§ 5.30 p.m.
§ An Amendment reported (according to Order).
§ Then, Standing Order No, XXXIX having been suspended (Pursuant to the Resolution of July 13):
§ Moved, That the Bill he now read 3*. —(The Lord Chancellor.)
§ VISCOUNT SIMON
My Lords, I have no intention at this stage of renewing the lively discussion which we had in Committee when, in place of the provision now contained in the Bill which sweeps away altogether and nullifies the effect of restraint upon anticipation in every existing marriage settlement, without consideration of the circumstances in which it was made in the past, I proposed that such a contract should be modified only by order of the court after considering the particular case, acting upon defined principles but with a wider discretion than the court has at present. My proposal would cover the Mountbatten case, which was the origin of this while matter. My Amendment in Committee was defeated by six votes, and among those who supported it were noble Lords whose names carry great weight in the House and in the country.
Your Lordships may have noticed that in The Times this marring a letter is published from a well-known firm of solicitors who are familiar with the practical working of marriage settlements. In that letter the view is taken which I ventured to submit to your Lordships in Committee. We are now passing the Bill to the other place, where I trust the arguments on either side will be duly weighed. But there is ova thing which I feel it my duty to say before the Bill leaves us. On the Third Reading we are supposed to survey the work of our hands and to consider the consequences of legislation which we propose. I am a former Chancellor of the Exchequer as well as a former Lord Chancellor—an unusual combination—and I am not prepared to remain silent in this House as to the effect upon the Revenue of this 183 wholesale cancellation of a provision in past marriage settlements. Public finance is, of course, the more immediate concern of another place, and no doubt the aspect I am about to mention briefly will receive consideration when this Bill reaches that place.
Income tax falls upon the income of individuals and companies alike. Surtax, on the contrary, is charged only on the income of individuals. If the income of an individual is large enough, the topmost slice of it suffers tax from both combined of no less than 19s. 6d. in the pound, and even within lower limits the combined deduction is a swingeing exaction from the gross income. This Bill, in its present form, by removing the restraint upon anticipation, enables the income which has hitherto been so restrained to be transferred as a whole to a company—say, an insurance company. In the hands of the company the income suffers income tax, but it escapes surtax. In the extreme case, income of the gross amount of £1 now brings in 6d. net, and the Revenue takes 19s. 6d. Once this Bill is passed, and the right to the income can be sold in advance to a company, £1 gross becomes worth 11s. net, deducting the income tax of 9s. It is obvious, therefore, that a profitable transaction may be made on these lines, with the result, however, that the Revenue loses the difference. I think we may expect transactions of this sort to be entered into in large numbers if the Bill in its present form reaches the Statute Book.
I am far from saying that there is anything wrong in taking advantage of the opportunity which the legislation we pass offers to avoid surtax by lawful means. I myself think that both surtax and income tax are higher than they ought to be. But, as I heard my noble friend Lord Selkirk say just now on the previous Bill, we should realise what we are doing. I, at any rate, feel that I should be joining almost in a conspiracy of silence if I did not point this out; for although, of course, this cannot be the purpose of the Bill—if it was, the Government would have said so; indeed, I recall that the noble and learned Viscount the Lord Chancellor said last Thursday, "I am not here to protect the rich people"—it is the inevitable effect of the Bill. And 184 much as I sympathise with the plight into which surtax puts the richer taxpayer, I sympathise still more with poorer taxpayers who, if the produce of surtax is reduced, will have to fill up the gap out of their own pockets.
§ 5.39 p.m.
§ THE LORD CHANCELLOR
My Lords, I did not expect that this line of approach would be taken. I want to say just this. I have sent for the speech I made on Second Reading, where I pointed out the effect on the Revenue. But I must point out quite plainly that I think it wholly wrong that, in deciding what is the right thing to do in this matter, we should seek to do something which injures an individual in order to benefit the Revenue. If it is right in the interest of married women to pass this Bill, if it is in their interests to remove restraint, if we are right to break documents and testamentary dispositions of the past—if those things are right, then I cannot think that we should be restrained from doing them merely because it would give the taxpayer certain advantages, as against the Revenue. It is to my mind an absolutely novel doctrine that you must crib, cabin and confine the taxpayer to a certain state of circumstances in order that the Revenue may extract more money out of him. It cannot be right.
If it is right to do this in the interests of the taxpayer, then let us do it. If it is wrong to do this sort of thing, then let us decline to do it, on the grounds which the noble and learned Viscount advanced on the last occasion. But accepting, as he does for the moment in this House, the Resolution of the Committee which passed this form of the Bill, I do not think it is possible to turn round and say, "Well, it may have been quite right. The Committee decided that and decided to remove this restraint. Now we realise that the Revenue may lose some money and, because the Revenue may lose some money, therefore we ought not to do it." In my speech on the Second Reading of this Bill I pointed out that it might have the effect that the Revenue would lose money. But I cannot for one moment think it right to accept the principle that, in deciding in regard to individuals whether we should or should not take a 185 certain line, when we come to the conclusion that it is in the interests of and right and fair to these individuals that we should take that line, we should draw back and say "Although we should do that which ex hypothesi is right and fair, since the Revenue will lose some money we will not do it." That seems to me to be an untenable position and I for one reject it.
§ 5.42 p.m.
§ THE MARQUESS OF SALISBURY
My Lords, this point is a new one. It is no doubt an important one, and to the noble and learned Viscount is a matter of conscience. In order that there may be no misunderstanding, I want to say only that in what I said on the Committee stage of this Bill I was concerned with the other side of this question. I held then, and I still hold, that it is wrong for Parliament by retrospective legislation to break a trust or settlement which has been already created. I think that is wrong. A man might naturally introduce some limitation on the use of capital which he was bequeathing to or settling on someone else, and even though circumstances have since changed, in my view his clearly expressed wishes should be respected. For that reason I supported the Amendment which was moved by my noble and learned friend Lord Simon. I still hold that view and I believe that we have made a mistake. But this other point is, of course, a completely different one. It is quite proper for the noble and learned Viscount to bring it up, but I am more concerned with the other side of the question.
§ THE LORD CHANCELLOR
My Lords, I now have the OFFICIAL REPORT and may I say, in reference to the "conspiracy of silence," if the noble and learned Viscount would be good enough to read what I said on July 5 at the bottom of Column 901 and in Column 902, he will see that I pointed out that there 186 might be this effect on the Revenue. So far as a "conspiracy of silence" is concerned, I have been no party to it.
§ VISCOUNT SIMON
I did not suggest it for a moment. What I said was that on considering this matter on Third Reading it was my duty to point out that this is the effect. I would be the first to agree that if it is the right thing to do, then nothing else matters. But it has a bearing on the question whether in some cases it is right to do it and in others it is not.
§ On Question, Bill read 3*, and passed, and sent to the Commons.