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Orders Of The Day

Volume 466: debated on Monday 27 June 1949

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Finance Bill

Considered in Committee. [ Progress, 23rd June.]

[MR. BOWLES in the Chair]

Clause 23—(Abolition Of Duties)

3.38 p.m.

Question again proposed, "That the Clause stand part of the Bill."

Question put, and agreed to.

Clause ordered to stand part of the Bill.

I had collected the voices. I am afraid that the right hon. Gentleman is now too late. I am sorry.

On a point of Order, Mr. Bowles. There was a very great noise going on and really it was quite impossible to hear.

I put the Question, and I waited quite a long time and looked round the Chamber. With great respect, I do not propose to enter into an argument.

May I say, Mr. Bowles, that I only wanted to make a suggestion to you as to how the Debate might be conducted, and I wonder if you will allow me just to put my suggestions to you at the present moment. Clause 23 is a Clause which abolishes certain existing duties. That abolition cannot really be conveniently discussed by itself but is part of a larger proposal which is perhaps more appropriately dealt with when we come to Clause 24. All I would have sought to say had I been lucky enough to catch your eye on Clause 23, was that it must not be thought that because we accepted Clause 23 without dividing against it, we accepted the principle which that Clause appears to put forward.

Clause 24—(Increase In Estate Duty And Modification Of Provisions Related To Legacy Or Succession Duty)

I beg to move, in page 16, line 33, to leave out "forty-five," and to insert "fifty-five."

The object of this Amendment is to deal with rates of duty upon agricultural land passing at death. Therefore it is an important matter to the agricultural industry upon which we are depending so much for our food production today. We attach the greatest possible importance to this Amendment, the object of which is to restore the position and to give agricultural land the same sort of relief which the predecessor of the right hon. and learned Gentleman retained during his period of office. This Chancellor is more unfriendly to agricultural land seemingly than his predecessor, because his proposals for what he regarded as a modest rise have resulted in a further burden being placed on agricultural land.

It is important that a Government which asks an industry to make sacrifices and undertake further liabilities should increase the duties upon agricultural land passing at death. I would remind the Chancellor that agricultural land and agricultural landlords have a great liability under the Agriculture Act, 1947. We pointed this out in the course of the passage of that Act. We pointed out that capital was expected to flow into the agricultural industry at a great rate every year at the request of the Government, and landlords in putting capital into their land were doing only what the Government had asked them to do. Perhaps the Chancellor would give me a little attention because the agricultural industry is an important one and the landowning community of this country is attempting to do its best at the request of the Government.

I was saying that there was a contract, or that there should have been a contract, between the Government and the landowning community because it is evidently supposed from the terms of the Agriculture Act, 1947, that some £25 million of capital are to be put into agricultural land during the coming year, and some £30 million in the year after, with a view to financing operations under that Act. Further, in this partnership about which we heard so much from the Minister of Agriculture during the passage of the Agriculture Bill, it was laid as a definite duty upon landowners, with penalties attached, they they should so maintain their estates by the introduction of capital that they were able to maintain the buildings and conduct good estate management.

It seems to us, therefore, particularly unfair that after entering into a contract—which I honestly believe the landowning section of the country has tried to observe, of improving estates and putting forward large sums of capital to reform estates—the Chancellor should now come along and attempt by Death Duties to do away with much of the good the landowners are trying to do by investing their capital in the land. I hope, therefore, that the Chancellor will address himself to what we regard as a question of contract, and will explain why in his Budget he is now putting an extra burden upon the agricultural industry by this steep rise in duties on certain agricultural estates.

Now leaving aside the question of contract, and looking forward to hearing the answer of the Government on that matter, I should like to draw attention to the incidence of the new duties. We do not complain about the incidence of this duty on an estate of about £40,000 in value. May I say it is easy to reach these figures with modern equipment on the land, modern dairies and everything else. It is however, upon the medium-sized estates between £40,000 and £100,000 in value that the incidence of this duty is particularly severe. If we take an estate of £100,000 in value, we find that the pre-Budget duty was approximately 15.7 per cent. and that the duty now amounts to 27.5 per cent., which is a considerable increase upon an estate of £100,000 in value. This, therefore, will impose upon the medium and larger estates, but not so much upon the smaller estates, a distinct extra burden.

Now the Government may say that owners have plenty of money and that there is no difficulty in finding capital for the land. I can only say, as one who is associated with agriculture in various parts of the country and has always taken an interest in this respect, that one of the greatest problems in the agriculture industry today is shortage of capital. That affects not only the landowners but also the country, because it deprives the workers of the best equipment and also makes it more difficult to attract labour to the land. Frankly, the only reason why we have been attracting and keeping the young men on the land is partly the order which keeps them there, and partly the much better schools which make their lives more worthwhile and easier.

3.45 p.m.

All of us who look to a great future for agricultural England attach the greatest importance to the introduction of capital into the industry so that conditions for workers on the land may be improved, and so that we may retain on the land the best type of young workers who may grow up and enjoy a useful and attractive life there. That can happen only if capital is brought into the industry, and I can say from my modest experience that there is a shortage of capital for the land. If we look at certain figures we see from the loans granted by the Agricultural Mortgage Corporation and by the Land Improvement Company that although we are still less than halfway through the year, the loans granted and in course of completion in 1949 by the Agricultural Mortgage Corporation exceed the total loans granted in 1948 by some 70 per cent. In the case of the Lands Improvement Company, the increase is of the nature of 200 per cent. That means that owners of land are finding it increasingly difficult to put capital into the industry without recourse to these operations, and it is some indication of the difficulties we are facing in attracting capital to the land.

For these reasons, and for many others I could adduce, it is most important that the Chancellor should give us some concession upon this matter. I shall not stress unduly the sentimental side of the question because under the arrangement suggested by my right hon. Friend the Member for the City of London (Mr. Assheton) we want to raise the question of Death Duties on perhaps the next Amendment or on the Question "That the Clause stand part of the Bill." I am dealing with the specific matter of the rates of duty on agricultural land but, on the sentimental side, and looking at that side from a practical angle, it is sad to feel that this Chancellor should have been obliged—let us look at it in the best possible light—for the sake of getting what I believe will be only a small contribution to his Budget—something perhaps in the neighbourhood of £300,000—to put an additional burden upon the agricultural industry at a time when the right hon. and learned Gentleman and his hon. Friends have been deliberately trying to encourage that industry to produce more.

I do not think this move will be welcomed in the countryside. The owners of property take a pride in their achievement. They take a pride in being able to pass on their business—because that is what modern agriculture is—to their children and families, and there is no doubt that this extra duty will make that increasingly difficult. This is a great pity for the sake of the countryside and for the sake of the traditions which have grown up in the countryside. I hope, therefore, that the Government will give this matter not only what is called in official parlance "sympathetic consideration," but will do something to relieve the burden.

The Government have said from time to time that it is in their interest to enlist the support of the agricultural industry. I can assure them that this increase of Death Duties on agricultural land passing at death has attracted the widespread attention not only of organised bodies and associations in the countryside but also of individual owners. I come from the County of Essex which has more owner-occupiers in it than any other county if one looks at the modern Domesday Book. I have always welcomed this development because I believe the owner-occupier movement is an extremely healthy one and, with the tying up of the tenancy system under the 1947 Act to such a degree, there is everything to be gained, in encouraging owner-occupiership.

I believe owner-occupiers have a great deal to contribute, not only to the industry but also to the prosperity of England. This proposal has removed from many of these people much confidence that they had placed, perhaps inadvisedly, in the belief that the Government were intending to encourage the agricultural industry at all costs. It has caused considerable consternation and depression, and I do not think that the Chancellor, in trying to squeeze this extra money out of the industry, has done a good turn to our countryside or to our agriculture.

I have one final argument. It may be said by the Chancellor, or by whoever winds up the discussion, that it is all very well, but the smaller people do not bear the burden. That is true of an estate worth £40,000, but above that figure, which comprises many of the owner-occupiers of whom I am talking, the burden is very considerably and steeply increased. It is madness to use arguments of that sort in relation to the agricultural industry. Supposing that our interest on all sides of the Committee is in better conditions for the workers; that we want to produce more from the land, on which, I think, we can all agree; and that we want our agricultural industry to compete with overseas and help the Chancellor bridge the dollar gap; from whichever angle we look at it—the workers, efficiency or any other—there is no doubt that the larger agricultural unit in Great Britain is the more efficient. That applies to working conditions; it applies to the opportunities offered for advancement to workers as much as it does to efficiency.

If ever any legislation of this country is to be directed towards a parcellation of the land for what are called social reasons, I am very sorry to say that that will result in a slump in production and in less efficiency in the agricultural industry. Personally, I prefer the smaller unit—it is more homely, friendly and easy to control—but there is no doubt that the bodies concerned with this matter have taken the view officially, and not on the basis of political arguments—of which we have already heard quite enough on this Bill—that the larger unit is on the whole more efficient. It is the larger unit which will be hit by the proposals of the Chancellor.

I have attempted to put these points without, perhaps, all that regard to propaganda and beating the big drum which seems to have been so much a feature of our Finance Bill Debates hitherto. I hope that the Chancellor will address his mind seriously to these arguments and will give us an answer which will reassure the agricultural industry and attempt to relieve this burden.

I hardly think that the Opposition are wise in putting down this Amendment because, for the first time for many years, they have drawn attention to the extraordinary discrepancy there is and always has been in the incidence of Death Duties upon industrial capital and upon agricultural land. A very large number of people do not know that that discrepancy exists, and they would have been very much wiser to count their blessings as represented by the 45 per cent. differentiation of which they gain the benefit. The right hon. Member for Saffron Walden (Mr. R. A. Butler) has tried to make out that this increased tax is a burden upon the agricultural industry. It is not—it is a burden upon the landowner, and upon nobody else. If Death Duties are a burden upon agriculture, they are a burden upon every form of industry. Why does not the right hon. Member for the City of London (Mr. Assheton) come all out and, instead of attempting to differentiate between agriculture and industry, move for a reduction of the whole of it?

That is not what the Amendment does, nor does any later Amendment suggest that agricultural land could be put upon the same basis as industrial capital. What we are now discussing is whether there is any justification whatsoever for a differentiation. Frankly, nothing that the right hon. Member for Saffron Walden has said has given even any colour of a case for it.

The right hon. Gentleman said that landlords were already finding difficulty in pouring back capital. That may be true; but he also gave most interesting figures to show that there are alternative sources of capital. There is the Agricultural Mortgage Corporation, which in the first six months of this year, as he said, had lent 70 per cent. more than in the whole of last year, and the Land Improvement Company, which this year has already lent two or three times as much as in the first six months of last year. It is quite obvious that there is available capital elsewhere.

It does not matter whether it is borrowed or not. The proposal is that the Government shall put 55 per cent. of the Death Duties back into the land or, at least, give the landlord the opportunity of putting 55 per cent. of the normal Death Duties back into the land if he wishes to do so. That is all the Amendment proposes to do. If industry wants capital it has to borrow it. Why should not agriculture be put on exactly the same footing? If the landlord cannot find the money, then somebody else will have to find it, but there is no earthly reason for treating the landlords differently from any industrial capitalist. Agriculture is important, as the right hon. Gentleman emphasised. So is cotton, and steel, and everything else. All our industries are important. Agriculture is not more important than the rest of them. Even though it is on a par with them, there is certainly nothing in the state of agriculture which justifies this extraordinary differentiation.

The right hon. Gentleman said that they were prepared to accept without criticism the scale of charges up to about £40,000. But if he takes a farm worth £40,000, what is he taking? If it is excellent land worth £100 an acre, its acreage would be 400; if it is normal land it may have an acreage of anything up to 1,000. The number of farms in this country of over 400 acres is practically negligible. This is not a tax upon the working farmer, because there are practically no working farmers who own farms of 400 to 1,000 acres. It is a tax upon the landowner, and nothing more.

If the right hon. Gentleman is really honest when he says that he likes the smaller unit; that he would like—I do not know whether I am interpreting him correctly—to see the land broken down into smaller ownerships, this tax will help him. It will not hit the small owner. It will hit the large landowner who owns tens of thousands of acres. If the right hon. Gentleman really wants to see the land broken up then he should support tax equality with industry.

I thank the hon. Member for Chesterfield (Mr. Benson). First, he advised my party that this was an unwise Amendment because it drew attention to unfairness. I have never thought that, although it may be unwise, it is wrong to draw attention to something a change in which may do good to the country as a whole. What the hon. Gentleman has done to incur my personal thanks is that he has undoubtedly strengthened the case very strongly indeed against the imposition of Death Duties as a whole; but I could not, of course, follow him upon that point. He has made a remarkable, interesting and quotable speech of the folly of this form of tax.

4.0 p.m.

I wish to add to the illustrations given by my right hon. Friend the Member for Saffron Walden (Mr. R. A. Butler), the great necessity for increasing money which goes into land. I understand that the Chancellor of the Exchequer has been having some difficulty in the last few days, not in this country but elsewhere, because of costs. Costs are getting very big and they are bearing heavily on the cost of land. Suppose it is desired to re-equip a considerable number of farms for milking purposes, which is most essential for the health of the people. I do not think the Chancellor has any objection to the production of clean milk. An estate rather larger than the £40,000 limit, which has been mentioned several times, would without any doubt have great difficulty in raising enough money for increasing agricultural production of this kind. Everything in the way of buildings, barns or drainage or development would cause heavy costs.

On the one hand, the Government are making big grants, for drainage, for instance, very deliberately and wisely pouring the taxpayers' money into land, but on the other side they drag it out. It does not seem sensible to do everything to get people to develop their land and then, when they have developed it, to have a system of taxation which withdraws immense sums of capital in other ways. I notice that the Chancellor of the Exchequer treats this matter in a rather lighthearted way, and I regret that he should do so as there can be no question of laughter in this matter.

Unless we can attract money to the land on a very large scale in the immediate future, we shall be handicapping the production of the land. We cannot hope to make the land attractive unless we make farming more productive. One of the most important reasons why I advocate that this tax should not be so hard is because if we kept it low, we would encourage housing of agricultural labourers in an economical way. This is a matter of vast importance. I ask the Chancellor, remembering the difficulties he is having at present, to remember that the ordinary citizen engaged in agriculture is in precisely the same difficulty in facing an enormous rise in costs.

Throughout the whole of the West Country any help which can be given to get money back into the land in this way will be valued and will be a great incentive to increased production. No one can say that agriculturists have failed in any way to live up to what has been asked of them. I have been told again and again by workers and small farmers that the worst enemies they have had are those who take taxation out of the land by means of Death Duties. It is no use the Chancellor making nasty faces at me because I am raising a matter which is unpalatable to him. The worker knows that one cannot take money from capitalists and at the same time expect them to use the money to develop land. I regret to call attention again to the fact that this whole question, which so vitally affects food, is treated with levity by the Chancellor of the Exchequer.

My hon. Friend the Member for Chesterfield (Mr. Benson), in his contribution, put the matter in its right perspective. I agree that it is a pity from the point of view of the Opposition that attention has been drawn to the fact that agricultural property enjoys a very generous rebate of Estate Duty compared with the general run of property. Estate Duty at present levied on agricultural property is on the 1919 scale and, although successive increases have been made in the general scale since then, going very high in the upper ranges, no change has been made in regard to agriculture since 1919. It is true that agricultural property pays the full rate of Succession Duty. No doubt owing to consolidation of the duties some hon. Members opposite have been led to the view that my right hon. and learned Friend has been less than fair to agricultural interests. Of course that is not true.

In fact, under the consolidation proposed by my right hon. and learned Friend agriculture is making an overall gain. Whereas under present duties the rebate is roughly 43 per cent., they will now get a rebate of 45 per cent. The suggestion is that the rebate should be increased from 45 per cent. to 55 per cent. My right hon. and learned Friend could not agree to that for one moment. Owing to the changes made, which even out the scale, particularly in the middle ranges, the fact that the two duties have been consolidated, and also because my right hon. and learned Friend has to raise an extra £20 million from the duties, in some instances it can be shown that on some agricultural properties the amount which will now be levied will be greater than before. Nevertheless it is true that the new incidence will not affect those which the right hon. Gentleman has in mind, the smaller estates. It will be much fairer for all concerned and will iron out anomalies and levy the burden where it should be levied, on estates more able to bear it.

The right hon. Gentleman gave instances, and I will give one or two. He indicated that estates below £10,000 were not affected. Under the present method they got no relief. An estate of £100,000 paid 14 per cent. as against the full rate of 35 per cent., a reduction of 60 per cent. in the charge. Owing to the haphazard way in which the scales grew up since 1919 there were definite anomalies which penalised the man with a small agricultural property who came within the incidence of the Death Duties. If, as I assume from what the right hon. Gentleman said, he does not desire that to happen, he should be grateful to my right hon. and learned Friend for what is now being done; because that type of estate owner is definitely being helped, and the burden has been shifted in part to those better able to bear it.

I do not wish to speak at great length on this topic because we are working against the clock, but I shall give a few figures to show how little there is in the charge which has been made. No separate record is kept by the Inland Revenue as to the actual duty levied on agricultural land by way of Estate and Succession Duty. Nevertheless it is possible to estimate pretty accurately what the amount is. At present it is estimated about £3 million per year is paid in Death Duties on agricultural land instead of £5,300,000, which would otherwise be paid if no relief was given on such land. We have consolidated those two duties, and if nothing further were done that would mean that agricultural properties, instead of paying £3 million, would pay something like £2,900,000. There is not a great difference but it would mean that the generous treatment now given to agricultural land would be even more generous unless the Chancellor did something to redress the balance.

If the Committee agrees, as I hope it will, to the suggestion now made in this Clause, and rejects the Amendment, it will mean that something like £3,300,000 will accrue. I again remind the Committee that the amount coming in at the moment is £3 million, so that the total burden placed on the bigger estates by the proposals now being made amounts in total to £300,000. I cannot conceive of any Member of the Committee, however biased he may be, imagining that to be a crippling burden to place on the owners of large agricultural properties. If the Amendment were accepted it would reduce what was receivable from that source to £2,700,000, so there is only a difference of £300,000 between the proposal made by the right hon. Gentleman and the proposals made by my right hon. and learned Friend.

Yes, £600,000; it is £300,000 each way. We are now getting £3 million and if my right hon. and learned Friend's proposals are accepted that figure will become £3,300,000; if the Amendment is accepted we shall receive £2,700,000. When one remembers how generously the agricultural interests are treated we ought to compliment my right hon. and learned Friend on being so generous.

The right hon. Gentleman tried to link this matter up with the Agriculture Act, 1947. If I understood him aright his thesis was that the Government had asked the agricultural interests to bring their equipment up to date. I do not know that they ought to be asked; surely it should be natural for those engaged in agriculture to want to bring their equipment up to date and to become as efficient as possible. They belong, like ourselves, to a great country, and agriculture is the basic industry of this country. They should not require spoon feeding at every turn, but I am not here to argue that one way or the other.

4.15 p.m.

I am saying that, as my hon. Friend the Member for Chesterfield pointed out, other industries have to re-equip themselves, and have to find the money for that from somewhere, and they often have to borrow it. I can find nothing wrong with the fact that agricultural interests may now have to go to certain corporations in order to borrow money. In fact, the figures quoted by the right hon. Gentleman prove too much. They show definitely that agricultural property is a very good investment. When these people go to the market for money they find that they can raise it without any trouble, and so far as my information goes, they can raise it at rates of interest well below what other industries would have to pay. Indeed, the man with money, remembering how high the rate of Death Duty is, would be well advised to invest in agricultural property because when his estate comes to be valued he will find that duty will be payable at 45 per cent. less than in the case of another man who has other forms of property. Therefore, I ask the Committee to reject this Amendment as unreasonable and one which should not be accepted.

The trouble about the right hon. Gentleman and the hon. Member for Chesterfield (Mr. Benson) is that neither of them really listened to the speech of my right hon. Friend the Member for Saffron Walden (Mr. R. A. Butler), and it would seem that neither of them has read in full the terms of the Agriculture Act, 1947. That Act places a statutory obligation upon the owners of agricultural land in a way which so far as I am aware, is not imposed upon the owner of any other form of property. There is a statutory obligation on the agricultural landowner to keep his buildings, farms and equipment up to date.

The fact remains, whether the right hon. Gentleman likes it or not, that a landowner's capital is not unlimited, and the same capital cannot be paid out in two different directions at the same time. It can either go into buildings or into the Chancellor's pocket in the form of Death Duties; it may go either in one way or the other but not in both. The right hon. Gentleman puts forward the facile argument that it is a simple operation for any agricultural landowner to borrow money from the Agricultural Mortgage Corporation or the Land Improvement Company. Of course it is, but if one borrows money one pays interest, and if one pays interest one puts a charge on the land. To carry a heavy annual rate of interest is sometimes not at all easy on marginal land.

The position which the right hon. Gentleman has taken up in asking the Committee to reject the Amendment is quite illogical. The more any agricultural landowner fulfils his obligations under the 1947 Act the more his successor is penalised. That is a ridiculous position to get into when the Chancellor and the Minister of Agriculture are continually telling the industry that the more food produced at home the greater is the amount of dollars saved. It is more often than not forgotten that sometimes the only realisable assets for Death Duties on an agricultural estate is a commodity which is in very short supply—namely timber. Perhaps the Chancellor had forgotten that point, and its implications upon timber supplies.

When the Financial Secretary tells us that the difference at stake is only a matter of £600,000–20 per cent.—he should carefully work out the number of pairs of agriculture cottages that could be built, the number of farm buildings that could be repaired and put up, the electric milking equipment that could be installed for that sum of money, and he might then have some rough idea of the damage which he is doing to the agricultural industry in asking the Committee to reject this Amendment.

I should like to add a word to what my hon. Friend the Member for Windsor (Mr. Mott-Radclyffe) has just said, and to try to reply to some of the points made by the hon. Member for Chesterfield (Mr. Benson) as well as to some of those made by the Financial Secretary. First, I would remind the Chancellor of the words he used introducing his Budget, when he said:

"I propose to substitute for the present concession on agriculture property … a new relief … of an abatement of 45 per cent. … which will produce approximately the same result by way of relief."—[OFFICIAL REPORT, 6th April, 1949; Vol. 463, c. 2096.]
I do not think the Chancellor could have studied the figures as closely as some of us have since done, or he could not reasonably have made that statement. It may well be that an additional imposition of £300,000 in total appeared to him to produce approximately the same result. Whether that is so or not, the fact is, as was pointed out by my right hon. Friend the Member for Saffron Walden (Mr. R. A. Butler), that on all estates above £35,000 the rate of duty is very heavily increased. I hope that the Chancellor will notice that with regard to the middle ranges of estates this increase amounts to 74.5 per cent. which cannot be called a moderate levy; it is a steep and substantial increase of taxation. I therefore suggest that when he made the original suggestion he did not appreciate entirely the significance of his proposals. Perhaps he has done so since. I hope he will reconsider the arguments which have been put forward from this side of the Committee and also these proposals.

The hon. Member for Chesterfield made a number of interesting points, as he always does. He started by saying that there was no justification for the discrepancy between the charge of duty on other forms of property and on agricultural land; between industry and agriculture. I would ask him to consider these points. He is very familiar with the basis of valuation, more familiar than I am and a great many hon. Members of this Committee. He knows that when an agricultural estate is valued, it is valued on the basis of that estate being broken up. It is not valued on the basis of the rent revenue which it earns and that alone makes a tremendous difference in the total result obtained from valuation.

I am sure all hon. Members are aware of the very low return on capital which applies to the agricultural landowning industry. It is lower than any other industry in the country. Moreover, out of the rents which are received by the agricultural landowner as distinct from many other forms of rent received, a very large proportion—up to 50 per cent. in the bulk of cases—has to be put back in repairs which at the present time are exceedingly heavy and expensive. So, whereas the income of an estate which appeared to be, let us say, £1,000, would be valued when it comes to valuation more or less on that basis, the return to the owner is only half that sum. So in fact the owner of agricultural land who has to pay Death Duties has to pay a great deal more in relation to his income than is payable on any other form of property.

That is perfectly true, but the right hon. Gentleman must not forget that the purchasing value of the land depends entirely on the desire of people to own it. If there is a large multiplier for valuation purposes, that is merely the measure of the desire to own land.

I entirely agree with the hon. Member, but that does not make it any easier for the owner of the property to find the money to pay for it. It may well be that what the hon. Member says is true. Would he say that the solution is to break up all estates into small units? I do not think that would be in the interests of agriculture.

The hon. Member said that it was not a tax on the working farmer. I agree, unless the working farmer owns a farm valued at more than £35,000. There are some who do, but not a very large number. It may not be a direct tax on the working farmer, but he feels the draught of it, because the landowner immediately has his resources very largely reduced and crippled. He cannot find the money which he might otherwise find for extensions of buildings and to pay for new cow sheds, new dairies and other things which he is being pressed to do at the present time. Nor can he easily find the money so necessary for repairs. There is no doubt therefore that the tenant farmer does feel a serious and immediate effect. Hon. Members are justified, in my opinion, in saying that it is a tax on the working farmer, because it is a tax the burden of which he feels.

The Financial Secretary talked about a generous rebate and he said that in some instances there was no increase at all. But does he appreciate that in all instances over £35,000 there is a very substantial increase? It is not a question of some fortuitous increases in the scale but there is an increase in every case where property devolves from father to son and the estate is more than £35,000. It is a substantial increase, running at the peak level at 74 per cent., which is an enormous increase, and is extremely discouraging to the owner of agricultural land. I hope

Division No. 176.]

AYES

[4.30 p.m.

Acland, Sir RichardAustin, H. LewisBarton, C.
Adams, Richard (Balham)Awbery, S. S.Battley, J. R.
Albu, A. H.Ayles, W. H.Bechervaise, A. E.
Allen, A. C. (Bosworth)Ayrton Gould, Mrs. B.Benson, G.
Anderson, A. (Motherwell)Balfour, A.Binns, J.
Attewell, H. C.Barstow, P. G.Blackburn, A. R.

that the Chancellor will take into account some of the observations made from this side of the Committee and will reconsider the matter, and appreciate that there is more in the argument than he thought.

There are two quite important points that arise from this. The Chancellor and the Financial Secretary seemed to be much more occupied in ironing out anomalies than in concentrating on the effect of this on the efficiency of the agricultural industry of this country. It so happens that on the larger estates affected by this matter, there take place a large proportion of the great experiments in dairy farming which can only be carried out on large herds over a fairly wide area. It is very often on just this type of farm that nearly all the important agricultural changes, such as experiments in grass drying and herd experiments, have been and can be carried out. If the right hon. and learned Gentleman wishes to have that point reinforced, perhaps on the pleasure trip he is undertaking to France the day after tomorrow, he will inquire what has happened there.

This tendency to break down the big estates has brought French agriculture to its lowest possible pitch and there is now being considered by the French Government a series of Bills with regard to the lotissement, the breaking up of the larger agricultural units, because they have been found so much more practical and efficient. This Clause to which the Amendment is being moved, does have exactly that effect of breaking down the farms on which the big-scale and long-term experiments can be carried out. I hope that the Chancellor will consider this entirely practical point which can be reinforced by any of his hon. Friends who take a practical interest in agriculture. I regret to say that it is part of the whole Socialist system of breaking down probably the most useful form of agriculture there is in this country.

Question put, "That 'forty-five' stand part of the Clause."

The Committee divided: Ayes, 217; Noes, 100.

Blyton, W. R.Holmes, H. E. (Hemsworth)Proctor, W. T.
Bowden, Fig. Offr. H. W.Horabin, T. L.Pursey, Comdr. H.
Braddock, Mrs. E. M. (L'pl. Exch'ge)Houghton, A. L. N. D. (Sowerby)Randall, H. E.
Braddock, T. (Mitcham)Hoy, J.Ranger, J.
Bramall, E. A.Hudson, J. H. (Ealing, W.)Reeves, J.
Brook, D. (Halifax)Hughes, Hector (Aberdeen, N.)Reid, T. (Swindon)
Brooks, T. J. (Rothwell)Hughes, H. D. (W'lverh'pton, W.)Ridealgh, Mrs. M.
Broughton, Dr. A. D. D.Hutchinson, H. L. (Rusholme)Robens, A.
Brown, T. J. (Ince)Hynd, H. (Hackney, C.)Roberts, Goronwy (Caernarvonshire)
Bruce, Maj. D. W. T.Hynd, J. B. (Attercliffe)Robertson, J. J. (Berwick)
Burden, T. W.Irvine, A. J. (Liverpool)Robinson, Kenneth (St. Pancras, N.)
Burke, W. A.Irving, W. J. (Tottenham, N.)Rogers, G. H. R.
Butler, H. W. (Hackney, S.)Jay, D. P. T.Ross, William (Kilmarnock)
Castle, Mrs. B. A.Jeger, G. (Winchester)Royle, C.
Chamberlain, R. A.Jeger, Dr. S. W. (St. Pancras, S. E.)Segal, Dr. S.
Champion, A. J.Jenkins, R. H.Sharp, Granville
Chater, D.Jones, D. T. (Hartlepool)Shurmer, P.
Chetwynd, G. R.Jones, P. Asterley (Hitchin)Silverman, J. (Erdington)
Cocks, F. S.Keenan, W.Silverman, S. S. (Nelson)
Collindridge, F.Key, Rt. Hon. C. W.Simmons, C. J.
Collins, V. J.Kinghorn, Sqn.-Ldr. E.Skeffington, A. M.
Colman, Miss G. M.Kinley, J.Skeffington-Lodge, T. C.
Cook, T. F.Kirby, B. V.Skinnard, F. W.
Corlett, Dr. J.Leonard, W.Smith, C. (Colchester)
Cove, W. G.Levy, B. W.Smith, S. H. (Hull, S. W.)
Crawley, A.Lewis, J. (Bolton)Snow, J. W.
Cripps, Rt. Hon. Sir S.Lindgren, G. S.Solley, L. J.
Crossman, R. H. S.Lipton, Lt.-Col. M.Sorensen, R. W.
Daines, P.Logan, D. G.Soskice, Rt. Hon. Sir Frank
Davies, Edward (Burslem)Lyne, A. W.Sparks, J. A.
Davies, Ernest (Enfield)McAdam, W.Stross, Dr. B.
Davies, R. J. (Westhoughton)McAllister, G.Stubbs, A. E.
Deer, G.McEntee, V. La. T.Summerskill, Rt. Hon. Edith
Delargy, H. J.McGhee, H. G.Taylor, R. J. (Morpeth)
Dobbie, W.Mack, J. D.Taylor, Dr. S. (Barnet)
Dodds, N. N.McKay, J. (Wallsend)Thomas, D. E. (Aberdare)
Donovan, T.Mackay, R. W. G. (Hull, N. W.)Thomas, George (Cardiff)
Driberg, T. E. N.McLeavy, F.Thomas, I. O. (Wrekin)
Dugdale, J. (W. Bromwich)MacPherson, Malcolm (Stirling)Thorneycroft, Harry (Clayton)
Dye, S.Mainwaring, W. H.Thurtle, Ernest
Evans, Albert (Islington, W.)Mallalieu, J. P. W. (Huddersfield)Titterington, M. F.
Evans, S. N. (Wednesbury)Mellish, R. J.Tolley, L.
Ewart, R.Messer, F.Ungoed-Thomas, L.
Farthing, W. J.Middleton, Mrs. L.Vernon, Maj. W. F.
Fennyhough, E.Millington, Wing-Comdr. E. R.Viant, S. P.
Follick, M.Mitchison, G. R.Wallace, G. D. (Chislehurst)
Foot, M. M.Monstow, W.Wallace, H. W. (Walthamstow, E.)
Forman, J. C.Morris, P. (Swansea, W.)Warbey, W. N.
Gallacher, W.Morrison, Rt. Hon. H. (Lewisham, E.)Watkins, T. E.
Gibbins, J.Mort, D. L.Wells, P. L. (Faversham)
Gitzean, A.Moyle, A.West, D. G.
Glanville, J. E. (Consett)Murray, J. D.Wheatley, Rt. Hon. John (Edin'gh, E.)
Grenfell, D. R.Naylor, T. E.White, H. (Derbyshire, N. E.)
Grey, C. F.Meal, H. (Claycross)Whiteley, Rt. Hon. W.
Grierson, E.Nichol, Mrs. M. E. (Bradford, N.)Wilkes, L.
Griffiths, D. (Rother Valley)Noel-Baker, Capt F. E. (Brentford)Williams, D. J. (Neath)
Griffiths, W. D. (Moss Side)Oliver, G. H.Williams, J. L. (Kelvingrove)
Gunter, R. J.Orbach, M.Williams, Ronald (Wigan)
Guy, W. H.Paget, R. T.Williams, Rt. Hon. T. (Don Valley)
Hall, Rt. Hon. GlenvilPargiter, G. A.Williams, W. R. (Heston)
Hamilton, Lieut.-Col. R.Parker, J.Willis, E.
Hannan, W. (Maryhill)Paton, Mrs. F. (Rushcliffe)Woodburn, Rt. Hon. A.
Hardy, E. A.Paton, J. (Norwich)Wyatt, W.
Hastings, Dr. Somerville.Poole, Cecil (Lichfield)Yales, V. F.
Haworth, J.Popplewell, E.Young, Sir R. (Newton)
Herbison, Miss M.Porter, E. (Warrington)
Holman, P.Porter, G. (Leeds)TELLERS FOR THE AYES:
Mr. Pearson and Mr. Wilkins.

NOES

Agnew, Cmdr. P. G.Butcher, H. W.Drayson, G. B.
Amory, D. HeathcoatButler, Rt. Hn. R. A. (S'ffr'n W'ld'n)Drewe, C.
Assheton, Rt. Hon. R.Challen, C.Dugdale, Maj. Sir T. (Richmond)
Baldwin, A. E.Channon, H.Duthie, W. S.
Baxter, A. B.Clarke, Col. R. S.Eccles, D. M.
Beamish, Maj. T. V. H.Conant, Maj. R. J. E.Eden, Rt. Hon. A.
Birch, NigelCrookshank, Capt. Rt. Hon. H. F. C.Elliot, Lieut.-Col. Rt. Hon. Walter
Boles, Lt.-Col. D. C. (Vells)Crosthwaite-Eyre, Col. O. E.Erroll, F. J.
Boothby, R.Crowder, Capt, John E.Fletcher, W. (Bury)
Boyd-Carpenter, J. A.Cuthbert, W. N.Fraser, H. C. P. (Stone)
Braithwaite, Lt.-Comdr. J. G.Darling, Sir W. Y.Fraser, Sir I. (Lonsdale)
Bromley-Davenport, Lt.-Col. W.Digby, Simon WingfieldGammans, L. D.
Brown, W. J. (Rugby)Dodds-Parker, A. D.Gridley, Sir A.
Buchan-Hepburn, P. G. T.Dower, Col. A. V. G. (Penrith)Grimston, R. V.

Hannon, Sir P. (Moseley)Maclean, F. H. R. (Lancaster)Spearman, A. C. M.
Harden, J. R. E.MacLeod, J.Stanley, Rt. Hon. D.
Harris, F. W. (Craydon, N.)Maitland, Comdr. J. W.Strauss, Henry (English Universities)
Head, Brig. A. H.Manningham-Buller, R. E.Sutcliffe, H.
Headlam, Lieut.-Col. Rt. Hon. Sir C.Mellor, Sir J.Taylor, C. S. (Eastbourne)
Hinchingbrooke, ViscountMorris, Hopkin (Carmarthen)Taylor, Vice-Adm. E. A. (P'dd't'n, S.)
Hogg, Hon. Q.Mott-Radclyffe, C. E.Teeling, William
Hutchison, Lt.-Cdr. Clark (Edin'gh, W.)Neven-Spence, Sir B.Thomas, Ivor (Keighley)
Hutchison, Col. J. R. (Glasgow, C.)Nicholson, G.Touche, G. C.
Keeling, E. H.Noble, Comdr. A. H. P.Turton, R. H.
Lancaster, Col. C. G.Odey, G. W.Watt, Sir G. S. Harvie
Lennox-Boyd, A. T.Peto, Brig. C. H. M.Webbe, Sir H. (Abbey)
Linstead, H. N.Pickthorn, K.Williams, C. (Torquay)
Lloyd, Selwyn (Wirral)Rayner, Brig, R.Williams, Gerald (Tonbridge)
Lucas, Major Sir J.Reed, Sir S. (Aylesbury)York, C.
Lucas-Tooth, Sir H.Roberts, H. (Handsworth)Young, Sir A. S. L. (Partick)
MacAndrew, Col. Sir C.Roberts, W. (Cumberland, N.)
McCorquodale, Rt. Hon. M. S.Robertson, Sir D. (Streatham)TELLERS FOR THE NOES:
Macdonald, Sir P. (I. of Wight)Ropner, Col. L.Brigadier Mackeson and
McFarlane, C. S.Ross, Sir R. D. (Londonderry)Colonel Wheatley.
Maclay, Hon. J. S.Smithers, Sir W.

I beg to move, in page 16, line 33, at the end, to insert:

"and where the property in respect of which estate duty is chargeable passes to persons who, save for section twenty-three of this Act, would have been liable to legacy duty or succession duty at the rate of two per cent., then on that proportion of the property passing and for the benefit of those persons there shall, without prejudice to the reduced rate applicable to agricultural values, be a further reduction of five per cent. in each of the rates."
I understand that it would be agreeable to you, Major Milner, and I hope that it would be agreeable to the Committee, if the discussion on the main proposals of the Chancellor of the Exchequer with regard to Death Duties were to take place on this Amendment.

I should like to try to warn the public that everyone who has made a will ought to have a look at it, because the new proposals made by the Chancellor are most likely to have an important effect upon it. You, Sir, as a member of the legal profession, will be fully apprised of that fact, but there may be many people who do not understand what a considerable revolution has been made in the Death Duty system by these proposals. I hope that they will all take occasion to look at the wills which they have made.

The proposals of the Chancellor which are embodied in this Clause have three main effects. First, they end the present differentiation in favour of near relatives of the testator. Secondly, they greatly increase the amount payable, especially in the middle range of estates. Thirdly, they increase the duty on agricultural land more steeply in relation to its present level than they increase the duty on any other class of property. That is the point which we have already discussed on the last Amendment, and naturally I shall not carry it any further on this occasion.

I suggest to the Committee that all these three moves which the Chancellor has made are really undesirable moves. He has put forward the proposal to abolish Legacy and Succession Duty and to concentrate all Death Duties on Estate Duty in the interests of simplification, and I am sure that all of us are always glad to look with sympathy on any proposal which simplifies the law relating either to Income Tax or Death Duties. But there are occasions when simplifications is bound to lead to what many people will think are injustices or undesirable consequences, and I think this is one of them. At the present time, in addition to Estate Duty, when estates pass there is charged a duty of 2 per cent. if the property is left to the widow and children, 10 per cent. if it is left to nephews and nieces, and 20 per cent. if it is left to a stranger; that is in addition to the substantial rate of Estate Duty which already runs up to 75 per cent.

Under the new proposals, the widow and children, the nephews and nieces and the stranger are all to pay the same rate of duty, and we on this side of the Committee think it is a very undesirable proposal, because we think that the present advantages which are conceded to the near relatives, for whom a testator is always most anxious to provide, are not only reasonable but human, civilised and very desirable in the interests of the family, and I believe hon. Members opposite, as well as those on this side, will think it important to consider carefully the interests of the family. There was a very interesting letter in "The Times" recently emanating from the Reform Club, though not from a member of my party, but from a distinguished ex-civil servant, as a matter of fact, in which he made this statement, which puts the whole case so well:
"To provide for the needs of widow and children is an elementary social duty. The above comparison shows with what unnatural and unsocial force the new scale may operate and how great is the additional inroad made on the resources available for the immediate family of the testator… It is difficult to follow the argument for a scale which leads to such results—in some cases to substantial reductions in the aggregate rate of tax applying to estates passing to outside beneficiaries, and, on the other hand, to swingeing increases in the case of estates passing to wife, husband or children."
Then he gives a table of figures to illustrate his point, and it really is very remarkable, because, on studying it more closely, I find that, in all ranges of estates up to £67,000, a stranger will obtain a substantial remission of duty under these new proposals, whereas the family man will find his estate taxed much more heavily.

If, for instance, we take an estate of £25,000 at the present moment, if it is left to the widow, the duty is just over 15 per cent., whereas if it goes to an outside relative or a stranger it is 31 per cent. Under the proposed uniform scale, there is an increase for the widow of 14 per cent., and it rises, in the case of an estate of £100,000, to an increase of 38 per cent. These are what the Chancellor has described as a "moderate lift," but I do not think he can have studied the table quite as closely at that stage as I hope he has been able to do since. Whatever those figures indicate, they are not a "moderate lift," but a very substantial increase indeed.

I should like to make one or two general observations on the subject of Death Duties. We see in the newspapers that a man has left £50,000 or £100,000, and, no doubt, to the ordinary reader, that immediately conjures up the idea of a large bank balance which is to be freely available for spending by some fortunate heir, who may or may not be related in blood to the deceased. Of what does that estate consist? First of all, it very likely consists of the man's own house, all the furniture in it, the tables, chairs, the pictures on the walls, his mother's picture and his father's picture, the silver on his table, if he is lucky enough to have any, his motor-car, all the clothes he possesses, and so on.

4.45 p.m.

What else does it include? If he has a business, it includes his factory and all its machinery, tools, motor-cars and all the various articles of which he had to be the proprietor in order to run that particular business. Or, if he was a farmer, it includes his cows, sheep and pigs and so on. When it comes to finding the Death Duties, the Inland Revenue says "We want cash." They are not prepared to take 10 cows, the dining room table or the old motor-car; what they say is "We want cash." When we are looking at a proposition of this sort where people are subject to Estate Duty, we must realise that all these effects will have to be turned into cash before the duty can be paid.

How is the cash found? In some cases, it may be that the man was sufficiently wealthy to have a considerable amount in gilt-edged securities with which to meet such a charge, but that is by no means the ordinary case or the inevitable practice. Most people who have small businesses and some who have large ones have not got the large resources in cash from which they can face a demand of this sort, so what do they do? Some men try to prepare for the occasion in advance by selling their assets or by not extending their businesses.

I heard a story from an hon. Member here which was a personal experience, and I was interested to learn that he was a Scotsman. It concerned a man who himself owned two factories both employing between 500 and 1,000 men, and he was in course of preparing plans to build a third factory. When he heard of a substantial increase in Death Duties, he asked his accountants what it would mean to him. They told him that it would mean so many thousands of pounds, and he said, "But I have not got £30,000" (or whatever the sum was). The accountants said, "No, but your executors will have to find it when the time comes." He then said, "If that is the case, we cannot go on with the plans for the new factory, and the extension of the present factory must be stopped. We must accumulate money with which to pay these duties when I die, because, otherwise, the business will be in difficulties. What will happen then? What will my son be faced with? Will he be faced with the prospect of closing down the factory, selling the machinery and so on?"

I think hon. Members opposite frequently consider these matters from the angle of the big industrial company which has a large number of shares on the market—shares which, when a man dies, have to be sold and can normally be sold on the market, though I understand that conditions in that respect today are very difficult. In the case of a small business or a landed estate or big farm, that is not the case. It is not capitalised in that way, and we do not have a large number of people owning marketable shares which enable the money to be found fairly quickly. The fact therefore is that these duties are a great deal more related to the ordinary life of the people than perhaps some hon. Members have been inclined to concede. They may affect very closely very humble people indeed.

Of course, there are a great many classical objections to Death Duties into which I will not go into detail now. In the first place, the most obvious one is that the country is living on capital, because we are spending, or did spend last year, £172 million of capital by way of income; that is to say, £172 million were being put into the hands of the Exchequer and the Chancellor was spending that £172 million as annual revenue. I know it can be argued that the people who bought the deceased's property bought it out of savings, and that, therefore, there has been no destruction of capital. But, of course, that is a false argument, because the £172 million would have been there to establish new capital had it not been used in that particular way. That being so, the community is undoubtedly living on its capital in so far as it uses Death Duties to finance its current expenditure. I do not think that can be controverted.

Then, of course, it is quite clear that it has a distinct disincentive effect on saving, and that, I think, has been more apparent in recent years than ever before. We have a situation in which capital is now being spent which, but for excessive Death Duties, might not be spent. The Committee ought not to forget the very grave hardship on the breadwinner. Take a man who has built up his own business and established a substantial position. He might, perhaps, be earning what would be considered a good income and have struggled to put aside out of that income a certain amount of money to provide for his widow and children. We know how difficult it is to put aside money at the present time owing to the very high rate of taxation, and that the tax on a big income is so high that it is difficult to save anything at all. The highest kind of income which an individual can now receive does not conduce to very substantial saving.

Take such a man who has succeeded in the course of his life in making some substantial savings, and who then dies. Perhaps he dies sooner than he expected—he may die in the prime of life—but at the very moment when the breadwinner is removed and is no longer able to provide money with which to support his wife and children, the State comes down on his dependants for this money. These rates of Death Duties go up to extraordinarily steep levels. In some cases they are as high as 80 per cent., and even on an estate of £100,000 they are 50 per cent. That does not seem to me a very sensible way of going on. To begin with, we are using the capital resources as income, and, secondly, we are imposing a very heavy burden on a family just at the moment when its members are probably least able to bear it.

I shall not take the opportunity now of deploying many of the other arguments that exist. There are a great many detailed arguments dealing with the question of aggregation which cause special hardship in relation to Death Duties, but in view of the arrangement we made with the Treasury Bench the other night, I should like to put off the development of these particular arguments until some future occasion. The particular Amendment on which I have hung the observations I have made proposes, in some degree, to remedy the blow which the Chancellor of the Exchequer has struck by removing the differentiation in favour of the family. We have inserted a proviso in the Amendment to the effect that, in the case of property left to a widow or a child, there shall be a further reduction of 5 per cent. I think that is a very moderate and reasonable proposal, and I hope that the Government will concede it.

I rise to support this Amendment. I do not propose to add much to the arguments already put forward by my right hon. Friend against these tremendously high Death Duties because the wasting of time by repetition is not my object. However, I think that the Government are under an obligation to this Committee to state quite clearly why they have removed the privilege and precedence of the family in connection with the question of Estate Duty. I think we are entitled to know why that has been done. A step has been taken which will be injurious to widows and children when this Bill becomes an Act, and we are entitled to know what are the arguments in support of this action, and why it has been taken.

During the last 12 months, I have been in many of the Colonies and in many foreign countries, and in nearly every one of them a privilege is extended to widows and children in connection with Estate Duty. For instance, in South Africa, when a man dies, not a penny in Death Duties is charged upon the estate which goes to the widow. The widow takes the estate complete, and it is not until she dies that the full charge of Death Duties is levied upon the estate. I am not saying that the South Africans are more enlightened than we are, or vice versa, but we all come from the same group of nations and we are all part of the British Commonwealth of Nations. The fact remains that in one part of the Commonwealth the widow does not have to pay a single penny in Death Duties while in this country we have a Government who say that she is to be treated just as if she were a stranger or a casual acquaintance of the deceased. Without labouring that particular point any more, I hope that the Solicitor-General will make it clear to the Committee why this has been done.

The right hon. Gentleman the junior Member for the City of London (Mr. Assheton) who moved this Amendment and the hon. and gallant Member for Penrith and Cockermouth (Colonel Dower) who supported it really advanced arguments which I thought fell into two separate categories. The one category of argument, namely, that which related to the hardship on the breadwinner whose estate had to pay Death Duties just at a time when it might be most difficult to do so were really arguments against the incidence of Estate Duties at all. Once Estate Duty becomes an institution of this country, none of those particular arguments, as far as I can see, have any especial validity to the change we are now making. Either Estate Duty is wrong or it is right. If it is right that Estate Duty should be charged, then it is no good complaining that a breadwinner who is earning a good income is treated harshly in that at the very moment when his family is left Estate Duty is charged in cash. Those are general arguments and are relevant, perhaps, to the increase as distinct from the form of the duty. My right hon. and learned Friend the Chancellor of the Exchequer has made it clear that he feels that the requirements of the country need a further increment of some £20 million from Death Duties. Those moneys are to be collected by an increase in duty on estates in excess of £35,000.

The second category of argument related to the way in which the family was affected by this new change. I believe that everybody in the Committee is sympathetic towards the desire of the Government to simplify the incidence of these duties. In their present form they are really most illogical and most inconvenient to everybody. An estate becomes liable to Estate Duty upon the death of a particular person, but after Estate Duty is paid, and it is thought by the ordinary person that everything is cleared up, Succession Duty or Legacy Duty, as the case may be, has to be paid in addition. It produces a great deal of complication, both from the point of view of beneficiaries, accountants, solicitors, and everybody else. The main object of abolishing Legacy and Succession Duties is to simplify the state of the law, and to make it fit more closely into actual life.

5.0 p.m.

The question, therefore, is whether the change which we have proposed operates in an undesirable way. It is said by hon. Members opposite that it does because it unfairly affects close relatives; that is to say, that it falls too heavily on wives and children. In reply to that, I would say that there are other considerations which the Committee should take into account. It is extremely difficult at the moment to justify the present incidence of Legacy Duty and Succession Duty, and I will try to give some reasons why. Take, for example, a large estate the residue of which goes to the son. It might be half a million pounds. The testator may have made provision for, say, an aged aunt or aged and impoverished relatives who are entirely dependent upon him and have no other means of support. I do not know what is the experience of other hon. Members, but I should have thought that in the case of large estates, normally the residue goes to the children and the estate makes provision for servants, relatives, charities and for a number of purposes of that sort.

As the matter stands at present, it works out in this way. As I said, the residue may be half a million pounds. That goes to the son and the son pays on that sum 2 per cent. Legacy Duty. Now let us take the aged aunt who may have been given a legacy of, say, £1,000 or £2,000 simply in order to assist her, she having no other means of support. It is really indefensible that she should have to pay 20 per cent. on that legacy, whereas the son who gets the whole of the residue of half a million pounds should only have to pay 2 per cent. That seems to us an entirely illogical position; not only that, but it seems extremely harsh. The person who desperately needs the money in that case is not the son who has got his life before him and who can earn his own living, but the relative who is dependent upon the legacy of £1,000 or £2,000 which she may have been left in order to assist her.

Is not the right hon. and learned Gentleman aware that in every well drawn will the Legacy Duty on such a legacy as he has described is drawn on the residue?

I am very well aware of that, and that is the case with regard to two out of three wills. That is the next point to which I wish to come. Two out of three testators who leave their money under terms of testamentary dispositions which they have executed provide that in the case of that sort the legacy shall be free of Legacy Duty to the beneficiary. What the present law requires one to do is, not withstanding that the testator has intimated as his desire that the relative shall have her legacy free of duty, we, in enforcing the present law, go contrary to his wish and carve the Legacy Duty out of the residue of the estate. That is the second point which I desire to make in asking the Committee to agree that the present state of the law is completely and utterly irrational. It is perfectly absurd that when the testator has said that he wishes the legacy to be free of Legacy Duty, the law should then say, "Oh, well, never mind; contrary to the expression of his wish, we are going to carve a fresh Legacy Duty out of the residue of the estate." That is what is done, and in our view it is completely indefensible.

A third consideration, and one which I think is of importance, is this. Legacy Duty and Succession Duty at the moment fall far more heavily upon small estates than upon rich estates. Take a case, for example, of an estate of £6,000 left to brothers who pay Legacy Duty at the rate of 10 per cent. The rate of Estate Duty would be 3 per cent., and then Legacy Duty is paid by the brothers on the benefit which they derive at the rate of 10 per cent. That represents mathematically a gross payment approaching 13 per cent. on the total of the £6,000 estate. I say "approaching" and not actually 13 per cent., because first 3 per cent. is charged on the total amount and then 10 per cent. is charged upon the balance, but it approaches 13 per cent.

Suppose it is a fairly big estate of, say, £3 million. I am taking a very big estate in order to illustrate the point I am trying to make. Under the present scale—that is to say, before the alteration which we are seeking in this Bill to make—the Estate Duty is 75 per cent.; assume it is left to brothers and they have to pay 10 per cent. on the legacy left to them. The total amount paid is 77½ per cent. Whereas we have an increase of from 3 per cent. to 13 per cent. in the case of an estate of £6,000, with a big estate—an estate charged at the rate of 75 per cent. which is the rate charged on estates over £2 million—the increase is 2½ per cent. That is another reason why the present rate of Legacy Duty is indefensible. It falls much more heavily upon small estates than on large estates.

What is the change that we have made? It is not easy in cases of these duties to devise a system which is absolutely beyond criticism from every point of view. What is the position with regard to wives and children under the new system which we are seeking to introduce by this Bill? On estates not exceeding £15,000, under the existing law wives and children pay no Legacy Duty. That position is being preserved, in this sense that under the new rates which we are introducing in the Schedule to this Bill the total Estate Duty chargeable on estates up to £17,500, which now incorporates Legacy and Succession Duty, is the same as the present existing Estate Duty. In other words, what we have done in the case of estates up to £17,500 is that we have virtually washed out Legacy Duty and Succession Duty. It is exactly the same. All wives and children, who at the present rate pay no Legacy or Succession Duty on estates up to £15,000, will be in exactly the same position; they will not have to pay one penny more. In point of fact, they will pay rather less, in that they are advantaged in the case of estates between £15,000 and £17,500.

As I say, the rate is still the same as the old Estate Duty rate was, although with an estate over £15,000 at the present rate wives and children will have to pay 2 per cent. In the case of that narrow margin between £15,000 and £17,500, whereas under the existing law wives and children pay 2 per cent., under the new system they will simply pay the equivalent of the existing Estate Duty without the addition of Legacy Duty or Succession Duty. With regard to estates between £17,500 and £35,000 the new combined Duty is not increased. It is the equivalent—I do not say it is exactly, because it cannot be worked out exactly—of the average of the three duties—Estate Duty, Legacy Duty and Succession Duty—under the existing law.

The right hon. Member for the City of London (Mr. Assheton) said that the matter bore hardly particularly on the small person or the moderate estate. That really is not true. Take the case of a wife and child. I have already said that in the case of estates up to £17,500 they pay no more, and indeed with estates of above £15,000 and under £17,500 they pay less. I think I am right in saying that some 550,000 persons die every year, and only 1 to 2 per cent. of those persons who die leave estates over £17,500. All the rest leave estates under £17,500.

Therefore, in 98 per cent. to 99 per cent. of the cases of deaths which at present take place, wives and children pay no more, and indeed in the particular band of estates between £15,000 and £17,500 they pay less. In point of fact, one must remember that the total yield from the Legacy Duty and the Succession Duty charged at the present moment is only some 10 per cent. of the total yield of Death Duties. The rest is accounted for by Estate Duty. The present differentiation, therefore, relates to only about one-tenth overall. In the case, therefore, of 98 to 99 per cent. of the families in this country the wife is in no worse position and, indeed, to some extent she is in a slightly better position in the case of estates between £15,000 and £17,500.

I do not think that is unfair. At the same time we have considerably advantaged the poor dependent relatives who, in the future, will not have to pay the 20 per cent. which, in the case of a small legacy, is very heavy indeed if the relative is dependent largely upon the legacy for his or her support or has been dependent on the testator for his or her support during the testator's lifetime.

Will the right hon. and learned Gentleman kindly deal with the question of the small minority? I am sure he does not wish to override the minority, although it may be very small in number.

May I make one point before I deal with that? The one point I want to make is this: as the law stands a considerable privilege in the matter of payments is granted to wives in this sense, that where property is settled by one spouse upon the other for life there is an advantage. Of course, Estate Duty is payable on the death of the first spouse, say the death of the husband who has settled property on the wife for life, but on her death no further Estate Duty is payable, and that differentiation in favour of the close relative, the wife, is still preserved under the system we have introduced.

I am asked, what about the case of the large estate? What about the case of the estate over £35,000? Perhaps I may make this point with regard to it. It is in these large estates—not the small estates—where we think it is more than ever necessary that we should lift the burden from the poor relative and apportion it to the son who inherits the residue. In the case of a son who inherits £500,000 it is quite illogical and unfair that he should have to pay only 2 per cent. whereas the dependent relative has to pay 20 per cent. It is in these very large estates that the present incidence of the duty operates most unfairly and most unreasonably and, indeed, harshly upon the relatives and persons like the servants who are dependent on the testator's legacy to them. We think there is a stronger case in connection with the larger estates than there is with the smaller estates. In the largest estates we find this completely unfair incidence of Legacy Duty and Succession Duty upon those who are least able to pay it. It is in this case that we think it is most necessary to make the change.

Would the right hon. and learned Gentleman deal with the anomaly whereby, under the new scale, some non-related beneficiaries will pay considerably less than they pay under the present scale? I will give him an example. On an estate of over £50,000 under the new consolidated scale a non-related beneficiary will pay 35 per cent.—that is, £17,500—whereas under the old scale he paid 44 per cent., i.e., Estate Duty of 24 per cent. plus Legacy Duty of 20 per cent., i.e., a total of £22,000—£4,500 more than under the new scales. How can the right hon. and learned Gentleman justify the system whereby, on the whole, relations will pay more while there is this glaring case in which a non-related beneficiary will pay very much less?

5.15 p.m.

There are two answers to that and one is that these increases—I am perfectly certain I am right—to which the hon. Gentleman referred are increases which are not attributable solely to this re-arrangement but are also attributable to the lift; that is to say, the extra revenue which the Chancellor desires to obtain from Death Duties.

Perhaps I may first make one point which I should have made earlier. Take the case of large estates. In the majority of cases, nearly always, the residue goes to a near relative. That is to say, if one looks at the matter by and large one finds that the residue goes to the near relative who pays only 2 per cent. Only small portions—£1,000 or £2,000 or, at most, £5,000—go to the dependant who pays 20 per cent. No doubt the dependants, who pay 20 per cent., are substantially advantaged by our proposals, but that is the very thing we think is fair. We think that is exactly what should happen.

If we take the case of the residue, we find that the total payment on the residue is, of course, substantially increased in the case of estates above. £35,000, but that brings me to the second point I was making. In the case of the residue, in such a case, there is a substantial lift in duty and that substantial lift is attributable only to a small extent to the rearrangement and to a large extent to the extra amount of revenue which the Chancellor desires to obtain from Death Duties. In the case of an estate of, say, £75,000 to £100,000 the combined duty will be raised from 30 to 45 per cent., but only 5 per cent. of that will be attributable to the re-arrangement and 10 per cent. will be attributable to the extra amount of Death Duties it is desired to obtain.

I do not think the right hon. and learned Gentleman appreciated the point I made. May I repeat it? Whereas, under the Bill, if an estate of over £50,000 goes to a near relative the consolidated duty payable will be much more than it is at present, if it goes to a non-related beneficiary it will be very substantially less—it will be £17,500 instead of £22,000. I want the right hon. and learned Gentleman to justify that anomaly, if he can.

I am not sure of the hon. Gentleman's figures and I shall have to accept them from him. We have to legislate for the great majority of cases and in the great majority of cases the position is that the relative pays less. We think it is perfectly right.

Two things happen. The total amount is lifted. That is attributable, in the case of an estate of £75,000, as to two-thirds to the extra revenue which the Chancellor desires to acquire and as to one-third to the rearrangement. That is in the case of an estate of that magnitude, but the individual amount which the dependant relative may have to pay is, in relation to him, less than it was under the old system—and that is what we think should happen.

That is in the majority of cases. Take the case where the residue is left to the son and a legacy is left to a dependent relative. The dependent relative pays 20 per cent. at the moment. Now, Estate Duty will include the amount attributable to Legacy Duty and Succession Duty and the total amount is raised, but——

We quite understand the case which the right hon. and learned Gentleman has been putting to us, but an example has been put to him and we should be very much obliged if he could deal with that example. It seems true that in that case, while these relatives will be made to pay more, a complete stranger will get off with very much less.

I am not quite sure of the figures which the hon. Member for Twickenham (Mr. Keeling) gave. Take the case——

May I assist the right hon. and learned Gentleman by giving one figure"? Up to £67,000, in every case of an estate left to a stranger, the Death Duty will be substantially less.

What I am saying is that one has to look at what is the reality of the situation. As I say, it is not generally the case that an estate is left to a stranger. Actually, I doubt if in the case mentioned it will be very much less. I mentioned the case of an estate of £3,000,000——

—where the 10 per cent. lift increases the duty at the moment by only 2½ per cent. So I doubt if the figures are quite as stated, if I may say so with all respect to the hon. Gentleman who quoted the example. The fact is we are legislating, as I said before, not for cases where estates go to strangers—that sometimes happens—but for the majority of cases where they go to the children or to the wives. That is the sort of case we are dealing with, and that is the large majority of cases. I am saying that in these cases we are taking to some extent the burden off dependent relatives and putting it on the general body of the estate, and that is what we think is perfectly fair. In the case of an estate which is left to a stranger, it may be that there is, as the hon. Gentleman said, a reduction, but, as I am saying, in the majority of cases we think it works out fairly, because, though there is a reduction in the case of the dependent relative, the incidence is fairly placed where it should be, and is not placed on the shoulders of the person who can least afford it, which is the situation under the existing law.

For these reasons we think the new system is one which does, at any rate, work in the great majority of cases equitably. In the case of estates under £17,500 it certainly works better than the present system, which does, we think, operate unfairly. In the case of estates over £17,500 one has to remember that, even though the burden is shifted from one type of beneficiary to another, it is shifted in a sense which we think is fair—in the sense that that beneficiary is nearly always a person who inherits a lesser amount than the child who takes the residue, and can afford to pay not nearly as well as the person who takes £500,000. Therefore, we do not think it works unfairly in the case of a larger estate.

In the case of a small estate we have tried to simplify the matter, and we have certainly, we think, achieved that, and we do not think there is any justification for the accusation that we are in any sense invading the rights of the family or in any sense removing privileges which ought to remain in the case of those estates under £17,500. They remain, as I have said. In the case of an estate over that, the near relative is disadvantaged to the advantage of the more distant relative; and in the cases we think one would actually be dealing with, where normally there is a small legacy, we think the system which we have devised works more fairly than the existing system.

Before the right hon. and learned Gentleman sits down may I ask him a question? I did not want to interrupt him before. In view of the line taken by the opposite side of the Committee about strangers, may I ask the right hon. and learned Gentleman if he is not aware that Scripture lays it down that we should give special consideration to the stranger within our gates?

Here we are concerned with fairly substantial estates. Estates under £15,000 are not greatly affected, and on estates between £15,000 and £17,000-odd the change is not very large. It is the middle range of estates that are affected by this, and whether or not this change is fair to those estates is what we have to decide upon on these Clauses today. The right hon. and learned Gentleman argued that the present system often operated in a converse sense to what testators intended when they gave gifts. Of course, that is true in the cases of those testators who make their own wills; in almost every one the testator who makes his own will almost invariably produces a result which is the opposite of what he intends.

However, in the case of these substantial estates, it is the general practice of mankind to go to solicitors for advice, and in a will drawn in that way we invariably find that the whole of the Death Duties are expressly directed to be paid out of the residue of the estate, so that there can be no question whatever of defeating any of the testator's intentions. We find in any properly drawn will a general direction that the Estate Duty and the Legacy Duty are to be paid before any of the legacies. In fact, what the testator does is to give a second legacy which he directs is to go on to the estate as a whole, and the result, therefore, is that the remoter relative gets precisely the sum which is given to her by the will—£1,000 or £2,000 or whatever it may be, as indicated by the Solicitor-General.

The curious thing about these Clauses seems to me to be that the Government have brought them forward on the basis that they are a useful reform, that they are a simplification of the law which will be generally welcomed. I am not for a moment saying that they do not amount to some sort of simplification, but I think it will be generally agreed that, on the whole, our system of Death Duties has not produced any very great complexity and no terrible conundrums for those concerned. I am quite certain that the hon. and learned Member for East Leicester (Mr. Donovan) will agree that, if we compare Death Duties with Income Tax, the need for revision lies in the Income Tax and not in the Death Duties.

I hope that the hon. and learned Gentleman will make a speech about it. I, at any rate, have no doubt whatever that, so far as the community at large is concerned, it would welcome some kind of simplification of the Income Tax and is largely indifferent to simplification of the Death Duty code—which is fairly clearly indicated by the small number of Members sitting on the opposite side of the Committee. There is a clear lack of interest in the matter. For this reform there is really no great public demand, and the right hon. and learned Gentleman let the cat out of the bag when he said that the real reason for these Clauses is that the Chancellor wants a further £20 million out of estates. It would have been much better if we had been told so at the start.

I suggest that the way in which it is being done is entirely absurd. If the real intention is to raise a further £20 million, it is a most extraordinary way to set about it to give a very substantial measure of relief in a large number of cases, because that is what is being done here. So far from remoter relatives paying a higher amount in Estate Duty, the result will be that they will pay a lower rate. That simply means that to obtain this £20 million additional revenue, the Chancellor has had to make an even greater increase on the Estate Duty in favour of wives and children and nearer relatives. If we could argue this on the straightforward basis of Estate Duty the matter would be different, but it seems to me wholly wrong that we should relieve the remoter relatives and throw a heavier burden on the nearer relatives—that a man should pay less when he leaves his fortune to his mistress and more when he leaves it to his wife, that he should pay less when he leaves his fortune to his illegitimate children, and more when he leaves his fortune to his own legitimate children. It seems to me to be wholly contrary to what is right and proper policy, but it is the general policy which has been pursued since this Government has been in office.

There has been an increasing tendency to make it more difficult for a man to save and endow for his own family, while at the same time making it easier for him to alienate his money in favour of strangers. If this policy is pursued it will be found that young people with good prospects will, instead of getting married, go through a form of religious ceremony which is not recognised by the law; they will be able to save, first of all on Income Tax, and secondly on being able to make endowments in favour of their children while they are alive; and they will now be able to save further, because their so-called wives and their illegitimate children will be able to take advantage of these provisions when they die. This is a wholly wrong policy which I hope the Committee will reject.

5.30 p.m.

I have not had the advantage of a legal training, so that I, unlike the Solicitor-General, may not be able to make myself plain on this very complicated Clause. The Solicitor-General said that the object of this Clause was to simplify the law and to make it fit more into actual life. As my hon. Friend the Member for South Hendon (Sir H. Lucas-Tooth) has just pointed out, that is precisely what the Clause does not do. In actual life wives and children mean more than distant relatives, more than a cats' home, and more than leaving money to party funds, and if we want our law to fit in with the kind of social structure in which we believe, founded upon the family, we must not pass this Clause.

The Labour Party cannot go on telling us that they believe in a Christian ethic, that they believe in Christian values, all of which have long been associated with the family, and then bring this sort of Clause before the House of Commons. They cannot have it both ways. To have the sentimental nonsense that some hon. Members opposite talk on platforms, and then have them coming down here and bringing in a Clause such as this—which means that supposing I selected my Uncle Arthur, or my Aunt Edith, or the T.U.C., or my mistress, to leave my money to, they would be better off under this Clause than if I left it to my wife—is absurd, and we ought not to pass this Clause on moral grounds.

It certainly is true, and the the Solicitor-General knows that it is true. But even if we could not point out any anomalies, and supposing there were none—which there are—is it right that the law of England should not make a difference in favour of the family and the near relative? That is the root of the matter. We can argue about the half-dozen serious cases that have already been cited, especially in the band of estates between £25,000 and £35,000, but the real point is: ought we to change the law of England and give no advantage to the wife and the child?

I have never heard more nonsense than that which the Solicitor-General talked about the aged aunt of the rich testator. The rich testator is perfectly capable of making proper provision for his aged aunt; it is for him to say how he wants to leave his money. For the Solicitor-General to say that he will take care of the aged aunt and advantage her under this provision, and make the son, or whoever it is, pay, is absolutely absurd. All that the House of Commons should do is to lay down the general principles on whether or not we think that the near relatives of the family are people who should be advantaged by law as against these strangers and more remote relatives, and then leave it to the testator in his conscience to do the best. If the institutions that we put upon the Statute Book do favour the family, that has an effect upon the way people think about the family: institutions act upon character and character acts upon the institutions; it is a two-way process. Here we are destroying something which is of value.

Since the Financial Secretary shakes his head, would he kindly answer whether this is true? If tomorrow I left the whole of my money to a cats' home, after this Clause is on the Statute Book would it not bear the same duty as if I left it to my wife? Is that a fact? It is perfectly clear that that would be so.

That, of course, is not the point, and it is not the way hon. Gentlemen opposite put it before. Under the present law, which is not being altered, the widow is particularly looked after. In addition, I should like to remind hon. Members that for estates up to, I think, £17,500 or £17,250, not only is the scale not changed, but the widows and children do not even have to contribute to the extra £20 million which my right hon. and learned Friend is collecting.

The Financial Secretary has given his case away. He says that up to £17,500, the legacy going either to the cats' home or to the widow, the widow would not be disadvantaged as compared with her present position. But thereafter she will be, and I say that it is not the business of the House suddenly to change its view about the family when we get to a certain level of estate. That should be a matter of principle throughout the whole of the Death Duties legislation: that the family is firmly put in front of the stranger and the cats' home. I very much hope that the Government will look at this again. We have had a very wide Debate, and there may be another opportunity to discuss the whole question of the incidence of Death Duties. I feel that the Committee would wish to confine the Debate at the moment to the consanguinity principle.

I cannot feel that the Solicitor-General made a very adequate reply to the cogent arguments of my right hon. Friend the Member for the City of London (Mr. Assheton). But he cannot be blamed, for he could not make out a better case than the one he had put into his hands, and I doubt whether the Solicitor-General has ever had such a poor brief put into his hands as the one he was given on this occasion. There really is not a shred of a case for what is being done by the Government. The right hon. and learned Gentleman got into a tangle by trying to compare the duties that would be paid on certain estates under the old scheme with those which would be paid under the new scheme. To my mind that is not the important thing. I am certain that my hon. Friend the Member for Chippenham (Mr. Eccles) has hit the nail on the head.

We are making a fundamental change in the law of England which will react to the detriment of the family. Under our existing law there is a gradation of duties according to degrees of consanguinity. That will in future disappear; and, as my hon. Friend so well said, it will make no difference whether an estate is left to the widow, to the stranger within the gate, to the cats' home or to a political party.

That is not the point. The hon. Member is falling into the error that I am trying to avoid. I do not think that it is of great value to compare a particular case under the old and under the new system. In the case of all wills made from now on there will be no difference between the widow, the stranger within the gate, and the cats' home. All estates, small or large, will bear the same rate of duty. We must look ahead. We are now committing ourselves to a fundamental change in the law of taxation which may be of the utmost importance for its social consequences.

The real reason, as given out in the admissions of the Solicitor-General and Financial Secretary, is that the Chancellor wants to get some more money out of this re-arrangement. The Solicitor-General has invoked the case of the aged and impoverished aunt. If he wanted to benefit the aged and impoverished aunt he could very well have come to the Committee with an Amendment for that specific purpose. I do not think he would have met with much opposition in the Committee. We all know perfectly well that it is always possible to invoke some hard case, but hard cases make bad laws. As has been said, if testators wish to make provision for aged aunts there are always means by which they will be able so to do.

As I understand we are having a general Debate on this matter—I think my hon. Friend the Member for Chippenham was mistaken in what he said in view of an earlier exchange—may I recall the famous puzzle about when a difference of degree becomes a difference of kind? It appears to me that the successive increases in the Death Duties have converted a difference of degree into a difference of kind. The old theory behind the Death Duties was that they were deferred Income Tax, but it is no longer possible to maintain that theory today. The rate of duty on an estate of £1 million and over has increased from 8 per cent. at the inception of the Estate Duty in 1894 to 80 per cent. today. It is a good example of that rake's progress to which Lord Milverton has so eloquently drawn attention in another place. Year after year successive Chancellors have gone on giving another turn to the screw, and I think the time has now come to protest because the fiscal and the social consequences of these vastly increased Death Duties are extremely serious.

Let me deal first with the fiscal consequences. The Death Duties are in their nature fiscally self-defeating, for it is obvious that the income from a large estate will pay more in Income Tax and Surtax than will the income from a number of small estates of equivalent value. The income from an estate of £1 million will clearly pay more in Income Tax and Surtax than the income on 10 estates of £100,000. There is an even more important fact to be noted, that these heavy duties are noticeably diminishing the potential taxable capacity of the country. Like my right hon. Friend the Member for the City of London (Mr. Assheton), I do not suggest that these duties are destroying capital, but they are clearly preventing new capital from coming into being. In the past generation or so there must have been a sum of about £2,500 million collected in Death Duties. At 4 per cent. that capital sum would have produced an income of £100 million a year, and the taxation on that income has been lost. The consequences for the economic life of the country of the destruction of this potential capital has been very serious. I suggest to the Committee it is time we called a halt in this process.

The social consequences are even more disturbing. I should like to ask the Financial Secretary a question about the facts. He said in a recent Debate that 10 per cent. of the people of this country own 90 per cent. of the capital. I suspect that that figure is taken from the work of Mr. Daniel and Mr. Campion published a long time before the war. I do not know of any more recent examination, and I doubt whether that statement is true today. The social argument on the other side of the Committee is that these taxes are producing greater equality. But is equality necessarily desirable? It is automatically supposed by Members opposite that that is desirable, but have they thought of all the consequences of destroying the large estates in this way? One result will be that all power will be gathered into the hands of the State. I know of no more potent instrument for bringing about the totalitarian State in this country than the Death Duties. The diffusion of wealth over a large number of people is the surest guarantee of liberty.

We are moving now into a period when the high rate of Death Duties is beginning to have one specially disturbing social consequence. Following the bad example set by the State, people are beginning to use capital as income. This is a serious tendency which, unless checked, will have the most deleterious consequences for the nation. It has begun in an innocent way by people beginning to use capital for the education of their children instead of paying for their children's education out of income. That may seem a justifiable purpose, but before very long people will be saying that they are not going to leave their estates to the Chancellor of the Exchequer, for purposes of which they may not approve, but will use their estates in their lifetime not only for the education of their children but also for their own amusement.

5.45 p.m.

The scope of this Debate has been considerably widened in the last few minutes, and I cannot help feeling considerable sympathy with Members opposite in having to listen to the speech which has just been delivered. Members opposite were making a perfectly simple and, I should have thought, quite arguable case, although I do not know whether it is right or not as I am not expert enough to say, about certain anomalies which result in a certain range of estates from the alterations proposed in the Finance Bill. I hope my hon. Friends will not mind if I say on that part of the matter that the result of the whole Debate has been to leave me in a little doubt; I am not quite sure who is right or who is wrong about it. The hon. Member for Keighley (Mr. Ivor Thomas) then comes along and makes a different kind of speech altogether in which he raises the wider and broader issue.

The trouble with converts is that they always go too far. They always feel under some inner compulsion to assure their new-found friends that they really do belong somewhere at last. Therefore, they feel bound to adopt every outworn, exploded doctrine, or theory, or dogma, which the party they have joined have ever given credence to, and repeat it with much more fervour than that with which it was originally expounded, although it may long ago have been abandoned. It is, I believe, a fact that the Conservative Party have abandoned the thesis the hon. Member was putting forward. The hon. Member said that the difficulty was to find where a difference of degree becomes a difference of kind. I think the hon. Member found out when he crossed the Floor of the House—that is where the difference of degree which existed before became a difference of kind, which becomes more obvious every time the hon. Member opens his mouth.

What is he really saying? He is saying that the whole policy which has not merely been followed by this party but by the party opposite, and not merely in this country but in other civilised countries, is not to permit vast accumulations of wealth, in the field of inheritance at least, to go beyond certain limited figures. That is done in the United States, in France and, so far as I know, in every modern society, because it is regarded as a great danger that the wealth of a family should continue to grow beyond certain recognised limits fixed by the State. It is no monopolised dogma of the Labour Government that it is a bad thing to let these estates grow in that way. It is a bad thing for the estate, bad for the country and, above all, bad for the recipients of the estates. Everybody knows that, and the hon. Member for Keighley knew it until the difference of degree became the difference of kind, and he forgot all about it.

Only the other day the Conservative Party were putting down an Amendment to a previous Clause which, if they had had their way, would have had the effect of raising the cost of living for a vast majority of our people. If we are to believe the hon. Member for Keighley, they are now adding another glory to that one—at the same time as they want to raise the cost of living for poor people they also want to lower the cost of dying for the millionaire. If that is the Conservative Party, then the sooner the hon. Member finds his proper place on the Opposition Front Bench the better.

I am sure the Solicitor-General will feel that as a result of the Debate this matter ought to be further examined. When he addressed us in, I think, the absence of the hon. Member for Nelson and Colne (Mr. S. Silverman)——

If the hon. Gentleman was here he will recollect that the Solicitor-General opened his remarks on a wider front than the Debate which followed. He mentioned the incidence of Death Duties as a whole. But I feel that the right hon. and learned Gentleman has not met the main argument which has been advanced from this side of the Committee.

We are not dealing so much with the effect of these proposals as between near and distant relatives, important though that is—I am sure the hon. Member for Nelson and Colne will agree that to be unfair above a certain limit of residue is not a good principle for the House of Commons to follow—but the effect as between the intimate family circle, the wife and child on the one hand, and what was so euphemistically described by my hon. Friend the Member for Twickenham (Mr. Keeling) as the "non-related beneficiary." That is a somewhat flattering description, I think, of the type of lady we have in mind. There is an inducement, under this proposal, to the testator to leave his money in such a direction as that, and that has not been controverted by anything that has been said today. Indeed, I am astonished that this Chancellor, of all Chancellors, should lend himself to such an immoral suggestion. I am surprised that he absented himself from the Committee while this horrid scene was being enacted——

I should have thought that the hon. Member would realise that the Chancellor would have been here if he had not been detained for a moment elsewhere. [Laughter.] Members opposite could not have heard the hon. and gallant Member's last observation: his assertion was that my right hon. and learned Friend the Chancellor had absented himself from the Debate, and I said that he would have been here if he had not been engaged elsewhere.

Whenever we get into difficulties the Financial Secretary always comes to our aid with statements which might not have occurred to us; here, at least, is a firm grasp of the obvious. I said I was surprised that the Chancellor had absented himself from the Debate while this horrid scene was being enacted. Perhaps he is steadying the cost of living through the consumption of some liquid in the Palace of Westminster.

However, I shall leave the non-related beneficiary for the time being, as it seems to have upset the Treasury Bench, and come to the main argument. The Solicitor-General declared that to say that the proposal would deprive the family of the breadwinner if the Treasury collected Death Duties when the breadwinner died in the prime of life was an argument against the imposition of Death Duties at all. That is an over-simplification. When Death Duties are light the effect is light, but when they are at their present level, and are increasing, it is a severe blow to a wife and her children should the breadwinner be taken from them in the prime of life. It is bad at any time, but it is particularly hard then.

My hon. and gallant Friend the Member for Penrith and Cockermouth (Colonel Dower) pointed out that a wife in the Union of South Africa, in these circumstances, was not mulcted in any way. It is true, as the hon. Member for Nelson and Colne said, that there is nothing exceptional to this country about the collection of Death Duties, but in these islands—and all Governments are blameworthy to a certain extent, I admit—there has been an unfortunate tendency always to regard Death Duties as a legitimate source of revenue. In many other places they are earmarked for sinking fund purposes and a reduction of debt, which are very different propositions.

It used to be said by Chancellors of all types of Government that in the interwar years the revenue collected from Death Duties approximately balanced the out-goings on war pensions, which were a declining demand on the Revenue. That argument, of course, has become less forceful as the years have gone by, and I was shocked to hear the Solicitor-General frankly admit, for the first time, that here are £20 million which are required as revenue this year, and which must be obtained. As I said last week we on this side do not admit that for one moment. We do not admit that this £20 million is necessary to the Revenue. It is almost precisely the same amount as has been squandered on the fatuous groundnuts experiment. This sum is now to be obtained by plundering widows and orphans.

Does the hon. Member really describe those who leave estates between £17,000 and £67,000 as millionaires?

No, but I say that the bulk of Death Duties is collected from large estates, and not from small ones. To moan about widows and orphans paying Death Duties is to complain about a percentage of millionaires paying their proportion to the Revenue.

I respect the hon. Member's parliamentary ability, but it seems that he has not studied this question in sufficient detail. What we have to address our minds to is the discrimination on estates between £17,000 and £67,000. That is where it happens to fall and it falls very harshly. We can delete the millionaires from our argument.

6.0 p.m.

To delete the widows is an even more sanguinary proposition. This afternoon from the Socialist Benches we are getting some hair-raising proposals. In view of the fact that we are working under a time table, I shall confine myself to the matter in hand. There is a lot more that can be said, but I suggest in all sincerity to His Majesty's Government that here is a matter which requires careful examination on the grounds of equity apart from any other grounds.

It will be necessary for us to reach a decision now on this Amendment. We undertook early in the morning at the end of our last Sitting, that we would try to conclude the Amendments at eight o'clock this evening, and leave the new Clauses to be gone into then.

I should like to get this straight; it was not eight o'clock but seven o'clock. [HON. MEMBERS: "Dinner time."] The right hon. Member for West Bristol (Mr. Stanley), after dinner time had been suggested, reduced it to actual figures and mentioned seven o'clock—about seven o'clock not eight o'clock.

The right hon. Gentleman need not quarrel about it. My right hon. Friend the Member for West Bristol informed me before he went out a moment ago that he had in mind that at eight o'clock we would finish the Amendments, after which we could make progress with the new Clauses. We shall try our best to hurry up matters, and I do not think the right hon. Gentleman need get excited that we are going to break any undertaking that we have given.

If the right hon. Gentleman refuses to accept our undertaking, I shall refuse to go on with the Debate. I do not think he has any reason to doubt our word. The Opposition have freely entered into an agreement, and given an undertaking that we shall finish at a certain time, and unless the right hon. Gentleman withdraws that observation, that will finish the matter as far as the Opposition is concerned.

Of course, I withdraw. All I said was that we shall see and so we shall. If the phrase hurts the right hon. Gentleman I shall unreservedly withdraw. We shall see.

I am obliged to the right hon. Gentleman, and we shall see. I accept the answer in the spirit of his reply and not in the spirit in which I heard it while he was sitting on the Government Front Bench.

I do not want to emphasise all the arguments that have been put forward on this matter, but we shall undoubtedly take the Amendment to a Division, because we cannot accept the view enunciated by the Solicitor-General on behalf of His Majesty's Government that up to a certain level, namely £17,500, the Government want to show the country that they are keen to help the widows and other relatives, but over that figure they are not so keen to carry the principle into effect. We think that that is not a moral basis on which taxation should rest whether Income Tax, Death Duties or any financial structure. We maintain in this matter that helping the stranger under the new arrangement suggested by the Chancellor of the Exchequer, will go against the widow or the near relative. By so doing the Chancellor is breaking faith with one of the most important principles of our taxation system. Frankly, if he is going to count, as has his hon. Friend the Member for Nelson and Colne (Mr. S. Silverman), the higher ranges of income only to mulct for the purposes of Death Duty, he might have had the decency to carry the principle in favour of the widow and the relative into the higher realms on which he depends for this duty.

In order to supplement a point made from this side of the House, I would remind the Solicitor-General that if an estate of £50,000 is left to a relative, the sum he pays is £15,500 as compared with £11,780 in other ways, an increase of £3,720. If the same size of an estate is left to a stranger, he pays £3,300 less than before, and similar figures can be given for larger estates. These show that there is no doubt that the stranger is coming off much better than before under the proposals of the Chancellor. I am glad to see the Solicitor-General nod his head, because that is an acknowledgment of the whole of the argument which we have been putting this afternoon. The Solicitor-General was badly briefed and he submitted his brief without conviction. In view of the lack of principle exhibited by the Government in this matter, we intend to take it to a Division.

Question put, "That those words be there inserted."

Division No. 177.]

AYES

[6.6 p.m.

Assheton, Rt. Hon. R.Grimston, R. V.Nutting, Anthony
Aster, Hon. M.Hannon, Sir P. (Moseley)Odey, G. W.
Baldwin, A. E.Harden, J. R. E.Peake, Rt. Hon. O.
Beamish, Maj. T. V. H.Hare, Hon. J. H. (Woodbridge)Peto, Brig. C. H. M.
Birch, NigelHarris, F. W. (Croydon, N.)Pickthorn, K.
Boles, Lt.-Col. D. C. (Wells)Harris, H. Wilson (Cambridge Univ.)Rayner, Brig. R.
Boothby, R.Headlam, Lieut.-Col. Rt. Hon. Sir C.Reed, Sir S. (Aylesbury)
Bower, N.Hinchingbrooke, ViscountRenton, D.
Boyd-Carpenter, J. A.Hogg, Hon. Q.Roberts, Emrys (Merioneth)
Braithwaite, Lt.-Comdr. J. G.Hope, Lord J.Roberts, H. (Handsworth)
Bromley-Davenport, Lt-Col. W.Hurd, A.Robertson, Sir D. (Streatham)
Butcher, H. W.Hutchison, Lt-Cdr. Clark (Edin'gh, W.)Robinson, Roland (Blackpool, S.)
Butler, Rt. Hn. R. A. (S'ffr'n W'ld'n)Hutchison, Col. J. R. (Glasgow, C.)Ropner, Col. L.
Challen, C.Jeffreys, General Sir G.Ross, Sir R. D. (Londonderry)
Channon, H.Keeling, E. H.Savory, Prof. D. L.
Clarke, Col. R. S.Kendall, W. D.Shepherd, W. S. (Bucklow)
Conant, Maj. R. J. E.Lambert, Hon. G.Spearman, A. C. M.
Crookshank, Capt. Rt.. Hon. H. F. C.Lancaster, Col. C. G.Stanley, Rt. Hon. O.
Crosthwaite-Eyre, Col. O. E.Lennox-Boyd, A. T.Strauss, Henry (English Universities)
Crowder, Capt, John E.Lindsay, M. (Solihull)Sutcliffe, H.
Cuthbert, W. N.Linstead, H. N.Taylor, C. S. (Eastbourne)
Darling, Sir W. Y.Lloyd, Selwyn (Wirral)Taylor, Vice-Adm. E. A. (P'dd't'n, S.)
De la Bère, R.Low, A. R. W.Teeling, William
Dodds-Parker, A. D.Lucas, Major Sir J.Thomas, Ivor (Keighley)
Dower, Col. A. V. G. (Penrith)Lucas-Tooth, Sir H.Thornton-Kemsley, C. N.
Drayson, G. B.MacAndrew, Col. Sir C.Touche, G. C.
Drewe, C.McCorquodale, Rt. Hon. M. S.Turton, R. H.
Dugdale, Maj. Sir T. (Richmond)McFarlane, C. S.Watt, Sir G. S. Harvie
Duthie, W. S.Mackeson, Brig. H. R.Webbe, Sir H. (Abbey)
Eccles, D. M.Maclay, Hon. J. S.Wheatley, Colonel M. J. (Dorset, E.)
Eden, Rt. Hon. A.Maclean, F. H. R. (Lancaster)White, J. B. (Canterbury)
Erroll, F. J.MacLeod, J.Williams, C. (Torquay)
Fletcher, W. (Bury)Maitland, Comdr. J. W.Williams, Gerald (Tonbridge)
Foster, J. G. (Northwich)Mellor, Sir J.York, C.
Fraser, H. C. P. (Stone)Morris, Hopkin (Carmarthen)Young, Sir A. S. L. (Partick)
Fyfe, Rt. Hon. Sir D. P. M.Mott-Radclyffe, C. E.
Galbraith, Cmdr. T. D. (Pollok)Neven-Spence, Sir B.TELLERS FOR THE AYES:
Gammans, L. D.Nicholson, G.Cmdr. Agnew and
Gridley, Sir A.Noble, Comdr. A. H. P.Mr. Wingfield Digby.

NOES

Acland, Sir RichardChamberlain, R. A.Fletcher, E. G. M. (Islington, E.)
Adams, Richard (Balham)Champion, A. J.Follick, M.
Albu, A. H.Chater, D.Foot, M. M.
Allen, A. C. (Bosworth)Chetwynd, G. R.Forman, J. C.
Alpass, J. H.Cluse, W. S.Fraser, T. (Hamilton)
Anderson, A. (Motherwell)Cooks, F. S.Gibbins, J.
Attewell, H. C.Collick, P.Gilzean, A.
Austin, H. LewisCollindridge, F.Glanville, J. E. (Consett)
Awbery, S. S.Collins, V. J.Gooch, E. G.
Ayles, W. H.Colman, Miss G. M.Goodrich, H. E.
Ayrton Gould, Mrs. B.Corlett, Dr. J.Gray, C. F.
Balfour, A.Crawley, A.Grierson, E.
Barstow, P. G.Cripps, Rt. Hon. Sir S.Griffiths, D. (Rother Valley)
Barton, C.Crossman, R. H. S.Griffiths, Rt. Hon. J. (Llanelly)
Battley, J. R.Daggar, G.Griffiths, W. D. (Moss Side)
Bechervaise, A. E.Daines, P.Gunter, R. J.
Benson, G.Dalton, Rt. Hon. H.Guy, W. H.
Bevan, Rt. Hon. A. (Ebbw Vale)Davies, Edward (Burslem)Haire, John E. (Wycombe)
Binns, J.Davies, Haydn (St. Pancras, S. W.)Hall, Rt. Hon. Glenvil
Blackburn, A. R.Davies, R. J. (Westhoughton)Hamilton, Lieut.-Col. R.
Blenkinsop, A.Deer, G.Hardy, E. A.
Blyton, W. R.de Freitas, GeoffreyHaworth, J.
Bottomley, A. G.Delargy, H. J.Herbison, Miss M.
Bowden, Flg. Offr. H. W.Diamond, J.Hobson, C. R.
Braddock, Mrs. E. M. (L'pl, Exch'ge)Dobbie, W.Holman, P.
Braddock, T. (Mitcham)Dodds, N. N.Holmes, H. E. (Hemsworth)
Brook, D. (Halifax)Driberg, T. E. N.Horabin, T. L.
Brooks, T. J. (Rothwell)Dugdale, J. (W. Bromwich)Houghton, A. L. N. D. (Sowerby)
Broughton, Dr. A. D. D.Dye, S.Hoy, J.
Brown, T. J. (Ince)Edelman, M.Hudson, J. H. (Ealing, W.)
Brown, W. J. (Rugby)Evans, Albert (Islington, W.)Hughes, Hector (Aberdeen, N.)
Burden, T. W.Evans, S. N. (Wednesbury)Hughes, H. D. (W'lverh'pton, W.)
Burke, W. A.Ewart, R.Hutchinson, H. L. (Rusholme)
Butler, H. W. (Hackney, S.)Fairhurst, F.Hynd, H. (Hackney, C.)
Carmichael, JamesFarthing, W. J.Hynd, J. B. (Attercliffe)
Castle, Mrs. B. A.Fernyhough, E.Irving, W. J. (Tottenham, N.)

The Committee divided: Ayes, 113; Noes, 238.

Jay, D. P. T.Noel-Baker, Rt. Hon. P. J. (Derby)Stubbs, A. E.
Jeger, Dr. S. W. (St. Pancras, S. E.)Oliver, G. H.Summerskill, Rt. Hon. Edith
Jenkins, R. H.Orbach, M.Sylvester, G. O.
Jones, D. T. (Hartlepool)Pargiter, G. A.Taylor, R. J. (Morpeth)
Jones, P. Asterley (Hitchin)Parker, J.Thomas, D. E. (Aberdare)
Keenan, W.Paton, Mrs. F. (Rushcliffe)Thomas, George (Cardiff)
King, E. M.Paton, J. (Norwich)Thomas, I. O. (Wrekin)
Kinghorn, Sqn.-Ldr. E.Pearson, A.Thorneycroft, Harry (Clayton)
Kinley, J.Peart, T. F.Thurtle, Ernest
Kirby, B. V.Poole, Cecil (Lichfield)Titterington, M. F.
Lee, F. (Hulme)Popplewell, E.Tolley, L.
Leonard, W.Porter, E. (Warrington)Tomlinson, Rt. Hon. G.
Leslie, J. R.Porter, G. (Leeds)Turner-Samuels, M.
Levy, B. W.Proctor, W. T.Ungoed-Thomas, L.
Lewis, J. (Bolton)Pursey, Comdr. H.Vernon, Maj. W. F.
Lipton, Lt.-Col. M.Randall, H. E.Viant, S. P.
Logan, D. G.Ranger, J.Walker, G. H.
Lyne, A. W.Reeves, J.Wallace, G. D. (Chislehurst)
McAdam, W.Reid, T. (Swindon)Warbey, W. N.
McAllister, G.Rhodes, H.Walkins, T. E.
McGhee, H. G.Ridealgh, Mrs. M.Webb, M. (Bradford, C.)
Mack, J. D.Roberts, Goronwy (Caernarvonshire)Weitzman, D.
McKay, J. (Wallsend)Robertson, J. J. (Berwick)Wells, P. L. (Faversham)
Mackay, R. W. G. (Hull, N. W.)Robinson, Kenneth (St. Pancras, N.)West, D. G.
McLeavy, F.Rogers, G. H. R.Wheatley, Rt. Hon. John (Edin'gh, E.)
MacPherson, Malcolm (Stirling)Ross, William (Kilmarnock)White, H. (Derbyshire, N. E.)
Mainwaring, W. H.Royle, C.Whiteley, Rt. Hon W.
Mallalieu, J. P. W. (Huddersfield)Segal, Dr. S.Wilkes, L.
Mann, Mrs. J.Sharp, GranvilleWilkins, W. A.
Manning, C. (Camberwell, N.)Shawcross, C. N. (Widnes)Willey, F. T. (Sunderland)
Mellish, R. J.Shinwell, Rt. Hon. E.Willey, O. G. (Cleveland)
Middleton, Mrs. L.Shurmer, P.Williams, D. J. (Neath)
Mikardo, IanSilverman, J. (Erdington)Williams, J. L. (Kelvingrove)
Millington, Wing-Comdr. E. R.Silverman, S. S. (Nelson)Williams, Ronald (Wigan)
Mitchison, G. R.Simmons, C. J.Williams, W. R. (Heston)
Monslow, W.Skeffington-Lodge, T. C.Willis, E.
Moody, A. S.Skinnard, F. W.Woodburn, Rt. Hon. A.
Morris, Lt.-Col. H. (Sheffield, C.)Smith, C. (Colchester)Wyatt, W.
Morris, P. (Swansea, W.)Smith, S. H. (Hull, S. W.)Yates, V. F.
Mort, D. L.Snow, J. W.Young, Sir R. (Newton)
Moyle, A.Sorensen, R. W.
Murray, J. D.Soskice, Rt. Hon. Sir FrankTELLERS FOR THE NOES:
Naylor, T. E.Sparks, J. A.Mr. Joseph Henderson and
Neal, H. (Claycross)Stewart, Michael (Fulham, E.)Mr. Hannon.
Nichol, Mrs. M. E. (Bradford, N.)Stross, Dr. B.

Amendment proposed, in page 16, line 33, at end, insert:

"and where the property in respect of which estate duty is chargeable passes to persons who, save for Section twenty-three of this Act, would have been liable to legacy duty or succession duty at the rate of 10 per cent., then on that proportion of the property passing and for the benefit of those persons there shall, without prejudice to the reduced rate applicable to agricultural values, be a further reduction of 2 per cent. in each of the rates."—[Mr. Stanley.]

Amendment negatived.

6.15 p.m.

I beg to move, in page 16, line 43, after "shown," to insert:

"that the property passes by reason only of a gift inter vivos or."
I understand that it is not the intention of the Clause to alter the law. The general principles of devolution are not to be affected, and the Clause is merely bringing the new provisions into order, having regard to what was done previously in Clause 23. If that be so, there is no need for me to argue the merits of the case.

As I understand the position, the existing law is that no Estate Duty is payable on property given inter vivos by a foreigner when he is resident in Great Britain, even if he dies within the five-year period prescribed for those of British domicile. I suppose that the obvious example will be the wealthy American father-in-law coming here on a visit. He makes some gift to his child or to his daughter-in-law or son-in-law, as the case may be. Hitherto, such a gift would have escaped duty, because the test whether such duty was payable or not was whether or not Legacy Duty or Succession Duty was payable on the gift. As no Legacy or Succession Duty would have been payable in such a case, no Estate Duty was payable under the law as it has hitherto stood. Legacy and Succession Duty are being abolished, and some other test has to be put in their place.

The Clause is not very easy to follow, but it seems to provide that in the case of a gift inter vivos Estate Duty is not to be payable if the disposition is made by an instrument governed by a foreign law. In other words, if the donor made the gift in this country and carried it into effect by an instrument in accordance with the law of America or of France, no Estate Duty would be payable. If he carried his intention into effect by a gift made under English law, notwithstanding the fact that he was merely transferring foreign property, the Clause would operate to attract Estate Duty. I see the Financial Secretary to the Treasury nod his head, but surely that proposal is not in accordance with the intentions of His Majesty's Government. I hope that we can get an assurance that the Clause does not operate as I have suggested and that the Government will indicate that they will accept this or some similar Amendment.

The hon. Gentleman has asked a number of questions, most of them, if not all of them, of a technical kind. As we are working against the clock perhaps he and the Committee will be satisfied if I say that all we seek to do by the subsection is to remodel, and not to change, the present law, in view of the fact that Legacy Duty and Succession Duty are ceasing to exist. The original Act goes back some time and was instituted to prevent people tranferring money abroad in certain circumstances or making gifts inter vivos and not paying Estate Duty on them.

I am not certain what the right hon. Gentleman's intervention involved. Does he mean that in the case I have indicated it is the intention of the Government that no Estate Duty shall be payable? Will he look into this matter and, if my argument is correct, give some undertaking to put down an Amendment at a later stage?

We are satisfied that there is no need. If the hon. Gentleman will look at the Clause he will see that the words cover a gift inter vivos.

Surely the right hon. Gentleman will say that he will look at this again. We fully accept his assurance that the intention of the Government is that there shall be no change. A case has been put that there might be a change. All we want him to say is that he will look at it again.

Amendment, by leave, withdrawn.

I beg to move, in page 16, line 43, after "that," to insert:

"by the law of the country in which it is situate such property is immovable property or."
This is also a technical Amendment. In view of the Financial Secretary's assurance that it is not intended to change the law, perhaps he will also look into this. I have here an opinion from a Chancery barrister who says:
"It is to be hoped that Clause 24 (2) … may be amended before it is passed into law, because as it now stands it is impossible to advise with certainty on the meaning of the words … 'if it shown that the proper law.' Presumably the sub-clause is not intended to effect any change in the present law, but is only inserted consequential on the abolition of legacy duty."
He also says:
"On the language of this sub-clause, it does not appear that effect has been given to that presumed intention."
I can assure the Financial Secretary that other opinions echo that fear that the intention has not been carried out.

The object of the Amendment is to ensure that immovable property abroad, whether passing in the estate of a person domiciled in Great Britain or outside Great Britain, shall not be taxed, as is the present position. The phrase "proper law" is one of the reasons why uncertainty has been introduced. The proper law under which property abroad passes can be regarded either as the law of the place where it is or the law of the disposition. I may say in my will, "I leave all my real property in England and Ireland to my son." Are there two proper laws—those of England and Ireland—or is the proper law the law of the will, which applies Irish law? If one says that Irish law is the proper law, there is a difficulty. If the will says, "I leave my property in England, Ireland and Ruritania," and Ruritanian law applies the law of nationality, there is a different proper law. I think I have said enough to show that the question is technical. I do not think that the phrase "proper law" is the correct phrase to apply to wills. The phrase is usually applied to contracts.

I am very grateful to the hon. Member for Northwich (Mr. J. Foster) for having called attention to the difficulties which might arise. We shall most willingly look into the points which he has raised. The general purpose of the Clause is in no sense to extend the charge which is at present created by the relevant provisions of the Finance Act, 1894, and the Finance Act, 1936. We simply want to reproduce them in the present Clause, and we have to alter the form because we leave out reference to Legacy Duty and Succession Duty. I am much obliged to the hon. Gentleman.

Amendment, by leave, withdrawn.

Motion made, and Question proposed, "That the Clause stand part of the Bill."

I propose to detain the Committee for a moment on a rather technical question which I put to the Solicitor-General earlier and which I thought it an advantage to ventilate publicly. It is the possibility of a very anomalous situation arising in connection with property liable to Estate Duty which is held in a foreign country where a system of blocked accounts operates. There are countries in which nationals of Great Britain can and do hold property, moneys and investments which they cannot touch. They may be able to buy and sell them in that country but they cannot bring the proceeds of the sale back here.

As I understand it, when an individual so circumstanced dies in this country, his estate becomes liable to Death Duty on the property held abroad. If the proportion of property held abroad is high in relation to that held in Britain he might be liable for more Death Duty than the total of his property held in Britain and at the same time, under the law as it stands, any part of his capital assets or the estate abroad cannot be liquidated in order to meet his liability to Death Duty. I do not know whether this peculiar anomaly has been considered by the Government. If it has, how do the Government propose to right it?

Earlier in the Debate the hon. Member for Chesterfield (Mr. Benson) said he found it difficult to make a case for different treatment for Death Duty on agricultural land from Death Duty in the case of a private business. I admit that it is difficult and that it is a subtle matter, but there is a great deal of difference. A man may die leaving a private business, and as a result a great deal of money may have to be taken out of the business to pay Death Duty. That business can be floated as a company. A man can take some money out and leave some in or take all of it out. Those working in such a business are very often better off because there is fresh money coming in and there are opportunities for advancement. They may not be as happy as in private business but they are often financially better off. The business runs perhaps as successfully as before and perhaps more successfully, in an association with a bigger business of the same kind. By and large, not much harm is done to the actual conduct of the business or to those working in it.

Let us take the case of an agricultural estate, a unit of 5,000 acres, which is about the size which is economically most satisfactory. I am making no party point over this. In the booklet, "Labour Believes in Britain," the Labour Party recommend the landlord and tenant system and estates of a certain size as the best way of carrying on the agricultural industry, and they are making provision for running estates of that sort under national ownership. When an estate of this kind has to face Death Duties, a great deal of money is probably taken out. Several things happen.

6.30 p.m.

It must be remembered that the capital in that unit of business in the agricultural industry probably represents two-thirds the fixed capital of the landlord and one-third the working capital of the farmer. Probably a certain amount of it has to be sold. The new landlord may not be so good. As in a great number of cases farmers borrow money from the bank, buy their farms and become their own landlords, the supposition is that as a rule, the new landlord is not so good. There is bound to be a break in con- tinuity. Under the old estate, the estate staff knew those farms intimately, they knew which pipes were getting furred up, what ranges would do a few more years, and they had a great deal of intimate knowledge which was a great help in keeping things going. Again, when the farmer becomes his own landlord the first thing that happens is that the capital has to be spread over three times the assets. He has to provide fixed capital as well as working capital, and nearly always the farm suffers in consequence. If the farmer suffers, production suffers as well.

Today we are doing all we can to increase and improve our agricultural production. I believe that the breaking up of agricultural units has a bad effect when the farmer suffers from a loss of capital or from a new landlord who has to start afresh and brings no continuity into the management of the fixed capital. Further than that, in the remainder of the estate the landlord is crippled because he has had to find ready money to pay Death Duties. Schemes for improvement have to be cut down or stopped altogether. The incidence on the farmer and on the industry in the case of taking large Death Duties from agricultural estates is far greater than in the case of taking them from a business. There is a subtle but very definite difference between the incidence of Death Duties on the two kinds of estates.

The hon. and gallant Member for East Grinstead (Colonel Clarke) was really answering an argument advanced by my hon. Friend the Member for Chesterfield (Mr. Benson), who said that there was no reason for differentiation between agricultural property and other property, and the hon. and gallant Member says there is. We have already had our Debate on agricultural property and my right hon. Friend the Financial Secretary, in answering it, pointed out that there is what we regard as a substantial difference made between the two in that a reduction of 45 per cent. is made in the case of agricultural property. So I do not feel that I can add usefully to what has been said having regard to the fact that we continue the distinction in favour of agricultural property.

The hon. and gallant Member for Central Glasgow (Colonel Hutchison) kindly gave me notice that he would raise the point he made. Where an estate includes frozen assets overseas, Estate Duty is levied if and in so far as there are sufficient assets in this country to cover the Estate Duty on the whole estate. However, if and in so far as the assets in this country are insufficient to cover the portion of the Estate Duty attributable to the frozen assets overseas, that portion is not collected until the assets become unfrozen. That, of course, does not arise under the provisions of anything we are doing here, and the hon. and gallant Gentleman was asking a question as to the effect of the general law. Nothing we are doing here touches that position.

I agree that it is not strictly relevant to what we are doing now, but we hope to have an opportunity of raising this matter again on the Report stage because it seems that the beneficiary is being treated harshly where he may be left without a penny because he has overseas a certain amount of money that he cannot touch. I am sure it is a matter that the House ought to consider, and in those circumstances, we shall try to devise some Amendment on Report stage which will enable us to raise it.

I want to refer to the incidence of Death Duties. Where there is a change in the rate as the estate gets larger, there is one point at which the increase attracts a tax of 100 per cent. It is entirely inequitable and it is thoroughly untidy, and it goes right through the scale. To give two small examples, a small estate of £10,000 is subject to 4 per cent., but above £10,000 it is subject to 6 per cent. An estate of £10,000 pays £400 tax and the residue is £9,600. If a man leaves £10,212, he comes into the 6 per cent. range with the proviso that he does not actually lose, but that the £212 above the £10,000 bears 100 per cent. tax and the larger estate, when the tax is paid, is exactly the same size as the smallest.

To take a larger example, an estate of £60,000 is subject to a tax of 35 per cent. and when that is paid there is left £39,000. Anybody leaving £65,000 is subject to 40 per cent. tax, and when that is paid it leaves as residue exactly the same amount as the estate of £60,000, that is £39,000. The reason why that happens is that the whole of the estate is assessed for Death Duties at the one rate. Surtax assessment is more equitable for, in the various steps, it is not the whole of the income which is assessed for the higher rate, but the increased income band. Why cannot the same principle be adopted for Death Duties?

I wish briefly to draw the attention of the Chancellor to the hardship involved where an estate declines from the date of death to the date of sale. I shall illustrate this simply by an extreme case. A man dies on 1st January leaving an estate to the value of £1 million. It is not possible to sell that until 1st March, by which time it may be possible to realise only £800,000. That will mean that the heir will get nothing at all with which to pay the expenses, so he will be worse off with the estate he has inherited. The delay in selling the estate may be no fault of the heir. It may occur quite apart from the legal delay in getting probate, because if the estate consists of shares largely in one company, it takes a long time to sell those shares, especially in markets such as we have at present.

The Chancellor may say that it works out on an average because if the price goes up, the estate gains, having paid a smaller amount of Death Duty than it would otherwise have paid; but neither I nor the Committee could accept that argument because the scales are weighted against the estate. The very fact of trying to sell the shares brings the price down and, therefore, creates an artificial position against the owner. Secondly, even if one man gains, that is no consolation to the man who loses. That seems just about as fair as when the judge said, "The justice in my country is admirably administered. It is quite true that six men who were not guilty were hanged. On the other hand, six men who were guilty got off. Justice, therefore, was done on the average." That seems to be applicable to the hardship in the present case.

I realise that hon. and right hon. Gentlemen opposite may have very little sympathy with large estates; of course, this question applies particularly to the large estates. But I assume that, even so, they do not wish the State to take more than the pound of flesh to which it is entitled; and when the State, in its wisdom or unwisdom, decides to take a very large share indeed of an estate it is up to the State to devise methods by which it makes quite sure that no more is taken than has been legally agreed upon in this House of Commons.

I do not apologise for returning to the point about Death Duties as between kin and when property passes to strangers. I do not wish to be quarrelsome about it, but I think that the Solicitor-General and the Financial Secretary to the Treasury themselves would agree that they were not at their very plainest. I do not apologise, therefore, if I did not wholly understand the matter and their explanations of it at the end. But if I have got it anything like right, surely the effect of the Clause is that for the first time in our history—and the history of the matter is far older than the Death Duties; it goes back to the times of the heriots and reliefs and all that—for the first time in our history property passing upon death is going to be equally heavily hit by the Crown whether it passes within the family or outside it.

I understood that the right hon. Gentleman the Member for the City of London (Mr. Assheton) had indicated to the Chair that he and his hon. Friends would have a wide Debate on the Amendment in his name and that no Debate would be continued upon the same point on the Motion, "That the Clause stand part of the Bill."

When the discussion was opened those of us then present agreed that it would be a convenient way of discussing the matter to have a general Debate upon the first Amendment.

I am not quite sure, Mr. Bowles, whether it is a point of Order or a point of decency upon which you are pulling me up. In either case, I am willing at once to give way. I have sat throughout the Debate except for one minute. I do not think I have been out of the Chamber for more than one minute and if during that minute the leaders of my party gave an assurance that this matter would not be raised at this stage then, of course, I will continue no further; but I really have not been out of the Chamber for more than a minute or two at the very beginning of the Debate, and I certainly heard no announcement of this sort nor did I know that it was a matter of Order.

It is not a matter of Order. I was merely pointing out that some kind of arrangement had been reached between, I think, the right hon. Gentleman the Member for the City of London and the Chair—I was not occupying it at the time—at the beginning of his speech on his own Amendment.

Whilst we want to get through the Debate, on the other hand no one wishes to prevent my hon. Friend the Member for Cambridge University (Mr. Pickthorn) from developing a point to which he attaches importance. I think it was, in fact, generally agreed that we would not prolong the Debate on the Motion, "That the Clause stand part of the Bill."

I have listened throughout the Debate and as I say, I was not out of the Chamber for more than a minute. I am sorry I missed hearing what was said. What I want to know is, whether, if that is the right meaning of the Clause—and I think it is—that is not a very great change in our law; and, if so, whether, even now, and in spite of all these reasons for hurry, the Treasury Bench does not feel it some kind of a duty to indicate what is the reason for that change in the law. We have had no reason on that point at all. We had the point that £20

Division No 178.]

AYES

[6.48 p.m.

Acland, Sir RichardCarmichael, JamesFollick, M.
Adams, Richard (Balham)Chamberlain, R. A.Foot, M. M.
Albu, A. H.Champion, A. J.Forman, J. C.
Allen, A. C. (Bosworth)Chater, D.Fraser, T. (Hamilton)
Alpass, J. H.Chetwynd, G. R.Gibbins, J.
Anderson, A. (Motherwell)Cluse, W. S.Gilzean, A.
Attewell, H. C.Collick, P.Glanville, J. E. (Consett)
Austin, H. LewisCollindridge, F.Gooch, E. G.
Awbery, S. S.Collins, V. J.Goodrich, H. E.
Ayles, W. H.Colman, Miss G. M.Grenfell, D. R.
Ayrton Gould, Mrs. B.Corlett, Dr. J.Grey, C. F.
Balfour, A.Cove, W. G.Grierson, E.
Barstow, P. G.Cripps, Rt. Hon. Sir S.Griffiths, D. (Rother Valley)
Barton, C.Daggar, G.Griffiths, Rt. Hon. J. (Llanelly)
Battley, J. R.Daines, P.Griffiths, W. D. (Moss Side)
Bechervaise, A. E.Dalton, Rt. Hon. H.Gunter, R. J.
Benson, G.Davies, Edward (Burslem)Guy, W. H.
Beswick, F.Davies, Haydn (St. Pancras, S. W.)Hall, Rt. Hon. Glenvil
Bavan, Rt. Hon A. (Ebbw Vale)Davies, R. J. (Westhoughton)Hamilton Lieut-Col. R.
Binns, J.Deer, G.Hardy, E. A.
Blackburn, A. R.Delargy, H. J.Hastings, Dr. Somerville
Blenkinsop, A.Diamond, J.Haworth, J.
Blyton, W. R.Dobbie, W.Hobson, C. R.
Bottomley, A. G.Dodds, N. N.Holman, P.
Bowden, Fig. Offr. H. W.Donovan, T.Holmes, H. E. (Hemsworth)
Braddock, Mrs. E. M. (L'pl, Exch'ge)Driberg, T. E. N.Horabin, T. L.
Braddock, T. (Mitcham)Dugdale, J. (W. Bromwich)Houghton, A. L. N. D.
Brook, D. (Halifax)Dye, S.Hoy, J.
Brooks, T. J. (Rothwell)Ede, Rt. Hon. J. C.Hudson, J. H. (Ealing, W.)
Broughton, Dr. A. D. D.Edelman, M.Hughes, Hector (Aberdeen, N.)
Brown, T. J. (Ince)Evans, John (Ogmore)Hughes, H. D. (W'lverh'ton, W.)
Brown, W. J. (Rugby)Ewart, R.Hutchinson, H. L. (Rusholme)
Burden, T. W.Fairhurst, F.Irvine, A. J. (Liverpool)
Burke, W. A.Farthing, W. J.Irving, W. J. (Tottenham, N.)
Butler, H. W. (Hackney, S.)Fernyhough, E.Jay, D. P. T.

million was wanted; that is quite understandable, but it is not relevant. Apart from that, we had merely the Solicitor-General's as near as possible simultaneous argument ( a) that it is very hard on the penniless aunt of a millionaire to have to pay Death Duties, and ( b) that it is very hard upon the son who inherits most of the matter if he has to pay it. That is the only argument we have been given so far.

6.45 p.m.

I do not believe that anybody on the other side imagines there is any great proportion of voters in this country who really think that there should be no distinction whatever between the family and strangers in the matter of the passing of property at death. I quite understand the belief that there should be no passing of property at death—that I can fully understand; but that there should be no distinction in the passing of property at death in the case where it passes to strangers and the case where it passes to close relatives is, I believe, an opinion shared by no one else in this country. The Treasury Bench really ought to have given us some kind of a case for it.

Question put, "That the Clause stand part of the Bill."

The Committee divided: Ayes, 235; Noes, 101.

Jeger, G. (Winchester)Neal, H. (Claycross)Sylvester, G. O.
Jeger, Dr. S. W. (St. Pancras, S. E.)Nichol, Mrs. M. E. (Bradford, N.)Symonds, A. L.
Jones, D. T. (Hartlepool)Oldfield, W. H.Taylor, R. J. (Morpeth)
Jones, J. H. (Bolton)Oliver, G. H.Taylor, Dr. S. (Barnet)
Jones, P. Asterley (Hitchin)Orbach, M.Thomas, D. E. (Aberdare)
Keenan, W.Paling, Will T. (Dewsbury)Thomas, George (Cardiff)
King, E. M.Pargiter, G. A.Thomas, I. O. (Wrekin)
Kinghorn, Sqn.-Ldr. E.Parker, J.Thorneycroft, Harry (Clayton)
Kinley, J.Paton, Mrs. F. (Rushcliffe)Thurtle, Ernest
Kirby, B. V.Paton, J. (Norwich)Titterington, M. F.
Lee, F. (Hulme)Pearson, A.Tolley, L.
Leonard, W.Peart, T. F.Tomlinson, Rt. Hon. G.
Leslie, J. R.Poole, Cecil (Lichfield)Turner-Samuels, M.
Levy, B. W.Popplewell, E.Viant, S. P.
Lewis, J. (Bolton)Porter, E. (Warrington)Wadsworth, G.
Lindgren, G. S.Porter, G. (Leeds)Walker, G. H.
Lipton, Lt.-Col. M.Proctor, W. T.Wallace, G. D. (Chislehurst)
Logan, D. G.Purvey, Comdr. H.Walking, T. E.
Longdon, F.Randall, H. E.Weitzman, D.
Lyne, A. W.Ranger, J.Wells, P. L. (Faversham)
McAdam, W.Reid, T. (Swindon)Wells, W. T. (Walsall)
McAllister, G.Rhodes, H.West, D. G.
McGhee, H. G.Roberts, Goronwy (Caernarvonshire)Wheatley, Rt. Hon. John (Edinb'gh, E.)
Mack, J. D.Robertson, J. J. (Berwick)White, H. (Derbyshire, N. E.)
McKay, J. (Wallsend)Robinson, Kenneth (St. Pancras, N.)Whiteley, Rt. Hon. W.
Mackay, R. W. G. (Hull, N. W.)Rogers, G. H. R.Wilkes, L.
McLeavy, F.Ross, William (Kilmarnock)Wilkins, W. A.
MacPherson, Malcolm (Stirling)Royle, C.Willey, F. T. (Sunderland)
Mainwaring, W. H.Sharp, GranvilleWilley, O. G. (Cleveland)
Mallalieu, J. P. W. (Huddersfield)Shawcross, C. N. (Widnes)Williams, D. J. (Neath)
Mann, Mrs. J.Shurmer, P.Williams, J. L. (Kelvingrove)
Mayhew, C. P.Silverman, J. (Erdington)Williams, Ronald (Wigan)
Mellish, R. J.Silverman, S. S. (Nelson)Williams, W. T. (Hammersmith, S.)
Mikardo, IanSimmons, C. J.Williams, W. R. (Heston)
Millington, Wing-Comdr. E. R.Skinnard, F. W.Willis, E.
Mitchison, G. R.Smith, C. (Colchester)Wilmot, Rt. Hon. J.
Monslow, W.Smith, S. H. (Hull, S. W.)Woodburn, Rt. Hon. A.
Moody, A. S.Snow, J. W.Wyatt, W.
Morris, Lt.-Col. H. (Sheffield, C.)Sorensen, R. W.Yates, V. F.
Morris, P. (Swansea, W.)Soskice, Rt. Hon. Sir FrankYoung, Sir R. (Newton)
Mort, D. L.Sparks, J. A.
Moyle, A.Stewart, Michael (Fulham, E.)TELLERS FOR THE AYES:
Murray, J. D.Stross, Dr. B.Mr. Joseph Henderson and
Nally, W.Stubbs, A. E.Mr. Hannan.
Naylor, T. E.Summerskill, Rt. Hon. Edith

NOES

Agnew, Cmdr. P. G.Gridley, Sir A.Noble, Comdr. A. H. P.
Assheton, Rt. Hon. R.Grimston, R. V.Nutting, Anthony
Astor, Hon. M.Hannon, Sir P. (Moseley)Odey, G. W.
Baldwin, A. E.Harden, J. R. E.Peake, Rt. Hon. O.
Beamish, Maj. T. V. H.Hare, Hon. J. H. (Woodbridge)Peto, Brig. C. H. M.
Birch, NigelHarris, F. W. (Croydon, N.)Pickthorn, K.
Boles, Lt.-Col. D. C. (Wells)Headlam, Lieut.-Col. Rt. Hon. Sir C.Rayner, Brig. R.
Boothby, R.Hinchingbrooke, ViscountReed, Sir S. (Aylesbury)
Bower, N.Hogg, Hon. Q.Roberts, H. (Handsworth)
Braithwaite, Lt.-Comdr. J. G.Hope, Lord J.Robertson, Sir D. (Streatham)
Bromley-Davenport, Lt.-Col. W.Howard, Hon. A.Robinson, Roland (Blackpool, S.)
Butcher, H. W.Hurd, A.Ropner, Col. L.
Challen, C.Hutchison, Lt.-Cm. Clark (E'b'rgh W.)Ross, Sir R. D. (Londonderry)
Clarke, Col. R. S.Hutchison, Col. J. R. (Glasgow, C.)Savory, Prof. D. L.
Conant, Maj. R. J. E.Jeffreys, General Sir G.Spearman, A. C. M.
Cooper-Key, E. M.Keeling, E. H.Stanley, Rt. Hon. O.
Crookshank, Capt. Rt. Hon. H. F. C.Kendall, W. D.Strauss, Henry (English Universities)
Crosthwaite-Eyre, Col. O. E.Lambert, Hon. G.Sutcliffe, H.
Crowder, Capt. John E.Lancaster, Col. C. G.Taylor, C. S. (Eastbourne)
Cuthbert, W. N.Lindsay, M. (Solihull)Taylor, Vice-Adm. E. A. (P'dd't'n, S.)
Darling, Sir W. Y.Lloyd, Selwyn (Wirral)Thomas, Ivor (Keighley)
Drayson, G. B.Low, A. R. W.Thornton-Kemsley, C. N.
Drewe, C.Lucas-Tooth, Sir H.Turton, R. H.
Dugdale, Maj. Sir T. (Richmond)MacAndrew, Col. Sir C.Watt, Sir G. S. Harvie
Duthie, W. S.McFarlane, C. S.Webbe, Sir H. (Abbey)
Eccles, D. M.Mackeson, Brig. H. R.White, J. B. (Canterbury)
Eden, Rt. Hon. A.Maclay, Hon. J. S.Williams, C. (Torquay)
Erroll, F. J.Maclean, F. H. R. (Lancaster)Williams, Gerald (Tonbridge)
Fletcher, W. (Bury)MacLeod, J.Winterton, Rt. Hon. Earl
Foster, J. G. (Northwich)Maitland, Comdr. J. W.York, C.
Fraser, H. C. P. (Stone)Mellor, Sir J.Young, Sir A. S. L. (Parlick)
Fraser, Sir I. (Lonsdale)Moore, Lt.-Col. Sir T.
Fyfe, Rt. Hon. Sir D. P. M.Morris, Hopkin (Carmarthen)TELLERS FOR THE NOES:
Galbraith, Cmdr. T. D. (Pollok)Mott-Radclyffe, C. E.Colonel Wheatley and
Gammans, L. D.Neven-Spence, Sir B.Mr. Wingfield Digby.

Clause ordered to stand part of the Bill.

Clause 25—(Allowance For, Or Repayment Of, Legacy Or Succession Duty Paid On Capital Of Settled Fund)

I beg to move in page 17, line 29, to leave out "successive."

This is a drafting change. On further consideration we thought the wording used might exclude some cases for relief intended to be included in the Clause. Clause 25 provides for proportionate relief from payment of the new Estate Duty in the case where Succession Duty has been paid on the capital value of a settlement. That would be the case where settled property passes through various persons each of whom is liable at the same rate of Succession Duty; for example, if it goes through the hands of several brothers liable at 10 per cent. We seek to leave out the word "successive" because that might exclude from relief given by the Clause the case, for example, in which a settlement provides for an annuity payable to "A" with the residue of the income to go to "B." It may be said that in that case there was contemporaneous interest and not successive interest. We seek to leave out "successive" so that that kind of case would not be excluded from the benefits conferred on the taxpayer by the Clause.

Amendment agreed to.

I beg to move, in page 18, line 24, to leave out "the whole," and to insert "any."

This Amendment has almost exactly the same purpose as the last Amendment. It makes sure that in a case in which a certain amount of property is taken out of settlement that it is not excluded from the scope of the Clause. The word "whole" might exclude cases where after the settlement was made, some of the property could be taken out of the settlement.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clause 26 ordered to stand part of the Bill.

Clause 27—(Exemption From Estate Duty Of Maintenance Funds Given To National Trust)

Motion made, and Question proposed, "That the Clause stand part of the Bill."

In view of the anxiety to make good progress with this Bill, I shall not delay the Committee more than a minute or two, but I think it would be inappropriate to pass the Clause without someone expressing on behalf of the National Trust our appreciation that the law is being improved in this way. The Clause is of great importance and the Chancellor of the Exchequer has shown that he, at any rate, realises the valuable work that the National Trust is doing. I hope he will convey to his colleague in charge of another Bill that view of the National Trust, because it is not held by all his colleagues to quite the same extent that he shows he holds it, by this very welcome Clause.

I wish to endorse what my hon. and learned Friend the Member for Combined English Universities (Mr. H. Strauss) has said. May we take it that property exempted from Estate Duty by this Clause will not, for the purpose of determining the rate of Estate Duty, be aggregated with other property passing at the death?

7.0 p.m.

Speaking on behalf of my right hon. and learned Friend, I would say that he is delighted that this Clause has received such universal support and is commended in quarters which normally do not look favourably on what he does. In reply to the hon. Member for Twickenham (Mr. Keeling), these gifts are not aggregated.

Question put, and agreed to.

Clause ordered to stand part of the Bill.

Clause 28—(Extension Of Relief On Compulsory Acquisitions)

Motion made, and Question proposed, "That the Clause stand part of the Bill."

May I ask for some explanation of this Clause? This is a rather complicated matter which is becoming of more interest to a larger number of people. Would the Chancellor or some Member of the Treasury Bench kindly explain where we are under this Clause and what is the necessity for its being in the Bill?

This Clause extends the time during which relief can be granted from Estate Duty in the following circumstances. Supposing land was valued at a certain figure and was subsequently compulsorily acquired at a lesser sum, relief from payment of Estate Duty could be granted proportionately to the extent to which the compulsory acquisition price was less than the value which had been accepted for the purposes of Estate Duty. This Clause extends the period to the period which is provided for under the Town and Country Planning Act, namely to the end of 1953, during which, in order to eliminate scarcity value, a notional lease is assumed to exist.

Under the Town and Country Planning Act, 1947, current values were substituted for 1939 values, but in order that, for purposes of compulsory acquisition of land the State or the acquiring authority should not have to pay a scarcity value, it is deemed that the land is subject to a lease which is due to expire at the end of 1953. That is provided in order to reduce, by eliminating scarcity value, the value of the land which it is proposed to quire. This Clause extends the provisi for relief in the payment of Estate Duty to cover the period in which it is deemed, under the Town and Country Planning Act, a notional lease exists.

Under that Act certain people have to make a claim, and those claims have to be made by the end of this month. Those making the claim do not know what is the value of their land or whether the claim will be accepted. Does this Clause deal with that matter, or is it dealt with elsewhere in the Bill? I think that the right hon. and learned Gentleman is covering the point but it is one which should be made certain. How is the case of such people dealt with?

This Bill does not affect that matter at all. The claims which have to be made by the end of this month are claims against the £300 million, which is the global figure of compensation to be paid to owners in respect of the loss of development value of their land. I was speaking about the elimination of scarcity value for the purposes of compulsory acquisition. So that the acquiring authority does not have to pay a scarcity value in acquiring land this notional lease is assumed, under the 1947 Act, to exist. The development value and the claim which has to be in by the end of the month is a different matter because land can only be disposed of in future at existing use value and the owners have lost something in respect of which they should have compensation.

If the Solicitor-General has not covered the point which has just been made by the hon. Member for Torquay (Mr. C. Williams), will he say where it is covered? I ask him to envisage what might happen. Supposing a man dies in possession of a piece of property in regard to which he or his lawyer has staked a claim for development rights. It is true that that claim is one against the global sum of £300 million. It is also true that that claim has some value as part of the estate. On his death the estate has to be wound up, but it may be a long time before the sum is recoverable from the £300 million global fund, and what is recovered may bear no relation to the claim which has been made. The figure of that claim will presumably be the figure taken for the assessment of Death Duty at the time of death.

It might conceivably happen that a man has a piece of property with a development right which his lawyer assesses at £1,000. A claim is put in for that amount, and Death Duty is presumably levied on that figure as representing part of the estate, and yet two or three years later it may emerge that there will be paid from the central fund in respect of that property not £1,000 but perhaps £200 or £300. Plainly, something should be done about that. If that is not dealt with in this Clause, would the Solicitor-General tell us where in the Bill or elsewhere that point will be dealt with?

The position in regard to such a claim and the value to be put upon it is the same as that in regard to any other claim which forms part of the assets of the estate. Supposing the man has made a claim, that claim is valued to see what is a fair value to be put on it. The claim would be on the same footing as any other claim.

Except that in this case the State is the beneficiary under both heads. I cannot imagine that the Exchequer is entitled to charge the executors Death Duty on £1,000, which is paid to the State and subsequently for the State to pay only £250 in relation to that precise consideration. The right hon. and learned Gentleman would not rob the estate of £750 in that way, would he? Or would he?

The claim may turn out to be more or less in value than the figure at which it is valued, according to which the estate will benefit or otherwise.

Does the right hon. and learned Gentleman suppose that the State will give from the £300 million more than the claim which is advanced? I find that difficult to believe. Even if that were so would not the Government require from the estate additional Estate Duty in regard to the increased figure?

Cannot the Solicitor-General give the assurance, which is the fact, that when the amount of the claim is ascertained, and finally settled, the estate will be adjusted accordingly and the duty adjusted accordingly?

I feel that a large sum of money depends on this matter. It is a difficult point and is one which may never have occurred to the right hon. and learned Gentleman. I should be perfectly satisfied, as I think would my Friends on this side of the Committee, if we could be assured that the point will be thoroughly gone into because it will be most unfair if Death Duties are to be valued on the claim. It is an entirely new position affecting a large number of people. It looks as if no one knows what is the position in regard to such a claim. If we can have an assurance that between now and the Report stage this matter can be gone into so that the unfair position raised by the hon. Member for Rugby (Mr. W. J. Brown) shall not arise, that will meet the point about which I am worried. It is a very real point, as has now been seen.

I speak subject to correction, but I have drawn inspiration from the experts in the box, and if I understand the position, what happens is that the executors or administrators of the estate are informed that payment of Estate Duty in regard to the claim can be left outstanding until the claim is finally settled.

If that is really so one must accept it, but it is not a very happy position. Apparently there is no real certainty in the Treasury on this matter. I hope that we shall see that that point is made certain.

Question put, and agreed to.

Clause ordered to stand part of the Bill.

Clause 29—(Extension Of Exemption For Small Gifts Inter Vivos)

I beg to move, in page 21, line 9, to leave out from "amount," to the end of the Clause, and to add:

"if the following condition is satisfied, namely, that bona fide possession of enjoyment of the property so taken was assumed by the donee immediately upon the gift and thenceforth retained to the entire exclusion of the deceased or of any benefit to him by contract or otherwise.
(2) Where in the case of any donee such gifts do not exceed in the aggregate five hundred pounds in value or in amount and bona fide possession or enjoyment of some but not all of the property so taken was assumed by the donee immediately upon the gift and thenceforth retained to the entire exclusion of the deceased or of any benefit to him by contract or otherwise, the foregoing subsection shall apply to the gift or gifts of which such possession or enjoyment was so taken or assumed and retained but not to the other or others."
Here I gather the Government are extending the exemption of small inter vivos gifts from £100 to £500. My Amendment seeks to make clear what I do not think is clear from the Clause, that if such a gift is out of settled or unsettled property it will equally get the benefit of this concession.

The answer is that in making this change my right hon. and learned Friend has in mind small gifts up to the sum of £500 and to include interests in settled property would, in his view, be going beyond the scope of what he has in mind. There is really no ground for exempting gifts which form the subject of formal settlements. If the right hon. Gentleman is thinking of settlements that form part of a marriage settlement, they are dealt with already, and do not come into this.

I wish the right hon. Gentleman to make this clear. Suppose a man or a woman is tenant for life of a marriage settlement and wishes to release the sum of £200 in favour of a daughter. Would the release of that £200 get the benefit of this exemption or not?

It gets exemption under another Finance Act altogether. Where a marriage settlement takes place, it is assumed, and properly so, that the gift, if a gift of this kind passes, is made in consideration of the marriage. Therefore, it does not come into this Clause at all. It is dealt with under another Finance Act and would be exempted.

I do not think the right hon. Gentleman is quite right. The question of consideration of marriage does not affect this matter. I am discussing a position where a man or woman is tenant for life of a settlement and that man or woman wishes to hand over to his child, or any other person who happens to be within the terms of the settlement, a sum of £200. It would be perfectly reasonable and should think in accordance with the wishes of this Committee, that such a release should be treated in exactly the same way as if the same person had been able to hand over £200 to the same individual out of his private estate. I cannot believe the Committee would wish the matter to be left in its present position, but if that is the case, I would press this Amendment. If, however, the right hon. Gentleman will assure me that he will look into the matter before the Report stage I shall be glad to ask leave to withdraw.

All I can say is that gifts made in consideration of marriage are already covered under a previous enactment. If the type of gift envisaged by the right hon. Gentleman is not of that kind all I can say is, it is not exempted and it is not the intention of my right hon. Friend to exempt it.

Division No. 179.]

AYES

[7.15 p.m.

Acland, Sir RichardBalfour, A.Blyton, W. R.
Adams, Richard (Balham)Barstow, P. G.Bottomley, A. G.
Albu, A. H.Barton, C.Bowden, Fig.-Offr. H. W.
Allen, A. C. (Bosworth)Battley, J. R.Braddock, Mrs. E. M. (L'pl, Exch'ge)
Alpass, J. H.Bechervaise, A. E.Braddock, T. (Mitcham)
Anderson, A. (Motherwell)Benson, G.Brook, D. (Halifax)
Attewell, H. C.Berry, H.Brooks, T. J. (Rothwell)
Austin, H. LewisBeswick, F.Broughton, Dr. A. D. D.
Awbery, S. S.Bevan, Rt. Hon. A. (Ebbw Vale)Brown, T. J. (Ince)
Ayles, W. H.Binns, J.Burden, T. W.
Ayrton Gould, Mrs. B.Blackburn, A. R.Burke, W. A.
Baird, J.Blenkinsop, A.Butter, H. W. (Hackney, S.)

satisfactory. I can quite see that it is in the interests of the Government, in the discharge of their responsibility, to put a monetary limit upon the extent of the gifts to which this exemption applies. But I cannot see, and no attempt has been made to explain, why we should draw a distinction between the same sum of money which a man hands to a child out of his free capital or out of settled capital. I cannot see why the sum should not come out of settled capital as out of free capital, and no attempt has been made to explain why it is that a gift made out of free capital is perfectly harmless and can draw exemption, while a gift made out of settled capital is in some way so obnoxious that it is not entitled to exemption. Unless we can be given some clear explanation, I shall ask my hon. Friends to press for a Division.

I think I can give an explanation. A man can give a gift out of free capital to a naughty lady but he can only give settled capital in all probability, to relatives. This is just another instance of the Government's attack on the family. Where money is settled on the family and is family money, the right hon. and learned Gentleman puts a special burden on it. This is rather a cute little way of once again attacking the family in this Bill. I think that is the natural explanation, short of the Government having an answer. We know the Government are going out of their way, even in these small things, to attack the family rather than the individual who may make a gift to some friend outside the family. It is a shocking position, but those of us who know the Government expect them to do these things.

Question put, "That the words proposed to be left out, stand part of the Clause."

The Committee divided: Ayes, 250; Noes, 102.

Carmichael, JamesHughes, H. D. (W'lverh'pton, W.)Ranger, J.
Castle, Mrs. B. A.Hutchinson, H. L. (Rusholme)Reid, T. (Swindon)
Chamberlain, R. A.Irvine, A. J. (Liverpool)Rhodes, H.
Champion, A. J.Irving, W. J. (Tottenham, N.)Roberts, Goronwy (Caernarvonshire)
Chater, D.Jay, D. P. T.Robertson, J. J. (Berwick)
Chetwynd, G. R.Jeger, G. (Winchester)Robinson, Kenneth (St. Pancras, N.)
Cluse, W. S.Jeger, Dr. S. W. (St. Pancras, S. E.)Rogers, G. H. R.
Collick, P.Jones, D. T. (Hartlepool)Ross, William (Kilmarnock)
Collindridge, F.Jones, Elwyn (Plaistow)Royle, C.
Collins, V. J.Jones, J. H. (Bolton)Scott-Elliot, W.
Colman, Miss G. M.Jones, P. Asterley (Hitchin)Sharp, Granville
Corbet, Mrs. F. K. (Camb'well, N. W.)Keenan, W.Shurmer, P.
Corlett, Dr. J.King, E. M.Silverman, J. (Erdington)
Cove, W. G.Kinghorn, Sqn.-Ldr. E.Silverman, S. S. (Nelson)
Cripps, Rt. Hon. Sir S.Kinley, J.Simmons, C. J.
Daggar, G.Kirby, B. V.Skinnard, F. W.
Daines, P.Lee, F. (Hulme)Smith, C. (Colchester)
Dalton, Rt. Hon. H.Leonard, W.Smith, S. H. (Hull, S. W.)
Davies, Edward (Burslem)Leslie, J. R.Snow, J. W.
Davies, Haydn (St. Pancras, S. W.)Levy, B. W.Sorensen, R. W.
Davies, R. J. (Westhoughton)Lewis, J. (Bolton)Soskice, Rt. Hon. Sir Frank
Deer, G.Lindgren, G. S.Sparks, J. A.
Delargy, H. J.Lipton, Lt.-Col M.Stewart, Michael (Fulham, E.)
Diamond, J.Logan, D. G.Stokes, R. R.
Dobbie, W.Longden, F.Stross, Dr. B.
Dodds, N. N.Lyne, A. W.Stubbs, A. E.
Donovan, T.McAdam, W.Summerskill, Rt. Hon. Edith
Driberg, T. E. N.McAllister, G.Sylvester, G. O.
Dugdale, J. (W. Bromwich)McEntee, V. La T.Symonds, A. L.
Dye, S.McGhee, H. G.Taylor, R. J. (Morpeth)
Ede, Rt. Hon. J. C.Mack, J. D.Taylor, Dr. S. (Barnet)
Edelman, M.McKay, J. (Wallsend)Thomas, D. E. (Aberdare)
Edwards, W. J. (Whitechapel)Mackay, R. W. G. (Hull, N. W.)Thomas, George (Cardiff)
Evans, John (Ogmore)McLeavy, F.Thomas, I. O. (Wrekin)
Evans, S. N. (Wednesbury)MacPherson, Malcolm (Stirling)Thorneycroft, Harry (Clayton)
Ewart, R.Mainwaring, W. H.Titterington, M. F.
Fairhurst, F.Mallalieu, J. P. W. (Huddersfield)Tolley, L.
Farthing, W. J.Mann, Mrs. J.Tomlinson, Rt. Hon. G.
Field, Capt. W. J.Mayhew, C. P.Turner-Samuels, M.
Follick, M.Mellish, R. J.Viant, S. P.
Foot, M. M.Middleton, Mrs. L.Wadsworth, G.
Forman, J. C.Mikardo, IanWalker, G. H.
Fraser, T. (Hamilton)Millington, Wing-Comdr. E. R.Wallace, G. D. (Chislehurst)
George, Lady M. Lloyd (Anglesey)Mitchison, G. R.Watkins, T. E.
Gibbins, J.Monslow, W.Weitzman, D.
Gibson, C. W.Moody, A. S.Wells, P. L. (Faversham)
Gilzean, A.Morris, Lt.-Col. H. (Sheffield, C.)Wells, W. T. (Walsall)
Glanville, J. E. (Consott)Morris, P. (Swansea, W.)West, D. G.
Gooch, E. G.Mort, D. L.Wheatley, Rt. Hon. John (Edin'gh, E.)
Goodrich, H. E.Moyle, A.White, H. (Derbyshire N. E.)
Grenfell, D. R.Murray, J. D.Whiteley, Rt. Hon. W.
Grey, C. F.Nally, W.Wilkes, L.
Grierson, E.Naylor, T. E.Wilkins, W. A.
Griffiths, D. (Rother Valley)Neal, H. (Claycross)Willey, F. T. (Sunderland)
Griffiths, Rt. Hon. J. (Llanelly)Nichol, Mrs. M. E. (Bradford, N.)Willey, O. G. (Cleveland)
Griffiths, W. D. (Moss Side)Oldfield, W. H.Williams, D. J. (Neath)
Gunter, R. J.Oliver, G. H.Williams, J. L. (Kelvingrove)
Guy, W. H.Orbach, M.Williams, Ronald (Wigan)
Hall, Rt. Hon. GlenvilPaling, Will T. (Dewsbury)Williams, Rt. Hon. T. (Don Valley)
Hamilton, Lieut.-Col. R.Palmer, A. M. F.Williams, W. T. (Hammersmith, S.)
Hardy, E. A.Pargiter, G. A.Williams, W. R. (Heston)
Hastings, Dr. Somerville.Parker, J.Willis, E.
Haworth, J.Paton, Mrs. F. (Rushcliffe)Wills, Mrs. E. A.
Henderson, Rt. Hn. A. (Kingswinford)Paton, J. (Norwich)Wilmot, Rt. Hon. J.
Herbison, Miss M.Pearson, A.Woodburn, Rt. Hon. A.
Hobson, C. R.Peart, T. F.Wyatt, W.
Holman, P.Poole, Cecil (Lichfield)Yates, V. F.
Holmes, H. E. (Hemsworth)Popplewell, E.Young, Sir R. (Newton)
Horabin, T. L.Porter, E. (Warrington)
Houghton, A. L. N. D. (Sowerby)Porter, G. (Leeds)TELLERS FOR THE AYES:
Hoy, J.Proctor, W. T.Mr. Joseph Henderson and
Hudson, J. H. (Ealing, W.)Pursey, Comdr. H.Mr. Hannan.
Hughes, Hector (Aberdeen N.)Randall, H. E.

NOES

Agnew, Cmdr. P. G.Braithwaite, Lt.-Comdr. J. G.Crockshank, Capt. Rt. Hon. H. F. C.
Assheton, Rt. Hon. R.Bromley-Davenport, Lt-Col. W.Crosthwaite-Eyre, Col. O. E.
Astor, Hon. M.Brown, W. J. (Rugby)Cuthbert, W. N.
Baldwin, A. E.Buchan-Hepburn, P. G. T.Darling, Sir W. Y.
Beamish, Maj. T. V. H.Butcher, H. W.Digby, Simon Wingfield
Birch, NigelChallen, C.Drayson, G. B.
Boles, Lt.-Col. D. C. (Wells)Clarke, Col. R. S.Drewe, C.
Boothby, R.Clifton-Brown, Lt.-Col. G.Dugdale, Maj. Sir T. (Richmond)
Bower, N.Conant, Maj. R. J. E.Duthie, W. S.

Eccles, D. M.Lambert, Hon. G.Robinson, Roland (Blackpool, S.)
Erroll, F. J.Lancaster, Col. C. G.Ropner, Col. L.
Fletcher, W. (Bury)Legge-Bourke, Maj. E. A. H.Ross, Sir R. D. (Londonderry)
Foster, J. G. (Northwich)Lindsay, M. (Solihull)Sanderson, Sir F.
Fraser, H. C. P. (Stone)Lloyd, Selwyn (Wirral)Savory, Prof. D. L.
Fraser, Sir I. (Lonsdale)Lucas, Major Sir J.Spearman, A. C. M.
Fyfe, Rt. Hon. Sir D. P. M.MacAndrew, Col. Sir C.Stanley, Rt. Hon. O.
Galbraith, Cmdr. T. D. (Polick)McFarlane, C. S.Strauss, Henry (English Universities)
Gammans, L. D.Maclay, Hon. J. S.Sutcliffe, H.
Grimston, R. V.Maclean, F. H. R. (Lancaster)Taylor, C. S. (Eastbourne)
Hannon, Sir P. (Moseley)MacLeod, J.Taylor, Vice-Adm. E. A. (P'dd't'n, S.)
Harden, J. R. E.Maitland, Comdr. J. W.Thomas, Ivor (Keighley)
Harris, F. W. (Croydon, N.)Mellor, Sir J.Touche, G. C.
Harvey, Air-Comdre, A. V.Moore, Lt.-Col. Sir T.Turton, R. H.
Headlam, Lieut.-Col. Rt. Hon. Sir. C.Morrison, Rt. Hon. W. S. (Cirencester)Wakefield, Sir W. W.
Hinchingbrooke, ViscountMott-Radclyffe, C. E.Watt, Sir G. S. Harvie
Hogg, Hon. Q.Neven-Spence, Sir B.Webbe, Sir H. (Abbey)
Hollis, M. C.Noble, Comdr. A. H. P.White, J. B. (Canterbury)
Hope, Lord J.Nulling, AnthonyWilliams, C. (Torquay)
Howard, Hon. A.Odey, G. W.Williams, Gerald (Tonbridge)
Hurd, A.Peake, Rt. Hon. O.Winterton, Rt. Hon. Earl
Hutchison, Lt.-Cdr. Clark (Edin'gh, W.)Peto, Brig. C. H. M.York, C.
Hutchison, Col. J. R. (Glasgow, C.)Pickthorn, K.Young, Sir A. S. L. (Partick)
Jeffreys, General Sir G.Rayner, Brig. R.
Keeling, E. H.Reed, Sir S. (Aylesbury)TELLERS FOR THE NOES:
Kendall, W. D.Roberts, H. (Handsworth)Brigadier Mackeson and
Colonel Wheatley.

Clause ordered to stand part of the Bill.

Clause 30—(Abolition Of Duty On Bonus Issues Of Securities)

Motion made, and Question proposed. "That the Clause stand part of the Bill."

The Financial Secretary to the Treasury complained earlier that we did not often enough congratulate the Chancellor of the Exchequer on what he does. I said then that we were always ready to congratulate the Chancellor when he was right: the trouble was that he was right so seldom. Here is another occasion where he is right and, therefore, we are prepared to congratulate him. I think that for the last two years we have taken every opportunity to point out the absurdity of the tax which is now being repealed. During the whole of that time no cogent arguments, except those of prejudice, have ever been advanced in favour of it. The Chancellor now says that it has served its purpose. No one could ever discover its purpose.

If bonus issues were undesirable then bonus issues could be stopped, and no doubt were stopped, by the Capital Issues Committee. The addition of this tax had no meaning at all. Therefore, we are glad that the Chancellor has taken this step. We would urge him once again to take as his maxim the indisputable fact that, if ever he is in a dilemma, if he chooses the course exactly opposite to that adopted by his predecessor as Chancellor of the Exchequer, he can always be certain that he will be right.

The Government Front Bench might well have expected that little bouquet. I am sorry if I am not throwing what could be described as a bouquet, but at least the Chancellor knows that he has the most enthusiastic support of hon. Members opposite. I suppose that I must also apologise for breaking into the pleasant little timetable arranged between the Government and the Opposition. However, there are rights for hon. Members other than those on the Government and Opposition Front Benches, and that is why I propose to make a few remarks on this Clause.

I want to ask why at this time of stringency and difficulty the Chancellor should elect to make this concession? He is making it at a time when he calls generally, and rightly, for sacrifices from the people. Why does he choose this moment to annul a duty which falls certainly not on the working classes—it is not something from which they have to be relieved—but on the better off—and in many cases the moneyed interests? I appreciate that there are exceptions, but in general this is a duty which would be borne by the wealthier and by the moneyed interests.

7.30 p.m.

This step would be understandable if industry had been having a bad time or had been going through a thin period. I could understand then that the Chancellor might want to make some kind of concession to industrialists to help them over the stile. Whatever can be said by the Opposition, or indeed by the Chancellor himself, nobody in any part of the Committee attempts to argue that industry and business generally has not had a royal, and indeed a golden, time for the last few years. Therefore, I cannot find a reason why industry needs help and assistance. If this was a Budget in which considerable concessions were being given to the workers, if there was a distribution of largess generally, perhaps we might then understand this concession being given at this time, but I think everybody without regard to Party agrees that this is an austere Budget. At a time when, so far from concessions being given to the people in the mass, new burdens in fact are being placed upon them, it seems entirely incomprehensible to me that that should be the moment when this bonus issue concession is made.

Whatever one may think about the technical merits or demerits of bonus issues, this at least is certain: these bonus issues, now coming out in full spate, are being given from reserves which were accumulated very largely during and since the war. After all, during the war period and during the period of blood and sweat and tears, great profits were made, as they always are during war-time, and, since the war, it has been a time of difficulty, necessity and shortage. Whether the great profits now being handed out in these bonus issues came from the period of the war or the period after the war, we know that in both cases they derive from the needs, the difficulties and the necessities of the people. They were prohibited in war-time. Why is it then, in a time which, financially and in many other ways, is almost as grave, they are not only allowed to have free sway, because that is what is happening, but that time is also chosen to end the small duty of 10 per cent., without any adequate reason being given?

The predecessor of the Chancellor of the Exchequer, the present Chancellor of the Duchy of Lancaster, described bonus issues in 1947 as "sheer money for jam." I know that the Chancellor of the Duchy is unpopular with the Opposition and I am glad of it and I honour him for it, for it is a very bad and dangerous thing when we have a Chancellor of the Exchequer who is popular with the Opposition. The present Chancellor knows perfectly well, as does the Chancellor of the Duchy, that bonus issues, in general, are "sheer money for jam," but, whereas the Chancellor of the Duchy was quite frank and candid about it, the present Chancellor of the Exchequer is very far from frank and candid on the subject.

Since the announcement of this concession was made, I have taken some note of what has been its effect already, and I have here a list of no fewer than 50 cases of bonus issues, mainly on a large scale and going up to as much as £6 million, in the intervening 2½ months. In 39 of these cases, I have been able to trace the exact amount which has been handed over as "sheer money for jam," that is to say, the cases in which no money payment was made at all for the bonus issues. In these 39 cases, which are of the "sheer money for jam" type, I have ascertained that the amounts involved total up to about £14,250,000, which is being handed out to the shareholders. I suppose that, on that basis, the 50 cases might reasonably involve about £17 million handed out, but I know quite definitely that in these 39 cases the actual amount is £14,250,000. In fact, the real value of what is being distributed is greatly in excess of that, and I can readily prove it in regard to a number of the cases I have mentioned, with figures and information which I have here. In numbers of cases——

I think the hon. Gentleman must not go into the amount involved. He may object to the duty being removed, but he cannot go into an explanation showing how many million pounds have been distributed in this way.

I quite appreciate that, Mr. Bowles. I was only trying to illustrate what I think is a valid point—that there has been this pent-up desire to give out this "sheer money for jam." It has been held up until now, but now it is coming out in full force—in one case to which I have referred it is to the extent of £6 million.

I must ask the hon. Gentleman not to continue on those lines any further.

I will not go into further details, because I have already given particulars of the largest instance, but I think I am entitled to say that the Chancellor of the Exchequer estimated that his loss of revenue would be about a million pounds in the current year. I think I am also entitled to say that the bonus issues already handed out represent far more than a million pounds, although I know that he might well argue that these amounts would not have been handed out if the 10 per cent. duty had not been removed. If my right hon. and learned Friend argues that way, then I would say that it makes the case worse than ever, because all this largess has been held up until the moment arrives when the Chancellor, no doubt on the advice and with the pressure of City interests, removes this duty. Now the flood is in full spate, and I want to know why it has been allowed.

The Chancellor, in his Budget speech, gave his reason for his action, and if the right hon. Gentleman the Member for West Bristol (Mr. Stanley) does not know the reason, it is quite clearly given in this passage. The Chancellor, speaking of this 10 per cent. duty, said:
"That duty has, I think, performed the task of controlling bonus issues when the ban was first relaxed, for which purpose it was very properly imposed, and it can now advantageously be discontinued. In future, such issues will be controlled in the same way as any other form of capital issue."—[OFFICIAL REPORT, 6th April, 1949; Vol. 463, c. 2088.]
One thing is very clear, and that is that the Chancellor said that "it can now advantageously be discontinued." Advantageously to whom? To the big vested interests, certainly to the City of London, for I think we can see here the pressure of the City interests on the Chancellor of this Labour Government. Is it really true that this little duty, at this time of difficulty and stringency, can now "advantageously be discontinued?" The Chancellor went on to say that these issues will be controlled in the same way as any other form of capital issue. What we know clearly about the work of the Capital Issues Committee is that it does not properly and adequately control the matter at all. If the Chancellor now says that we do not now need this control but that he can rely on the control of the Capital Issues Committee, my comment is that it is no control at all, and the spate of 50 issues to which I have referred already shows quite clearly that the thing has become virtually uncontrolled.

I regret to have to make this criticism, particularly after the delightful bouquet which the right hon. Gentleman the Member for West Bristol handed to the Government, but I hold very strongly, and I am sure every real Socialist does, in the light of the facts which I have already given, that the cancellation of this duty is entirely unjustified at the present time and will inevitably lead to inflation and to swollen prices, because, in case after case, of which I have the records here, it has been quite clearly intimated that the same level of dividends will hold good after this watering of capital. If that is not largess, if it is not a measure of inflation, and if it does not lead to swollen prices, I just do not know what does.

Furthermore, there is the actual loss of revenue. We may dissent as to the amount involved, which the Chancellor himself estimated at a million pounds. I have already shown that it is far more than that, and that at a time when the Chancellor is looking here and there for little bits of revenue and putting little duties on match-boxes and such things. In my view, to allow this concession is entirely reprehensible and wrong. Taken all in all, I think it is entirely unfair to the bulk of the people, when they are told that they must surrender this and that, to have additional burdens placed upon them, and that this largess, however technically justifiable, should be given at this time. I know the argument about being technically justified, and I could talk of many other things that are technically justified, but the Chancellor is refusing to do these other things because he says the time is not ripe. What about the people with Post-war Credits who want them encashed? They have been told that although they have a right to have them encashed, that right cannot be exercised at the moment. But this technical right of these companies to water their capital is conceded, and, in all the circumstances, I think a good deal of explanation about the whole matter is called for before some of us will be satisfied.

When my attention was drawn to the fact that this was really a proposal for taking off 10 per cent. of the taxation on bonus issues. I was extremely surprised. I had heard about the putting on of 10 per cent. in connection with the pools betting, but I did not hear a great deal of protest about this 10 per cent. on bonus shares except, of course, from hon. Members opposite, from whom we always expect to hear protests although, as a matter of fact, we do not take very much notice of what they say. On the other hand, we do take notice of what we hear in our constituencies and throughout the country. So far as my constituency is concerned, I had quite a number of letters about the 10 per cent. being put on pools betting, but I did not get a single letter about the 10 per cent. placed on bonus shares. I really thought that the Chancellor was putting on another 10 per cent., and I fully approved of such action. I was astonished to find that I was wrong. It seems to me after about 20 years in the movement an extraordinary thing that a Socialist Government with a Left-Wing Chancellor of the Exchequer, the chap who wanted to hoist the Red Flag over Buckingham Palace, can do a thing like this.

The phrase, "hoist the Red Flag over Buckingham Palace," was used by a gentleman who has been dead for many years, and the present Chancellor of the Exchequer is certainly not dead.

He may not be dead as a Socialist, but it certainly seems to me that he is dying as a Left-Wing Socialist. However, I accept the correction, although I think my hon. Friend well knows that the phrase has been fathered on my right hon. and learned Friend more than once. In any case, I do not know that it is not true; after all there is a housing shortage, and there are a lot of spare rooms there. My hon. Friend ought not to have interrupted me; he has put me off.

I can quite understand right hon. Gentlemen opposite approving of this Motion, but that very fact makes me exceedingly suspicious. Throughout my short membership of this Parliament, I have never found myself able to go into the Division Lobby on the few occasions when Members of the Government Front Bench and right hon. Gentlemen opposite have been mixed up together. It sometimes seems to me, in my elementary way, that there might be some good reason for the fraternisation, but, as a matter of fact, my feet just will not carry me into the same Lobby as that used by Opposition Members. I do not feel convinced by the arguments put forward by the Opposition this evening. Their spokesman suggested that the Capital Issues Committee could always control this matter, but, if my investigations are correct, the Coalition Government in May, 1940, totally prohibited the issue of bonus bonds. That committee only came into the picture when some sort of cash consideration was attached to the transaction. Therefore, I do not think that right hon. Gentlemen opposite have quite got the full story in regard to this particular matter.

It seems to me an extraordinary situation that here in 1949, for the first time since 1940, this Parliament is giving up all control with regard to this matter. It was not until the Budget of April, 1947, that the ban was relaxed, and it was only relaxed on the clear understanding that there should be a 10 per cent. duty on bonus issues. That was the price exacted by the Labour Government for the concession they gave with regard to the Measures passed by the Coalition Government. Speaking on 7th June, 1948, the present Chancellor of the Exchequer indicated that, in his opinion, it might be suitable to impose some restrictions of this sort during a period of potential inflation, but that when we had emerged from that period it might be possible to discontinue that type of measure.

7.45 p.m.

I ask the Government whether, in their opinion, we are now running out of the period of "potential inflation." Is that really the Chancellor's case? I think we are entitled to be told because, as I said, in 1948 the Chancellor advocated this sort of legislation because of the danger of inflation. Are we to understand that, because this duty has been withdrawn, there is no longer any danger of inflation in this country? If that is the case, then I fully agree with what was said by my hon. Friend the Member for Norwood (Mr. Chamberlain). In my opinion, there are a great many more worthy recipients of a bonus of this sort than the people who issue bonus shares. My hon. Friend the Member for Norwood mentioned the people holding post-war credits and the fact that the Chancellor had more than once said that he could not repay those credits at the present time. It seems to me that he might well have kept on this 10 per cent. duty on bonus issues and repaid some of the Post-war Credits.

Has it occurred to my hon. Friend that it may be the Chancellor's object to encourage bonus issues because, in their absence, it might well be that money which in other circumstances would be reinvested in the company and put to reserve would be distributed by way of dividends?

That may be the explanation of the attitude of the Chancellor, but, if it is, it seems a most extraordinary one. It is not the sort of argument to which I should have expected the Chancellor to agree in view of the country's present situation. But the argument does not only apply to Postwar Credits; there is also the question of the Purchase Tax which is levied on a considerable number of commodities.

I am sure the hon. Member will appreciate that he cannot discuss the Purchase Tax.

I was only using it as an example, and if we are not allowed to use that sort of example, how can we drive home our point? However, I think the Committee quite understands what I was saying. There is a number of people in this country who could do with a million or so far more, and could use it far better, than the people who are to receive the advantage of the relief of duty on these bonus shares.

I do not propose to say very much more because I understand that there is some sort of timetable in respect of speeches. I certainly do not wish to stay here until three in the morning if it can possibly be avoided, but, of course, if it is to the advantage of the country, and if the Committee think that the country can be better governed by our staying here until the early hours of the morning, I am quite willing to stay. Before sitting down, I wish to quote a passage from a speech of the previous Chancellor of the Exchequer—not the Left-Wing Chancellor but the ordinary Chancellor—which he made on 23rd April, 1947. He was defending the imposition of this tax. What he said is true, and I think it will appeal to the people of this country. It appealed to them then. It appealed to the Members on this side of the Committee at that time, even to the junior Member for Bolton (Mr. J. Lewis). He said this:
"Is it not really better that I should have put a tax on bonus shares if that is one way in which we can get relief for the families of the Income Tax payers?"—[OFFICIAL REPORT, 23rd April, 1947; Vol. 436, c. 1200.]
That is just as true today as it was in 1947, and I very much regret that it is a Labour Chancellor of the Exchequer who is taking action of this sort. It is unnecessary, it is dangerous and it disregards the needs of the ordinary people of this country.

I think I can reassure both the proposer of this Amendment and my hon. Friend the Member for Mitcham (Mr. Braddock).

There was an Amendment on the Order Paper, and I was unaware that my hon. Friend the Member for Norwood (Mr. Chamberlain) was not speaking to the Amendment.

There was an Amendment, and as I understood that it was not to be called I made my speech on the Question "That the Clause stand part." It amounts to the same thing.

I should like to reassure both my hon. Friends that no pressure has been brought by the City on my right hon. and learned Friend the Chancellor of the Exchequer, and that if they know anything of his character they should feel assured that even if such pressure were brought it would have no effect upon him whatsoever. He would treat this matter purely on its merits, and I can assure the Committee that that is exactly what he has done.

I could talk on this subject for quite a long time and I am positive that even if I did I should not succeed in convincing either of my hon. Friends. However, I would say that this tax right from the beginning has not been looked upon as the kind of tax that one would retain before any other. So long as we get the revenue that we desire and so long as it is just and fair, I see no reason why this tax should be retained simply because certain people think that it should be kept on the Statute Book. It was extremely useful at the time when it was levied by my right hon. Friend the Chancellor of the Duchy of Lancaster, a period which one might describe as a time of boom; but I should like to say this—and this is all I really have to say—that we still have in existence the Capital Issues Committee, that it is extremely active, that when applications are made to it it judges those applications on their merits, and that it is quite immaterial to the Capital Issues Committee whether this extra stamp tax on bonus issues is in existence or not.

All that we have done and all that we are doing by repealing Sections 60 to 62 of the Finance Act, 1947, is to bring once more into the free area the raising, by those who desire, of £50,000. Anything above that, in spite of this Clause, will still have to go to the Capital Issues Committee, and that Committee will carry through, as it has done up to now, the policy laid down by the Government with regard to these issues. I think, therefore, that what my right hon. and learned Friend is doing is not in any sense a going back on his beliefs as a Socialist Chancellor of the Exchequer, neither does it mean that he has poured money into the laps of vested interests, as has been alleged—far from it.

Is not my right hon. Friend aware that there has been a definite spate and flood of these things since this matter was announced, and does he not agree that it is purely inflationary and a strong tendency to high prices?

There is one thing I would like the Minister to deal with. He heard my hon. Friend the Member for Mitcham (Mr. Braddock) read out what had been said by the previous Chancellor of the Exchequer as the reason for maintaining this 10 per cent. When the Chancellor of the Duchy of Lancaster was Chancellor of the Exchequer and he made that speech he had the full backing of the Financial Secretary and the full backing and enthusiastic cheers of hon. Members on this side of the Committee. There is not the slightest doubt about that. Can the Financial Secretary now tell us that the situation has changed in this country from what it was as described by the then Chancellor of the Exchequer in the speech which has been quoted by my hon. Friend? My hon. Friend the Member for East Coventry (Mr. Crossman) on Thursday last told us that there had been a Socialist revolution in this country and that the bonus shares, which had been referred to by the hon. Member for Birmingham——

I beg the hon. Member's pardon. I always associate the name "Chamberlain" with Birmingham. The facts that he put before us here made it clear that the Socialist revolution that has taken place has been of a very peculiar character. I want the Financial Secretary to say whether he accepts this fiction which was presented by the hon. Member for East Coventry, or whether he is of the opinion that the situation described by the then Chancellor, who is now Chancellor of the Duchy, as contained in the quotation made by my hon. Friend on my right—the hon. Member for Norwood, who is pretty much to the left—applies to the conditions today, or whether those conditions have changed and that quotation does not apply any more. Are there not, as the then Chancellor said, more deserving methods of giving taxation relief than the method proposed in this Clause? Would the Minister say what it has cost him to change from his support of the previous Chancellor to the support of the present Chancellor?

Question put, and agreed to.

Clause ordered to stand part of the Bill.

Clauses 31 to 33 ordered to stand part of the Bill.

Clause 34—(Exoneration Of Certain Properties)

I beg to move in page 25, line 12, to leave out "ten shillings," and to insert "one pound."

The Amendment is very simple. I know the Committee are aware that Land Tax is a very complicated affair, but I am not sure that the Committee are aware in what a frightful muddle Land Tax assessments are. In every Income Tax office up and down the country Land Tax assessments are in such a muddle that nobody knows on what particular bit of land the tax is assessed. The proposal to do away with the tax is very desirable.

The Chancellor has proposed that all assessments under 10s. should be completely disposed of at once. I suggest that 10s. should be raised to £1 because that would include a very large number of small assessments, and would save the Inland Revenue, a large number of lawyers and private individuals an immense amount of time and trouble. I hope the Financial Secretary will see fit to accept the Amendment because I can assure him that it was put down only with the view of helping the Board of Inland Revenue. I do not think it would cost the Government anything at all. Probably they would be in pocket as a consequence of accepting it.

8.0 p.m.

The reason for abolishing the Land Tax where it is not in excess of 10s. is that it is not worth while collecting it. The cases in which it is less than 10s. are 700,000 out of 1,100,000 assessments and, therefore, there is a strong case for saying that if it does not mean a loss to the Revenue, if the tax is not worth collecting, then it should be abolished altogether; and that applies to the figure of 10s.

That cannot be said, however, when we get above 10s. It cannot be said that it is not worth collecting at figures between 10s. and £1. The redemption value for Land Tax of £1 is £25. It would cost the Treasury something like £75,000 a year if the Amendment were accepted and, therefore, we feel that we cannot fairly go above 10s. If we did go above 10s. then landowners who have redeemed their Land Tax in excess of that and have paid 25 years' capital redemption sum to redeem it, might have a grievance, because they would have paid quite a substantial sum to redeem it. For those reasons we have fixed a level which takes out 700,000 of the 1,100,000 and we cannot go further.

I was not pressing the right hon. and learned Gentleman to go further if it meant a loss of revenue. I believe it would save a lot of money. I do not believe that the argument which the right hon. and learned Gentleman has put forward is a very convincing one because I do not think he appreciates the amount of work involved and the frightful muddle which now exists. Possibly we could pursue the matter on the Report stage and because I know the Committee is most anxious to get on with the business, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

I beg to move, in page 25, line 19, at the end, to insert—

(d) all properties comprised in the countries of Orkney and Shetland.
Hon. Members who sit for Scottish constituencies are sometimes accused of taking an undue interest in the antiquarian side of politics. On occasions, in my capacity as a Chairman of the Scottish Standing Committee, I have had to recall them to the present. I am, therefore, all the more sorry tonight that I have to go right back to the year 872. Do not let hon. Members be alarmed, however; I hope the intervening centuries will melt away like snow in May, and I shall refer to nothing which is not strictly relevant to the Amendment.

In the year 872, Jarl Harald Haarfagr, who hon. Members doubtless met in their history books as Harald Fair Hair, subdued his brother Jarls in Norway and turned that country into a monarchy with himself as King. Orkney and Shetland were conquered at the same time. They had been settled about a couple of centuries earlier and they became part of King Harald's Norse domains. Orkney became an Earldom under Jarl Sigurd, whilst Shetland was ruled by a Foud or Governor directly responsible to the King of Norway. King Harald instituted throughout his Norse Domains, including Orkney and Shetland, a yearly Land Tax called Skat which was levied for the support of the State. It was not in any sense of the term a feudal duty because there could be no such thing in the Udal system of law and land tenure which then prevailed throughout the Norse domains. Such duties were entirely foreign to the Udal system.

Jarl Sigurd of Orkney and the Foud of Shetland were authorised to levy Skat, or Land Tax, in Orkney and Shetland and were specifically directed to apply it for purposes of administration in the islands. This is borne out by various references in the Orkneyinga Saga and also by the expressly specified conditions under which the half-Norse, half-Scottish nobleman, Lord Henry St. Clair, obtained the Jarldom of Orkney from the King of Norway in 1379.

I am sure the hon. Member will appreciate that while he can refer to Skat by way of illustration, the merits or demerits of Skat cannot be discussed on this Amendment.

I am not proposing to discuss the merits or demerits of Skat. I must refer to it, however, in order to make my case with regard to the Land Tax. Lord Henry St. Clair's accounts are still extant and they show that he gathered the Land Tax and applied it in the islands for its proper purpose. This continued until 1469, when Orkney and Shetland were pledged to the Scottish Crown by King Christian I of Norway, Denmark and Sweden in security for the unpaid balance of the dowry of Princess Margaret on her marriage to James I of Scotland.

At that time there was levied in Scotland a Land Tax known as the "Old Extent." This tax was not levied in Orkney and Shetland after these islands came under the Scottish Crown, doubtless because they were already paying a form of Land Tax, Skat. But in 1643, when the "Old Extent" was repealed in Scotland, a new Land Tax or Cess was introduced. That new tax was imposed in Orkney and Shetland in addition to the Land Tax or Skat which they were already paying, with the result that from 1643 down to the present day the islands have been paying a double Land Tax. That is why I put the Amendment on the Order Paper.

When these islands were pledged to the Scottish Crown the King of Norway stipulated that the Scots were not to interfere with the Norse laws and language and customs and the Udal system of land tenure which then prevailed in the islands. That is actually stipulated in an Act of the Scots Parliament in 1657, but it was more honoured in the breach than in the observance. During the first two centuries under the Scottish Crown, the Earldom lands were, to quote Balfour:
"Granted, revoked, annexed and regranted, confiscated and re-annexed with wearisome monotony and torturing change. Five times they were formally annexed to the Crown by Acts of the Scots Parliament, and fourteen times were conceded in defiance of such Acts to one needy and rapacious courtier after another."
At length, in 1707, the then Earl of Morton procured a redeemable Crown grant which was made absolute in 1742. This grant embraced the lands which the Earl of Morton sold, in 1776, to Sir Laurence Dundas, ancester of the present Marquess of Zetland. The Grant to the Morton family conferred on them the right to levy Skat but failed to stipulate that it should be spent as it had been during the previous nine centuries, for the purposes of administration in the islands.

In the meantime, the udallers of Orkney and Shetland had never ceased to protest, since 1643, against the injustice of having to pay the Scots Land Tax in addition to the Norse Land Tax. These protests became more vigorous when the Donatories of the Scottish Crown not only treated Skat as part of their personal income, but greatly added to the burden by arbitrarily altering the long-established Norse weights and measures in their own favour. These protests continued for two centuries without redress and came to a head in 1835 when the matter was brought to the Court of Session in Scotland. The udallers based their case on the argument that the levying of the Norse Land Tax in Orkney and Shetland should have ceased in 1643 when the Scottish Land Tax was introduced. They said it should be either one or the other, but that it was utterly wrong to continue with both forms of taxation.

The Court held that the Earl's right to levy the tax was secured by prescription, since the tax had been paid to the Crown from 1643 to 1707, and from that time on to the Crown's Donatory without interruption. The decision may have been right in law, but it did not remove the essential injustice. The Crown should forthwith have remedied this by repealing either that or Land Tax.

It was very foolish of the Crown ever to have granted the right to a private citizen to collect a public tax and then to allow——

Well, Mr. Burden, the Scottish Crown. It was foolish to have granted to a private citizen and his successors the irredeemable right to collect a public tax and use it for his own private purposes. But having made that error it was indefensible on the part of the Crown to cover up its own folly by victimising the people of Orkney and Shetland.

This grievance has subsisted for over 300 years, and I can assure the right hon. and learned Gentleman that the islanders affected feel just as bitter today as their forbears did then. I hope the right hon. Gentleman does not think that this has been forgotten. There is in the Treasury a memorial which was lodged as late as 1921, and a further memorial was lodged with the Scottish National Development Council in 1939, so that I can assure him that it is a very live subject at the present day. It is a grievance which can to some extent be remedied though not wholly by accepting the Amendment which stands in my name. The grievance would not be wholly redressed because of the fact that the Norse Land Tax, which must remain as the law stands, is a far heavier burden than the Land Tax, which is the subject of this Amendment.

More than one half of the duties collected by the Earldom and the Crown consists of Skat, and the burden and other duties is so heavy that in many cases it even exceeds the rental of the lands. Here are a few examples for the year 1918. The lands of Tirlot in the Island of Westray with a gross rental of £138 15s. 9d. paid duties amounting to £161 9s. The land of Upper Scapa, St. Ola, with a gross rental of £60 paid duties amounting to £63 16s. 0d. The land of Fea in Orphir with a gross rental of £11 5s. paid duties amounting to £10 18s. 11d. the lands of Hoy with a gross rental of £387 5s. 6d. paid duties amounting to £306 14s. 2d. when it is remembered that more than half of these duties consisted of Skat which is obviously a far heavier burden than the land tax, it will be realised what a scandalous injustice it was to superimpose an additional form of Land Tax.

I have given my right hon. and learned Friend a golden opportunity to redress partially this 300 years' old grievance by exonerating from land tax all properties comprised in the counties of Orkney and Shetlands. I suggest, too, that the Crown might well take steps to examine the whole position regarding the imposition of Skat, and see whether, perhaps in this Bill, some arrangement cannot be made whereby this grievous burden can be redeemed in the course of time on reasonable terms.

I am sure the Committee would like to congratulate the hon. Member for Orkney and Shetland (Sir B. Neven-Spence) on his historical researches. I should like to thank him for the compliment he paid to my right hon. and learned Friend the Chancellor of the Exchequer, because the hon. Gentleman obviously feels that an injustice is being suffered in the Orkney and Shetlands which has lasted for 300 years and which in 1921 and again in 1939 he sought to have removed by Governments of his own party. Apparently Chancellors of the Exchequer of the day were unwilling to yield to the blandishments of the hon. Gentleman, and yet he feels the present Chancellor of the Exchequer will remove this alleged injustice. It seems to me, after listening to his interesting speech, that he is going about this the wrong way if it is an injustice, because he said that a heavier burden by far is imposed by Skat than by the land tax. If that is so, he should lead a crusade for the abolition of the burden of Skat.

That is just what I cannot do. It can only be done by the Government dealing with it.

But he is asking the Government to go about it in the wrong way, because if he leads a crusade for the abolition of Skat and other curious land burdens in Scotland and elsewhere, he might find a certain amount of sympathy on this side of the Committee. This Amendment is not acceptable because it seeks to exclude all properties in the Counties of Orkney and Shetland and the majority of the tenures in Orkney and Shetland are not udal tenures but feudal tenures, and it would embrace the feudal tenures.

If the right hon. and learned Gentleman looks up some of the observations of distinguished members of the Court of Session in the past he will find that the whole land retains its essential udal character. The granting of feudal charters has not altered the fundamentally udal nature of land tenure in Orkney and Shetland.

8.15 p.m.

There are feudal charters in existence which regulate the burden put upon the Islands of Orkney and Shetland, and they far exceed the tenures held under the alternative system of udal tenure. According to this Amendment the feudal tenures in these islands would be exempt from tax, although feudal tenures elsewhere in Scotland will be subject to the tax. That is indefensible. Even if it were the position that all tenures in the Orkney and Shelands were udal tenures, the difference between a udal and feudal tenure is not sufficient to justify any differentiation for land tax purposes. While Skat is not a feudal tenure it is, to all intents and purposes, commensurate with the burdens imposed by a feudal tenure——

I cannot give way again because the hon. Gentleman knows that this is a matter of principle. There would be no justification for giving exemption for one type of burden imposed on the land and not giving exemption for other types of burden. The logical result of this Amendment would be to exclude from the Land Tax altogether all kinds of land property in Scotland.

I would point out to the Committee that this tax as levied in the Orkney and Shetlands is not providing any great hardship in these islands. The total land tax in the islands, once it becomes operative, is only £427 per annum reduced to £325 per annum on the operation of that part of the Clause which excludes an assessment less than 10s. The £325 will be levied on 140 separate assessments and it is quite obvious that there is no great financial hardship to be suffered, particularly at a time when, as a result of other measures by this Government, these islands are in a properous position, more prosperous than they ever were before.

I want to say a word here, because it seems to me that the right hon. and learned Gentleman in the last few words gave the case away. He says that the amount of money at stake is extremely small, but he attempted earlier in his speech to say that there was an injustice but that my hon. Friend the Member for Orkney and Shetland (Sir B. Neven-Spence) was going about it in the wrong way.

I am sure the hon. and gallant Gentleman does not wish to misrepresent me. I did not admit that there was an injustice. I said, if there was an injustice as alleged by the hon. Gentleman, but I was not admitting that there was any.

There is a slight difference between what I said and what the right hon. and learned Gentleman has said. However, be that as it may, the position is that it is undoubtedly an injustice to have double taxation however insignificant a double taxation may be. He went on to say that my hon. Friend should not have attacked it in this way, but that he should have dealt with another tax. My hon. Friend says that it is not possible for him to do that, but it is possible for the Government to take action. The solution seems to be a simple one. The Skat tax should be abolished and an injustice would be removed from these islanders.

Amendment negatived.

Clause ordered to stand part of the Bill.

Clauses 35 to 39 ordered to stand part of the Bill.

Clause 40—(Interpretation Of Part V)

I beg to move, in page 30, line 6, to leave out, "or the Duchy of Lancaster."

This Amendment is a correction of a minor flaw in the provisions of the Clause, which includes among the Crown property the property of the Duchy of Lancaster. As a matter of fact, however, the Duchy of Lancaster has paid Land Tax, and has always redeemed it when required, and should not have been included. The Chancellor of the Duchy has been consulted upon it and he agrees to the omission of these words and, therefore, the inclusion of the Duchy of Lancaster as an ordinary citizen who will pay the redemption money.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clauses 41 to 44 ordered to stand part of the Bill.

Clause 45—(Extension Of Special Contribution To Northern Ireland)

Motion made, and Question proposed, "That the Clause stand part of the Bill."

The Clause extends and makes legal the extension of the Special Contribution to Northern Ireland. I understand that without the Clause the Special Contribution would not be legal in Northern Ireland because it was not one of those taxes which were reserved taxes as laid down in the Act of 1920. In Northern Ireland, we have always been prepared to agree to bear our share of all the burdens of the United Kingdom, and there has been no protest at the extension of this tax to Northern Ireland.

On the other hand, there is a very real objection, in that the tax is not legal until this Bill be passed, and that when it is collected, those who pay it will have to pay interest for a period when the tax was not legally recoverable. That is not only a hardship on individual people but a legal blemish. After all, one should have some regard for the law. The tax does not become legally due from the people upon whom it falls until this Finance Bill is passed. They cannot legally pay it, I understand, until that happens. Nevertheless, the Treasury propose to take interest from them for not having paid it when they could not have done so without an infringement of the law.

In fact, it means an addition to the tax. The people who pay promptly do not have to pay any interest, and pay less than those who pay later, and who have to meet the rates of interest laid down. It is not a great sum of money, but it is a serious and significant thing that the present Government should envisage what seems to be a definite breaking of the legal tradition by trying to extract a comparatively small sum of money by subsequent legislation. There was no protest against the fact that we should bear an equal burden with the rest of the United Kingdom, but it is most unjust that this attempt should be made to make people pay interest for a period when they could not have paid the money. I very much hope that the Chancellor will consider that aspect of the matter. He has that conscience which the law produces in those who serve the law. It will assist me in urging him to reconsider this matter and not to charge interest in this way.

I should like to be allowed to say a word. My hon. Friends will notice that there is an Amendment on the paper in the name of my hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd), dealing with exactly the same point. My hon. and learned Friend did not move the Amendment. In view of the time that we have taken, he thought that it would be better discussed upon the Report stage. I would point out to my hon. Friend the Member for Londonderry (Sir R. Ross) that the Amendment, when moved, will not only allow us to have an answer, but an answer upon the particular point which has now been raised, and it will give us an opportunity to divide upon it.

In the circumstances, I do not wish to press the point now. I did not understand the position. The Amendment did not spring from us in Northern Ireland but from other Members independently. In the circumstances, I do not press the Chancellor for an answer now.

Question put, and agreed to.

Clause ordered to stand part of the Bill.

Clauses 41 to 48 ordered to stand part of the Bill.

New Clause—(Remission Of Customs Duties On Certain Aircraft And Parts And Equipment Therefor)

(1) Subject to the following subsections, the Treasury may direct that duty shall not be chargeable under the Import Duties Act, 1932, or the Safeguarding of Industries Act, 1921, on the importation into the United Kingdom of any aircraft or aircraft parts or equipment to which this Section applies.

(2) The aircraft and aircraft parts and equipment to which this Section applies are any aircraft of wing span greater than one hundred and twenty feet and any spare part or equipmnt for incorporation in or use on such an aircraft, as respects which the Treasury are satisfied—

  • (a) in the case of any aircraft that it is to be used in maintaining overseas services; and
  • (b) in the case of any spare part or equipment that it is required for an aircraft manufactured outside the United Kingdom and used or to be used as aforesaid.
  • (3) The Treasury shall not exercise the powers conferred by this section except on the recommendation of the Board of Trade and on being satisfied that it is in the national interest that the duty should not be chargeable, and any directions of the Treasury under this Section may be given subject to such conditions as they think fit for restricting the use or disposal of the aircraft, aircraft parts or equipment and for enabling the Board of Trade to satisfy themselves that the conditions are complied with.

    (4) The said powers shall also not be exercised except on an application made by the importer before delivery to him of the aircraft or aircraft parts or equipment.

    (5) An application under the last foregoing subsection shall be made in writing and in accordance with such directions, if any, as may be given by the Treasury.

    (6) Where any aircraft or aircraft parts or equipment are imported without payment of duty by virtue of directions of the Treasury under this Section, and any conditions attached to the directions are not complied with, then (without prejudice to any liability for duty) the aircraft or aircraft parts or equipment shall be forfeited.—[ Mr. Jay.]

    Brought up, and read for the First time.

    8.30 p.m.

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

    The Clause is designed simply to give the Treasury power to exempt from Import Duty certain large types of aircraft imported into the United Kingdom, and also spare parts and equipment for those aircraft. The Clause has the purpose, which I am sure the whole Committee will support, of assisting our airlines to overcome the deficit which they have been incurring in recent years. We want to enable British airlines to compete on the international routes where their competitors have many advantages.

    We shall not by this Clause be depriving the British aircraft industry of the protection which it has had against foreign imports since the Import Duties Act, 1932. The reason is that the Clause will only enable us to give the exemption in the case of aircraft of a wing span greater than 120 feet. As the Committee will probably realise, in practice this means simply Constellations and Stratocruisers used by B.O.A.C. Planes of that size are not at the moment manufactured by the British aircraft industry. If they were, foreign currency would not have been made available for importing them from North America. The Treasury will give directions that duty should only be chargeable on a recommendation from the Board of Trade. Therefore, in our view the change will be of some value to British civil aviation and will not have any injurious effect on the British aircraft industry.

    It will be very small. I will let the hon. and learned Member have the exact figure later.

    Question put, and agreed to.

    Clause read a Second time, and added to the Bill.

    New Clause—(Footballers' Benefits)

    The money, commonly known as benefit, payable to professional footballers after a period of service, where not specifically guaranteed by contract, shall be exempted from Income Tax.—[ Mr. Hollis.]

    Brought up, and read the First time.

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

    This is a very small Clause as regards the amount of money involved which obviously cannot be more than something in the nature of £2,000 every year. It is obvious from the other hon. Members who have been good enough to write their names under mine that it is by no means a party issue. It clears up what I am sure the Committee will agree is a small anomaly, and I have great hopes that the Chancellor will allow that anomaly to be cleared up by accepting the Clause or by inserting a provision with similar effect.

    Professional footballers are an admirable class of persons who give great pleasure to me, to many other hon. Members and to many millions of people throughout the country. I am in no sense pleading for any special favours for them and I am in no sense setting them up as such model citizens that they should be exempted from the normal incidence of Income Tax. I am simply asking that an anomaly be remedied. Most people make their living from a more or less steady income and can calculate roughly what they will spend each year, but certain people in various walks of life make the bulk of their earnings over a very short period of time or in some cases on one occasion in their lives. There is nothing in the least unethical about that. In the past when Income Tax was at a very low level it raised no practical problem, but these days when Income Tax is at a very high level it raises a very great problem for these people if the bulk of their life savings, if it comes within one year, is liable to Income Tax.

    There are a number of professions which suffer from that anomaly and included in them is the professional sportsman, who, by the nature of his working life, has to divide it into two parts. In the nature of things the professional sportsman has to stop playing his game long before he reaches the age when he wants to stop work. Therefore, the sensible system has been devised in football and cricket by which the professional sportsman receives a reasonable but not excessive remuneration for playing his game and, if he has achieved great distinction, when he gets towards the end of his playing career he is sometimes allowed to have what is called a benefit. The money from that benefit is not intended to be used, and is not used as income during that current year, but is used in order to give him a sum of money with which he can buy a shop or farm or establish himself in a public house or set himself up in whatever form of life he wishes for the second or non-playing period of his life.

    I am putting forward two contentions. The first is that whatever may be the correctness of the technical decision of the courts that the benefit money counts as income, it is not income in any sense of the word but is a capital payment. Secondly, it is not in any real sense of the word a contractual payment but is much more in the nature of a personal gift. There is, in one of the curious anomalies of the law, a distinction between cricket professionals and football professionals on this point. Cricket professionals are allowed to have their benefits exempt from Income Tax. That was entirely due to the pertinacious public spirit of Mr. Seymour, the Kent batsman, who had a benefit in his match at Canterbury with Hampshire on which the Inland Revenue attempted to charge him Income Tax, and he so obstinately refused to accept this ruling that he carried the matter right up to the House of Lords and eventually obtained exemption of Income Tax for cricketers.

    When, however, similar tactics were attempted by a number of football professionals, particularly Mr. Harrison, who played for Everton, and Mr. Duff, who played for Manchester City, their Lordships were less amenable to footballers than to cricketers and they did not get exemption.

    That may well be. They all come from Lancashire without exception. It is not my intention to challenge the verdict of the law. The hon. and learned Member for East Leicester (Mr. Donovan) is in his place, and I hope he will intervene in this discussion so that if there are observations to be made about the law as it is now, they can be made with great authority by the hon. and learned Member. My intention is to put forward certain contentions about what, in my submission, the law should be. Doubtless these learned judges gave the correct interpretation of the law as it is now, but even the law as it is now cannot be as certain as all that, because there was a large variety of opinions and appeals and assenting judgment, so clearly it is in some doubt.

    Indeed, oddly enough in both cases the lawyers were continually referring back to a somewhat distant parallel of clergymen's Easter offerings. The case seemed to turn on whether a footballer or cricketer was more like a clergyman, and it was decided on the whole that a footballer was more like a clergyman.

    No. However, neither of them in this respect was very much like a clergyman because, without wishing to raise the issue of Easter offerings about which I have strong views, those offerings are in the nature of income in the sense that they come in every year. As I understand them, the reasons why footballers were discriminated against in contradistinction to cricketers was that in the judgment on clergymen's Easter offerings we were told that clergymen got away with it if the Easter offering had been peculiarly due to the personal qualities of the particular clergyman. It was decided that on the whole that was not so; that they were payments made to a person by virtue of his office rather than to a clergyman as a personal gift.

    It was decided that the cricketer's benefit was more in the nature of a personal tribute from admirers and that the footballer's benefit was more in the nature of part of the regular remuneration of his profession. The clause in the Football League's contract which says that clubs may enter into agreements with players for a benefit was quoted as evidence that they had at least a semi-contractual right to this benefit; but the right was semi-contractual only in the most literal sense of the word, for only 53 per cent. of regular playing professional footballers do, in fact, get their benefit.

    Benefits are of certain different natures and kind. There are occasions when it is a very little different from a regular payment. The club simply says to a player, "We will pay you so much money—£650." There are occasions when the footballer runs a private charity match of his own and gets the gate money in very much the same way that a cricketer does. In any event it is not for me, and it is not my wish, to challenge the interpretation of the law as it is now. I simply want to make the point, with which the Committee, I think, would agree, that if there are these differences between cricketers and footballers they are technical and legal differences. Doubtless the courts did their duty by interpreting the law as it was at the time or as it is now and paying attention to the technical difficulties; but it is equally our duty in this Committee, surely, to free the courts from this obligation of being tied down by a mere technicality and to put the football profession into a position where it can properly remunerate its players with benefits. This is as all-important in the football as in the cricketing world, because in the nature of things the playing life of a professional footballer is much shorter than that of the professional cricketer.

    There is little doubt that there are ways in which, by changing words in contracts and in changing titles, these things can probably be got round without an amendment of the law, but I assure the Committee, and I hope the Chancellor will agree, that it would be very much better to put the thing above board and beyond doubt rather than it should be left in this present extremely unsatisfactory condition. There is a general feeling of injustice that the Income Tax is being paid and continual attempts are being made in courts to use wording to get round this obligation. It is very much better that the Committee should take the opportunity of dealing frankly with the situation and put it beyond doubt.

    I am very glad indeed to be associated in the new Clause with somebody to whom on this occasion I can refer to as my hon. Friend the Member for Devizes (Mr. Hollis). He has put the case very clearly and fairly. Like him, I am no lawyer, and I should certainly hesitate to argue with anybody, particularly the Solictor-General and the Chancellor of the Exchequer, upon legal matters; but I would put just one or two legal questions before I come to my main point of underlining some of the points made by the hon. Member for Devizes.

    8.45 p.m.

    On the legal points, it seems that there is a strictly legal case for treating these benefits as capital rather than as income. They are, in the first place, a form of depreciation; of wear and tear on the footballer. There is considerable wear and tear on the footballer. Ordinary company profits like those of a coalmine or such things are strictly income, yet the Chancellor allows sums to be ploughed back to reduce taxation. Besides capital depreciation, there is also compensation because of the nature of the footballer's job. Nearly all professional football clubs insist that their players shall be fulltime footballers and not indulge in any other jobs outside. To compensate them for the disadvantage of not being able to learn a trade until they reach the age of 35, or even slightly later, this capital sum of money is set aside in the form of benefits and can be used to set up in business. I urge that the law should recognise these sums as being capital and not income.

    I leave the legal argument for a ground on which I feel more secure, not the ground of legality but the ground of fairness and justice. The hon. Member for Devizes has mentioned that cricketers' benefits are tax free, whereas footballers' benefits are not tax free. That leads to some of the most extraordinary anomalies. Those who are interested in cricket will remember that Bill Bowes, the famous Yorkshire fast bowler, had a benefit two years ago of £8,000. Cyril Washbrook, Lancashire's opening batsman, got a benefit last year of £13,000 and it is forecast that in the current year Denis Compton will get something in the nature of £20,000.

    All those benefits are tax free. Yet in the past season five players of the Brighton and Hove Football Club who were granted a benefit in the form of a sort of charity match—the lowest service they had was 10 years and the highest 15 years—and they got, not £8,000, £13,000, or £20,000, but £300, and that £300 is not tax free, but subject to tax. That seems utterly ridiculous. An even more ridiculous instance relates to Denis Compton who, besides being a top-class cricketer, is also so good a footballer as to be almost worthy of playing for Huddersfield Town. Supposing he gets a benefit from Arsenal Football Club, that would be taxable, but, if the Arsenal Football Club decided to hand over to the cricketer Compton's benefit fund the sum of £700, that would be tax free.

    There is an almost grosser case in a club very near to my heart, the Oldham Athletic Club. They have a player named Williamson, who has been on the books for 15 years. To recompense him for loss of efficiency, the club allowed him to organise a benefit match himself and took no part in the organisation, beyond lending him the ground. He arranged the benefit match, paid out of his own pocket the wages of players and received about £1,200. By league regulation he could not receive more than £900 and Oldham Athletic took the remainder. But, although he got only £900, he was subject to tax not only on £900, but on the £1,200, some of which he did not even get.

    That kind of anomaly, of which there are dozens in the realm of sport is ridiculous and unjust. They tend to make people think the law is unfair and ridiculous and offers an inducement, as the hon. Member for Devizes said, for wangling round the law. Wangles can be done and it would be most unfortunate if they were done and the law brought into disrepute. I beg the Chancellor to consider accepting this proposed new Clause in the interests of the players, but even more in the interests of the law, and most of all in the interests of common simple justice.

    I should like to associate myself with the plea which has been made to the Chancellor for the adoption of this Clause. I happen to have been associated in a modest way for a long time with the football world, and I am president of a well-known football club. For years we have had to deal with cases of the kind envisaged in this new Clause. The Chancellor, with his great wisdom, judgment and all the fine Parliamentary and other qualities he possesses, ought not to allow an anomaly like this to continue as part of the structure of our sporting life, and I hope that he will pay heed to the plea which has been made by my hon. Friend the Member for Devizes (Mr. Hollis) and by the hon. Member for Huddersfield (Mr. J. P. W. Mallalieu).

    The life of a footballer as such is limited, and the time comes when he has to be given some measure of compensation to make up for what one might call the depreciation of his efficiency in his profession of sport. In that situation, the benefit given to such a man ought not to be treated otherwise than as a gift. Under the present state of the law that position does not obtain, and I very much hope that the Chancellor will see the absurdity of a football player being placed in one category in relation to his sporting work and a cricketer being placed in a different category. I am sure that that is something to which the Chancellor would not like to be a permanent party, and I strongly support the plea which has been made from both sides of the Committee this evening.

    The hon. Member for Devizes (Mr. Hollis) said that this was not a party question. Indeed, it is not; nor is it, I am afraid, a question of whether we are sympathetic to this claim on behalf of footballers, or whether they are deserving people. It is simply a question whether these benefits, which footballers receive on some specific occasion, are or are not income or remuneration for their services. If the benefits are income, or remuneration, we are bound under the law to tax them. We cannot select one form of income and say that Income Tax should not apply to it. The question whether a given footballer's benefit is to be regarded as remuneration for his services or not is really one for the courts to determine, and any individual who wishes to contest his own case can do so in the courts.

    I understand that this question has on several occasions been contested in the courts, and on all those occasions the court found in the case of footballers that the payment in question, benefit or whatever it was called, amounted to remuneration and income. If the courts find that, we are bound to impose the tax. I believe that in the case of cricketers the courts have come to a different conclusion. I do not intend to enter into the reasons for that now, but so long as the position is as I have stated, we are bound to impose tax accordingly. I do not think that we should here pass an amendment of the law which would in effect instruct the courts that one particular form of what they regarded as income was not to be so regarded for Income Tax purposes. Indeed, if we were to do so it would raise the question of whether that did not——

    We are asking that Parliament shall take a course which will make it perfectly clear to the courts what interpretation is to be placed on the law. This House is superior to the judges so far as legislation is concerned.

    Yes, but that would raise the question how widely the expression "commonly known as benefit," could be applied. It might be open to football clubs to apply that expression very widely. I do not think that the exemption could be extended too far in that direction. Even if we did make this exemption, it would produce a series of further anomalies in the other cases which have been mentioned—tips of waiters, etc. Therefore I think that whatever our opinion about the benefits to footballers, we must accept the principle that Income Tax applies to incomes, and must therefore apply to those individual cases where the courts think that the payment in question was remuneration for services.