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New Clause—(Payment Of Duties Out Of Capital In Certain Cases)

Volume 155: debated on Wednesday 28 June 1922

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Any Estate Duty which has or shall become payable in respect of lands or chattels settled in the manner referred to in Subsection (5) of Section five of the Finance Act, 1894, shall, notwithstanding anything contained in the Act of Parliament or Royal Grant creating such settlement, be payable out of capital, and the trustees of the settlement may raise such Estate Duty or Succession Duty by sale or mortgage of such lands or chattels or any part thereof.— [Mr. Ormsby-Gore.]

Brought up, and read the First time.

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

This is concerned with what are known as Parliamentary settled estates. I believe there are about fifty or sixty of these in the country. The object of the Clause is to enable such estates to pay Death Duties out of capital. If I succeeded to my father's estate, I should be able to pay out of capital, because it is not a Parliamentary settled estate. Parliamentary settled estates are debarred by law from paying out of capital. There is a glaring case now under consideration in my constituency, and that is why I am moving this Clause. I refer to the Shrewsbury estate, which is the subject of a law suit. If the will of the late Lord Shrewsbury should stand, that estate, being a Parliamentary settled estate, passes to his grandson, who is a small boy, and the Death Duties on the whole property will have to be paid out of that settled estate. The Death Duties are such that if they are to be paid out of income, and the capital cannot be touched, the whole income for the next 11 years will be taken up, and there will not be one farthing to educate or feed that boy. Further, there will be no money whatever to pay two jointures, one for the wife of the previous owner of the estate and the other for an aunt. As these Parliamentary settled estates are so restricted and the Death Duties are now so high, it is essential that we should give them the same sort of freedom as other estates. There will be no money for repairs or for the adequate maintenance of the estate. The whole of the income and the rents will be taken for 11 years and the property will deteriorate in the most lamentable way, and will affect many persons besides the eventual owners of the estate. In the interests of the agricultural dependants on this estate I hope that the Chancellor of the Exchequer will accept the new Clause. I have put it down in two alternative forms. The second form, which appears later on the Paper, has been drafted by a skilled Parliamentary agent who tells me that it effects my object in somewhat more cumbersome language. Even so, there may be verbal alterations required, as to which only a Treasury expert can advise.

I prefer the second of the two alternative forms put down by my hon. Friend. Both effect precisely the same result, but to my legal mind the second is more apt to achieve the purpose than the first.

I am sorry the Government propose to do that. Hard cases make bad law. The argument for altering the settlement which was made under the authority of an Act of Parliament is that in one special case hardship might arise.

That case was only an illustration. It could happen in any other case.

It might. As a matter of fact, as far as I know, it has not happened in any other case. What was the object of the settlement in this case? The object was to preserve the property. The last owner has been rather foolish and he has spent money in a way which the person who settled the estate certainly did not contemplate. Because he has done that, and in order to relieve the estate, it is proposed that part of the estate shall be taken away in order to pay Death Duties, instead of the proper course being adopted, namely, that the Death. Duties be paid out of income. I think my hon. Friend must have been guilty of exaggeration when he said that there would be nothing left for the owner of the property. The proper course would be to ask the Inland Revenue authorities to extend the payments over some years. We do not want to encourage people to spend capital in order that they may have a pleasant time in the next few years. They must be impressed with the fact that they must have bad times and must save money if the country is to be resuscitated. The result of acceptance of this Clause might be that the present owner's son might say, "I will pay the Death Duties from what is left of the property," and in two or three lives you might have nothing left at all. In the end the property would have disappeared. I view with great apprehension the passing of these estates. As things stand at the present moment, it is almost impossible, with the Death Duties and the enormous taxation, for the owners of these historic estates to maintain them. The only possible way is by rigid economy on their own part, and I think a great many of them are exercising it. It would be very serious if all these great estates, with all the advantages which they have conferred upon the country, were to be dissipated. After all, the land-owning class has done a great deal for England. Is it to be wiped out of existence in order that some persons at the present moment may enjoy a pleasant time? Some alteration should be made in the law which would prevent estates being continued in the hands of such persons, and would place them in the hands of someone of rather stronger mind. I do not know whether the Chancellor has considered these points, but I put them before him in all seriousness, and I believe, in what he is going to do now, he is making a great mistake.

I considered very carefully all the points which the right hon. Baronet has put forward, before this Clause came on the Paper at all. The matter has been impressed on my mind, having been brought to my attention in its most extreme form by the case to which my hon. Friend the Member for Stafford (Mr. Ormsby-Gore) referred. I agree with the right hon. Baronet who spoke last that one of the elements of the stability in this country has been the preservation of the old landed properties. I would point out, however, to the right hon. Baronet that the principle with which he was dealing has already been given away by the House, and the right hon. Baronet has been a Member of it for a long time. I do not know whether he raised his voice in this matter on previous occasions, but we have this anomaly to-day, that while there are some 50 Parliamentary estates in the whole country, the great mass of estates in the country are in another category and are what I may describe as ordinary settled estates. What is the fact in regard to them? It is that, the estate duty may be paid out of the corpus of the estate. In fact, only an infinitesimally small part of the estates of England come within the Clause with which we are now dealing. So far as the great mass of the estates of the country are concerned, what the right hon. Baronet asks for has already been given away. It is no good trying to shut the door upon this comparatively small portion of the country's estates. I think it is preserving an anomaly at the present time which we really should not suffer, especially if in doing so we are also to create great embarrassments, not merely to the individuals chiefly concerned, but to every person who resides upon the property.

I think the somewhat ungenerous speech of the right hon. Baronet the Member for the City of London (Sir E. Banbury) requires that some facts should be placed upon record to correct the impression which the right hon. Gentleman evidently intended to create in regard to the particular ease referred to. It is not a question of people having a good time now, as he said. It is a question of getting a fair subsistence to provide for the maintenance and education of the grandson who is the next heir. I wish briefly to tell the Committee that the income of this particular estate is, roughly speaking, £30,000 a year, and when the outgoings of Income Tax, which amount to £9,000 in the current year 1921–22, and the first instalment of Estate Duty, amounting to £18,730, have been paid, there will be a nominal surplus—without any allowance for the maintenance of the estate or making good the ordinary ravages of time—of £2,250. In the following year the Income Tax amounts to £15,750, the second instalment of Estate and Succession Duty to £18,750, and this, with interest on the unpaid duties at 4 per cent., turns that £2,250 surplus into a deficiency of £3,552. So there is an absolute deficiency upon the accounts of the estate without reference to any repairs or maintenance, and nothing to provide maintenance and education for the infant. In the following year the deficiency amounts to £5,536, and so on until in the year 1928–9 the deficiency in the aggregate will have amounted to £34,000. Taking into consideration the incidence of other duties which have to be provided for, there is a total deficiency of £37,350, and not, a penny to pay the jointure of the widow of the late Earl whose son died—not a fraction to pay for the two jointures that are chargeable upon the estate, and nothing to provide for the maintenance and education of the infant. I wish those facts to be placed on record in the OFFICIAL REPORT in order that the speech of the right hon. Baronet may be controverted to that extent.

I am glad my hon. Friend has read extracts from the accounts of the estate. They show the ruinous effect of the enormous taxation which is being imposed at the present moment. They do not do away with my argument that what we ought to do in the dreadful state to which the country has been brought owing to this enormous taxation, is to endeavour to save money and not to endeavour to get out of ruinous taxation by getting rid of our capital. I may point out to my hon. Friend that I suggested the proper way of dealing with cases of this kind, was to approach the Inland Revenue authorities and ask them to allow the payment of death duties to be spread over a longer period. I cannot believe that the Inland Revenue authorities would refuse, as they have allowed the payment of other duties to be spread over an extended period. As to what the Chancellor said, it is quite true that in the case of the ordinary settlement this is allowed, but the particular settlement referred to is not an ordinary settlement. It is a special settlement made under Parliamentary powers, and it is rather a new thing if, when people have gone to the trouble of getting a special Act of Parliament in regard to these settlements, the special Act of Parliament is to be set aside because there are other cases where the people concerned have not gone to the trouble and expense of netting a special Act. I am much obliged to the hon. Member for Ealing (Sir H. Nie1d) for the extracts he has read, which show in a lurid light the position in which we are at the present moment.

Motion and Clause, by leave, withdrawn.