HC Deb 30 June 1964 vol 697 cc1205-25

(1) The following provisions of this section shall have effect to provide information for determining whether, and in what form and to what extent, it is expedient to amend the law in order to prevent avoidance of estate duty.

(2) Where it appears to the Commissioners of Inland Revenue that a person at any time during the calendar year 1964 has been or may reasonably be supposed to have been a party to an estate duty scheme or engaged in the advertisement of an estate duty scheme, the Commissioners may by notice in writing require that person to furnish them within such time as they may direct (not being less than twenty-eight days) with such particulars as they think necessary for the purpose of determining the nature, purpose and effect of the scheme and whether and to what extent it has resulted or will result in the avoidance of estate duty.

(3) In this section—

  1. (a) the word "advertisement" refers to an offer, invitation or inducement by letter or other written communication or in a newspaper (so, however, that in relation to an advertisement in a newspaper the words "engaged in" refer only to the person or persons who procured the advertisement to be inserted);
  2. (b) the phrase "estate duty scheme" means a transaction or series of transactions, the purpose or a main purpose of which is and the effect of which is or will be, contingently or otherwise, to avoid or reduce estate duty payable on the death of any individual or in relation to any group or class of individuals; and, without prejudice to the generality of the foregoing words, such a transaction may consist of or comprise a settlement (within the meaning attributed to that word by subsection (2) of section 411 of the Income Tax Act 1952), a contract for an annuity payable during a term of years or for a life or joint lives or a contract of insurance;
  3. (c) in relation to a transaction which consists of or comprises a contract for an annuity or a contract of insurance, the phrase "a party to" includes not only the grantor and grantee of the annuity, the insurer and the assured, but also a broker procuring the contract.—[Mr. Mitchison.]

Brought up, and read the First time.

Mr. Mitchison

I beg to move, That the Clause be read a Second time.

This is a Clause on the useful model set by the Government for the purpose of obtaining information, in this case not about tax evasion but about lawful tax avoidance, in the matter of Estate Duty. The Estate Duty schemes referred to in the Clause are schemes which have as one of their main purposes and as their effect the avoidance of Estate Duty. The definition is wide and the scope of the Clause itself is wide, because it is directed to obtaining information not only from those who are parties to these schemes but from those who advertise them.

There has never been a case where one could move a Clause with more conviction of its need, and when one could be more certain that a Tory Government would infallibly reject it. Dismissing for the moment the latter consideration from my mind, I must call the attention of the House to what hon. Members know full well, that extensive avoidance of Estate Duty is going on.

Let us be clear what is meant. Many schemes have perfectly good objects. One of their results may be the avoidance of Estate Duty. Therefore, one is not in a position to say at present that every one of these schemes constitutes an avoidance, but one is in a position to say that this is a matter which merits early inquiry and upon which the information available to the Government cannot be sufficient, for the simple reason that, as soon as any legislative provision is directed to Estate Duty, a corresponding change comes in the schemes designed to avoid payment of that duty.

The effect of avoiding Estate Duty is much the same as the effect of avoiding any other tax. It means that other taxpayers have to pay more. The people who suffer in the long run are not some abstract body called "the Revenue", but the people who pay taxes; and taxes run together, in the sense that the total revenue the Government require from year to year comes from a whole variety of them, of which Estate Duty is by no means the least important.

I do not think that there can be a single Member who is practising as a solicitor, or has practised as a solicitor, or who is practising as an accountant, or has practised as an accountant, who does not know full well that a very considerable slice of his professional time is devoted just to this purpose, that of devising schemes for avoiding Estate Duty.

I went to the Library and extracted from it "Morcom, Estate Duty Saving". This is the second edition and there is a supplement to keep it up-to-date. I do not say that the Government do not go on trying, but it so happens that the book does not contain any anti-avoidance provisions. The first edition I appear to have referred to, to judge from a footnote in the second edition.

May I reassure right hon. and hon. Gentlemen?; I shall not give them a number of tips as to how to avoid Estate Duty. They can work that out for themselves. I shall not trouble them with elaborate details, but I must make the picture clear, not only to them, but to numbers of others all over the country who pay the full run of Estate Duty and do not regard it as what it has sometimes been described as—a voluntary tax. It is certainly not a voluntary tax to those in the lower range of contributors.

I shall quote from that very useful appendage to any book, the publisher's blurb. Nobody ever knows whether the publisher writes it or whether the author does. I think that the practice varies. This one is good and fruity: 'Morcom'"—

that is, the book— provides the ideal guide to the savings which can be effected in regard to Estate Duty, for the taxpayer who is interested in minimising his commitments to the Inland Revenue.

I like the next sentence: It also covers the avoidance of Surtax, Income Tax and the incidence of Stamp Duty.

It is no exaggeration after that to say: This is essentially a practical book.

At the end there is this statement: Most people today, whether they are very wealthy or of only moderate means"—

how moderate, I wonder— consider it a wise policy to take advantage of the established fact that taxpayers are entitled to reduce their commitments to the Revenue so far as they honestly can.

Let me say at once that this new Clause has nothing to do with dishonesty. It is just a question of what limit ought to be put on honest avoidance. To their legal and financial advisers, therefore, who are frequently required to advise on a policy of 'tax planning', this book will prove invaluable.

Tax planning, the House will observe, is by analogy with family planning. A couple who do not want more family have a bit of family planning. Someone who does not want to pay any more taxes has a bit of tax planning. The difference is that some members of the family are occasionally welcome, taxes only very rarely to the payer.

I repeat—I shall probably repeat it again—that this is not a case of people doing anything but using every legal device they can to pay the minimum of Estate Duty. The social injustice of it is, first, that there should be so many loopholes, and, secondly, that those loopholes are in practice open only to those who are fairly well off and obtain such skilled advice as is provided, not only in this book, but in the services of their professional advisers, to whom we are told the book will be most useful.

I want to quote one very short passage that Lord Simon once uttered. People frequently quote remarks by judges to the effect, quite rightly, that a person is entitled to take advantage of everything he can to pay as little tax as possible. Of course he is entitled to do that, but is that the real point? Lord Simon uttered these words in a case in 1943 about a Mr. Latilla. Lord Simon, then Lord Chancellor, said this: My Lords, of recent years much ingenuity has been expended in certain quarters in attempting to devise methods of disposition of income"—

this case was about Income Tax— by which those who are prepared to adopt them might enjoy the benefits of residence in this country while receiving the equivalent of such income without sharing in the appropriate burden of British taxation. Judicial dicta may be cited which point out that, however elaborate and artificial such methods may be, those who adopt them are 'entitled' to do so. There is, of course, no doubt that they are within their legal rights, but that is no reason why their efforts, or those of the professional gentlemen who assist them in the matter, should be regarded as a commendable exercise of ingenuity or as a discharge of the duties of good citizenship.

I need go no further. That surely is the test that we must apply today. It is no logical defence to say that these things are legal, since what we are called upon to examine is whether the law should be altered. The existence of the kind of thing that is outlined in Morcom and mentioned in Lord Simon's speech is perfectly well known to the majority of Members. It ought not to go on, but it is no easy matter, and it will be no easy matter, to sort out in these cases motives of which I think we should all approve and motives which expose the taxpayer to the condemnation inherent in those words of Lord Simon, who, after all, had experience of both sides, the judicial side and the parliamentary side.

I shall not go into any of these schemes in detail. They are far too complicated and varied for that. However, I shall indicate the kind of way in which they work. One of them is in dealings with settlements. I need go no further than that into it. The settlements often have to be varied if the intention is to avoid Estate Duty.

7.0 p.m.

In 1958, we passed the Variation of Trusts Act and we left to the courts a very wide discretion to consent—on behalf of people who, for one reason or another were unable to consent—to the variation of trusts, provided they were of benefit to the person concerned. The courts, in the wholly proper exercise of their discretion in that respect, have consented to variations, the main purpose of which has been in some cases—I say some cases, but I should preface the phrase by saying that often it has been the sole purpose—to avoid Estate Duty.

That does not make the matter any more right. It merely means that the variation is a perfectly legal one. I hope that we will get this distinction clear and keep it clear all the time. There have been a number of cases of this, some in and some out of court, and there is one particular one to which I would like to refer the House because it involves the sort of broad question we are now considering.

It concerned a tax case involving Pilkington and Another. It began with a short speech by Lord Reid who, like Lord Simon, had had experience both on the legislative side of Government and, of course, as a law lord. He said at the beginning of his speech—having had the advantage of reading the speech delivered by Lord Radcliffe: … I am reluctantly persuaded … to agree that Section 32 of the Trustee Act, 1925, can be applied to the present case. I do not think that it is disputed that the main purpose of the Appellant's scheme, and its main benefit to the infant … is avoidance of death duties and surtax.

Later, at the end of that judgment, he said: I realise that this case opens a wide door and that many other trustees may seek to take advantage of it. But if it is thought that the power which Parliament has conferred"—

This was lot under the Variation of Trusts Act, but another power altogether is likely to be used in ways of which Parliament does not approve, then it is for Parliament to devise appropriate restrictions of the power.

That seems to me to go not only for power expr2ssly conferred by Parliament but for other powers which are lawfully exercised now. We must judge whether we think it is likely to be used or is being used in ways of which the House does not approve.

I cannot believe that hon. Members on either side of the House really believe that it is reasonable to oblige the courts to support a scheme, the main purpose of which is the avoidance of death duties and Surtax. That is how Lord Reid described that scheme. Nor is it any the less our duty to amend it when not only has it that purpose in itself but when it is going, in his words, to "open the door" to other similar cases.

We are not here merely to say that the law has existed for a long time and that this or that Amendment of it cannot be made. We are here to look at the present position to see, in the light of the information required for the purpose, whether the time has not come to make other changes. The question then is, have we really got enough information about it?

There is one other type of case to which I wish to refer. I have been talking about settlements, the exercise of powers and so on, but policies under the Married Women's Property Acts are no doubt a perfectly proper provision in many cases. They can, however, be used by way of avoiding Estate Duty to an extent which I believe was never intended when the legislation was originally passed. Not only those policies but others, too, for, even if the kind of thing I have described in the simplest of terms has now to some extent been limited, the inherent difficulty of it still exists.

Consider the man who proposes to avoid, as much as he can, the payment of Estate Duty and, at the same time, to maintain his own income. Let us suppose that he takes out a policy—in the case I have been supposing, for the benefit of his wife under the Married Women's Property Acts. He pays a single premium and, for that purpose, he borrows from the bank so that against his income he can set the charges of that loan. I agree that to some extent this has been met, but whether it has been met sufficiently is doubtful.

If that is the position, he may well succeed in having no smaller income and, at the same time, leaving his successors with far less Estate Duty to pay. I am not saying that this is always wrong; merely that when there are loopholes of this character they should be the subject of a general investigation which, so far as I know, has never been made. I am not even saying that there is not some power to make it; just that there is not enough, although when a case comes to court one gets a fairly thorough investigation. Thus there is power in an Estate Duty case, although it is rarely exercised, to make such an investigation.

Such power was exercised once, in the case of one of our dukes. Estate Duty avoidance seems to be rather a ducal malady. Witnesses may be heard and everything gone into, but it is rather like what my hon. Friends and I always used to say about free milk in schools; we declared that we could never get it out of a Tory council until the children's physical condition showed signs that their health was suffering. These cases which come to court are cases where, successfully or unsuccessfully, there has been a fairly stiff Estate Duty avoidance, or an attempt to avoid, and where the Revenue, because it has considered the matter doubtful, has brought or fought the case.

I am sorry to tell the right hon. Gentleman the Chief Secretary, for whom I have the highest personal regard, that I shall simply not believe him if he tells me that there is no extensive avoidance of Estate Duty now. I do not think he will say that. He will probably attempt to justify it or to say that whatever it is it does not need further investigation. That cannot be right, either, because if one considers the cases of policies one finds that this single premium business has resulted in an agreement being reached among the insurance companies to the effect that they will not issue single premium policies in certain cases beyond £1,000.

One should not have to rest public morality and the fair incidence of taxation on an agreement between insurance companies. It is our business to provide for that kind of thing, and I was amused at the commentary on this aspect of the matter in the book to which I referred, where it is stated on page 187: However rules observed by United Kingdom assurance companies preclude them accepting premiums for such policies in excess of £1,000".

The next sentence amused me: It would be possible to secure a single premium policy for a larger sum from a non-U.K. assurance company or several single premium policies from several United Kingdom companies.

This is, according to the publisher's blurb, a practical book. When one is driven to that kind of practice and comment one is driven to it because it is recognised that what is going on is unsound and unfair and that someone does not want to drag it too much into the open. One finds it concealed in that unsatisfactory way—and these agreements are capable of evasion or avoidance, as are statutory provisions, and they are usually called "gentlemen's agreements" for that reason.

I want to refer to one other aspect of this matter. We are dealing with something that we all of us know about, or most of us know about. It is a field where it is singularly difficult to decide between what is right, proper and fair in the interests of the family and is not, at the same time, unfair to the community; and, on the other hand, cases where, whatever element of good intention there may be towards the family, the intention and certainly the result of it is the avoidance of Estate Duty, which is most unfair to one's fellow taxpayers.

When we are dealing with a question of that kind, we must first get our information right. I would agree at once that it is not easy to collect information, partly because of the variety of the schemes and partly because of the mixture of motives that will certainly be found in most of them. I do not say that the mere fact that one of the purposes is the avoidance of Estate Duty necessarily condemns the scheme. I am saying that that and other schemes must be examined in conjunction, because this is a matter where it is the duty of the House to get information and ultimately, when it has got it, to frame a policy and put it into legislative form. It has gone beyond something which is capable of being dealt with by a little bit of patchwork here and there and it wants looking at as a whole.

I feel certain that hon. Members on both sides of the House will see that we have a duty in this matter and that it is not to be pushed aside by saying, "Well, this case or that case may be all right and this or that case may be all wrong." It is a case where we have to come to a decision of a public and general character, as I see it, and to do it on full information. This Clause involves no decision; it contains no penalties; it merely empowers the collection of information. I have enough confidence in people to believe that if it is passed the majority at any rate will give the information that they are called upon to give under this Clause.

Therefore, I in no sense regard it as oppressive. It obtains this information over a limited period of time. The limit in the Clause is the year that ends at the end of this calendar year. There is no question of retrospective legislation when one is collecting information. We have to go back to some extent to collect it, of course, but I think that is quite a good time limit. Here I will allow myself to be quite immoderate. I have been scrupulously moderate before. We shall have a Labour Government by then and I think that this information will be available in time for a Labour Chancellor to make proper use of it. I doubt whether any Tory Chancellor ever would or will.

Sir Henry d'Avigdor-Goldsmid (Walsall, South)

When listening to the hon. and learned Member for Kettering (Mr. Mitchison) I was strongly reminded that we have come to a very late stage in the proceedings on this Bill without having had any mention of Estate Duty. I felt that, with so many special initiatives required from his party, certainly a dig at Estate Duty would arrive before long. Well, it has arrived.

7.15 p.m.

Frankly, I do not see any merit whatsoever in this new Clause for the purpose for which it is designed. The hon. and learned Gentleman quoted at great length from published volumes information which is readily available. He mentioned matters of which almost every accountant or solicitor has a great deal of knowledge. Incidentally, I am surprised that his hon. Friend the Member for Gloucester (Mr. Diamond) s not with him, because I am sure that he would have been able to confirm me in these views. Therefore, if the purpose of this Clause is to get information, it is quite useful because the information is already there. I see that its scope is limited to 1964. Such information as would be available in 1964 would, in the usual way of things, be out of date in some respects by 1965. So, frankly, I do not think that the Clause stands simply as an inquiry.

What it does, of course, is to give the hon. and learned Gentleman a peg for a discourse about Estate Duty and its avoidance, a subject which Chancellors in the past have frequently had to deal with. I appreciate that the Opposition are not able to propose taxation, otherwise it would have been much more satisfactory if, instead of having this debate, we had had a discussion on the taxation of gifts inter vivos. I think that then we should have had an interesting and revealing discussion on which certain views would have been taken. In fact, we have not had such a discussion. All we have had is an opportunity for the hon. and learned Gentleman to cast a good deal of innuendo and, without framing the charges, a slur on all those who treat in these matters.

I, for my sins and to my infinite regret, have had several dealings with the Estate Duty Office and with Estate Duty legislation as well. I have had to fight a case all the way up to the House of Lords, which, I believe, has resulted in an improvement of the law—and I have never beer told at any time that such action as I was taking was contrary to the public interest or not in fulfilment of one's duty of citizenship.

This Clause will not in fact be a peg for a Labour Chancellor because there will not be a Labour Chancellor, and if we are unwise enough to accept it it will not be worth the paper that it is written on. This information is readily, completely and fully available to the Commissioners if they want it. The hon. and learned Gentleman has that information, too, and therefore I hope that I shall not be speaking out of turn if I suggest that there is no place in a Finance Bill for a Clause which serves no useful purpose whatsoever.

Mr. Boyd-Carpenter

The hon. and learned Member for Kettering (Mr. Mitchison) has the agreeable gift of being able to propound with the air of utmost moderation and reason really the most monstrous propositions. I have rarely seen that very powerful Parliamentary gift more effectively exercised than this evening when he presented this Clause to us as a moderate, reasonable, little proposal which, he added, none the less no Tory Government would accept. If one looks at the Clause one sees that it is a very striking one and goes a very long way indeed.

The hon. and learned Gentleman sought to confer credit on it by saying that it followed the pattern of the one in last year's Finance Bill in respect of betting and gaming. But, if this is a descendant of that Clause, it is certainly a bastard one because, as I say, this new Clause goes a very long way indeed. It would empower the Inland Revenue in any case where it appeared that either a citizen was making arrangements or a professional man was assisting him in making arrangements which could result in avoidance, not evasion, of Estate Duty, to serve notice demanding very detailed particulars both from the person and from his professional adviser.

Then this proposal has the odd feature, to which I will come later—and the hon. and learned Member forgot his air of reason and moderation for a moment when he explained it—that it would operate only during the year 1964.

Mr. Mitchison

I am sure that the right hon. Gentleman does not want to misrepresent me or the Clause. The Clause is not drawn so as to oblige professional advisers to disclose their clients' affairs. I have watched this carefully, and if the right hon. Gentleman looks he will discover that to be the case. Secondly, if the Revenue has all this information already, then it does not seem to matter very much what the contents of the new Clause are.

Mr. Boyd-Carpenter

On the second observation of the hon. and learned Member, I take the point that it matters a very great deal. I should have thought that it was basic to our system of Government that one did not arm Government Departments with interrogatory powers save where there was an overwhelming case for them. To say lightheartedly that if the Revenue knows this already it does not matter is a quite startling observation from the hon. and learned Gentleman.

As to the hon. and learned Member's observation that it is not the intention of the new Clause that professional advisers should be compelled to disclose their clients affairs, I take it from him that that is the case. Whether it would be the effect I take very serious leave to doubt. There is a very clear indication to me that it would involve the professional advisers or those engaged in the advertisement of an Estate Duty scheme—

Mr. Mitchison

Solicitors do not advertise.

Mr. Boyd-Carpenter

No, but the hon. and learned Gentleman referred to people engaged in the advertisement of an Estate Duty scheme. Let us assume that someone responds to that advertisement. As I read the new Clause, the person who had advertised the scheme or who was advising a person who had responded to the advertisement would, under the new Clause, be liable to disclose his client's affairs. I give the hon. and learned Member the credit for having sought to avoid what he and I, as members of the same profession, would regard as an outrageous thing, namely, to impose on a professional adviser the duty to disclose affairs divulged to him in confidence by a client. But I doubt the hon. and learned Member's success in the situation which I have described.

The new Clause goes extremely wide. The definition of an Estate Duty scheme in subsection (3,b) of the new Clause is very wide. It says: … the purpose or a main purpose of which is and the effect of which is or will be, contingently or otherwise, to avoid or reduce estate duty payable on the death of any individual …". The hon. and learned Member stated very fairly that this was aimed not at fraud or evasion but only at lawful avoidance. It falls on the hon. and learned Gentleman to satisfy the House that it is plainly necessary for that purpose, because I am sure that the House would take the view that we should not without reason give a Government Department these very considerable powers to inquire into the personal affairs of the citizen.

Estate Duty is reduced or avoided by all sorts of means. The simplest way that one can do it is by giving a present to one's child and then living for a further five years. That is the kind of transaction which apparently would come within the scope of this interrogatorial Clause. I say to the hon. and learned Member sincerely that there is no necessity for it.

As my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) said, the nature of these schemes is perfectly well known. Indeed, the hon. and learned Member read from a book about them. I would quote to him the words of one of the greatest men of his own party," Why peer into the crystal if you can read the book?". Why take interrogatory powers over the citizen when it is all in a booklet to which the hon. and learned Gentleman gave an admirable commercial advertisement, which no doubt will greatly expand its sales?

The question is not one of finding out the nature of these schemes. It is, in all seriousness, the difficult problem of judging in respect of which of them it is right to take action. One has to weigh the interest of the other citizens and the taxpayer against the hardship to individuals and interference with individuals' affairs which is involved in legislation. It is sometimes a very difficult exercise in judgment, but one is not spared that exercise in the slightest by this method of obtaining information which is already available. It does not help to resolve that problem.

The Government have not hesitated, when they have seen that there has been avoidance of a serious character, to take action in successive Finance Bills. Last year we legislated to tighten up the position in the light of a court decision on gifts in consideration of marriage, which the hon. and learned Member will recall. In the previous year we legislated to bring foreign immovables within the scope of Estate Duty. That case illustrates my point that such decisions as these are, and have to be, taken on a balance of the general desirability of supporting the Revenue as against the hardship which can be caused to individuals, for that provision in the 1962 Act resulted in the departure from his home and from this country of a very distinguished member of another place who has rendered very great services throughout his long life to this country.

I return to the point of principle. If information is sought to be obtained by these compulsory methods, the case that it cannot be obtained otherwise must be made out. No attempt has been made to make it out. The hon. and learned Member said that this was a voluntary tax. If it is, there seem to be a great many volunteers. The yield between 1951–52 and 1958–59 fluctuated between £160 million and £185 million a year. In 1963–64 it was £310 million. It has risen very substantially indeed.

I thought that the hon. and learned Member fell to temptation in the concluding moments of his speech and let the cat out of the bag by explaining that this provision, which one would have thought, if it were a good or normal one, might be permanent, was designed to run only to the end of 1964. He offered the controversial opinion, which he may live to regret, that by the end of that year there would be a Labour Government. I think that this gives the clue to what may be behind this Clause and certainly illustrates its dangers, for in that increasingly improbable contingency it would be very convenient to have these powers for the purpose, not of dealing with Estate Duty problems, but of introducing further extensions of taxation.

This proposal would be very helpful if the hon. and learned Member and his hon. Friends came to office and wanted to introduce a gifts tax. Perhaps he will tell us whether it is the Labour Party's intention to introduce a gifts tax.

Mr. Mitchison rose

Mr. Boyd-Carpenter

The hon. and learned Gentleman is about to try to tell us.

Mr. Mitchison

I will certaintly try.

The answer on that point, as on other questions of the avoidance of Estate Duty, is that we require further information. Perhaps the right hon. Gentleman will tell us which proposition he is putting forward—that this further information is unnecessary, or iniquitous, or both.

Mr. Boyd-Carpenter

I am putting forward the proposition that, in respect of Estate Duty, it is unnecessary and, therefore, iniquitous, but I am conceding to the hon. and learned Gentleman that this proposal would be very useful to a Labour Government if they wanted to introduce a gifts tax.

It is because it seems to me that this new Clause is founded, first on the false supposition that there will be a Labour Government and, secondly, on the supposition that it would be a right and fair thing to do, although hon. Members opposite are still very cagey about whether they really want to do it, that I ask the House to reject it.

7.30 p.m.

Mr. Douglas Jay (Battersea, North)

I am tempted to say that the Chief Secretary to the Treasury, in contrast to my hon. and learned Friend the Member for Kettering (Mr. Mitchison), has a habit of uttering the most vacuous platitudes with a great air of emphasis, vigour and passion. I will give a perfectly plain answer to his question about the Labour Party's intentions concerning a gifts tax, and that is that I am unable to anticipate my right hon. Friend's next Budget.

The hon. Baronet the Member for Walsall, South (Sir H. d'Avigdor-Gold-smid) made a valid point when he said that we are always in some difficulty in these debates because it is not possible for anyone other than the Government to put down Amendments which involve an increase in taxation and therefore it is sometimes necessary to discuss important issues like this on the strength of Amendments which have some effect other than that. But I do not think that the hon. Member or the Minister was on nearly such strong ground when both argued that we have this information already and therefore nothing more needs to be done about it. If the Government and the Inland Revenue have this information, why does this sort of thing go on? Do hon. Members opposite say that it does not go on, or do they say that although the Government have the information this practice nevertheless goes on? We are entitled to an answer.

It is right that the House in the course of debate on the Finance Bill should look at Estate Duty. The duty is important and extremely valuable, and whatever we may think about taxation on income, direct or indirect, if there is a strong case for taxation anywhere it is surely the case for a tax on inherited wealth. I do not think that the right hon. Gentleman would deny that we still have a very unequal distribution of property in the country, and the most effective instrument we have yet devised for combating that inequality is undoubtedly Estate Duty. This duty, over the past 66 years, has been fighting not a losing battle but a tough battle against the forces of private capital appreciation. On the whole, the evidence is that the duty has been very slowly, but only just, winning that battle.

I would not go as far as my hon. and learned Friend the Member for Kettering—if he said it—as to say that this is a voluntary tax, but it could easily become so if the Government do not take the sort of action that we are advocating today. On the other hand, it is not a tax so riddled with loopholes that Parliament should despair of it and give it up. It is true that Estate Duty up to 1959 was yielding a revenue of under £200 million, that it rose last year to £310 million, and that this is the Government's estimate for the coming year. I draw the moral from this that this is a tax exceedingly worth having and that we ought to be preserving it by closing up the loopholes.

Hon. Members opposite, and particularly the hon. Member for Walsall, South, argue that everything is known about it and that no further steps are necessary, and they challenge us to say why it is desirable to collect further information on the subject. I content myself with quoting a document which was sent to me through the post, appropriately a few days before Budget day. This is a letter from a gentleman with an office in the City whose name I will not read out because the Chief Secretary accused my hon. and learned Friend the Member for Kettering of commercial advertising, but I will be glad to give it to him for the Inland Revenue.

This gentleman says: Last year we wrote to inform you that there are many means by which you can lessen Estate Duty liability. Since that time over £270 million has been collected by the Treasury in death duties. He was wrong. It was £310 million, which from his point of view was even worse.

Sir H. d'Avigdor-Goldsmid

Surely on this point of information it is open to the right hon. Gentleman's friends and his wealthy sympathisers to employ the same tactics as advised by the hon. Member for Cardiff, South-East (Mr. Callaghan) a fortnight ago for obtaining information from companies on how they spend their funds. If the right hon. Member wants this information he has enough rich and rich-seeming supporters to initiate a few inquiries. It might result in a useful harvest.

Mr. Jay

I do not want the information. I want to Inland Revenue to have it. My correspondent added: If you look at the ' Wills ' columns in the newspapers, you may have noticed that some people seem to have attracted remarkably little duty in relation to the size of their estate. This is true, and I wonder whether the Minister and the Inland Revenue have noticed it. He adds: This desirable situation can be achieved, by wholly legal and ethical means, and it may well be possible at the same time to improve your own living standards. A reply form is incorporated in the enclosed brochure. If literature of this kind is being widely circulated in the post, is not it reasonable to suppose that some people take advantage of it?

The brochure goes into further detail. Among other things it says: So complex have the tax laws of this country become that each member of a group of people in similar financial circumstances may well pay quite a different amount in tax. I hope that that is not true of other taxes, but in the writer's opinion it is true of Estate Duty because he says: The same applies in an even greater degree to Estate Duty, due to the method by which this Duty is levied. He then gets down to brass tacks and says: To reduce the impact of Estate Duty it is necessary to find means of creating assets which do net bear duty or which bear duty at a lower rate than that applicable to the remainder or the Estate. There are various means by which this can be done, but it is important that any rearrangement fully safeguards the living standards and interests of the settlor. It is then explained, as my hon. and learned Friend the Member for Kettering says, that life insurance is the most effective means whereby large estates bearing low rates of Estate Duty can be created and is the biggest factor in what this gentleman calls the rearrangement of Estate Duty. He offers his services in making arrangements of this kind on behalf of anybody who likes to avail himself of them. If all this information is being made available to the public—and the Minister knows that this is so—there is an obligation on the Government to take some action to prevent what is an apparently massive avoidance of this kind.

We often have quotations—and my hon. and learned Friend the Member for Kettering gave one—from learned judges who have said in the past that it is perfectly proper and honest for the individual citizen to minimise and lessen his tax liability. This is something which one cannot contest, but if we are to say that it is perfectly reasonable for a citizen to take any advantage of a loophole in the law, it is all the more clear that there is an obligation on Parliament to see that loopholes do not exist. If they exist, the spirit and intentions of Parliament are being frustrated because of accidents of which we then say the public are perfectly justified in taking advantage.

The Chief Secretary argued in favour of doing nothing about this that my hon. and learned Friend's proposals would have involved the collection of information and this would have meant the most tyrannical and oppressive inquisition into the affairs of ordinary people by compulsory means. He used the word "compulsory" several times. Every Income Tax return involves an inquisition into our affairs in which all sorts of detailed answers have to be given. Surely, the Minister must know that the National Assistance Board asks all sorts of questions, quite properly, before paying out public money. Why is this kind of inquisition justifiable and acceptable in the case of Income Tax or the National Assistance Board but suddenly becomes a tyrannical interference with individual liberty when we are concerned

with death duty avoidance? That seems to me to be a most unconvincing argument.

The Minister's whole negative attitude when this kind of thing is plainly going on is exceedingly disappointing and I hope that unless he has something better to suggest, my hon. Friends will press the Amendment.

Question put, That the Clause be read a Second time:—

The House divided: Ayes 163, Noes 207.

Division No. 123.] AYES [7.41 p.m.
Ainsley, William Griffiths, David (Rother Valley) O'Malley, B. K.
Alldritt, W. H. Griffiths, Rt. Hon. James (Lanelly) Oram, A. E.
Allaun, Frank (Salford, E.) Grimond, Rt. Hon. J. Owen, Will
Allen, Scholefield (Crewe) Gunter, Ray Padley, W. E.
Awbery, Stan (Bristol, Central) Hale, Leslie (Oldham, W.) Pannell, Charles (Leeds, W.)
Beaney, Alan Hamilton, William (West Fife) Paton, John
Bence, Cyril Hannan, William Pavitt, Laurence
Benn, Anthony Wedgwood Harper, Joseph Pearson, Arthur (Pontypridd)
Benson, Sir George Hayman, F. H. Pentland, Norman
Blackburn, F. Henderson, Rt. Hn. Arthur (Rwly Regis) Prentice, R. E.
Blyton, William Herbison, Miss Margaret Price, J. T. (Westhoughton)
Boardman, H. Hilton, A. V. Probert, Arthur
Bottomley, Rt. Hon. A. G. Holman, Percy Rankin, John
Bowden, Rt. Hn. H. W. (Leics, S. W.) Holt, Arthur Redhead, E. C.
Bowen, Roderic (Cardigan) Houghton, Douglas Rees, Merlyn (Leeds, S.)
Bowies, Frank Howell, Denis (Small Heath) Rhodes, H.
Braddock, Mrs. E. M. Hoy, James H. Roberts, Albert (Normanton)
Bradley, Tom Hughes, Cledwyn (Anglesey) Roberts, Goronwy (Caernarvon)
Brockway, A. Fenner Hughes, Emrys (S. Ayrshire) Robertson, John (Paisley)
Broughton, Dr. A. D. D. Hughes, Hector (Aberdeen, N.) Rodgers, W. T. (Stockport)
Brown, Rt. Hon. George (Belper) Hunter, A. E. Ross, William
Butler, Herbert (Hackney, C.) Hynd, H. (Accrington) Short, Edward
Carmichael, Neil Hynd, John (Attercliffe) Silkin, John
Castle, Mrs. Barbara Irvine, A. J. (Edge Hill) Slater, Joseph (Sedgefield)
Chapman, Donald Jay, Rt. Hon. Douglas Small, William
Collick, Percy Johnson, Carol (Lewisham, S.) Smith, Ellis (Stoke, S.)
Corbet, Mrs. Freda Jones, Elwyn (West Ham, S.) Snow, Julian
Craddock, George (Bradford, S.) Jones, T. W. (Merioneth) Sorensen, R. W.
Cronin, John Kenyon, Clifford Steele, Thomas
Crosland, Anthony Key, Rt. Hon. C. W. Stones, William
Cullen, Mrs. Alice King, Dr. Horace Strauss, Rt. Hn. G. R. (Vauxhall)
Dalyell, Tam Lawson, George Stross, Sir Barnett (Stoke-on-Trent, C.)
Darling, George Lee, Frederick (Newton) Symonds, J. B.
Davies, Ifor (Gower) Lever, L. M. (Ardwick) Taylor, Bernard (Mansfield)
Davies, S. O. (Merthyr) Lewis, Arthur (West Ham, N.) Thornton, Ernest
Deer, George Loughlin, Charles Timmons, John
Delargy, Hugh Lubbock, Eric Tomney, Frank
Dempsey, James Mabon, Dr. J. Dickson Wade, Donald
Diamond, John McBride, N. Wainwright, Edwin
Dodds, Norman MacColl, James Warbey, William
Doig, Peter McInnes, James Watkins, Tudor
Driberg, Tom McKay, John (Wallsend) Weitzman, David
Edwards, Rt. Hon. Ness (Caerphilly) McLeavy, Frank Whitlock, William
Edwards, Robert (Bilston) MacPherson, Malcolm Wilkins, W. A.
Evans, Albert Manuel, Archie Willey, Frederick
Finch, Harold Mapp, Charles Williams, W. T. (Warrington)
Foot, Dingle (Ipswich) Mason, Roy Willis, E. G. (Edinburgh, E.)
Foot, Michael (Ebbw Vale) Mayhew, Christopher Winterbottom, R. E.
Forman, J. C. Mendelson, J. J. Woodburn, Rt. Hon. A.
Fraser, Thomas (Hamilton) Millan, Bruce Woof, Robert
Galpern, Sir Myer Mitchison, G. R. Yates, Victor (Ladywood)
George, Lady Megan Lloyd (Crmrthn) Monslow, Walter
Ginsburg, David Moody, A. S. TELLERS FOR THE AYES:
Gordon Walker, Rt. Hon. P. C. Morris, Charles (Openshaw) Mr. Charles A. Howell and
Gourlay, Harry Morris, John (Aberavon) Mr. Grey.
Greenwood, Anthony Moyle, Arthur
Agnew, Sir Peter Anderson, D. C. Awdry, Daniel (Chippenham)
Allan, Robert (Paddington, S.) Ashton, Sir Hubert Barber, Rt. Hon. Anthony
Allason, James Atkins, Humphrey Barter, John
Batsford, Brian Grant-Ferris, R. Osborn, John (Hallam)
Beamish, Col. Sir Tufton Green, Alan Page, John (Harrow, West)
Bell Ronald Gresham Cooke, R. Pannell, Norman (Kirkdale)
Bevins, Rt. Hon. Reginald Griffiths, Eldon (Bury St. Edmunds) Pearson, Frank (Clitheroe)
Bidgood, John C. Grosvenor, Lord Robert Peel, John
Biggs-Davison, John Hall, John (Wycombe) Percival, Ian
Bingham, R. M. Hamilton, Michael (Wellingborough) Pickthorn, Sir Kenneth
Bishop, Sir Patrick Harris, Frederic (Croydon, N. W.) Pitt, Dame Edith
Bourne-Arton, A. Harris, Reader (Heston) Powell, Rt. Hon. J. Enoch
Box, Donald Harrison, Brian (Maldon) Price, David (Eastleigh)
Boyd-Carpenter, Rt. Hon. John Harvie Anderson, Miss Prior, J. M. L.
Braine, Bernard Heald, Rt. Hon. Sir Lionel Proudfoot, Wilfred
Brooke, Rt. Hon. Henry Henderson, Sir John (Cathcart) Pym, Francis
Brown, Alan (Tottenham) Hiley, Joseph Ramsden, Rt. Hon. James
Buck, Antony Hill, Mrs. Eveline (Wythenshawe) Rawlinson, Rt. Hon. Sir Peter
Bullard, Denys Hill, J. E. B. (S. Norfolk) Redmayne, Rt. Hon. Martin
Bullus, Wing Commander Eric Hirst, Geoffrey Ridsdale, Julian
Burden, F. A. Hocking, Philip N. Roots, William
Campbell, Gordon Hogg, Rt. Hon. Quintin Ropner, Col. Sir Leonard
Carr, Rt. Hon. Robert (Mitcham) Holland, Philip Russell, Sir Ronald
Chataway, Christopher Hollingworth, John Scott-Hopkins, James
Chichester, Clark, R. Hughes Hallett, Vice-Admiral John Sharples, Richard
Clark, Henry (Antrim, N.) Hughes-Young, Michael Shaw, M.
Clark, William (Nottingham, S.) Hulbert, Sir Norman Skeet, T. H. H.
Cleaver, Leonard Hutchison, Michael Clark Smith, Dudley (Br'ntf'd & Chiswick)
Cole, Norman Iremonger, T. L. Spearman, Sir Alexander
Cooper, A. E. Irvine, Bryant Godman (Rye) Stainton, Keith
Cooper-Key, Sir Neill James, David Steward, Harold (Stockport, S.)
Cordeaux, Lt.-Col. J. K. Johnson, Eric (Blackley) Stoddart-Scott, Col. Sir Malcolm
Cordle, John Johnson Smith, Geoffrey Storey, Sir Samuel
Corfield, F. V. Jones, Rt. Hon. Aubrey (Hall Green) Studholme, Sir Henry
Costain, A. P. Kaberry, Sir Donald Tapsell, Peter
Courtney, Cdr. Anthony Kerans, Cdr. J, S. Taylor, Sir Charles (Eastbourne)
Craddock, Sir Beresford (Spelthorne) Kerby, Capt. Henry Taylor, Edwin (Bolton, E.)
Critchley, Julian Kerr, Sir Hamilton Taylor, Frank (M'ch'st'r, Moss Side)
Curran, Charles Kirk, Peter Teeling, Sir William
Currie, G. B. H. Lancaster, Col. C. G. Thatcher, Mrs. Margaret
Dance, James Legge-Bourke, Sir Harry Thomas, Sir Leslie (Canterbury)
d'Avigdor-Goldsmid, Sir Henry Lewis, Kenneth (Rutland) Thompson, Sir Kenneth (Walton)
Donaldson, Cmdr. C. E. M. Lilley, F. J. P. Thompson, Sir Richard (Croydon, S.)
Doughty, Charles Litchfield, Capt. John Thornton-Kemsley, Sir Colin
Douglas-Home, Rt. Hon. Sir Alec Lucas-Tooth, Sir Hugh Tiley, Arthur (Bradford, W.)
Drayson, G. B. McAdden, Sir Stephen Touche, Rt. Hon. Sir Gordon
du Cann, Edward MacArthur, Ian Turner, Colin
Duncan, Sir James Maclean, Sir Fitzroy (Bute & N. Ayrs) Turton, Rt. Hon. R. H.
Eden, Sir John MacLeod, Sir John (Ross & Cromarty) Tweedsmuir, Lady
Elliot, Capt. Walter (Carshalton) Macmillan, Maurice (Halifax) van Straubezee, W. R.
Maginnis, John E. Walder, David
Elliott, R. W. (Newc'tle-upon-Tyne, N.) Maitland, Sir John Walker, Peter
Emery, Peter Markham, Major Sir Frank Walker-Smith, Rt. Hon. Sir Derek
Emmet, Hon. Mrs. Evelyn Marples, Rt. Hon. Ernest Ward, Dame Irene
Errington, Sir Eric Marshall, Sir Douglas Webster, David
Farey-Jones, F. W. Marten, Neil Whitelaw, William
Farr, John Matthews, Gordon (Meriden) Williams, Sir Rolf Dudley (Exeter)
Fell, Anthony Maude, Angus (Stratford-on-Avon) Williams, Paul (Sunderland, S.)
Fisher, Nigel Maudling, Rt. Hon. Reginald Wills, Sir Gerald (Bridgwater)
Fletcher-Cooke, Charles Mawby, Ray Wilson, Geoffrey (Truro)
Fraser, Ian (Plymouth, Sutton) Maxwell-Hyslop, R. J. Wise, A. R.
Freeth, Denzil Maydon, Lt.-Cmdr. S. L. C. Wolrige-Gordon, Patrick
Galbraith, Hon. T. G. D. Miscampbell, Norman Woodhouse, Hon. Christopher
Gammans, Lady Montgomery, Fergus Woodnutt, Mark
Gardner, Edward More, Jasper (Ludlow) Woollam, John
Gibson-Watt, David Morrison, Charles (Devizes) Worsley, Marcus
Giles, Rear Admiral Morgan Morrison, John (Salisbury) Yates, William (The Wrekin)
Gilmour, Ian (Norfolk, Central) Neave, Airey
Glyn, Dr. Alan (Clapham) Oakshott, Sir Hendrie TELLERS FOR THE NOES:
Goodhew, Victor Orr, Capt. L. P. S. Mr. McLaren and Mr. Hugh Rees.