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New Clause—(Estate Duty)

Volume 155: debated on Wednesday 28 June 1922

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Where, on the death of the testator, the property passing has been settled by the will of the deceased or, having been settled by some other disposition, passes under that disposition on the death of deceased to some person not competent to dispose of the property, then, notwithstanding the provisions of Section fourteen of the Finance Act, 1914, the relief from the payment of Estate Duty given by Sub-section (2) of Section five or by Sub-section (1) of Section twenty-one of the Finance Act, 1894 (which relate to settled property), or by Sub-section (16) of Section twenty-three of that Act (which relates to entailed estates in Scotland) shall continue to operate as if Section fourteen of the Finance Act, 1914, had not been enacted.— [Mr. Pretyman.]

Brought up, and read the First time.

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

This Clause raises a point on the same lines as the last. Under the Act of 1894 there was a provision that when a person died and left an estate in settlement, duty should only be paid once on the settlement, and, in consideration of that, additional duty, called Settlement Estate Duty, was levied which was in some sense a composition for that relief. If there is a wish to destroy settlements, then the existing practice is no doubt effective for that object. It is possible that if this Amendment were accepted there may not be any loss of revenue, because all you have got to do is to adjust the Settlement Estate Duty to a point at which it would amount to something like an insurance for the length of the settlement. The position at present is that where you have got property tied up by settlement it is very difficult for the owner to deal with it, and an estate suffers more from Estate Duties, when there are frequent deaths, than if the estate were free. It would be far better for the estate and for the revenue not to go outside the principle of the Act of 1894. It is outside the prin- ciple on which that Act was based to levy duty except on the death of a person who is competent to dispose. The original wording of the Act is that Estate Duty shall be claimed on the death of a person who is competent to dispose.

The duty is not paid by the successor. It does not in the least depend on the wealth of the man who is going to get the property or parts of the property. It depends solely on the value of the property at the time of the death which was in the hands of the person who was competent to dispose. You have gone outside the principle of that Act and applied the duty to the case of persons who are not competent to dispose. I would suggest that you should go hack to the original principle of the Act. By charging Settlement Estate Duty you can recoup yourself for any probable loss. It really amounts to this, that within a small area, the area of a single settlement, an estate can by paying Settlement Estate Duty insure itself against frequent claims of duty during the currency of the settlement. I hope that the Chancellor of the. Exchequer will have the matter looked into between now and next Session, and legislate for it. This Amendment and the last were put forward so that these matters might be considered.

I understand from the speech of the right hon. Gentleman that he is not asking the Committee to adopt the Amendment without a correlative Amendment for the re-introduction of the Settlement Estate Duty.

Also that he is not asking the Committee to accept this Amendment now, but is going to ask leave to withdraw it. The position is this. When the Act of 1894 was passed there was a Provision made in regard to settled property that one payment of Estate Duty should, so to speak, frank the settlement so long as the settlement continued. Or, in other words, until the property passed into the hands of the tenant for life competent to dispose- of the whole of it. But as a corollary to that concession the House of Commons imposed a condition that the settled property should in addition to ordinary Estate Duty pay a second duty called Settlement Estate Duty. That was originally taken at 1 per cent. Two or three years later it was raised to 2 per cent. That was substantial compensation to the Exchequer for the exceptional treatment of settled land. The proposal now is that that system should be again adopted. To that I say that the House, after very careful consideration in 1914, came to the conclusion that there was no real reason for treating settled property differently from other property, that the course of descent was not often different with settled property from what it is with any other property—sometimes it is, but not often—and, it was felt, that there was no reason for making this difference. There was an additional reason that if there were a difference which in the result, after taking the exception and the additional duty together and setting them off one against the other, inured to the advantage of settled property it was an invitation to settle and escape the general duty. It was for reasons of that kind that the course taken in 1914 was adopted. To adopt the proposal as it stands would cost a large sum of money, probably 4,000,000 a year, though I understand that it is contemplated by the right hon. Gentleman that additional duty should be imposed making up approximately the same sum.

If it is going to make up the same sum it is as broad as it is long, or it should be so. I cannot express an opinion on that, but this year it is impossible, and the right hon. Gentleman does not treat it as possible, to accept the Clause. All he asks us to do is to consider this Amendment, and the last Amendment, and the Chancellor of the Exchequer authorises me to say that between now and next year he will consider the matter, though he must not be understood as making any promise whatever.

May I ask whether, when a settlement of land is executed now, a stamp duty of 1 per cent. on the value of the property is not payable, while at the time of the Act of 1894 a stamp duty of 10s. only had to be placed on the deed, so that a person now has already paid on the settlement itself an ad valorem duty of 1 per cent. at the time it was settled, and in addition he will have to pay this duty?

What the Solicitor-General said was justified. In reference to the statement that the Government will undertake to give this matter consideration next year I wish to have it placed on record that if the Government do propose to alter this duty next year the proposal will meet with the unmitigated hostility of those who sit on this side.

The right hon. Gentleman has misunderstood what the Solicitor-General said. He said that we would take the matter into consideration, but no pledge has been given.

What is the exact value which the Government attach to taking the matter into consideration? Nothing at all.

I rise because of the interruption of the right hon. Member for Peebles (Sir D. Maclean). Surely, if the suggestion be that the duty should be so increased as to make no difference in amount to the Exchequer, and that it is merely a matter of machinery, there is no reason for that warmth in prophesying objection this time next year. When these duties were put on for the first time in 1894 there was science in the way in which they were put on, and there was a scientific assessment. But in 1914, by reason of our profligate expenditure on all kinds of things, we had reached the absolute limit, and morality in taxation had ceased. What was done in 1914 must not be taken as a standard of just taxation. It is simply a terrible record of what a Government situated as that Government was at that time will do. I am not going to inflict on the Committee the iniquities which were perpetrated at that time with regard to land and taxation. It is going rather far to say that because machinery may be altered in a year's time, so as to produce the same revenue, violent opposition is to be offered by the Front Opposition Bench. Perhaps it will form in the interval an electioneering cry.

With regard to the increase in the Stamp Duty, may I point out that there was an increase in the Stamp Duty some three or four years ago for War purposes, and that it is still running? It is a small thing.

I repeat what I said at the time. I said that when the 1894 Act was passed there was only a 10s. duty, whatever the value of the land settled, and that was the only sum payable. Subsequently an ad valorem stamp duty, on the value of the land settled, of per cent. was placed upon it, and is payable now.

Question, "That the Clause be read a Second time," put, and negatived.