§ Order for Second Reading read.
§ 1.24 p.m.
§ Mr. William Teeling (Brighton, Pavilion)
I beg to move, That the Bill be now read a Second time.
This is a Bill toreduce death duties in cases where two or more persons perish as a result of a common calamity.I must start by apologising, for having a rather severe cold. It may mean that my voice may not carry through to the end of my speech. Having listened all about bus shelters, I feel sorry for myself for the lack of shelter on my way back from Hong Kong in the last seven days which has resulted in this particularly unpleasant feeling.
The Bill is very short and very simple, but it is necessarily one that covers the whole of this very serious problem. It seems to me that all questions that might arise would be dealt with more appropriately in a Finance Act rather than by a Member bringing forward a Private Member's Bill. On the other hand, this is one of the opportunities Private Members get to bring forward a Measure which, I hope, can be a stepping stone to something much more important.
I also feel it is important that this matter should be aired today, especially as we have had in the not very distant past one or two quite prominent cases which have made people feel that the present situation is extremely unfair. Another point is that the tax-gatherer spends almost the whole of his time, while husbands and wives are alive, trying to bring them together to obtain as much taxation as possible out of them. The moment they die, far from following the same procedure, he does everything he can to separate them and make them pay at least two death duties. It seems to me that he should be logical and come to the conclusion either to bring people regularly together in life and death or separate them both in life and death, as he tries to do after death today.
It also seems to me that the main object of death duties—which, after all, only follow the historical method of fines which were used in the old days—is so 1442 that people, when they come into property and are about to enjoy it, shall pay a form of levy to the State because they are about to enjoy it. When it comes to people dying almost at the same moment and, possibly, from the same cause, there can be absolutely no question that the second person does not receive any enjoyment. That being so, it is grossly unfair that the State should demand that the tax should be levied, whether it is, as at present, 50 per cent. in the first year for certain types of property and 10 per cent. spread over the first five years. The very fact that it should be taken at all, with people who are dying possibly in the same minutes, seems to me to be grossly unfair.
These things may not have happened so very often in the past, but they are beginning to happen more frequently now, with aeroplane crashes, motor car crashes in which husband and wife and, indeed, whole families may be involved, and appalling railway accidents, like Lewisham. One must think of these appalling tragedies now taking place because of the faster methods and more modern methods of transport, which, of course, are more dangerous.
I first noticed this unfairness when the son of an old friend of mine some years ago went with his young wife for their first visit to France. On their return, the plane crashed at London Airport, caught fire and they were both killed, leaving a considerable family with not much money, made much less by death duties. Luckily, they happened to belong to a wealthy family connected with the Press and something was done for them privately. That will not happen in every case. Then there is the now famous case of the Beare family, to which I will return in a few minutes.
Shortly after I put down the Bill for First Reading there was a very serious seaplane crash near the Isle of Wight in which no less than six couples were killed. Three of those couples were on their honeymoon. One of those couples came from my constituency. I believe that if the old common law had been in practice the man's estate would have gone to his relations and the wife's estate to her relations. Under the present law everything went to the wife and, through her, eventually to her family, although 1443 the property belonged to her husband. That does not really come within the scope of my Bill, but I should like to bring it to the notice of the Financial Secretary, as it is a matter on which I think he might well ponder.
The case that has caused most publicity and one which led me to produce this Bill, together with the fact that my hon. Friend the Member for Honiton (Mr. Mathew) asked me to do so—and he is largely responsible—was the case of the Beare family. That so upset many people that, as will be seen from the backing of this Bill, it has the support of two prominent Labour Members, one prominent Liberal Member and nine Members of my own party, some of whom are well-known lawyers.
The Beares were husband and wife who were motoring somewhere near London and met with an accident in which their car overturned into about three feet of muddy water. The husband was hit on the head, as it was afterwards discovered at the post mortem examination, and knocked completely unconscious. The wife was not. When, however, they were found they were both already dead. The medical evidence proved that by the husband being unconscious—they were both drowned in three feet of muddy water—he would not have tried to breath in the muddy water unduly fast, whereas the wife, being completely conscious, would make a mad effort to try to get air and in that way would use up the oxygen in her body, and so it could be proved that she died first.
However, the judge, seeing that it was only a question literally of a few minutes, had to take the law as it stands under Section 184 of the Law of Property Act, 1925, which proved that the husband was the elder, as he was by about seven months, and that therefore it must be presumed that he died first. That being so, he had left a will leaving everything to his wife who was the sole executrix.
There again double death duties became payable. There were four infants to lose not only their parents but, in addition, a very large percentage of any money that might be available for their education and upbringing, which seems to me to be particularly unfair. However, there was nothing that could be done about it under the law as it stands at present.
1444 There was a long correspondence about this in The Times which showed how other countries deal with this sort of matter. It was pointed out that in Germany both are considered to die as one, and reference was made to a case of some German refugees who were killed in this country during the war and who were allowed to be treated as if they were German. More or less the same law applies in other countries—for instance, in Greece, Italy, Holland, Switzerland and China.
In the Dutch law there is a provision, saying that in the event of a number of persons, one of whom is entitled to inherit before the other, dying in one and the same accident, or on the same day, without it being possible to ascertain who died first, the assumption is that they deceased at the same moment and no devolution of the estate of the one takes place on behalf of the other. There are other countries which are already agreed on the basis that they die as one. I believe that we ourselves have begun to realise that that is a more just state of affairs because in the case of intestacies the intestate gets off. According to the First Schedule of the Intestates' Estates Act, 1952, that is what happens. If Mr. Beare had not left a will at all, but had been intestate, none of these financial tragedies would have happened to their children.
In France a different view is taken, but I believe that the French themselves consider the situation to be extremely unsatisfactory and are attempting to alter it. They go on the basis of the survival of the fittest, and they work it out in this fashion. If a person is under fifteen years of age at the time of death, the elder survives. Between the ages of 15 and 60 the younger dies first, but males are presumed to come before females because females are not considered to be so fit. Over 60 it seems that the youngest, whether male or female, survives. That is the position at the moment in foreign countries but what about our own country.
I am not trying to bring forward a Bill which will cover all the many problems involved. I am merely seeking to bring forward one side of the situation. The Bill might easily be amended one way or the other in Committee, and, indeed, it 1445 could possibly be dealt with in the next Finance Bill if the Government should think fit.
I have called thisA Bill to reduce Death Duties in cases where two or more persons perish as a result of a common calamity.It may be asked, why must it be a common calamity? If the husband is killed in a motor accident and somebody tells his wife who collapses at the news and dies, it is the same tragedy but it is not the same common calamity. One can always find these detailed problems which are heaven to lawyers but a little difficult for the ordinary layman completely to understand. However, I have brought in this Bill to deal with a common calamity, to confine it to one particular issue as in the case of the Beare family and as might arise in a bus or aeroplane accident.
I have said:Where, in the case of deaths occurring after the commencement of this Act the Commissioners of Inland Revenue are satisfied that…Estate Duty has become chargeable on any real or personal property passing on the death of any person…Up to now they have always been able to get off 50 per cent. in the case of business and land, and it seems to me that they should be able to get 50 per cent. or more in the case of any real or personal property.
I have used the words:within one month thereafter Estate Duty has again become chargeable on the same property or any part thereof.If I am asked why I have chosen the period of one month I would reply in this fashion. Suppose that in a bus accident in which six couples are killed, four die within the month and the fifth dies just after it. It would become unfair. It is true that in Committee we may alter the period so that it becomes one day as it is in other countries, or longer than a month, or we may introduce a graduated scale. I should think that could easily be left to the Committee, but one has to state some period of time in the Bill, and one month was the period which seemed the most reasonable to me.
There is the possibility that, between the death of one and the other, the estate may go up in value. Not unnaturally, I ask only for the duty to be taken at the figure it was at the start. Finally, we 1446 have chosen 95 per cent.; this is just a figure, and again it can be gone into later on.
Even though the present position may be legally sound, it seems to me to be morally right that such a Bill as this should be brought in and, in some form, incorporated in the law of the land. The Treasury will, no doubt, say that there are appalling difficulties and that, if we do one thing or another thing, we shall be opening the floodgates to various other problems. My answer to that would be that, from the moral point of view, it is up to the Government to try to do something about it. I leave the matter, therefore, in his way, that I very much hope that I shall have the support of the Government and the Treasury. The moral issue ought to be settled and the position made a great deal fairer as it affects the estates of people who die more or less at the same time.
§ 1.41 p.m.
§ Mr. Robert Mathew (Honiton)
I beg to second the Motion.
I congratulate my hon. Friend the Member for Brighton, Pavilion (Mr. Teeling) on using his good fortune in the Ballot to attempt to effect this very necessary law reform. During the last year, in particular, there has been a great deal of publicity about the legal results of tragedies occurring in consequence of motor car, aeroplane and other accidents. We have fresh in our minds the recollection of the two accidents to which my hon. Friend referred, the Lewisham railway accident and the Isle of Wight air accident. My hon. Friend referred partticularly to the case of In re Beare, a case which prompted a great deal of correspondence in the Press. Many hon. Members, no doubt, received a great number of letters, as I did, from constituents who were very shocked at the legal consequences of that particular tragedy.
Today, not only the lawyers and the tax experts but more and more people generally are becoming aware of what is, in fact, a manifest injustice. In cases of double death resulting from an accident, and the consequent quick succession of property, the operation of the law is such that the State automatically—indeed, cold-bloodedly—may add to the troubles of a family which 1447 has already suffered almost unbearable loss and sorrow the further disaster of material hardship or ruin. In my opinion, there can be no principle of law or equity to justify the continuance of this state of affairs.
Hon. Members will know that the legal problem resulting from quick succession has a long history. Various aspects of the matter have occupied the attention of the House from time to time ever since we passed the Wills Act in 1837. A number of limited reforms have been effected over the years, but in rather piecemeal fashion; for instance, under Section 15 of the Finance Act, 1914, partial relief from double duty is allowed on a graduated scale in the case of individually owned land or business property.
Perhaps I might say here that, although the Bill does not deal with that particular type of exemption, there is, of course, a very strong case now for extending the graduated relief to all classes of property when there is a quick succession. That, however, is a much wider matter than that contained in the Bill before us, and I think that the House might well consider that such wider reform would be unsuitable for a Private Member's Bill. I merely draw the attention of hon. Members to it, if I may, particularly the attention of my hon. and learned Friend the Financial Secretary to the Treasury.
It is an odd reflection on the operation of the law that the calamitous results of the Beare tragedy might have been avoided had Mr. Beare, the father, made no will at all. In those circumstances, under the Intestates' Estates Act, both husband and wife would have been deemed to have died second from the point of view of his or her estate.
As my hon. Friend has stressed, in an age of fast travel by motor vehicles and aeroplanes, accidents being inevitable, the time has come for the House to make a further amendment to Estate Duty legislation. The scope of the Bill is deliberately limited to cases arising out of a common calamity or accident.
There has been criticism of the Bill, but, as far as I have heard it, that criticism nearly always stresses that the Bill does not include this or that hypo- 1448 thetical case; in fact, the criticism is directed not at what the Bill seeks to do, but at what it omits.
There has not at any time been an intention to include exemption in the case of certain other anomalies and injustices which arise out of quick succession and double death. The Bill does not attempt to deal with the case of a husband and wife who died from different causes within a short period of time. Criticism of it upon that ground appeared in a leading article in The Times, which commended the Bill as a step in the right direction, and which was, I think, published on 21st December last year. There is, of course, a very strong argument for including some such provision in any broad reform which the House may favour in the future.
It has also been suggested that the blame for the unhappy result of the Beare case lay in the fact that the father did not make a sensible will, that he did not draw up his will in a different form. It is said that if he had, as many do, inserted a proviso that the property should not pass unless his wife survived him by a stated time—say, one to three months—the results would have been not so unhappy.
There is a difficulty there, to which I have no doubt some of my hon Friends who are lawyers will refer. It is an administrative difficulty; the period must be short, and I am told that anything longer than three months causes the very greatest difficulty to those administering the estate. It is said also that Mr. Beare did not take advantage of the exemption from Estate Duty which is usually referred to as "the surviving spouse exemption."
I cannot see that the onus for avoiding what is recognised by a large number of people as a manifest injustice should be placed by the State on the shoulders of the individual. There is a principle here to which the House should pay attention in considering any reform of the law in this connection, and I will indicate briefly what I consider the principle should be.
Estate Duty is a tax on the passing of property and, as my hon. Friend has already indicated, in this particular aspect it is on the passing of property where there is a change in the enjoyment of property on a death. In my opinion, it is clearly unjust that where a person dies 1449 so soon after another and, although normally entitled to the enjoyment of property on that other's death, he could never in reality have had an opportunity of enjoying it. In such a case, as the House has heard, two lots of duty are payable, and they are payable in respect of only one real change in the enjoyment of that property.
This short Bill attempts to bring the law into line with that principle. It only does so, however, in the restricted class of cases where the death of the two persons is caused by one and the same calamity. I hope that my hon. and learned Friend the Financial Secretary, if he should intervene in this debate, will invite the House to give the Bill a welcome.
In asking the House to give the Bill a Second Reading, I also ask the Financial Secretary and my right hon. Friend the Chancellor of the Exchequer to consider a wider exemption in all cases where two material deaths occur so close together that the second deceased never had any real opportunity to enjoy the property. By doing so we would remove what is universally recognised by an increasing body of responsible opinion in this country to be a manifest injustice.
§ 1.54 p.m.
Major W. Hicks Beach (Cheltenham)
I will begin by congratulating my hon. Friend the Member for Brighton, Pavilion (Mr. Teeling) on the able way he has introduced this rather complicated Measure. He said that it was a legal matter, as, largely, it is, but I join with him in agreeing that it is also a human matter.
The object of the Bill is to remedy an anomaly or injustice which arises under the Estate Duty law when two people die as the result of the same accident. I stress that it applies to two people, not only a husband and wife, because an interesting article which was in The Times of 21st December, giving full support to the general principle of this Bill, appeared to suggest that this anomaly applies only where a double death occurs as between a husband and wife and not in the case of ordinary individuals. Of course, as the law stands, it applies to any two persons.
This position has arisen from the passing of Section 184 of the Law of Property Act, 1925, a Measure which changed to 1450 a great extent the conveyancing law of this country. It was a well-founded Measure. Although I was not practising as a solicitor at the time, I was an articled clerk. Sir Arthur Underhill was responsible for this Act to a great extent. I mention this because I think it would be appropriate to recount a conference I had with the late Sir Arthur Underhill before 1930, when this Section of the Act was discussed. It is very short and clear, and runs as follows:In all cases where, after the commencement of this Act, two or more persons have died in circumstances rendering it uncertain which of them survived the other or others, such death shall (subject to any order of the court), for all purposes affecting the title to property, be presumed to have occurred in order of seniority, and accordingly the younger shall be deemed to have survived the elder.Incidentally, it is interesting to recall that when I saw Sir Arthur a similar case to the Beare case had arisen. We had some discussion on the workings of this Section, and he said that in his view it was essential to have legislation by Statute to make clear the position when such circumstances arose.
I do not criticise the High Court judge in any way, but difficulty has arisen over this Section, not so much as it is drawn—because there must be some limitation—but in the way it has been interpreted by the courts, I am sure correctly. The practical effect is an extremely serious one, however, and it has recently been brought to the notice of the public owing to the decision in the case of Re Beare.
In quoting this case, my hon. Friend dealt with it fairly and properly, but I want to read to the House a fuller report of it because there is another point which should be stressed, namely, the hardship which can be created in such a case. I am quoting from the current document on the effects of the Beare case, Current Law for October, 1957:In Re Beare, Barclays Bank v. Beare (October 3, 1957) the testator and his wife were killed when their car overturned in a ditch. The testator had left a will giving the whole of his property to his wife. The wife had left no will.This is the point I want to stress:There were four infant children of the marriage who had survived their parents. There was medical evidence to the effect that the husband, who was seven months older than his wife, died a very short time after her. On the question of the order in which the spouses must be presumed to have died. 1451 Danckwerts J. held that the medical evidence was insufficient to reach a conclusion contrary to the presumption prescribed in such circumstances by s. 184 of the Law of Property Act, 1925, that the elder had predeceased the younger.I am sure the judge was right in his decision, but the fact remains that as a result of the decision—this was not stressed by my hon. Friend—these four infants suffered very great hardship under the existing law as regards Estate Duty. Therefore, in considering this difficult problem, we must bear in mind that in Many cases we are dealing with the interests of infants.
Quite a lot has been said about the Beare case and how the difficulties which arose there could have been avoided by Mr. Beare making a proper will. If he had made a will in a form which is known to most practising lawyers, the difficulty would probably have been overcome. I feel strongly that the State has a duty to assist people who are ignorant of the law, although I am all in favour of people consulting solicitors in order to make wills. I do not think it is a responsibility which should be thrown on the individual.
It is said by most lawyers that one thing that they all desire is a case in which a testator has made his own will because it is almost inevitable that a self-made will will lead to litigation. That is probably a very fair truism. I certainly feel that the State has a responsibility in this matter. I do not know the circumstances of Mr. Beare's will, but it might have been a will that he made himself. There is a common form of will in which one leaves everything to one's wife. In such cases as these the State has a duty to assist the individual.
Reference has been made to the position which arises in the case of intestacy. It is clear in the law as it stands that the position under the intestacy Acts is much more satisfactory than it is if a will has been made. The intestacy law enacts that if two people die simultaneously and there is no evidence to the contrary, it shall be held that the estate does not pass from one to the other, and, therefore, no double duty is payable. That seems to be a very sensible and reasonable way to approach the matter.
It is proper to point out that under Section 15 of the Finance Act, 1914, a relief is given against double death duty, 1452 on a graduated scale, where double deaths occur within five years. That seems a very sensible and equitable way to deal with the matter. Under that section a maximum relief of 50 per cent. was given. I should have thought that that was wrong and that it was a matter which should be reconsidered. For some reason which those of us who were not present at the time do not know, the relief applies only to land or business. It does not apply to an insurance policy, shares or furniture. I stress that because I think it is very important.
The Bill provides that where two persons die within one month as a result of the same accident there shall be a 95 per cent. rebate in duty. The only comment that I have to make on that—my hon. Friend knows that I am all in favour of the Bill—is that where one has a fixed period, such as a month, one always has cases arising of death occurring just after the period. Consequently, I feel that in legislation of this nature one should as far as possible avoid a date as short as a month. I should have preferred a period of three months.
My hon. Friend the Member for Honiton (Mr. Mathew) said that that would create great administrative difficulties. I do not see how administrative difficulties of that sort could be great. At all events, I consider a month too short and would have preferred a formula having no fixed date except something in the neighbourhood of five years, as laid down in the 1914 Act.
Although I fully support the Bill and hope it will be given a Second Reading, I suggest that this anomaly and the present problem should be dealt with on a rather wider basis. I feel that if Section 15 of the 1914 Act could be amended a great number of problems would be overcome. The Bill has been difficult to draft, but it is an excellent one and I congratulate my hon. Friend. While I hope it will be given a Second Reading, I trust that the Government will give careful consideration to whether the problem cannot be remedied by means of some amendment of the 1914 Act.
§ 2.6 p.m.
§ Mr. John Hall (Wycombe)
I join my hon. Friend the Member for Cheltenham (Major Hicks Beach) in congratulating my hon. Friend the Member for Brighton, Pavilion (Mr. Teeling) upon having given 1453 us an opportunity to debate at least one of the many injustices perpetrated by existing Estate Duty legislation. I agree that it is the duty of the State to protect its citizens in this respect. They should not be expected to try to wind their way through the very tortuous channels of existing Estate Duty legislation.
I regret to say that even if one takes legal advice about the drawing up of a will one does not always obtain the safeguards that one ought to have. In fact, there is probably as much litigation about wills drawn up by solicitors as there is about wills drawn up by individual laymen themselves. It is a very complicated subject, as anyone who is involved in these matters realises.
Since the abolition of the legacy and succession duties, Estate Duty legislalation has been enshrined in statutes going back as far as the Customs and Inland Revenue Act, 1881. It is true that the principal Act, passed in 1894, still applies in most cases, but it has been amended so often that to ascertain liability to Estate Duty one has to wade through a mass of amendments, to have a knowledge of a vast amount of case law, to know something about the provisions of about 62 Finance Acts and other main Acts, and to have a knowledge of numerous orders relating to such matters as double taxation relief, and so on. It is quite beyond the capacity of the ordinary individual, and, I suggest, beyond that of many solicitors, to provide safeguards against all contingencies which may arise.
My objection to the Bill, the principle of which I support, is that it adds another complication. It seems to provide a rich source for future litigation which can advantage no one except the legal profession. I have sometimes thought that one of our troubles is that so much of our legislation is introduced in the House of Commons by members of the legal profession, as a result of which they ensure for themselves very lucrative careers for many years, sometimes for centuries ahead. Perhaps that is slightly unfair.
§ Mr. Hall
My hon. Friend the Member for Cheltenham referred to Section 15 of the Finance Act, 1914, which deals with quick succession relief and enables a certain amount of relief to be given to a second beneficiary over a period of five years on a descending scale. Section 30 of the Finance Act, 1954, gave some further relief in that respect in the case of holdings in private companies. I feel that the principle which my hon. Friend the Member for Brighton, Pavilion has in mind might be better served if we amended Section 15 of the Finance Act, 1914.
I want to deal with one or two provisions of the Bill which offers tax relief in the case of those who die as the result of the same calamity. First, how is "calamity" to be defined? I know precisely what my hon. Friend the Member for Brighton, Pavilion has in mind. He is thinking of an accident in which two people are killed simultaneously, or as near simultaneously as can be ascertained. But a calamity could easily be an epidemic and two people might die simultaneously as the result of an epidemic, but be miles apart at the time. Is that to be a calamity? There will be a great deal of argument about that.
Another difficult problem arises when two people have an accident and one is killed outright and one is apparently not seriously injured, but, within the time laid down, the survivor, who appears to have recovered, suddenly dies of pneumonia. In such a case, there would be long legal argument about whether the pneumonia was caused by the accident, or was due to a quite different cause not associated with the original accident. From time to time, there would be similar complications and decisions would be very difficult.
If the existing Finance Act, 1914, were amended, there would be a number of beneficial effects. It would be far better to allow the present five-year period as the benefit period. One could also take advantage of the change in the rate which the Bill proposes—a reduction of 95 per cent.—by substituting the existing scale under Section 15 of the 1914 Act and reducing death duty in respect of any successor dying within the first twelve months after the death of the original testator by 95 per cent., instead of 50 per cent. as now, and scaling up the remain- 1455 ing years to the end of the five-year period.
The real problem we face today is the fact that Estate Duty is confiscatory in character. The matter is so complicated that it requires a complete revision of all the legislation as it exists today, not only to make it more understandable, but to make it more just. Let us take, for example, the gamble of the five-year gift. Many people are apparently suffering from an anxiety neurosis and adding to the dangers of their existence by the mere thought of dying before the five years is up. It seems to be far more just for Estate Duty to be assessed on the unexpired portion of the five-year period so that if the donor dies after, say, four years, the recipient of the original gift would have to pay only one-fifth of the duty.
It might be far better to abolish Estate Duty altogether and to revert to legacy duty, assessing tax at the rate applicable to the particular gift in the hands of the recipient. I was very interested, when in Eastern Germany recently and talking to officials of the Ministry of Finance there, to find out that that is the system adopted in that Communist country. It may be that they think that no one in a Communist country will ever accumulate sufficient money by the hardest possible work and thrift to yield very much in the way of death duties, but it is interesting to find that they have a system of legacy duty which is much less onerous and much less hard on the legatees or beneficiaries than is our existing system.
§ Mr. Deputy-Speaker (Sir Charles MacAndrew)
The Bill refers only to two deaths and not to single deaths.
§ Mr. Hall
I mentioned that as a point of interest and to illustrate some of the difficulties and problems of death duties.
I was about to point out that under the Bill an injustice which now exists when two people die together and which results in their successors having to pay an excessive amount of Estate Duty can be put right, but it could be put right more easily by amendments to existing legislation. This is not a small injustice. We have to remember the scales of Estate Duty which now have to be paid.
Section 15 of the 1914 Act refers specifically to the relief in the case of quick succession and yet in that year death duties started at about 4 per cent. on 1456 an estate of £5,000, were 7 per cent. on an estate of £50,000, and 10 per cent. on an estate of £100,000, to quote three examples. Today, the rates are 3 per cent. on estates over £5,000, 35 per cent. on estates over £50,000, and 50 per cent. on estates over £100,000. On the whole, the rates have been increased by about five times, despite the fact that the value of money has probably fallen by as many times or more. One would have expected that the rates would have gone down rather than up. That illustrates the savage effect of Estate Duty and emphasises, if emphasis were needed, the necessity of Measures of this kind and reforms of the existing law.
There seems to be an attitude of mind today which can be summed up in the following way: a man who tries to make money is often described as being money-mad; if he keeps it, he is described as a capitalist; if he spends it, he is often called a play-boy; if he does not try to get it, he is told that he lacks ambition; if he gets it without working for it, he is a parasite; if he accumulates it after a lifetime of hard work and thrift, he is often told that he is a fool not to have got the best out of life. When one realises the deprecations of the Treasury on his estate after his death, one is inclined to think that the last definition of the man who has tried to make and save money may be correct.
If that is so, it is a pity, because it is a great pity to have a system which encourages people to spend what they have and not to develop the habit of thrift. I want to conclude with a short extract from one of Chesterton's poems which is well-known and of which one is sometimes reminded when dealing with the Treasury about tax matters, especially about Estate Duty matters. I want to quote what seem to me appropriate verses.
The poem is entitled "On England" and the verses I want to quote are:They have given us into the hands of the new unhappy lords,Lords without anger and honour, who dare not carry their swords.They fight by shuffling papers; they have bright dead alien eyes;They look at our labour and laughter as a tired man looks at flies.And the load of their loveless pity is worse than ancient wrongs,Their doors are shut in the evening; and they know no songs.1457 That seems to be an appropriate description of the Treasury when dealing with Estate Duty. The concluding lines of the poem, which I have slightly paraphrased, are:But we are the people of England; and we have not spoken yet.Smile at us, tax us, pass us. But do not quite forget.While supporting the Bill in principle, because it does remedy some small part of one of the injustices we suffer, I hope that the Treasury, as represented by my hon. and learned Friend the Financial Secretary, will take account of the many hardships suffered under existing legislation and will not quite forget those who have to pay such heavy taxes today.
§ 2.20 p.m.
§ Mr. Charles Doughty (Surrey, East)
I should like to add my congratulations to my hon. Friend the Member for Brighton, Pavilion (Mr. Teeling) on putting forward the Bill. I express to him my sympathy for the unfortunate cold from which he is so obviously suffering, and I wish him a speedy recovery. I would riot follow my hon. Friend the Member for Wycombe (Mr. John Hall) in advocating a complete reform of the laws of inheritance; I think that the task would be almost beyond us, and the final result might be even less happy than the unhappy condition in which we find ourselves today.
I want to put in a word for those persons who have to operate in the Treasury and take part in discussions, agreements and the necessary arguments about Estate Duty. They are bound by the law and the regulations. Their own private view—if they have one—may be that the law operates, in some cases very harshly, as indeed it does, but the Ministers have no power to say, "This is a hard case; I propose to ignore the law. I shall do my duty, and although Parliament says that this must not be done, I shall come to a totally different conclusion." They must say, "This is the law. I did not make it, but I have to enforce it in this way."
This is a problem which has affected many countries for hundreds of years. It has been dealt with in different ways, and I do not propose to go through the history again; it has already been touched upon by the proposer and seconder of the Bill. 1458 But it has always resulted in very great hardship when, as the Bill states, the deathsare the result of some one and the same calamity.Nowadays, when Estate Duty is so very high, it results in many cases in the financial crippling of a family and, as my hon. and gallant Friend the Member for Cheltenham (Major Hicks Beach) said, the infants and the young people suffer most of all.
How are we to remedy this difficulty? Whenever we want to amend the law to deal with a hard case we must be careful not to make the resulting position worse than the original position. It is a truism that hard cases make bad law. This is undoubtedly a hard case, and we must, therefore, be very careful not to make bad law when we deal with it.
I want to add to the warning which my hon. Friend the Member for Wycombe has already given, namely, that Clause 1 (c) is very difficult to follow when applied to individual cases. The cases which the draftsmen had in mind were those where two people are concerned in the same accident and both die at approximately the same time. That is fairly clear, but what is a calamity?
Can a loose stair rod cause a calamity if the husband, as he goes downstairs, falls, and, later, before the rod has been replaced, the wife also falls downstairs, and both break their necks in the process? It is undoubtedly a calamity that a careless person pulled out the rod, or that it happened to come out by accident, and two deaths result, but I do not think that the Bill was drafted to meet the case. Nevertheless, I think that it would cover it.
Then, again, the phrase that the deathsare the result of some one and the same calamityis very ambiguous and sweeping. As one hon. Member has said, it may be that a person is killed in an accident and this is such a shock to the spouse that he or she has a heart attack and dies. In one sense that is the result of the calamity, but in another it is a result of the news of the calamity. I can see an interesting point of law arising there. I should hesitate to give an opinion in the matter. Lawyers could argue about it for some time, but the last place in which to argue it would be this House.
1459 Again, if we produce a Bill to alleviate a hard case we shall produce other hard cases. The Bill provides an arbitrary period of one month. Those who operate the Estate Duty laws cannot say, if a person dies one month and one day after the spouse, "This is a very hard case. It is only a few hours outside the period, therefore we propose to take alleviating action." They have no power to do so. They are bound by the terms of the Bill, if it becomes an Act. In that event, we shall perhaps have another private Member, or a Government, bringing forward another Bill to deal with that hard case. Those are merely points of particular criticism in what I regard as a sound Bill, which is, at any rate, a genuine effort to deal with a very great hardship.
I do not know whether the calamities of today are any worse than those that occurred in past ages. It is true that we have aeroplanes, but we have fewer terrible accidents. Train smashes are all too familiar, but they are not so frequent as they were in the last century. Even stage coaches were not immune from accidents. The point is, however, that in those days, when Estate Duty was so much lower, if two people died as a result of the same calamity it was not considered to be the same hardship as it is today, because there would probably still be a healthy part of the estate left and it would, therefore, not be necessary to have separate legislation to deal with the problem.
Nowadays, however, when Estate Duty is so cripplingly high in any event—indeed, it is not unfair to describe it as a form of capital levy, because a levy is taken from the capital—the Bill certainly becomes necessary, especially when the incomes of husband and wife are not taxed separately. The present situation really becomes rather ridiculous. There are many cases where, partly for this reason, husband and wife will not travel in the same aeroplane. If they are going to Paris one will fly by Air France and the other by B.E.A. The same consideration may not apply in the case of ocean liners, but it certainly applies to air travel.
They travel separately partly because, if they do die at the same time, there will be nobody left to care for their children, but also partly because their children may be left financially embarrassed. I there- 1460 fore support the Bill and commend it as going some way towards alleviating a great hardship, but I add, as a word of caution, that we must be careful not to make bad law out of a hard case. I hope that the Bill will be very carefully considered and improved in Committee.
§ 2.28 p.m.
§ Sir Lynn Ungoed-Thomas (Leicester, North-East)
As the hon. Member for Brighton, Pavilion (Mr. Teeling) said, the Bill has the support not only of hon. Members of the Conservative Party but also of the Liberals and some distinguished hon. Members of the Labour Party. I say at once that we do not accept the general diatribe against Estate Duty which was made by the hon. Member for Wycombe (Mr. John Hall) but there are, within the ambits of Estate Duty, injustices which require consideration. Whether an injustice occurs in questions of Estate Duty or in questions of wages, I hope that the Government will be as open-minded and sympathetic towards remedying it as are hon. Members on this side.
I do not know what the cost of reform on the lines proposed by the Bill would amount to, but I assume that if it were anything less than £50 million it would be regarded as chicken-feed, and that we could expect to have action from the Government.
I hope that if the Government are to deal sympathetically with the principle of the Bill they will deal equally sympathetically with the case of Health Service employees where there is a manifest injustice as between one set of employees and another. It is in that spirit, as I say, that I hope the Government will approach the Bill, and it is in that spirit that we on this side of the House approach it.
I agree at once with the criticisms made by the hon. and learned Member for Surrey, East (Mr. Doughty) about the Bill. I do not think it would be putting it too high to say that the Bill, as a technical production, is almost a shambles. I do not see how the Government can accept the Bill. However, I propose to treat it as the hon. Member for Brighton, Pavilion invited the House to treat it, as a discussion on principle with a view, perhaps, to the Government dealing with the proposal, because 1461 it is, above all, a proposal which should be dealt with by the Government and in a Finance Bill and not by a Private Member's Bill on the lines put forward today.
The Bill contains proposals for dealing with an injustice arising out of common calamity. I agree at once and will not repeat the criticisms made, particularly by the hon. and learned Member for Surrey, East, of "common calamity" and the difficulty to which it gives rise. As I understand, there are two aspects of common calamity. First, there are the people who die together, and, secondly, the people who die one after another after a comparatively short interval of time. I make that distinction between the two because in the Finance Acts as they at present exist there are those two distinctions.
The injustice does not arise because there is a calamity—let us be perfectly clear about that—in which two people die. The injustice arises because, as the hon. Member for Honiton (Mr. Mathew), I think, pointed out, there is such a short interval of time for the enjoyment of the property which passes from one to the other. Therefore, I hope that in any Bill dealing with the matter these very contentious and misleading references to common calamity will be eliminated. The essence of the matter is not common calamity, but the elimination of enjoyment of the property. That is the calamity from the Estate Duty point of view.
I will deal, first, with those who die at the same time, but I shall be very brief because I know that there is another important Bill coming before the House. In existing legislation on intestacy, where husband and wife die together double Estate Duty is not levied. Therefore, we have that principle recognised in one small class of case.
Secondly, as I understand the matter under the 1894 Finance Act, if, for example, there is under a settlement a gift to A for life and then to B for life, and then other limitations in the settlement, and if A and B die together again double Estate Duty is not levied. That being so, we have in the Finance Acts another instance where double Estate 1462 Duty is not levied when people die together.
I should have thought that what is required is consideration of whether that principle which is embodied on intestacy and under settlements should be expanded to apply to other cases. I must say that I cannot see the justification, although there may be one, for limiting the non-levying of double Estate Duty to those two kinds of cases.
I now come to the second point where there is, in fact, survival, but where one person dies a short time after another, whether by reason of common calamity or not. My approach to this part of the Bill is very much on the lines taken by the hon. and gallant Member for Cheltenham (Major Hicks Beach), that is to say, the lines laid down in Section 15 of the 1914 Finance Act where provision is made on a sliding scale for relief from Estate Duty where one person dies within periods up to five years after another.
The present maximum relief is the 50 per cent. reduction in Estate Duty if the person to whom property passes dies within twelve months of the person from whom the property passes. Surely what should be considered is that when a person dies within a shorter period than twelve months there should be a greater increase than the 50 per cent. in the concession. I sympathise more with the approach of the hon. and gallant Member for Cheltenham than I do with the approach made by the Bill. Of course, as the hon. and gallant Gentleman pointed out, Section 15 of the 1914 Act is limited to cases of land and business for the reason, as I understand, that if that concession were not made it might lead to difficulty in handling the land or dealing with the business. But that is not a reason which appeals to me for limiting the concession to land and business.
Why should this be so simply because there is an embarrassment or because an embarrassment might arise in the case of land or business? The same embarrassment might easily arise in other ways—in the realising of shares or of any other thing in which the property happens to be locked up. Why the concession in the amount of Estate Duty should be made in that case instead of a concession in time in which the duty can be paid, I completely fail to understand.
1463 I sympathise, as I say, with the approach of the hon. and gallant Member for Cheltenham; I do not understand why the concession is limited to land and business. I hope, therefore, that, whatever is the fate of the Bill today, the matter will be dealt with not in the last resort by a Private Member's Bill, but by the Government. I hope that the Government will tell us what cost involved, and that if the matter is to be dealt with by the Government it will be dealt with along the lines of the 1894 and 1914 Acts which deal with people who die together or who die within a very short period of one another.
I think that there is a case here for consideration, and because we consider that there is such a case we on this side of the House will certainly not oppose the Bill. Indeed, as I have said, some hon. Members on this side have put down their names in support of the Bill. However, I would remind hon. Members opposite particularly that when it comes to dealing with injustice as between one person or one set of people and another on wage claims, or whatever we are dealing with, they will be equally as sympathetic to these invidious pieces of injustice as we are in this case.
§ 2.40 p.m.
§ The Financial Secretary to the Treasury (Mr. J. E. S. Simon)
I would add my congratulations to those which have been so justly offered to my hon. Friend the Member for Brighton, Pavilion (Mr. Teeling) upon having introduced the Bill, as he did, in such a very able, clear, and human speech. It has led not only to an extremely useful debate upon the hardship in the particular case which gave rise to the Bill, but to a very interesting discussion upon Estate Duty and the reliefs which might be given in cases where persons have died in a common disaster or in quick succession.
The Government understand and sympathise with the feelings expressed by my hon. Friend. The Beare case was very hard. Mr. and Mrs. Beare died together in a motoring accident, leaving four children. No evidence was found by the court sufficient to show which of the two survived the other. Accordingly, by operation of a fiction of the law—a necessary fiction, as hon. Members who have experience in this branch of the law would agree—the husband, who was a 1464 few months older than his wife, was presumed to have died first. This rule was laid down by Section 184 of the Law of Property Act, 1925, for determining title to property in cases where it is uncertain which of two or more persons survived the others.
The Chancery Division held that the rule applied in this case. The husband had left his property absolutely to his wife by will. The result was that the property passed twice, first to the wife and then, on her intestacy, to their four children. In consequence, there was a double charge of Estate Duty on the husband's property, since the duty is levied on the passing of a life. It is only fair to point out that there was some relief under the quick succession provisions which have been mentioned in the debate. The House will understand that I cannot give details in the case of any particular taxpayer. The hardship was to some extent mitigated, but I do not pretend that no hardship remained.
We were all rather shocked that the Exchequer was entitled to two lots of Estate Duty at the expense of children whose parents had been killed in such tragic circumstances. The double claim does not arise out of any provision of Estate Duty law. I think that the hon. and learned Member for Leicester, North-East (Sir L. Ungoed-Thomas) made that point clear. It arises from the general law.
Hon. Members may wonder why this matter has never been raised before. Only in a very few cases is this situation likely to occur. As the hon. and learned Member for Leicester, North-East, pointed out, the case where husband and wife die without leaving a will is outside the operation of Section 184 of the Law of Property Act and is covered by the Intestates' Estate Act, 1952, which ensures that property shall not pass from husband to wife or vice versa if they die intestate and it is not certain which survived the other.
Where there is a will, the testator, if he is competently advised, usually provides against the possibility of this sort of case, either by granting his wife a life interest, which is quite usual in cases where there are children, or by providing that the gift shall not be effective unless the wife survives him by, say, 1465 a month. And even in some of the few cases which do occur there may be no financial hardship to the beneficiaries, who are by no means always children. Nor am I being cynical when I say that beneficiaries who are not close relations often experience an actual advantage because the property comes to them rather more quickly by reason of the common disaster.
Nevertheless, it has been made abundantly clear in the debate that there is a hardship here which merits the consideration of the Legislature and of the Government. I agree that there is a strong case for preventing such a situation happening again. On the other hand. I am bound to say two things. The first is, as I think my hon. Friend the Member for Brighton, Pavilion will agree—and I shall not repeat the details—that the drafting of the Bill has been subjected to great scrutiny by well-wishers of the principle which my hon. Friend has upheld. I will not repeat the criticisms made by my hon. and learned Friend the Member for Surrey, East (Mr. Doughty) of the word "calamity", which raises very great difficulties of construction. It recalls Robertson Hare; and as in the case of his "Oh, calamity‡" it seems to cover a very wide range of circumstances.
Another point was mentioned by the hon. and learned Member for Leicester, North-East, which I think is just. It is this. This is the sort of reform which ought to be made by the Government in a Finance Bill and in the context of a general review of the fiscal structure. On the other hand, my hon. Friend is entitled to some assurance that the matter will be dealt with in that way. I am authorised by my right hon. Friend the Chancellor of the Exchequer to say that it is his intention to deal with this problem in the forthcoming Finance Bill. I do not say that it will necessarily be dealt with by the method adopted in the Bill, but it will be dealt with in the spirit in which my hon. Friend has approached it.
There are at least three ways in which it could be dealt with. The first is merely by Amendment of Section 184 of the Law of Property Act. There has already been inroad made into that Section by the Intestates Estate Act, 1952. 1466 On the other hand, this is a general rule of succession. It does not by any means apply only to Estate Duty cases. It was enacted to deal primarily with cases of benefit by will. As I understand, according to the common law, whether the property was given by will or otherwise and it was uncertain whether the donee survived the donor, the onus was on the donee to prove that he had survived.
In cases of common disaster that led to very great hardship and imposed onus not only in such cases, but in cases of general calamity, in which it was uncertain which of the two had survived the other. In many cases the property did not go where it was intended to go and where justice demanded that it should go. It is necessary to have some rule of law in these cases which will mark out how the property shall pass. For that reason we have the rule that the younger is deemed to survive the older.
Although my right hon. Friend has by no means made up his mind on this matter, I would suggest that there are disadvantages—
§ Sir L. Ungoed-Thomas indicated assent.
§ Mr. Simon
—I am very glad to see that the hon. and learned Member, with his wide experience in this branch of the law agrees—in dealing with it by interfering with the law of succession.
The second way in which the matter could be dealt with is one which has found considerable favour in the course of this debate. It was mentioned particularly by my hon. and gallant Friend the Member for Cheltenham (Major Hicks Beach) and the hon. and learned Member for Leicester, North-East. That is an adaptation of the quick succession relief constituted by Section 15 of the 1914 Finance Act. I will not trouble the House by reading it, but it provides for relief on a sliding scale depending on the interval between the deaths—50 per cent. when the second death occurs within 12 months, 40 per cent. when it occurs between one or two years, and so on. Of course it would be possible to have a higher scale, as has been suggested, for deaths separated by less than twelve months, even rising, as the Bill suggests, to 95 per cent. for deaths occurring within one month.
1467 The disadvantages of the provision of the 1914 Act are threefold. First, it is extremely complicated and difficult to administer. Secondly, it must be the same property which passes. If the property has changed in its nature between the two deaths, the Section does not apply. Thirdly, as has been pointed out by the hon. and learned Member for Leicester, North-East and my hon. and learned Friend, it applies only to certain types of property, to land and businesses. I think that the reason for that was that at the time of the passing of the 1914 Act they were types of property which were not easily realisable, but whether that criterion and differentiation are still valid I think is a matter for argument.
A fourth disadvantage of that Section is that it does not prevent aggregation. Although there is a relief, the property passing is still aggregated with the main estate and, therefore, may attract a higher rate of duty. I am bound to say that not only would a provision on these lines be very complicated, but it would be quite expensive. The hon. and learned Member for Leicester, North-East asked how much it would cost. I cannot give him precise figures at this stage, but it would be a matter of millions, rather than of thousands, of pounds.
There is a third way of dealing with the problem, which I mention for the consideration of the House. This is quite a short provision to eliminate the second charge on Estate Duty arising out of the operation of Section 184 of the Law of Property Act. That seems to be clearly justifiable on the ground that the double charge in these cases arises out of a pure technicality—a legal presumption as to the order of deaths—which may, of course, not correspond at all with the facts. It would merely put the parties in the same position as regards Estate Duty liability as they would have been in under Section 1 of the Intestates Estate Act, 1952, if the elder had died intestate.
That would be a simple provision, which seems to me to be a great advantage in this branch of the law, which, as my hon. Friend the Member for Wycombe (Mr. John Hall) pointed 1468 out, is already over-complicated to administer, and its cost would be negligible. It would deal with the hard cases, such as the Beare case which prompted my hon. Friend the Member for Brighton, Pavilion to introduce this Bill.
My right hon. Friend proposes to deal with this matter in the Finance Bill, although he has not determined whether one of these three methods, or even some other method, may be the appropriate way. In those circumstances, and in view of the fact that these matters are better dealt with in a Finance Bill, and the drafting of this Bill has been subjected to stringent, although friendly, criticism, I ask my hon. Friend to consider whether, having heard what I have said, he should withdraw it at this stage and see what happens in the Finance Bill. As I recognise there is a case for remedy, I cannot ask the House to reject this Bill if my hon. Friend wishes to get a Second Reading, but I would ask him then to consider whether it would be really profitable to pursue the matter in Committee. Having heard what I hope he feels to be a fairly forthcoming attitude on the part of the Government, I would ask him whether the proper course would not be to withdraw this Bill and rely on action being taken in the Finance Bill.
§ Mr. Teeling
Personally, I would prefer to go on with the Second Reading and then to leave the question of dealing with the Bill in Committee until we find what the problems will be. I have learned with great interest of all the difficulties which will now obviously arise from the drafting of my Bill. At the same time, there will be plenty of opportunity, should it be necessary, to deal with it, but I am certain that my hon. and learned Friend and my right hon. Friend will carry out their promises and that there will be no need to go on after Second Reading.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Standing Committee pursuant to Standing Order No. 38 (Committal of Bills).