§ 8.10 p.m.
§ The PARLIAMENTARY UNDERSECRETARY of STATE, NORTHERN IRELAND OFFICE (Lord Elton)
My Lords, I beg to move that the Inheritance (Provision for Family and Dependants) (Northern Ireland) Order 1979 be approved. Another order, the Capital Transfer Tax (Northern Ireland Consequential Amendment) Order 1979, is a minor consequential measure, and I shall move that order also after this debate. Your Lordships may, 1242 however, find it convenient to discuss both orders together and I shall therefore outline its purposes and effects briefly before I conclude introducing this order.
The Inheritance Order replaces the existing legislation on family provision in Northern Ireland. In the interests of equity, and to minimise avoidable distress, it enlarges the category of persons entitled to apply for financial provision out of the estate of a deceased person. In the case of a surviving spouse, it raises the standard of provision which can be made. In all major respects it thus brings the law of Northern Ireland on these matters into line with that of England and Wales as embodied in the Inheritance (Provision for Family and Dependants) Act 1975 which, your Lordships will recall, gave effect to the recommendations made by the Law Commission in 1974 and published in its Second Report on Family Property: Family Provision on Death.
The Order extends to 28 Articles. Article 1 sets out the title. Article 2 deals with interpretation. Articles 3 to 9 determine the powers of the court to order financial provision from the deceased's estate. Of these, Article 3 permits certain people who are not at present entitled to reasonable financial provision under the will of the deceased person or under the law of intestacy to apply to the court for an order making such provision. Article 2 provides that the term "reasonable financial provision" in the case of a surviving spouse means such provision as it would be reasonable for a husband or wife to receive—whether or not it is required for his or her maintenance. In the case of other applicants, it denotes such provision as it would be reasonable for the applicant to receive for the purpose of his or her maintenance.
This is a new and more generous criterion for measuring "reasonable financial provision" in the case of an application by a surviving spouse. It is intended to ensure that, so far as possible, a husband or wife whose marriage is ended by the death of their spouse is at least as favourably placed as, under the Matrimonial Causes (Northern Ireland) Order 1978, would be someone whose marriage ended in divorce. The list of those entitled to make applications is set out in Article 3. This includes all those categories of people at present covered 1243 by existing legislation. It also includes, as an innovation, some new categories, notably those of persons who were unrelated to the deceased but who, prior to his death, had been dependent upon him; and also children of the deceased who have achieved the age of 21 but are still in full time education.
Article 4 would give the court, provided it is satisfied that provision should be made for the benefit of an applicant, wider powers to make orders which would, in effect, alter the distribution of the deceased's estate from what would otherwise have taken place. The power of the court to order financial provision is discretionary, but in deciding whether or not it should be exercised, and, if so, how, it must have regard to the criteria set out in Article 5. These include the financial needs and resources of the applicant, and the needs and resources of other persons whose position might be prejudiced by the making of an order for the benefit of an applicant. The conduct of the interested parties is also a relevant consideration. Article 6 limits the time within which an application may be made.
Where an applicant is in immediate need of financial assistance and delay could cause hardship, Article 7 empowers the court to make interim orders for money payments to the applicant. If and when a final order is made, any sum paid to the applicant by way of an interim order may be taken into account. The remaining provisions of this order are technical in nature and detailed in presentation. I do not think your Lordships would wish me to catalogue them now. It is, however, open to any noble Lord to raise any matter pertaining to them in the course of this debate.
My Lords, I turn now, therefore, to the Capital Transfer Tax (Northern Ireland Consequential Amendment) Order 1979. If your Lordships agree to it, this minor consequential order will be made under Section 38(2) of the Northern Ireland Constitution Act 1973. It will ensure that the Finance Act 1976 will operate in relation to Northern Ireland court orders in the same way as it does in relation to court orders in England and Wales. Section 122 of the Finance Act 1976 ensures that the effect of a court order made under the Inheritance (Pro- 1244 vision for Family and Dependants) Act 1975 is followed for capital transfer tax purposes. Thus, for example, where the court orders that provision shall be made out of the deceased's estate for his surviving spouse, the effect of Section 122 is that the "Capital Transfer Tax Exemptions" shall apply. The Inheritance (Provision for Family and Dependants) Order will help therefore to relieve the financial hardship of people in distressing circumstances. I beg to move.
§ Moved, That the draft order laid before the House on 22nd March, be approved.—(Lord Elton.)
§ 8.16 p.m.
§ Lord BLEASE
My Lords, I would wish to thank the Minister for the detailed, comprehensive, and explicit way in which he explained these two orders. The orders are generally helpful to the people of Northern Ireland and bring the provisions concerning inheritance and tax-related matters into line with the provisions at present pertaining to England and Wales. We, on this side of the House, support the orders. However, I think that, having stated my position for the present, I would wish to qualify my support for the orders by placing on record my opposition to the capital transfer tax system as it applies to the United Kingdom. I realise that this is neither the time nor the occasion on which to press my views on this subject, but I think that I should say that I believe that the capital transfer system is based on what is defined as the estate principle; that is, where the size of the gift or legacy is the only consideration in connection with the estate principle and transfer tax arrangements.
Other countries exact death duties and gift taxes on the inheritance principle as opposed to the estate principle. The United Kingdom transfer tax makes no distinction between giving £100,000 to a millionaire and a similar amount to a pauper. I believe that the system penalises workers and particularly, I think, manual workers who have invested in homes and in their personal savings. It is particularly harsh in Northern Ireland in the context of small farmers and small businesses. My view is that the inheritance tax principle is fair. It encourages savings and it upholds the concept and the values of 1245 a property-holding democracy. No doubt we shall return to this aspect at a later date. In the meantime, I should like to assure the noble Lord the Minister that we on this side of the House support the two orders at present before us.
§ Lord ELTON
My Lords, I am obliged to the noble Lord for his intervention. It is refreshing to hear from his side of the House arguments in support of a property-holding democracy. I see that we are going to have increasingly fruitful co-operation in a widening sphere of our activities. I accept that this is not the forum in which to debate the merits of the various forms of taxation. I am grateful to the noble Lord for his support of the order.
§ On Question, Motion agreed to.