrospective provision at all. [An HON. MEMBER: "It is."] I hope that my hon. Friend will allow me to put the Government's point of view; we shall then probably proceed more helpfully.

When the most serious of criminal offences is charged, it is a valid defence to say that one did not do it, and my first submission to the Committee is that this is not retrospecive legislation. It is a fact, if one troubles to look back over the precedents, that in the field of Estate Duty, broadly and generally, though I would not say without exception, the date of the death has been treated as the operative date for such purposes as this. That goes back to the earliest days of Estate Duty, to the Finance Act, 1894, which applied in the case of all deaths not taking place before the Act came into force.

The first anti-avoidance provision which operated in the same way operated also in respect of the date of death. That was put through in 1900 by the great-uncle of my hon. and gallant Friend the Member for Cheltenham (Major Hicks Beach) who was Chancellor of the Exchequer, and I should have said that that gave the practice a most respectable parentage. There was also a very similar provision dealing with a form of evasion which arose from the transfer of property to companies. That was put through in 1938 by Sir John Simon. In that case, too, the operative date was the date of the death.

Looking at the matter broadly from the common-sense point of view, when one is in the Estate Duty field the date of the death is really the operative moment, for it is the moment which makes the Estate Duty payable and it is also, sadly enough, the moment which makes it impossible for the person concerned to alter his arrangements—at any rate in this world.

I would ask my hon. Friend to appreciate the difficulty that one gets into if one adopts as a general principle the contrary argument and suggests that all arrangements that are made on the basis of the existing law cannot be altered and only future arrangements can be made. It would mean that any form of tax evasion or avoidance which was discovered by human ingenuity—from time to time human ingenuity does exert itself on this diverting pastime—could be checked only in respect of new arrangements. I must remind the Committee that not only would that interfere seriously in the operation of the tax, but it would really be contrary to the practice which has generally been adopted for a good many years by Governments of all political colours.

My hon. Friend's second argument was that the proposal interfered with existing rights. I should like to analyse that. It does not interfere in any way with the agreement made between the person concerned and his insurance company. It operates only to affect the tax position arising in respect of his policy when he dies, and therefore it does not affect any right other than the right—if my hon. Friend so regards it—to avoid the payment of tax on the proceeds of the policy. Otherwise, it does not affect or avoid in any way the arrangements made with the company.

My hon. Friend referred at some length, as did the hon. Member for Stechford, to the arrangements made by the life offices a year or two ago. In view of one thing that my hon. Friend said, I should like to make it clear at the outset that there was no agreement or arrangement between the Government or the Inland Revenue and the life offices. This was an arrangement made on their own initiative by the life offices because, as I understand it, they were disturbed at the possibilities of tax avoidance arising from the use of this device. They very properly informed the Inland Revenue of what they were doing. It is not necessary for me to say that their initiative was considered very proper and very welcome.

I repeat that no arrangement or agreement was made in respect of this matter, and, in particular, no arrangement was made, or indeed could have been made, by a Government Department with outside interests that the law would be preserved in its existing form. Therefore, whatever else one may think about this proposal. it is not in breach of any arrangement made between any Government or Government Department and the life offices. It was a matter undertaken solely on the very proper initiative of the life offices.

Nor, of course, does the arrangement really fill the gap. As has already been pointed out, under this arrangement it is still possible to take out one new policy every year. In reply to a question which was put in the course of the earlier debate, I understand that that means one policy in all and not one policy from a certain company. Therefore, this still permits the taking out of one policy a year, and over a number of years arrangements of the type which we have been describing can be made.

Equally, the arrangement does not operate in a case where policies had already been taken out before this arrangement was made by the life offices. Therefore, though the action of the life offices can be taken as a very proper indication of their desire not to be mixed up in devices of this sort, I suggest to the Committee that it really is not a proper alternative to the statutory provision contained in the Clause.

7.0 p.m.

Mr. Roy Jenkins

Can the hon. Gentleman tell us—I admit that I ought to know—when this arrangement was instituted? I understood the hon. Member for Wimbledon (Mr. Black) to say five years ago, but the right hon. Gentleman himself said a year or two ago.

Mr. Boyd-Carpenter

I have not got the exact date, but I think it was early in 1952. It may have been earlier, but I will check the date, and, if I am wrong, I will communicate it to the hon. Gentleman.

My hon. Friend the Member for Horsham (Mr. Gough), who speaks with considerable authority on many of these subjects, indicated that the importance of the date from which this provision operates depends very much on the nature of the provision itself. I suppose it is clear, as a matter of ordinary common sense, that the more severe the provision the more onerous may be an early date of application, and the converse is equally true, I cannot, of course, discuss the next Amendment, which raises the very issue of the extent of this restriction, but I can perhaps suggest that, unlike almost every other Clause in this Bill, this is a subject matter with which the House may very well wish to concern itself on Report, and in any event, before even the Committee stage is concluded, it may be possible to discuss it.

There was great force in what my hon. Friend the Member for Horsham said on the fact that the operative date of the provisions, from the practical point of view, can be looked at very differently in accordance with the nature and the rigour of the provisions. It does not affect those who are seeking to deal with the matter as one of principle. If one takes the view that it is a matter of principle, one can take the logical view that it does not matter very much whether the provision itself is severe or not, but I would venture, on this question of principle, to say once again to the Committee that it is just not the fact that in the Estate Duty field at any rate, a provision of this kind has been regarded as being of a retrospective nature.

Certainly, as I have said, what we are doing here in proposing that this provision shall operate as from the date of the Bill becoming law is precisely what has been done in respect of similar provisions in dealing with similar loopholes over a good many years. Therefore, it is a little difficult to erect a great argument on, as it seems to me, the false hypothesis that this is retrospective legislation. The difficulty is not in finding adjectives with which to denounce retrospective legislation, but the real moment when to decide clearly in one's own mind whether a particular provision is retrospective or not.

This provision does not affect anybody who is alive at this moment. It cannot affect anybody except those who die after the Bill becomes law, and I would say, with great respect to the contrary views which have been expressed, that this is not, in my understanding of the matter, retrospective legislation; on the contrary, it is the normal method, hallowed now by 50 or 60 years of legislative practice, of terminating abuses which I feel ought not to be defended, and which this Government would be severely criticised for not ending.

Sir F. Soskice

I should like to say very shortly that we on this side of the Committee certainly support the standpoint which the right hon. Gentleman the Financial Secretary has taken. It seemed to me that one particularly cogent argument was that used both by the Financial Secretary and by the hon. Member for Hall Green (Mr. Aubrey Jones). It is only in a very qualified sense that we could describe this subsection as being retrospective at all, because it fastens upon the date of the death which is to occur in the future. As the hon. Member for Hall Green pointed out, when arguing the case at an earlier stage of our debate, exactly the same considerations apply to all cases of an increase in Estate Duty.

If one may assume the case of a decrease of duty, the hon. Member for Wimbledon (Mr. Black) would maintain that, if it were possible to decrease the Estate Duty, it should equally operate retrospectively in respect of Estate Duty on policies taken out before the date of the provision effecting the decrease, so that it is really a question of applying a general rate of increase, and that is bound, according to the ordinary practice of Estate Duty legislation, to affect policies and other transactions, within the scope of the increase effected before the date on which the increase is to take place.

Therefore, I support the Financial Secretary. In my view, the provision is only in a very qualified sense retrospective at all, but it does seem to me that this is a kind of provision which one might justifiably make fully retrospective.

The distinction between evasion and avoidance is sometimes not very easy to draw, and I think that here we are really dealing with pretty serious cases of abuse. as I think the Financial Secretary himself described them, by people who use this form of transaction. What is the situation with which we are dealing? It is the case of persons who, being lucky enough to hit upon a particular device, by striking upon that form of device have saved themselves a great deal of money in the form of taxation of their assets which other people, less fortunate or less ingenious, have had to pay. This has happened on a considerable scale, and it is quite obvious, from the fact that the Government have introduced this subsection, that they have found that the arrangement made by the life offices has not gone anything like far enough, and they have not been able to stop this form of evasion adequately. Quite obviously, it is the fact that the arrangement permits a fresh policy each year which still leaves a very wide area over which the evasion can be practised.

For these reasons, I was very glad to hear the Financial Secretary say that he does not propose to accept this Amendment. It seems to me that he cannot justify an Amendment which would enable a great deal of tax to be avoided when legitimately it ought to be paid, and I therefore hope that the Financial Secretary will stand his ground.

Sir Hugh Linstead (Putney)

I want only to add a few comments on the interesting debate we have had on the Amendment moved by my hon. Friend the Member for Wimbledon (Mr. Black), and the main point that I want to emphasise is that, by implication, considerable injustice has been done to persons who have entered into this type of policy by the use of words such as "abuses" and "evasion," and by the phrase used by the hon. Member for Stechford (Mr. Roy Jenkins) implying that what they were doing was not legitimate.

If the word "legitimate" has any meaning at all, it means in accordance with the law, and no one will suggest that what has, in fact, been done has not been in accordance with the law. I do not think it is reasonable that we should stigmatise a group of people for action which they have taken, which presumably was entirely legitimate, because if it was not they would have been prosecuted or otherwise dealt with by the Inland Revenue.

Mr. Roy Jenkins

I never used the word "evasion," but instead used the word "avoidance." I think there is a difference in the meaning of "legitimate" and "legal," which means in accordance with the law. The word "legitimate" has a slightly different meaning. If this is legitimate in the sense not merely of being in accordance with the law but of being a proper practice, why did the life offices, as the Financial Secretary said, on their own initiative take steps to stop it?

Sir H. Linstead

I am not arguing against the Treasury view, but against the implication that people who have entered into this type of policy are virtually criminal. That is an implication that might very easily be read into the terms used in the debate. We ought to recognise that this sort of provision used by our citizens arises from their purely natural desire to do the best they can for their widows and children, and that in so far as these methods are open to criticism it is largely because the high incidence of taxation drives people to devious ways of trying to get the better of the Inland Revenue authorities. What is being attacked is not criminal conduct so much as ordinary ingenuity by hard-pressed citizens, who are trying to do the best they can for their families.

What I regret about this change in the law is that it amounts to an extremely capricious alteration which will catch a lot of well-meaning citizens who have merely attempted to do the best they could for those dependent upon them.

Mr. Peter Roberts (Sheffield, Heeley)

Like a large number of hon. Gentlemen on this side of the Committee, I feel that the Clause and the Amendment which we are discussing have a lot in them that smacks of Socialism. We have not had anything like that before in this Budget debate, so I have not taken a very vocal part in it.

I should like briefly to make three points. First, I endorse what my hon. Friend the Member for Putney (Sir H. Linstead) said about the idea of there being something wrong in going to an astute lawyer and being guided by what the law happens to be. I was surprised to hear the right hon. and learned Member for Neepsend (Sir F. Soskice) say that it was unfortunate that somebody who went to a good lawyer should get away with the benefit of that advice. He seemed to suggest that if one went to a bad lawyer it was all right. That was an extraordinary argument.

A battle of wits takes place between such gentlemen as the right hon. and learned Gentleman and the Treasury Solicitor. It goes on year in and year out. It has been going on for a long time and it will still go on. The unfortunate thing is that my right hon. Friends. speaking on behalf of the Treasury from the Treasury Bench and trying to support their own case and possibly help their own officials, should use the term "evasion" that my right hon. Friend used this afternoon. That idea crept into the speeches of hon. and right hon. Gentlemen on the Opposition side of the Committee when they were in the Government. I was very sorry to hear my hon. Friend the Member for Hall Green (Mr. Aubrey Jones) echoing that sort of propaganda, which may be good Socialism but is not good Conservatism.

Mr. Aubrey Jones

I said that many good Conservatives would regard it as their duty to uphold the dignity of the law.

7.15 p.m.

Mr. Roberts

I did not say that my hon. Friend was not a very good Conservative but that what he said happened to smack of Socialism. The law is a device to show people what they may and may not do. There may be an abuse or a loophole in the law, and my right hon. Friend the Chancellor is right in coming to the Committee to block up this loophole—which I personally do not support—but I do not like the suggestion that it is improper for somebody to go to an astute lawyer and be advised.

The effect of preventing this is to increase the burden of Estate Duty on certain people. I do not approve at this stage of increasing the burden of Estate Duty. In principle it is a bad tax, and I should like to see it reduced rather than increased. I am sorry that my right hon. Friend has had to come to the Committee to try to block the loophole, and in point of fact to increase the incidence of Estate Duty.

I hope that my hon. Friend who moved the Amendment will notice from where support for his policy is coming. I hope he will remember that the leaders on the Opposition Front Bench leapt up to support it. I hope that he will listen to some of the arguments put from this side of the Committee and will realise that some of us feel that there are certain aspects of the Clause which are not right in principle.

Mr. Crosland

We have had the pleasure of listening to the most remarkable and revealing speech that has been made in the debate. The hon. Member for Heeley (Mr. P. Roberts) admits there is a loophole. The Government propose to close the loophole, and he objects to the Opposition Front Bench supporting the Government.

Mr. P. Roberts

I am objecting to slurs and insinuations against people who have adopted a course which it is proper for them to adopt, although it may be improper for the Government to allow the opportunity to continue.

Mr. Crosland

The hon. Gentleman said nothing of the sort. He was criticising my right hon. Friends for supporting the Government in blocking up the loophole. The whole tenor of his speech was revealing to an extreme degree. We now know that the pure doctrine of Conservatism is the greatest possible degree of tax avoidance by recourse to the cleverest possible accountants. Nothing said from the Government Benches got more support from hon. Members on that side than the hon. Gentleman's definition of what was Socialism and what was Conservatism in regard to trying to stop up loopholes.

Sir Ian Fraser (Morecambe and Lonsdale)

Is it not all-party practice?

Mr. Crosland

We appear to have a clear party division. To stop up loopholes and prevent tax avoidance is Socialism. It will be worth while reading and quoting the hon. Gentleman's speech. It is good also that he came in at a rather late stage in our debate. The attendance in the Committee makes it clear that a serious issue of principle exists on tax avoidance. We are not discussing tax evasion or things which are illegal, but there is a clear-cut division of opinion between the two sides of the Committee as to how good or bad tax avoidance is, and how justified the Government are in trying to stop it.

Mr. Albu

What was particularly revealing in the speech of the hon. Member for Heeley (Mr. P. Roberts) was his statement—it was the second time it had occurred in the Committee—that the party opposite is more concerned with the reduction of Estate Duty than with the reduction of any other form of taxation. [HON. MEMBERS: "No."] That is what the hon. Gentleman said. In fact, his whole attack upon his own Front Bench and upon the Opposition Front Bench was that they were bound together to make Estate Duty effective and to prevent the perfectly legal method of avoidance which is taking place.

What the hon. Gentleman is asking the Committee to do is to deceive the public by introducing legislation which appears to impose certain levels of taxation and certain levels of Estate Duty, with a consequent effect upon the distribution of wealth, and then to find back-stair methods of avoiding it. Goodness knows that a Finance Bill is never very clear and simple to the layman, but at any rate we should try to ensure that our legislation is not deceptive. That is what the hon. Gentleman was asking for. The hon. Member was asking that, where existing Acts are clearly not what they appear to be, and where their provisions can be avoided—one does not know by what kind of jiggery-pokery—nothing should be done to make that legislation clear and straightforward. It is extremely interesting that stronger feeling has been shown, and more Members have been present during the discussion on this than on any other issue in Committee. It shows clearly that the real division between Conservatives and Socialists is that Conservatives believe in inherited wealth and Socialists do not.

Amendment negatived.

Sir I. Fraser

I beg to move, in page 35, line 28, to leave out "included," and to insert: "passing to any separate beneficiary.

The Deputy-Chairman

I think that it will be for the convenience of the Committee if with this Amendment we take that in page 35, line 30.

Sir I. Fraser

Under Section 11 of the Married Women's Property Act which is now, I think, 72 years old, there was a provision whereby a person could take out an insurance policy, the fruits of which were to inure to his wife or to any one or more of his several children. By invoking the aid of the Act he could so arrange that the piece of property represented by each of the insurance policies would be assessed as separate estates at his death. They would not be aggregated with his estate nor with each other. Each would be separate. That was a wise Victorian rule devised to encourage a person to save for his wife and children. It persisted for over half a century.

Owing to changes of the law into which I need not now go in detail it has become necessary, in the sense that it has become desirable, if one is to make the fullest possible provision for wife and children, having regard to very high estate duties, to look for every possible legal means of doing so. Some persons have discovered that this Clause of this old Act could be, so to speak, augmented by taking out more than one policy for each beneficiary. Instead of one for the wife and one for each child there might be a great many, and if all were below a certain value none fell to be accounted for estate duty.

This is the practice which, as the hon. Member for Wimbledon (Mr. Black) explained earlier, has been frowned upon by the insurance companies themselves. I think that they should be given credit for having taken that attitude and for having brought the matter to the notice of the Inland Revenue. Indeed, if I have any comment to make to the Financial Secretary it is to say that it is a little discouraging for the life offices or other responsible elements in private industry to know that if they bring such things to the notice of the Inland Revenue and take steps themselves to deal with the matters, only a few years will pass before some Government or other will legislate upon the matter.

I wonder whether possibly the Government, in their desire to stop up what they call a loophole, have gone further than they thought. They have not merely stopped a person taking out a number of policies for each one of his beneficiaries—his wife or children—but have said that all the policies for the beneficiaries must be aggregated, not, it is true, with the main estate but each with the other.

The purpose of my Amendment is to enable the Government still to carry out their desire to prevent a number of policies being taken out for each beneficiary but still to leave it possible for a person to take out one policy for each beneficiary and for that policy to remain a separate estate. That would be the effect of the words which I have put down. I cannot see why the Government, in seeking to stop up a loophole which has been brought to their notice, should take advantage of the occasion to take away what I will call a privilege enjoyed for over 70 years by a class of thrifty people who deserve well of all Governments and especially of this Government.

Mr. Aubrey Jones

Much to my regret, on the last Amendment I found myself opposed by most of my colleagues on this side of the Committee. On this occasion I am happy to say I am only half in opposition. There is merit—I think possibly even greater merit than my hon. Friend the Member for Morecambe and Lonsdale (Sir I. Fraser) claimed for it—in this Amendment. There appears to be considerable demerit also, and I should like to indicate to the Financial Secretary a better method of dealing with the merits than by accepting the Amendment.

The Amendment's merit is that it incorporates quite a new principle, but incorporates it, I suggest, in a highly unfortunate way. I should not for one moment wish to question the desirability of taxation at death. I do question the form which that taxation now takes. We have at the moment what is called a mutation duty—a duty on the sum total of the property existing at death. I may be a poor man—as in fact I am. I may inherit a small fraction of a very large estate, but the rate of duty which I would pay on that very small inheritance would be related to the totality of the estate. The duty I would pay would, in fact, be related to someone else's wealth. If one cared to carry the analogy into the sphere of Income Tax, it would be as though I were to be assessed at a rate of tax with reference to the income of someone else, for instance, of my hon. Friend the Member for Wimbledon (Mr. Black). That, I venture to suggest, would be a most unjust proceeding.

For this mutation duty, therefore, I should like to see substituted something in the nature of an acquisition duty; that is, a duty related to what is actually received by the beneficiary—and possibly even to the wealth of the beneficiary. We had such an acquisition duty in the old legacy and succession duties. I am sorry that the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton) is not here because it was he in his lecture room who first initiated me into these esoteric matters. Unfortunately, the legacy and succession duties were based on consanguinity—the nearer the relationship, the lower the rate of duty. The effect was that the heir to a very large estate might pay a relatively small duty whereas an old retainer inheriting a small part of the estate paid a relatively high duty.

7.30 p.m.

That did not matter very much until, in 1946, the right hon. Member for Bishop Auckland doubled the legacy and succession duties. Immediately he did so the discrepancy became apparent. Later, his successor, Sir Stafford Cripps, did what I hope no good Conservative will ever do; he threw out the baby with the bath water by doing away with the whole lot. Instead of ridding the legacy and succession duties of their defects, he abolished them altogether. I believe in the acquisition principle, and the merit of the Amendment lies in the fact that it introduces this principle for the first time since the abolition of legacy and succession duties. If the Amendment were to be carried, the rate of Estate Duty payable by the beneficiary of a life assurance policy would be related to that policy and not to the whole estate of which the policy formed a part. That, to me, is highly commendable.

But there are two defects in the Amendment. The first is that the acquistion principle is applied to property represented by life assurance policies and not other forms of property. I see no justification for that distinction. It seems to me to be almost unethical, because it confers an advantage on the heirs of people who have insurable lives as against those of people who have non-insurable lives. If I were the heir of somebody who had an insurable life because he is strong and healthy, I should be at an advantage compared with the heir of a weak and infirm person whose life was non-insurable. That is almost a new form of regressive taxation, and it seems to me to be quite objectionable.

Mention has been made of the Married Women's Property Act, 1882. I do not wish to weary the Committee with legal terminology, but I should like to refer to Section 11 of that Act. It was passed long before Estate Duty was introduced and its purpose was to protect the families of men who were threatened with bankruptcy. The creditors could not reach those families, because Section 11 provided that: A policy of assurance effected by any man on his own life, and expressed to be for the benefit of his wife … shall create a trust in favour of the objects therein named, and the moneys payable under any such policy shall not … form part of the estate of the insured or be subject to his or her debts. That is perfectly proper. Then comes a proviso, as follows: Provided, that if it shall be proved that the policy was effected and the premiums paid with intent to defraud the creditors of the insured, they shall be entitled to receive, out of the moneys payable under the policy, a sum equal to the premiums so paid. In other words, the authors of the Act were aware that advantage might be taken of that Section by a potential bankrupt in order entirely to avoid payment to his creditors. The proviso was inserted to stop that loophole.

In quoting this Act, some hon. Members have been pleading the principle of Section 11 by applying it to Estate Duty, but omitting the proviso. That is very serious. If the Amendment were adopted, it would still be possible for somebody to parcel his entire estate in the form of life insurance policies to the members of his family, thereby almost completely avoiding the payment of Estate Duty. That is the second objection to the Amendment.

Hon. Members opposite have used one or two phrases with which I agree. One was by the hon. Member for Edmonton (Mr. Albu), who said that if we thought that a tax was wrong we should not try to get out of it by a backstairs method. I entirely agree. I yield to nobody on my side of the Committee in my detestation of the principle of aggregation. If we accept the Amendment, we are really saying, "This provides a loophole by which we can avoid the disadvantages caused to us by the principle of aggregation." That is not compatible with the reputability of the House of Commons or the law. If the principle is wrong, we should deal with it, and not merely seek to provide a loophole out of it.

Rather than create a loophole, I suggest that my right hon. Friend should look at the principle afresh. Last year my right hon. Friend the Chancellor, in response to pressure by many of his hon. Friends, instituted an inquiry into anomalies. I suggest that this year he goes one better by doing something more fundamental, namely, by instituting an inquiry into the whole principle of Estate Duty. No such inquiry has been held since the matter was considered incidentally by the Colwyn Committee in the 1920s. The right hon. Member for Bishop Auckland was a very important witness before that Committee, which discussed the question of mutation duty as against acquisition duty and came down slightly in favour of mutation duty.

Circumstances have changed since those days. Then, when current rates of taxation were low, it could be said that Estate Duty rested upon the person who died, because he could make provision for it during his lifetime. He cannot do so today, and he does not, therefore, pay it. The heirs pay the tax related to a wealth which is not theirs but that of somebody else. That is an iniquity. I understand the obsession of my right hon. Friend the Financial Secretary with loss of revenue. If he changed the principle of Estate Duty, however, he would not incur any loss in the long term. There would be an initial loss, because the incidence of the death duty would be shifted from the moment of death to the moment of receipt by the beneficiary, but there would be no loss in the long term.

I appreciate that, for that reason, the principle could be incorporated only gradually. I am not asking for anything more than that. These are matters for the experts to decide. I suggest that my right hon. Friend institute an inquiry into this subject. He has a great opportunity to bring about justice in the incidence of Estate Duty, but that opportunity would be prejudiced if he were to accept the Amendment in its present form.

Mr. Albu

In spite of the opening words of the hon. Member for Hall Green (Mr. Aubrey Jones), I am not sure that his hon. Friends are quite so enthusiastic about what he has been saying as might have been expected. He made an extremely thoughtful speech. The only thing I cannot understand is why he had to put in the middle of it—probably it was in order to give encouragement to the benches opposite—the statement that he yielded to nobody in his detestation of the principle of aggregation. It seemed to me that he was talking not so much about the principle of aggrega tion as the basis upon which the taxation of an inheritance should be applied.

He made out a good case for some consideration of the relationship of the inheritance to the need of the heirs. I am not sure how far we can pursue that matter in a consideration of this Clause. Of course, on this side of the Committee. where we are not in favour of inherited wealth, at any rate above what may be considered reasonable levels, such a consideration of the needs of heirs would probably be different from that of hon. Gentlemen opposite.

My right hon. Friend the Member for Bishop Auckland (Mr. Dalton) made some sweeping changes and introduced a quite substantial relief from Estate Duty, although hon. Members opposite may not consider it substantial. It ma!, be that that method of dealing with the needs of not-very-well-off-people is not the way to do it, and that it would be more just to deal with the relief from the point of view of those who inherit the estate, but we must bear in mind that in this Clause we are dealing with Estate Duty on the estates of comparatively wealthy men. We are not dealing, I think it will be generally agreed, with those in very great need, because there cannot be aggregation unless there is a fairly large number of sums to aggregate. I was extremely interacted to hear that the hon. Gentleman supported the Amendment of my hon. Friend the Member for Stechford (Mr. Roy Jenkins), which would aggregate the insurance policies, which are the main form of estate we are considering, and other forms of estate.

Mr. Aubrey Jones

Not quite. I agree that the Amendment is logical if one accepts the principle of aggregation, as the hon. Gentleman opposite does. Personally, if I were Financial Secretary, I should not accept that Amendment pending a review of the principles of Estate Duty, as I suggested.

Mr. Albu

I still do not quite know where the hon. Gentleman stands on the question of aggregation. Most of his speech was devoted to saying that he would prefer a different form of inheritance tax. Whether such inheritance tax should involve aggregation or not, I do not know. What he said was that he preferred the acquisition basis of taxation to the Estate Duty basis. I am not enough of a tax expert to work out what the relationship of such a system would be to the present system, either before or after the passing of this Clause.

However, my purpose is not to deal with the Amendment that has been moved but to ask the Committee to support the Amendment of my hon. Friend the Member for Stechford, which would aggregate other property with property of this nature. I am not against a review. There may be a very good case for review of Estate Duty, but until such a review has taken place I am certainly not in favour of altering the present intended basis, the basis that was intended by Parliament when it passed the existing statute. I am not in favour of altering the basis so as to make it easier for estates to be passed without being subject to the Estate Duty Parliament thought it was imposing.

Sir P. Spens

It is tempting to have a discussion of the general nature of Estate Duty and of the basis on which it ought to be imposed, but I feel myself that it is necessary to confine ourselves to exactly what the Clause does and what the Amendment would do. I join with my hon. Friend the Member for Morecambe and Lonsdale (Sir I. Fraser) in having the greatest respect for a provision that, down the decades since it has been in force, has been of the very greatest use, not to rich people, but to people of very moderate means. It was brought forward for the purpose of enabling people of moderate means to make provision for their widows and for their children, and it was for that reason that it was provided in the Act that each provision by a policy of insurance should be an estate by itself. It was for the very purpose of giving benefits to the poorer section of society that it was brought forward.

7.45 p.m.

This provision has been used recently to take a whole series of policies in favour of the widow and in favour of the children, and, prima facie, in dealing with that situation, there is a good deal to be said for aggregating the whole lot together, but, on the other hand, I ask the Financial Secretary to look at it from the point of view of the recipient of the money that is to pass. In many cases where a man may provide £1,000 or £1,500, or even £2,000, for his widow be is able to provide only a few hundreds for the child, and if they have all to be aggregated together it means that the rate of duty will be very severe and the benefit done to the child will be very much less. I cannot agree that in cases where a person has done that, and where there happened to be other policies on his life, the total aggregation is for the benefit of the recipients.

I hope, therefore, that, while we cannot object, if it is accepted that there is a loophole, to its being stopped up, it is not necessary to do it by aggregating all the policies on the life of the deceased. The alternative of aggregating policies for the benefit of each separate beneficiary is a quite sufficient sanction to stop up the loophole. I believe it would be of greater benefit.

Mr. Boyd-Carpenter

As my right hon. and learned Friend the Member for Kensington, South (Sir P. Spens) said, it would be fascinating, although, no doubt, we should consume a great deal of time, if we were to have a philosophic discussion on the principle of Estate Duty. I doubt, however, Sir Rhys, whether you would rule it to be in order. It is, of course, important, in considering this provision, to remember that we are considering it. as my right hon. and learned Friend very properly reminded us, against the background of what has been the practice for some 60 years under the Married Women's Property Acts. Therefore, we are discussing it, not as we might be if we were constructing de novo a system of taxation in this respect, but against the background of what has been accepted policy in this country for some 60 years.

The purpose of the Clause is to deal with the abuse as I described it on an earlier Amendment—if hon. Members prefer, the tax avoidance device—of taking out a number of policies at or below the exemption level in favour of the same person, the proceeds of which fall to be treated as a separate estate not liable to duty; the amount of which may be, and in certain circumstances has been, quite a large total sum. I was glad to hear my right hon. and learned Friend say it was a purpose that he supported.

The method used in the Clause is to create, as it were, two ring fences, one ring fence encircling the main body of the estate, and the other the proceeds of all the policies of insurance taken out, no matter in favour of whom. The Amendment moved by my hon. Friend the Member for Morecambe and Lonsdale (Sir I. Fraser), in what I thought was a very agreeable speech, proposes that instead of the policies of insurance being in one, as it were, "policy of insurance ring fence," there should be separate ring fences in respect of each particular beneficiary. That is the proposal as I understand it.

My hon. Friend described the Amendment with great fairness, and I will endeavour to follow his example, but it is not as straightforward as it sounds. For example, complications can arise when we are discovering who is the beneficiary for the purpose of assessing Estate Duty in the case of a policy to a widow for life and afterwards to the children. Another difficulty arises with a policy taken out in respect of two or three named persons. It is not clear from the Amendment whether those two or three persons who benefit from the same policy are one beneficiary or two or three.

Still more complicated is the situation which arises when we do not know who will be the ultimate beneficiary. In the case of a policy taken out in favour of the survivors of various relations, there are what one must describe as unidentifiable beneficiaries. All those points are not dealt with in the Amendment, and I would not expect them to be dealt with in it.

What I understood my hon. Friend was trying to do—and he seemed to do it with great fairness—was to put before the Committee the general issue of principle as to whether or not, in aggregating all policies of assurance within the one ring fence, we were not going further than is necessary to deal with the abuse. My hon. Friend agrees that we must stop the abuse, but the practical question is, "As the Clause stands, are we going too far?"

No doubt there is a good deal of force in the argument that we are going too far when we consider the Clause, as I suggested to the Committee that we properly can, against the background of the practice for the last 50 years under the Married Women's Property Act. The essence of what we are trying to do is to stop people from taking out a multiplicity of policies for the benefit of the same person. My right hon. Friend is disposed to agree that it would be fairer to look at the matter from the point of view of the separate beneficiaries—that is to say, to take perhaps the simplest case of a wife and one child, to look at it from the point of view of one ring fence covering all policies in respect of the wife anal one ring fence embracing all the policies in respect of the child or, if he is the happy possessor of a larger family, separate ring fence in respect of each child.

In those circumstances, my right hon. Friend is in agreement with the spirit of the Amendment, but, in deciding precisely what we do to implement the spirit of the Amendment, we must be careful not to leave fresh avenues of abuse. I have pointed out some in passing and, if I thought it right to detain the Committee. I could give many more examples of the complications which undoubtedly arise when one accepts the principle.

In some cases it may be impossible at, the time of death to identify at any rate some of the beneficiaries from a policy. A further complication arises with the possibility of avoidance by a person, for whose benefit the policy has been taken out, selling the policy before it is paid. Who is then the beneficiary for these purposes—the person who sold the policy or the investment company who bought it?

Clearly we must look at all those things. but nevertheless, in the light of the considerations to which I have referred, my right hon. Friend has authorised me to say that he accepts the intention of the Amendment with respect to separate and identifiable beneficiaries and that on Report he will lay before the House a Clause, which I am bound to say will be somewhat complicated, although not too complicated, endeavouring not only to Jo this but also to deal with the dangers which I have pointed out. In general, the intention will be that where the beneficiary is identifiable, then the policies in his favour shall be aggregated in his favour but not with other policies in favour of other beneficiaries. The provisions of the Clauses as it stands shall in general continue to apply in the case of unidentifiable beneficiaries and perhaps also to cases in which the policies have been sold.

That, I think, is the right way in which to approach this very difficult problem. I warn my hon. Friends that we shall have to meet these complications. I do not wish to mislead them by suggesting that it will be possible to deal with every policy in favour of any beneficiary, identifiable or unidentifiable, in this way. Leaving aside the question of the sale of the policy, it is my right hon. Friend's intention on Report to introduce an Amendment dealing with identifiable beneficiaries.

For the reasons which I have given, it is not possible to accept the terms of the Amendment, which neither deals nor attempts to deal with the more difficult subsidiary issues to which I have referred. The intention of the Amendment is quite clear, however, and we shall seek to implement that intention on Report.

Sir F. Soskice

I must confess that I am very much surprised at the Financial Secretary turning tail on the Clause. He has told us over and over again that he is concerned about an abuse. He says he has not been satisfied with the arrangements made by the Life Offices and thinks the abuse cannot be stopped in that way. Having called attention to the seriousness of the abuse, he now says that he proposes to water down the Clause until it does virtually nothing.

We on this side of the Committee take the view that the Clause as it stands does not go nearly far enough and we should have desired to see these policies aggregated, as we have suggested, with the whole of the rest of the property of the deceased person. If we look squarely at the position, here is a case of a deceased person, upon whose estate duty is being levied, giving away his property in a particular form—I will not say in a particular guise—which has been authorised by legislation of some long standing.

It is difficult to see what the justification for that exception, provided by that legislation, is in any case, and we think that in order to make the Estate Duty system coherent and systematic, there is a strong case for saying that the method of giving away money in form of policies should no longer be tolerated and that money given away in this manner to children and widows, for example, beyond a certain amount, should stand on exactly the same footing as that of any other gift which the testator makes by his will or while he is alive. It should be subject to the same rate of duty as any other portion of his property.

Opinions may differ about that, and hon. Members opposite will no doubt not accept that point of view. If they do not accept it, it seems to me extraordinary that the Financial Secretary and the Government, having taken what they regard as a serious abuse, having considered the task of putting an end to it—and the Clause goes some of the way necessary to do that—should now, when the suggestion is made for emasculating the Clause almost 99 per cent., suddenly change their point of view and say that they are ready to accept the suggestion. That is what it does. [HON. MEMBERS: "No."] Certainly, it does. It means that the testator who is well-to-do can now distribute his estate by granting a number of different policies, so long as he takes the precaution of avoiding falling into the error of giving several policies to the same person.

8.0 p.m.

Hitherto, he has been able to give several policies of small amounts to the same person and have them treated separately. What is proposed if the Government accept the Amendment is this: If the testator has a wife and a number of children or other people who are beneficiaries of his bounty, all that he must not do is to give to one of his children five, six or seven policies. If he does, all that happens is that these policies are treated as one. If the Clause goes no further than that, the Government are really playing with the position, and are not making any serious endeavour to stop this kind of abuse. That is not only an abuse and an evasion, but a vicious abuse. It is deplorable that the Government should turn tail in the way they are doing.

Therefore. I repeat that this is a deplorable abuse, and the Government are being asked, having taken their stand about it, to give in to some of their back benchers and run away from what they were about to do. That is really what they are doing. The argument will not benefit by repetition, and I do not propose to repeat it, but I appeal to the Financial Secretary, if he has self-respect, to think again before he falls in with That proposal, and not to put his pencil right through this Clause.

He is going to make it possible for these testators—and it does enure principally to the advantage of the best off— to do practically what they have been doing hitherto. The only thing that it stops them from doing is to practise the abuse in its greatest form. That is a poor performance on the part of the Government, and a deplorable attitude to take up.

We press on this Committee that, not only ought the Government not to accept the proposal made, but they ought to say that the time has come when these kind of policies should be put on the same footing as other gifts for the disposal of the estate. I hope that when the Financial Secretary has thought the matter over, and realises the feeling that his proposal will certainly cause in the country, when the country realises what he is doing, he will not only not accept it, but will go the whole length which he ought to go, and say that all these policies should be aggregated with the rest of testator's estate and subject to Estate Duty accordingly.

Mr. E. H. C. Leather (Somerset, North)

I apologise for detaining the Committee after the right hon. Gentleman has spoken, but I do so because there is an important point which needs going into, in view of the fantastic argument which we have just heard from the right hon. and learned Member for Neepsend (Sir F. Soskice).

He says that this Clause does not go far enough as it stands before my right hon. Friend indicated his acceptance of the Amendment. He says that he would go much further. The important point is that the Clause as it stands goes much too far to achieve its purpose anyway. The right hon. and learned Gentleman is once again riding his favourite hobbyhorse of taking away from the rich man. He is entitled to follow that view if he likes, but the point is this. In the way in which his Clause stands, it would not have that affect at all. It completely defeats its purpose as it stands, because the rich man, affected by this Clause as it is in the Bill—and the right hon. Gentleman wants to go further—will say: "If that is the way the law stands, I want it that way. I will make the gift inter vivos, and pay no tax at all."

In that case the Treasury would lose. I urge my right hon. Friend to withdraw this Clause, because the effect of the Clause is that the Treasury will not only lose the Estate Duty altogether, but also lose the Income Tax on the income that is being used to pay the premiums. After all, people do usually pay premiums out of income. If a man has great wealth and capital he can transfer the lot.

The right hon. and learned Gentleman and his hon. Friends may argue that that is a bad thing, and I may agree, but they never did anything about it. To suggest that the country would criticise the Government for not stopping the abuse, which he and his hon. Friends allowed to continue for six years without a single move to stop it, is the heighth of nonsense, and the right hon. and learned Gentleman knows it.

The point which I want to make to my right hon. Friend is that the Clause as it stands will completely defeat its object.

The concession which he has agreed to make to the hon. Member for Morecambe and Lonsdale (Sir I. Fraser) is a very wise one. It will allow people to do what the Married Women's Property Act has always intended to do, that is, make prudent provision for their children and their wives, and to allow the Bill to stand as it is, or to make it stronger as hon. Members opposite want to do, would be to encourage people to make more gifts and the revenue would lose and not gain.

Mr. Gough

I have no intention of detaining the Committee. When speaking on an earlier Amendment, I emulated the Solicitor-General and made most of my speech under that head. My hon. Friend the Member for Somerset, North (Mr. Leather) has disposed of what I was going to say to the hon. Member for Stechford (Mr. Roy Jenkins), because it is nonsense to say that the Married Women's Property Act was designed for rich people. I want now to confine my remarks to one thing, since I have heard the remarks of my hon. Friend the Financial Secretary, which gave me the greatest pleasure, because I think that it is not an abuse, as the right hon. and learned Gentleman for Neepsend (Sir F. Soskice) said, to look after one's widow and children. We on this side of the Committee feel that the words of my right hon. Friend were an emulation of our policy of a property-earning democracy.

There is one technical point which I would ask my right hon. Friend to consider when he is thinking about his Clause. That is in regard to pensions schemes and pension funds of which there are hundreds and thousands of beneficiaries up and down the country in every scale of life. In practically all these pension schemes, particularly the ones managed by insurance offices, there is a death benefit which, in the case of those of very long service, is a quite considerable amount.

I am perhaps throwing another spanner into the works and making this even more difficult, but I feel that where there is a benefit coming from the employer something might be done, if my right hon. Friend would consider it, to prevent it being aggregated with policies under the Married Women's Property Act. That is the only point which I have to make, except to thank my right hon. Friend for giving this matter his consideration, and I express the hope that he will be able to produce a Clause to deal with the Amendment which has been put forward.

Mr. Roy Jenkins

I think that the speech of the hon. Member for Somerset, North (Mr. Leathers) put an extraordinary point. It seems to me that it was accepted by some hon. Members as shining a new light on our debates and having a good deal of validity. I do not think that this can be said to be so. The hon. Member's main argument was that this Clause does not have to be too effective, because if it is effective it will mean a great increase of gifts inter vivos, and the whole purpose of the Clause will be defeated.

Mr. Leather

The hon. Member is close, but not quite right. By "effective" I do not mean enforced and enforcible; I mean over-done. By making it too drastic, as with most things, one defeats one's own object.

Mr. Jenkins

It is difficult to know exactly what meaning one will apply to terms like "too drastic." Surely, the hon. Member's argument amounts to this. We all know the loopholes of gifts made inter vivos. If this one loophole is closed, people will automatically go to the other loophole. I am not at all clear as to the extent to which the hon. Member thinks that, holding the view which he does, it is worth having any Clause at all. The whole purpose of the Clause is to make it difficult for people to get round the provisions of Estate Duty by means of a variety of insurance policies.

Mr. Leather

I was trying to be brief and perhaps did not make myself clear. There is a great distinction between the rich man with lots of capital, who would do as I said—he was the person with whom I was dealing and with whom the right hon. and learned Member for Neepsend (Sir F. Soskice) dealt—but the middle-class man, on the £700, £800, £900 or £1,500 level, is in a very difficult position. He cannot make a gift inter vivos because he does not have the capital, but he can do it by insurance out of his income, which seems to me a thoroughly laudable thing for him to do, and he should not be stopped from doing it.

Mr. Jenkins

I understood that point, but I did not see how it led to the conclusion which the hon. Member attempted to draw. If what he is concerned about are middle-income people who, because they do not possess the capital, are not able to make gifts inter vivos, it is in no way apparent to me how any provision in the Clause can force these people into making such gifts. The purpose of the hon. Member's argument, as I understood it, was that they were not in a position to do so.

Mr. Leather

Then why the Amendment?

Mr. Jenkins

That is an entirely different argument.

Mr. Leather

The hon. Member must not make this deliberately wrong. He would hit the middle class for no good purpose and he would merely force the rich man to avoid more tax, which is in every way a bad thing. There is no doubt that the rich man is being forced to avoid tax.

Mr. Jenkins

I am still completely bewildered by the hon. Member's argument. If it pays the rich to make these gifts inter vivos, obviously they will make the gifts rather than take out insurance policies and make themselves subject to any of these difficulties. If one is dealing with a category of persons who, as the hon. Member says, may be the most concerned with insurance policy avoidance, those people, as I understand it, are not in a position to do what the hon. Member says is the danger. Where, therefore, is the danger? The hon. Member's argument, which I think is completely untenable, was that if the Clause were put through without the Amendment of the hon. Member for Morecambe and Lonsdale (Sir I. Fraser), which is being considered by the Government, it would lead to a great increase in gifts inter vivos. That is what I understood the hon. ber to say.

Mr. Leather

The hon. Member has deliberately misunderstood me.

Mr. Jenkins

I have tried hard to understand the hon. Member. He has been on his feet three times since his speech. If he likes to get on his feet again—the Government Chief Whip is not here—he could give a brief explanation and I would try to follow anything else he put forward, but on the basis of what he has said so far, the hon. Member's argument seems to be absolute nonsense.

Mr. Leather

There are none so deaf as those that will not hear.

Mr. Jenkins

I agree with my right hon. and learned Friend the Member for Neepsend (Sir F. Soskice) that this is an extremely disturbing concession which we have heard from the Government this afternoon. It greatly undermines the purpose of the Clause. I am not sure why the Financial Secretary bothered to incur the odium, which he certainly did incur, in resisting the previous Amendment if he was going to give so much away on this Amendment. I am not sure that the right hon. Gentleman has not got for himself and the Treasury the worst of both worlds. It would have been better for him either to have given way earlier or to have resisted both Amendments. There is no doubt that this concession undermines the value of the Clause. As is clear from the Amendment in the names of some of my hon. Friends, and which, I understood, we could discuss with the present Amendment, we would prefer to get away from the concept of insurance policies being separate property.

8.15 p.m.

The logic of that argument was recognised by the hon. Member for Hall Green (Mr. Aubrey Jones) in the second of his powerful speeches on the Clause. The hon. Member recognised that it was quite wrong to treat insurance policies in a way different from any other property for this purpose. It is true, as the right hon. and learned Member for Kensington, South (Sir P. Spens) and others have said, that this practice under the Married Women's Property Act is an old practice which has been in operation for about 70 years. But the Married Women's Property Act was a pre-death duties and pre-Estate Duty Act. It was certainly put upon the Statute Book with no thought whatever of the position which began in 1894 and which has grown up since. It was in no way intended to be the means of avoiding the payment of Estate Duty. The fact that it has become so in any way is a purely haphazard growth. Although it has existed for a long time, that is no reason why the existing position should continue.

The hon. Member for Hall Green put forward an interesting new point about his approach to the whole matter being to levy Estate Duty upon the point of acquisition rather than upon the point of succession, and one would like to consider its consequences, but the hon. Member certainly joined with us on this side in saying that now that there are very large death duties, it is completely illogical to allow the Married Women's Property Act or anything else which was drawn up before that period to create for insurance policies an entirely distinct position under our succession law. Such a course has no basis whatever in logic.

Sir I. Fraser

The Government are taking a step to support and strengthen family life. Their proposal is by no means deplorable but is, on the contrary, generous and sensible. I gladly accept the proposal to introduce on Report a Clause which will deal more adequately with the principle which I have in mind. I hope that its effect will be to encourage family life and to cause the people to increase and multiply. I beg to ask leave to withdraw the Amendment.

Hon. Members

No.

Amendment negatived.

Mr. Boyd-Carpenter

I beg to move, in page 35, line 29, to leave out "is not leviable," and to insert: neither is payable nor would be if the duty were payable on estates of however small a principal value. This Amendment is designed to make completely clear the words which appear in brackets in line 29. As the Committee is aware, the intention is to aggregate certain policies of insurance. The words in brackets in line 29 are designed to exclude from that aggregation the policies which on the death of the assured person are outside the Estate Duty charge. An obvious example would be a policy taken out on a deceased's life by his wife on which she had paid all the premiums out of her own resources.

Since the publication of the Bill, the question has been raised whether the word "leviable," which appears at the end of the passage in brackets, might not be thought to cover also policies whose total value, being below £2,000, was below the exemption level for Estate Duty purposes. It is not, of course, intended to exclude them and the words on the Order Paper are designed to make

it clear that the only policies to be excluded are the policies which do not come into the charge at all because of their nature, not those which are merely below the exemption level.

Mr. Houghton

"Leviable" is such an ugly word that I cannot believe it has any place in the English language. Does the right hon. Gentleman happen to know whether it is a word in the English language or one from the collection of jargon which comes from Whitehall?

Mr. Boyd-Carpenter

I do not know whether what I am going to tell the hon. Gentleman will please him, but I do not know whether the answer is "yes" or "no." It is language that appears in previous Finance Acts.

Amendment agreed to.

Amendment proposed: In page 35, line 30, after "estate," insert: with the other property passing on the death.—[Mr. Roy Jenkins.]

Question put, "That those words be there inserted."

The Committee divided: Ayes, 238; Noes, 270.

Division No. 176.)	AYES	[8.23 p.m.
Acland, Sir Richard	Corbet, Mrs. Freda	Greenwood, Anthony
Adams, Richard	Cove, W. G.	Grey, C. F.
Albu, A. H.	Craddock, George (Bradford, S)	Griffiths, David (Rother Valley)
Allen, Arthur (Bosworth)	Crosland, C. A. R,	Griffiths, Rt. Hon. James (Llanelly)
Allen, Scholefield (Crewe)	Crossman, R. H. S.	Griffiths, William (Exchange)
Anderson, Frank (Whitehaven)	Cullen, Mrs. A.	Hale, Leslie
Awbery, S. S.	Daines, P.	Hail, Rt. Hon. Glenvil (Coine Valley)
Bacon, Miss Alice	Dalton, Rt. Hon. H.	Hall, John T. (Gateshead, W.)
Baird, J.	Darling, George (Hillsborough)	Hamilton, W. W.
Balfour, A.	Davies, Ernest (Enfield, E.)	Hannan, W.
Bartley, P.	Davies, Harold (Leek)	Hardy, E. A.
Bellenger, Rt. Hon. F. J	Davies, Stephen (Merthyr)	Hargreaves, A.
Bence, C. R.	de Freitas, Geoffrey	Harrison, J. (Nottingham, E.)
Benn, Hon. Wedgwood	Deer, G.	Hastings, S.
Benson, G.	Delargy, H. J.	Hayman, F. H.
Beswick, F.	Dodds, N. N.	Healey, Denis (Leeds, S. E.)
Bing, G. H. C.	Donnelly, D. L.	Henderson, Rt. Hon. A. (Rowley Regis)
Blackburn, F.	Driberg, T. E. N.	Herbison, Miss M.
Blenkinsop, A.	Dugdale, Rt. Hon. John (W. Bromwich)	Hewitson, Capt. M.
Blyton, W. R.	Ede, Rt. Hon. J. C.	Hobson, C. R.
Boardman, H.	Edelman, M.	Holman, P.
Bottomley, Rt. Hon. A. G.	Edwards, W. J. (Stepney)	Holmes, Horace
Bowden, H. W.	Evans, Albert (Islington, S.W.)	Houghton, Douglas
Bowles, F. G.	Evans, Edward (Lowestoft)	Hudson, James (Ealing, N.)
Braddock, Mrs. Elizabeth	Evans, Stanley (Wednesbury)	Hughes, Emrys (S. Ayrshire)
Brockway, A. F.	Fernyhough, E.	Hughes, Hector (Aberdeen, N.)
Brook, Dryden (Halifax)	Fienburgh, W.	Hynd, J. B. (Attercliffe)
Broughton, Dr. A. D. D.	Finch, H. J.	Irvine, A. J. (Edge Hill)
Brown, Rt. Hon. George (Belper)	Fletcher, Eric (Islington, E.)	Irving, W. J. (Wood Green)
Brown, Thomas (Ince)	Follick, M.	Isaacs, Rt. Hon. G. A.
Butler, Herbert (Hackney, S.)	Foot, M. M.	Janner, B.
Callaghan, L. J.	Forman, J. C.	Jay, Rt. Hon. D. P. T
Carmichael, J.	Fraser, Thomas (Hamilton)	Jeger, George (Goole)
Cattle, Mrs. B. A.	Freeman, John (Watford)	Jeger, Mrs. Lena
Champion, A. J.	Freeman, Peter (Newport)	Jenkins, R. H. (Stechford)
Chetwynd, G. R	Gaitskell, Rt. Hon. H. T. N.	Johnston, Douglas (Paisley)
Clunie, J.	Gibson, C. W.	Jones, David (Hartlepool)
Coldrick, W.	Glanville, James	Jones, T. W. (Merioneth)
Collick. P. H	Gordon Walker, Rt. Hon. P. C	Keenan, W
Key, Rt. Hon. C. W	Palmer, A. M. F.	Strachey, Rt. Hon. J
King, Dr. H. M.	Pannell, Charles	Stress, Dr. Barnett
Kinley, J.	Pargiter, G. A.	Summerskill, Rt. Hon. E
Lawson, G. M.	Parker, J.	Swingler, S. T.
Lee, Frederick (Newton)	Parkin, B. T	Sylvester, G. O.
Lee, Miss Jennie (Cannock)	Paton, J.	Taylor, Bernard (Mansfield)
Lewis, Arthur	Pearson, A.	Taylor, John (West Lothian)
Lindgren, G. S	Peart, T. F.	Taylor, Rt. Hon. Robert (Morpeth)
Legan, D. G-	Plummer, Sir Leslie	Thomas, Ivor Owen (Wrekin)
MacColl, J. E.	Popplewell, E.	Thomson, George (Dundee, E.)
McGovern, J.	Porter, G.	Thornton, E.
McKay, John (Wallsend)	Price, Philips (Gloucestershire, W.)	Tomney, F
McLeavy, F.	Proctor, W. T.	Viant, S. P.
McNeil, Rt. Hon. H.	Pryde, D. J.	Wallace, H. W
MacPherson, Malcolm (Stirling)	Pursey, Cmdr. H.	Warbey, W. N.
Mainwaring, W. H.	Rankin, John	Watkins, T. E.
Mallalieu, E. L. (Brigg)	Reid, Thomas (Swindon)	Weitzman, D.
Mann, Mrs. Jean	Reid, William (Camlachie)	Wells, Percy (Faversham)
Manuel, A. C.	Roberts, Rt. Hon. A.	Wells, William (Walsall)
Marquand, Rt. Hon. H. A	Roberts, Albert (Normanton)	West, D. G.
Mason, Roy	Roberts, Goronwy (Caernarvon)	Wheeldon, W. E.
Mayhew, C. P	Robinson, Kenneth (St. Pancras, N.)	White, Mrs. Eirene (E. Flint)
Mellish, R. J.	Rogers, George (Kensington, N.)	White, Henry (Derbyshire, N. E.)
Messer, Sir F.	Ross, William	Wigg, George
Mikardo, Ian	Royle, C.	Wilcock, Group Capt. C. A. S.
Mitchison, G. R	Shackleton, E. A. A.	Willey, F. T.
Monslow, W.	Shinwell, Rt. Hon. E.	Williams, David (Neath)
Moody, A. S.	Short, E. W.	Williams, Rev. Llywelyn (Abertillery)
Morgan, Dr. H. B. W	Shurmer, P. L. E.	Williams, Rt. Hon. Thomas (Don V'll'y)
Morley, R	Silverman, Julius (Erdington)	Williams, W. R. (Dreylsden)
Mulley, F. W	Silverman, Sydney (Nelson)	Williams, W. T. (Hammersmith, S.)
Nally, W.	Simmons, C. J. (Brierley Hill)	Willis, E. G.
Noel-Baker, Rt. Hon. P. J.	Skeffington, A. M.	Winterbottom, Richard (Brightside)
O'Brien, T.	Slater, Mrs. H. (Stoke-on-Trent)	Woodburn, Rt. Hon. A.
Oldfield, W. H.	Slater, J. (Durham, Sedgefield)	Wyatt, W. L
Oliver, G. H	Smith, Ellis (Stoke, S.)	Yates, V. F.
Orbach, M.	Smith, Norman (Nottingham, S.)	Younger, Rt. Hon. K.
Oswald, T.	Snow, J. W.
Padley, W. E.	Sorensen, R. W.	TELLERS FOR THE AYES:
Paget, R. T.	Soskice, Rt. Hon. Sir Frank	Mr. J. T. Price and
Paling, Rt. Hon. W. (Dearne Valley)	Sparks, J. A.	Mr. James Johnson.
Paling, Will T. (Dewsbury)	Steele, T.
NOES
Aitken, W. T.	Clyde, Rt. Hon. J. L.	Graham, Sir Fergus
Alport, C. J. M.	Cole, Norman	Grimond, J.
Amory, Rt. Hon. Heathcoat (Tiverton)	Colegate, W. A.	Grimston, Hon. John (St. Albans)
Anstruther-Gray, Major W. J.	Conant, Maj. Sir Roger	Grimston, Sir Robert (Westbury)
Arbuthnot, John	Cooper, Son. Ldr. Albert	Hall, John (Wycombe)
Assheton, Rt. Hon. R. (Blackburn, W.)	Cooper-Key, E. M.	Harris, Frederic (Croydon, N.)
Astor, Hon. J. J.	Craddock, Beresford (Spelthorne)	Harris, Reader (Heston)
Baldock, Lt.-Cmdr. J. M.	Crosthwaite-Eyre, Col. O. E.	Harrison, Col. J. H. (Eye)
Baldwin, A. E.	Crouch, R. F.	Harvey, Air Cdre. A. V. (Macclesfield)
Baxter, Sir Beverley	Crowder, Sir John (Finchley)	Harvey, Ian (Harrow, E.)
Beach, Maj. Hicks	Crowder, Petre (Ruislip—Northwood)	Harvie-Watt, Sir George
Bell, Philip (Bolton, E.)	Darling, Sir William (Edinburgh, S.)	Hay, John
Bell, Ronald (Bucks, S.)	Davidson, Viscountess	Head, Rt. Hon. A. H.
Bennett, F. M. (Reading, N.)	Deedes, W. F.	Heald, Rt. Hon. Sir Lionel
Bennett, Dr. Reginald (Gosport)	Digby, S. Wingfield	Heath, Edward
Bennett, William (Woodside)	Dodds-Parker, A. D.	Henderson, John (Cathcart)
Bevins, J. R. (Toxteth)	Donaldson, Cmdr. C. E. McA.	Higgs, J. M. C.
Birch, Nigel	Doughty, C. J. A.	Hill, Dr. Charles (Luton)
Bishop, F. P.	Douglas-Hamilton, Lord Malcolm	Hill, Mrs. E. (Wythenshawe)
Black, C. W.	Drayson, G. B.	Hirst, Geoffrey
Boothby, Sir R. J. G	Drewe, Sir C.	Holland-Martin, C. J
Bossom, Sir A. O.	Dugdale, Rt. Hon. Sir T. (Richmond)	Hollis, M. C
Boyd Carpenter, Rt. Hon. J. A	Duncan, Capt. J. A. L.	Holt, A. F.
Boyle, Sir Edward	Duthie, W. S.	Hope, Lord John
Braine, B. R.	Eden, J. B. (Bournemouth, West)	Hopkinson, Rt. Hon. Henry
Braithwaite, Sir Albert (Harrow, W.)	Erroll, F. J.	Horobin, I. M.
Braithwaite, Sir Gurney	Finlay, Graeme	Horsbrugh, Rt. Hon. Florence
Bromley-Davenport, Lt.-Col. W H	Fisher, Nigel	Howard, Hon. Greville (St. Ives)
Brooke, Henry (Hampstead)	Fletcher-Cooke, C.	Hudson, Sir Austin (Lewisham, N.)
Brooman-White, R. C.	Ford, Mrs. Patricia	Hulbert, Wing Cdr. N. J.
Browne, Jack (Govan)	Fort, R.	Hutchison, Sir Ian Clark (E'b'rgh, W)
Buchan-Hepburn, Rt. Hon. P. G. T	Fester, John	Hyde, Lt.-Col. H. M.
Bullard, D. G.	Fraser, Hon. Hugh (Stone)	Hylton-Foster, H. B. H.
Bullus, Whig Commander E. E.	Fraser, Sir Ian (Morecambe & Lonsdale)	Iremonger, T. L.
Burden, F. F. A.	Galbraith, Rt. Hon. T. D. (Pollok)	Jenkins, Robert (Dulwich)
Butcher, Sir Herbert	George, Rt. Hon. Maj. G. Lloyd	Johnson, Eric (Blackley)
Campbell, Sir David	Glover, D.	Johnson, Howard (Kemptown)
Channon, H.	Godber, J. B.	Jones, A. (Hall Green)
Clarke, Col. Ralph (East Grinstead)	Cough, C. F. H	Joynson-Hicks, Hon. L W
Clarke, Brig. Terence (Portsmouth. W.)	Gower, H. R	Kaberry, D

Kerby, Capt. H. B.	Nicholson, Godfrey (Farnham)	Spence, H. R. (Aberdeenshire, W.)
Kerr, H. W.	Noble, Comdr. A. H. P	Spens, Rt. Hon. Sir P. (Kensington, S.)
Lambert, Hon. G.	Nugent, G. R. H.	Stanley, Capt. Hon. Richard
Lambton, Viscount	Nutting, Anthony	Stevens, Geoffrey
Lancaster, Col. C. G	Oakshott, H. D.	Steward, W. A (Woolwich, W.)
Langford-Holt, J. A.	Odey, G. W.	Stewart, Henderson (Fife, E.)
Leather, E. H. C.	O'Neill, Hon. Phelim (Co. Antrim, N.)	Stoddart-Scott, Col. M.
Legge-Bourke, Maj. E. A. H.	Ormsby-Gore, Hon. W. D.	Storey, S.
Legh, Hon. Peter (Petersfield)	Orr, Capt. L. P. S.	Strauss, Henry (Norwich, S.)
Lennox-Boyd, Rt. Hon. A. T	Orr-Ewing, Charles Ian (Hendon, N.)	Stuart, Rt. Hon. James (Moray)
Linstead, Sir H. N.	Osborne, C.	Studholme, H. G.
Llewellyn, D. T.	Page, R. G.	Summers, G. S.
Lloyd, Rt. Hon. G. (King's Norton)	Peake, Rt. Hon. O.	Sutcliffe, Sir Harold
Lloyd, Maj. Sir Guy (Renfrew, E.)	Perkins, Sir Robert	Taylor, Sir Charles (Eastbourne)
Lockwood, Lt.-Col. J. C.	Peto, Brig. C. H. M.	Taylor, William (Bradford, N.)
Longden, Gilbert	Pickthorn, K. W. M.	Teeling, W.
Low, A. R. W.	Pilkington, Capt. R. A.	Thomas, Rt. Hon. J. P. L. (Hereford)
Lucas, Sir Jocelyn (Portsmouth, S.)	Pitman, I. J.	Thomas, Leslie (Canterbury)
Lucas, P. B. (Brentford)	Pitt, Miss E. M.	Thompson, Kenneth (Walton)
Lucas-Tooth, Sir Hugh	Powell, J. Enoch	Thompson, Lt.-Cdr. R. (Croydon, W.)
McAdden, S. J.	Price, Henry (Lewisham, W.)	Thorneycroft, Rt. Hn. Peter (Monmouth)
McCorquodale, Rt. Hon. M. S	Prior-Palmer, Brig. O. L	Thornton-Kemsley, Col. C. N.
Macdonald Sir Peter	Profumo, J. D,	Tilney, John
Mackeson, Brig. Sir Harry	Raikes, Sir Victor	Touche, Sir Gordon
McKibbin, A. J.	Rayner, Brig. R.	Turner, H. F. L.
Mackie, J. H. (Galloway)	Redmayne, M.	Turton, R. H.
Maclay, Rt. Hon. John	Rees-Davies, W. R.	Tweedsmuir, Lady
Maclean, Fitzroy	Remnant, Hon. P.	Vane, W. M. F.
Macleod, Rt. Hon. Iain (Enfield, W.)	Renton, D. L. M.	Vaughan-Morgan, J. K
Macmillan, Rt. Hon. Harold (Bromley)	Ridsdale, J. E.	Vosper, D. F.
Macpherson, Niall (Dumfries)	Roberts, Peter (Heeley)	Wade, D. W.
Maitland, Comdr. J. F. W. (Horncastle)	Robertson, Sir David	Wakefield, Edward (Derbyshire, W.)
Maitland, Patrick (Lanark)	Robinson, Sir Roland (Blackpool, S.)	Wakefield, Sir Wavell (St. Marylebone)
Manningham-Buller, Rt. Hn. Sir Reginald	Rodgers, John (Sevenoaks)	Walker-Smith, D. C.
Markham, Major Sir Frank	Roper, Sir Harold	Wall, Major Patrick
Marlowe, A. A. H.	Ropner, Col. Sir Leonard	Ward, Hon. George (Worcester)
Marples, A. E.	Russell, R. S.	Ward, Miss I, (Tynemouth)
Marshall, Douglas (Bodmin)	Ryder, Capt. R. E. D.	Waterhouse, Capt. Rt. Hon. C
Maude, Angus	Sandys, Rt. Hon. D.	Watkinson, H. A.
Maudling, R.	Savory, Prof Sir Douglas	Webbe, Sir H. (London & Westminster)
Maydon, Lt.-Comdr. S. L. C	Schofield, Lt.-Col. W.	Wellwood, W.
Medlicott, Brig F.	Scott, R. Donald	Williams, Rt. Hon. Charles (Torquay)
Mellor, Sir John	Scott-Miller, Cmdr. R.	Williams, Sir Herbert (Croydon, E.)
Molson, A. H. E.	Shepherd, William	Williams, Paul (Sunderland, S.)
Monckton, Rt. Hon. Sir Walter	Simon, J. E. S. (Middlesbrough, W.)	Williams, R. Dudley (Exeter)
Moore, Sir Thomas	Smithers, Peter (Winchester)	Wills, G.
Morrison, John (Salisbury)	Smithers, Sir Waldron (Orpington)	Wilson. Geoffrey (Truro)
Mott-Radclyffe, C. E.	Smyth, Brig. J. G. (Norwood)	Wood, Hon. R.
Nabarro, G. D. N.	Snadden, W McN.
Neave, Airey	Spearman, A. C. M.	TELLERS FOR THE NOES:
Nicholls, Harmar	Speir, R. M.	Mr. T. G. D. Galbraith and
		Mr. Robert Allan.

Question put, and agreed to.

Amendment made: In page 35, line 32, leave out "That," and insert" This."—[Mr. Boyd-Carpenter.]

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

Mr. Crosland

This is one of the Clauses in the Finance Bill which has produced the greatest possible division between the two sides of the Committee. I am sorry that the hon. Member for Heeley (Mr. P. Roberts) is not present, because I want to refer to some of his remarks.

Before I do that, however, I shall say something on a point raised by the hon. Member for Horsham (Mr. Gough), who objected to the fact that my right hon. and learned Friend the Member for Neepsend (Sir F. Soskice) had used the word "abuse" to describe the method of tax avoidance which we have been discussing on this Clause. The hon. Member for Horsham asked whether we on this side of the Committee think that it is an abuse for a man to make provision for his wife and children. Of course we do not think that, but we do think it is an abuse for him to make it in a way deliberately designed to escape tax. That is the only abuse with which we are concerned.

I now come to the general question of tax avoidance and the attitude to it taken by the other side of the Committee during the last two hours. The hon. Member for Heeley admitted that there was a loophole in the law. He also admitted that a great number of people had taken advantage of it and that the Government were right to close the loophole by this Clause. Having admitted all these things, he still went on to say that a large number of the speeches, including that of the Financial Secretary, smelled of Socialism. He appeared to be giving vent to some really deep-seated emotional feeling on his part which met with a great deal of support from his hon. Friends.

This suggests that here is a basic difference between the two sides of the Committee on whether we think tax avoidance is or is not a good thing. It is clear that the hon. Member for Heeley thinks that tax avoidance is a good thing. He said that it smells of Socialism to give the appearance of condemning tax avoidance. That was his phrase, and it was applauded by all hon. Members on his side of the Committee. He said that it was a thoroughly desirable thing to do for people to employ the best lawyers and the best accountants in order to find the maximum loopholes in the law. It is important to bring out the fact that this is the view of hon. Members opposite and that it certainly is not the view of hon. Members on this side of the Committee.

The most obvious reason we do not believe in tax avoidance is that the basic principle of our tax system, which has been accepted by Tory Chancellors of the Exchequer as well as by Labour Chancellors. is that taxation is levied on different people according to one thing and one thing only—their capacity to pay. The more tax avoidance there is, clearly the further we get away from taxation according to people's capacity to pay. What we get to is taxation not according to people's capacity to pay but according to people's capacity to pay expensive accountants. That is what it leads to.

The more frequent and regular the tax avoidance becomes, the more farcical the whole of our taxation system becomes. It ceases to bear any relation whatever to people's capacity to pay and merely bears a relation to the extent to which they are prepared to go to really competent accountants. If this is a Tory principle of taxation, it is a very good thing that it should be made clear to the Committee.

One could go further and say that if we are to agree with the hon. Member for Heeley and praise tax avoidance and encourage people to go to expensive accountants in order to find loopholes, we do not merely get away from the whole idea of capacity to pay but we actually get to a system in which the wealthier the person is the less tax relatively he is likely to pay. It is the wealthy people who are likely to employ the best accountants, generally speaking, compared with those of modest means. The result of this encomium of tax avoidance which we have had from the other side of the Committee would mean that the better off people were the less likely would they be to bear their share of the total tax burden. Again, if this really is a Tory principle of taxation it is a very good thing that it has been made clear to the Committee.

The third point to be made about tax avoidance in view of what the hon. Member said—and I am sorry that he is not here—is that the present concentration on tax avoidance, which is notorious and beyond any dispute, involves a really serious waste of people's time and effort which could be very much better spent in other directions. The time and effort of the taxpayers themselves, and the time and effort of their accountants and lawyers—all this would be better spent on productive purposes instead of being spent on finding means of circumventing the laws which Parliament has passed. If it is really the view of the hon. Member for Heeley that there is nothing wrong about this diversion of time and effort, it is excellent that that should have been clearly stated tonight.

The last thing to be stated about tax avoidance is that the more successful it is—the hon. Member wants it increased and wants us all to go to expensive accountants—the more the non-tax avoiders will have to pay. We shall have a redistribution of the whole burden of tax payment between the clever people who go to clever accountants and the rest who do not. The latter will have to pay more for the losses of taxation which the friends of the hon. Member will incur to the Treasury. We have not said that in this sense tax avoidance is illegal; tax evasion is illegal, not tax avoidance, but we certainly say it is an undesirable practice.

If it is a Socialist principle to be against tax avoidance, we are glad to be Socialists, and if it is a Tory principle to believe in tax avoidance, we are glad to be anti-Tory. The party opposite has ceased to be a party of active business men and entrepreneurs and has become a party of accountants and lawyers, willing to praise tax avoidance. [An HON. MEMBER: "Tax dodgers."] This Clause would have been well worth while considering if only to enable us to hear the speech of the hon. Member for Heeley and what he thinks Tory principles are. I hope the country will hear of this and will ponder it very seriously.

Mr. Houghton

We on this side of the Committee would be very glad to see this Clause stand part of the Bill, but we know that hon. Members opposite who agree to this Clause standing part of the Bill are looking forward to the Amendment which the Financial Secretary has promised to bring forward on Report stage that will destroy any effective step against this form of tax avoidance.

One aspect of life insurance provisions which has not been mentioned in the debate so far is an important reason against giving life assurance provision on death the special privileges now enjoyed and which this Clause as it stands would severely modify. Life insurance premiums are already given tax relief for Income Tax purposes so that all premiums paid towards life insurance policies passing to beneficiaries on the death of the insured person are to an extent subsidised out of the taxation from the very first premium to the last. I acknowledge that the relief is not at the standard rate of Income Tax and does not apply to Surtax, but, nevertheless, on large policies involving large premiums the Income Tax relief is considerable.

Under the Clause as it stands there was still a very valuable concession left to policies taken out in that way. The valuable concession left was that the aggregation of the proceeds of the policies could still be kept separate from the real estate, the free estate of the testator. There would, in fact, have been two separate estates on death, as the right hon. Gentleman explained—one with the fence round it being the free estate of the testator liable to Estate Duty at the appropriate rates, and another the separate estate belonging to beneficiaries, which, aggregated, would suffer Estate Duty at its own appropriate rate—the two being kept quite separate.

Had they been added together, as the Amendment moved by my hon. Friend the Member for Stechford (Mr. Roy Jenkins) proposed, these would have been in the complete aggregation a very big difference in the ultimate amount of Estate Duty payable. But the Chancellor proposes in this Clause as it stands still to retain the substantial benefit of two separate estates for one testator—one composed of his normal estates, real estate and the rest of his personal possessions, and the other the provision made by life insurance policies for beneficiaries, wife, children and so on.

8.45 p.m.

Now, the right hon. Gentleman, in his proposed Amendment to the Clause, will sub-divide the second aggregated estate provided by life insurance policies and revert to the present arrangement of having one separate estate for each beneficiary. In fact, the only thing that the Clause will do if it is amended as forecast by the right hon. Gentleman is to stop the more extreme case of a series of policies being taken out by the testator in the interests of one beneficiary.

An extreme example was quoted by the right hon. Gentleman on Second Reading, where a person took out 50 separate policies in the name of his wife. Each was a separate estate, and, being under the exemption limit, paid no Estate Duty at all. There is a considerable amount of life insurance provision being made for wives and children which will have the full benefit of the Clause if it is amended in the way suggested.

Mr. Ellis Smith (Stoke-on-Trent, South)

I am very interested in the example quoted in which 50 insurance policies were taken out. Will it still be possible for that to be done under the Clause?

Mr. Houghton

No. I have just pointed out that that type of case is the only one which the Clause will affect if it is amended in the manner suggested by the right hon. Gentleman. The Opposition would like the Clause to stand part of the Bill and to remain part of the Bill, particularly subsection (2) which deals with the problem of aggregation.

I regard this as a disgraceful surrender to the clamour which has obviously arisen on the benches opposite for modification of the Clause in the direction indicated. It is significant that a great deal of professional propaganda has been going on from the life insurance interests and the insurance brokers to get the Clause amended in that sense.

The life insurance interests have already recognised the abuses—that is a word which was used by the Financial Secretary; it has not been used exclusively on this side of the Committee—which were being employed by people in taking out a succession of policies of low denominations in the name of the same person in order to gain exemption eventually. That is why the life insurance interests voluntarily, and not by any agreement with the Inland Revenue, decided to restrict the number of policies that could be taken out in succession in that way to one per year.

I think that the life insurance companies in taking that step were not only concerned with ethical considerations and consideration of public interest, but also saw the danger that unless they put some check upon the abuse legislative steps would have to be taken to do so. There is no doubt that they have procured a reprieve from a legislative check upon the abuse by voluntarily taking the step which they have done. I am not criticising them, but let us be realists. I believe that they had their own interests very much in mind indeed when they took the step to which the Financial Secretary referred and about which he expressed a considerable measure of praise and approval.

The life insurance brokers and the life insurance interests, realising that the game is up so far as a succession of policies in the name of one person is concerned, have concentrated their propaganda on the part of the Clause which aggregates the insurance policies for all beneficiaries into one separate estate, which, as I pointed out, would in any case carry considerable advantages from the point of view of the total amount of Estate Duty payable, because it is obviously cheaper from an Estate Duty point of view to have two separate estates instead of one. If we have the one, the total is bigger, and the incidence of the duty rises sharply.

Coming from hon. Gentlemen who have recently been reminding hon. Members of the plight of the old-age pensioners, and who have recently said that it would be unseemly for hon. Members to improve their own financial position as Members, having regard to public opinion and to the plight of old-age pensioners, it is shameful that that amount of money, and a good deal more, is being given away by concessions in this Clause.

Let me remind hon. Members opposite of a further point. If we are to make proper provision for old-age pensioners, if we are to improve our welfare services, if we are to regard family life as sacred at the bottom as well as in the middle and at the top, and if we are to preserve those things in life and in our enlightened society to which we all pay lip service and which we should all be working to achieve, every £ in taxation counts. Everything that the revenue can yield has its place in the national interest, and, in these circumstances, if we are to give reliefs which are not justified on the grounds of equity, which are not justified on the grounds of personal or family need, we are merely surrendering to the clamour of the people who believe that these things are the most precious in our society.

Hon. Gentlemen opposite extol the virtues of social equality, of fiscal justice and all the rest, but, when it comes to the point of making a proposal which will make Estate Duty more equitable as between those who can adopt this device and those who cannot, the hon. Member for Heeley (Mr. P. Roberts) says that this smacks of Socialism.

This is the most regrettable episode in the debate on this Bill, and I can promise the right hon. Gentleman that we on these benches will look very critically indeed at the next step in this surrender to the protests of his hon. Friends behind him. The right hon. Gentleman has, in fact, forecast that, although we are asked to agree to this Clause standing part of the Bill, he does not mean it to stand part, but that it will be a different and less effective Clause, and one which really will not bear comparison with the proposals in their original form.

Mr. Hugh Gaitskell (Leeds, South)

The discussion on this Clause, it seems to me, can be clearly divided into two halves. During the first half, we had the position in which a number of hon. Gentlemen opposite were pressing the Government with great vigour and great determination to make important concessions to them. They were asking that people who had taken out these policies, but who have not yet died, should have the benefit of the very substantial gains which the law as it stands allows them to have.

At the same time, we had the Financial Secretary putting up a gallant fight against these attacks. He was defending the right of the Government to insist on the law being applied as it was always applied before, and that the change should occur at the date of death and not at the time the policies were taken out. For our part, we on this side of the Committee were glad to see that the Financial Secretary was opposing what seemed to us to be a quite indefensible Amendment submitted from the other side of the Committee.

We then came to the second half, when we found, on the contrary, that the Financial Secretary was indulging in what can only be described as an abject surrender to the pressure put upon him, and I must join with my hon. Friends in protesting at such an extraordinary concession being made. Let us consider for a moment what is involved here. Let us suppose that we have the case of a man who is leaving £100,000 in the form of insurance policies. Admittedly, under the law, he can almost avoid duty altogether if he has enough insurance policies through which that £100,000 is bequeathed. Under the Bill as proposed, he would be obliged to pay duty on that £100,000 at the full rate, namely, £45,000.

Now the Financial Secretary has told us that that individual will not be obliged to do that at all. He is to be allowed to give all the beneficiaries in his will a separate sum under an insurance policy, and of course each separate insurance policy will be assessed separately for the purposes of Estate Duty. Suppose there are five persons in the family to whom he leaves this £100,000 and that they all get £20,000. The amount of duty which will be paid on this part of the estate will not be £45,000 but £12,000, a loss to the Exchequer of £33,000. That is an astonishing proposition. Surely the Government must have thought of this possibility before. To come to the Committee and suddenly give way on this issue smacks of the worst possible surrender to the vested interests of the Conservative Party.

We do not propose to divide the Committee on this Clause because, despite all that I have said and despite the fact that what is now proposed goes a large way to lessen the benefits of the Clause, we recognise that it is not quite as bad as it was before. I must warn the Financial Secretary that we shall contest very strongly the Government Amendment that he has promised to introduce on the Report stage and which he has said will be long and complicated. Our arguments against it will be long and complicated as well.

Hon. Gentlemen on the Government side have said that it is all very well for us to criticise now, when we did not stop up these very loopholes. Coming from hon. Gentlemen who protested again and again against the tax-avoidance methods which we brought in when they were in opposition, this is a little too much. We made considerable progress while we were in office with dealing with the problem of tax avoidance. I should be the last to claim that we did the job completely, but we shall do it completely when we are back in power again. I can assure hon. Gentlemen of that. I trust that we shall then have the support of the hon. Member for Somerset, North (Mr. Leather) who, in that glib way of his, assured us that of course he was against all this avoidance by gifts inter vivos. This problem is serious and must be tackled, but it is not a very easy one to tackle. I hope we shall be able to tackle it and that we shall have the support of the hon. Member when we come forward with measures to do that very job.

This has been one of the most disappointing discussions that we have had, although I agree with my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) that it has been very revealing. In the early part of the debate I thought the Government would at least stand firm, but now we have this complete collapse. I can only express my very greatest regret and say again that we shall resist the proposed Amendment strongly when it is brought forward on Report.

9.0 p.m.

Mr. Boyd-Carpenter

Neither the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) nor the Committee would wish me to anticipate the discussion on an Amendment which has not yet been put down and a stage of the Bill not yet reached, but it would be a discourtesy to the right hon. Gentleman and to the Commitee if I did not speak for a moment.

In reply to the right hon. Gentleman's strictures, I can only say two things. First of all, as I anticipate the Clause will stand after discussion on Report, it will deal with the precise type of case to which I referred on Second Reading, to deal with which was the main purpose of introducing this particular Clause into the Bill. Secondly, I think that the Committee would do well to remember that what we are doing here—and from all aspects it is a serious thing—is to interfere with the old arrangement, which has lasted a good many years, under the Married Women's Property Act which provides that these insurance policies and their proceeds constitute wholly separate estates. The only difference that appears to arise between the two sides of the Committee—and will no doubt arise between the two sides of the House—is the degree of tightening of the law necessary in those circumstances. I would suggest, Sir Charles, that that is not a matter which we can properly or easily discuss at this stage when the Amendment is not before us.

The right hon. Gentleman has promised to bring forward on Report arguments not only long but complicated. I am sure that we shall be prepared to meet them when they come. Having said that, and as the Committee has a good deal of work before it, I wonder whether hon. Members would be prepared to give us this Clause and proceed to the other business?

Clause, as amended, ordered to stand part of the Bill.