New Clause.—(AGGREGATION.) (Hansard, 15 July 1958)

§ Mr. John Arbuthnot (Dover)
I beg to move, That the Clause be read a Second time.
This Clause seeks to remove what appears to be a considerable injustice to a certain very small number of payers of Estate Duty. Perhaps I can best put the point by taking a simple illustration. Let us take the case of an estate of, say, £¾ million, all except £50,000 of which is entailed to go with a title. The person who dies has no means by which he can dispose of that entailed part of the estate; that is to say, the majority of the estate goes with the title, possibly to a second cousin. It may well be that the life tenant of the estate has one or more daughters who will come into the £50,000 that is left. As the law stands, the £50,000 that is left becomes an almost negligible sum because it bears duty at the rate which is applicable to the £¾ million rather than at the rate which would be applicable to the £50,000.
If the Solicitor-General feels that the proposed Clause goes too far, I would be happy if the benefit were confined to people who are direct descendants, but 1101 I feel that this is a gross injustice and is a matter which affects so few cases that the cost to the Treasury must be negligible, and therefore I hope that my right hon. and learned Friend will be able to give the Clause sympathetic consideration.

§ Sir T. Low
I beg to second the Motion.

§ The Solicitor-General
Heavy-heartedly, I rise because I know full well I shall not be able to gratify any of the wishes of my right hon. and hon. Friends. The complaint here really is a complaint against the operation of aggregation in general in so far as it applies to this special instance of entailed property. It is true, of course, that not only in relation to entailed property but in relation to other property, too, the existence of the rule about aggregation may work hardship in the kind of case where the property other than that which is settled upon the person who dies, his own free property, is much less in value than the property which is settled. It is a long-standing rule, originating in 1894 at least, and I venture to doubt whether we would be in order in discussing the general application of the rule on this question.
There is a very important exception to the rule in the relief conferred by my right hon. Friend the present Home Secretary when he was Chancellor of the Exchequer in 1954. I refer to the relief whereby, when the deceased's own property, including any property derived from him which is liable to duty on his death, is of a modest amount. If it does not exceed £10,000, under the relief provided in 1954 it is treated as a separate estate for the purposes of aggregation.
Over and above that, there is provided marginal relief tapering off, which works when the estate exceeds £10,000. My right hon. and hon. Friends will recall the then Chancellor explaining how he had raised the limit of this relief to £10,000 after an examination of the Estate Duty position in general, in the hope that it would get rid of the great bulk of the hardship in those cases. Therefore, there is a considerable qualification operating against the general rule of aggregation where the deceased's own personal free assets are modest in amount.
1102 7.45 p.m.
I must confess that the proposed Clause is odd in some respects. The usual complaint that the Revenue has about aggregation is based on the fact that it is harsh, that the rate of duty applicable to the estate of the deceased should be raised to a high level by reason of property over which he does not have a power of disposition and which will go outside the family. But entailed property would seem to be that which is most likely to remain within the family. On that account, it would seem to be the worst kind of property to select for special treatment in this context.
I must confess that in the case my hon. Friend was suggesting as a test there was one factor I did not understand. He referred to the inability of the person who died to have any means by which he could dispose of the estate. He did not attach a date to his example, but I am a little puzzled because, as I understand the law, ever since the Law of Property Act, 1925, the tenant in tail in possession can dispose of the entailed property by will. I would have thought that was an additional reason for choosing entailed property as the kind of property likely to remain within the deceased's family, and, therefore, difficult for selection for special treatment under this branch of the law.
There is another difficulty. I do not desire to be absurdly technical, but this proposed Clause is a little strange to us when one looks at it. There are really two rates of duty to be considered. There is the rate of duty on property other than the entailed estate and there is the rate of duty on the entailed estate. Under the Clause, as I read it, the rate of duty on any property passing on the death, other than the entailed estate, would be determined without aggregating the entailed property with it, except insofar as the rest of the estate passed to the same beneficiary. That would account for the rate of duty on property within the entailed estate.
This would still leave the position where the rate of duty on the entailed estate would be governed by the process of aggregation. The property passing to the other beneficiaries would still be aggregated with the entailed property for the purpose of ascertaining the rate of duty on the entailed estate itself and on the other property of the same beneficiary 1103 as the entailed estate. I must confess to the House that at the moment I do not see what logical basis one could find for that position, and on that ground alone one would be bound to say that one could not accept the proposed Clause.
I am sure that my right hon. and hon. Friends will understand that there is an inherent difficulty in this way of trying to deal with what is really a much wider problem. In those circumstances, I much regret that I cannot hold out any hope that we would be able to select entailed property for treatment in some special way in relation to the rule of aggregation.

§ Mr. Mitchison
On this side of the House we are, in general, in favour of fragmentation rather than aggregation but, when we get aggregation as a fiscal proposition, we like to stick to it. I am glad, therefore, that this proposed Clause will not be accepted. I want to try to help the Solicitor-General in his difficulties about the form of the Clause by reminding him of the need we all feel from time to time to repeal the Act of Union with Scotland. I have always thought it wise, if one brought forward a measure of that kind, to provide that it should not apply to Scotland.

§ Mr. Arbuthnot
While I do not say that I am satisfied with what my right hon. and learned Friend said, and while I can promise him that we shall have another attempt at this in the next Finance Bill and hope that we shall then meet with a more favourable reception, in view of what he has said, I beg to ask leave to withdraw the Motion.