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New Clause—(Surrender Of Interest By Tenant For Life Or Person Having Interest In Succession)

Volume 65: debated on Tuesday 21 July 1914

The text on this page has been created from Hansard archive content, it may contain typographical errors.

Where under any settlement by will or otherwise any tenant for life before the first day of April, nineteen hundred and fifteen, or where at any time any person possessing an interest in succession surrenders by deed lodged with the Estate Duty Commissioners his interest in possession in, or in succession to, any settled property, no Estate Duty shall be charged on any property passing, or which would have passed, under the provisions of the settlement at his death, and which would but for the provisions of this Section have been liable to Estate Duty under this Act.

Clause brought up and read the first time.

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

I desire to say at the outset that which no doubt will soon become apparent, that I do not pretend to be an expert in the law of settled property, and, if the learned Solicitor-General contests with me the form of my Amendment, I must leave it to my learned Friends behind me to carry on the contest. I must, however, say that I think the object of this new Clause is pretty plain. It is to do something to mitigate the effect of the application of the Estate Duty to property passing in succession under a settlement. The effect, I think, was hardly brought out in the course of the Debates on the new Clause which is now Clause 12. I will take two cases which I think are both covered by this Amendment, two cases which, of course, may apply in the course of the same settlement. There is, first of all, the case of a man who is now tenant for life, and who has thought that the property which will pass on his death to his heir would be entirely free from Estate Duty. His arrangements have been made on that assumption. If he had thought otherwise, he might perhaps have saved money and have left it to his heir, or he might have insured against his death; but, owing to the change of the law, he has made no provision against the duties which will now be payable, and which will be increased from the former rates if the estate is above a certain sum. In the case of this man, I suggest by this Clause that he should be free to say, "I am tenant for life only of this property; I cannot dispose of it; I cannot realise it, and probably only to a very limited degree can I charge it. I know I cannot enjoy it for any great length of time, and I wish now to relinquish my interest in it, and to let my successor have the benefit of the enjoyment of the estate, whether it be in land or personal property, as he could have had but for the change in the law this year 1014, which he was fully expecting to have, and on the assumption of which both he and I have based our calculations." I know that the tenant for life can renounce, subject to the three years' provision of Section 59 of the Finance Act, 1910, but I do not think it fair in the case I am talking of that he should not have the right of renouncing his life interest under the changed circumstances of the law without being subject to that limitation.

It is not only the interest of the present tenant for life that I am considering, and perhaps not so much as the interests of others in the succession. I have in mind a very hard case that sometimes occurs where you have property passing from brother to borther, and then to the son of the youngest brother. It is not such a very uncommon case to find three brothers of very much the same age, and only the youngest of the three with a son. I do not know whether hon. Members will have noticed the tragic fact in the case of my lamented Friend the Member for Oxford University (Sir W. Anson), that there were no less than three brothers and one nephew who died within twelve months. It is quite true that they did not die in order of succession, and I do not know whether there was any settlement, but that illustrates the kind of hardship that might be incurred if there were succession from brother to brother, and if the brothers were very much of the same age, and their lives were worth much the same. I propose to deal with such a case by this Clause. A is the present tenant for life, B is the next brother, C is the youngest brother, and D is C's son. I propose to give an option to C and D to cut themselves out of the succession, and that power is to hold good whether they die within three years or not. Surely it is perfectly fair that a man should have the right to say, "I am an elderly man. I am the heir of my brother. I am comfortably enough provided for. I do not wish to inherit. I do not wish to take upon myself the responsibilities of the estate or the responsibility which will inevitably attach to the business if I succeed to any settled share in it. If I succeed I cannot dispose of it or alter the succession. I am provided for, and I wish to stand out and let it go to my next brother." The third brother may say the same. The result of that would be that the heir who would ultimately succeed, the son of the youngest brother, would have the benefit of the succession, and the property would not be ruinously charged as it would be if the present proposal of the Chancellor of the Exchequer with regard to settled property comes into effect.

I ask only that this option shall be exercised if a man in succession entirely renounces his interest. Of course I quite realise that, subject to the three years' provision, C and D could surrender at the present time, and some mitigation is afforded by the Clause which is now Clause 13, but, even so, I submit that it would not be nearly enough. Supposing three deaths occurred within two years, I find, even with those mitigations in the case of quick succession, that a property which would ordinarily pay 10 per cent would pay something like 21 per cent. It surely is not the intention of this House to take advantage of the accidents of mortality to impose so ruinous a charge as that. I do not want to take any advantage; all I want is that settled property should not be at an unfair advantage, and that the tenant for life, or man having an interest in expectancy, should not be unfairly mulct because he is tied up by the settlement. Surely a man who can dispose of his interest is in a quite different position from the man who cannot dispose of it. Although it may be a matter of policy not to discourage settlements, it cannot be right to take advantage of a man being tied up by a settlement by the Exchequer levying heavy sums upon his property when he is quite willing and even eager to renounce all his interest in it for life. It is from that point of view, and not from the point of view of any advantage to settled property, but to save people who would be unwillingly caught in the net of the Inland Revenue, owing to the fact of their being under a settlement made under totally different conditions, and prior to this unexpected change in the law, that I ask the House to read the Clause a second time.

At the invitation of the hon. Member (Mr. James Hope) I will forbear from criticising the language of this Clause, although I think it is quite obvious that, if the House were to adopt it, it would, in order to give effect to his intention, require to be couched in somewhat different terms. I quite agree with what he said that, in discussing a matter such as this, one has to look at the object of the Clause and to consider the real subject-matter of the Debate. In order to make plain why it is that this Clause cannot be accepted, I must ask the House to bear with me for a few moments while I invite its consideration of the state of the law as it stands at the present time. By the Finance Act of 1894 Estate Duty was charged not only upon property that a man owned when he died, but upon the property that passed by reason of his death, and it followed, therefore, when a man who was tenant for life of settled property died, although he owned no interest in the capital of the estate, yet, none the less, the capital of the estate was taxed. That was one of the cardinal principles of the Act of 1894. Another was this. That a man should not be able to dispose by gift of his property within twelve months of his death, or if he did dispose of it none the less it should be aggregated with his other property. That provision was inserted as soon as attempts were made to get out of the Act of 1894.

The particular moment when that provision was added does not matter. Probably it was in 1896. But the provision was made that if a man disposed of his property by gift within twelve months of death the property was none the less liable to be aggregated with his other property. That was how the law stood under the Act of 1894 as amended in 1896. It was then found that the tenant for life by surrendering his life interest caused what lawyers called a merger in the reversion, the result being that when he died the property did not, in fact, pass, because the union of the two estates made by virtue of the assignment effected during his life had caused the whole property to come under a totally different dominion, and it never passed at his death at all. The result was that people began to dispose of their property if tenants for life by surrender shortly before death, and the prudent cautious Government in power in 1900 took steps to remedy that by passing Section 11 of the Finance Act, 1900. That Section provides:—

"In the case of every person dying after the 31st day of March, 1900, property, whether real or personal, in which the deceased person or any other person had an estate or interest limited to cease on the death of the deceased, shall.… be deemed to pass on the death of the deceased, notwithstanding that the estate or interest has been surrendered.… whether for value or not to or for the benefit of any person entitled to an estate or interest in remainder … unless that surrender was bonâ fide resale or effected twelve months before the death of the deceased and bonâ fide possession and enjoyment of the property was assumed … and retained," etc.

In that case the estate might escape duty. Thus under the Act of 1900 hon. Members opposite took care to prevent the mischief that was apprehended under the Act of 1894. But the hon. Member's new Clause seeks to restore it. It was provided that no such surrender of life estate should save the estate liability to duty when it passed, excepting when it was done more than twelve months before the date of death and bonâ-fide possession was taken. Now the twelve months is stretched to three years, and the position is we have extended the area of caution which hon. Members opposite established. What is this Amendment? Its object is to do away with the whole of that—

The hon. and gallant Member says "No, no!" but I invite him to look at the Amendment. He will sue it is exactly what the hon. Member who moved it said it was its intention. It provides—

"Where under any settlement by will or otherwise any tenant for life before the first day of April, nineteen hundred and fifteen, or where at any time any person possessing an interest in succession surrenders by deed lodged with the Estate Duty Commissioners his interest in possession in, or in succession to, any settled property, no Estate Duty shall be charged on any property passing, or which would have passed, under the provisions of the settlement at his death, and which would but for the provisions of this Section have been liable liable to Estate Duty under this Act."

If I understand that Amendment, and I think I do understand it clearly, the effect is as I have stated. Let me assume that the person who surrenders his life estate dies. Where any tenant for life before the 1st day of April, 1915, surrenders by deed his interest in the estate the estate is to be free from duty. And the same thing would be true of any person who had surrendered his life interest previously to this date, provided he died within twelve months of the surrender. That is the position so far as the life tenant is concerned, and to that extent this Clause completely repeals the whole effect of Section 11 of the Act of 1900, amended and extended as it was by our Statute in 1910. That is so far as the tenant for life himself is concerned. But the hon. Member goes on to suggest that it shall be open to a person entitled to any succession to effect release of that succession. It means, I assume, this, that a person who to-day is tenant for life in remainder and expectancy upon the death of his brother with remainder and expectancy on his death to some other relation, shall be at liberty to surrender his life estate expectancy to the third person in the reversion. This person is to surrender on the hypothesis that he must become tenant for life in settlement, because if he does not he will have to surrender nothing; nothing will have passed at his death, and there will never have been any duty payable on it. It can only operate on the hypothesis that the man who surrenders his estate in succession comes into the estate himself, and would, but for his dispossession have been entitled as tenant for life to the property. Therefore, in other words, it is an assignment in advance of the interest that he would enjoy as tenant for life.

So, again, there would be no difference whatever between assigning the estate which you are coming into in expectancy, and assigning an estate when you have come into it, in the case where the assignment will only become effective and operative on the hypothesis that you do come into it. In other words, the subsequent words of this Amendment as to assigning the interest in succession are nothing but providing that the first part of the Section may be extended, so as to affect all tenants for life, who, before the estate falls into their possession, like to assign that estate away. What the reason for such an Amendment is, it is hard to understand. It affects exactly the same consideration as in the case of a tenant for life himself. And when the hon. Member says he does not desire to give any advantage to the tenants for life of settled property, he overlooks the fact that that is exactly what he is doing. If a person who owns property absolutely disposes of it within three years of his death, it would be aggregated. Yet if a man disposes of it before he comes into possession he is to be exempted notwithstanding the fact that he does come into possession as tenant for life.

The hon. and learned Gentleman obviously does not understand the real object of this Amendment. He is perfectly correct in saying that on the Second Reading of a Clause what is important is to get at the real gist of its language, and then you can, if necessary, alter the wording later on. I thought my hon. Friend's explanation opposite perfectly clear, and I will repeat what he said in order to explain the object of this Clause. It is not desired by it to give any advantage whatever to the tenant for life, or anybody concerned in a settled estate which they do not possess now. And I will say at once that some words will have to be inserted in order to ensure that.

The last part does, but not the first. I do not think—I speak with great diffidence—that the learned Solicitor-General is quite correct in saying that the object of the Act of 1894 was to make property passing at the death of the tenant for life, and where the tenant for life had no power over the capital, to pay Death Duty. That was not so. The whole scheme of the Act was that duty should only be paid on the death of the person competent to dispose of the capital. That was the main scheme of the Act upon which the whole duty was founded. A Clause was inserted, as the Solicitor-General will find, providing that, in order that the Act might come into bearing at an earlier date than it otherwise would do, where the tenant for life died, and where the duty had not already been paid on that setttlement, then, and then only, the duty was to be paid on his death. I think the Solicitor-General will find that is correct. The whole scheme of the Act is not to charge on the death of a tenant for life, but only on the death of persons competent to dispose. The words "competent to dispose" will be found in the original Clause. The object of that Act was to encourage settlements. When the Chancellor of the Exchequer himself, in his Budget of 1909–10, raised the insurance rate from 1 to 2 per cent., he endorsed the action of Sir William Harcourt, in 1894, in encouraging settlements. I do not myself think that such a great advantage was given to settled property as the Chancellor of the Exchequer supposes, but there was some advantage. To whatever extent that advantage goes, it follows that the action of Parliament was to encourage settlements. I am sure I have established that. Now Parliament turns round and completely alters its system, and we now say that, instead of encouraging settlements, we are going to charge the same duties upon the death of a tenant for life as those which are otherwise dealt with. I think the Solicitor-General finds I am correct.

Not only do I not find that, but I should like to withdraw my recantation with regard to the twelve months, which came in under the Act of 1894, and not the Act of 1896.

The matter was tried in the Beech case. I debated that across the floor over and over again, and it will be within the recollection of every Member present who was here at that time. The question was whether, whenever an interest was transferred by a person in articulo mortis, the twelve months applied to it or not. The Beech case was the case of a clergyman in Suffolk who had the same name, although spelt differently, as the then Chancellor of the Exchequer. It was selected as a test case, and the then Chancellor of the Exchequer agreed to pay the costs of both sides, so that it should be decided whether the twelve months applied or not. That was settled property.

The hon. and gallant Member will forgive me for interrupting him, but we are at cross purposes. My statement was that the Act of 1894 left it open to the tenant for life to surrender his life estate up to the time he was dying, but that the Act of 1894 provided that if the gift was made within twelve months from that it should not take away the liability to aggregation. It was that statement, which was not advertently but inadvertently corrected by hon. Members opposite, that I was correct in making. I pointed out that it being found that the tenant for life could exercise a right up to the moment of death which the absolute owner could not enjoy, it was that which led to the Act of 1900 being passed, placing him on the same footing in regard to it with the absolute owner. It is quite right to say that the Beech case did decide that with regard to settled property, but not with regard to unsettled property. That was the part of my argument which was misunderstood.

We are discussing settled property now. We do not desire in any way that settled property should be put in a different position. We are dealing with existing settlements which have been created largely and mainly because this House has given settled property an opportunity of insurance. It has insured itself, and the settlements have been created. The Chancellor of the Exchequer will agree that these settlements, having been created for the purpose of obtaining this insurance, cannot now be determined. That is impossible, because they are tied by the leg. The argument by which Clause 10, to which this Clause applies, was supported from the Government Bench was that the intention was to put settled property in the same position as free property. All that we desire is to put settled property in the same position as free property. It is now in a much worse position. Take the case of three brothers mentioned by my hon. Friend. You have three brothers, A, B, and C. A is the owner of free property. He has a brother B a year or two younger, and another brother C a year or two younger than himself. C is a son. D is a son of C. A as the owner of the free property can leave that property by will direct to his nephew D, and no Estate Duty will be payable. It will then pass direct to the next generation, and Estate Duty will only be payable once in a generation. With the enormous Death Duties which are now levied, it is the care of every careful owner of property to see that these crushing burdens do not fall more than once in a generation, because, if they do, even if it is landed property to which the settlement applies, the property is absolutely crushed out of existence. That is a normal case. If the Chancellor of the Exchequer does not agree to some Amendment of this character he will be doing by this Bill what he said he would do, taxing people out of existence. They are tied up and cannot escape.

Take the case of the three brothers, A, B and C, which is not an uncommon case, but a very ordinary case in the ownership of an estate. A cannot dispose of the capital of the property at all. He has no discretion over the capital. He can only deal with his own estate. He has no power to say how much B, C or D is to have, and without any discretion of his own it must pass to B. B may, it is true, divest himself of it by passing it on to C, and C may again divest himself of it bypassing it on to D. In each case the three years have to elapse before that transfer has any effect in avoiding the duty, whereas were the property free, and had the Chancellor of the Exchequer desired to put it in the same position as free property, A might leave the property direct to I), and only one duty would be payable in the generation. This Clause divides itself into the two cases of the existing tenant for life and of those who are expectant tenants for life. In regard to the existing tenant for life, it is perfectly clear that we must give him a limited opportunity to act, and it is suggested that the 30th April next would be a reasonable date. As to the wording of the Amendment, the Solicitor-General is right in saying—I admit it was an oversight—that any tenant for life would be able to transfer, even if he were liable to duty now, on his death. To meet that it would be perfectly easy to insert words which will make the Clause read: "Where under any settlement by will or otherwise any tenant for life at whose death Estate Duty would not be payable but for Section 10 of this Act." I think that would make it clear. That is what we intended, namely, that where a tenant for life is now exempt and has made a bargain with the State—he holds a contract which the State has made with him—Estate Duty shall not be payable at his death. Now the State, although he holds the State's paper and a contract the State has made with him that he is not to pay duty at his death, not only rescinds that contract and says that he shall pay that duty, but it deprives him of a power all free men should have of being able to transfer his property.

We say that where a tenant for life has this contract broken he should have a few months, and only in that case, not in the case where he would pay duty normally at his death because he is tenant for life under the Act of 1894, but where the bargain is broken and where the State has repudiated its contract with him that he should have a few months in which, if he likes, to transfer his property to the next generation; that where other lives intervene in the same generation—that is, taking the difficult case of the brothers B and C—they should both have the option before they succeed, of renouncing their tenure of the property and by agreement although it does not put them in the same position as they would be if the owner were a free owner because he has got to get the consent of B and C—if they desire that the property should pass from A to D, which is the next generation, that they should have the power of transferring within the period of a few months and of renouncing their right of succession; and that they should be put in the same position as the owner of a free property is in. I hope I have made the position absolutely clear. If there is anything in this proposal which gives an advantage to a settled property which is not held by a free property, we are perfectly willing to find words to put that right, but we maintain most strongly that this House has no right, not only to break its contract but to put the individual with whom the contract is broken in an infinitely worse position than a man who has never made a contract with the State at all. There must surely be a point beyond which dishonesty and unfairness in taxation cannot be carried. We have long passed the point when the same code of honour is expected from the State as is expected between one individual and another. My own view is that that is a most dangerous point to pass, because I do not conceive that it is to the advantage of the State or of public policy that there should be one code of honour between individuals and another and a, lower code of honour between the State, and the subjects of the Crown. That is bad, and this shows it.

7.0 P.M.

You are, in this Bill, passing the point where a private individual who dealt with another man as you are dealing with people with whom you have made contracts would be liable to be hauled before a Court of Law to make good his tort. You are above the law. One lapse leads to another. Finding yourselves above the law, there seems to be no limit to which you would not carry the hardship you inflict upon the taxpayers. We ask the Chancellor of the Exchequer to accept this Amendment as a measure of ordinary justice to owners of settled property who are put in a most unfortunate position by this legislation, because they are tied up. Does he understand that Clause 10, with which this new Clause is concerned, even if amended as we propose, may place enormous and unequal burdens on a particular class of property? There are many properties which will not be affected to the extent of one farthing by Clause 10 in any shape or form. There are other properties which by the mere accident of the position of the lives which happen to hold them, and to be likely to succeed to them, would be absolutely crushed, and where anything from £100,000, £200,000, or £300,000 may be demanded over and above the contract which has been definitely made with the State. When the Chancellor of the Exchequer is by the mere force of his majority, against all right and justice, carrying such a Clause as Clause 10, and when his argument on Clause 10 is that he proposes to put settled property in the same position as free property, he is surely bound to see that, at any rate, he does not put settled property in a worse position.

I have always had some hesitation on this Budget in supporting the Settlement Clause. I have supported the Government all through on the Budget, but I did not take part in the Division on the Settlement Clause. I have no interest, directly or indirectly, in settled property, but I think, when the State has entered into a bargain with individuals, the honour of the State should be just the same as the honour of an individual. Whether it has been in this case or not I am not going to say, further than this. If the State finds it is necessary to raise money for the purpose of increased expenditure, I think the State ought to have regard to the interest of those who have entered into a direct bargain with them. In this case where a man has entered into a bargain with the State, and where a settlement would not have been made unless Parliament had given them this right, you ought not to put him in a worse position than where property has not been settled at all. For this reason, though not accepting the Amendment on the Paper, which is of a totally different character, I hope the Government will give consideration to the Amendment to the Clause which my hon. Friend has proposed.

I quite appreciate the fact that we are not discussing the form of this Clause, because the hon. Member (Mr. James Hope) very fairly admitted that it would require consideration. I am in sympathy with his object, and with the reason given by my hon. Friend (Mr. Pretyman). I quite agree with the Solicitor-General that the whole thing began with what he calls one cardinal principle of the Act of 1894, that property shall be deemed to pass on death when it does not, in fact, pass on death. It may be that it is a bad principle, but it is far too late, at any rate this is not the occasion on which, to attempt to alter it, and we must accept it at present. The Act of 1894 did provide that when the life tenant died, the property which passed to others on his death, not under his will or by his disposition, should bear duty as if the whole interest were then created in the successor. Then came this difficulty, that it was thought—I do not know whether it was true or not—that people began to make what might be called death-bed surrenders. A man who was not likely to live surrendered his life estate just before his death. To meet that difficulty the Act of 1900 was passed, and one year was allowed so that surrenders within that year were not really effective. So far, so good. The real difficulty and hardship came in first, under the three years' rule, which the Chancellor of the Exchequer proposed in 1909–10, and, secondly it will be greatly increased by the provision in Clause 10. Under the three years' rule, if a man surrenders or gives property within three years before his death, you treat that as if it passes on his death, which is an absolutely unfair thing. Three years is much too long a time, and very often that provision imposes duty on people who make their gift without the least intention of evading Death Duty. We probably all know cases in which that provision has worked great hardship. We all think on this side of the House that a great mistake is being made in going behind the provisions of the Act of 1894 with regard to Settlement Estate Duty. Naturally the hon. Baronet (Sir A. Markham) agrees with us that bargains of that kind ought to be kept. When you have got two great hardships of that kind it is only right for hon. Members to try and see whether they cannot relieve settled property in some way or other by some fair means. The effect of what my hon. Friend proposes is that the three years' rule shall not apply to surrenders of life estates made within the next year—a very modest proposal. I can hardly understand why it is limited to surrenders of life estates before April next. But, at all events, the Chancellor of the Exchequer cannot complain of that, and the proposal is simply that as between now and April next surrenders should be made without being subject to this very harsh rule, which is created by the two Sections. Really, I do not see why that should not be accepted! At all events, you might go back to the one year imposed by the Act of 1900, and make it one year instead of three. I will go further. I should have thought it a hardship that, notwithstanding the surrender of a life estate, the reversion should bear Succession Duty as if no surrender had been made. I myself would like to alter that rule and to relieve settled property of that burden, but that is not done by this Amendment. So the first part of the new Clause, in principle, is surely right. The second part seems to me merely an extension of it. It only operates if the person who surrenders the life interest survives the actual tenant for life. The only intention is to put the reversionary life tenant upon the same footing as the actual life tenant. While my hon. Friend limits the relief in the case of actual life tenants to surrenders within the year, he makes the relief to the reversionary life tenant general. For myself, I would make the relief general all round. I think, subject to Amendments in detail, something of this kind might fairly be done.

I associate myself with the arguments which have been used by my hon. and learned Friend (Mr. Cave) and my hon. Friend (Mr. Pretyman), but I should like to put a case stronger than my hon. Friend put with regard to his A, B, C, and D. He suggested that at present, in dealing with unsettled property, the donor, instead of leaving the property to A, B, and C in succession, and then to D, should leave it straight away to D. Surely it is stronger than that. I want to draw a comparison between unsettled and settled property. The object of the Government should be to make it equally fair whether the property is settled or unsettled. If the Chancellor of the Exchequer makes his will and leaves me a legacy of £10,000, and in default of my taking that legacy leaves it to his son, it is perfectly open to me to say, "I will not touch the money." I renounce it later. I need not do It before his death. Or, say, he leaves £10,000 to me; if I do not take it, he leaves it to the Solicitor-General, and, if he does not take it, he leaves it to anyone you like, and, in the fourth place, he leaves it to his son D. If that is not settled property, I can say I will not touch the money, and there is no duty payable. The Solicitor-General in turn says, "I will not take the £10,000. I have plenty of my own." Again, no duty is payable. Then the next man will not take it, and finally it goes to the Chancellor's own son D., and there is only one duty payable. Suppose, instead of that, he says, "I will leave my estate to Mr. Joynson-Hicks for life, and after his death to the Solicitor-General for life, and after his death to someone else for life, and after his death to my son D." What is the case there? I cannot renounce without duty being payable, the Solicitor-General cannot renounce without duty being payable, the next person cannot renounce without duty being payable, and if we all three say we do not want to take the life interest which the Chancellor has left, three duties have to be paid before the property gets down.

I appeal to the Solicitor-General if that is not the effect of the law as it stands to-day? In other words, it is penalising settled property as against property which is not settled. A person to whom it is left absolutely may renounce the legacy, but the tenant for life cannot do it. Surely that is not right. My hon. Friend raised this point when the Budget was going through Committee. I think the Law Officers of the Crown will admit that there is no power for a life tenant, either in reversion or in possession, to renounce his life interest without duty-accruing. It seems a monstrous thing.

I do not understand the appeal that is made to me in the least. If the tenant for life assigns or surrenders his life interest at a period within three years before death there is no hardship whatever.

We all know that. I was dealing on the same lines between settled property and unsettled property. Is it necessary for me to renounce a legacy of £10,000 three years before I die or not? That is the whole point of the Amendment. Is it necessary for me to live three years or not? If the right hon. Gentleman will not answer that he is not dealing fairly with me and with my argument.

But if I do not take it, just exactly as the tenant for life says I will not take this life interest. The Solicitor-General knows perfectly well that the cases are on all-fours, and if I renounce the legacy I am not bound to live three years, but if I renounce a life interest I am bound to live three years. That is the whole question. My hon. Friend asks that the life tenant of settled property may be put in exactly the same line as a person who is left a legacy of unsettled property. That seems to be so absolutely fair that the Amendment is one which ought to be accepted.

What I think is always forgotten is this fact, that in justifying the Death Duties originally Sir William Harcourt pointed out that it would be possible to insure. Everybody thought it would be possible to insure against the Death Duties, and what seems to be so very immoral in the present suggestion is the fact that no tenants for life have had the opportunity of undertaking insurance, because they thought the State could be trusted to keep its contracts. I think it is a little doubtful whether many of such settlements would ever have been made if those making them could have had any idea that in three, five or six years they would have to pay a large amount in Death Duties. These Death Duties are very much larger under the new Budget. I think there are many Members of this House who agree that from to-day there are certain arguments which make it advisable that settled estate should bear the same burdens as unsettled estate. But to go back ten, fifteen, or twenty-five years when there was no opportunity for insurance seems to me to be absolutely contrary to all principles of justice and equity. Whatever a man may decide to do in relation to his private life that is his own affair. If he wishes to be regarded as a person who breaks his contracts, that is his own affair, but the right hon. Gentleman has no right to allow the reputation of the State to be dragged in the mud. I have heard, not one, but dozens of hon. Members, deplore this departure from rectitude on the part of the State. I hope the Chancellor of the Exchequer will accept this Amendment, which appears to be only just and equitable. I think it does not meet the point, but it gives some opportunity to those who desire to do so to make over their property at the present time.

I hope that some answer will be given by the Chancellor of the Exchequer to the case which has been presented in support of this Clause. The Solicitor-General, who was misled possibly, and not unnaturally, by the precise form of the Clause, delivered an argument which had absolutely no bearing on the real object of the Clause. The hon. and learned Gentleman directed his attention to an entirely different point, but now that the real nature of the Clause has been explained, I hope the Chancellor of the Exchequer will address his mind to it. The Solicitor-General said that if you pass this Clause then you reverse the policy of the Act of 1894. The exact opposite result would follow. This Clause is not intended to reverse the policy of the Act of 1891. It is intended to carry it out, and it is entirely due to Clause 12 of this Bill that it becomes necessary to introduce the Clause. If Clause 12 had not been in the Bill we should not have been asking this Clause. It is because it runs counter to what Parliament declared in 1894 was fair that this Clause becomes necessary. Sir William Harcourt declared that it would not be fair to exact Succession Duty on every life. The Chancellor of the Exchequer says by this Clause that it is fair. Here is a way in which he can give relief from some of the hardships imposed by Clause 12. The case was put by my hon. Friends, and to that we have had no answer. What we would like to hear from the Chancellor of the Exchequer is an answer, if he can give one, to the case which has been put forward. Clause 12 is really a breach of a Parliamentary bargain, and we wish to know whether he can state reasons why he cannot remove some of the hardships which fall upon tenants for life. By accepting this new Clause he will give some relief, if not the whole relief, they are entitled to.

I rise in response to the appeal made by the hon. Gentleman opposite. I wish to say a word in regard to certain observations which were made before I was present. I understand that there was some complaint made in regard to my absence during the first hour of the Debate. I very much regret that owing to circumstances over which I have no control, because of a duty which has been thrust upon me, certainly not of my own seeking, but which I had no option but to accept, and which entails the giving of a good deal of attention to matters not strictly relevant to my office, it was not possible during the first hour, consistently with the proper discharge of that duty, to be present here. I should like to make another observation in reply to the right hon. Gentleman the Member for West Birmingham (Mr. Chamberlain), I think he rather complained that I was not present at the Debates on other days. I do not think that that would be the observation of those who were here during the Debates. As a matter of fact, I was here every day until nine o'clock. I remained in attendance until that hour before I took my dinner.

I did not mean to say anything offensive with respect to the right hon. Gentleman.

I have been here consistently much longer than is usual, having regard to the arrangements which are made in circumstances of the kind. I hope I may make that statement to the House to put the matter in its proper light. Now, I come to the matter under discussion. The speech of the hon. Gentleman opposite is one which makes it as difficult as possible for the Government even to approach him with a desire to meet the difficulties which he has stated to the House. It is very difficult to get up and make a concession which is based on the assumption that one has been exceedingly dishonest, and has done something equivalent to a fraud. That is a bad beginning to an appeal for some sort of reasonable compromise. I must say that up to that moment I was applying my mind to the case presented by the hon. Member for the Central Division of Sheffield (Mr. J. Hope) which appeared to be one deserving of some consideration. But I felt at once after the speech of the hon. Gentleman that, oven if I met the hon. Member on that point, the speech was tantamount to an appeal for something which the Government could not accede. Let me address myself to the question raised by this Amendment. If we accept the assumption that we are breaking contracts, then the whole case of the other Clause goes. That is not relevant to this Amendment. I agree that if he is right in that argument, then the other Clause ought to go. That is the decision of the Committee of the House of Commons, and I should have thought that the hon. Gentleman made his appeal in respect of this Amendment on the assumption, for the purpose of this Clause, that the decision of the Committee was embodied in the Kill and accepted. I have no doubt he will challenge that decision later on. But when he puts it there will be no need for this Clause. If he moves this Clause, it must be for the purpose of argument when that Clause is accepted by the Committee. There are two classes dealt with in this particular Clause. The first is the case of the tenant for life—the person who is in the enjoyment of settled property. It is suggested that, so far as he is concerned, he should have an opportunity of surrendering. The first case put by the hon. Gentleman (Mr. Pretyman) is that the tenant for life ought to have an opportunity of surrendering, because you can put him in a position under this Clause which he did not and could not anticipate. I see the force of that. He says, "Supposing a tenant for life knew that he was going to be put under conditions of that kind, he might have surrendered in time to make the three years' limit operative." That case is fairly open to that observation.

The second case is this: I am not sure whether remainder man is the proper phrase—I would say the intermediate interest, or the next interest. I think that is in a totally different category. I do not think that that is a case which has the same claim for consideration as the claim of a person who is now tenant for life—a case where a man actually surrenders something he is in the enjoyment of at the present moment. I say so for this reason: I do not think it is the business of the Legislature to encourage transfers of property with the view of defeating the revenue. I am prepared to meet the hon. Member in so far as the first case is concerned—the case of a man who is now actually in the enjoyment of property, and who might conceivably say, "If I knew I was to be put in that position, I would have surrendered my life interest long-ago." As my hon. Friend pointed out, he had not the option of insuring. I should be prepared, as far as that particular case is concerned, to do something to meet it. I would prefer to have a little more time to consider the words which I would propose if the hon. Gentleman would withdraw his Clause at the present moment. I do not know whether it would be possible to move a new Clause if it was not on the Paper, but, if so, I think that would be preferable.

On the point of Order. May I suggest that something to this effect would be possible as a proviso to Clause 12?

I am not suggesting that this could not be put as a new Clause, but on the point of Order am I right in the opinion that this would come in better as a proviso than as a Clause itself? I submit that it can be moved as a proviso to Clause 12 because it deals with the subject-matter of that Clause, and that Clause renders it necessary that this should be moved. If this can be moved as a proviso to Clause 12, as I submit, I would invite the hon. Gentleman to withdraw his Clause and I will put on the Paper an Amendment in the form of a proviso to Clause 12, which can be moved to-morrow.

There is nothing on the face of this Clause to show that it is connected with Clause 12. That came out in the course of the argument on Clause 12. That was taken in the Committee. Therefore it seemed to me to be an independent matter, and that is why I allowed it to be moved as a separate Clause. Now that I have heard all the arguments about it, it is obvious that this is, pro tanto, a remedy, or at all events an alleviation, of the conditions of Clause 12, and as such it might come in as a proviso. The right hon. Gentleman is entitled to move a proviso, but if I may say so, I think that he should put down the proviso to-night in case of what may happen by the time we reach the Clause to-morrow.

I would suggest that the proviso to be added to Clause 12 should be as follows:—

"and (c) Section eleven of the Finance Act, 1900, as amended by Section fifty-nine of the Finance (1909–10) Act, 1910, shall not operate on any such surrender, assurance, divesting, or disposition, as is mentioned in the said Section eleven made by any person between the fifteenth day of August, nineteen hundred and fourteen, and the first day of April, nineteen hundred and fifteen, so as to make any Estate Duty payable on the death of that person which would not have been payable but for this Section."

I do not wish to seem otherwise than grateful to the Chancellor of the Exchequer for the spirit in which he has dealt with this somewhat difficult matter, but I would beg him to take a little more time for consideration, and to devote that consideration not only to the exact wording of what he has undertaken to do, but to further reflection upon the distinction which he has drawn between the two classes of cases. I submit that the distinction really will not hold good. What is the basis of the criticism which the right hon. Gentleman is making? I am not going to use contentious language if I can avoid it, though the right hon. Gentleman knows my opinion of Clause 12. But previous to Clause 12 the State offered to individuals certain advantages under a settlement subject to certain conditions. By Clause 12 you alter that state of things and deprive them of the special advantages which in many cases were the only inducement to settle the property. In such cases these people should not continue to be saddled with the disadvantage which the settlement entails.

There is another point of distinction. [HON. MEMBERS: "Speak up!"] In one case the opportunity must be exercised before 1915. In the other case it can be exercised at any time, and it is in a different category altogether for that reason.

Perhaps the Chancellor of the Exchequer will be good enough to consider my plea without regard to the exact words of the Amendment, which is going to be withdrawn, but rather as a subject-matter for a possible Amendment to Clause 12. The plea which I put forward is strictly limited. I do not want it to apply to settlements in future. It is only a plea for interests under existing settlements, which settlements I contend would not have been made, or at any rate would very probably not have been made, if at the time they were made Clause 12 had already been the law of the land. If the Chancellor of the Exchequer likes to attach a time limit to the concession to the intermediate interest within which he should exercise the option, I should think that that would be perfectly reasonable, and there would be no cause of difference between us. I believe that the Chancellor will find that you cannot make any distinction in justice between the two classes, and that the amount of money involved, if it be safeguarded as we on this side of the House are willing that it should be, by in the first place confining it to existing settlements, and in the second place, by making a time limit within which that option must be exercised, would not be very great, and by conceding it you would really remove a great hardship which, quite apart from the original controversy between us as to the merits or demerits of Clause 12, is only accidental to the scheme and is not essential to its main objects or principle. I only beg him to consider this matter. I do not ask him to give an answer now, but to consider it with an open mind, subject to the restrictions and reservations which I have suggested, and confining it purely to the point which I have indicated.

Can the right hon. Gentleman say how much this concession is going to cost?

That is a very difficult question, and it would be impossible for me to say. I would promise the right hon. Gentleman to consider the matter, and the fact that he has indicated his willingness to agree to a time limit makes it easier for me to do so. Without a time limit it would be quite impossible for me to consider it.

The Chancellor of the Exchequer would meet the views of a great many Members on this side of the House if he would give consideration to the remarks of the right hon. Gentleman the Member for West Birmingham. All those cases should be placed in exactly the same position as if the people had not settled at all. No doubt the inducements held out did induce the settlement of estates, and the option ought now to be given as if those estates had not been settled at all. I am sure that a very great number of hon. Members on this side of the House would join in asking the Chancellor of the Exchequer to give this matter favourable consideration.

I admit that the Chancellor of the Exchequer has met me on the first point, and I hope that he will bear in mind what my right hon. Friend has said. Personally, I attach quite as much importance to the second point as to the first, but in all the circumstances, as he has met us fairly on the one point and promises to give consideration to the other, I would ask leave to withdraw the Clause.

Clause, by leave, withdrawn.