New Clause.—(AMENDMENT OF S. 32 (2) OF FINANCE ACT, 1954.) (Hansard, 25 June 1956)

§ Mr. John Arbuthnot (Dover)
I beg to move, That the Clause be read a Second time.

Mr. H. Wilson
On a point of order, Sir Charles. Before the hon. Member continues, would it be in order to move to report Progress so that we may hear from the Government exactly how far they hope to go tonight?

§ The Chairman (Sir Charles MacAndrew)
I am afraid that I have called the hon. Member for Dover.

§ Mr. Arbuthnot
The purpose of this Clause is to amend Section 32 (2) of the Finance Act, 1954. It is concerned with the exemption from Estate Duty on the death of the second to die of parties to a marriage where duty was paid upon the death of the first to die on property of which the second to die was not competent to dispose. The exemption is contained in a number of statutory provisions, including the Finance Act, 1894, Section 5 (2), the Finance Act, 1898, Section 13, and the Finance Act, 1914, Section 14 (a).
Before 1954 duty had actually to be paid on the death of the first spouse to die. If no duty was paid, because at the date of the death the net value of the estate fell below the exemption limit, duty became payable on the death of the second spouse to die, even if he or she was not competent to dispose of the property. However, by Section 32 (2) of the Finance Act, 1954, it was provided, in effect, that in those circumstances duty would be deemed to have been paid on the first death, thus exempting the property from duty on the second death, even though no duty would actually have been paid on the first death.
The purpose of this new Clause is to clarify matters because doubts have now been expressed as to whether in fact the Section achieves this object in all the circumstances in which logically it should 216 apply. So far as it is relevant, the Section runs as follows: For the purpose of the exemption from estate duty chargeable on property passing on the death of a surviving spouse, estate duty shall be deemed to have been paid on any property passing on the death of the other spouse, being property on which it was not payable, but would have been if the duty were payable on estates of however small a principal value … We suggest that these words are not wide enough to comprehend the case where the first estate was insolvent. It is for that reason that my hon. Friend the Member for Langstone (Mr. Stevens) and I bring forward this new Clause.

§ The Solicitor-General (Sir Harry Hylton-Foster)
I would present to the Committee the view that the Clause is obviously right in principle, that its aim and object are right. My hon. Friend the Member for Dover (Mr. Arbuthnot) has explained why it is needed and I have not to repeat the explanation.
When this House tried to put the matter right in 1954, it clearly did it in terms which meant that duty on the second death might be excused if the duty had not been paid on the first death because the estate fell below the exemption limit, but there remains the case of the estate which does not pay duty because it is insolvent and also, I suppose, the rather mythical case where the estate is exactly nil.
I cannot accept the wording of my hon. Friend's Clause which requires looking at. It says: "For the purpose of resolving doubts …" I think the Greeks had a word for that which was not monosyllabic. If my hon. Friend thought fit on this undertaking to withdraw the Clause, I have the authority of my right hon. Friend for saying that we would put down an appropriate Clause on Report stage to deal with the point he has in mind.

§ Mr. Mitchison
I have one question and one comment, and I make the comment first. The subsection we are here amending arose from the Government accepting an Amendment in the name of Mr. Ralph Assheton, as he then was, in preference to a cruder but fundamentally truer Amendment in the name of my right hon. Friend the Member for Bishop Auckland (Mr. Dalton). Attracted by the apparent simplicity of that 217 Amendment, they accepted it and now appear to be discovering their error.
I wish to ask the Solicitor-General one question, and I hope he will accept that it really puzzles me. Supposing we get an estate which appears to be a minus quantity, how at any stage could any duty be charged on it? I invoke the shades of Lewis Carroll, if they are present with us tonight, and would be glad of an explanation.

§ The Solicitor-General
I do not think duty could be charged on that estate. I think it is the case we want to see covered by the Clause. If the hon. and learned Member for Kettering (Mr. Mitchison) thinks that course appropriate, I will look at his words before the Report stage.

§ Mr. Arbuthnot
I wish to thank my hon. and learned Friend for the favourable reception he has given to the Clause. In view of what he said and, on the understanding that the Government will bring in a new Clause which will cover the point, I beg to ask leave to withdraw the Motion.

Mr. H. Wilson
I beg to move, That the Chairman do report Progress and ask leave to sit again.
I want to make clear that, in moving this Motion, I do not necessarily intend to press it if the Chancellor can give us a reasonable understanding about what is likely to happen in the future course of our business tonight. It will be within the recollection of the Chancellor and of the Committee that we have now spent an hour and a half on new Clauses moved entirely by hon. Members opposite. Some of them, however, interesting and important, have been moved at inordinate length. I am not referring to the hon. Member for Dover (Mr. Arbuthnot), who spoke briefly.
We on this side of the Committee, I think the Chancellor will agree, have shown great restraint through the major part of the passage of this Bill in Committee. Certainly since 11.30 p.m. no new Clauses have been moved from this side of the Committee. If it is the desire of the Chancellor that we should go on until we have exhausted all the Tory new Clauses on the Notice Paper, which would appear to be the case, I 218 would appeal through you, Sir, to some hon. Members moving these not uninteresting but small Clauses to show the same restraint and forbearance we showed a couple of hours ago when we withdrew a new Clause in order to facilitate business and get on with the Bill. This is not really the job of the Opposition. Perhaps hon. Members opposite will show the same forbearance and postpone their important arguments to a later stage of the Bill.

§ Mr. H. Macmillan
I am very conscious of the co-operation which the whole Committee has shown in the course of the seven days we have so far spent on the Bill, and also of the help which the right hon. Member for Huyton (Mr. H. Wilson) has given to get our business through in as good a period of the day as we could. I understand that the next new Clause to be selected is that in the names of the hon. Member for Langstone (Mr. Stevens) and the hon. Member for Dover (Mr. Arbuthnot)—(Continuation of period for which mills and factories allowances may be given). It might be for general convenience if we took that new Clause and then the new Clause in the name of the same hon Members—(Stock valuation for inter-group sales). That will probably result in the first new Clause which we have to take at the next sitting being that in the name of the right hon. Member for Huyton—(Increase of relief in respect of insurance premiums paid by self-employed persons and non-pensionable employees). I think voting is reserved on two other Clauses. I think we could then finish the Committee stage in the course of the next sitting.

Mr. Wilson
That does not seem entirely unreasonable to us, in the co-operative mood we have been in throughout the Bill, but I want to make one general point. We have again seen—and this tends to happen late at night or early in the morning—a very complicated new Clause accepted by the Government, at any rate in principle, without the Committee being able to give it a thorough examination. There is no harm in this instance, because we gathered from the Solicitor-General that it will be necessary for the Government to put down their own Clause on Report. We shall therefore be able to consider it in plenty of time, take advice on it and 219 debate it, we hope, at a more reasonable hour—and I am sure that will please no one more than the hon. Member for Dover (Mr. Arbuthnot).
If there is any question of accepting any of the next new Clauses—and we have had some surprise acceptances of back bench Tory Amendments in the early days of the Committee Stage—it raises a very important principle, because some of us might feel that issues of principle are being given away in the early hours when it is difficult for the Committee fully to understand what is involved. Although we are quite agreeable to what the Chancellor has proposed, if there were any question of accepting these new Clauses we should be much against going on, unless there were an opportunity of re-examination on Report. With that understanding, I beg to ask leave to withdraw the Motion.