HC Deb 06 March 1975 vol 887 cc1788-813
Sir Geoffrey Howe (Surrey, East)

I beg to move Amendment No. 502, in page 19, line 12, at end insert: '(4) A dwelling is excluded property if on the death of the person with an interest in possession of that said dwelling and which is occupied by him at the time of his death it passes to an ancestor or descendant, brother or sister, or spouse thereof who has lived with him for not less than two out of the three years preceding'. The amendment is designed to deal, so far as we can, with the fact that the new capital transfer tax designed and introduced by this Labour Government will prove to be, in a way that estate duty never was, a tax on homes, on the family and—if I may be forgiven the phrase, despite the mocking of the Chancellor of the Exchequer yesterday—on the natural bonds of love and affection that exist within a family. The Chancellor derided that concept.

Perhaps that is not surprising. We know that in Labour's house, or at least in those parts above stairs that are reserved for members of the Labour Cabinet, there are many mansions. Labour Ministers appear to collect houses with as much enthusiasm as commissars collect dachas. But that is not the life they visualise for the ordinary people. They have no natural sympathy with those who save, with those who own their own homes. I am sorry if the Chief Secretary feels underprivileged in having only one home when his colleagues have so many.

It is not surprising that the tax will impose a new and growing burden on exactly those thrifty and hard-working people who own their own homes. It will impose a new and growing burden on right to keep the benefits of thrift within one's family. I am not dealing with the rich minority, on the subject of whom the Chancellor loves to dwell, and of which he is such an outstanding, if undistinguished, Member. I am dealing with that half of the families of this country who live in their own homes. Many of those homes already come near to facing the lower limit of the new tax, because it starts at £15,000. The average price of a new home in the South-East of England is now estimated at about £14,250. If inflation continues at the pace we have unfortunately come to expect under this Government, that figure will soon be reached in other parts of the country.

It is true that the rate of tax payable on death is no higher than under estate duty, but that argument, which we have heard so often from the Chancellor, overlooks the extent to which it is a cumulative tax, assessed over the transactions effected during the lifetime of the taxpayer or his family. The tax burden must take account of the lifetime gifts of any other part of the estate of the original house-owner above £1,000, whether in the form of savings, chattels, cars or anything of that kind.

The tax will inevitably impose a new and growing burden on dispositions within the family. Even if it did not do that, there is a good additional social reason for seeking to encourage home owership, as the amendment would. There is a good reason for seeking to encourage disposition of homes within the families of those who have saved in order to buy them.

Moreover, there is a good reason for encouraging succession to the family home by others than just the surviving spouse, although that certainly is desirable. One acknowledges that the legislation at least has that effect, as did the provisions made by the Conservative Government in 1972. But we want also to encourage succession to the home by, for example, a child or children living with the person who wishes to pass it on at death or at any other time. Perhaps even more, we wish to encourage the possibility of a home being passed on to elderly relatives, quite often dependent relatives. There is something positively socially desirable in the transmission of homes and dwelling houses to other members of the family.

That desirable aspect of policy has been recognised in many other parts of housing policy and taxation policy over many years. I begin by citing the remarkable example of the practice in local authority housing, where the original tenant has no continuing title, nothing resembling a freehold title to which he has contributed anything by any act of thrift on his part. I do not say that critically. In most parts of the country the members of the family living with the tenant who dies in practice have a title to succeed to the house.

Paragraph 208 of the Cullingworth Report says: So far as transfer of tenancies to adult children is concerned, a distinction is made between children who have been living in the parental household for a considerable time … and those who have been living separately … In the former case the transfer of tenancy is common; in the latter less common—though much depends on the nature of the local housing shortage. Even in these circumstances of local authority housing, with no title, no acquisition, no thrift and no saving, our social policy recognises the desirability of allowing the family of the original tenant to succeed, and the case is even stronger where rent-controlled property or regulated property is concerned.

Here again we are dealing with property where the tenant has no continuing title, nothing resembling a freehold or a leasehold to the property. He has a statutory right to remain there at the expense of the owner of the freehold who is often poorer than the person who is enjoying the right to remain on. Yet even in that situation as set out in Schedule 1 of the Rent Act 1968 there is a right to the family of the original tenant to succeed to the statutory tenancy. The original tenant can pass his tenancy on to his widow who was residing with him at his death or to a person who was a member of the original tenant's family who had resided with him for six months before his death. If that first successor dies leaving his widow who was residing with him at the time of his death or a member of the family living with him for a minimum period of six months the tenancy can be transferred to them. There is therefore a statutory right to double inheritance to a tenancy which may be no more than a monthly tenancy. There again we see the extent to which social policy recognises the desirability of allowing families to continue living in their original homes.

Although that provision is in the 1968 Act, it dates from the original rent-control legislation passed in the palmy days of Messrs. Asquith and Lloyd George during World War I. Here at least is a residual contribution by the Liberal Party to one aspect of our current social policy. More recent legislation concerning capital gains tax allows for relief in respect of owner-occupied houses. In that situation relief is allowed without limit as to the amount, and beyond that it extends to a house that is occupied rent-free by a dependent relative. In that situation the dwelling is also relieved from capital gains tax.

That is another example of sensible social policy to adjust the impact of tax on actual social conditions. The reasons for the exemption are to encourage home ownership, to avoid any feeling of resentment there might be—and I think that it would be widespread if this was subject to tax—and, also, from a social point of view, to assist greater mobility, which is an important matter from a labour point of view. The effect of it, as I say, is to make home ownership very attractive front the investment point of view".—[Official Report, 27th May 1965; Vol. 713, c. 997.] Those are not my reasons; they are the reasons for such an exemption from capital gains tax produced by the previous Financial Secretary to the Treasury. Mr. Niall MacDermot, as he then was. He held the office for, as far as I recollect, very many years, but thereafter advanced no further within the ranks of his party. I do not know whether that fate will befall his successor today.

The additional relief to which I have referred, again recognising the importance of social policy and taxation policy working together, is the one granting exemp tion from capital gains tax to the dependent relative living rent free in the house. That provision was enacted in 1965 as a result of the initiative by my hon. Friend the Member for Wycombe (Sir J. Hall). He moved an amendment on that same day's proceedings, and he was fortunate enough, again, not merely in the identity of the Financial Secretary but in the response of that Minister to the amendment. Mr. MacDermott said There is a popular fallacy that Treasury Ministers are cold and hard-hearted and never moved by an emotional appeal, and that it is only cold, remorseless logic which will make them shift at all. In present times that fallacy has indeed given way to fact in the case of present Ministers. Mr. MacDermott went on, I would only point out in answering the hon. Member that in this case we do not feel that cold, remorseless logic is on this side, but, nevertheless, we are moved by the sympathetic and emotional considerations to support his case. Those were the days, and would that we should see a similar compassionate response from present Ministers. Mr. MacDermott went on to commend the proposal to the Committee, saying I think the Committee will agree that this is a proposal which has an obvious appeal to it, that it is not unreasonable that someone who provides a home for a dependent relative should have some benefit in respect of such property, as he does in respect of a house he occupies himself."—[Official Report, 27th May 1965; Vol. 713, c. 1003–4.] That is the way in which we should tailor our tax legislation. We should not be introducing, as the Government are, a new tax with the mechanistic automatism of people without humanity or heart, with no exceptions, and designed to impose a tax of this kind upon the home and the family. The amendment is well designed to fulfil legitimate social purposes, and I commend it to the House.

Mr. J. Enoch Powell (Down, South)

I hope that in their response to the amendment the Government will not be over-influenced by the fact that it appears in itself to be ungrammatical and, much more serious, that as it is drawn it would clearly provide an immense scope for avoidance which cannot be the intention of those who designed and moved it. That is my belief and I detected no evidence in what the right hon. and learned Member for Surrey, East (Sir G. Howe) said that any such consideration was in his mind. There are circumstances in which it would be thought unreasonable that a dwelling which is a legitimate home, and probably the sole home and a home of long standing of the deceased person, should attract, in all circumstances, capital transfer tax along with the rest of the estate.

I do not wish to waste the time of the House by proposing what will more readily occur to the Government by way of methods to introduce safeguards which would reduce this innovation to its intended scope. For instance, one could imagine that there could be a fairly low upper limit upon the value of the property.

Sir G. Howe

Far be it from me to intervene in a discussion between an ex-Treasury Minister and Treasury Ministers about tax avoidance, but the right hon. Gentleman is entirely right. If it were found necessary and sensible to propose limitations in order to prevent undesirable tax avoidance we would accept them, but the objective of the amendment is clear.

Mr. Powell

It is most helpful that the right hon. and learned Gentleman has made that clear, and I will not elaborate except to say that there could also be safeguards regarding the domiciliary connection with the particular house of the recipient under the will of the deceased person. Quite obviously as the provisions stand it would be possible to buy an immensely expensive dwelling and to arrange for the intended legatee to occupy it for two years so that it would be outside estate duty. Therefore I hope that the Government will overlook the obvious grave defects of the new subsection and have regard solely to the intention.

We are in a stronger position than usual, I believe, in making that kind of plea. I say that first because none of the rest of us has had an opportunity adequately to consider these amendments and therefore perhaps to bring points forward by amendments to amendments. That would be the proper way, rather than by this kind of debate. But even more, the fact that we are just looking forward to our next Finance Bill makes it possible for the Government in this case almost to treat it as one stage of legislation which will presently be succeeded by the next.

Whereas, therefore, it would normally be absurd for the Government spokesman to say, in responding, that he would see what could be done at the next stage, I hope that, since the next stage in financial legislation is so near in time, the Government spokesman in this case will find it in his heart to use some such well-honoured formula as that.

4.30 p.m.

Mr. John Pardoe (Cornwall, North)

I rise to support what the right hon. Member for Down, South (Mr. Powell) has said. I am entirely in agreement with him on the amendment. It had occurred to me that it might be possible to seek your leave, Mr. Deputy Speaker, to introduce a manuscript amendment to the amendment which would make it very supportable on all sides of the House and even perhaps acceptable to the Government. Even as it stands, it is a very attractive amendment and I believe that its principle will gain sympathy on all sides of the House. But as the hon. and learned Gentleman has acknowledged, it is too wide. It would enable somebody, presumably on his deathbed, as has happened with agricultural land in the past, to buy an enormous house of prodigious value and thereby to a certain extent to overcome the problems of capital transfer tax. In that sense, I suppose one could say that as it stands this is almost a wrecking amendment.

I do not want to suggest to the Government how a change could be made if they were prepared to accept it in that spirit. Certainly, changes could be made to schedules later in the Bill, and on the Orders Paper there is an amendment which has not been selected which mentions an upper limit of £25,000. Whether or not that is the right limit is difficult to decide. We always discover that a limit that will do for one part of the country will not do for other parts, but that is probably as good a figure as any. Therefore, I suppose the insertion after the words "a dwelling" of the words "of a value of not more than £25,000" might well solve the problem, if not to the satisfaction of the parliamentary draftsmen.

I would say to the Government that hon. Members on all sides of the House accept that a dwelling is a rather special type of property and wealth. We accept that in relation to capital gains tax, and therefore it seems sensible that we should accept it in relation to capital transfer tax. In the spirit in which the right hon. and learned Gentleman moved the amendment, bearing in mind what he has said and what has been said by the right hon. Member for Down, South, I hope that the hon. Gentleman will accept its principle, and perhaps he can do something to overcome its wrecking nature, if that is not too strong a way of putting it. I do not know whether we can dignify the Opposition stance—is "mechanistic automatism" better than categorising that stance as "wrecking"?—but I hope the Government can meet the arguments put forward on this side of the House.

Dr. Gilbert

I hope that I do not have to reply in kind to the right hon. and learned Gentleman the Shadow Chancellor every time he gets up, because that would be rather tedious. But when he starts by criticising my right hon. Friend and myself for being hard-hearted and for damming up the milk of human kindness, and then criticises us for giving way, after so many proddings and so many amendments moved at his behest or by those of his hon. Friends who have studied the Bill, then the illogicality of his remarks stands out in stark clarity without further comment from me. As the right hon. Member for Down, South (Mr. Powell) has observed, this amendment suffers from obvious grave defects, to use his own words and would allow a coach and horses to be driven through the whole principle of the capital transfer tax. If one accepts the good motives of right hon. Gentlemen opposite, one can only marvel at their incompetence in producing so technically defective an amendment.

It is important to point out that in many ways the reliefs that the Government are already giving under the Bill are far in excess of those contemplated in Amendment No. 502. In the first place, we have introduced for the first time in British history the principle that there shall be no charge at all to the surviving spouse on the death of a spouse with respect to any property whatsoever that is passing from the deceased spouse to the surviving spouse. For the first time, a widow suffering bereavement and the additional economic loss of the breadwinner of the family will not simultaneously be faced with a liability to estate duty and perhaps the need to sell the home in which she has lived all her life, with a consequent rupture of friendships and social connections on which she would be particularly dependent at a time of bereavement.

This is a relieving provision which has been in the Bill from the beginning. It was introduced by my right hon. Friend without any suggestions or prodding. The idea was not even in the mind of hon. Gentlemen opposite in their proposals while in Opposition, let alone in their election manifesto.

Sir G. Howe

Lest the hon. Gentleman should become too puffed up with glory, may I point out that this is one of the foundations of the argument that I have been putting forward, that a previous Chancellor of the Exchequer, Lord Barber, introduced in his Finance Bill in 1972 provisions giving precisely to the surviving spouse a doubling of exemption from estate duty up to a figure of £30,000 in order to cover a dwelling. There are very few dwelling houses occupied by a surviving spouse that have been helped by the generosity of this Government except those occupied by the tiny minority, for whom it has had little benefit.

Dr. Gilbert

Clearly the hon. and learned Gentleman has failed to recognise that the impact of estate duty on a widow's other assets might make it necessary for her to sell the house in which she is living. I would have thought even the level of economic sophistication that the hon. and learned Gentleman has managed to reach under the tutorship of his colleagues would have instructed him on that. I am sorry that the hon. and learned Gentleman is being churlish. It is obvious that this relief, being provided by the Government without any prodding, for a widow or a widower at the time of the death of a spouse, goes far beyond anything that is on the statute book or was even conceived before my right hon. Friend entered office. Furthermore, in the terms of the amendment, the relief contemplated would be available only to a spouse who has lived with her husband for not less than two out of the three years preceding his death. Our relief in no way relates to how long they have been married, let alone how long they have been living together. Had such a provision entered into our proposal, I should have been very surprised had there not been a storm of protest from hon. Gentleman opposite that it was an impertinence to include such provision in this relief, that it was an outrageous intrusion into people's privacy, and stuff of that kind. The relief we are offering is an absolute relief, regardless of the time that a man and woman have been married and regardless of whether they are living together at the time that death occurs. It would be only gracious of the right hon. Gentleman to acknowledge that.

The hon. Member for Cornwall, North (Mr. Pardoe) pointed out quite clearly that there was a provision in capital gains tax law recognising the particular and peculiar nature of property, in addition to the property of a deceased, where it is held for a dependent relative. Certainly I take his point, but I am sure he will recall that only yesterday evening the Government brought forward an amendment to the Bill extending relief on transfers to dependent relatives as defined under capital transfer tax. I am obliged to him for acknowledging that.

I have to tell hon. Gentlemen opposite that we see no reason why any relief which could be given for particular types of assets should be tied to the ownership of a dwelling house. It is a matter entirely for the discretion of the family whether they choose to buy a house to live in or whether they choose to rent accommodation and to invest their savings elsewhere. We see no justification for benefiting the first category more than the second. That would introduce an unjustifiable degree of favouritism and distortion. If it became possible to reduce the rate of tax we would wish to spread it over a much wider class of beneficiary than the class to which the amendment relates, and I therefore have to advise my hon. Friends not to accept the amendment.

Mr. Peter Rees (Dover and Deal)

I had not proposed to intervene until I heard the words of the Financial Secretary. So outraged was I by his callous indifference and by the flimsy nature of his arguments that I felt obliged to rise to catch your eye, Mr. Deputy Speaker.

One might have accepted from practically any hon. or right hon. Gentleman on the Government benches other than the Financial Secretary the stringent criticism which he made of the technical defects of the amendment. Had we in Committee or on Report been aware that the Financial Secretary had even a glimmering of understanding of the technicalities of his own Bill, we might have been able to accept that criticism. But the notes that passed to and from the Box and rained on him like confetti—with which he has grappled with manly incompetence—convince me and my hon. Friends that he and the Chancellor, of all members of the Treasury Front Bench, have not condescended to master the technicalities of the Bill, and when he tells us that this well-conceived, modest, charitable amendment is so grossly technically defective, and pours ridicule on it and its authors, I am moved to intervene.

The Financial Secretary made great play of the fact that the Bill, for the first time, introduces total exemption from tax for transfers between husband and wife or wife and husband. That is the one redeeming feature of this odious tax. However, mere concentration of that feature will not commend the tax either to the Opposition or to the country.

The Financial Secretary is clearly busy mastering his brief for the next set of amendments. The House would appreciate a little more courtesy from him and more concentration on the arguments addressed to him. His present stony indifference suggests to us that, far from listening to our argument, he and his hon. and right hon. Friends had made up their minds on this important question long before my right hon. and learned Friend moved the amendment. The Financial Secretary does not appear to appreciate that homes stand in a special category. They are not like other assets. Indeed, his hon. and right hon. Friends recognised that when they conceded a measure of relief yesterday for historic homes.

4.45 p.m.

We have the bizarre situation, which gives the lie to the arguments put forward by the hon. Member for Cornwall, North (Mr. Pardoe), that a person buying Blenheim Palace may obtain a measure of exemption from capital transfer tax but a person buying a modest home in Hampstead or Highgate—to which the hon. Gentleman referred during the watches of the night upstairs—will obtain no exemption. It is not that I feel particularly tender of the interests of the spokesman for the Liberal Party, but I am moved to add my voice to that of the right hon. Member for Down, South (Mr. Powell). It may be that, at the margin, if the amendment were accepted some people might be moved to take advantage of it in a way in which the Financial Secretary and his hon. and right hon. Friends who prefer to live in rented accommodation would find unattractive.

I do not believe that one should judge these grave issues by such paltry considerations. We must take a broad view of fiscal matters. That is what the country elects us to the House to do. We must not concentrate on them the dogged gaze of the tax collector. In saying that, I intend no disrespect to that honourable and dutiful body of men. They have their duty and we have ours. Our duty is to look in a broad, farseeing, generous spirit at the fiscal measures which the Government put before us.

If a precedent is needed for this measure I remind the Financial Secretary that a special measure of relief from capital gains tax is given to those who sell their homes. If the Financial Secretary is looking for a precedent, I see no reason why a similar definition should not be inserted in the Bill.

There will be many situations in which the imposition of capital transfer tax on the death of the home owner will entirely disrupt family life. Transfers between husband and wife have been covered, but there are many widows and widowers who maintain a family home to whom the benefit of that exemption will not be available.

The Financial Secretary will say that there is relief for the first £15,000. I am sorry to have to tell him that in the South-East, in the part of the world which I have the privilege of representing, £15,000 will buy a house but not much more. It will not buy the chattels and furnishings necessary to keep the house going, and family capital invested in real estate will be so much dead capital. It cannot readily be realised or cut up and offered to the tax gatherer. I foresee that as a consequence of this ill-conceived measure a number of family homes, in circumstances of great melancholy, will have to be sold. I hope that that will rest on the conscience of the Financial Secretary and the Chief Secretary. It obviously will not rest on the conscience of the Chancellor of the Exchequer, because we know that in these matters he is conscienceless. His personal convictions are too well known for me to comment on them.

It is interesting to note that often the cut-off point for relief is just sufficient to allow relief to Ministers on the Treasury Front Bench who have a house in Highgate, one in Sussex and a few more chattels, but for those who just transgress that limit there is no mercy. In the fullness of time they may be receiving considerable sums from the Press and, although it may be too late their attitude will alter. I ask the Financial Secretary to search his conscience once again and to allow full rein to the generosity that peeped through on occasions—

Dr. Gilbert

I want to be clear on this. Is the hon. and learned Gentleman suggesting that the level of the tax has been set deliberately at a point to benefit Treasury Ministers?

Mr. Rees

I am saying that it is a curious coincidence. The Financial Secretary can rebut this if he likes. I do not know the individual circumstances of Treasury Ministers and should be delighted to hear from the Financial Secretary just how he personally would be affected by it. It is a matter for comment that the cut-off point for most reliefs happens to be above a figure that would allow a modest house in Highgate, a small farm in Sussex, a country cottage here and there and the chattels that go with them. We all know that the Chancellor of the Exchequer, whenever he receives some money, goes out and buys—

Mr. Deputy Speaker (Mr. Oscar Murton)

Order. There are certain inferences which can be drawn from what the hon. and learned Gentleman is saying which I am sure he does not mean. Care should be used in approaching these matters.

The Chancellor of the Exchequer (Mr. Denis Healey)

I am delighted to hear the horrible little man again. Is he suggesting that the level of tax has been set to suit myself? If he is making that suggestion, will he withdraw it immediately?

Mr. Rees

If the Chancellor had paid the House the courtesy of coming more often to listen to our debates, he would not perhaps have derived the wrong impression from my remark. [HON. MEMBERS: "Answer."] I shall answer in my own way and in due time the challenge which the Chancellor put to me. [HON. MEMBERS: "Answer the Chair."] I shall direct my remarks to the Chair. The Chancellor—who, if I may say so, is never hesitant in making personal attacks on whoever happens to be speaking from the Opposition Front Bench—is showing undue sensitivity. Since he feels slighted by my remarks, I hope that in future he will exercise a litte more discretion and self-restraint.

I do not happen to know the Chancellor's financial circumstances, except to the extent that he has disclosed them to the Press. We know that he has a house in a somewhat favoured part of North London and a house in the country. We do not know whether he has a family business. All I was saying was that if he had a family business, he might have thought a little more carefully about the level of tax he has imposed. He seems to be quite unconscious of the damage he will inflict on a great number of family businesses, farms and woodlands.

Mr. Bob Cryer (Keighley)

The hon. and learned Member for Dover and Deal (Mr. Rees) made a deliberate and specific imputation that Government Ministers have manipulated the tax for their own financial advantage. Subsequently he denied knowing the financial circumstances of any of the Ministers. In those circumstances I ask you, Mr. Deputy Speaker, to request the Member specifically to withdraw the imputation which he has clearly made.

Mr. Deputy Speaker

The hon. and learned Member for Dover and Deal (Mr. Rees) made certain passing references which were becoming in the nature of an implication. I urge the hon. and learned Member to explain the situation more clearly.

Hon. Members

Make him withdraw.

Mr. Rees

I am always happy to respond to your invitation Mr. Deputy Speaker. My conscience is clear. If the cap fits hon. Gentlemen opposite, let them wear it.

Mr. Tam Dalyell (West Lothian)

Outrageous!

Mr. Deputy Speaker

It is not good enough. The hon. and learned Gentleman must be courteous. He should respond in the appropriate manner.

Mr. Rees

I have been accused of having accused the other side—it is all getting a little tortuous—of manipulating for their own advantage a tax that is not yet in existence. I leave the House to judge for itself whether that could be regarded as an accusation. What I said was that the limits have been so fixed that it appears that those without family businesses or farms or woodlands will be less affected. It may be that the Chancellor has a farm. It may be that he has a family business or woodlands. If he has, fine—I admire his public spirit and the way in which he is so resolute in raising taxes for the salvation of the country by placing himself so fairly and squarely within the net. I am sorry that the right hon. Gentleman feels sensitive on this matter. [HON. MEMBERS: "Withdraw."] I am sorry that I have offended his delicate sensibilities. It is nice to know that he has delicate sensibilities because he is so ruthless about the sensibilities of others.

Mr. Healey

On a point of order, Mr. Deputy Speaker. We are familiar with the squalid and seedy insinuations of the hon. and learned Member on political quesions. Yesterday I described him as a moth-eaten McCarthy. But it is another matter to make an insinuation of improper financial motives. I suggest that the hon. Member, as I am compelled to address him, should withdraw the insinuation he has just made.

Mr. Deputy Speaker

If I may intervene at this point, I think the hon. and learned Member for Dover and Deal should in all decency withdraw that remark. It was liable to misconstruction.

Mr. Rees

If, Mr. Deputy Speaker, you would say which remark of mine could be open to misconstruction, I will bow to your observation. But I am not conscious of having imputed any financial impropriety to the Chancellor of the Exchequer. If you can point to any remark of that kind, I should be as quick as anybody in the House to withdraw it. I await your direction.

Mr. Deputy Speaker

It was a question of the implication of motives in the earlier part of the hon. and learned Gentleman's speech.

Mr. Pardoe

Further to that point of order, Mr. Deputy Speaker. It is within the recollection of the House that in the earlier part of the speech made by the hon. and learned Member for Dover and Deal (Mr. Rees), in the context of the amendment with which he was dealing, he referred to property that I own. Perhaps he gave the impression that I had spoken on the amendment because it was relevant to the price and value of the property that I own. I do not believe that was said in an offensive spirit. I do not believe that there was anything more offensive in what he said about the Chancellor of the Exchequer than in what he said about me. The Chancellor is being unnecessarily sensitive. If the hon. and learned Gentleman is being asked to withdraw the remark, it is all part of the childish nonsense in which the House has indulged in the last two or three days.

Mr. Deputy Speaker

It was an implication that involved the Treasury Bench specifically. That is the difference.

Sir G. Howe

Further to that point of order, Mr. Deputy Speaker. You will recollect that a moment ago my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) asked you to which remark in the earlier part of his speech you were addressing your request. You will also recollect that you intervened at that point to say that my hon and learned Friend was coming near to such an implication and you encouraged him to move away from it. In the circumstances your ruling went no further than saying that he was coming near to such an implication. Your warning was no doubt timeous, and my hon. and learned Friend continued his speech. Shortly after that, the Chancellor of the Exchequer arrived with such sensitivity on the scene.

Dr. Gilbert

Further to that point of order, Mr. Deputy Speaker. You will recall that I intervened in the hon. and learned Gentleman's speech and called on him to withdraw. So far he has not been man enough to do so. He has been getting as close as he can to making dirty financial innuendoes across the Floor of the House. He knows it, and it is high time that you enforced your ruling.

Sir G. Howe

Further to that point of order, Mr. Deputy Speaker. With great respect, it is difficult to see what my hon. and learned Friend has been imputing—

Dr. Gilbert

We disagree.

Sir G. Howe

When I am trying to clarify my point of order, the reaction from the Labour benches surpasses understanding. My hon. Friend and learned Friend asked you, Mr. Deputy Speaker, to identify the remark which he was to withdraw. You said that it was a remark made in an earlier part of the speech, but his remarks at that point of time preceded your suggestion that he was coming close to making an implication.

5.0 p.m.

Mr. Deputy Speaker

I am disturbed because I feel that there was some implication of motive. I shall be grateful if the hon. and learned Member will clear up that point, to put everybody's mind at peace on this matter, and withdraw the remark.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

On a point of order, Mr. Deputy Speaker. In Committee, a direct insinuation was made against me that I had failed to declare an interest—

Mr. Deputy Speaker

Whatever may have happened in Committee upstairs is irrelevant to what is taking place in the House.

Mr. Ridley

With respect, it is not irrelevant, because there was a direct insinuation that I had failed to declare an interest. That turned out to be totally untrue.

Mr. Deputy Speaker

Is the hon. Member still referring to the Committee stage? That is, by custom, irrelevant to anything which may be said in the House at this time.

Mr. Patrick Cormack (Staffordshire, South-West)

On a point of order, Mr. Deputy Speaker. I suggest that the hon. Member for Cornwall, North (Mr. Pardoe) made a most sensible suggestion. Until the Chancellor walked in, this debate was entirely good-humoured, and both Treasury Ministers were smiling, although they might have disagreed, and that is fair enough. However, my hon. Friend was guilty of no dirty insinuation and should not be obliged to withdraw.

Mr. Deputy Speaker

That is entirely a matter for the Chair.

Mr. John Gorst (Hendon, North)

On a point of order, Mr. Deputy Speaker. Could you, very kindly, clear up the point you made about the withdrawal of an imputation? It is very difficult for us to know what the imputation was and what implication is being withdrawn.

Mr. Deputy Speaker

I do not know whether the hon. Member for Hendon, North (Mr. Gorst) was in fact here when the remarks were made.

Mr. Cranley Onslow (Woking)

rose—

Mr. Deputy Speaker

I call the hon. and learned Member for Dover and Deal (Mr. Rees).

Mr. Peter Rees

I am grateful for your protection Mr. Deputy Speaker, in this situation.

I am extremely sorry that the delicate sensibilities of the Chancellor, the Financial Secretary and the Chief Secretary should have been affronted by my inept use of words. From my long study of the Chancellor, I know how sensitive he is to other people's feelings in these matters. Therefore I should have matched his sensitivity with an equal sensitivity. I did not appreciate that the Chancellor was taking a close personal interest in my remarks. Let me endeavour to explain.

I see that the Chancellor is now in a good humour. He appreciates this and takes it in good heart—

Dr. Gilbert

How much longer shall we have to endure this drivel? It is a disgrace. I was in the House. I rose on the original point of order when the hon. and learned Member for Dover and Deal suggested that the rate of this tax had been carefully set to benefit members of the Treasury Bench.

Mr. Cormack

My hon. and learned Friend did not say that.

Dr. Gilbert

He did say that.

Mr. Deputy Speaker

May I refer the House to Erskine May page 419, where there is a ruling on the question of imputation of false or unavowed motives. That is the matter which troubles the Chair, and I shall be grateful if the hon. and learned Member for Dover and Deal will withdraw any imputation.

Mr. Peter Rees

I never intended to suggest that there was fianancial manipulation by the Treasury Bench. How could I? We know that their inexperience in these matters is so total that they have never become involved in any serious financial affairs.

Allow me to try to clear up the point, so that the record is absolutely clear. If Treasury Ministers owned family businesses, farms or woodlands, they might have been a little more sensitive to the damage which they will inflict. I shall not be deterred by a flurry of indignation from the Financial Secretary. We had to endure him for five weeks in Committee upstairs—

Mr. Deputy Speaker

Upstairs is no concern of the Chair in the House. Will the hon. and learned Member be generous and withdraw any possible imputation which he now made, possibly in error, on this point?

Mr. Rees

Of course I realise that because of my inexperience and my inept use of language, I frequently blunder. I am grateful to you, Mr. Deputy Speaker, for the guidance which you have given to me. If in any way I have trodden on or affronted the sensibilities of the Chancellor or of the Financial Secretary, of course I unhesitatingly withdraw. I have tried to explain that.

Mr. Deputy Speaker

The hon. and learned Member has been graceful enough to withdraw. I think it would be as well if we did not pursue the matter any further and now continue with the business of Amendment No. 502. Mr. David Howell—

Mr. Rees

Although the House may long ago have lost the thread of my discourse, I was addressing myself to the amendment.

Mr. Deputy Speaker

Inevitably, as a result of these exchanges, there has been some lapse in time. I agree that the hon. and learned Member was on his feet originally. Perhaps he will kindly continue his speech.

Mr. Rees

Just as the Opposition have uncovered, not for the first time, the sensitivities of the Government Front Bench, so the Opposition also have their sensitivities. Our sensitivities are for the continuance of family life. That is the point of my brief intervention, which was slightly prolonged. I was prompted to speak by the intemperate remarks of the Financial Secretary.

The Opposition are concerned to maintain the continuance of family life, and that is the argument behind the amendment. I believe that the Financial Secretary should rise above his indignation, ignore the technical defects, and accept it with as much a good grace as he can now muster.

Mr. David Howell

I am sorry that our debate on this important subject should have been marred halfway through by this outbreak of ill humour from the Treasury Bench.

Mr. Cryer

On a point of order, Mr. Deputy Speaker. The hon. Member for Guildford (Mr. Howell) has implied that the delay in the proceedings was due to the ill humour of the Treasury Bench, whereas it was at your specific request and command, Mr. Deputy Speaker, that the hon. and learned Member for Dover and Deal (Mr. Rees) withdrew his totally unfounded imputation.

Mr. Deputy Speaker

I am aware of that point. Now perhaps the hon. Member for Guildford will continue.

Mr. David Howell

I shall do that, Mr. Deputy Speaker. I did not intend to delay the House. But I think that Ministers should be a little less sensitive about this matter.

I was referring to the considerable importance of the amendment and to our desire to secure the family home from the onward march of this tax and Socialist policy. The Financial Secretary rested much of his defence or rejection of the argument on the repeated claim of the Chancellor, the Chief Secretary, and the Financial Secretary that this legislation exempted the spouse and was an improvement on what had gone before. None of us has been churlish enough to deny that.

It is worth pointing out that if the spouse owns any assets, there will be a powerful incentive for the husband or wife to leave assets in a way which will leave less to the spouse and more to the children in order to minimise the capital transfer tax so that only in a case where the spouse has very little property will the benefit claimed by the Chancellor of the Exchequer work. Like so many of these other examples, it depends on the circumstances and the details.

I hope that neither the Chief Secretary nor the Financial Secretary will suggest that, if that advice is followed in the case of the spouse and the husband leaves assets not entirely to the spouse in order to minimise the liability to CTT, that should be described as a loophole, though I have no doubt that it will be so described by the Chancellor of the Exchequer. We gain the impression sometimes that in the right hon. Gentleman's view life is a loophole to escape death. That seems to be his attitude about estate duty—that anyone ill-judged enough not to die and who hands on during his life avoids death duty by doddering through a loophole. That is an absurd concept of taxation which we reject.

As for the amendment, the Financial Secretary made play with the point about there being no upper limit proposed. If he prefers an upper limit, there is a later amendment to Schedule 6, although it has not been selected, which would put an upper limit on the residence of £25,000. If the Government think that that is the right way to go about it, I have no doubt that they can submit a manuscript amendment which may find favour with the Chair for debate later. I hope also that that later amendment will stand up to the very proper grammatical demands of the right hon. Member for Down, South (Mr. Powell).

If the Government were interested in preserving quite modest family homes from this tax and in preventing people from having to sell homes and the furniture in them in order to meet the tax, they could accept such an amendment. However, they have indicated that they are not interested in doing that. They are interested in smashing up family homes and preventing them and the furniture in them from being passed on. They will cause much misery and suffer

ing if they reject the amendment. We believe that it should be pressed, and I advise my right hon. and hon. Friends to do so.

Question put, That the amendment be made:—

The House divided: Ayes 222, Noes 272.

Division No. 131.] AYES [5.14 p.m.
Adley, Robert Glyn, Dr Alan Mills, Peter
Aitken, Jonathan Goodhart, Philip Miscampbell, Norman
Alison, Michael Goodhew, Victor Moate, Roger
Amery, Rt Hon Julian Goodlad, Alastair Monro, Hector
Atkins, Rt Hon H. (Spelthorne) Gorst, John Montgomery, Fergus
Awdry, Daniel Gow, lan (Eastbourne) Moose, John (Croydon C)
Banks, Robert Griffiths, Eldon More, Jasper (Ludlow)
Beith, A. J. Grimond, Rt Hon J. Morgan-Giles, Rear-Admiral
Bell, Ronald Grylls, Michael Morris, Michael (Northampton S)
Bennett, Dr Reginald (Fareham) Hall, Sir John Morrison, Charles (Devizes)
Benyon, W. Hall-Davis, A. G. F. Morrison, Hon Peter (Chester)
Biffen, John Hamilton, Michael (Salisbury) Mudd, David
Biggs-Davison, John Hampson, Dr Keith Neave, Airey
Blaker, Peter Hannam, John Nelson, Anthony
Bowden, A. (Brighton, Kemptown) Harrison, Col Sir Harwood (Eye) Neubert, Michael
Boyson, Dr. Rhodes (Brent) Harvie Anderson, Rt Hon Miss Newton, Tony
Braine, Sir Bernard Hastings, Stephen Normanton, Tom
Brittan, Leon Hawkins, Paul Nott, John
Brotherton, Michael Hayhoe, Barney Onslow, Cranley
Brown, Sir Edward (Bath) Hicks, Robert Osborn, John
Bryan, Sir Paul Higgins, Terence L. Page, John (Harrow West)
Buchanan-Smith, Alick Holland, Philip Page, Rt Hon R. Graham (Crosby)
Buck, Antony Hooson, Emlyn Pardoe, John
Bulmer, Esmond Hordern, Peter Parkinson, Cecil
Burden, F. A. Howe, Rt Hn Sir Geoffrey Pattie, Geoffrey
Butler, Adam (Bosworth) Howell, David (Guildford) Penhaligon, David
Carlisle, Mark Howell, Ralph (North Norfolk) Percival, Ian
Carr, Rt Hon Robert Howells, Geraint (Cardigan) Peyton, Rt Hon John
Chalker, Mrs Lynda Hunt, John Prior, Rt Hon James
Channon, Paul Hurd, Douglas Raison, Timothy
Churchill, W. S. Irving, Charles (Cheltenham) Rees, Peter (Dover & Deal)
Clark, Alan (Plymouth, Sutton) James, David Rees-Davies, W. R.
Clark, William (Croydon S) Jenkin, Rt Hon P. (Wanst'd & W'df'd) Renton, Rt Hon Sir D. (Hunts)
Clegg, Walter Jessel, Toby Renton, Tim (Mid-Sussex)
Cockcroft, John Johnson Smith, G. (E. Grinstead) Ridley, Hon Nicholas
Cooke, Robert (Bristol W) Jones, Arthur (Daventry) Ridsdale, Julian
Cope, John Kellett-Bowman, Mrs Elaine Rifkind, Malcolm
Cormack, Patrick Kershaw, Anthony Roberts, Wyn (Conway)
Corrie, John Kimball, Marcus Ross, Stephen (Isle of Wight)
Costain, A. P. King, Evelyn (South Dorset) Rossi, Hugh (Hornsey)
Crouch, David King, Tom (Bridgwater) Rost, Peter (SE Derbyshire)
Crowder, F. P. Kirk, Peter Sainsbury, Tim
Davies, Rt Hon J. (Knutsford) Knight, Mrs Jill St. John-Stevas, Norman
Dodsworth, Geoffrey Lamont, Norman Shaw, Giles (Pudsey)
Douglas-Hamilton, Lord James Lane, David Shaw, Michael (Scarborough)
du Cann, Rt Hon Edward Latham, Michael (Melton) Shelton, William (Streatham)
Durant, Tony Lawrence, Ivan Shepherd, Colin
Dykes, Hugh Lawson, Nigel Shersby, Michael
Eden, Rt Hon Sir John Le Marchant, Spencer Silvester, Fred
Edwards, Nicholas (Pembroke) Lester, Jim (Beeston) Sims, Roger
Elliott, Sir William Lloyd, Ian Sinclair, Sir George
Emery, Peter Loveridge, John Skeet, T. H. H.
Eyre, Reginald Luce, Richard Smith, Dudley (Warwick)
Fairbairn, Nicholas McCrindle, Robert Speed, Keith
Farr, John MacGregor, John Spence, John
Fell, Anthony McNair-Wilson, M. (Newbury) Spicer, Jim (W Dorset)
Finsberg, Geoffrey McNair-Wilson, P. (New Forest) Spicer, Michael (S Worcester)
Fisher, Sir Nigel Madel, David Sproat, Iain
Fletcher, Alex (Edinburgh N) Marshall, Michael (Arundel) Stainton, Keith
Fletcher-Cooke, Charles Marten, Neil Stanbrook, Ivor
Fookes, Miss Janet Mates, Michael Stanley, John
Fox, Marcus Mather, Carol Steel, David (Roxburgh)
Fraser, Rt Hon H. (Stafford & St) Maude, Angus Steen, Anthony (Wavertree)
Fry, Peter Mawby, Ray Stewart, Ian (Hitchin)
Gardiner, George (Reigate) Maxwell-Hyslop, Robin Stokes, John
Gardner, Edward (S Fylde) Mayhew, Patrick Stradling Thomas, J.
Gilmour, Rt Hon Ian (Chesham) Meyer, Sir Anthony Taylor, R. (Croydon NW)
Gilmour, Sir John (East Fife) Miller, Hal (Bromsgrove) Tebbit, Norman
Temple-Morris, Peter Walker, Rt Hon P. (Worcester) Wood, Rt Hon Richard
Thatcher, Rt Han Margaret Walker-Smith, Rt Hon Sir Derek Young, Sir G. (Ealing, Acton)
Townsend, Cyril D. Walters, Dennis Younger, Hon George
Tugendhat, Christopher Weatherill, Bernard
van Straubenzee, W. R. Wells, John TELLERS FOR THE AYES:
Vaughan, Dr. Gerard Wiggin, Jerry Mr. Anthony Berry and
Viggers, Peter Winterton, Nicholas Mr. Russell Fairgrieve.
Wakeham, John
NOES
Abse, Leo Ellis, Tom (Wrexham) MacCormick, Iain
Allaun, Frank English, Michael McGuire, Michael (Ince)
Anderson, Donald Ennals, David Mackintosh, John P.
Archer, Peter Evans, loan (Aberdare) Maclennan, Robert
Armstrong, Ernest Evans, John (Newton) McMillan, Tom (Glasgow C)
Ashley, Jack Ewing, Harry (Stirling) McNamara, Kevin
Ashton, Joe Fernyhough, Rt Hon E. Madden, Max
Atkins, Ronald (Preston N) Fitt, Gerard (Belfast W) Magee, Bryan
Bagier, Gordon A. T. Flannery, Martin Mahon, Simon
Bain, Mrs Margaret Fletcher, Ted (Darlington) Marks, Kenneth
Barnett, Guy (Greenwich) Foot, Rt Hon Michael Marshall, Dr Edmund (Goole)
Bates, Alf Ford, Ben Marshall, Jim (Leicester S)
Bean, R. E. Forrester, John Mason, Rt Hon Roy
Benn, Rt Hon Anthony Wedgwood Fowler, Gerald (The Wrekin) Meacher, Michael
Bennett, Andrew (Stockport N) Fraser, John (Lambeth, N'w'd) Mellish, Rt Hon Robert
Bidwell, Sydney Freeson, Reginald Mikardo, Ian
Blenkinsop, Arthur Garrett, John (Norwich S) Miller, Dr M. S. (E Kilbride)
Boardman, H. Garrett, W. E. (Wallsend) Miller, Mrs Millie (Ilford N)
Booth, Albert Gilbert, Dr John Mitchell, R. C. (Soton, Itchen)
Boothroyd, Miss Betty Ginsburg, David Moonman, Eric
Bottomley, Rt Hon Arthur Golding, John Morris, Alfred (Wythenshawe)
Boyden, James (Bish Auck) Gould, Bryan Morris, Charles R. (Openshaw)
Bradley, Tom Gourlay, Harry Mulley, Rt Hon Frederick
Bray, Dr Jeremy Graham, Ted Murray, Rt Hon Ronald King
Brown, Hugh D. (Provan) Grocott, Bruce Newens, Stanley
Brown, Robert C. (Newcastle W) Hamilton, W. W. (Central Fife) Noble, Mike
Brown, Ronald (Hackney S) Hardy, Peter Oakes, Gordon
Buchan, Norman Harper, Joseph Ogden, Eric
Butler, Mrs Joyce (Wood Green) Harrison, Walter (Wakefield) O'Halloran, Michael
Callaghan, Jim (Middleton & P) Hattersley, Rt Hon Roy O'Malley. Rt Hon Brian
Campbell, Ian Hatton, Frank Orbach, Maurice
Canavan, Dennis Hayman, Mrs Helene Ovenden, John
Cant, R. B. Healey, Rt Hon Denis Owen, Dr David
Carmichael, Neil Heffer, Eric S. Padley, Walter
Carter, Ray Henderson, Douglas Palmer, Arthur
Carter-Jones, Lewis Hooley, Frank Park, George
Castle, Rt Hon Barbara Horam, John Parker, John
Clemitson, Ivor Howell, Denis (B'ham, Sm H) Parry, Robert
Cocks, Michael (Bristol S) Hoyle, Doug (Nelson) Pavitt, Laurie
Cohen, Stanley Huckfield, Les Peart, Rt Hon Fred
Colquhoun, Mrs Maureen Hughes, Rt Hon C. (Anglesey) Pendry, Tom
Conlan, Bernard Hughes, Mark (Durham) Perry, Ernest
Cook, Robin F. (Edin C) Hughes, Robert (Aberdeen N) Phipps, Dr Colin
Corbett, Robin Hughes, Roy (Newport) Prentice, Rt Hon Reg
Cox, Thomas (Tooting) Hunter, Adam Price, William (Rugby)
Craigen, J. M. (Maryhill) Irving, Rt Hon S. (Dartford) Radice, Giles
Crawford, Douglas Jackson, Colin (Brighouse) Reid, George
Cronin, John Jackson, Miss Margaret (Lincoln)
Crosland, Rt Hon Anthony Janner, Greville Richardson, Miss Jo
Cryer, Bob Jay, Rt Hon Douglas Roberts, Albert (Normanton)
Cunningham, G. (Islington S) Jeger, Mrs Lena Roberts, Gwilym (Cannock)
Dalyell, Tam Jenkins, Hugh (Putney) Robertson, John (Paisley)
Davidson, Arthur Jenkins, Rt Hon Roy (Stechford) Roderick, Caerwyn
Davies, Bryan (Enfield N) Johnson, James (Hull West) Rodgers, George (Chorley)
Davies, Denzil (Llanelli) Johnson, Walter (Derby S) Rodgers, William (Stockton)
Davies, Ifor (Gower) Jones, Dan (Burnley) Rooker, J. W.
Davis, Clinton (Hackney C) Kaufman, Gerald Roper, John
Deakins, Eric Kelley, Richard Rose, Paul B.
Dean, Joseph (Leeds West) Kerr, Russell Ross, Rt Hon W. (Kilmarnock)
de Freitas, Rt Hon Sir Geoffrey Kilroy-Silk, Robert Ryman, John
Dell, Rt Hon Edmund Kinnock, Neil Sandelson, Neville
Dempsey, James Lambie, David Sedgemore, Brian
Doig, Peter Lamborn, Harry Selby, Harry
Dormand, J. D. Lamond, James Shaw, Arnold (Ilford South)
Douglas-Mann, Bruce Leadbitter, Ted Sheldon, Robert (Ashton-u-Lyne)
Duffy, A. E. P. Lever, Rt Hon Harold Shore, Rt Hon Peter
Dunn, James A. Lewis, Ron (Carlisle) Short, Rt Hon E. (Newcastle C)
Dunnett, Jack Lipton, Marcus Short, Mrs Renée (Wolv NE)
Dunwoody, Mrs Gwyneth Loyden, Eddie Silkin, Rt Hon John (Deptford)
Eadie, Alex Luard, Evan Silkin, Rt Hon S. C. (Dulwich)
Edelman, Maurice Lyon, Alexander (York) Sillars, James
Edge, Geoff Lyons, Edward (Bradford W) Silverman, Julius
Edwards, Robert (Wolv SE) McCartney, Hugh Skinner, Dennis
Small, William Tierney, Sydney Whitlock, William
Smith, John (N Lanarkshire) Tinn, James Willey, Rt Hon Frederick
Snape, Peter Tomlinson, John Williams, Alan (Swansea W)
Spearing, Nigel Torney, Tom Williams, Alan Lee (Hornch'ch)
Spriggs, Leslie Urwin, T. W. Williams, Rt Hon Shirley (Hertford)
Stallard, A. W. Varley, Rt Hon Eric G. Williams, W. T. (Warrington)
Stewart, Donald (Western Isles) Wainwright, Edwin (Dearne V) Wilson, Alexander (Hamilton)
Stewart, Rt Hon M. (Fulham) Walden, Brian (B'ham, L'dyw'd) Wilson, Gordon (Dundee E)
Stoddart, David Walker, Harold (Doncaster) Wilson, Rt Hon H. (Huyton)
Stott, Roger Walker, Terry (Kingswood) Wilson, William (Coventry SE)
Strang, Gavin Ward, Michael Wise, Mrs Audrey
Strauss, Rt Hon G. R. Watkins, David Woodall, Alec
Summerskill, Hon Dr Shirley Watkinson, John Wrigglesworth, Ian
Taylor, Mrs Ann (Bolton W) Watt, Hamish Young, David (Bolton E)
Thomas, Jeffrey (Abertillery) Weitzman, David
Thomas, Mike (Newcastle E) Wellbeloved, James TELLERS FOR THE NOES:
Thomas, Ron (Bristol NW) Welsh, Andrew Mr. James Hamilton and
Thompson, George White, Frank R. (Bury) Mr. John Ellis.
Thorne, Stan (Preston South) White, James (Pollok)

Question accordingly negatived.

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